ZİRAAT HAYAT VE EMEKLİLİK A.Ş. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Translated into English from The Original Turkish Report)

CONVENIENCE TRANSLATION OF REPORT AND FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ZİRAAT HAYAT VE EMEKLİLİK A.Ş. INDEPENDENT AUDITORS' REPORT To the Board of Directors of Ziraat Hayat ve Emeklilik A.Ş. 1. We have audited the accompanying financial statements of Ziraat Hayat ve Emeklilik A.Ş. (“the Company”) which comprises the balance sheet as at 31 December 2011, and the income statement, statement of changes in equity and cash flows statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements 2. Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles and standards issued based on insurance laws and regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards issued in insurance laws and regulations. Those standards require that we comply with ethical requirements and plan and perform the 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 auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control 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, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion 4. In our opinion, the accompanying financial statements give a true and fair view of the financial position of Ziraat Hayat ve Emeklilik A.Ş. as of 31 December 2011, and of its financial performance and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards issued (Note 2) based on insurance laws and regulations. Additional paragraph for the English translation: 5. The effect of the differences between the accounting principles summarized in Note 2 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 Company’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, 16 March 2012 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç Partner

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 12 Audited Audited Current Period Previous Period (31/12/2011) (31/12/2010) A- Cash and Cash Equivalents 14 794,951,449 423,880,572 1- Cash - - 2- Cheques Received - - 3- Banks 794,951,449 423,880,572 4- Cheques Given and Payment Orders - 5- Other Cash and Cash Equivalents - - B- Financial Assets and Investments with Risks on Policyholders 11 36,912,504 - 1- Financial Assets Available for Sale 36,912,504 - 2- Financial Assets Held to Maturity - - 3- Financial Assets Held for Trading - - 4- Loans - - 5- Provision for Loans - 6- Investments with Risks on Policyholders - - 7- Equity Shares - - 8- Impairment on Financial Assets - C- Receivables From Main Operations 247,143 128,936 1- Receivables From Insurance Operations 12 165,605 128,936 2- Provision for Receivables From Insurance Operations - 3- Receivables From Reinsurance Operations - - 4- Provision for Receivables From Reinsurance Operations - 5- Cash Deposited With Insurance & Reinsurance Companies - - 6- Loans to Policyholders - - 7- Provision for Loans to Policyholders - 8- Receivables from Pension Operation 12 81,538 - 9- Doubtful Receivables From Main Operations - - 10- Provisions for Doubtful Receivables From Main Operations - D- Due from Related Parties 12 4,729 3,181 1- Due from Shareholders - - 2- Due from Affiliates - - 3- Due from Subsidiaries - - 4- Due from Entities Under Common Control - - 5- Due from Personnel 4,729 3,181 6- Due from Other Related Parties - - 7- Discount on Receivables Due from Related Parties - 8- Doubtful Receivables Due from Related Parties - - 9- Provisions for Doubtful Receivables Due from Related Parties - E- Other Receivables 12 3,170 - 1- Leasing Receivables - - 2- Unearned Leasing Interest Income - 3- Deposits and Guarantees Given - - 4- Other Receivables 3,170 - 5- Discount on Other Receivables - 6- Other Doubtful Receivables - - 7- Provisions for Other Doubtful Receivables - F- Prepaid Expenses and Income Accruals 10,589,533 11,245,541 1- Prepaid Expenses 10,589,533 11,245,541 2- Accrued Interest and Rent Income - - 3- Income Accruals - - G- Other Current Assets 1,185,793 640 1- Inventories - - 2- Prepaid Taxes and Funds 35 1,185,293 - 3- Deferred Tax Assets - - 4- Business Advances - 110 5- Advances Given to Personnel 500 530 6- Stock Count Differences - - 7- Other Current Assets - - 8- Provision for Other Current Assets - I- Total Current Assets 843,894,321 435,258,870 Note ZİRAAT HAYAT VE EMEKLİLİK A.Ş. DETAILED BALANCE SHEET TL ASSETS I- CURRENT ASSETS

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 13 TL Audited Audited Current Period Previous Period (31/12/2011) (31/12/2010) A- Receivables From Main Operations 51,751,005 - 1- Receivables From Insurance Operations - - 2- Provision for Receivables From Insurance Operations - 3- Receivables From Reinsurance Operations - - 4- Provision for Receivables From Reinsurance Operations - 5- Cash Deposited with Insurance & Reinsurance Companies - - 6- Loans to Policyholders - - 7- Provision for Loans to Policyholders - 8- Receivables From Pension Operations 12 51,751,005 - 9- Doubtful Receivables from Main Operations - - 10-Provision for Doubtful Receivables from Main Operations - - B- Due from Related Parties - - 1- Due from Shareholders - - 2- Due from Affiliates - - 3- Due from Subsidiaries - - 4- Due from Entities Under Common Control - - 5- Due from Personnel - - 6- Due from Other Related Parties - - 7- Discount on Receivables Due from Related Parties - 8- Doubtful Receivables Due from Related Parties - - 9- Provisions for Doubtful Receivables Due from Related Parties - C- Other Receivables - - 1- Leasing Receivables - - 2- Unearned Leasing Interest Income - 3- Deposits and Guarantees Given - - 4- Other Receivables - - 5- Discount on Other Receivables - 6- Other Doubtful Receivables - - 7- Provisions for Other Doubtful Receivables - D- Financial Assets - - 1- Long-term Investments - - 2- Affiliates - - 3- Capital Commitments to Affiliates - 4- Subsidiaries - - 5- Capital Commitments to Subsidiaries - 6- Entities Under Common Control - - 7- Capital Commitments to Entities Under Common Control - 8- Financial Assets and Investments with Risks on Policyholders - - 9- Other Financial Assets - - 10- Impairment on Financial Assets - E- Tangible Fixed Assets 6 665,382 216,436 1- Investment Properties - - 2- Impairment on Investment Properties - 3- Owner Occupied Property - - 4- Machinery and Equipments - - 5- Furnitures and Fixtures 652,103 119,208 6- Vehicles 137,040 137,040 7- Other Tangible Assets (Including Leasehold Improvements) 12,000 7,535 8- Leased Tangible Fixed Assets - - 9- Accumulated Depreciation ( 135,761) (47,347) 10- Advances Paid for Tangible Fixed Assets (Including Construction In Progresses) - - F- Intangible Fixed Assets 8 592,519 255,509 1- Rights - - 2- Goodwill - - 3- Establishment Costs - - 4- Research and Development Expenses - - 5- Other Intangible Assets 865,595 331,458 6- Accumulated Amortizations ( 273,076) (75,949) 7- Advances Regarding Intangible Assets - - G- Prepaid Expenses and Income Accruals 1,685 1,857 1- Prepaid Expenses 1,685 1,857 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals - - H- Other Non-current Assets 3,258,789 1,430,367 1- Cash Foreign Currency Accounts - - 2- Foreign Currency Accounts - - 3- Inventories - - 4- Prepaid Taxes and Funds - - 5- Deferred Tax Assets 21 3,258,789 1,430,367 6- Other Non-current Assets - - 7- Other Non-current Assets Amortization - 8- Provision for Other Non-current Assets - II- Total Non-current Assets 56,269,380 1,904,169 Total Assets (I+II) 900,163,701 437,163,039 ZİRAAT HAYAT VE EMEKLİLİK A.Ş.

ASSETS II- NON CURRENT ASSETS DETAILED BALANCE SHEET Note

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 14 TL Audited Audited Current Period Previous Period (31/12/2011) (31/12/2010) A- Borrowings 20, 43 - - 1- Borrowings from Financial Institutions - - 2- Finance Lease Payables - - 3- Deferred Finance Lease Costs - 4- Current Portion of Long Term Borrowings - - 5- Principal, Installments and Interests on Issued Bills (Bonds) - - 6- Other Financial Instruments Issued - - 7- In Excess of Par of Financial Instruments - 8- Other Financial Borrowings (Liabilities) - - B- Payables From Main Operations 19 468,626 27,098 1- Payables From Insurance Operations 25,810 27,098 2- Payables From Reinsurance Operations 45 12,048 - 3- Cash Deposited by Insurance & Reinsurance Companies - - 4- Payables From Pension Operations 398,414 - 5- Payables From Other Operations 32,354 - 6- Discount on Other Payables From Main Operations, Notes Payable - C- Due to Related Parties 19 553,422 32,054 1- Due to Shareholders 45 43,310 2,263 2- Due to Affiliates - - 3- Due to Subsidiaries - - 4- Due to Entities Under Common Control - - 5- Due to Personnel 12 430,884 - 6- Due to Other Related Parties 45 79,228 29,791 D- Other Payables 19 443,513 80,393 1- Guarantees and Deposits Received - - 2- Other Payables 47 443,695 80,404 3- Discount on Other Payables ( 182) (11) E- Insurance Technical Reserves 115,603,056 75,322,135 1- Unearned Premiums Reserve - Net 52,672,388 58,258,216 2- Unexpired Risk Reserves - Net - - 3- Life Mathematical Reserves - Net 17.2 19,122,361 7,673,709 4- Outstanding Claims Reserve - Net 4.1 43,808,307 9,390,210 5- Provision for Bonus and Discounts - Net - - 6- Reserve for Policies Investment Risk, Belonging to Life Insurance Policyholders - Net - - 7- Other Technical Reserves - Net - - F- Taxes and Other Liabilities and Provisions 1,096,959 4,121,238 1- Taxes and Dues Payable 806,145 229,809 2- Social Security Premiums Payable 290,814 59,474 3- Overdue, Deferred or By Installment Taxes and Other Liabilities - - 4- Other Taxes and Liabilities - - 5- Corporate Tax Provision on Period Profit 35 - 13,541,318 6- Advance Taxes and Other Liabilities on Period Profit (-) 35 - (9,709,363) 7- Provisions for Other Taxes and Liabilities - - G- Provisions for Other Risks 23 924,494 416,785 1- Provision for Employment Termination Benefits - - 2- Pension Fund Deficit Provision - - 3- Provisions for Costs 22 924,494 416,785 H- Deferred Income and Expense Accruals - - 1- Deferred Income - - 2- Expense Accruals - - 3- Other Deferred Income and Expense Accruals - - I- Other Short Term Liabilities - - 1- Deferred Tax Liability - - 2- Inventory Count Differences - - 3- Other Short Term Liabilities - - III - Total Short Term Liabilities 119,090,070 79,999,703 LIABILITIES Note III- SHORT TERM LIABILITIES DETAILED BALANCE SHEET ZİRAAT HAYAT VE EMEKLİLİK A.Ş.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 15 TL Audited Audited Current Period Previous Period (31/12/2011) (31/12/2010) A- Borrowings 20, 43 - - 1- Borrowings From Financial Institutions - - 2- Finance Lease Payables - - 3- Deferred Finance Lease Costs - 4- Bonds Issued - - 5- Other Financial Instruments Issued - - 6- In Excess of Par of Financial Instruments - 7- Other Borrowings (Financial Liabilities) - - B- Payables From Main Operations 19 51,751,005 - 1- Payables From Insurance Operations - - 2- Payables From Reinsurance Operations - - 3- Cash Deposited by Insurance & Reinsurance Companies - - 4- Payables From Pension Operations 51,751,005 - 5- Payables From Other Operations - - 6- Discount on Other Payables From Main Operations - C- Due to Related Parties - - 1- Due to Shareholders - - 2- Due to Affiliates - - 3- Due to Subsidiaries - - 4- Due to Entities Under Common Control - - 5- Due to Personnel - - 6- Due to Other Related Parties - - D- Other Payables - - 1- Guarantees and Deposits Received - - 2- Other Payables - - 3- Discount on Other Payables - E- Insurance Technical Reserves 609,012,030 288,707,643 1- Unearned Premiums Reserve - Net - - 2- Unexpired Risk Reserves - Net - - 3- Life Mathematical Reserves - Net 17.2 593,346,999 281,947,370 4- Outstanding Claims Reserve - Net - - 5- Provision for Bonus and Discounts - Net - - 6- Reserve for Policies Investment Risk, Belonging to Life Insurance Policyholders - Net - - 7- Other Technical Reserves - Net 2.1 15,665,031 6,760,273 F- Other Liabilities and Provisions - - 1- Other Liabilities - - 2- Overdue, Deferred or By Installment Other Liabilities - - 3- Other Liabilities and Expense Accruals - - G- Provisions for Other Risks 76,654 28,321 1- Provision for Employment Termination Benefits 22 76,654 28,321 2- Provisions for Employee Pension Fund Deficits - - H- Deferred Income and Expense Accruals - - 1- Deferred Income - - 2- Expense Accruals - - 3- Other Deferred Income and Expense Accruals - - I- Other Long Term Liabilities - - 1- Deferred Tax Liability - - 3- Other Long Term Liabilities - - IV- Total Long Term Liabilities 660,839,689 288,735,964 LIABILITIES ZİRAAT HAYAT VE EMEKLİLİK A.Ş. Note DETAILED BALANCE SHEET IV- LONG TERM LIABILITIES

