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TOFAŞ TÜRK OTOMOBİL FABRİKASI A.Ş. CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 30 SEPTEMBER 2012 (ORIGINALLY ISSUED IN TURKISH)

CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED

CONSOLIDATED INTERIM FINANCIAL STATEMENTS ORIGINALLY ISSUED

IN TURKISH

TOFAŞ TÜRK OTOMOBİL FABRİKASI A.Ş.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE INTERIM PERIOD 1 JANUARY - 30 SEPTEMBER 2012

CONTENTS PAGE

CONDENSED CONSOLIDATED BALANCE SHEETS ......................................................... 1 - 2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME .......................................... 3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ..... 4

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ................. 5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ................................ 6

EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS ...................................................................................................... 7-42

NOTE 1 GROUP’S ORGANISATION AND NATURE OF OPERATIONS ............................................................. 7

NOTE 2 BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ........ 8-11

NOTE 3 CASH AND CASH EQUIVALENTS........................................................................................................... 11-12

NOTE 4 FINANCIAL ASSETS. ................................................................................................................................. 12

NOTE 5 FINANCIAL LIABILITIES .......................................................................................................................... 12-15

NOTE 6 TRADE RECEIVABLES AND PAYABLES ............................................................................................... 16

NOTE 7 RECEIVABLES FROM FINANCE SECTOR OPERATIONS .................................................................... 17-18

NOTE 8 INVENTORIES ............................................................................................................................................ 18

NOTE 9 INVESTMENT PROPERTIES ..................................................................................................................... 18-19

NOTE 10 PROPERTY, PLANT AND EQUIPMENT .................................................................................................. 20-21

NOTE 11 INTANGIBLE ASSETS ............................................................................................................................... 22-23

NOTE 12 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES.................................................................... 23-24

NOTE 13 OTHER ASSETS AND LIABILITIES ......................................................................................................... 24-25

NOTE 14 SALES .......................................................................................................................................................... 25-26

NOTE 15 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND

DISTRIBUTION EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES .................................. 26-27

NOTE 16 FINANCIAL INCOME/EXPENSES ............................................................................................................ 28

NOTE 17 TAX ASSETS AND LIABILITIES .............................................................................................................. 28-30

NOTE 18 EARNINGS PER SHARE ............................................................................................................................ 30

NOTE 19 TRANSACTIONS AND BALANCES WITH RELATED PARTIES .......................................................... 30-32

NOTE 20 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT ............................................. 32-41



IN TURKISH


CONDENSED CONSOLIDATED BALANCE SHEETS

AT 30 SEPTEMBER 2012 AND 31 DECEMBER 2011 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

1

Unaudited Audited

Notes 30 September 2012 31 December 2011

ASSETS

Current assets: Cash and cash equivalents 3 1.536.138 1.331.702

Financial assets 4 408 60.424

Trade receivables

- Due from related parties 19 276.550 738.115

- Other trade receivables 6 379.401 426.846

Receivables from finance sector operations 7 654.873 539.824

Other receivables 446 349

Inventories 8 375.784 380.052

Other current assets 13 151.627 94.454

Total current assets 3.375.227 3.571.766

Non-current assets:

Receivables from finance sector operations 7 490.434 536.758

Investment properties 9 22.100 22.100

Property, plant and equipment 10 1.233.378 1.305.296

Intangible assets 11 754.000 782.208

Deferred tax assets 17 14.582 63.758

Other non-current assets 13 38.513 20.222

Total non-current assets 2.553.007 2.730.342

Total assets 5.928.234 6.302.108

These condensed consolidated interim financial statements as of and for the nine-month period ended

30 September 2012 have been approved for issue by the Board of Directors on 8 November 2012 and

signed on behalf of the Board of Directors by Chief Executive Officer Kamil Başaran, Chief Financial

Officer Cengiz Eroldu, and Accounting Manager Doğu Özden.

The accompanying notes form an integral part of these interim condensed consolidated financial statements.



IN TURKISH


CONDENSED CONSOLIDATED BALANCE SHEETS

AT 30 SEPTEMBER 2012 AND 31 DECEMBER 2011 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

2

Unaudited Audited

Notes 30 September 2012 31 December 2011

LIABILITIES

Current liabilities:

Financial liabilities 5 964.180 939.879

Trade Payables

- Due to related parties 19 734.565 932.595

- Other trade payables 6 479.618 678.022

Income taxes payable 17 2.111 4.872

Provisions 12 171.431 86.325

Government incentives and grants 22.275 22.275

Other current liabilities 13 47.128 80.272

Total current liabilities 2.421.308 2.744.240

Non-current liabilities:

Financial liabilities 5 1.375.938 1.581.661

Government incentives and grants 67.214 83.938

Provision for employment termination benefits 118.531 102.942

Total non-current liabilities 1.561.683 1.768.541

Total liabilities 3.982.991 4.512.781

Equity:

Paid-in share capital 500.000 500.000

Inflation adjustment on equity items 348.382 348.382

Restricted reserves 149.301 114.560

Cumulative losses on hedging (123.822) (207.136)

Retained earnings 748.780 559.356

Net profit for the period 322.602 474.165

Total equity 1.945.243 1.789.327

Total liabilities and equity 5.928.234 6.302.108



CONSOLIDATED INTERIM FINANCIAL STATEMENTS ORIGINALLY

ISSUED IN TURKISH


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE INTERIM PERIODS ENDED 30 SEPTEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

3

Unaudited Unaudited Unaudited Unaudited

1 January - 1 July - 1January - 1 July -

Notes 30 September 2012 30 September 2012 30 September 2011 30 September 2011

Net Sales 14 4.936.389 1.537.450 5.553.917 1.668.560

Cost of sales (-) (4.365.405) (1.364.907) (4.937.932) (1.458.229)

Gross profit from operations 570.984 172.543 615.985 210.331

Interest, fee, premium, commission and other income 138.809 48.144 91.975 34.231

Interest, fee, premium, commission

and other expense (-) (101.251) (35.124) (55.757) (24.483)

Gross profit from finance sector operations 37.558 13.020 36.218 9.748

Gross profit 608.542 185.563 652.203 220.079

Marketing selling and distribution expenses (-) 15 (152.635) (44.432) (166.316) (61.897)

General administrative expenses (-) 15 (96.263) (32.838) (89.137) (27.188)

Research and development expenses (-) 15 (10.503) (5.014) (6.406) (2.065)

Other income 9 8.617 1.324 25.206 4.527

Other expense (-) (7.242) (2.315) (42.729) (1.363)

Operating profit 350.516 102.288 372.821 132.093

Financial income 16 350.191 174.204 331.614 262.510

Financial expense (-) 16 (342.404) (167.650) (318.733) (254.667)

Profit before tax 358.303 108.842 385.702 139.936

Tax expense (35.701) (9.309) (42.495) (8.817)

- Taxes on income (7.353) (2.107) (3.553) (326)

- Deferred tax expense 17 (28.348) (7.202) (38.942) (8.491)

Net profit for the period 322.602 99.533 343.207 131.119

Attributable to:

Non-controlling interests - - - -

Parent company interests 322.602 99.533 343.207 131.119

Earnings per share 18 0,65 0,20 0,69 0,26

The accompanying notes form an integral part of these interim condensed consolidated financial statements



ISSUED IN TURKISH


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


4

Unaudited Unaudited Unaudited Unaudited

1 January - 1 July - 1January - 1 July -

Notes 30 September 2012 30 September 2012 30 September 2011 30 September 2011

Net profit for the period 322.602 99.533 343.207 131.119

Other comprehensive income: Cumulative gains/(losses) on

cash flow hedging 83.314 (3.840) (181.576) (62.606)

Other comprehensive income (after tax) 83.314 (3.840) (181.576) (62.606)

Total comprehensive income 405.916 95.693 161.631 68.513

Attributable to:

Non-controlling interests - - - -

Parent company interests 405.916 95.693 161.631 68.513


CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


5

Inflation Net profit

adjustment Cumulative Prior /(loss)

Paid-in on equity Restricted (losses)/gains year’s for the Total

share capital items reserves on hedging (*) profit/(loss) period equity

Balances at 1 January 2011 500.000 348.382 77.047 (66.473) 462.699 384.220 1.705.875

Transfers - - 37.513 - 346.707 (384.220) -

Dividends paid - - - - (250.050) - (250.050)

Total comprehensive (losses)/income (*) - - - (181.576) - 343.207 161.631

Balances at 30 September 2011 500.000 348.382 114.560 (248.049) 559.356 343.207 1.617.456

Balances at 1 January 2012 500.000 348.382 114.560 (207.136) 559.356 474.165 1.789.327

Transfers - - 34.741 - 439.424 (474.165) -

Dividends paid - - - - (250.000) - (250.000)

Total comprehensive income (*) - - - 83.314 - 322.602 405.916

Balances at 30 September 2012 500.000 348.382 149.301 (123.822) 748.780 322.602 1.945.243

(*) Net off deferred tax amount.

