annual report - yapikredikoray.com · • ykk reic was founded as a joint venture between yap›...

We have reflected 'you' in all of our projects for 10 years...

ANNUAL REPORT

2006 Ordinary General Assembly Meeting Agenda

1. Opening and election of officers

2. Board of Directors Report on 2006 operations and accounts; presentation and discussion of the Statutory Auditors' Report

and the summary of the Independent Auditor's Report of Baflaran Nas Serbest Muhasebeci Mali Müflavirlik A.fi.; and the

approval, amendment or rejection of the Board's proposed Balance Sheet and Income Statement for 2006.

3. Formal discharge of the Board of Directors and Statutory Auditors for the operations of the Company during 2006.

4. Pursuant to the Corporate Governance Principles, informing the General Assembly about the Company's dividend

distribution policies for 2007 and the following years.

5. Informing the shareholders pursuant to Article 27 Section (d) of the Capital Markets Board Communiqué Series: VI, No:

11 on Principles Regarding Real Estate Investment Companies.

6. Re-election or replacement of the Board of Directors whose terms have expired and determination of lengths of terms of

service for the newly re-elected or appointed Directors.

7. Re-election or replacement of the Statutory Auditors whose terms have expired and determination of lengths of terms

of service for the newly re-elected or appointed Statutory Auditors.

8. Determination of the monthly gross salaries to be paid to the Chairman and Members of the Board of Directors and the

Statutory Auditors.

9. Pursuant to the regulations of Turkey's Capital Markets Board regarding Independent Auditing in Capital Markets, approval

of the Independent Audit Company selected by the Board of Directors.

10. Authorizing the Officers to sign the Minutes of the General Assembly on behalf of the shareholders.

11. Wishes.

Buildings reflect the souls of their cities...We have reflected 'you' in all of our projects for 10 years...

People's faces reflect the faces of the cities they inhabit. They resemble thefaces of the homes they live in, the roads they drive on, the bridges they crossand the parks and gardens they play and relax in.

As the youngest society in Europe, along with the cities we inhabit, our facesare being reshaped every year. If our living spaces reflect our lives, then we arecontinually being changed.

YKK REIC's reason to exist is to enhance the aesthetics of the urbanenvironment, as well as quality, pleasure and comfort to our lives.

A ten-year success story,YKK REIC is especiallyproud of its heritage ofhuman-focused projectsthat conform to thedeveloping and changingneeds of cosmopolitan life,where functionality andaesthetics converge tocreate contemporaryurban architecture.

YAPI KRED‹ KORAY(YKK REIC) IS TENYEARS OLD

One of the most distinguished and respected real estateinvestment trusts in Turkey today, YKK REIC wasestablished in December of 1996 as a joint venturebetween Yap› Kredi Bank (with a 51% stake) and KorayYap› Endüstrisi (49%), both of which are leadingcompanies in their own sectors. Following the initialpublic offering of 49% of the shares in June of 1998,the shareholding structure of the remaining shareswas reconfigured to 26% for Yap› Kredi Bank and 25%for Koray Yap› Endüstrisi.

After the merger of Koçbank and Yap› Kredi Bank onOctober 2, 2006, YKK REIC has continued its operationswith even greater strength and vision as a subsidiaryof Yap› Kredi Bank.

During the ten years of its existence, YKK REIC hasconsistently concentrated all its experience, expertiseand energy on developing human-focused projectswhich conform to the developing and changing needsof urban life. These ventures where functionality andaesthetics come together in contemporary urbanarchitecture have not only reflected the discriminatingtastes of the target consumer audience, but have alsocaptured the attention of institutional entities. Thesereliable, original and high-quality projects, most ofthem the first of their kind in Turkey, are the milestonesthat YKK REIC is most proud of in its ten-year successstory.

CONTENTSYKK REIC is Ten Years Old 01 Vision 02 Milestones in the First Ten Years 02 Shareholding Structure 04 Financial Highlights 04 Performance of YKGYO shares on the ISE05 Message from the Board 06 Board of Directors 07 Senior Management 07 Real Estate Sector 08 Real Estate Investment Trusts 10 YKK REIC in 2006 11 Different Projectsfor Different Needs 14 New Residential Projects 21 New Mixed Use Projects 22 Projects under Development 23 Assets 24 Subsidiaries 25 Investment Portfolio 26Project Development 27 New Directions 27 International Relations 28 International Awards and Achievements 28 Investor Relations 29 Dividend Distribution Policy 292006 Activities 30 Declaration of Compliance with Corporate Governance Principles 31 Audit Committee Report 38 Financial Statements and Footnotes 41

A success story bringingtogether functionalityand aesthetics...

YKK REIC's current ongoing projects feature:• Istanbul-Istanbul-entirely developed by a real estate

investment trust• Istanbul-Zen-a completely original design• Ideal Home Evidea and Istanbul Bis• Neo-to be completed in the first quarter of 2007• Ankara Ankara-YKK REIC's first project outside of

Istanbul• Other ventures in Istanbul, Ankara, Izmir and

BodrumOf these projects, YKK REIC intends to present the oneswhose concept work has been finalized in 2007 to thepublic pursuant to obtaining all the necessary permits.

The sources of YKK REIC's strength in the real estatemarket today are its experienced and dynamic staffand its distinctive position in concept creation andbrand formation. Equipped with these qualities, YKKREIC became a company that is resistant to the impactof macro fluctuations in the Turkish economy on thesector. Moreover, the Company is able to continuallyimprove its corporate image in the eyes of the targetcustomer segment and its respectability in the eyesof the finance sector, thus pleasing both its customersand shareholders.

As one of the most effective and leading protagonistscontributing to the process of urban transformation,YKK REIC continues to design havens for people todwell in tranquility.

YKK ANNUAL REPORT 2006 01

VISION

Yap› Kredi Koray's goals are:

• To bring its business development, project management, sales, post-sales customer relations and financial managementprocesses, as well as its entire organization, on par with the best real estate companies in Europe by creating a corporateculture focused on performance.

• To become one of the top companies in Europe in terms of real estate development and value creation in real estatethrough strategic partnerships with management, marketing and design firms which are among the best in the worldin their field.

• To expand abroad and develop products to appeal not only the customers in Turkey but in Europe as well, thus increasingYKK REIC's customer base.

• To increase its business volume beyond US$ 500 million within the next three years through project-based financialpartnerships with foreign funds and more effective utilization of project finance instruments.

02 YKK ANNUAL REPORT 2006

MILESTONES IN THEFIRST TEN YEARS

2005

• The land purchasing agreement was signedand the foundation was laid for the Neoproject, YKK REIC's first shopping and lifestylecenter project.

• Ground was broken for the Istanbul Bis project.

2006

• The foundation was laid for the AnkaraAnkara project.

• The Istanbul Zen residences were deliveredto their owners.

• Evidea's First Phase residences weredelivered to their owners.

2002

• Owner occupancy began at Istanbul Istanbul.

1996

• YKK REIC was founded as a joint venturebetween Yap› Kredi Bank and Koray Yap›Endüstrisi.

1998

• Following the Company's initial publicoffering in June, 49% of YKK REIC's sharesbegan to be traded on the Istanbul StockExchange.

1999

• YKK REIC laid the foundation for theIstanbul Istanbul venture, Turkey's firstresidential project planned, developed andmarketed by a real estate investment trustfrom inception to completion.

2004

• YKK REIC broke ground on theIstanbul Zen and Evidea projects.


2006 FINANCIAL HIGHLIGHTS

(as of 31 December 2006)

YTL 122,656,228

NET ACTIVE VALUE

SHAREHOLDING STRUCTURE31 December 2006

COMPANY PROFILETitle Yap› Kredi Koray GYO A.fi.

Headquarters Istanbul

Date of Incorporation 24 December 1996

Issued Capital YTL 2,600,000

Registered Capital YTL 25,000,000

Date of Initial Public Offering 18 June 1998

Initial Public Offering Price YTL 0.48

Yap› KrediBank26%

KorayGroup25%

PubliclyHeld49%

FINANCIAL POSITIONThe total value of cash and capital market instruments in the portfolio as of December 31, 2006 was YTL 2,598,364and the overall value of the portfolio was YTL 246,251,544.

FINANCIAL INDICATORS(YTL) 2005 2006Total Assets 205,632,721 288,941,499Shareholders' Equity 92,249,003 99,094,683Net Income 5,179,121 6,216,680Net Active Value of Portfolio 96,120,087 122,656,228Net Income per Share 0.1295 0.1554

COMMERCIAL REGISTRATIONINFORMATIONRegistration Date 09 February 2006

Registration No. 359254


(YTL) 2005 2006Net Active Value per Share 2,403 3,066Share Price as of December 31, 2006 4.28 3.04Net Income per Share 0.1295 0.1554Weighted Average Share Price at the last ISE Trading Session 3.04Market Capitalization 121,600,000

PERFORMANCE OF YKGYO SHARES ON THEISTANBUL STOCK EXCHANGE

The ISE National-100 Index lost 1.66% in 2006,whereas the ISE Real Estate Investment Trust Indexlost 16.85%. The YKGYO share price moved parallelto the sector index and closed 2006 at YTL 3.04,down from its 2005 close of YTL 4.56.

Residential and commercial projects underconstruction in 2006, which are slated forcompletion in 2007, along with other potentialproject-based partnerships with foreign funds,have created a positive expectation regarding the

performance of the share price for the up-comingperiod. The share price was YTL 3.04 (weightedaverage) per share at 2006 year-end. 58.4%(11,441,520 lots) of our shares are held by foreigninvestors.

2006 ISE National-100 Index, ISE Real Estate Index andYKGYO Share Performance

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MESSAGE FROMTHE BOARD

in the final days of 2006 did not negatively impactour economy, reflecting a measure of strength.Despite the economic and political uncertaintiesover the short and medium terms, the corporationswhich have made long-term investments in Turkeycontinue to believe in the growth potential of ourcountry. This interest by foreign investors in theTurkish economy is expected to continue in thefollowing period as well.

Although housing loan costs increased followingthe interest rate hike in May of 2006 by the CentralBank of Turkey, home sales financed by mortgagesbegan picking up again following a new decline ininterest rates in September. In the commercialreal estate sector, the shopping center segmentregistered an 8% growth. In fact, it was thispersistent investor demand for shopping andbusiness centers that was the main dynamic forcebehind the growth of the real estate sector. Tosummarize, the real estate sector grew by 26.7%in the first half of the year and 13.7% in the secondhalf, moving in alliance with the constant growthof the Turkish economy and particularly theconstruction sector, in the past five years.Additionally, the continuous increase in populationin Turkey, along with pressing urbanization needspoints to further growth in the sector in the daysahead.

In the midst of all this, YKK REIC continued on thepath of its growth plan in 2006. While continuouslyundertaking large-scale projects as the most prolificproject developer and real estate investment trustin the sector, we also maintained our strongbalance sheet. In addition to our popular residentialprojects targeting the high-income segment, ourever-increasing expansion into broader segmentshas led us to invest in residential and shoppingcenter ventures geared toward the middle-incomeclass.

Our skills in project development, sales, marketingand financing procurement have elevated us to aunique leadership role as the architect of newdevelopments in our sector. Due to its strongbalance sheet and sound real estate portfolio, YKKREIC succeeded in becoming one of the mostresilient companies despite the unfavorableeconomic conditions Turkey has faced over thelast few years. Because of our strong management,staff and corporate structure, we have been ableto closely follow market trends and accuratelyassess risk. Our total assets rose from YTL96,120,087 in 2005 to YTL 122,656,228 in 2006.

Dear Shareholders,

After witnessing high economic growth in the firstquarter of 2006, the downward trend in inflationand real interest rates continued throughout theyear. Declining interest rates created a strongincrease in the demand for automobile and housingloans. Moreover, the start of full membershipnegotiations with the European Union contributedto the optimism in the economy and steeredinternational liquidity towards Turkey. Thus, theeconomy grew at a rate of 7% in the first half ofthe year and experienced a growing increase inthe influx of foreign capital during the year. Despitethe global financial fluctuation that began in Mayof 2006 and impacted developing marketsthroughout the second half of 2006, an estimatedUS$ 20 billion in foreign capital flowed into Turkeyduring the year.