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 16 TL Audited Audited Current Period Previous Period (31/12/2011) (31/12/2010) A- Paid in Capital 20,000,000 20,000,000 1- (Nominal) Capital 15 20,000,000 20,000,000 2- Unpaid Capital - 3- Positive Inflation Adjustment on Capital - - 4- Negative Inflation Adjustment on Capital - B- Capital Reserves - - 1- Equity Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Gain on Sale of Assets to be Transferred to Capital - - 4- Translation Reserves - - 5- Other Capital Reserves - - C- Profit Reserves 48,405,180 - 1- Legal Reserves 15 2,421,369 - 2- Statutory Reserves - - 3- Extraordinary Reserves 15 46,006,003 - 4- Special Funds (Reserves) - - 5- Revaluation of Financial Assets 15, 16, 27 (22,192) - 6- Other Profit Reserves - - D- Previous Years' Profits - - 1- Previous Years' Profits - - E- Previous Years' Losses ( 93,948) 1- Previous Years' Losses - (93,948) F- Net Profit of the Period 51,828,762 48,521,320 1- Net Profit of the Period 51,828,762 48,521,320 2- Net Loss of the Period - - Total Shareholders' Equity 120,233,942 68,427,372 Total Liabilities and Shareholders' Equity (III+IV+V) 900,163,701 437,163,039 V- SHAREHOLDERS' EQUITY ZİRAAT HAYAT VE EMEKLİLİK A.Ş. SHAREHOLDERS' EQUITY Note DETAILED BALANCE SHEET

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 17

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 18 TL Audited Audited Current Period Previous Period 01/01/2011-31/12/2011 01/01/2010-31/12/2010 A- Non-Life Technical Income 2,665,789 4,619 1- Earned Premiums (Net of Reinsurer Share) 2,548,512 4,619 1.1 - Premiums (Net of Reinsurer Share) 24 4,089,211 65,705 1.1.1 - Gross Premiums (+) 4,089,211 65,705 1.1.2 - Ceded Premiums to Reinsurers - 1.2- Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (1,540,699) (61,086) 1.2.1 - Unearned Premiums Reserve ( 1,540,699) (61,086) 1.2.2 - Reinsurance Share of Unearned Premiums Reserve - 1.3- Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward - 1.3.1 - Unexpired Risks Reserve - 1.3.2 - Reinsurance Share of Unexpired Risks Reserve - 2- Investment Income Transferred from Non-Technical Division 117,277 - 3- Other Technical Income (Net of Reinsurer Share) - - 3.1 - Gross Other Technical Income - 3.2 - Reinsurance Share of Other Technical Income - B- Non-Life Technical Expenses ( 1,555,647) (27,167) 1- Total Claims (Net of Reinsurer Share) (1,010,913) - 1.1- Claims Paid (Net of Reinsurer Share) (483,250) - 1.1.1 - Gross Claims Paid ( 483,250) - 1.1.2 - Reinsurance Share of Claims Paid - 1.2- Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward ( 527,663) - 1.2.1 - Outstanding Claims Reserve ( 527,663) - 1.2.2 - Reinsurance Share of Outstanding Claims Reserve - 2- Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward - 2.1 - Bonus and Discount Reserve - 2.2 - Reinsurance Share of Bonus and Discount Reserve - 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward ) 781 (781) 4- Operating Expenses (-) 32 (545,515) (26,386) C- Non Life Technical Profit/(Loss) (A-B) 1,110,142 (22,548) D- Life Technical Income 810,084,002 540,672,834 1- Earned Premiums (Net of Reinsurer Share) 810,084,002 540,672,834 1.1 - Premiums (Net of Reinsurer Share) 24 802,957,475 598,869,964 1.1.1 - Gross Premiums (+) 806,001,560 601,704,530 1.1.2 - Ceded Premiums to Reinsurers (-) 10.2 (3,044,085) (2,834,566) 1.2- Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) 7,126,527 (58,197,130) 1.2.1 - Unearned Premiums Reserve (-) 7,126,527 (58,197,130) 1.2.2 - Reinsurance Share of Unearned Premiums Reserve - 1.3- Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward - 1.3.1 - Unexpired Risks Reserve - 1.3.2 - Reinsurance Share of Unexpired Risks Reserve - 2- Life Branch Investment Income - - 3- Accrued (Unrealized) Income from Investments - - 4-Other Technical Income (Net of Reinsurer Share) - - E- Life Technical Expense (810,668,321) (502,362,323) 1- Total Claims (Net of Reinsurer Share) (345,685,451) (119,979,469) 1.1- Claims Paid (Net of Reinsurer Share) (311,795,017) (110,589,259) 1.1.1 - Gross Claims Paid ( 315,780,000) (111,466,148) 1.1.2 - Reinsurance Share of Claims Paid (+) 10.2 3,984,983 876,889 1.2- Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward ( 33,890,434) (9,390,210) 1.2.1 - Outstanding Claims Reserve ( 33,890,434) (9,390,210) 1.2.2 - Reinsurance Share of Outstanding Claims Reserve - 2- Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward - 2.1 - Bonus and Discount Reserve - 2.2 - Reinsurance Share of Bonus and Discount Reserve - 3- Changes in Life Mathematical Reserves (Net of Reinsurer Share and Reserves Carried Forward ( 322,848,281) (289,621,079) 3.1 - Life Mathematical Reserves (322,848,281) (289,621,079) 3.2 - Reinsurance Share of Life Mathematical Reserves - - 4- Changes in Technical Reserves for Investments with Risks on Policyholders (Net of Reinsurer Share and Reserves Carried Forward - ) - - 4.1 - Technical Reserves for Investments with Risks on Policyholders - 4.2 - Reinsurance Share of Technical Reserves for Investments with Risks on Policyholders - 5- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward ( 8,905,539) (6,759,492) 6- Operating Expenses (-) 32 (133,229,050) (86,002,283) 7- Investment Expenses - 8- Unrealized Losses from Investments - 9- Investment Income Transferred to Non Technical Divisions - F- Life Technical Profit/(Loss) (D-E) (584,319) 38,310,511 G- Private Pension Technical Income 570,438 - 1- Fund Management Fee 273,326 - 2- Management Fee Deduction 46,247 - 3- Initial Contribution Fee 136,763 - 4- Management Fee In Case Of Temporary Suspension - - 5- Witholding tax - - 6- Increase in Market Value of Capital Commitment Advances 114,083 - 7-Other Technical Income 19 - H- Private Pension Technical Expenses (1,448,737) - 1- Fund Management Expenses ( 129,253) - 2- Decrease in Market Value of Capital Commitment Advances ( 36,999) - 3- Operating Expenses (-) 32 (973,834) - 4- Other Technical Expenses ( 308,651) - I- Private Pension Technical Profit/(Loss) (G-H) (878,299) - ZİRAAT HAYAT VE EMEKLİLİK A.Ş.

DETAILED INCOME STATEMENT I- TECHNICAL DIVISION Note

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 19 TL Audited Audited Current Period Previous Period 01/01/2011-31/12/2011 01/01/2010-31/12/2010 C- Non Life Technical Profit/(Loss) 1,110,142 (22,548) F- Life Technical Profit /(Loss) (584,319) 38,310,511 I- Private Pension Technical Profit/(Loss) (878,299) - J- Total Technical Profit/(Loss) (C+F+I) (352,476) 38,287,963 K- Investment Income 69,136,977 24,000,379 1- Income From Financial Investment 26 60,002,226 21,872,678 2- Income from Sales of Financial Investments - - 3- Revaluation of Financial Investments 26 9,134,751 2,127,701 4- Foreign Exchange Gains 36 - - 5- Dividend Income from Affiliates - - 6- Income form Subsidiaries and Entities Under Common Control - - 7- Income Received from Land and Building - - 8- Income from Derivatives - - 9- Other Investments - - 10- Investment Income transferred from Life Technical Division - - L- Investment Expenses ( 285,541) (113,561) 1- Investment Management Expenses (Including Interest - 2- Valuation Allowance of Investments - 3- Losses On Sales of Investments - 4- Investment Income Transferred to Life Technical Division - 5- Losses from Derivatives - 6- Foreign Exchange Losses (-) 36 - - 7- Depreciation Charges (-) 6.8 (285,541) (113,561) 8- Other Investment Expenses - M- Other Income and Expenses ( 1,872,614) (112,143) 1- Provisions ( 556,043) (435,532) 2- Discounts ) 1,832 (4,309) 3- Specialty Insurances - 4- Inflation Adjustment - 5- Deferred Tax Asset ) 21, 35 1,828,422 1,429,771 6- Deferred Tax Liability Accounts - 7- Other Income and Revenues 7,818 5,064 8- Other Expenses and Losses (-) 47 (3,154,643) (1,107,137) 9- Prior Period Income - - 10- Prior Period Losses - N- Net Profit / (Loss) 51,828,762 48,521,320 1- Profit /(Loss) Before Tax 66,626,346 62,062,638 2- Corporate Tax Charge (-) 35 (14,797,584) (13,541,318) 3- Net Profit (Loss) - - 4- Inflation Adjustment Account - ZİRAAT HAYAT VE EMEKLİLİK A.Ş. DETAILED INCOME STATEMENT II- NON TECHNICAL DIVISION Note

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 20 TL PREVIOUS PERIOD Capital Treasury Stock (-) Investment Revaluation Reserves Inflation Adjustment to Shareholders' Equity Exchange Differences Arising on Translation of Foreign Operations Legal Reserves Statutory Reserves Other Reserves and Retained Earnings Net Profit / (Loss) For the Period Previous Periods' Profits / (Losses ) Total I- Balance at 31/12/2009 20,000,000 ( 93,948) - 19,906,052 A- Capitalincrease (A1+ A2 - 1- Cash - 2- InternalResources - B- Change in treasury shares - C- Income / (expenses) recognized directly in equity - D- Valuation gains on assets - E- Exchange difference arising on translation of foreign operations - F- Other income / (expenses - G- Inflation adjustments - H- Net profit for the period - 48,521,320 - 48,521,320 I- Payment of dividends - J- Transfers to reserves - 93,948 (93,948) - II- Balance at 31/12/2010 (III+A+B+C+D+E+F+G+H+I+J) 20,000,000 - 48,521,320 (93,948) 68,427,372 ZİRAATHAYATVEEMEKLİLİKA.Ş.

DETAILED STATEMENTOFCHANGES IN EQUITY (Audited) TL CURRENTPERIOD Capital Treasury Stock (-) Investment Revaluation Reserves Inflation Adjustment to Shareholders' Equity Exchange Differences Arising on Translation of Foreign Operations Legal Reserves Statutory Reserves Other Reserves and Retained Earnings Net Profit / (Loss) For the Period Previous Periods' Profits / (Losses ) Total I- Balance at 31/12/2010 20,000,000 - 48,521,320 (93,948) 68,427,372 A- Capitalincrease (A1+ A2 - 1- Cash - 2- InternalResources - B- Change in treasury shares - C- Income / (expenses) recognized directly in equity - D- Valuation gains on assets ( 22,192 ( 22,192) E- Exchange difference arising on translation of foreign operations - F- Other income / (expenses - G- Inflation adjustments - H- Net profit for the period - 51,828,762 - 51,828,762 I- Payment of dividends - J- Transfers to reserves - 2,421,369 - 46,006,003 (48,521,320) 93,948 - II- Balance at 31/12/2011 (III+A+B+C+D+E+F+G+H+I+J) 20,000,000 - (22,192 - 2,421,369 - 46,006,003 51,828,762 - 120,233,942 ZİRAATHAYATVEEMEKLİLİKA.Ş.

DETAILEDSTATEMENTOFCHANGES INEQUITY (Audited)

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 21 TL Audited Audited Current Previous Period Period Note (01/01 – 31/12/2011) (01/01 – 31/12/2010) A. CASH FLOWS FROM THE OPERATING ACTIVITIES 1. Cash inflows from the insurance operations 822,764,462 540,704,551 2. Cash inflows from the reinsurance operations 1,410,170 - 3. Cash inflows from the pension operations 52,752,212 - 4. Cash outflows due to the insurance operations ( 473,222,834) (149,625,925) 5. Cash outflows due to the reinsurance operations ( 251,393) - 6. Cash outflows due to the pension operations ( 53,281,279) - 7. Cash generated from the operating activities (A1+A2+A3-A4-A5-A6) 350,171,338 391,078,626 8. Interest payments - 9. Income tax payments (-) 35 (19,814,832) (9,709,363) 10. Other cash inflows 26,369,909 25,833,781 11. Other cash outflows ( 16,787,887) (26,748,116) 12. Net cash generated from the operating activities 339,938,528 380,454,928 B. CASH FLOWS FROM THE INVESTING ACTIVITIES - 1. Sale of tangible assets - - 2. Purchase of tangible assets (-) 6 (537,360) (101,831) 3. Acquisition of financial assets ( 36,468,657) - 4. Sale of financial assets - 5. Interest received 62,321,415 21,872,678 6. Dividends received - - 7. Other cash inflows - - 8. Other cash outflows ( 532,574) (335,767) 9. Net cash generated from the investing activities 24,782,824 21,435,080 C. CASH FLOWS FROM THE FINANCING ACTIVITIES 1. Issue of equity shares - - 2. Cash inflows from borrowings - - 3. Payments of financial leases - 4. Dividends paid - 5. Other cash inflows - - 6. Other cash outflows - 7. Cash generated from/(used in) the financing activities - - D. EFFECTS OF EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS - - E. Net increase/(decrease) in cash and cash equivalents (A12+B9+C7+D) 364,721,352 401,890,008 F. Cash and cash equivalents at the beginning of the period 421,561,385 19,671,377 G. Cash and cash equivalents at the end of period (E+F) 14 786,282,737 421,561,385 ZİRAAT HAYAT VE EMEKLİLİK A.Ş.