The accompanying notes form an integral part of these condensed consolidated interim financial statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


6

Unaudited Unaudited

Notes 30 September 2012 30 September 2011

Cash flows from operating activities Profit before tax 358.303 385.702

Adjustments to reconcile income before tax to net cash generated from operating activities: Depreciation and amortization 10, 11 258.408 219.683 Interest expense 16 59.215 55.682 Interest income 16 (92.601) (95.981) Provision for employment termination benefits 24.854 25.681 Gain on barter transaction 9 - (17.448) Gain on sale of property, plant and equipment (951) (18) Cash flow hedges accounted under equity 83.314 (181.576)

Interest accrual 3 2.326 (715)

Warranty provision 31.967 31.453

Operating profit before working capital changes 724.835 422.463

Net working capital changes in:

Trade receivables and due from related parties 509.010 (69.487)

Inventories 4.268 (116.111) Other current/non-current assets and other receivables (57.059) (69.555) Receivables from finance sector operations (68.725) (302.672) Trade payables and due to related parties (396.434) (7.825)

Other current liabilities 51.678 (29.921) Other current/non-current payables (16.724) 113.980 Employee termination benefits paid (9.265) (5.323) Taxes paid (10.114) (4.453) Warranty payments (31.683) (22.442)

Net cash generated from operating activities 699.787 (91.346)

Investing activities Interest received 94.927 97.557 Financial investments matured 4 60.424 45.393 Financial assets (408) (58.282) Purchase of tangible and intangible assets 10, 11 (159.905) (185.090) Proceeds from sale of tangible and intangible assets 2.574 2.687

Net cash used in investing activities (2.388) (97.735)

Financing activities Interest paid (64.596) (70.230)

Dividend paid (250.000) (250.050) Proceeds from bank loans 102.982 1.100.819 Bank loans paid (279.023) (347.264)

Net cash (used)/generated from financing activities (490.637) 433.275

Net increase in cash and cash equivalents 206.762 244.194

Cash and cash equivalents at the beginning of the period 3 1.324.772 1.139.737

Cash and cash equivalents at the end of the period 3 1.531.534 1.383.931

The accompanying notes form an integral part of these condensed consolidated interim financial statements.



ISSUED IN TURKISH


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS FOR THE INTERIM PERIOD ENDED 30 SEPTEMBER 2012 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

7

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS

Tofaş Türk Otomobil Fabrikası A.Ş. (“the Company” or “Tofaş”) was established in 1968 as a

Turkish-Italian cooperation venture. The core business of the Company is manufacturing, exporting

and selling passenger cars and light commercial vehicles under licenses of Fiat Auto S.p.A. (“Fiat”).

The Company, which is a joint venture of Koç Holding A.Ş. (“Koç Holding”) and Fiat, also produces

various automotive spare parts used in its automobiles. The Company’s head office is located at

Büyükdere Cad. No: 145 Zincirlikuyu Şişli, İstanbul. The manufacturing facilities are located at Bursa.

The Company manufactures its cars, except for Mini Cargo and New Doblo, pursuant to license

agreements between the Company and Fiat. The Company has been registered with the Turkish

Capital Market Board (“CMB”) and quoted on the İstanbul Stock Exchange (“ISE”) since 1991.

The Company conducts a significant portion of its business with affiliates of Koç Holding and Fiat

Group (Note 19).

The Company’s subsidiaries as of 30 September 2012 and 31 December 2011 which are subject to

consolidation are as follows:

% of ownership

Name of the company Operating area 30 September 31 December

2012 2011

Koç Fiat Kredi Tüketici

Finansmanı A.Ş. “KFK” Consumer financing %99,9 %99,9

Fer Mas Oto Ticaret A.Ş.”Fermas” Trading of automobile and spare parts %99,4 %99,4

Platform Araştırma Geliştirme

Tasarım ve Tic. A.Ş. “Platform” Research and development %99,0 %99,0

For the purpose of the consolidated financial statements, the Company and its consolidated

subsidiaries are referred to as “the Group”

During the General Assembly dated 1 February 2011, it was decided unanimously to cease the

operations and complete the liquidation of Platform which is one of the subsidiaries of the Company.

The average number of personnel in accordance with their categories is as follows:

30 September 2012 31 December 2011

Blue-collar 6.067 6.535

White-collar 1.305 1.185

7.372 7.720



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8

NOTE 2 - BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS

2.1 Basis of presentation

2.1.1 Financial reporting standards

The CMB regulated the principles and procedures of preparation, presentation and announcement of

financial statements prepared by the entities with the Communiqué No: XI-29, “Principles of Financial

Reporting in Capital Markets” (“the Communiqué”). According to the Communiqué, entities shall

prepare their financial statements in accordance with International Financial Reporting Standards

(“IAS/IFRS”) endorsed by the European Union. Until the differences of the IAS/IFRS as endorsed by

the European Union from the ones issued by the International Accounting Standards Board (“IASB”)

are announced by Turkish Accounting Standards Board (“TASB”), IAS/IFRS issued by the IASB shall

be applied. Accordingly, Turkish Accounting Standards/Turkish Financial Reporting Standards

(“TAS/TFRS”) issued by the TASB which are in line with the aforementioned standards shall be

considered.

With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005,

the application of inflation accounting is no longer required for companies operating in Turkey and

preparing their financial statements in accordance with the financial reporting standards accepted by

the CMB (“CMB Financial Reporting Standards”). Accordingly, IAS 29, “Financial Reporting in

Hyperinflationary Economies”, issued by the IASB, has not been applied in the financial statements

for the accounting year commencing 1 January 2005.

The Group, prepares its consolidated financial statements within the framework of Communiqué XI,

No:29 and related promulgations to this Communiqué as issued by the CMB, in accordance with the

CMB Financial Reporting Standards which are based on IAS/IFRS. The consolidated financial

statements and the related notes to them are presented in accordance with the CMB’s announcements

and formats recommended by the CMB, including the compulsory disclosures. Necessary changes are

performed in the prior year consolidated financial statements in this scope.

The Group registered in Turkey maintain their books of account and prepare their statutory financial

statements (“Statutory Financial Statements”) in Turkish lira (“TRY”) in accordance with the Turkish

Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts issued by the Ministry

of Finance. These consolidated financial statements are based on the statutory records and maintained

under historical cost conversion, with the required adjustments and reclassifications reflected for the

purpose of fair presentation in accordance with CMB Financial Reporting Standards.

2.1.2 Comparatives and adjustment of prior periods’ financial statements

The condensed consolidated interim financial statements of the Group include comparative financial

information to enable the determination of the financial position and performance. Comparative

figures are reclassified, where necessary, to conform to changes in presentation in the current period

condensed consolidated interim financial statements.



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9


STATEMENTS (Continued)

2.1.3 Functional and reporting currency

The Group’s functional and reporting currency is Turkish Lira (“TRY”). Foreign currency

transactions are converted using the exchange rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currency are converted using the exchange

rates at the balance sheet date. Foreign exchange gains and losses resulting from the conversion of

monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated

financial statements as financial income or expense.

2.1.4 Basis of consolidation

The control relation is normally evidenced when the Company owns, either directly or indirectly, more

than 50% of the voting rights of a company’s share capital and is able to govern the financial and

operating policies of an enterprise so as to benefit from its activities. During consolidation inter-

company balances and transactions, including inter-company profits and unrealised profits and losses

are eliminated. The consolidated financial statements are prepared using consistent accounting policies

for similar transactions and other events in similar circumstances. Minority shares of the Company in

subsidiaries were not recognized under non-controlling interest (“Minority Interests” or “Non-

controlling Interests”) since they do not have a material effect in consolidated financial statements.

Financial statements of the Company and its subsidiaries subject to consolidation were prepared as of

the same date.

2.1.5 Significant accounting judgments, estimates and assumptions

The preparation of financial statements require the Group management to make estimates and

assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period. Actual results could differ from those estimates. Those estimates

are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the

periods in which they become known.

