Financial - Turkish Airlines

(Convenience Translation of Report and Financial Statements Originally Issued in Turkish)TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIESNotes to the Audited Consolidated Financial StatementsFor the Year Ended 31 December 2012(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)Interest rate sensitivityThe following sensitivity analysis is determined according to the interest rate exposure in the reporting date andpossible changes on this rate and it is fixed during all reporting period. Group management checks out possible effectsthat may arise when Libor and Euribor rates, which are the interest rates of the borrowings with variable interest rates,fluctuate 0.5% and reports these to the top management.In condition that 0.5% increase in Libor and Euribor interest rate and all other variables being constant:Loss before tax of the Group, which belongs to the twelve-month-period, will increase by TL 16,778,503 (as of 31December 2011 profit before tax will decrease by TL 19,924,020). In contrast, if Libor and Euribor interest rate decreases0.5%, loss before tax for the six-month-period will decrease by the same amounts.Moreover, as a result of the interest rate swap contracts against cash flow risks, in case of a 0,5% increase in the Liborand Euribor interest rates, the shareholders’ equity of the Group will increase by TL 13,823,126 without the deferredtax effect. In case of a 0.5% decrease in the Libor and Euribor interest rates, the shareholders’ equity of the Group willdecrease by the same amount without the deferred tax effect.b.3.3) Fuel prices sensitivityAs explained in Note 39, Group made forward fuel purchase contracts in order to hedge cash flow risks arising from fuelpurchases beginning from 2009. Due to forward fuel purchase contracts subject to hedge accounting, as a result of a10% increase in fuel prices, the shareholders’ equity of the Group will increase by TL 63,778,860 excluding the deferredtax effect. In case of a 10% decrease in fuel prices, the shareholders’ equity of the Group will decrease by TL 60,668,805excluding the deferred tax effect.39. FINANCIAL INSTRUMENTSFair Values of Financial InstrumentsFair values of financial assets and liabilities are determined as follows:• In standard maturities and conditions, fair values of financial assets and liabilities which are traded in an activemarket are determined as quoted market prices.• Fair values of derivative instruments are calculated by using quoted prices. In absence of prices, discounted cashflows analysis is used through applicable yield curve for maturities of derivative instruments (forward and swaps).71