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.)1. COMPANY ORGANIZATION AND ITS OPERATIONSTürk Hava Yolları Anonim Ortaklığı (the “Company” or “THY”) was incorporated in Turkey in 1933. As of 31 December2012 and 31 December 2011, the shareholders and their respective shareholdings in the Company are as follows:31 December 2012 31 December 2011Republic of Turkey Prime Ministry PrivatizationAdministration 49.12 % 49.12 %Other (publicly held) 50.88 % 50.88 %Total 100.00 % 100.00 %The total number of employees working for the Company and its subsidiaries (together the “Group”) as of 31 December2012 is 19,109. (31 December 2011: 18,489). The average number of employees working for the Group for the year ended31 December 2012 and 2011 are 18,789 and 18,104, respectively. The Company is registered in İstanbul, Turkey and itshead office address is as follows:Türk Hava Yolları A.O. Genel Yönetim Binası, Atatürk Havalimanı, 34149 Yeşilköy İSTANBUL. The Company’s stocks aretraded on the Istanbul Stock Exchange since 1990.Subsidiaries of the Company are THY Teknik A.Ş. (THY Teknik), HABOMHavacılık Bakım Onarım ve Modifikasyon Merkezi A.Ş. (HABOM), and THY Aydın Çıldır Havalimanı İşletme A.Ş..Group management decisions regarding resources to be allocated to departments and examines the results and theactivities on the basis of air transport and aircraft technical maintenance services for the purpose of department’sperformance evaluation. Each member of the Group companies prepares its financial statements in accordance withaccounting policies are obliged to comply. The Group’s main business of topics can be summarized as follows.Air Transport (“Aviation”)The Company’s main activity is domestic and international passenger and cargo air transportation.Technical Maintenance Services (“Technical”)The Company’s main activity is giving repair and maintenance service on civil aviation sector and giving all kinds oftechnical and infrastructure support related to airline industry.Approval of Financial StatementsBoard of Directors has approved the consolidated financial statements as of 31 December 2012 and delegated authorityfor publishing it on 14 March 2013. General shareholders’ meeting has the authority to modify the financial statements.2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS2.1 Basis of PresentationBasis of Preparation for Financial Statements and Significant Accounting PoliciesThe Company and its subsidiaries registered in Turkey maintain their books of account and prepare their statutoryfinancial statements in accordance with accounting principles in the Turkish Commercial Code and Tax Legislation.7