The estimates and assumptions that have a significant effect on the carrying amounts of assets and

liabilities for the next reporting period are outlined below:

a) The Company determines warranty provision by considering the past warranty expenses and

remaining warranty period per vehicle.

b) A specific credit risk provision for loan impairment has been established to provide for

management’s estimate of credit losses as soon as the recovery of an exposure is identified as

doubtful. Impairment and uncollectability are measured and recognized individually for loans and

receivables that are individually significant, and measured and recognized on a portfolio basis for a

group of similar loans and receivables that are not individually identified as impaired. As of 30

September 2012, KFK has reserved portfolio provision amounting to TRY12.274 (31 December

2011: TRY11.464).



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STATEMENTS (Continued) 2.1.6 Convenience translation into English of consolidated financial statements originally issued

in Turkish

The accounting principles described in Note 2.1 to the consolidated financial statements (defined as CMB Financial Reporting Standards) differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January and 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.

2.2 Amendments in International Financial Reporting Standards

Standards, amendments and interpretations effective from 1 January 2012 - IAS 24 (Revised), “Related Party Disclosures” - IFRIC 14 (Revised), “Prepayments of a Minimum Funding Requirements” - IFRS 1(Revised), “First time adoption’’

- IFRS 7 (Revised), ““Financial Instruments: Disclosures”

- IAS 27 (Revised), “Separate Financial Statements”

- ISA 34 (Revised), “Interim Financial Reporting”

- IFRS 3 (Revised), “Business combinations’’

Above amendments and interpretations have no significant effect on the consolidated financial

statements of the Group;

Standards, amendments and interpretations to existing standards that are not yet required and will not have a significant effect on the financial statements of the Group as of 1 January 2012 - IAS 12 (Revised), “Income Taxes on Deferred Taxes” - IAS 19 (Revised), “Employee Benefits” - IAS 1 (Revised), “Presentation of Financial Statements” - IFRS 9 (Revised), “Financial Instruments” - IFRS 10 (Revised), “Consolidated Financial Statements” - IFRS 11 (Revised), “Joint Arrangements” - IFRS 12 (Revised), “Disclosures of Interests In Other Entities” - IFRS 13 (Revised), “Fair Value Measurement” - IAS 27 (Revised), “Separate Financial Statements” - IAS 28 (Revised), “Associates and Joint Ventures” - IAS 32 (Revised), “Financial Instruments: Presentation The Group assumed that the given amendments and interpretations has no material effect on the financial statements.



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11


STATEMENTS (Continued)

2.3 Summary of significant accounting policies

The condensed consolidated interim financial statements for the period ended 30 September 2012 have

been prepared in accordance with IAS 34. The accounting policies used in the preparation of these

condensed consolidated interim financial statements for the period ended 30 September 2012 are

consistent with those used in the preparation of annual consolidated financial statements for the year

ended 31 December 2011. Accordingly, these condensed consolidated interim financial statements

should be read in conjunction with the annual consolidated financial statements for the year ended

31 December 2011.

2.4 Segment reporting

Since the Company operates in one business segment and the operations are held in Turkey, there is no

segment reporting. The information regarding the sales of the Company as to domestic and export

sales and the categorization of sales as to product type is disclosed in note 14.

NOTE 3 - CASH AND CASH EQUIVALENTS


Cash in hand 19 2

Due from banks

- demand deposits 127.083 49.215

- time deposits 1.409.036 1.282.485

Total 1.536.138 1.331.702

The breakdown of time deposits is as follows:

30 September 2012 31 December 2011 Effective Effective Amount interest rate Amount interest rate (TRY equivalent) per annum (%) (TRY equivalent) per annum (%)

TRY 744.686 8-10,2 865.258 11,00 - 12,4 EUR 664.350 3,70 - 4,50 417.227 4,70 – 5,70

Total 1.409.036 1.282.485

As of 30 September 2012, the maturities of time deposits vary between 3 - 67 days (31 December 2011: between 3 - 61 days).

As of 30 September 2012, the cash at banks comprise deposits amounting to TRY941.894 (31 December 2011: TRY840.133) which are deposited at a bank which is related party of the Group.



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NOTE 3 - CASH AND CASH EQUIVALENTS (Continued)

As of 30 September 2012 and 2011, the reserves of cash and cash equivalent in cash flow statement;

2012 2011

Cash and banks 1.536.138 1.386.344

Less: interest accruals (4.604) (2.413)

1.531.534 1.383.931

NOTE 4 - FINANCIAL ASSETS

a) Short-term financial assets

As of 30 June 2012, the Group does not has any time deposit amounts for short term financial assets.

(31 December 2011: TRY53.695, maturity 183 days, interest rate: 0.11%) Also, as of 31 December

2011, the Group has financial assets amounting to TRY6.631 which is consisting of derivative

financial instruments.

b) Available for sale financial investments

As of 30 June 2012, the Group has an amount of TRY408 (31 December 2011: TRY98) available for

sale financial investments.

NOTE 5 - FINANCIAL LIABILITIES

a) Short-term financial liabilities

30 September 2012 31 December 2011 Original Original Amount Amount Interest rate amount Amount Interest rate (thousand) (TRY) (%) (thousand) (TRY) (%)

Short-term borrowings denominated in TRY (*) - 317.567 9.98-16.38 - 408.887 8.98-16.43 EUR 10.445 24.112 4.15-6.77 8.016 19.589 4.15 USD (*) - - - 31.451 59.407 4.51-5.78 Interest accrual - 10.979 - - 5.598 Current portion of long-term bank borrowings 122.341 282.425 - 122.359 299.020 - Bonds (

1,2,3,4,5,6,7,8,9) - 329.097 8.68-13.78 - 147.378 8.87-10.87

Total 964.180 939.879



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NOTE 5 - FINANCIAL LIABILITIES (Continued)

b) Long-term financial liabilities

30 September 2012 31 December 2011 Original Effective Original Effective amount Amount interest rate amount Amount interest rate (thousand) (TRY) per annum (%) (thousand) (TRY) per annum(%)

Long-term borrowings denominated in EUR 567.550 1.310.190 Euribor + 0.15 628.344 1.535.548 Euribor+0.15 Euribor + 1.96 Euribor+1.96 TRY (*) - 274.049 4.51-5.78 - 240.772 4.51-5.78 Bonds (

1,2,3,4,5,6,7,8,9) - 74.124 8.68-13.78 - 104.361 8.87-10.87

Less: Current portion of long-term bank borrowings (122.341) (282.425) - (122.359) (299.020) -

Total 1.375.938 1.581.661

(*) A portion of short-term bank borrowings which are denominated in EUR, the whole short term bank borrowings

which are denominated in USD and the whole long-term bank borrowings which are denominated in TRY comprise

bank borrowings obtained by KFK, consolidated subsidiary, to finance consumer financing loans. (1)

Based on the board of directors meeting decision at 1 November 2010, according to the Capital Market

Law no 2499 with the mandatory permission, commercial papers amounting to TRY50.000 comprise of

bonds which is issued on 24 December 2010 with 24 months maturity, 8,68% coupon interest rate,

TRY50.000 nominal value with interest payment in every 6 month and the principle and interest payment

at maturity. These commercial papers were sold to Yapı Kredi Bank which is a related party to the Group

with closed issuance. (2)



bonds which is issued on 26 January 2011 with 24 months maturity, 9,08% coupon interest rate,






bonds which is issued on 26 January 2011 with 36 months maturity, 9,36% coupon interest rate,




Based on the board of directors meeting decision at 31 May 2011, according to the Capital Market Law

no 2499 with the mandatory permission, commercial papers amounting to TRY50.000 comprise of bonds

which is issued on 13 July 2011 with 16 months maturity, 10,33% coupon interest rate, and TRY50.000

nominal value with the principle and interest payment at maturity. These commercial papers were sold to

Yapı Kredi Bank which is a related party to the Group with closed issuance.



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14


(5) Based on the board of directors meeting decision at 31 May 2011, according to the Capital Market Law

no 2499 with the mandatory permission, commercial papers amounting to TRY50.000 comprise of bonds

which is issued on 13 July 2011 with 22 months maturity, 10,87% coupon interest rate, and TRY50.000

nominal value with the principle and interest payment at maturity. These commercial papers were sold to

Yapı Kredi Bank which is a related party to the Group with closed issuance.

(6)

Based on the board of directors meeting decision at 9 December 2011, according to the Capital Market


bonds which is issued on 17 January 2011 with 22 months maturity, 13,78% coupon interest rate, and

TRY40.000 nominal value with the principle and interest payment at maturity. These commercial papers

were sold to Yapı Kredi Bank which is a related party to the Group with closed issuance.