CASH FLOW STATEMENT

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 22 TL Audited Audited Current Period Previous Period Note (31/12/2011 ( 31/12/2010) I. DISTRIBUTION OF PERIOD PROFIT 1.1 PERIOD PROFIT 66,626,346 62,062,638 1.2 TAXES AND SURCHARGES PAYABLE ( 14,797,584) (13,541,318) 1.2.2 Corporate tax (Income tax) (14,797,584) (13,541,318) 1.2.2. Income witholding tax - - 1.2.3 Other taxes and surcharges - - A. NETPERIOD PROFIT(1.1-1.2) 51,828,762 48,521,320 1.3 PRIOR PERIODS’ LOSSES ( 93,948) 1.4 FIRST LEGAL RESERVE ( 2,421,369) 1.5. COMPULSORY LEGAL FUNDS TO BE RETAINED IN THE COMPANY - B. NETPROFITAVAILABLEFOR DISTRIBUTION [(A-(1.3+1.4+1.5)] 51,828,762 46,006,003 1.6 FIRST DIVIDEND TO SHAREHOLDERS - 1.6.1 To Holders of Ordinary Shares - - 1.6.2 To Holders of Preferred Shares - - 1.6.3 To Holders of Participating Redeemed Shares - - 1.6.4 To Holders of Bonds Participating to Profit - - 1.6.5 To Holders of Profit and Loss Sharing Certificates - - 1.7 DIVIDENDS TO PERSONNEL - 1.8 DIVIDENDS TO FOUNDER SHAREHOLDERS - 1.9 DIVIDENDS TO BOARD OF DIRECTORS - 1.10 SECOND DIVIDEND TO SHAREHOLDERS - 1.10.1 To Holders of Ordinary Shares - - 1.10.2 To Holders of Preferred Shares - - 1.10.3 To Holders of Participating Redeemed Shares - - 1.10.4 To Holders of Bonds Participating to Profit - - 1.10.5 To Holders of Profit and Loss Sharing Certificates - - 1.11 SECOND LEGAL RESERVE - 1.12. STATUTORY RESERVES - 1.13. EXTRAORDINARY RESERVES - 46,006,003 1.14 OTHER RESERVES - - 1.15 SPECIAL FUNDS - - II. DISTRIBUTION OF RESERVES - - 2.1 DISTRIBUTED RESERVES - - 2.2. SECOND LEGAL RESERVES - 2.3 DIVIDENDS TO SHAREHOLDERS - 2.3.1 To Holders of Ordinary Shares - - 2.3.2 To Holders of Preferred Shares - - 2.3.3 To Holders of Participating Redeemed Shares - - 2.3.4 To Holders of Bonds Participating to Profit - - 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 - ZİRAAT HAYAT VEEMEKLİLİKA.Ş. STATEMENT OF PROFIT DISTRIBUTION (*) As the statement of profit distribution to be authorized by the General Assembly has not been determined by the Board of Directors yet, only the net profit available for distribution is presented in the statement of profit distribution for the year 2011.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 23 1. General Information 1.1 The title of the parent company and the ultimate shareholders Ziraat Hayat ve Emeklilik A.Ş. (“the Company” or “the Entity”), which was registered to İstanbul Trade Registry Office on 11 May 2009, commenced its operations after issuance of its main agreement on 15 May 2009. The shareholding structure of the Company is as follows: Hata! Bağlantı geçersiz. 1.2 Company’s address and legal structure, country where the company was founded and the address of the registered office (if the company’s address is different from the address of the registered office, the main location where the operations are maintained) The Company is a corporation, which is established in compliance with the requirements of Turkish Commercial Code, maintains its operations at Aksaray Mahallesi Turgut Özal Millet Caddesi No:7 34096, Fatih, İstanbul. Principles of operations are determined based on the Insurance Law No: 5684, Individual Pension, Saving and Investment System Law No. 4632 and the related pronouncements in support of these laws.

1.3 The Company’s main operations The operations of the Company involve providing individual and group insurance and reinsurance services relating to pension, individual life, birth/marriage, capital redemption and accident insurance branches, establishing pension funds, developing internal rules and regulations related to these funds, carrying out retirement, annual income insurance, portfolio management and custody contracts for the assets of the funds held in custody. The Company obtained operation licenses for life, accident, birth/marriage, capital redemption and investment funds insurance branches as of 31 December 2009 and the Company obtained operation licenses for Private Pension branch as of 24 January 2011. 1.4 Details of the Company’s operations and nature of field of activities Principles of personal and group private pension operations are determined based on the Individual Pension, Saving and Investment System Law No. 4632 and the principles of life insurance operations are determined based on the Insurance Law No. 5684 and standards and policies set out in prevailing regulations.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 24 1. General Information (cont’d) 1.5. Average number of the Company’s personnel based on their categories Total number of personnel as of 31 December 2011 is 143. (31 December 2010:35) Hata! Bağlantı geçersiz. 1.6 Remuneration and fringe benefits provided to top management The gross remuneration and fringe benefits provided to top management such as; Chairman of the Board of Directors, Board of Directors members, general manager and assistant general managers in the current period amount to TL 875.494 (1 January - 31 December 2010: TL 535.611) 1.7 Distribution tables used in the distribution of investment income and operating expenses (personnel, administration, research and development, marketing, selling, and other operating expenses) in the financial statements The Company allocates the personnel, management, research and development, marketing and selling, outsourcing costs and services and other operational expenses in the technical accounts in accordance with the Undersecretariat of Treasury’s Circular on the Insurance Uniformed Chart of Accounts issued on 4 January 2008 and new circular that amends the circular mentioned above dated 9 August 2010 numbered 2010 / 9. 1.8 Stand-alone or consolidated financial statements Financial statements include financial information of Ziraat Hayat ve Emeklilik A.Ş. only. 1.9 Name and other information of the reporting company and changes occurred since the prior balance sheet date Name / Trade name : Ziraat Hayat ve Emeklilik A.Ş. Headquarter address : Aksaray Mahallesi Turgut Özal Millet Caddesi No.7 Fatih/İstanbul Phone : 0 212 459 85 85 Fax : 0 212 587 67 00 Web page address : www.ziraatemeklilik.com.tr E-mail address : info@ziraatemeklilik.com.tr There has been no change in the above information since the prior balance sheet date.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 25 1. General Information (cont’d) 1.10 Subsequent Events Subsequent events; even if the occur after any announcement concerning the profit or declaration of other chosen financial information to public, include all issues occur between balance sheet date and authorization date of balance sheet. When there are issues that need to be corrected after balance sheet date, the Company corrects the amounts in the financial statements according to this new situation. Explanations related to subsequent events are disclosed in Note 46.

2. Summary of the Accounting Policies 2.1. Basis of Preparation 2.1.1. Basis of preparation of financial statements and specific accounting policies used in preparation of the financial statements Accounting Standards The financial statements of the insurance and reinsurance companies are prepared in accordance with the Decree on “Presentation of Publicly Disclosed Financial Statements and Related Notes and Disclosures” issued by the Undersecretariat of Treasury, announced in the Official Gazette No: 26851 dated 18 April 2008.

Article 4(1) of the Decree on “Financial Reporting of Insurance and Reinsurance Companies and Pension Funds” which was published in the Official Gazette No: 26852 dated 14 July 2007 and have become effective as of 1 January 2008, require the preparation of the financial statements in accordance with the Turkish Accounting Standards Board (“TASB”). The financial statements are prepared in the framework of the form and standards declared in respect of the Decree on “Presentation of Publicly Disclosed Financial Statements and Related Notes and Disclosures” published in the Official Gazette No: 26851 dated 18 April 2008.

According to the sector announcement related with the pronouncements of the Undersecretariat of Treasury in relation with the financial reporting, dated 18 February 2008, Article 4(1) of the Decree on “Financial Reporting of Insurance and Reinsurance Companies and Pension Funds” requires the recognition of company operations in accordance with the preparation and presentation of financial statements requirements in this Decree and TASB, except for any decrees issued by the Undersecretariat of Treasury in relation to the matters specified in 4(2).

In this respect, the below requirements are set out in regards to Article 4(2) of the aforementioned Decree dated 18 February 2008. TASB’s “Insurance Contracts” standard numbered 4 will be applied for the financial periods after 31 December 2005 that will be effective from 25 March 2006, but because the second phase of the “insurance contracts” project of International Financial Reporting Standards Board has not been finished yet, TFRS 4 will not be applied. However, if required, standards and applications about the preparation of footnotes and explanations about the insurance contracts will be determined through a pronouncement declared by the Undersecretariat of Treasury. Accordingly, TFRS 4 has not been applied in the accompanying financial statements.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 26 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.1. Basis of preparation of financial statements and specific accounting policies used in preparation of the financial statements (cont’d) Accounting Standards (cont’d) Statutory Decree No: 660, which has been become effective and published in the Official Gazette on 2 November 2011, and the Additional Clause 1 of the Law No: 2499 were nullified and accordingly, Public Oversight, Accounting and Audit Standards Institution (the “Institution”) was established. As per Additional Article 1 of the Statutory Decree, applicable laws and standards will apply until new standards and regulations be issued by the Institution and will become effective. In this respect, the respective matter has no effect over the ‘Basis of The Preparation of Financial Statements” Note disclosed in the accompanying financial statements as of the reporting date.

Comparative information and restatement of prior period financial statements Financial statements of the Company are prepared in comparison with prior period to determine financial position, performance and cash flow of the Company. There are no adjustments to restate the financial statements as of 31 December 2010 according to “Communiqué Related to the Financial Reporting of Insurance, Reinsurance, and Individual Pension Companies”. 2.1.2. Other related accounting policies relevant for the financial statements a. Technical Reserves Unearned premiums reserve, outstanding claims reserve and their reinsurance shares in the financial statements are recognized based on the below principles in accordance with Article (16) of the Insurance Law No: 5684 effective at 14 June 2007, Article (8) of the Private Pension, Saving and Investment System Law No. 4632 effective at 28 March 2001 and the requirements set out in the “Decree on Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions” issued in the Official Gazette No: 26655 on 28 July 2010.

Unearned premium provision: The Company is required to provide unearned premium reserves for all insurance contracts except for the contracts for which mathematical reserves are provided. A reserve is provided for the premiums corresponding to the annual insurance guarantees provided in policies with maturities for more than one year that are annually renewed. Policies providing guarantees given for the possibilities of life and death or both and for personal accident, disability by illness and serious illness are considered as life insurance policies and their premiums are classified as life insurance premiums. Where premiums of personal accident, disability from illness and serious illnesses are given together with life insurance policies as package policy deals, such coverage are assessed separately from the life insurance policies.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 27 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements a. Technical Reserves (cont’d) Unearned premium provision (cont’d) Unearned premiums reserve is the carried forward portion of unearned gross premiums written in the current period, without commissions or any other deductions, and is calculated on a daily pro-rata basis. It is the carried forward portion of the written gross premiums less the portion allocated for accumulation for effective annual life policies and for long term life policies with accumulation premiums.

In accordance with the provisions of the Sector Circular no: 2009/9 “Adaptation of Technical Reserves Regulation” issued on 27 March 2009 and the requirements of the Communiqué of “Changes in Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued by the Undersecretariat of the Treasury on the Official Gazette dated 28 July 2010, future portion(s) of commissions paid to agencies, commissions received in relation with premiums ceded to reinsurers, production expense shares and amounts paid for non-proportional reinsurance treaty agreements are recognized under the deferred income/loss and other related accounts. Regardless of any classification; incentives, profitability and similar commissions which are not related to insurance policies are not considered in deferred income/loss calculations. Reserve for unearned premiums is calculated on the basis of 1/8 for reinsurance and retrocession transactions that are not subject to basis of day or 1/24 due to application limitations.

Terms of reinsurance treaty agreements are considered in the accounts of reinsurer’s share of unearned premium reserves. In the related period, as the financial statements are prepared, the “Carried Forward Unearned Premium Reserves” account should reflect the “Unearned Premium Reserves” account of the prior period’s financial statement and “Unearned Premium Reserves” for the period should be recognized as the sum of unearned portion of premiums of policies effective as of balance sheet date, which are calculated on a daily basis. Unearned premium reserve for the insurance policies in foreign currencies are calculated using foreign currency selling rate issued on the Official Gazette by Central Bank of Republic of Turkey if a foreign currency rate is not specified on the insurance policy.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 28 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Unexpired Risk Reserve: Unexpired risk reserve is provided for the branches, in which there is inconsistency between the risk level assumed over the insurance period and the premiums earned over time and where the Company’s unearned risk reserve is inadequate for its risks assumed and/or costs estimated. In accordance with the Communiqué on Technical Reserves, in each accounting period, the companies while providing reserve for unearned premiums should perform adequacy test covering the preceding 12 months in regard with the probability of future claims and compensations of the outstanding policies will arise in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (reserve for outstanding claims, net + claims paid, net – reserve for outstanding claims carried forward, net) to earned premiums (written premiums, net + reserve for unearned premiums, net – reserve for unearned premiums carried forward, net).