The fiscal discipline longed for in the public sectorfor many years finally became a reality and theprimary budget balance (balance excluding interestpayments) turned into a surplus. As a consequenceof favorable economic indicators, relatively lowerinterest expenditures and longer maturities wereachieved in public sector borrowing. However, thesepositive developments are threatened by severalpotential dangers which have not yet beenovercome. As Turkey continues to reach recordlevels in exports, the trade deficit also continuesto widen. With an unemployment rate hoveringabove 10% impeding economic stability, theunemployment problem remains unresolved.Furthermore, the fact that 2007 is a major electionyear has created concern about the maintenanceof political stability. However, one pleasantdevelopment is that the suspension of eightchapters of the European Union accession talks,which has been serving as an economic anchor,

The Istanbul Zen Project that was completed in2006 has already brought in a large profit for itsinvestors. The first two phases of the Evideadevelopment in Çekmeköy, a joint venture withthe Garanti Real Estate Investment Company Inc.,were finished and turned over to homeowners. Theconstruction phase of the Istanbul Bis and AnkaraAnkara projects are nearly complete. The NeoProject, representing YKK REIC's first venture intothe shopping center sector and the first shoppingand lifestyle center in the city of Eskiflehir, is now80% complete. In addition to these investments,we are continuing our development of the Riva,Bahçeflehir, Ka¤›thane, Ankara-Çankaya andBeyo¤lu-Narmanl› projects.

In this highly competitive sector, we are continuingto walk steadfastly towards our vision, fully awareof our responsibilities and constantly guided byour corporate values. In doing so, we continue tocapture international attention and plaudits. In2006, YKK REIC received the Euromoney Awardsfor Excellence, given annually to the bestperforming companies and banks in major financialmarkets and product sectors in 100 countries, inthe Best Real Estate Developer and Best Real EstateManagement Specialist categories.

As we celebrate our 10th anniversary, we are bothpleased and proud to have delivered the qualityprojects to our customers and have been workingtoward a brighter future for our partners andshareholders. We view this decade of fineachievements as the assurance of our futuresuccess. Last, but by no means least, we want tothank our committed staff and shareholders, whoseinvaluable support constantly encourages us aswe move forward.

Respectfully yours,

S. Kemal Kaya, ChairmanSüleyman Yerçil, Vice ChairmanYücel Ersöz, General Manager

(on behalf of the Board of Directors)

The decade of fineachievement is theassurance of our futuresuccess.


BOARD OF DIRECTORS

1) Yücel Ersöz General Manager2) Efran Tabo¤lu Assistant General Manager

/ Financial and Administrative Affairs3) Erdem Tavas Assistant General Manager

/ Project Management4) Eser Güven Özbay Assistant General Manager

/ Sales and Marketing

SENIOR MANAGEMENT

Pursuant to the Capital Markets Board regulations, Independent Members constitute one third of the Board of Directors.

Ayd›n BoysanIndependent Member

Afa BoranIndependent Member

Mete TapanIndependent Member

Tamer Haflimo¤luBoard Member

Selim KorayBoard Member

Federico GhizzoniBoard Member

Murat KorayBoard Member

Süleyman YerçilVice Chairman of the Board

S. Kemal KayaChairman of the Board

1 23 4


REAL ESTATESECTOR


The primary factors promising rapid growth in the real estatemarket in the coming years are the increasing demand amongthe high-income class, due to lower interest rates and high qualityproducts in the construction sector and the increasing demandby middle and low-income classes, driven by the impendingMortgage Law.

New housing complexes, the main driver in thereal estate sector in 2006, maintained their statusas one of the most popular investments in thelast few years. Until May of 2006, housing loanswith low interest rates and long maturities led tosignificant increases in the number of residentialprojects being developed, especially in the largercities. The interest rate hike by the USA FederalReserve Bank in May of 2006, followed by theCentral Bank of Turkey's decision to raise interestrates, reshaped the sector and investors returnedto purchasing existing homes instead of takingout high-cost housing loans.

In general, however, thanks to favorabledevelopments in the preceding two years, 2006was a year in which the real estate sectorcontinued its dynamic growth. Parallel to thepositive developments in the Turkish economyand the construction segment, the real estatesector grew by 26.7% in the first half of the year,a much faster pace than that of previous years,whereas the growth rate in the second half of theyear stood at 13.7%. This transition periodresulted in a boom in the sales of existingresidences. With the return of lower interest ratesin September 2006, albeit not as low as before,home sales financed by loans picked up onceagain.

Residents of large cities are increasingly leaningtoward housing complexes, especially outsidedowntown areas, because they are far removedfrom the hectic pace of daily life and nearer tonature, offering secure, peaceful and community-oriented living.

Once the Mortgage System legislation that hasbeen on the public agenda since 2003 comesinto effect, it will facilitate home ownership withinan institutional structure through long-term

affordable installments, as can be seen fromsimilar successful implementations abroad. Thissystem is expected to cover 60% of the Turkishpopulation.

Istanbul constitutes half of Turkey's residencedeficiency and the residential areas are expandingnorth, towards the periphery of the city. TheLevent-Etiler-Maslak, Kemerburgaz, Silivri andHad›mköy areas on the European side ofIstanbul, along with the Ömerli, Çekmeköy andTepeören areas on the Asian side are where Aand B class housing demand and supply aregrowing the fastest. In the downtown area,Beyo¤lu and Cihangir are in strong demand dueto the historical texture of these neighborhoods.

Although the primary growth zones in Ankaraare the Eskiflehir and Konya highway areas andtheir surroundings, Gölbafl› and other residentialareas on the west side of the city are also showingincreasing growth. In Izmir, the Maviflehir areais the location of choice for new residentialdevelopment projects. Besides this, the newlydeveloping areas include the Çeflme highwayregion as well as the Balçova and Narl›deredistricts. In Adana, the Mersin and Baraj (Dam)highway areas, which are on the north side ofthe city, are among the zones where real estatedevelopment is expected to be strongest. InKocaeli, the growing regions appear to be in theGebze, Gölcük and Karamürsel districts.

Traditionally, the primary source of residencefinancing in Turkey has been through personalfunds. According to the residence census pollresults conducted last year, among the populationsegment that does not use loans to finance theirhome purchases, 61.9% financed the purchaseof their new residences through savings. 7.2%transacted such purchases from the proceeds of


the sale of previous homes, 5.7% from the saleof other real estate and 1.2% via savingsaccumulated abroad. Personal funds amount to76% of the overall financing in this segment. Theremaining means of financing are family support(10.3%), personal borrowing (12.3%) and otherways (1.4%).

Home Purchase FinancingPersonal funds 76%Family support 10.3%Personal borrowing 12.3%Other 1.4%

Personal Funds in Home PurchasesSavings 61.9%Sale of previous homes 7.2%Sale of other real estate 5.7%Savings from abroad 1.2%

The office market also showed a strong growthin 2006. Along with the increased economicgrowth and rising business volume in Turkey,demand for office space is expected to grow evenfurther in the new development areas.

As of 2006, there are currently 99 shoppingcenters active in the retail sector. Along with theentry of transnational retail chains into theTurkish market and the increase in the pace ofurbanization, demand for shopping centers isexpected to remain strong over the coming years.

Breakdown of Shopping CentersHypermarket 30.09%Regional center 30.09%Neighborhood center 21.35%Outlet 8.73%Lifestyle center 4.85%Themed 4.85%

The strong demand for real estate in 2006 created a response and expansionin supply side. Residential projects were developed to meet investorrequirements, shopping centers were launched with diverse concepts and thedemand for business centers picked up during 2006. Collectively, these signalthat the rapid growth in the energized real estate market will continue in 2007.


REAL ESTATEINVESTMENTTRUSTS

Real estate has traditionally been considered areliable investment in Turkey. The demand for theshares of companies that invest in real estateconfirms the validity of this trend. Following theearthquake in the Marmara region in August of1999, the necessity to reassess real estatestandards increased, further highlighting theimportance of reliable real estate investmentcompanies.

Co-founded and chaired by YKK REIC, theAssociation of Turkish Real Estate InvestmentCompanies (GYODER) was established after the1999 Marmara earthquake to develop andmaintain high standards for real estate in Turkey.As the primary representative of the real estatesector both at home and abroad, the Associationaims to establish and maintain industry-widequality, control and education standards withinthe framework of a sound code of ethics.

The Urban Land Institute (ULI) Turkish Council,founded in 2005 and also chaired by YKK REIC,supports education and exemplary projects in thesector and helps establish the infrastructure forefficient coordination between the private sector,non-governmental organizations and the centraland local governments. In addition, the Councilalso endeavors to provide Turkey with the bestrepresentation possible on international platforms.

The total portfolio value of the ten publicly tradedreal estate investment trusts in 2006, as ofDecember 31, 2006, was YTL 2,732,953,621. Themain portion of the portfolio value of these trusts,66.4%, consists of buildings and offices that earnrental income. The rest of the portfolio value iscomprised of residential and shopping center realestate projects (16%), cash and capital marketinstruments (11.1%) and land to be developed(4.1%).

Net Active Value Breakdown31 December 2006

Net Active Value Breakdownof the Overall Market31 December 2006

The increase in the construction sector last yearwas also reflected in the portfolio value of the realestate investment trusts. Having made theirpresence felt with the construction of high-risebuildings, especially in downtown areas, the realestate investment trusts intend to expand theirmarkets in 2007 by continuing to produce projectsin this concept that are geared especially towardthe working class.

In this regard, YKK REIC signed a letter of intentwith Global Principal Investments, a subsidiary ofthe Merrill Lynch Global Markets & InvestmentBanking Group, to sell this entity a 50% share ofthe Company's current Neo Shopping CenterProject in Eskiflehir. Negotiations for this ventureare ongoing, with an anticipated completion ofthe agreement in January 2007.

The significance and potential of real estateinvestment trusts were highlighted once againafter they developed projects that met investordemands in 2006. Thanks to these efforts, YKKREIC received two Euromoney Awards forExcellence, granted for the past fifteen years in100 countries based on surveys conducted.

In summary, given the need for 300,000 newresidences in Turkey due to increasing populationand urbanization, the growth potential of thehousing sector, in comparison to the strength ofthe construction sector, is still insufficient to meetthe deferred demand. Therefore, investments inthe residential sector and growth in constructionactivities are expected to continue. As the largestplayers in this sector, where high growth is neededto meet the needs of the burgeoning Turkisheconomy, project volume and project diversity ofreal estate investment trusts will obviouslyincrease as well.

The growth potential of thehousing sector in Turkey,in comparison to thestrength of theconstruction sector, is stillinsufficient to meet thedeferred demand. Thus,investments in theresidential sector andgrowth in constructionactivities are expected tocontinue.

(YTL thousands)Sector Total : 2,480,823YKGYO : 122,656

Residence 22%

Land 18%

Subsidiaries1%

BusinessCenter20%

Liquid Assets1%

Office 4% Net Debt34%

YKGYO 6%

Other REITs94%

Liquid Assets6%

Land6%

Residence0%

Subsidiaries0%

Ofis 79%Net Debt9%

Real Estate Investment Trust SectorMarket Capitalization Breakdown31 December 2006


YAPI KRED‹ KORAYIN 2006

The year 2006 was one in which YKK REICcontinued to make large-scale investments. As areal estate investment trust that can develop manydiverse projects, the Company continues to receivepraise both on the domestic and internationalfronts for its successful management, skilled staffand strong corporate structure. In the internationalarena, YKK REIC added the 2006 EuromoneyAwards for Excellence to its numerousachievements. One of the world's most respectedpublications in the field of global banking, financeand capital markets, Euromoney magazine choseYKK REIC as the recipient of its Best Real EstateDeveloper and Best Real Estate InvestmentManagement Specialist awards in 2006.