(7)

Based on the board of directors meeting decision at 10 February 2011, according to the Capital Market


bonds which is issued on 11 April 2011 with 13 months maturity, 11,39% coupon interest rate, and



(8) Based on the board of directors meeting decision at 10 February 2011, according to the Capital Market


bonds which is issued on 31 May 2011 with 15 months maturity, 11,68% coupon interest rate, and



(9) Based on the board of directors meeting decision at 20 April 2011, according to the Capital Market Law

no 2499 with the mandatory permission, commercial papers amounting to TRY50.000 comprise of bonds which

is issued on 4 June 2011 with 15 months maturity, 11,57% coupon interest rate, and TRY50.000 nominal value

with the principle and interest payment at maturity. These commercial papers were sold to Yapı Kredi Bank

which is a related party to the Group with closed issuance



ISSUED IN TURKISH




15


Financial liabilities denominated in TRY bear fixed interest rates while financial liabilities

denominated EUR and USD bear floating interest rates.

As of 30 September 2012 TRY359.840 (31 December 2011: TRY380.400) of short-term and long-

term financial liabilities are obtained was through banks which are related parties of the Group.

The redemption schedule of the long-term bank borrowings as of 30 September 2012 and

31 December 2011 is as follows:


Between 1-2 years 650.297 632.776

Between 2-3 years 282.465 330.223

Between 3-4 years 213.750 299.019

Between 4-5 years 145.037 153.538

More than 5 years 84.389 166.105

Total 1.375.938 1.581.661

Long-term loans denominated in Euro were obtained to finance the investment to manufacture New

Doblo and Mini Cargo light commercial vehicles. According to the manufacturing agreements signed

by the Group, the repayment obligations related to these loans obtained for (i) New Doblo is

guaranteed by Fiat and (ii) Mini Cargo is guaranteed by Fiat and PSA through future purchases. The

Group has obtained EUR350 million long-term loan limit in 2006 based on two different

manufacturing agreements with the participation of various financial institutions to be utilized in

investment of Mini Cargo. Long-term loans -obtained in relation with the investment for Mini Cargo

model- have been started to be repaid beginning from the year 2008 till 2015 in equal installments. As

of 30 September 2012, the remaining balance of the loan is TRY319.399 (equivalent of EUR 138.358

thousand), (31 December 2011: TRY386.422 equivalent of EUR158.123). The Group’s exposure to

foreign exchange rate and interest fluctuations for the loan obtained in relation with the investment for

Mini Cargo model is undertaken by Fiat and PSA.

At 4 March 2008, a loan agreement has been signed between the Company and i) Societe Generale,

Calyon, Fortis Bank S.A., Ing Bank NV and Intesa Sanpaolo banks as regulator, grantor and guarantor

ii) EIB as guarantor and credit grantor and iii) Servizi Assicurativi per il Commercio Estreo S.p.A.

(SACE) as guarantor role in the consortium amounting to EUR450 million. The loans, amounting to

TRY732.406 (equivalent of EUR(374.949 thousand) have been utilised as of 30 September 2012

(31 December 2011: TRY845.817 equivalent of EUR346.107) and have a maturity of ten years with

two years grace period and it has been used for financing investment expenditures regarding the

development and production of New Doblo. The Group’s exposure to foreign exchange rate and

interest fluctuations for the loan obtained in relation with the investment for New Doblo model is

undertaken by Fiat.

In 2011, The Group has obtained a credit line by EUR36 million in order to use in capacity increase of

New Doblo constructions. The repayment of principle amounts will be on equal installments starting

in 2012 until 2018.As of 30 September 2012, the remaining balance of the loan amount to

TRY76.181 (corresponding to EUR33 million).



ISSUED IN TURKISH




16

NOTE 6 - TRADE RECEIVABLES AND PAYABLES

a) Trade receivables


Trade receivables 380.036 430.589

Doubtful trade receivables 5.435 5.435

Less: provision for doubtful receivables (4.715) (4.715)

Less: unearned credit finance income from credit sales (1.355) (4.463)

Total 379.401 426.846

Movement of the provision for doubtful receivables is as follows:

2012 2011

1 January 4.715 4.715

Increase during the period - 521

31 September 4.715 5.236

Collateral received related with trade receivables

As of 30 September2012, the letter of guarantees, guarantee notes, mortgages and direct debit system

limit (payment guarantee limit secured by the banks) obtained as collateral for trade receivables

amounts to TRY27.792, TRY14.959, TRY7.787 and TRY383.939, respectively (31 December 2011:

letter of guarantees amounting to TRY20.304, guarantee notes amounting to TRY15.551, mortgages

amounting to TRY7.787 and direct debit system limit amounting to TRY389.273).

b) Trade payables


Trade payables 481.424 685.672

Less: not accrued credit finance expense from credit purchases (1.806) (7.650)

Total 479.618 678.022



ISSUED IN TURKISH




17

NOTE 7 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS


Short-term consumer financing loans 653.560 541.612

Non-performing loans 15.358 10.124

668.918 551.736

Provision for loan impairment

Specific provision (6.834) (5.568)

General provision (7.211) (6.344)

Total 654.873 539.824

Long-term consumer financing loans 495.497 541.878

Provision for loan impairment

General provision (5.063) (5.120)

Total 490.434 536.758

As of 30 September 2012,TRY and foreign currency denominated loans originated by the Group bear

fixed interest rates ranging between 0,79 % and 2,10% per month (31 December 2011:between 0,86%

and 2,16%) between 0,75% - 0,85% (31 December 2011: between 0,75% and 1,05%),respectively. As

of 30 September 2012, the Group has guarantees amounting to TRY1.327.581 regarding consumer

financing loans of subsidiary KFK (31 December 2011: TRY1.272.966).

As of 30 September 2012 and 2011 movements in the specific for loan impairment provision are as

follows:

2012 2011

1 January 5.568 13.775

Current year provision 1.991 3.409

Recoveries from loans under follow (725) (858)

30 September 6.834 16.326

The Group has obtained pledge rights as a guarantee for its consumer financing loans, up to total

amount of receivables, depending on the agreement between the Group and the consumers.

Furthermore, the Group obtains mortgage guarantees where necessary. As of 30 September 2012, the

fair value of guarantees obtained for the consumer loans, which have been impaired, amounts to

TRY9.114 (31 December 2011: TRY3.778) and related impairment provision has been accounted for

those loans. The fair value of guarantees obtained for the overdue consumer loans, for which no

provision has been provided, amounts to TRY8.668 (31 December 2011: TRY5.256).



ISSUED IN TURKISH




18

NOTE 7 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS (Continued)

The maturities of long-term consumer financing loans are as follows:

Years 30 September 2012 31 December 2011

1 to 2 years 341.040 336.943

2 to 3 years 137.346 161.192

3 years and more 17.111 43.743

Total 495.497 541.878

NOTE 8 - INVENTORIES


Raw materials 130.443 97.180

Work-in-progress 59.588 100.290

Finished goods 42.541 55.731

Spare parts 34.729 29.413

Imported vehicles 46.532 33.950

Goods in transit 66.628 68.892

Less: provision for impairment on inventories (-) (4.677) (5.404)

Total 375.784 380.052

An amount of TRY3.849.156 (30 September 2011: TRY3.179.757) inventory cost that occurred in the

current period has been included in the cost of goods sold.

NOTE 9 - INVESTMENT PROPERTIES

During the interim period ended 30 September 2012, the movement of investment properties is as

follows:

2012 2011

1 January, net book value 22.100 -

Additions (*) - 20.000

30 September, net book value 22.100 20.000

(*) The property of the company located in Güngören has been expropriated for public purpose by the

İstanbul Metropolitan Municipality in consideration for the land located in Alibeyköy/Eyüp. According to

the valuation report dated 18 October 2010, prepared in accordance with the Communiqué No: IV-8 of

Capital Markets Board, the market value of the land located in Alibeyköy, Eyüp, has been determined as

TRY20.000. Following the above aforementioned barter transaction with İstanbul Metropolitan

Municipality, land and buildings amounting to TRY2.552 has been disposed of and investment property

amounting to TRY20.000 has been accounted for as of 31 December 2011. The income generated from

the barter transaction amounting to TRY17.448 has been accounted for under other operating income.



ISSUED IN TURKISH




19

NOTE 9 - INVESTMENT PROPERTIES (Continued)

As of 31 December 2011, the fair value of the property has been determined as TRY22.100, as a result

of the revaluation of the property, revaluation gains amounting to TRY2.100 has been accounted for

under other income. Relevant valuation report is determined by an independent firm which has CMB

licenses and necessary professional experience.

CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE INTERIM PERIOD ENDED 30 SEPTEMBER 2012 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

20

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT

During the interim period ended 30 September 2012, the movement of property, plant and equipment and the accumulated depreciation is as follows:

Land, land

improvements Machinery Furniture Leasehold Construction

and buildings and equipments and fixtures Vehicles improvements in progress Total

1 January, net book value Cost 345.309 3.117.906 308.668 30.149 9.763 75.394 3.887.189 Accumulated depreciation (189.751) (2.151.712) (210.812) (24.793) (4.825) - (2.581.893)

Net book value 155.558 966.194 97.856 5.356 4.938 75.394 1.305.296

1 January 2012, net book value 155.558 966.194 97.856 5.356 4.938 75.394 1.305.296

Additions - 17 42 65 - 69.421 69.545

Disposals, net - (154) (13) (1.456) - - (1.623)

Transfers 3.663 47.176 12.796 6.616 - (70.251) -

Depreciation charge for the period (5.102) (116.602) (16.220) (1.735) (181) - (139.840)

30 September 2012, net book value 154.119 896.631 94.461 8.846 4.757 74.564 1.233.378

As of 30 September 2012

Cost 348.972 3.164.945 321.493 35.374 9.763 74.564 3.955.111

Accumulated depreciation (194.853) (2.268.314) (227.032) (26.528) (5.006) - (2.721.733)


As of 30 September 2012 there are no pledges or collaterals on property, plant and equipment.

For the nine-month interim period ended 30 September 2012, TRY132.897 of the depreciation expense has been charged to cost of sales, TRY5.186 has been

charged to general administrative expenses, TRY1.036 has been charged to marketing, selling and distribution expenses, TRY721 has been charged to

research and development expenses.

CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE INTERIM PERIOD ENDED 30 SEPTEMBER 2012 (Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

21

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT (Continued)

During the interim period ended 30 September 2011, the movement of property, plant and equipment and the accumulated depreciation is as follows:

Land, land

improvements Machinery Furniture Leasehold Construction

and buildings and equipments and fixtures Vehicles improvements in progress Total

1 January, net book value Cost 338.235 3.008.242 287.597 28.069 9.659 5.898 3.677.700 Accumulated depreciation (183.271) (2.034.764) (191.868) (22.326) (4.453) - (2.436.682)

Net book value 154.964 973.478 95.729 5.743 5.206 5.898 1.241.018

1 January 2011, net book value 154.964 973.478 95.729 5.743 5.206 5.898 1.241.018

Additions - - 8 - - 108.229 108.237

Disposals, net (2.674) (70) (130) (930) - - (3.804)

Transfers 24.003 32.793 8.127 1.214 - (66.137) -

Depreciation charge for the period (6.274) (89.910) (14.164) (1.911) (210) - (112.469)



Cost 359.564 3.040.965 295.602 28.353 9.659 47.990 3.782.133

Accumulated depreciation (189.545) (2.124.674) (206.032) (24.237) (4.663) - (2.549.151)


As of 30 September 2011 there are no pledges or collaterals on property, plant and equipment. For the nine-month interim period ended 30 September 2011, TRY106.776 of the depreciation expense has been charged to cost of sales, TRY3.780 has been

charged to general administrative expenses, TRY1.333 has been charged to marketing, selling and distribution expenses, TRY580 has been charged to

research and development expenses.


CONSOLIDATED INTERIM FINANCIAL STATEMENTS

ORIGINALLY ISSUED IN TURKISH




22

NOTE 11 - INTANGIBLE ASSETS

During the interim period 30 September 2012 and 2011, the movement of intangibles is as follows:

Licenses fee

development costs Others Total

1 January 2012, net book value

Cost 1.330.477 48.431 1.378.908

Accumulated amortization (568.341) (28.359) (596.700)

Net book value 762.136 20.072 782.208

1 January 2012, net book value 762.136 20.072 782.208

Additions 83.421 6.939 90.360

Amortization charge for the period (113.997) (4.571) (118.568)

30 September 2012, net book value 731.560 22.440 754.000


Cost 1.413.898 55.370 1.469.268



Licenses fee

development costs Others Total

1 January 2011, net book value

Cost 1.271.921 38.459 1.310.380


Net book value 850.443 16.303 866.746

1 January 2011, net book value 850.443 16.303 866.746

Additions 76.853 - 76.853

Disposals (1.417) - (1.417)

Transfers 4.680 (4.680) -

Amortization charge for the period (103.509) (3.705) (107.214)



Cost 1.352.037 33.779 1.385.816









23

NOTE 11 - INTANGIBLE ASSETS (Continued) Intangible assets are started to be amortised when the related assets are ready to be used. In relation to this, the Group has intangible assets amounting to TRY125.912 (31 December 2011: TRY67.559), which are not determined as ready for use and therefore, not started to be amortized.

For the nine-month interim period ended 30 September 2012, TRY115.011 of the depreciation expense has been charged to cost of sales, TRY2.248 has been charged to general administrative expenses, TRY698 has been charged to marketing, selling and distribution expenses, TRY611 has been charged to research and development expenses (30 September 2011: TRY103.998 of the depreciation expense has been charged to cost of sales, TRY2.033 has been charged to general administrative expenses, TRY631has been charged to marketing, selling and distribution expenses, TRY552 has been charged to research and development expenses).

NOTE 12 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

Short-term provisions:


Provision for warranty 57.904 57.246 Provision for sales discounts 30.259 11.564 Provision for development expenses 27.741 Provision for personnel expenses 20.767 4.873 Provision for advertisement expenses 12.066 - Provision for executive expenses 8.410 392 Provision for legal cases 6.407 6.407 Provision for extended warranty 1.441 1.815 Other 6.436 4.028

Total 171.431 86.325

Movement of the provision for warranty and extended warranty is as follows: 2012 2011

1 January 59.061 46.352 Paid during the period (31.683) (22.427) Increase in provision during the period 31.967 31.952

30 September 59.345 55.877

Movement of the provision for litigation is as follows: 2012 2011

1 January 6.407 1.012 Paid during the period - -

30 September 6.407 1.012

Litigations against the Group

As of 30 September 2012 the total amount of outstanding legal claims brought against the Group is TRY11.514 (31 December 2011: TRY10.063). The Group has reflected a reserve amounting to TRY6.407 (31 December 2011: TRY6.407) in the financial statements.







24

NOTE 12 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Guarantees provided by the Group:

The breakdown of letters of guarantee, guarantee notes given, mortgage and pledges (together referred

to as guarantees) by the Group as of 30 September 2012 and 31 December 2011 is as follows:

30 September 2012 31 December 2011 A. Total amount of Guarantees provided by the Company on behalf of itself 10.903 11.391 B. Total amount of Guarantees provided on behalf of the associates accounted under full consolidation method - - C. Provided on behalf of third parties in order to maintain operating activities (to secure third party payables) - - D. Other Guarantees given - i) Total amount of Guarantees given on behalf of the parent Company - - ii) Total amount of Guarantees provided on behalf of the associates which are not in the scope of B and C - - iii) Total amount of Guarantees provided on behalf of third parties which are not in the scope of C - -

10.903 11.391

NOTE 13 - OTHER ASSETS AND LIABILITES

a) Other current assets


Income accruals 103.208 5.649

Prepaid expenses 16.594 13.789

Bank stoppage 10.960 12.753

Advances given 872 3.835

Deferred VAT 197 45.586

Other 19.796 12.842

Total 151.627 94.454

(*) As of 30 September 2012, TRY69.734 of income accruals are related to the income from “Take-or-pay”

agreements with Fiat and PSA.

b) Other non-current assets:

As of 30 September 2012, the Group has other non-current assets amounting to TRY38.513

(31 December 2011: TRY20.222) comprising of mainly fixed asset purchase advances by TRY38.382

(31 December 2011: TRY20.089).







25

NOTE 13 - OTHER ASSETS AND LIABILITES (Continued)

c) Other liabilities


Cash collected loan investigation fees 17.575 16.628

Social securities payable 14.537 16.966

Taxes and funds payable 7.234 21.746

Payable to personnel 2.928 19.370

Other 4.854 5.562

Total 47.128 80.272

NOTE 14 – SALES

a) Net sales

1 January - 1 July - 1 January - 1 July -

30 September 2012 30 September 2012 30 September 2011 30 September 2011

Export sales 2.775.127 791.231 2.911.933 847.677

Domestic sales 2.083.325 729.667 2.368.100 733.346

Other income from

operational activities 77.937 16.552 273.884 87.537

Total 4.936.389 1.537.450 5.553.917 1.668.560

The amount of sales discount is TRY305.180 (30 September 2011: TRY263.763).