If the estimated claim premium ratio exceeds 95% in future periods for the estimated claim premium ratio of insurance branches, the amount calculated multiplying ratio exceeding 95% by net unearned premiums reserve is called net provision for unexpired risk reserve, and the amount calculated multiplying ratio exceeding 95% by gross unearned premiums reserve is called gross provision for unexpired risk reserve. The difference between net and gross provision for unexpired risk reserve is considered as reinsurer share. For the non-proportional reinsurance agreements, the accrued amount of the claims paid is considered as premium ceded under net premium account. The unexpired risk reserve includes the outstanding claims incurred and calculated but not actually paid in the prior or current period including the related expenses and the outstanding claim adequacy difference. The entities are required to take unexpired risk reserve into consideration during the preparation and update of their tariffs. For the newly started insurance branches, unexpired risk reserve is calculated after twelve months following the beginning of the operations.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 29 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Equalization Reserve: It is the reserve provided for earthquake and credit guarantees in order to equalize the possible fluctuations in the claims compensation rates and to cover the catastrophic risks in subsequent periods 12 % of the net earthquake and credit insurance premiums are taken for the calculation of this reserve. Amounts paid for non-proportional reinsurance contracts are considered as premiums ceded in the calculation of net premium. For the non-proportional reinsurance agreements including more than one branch, the amount of premium carried forward for credit insurance and earthquake insurance is calculated per their percentages in the total premium unless another calculation method is determined by the Company.

The reserve is provided to the extent that reserves reach at 150% of the maximum net premium written in the last five financial periods. In a case of an incurrence of a claim, the amounts corresponding to the reinsurer and the amounts below the exemption limit determined in the contract cannot be deducted from the equalization reserves. Such amounts presented under equity can be kept as reserve, used for capital increase or payment of claims. In life insurance providing death benefit, the Company will be using its own statistical data in the calculation of equalization reserve. In accordance with the modification of the regulation issued by the Undersecretariat of Treasury dated 28 July 2010, numbered 27655 regarding “Reinsurance and Pension Companies’ Technical Reserves and the Funding Related to Such Reserves”, the companies which do not have past data to make the required calculations will consider 11% of the premium for death coverage as the earthquake coverage premium and they will reserve 12% of this amount.

In the case of an earthquake or a loss in the loan branch and related financial year, reserves booked for credit or earthquake insurances can be used in the payment of claims. Reinsurers’ share and the amount(s) below the exemption limit set out in the reinsurance agreement will not be deducted against equalization reserves. According to Circular No:2012/1, “The Circular on the Use of Equalization Reserve and Additional Information about some other Circulars”, it is possible to use the equalization reserve provided for catastrophic claims on the reimbursement of catastrophic claims. Additionally, it is possible to net off the outstanding claims provided, based on expertise report or the documents provided from legal authorities in case of catastrophe, from the equalization reserve. However, the related net off should not be done from current year equalization reserve. Besides, incurred catastrophic claims should be recorded to related technical accounts that incurred catastrophic claims covered from the equalization reserve should be debited from balance sheet account of equalization reserve and credited to the changes in other technical reserves account. On the other hand, it is possible not to include paid catastrophic claims provided from the equalization reserve to the calculation of incurred but not reported claims (“IBNR”).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 30 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Equalization Reserve (cont’d): The Company calculated equalization reserve of TL 15.665.031 which is presented in “Other Technical Reserves” in the accompanying financial statements. (31 December 2010: TL 6.760.273) Outstanding Claim Reserve: Outstanding claims reserve is provided for outstanding claims incurred and calculated but not actually paid in prior or current period, or outstanding claims for which the related amount is carried at estimated value. When determining outstanding claim reserve, calculated or estimated expert, consultant, court or communication expenses and all other necessary expenses for claims are taken into consideration whereas salvage and subrogation income are not deferred from the reserve amount. Provided that subrogation rights are obtained, accrued salvage and subrogation like income items are included within the receivable amount on the balance sheet in accordance with regulations by Undersecretariat of Treasury. Except the life branch, the difference between the actual amount of outstanding claims reserve and the amount per actuarial chain ladder method in accordance with the regulations by Undersecretariat of Treasury is considered as the incurred but not reported outstanding claims reserve. The Undersecretariat has a right to demand from the companies use actuarial chain ladder method for certain insurance branches. Companies are required to disclose the insurance branches for which the actuarial chain ladder method was used in the financial statements. For life branch, the methods to be used for calculating incurred but not reported claims reserve is determined by the Undersecretariat considering the collaterals required for each branch. When calculating the IBNR the amounts during the last 12 months period preceding the balance sheet date are taken into consideration. Claims that were incurred before, but not reported as of these dates are considered as IBNR. When calculating IBNR, the weighted average ratio of IBNR (net of subrogation and salvage income) divided by annual premiums during the past 5 or more years period is used. The IBNR for the current period is calculated by multiplying aforementioned ratio by the premium income of past 12 month period. The IBNR calculation should be performed for each insurance branch separately using the related premium income. Any claims which were incurred and reported by the balance sheet date, but for some reason not included in the outstanding claims provision are also included in IBNR.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 31 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Outstanding Claim Reserve (cont’d) The amounts calculated both using the actual calculation and actuarial chain ladder method are compared and the higher amount is reflected IBNR in the financial statements. Amendments made by the Undersecretariat of Treasury in Communiqué of “Amendments to the Technical Reserves Communiqué” published in the Official Gazette no: 27655 dated 28 July 2010 are effective as of 30 September 2010.

Following the amendments in the related Communiqué by the Undersecretariat of Treasury, the Circular no: 2010/19 and the sector announcements no: 2010/12, 2010/13 and 2010/14 have been issued. These included clarifications for the accounting of salvage and subrogation income, measurement of IBNR and disclosures of some specific issues, and thus eliminated the unresolved and unclear matters that were not explicitly described in previous circulars and sector announcements. It has been stated that such new regulations would be effective as of 30 September 2010.

Claims incurred but not reported by the balance sheet date are considered as IBNR. According to the circular numbered 2010/14 about the “Incurred but not reported outstanding claims reserve for life insurance branch” issued by the Undersecretariat of Treasury, there is a change in the method of IBNR. In accordance with this change, a weighted average ratio is used which is calculated by dividing the gross IBNR during the previous 5 or more years by the yearly average insurance coverage amounts during the same period. In life insurance branch, IBNR is calculated on the basis of insurance coverage amounts within the framework of Circular dated 20 September 2010, numbered 2010/14 “Calculation of outstanding IBNR reserves at Life Insurance Branch” and Article No.7 of Circular “Technical Reserves and Assets for Investing Reserves of Insurance, Reinsurance and Pension Funds Companies” published by Treasury numbered 2010/14. Accordingly, for the newly operating branches the companies use the IBNR calculated by their actuaries during the first 5 years period.

The Company started to underwrite premiums as of 1 January 2010, hence the Company is accepted as newly operating in life and personal accident branches as per the regulation.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 32 2. Summary of the Accounting Policies (cont’d) 2.1 Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Outstanding Claim Reserve (cont’d) In this respect, the Company has prepared monthly and quarterly calculations based on average guarantees till the five year based data would be ready for the calculation of IBNR. Additionally, the Company follows up sectoral average and compares their work with regulation and sectoral applications. Outstanding claims adequacy calculations have been performed and IBNR adequacy is followed up. For this purpose, the calculations have been performed based on actuarial chain ladder method including life branch based on former regulation applications.

The Company considers the values that have been calculated for life branch with actuarial chain ladder method based on former regulation as discussed above is high, therefore the Company predicts to expose to an IBNR claims reserve that are not exceeding one year because the 100 % portfolio of the Company is credit life branches. The monthly calculation does not respond immediately to the fluctuation of claims. Because of the fact, the Company prefers to use quarterly method and shows the result on its financial statements. The calculation includes quarterly reported and paid claims.

In the accompanying financial statements, “outstanding claim reserve-net” is amounting to TL 43.808.307, which is composed of TL 6.743.256 for outstanding claims reserve for reported claims, TL 24.610.646 for IBNR claims and TL 12.454.405 for outstanding claims adequacy difference (31 December 2010: TL 9.390.210, which is composed of TL 569.363 for outstanding claims reserve for reported claims, TL 8.820.847 for IBNR claims). For branches where the total number of claims is deemed insufficient and therefore large scale claims are separated, an adequacy test is performed. Companies are required to prepare outstanding claims reserve adequacy tables for each insurance branch as of each balance sheet date. This table demonstrates the outstanding claim reserve adequacy ratio calculated by dividing the outstanding claim reserve of the companies to actual paid compensation amounts of the related provisions. In cases where the outstanding claim adequacy ratio is under 100%, adequacy gap is calculated by multiplying the 100% difference with current year outstanding claims reserve.

Adequacy gap is added to outstanding claims reserve for each branch to calculate final adjusted outstanding claim reserve as of balance sheet date. When preparing the adequacy table and calculating the outstanding claims reserve, incurred but not reported claims and all related expenditures are taken into consideration. Reinsurers’ share in claims is calculated per the reinsurance contracts.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 33 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Outstanding Claim Reserve (cont’d) Under the Insurance Supervision System (“ISS”), the Treasury requires insurance and reinsurance companies and pension funds to provide information/data for specific periods on a consistent basis for the purpose of preparation of reports on the insurance and individual pension fund operations; performing financial analysis and identifying risk areas to form an audit plan; and ensuring that liabilities in relation to policyholders are met. The regular information/data required by the Treasury are uploaded to the Insurance Supervision System portal. The Company’s “Outstanding Claims Reserve Adequacy Difference” calculated by using the “18OCRAD” (“Outstanding Claims Reserve Adequacy Difference”) worksheet included in the “TABLE10-Financial” data file required for the 2011 financial data may differ from the “Outstanding Claims Reserve Adequacy Difference” presented in the accompanying financial statements.

If a company can not estimate the claim amount reliably when it is first notified the outstanding claims reserve is accrued based on the statistical claim data over the past 5 years. According to the obtained information, these calculations are revised at every balance sheet period to adjust the reserve amounts. Claims related to foreign currency denominated insurance policies are carried at rates prevailing on the contracts. If claims are agreed to be paid at the effective rates of the payment date, the exchange selling rate issued by Central Bank of Turkish Republic announced in the Official Gazette. Regardless of likelihood for losing of winning a legal case, for claims under litigation, outstanding claims reserve is initially based on the value determined per the amount claimed in the legal case. If, however, claims excluding the expenditures such as; overdue interest, legal costs and counselor’s fee claimed by the policy holders exceed the total coverage of the insurance policy, companies should deduct the exceeding portion(s) against the outstanding claim portion.

If more reliable evidences such as official court expert’s report or experts report or invoice are available they are considered as a more reliable estimate (including the delay interest charges, legal expenses, even if there is a different amount per the legal case. Claims which are not followed up by the claimants or which did not result in payment should be reversed and recognised as income at the end of statute of limitations.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 34 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) a. Technical Reserves (cont’d) Mathematical Reserves: Companies engaged in life and non-life branches provide appropriate actuary mathematical reserves in order to meet their liabilities to policyholders and beneficiaries having life, health and personal accident policies having more than one year of maturity. For additional coverages; personal accident, health, disability from illness and serious illnesses with long term coverage period; given as a part of long term life insurance contract, life insurance mathematical reserve should be calculated including the additional coverages in accordance with actuarial basis Mathematical reserves consist of actuarial mathematical reserves and profit share reserves (share of policyholders, determined from the income generated from mathematical reserves directed towards investment), that are calculated separately for each effective policy, in accordance with the technical principles in the tariffs and which are explained in clauses (i) and (ii) below.

i) Actuarial mathematical reserve is the difference between the premiums received for the risks assumed and cash value of liabilities to policy holders and beneficiaries. Actuarial mathematical reserves are provided based on the formulas and elements of the approved technical principles of directions determined for life insurances having more than one year of maturity. Actuarial mathematical reserves are calculated on a prospective method by determining the difference between the cash value of the insurance company’s future liabilities and the present value of future premiums of policy holders.

However, the sum of actuarial mathematical reserves calculated either based on the retrospective method (calculation of difference between the final value of premiums paid and the final value of the risks assumed) or based on the generally accepted methods by the Undersecretariat of Treasury cannot be less than this amount. When the actuarial mathematical reserves are presented as negative, this value is deemed to be nil. In life insurance policies where accumulated premiums are collected, actuarial mathematical reserve includes the sum of accumulated portion of premiums. Actuarial mathematical reserves can be measured on an accrual or collection basis depending on the technical characteristics of the tariffs.

ii) Profit share reserves consist of the income obtained from assets in relation to reserves provided for the obligations for the policyholders and beneficiaries in contracts for which the Company has committed to distribute profit shares; the guaranteed portion (not to exceed the technical interest income calculated based on the profit share distribution system prescribed in the approved technical principles of profit share) and prior years’ accumulated profit share reserves.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 35 2. Summary of the Accounting Policies (cont’d) 2.2. Basis of Preparation (cont’d) 2.1.2. Other related accounting policies relevant for the financial statements (cont’d) b. Insurance income and expenses Premium income consists of installment amounts of accumulated life insurance policies issued in current or prior period(s), less any shares transferred to reinsurers. In life branch, premium income is accrued on a timely basis when the related premiums are due. Premiums are collected in cash or in installments at the option of the customers. Premium income for accumulated life insurance is recorded at the due dates of the premium installments. Premium from personal accident branch are collected in cash or in installments. The Company books provisions for uncollectible insurance receivables that in legal follow up as of the balance sheet date.