Through its Neo project in Eskiflehir, YKK REICentered the lucrative shopping center sector in2005. This huge project was 80% complete by theend of 2006. Covering a total area of 50,000 m2,Neo will be the first shopping and lifestyle centerin Eskiflehir. By the 2006 year end, constructionwork on the Evidea, Istanbul Bis and Ankara Ankaraprojects was also nearly complete. During the year,the Istanbul Zen project was finished and theresidences were delivered to their owners.Development work is ongoing in the Bahçeflehir,

Ka¤›thane, Ankara-Çankaya, Beyo¤lu-Narmanl›,Bucharest and Riva projects. These new venturesare a testament to YKK REIC's resolve to builddevelopments not only for the upper income class,but also for the middle income segment. Havingextended itself within Turkey with its projects inAnkara and Eskiflehir and internationally byentering the Romanian market through itsBucharest project, YKK REIC is determined tocontinue its expansion. The total number ofresidences in the projects YKK REIC has finishedthus far is 900, a figure which is expected to riseto 2,000 with the completion of units currentlyunder development.

As a consistent and solid performer financiallywith its strong balance sheet and sound real estateportfolio, YKK REIC raised the bar even further withits performance in 2006, as reflected in its highernet active value, profitability and share priceperformance. The year 2006 financial statementsare reported on a consolidated basis. Thecompanies subject to consolidation are Yap› KrediKoray GYO A.fi., YKS Tesis Yönetim Hizmetleri A.fi.,GKY Real Estate Investments SA and the jointventure between Yap› Kredi Koray GYO A.fi. andGaranti GYO A.fi. for Evidea Project

With residential projects in planning stages, YKKREIC, among all the real estate investment trustsin Turkey, is in the ideal position to benefit fromthe potential of the mortgage system. TheCompany will maintain its current balance betweenits residential and office properties. It will earnincome from both development projects and rentalproperties, thereby preserving its strong positionin the market for the future as well. Furthermore,YKK REIC will continue to enhance its brandrecognition by developing reference projects.

Another important development in 2006 was theincrease in foreign investor demand. Having playedan active role in the establishment of sectorassociations such as the Association of TurkishReal Estate Investment Companies and the UrbanLand Institute Turkish Council, the Companysuccessfully represented Turkey, considered to beone of the two most promising markets in Europe,in the international arena. YKK REIC had meetingswith approximately 250 analysts and investorsduring the period, plus it actively participated inthe CAIB, UBS, EFG, ULI and GRI meetings thatwere held at home and abroad.

One of the world's most respected publications in the field ofglobal banking, finance and capital markets, Euromoneymagazine chose YKK REIC as the recipient of its Best RealEstate Developer and Best Real Estate InvestmentManagement Specialist awards in 2006.

Strong tripod:Financing, marketing andproject development

Healthy development,efficient growth

The pattern of growth in the Turkisheconomy, added to that the weight of theyounger generation in the demographicmix, presents significant opportunities forthe real estate sector in Turkey. Whileproducing excellent solutions to meet theconstantly-evolving needs of the urbanareas during its ten years of experienceand performance in the sector, YKK REIChas become one of the most strikingexamples of healthy development andefficient growth.

Building on its strong, three-fold foundationof sound financing, marketing and projectdevelopment processes, YKK REIC iscontinuing its leadership status in thisrapidly growing sector. The Company'ssuccess is further driven via theopportunities created by its strong balancesheet as well as a real estate portfoliocomprised of the most prominent piecesof property in the urban landscape. Thisensures a bright future for YKK REIC, whichhas targeted to become a successful andeffective global company as one of its toppriorities.


FlexibilityTeam playWith the natural benefit stemming fromits increasing respectability in internationalfinance communities and its investmentpotential in diverse segments, YKK REIChas the flexibility of repositioning itself inresponse to macro-level fluctuations andthe changing expectations in the market.

With the conviction that a company's mostvaluable asset is its highly skilled andunified professional staff, YKK REIC is proudof the strong team spirit manifested by allwho serve there. This workforce, fromfinancing and project development tomarketing and sales, has the reputation ofbeing the best in the sector.


Different Projects forDifferent Needs...YKK REIC has formulated its marketing strategy in order to appeal to both thediscriminating expectations of the high income class and the demands of the middleand lower income groups for more affordable solutions. With its investments in thecommercial sectors, the Company is also contributing to the changing silhouettesof Turkey's growing urban areas. The coming years will also witness YKK REIC'sinternational accomplishments.


The Istanbul Istanbul project launched in 1999 wasTurkey's first residential project to be planned,developed and marketed by a real estate investmenttrust from its inception to completion.

Pride of being the World's BestCombining Mediterranean architecture withtraditional Turkish design, Istanbul Istanbul wonfirst prize as the “Best Residential Development” in2002 at the MIPIM International Real Estate Awards,which is held in Cannes, France in March of everyyear and is considered to be the most importantreal estate competition in the world.

Featuring an extremely well-groomed environmentwith a 10,200 m2 pond, bridges and well-kept greenareas and landscaping, Istanbul Istanbul offers awide variety of residential units, ranging from studioapartments and apartments with terraces andbalconies to two-story villas and corner villas withsix rooms.

Contemporary and natural...These residences were built in such a way as tomove life away from monotonous and toward anenvironment that is both warm and friendly. A viewof the pond and the green areas was the primaryfactor in the positioning of the villas and apartments.

Planned to be implemented in three phases on100,000 m2 of land, the two completed phases of

the project occupy approximately 73,000 m2 andconsist of 204 units. The first phase of the projectconsists of 117 adjacent villas, ranging from 188to 274 m2 and 39 apartments ranging from 79 to158 m2. The second phase consists of 27 adjacentvillas ranging between 188 and 270 m2 and 21apartments ranging from 79 to 158 m2. The sale ofunits within the scope of the Istanbul Istanbulproject was concluded in 2002.

Holiday Village Comfort...A service concept called BizBize, Turkey's first realestate service of its kind, aims to make the lives ofIstanbul Istanbul residents easier. With the comfortof a holiday village, BizBize provides a full range ofservices to meet all needs of the residents, includingyard cleaning, catering, housekeeping, gardening,24-hour technical service and security. BizBizeservices are constantly evolving and improvingbased on the needs and feedback of the residentsof Istanbul Istanbul.

Social facilities covering 8,500 m2 feature bothoutdoor and indoor swimming pools, a sauna, amassage room, a steam room, a kindergarten,squash courts, a billiard room, a bar-restaurant,aerobic and fitness facilities, tennis and basketballcourts, a playground and a multi-purposeconference area.

www.istanbul-istanbul.com

‹STANBUL‹STANBUL

Total Land (Net) 72,743 m2

Total Construction Area 76,750 m2

Residence 50,633 m2

Parking Space 24,453 m2

Social Facilities 1,664 m2

Total Area for Sale 40,743 m2

Launch Date March 1999

Delivery Date June 2003

The sale and delivery of all 204 units hasbeen concluded.

A colorful and peacefullifestyle alternativecentered in nature...

A project of “firsts”


Total Land (Gross) 9,934 m2



Residence 14,674 m2


Social Facilities 339 m2


Launch Date September 2004

Delivery Date March 2006

The sale and delivery of all 74 units hasbeen concluded.

“Let the sunshine in...”

Istanbul Zen, located in Istanbul's earthquake-resistant Göktürk district, is built on an area of10,000 m2 adjacent to Istanbul Istanbul and isYKK REIC's second residential project in the region.The site combines urban comfort and naturaltranquility with a design concept that provides anescape from the hectic life of the city.

With the natural beauty of green areas and anexcellent infrastructure, Istanbul Zen has nowbrought a new breath of life to the district ofGöktürk. Sales were first launched in June of 2004and the units were completed and delivered totheir owners by March of 2006, adding anothersecure residential community to the city.

Pleasure of waking up to a life with sunshineWith a design based on the proverb from the FarEastern Zen philosophy that “A residence is a placeto feel alive and to wake up to life,” the Zenresidences were built to achieve the harmonybetween light, nature, greenery and wood.

The project is comprised of 74 residences withliving spaces ranging between 111 and 229 m2

and layouts ranging from 2+2 to 4+1 rooms. Thereare two-story garden units, two-story penthouseswith terraces, two-story units with galleries andstudio flats in a three-block complex. Socialfacilities feature an open swimming pool, a sauna,a steam bath, a massage room, a billiard room,changing rooms, a sandwich kiosk, a vitamin bar,a meeting room, a card game salon, a children'splayground, a multi-purpose fitness center, awalking and bicycle trail and an aerobic and fitnessfacility.

A profitable investmentThe objective from the very beginning of the projectwas not only to design a pleasant lifestyle forresidents but also to create a profitable tool forinvestment. For this reason, new and distinctivetrends in the world of real estate were studied andimplemented down to the last detail. As a resultof these efforts, Istanbul Zen produced a return ofup to 55% for its investors in 2006.

www.istanbulzen.com

‹STANBUL ZEN

A breeze from the Far East


Close to the city,close to natureWith its unparalleled landscaping and architecturaldesign, Istanbul Bis, YKK REIC's third project, isalready a strong candidate to add a uniquecharacteristic to the Kemerburgaz Göktürkneighborhood.

Friends with magnolia treesIstanbul Bis bears the signature of the conceptualarchitect Charles Legler, winner of the internationalMIPIM and CRM awards for the Istanbul Istanbulproject. The complex has a green, lively viewcomplete with a broad horizon. Istanbul Bis, builtutilizing an elegant, noble and functionalarchitectural style, immediately captures attentionwith its majestic magnolia and cypress trees andgreen areas adorned with water features.

Constructed on 10,000 m2 of land and consistingof a total of 112 units, Istanbul Bis offers a varietyof functional units ranging from 2+1 to 5+1 rooms,studios, two-story apartments and units withgardens, ranging from 104 to 253 m2.

The development's social facilities feature a mini-café, bicycle and walking trails, multi-purposeexercise area, fitness center, meeting and gamerooms, swimming pool, children's pool, tanningterrace and a children's playground.

The units in the project are planned to be deliveredin March of 2007. There are still units available forpurchase under long-term payment plans.

www.istanbulbis.com

‹STANBUL B‹S




Residence 21,345 m2


Social Facilities 534 m2


Launch Date April 2005


The sale of 91 out of a total of 122 units hasbeen concluded.

Elegant, noble andfunctional


The Evidea Project that Garanti REIC and YKKREIC began developing in Çekmeköy is the firstproject to be undertaken as a joint venture in thesector. The goal is to create a reference projectutilizing the synergy created by the experienceof the two companies in real estate developmentand financing. Targeting the B+/A income groups,Evidea was built on approximately 60,000 m2 inthe Ümraniye-Çekmeköy region of Istanbul, onthe fiile highway.

Bearing the signatures of architects Emre Arolat,‹hsan Bilgin and Nevzat Say›n, Evidea has featuresrolling grass hills, a pond, scented gardens, awalking trail, a bicycle trail and landscaped areaswith magnolia, fruit and beech trees. Socialfacilities include tennis courts, a mini soccer

field, a children's park, climbing walls for children,water games, a kindergarten, a shopping center,a swimming pool plus a children's pool, a tanningterrace, a bar and rooms for TV, DVD, billiards,table tennis and relaxing.

Forest close to the center of the cityLocated close to the Ümraniye and Alemda¤forests, Evidea offers an alternative residentialarea where everything pleasant in life but missingin the city has been meticulously planned. Theproject consists of 473 residences, each of whichwas carefully designed down to the smallest ofdetails. Units range from 1+1 to 4+1 rooms whichare between 70 - 205 m2 in area.

Launched on October 10, 2004 and offered forsale in three phases, the first and second phasesof the Ideal Home Evidea Project were deliveredin July and December of 2006, respectively. Thethird phase is scheduled for completion in Augustof 2007.

www.ev-idea.com

EV‹DEA

A 50-50 joint venture between YKK REICand Garanti REIC




Residence 74,289 m2




Launch Date October 2004

First Delivery Date July 2006

The sale of all 473 units has been concluded.