26

NOTE 14 - SALES (Continued)

b) Production and sales quantities

1 January - 30 September 2012 1 January - 30 September 2011

Production Sales Production Sales

MCV 86.260 86.217 109.380 109.205 Yeni Doblo 64.549 64.649 66.100 64.856 Linea 27.230 27.346 26.692 26.114 Doblo 11.814 11.653 10.760 10.827 Albea - 957 7.244 7.137 Palio-Palio Van - 35 774 757 CKD Demonte - - 11.232 11.424 SKD - - 576 576 Grande Punto (*) - 5.103 - 7.382 Ducato (*) - 3.409 - 3.484 Panda (*) - 135 - 1.010 Bravo (*) - 564 - 711 Alfa Romeo (*) - 851 - 608 Scudo (*) - 9 - 261 Fiat 500 (*) - 113 - 204 Lancia (*) - 201 - 136 Maserati (*) - 11 - 18 Ferrari (*) - 13 - 17 Jeep (*) - 416 - - Stillo (*) - - - 1

189.853 201.682 232.758 244.728

(*) Imported vehicles.

NOTE 15 - RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES



Selling and marketing

expenses 152.635 44.432 166.316 61.897

General administrative

expenses 96.263 32.838 89.137 27.188

Research and

development expenses (*) 10.503 5.014 6.406 2.065

Total 259.401 82.284 261.859 91.150

(*) Total research and development expenditures of the Group during the nine-month period ended 30 September 2012

amount to TRY93.924 (30 September 2011: TRY87.939) and TRY83.421 (30 September 2011: TRY81.533) of this amount has been capitalized. The remaining amount of TRY10.50 (30 September 2011: TRY6.406) has been accounted for as expense.







27

NOTE 15 - RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND

DISTRIBUTION EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES

(Continued)

a) Marketing and selling expenses



Transportation and

insurance expenses 36.985 13.800 36.216 12.982

Advertisement expenses 36.045 4.405 38.754 16.464

Warranty expenses 31.605 10.093 33.299 9.841

Personnel expenses 24.672 8.174 22.289 8.210

Royalty expenses 2.693 868 3.708 1.222

Depreciation and

amortization expenses 1.842 620 2.256 752

Exhibition-fair expenses 1.239 74 3.192 860

Other selling and

marketing expenses 17.554 6.398 26.602 11.566

Total 152.635 44.432 166.316 61.897

b) General administrative expenses



Personnel expenses 39.018 13.269 38.713 13.070

Services obtained from

third parties 15.576 5.569 14.411 2.602

Depreciation and

amortization expenses 8.752 2.969 8.648 4.315

Duties, taxes and levies 3.915 1.154 4.091 1.605

Insurance expenses 3.839 1.305 5.103 1.544

Other general and

administrative expenses 25.163 8.572 18.171 4.052

Total 96.263 32.838 89.137 27.188







28

NOTE 16 - FINANCIAL INCOME/EXPENSE



Foreign exchange gains 257.590 145.911 235.633 227.784

Interest income 92.601 28.293 95.981 34.726

Total financial income 350.191 174.204 331.614 262.510

Foreign exchange losses (283.189) (151.390) (263.051) (236.759)

Interest expenses (59.215) (16.260) (55.682) (17.908)

Total financial expenses (342.404) (167.650) (318.733) (254.667)

NOTE 17 - TAX ASSETS AND LIABILITIES

a) General

The Group is subject to taxation in accordance with the tax regulation and the legislation effective in

Turkey.

In Turkey, the corporation tax rate from January 1, 2006 onwards is 20%. Platform, the subsidiary of

the Group, is exempt from the corporate tax due to its nature of establishment until the year 2013.

Corporate tax returns are required to be filed by the twenty-fifth day of the fourth month following the

balance sheet date and taxes must be paid in one installment by the end of the fourth month. The tax

legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated

for each quarter. The amounts thus calculated and paid are offset against the final corporate tax

liability for the period.

As of 31 December 2010, the Group had written off deferred tax assets arising from unused

investment incentives due to the expiration as of 31 December 2008, amounting to TRY2.141.858,

through statement of income. Upon the meeting held by the Constitutional Court dated 15 October

2009 and upon the Constitutional Court conclusion on 8 January 2010, unused investment incentives

of the Group have become available for use again and the Group has recognized deferred tax assets

over the investment by increasing in proportion of PPI and revaluation rate amounted to

TRY2.787.421 as of 30 September 2012 and an amount of TRY325.879 has been used in the basis of

tax assessment. Remaining balance of TRY2.461.542 has been subject to deferred tax asset

calculation.

In Turkey, the tax legislation does not permit a parent company and its subsidiaries to file a

consolidated tax return. Therefore, provision for taxes, as reflected in the consolidated financial

statements, has been calculated on a separate-entity basis

Corporate tax losses can be carried forward for a maximum period of five years following the year in

which the losses were incurred. The tax authorities can inspect tax returns and the related accounting

records for a retrospective maximum period of five years.







29

NOTE 17 - TAX ASSETS AND LIABILITIES (Continued)

The taxation on income for 30 September 2012 and 2011 are as follows:



Current year corporate tax (7.353) (2.107) (3.553) (326)

Deferred tax

(expense)/income (28.348) (7.202) (38.942) (8.491)

Total (35.701) (9.309) (42.495) (8.817)


Corporate tax payable 7.353 4.872

Less: Prepaid taxes (-) (5.242) -

Tax payable, net 2.111 4.872

b) Deferred tax assets and liabilities

The breakdown of cumulative temporary differences and the resulting deferred tax assets and

liabilities provided at 30 September 2012 and 31 December 2011 using the current enacted tax rates is

as follows:

Cumulative temporary Deferred Tax

differences asset / (liabilities)

30 September 2012 31 December 2011 30 September 2012 31 December 2011

Provision for employee termination

benefits and unused vacation (124.433) (107.781) 24.887 21.556

Warranty provisions (59.344) (59.061) 11.869 11.812

Property, plant and equipment

and intangibles and inventories 921.240 934.635 (182.257) (184.936)

Deferred income (66.076) (78.328) 13.215 15.666

Unused R&D allowances - (41.654) - 8.331

Unused investment incentive

allowances (441.194) (378.411) 132.358 113.523

Deferred investment incentive

allowances (2.461.542) (2.632.887) 10.975 76.060

Other temporary differences (17.675) (8.731) 3.535 1.746

Deferred tax asset, net 14.582 63.758







30

NOTE 17 - TAX ASSETS AND LIABILITIES (Continued)

The movement of the deferred tax asset balance during the period is as follows:

2012 2011

Deferred tax asset 1 January 63.758 57.643

Deferred tax expense (28.348) (38.942)

Amount accounted under equity (20.828) 45.394

Deferred tax asset, 30 September 14.582 64.095

NOTE 18 - EARNINGS PER SHARE

Earnings per share are determined by dividing net income by the weighted average number of shares

that have been outstanding during the related period concerned. For the nine-month period ended

30 September 2012 and 2011 earnings per share is TRY0,65 and TRY0,69 respectively.

NOTE 19 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

Related party balances 30 September 2012 31 December 2011

Due from related parties Fiat 180.917 633.153 Otokoç A.Ş. 94.766 104.028 Other 867 934

Total 276.550 738.115

Due to related parties

Fiat 721.448 874.146 Other 13.117 58.449

Total 734.565 932.595

Advances given to related parties

Matay Otomotiv Yan San.ve Tic.A.Ş. 1.136 - Mako Elektrik Sanayi ve Ticaret A.Ş. 44 343

Total 1.180 343







31

NOTE 19 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) Related parties transactions



Sales Fiat 2.102.365 606.964 2.168.876 674.184

Otokoç A.Ş. 550.087 192.131 622.785 198.769

Other 6.251 1.806 3.982 2.518

Total 2.658.703 800.901 2.795.643 875.471



Domestic goods and services purchases Mako Elektrik Sanayi ve Ticaret A.Ş. 71.783 25.202 90.286 27.189 Otokoç A.Ş. 82.129 36.995 20.683 6.989 Zer Merkezi Hiz. ve Tic. A.Ş. 48.837 18.620 47.401 21.047 Ram Dış Ticaret A.Ş. 40.931 17250 868 868 Matay Otomotiv Yan San.ve Tic.A.Ş. 24.905 8.781 43.588 - Plastiform Plastik San.Tic. A.Ş. 19.457 7.010 19.985 5.520 Koç Sistem 6.950 1.661 4.541 2.829 Opet Fuchs Madeni Yağlar Tic. A.Ş. 7.908 4170 102 20 Koç Holding 4.693 1.632 3.465 1.408 Setur Servis Turistik 3.769 1.128 2.349 - Akpa Dayanıklı Tüketim Lpg ve Akaryakıt Ürünleri Paz. A.Ş. 3.826 1.269 4.328 1.536 Ram Sigorta Aracılık A.Ş. 10.681 - 7.302 219 Diğer 5.699 2.253 6.116 1.669

Total 331.568 125.971 251.014 69.294

Foreign Trade goods material and services purchases



Fiat 1.780.232 537.864 1.780.408 527.274 Diğer 538.123 520.780 18.174 4.546

Total 2.318.355 1.058.644 1.798.582 531.820

Interest income from the related parties, for the nine-month period ended 30 September 2012 amount

to TRY32.055 (30 September 2011: TRY33.061).