Claims are recognized as expense as they are paid. Outstanding claims reserve is provided for both reported but not paid claims and incurred but not reported claims. Reinsurers’ shares in outstanding claims and claims paid are off-set against the gross claim amounts. The expenses related to the other technical reserves are explained in Note 2.1.2 a. Technical Reserves above. c. Receivables from insurance operations The Company’s receivables and payables from reinsurance and insurance companies are recognized in the financial statements in netted-off basis per each company. The Company provides provision for receivables under managerial and legal-follow up (doubtful receivables), considering the value and nature of such receivables. There are no doubtful receivables as of 31 December 2011. 2.1.3. Functional currency The Company’s financial statements are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The results and financial position of the Company are expressed in Turkish Lira, which is the functional and presentation currency of the Company.

2.1.4. Rounding degree used in the financial statements All the figures presented in the financial statements are expressed in Turkish Lira (TL). 2.1.5. Valuation method(s) used in the presentation of financial statements Financial statements are prepared based on the historical cost method.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 36 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors Details of new and revised standards and interpretations adopted in these financial statements but that have had no impact on the financial statements are set out below. Standards and Interpretations that are effective in 2011 with no impact on the 2011 financial statements IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities.

The Company and its subsidiaries are not government-related entities Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements. Amendments to IAS 32 Classification of Rights Issues The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entity's equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entity's equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application.

The application of the amendments has had no effect on the amounts reported in the current and prior years because the Group has not issued instruments of this nature. Amendments to IFRS 3 Business Combinations As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity's net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquiree's employees. Specifically, the amendments specify that share- based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (‘market-based measure’)

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 37 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors Standards and Interpretations that are effective in 2010 with no impact on the 2010 financial statements (cont’d) Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions.

The application of the amendments has not had material effect on the Group's consolidated financial statements IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognised in profit or loss.

The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature Improvements to IFRSs issued in 2010 Except for the amendments to IFRS 3 and IAS 1 described earlier in section 2.1, and 2.2, the application of Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the consolidated financial statements.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 38 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: Amendments to IFRS 7 Disclosures – Transfers of Financial Assets1 IFRS 9 Financial Instruments2 IFRS 10 Consolidated Financial Statements5 IFRS 11 Joint Arrangements5 IFRS 12 Disclosure of Interests in Other Entities5 IFRS 13 Fair Value Measurement5 Amendments to IAS 1 Presentation of Items of Other Comprehensive Income3 Amendments to IAS 12 Deferred Tax – Recovery of Underlying Assets4 IAS 19 (as revised in 2011) Employee Benefits5 IAS 27 (as revised in 2011) Separate Financial Statements5 IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures5 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine5 Amendments to IAS 32 Financial Instruments: Presentation - Offsetting of Financial Assets and Financial Liabilities6 The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The group management does not anticipate that these amendments to IFRS 7 will have a significant effect on the Group’s disclosures. However, if the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected. The amendments to IFRS 7 require an entity to disclose information about rights of offset and related agreements for financial instruments under an enforceable master netting agreement or similar arrangement. The new disclosures are required for annual or interim periods beginning on or after 1 January 2013.

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 39 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors (cont’d) The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective (cont’d): Key requirements of IFRS 9 are described as follows: IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

IFRS 9 was amended to defer the mandatory effective date of both the 2009 and 2010 versions of IFRS 9 to annual periods beginning on or after 1 January 2015. Prior to the amendments, application of IFRS 9 was mandatory for annual periods beginning on or after 1 January 2013. The amendments continue to permit early application. The amendments modify the existing comparative transition disclosures in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and IFRS 7 Financial Instruments: Disclosures. Instead of requiring restatement of comparative financial statements, entities are either permitted or required to provide modified disclosures on transition from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9 depending on the entity’s date of adoption and whether the entity chooses to restate prior periods.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 40 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors (cont’d) The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective (cont’d): In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).

Key requirements of these five Standards are described below. IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SIC-12 Consolidation – Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Under IFRS 10, there is only one basis for consolidation, which is the control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor's returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios.

IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. SIC-13 Jointly Controlled Entities – Non-monetary Contributions by Venturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting. IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards. These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 41 2. Summary of the Accounting Policies (cont’d) 2.1. Basis of Preparation (cont’d) 2.1.6. Change in Accounting Policies, Accounting Estimates and Errors (cont’d) The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective (cont’d): IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope. IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that IFRS 13 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods. The amendments to IAS 12 are effective for annual periods beginning on or after 1 January 2012. The directors anticipate that the application of the amendments to IAS 12 in future accounting periods may result in adjustments to the amounts of deferred tax liabilities recognised in prior years regarding the Group's investment properties of which the carrying amounts are presumed to be recovered through sale. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 42 2. Summary of the Accounting Policies (cont’d) 2.2. Basis of Preparation (cont’d) 2.2.6. Change in Accounting Policies, Accounting Estimates and Errors (cont’d) The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective (cont’d): The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.

The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Groups’ defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact.

On 19 October 2011 the IASB issued an Interpretation, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, clarifying the requirements for accounting for stripping costs in the production phase of a surface mine. The Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The Interpretation is effective for annual periods beginning on or after 1 January 2013 with earlier application permitted. The amendments to IAS 32 are intended to clarify existing application issues relating to the offsetting rules and reduce the level of diversity in current practice. The amendments are effective for annual periods beginning on or after 1 January 2014. 2.2. Consolidation Company has no subsidiary or affiliate. 2.3. Segment Reporting The Company is engaged in private pension, life and related casualty insurance branches. The Company has segment reporting due to the diversification of the nature of its products (Note 5).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 43 2. Summary of the Accounting Policies (cont’d) 2.4. Reserves in Foreign Currencies In the preparation of the financial statements of the Company, transactions in foreign currencies (currencies other than TL) are recognized at exchange rates prevailing at the transaction date. At each balance sheet date, monetary items denominated in foreign currencies are recognized at the exchange rates prevailing on the balance sheet date. There are no transactions in foreign currencies during the period. Financial statements are presented in TL which is the Company’s functional currency.

2.5. Tangible Assets Tangible assets are carried at cost, less any accumulated depreciation and any impairment loss. Assets under construction for administrative or any other purposes, and leased assets, are carried at cost, less any impairment. Legal charges are also added to costs. Assets, other than land and ongoing constructions, are depreciated over their expected useful lives by using the straight line method. Estimated useful life, residual value, and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Gain or loss arising on the disposal or retirement of an item of tangible assets is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. Tangible assets, based on asset type, are depreciated in the stated periods below: Hata! Bağlantı geçersiz. 2.6. Intangible Assets Purchased intangible assets are accounted for at cost at the initial recognition. Purchased intangible assets are accounted for at cost less accumulated amortization and any impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. Estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Purchased computer software licenses are capitalized on the basis of the costs incurred from the date of acquisition to the date to bring the specific software in use. These costs are amortized over their estimated useful lives (3 years). Costs that are directly associated with the development of identifiable and unique software products that are controlled by the Company and will probably provide more economic benefits than costs in one year are recognized as intangible assets. Costs include software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognized as assets are amortized over their estimated useful lives (not exceeding three years).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 44 2. Summary of the Accounting Policies (cont’d) 2.7. Financial Assets Financial assets are classified into the following specified categories: financial assets as “at fair value through profit or loss” (“FVTPL”), “held-to-maturity investments”, “available-for- sale financial assets” (“AFS”) and “loans and receivables”.

Effective interest method Effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Financial assets at fair value through profit or loss (Held-for-trading financial assets) Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset can be classified as financial asset at fair value through profit or loss, if it is acquired principally for the purpose of selling in the short-term. Derivatives are also classified as held for trading unless they are designated as hedging instruments. Financial assets at fair value through profit and loss are classified as current assets.

Income related to the financial assets except for the financial assets at fair value through profit and loss is calculated by using the effective interest method Held-to-maturity investments Investments in debt securities with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held- to-maturity investments. Held-to-maturity investments are recorded at amortized cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.

Available-for-sale financial assets Investments other than held-to-maturity debt securities and held for trading securities are classified as available-for-sale, and are measured at fair value. Available-for-sale investments that do not have quoted prices in active markets and whose fair values cannot be reliably measured are stated at cost. Gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in the profit or loss for the period. Impairment losses recognized in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognized in profit or loss for debt instruments classified as available-for- sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. The Company does not have financial assets at fair value through profit or loss (held-for- trading financial assets) and held-to-maturity financial assets. The Company has TL 36.912.504 available for sale financial assets. TL 337.569 of this total is private pension investment funds, TL 398.730 of this total is the share of the Company at Pension Monitoring Center. The remaining TL 36.176.205 is private sector bonds and asset-backed securities.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 45 2. Summary of the Accounting Policies (cont’d) 2.7. Financial Assets (cont’d) Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.

2.8. Impairment of Assets Impairment of Non-financial Assets Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non- financial assets that are subject to impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment of financial assets The Company assesses its financial assets, other than those at FVTPL, at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or portfolio of financial assets is impaired and an impairment loss incurred if there is objective evidence that an event or events since initial recognition of the asset have adversely affected the amount or timing of future cash flows from the asset. For loans and receivables, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

Changes in the carrying value of the allowance are recognized in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For AFS equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity.

2.9. Derivative Financial Instruments As of the balance sheet date, the Company has no derivative financial instruments. 2.10. Offsetting of Financial Assets Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 46 2. Summary of the Accounting Policies (cont’d) 2.11. Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

2.12. Share Capital As of 31 December 2011, the Company's paid in capital is TL 20.000.000 (31 December 2010: TL 20.000.000). The Company is not subject to the registered capital system. There is no privilege on the shares. 2.13. Insurance and Investment Contracts - Classification Insurance Contracts: Insurance contracts are contracts in which one part accepts a significant insurance risk and pays compensation (insurer) to the other part (insuree) when any uncertain case affects the insuree. The Company enters into reinsurance agreements in which the Company (ceding company) is compensated by the insurer (reinsurer company) for one or more claims. Insurance contracts entered into by the Company under which the contract holder is another insurer (reinsurance) are included in insurance contracts.

Insurance contracts are accounted for when the insurance risk is transferred, and classified as an insurance contract as of the maturity date and/or amortization of the all contractual rights and liabilities. Investment Contracts: The accumulation component present in life insurance products is measured by the Company on a separate basis. On the other hand, as the accounting policies require the recognition of rights and obligations related with the accumulation component, regardless of the measurement principles, the insurance and investment components are not decomposed. The Company has no liabilities due to the life insurance products which include accumulation component as of 31 December 2011.

2.14. Insurance contracts and investment contracts with discretionary participation Discretionary participation feature (“DPF”) within insurance contracts and investment contracts is the right to have following benefits in addition to the guaranteed benefits. that are likely to comprise a significant portion of the total contractual benefits, whose amount or timing is contractually at the discretion of the Issuer; and that are contractually based on: a. the performance of a specified pool of contracts or a specified type of contract; b. realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or c. the profit or loss of the Company, Fund or other entity that issues the contract. As at balance sheet date, the Company does not have any insurance or investment contracts with DPF.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 47 2. Summary of the Accounting Policies (cont’d) 2.15. Investment contracts without DPF The Company does not have investment contracts without DPF. 2.16. Borrowings The Company does not have borrowings. 2.17. Deferred Income Tax Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset in the accompanying financial statements. Deferred tax for the current period, except for those that are associated with items that are directly recognized as receivable or payable in equity (the related deferred tax is also recognized directly in equity), is recognized as profit or loss in the statement of income.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 48 2. Summary of the Accounting Policies (cont’d) 2.18. Employee Benefits Under the Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan in accordance with TAS 19 “Employee Benefits”. The amount payable consists of one month’s salary limited to a maximum of TL 2.805,04 for the period 1 January 2012 until 30 June 2012 .

2.19. Provisions Provisions are recognised when the Company has a present or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are measured considering the expected outflow of economic resources and expenditures, required to settle the obligation by considering the risks and uncertainties related to the obligation at the balance sheet date. When the provision is measured by using the estimated cash outflows that are required to settle the obligation, the carrying value of the provision is equal to present value of the related cash outflows.

Where some or all of the expenditure required to set a provision is expected to be reimbursed by another party, the reimbursement shall be recognised as an asset if and only it is virtually certain that reimbursement will be received and the reimbursement can be reliably estimated. As of balance sheet date, there is a lawsuit against the company due to the rejection of a claim with an insurance coverage of TL 6.300 (case amount TL 10.799). There are not any other legal proceedings expected against the Company.