A contemporary andpleasant alternative tomass housing...

Ideal place,ideal life


A distinguished comfort on the edge of the cityBuilt on 18,000 m2 and comprised of 184 units,Ankara Ankara has functional units consistingof regular and two-story apartments as well asapartments with gardens, ranging from 2+1 to5+1 rooms and from 100 - 278 m2.

Ankara Ankara is located along the Eskiflehir-Istanbul highway and in a distinguishedneighborhood in the center of Ankara's maindevelopment district. Situated just ninekilometers from the city center, three kilometersfrom Bilkent University, six kilometers fromMiddle East Technical University and only 100meters from the Bilkent metro station and thecity bus route, this complex is drawing attentionfor its convenient location and easy commute toall areas of the city.

Like the other projects developed by YKK REIC,the Ankara Ankara venture offers both a high-quality and contemporary residential space aswell as a good investment opportunity. It isexpected to be completed in March of 2008.

www.ankara-ankara.com

ANKARA ANKARA

• It is the first project developed by YKKREIC outside of Istanbul.

• The aim is to combine easy access withfunctional architecture and socialfacilities.




Residence 31,501 m2




Launch Date May 2006


To date, 126 out of a total of 184 units havebeen sold.

Redefining life in theTurkish Capital

With its elegant,elite and functionalarchitecture,an adorable trend isbeing introduced to thecapital.Ankara Ankara, the first project YKK REIC hasdeveloped outside of Istanbul, is adding a newperspective to life in the capital city of Turkey.

Having created unique features and contributionsin all of the award-winning projects it hasdeveloped, each based on a human-focusedapproach, YKK REIC is now offering the peopleof Ankara an exclusive development that meetstheir discerning expectations.

Away from the hectic life of the city, AnkaraAnkara will provide its residents enjoyable socialfacilities featuring bicycle and walking trails, acafé, a swimming pool, a children's pool, a fitnesscenter, meeting and game rooms, a tanningterrace and a children's playground.


As Eskiflehir's first shopping and lifestyle center,Neo has been launched around the theme of “Life'sthree colors: shopping, pleasure andentertainment.” With its unique architecturaldesign, enjoyable green areas and excitingentertainment sections, Neo is a striking projectunrivaled in its category.

The Neo Shopping and Lifestyle Center, YKK REIC'sfirst commercial project, was financed with theCompany's equity as well as a US$ 40 millionproject finance loan from AAreal Bank. Havingalready secured an occupancy rate of nearly 90%by the end of 2006, Neo will open its doors forbusiness in March of 2007. Expected to changeEskiflehir's physical, social and economic landscapewith Carrefour, Cinemars and many otherdistinguished stores, Neo expects to host sevenmillion visitors annually.

Five minutes from the cityNeo is conveniently located in one of Eskiflehir'sdeveloping neighborhoods, Tepebafl› Township,just five minutes away from the city center, therebyavoiding the normally congested downtown area.In addition to the huge, 11,500 m2 Carrefour-SAhypermarket and many top brand shops, there isa large parking garage with a capacity for 1,500cars.

In the development of this project, YKK REIC hascollaborated with several experts in their respectivefields which include Alkafl Al›flverifl MerkezleriDan›flmanl›k (for commercial concept, marketingand choice of stores), Era fiehircilik, Mimarl›k andMüflavirlik (for technical design) and YKS TesisYönetim Hizmetleri (for management of premises).

www.neoeskisehir.com

NEOSHOPPING ANDLIFESTYLE CENTER



Total Rental Area 35,813 m2

Hypermarket 11,500 m2

Movie Theatre 2,895 m2

Food Court 1,706 m2

Stores 19,712 m2

Opening Date March 2007

From now on, nothingwill be the same inEskiflehir!...

A new color,a new life in Eskiflehir


NEW RESIDENTIAL PROJECTS


BAHÇEfiEH‹R-ESENYURT

A distinguished andqualified approach tourban development...

BAHÇEfiEH‹R-HOfiDERE

To ensure a healthyurban lifestyle...

• The Bahçeflehir-Hofldere project, locatedconveniently near Istanbul's bustling industrialzones and connected to the city via anexpressway, will be a large-scale residentialdevelopment.

• Like the Bahçeflehir- Esenyurt Project, thisdevelopment will be based on a revenue sharingagreement with the land owner.

• The project is anticipated to be launched in2007.

• This residential project in Bahçeflehir, one ofIstanbul's primary growth districts, primarilytargets the middle income class.

• In stark contrast to YKK REIC's other residentialprojects, the Bahçeflehir- Esenyurt Project isbased on a revenue sharing agreement withthe land owner.

• The project is expected to be launched in 2007.

Following the concept at Evidea, YKK REIC's jointventure with Garanti REIC which targets themiddle income class, the Company continues todevelop projects for this group. With a launchexpected to take place in the second half of 2007and featuring a wide variety of social facilities aswell as luxury apartments, the project in theBahçeflehir and Esenyurt area is still underdevelopment. As the second residential projectdeveloped by YKK REIC for this populationsegment, the complex will be built over a totalarea of 54,087 m2 and will consist of 750residences. The project aims to provide B and Cincome groups with a new residential communityfeaturing modern and comfortable social facilities.

YKK REIC's current market leadership in the specialresidential project sector will be confirmed andenhanced via this project, which consists of alarge number of residential units and presents aunique conceptual design. Slated for constructionon a 110,000 m2 plot of land in the Hofldereneighborhood of Istanbul's Büyükçekmece district,this concept is expected to be launched in 2007.

NEW MIXED USE PROJECTS


ANKARA-ÇANKAYA • The Ankara-Çankaya Project is a revenue-sharing development aiming to combine socialand commercial facilities with residencestargeting high income groups.

• It is located in the most exclusive area of thecity and geared toward the A/A+ incomegroups.

NARMANLI HAN Built in the late 1800s as service buildings for Russian Embassy, Narmanl› Han is one of the mostbeautiful architectural examples of its era and one of the few remaining buildings from 19th centuryIstanbul. Located in the historic Beyo¤lu district, throughout the years various annexes were addedto Narmanl› Han until the beginning of the 20th century. Narmanl› Han is comprised of five largebuildings built around an inner courtyard situated on a land site of 2,650 m2.

The complex was sold to the Narmanl› family in 1933 and later used for shops, offices, residentialunits and artists' workshops. Over the years, this historic building hosted many famous artists,including Bedri Rahmi Eyübo¤lu, Ahmet Hamdi Tanp›nar, Aliye Berger and Nam›k Deniz Han.

At the end of May of 2001, YKK REIC signed a unit sharing agreement with the Narmanl› family. Atpresent, YKK REIC owns 15% of the complex. Upon completion of the Narmanl› Project, 60% of thecomplex will be owned by the Company with the balance remaining in the hands of the Narmanl›family.

This significant project is considered to be the first step in reassessing the value of historical buildingsin Turkey. In order to become a popular “meeting place” in Beyo¤lu for Istanbul residents, thedevelopment will house various functional units such as a movie theater, a concert hall, an exhibitionhall, shops, a bookstore and a music store, as well as cafés and restaurants and workshops and studios.

This state-of-the-art development consists ofresidential and shopping areas to beconstructed on approximately 10,000 m2 inthe Ankara-Çankaya neighborhood of thecountry's capital; the anticipated launch dateis 2007.

Residential andshopping centers in anexclusive setting...

A contemporary place...reminiscent of a richhistorical past...situated in the heart ofIstanbul's cultural and artsdistrict...

PROJECTS UNDER DEVELOPMENT


Following the opening of 16 million m2 of land to development and construction at the beginning of2005, Riva became one of Istanbul's new settlement areas. Market research conducted last yearrevealed that Riva will become Istanbul's most popular new residential area on the Asian side of thecity in the years to come.

YKK REIC decided that the Riva Project should be a low-density settlement in complete harmonywith its surroundings. The market research, concept development and design planning phases arestill underway at the moment. In keeping with the reputation it has built via past projects as thesector leader in unique concept developments, YKK REIC will continue to lead the way with new andunrivaled ideas as the Riva Project unfolds.

In contrast to the other projects being planned in the region, YKK REIC is designing two large scaleresidential developments. The Company currently owns the Riva Do¤u/Göllü property and has signeda revenue sharing agreement with the owners of the Riva Bat› property. YKK REIC will finalize thedetails of these projects once the pending zoning decisions completed by the municipality.

The rising star ofIstanbul: Riva

RIVA

ASSETS


A design that fitsIstanbul's modernskyline with its ellipticarchitecture...

EL‹T RESIDENCE

Alone with nature:country living surroundedby green forests...

KEMER COUNTRY Situated 12 kilometers from the Kemerburgazexit on the TEM highway and built on 320hectares of land, Kemer Country consists of 750units, including villas, townhouses andapartments. Designed within the concept of acountry lifestyle and targeting the high-incomebracket, the development includes the KemerGolf & Country Club featuring an international18-hole golf course and equestrian facilities.

In 1998, YKK REIC invested in 68 of the units inKemer Country. Today, the Company'sinvestment in Kemer Country consists of fourunits in the Kemer Residence and one unit in theBeyaz Konaklar. Four units in the Yal›konaklardevelopment have been sold.

With a design based on the philosophy of“suburban living built around recreationalfacilities” that is prevalent in western countries,the Kemer Country concept was first created in1986 and construction began in 1988. This projectwon an award at “A Vision of Europe” exhibitionheld in Bologna, Italy in 1992 as the first projectto bring European style city planning to Turkey.

Designed and built by more than twenty world-renowned architects, each of the Kemer Countryprojects has its own unique qualities and charm.Overlooking ancient aqueducts, in harmony withthe surrounding nature and excellentlydecorated, the unique design of all the residencesin Kemer Country was inspired by the traditionalstyle of the great Turkish architect, Sinan.

Of the total enclosed area of 30,000 m2,residences comprise 15,000 m2. Other facilitieson the premises include a fitness center operatedby Sports International, a swimming pool, sauna,steam room, tennis and squash courts, arestaurant, a dry cleaning store and coveredparking garage.

Elit Residence's earthquake resistance has beencertified by the world-famous US seismic researchexperts, EQE International. Reports prepared byEQE testify that Elit Residence is structurallysound and resistant to major earthquakes andits structural quality is on par with its UScounterparts.

YKK REIC purchased four floors of Elit Residenceand included it in its investment portfolio in Aprilof 1998; construction was completed anddelivered in 2001. Most of the apartments withinthe project have been sold and the remainingunits have been rented.

Elit Residence was built on a 4,500 m2 site infiiflli, a major business district in Istanbulsurrounded by all the features and opportunitiesof modern urban life. With its creative ellipticaldesign bearing the landmark signature of BSBLondon Architects, it is among the elite buildingswhich define Istanbul's contemporary skyline.

Designed with the lifestyle and comfort conceptof the 21st century, Elit Residence is one ofIstanbul's most exclusive residential high-riseprojects. It features high quality constructionstandards and a wide range of social andrecreational activities, including shoppingcenters, healthcare facilities, banks, movietheaters and fashionable boutiques.

YKK REIC's rental portfolio at Elit Residenceincludes five units, totaling 1,530 m2.

Completed in 2003, the Elit Residence projectwas ranked in the top three in the residentialcategory at the 2001 MIPIM Awards in France.


Yap› Kredi Plaza, the country's first officecomplex on par with international standards,was built by the Koray Group in 1989 in threeblock units. The fourth unit, presently theheadquarters of Yap› Kredi Bank, was annexedto the complex in 1999. Conveniently locatedin Levent, one of Istanbul's leading businessdistricts and easily accessible via the TEMhighway, Yap› Kredi Plaza is place-of-choice forboth domestic and foreign firms.