32

NOTE 19 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

Salaries and similar benefits paid to the top management for the nine-month period ended

30 September 2012 (16 person) (2011: 19 person) amount to TRY5.045 (2011: TRY7.433).

Interest expense paid or accrued to the related parties for the nine-month period ended 30 September

2012 amount to TRY29.843 (2011: TRY21.261).

Furthermore, in 2012, wholly owned subsidiary KFK has sold the closed issuance of bonds and

treasury bills to Yapı ve Kredi Bankası A.Ş. It is accounted under other financial liabilities with a

carrying amount of TRY359.857 (31 December 2012: TRY252.281).

NOTE 20 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial risk management objectives and policies

The Group’s principal financial instruments are cash and cash equivalents and bank borrowings. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Group management reviews and agrees policies for managing each of the risks as summarized below:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties, and continually assessing the creditworthiness of the counterparties. It is the Group policy that all customers who wish to trade on credit terms are subject to credit screening procedures and the Group also obtains collaterals from customers when appropriate. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Trade receivables are evaluated by management based on their past experiences and current economic condition, and are presented in financial statements net of provision for doubtful receivables (Note 6).

Amounts carried in the balance sheet reflect maximum credit risk of the Group.







33


(Continued)

Trade receivables Receivables Related Bank from Sector Other Other deposit Derivative finance 30 September 2012 Party party receivables (Not 3,4) instruments operations Maximum credit risk exposure as of reporting date (A+B+C+D+E) (1) 276.674 379.401 446 1.536.119 408 1.145.307 - Maximum risk secured by guarantee (2) 30.000 434.477 - - - 1.145.307 A. Net book value of financial assets neither overdue nor impaired 276.674 343.149 446 1.536.119 408 1.127.829 - Maximum risk secured by guarantee 30.000 433.942 - - - 1.127.829 B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue - - - - - - C. Net book value of assets overdue but not impaired - 35.717 - - - 8.668 - Maximum risk secured by guarantee - - - - - 8.668 D. Net book value of impaired assets - 535 - - - 8.810 - Overdue (gross book value) - 5.250 - - - 15.644 - Impairment (-) - (4.715) - - - (6.834) - Net value under guarantee - 535 - - - 8.810 - Not overdue (gross book value) - - - - - - - Impairment (-) - - - - - - - Net value under guarantee - - - - - - E. Off- balance sheet items - having credit risk - - - - - -

(1) Guarantees received and factors increasing the loan reliability are not considered when determining this amount.

(2) Guarantees consist of guarantee notes, guarantee checks, mortgages and car pledges received from customers.







34


(Continued)

Trade Receivables Receivables Bank from Related Other Other deposit Derivative finance 31 December 2011 Party party receivables (Not 3) instruments operations

Maximum credit risk exposure as of reporting date (A+B+C+D+E) (1) 738.115 426.846 349 1.331.700 60.424 1.076.582 - Maximum risk secured by guarantee (2) 30.000 365.984 - - - 1.276.744 A. Net book value of financial assets neither overdue nor impaired 726.901 423.344 349 1.331.700 60.424 1.066.769 - Maximum risk secured by guarantee 30.000 365.970 - - - 1.267.710 B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue - - - - - - C. Net book value of assets overdue but not impaired 11.214 3.488 - - - 5.256 - Maximum risk secured by guarantee - - - - - 5.256 D. Net book value of impaired assets - 14 - - - 4.557 - Overdue (gross book value) - 5.250 - - - 10.125 - Impairment (-) (Note 6) - (5.236) - - - (5.568) - Net value under guarantee - 14 - - - 3.778 - Not overdue (gross book value) - - - - - - - Impairment (-) - - - - - - - Net value under guarantee - - - - - - E. Off- balance sheet items having credit risk - - - - - -

(1) Guarantees received and factors increasing the loan reliability are not considered when determining this amount.

(2) Guarantees consist of guarantee notes, guarantee checks, mortgages and car pledges received from customers.

Aging analysis of trade receivables

The aging of trade receivables that are past due as of the balance sheet date but not impaired are as

follows:

30 September 2012 Trade receivables

1- 30 days past due 32.732

1- 3 months past due 2.987

3- 12 months past due -

1- 5 years past due -

Over 5 years past due -

Total 35.719

Amount secured by guarantees -







35


(Continued)

31 December 2011 Trade receivables

1- 30 days past due 9.457

1- 3 months past due 5.245

3- 12 months past due -

1- 5 years past due -

Over 5 years past due -

Total 14.702

The part secured by guarantees -

Foreign currency risk

The Group is exposed to foreign exchange risk arising from the ownership of foreign currency

denominated assets and liabilities with sales or purchase commitments. The policy of the Group is to

compare every foreign currency type for the probable sales or purchases in the future.

As explained in detail in Note 5, according to the manufacturing agreements signed by the Group, the

repayment obligations related to loans obtained for Doblo are guaranteed by Fiat and for Mini Cargo

by Fiat and Peugeot Société Anonyme (PSA) through future purchases. The Group’s exposure to

foreign exchange rate and interest rate fluctuations in relation with the loan obtained to manufacture

Mini Cargo vehicles is undertaken by Fiat and PSA.







36


(Continued)

Table of foreign currency position

TRY equivalent

30 September 2012 (functional currency) USD EUR Other

1. Trade receivables 249.994 - 108.293 -

2a. Monetary financial assets

(including cash, bank accounts) 742.238 11 321.514 1

2b. Non-monetary financial assets - - -

3. Other 69.379 18 30.040 -

4. Current assets (1+2+3) 1.061.611 29 459.847 1

5. Trade receivables - - -

6a. Monetary financial assets - - -

6b. Non-monetary financial assets - - -

7. Other (KFK long-term consumer financing loans) - - -

8. Non-current assets (5+6+7) - - -

9. Total assets (4+8) 1.061.611 29 459.847 1

10. Trade payables (816.995) (2.113) (352.127) (117)

11. Financial liabilities (317.516) - (137.542) -

12a. Monetary other liabilities (54.157) - (23.460) -

12b. Non -monetary other liabilities - - - -

13. Current liabilities (10+11+12) 1.188.668) (2.113) (513.129) (117)

14. Trade payables - - - -

15. Financial liabilities (1.027.763) - (445.208) -

16a. Monetary other liabilities - - - -

16b. Non -monetary other liabilities - - - -

17. Non-current liabilities (14+15+16) (1.027.763) - (445.208) -

18. Total liabilities (13+17) (2.216.431) (2.113) (958.337) (117)

19. Net asset / (liability) position of off-balance sheet

derivative instruments(19a+19b) 41.553 - 18.000 -

19a. Total hedged asset amount 41.553 - 18.000 -

19b. Total hedged liability amount - - - -

20. Net foreign currency asset / (liability)

position (9+18+19) (1.113.267) (2.084) (480.490) (116)

21. Net foreign currency asset/(liability)

monetary items - - - -

(=1+2a+5+6a+10+11+12a+14+15+16a) (1.154.820) (2.084) (498.490) (116)

22. Total fair value of financial instruments used for foreign

currency hedging - - - -

23. Export 2.779.786 - 1.222.229 -

24. Import 2.102.575 44 914.187 182

(*) The Group’s exposure to foreign exchange rate fluctuations on the long-term bank borrowings

denominated in Euro are undertaken by Fiat and PSA. Accordingly, net foreign currency exposure of the

Group excluding such borrowings as of 30 September 2012 is TRY71.200 foreign currency liability

position (TRY31.271 foreign currency asset position when considering the foreign currency denominated

inventory and fixed asset purchase advances).