There are no court cases filed by the Company against third parties. 2.20. Revenue Recognition Insurance income and expenses are explained in the note “2.1.2. Other related accounting policies relevant for the financial statements - Insurance income and expenses”. Interest income and expense Interest income and expense are accounted for on an accrual basis. Dividend income Dividend income is recognized when the Company’s right to receive payment is ascertained. 2.21. Financial Leasing The Company has no leasing transactions.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 49 2. Summary of the Accounting Policies (cont’d) 2.22. Profit Distribution Dividend payments are accounted for in the financial statements in accordance with the Company’s Main Agreement and General Assembly Meeting. 3. Significant Accounting Estimates and Requirements The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

Significant accounting estimates and requirements are explained in Note 2.1, Basis of Preparation, Technical Provisions. 4. Insurance and Financial Risk Management 4.1. Insurance Risk 4.1.1. Objective of managing risks arising from insurance contracts and policies used to minimize such risks: Insurance risk is the probability of risk exposure that is covered under any insurance contracts and the uncertainty of the magnitude of the claims in relation to the risk exposed. Due to the nature of insurance transactions, risks are incidental and hard to anticipate. Insurance risk represents the possibility that the premiums received are not sufficient to cover the claims paid.

The Company’s claim/premium ratio for life insurance is 71,32 % as of 31 December 2011. (31 December 2010: 49,48 %) The Company’s claim/premium ratio for personal accident insurance is 39,67 % as of 31 December 2011. A low claim/premium ratio, which is calculated by the proportion of claims to collected risk premium indicates that the Company has a significant income. The Company periodically reviews the claim/premium ratio to determine the insurance risk. The Company holds a retention amount of TL 150.000 per claim, and makes contracts for excess claims to be ceded to reinsurers. Also, each year the Company signs excess of loss reinsurance contracts to hedge against its conservation for catastrophic damages such as earthquake, flood, major public transportation accidents, major natural disasters or terrorist attacks. In accordance with the agreement, when there are 3 or more claims payments due to catastrophic damages, a total coverage of EUR 21.000.000 with conservation amount EUR 200.000 per case and EUR 42.000.000 per annum is established.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 50 4. Insurance and Financial Risk Management (cont’d) 4.1.1. Insurance Risk (cont’d) 4.1.1. Objective of managing risks arising from insurance contracts and policies used to minimize such risks (cont’d): As of 31 December 2011 and 31 December 2010, the portion of the total risk which is transferred to the reinsurers per each risk coverage for life insurance portfolio is presented as below : 31 December 2011 Death by Death by Disability by Disability by Natural Cause Casualty Casualty Illness 1,81 % 0,45 % 1,89% 0,56 % 31 December 2010 Death by Death by Disability by Disability by Natural Cause Casualty Casualty Illness 0,32 % 0,28 % 0 % 0,26 % 4.1.2. Information about insurance risk including the information about the followings (before and after the reduction of risk by reinsurance) 4.1.2.1. Sensitivity to insurance risk The Company’s policy production strategy follows an effective risk management in the policy production process considering the nature, extent, and accurate distribution of the risk incurred.

Reinsurance agreement is established as the excess of loss type. If the risk materializes, for the year 2010 and 2011, claims payment exceeding TL 150.000 are transferred to the reinsurer firm according to death and additional guarantees. Also, catastrophic claims are secured as explained in note 4.1.1. 4.1.2.2.Insurance risk concentrations which include the methods used by the management to identify the concentrations and common characteristics of each concentration criteria (the nature of insured event, geographical area or currency): The Company has life and personal accident insurance policies. The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below. Life and personal accident contracts are realized in the year 2010 and 2011.

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ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 51 4. Insurance and Financial Risk Management (cont’d) 4.1. Insurance Risk (cont’d) 4.1.2.2.Insurance risk concentrations which include the methods used by the management to identify the concentrations and common characteristics of each concentration criteria (the nature of insured event, geographical area or currency) (cont’d): Error! Not a valid link.

All of the Company’s insurance contracts are issued in Turkey. Distribution of risk concentrations (total liability of claims) under the effect of geographical regions in the insurance contracts are summarized on table below as gross and net amount (after the reinsurance). Hata! Bağlantı geçersiz. (*)Total claim liability contains TL 43.808.307 of outstanding claims reserve as of balance sheet date and TL 24.610.646 of incurred but not reported claims reserve, TL 12.454.405 outstanding claims reserve is not included in calculation. (31 December 2010: Total claim liability contains TL 9.390.210 of outstanding claims reserve as of balance sheet date and TL 8.820.847 of incurred but not reported claims reserve is not included in calculation.)

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 52 4. Insurance and Financial Risk Management (cont’d) 4.1 Insurance Risk (cont’d) 4.1.2.3.Comparison of claims incurred with past estimations Outstanding claims reserve adequacy table represents the ratio of claims reserves over the realized amounts to such claims over the past five years. Claims reserve adequacy table has not been prepared as there are no data for the past five years yet. 4.1.2.4. Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements None.

4.2. Financial Risk Capital risk management and capital requirements The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company’s financial assets amount to TL 36.912.504 as of 31 December 2011. TL 337.569 of the balance is private pension funds in the portfolio of the company, TL 398.730 is the Company’s share of Pension Monitoring Center. Remaining TL 36.176.205 consists of private sector bonds and asset-backed securities. Risk Management Programme of the Company is focused on minimizing the potential negative effects of uncertainty in financial markets on the Company’s financial performance. The capital adequacy of the Company is calculated in accordance with the Decree of “Measurement of Capital Adequacy of Insurance, Reinsurance and Private Pension Companies”. Capital adequacy table as of 31 December 2011 and 2010 is presented below.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 53 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Capital risk management and capital requirements (cont’d) 31 December 2011 31 December 2010 1.Method Required Capital For Non-Life Branches 736.058 5.913 Required Capital For Life Branch 90.674.270 40.963.050 Required Capital For Retirement Branch 388.132 - Total Required Capital 91.798.460 40.968.963 2.Method Required Capital For Asset Risk 2.978.005 6.246.014 Required Capital For Reinsurance Risk 91.323 85.037 Required Capital For Excessive Premium 799.828 - Required Capital For Outstanding Claims 1.095.208 234.755 Required Capital For Underwriting Risk 40.504.538 30.088.512 Required Capital For Exchange Rate Risk - 38 Total Required Capital 45.468.902 36.654.356 Capital (*) 136.076.116 75.187.645 Capital Adequacy Result 44.277.653 34.218.682 CAPITAL ADEQUACY TABLES (*) As per the capital adequacy table format, the equalization reserve amounting to TL 15.842.171 was added to capital amount (31 December 2010: TL 6.760.273). Interest rate risk The Company is exposed to interest rate risk arising from fluctuations in prices of financial instruments caused by changes in interest rates. The Company’s sensitivity to interest rate risk is related to the unmatching maturities of assets and liabilities. This risk is managed through meeting the assets that are affected by the changes in interest rate with the same type of liabilities. The Company’s financial assets subject to the interest rate risk as of 31 December 2011 and 31 December 2010 is presented below.

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ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 43 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Interest rate risk (cont’d) Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 44 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Interest rate risk (cont’d) Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 45 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Exchange rate risk Exchange rate risk is the effects of exchange rate movements on assets, liabilities and off balance sheet liabilities denominated in foreign currencies. The Company does not have any assets and liabilities in foreign currencies as of 31 December 2011 and 31 December 2010.

Credit Risk Credit risk is the risk that the debtor defaults on its obligations related with receivables from insurance operations, under the terms of the insurance transactions. Based on the Company's operations and relationships with other parties, its credit risk is deemed to be relatively at minimum. The review of the Company's third party relations are presented below. Reinsurers: The Company works with financially solid international reinsurance companies. Therefore the level of risk exposure is also deemed to be at minimum. Agencies: Due to the structure of its operations the sole agency of the Company is Ziraat Bankası A.Ş. Commission expenses to agencies are paid over a long terms as the policies sold have also long terms. Also premium collections are done at the time of the issuance of the policy, which prevents large balances of receivables and payables to build-up. Policy Holders: Overdue receivables are not considered as a significant risk for the Company because when the premium collections are delayed the insurance coverage is also void. Liquidity risk Liquidity risk is the possibility of the Company’s not meeting its net funding liabilities. Cases such as deteriorations in markets or decreasing the credit rating which are resulted in decrease in fund resources generate liquidity risk. In order to meet its current and potential liabilities, the Company holds adequate cash and equivalents. The Company’s liabilities are settled through its own sources. The Company neither has any borrowing nor similar financial payables. As of 31 December 2011 and 2010, the distribution of the assets and liabilities in terms of remaining maturities is presented in the below table:

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 46 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Liquidity risk (cont’d) Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 47 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Liquidity risk (cont’d) Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 48 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Other Risks Categories of Financial Instruments: The fair value of financial assets and liabilities are determined as below: 31 December 2011 Financial Assets Available for sale financial assets 36.912.504 30.561.299 - 6.351.205 Receivables from main operations 51.998.148 - - 51.998.148 Receivables from related parties 4.729 - - 4.729 Financial Liabilities Payables from main operations 52.219.631 - - 52.219.631 Payables to related parties 553.422 - - 553.422 Other liabilities 443.510 - - 443.510 31 December 2010 Category 1 Category 2 Category 3 Financial Assets Available for sale financial assets - Receivables from main operations 128.936 - - 128.936 Receivables from related parties 3.181 - - 3.181 Financial Liabilities Payables from main operations 27.098 - - 27.098 Payables to related parties 32.054 - - 32.054 Other liabilities 80.393 - - 80.393 Category 3 Category 1 Category 2

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 49 4. Insurance and Financial Risk Management (cont’d) 4.2. Financial Risk (cont’d) Other Risks (cont’d) Categories of Financial Instruments (cont’d) The fair values of financial assets are presented in three categories in terms of their valuation methods in the table above. "Category 1" represents the fair value derived from active liquid markets (market data), the "Category 2" represents the fair value derived from similar actual transactions and "Category 3" represents the fair value derived from discounted cash flows of financial assets.

Fair value of financial assets: Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The Company determines the estimated fair value of its financial instruments by using the current market information and appropriate valuation methods The following methods and assumptions are used in fair value estimations for financial instruments of which their fair value cannot be practically measured: Financial assets: It is anticipated that fair value of the financial assets including cash and cash equivalents and other financial assets carried at cost will approximate to their book value based on their short term nature and having insignificant potential losses. Market value is taken as a basis in the measurement of fair value of government bonds and equity shares.

Financial liabilities: It is anticipated that fair value of monetary liabilities will approximate to their carrying value based on their short term nature.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 50 5. Segmental Information Segmental information related with the Company’s operations of life insurance, private pension and personal accident branches as of 31 December 2011 are presented below: Hata! Bağlantı geçersiz. Segmental information related with the Company’s operations of life insurance and personal accident branches as of 31 December 2010 are presented below Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 51 5. Segmental Information (cont’d) Hata! Bağlantı geçersiz. Hata! Bağlantı geçersiz. 6. Tangible Assets The Company’s tangible assets as of 31 December 2011 are presented below: Furniture and Fixtures Vehicles Other Tangible Assets Total Cost Opening balance as of 1 January 2011 119.208 137.040 7.535 263.783 Additions 532.895 - 4.465 537.360 Closing balance as of 31 December 2011 652.103 137.040 12.000 801.143 Accumulated Depreciation Opening balance as of 1 January 2011 (10.049) (36.544) (754) (47.347) Charge for the period (58.535) (27.408) (2.471) (88.414) Closing balance as of 31 December 2011 (68.584) (63.952) (3.225) (135.761) Net book value as of 31 December 2011 583.519 73.088 8.775 665.382

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 52 6. Tangible Assets (cont’d) The Company’s tangible assets as of 31 December 2010 are presented below: Furniture and Fixtures Vehicles Other Tangible Assets Total Cost Opening balance as of 1 January 2010 24.912 137.040 - 161.952 Additions 94.296 - 7.535 101.831 Closing balance as of 31 December 2010 119.208 137.040 7.535 263.783 Accumulated Depreciation Opening balance as of 1 January 2010 (599) (9.136) - (9.735) Charge for the period (9.450) (27.408) (754) (37.612) Closing balance as of 31 December 2010 (10.049) (36.544) (754) (47.347) Net book value as of 31 December 2010 109.159 100.496 6.781 216.436 7. Investment Properties The Company’s does not have investment properties as of 31 December 2011 and 31 December 2010.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 53 8. Intangible Assets The Company’s intangible assets as of 31 December 2011 are presented below: Current Period (31 December 2011) Other Intangible Assets Total Cost Opening balance as of 1 January 2011 331.458 331.458 Additions 534.137 534.137 Closing balance as of 31 December 2011 865.595 865.595 Accumulated Depreciation Opening balance as of 1 January 2011 (75.949) (75.949) Charge for the period (197.127) (197.127) Closing balance as of 31 December 2011 (273.076) (273.076) Net book value as of 31 December 2011 592.519 592.519 Prior Period (31 December 2010) Other Intangible Assets Total Cost Opening balance as of 1 January 2010 - - Additions 331.458 331.458 Closing balance as of 31 December 2010 331.458 331.458 Accumulated Depreciation Opening balance as of 1 January 2010 - - Charge for the period (75.949) (75.949) Closing balance as of 31 December 2010 (75.949) (75.949) Net book value as of 31 December 2010 255.509 255.509 9. Investments in Affiliates None (31 December 2010: None.).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 54 10. Reinsurance Assets 10.1 Amounts accounted as reinsurance assets and liabilities as a result of various reinsurance agreements are presented below: Reinsurance Assets 31 December 2011 31 December 2010 Equalization Reserve Share of Reinsurers 177.140 - Receivables from Reinsurers Companies 66.675 73.219 Payables from Reinsurers Operations 31 December 2011 31 December 2010 Payables to Reinsurers Companies 12.048 - 10.2 Amounts recognized in profit or loss due to the reinsurance agreements: Life Branch Reinsurers operations 1 January- 31 December 2011 1 January- 31 December 2010 Premiums Ceded to Reinsurers ( 3.044.085) (2.834.566) Reinsurers Share in Claims Paid (+) 3.984.983 876.889 Equalization Reserve Share of Reinsurers (+) 177.140 - 11. Financial Assets The Company’s financial assets amount to TL 36.912.504 as of 31 December 2011. TL 337.569 of the balance is private pension funds in the portfolio of the company, TL 398.730 is the Company’s share of Pension Monitoring Center. TL 36.176.205 consists of private sector bonds and asset-backed securities. The details of the pension funds of the Company is presented below (31 December 2010: None).