In order to secure a long-term and stable influxof income, in 1996 YKK REIC invested in a totalof 20 independent units on ten floors of BlocksA and C of Yap› Kredi Plaza. Of these, five floorsin Block A were sold in February of 2005. Theremaining independent units have been rentedto distinguished organizations such as UB D›flTicaret, Akflam Pazarlama, KPMG, Gide LoyretteNouel, Bener Hukuk, Stewart International, NCEElver Avukatl›k, Koray Sigorta and Koray ‹nflaat.A series of new investments were made in 2005to renovate the building and improve security.

YAPI KRED‹ PLAZA

SUBSIDIARIES

GKY ROMANIAEstablished to carry out residentialconstruction projects, GKY Romania is a50/50 joint venture between YKK REIC andGaranti REIC.

The Company purchased 34,537 m2 of land,currently valued at between EURO 8.5 to9 million, to be used for construction.

YKS TES‹S YÖNET‹MH‹ZMETLER‹ A.fi.As the facility management companyresponsible for the operation of more thantwenty projects, YKS Tesis YönetimHizmetleri A.fi., is jointly owned by Yap›Kredi Koray GYO A.fi. (51%) and the KorayGroup (49%). It is Turkey's fourth largestfacility management company.

As Turkey's first officecomplex compatible withinternational standards,Yap› Kredi Plaza is the firstchoice of distinguisheddomestic and foreigncorporations thanks to itslocation and excellentconstruction and securityfeatures.

Land 30,775,000 31 33,895,000 35 33,895,000 35 67,555,000 55Riva property 15,350,000 16 20,465,000 21 20,465,000 21 36,890,000 30Göllü property 10,070,000 10 13,430,000 14 13,430,000 14 17,900,000 15Esenyurt property 0 0 0 0 0 0 12,210,000 10Çankaya property 0 0 0 0 0 0 555,000 0‹stanbul Bis property 5,355,000 5 0 0 0 0 0 0

Buildings 32,240,000 33 21,555,000 22 21,325,000 22 22,995,000 19Yap› Kredi Plaza 24,300,000 25 13,120,000 14 13,120,000 14 14,580,000 12Narmanl› Han 1,320,000 1 1,525,000 2 1,525,000 2 1,815,000 1Elit Residence 4,720,000 5 5,335,000 6 5,335,000 6 5,725,000 5Kemer Country 1,900,000 2 1,575,000 2 795,000 1 375,000 0Kemer Beyaz Konaklar 0 0 0 0 550,000 1 500,000 0

Projects 6,365,869 6 49,433,645 51 111,519,919 116 150,149,310 122Neo 0 5,882,645 6 43,603,945 45 73,554,662 60Istanbul Zen 3,284,807 3 18,435,160 19 0 0 0 0Evidea 2,781,062 3 14,890,925 15 27,719,422 29 25,940,471 21Istanbul Bis 0 0 10,224,915 11 22,758,000 24 28,256,491 23Ankara Ankara 0 0 0 0 17,438,552 18 22,397,686 18Istanbul Istanbul 300,000 0 0 0 0 0 0 0

Subsidiaries 8,691,388 9 2,953,870 3 2,953,870 3 2,953,870 2GKY Real EstateInvestment S,A, 2,748,529 3 2,748,529 3 2,748,529 3 2,748,529 2YKS Tesis YönetimHizmetleri A,fi, 205,341 0 205,341 0 205,341 0 205,341 0Anadolu TurizmYat›r›mlar› A,fi, 5,737,518 6 0 0 0 0 0 0

Liquid Assets 11,968,157 12 46,045,971 48 3,559,489 4 2,684,432 2

Receivables 7,979,019 8 14,976,517 16 9,312,049 10 7,053,968 6

Liabilities (1,012,510) (1) (83,599,409) (87) (112,273,670) (117) (157,153,576) (128)

Other Assets 1,138,082 1 10,859,493 11 25,670,656 27 26,418,224 22

Net Active Value 98,145,005 100 96,120,087 100 95,962,313 100 122,656,228 100

* Portfolio Investments report released quarterly pursuant to the Capital Markets Board communiqués.


INVESTMENT PORTFOLIO*

Net Active Value YTL (%) YTL (%) YTL (%) YTL (%)

12/31/2004 12/31/2005 09/30/2006 12/31/2006

Subsequent to its investment in the Göktürkregion and after taking careful note of Istanbul'sprimary growth districts, YKK REIC invested inthe Esenyurt district and signed an agreementto develop a residential project there.

Beyond Istanbul, YKK REIC is about to completethe Neo Shopping and Lifestyle Center inEskiflehir, with the new complex ready to greetits visitors in the first quarter of 2007. AnkaraAnkara, the exclusive residential development inAnkara along the Eskiflehir highway, will bedelivered in the first quarter of 2008. The Ankara-Çankaya project, consisting of residential andcommercial properties, will be completed in thefirst quarter of 2009.

Since the day it was founded, YKK REIC hasachieved successful results in every aspect ofreal estate investment, including the choice of aright location, creating a unique architecturalconcept, design functionality and high qualitymarketing skills and customer relationsmanagement. With the trust it has earned bothdomestically and abroad, YKK REIC is rapidlybecoming one of the best real estate developmentand investment companies in Europe and issteadfastly developing even more original,excellent and surprising projects.


PROJECTDEVELOPMENT

YKK REIC considers project development as acontinuous process which consist of the choiceof location, architectural concept, thefunctionality of the design and marketing. Marketresearch, fieldwork and monitoring of changingmarket trends are prerequisites for producingexcellent projects. Investment planning is stillongoing for new projects. Building largecomplexes at world-class standards requiressensitive planning, value engineering andeffective project management. Delivery of theprojects on the promised date is a significantfactor for customer satisfaction.

After beginning its development ventures withprojects targeting the high-income group, in2004 YKK REIC started to expand its services tocover other income classes, simultaneouslyincreasing its commercial and entertainmentfacility investments while continuing itsresidential projects.

Following completion of the Evidea Projectdeveloped jointly with Garanti REIT in Çekmeköy,YKK REIC demonstrated its determination toinclude projects targeting the middle incomeclass in its investment strategy by signing anagreement for a project in the Esenyurt region.

Market research,fieldwork andmonitoring of changingmarket trends areprerequisites forproducing excellentprojects.

• Diverse segments: The most prolific andoriginal project developer in Turkey, YKK REICwill continue to expand its alternatives,serving not only the upper-income class butalso the middle-income segment of thepopulation. Additionally, in addition toresidential complexes, it will carry ondeveloping concepts in diverse areas such ascommerce, entertainment and tourism.

• New regions: After its success indevelopments like the Neo shopping andlifestyle center project in Eskiflehir and theAnkara Ankara and Ankara-Çankaya projectsin the nation's capital, YKK REIC is in theprocess of accelerating its investmentsoutside of Istanbul. Towards this end, theCompany is committed to follow thechanging trends, analyze the demand andsupply in the market and monitor otherpromising regions of Turkey.

• International markets: Aiming to become aglobal real estate investment trust, YKK REICowns a 30,000 m2 plot of land in the Voluntaridistrict of Bucharest, Romania, one of therising stars of the European Union.

NEW DIRECTIONS • Projects that generate reference and cash:In 2006, YKK REIC performed feasibilitystudies on many projects and determined itspriorities. Such a careful planned businessdevelopment approach will continue in 2007as well. Along with these studies and also incollaboration with international corporations,new real estate investment and developmentprojects in Turkey are constantly beingsought out. The goal is to finance these newundertakings with current income influx andto give priority to the projects which havethe highest potential of generating cash. Inthis regard, because it is already known forits successful projects in the Kemerburgazarea, YKK REIC launched the Istanbul BisProject in the same district. Beyond this, theNeo shopping and lifestyle center investmentventure, whose purchase announcement wasmade in April of 2005, is considered to be aproject with the high potential of generatingcash.

Smart financialmanagement,excellent projects,innovative marketing

Right choice,sensitive planning,effective management

INTERNATIONAL RELATIONS

R‹VA (BATI)

With the goal of becoming a successful companyworldwide clearly inscribed in its vision statement,the Company's management successfullyrepresents Turkey on all global real estate platforms.In addition to domestic and internationalconferences such as CAIB, UBS, EFG, ULI and GRI,the leadership team members regularly participatein all international real estate activities.

YKK REIC employees have received praise andaccolades, both in Turkey and abroad, aswitnessed by winning the prestigious EuromoneyAward for Excellence in 2006. The EuromoneyPublication and Organization Group, which hasbeen active in the international arena since 1969and whose publications and research-basedopinions are accepted as a point of referenceworldwide, deemed YKK REIC worthy of its BestReal Estate Developer and Best Real EstateInvestment Management Specialist awards.

In 2001, the Elit Residence Project was nominatedfor the MIPIM International Real Estate Awards,the “Oscars” of the real estate industry, in the“Residential Development” category, an awardwon by the Istanbul Istanbul development at thebeginning of 2002. After capturing a majority ofthe votes from 15,000 real estate professionals,the Istanbul Istanbul project won the first placeaward out of 100 other projects created by world-class developers. This project was also a finalistin the ULI Awards of Excellence competition.These awards have underscored the tremendoussuccess of both YKK REIC and the Turkish realestate sector.

Furthermore, the Company's presence at twoimportant fairs this past year has significantlyboosted its image in the international arena.Drawn by the sumptuous aroma of Turkish coffeeoffered at its stand at the MIPIM fair in Cannes,


Representing Turkey on all international real estate platforms,YKK REIC certified its leadership in the sector by winning the 2006Euromoney awards as the Best Real Estate Developer and the BestReal Estate Investment Management Specialist.

France, foreign investors were greatly interestedin YKK REIC's projects. Likewise, the Company'sdevelopment ventures were received with greatenthusiasm at the sector's largest fair, theBarcelona Meeting Point held from October 25-30 in Spain, where projects from leading realestate real estate companies from variouscountries were on display.

The activities of Real Estate Summits and ULITurkey, organized by the Association of TurkishReal Estate Investment Companies (GYODER) andimportant in determining the agenda of the realestate sector since 2000, were sponsored by YKKREIC. The Company also played an active role inthe 2005 ULI European Summit Conference thatwas organized in Turkey.

INTERNATIONAL AWARDSAND ACHIEVEMENTS

• Elit Residence was a finalist in the 2001 MIPIM International Real EstateAwards.

• The Istanbul Istanbul Project won first place in the 2002 MIPIMInternational Real Estate Awards in the “Residential Development” categoryand was a finalist in the ULI Awards of Excellence competition.

• At the 2003 Customer Relations Awards, the Istanbul Istanbul Projectwon the CRM Oscar “Customer-Focused Process Management” category.

• YKK REIC Real Estate Investment Trust won the Best Real Estate Developerand Best Real Estate Investment Management Specialist awards at the2006 Euromoney Awards for Excellence.


INVESTORRELATIONS

For YKK REIC, providing its investors with accurate,objective and real-time information about itsoperations is a basic requirement of soundCorporate Governance Principles and part of itstransparency policy. To the extent that legislationallows, the Company strives to provide allnecessary information disclosures in the mostdetailed manner possible. Formed for this purposeunder the Financial and Administrative AffairsDivision, the Investor Relations Department aimsto represent the Company in the best possibleway, ensure close relations with both current andpotential investors and provide timely disclosureof information and the most efficient responsesto investor's questions.

In order to represent the Company well, meetingswere organized throughout the year withinstitutional investors, as well as domestic andforeign investment banks and representatives of

brokerage houses, presentations were made andinternational and domestic conferences wereattended. Thereby, comprehensive informationwas made available regarding the Company'sportfolio, projects, investment strategies andgrowth potential.

In the Investor Profile section of YKK REIC'swebsite, which is updated frequently, theCompany provides investors with financialstatements, information about projects, newsconcerning stock performance and other relateddata. In 2007, the content of the website will bereviewed and improved in order to meet the needsand demands of all investors.