37


(Continued)

Table of foreign currency position

TRY equivalent

31 December 2011 (functional currency) USD EUR Other

1. Trade receivables 727.472 - 297.681 -

2a. Monetary financial assets

(including cash, bank accounts) 487.717 23 199.556 -

2b. Non-monetary financial assets - - - -

3. Other 2.126 96 795 -

4. Current assets (1+2+3) 1.217.315 119 498.032 -

5. Trade receivables - - - -

6a. Monetary financial assets - - - -

6b. Non-monetary financial assets - - - -

7. Other 48 - 20 -

8. Non-current assets (5+6+7) 48 - 20 -

9. Total assets(4+8) 1.217.363 119 498.052 -

10. Trade payables (958.010) (457) (391.580) (203)

11. Financial liabilities (383.613) (10.371) (148.958) -

12a. Monetary other liabilities (117) - (48) -

12b. Non-monetary other liabilities - - - -

13. Current liabilities (10+11+12) (1.341.740) (10.828) (540.586) (203)

14. Trade payables - - - -

15. Financial liabilities (1.236.529) - (505.986) -

16a. Monetary other liabilities - - - -

16b. Non-monetary other liabilities - - - -

17. Non-current liabilities (14+15+16) (1.236.529) - (505.986) -

18. Total liabilities (13+17) (2.578.269) (10.828) (1.046.572) (203)

19. Net asset / (liability) position of off-

balance sheet derivative instruments

(19a-19b) 102.524 10.893 33.533 -

19a. Total hedged asset amount 102.524 10.893 33.533 -

19b. Total hedged liability amount - - - -

20. Net foreign currency asset/(liability)

position (9+18+19) (1.258.382) 184 (514.987) (203)

21. Net foreign currency asset/(Iiability)

position of monetary items

(1+2a+5+6a-10-11-12a-14-1 5-16a) (1.360.954) (10.709) (548.540) (203)

22. Total fair value of financial instruments

used for foreign currency hedging - - - -

23. Export 4.144.772 - 1.744.316 174

24. Import 3.342.856 77 1.438.950 906

(*) The Groups exposure to foreign exchange rate fluctuations on the long-term bank borrowings denominated in EUR

are undertaken by Fiat and PSA. Accordingly, net foreign currency exposure of the Group excluding such borrowings

as of 31 December 2011 is TRY43.322 foreign currency asset position (TRY130.847 foreign currency liability

position when considering the foreign currency denominated inventory and fixed asset purchase advances)







38


(Continued)

The following table demonstrates the sensitivity to a possible change of 10% in the USD, Euro and other

exchange rates in the Group’s foreign currency denominated liabilities (excluding foreign currency denominated

inventory and fixed asset purchase advances), with all other variables held constant, on the Group’s income

before tax as of 30 September 2012 and 31 December 2011:

Exchange rate sensitivity analysis table

30 Sptember 2012

Profit/loss Equity

Appreciation Depreciation Appreciation Depreciation

of foreign of foreign of foreign of foreign

currency currency currency currency

In case 10% appreciation of USD against TRY:

1- USD net asset/liability (446) 446 - -

2- Amount hedged for USD risk (-) - - - -

3- USD net effect (1+2) (446) 446 - -

In case 10% appreciation of EUR against TRY:

4- EUR net asset/liability (138.092) 138.092 - -

5- Amount hedged for EUR risk (-) 125.048 (125.048) 125.048 (125.048)

6- EUR net effect (4+5) (13.044) 13.044 125.048 (125.048)

In case 10% appreciation of other exchange rates against TRY

7- Other exchange rates net asset/liability (40) 40 - -

8- Amount hedged for other exchange rates risk (-)

9. Other exchange rates net effect (7+8) (40) 40 - -

Total (3+6+9) (13.530) 13.530 125.048 (125.048)







39


(Continued)

Exchange rate sensitivity analysis table

31 December 2011

Profit/loss Equity

Appreciation Depreciation Appreciation Depreciation

of foreign of foreign of foreign of foreign

currency currency currency currency

In case 10% appreciation of USD against TRY:

1- USO net asset/liability (2.427) 2.427 - -

2- Amount hedged for USD risk (-) - - - -

3- USD net effect (1+2) (2.427) 2.427 - -

In case 10% appreciation of EUR against TRY:

4- EUR net asset/liability (160.857) 160.857 - -

5- Amount hedged for EUR risk (-) 156.204 (156.204) 156.204 (156.204)

6- EUR net effect (4+5) (4.652) 4.652 156.204 (156.204)

In case 10% appreciation of other exchange rates against TRY

7- Other exchange rates net asset/liability (24) 24 - -

8- Amount hedged for other exchange rates risk (-)- - -

9. Other exchange rates net effect (7+8) (24) 24 - -

Total (3+6+9) (7.103) 7.103 156.204 (156.204)

Interest rate risk

Interest rate risk stems from the probability of an impact of rate changes on financial accounts. The

Group is exposed to interest rate risk due to maturity mismatch or differences of the assets and

liabilities that are re-priced or matured in a specific period. These exposures are managed by using

natural hedges that arise from offsetting interest rate sensitive assets and liabilities.







40


(Continued)

As of 30 September 2012 and 31 December 2011, the effect of +/___% change in interest rates until

the next reporting period on the interest sensitive financial instruments in the balance sheet has been

calculated as follows:

1 January - 1 January -

30 September 2012 30 September 2012

Change in interest rates %0,5 %(0,5)

Effect on net income before for taxes (101) 101

1 January - 1 January -

31 December 2011 31 December 2011

Change in interest rates %0,5 %(0,5)

Effect on net income before for taxes (152) 152

Liquidity risk

Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The risk is

mitigated by matching the cash in and out flow volume supported by committed lending limits from

qualified credit institutions.

The breakdown of financial assets and liabilities according to their maturities is disclosed considering

from balance sheet date to due date period. Financial assets and liabilities that have no certain due

dates are classified in over one year column.

30 September 2012: Total cash outflow per Between Over 5 Book agreement Less than 3 3-12 Between 1 - years Expected maturities Value (=I+II+III+IV) months (I) months (II) 5 years (III) (IV)

Non-derivative financial liabilities

Bank loans 1.936.897 2.225.996 372.519 591.661 1.177.425 84.391 Commercial paper issuance 403.221 432.683 220.347 98.212 114.124 - Trade payables 1.214.183 1.215.989 1.108.918 107.071 - - Other current liabilities 42.076 42.076 42.076 - - -

Total 3.596.377 3.916.744 1.743.860 796.944 1.291.549 84.391

Total cash outflow per Between Expected maturities (or maturities Book agreement Less than 3 3-12 Between 1 - Over 5 per agreement) Value (=I+II+III+IV) months (I) months (II) 5 years (III) years (IV)

Derivative financial assets (net) Derivative cash inflows - 93.380 48.953 24.092 20.335 - Derivative cash outflows - (96.885) (49.888) (25.062) (21.935) -







41


(Continued)

31 December 2011: Total cash outflow per Between Over 5 Book agreement Less than 3 3-12 Between 1 - years Expected maturities Value (=I+II+III+IV) months (I) months (II) 5 years (III) (IV)

Non-derivative financial liabilities

Bank loans 2.269.801 2.455.823 92.057 1.060.400 1.133.091 170.275 Commercial paper issuance 251.739 276.486 48.004 113.471 115.011 - Trade payables 1.610.618 1.618.268 1.459.943 158.325 - - Other current liabilities 80.272 80.272 80.272 - - -

Total 4.212.429 4.430.849 1.680.276 1.332.196 1.248.102 170.275

Total cash outflow per Between Expected maturities (or maturities Book agreement Less than 3 3-12 Between 1 - Over 5 per agreement) Value (=I+II+III+IV) months (I) months (II) 5 years (III) years (IV)

Derivative financial assets (net) Derivative cash inflows - 101.519 - 79.658 21.861 - Derivative cash outflows - (94.888) - (74.509) (20.379) -

Capital management policy

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit

rating and healthy capital ratios in order to support its business and maximize shareholder value. The

Group manages its capital structure and makes amendments to it, in light of changes in economic

conditions.

The Group has the power to organize the dividend payments in order to regulate and keep the capital

structure. There is no change in policy, target or processes of the Group as of 30 September 2012.

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