Fund Name Number of Units in the portfolio Cost Value 31.12.2011 Price 31.12.2011 Value Alternative Flexible P.F.(*) 33.746.807 337.468 0,010003 337.569 Total 33.746.807 337.468 337.569 (*) P.F. = Pension Fund Hata! Bağlantı geçersiz. The details of guarantees on the Company’s available for sale financial assets are presented on Note 17.1. (*)The Company has unlisted equity instrument that is not traded in an active market and classified as available for sale financial assets and carried at cost because the fair value cannot be measured reliably. 12. Payables and Receivables Details of receivables are as follows : Hata! Bağlantı geçersiz.Aging table of receivables from insurance operations is as follows: Hata! Bağlantı geçersiz.The Company does not have guarantees of the receivables.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 55 Receivable-payable relationship with shareholders, affiliates and subsidiaries of the Company: 31 December 2011 Trading (*) Non- Trading Trading (*) Shareholders 32.470 290.204.774 22.065 43.310 31 December 2010 Trading (*) Non- Trading Trading (*) Shareholders 27.899 423.880.572 - 2.263 Payables Payables Receivables Receivables Non- Trading (**) Non- Trading (**) (*) All trade receivables due from shareholders are premium receivables and presented under receivables from insurance operations in the financial statements. (**) Non-trading receivables from shareholders consist of bank accounts. Non-trading payables to shareholders consist of cost of services.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 56 12. Receivables and Payables (cont’d) The Company has foreign currency payables presented on note 4.2. The details of payables are as follows : Hata! Bağlantı geçersiz. 13. Derivative Financial Instruments There are no derivative financial instruments as of 31 December 2011 and 31 December 2010. 14. Cash and Cash Equivalents Cash and cash equivalents in current assets are as follows: Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 57 14. Cash and Cash Equivalents (cont’d) Cash and cash equivalents on the cash flow statement are presented by subtracting interest accruals. Hata! Bağlantı geçersiz. Maturities of time deposits are up to 6 months (31 December 2010: up to 3 month) and, interest rates are between 9,4% and 13,00% as of balance sheet date (31 December 2009: 8,90% - 9,30%).

The Company does not have foreign currency denominated cash and cash equivalents as of 31 December 2011 and 31 December 2010. 15. Share capital The Company’s shareholder structure as of balance sheet is disclosed in Note 1.1. The Company’s nominal capital is TL 20.000.000 consisting 20.000.000 shares with TL 1 nominal value each (31 December 2010: TL 20.000.000). The Company is not subjected to the registered capital system. There is no privilege on shares. Legal reserves The legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of historical statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the historical paid-in share capital. The second legal reserve is appropriated after the first legal reserve and dividends, at the rate of 10% per annum of all cash dividend distributions. Unless first and second legal reserves exceed 50% of share capital amount but they can be used for compensation of losses.

Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 58 15. Share capital (cont’d) Hata! Bağlantı geçersiz. 16. Other Provisions and Capital Component of Discretionary Participation As at 31 December 2011, there are no other reserves presented under equity except for the fair value reserves of available-for-sale financial assets which is presented as “revaluation of financial assets” in the accompanying financial statements. Available for sale financial assets’ changes of fair value differences and related tax effects presented on the table above in Note 15.

17. Insurance Liabilities and Reinsurance Assets 17.1 Guarantees to be provided for life and non-life insurances and guarantees provided for life and non-life insurances based on assets According to the Communique for the Financial Structure of the Insurance, Reinsurance and Pension Plan Entities, insurance companies and pension plan entities operating in the life and individual accident branches are required to provide their guarantees within two months following the capital adequacy calculation period. The Company had made calculation for life branch and life insurances with maturities of one year or less as of 29 February 2012. Accordingly the Company established the related guarantee as of 29 February 2012. According to calculation as of 31 December 2011, total amount of guarantee to be established for life insurances with maturities of more than one year is TL 634.105.741, for life insurances with maturities of one year or less is TL 9.289.250, totaling to TL 643.394.991. This amount has been blocked in favour of Undersecretariat of Treasury on 29 February 2012. Blocked time deposits amounted to TL 544.981.144 and T-bill has TL 105.100.000 nominal value. The guarantee amount for personal accident branch is calculated per minimum capital basis and minimum guarantee amount is determined as TL 175.080 and TL 190.000 has been blocked in favour of Treasury.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 59 17. Insurance Liabilities and Reinsurance Assets (cont’d) 17.2. Number of life insurance policies, additions, disposals in the current period, and current life policy holders and their mathematical reserves Number of policies and the value of mathematical reserves as of 31 December 2011 and 31 December 2010 are presented below Hata! Bağlantı geçersiz. 17.3 Insurance coverage given to non-life insurance branches As of 31 December 2011, insurance coverage given for personal accident branch as non-life insurance is TL 4.728.332.670 (31 December 2010: TL 68.986.500). 17.4 Unit prices of pension investment funds established by the Company The Company provided the capital advance payment of Private Pension Funds as of 1 April 2011, the recognition of Private Pension Funds has ended as of 27 June 2011. The unit prices of the Company’s pension investment funds as of 31 December 2011 are presented below: Fund Name 31 December 2011 Prices Liquid Government P.F.(*) 0.010342 Government Bond P.F ) 0.010161 Equity Share P.F.(*) 0.008515 Mixed Foreign Currency Bond P.F.(*) 0.011635 Flexible P.F.(*) 0.009842 Alternative Flexible P.F.(*) 0.010003 (*) P.F. = Pension Fund (*) It shows the unit price which is composed of data at the end of 30 December 2011 closing and prevalent at subsequent business day.

17.5 Number and amount of participation certificates in portfolio and circulation The unit and value of participation certificates in circulation as of 31 December 2011 are presented below (31 December 2010: None). Fund Name 31 December 2011 Unit 31 December 2011 P.F. Price Liquid Government P.F.(*) 1,329,679,530 13,751,546 Government Bond P.F ) 2,715,547,893 27,592,682 Equity Share P.F.(*) 308,809,984 2,629,517 Mixed Foreign Currency Bond P.F.(*) 127,546,166 1,484,000 Flexible P.F.(*) 626,053,750 6,161,621 Alternative Flexible P.F.(*) 13,159,951 131,639 (*) P.F. = Pension Fund 17. Insurance Liabilities and Reinsurance Assets (cont’d) 17.6 Numbers and portfolio amounts of additions, disposals, reversals and current individual and group private pension participants Numbers and portfolio amounts of additions, disposals, reversals and current individual and group private pension participants are presented below (31 December 2010: None). Hata! Bağlantı geçersiz.

(*) The table includes the proposed private pension agreements .

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 60 17.7 Valuation methods used in profit share calculation of life insurances with profit shares The Company does not have life insurance with profit share (31 December 2010: None). 17.8 Number of additions and their group or individual gross and net share participations in the current period: Number of additions and their group or individual gross and net share participations in the current period is presented below (31 December 2010: None).

Hata! Bağlantı geçersiz. 17.9 Number of additions from the other companies and their group or individual gross and net share participations in the current period: Number of additions from the other companies and their group or individual gross and net share participations in the current period is presented below (31 December 2010: None). Hata! Bağlantı geçersiz.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 61 17. Insurance Liabilities and Reinsurance Assets (cont’d) 17.10 Number of transfers from the Company’s life portfolio to private pension portfolio and their group or individual gross and net share participations: None (31 December 2010: None). 17.11 Number of transfers from the Company’s individual pension portfolio to other company or not, and together their individual and corporate allocation and gross and net share participations: Number of transfers from the Company’s individual pension portfolio to other company or not, and together their individual and corporate allocation and gross and net share participations is presented below (31 December 2010: None). Hata! Bağlantı geçersiz.

17.12. Number of additions of life insurances and their group or individual allocation and gross and net premiums: Hata! Bağlantı geçersiz. Hata! Bağlantı geçersiz. Cancellations are not included in the table above.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 62 17. Insurance Liabilities and Reinsurance Assets (cont’d) 17.13. Number of disposals of life insurances and their group or individual allocation and gross net premiums and net mathematical reserves: Unit Mathematical Reserve (TL) Individual 86 - Group 1.649.959 128.748.029 Total 1.650.045 128.748.029 31 December 2011 Unit Mathematical Reserve (TL) Individual 5 - Group 1.573.773 22.028.677 Total 1.573.778 22.028.677 31 December 2010 17.14. Profit share distribution rate of life insurances as of 1 January 2011 - 31 December 2011 are calculated as follows: None (31 December 2010: None). 17.15. Amounts from insurance contracts: There are no changes in mathematical reserves or increase and decrease in portfolio as there are no individual or group insurance contracts during the periods of 1 January 2011 to 31 December 2011 and 1 January 2010 to 31 December 2010 Group insurance contracts portfolio increase and decrease tables are presented for the period of 1 January 2011 to 31 December 2011 and 1 January 2010 to 31 December 2010. Gross Mathematical Reserve (TL) Gross Mathematical Reserve (TL) Portfolio Increase 1 January - 31 December 2011 1 January - 31 December 2010 Written premiums 451.596.310 311.649.756 Total portfolio increase 451.596.310 311.649.756 Gross Mathematical Reserves (TL) Gross Mathematical Reserves (TL) Portfolio Decrease 1 January - 31 December 2011 1 January - 31 December 2010 Terminations and Cancellations (-) 81.624.501 19.561.123 Ended because of risk occured (-) 12.486.130 2.467.554 Expired (-) 34.637.398 - Total portfolio decrease 128.748.029 22.028.677

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 63 17. Insurance Liabilities and Reinsurance Assets (cont’d) 17.16 Assets, liabilities, income, expenses and cash flows arising from insurance contracts and when the insurer is a ceding company; gain or loss recognized in profit/loss due to reinsurance contracts Gain or loss recognized in profit/loss due to reinsurance contracts are disclosed in Note 10. 17.17 Comparison of the incurred claims with past estimates The gross amount of claims paid is TL 316.263.250 as of 31 December 2011. Amount of claims paid net of reinsurers’ share is TL 312.278.267 ( The gross amount of claims paid is TL 111.466.148 as of 31 December 2010. Amount of claims paid net of reinsurers’ share is TL 110.589.259.) 17.18 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately Effects of changes in the assumptions used in the measurement of insurance assets and liabilities are disclosed in Note 4.

17.19 Reconciliation of changes in insurance liabilities, reinsurance assets and deferred acquisition costs if any: Hata! Bağlantı geçersiz. 18. Investment Contract Liabilities The Company does not have any investment contracts (31 December 2010: None).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 64 19. Trade and Other Payables, Deferred Income 31 December 2011 31 December 2010 Payables from Insurance Operations 25.810 27.098 Payables from Reinsurance Operations 12.048 - Payables from Pension Operations 52.149.419 - Payables from Other Main Operations 32.354 - Payables from Main Operations 52.219.631 27.098 Payables to shareholders 43.310 2.263 Payables to personnel (*) 430.884 - Payables to other related parties 79.228 29.791 Total payables to related parties 553.422 32.054 Other payables 443.513 80.393 Total other payables 443.513 80.393 Total 53.216.566 139.545 (*) The Company pays the salary on the last day of each month. However, the last day of December 2011 was holiday and the Company paid the salaries on 1 January 2012. Since the salary payable of TL 430.884 could not been paid at the end of December, it has been recorded as liability.