In reports prepared by investment brokeragehouses, YKK REIC is consistently referred to as asector leader and is among the companies whosestocks are recommended for investment.

Transparency at thedomestic andinternational levels

In the dividend distribution proposal set before the General Assembly if the Company makes a netprofit, our Board of Directors will take into account the following:

1. The delicate balance between our shareholders' expectations and the growth requirement of theCompany

2. Cash and capital requirements for the ongoing projects and those that will be launched in thecoming years

Based on these considerations, the Board has adopted a dividend distribution policy to propose tothe General Assembly to pay out a portion of the distributable profit that is above the minimumprofit distribution ratio in the form of cash or bonus stock shares.

DIVIDENDDISTRIBUTIONPOLICY

Note: Detailed information on the Company's dividend distribution policy can be found in theDeclaration of Compliance with the Corporate Governance Principles.


March 7, 2006-AMPD Fair features Neo...The Neo Shopping and Lifestyle Center wasrepresented with a stand at the fair organized bythe Turkish Council of Shopping Centers andRetailers (AMPD) in Ç›ra¤an. As Eskiflehir's firstshopping center, Neo was introduced to the retailbrands in the sector.

March 12-19, 2006-Yap› Kredi Koray GYO A.fi.creates stir in Cannes...Having previously won recognition at the MIPIMAwards, the “Oscars” of the real estate industry,in 2002 with its Istanbul Istanbul Project, YKKREIC stood out with its stand at this year's MIPIMFair, the real estate sector's largest exhibition.Besides the Company's projects arousing greatinterest among foreign investors attending, theTurkish coffee offered participants created quitea stir in Cannes.

March 28, 2006-Eskiflehir Neo trip...Representatives of retail brands, all potentialclients, were taken to Eskiflehir and given a tourof the city as well as the Neo Shopping andLifestyle Center, followed by a meeting wheredetailed information about Neo was presented.

April 20, 2006-Ankara Ankara presented to thepress...A special press conference was held to presentYKK REIC's successful projects to the Ankara pressand to introduce the Ankara Ankara Project.

2006 ACTIVITIES April 24, 2006-Ankara Ankara launched in thecapitol...YKK REIC's first project outside of Istanbul, AnkaraAnkara, was launched at the Ankara SheratonHotel. The modern design and elite outline of theexclusive Ankara Ankara development werepresented to the residents of the capital city.

May 2-3, 2006-GYODER VI Real Estate Summitheld in Ç›ra¤an...As it does every year, YKK REIC continued tosponsor this significant event in the real estateindustry.

June 7, 2006-“Play for Two” sponsorship a bighit...YKK REIC continued its support of the arts bysponsoring the drama “Play for Two” at Istanbul'sDOT Theater. Meeting with great applause andappreciation, the play was a part of the IKSV's15th International Theatre Festival and the 4thInternational Theater Olympics.

July 4, 2006-New General Manager Yücel Ersözintroduced to the press...At a press conference held at the Sunset Grill&Bar, YKK REIC's new General Manager Yücel Ersözwas presented to the media.

July 12, 2006-“Welcome Home” party at theIstanbul Zen Social Club...Following the completion and delivery on thepromised date, the new homeowners of IstanbulZen, YKK REIC's second residential project in thedeveloping Göktürk district, celebrated thebeginning of their new lives with great joy andhigh spirits.

July 20, 2006-Foundation laid for the AnkaraAnkara Project in the capital...YKK REIC and Koray ‹nflaat staff, architects, newhomeowners and special guests had a pleasantevening at the cocktail party held in the SalesOffice of the Ankara Ankara development on theoccasion of the laying of the foundation.

August 1, 2006-Evidea begins First Phasedeliveries...Developed as a joint venture between YKK REICand Garanti REIC by combining the strength andexperience of the two companies, Evidea is a“first” in the sector. With construction beingcovered in three phases, the delivery of the firstphase of Evidea, or “Ideal Homes” began.

October 25, 2006-A winner at the EuromoneyAwards for Excellence...As an award-giving standard in 100 countries inthe industry for fifteen years based on surveysconducted, the Euromoney Magazine Awards forExcellence honored YKK REIC as the “Best RealEstate Developer in Turkey” and the “Best RealEstate Investment Management Specialist inTurkey.”

November 4-12, 2006-Eskiflehir InternationalFestival sponsored by Neo...The Neo Shopping and Lifestyle Center was oneof the main sponsors of the celebrated annualfestival in Eskiflehir, which features many creativeforms of art and music.

November 29-30, 2006-Neo lights up SOYSAL“Retail Days '06”...Neo's pleasant and entertaining stand receivedpositive reviews at the annual “Retail Days '06”exhibition which is enthusiastically attended byretailers. The development was well received notonly for its novel architecture, but also asEskiflehir's first shopping and lifestyle center.

December 16, 2006-“Move-in Party” for Evidea'sFirst Phase residents...Evidea's new homeowners met and celebratedtheir fresh beginnings prior to New Year's Day.

December 20, 2006-Staff welcomes the NewYear...Employees and staff members of the YKK REICtoasted the coming of 2007 with a New Year'sparty at the S International Equestrian Center inIstanbul's Istinye district.

Since it was first introduced into the world ofcommerce, the concept of corporate governancehas been embraced by YKK REIC and theseprinciples have been closely followed over theyears.

Adopted by the Capital Markets Board on July 4,2003 as Regulation No. 35/835 and disseminatedto the public in July of 2003, CorporateGovernance Principles have also beenappropriated by YKK REIC. Furthermore, theCompany constantly endeavors to improve itsmanagement system in order to develop anorganization that best serves the interests of allits shareholders.

Pursuant to the Capital Markets Board'sRegulation No. 48/1588 adopted at the meetingheld on December 10, 2004, the companies listedon the Istanbul Stock Exchange are recommendedto include declarations regarding theircompliance with the Capital Market Board'sCorporate Governance Principles in their annualreports and on their websites, with effect fromthe 2004 Annual Report. Therefore, informationregarding the Company's compliance with theseprinciples is presented below.

DECLARATION OFCOMPLIANCEWITH CORPORATEGOVERNANCEPRINCIPLES

SECTION I - SHAREHOLDERS

1. Investor Relations Department

To ensure that shareholders receive informationin a more timely and comprehensive manner, anInvestor Relations Department has been createdin the Financial and Administrative AffairsDivision to provide faster and more effectivecommunications with shareholders. Queries filedwith the Investor Relations Department throughthe Company website or by other means receivereplies in a quick and detailed fashion. Theactivities of the Investor Relations Departmentin 2006 included:

• Participation in analyst and investor meetingsand conferences

• Preparation of regularly updated investorpresentations

• Responding to queries received via email ortelephone

• Material disclosures• Publication of financial statements and net

active value reports on the Company website• Updating the Investor Profile section on the

Company website

During the year the Department communicatedwith more than 250 analysts and investors andattended various national and internationalconferences. More than 300 information requestswere submitted to the Department throughtelephone, email or the Company website. Moredetailed information regarding such requests ispresented below under the heading “Shareholders'Exercise of Their Right to Obtain Information.”

2. Shareholders' Exercise of Their Right to ObtainInformation

Shareholders most often request information viatelephone, email or at in-person meetings duringor following a General Assembly, capital increaseand/or public announcement of financialstatements. The Investor Relations Departmentresponded promptly to all questions or requestsin writing or verbally after determining that therequested information was not a trade secret.The primary information requests received bythe Investor Relations Department during theyear concerned:

• General or specific information regarding theannounced financial statements

• Information regarding accounting standardsused in preparing financial statements

• General or specific information regarding theannounced net asset value reports

• Information regarding the Company's currentand future projects

• Information regarding the capital structure• Queries regarding the tender offer for Yap›

Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤› A.fi.shares and share certificates by Koç FinansalHizmetler A.fi.

• Questions regarding the real estate sector

YKK REIC deems it essential to inform itsshareholders about the information disclosed tothe public concerning the Company in the fastestand most effective manner possible. The Companyconsiders its website as the most effective methodof communication and all publicly disclosedinformation is simultaneously posted on theCompany website. (All the information madeavailable to the investors through this medium isdiscussed in detail below under the heading“Section II. 9. The Company Website and itsContents.”) In addition, pursuant to the agreementwith Foreks Bilgi ‹letiflim A.fi., the price performanceof the Company shares is posted on our websitewithin the restrictions imposed by relevantlegislation. For news and announcements via thepress, the Company uses the national editions ofTurkey's highest circulation newspapers.

The Company's Articles of Association do notcontain any provisions concerning theappointment of a special auditor as an individualshareholder right. During the reporting period,no request was made to the Company for theappointment of a special auditor.

3. Information about the Ordinary GeneralMeeting of Shareholders

The Ordinary General Meeting of Shareholderswas held on March 10, 2006. (There were noExtraordinary General Meetings of Shareholdersduring the period.) The invitation, Agenda andproxy forms for the Ordinary General Meeting ofShareholders were published in two nationalnewspapers. The Annual Report was sent to theaddresses of the investors who requested it, plusit was made available for examination byshareholders who visited the Companyheadquarters or attended the Ordinary GeneralMeeting of Shareholders.


5. Dividend Policy and Timing of Distributions

The dividend distribution objective of theCompany is to pay out the largest possible portionof the annual net profit subject to the standardsand limits specified by the Capital Markets Boardand the investment strategies of the Company.In 2007, an official dividend distribution policywill be determined by the Board of Directors andsubmitted to the Ordinary General Meeting ofShareholders for shareholder approval.

Pursuant to Article 36 of the Articles ofAssociation, the amount and date of dividendpayments are determined by the Board ofDirectors. The Company has not yet paid adividend. There are no privileges with respect toentitlements to the Company's profits.

6. Transfer of Shares

The transfer of Company shares is not subject toany restrictions and the Company shareholdersare treated equally regardless of their nationalityor minority rights holder status.

SECTION II - PUBLIC DISCLOSURES ANDTRANSPARENCY

7. Company Disclosure Policy

Although the Company does not have a publiclyannounced disclosure policy, it strictly adheresto the principles in the “Public Disclosure andTransparency” section of the Capital MarketsBoard's Corporate Governance Principles andensures that shareholders and stakeholdersreceive the most accurate information in a timely,comprehensive and low-cost manner. All publicdisclosures regarding the Company (includinginformation concerning relationships betweenthe Company and its shareholders, Boardmembers or executives) are made available tothe shareholders and stakeholders in a promptmanner through the Istanbul Stock Exchange,the Capital Markets Board and the Companywebsite in accordance with the Capital MarketsBoard Communiqué Series VIII, No. 39.Furthermore, within the scope of the PublicDisclosure Platform (KAP) Project of the CapitalMarkets Board, all information disclosed to thepublic is also posted on the electronic platform.Public disclosures are coordinated by the InvestorRelations Department that operates under theFinancial and Administrative Affairs Division.

The Ordinary General Meeting of Shareholders isheld under the supervision of an observer fromthe Ministry of Industry and Commerce. At eachstage of the meeting the shareholders are giventhe opportunity to ask questions and makesuggestions. All questions are answered and allsuggestions are taken into consideration. Therewere no shareholder questions or suggestionsduring the Ordinary General Meeting ofShareholders this year, thus the Minutes of theMeeting do not include anything of the like. TheMinutes of the Ordinary General Meeting ofShareholders will be posted on our website from2007 onwards. In addition, the Minutes areavailable at the Company headquarters for allshareholders to examine.

The Company acts as a real estate investment trustand thus its main operations are purchasing, sellingand renting real estate, as well as projectdevelopment. Consequently, the sale, purchaseand lease of properties are decisions the Companymakes on a frequent basis as part of its routineoperations. Hence, it is not feasible to call a GeneralMeeting of Shareholders for each of thesetransactions. Furthermore, such a practice couldseriously hamper the Company since it couldimpact the purchase or sale price of the property.For these reasons, the Articles of Association donot contain provisions requiring that the GeneralMeeting of Shareholders approve such transactions.

4. Voting Rights and Minority Rights

Within the framework of voting rights, theCompany has granted preferred status to ClassA Shareholders limited to the nomination ofcandidates for two-thirds of the Boardmembership positions. There are no otherprivileges for any other shareholders. Eachshareholder is entitled to one vote per share.Shareholders may exercise their votes in personor by proxy. Shareholders may also exercise theirminority rights pursuant to the TurkishCommercial Code and Capital Markets Law. TheCompany has not adopted a cumulative votingsystem as of this time.


8. Material Disclosures

In 2006, pursuant to the Capital Markets Boardregulations, 24 material disclosures were madewithin the time frame stipulated in the legislationand all were posted on the Company website. Nosanctions were imposed on the Company by theCapital Markets Board during the year. Since theCompany's shares are not listed on anyinternational stock exchanges, no materialdisclosures were made in any stock exchangeother than the Istanbul Stock Exchange.

9. The Company Website and Its Contents

Pursuant to the Corporate Governance Principlesand Public Disclosure and Transparency Principle,the Company has created a website both inTurkish and English that is updated regularly.The purposes of this website are as follows:

• To provide information that is timely, accurate,comprehensive, easy to interpret andanalyzable

• To do so in manner that is prompt, easilyaccessible and cost effective

• To manage investor relations more effectivelyand rapidly

• To be in constant contact with shareholders

The website can be accessed atwww.yapikredikoray.com. It contains most of theinformation listed in Article 1.11.5 of Section IIof the Capital Market Board's CorporateGovernance Principles.

SECTION III - STAKEHOLDERS

12. Disclosure to Stakeholders

In compliance with the principles stipulated inthe “Stakeholders” section of the Capital MarketsBoard's Corporate Governance Principles, theCompany performs its operations in a way thatfully protects the interests of its employees,creditors and customers. Open and honestchannels of communication have beenestablished with all stakeholders and maximumeffort is exerted to ensure the free and easyaccess to information that concerns them.

13. Stakeholder Participation in Management

The Company considers it essential to keep openall communication channels betweenmanagement and stakeholders and strives tomake it possible for stakeholders to participatein the management.

In this regard, the opinions of employees aretaken into consideration in the formulation ofthe Company's management principles. TheGeneral Manager chairs regular monthlymeetings which are organized for and attendedby the Company's employees for the purpose ofbetter coordinating the ongoing work of theCompany. These meetings play an importantrole in the decision-making process of theCompany's senior management.

With a view toward maximizing customersatisfaction, the Company highly values feedbackfrom its clients and takes into consideration itscustomers' opinions and suggestions in thedevelopment and provision of its good andservices.

10. Disclosure of Majority Controlling Real-Person Shareholders

The shareholder structure of the Company and the shareholder structure of real-person majoritycontrolling shareholders are presented in the tables below:

Shareholders Ownership % Number of Shares Nominal Value of Shares Class Type

Yap› ve Kredi Bankas› A.fi. 26.01 10,404,000,000 10,404,000 A RegisteredKoray Yap› Endüstrisi A.fi. 4.99 1,995,999,976 1,996,000 A RegisteredMurat Koray 5 2,000,000,008 2,000,000 A RegisteredSelim Koray 5 2,000,000,008 2,000,000 A RegisteredSemra Turgut 5 2,000,000,000 2,000,000 A RegisteredSüleyman Yerçil 1.4 560,000,000 560,000 A RegisteredMustafa Zeki Gönül 1 400,000,000 400,000 A RegisteredHüseyin Ayduk Esat Koray 2.2 880,000,000 880,000 A RegisteredZeynel Abidin Erdo¤an 0.4 160,000,000 160,000 A RegisteredNecdet Öztürk 0 8 0 A RegisteredPublicly traded 49 19,600,000,000 19,600,000 B UnregisteredTotal 100.00 40,000,000,000 40,000,000

11. Public Disclosure of Individuals who are in a Position to Acquire Insider Information

In the context of striking the right balance between transparency and the protection of the Company'sinterests, the Company deems it critical that all employees adhere strictly to the rules regarding theuse of insider information.

The people at YKK REIC who have access to insider information are limited to the Members of theBoard of Directors and those who are in senior management in the Company. They are listed below:

Members of the Board of Directors:

S. Kemal Kaya Chairman of the Board

Süleyman Yerçil Vice Chairman of the Board

Federico Ghizzoni Board Member

Selim Koray Board Member

Murat Koray Board Member

Tamer Haflimo¤lu Board Member

Ayd›n Boysan Independent Board Member

Afa Boran Independent Board Member

Mete Tapan Independent Board Member

Senior Management:

Yücel Ersöz General Manager

Efran Tabo¤lu Assistant General Manager - Financial and Administrative Affairs

Erdem Tavas Assistant General Manager - Project Management

Eser Güven Özbay Assistant General Manager - Sales and Marketing


14. Human Resources Policy

The Company has devised objectives andstrategies for its human resources policy in orderto ensure the recruitment of the most qualifiedemployees and to utilize this workforce in themost efficient way possible. Towards this end,the Company aims to create an effective andhighly-motivated working family, to offer equalopportunities to all employees for personaldevelopment and to provide each one withsatisfying career opportunities. In addition tothis, the personal integrity and legal rights ofeach employee are protected. Beyond this, theCompany has laid the necessary foundation fora safe and healthy environment for its personnel.

In return, employees are expected to adopt aperformance-focused management concept andto recognize that their individual participationwill contribute to the satisfaction of bothcustomers and shareholders. Furthermore,employees are expected to maintain anappropriate standard and distance in theirrelationships established during the course oftheir work, avoid any illegal activities andpromptly inform their superiors of any gifts orbenefits offered to them.

All decisions regarding personnel, including socialbenefits, are taken by the Personnel Committee,which is composed of the general manager andthe assistant general managers, operates underthe direction of the Financial and AdministrativeAffairs Department. There were no reports orcomplaints of discrimination during the period.

15. Information Regarding Customers andSuppliers

The Company places great emphasis ondeveloping working relationships with partnerswho have adopted sound ethics. All customersare treated equally and fairly in professionalrelationships. Moreover, reliability of contractsis emphasized and commitments are undertakenin a prompt manner. The Company is committedto long-term relationships with suppliers basedon mutual trust.


16. Social Responsibility

In all its activities and endeavors, the Companyis conscious of its social responsibility and strivesto act in compliance with all corresponding lawsand environmental values and regulations. TheCompany aims to contribute to the social,cultural, artistic and economic development ofthe neighborhoods in which its projects arelocated and undertakes social responsibilityprojects for this purpose. During the past yearno lawsuits were filed against the Company onthe grounds of environmental damage orirresponsibility.

SECTION IV - BOARD OF DIRECTORS

17. Structure and Formation of the Board ofDirectors and Independent Members

Members of the Board of Directors:

S. Kemal KayaChairman of the Board of Directors(Non-Executive)

Süleyman YerçilVice Chairman of the Board of Directors(Non-Executive)

Federico GhizzoniMember of the Board of Directors (Non-Executive)

Selim KorayMember of the Board of Directors (Non-Executive)

Murat KorayMember of the Board of Directors (Non-Executive)

Tamer Haflimo¤luMember of the Board of Directors (Non-Executive)

Afa BoranIndependent Board Member (Non-Executive)

Mete TapanIndependent Board Member (Non-Executive)

Ayd›n BoysanIndependent Board Member (Non-Executive)

Senior Management:

Yücel ErsözGeneral Manager

In terms of capital and commercial relationships,three of the Board members are independent ofthe primary entrepreneurs as well as the peopleand companies that the Company procuresservices from. During the previous operatingperiod no event or situation has occurred to causeany of our directors to lose their independence.

The Members of the Board are not prevented byCompany rules from assuming other dutiesoutside the Company.

18. Qualifications of Board Members

The minimum qualifications the Companyrequires for its Board members are fullycompatible with the Capital Markets Board'sCorporate Governance Principles. The majorityof the members appointed to the Board must beTurkish citizens. Furthermore, Board Membersmust meet the conditions stipulated in the CapitalMarkets Board's Real Estate Investment TrustCommuniqué. This issue is addressed in Article11 of the Company's Articles of Association.

19. Mission, Vision and Strategic Goals of theCompany

The Company's mission and vision have beendetermined and publicly announced by the Boardof Directors. Accordingly, YKK REIC, whichperpetually operates as a highly competitiveentity in both domestic and internationalmarkets, aims to become one of Europe's fivemost respected real estate development andinvestment companies within three years byachieving the following:

• creating world-class real estate concepts andbrands

• winning awards in Europe and around theworld in various categories

• maximizing shareholder value through capitalgains and dividends


20. Risk Management and Internal ControlMechanism

During the year, the Risk Management andInternal Control Department was formed and amanager was appointed to lead this entity. Themain activities of the Department are auditingthe transactions for accuracy and compliancewith legislation, defining and reducing the risksthe Company faces, monitoring the businessprocesses and creating appropriate riskmanagement mechanisms. Department is alsocharged with the responsibility of preparing andupdating internal regulations, a process in whichsignificant progress has been made and draftwork has been completed.

21. Authorities and Responsibilities of BoardMembers and Executives

The authorities and responsibilities of theMembers of the Board are clearly stipulated inArticle 15 of the Articles of Association. Thisarticle states that the Company is managed andrepresented by the Board of Directors. The Boardof Directors performs the duties that it has beenassigned by the Turkish Commercial Code, theCapital Markets Law, other relevant legislationand the General Meeting of Shareholders. Theauthorities are stipulated in detail in theCompany's list of authorized signatories.

22. Operating Principles of the Board ofDirectors

The agenda of the meetings of the Board isdetermined by the proposals of the GeneralManager and with the knowledge of the Chairmanof the Board. This agenda is then submitted tothe Chairman of the Board for approval six daysprior to each meeting. Following approval, theMembers of the Board are notified and invitedthree days prior to the meeting. The StatutoryAuditors are also invited to Board meetings andall the reports that are sent to the Board membersare also sent to the auditors. The GeneralManager's assistant is responsible for notifyingthe Board members and the auditors and sendingthem all necessary information andcommunication.

The Board of Directors convened 27 times duringthis fiscal period. The Company considers itessential for the decisions of the Board ofDirectors to be taken unanimously. Pursuant tothe Capital Markets Board's CommuniquéRegarding the Real Estate Investment Trusts(Article 21), when a decision of specialsignificance is not taken unanimously, suchinformation should be disseminated to the publicvia a material disclosure submitted to the IstanbulStock Exchange. So far no such occurrence hastaken place to require a public disclosure.

In-person attendance has been achieved on allissues in Article 2.17.4 of Section IV of the CapitalMarkets Board's Corporate Governance Principles.The Board Members have not been grantedweighted voting or veto rights.

23. Prohibition of Doing Business with theCompany and Non-Competition Clause

Pursuant to Article 20 of the CommuniquéConcerning Real Estate Investment Trusts thatregulates the Company's operations, if a BoardMember is not independent of the people whoare party to any decisions that the Board is taking,in the sense stipulated in Article 4 Section (g) ofthe Communiqué, that Board Member isresponsible for presenting this information tothe Board together with the necessary explanationand justification. In addition to this, suchinformation should be recorded in the Minutesof the Meeting. Furthermore, the Members of theBoard cannot seek permission from the GeneralAssembly to be exempted from the prohibitionto carry on transactions with the Company asstipulated in article 334 of the TurkishCommercial Code (TCC) and the non-competitionclause as stipulated in Article 335 of the TCC.Within the framework of the relevant section ofthis Communiqué, this issue is required to bestipulated in the Articles of Association. Duringthe period under review, there was no violationof the prohibition to do business with theCompany or the non-competition clause.

24. Code of Ethics

The framework of the code of ethics for theCompany and its employees has been createdby the Board of Directors to deal with issues thatmight arise with shareholders, employees,customers, suppliers and partners. It will beannounced to the employees and the public in2007.