20. Payables The Company does not have financial liabilities (31 December 2010: None). 21. Deferred Income Tax Deferred Tax The Company recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for TAS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TAS and tax purposes and they are given below. 20% is applied in the calculation of deferred tax asset and liabilities.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 65 21. Deferred Income Tax (cont’d) 31 December 2011 31 December 2010 Interest accrual on time deposits 334.346 113.355 Equalization reserve 15.665.031 6.760.273 Expense accruals 327.149 192.479 Assets liability discount difference 2.477 - Valuation differences of the financial assets - 4.309 Retirement pay provisions and unused vacation accruals 200.544 131.000 Deferred tax assets 16.529.547 7.201.416 Valuation differences of the financial assets 4.787 - Depreciation and amortisation differences on tangible and intangible assets 230.816 49.583 Deferred tax liabilities 235.603 49.583 Net deferred tax assets/ (liabilities) 16.293.944 7.151.833 31 December 2011 31 December 2010 Interest accrual on time deposits 66.869 22.671 Equalization reserve 3.133.006 1.352.055 Expense accruals 65.429 38.496 Assets liability discount difference 495 - Valuation differences of the financial assets - 862 Retirement pay provisions and unused vacation accruals 40.109 26.200 Deferred tax assets 3.305.908 1.440.284 Valuation differences of the financial assets (957) - Depreciation and amortisation differences on tangible and intangible assets (46.163) (9.917) Deferred tax liabilities (47.120) (9.917) Net deferred tax assets/ (liabilities) 3.258.789 1.430.367 Total temporary differences Deferred tax assets /(liabilities)

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 66 21. Deferred Income Tax (cont’d) Movement of deferred tax assets / liabilities is given below: Movements of deferred tax assets/ (liabilities) 1 January- 31 December 2011 1 January- 31 December 2010 Opening balance at 1 January 1.430.367 596 Charged to income 1.828.422 1.429.771 Closing balance at 31 December 3.258.789 1.430.367 22. Retirement Benefits Under the Turkish Labour Law, the Company is required to pay employment termination benefits to each employee who has qualified for such payment. Also, employees are entitled to retirement pay provisions subsequent to the completion of their retirement period by gaining a right to receive retirement payments in accordance with the amended Article 60 of the applicable Social Insurance Law No: 506 and the related Decrees No: 2422 and 4447 issued on 6 March 1981 and 25 August 1999, respectively. Some transitional provisions related to pre-retirement service term was excluded from the law since the related law was amended as of 23 May 2002.

The retirement pay provision is not legally subject to any funding. The provision is calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. TAS 19 (“Employee Benefits”) requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the actuarial assumptions, used in the calculation of the total liability, are as below: The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 December 2011, the provision was calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The provisions at the respective balance sheet dates have been calculated assuming an annual inflation rate of 5 % (31 December 2010: 5,1%) and a discount rate of 10% (31 December 2010: 10%), resulting in a real discount rate of approximately 4,76% (31 December 2010: 4,66%). The anticipated rate of forfeitures is considered and estimated rate of the Company’s retirement pay is also taken into account. As the maximum liability is updated semi-annually, the maximum liability amount of TL 2.805,04 effective from 1 January 2012 has been taken into consideration in calculation of provision from employment termination benefits (1 January 2011: TL 2.517,01).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 67 22. Retirement Benefits (cont’d) The Company’ provision as of 31 December 2011 presented below. Hata! Bağlantı geçersiz. 23. Other Liabilities and Expense Accruals 31 December 2011 31 December 2010 Expense Accruals - Provision for Banking Insurance and Transaction Tax expense on investment income accrual 473.455 121.627 - Accruals for bonus 304.026 - - Expense accrual for services puchased 23.122 192.479 - Unused vacation accruals 123.891 102.679 Total 924.494 416.785 24. Net Insurance Premium Income Hata! Bağlantı geçersiz. 25. Fee Income Hata! Bağlantı geçersiz. 26. Investment Income 1 January- 31 December 2011 1 January- 31 December 2010 Interest income from time deposits 59.829.419 21.867.048 Valuation of time deposits 8.668.712 2.127.701 Valuation of private sector bonds 335.393 - Income from Government bonds 149.278 - Valuation of asset-backed securities 130.646 - Income from reverse repo 23.529 5.630 Total 69.136.977 24.000.379 27. Net Income Accrual on Financial Assets The Company’s income accrual on financial assets is presented as below (31 December 2010: None).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 68 Accounted under equity Accounted under profit/loss Interest acrrual of financial assets available-for-sale (22.192) 488.231 Interest income of financial assets available-for-sale - 149.278 Total (22.192) 637.509 1 January-31 December 2011 28. Assets Held at Fair Value through Profit and Loss 1 January- 31 December 2011 1 January- 31 December 2010 Interest acrrual of assets held at FVTPL - - Interest income of assets held at FVTPL 23.529 5.630 Total 23.529 5.630 29. Insurance Rights and Claims For the period of 1 January – 31 December 2011 there is no subrogation gain or losses (1 January – 31 December 2010: None) 30. Investment Contract Rights None (31 December 2010: None).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 69 31. Other Expenses Grouping of expenses according to nature or use is presented in Note 32. 32. Operating Expenses 1 January- 31 December 2011 1 January- 31 December 2010 Commission expenses 119.249.460 78.487.880 Personnel expenses 5.969.896 2.976.619 Administration expenses 6.481.989 3.562.447 Outsourcing costs 1.729.376 770.537 Other operating expenses 1.317.678 231.186 Total 134.748.399 86.028.669 33. Employee Benefit Expenses Hata! Bağlantı geçersiz. 34. Finance Costs The Company does not have any finance costs (31 December 2010: None). 35. Income Tax 31 December 2011 31 December 2010 Current tax provision Corporate tax liability provision 14.797.584 13.541.318 Prepaid taxes and surcharges (15.982.877) (9.709.363) Total (1.185.293) 3.831.955

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 70 35. Income Tax(cont’d) Income tax charge/(benefit) is formed by the items below: Hata! Bağlantı geçersiz. The reconciliation of current tax expense is as follows: Hata! Bağlantı geçersiz. Corporate Tax The Company is subject to Turkish corporate taxes. Estimated tax charge on the Company’s current period operations is provided in the accompanying financial statements. Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized. The effective tax rate used in 2011 is 20% (31 December 2010: 20%). In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate used in 2011 is 20%.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 71 35. Income Tax (cont’d) Corporate Tax (cont’d) Losses are allowed to be carried 5 years maximum to be deducted from the taxable profit of the following years. Tax carry back is not allowed. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1-25 April following the close of the financial year to which they relate.

Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. Income Withholding Tax In addition to corporate taxes, companies should also calculate income withholding taxes and funds surcharge on any dividends distributed, except for companies receiving dividends who are resident companies in Turkey and Turkish branches of foreign companies. The rate of income withholding tax is 10% starting from 24 April 2003. However, this rate was changed to 15% commencing from 22 July 2006. Undistributed dividends incorporated in share capital are not subject to income withholding taxes.

36. Net Income from the Changes in Foreign Exchange Rates None (31 December 2010: None). 37. Earnings per Share In respect of TAS 33, "Earnings Per Share" standard, companies whose stocks are not traded on the stock exchange are not required to disclose earnings per share. Since the Company's shares are not publicly traded, earnings per share are not disclosed in the accompanying financial statements. 38. Dividends per Share None (31 December 2010: None.). 39. Cash Generated from the Operations Statement of cash flows is presented within the financial statements. 40. Convertible Bonds None (31 December 2010: None). 41. Cash Convertible Preferred Equity Shares None (31 December 2010: None).

42. Risks Disclosed in Note 2.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 72 43. Commitments The Company has contingent liability related to a service agreement. Per the agreement, if the Company does not meet its commitments within the 5 years period starting on 4 January 2010, the Company will pay USD 235.000 to the service provider. Since the likelihood of this payment is not evaluated as probable, it is disclosed in the financial statements instead of providing a provision for it.

44. Business Combinations None (31 December 2010: None). 45. Related Parties a. Parent company's name and the ultimate owner of the group The Company's parent is T.C. Ziraat Bankası A.Ş with a 99,96 % of share. b. In accordance with the Company's activities, items of sub-classifications The Company is engaged in providing individual and group life insurance or death insurances and related accident and life insurance and reinsurance services and also private pension as of 31 December 2011. c. Provision for doubtful receivables from shareholders, affiliates and subsidiaries and their payables None (31 December 2010: None). d. Affiliates and subsidiaries having indirect capital and management relations with the Company None (31 December 2010: None). e. Guarantees and other commitments provided in favour of shareholders, affiliates and subsidiaries None (31 December 2010: None).

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 73 45. Related Parties (cont’d) Transactions with related parties 1 January 31 December 2011 1 January 31 December 2010 Written premium 806.151.270 599.685.633 T.C. Ziraat Bankası A.Ş ) 806.122.103 599.663.607 Bileşim Alternatif Dağıtım Kanalları 22.834 16.460 Ziraat Finansal Kiralama 6.333 5.566 Interest income 42.687.815 21.872.679 T.C. Ziraat Bankası A.Ş. 42.664.285 21.867.049 T.C. Ziraat Bankası A.Ş. (reverse repo interest income) 23.524 5.630 Ziraat Yatırım Menkul Değerler (reverse repo interest income) 6 - Reinsurers share in claims paid (Milli Reasürans) 1.793.242 306.911 Indirect premium (Ziraat Sigorta A.Ş.) 1.398.122 - Fund Management Fee (Ziraat Portföy Yönetimi A.Ş.) 273.326 - Total 852.303.775 621.865.223 Services rendered from related parties Paid commisions (T.C. Ziraat Bankası A.Ş.) 118.236.689 89.629.466 Paid bank expenses (T.C. Ziraat Bankası A.Ş.) 3.991.595 2.805.185 Premium ceded to reinsurers (Milli Reasürans T.A.Ş.) 1.369.448 992.098 Rent expense (T.C. Ziraat Bankası A.Ş.) 693.318 173.250 Commission paid related to indirect premium (Ziraat Sigorta A.Ş.) 251.662 - Insurance expense (Ziraat Sigorta A.Ş.) 159.897 34.306 Recognition of joint costs (Ziraat Sigorta A.Ş.) 126.401 90.767 Fund service expense (Ziraat Yatırım Menkul Değerler) 105.000 - Oracle license and software payment (Fintek Finansal Teknoloji Hizmetleri A.Ş.) 58.446 45.041 Call center service cost (Bileşim Alternatif Dağıtım Kanalı) 57.243 7.444 Portfolio management expense (Ziraat Portföy Yönetimi A.Ş.) 24.253 - Paid bank expenses (Ziraat Yatırım Menkul Değerler) 6.883 - Custodian commission (İMKB Takas ve Saklama Bankası A.Ş.) 6.222 - Paid bank expenses (İMKB Takas ve Saklama Bankası A.Ş.) 5.402 - Paid personnel expenses (T.C. Ziraat Bankası A.Ş.) - 87.207 Total 125.092.459 93.864.764 (*) Written premium from T.C Ziraat Bankası A.Ş. in the table above includes the written premiums through Ziraat Bankası and Ziraat Bankası branches as an agency.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 74 45. Related Parties (cont’d) Receivables from related parties 31 December 2011 31 December 2010 Time deposits (T.C. Ziraat Bankası A.Ş.) 288.380.821 422.346.804 Demand deposits (T.C. Ziraat Bankası A.Ş.) 1.803.889 1.533.768 Demand deposits (İMKB Takas ve Saklama Bankası A.Ş.) 20.064 - Reinsurers Share in claims paid (Milli Reasürans T.A.Ş.) 30.004 25.627 Receivables from main operations 32.634 27.899 T.C. Ziraat Bankası A.Ş. 31.465 26.786 Ziraat Finansal Kiralama A.Ş. 1.169 1.113 Fund management fee (Ziraat Portföy Yönetimi A.Ş.) 99.212 - Payables to related parties 31 December 2011 31 December 2010 Due to other related parties 79.043 29.791 Insurance premium payable (Ziraat Sigorta A.Ş.) 55.786 - Joint cost payables (Ziraat Sigorta A.Ş.) 23.257 29.791 Due to Shareholders 43.310 2.263 Oracle portal software payable (Fintek Finansal Teknoloji Hizmetleri A.Ş.) 32.214 - Call Center Service Cost (Bileşim Alternatif Dağıtım Kanalları) 11.096 2.263 Fund management fee payable (Ziraat Yatırım Menkul Değerler) 21.000 - Payables from reinsurance operations (Ziraat Sigorta A.Ş.) 12.048 - Portfolio management fee payable (Ziraat Portföy Yönetimi A.Ş.) 8.368 - Custodian commission payable (İMKB Takas ve Saklama Bankası A.Ş.) 1.683 - Payables from main operations (Bileşim Alternatif Dağıtım Kanalı) 1.065 -

ZİRAAT HAYAT VE EMEKLİLİK A.Ş. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated.) 75 46. Subsequent Events None 47. Other 47.1 Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet Hata! Bağlantı geçersiz. 47.1 Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet (cont’d) Other expenses and losses (-) 1 January- 31 December 2011 1 January- 31 December 2010 Banking Insurance and Transaction Tax expense 3.121.323 1.093.661 Non-deductible expenses 23.887 13.164 Fee and other taxes - 287 Other expenses 9.433 25 Total 3.154.643 1.107.137 47.2 Total amount of each due to/from personnel items classified under “Other Receivables” and “Other Short and Long Term Payables” exceeding one per cent of total assets in the balance sheet None (31 December 2010: None). 47.3 Subrogation receivables followed under the off-balance sheet accounts None (31 December 2010: None).

47.4 Descriptive disclosure in relation to amounts and resources of prior period income, expenses, and losses None (31 December 2010: None).

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