25. The Number, Structure and Autonomy ofBoard Committees

Pursuant to the Capital Markets BoardCommuniqué Series X, No. 19, an AuditCommittee comprised of two non-executivemembers of the Board of Directors was formed.One of the members of the Audit Committee isan independent member. Furthermore, aCorporate Governance Committee has beenformed where one of the members is anindependent member. Members of the Board ofDirectors do not serve on more than onecommittee.

Audit Committee:

Federico Ghizzoni Board Member (Non-Executive)

Afa BoranIndependent Board Member (Non-Executive)

Corporate Governance Committee:

Tamer Haflimo¤luBoard Member (Non-Executive)

Mete TapanIndependent Board Member (Non-Executive)

26. Remuneration of the Board of Directors

Only the independent members of the Board ofDirectors are remunerated and the compensationlevel is determined by the General Meeting ofShareholders. In the Ordinary General Meetingof Shareholders held on March 10, 2006, theassembly decided to pay a net monthly salaryof YTL 2,200 to the independent members of theBoard. During the period, no transactions suchas lending money, extending loans or acting assurety have occurred between the Company andits Directors or senior management.

Report of Board of Directors Auditing Committeein accordance with Arrangements of Capital Market Board

We hereby certify that the Consolidated Financial Tables, the foot-notes thereof and the auditing report pertaining to the period of 31.12.2006 auditedby Baflaran Nas Serbest Muhasebeci Mali Müflavirlik A.fi. within the scope of the provisions of Bulletin Serial: XI No.25 of Capital Market Board and issuedin accordance with the provisions of the said bulletin and aforesaid financial tables and foot-notes do not include any explanation contrary to the truthon important issues or any deficiency that may cause any misleading as of the date when the declaration has been made and they reflect the truthregarding financial status and activity results of the company correctly as of the said period within the scope of our authorizations and responsibilitiesin the company and according to the best of our knowledge.

Afa Boran Federico GhizzoniMember of Auditing Committee Member of Auditing Committee



AUDIT REPORT SUMMARY

Yap› Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤› A.fi.To the Ordinary Shareholders Meeting in the 2006 Operating Period

The Partnership's:

Title : Yap› Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤› A.fi.

Headquarters : Istanbul

Capital : YTL 40.000.000

Line of Activity : Real Estate Investment Partnership

Auditors' names and terms of office / and whether they are partners or employees of the company : H. Murat Çekici - Company employee / not a partner.

Term of Office: 1 year Osman Günayd›n: Company employee / not a partner.Term of Office: 1 year

Shareholders Meeting Attended, / The Number of Auditors' Board Meetings Held : The Shareholders Meeting was Attended Once.

The Auditors' Board Meeting was Held Once.

The scope of the audit on Partnership Accounts, books, and documents, dates of audit, and the conclusion : A general audit of legal books and documents was performed in December; books

and documents were found to be in compliance with records.

Number and result of counts in the partnership cash made as per Paragraph under Section 1 of the Article 353of the Turkish Commercial Code : The company cash was counted once, and existing assets were found to be in

compliance with book records.

Dates and conclusions of audits made as per Paragraph 4Under Section 1 of the Article 353 of the Turkish Commercial Code : Monthly audits showed that negotiable instruments were complete and in

compliance with book records.

Complaints and corruptions notified / the pertinent actions taken : There are no complaints and corruptions notified.

We have completed the audit of Yap› Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤› A.fi.'s accounts and transactions between 01 January 2006 and 31December 2006 in accordance with the Turkish Commercial Code, the Company's Articles of Association, other legislation, and generally acceptedaccounting principles and standards.

We have come to the conclusion that the attached balance sheet with an issue date of 31 December 2006 whose contents we verify reflects theCompany's financial standing on the said date, and the income statement pertaining to the 01 January 2006 - 31 December 2006 period reflectsthe results of activities performed in the said period in a truthful and accurate way.

We hereby submit to your approval that the balance sheet and the income statement be approved and the Board of Directors be acquitted.

Auditor AuditorHüseyin Murat ÇEK‹C‹ Osman GÜNAYDIN

YAPI KRED‹ KORAY GAYR‹MENKUL YATIRIM ORTAKLI⁄I A.fi.

CONVENIENCE TRANSLATION INTO ENGLISH OFCONSOLIDATED FINANCIAL STATEMENTSAT 31 DECEMBER 2006


CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR'S REPORT ORIGINALLY ISSUED IN TURKISH

AUDITOR'S REPORT

1. We have audited the accompanying consolidated financial statements of Yap› Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤› A.fi. and its subsidiaries (together, the “Group”)which comprise the consolidated balance sheet as of 31 December 2006 and the consolidated statement of income, consolidated statement of changes in equity andconsolidated statement of cash flows 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 consolidated financial statements in accordance with the financial reporting standards issuedby the Capital Markets Board. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the auditingstandards issued by the Capital Markets Board. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance on 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 theauditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit proceduresthat 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 includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation 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 consolidated financial statements give a true and fair view of the financial position of Yap› Kredi Koray Gayrimenkul Yat›r›m Ortakl›¤›A.fi. as of 31 December 2006, and of its financial performance and its cash flows for the year then ended in accordance with the financial reporting standards issued by theCapital Markets Board (See Note 2).

5. Additional paragraph for convenience translation into English:

The effects of differences between financial reporting standards issued by the CMB, the accounting principles generally accepted in countries in which the accompanyingfinancial statements are to be distributed and International Financial Reporting Standards (“IFRS”) have not been quantified in the accompanying financial statements.Accordingly, the accompanying financial statements are not intended to present the financial position, results of operations and changes in financial position and cashflows in accordance with accounting principles generally accepted in such countries and IFRS.

Baflaran Nas Ba¤›ms›z Denetim ve Serbest Muhasebeci Mali Müflavirlik A.fi.a member ofPricewaterhouseCoopers

Haluk Yalç›n, SMMMPartner

Istanbul, 14 March 2007



Notes 31 December 2006 31 December 2005

ASSETS

Current assets 263.520.754 180.550.923

Cash and cash equivalents 4 3.845.147 37.846.590Marketable securities (net) 5 179.113 9.518.686Trade receivables (net) 7 7.716.150 11.779.318Leasing receivables (net) 8 - -Due from related parties (net) 9 169.541 200.196Other receivables (net) 10 24.330.317 5.078.958Biological assets (net) 11 - -Inventories (net) 12 226.496.639 115.490.669Construction contract receivables (net) 13 - -Deferred tax assets 14 - -Other current assets 15 783.847 636.506

Non-current assets 25.420.745 25.081.798

Trade receivables (net) 7 41.396 1.921.407Leasing receivables (net) 8 - -Due from related parties (net) 9 - -Other receivables (net) 10 - -Financial assets (net) 16 - -Goodwill/negative goodwill (net) 17 - -Investment properties (net) 18 20.988.893 18.977.590Property, plant and equipment (net) 19 4.270.000 4.029.199Intangible assets (net) 20 117.928 149.140Deferred tax assets 14 2.528 4.462Other non-current assets 15 - -

TOTAL ASSETS 288.941.499 205.632.721

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

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINAL ISSUED IN TURKISH


CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2006 AND 2005(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


Notes 31 December 2006 31 December 2005

LIABILITIES

Current liabilities 107.082.160 31.618.414

Short-term borrowings (net) 6 14.064.552 -Current portion of long-term borrowings (net) 6 1.221.800 -Leasing payables (net) 8 - -Other financial liabilities (net) 10 803.277 486.440Trade payables (net) 7 9.808.993 5.086.411Due to related parties (net) 9 2.263.523 324.023Advances received 21 78.172.334 25.456.187Construction progress billings (net) 13 - -Provisions 23 - -Deferred tax liabilities 14 - -Other current liabilities (net) 15 747.681 265.353

Non-current liabilities 82.563.332 81.548.996

Long-term borrowings (net) 6 38.104.386 -Lease payables (net) 8 - -Other financial liabilities (net) 10 - -Trade payables (net) 7 6.983 6.983Due to related parties (net) 9 - -Advances received 21 44.407.184 81.502.727Provisions 23 44.779 39.286Deferred tax liabilities 14 - -Other liabilities (net) 15 - -

MINORITY INTERESTS 24 201.324 216.308

SHAREHOLDERS' EQUITY 99.094.683 92.249.003

Share capital 25 40.000.000 40.000.000Treasury shares 25 - -Capital reserves 26 91.460.568 91.460.568

Share premium - -Share cancellation gains - -Revaluation fund - -Financial assets fair value reserve - -Inflation adjustment to shareholders' equity 27 91.460.568 91.460.568

Profit reserves 27 653.628 22.201Legal reserves 41.438 39.011Statutory reserves - -Extraordinary reserves 172.860 172.860Special reserves 2.351 2.351Investment and property sales income

to be added to the capital - -Translation reserve 436.979 (192.021)

Current year profit 6.216.680 5.179.121Retained earnings 28 (39.236.193) (44.412.887)TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 288.941.499 205.632.721

Commitments and contingent liabilities 31

These consolidated financial statements have been approved by the Board of Directors on 14 March 2007.




CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2006 AND 2005(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


Notes 2006 2005

Operating Revenue

Sales (net) 36 60.105.032 23.864.663Cost of sales (-) (50.345.540) (22.980.077)

Gross operating profit 9.759.492 884.586

Operating expenses (-) 37 (7.340.617) (5.297.525)

Net operating profit/(loss) 2.418.875 (4.412.939)

Other income and profits 38 6.849.686 12.061.608Other expenses and losses 38 (2.495.167) (2.436.213)Financial expenses-net 39 (543.249) -

Operating profit/(loss) 6.230.145 5.212.456

Minority interest 24 (8.927) (29.755)

Income/(loss) before tax 6.221.218 5.182.701

Taxes on income (4.538) (3.580)

Net income 6.216.680 5.179.121

Earnings per share 42 0,1554 0,1295




CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2006 AND 2005(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


Notes 2006 2005

Operating activities:Net income 6.216.680 5.179.121

Adjustments:

Decrease in provision for employment termination benefits 23 5.493 (4.200)

Depreciation and amortisation 19, 20 668.680 551.682Interest income 39 (1.425.108) (3.045.789)Interest expense 39 543.249 -Loss on sale of investment properties 18 - 279.185Change in fair value of investment properties 38 (1.848.000) (1.644.500)Change in fair value of tangible assets 38 - (52.867)Reversal of impairment provision on inventories 12, 38 (80.000) (6.929.164)Loss on sale of financial assets 38 - 331.961Minority interest 24 (14.984) 6.103Taxation 41 4.538 3.580Translation reserve 629.000 60.540

Net cash provided from/(used in) operating activities before changes in operating assets and liabilities 4.699.548 (5.264.348)

Changes in operating assets and liabilities 43 (91.942.484) 16.735.266Net cash inflow from sale of investment properties - 11.870.815Additions to investment properties (163.303) (265.763)Collection from doubtful receivables 10.468 (9.382)Employment termination benefits paid 23 - (10.106)

Net cash (used in)/provided from operating activities (87.395.771) 23.056.482

Investing activities:Purchase of tangible and intangible assets 19, 20 (970.328) (1.265.503)Sale of tangible and intangible assets 19, 20 92.059 810Sale of financial asset - 5.753.250

Net cash (used in)/provided from investing activities (878.269) 4.488.557

Financing activities:Interest received 1.425.108 3.045.789Interest paid (435.479) -Loan received 153.282.968 -Loan paid (100.000.000) -

Net cash provided from financing activities 54.272.597 3.045.789

Net increase in cash and cash equivalents (34.001.443) 30.590.828

Cash and cash equivalents at the beginning of the year 4 37.846.590 7.255.762

Cash and cash equivalents at the end of the year 4 3.845.147 37.846.590




CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2006(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


Capital reserves Profit Reserves Retained EarningsInflation

Adjustment to TotalShare shareholders' Legal Extraordinary Special Translation Accumulated Net shareholders'

Capital equity Reserves reserves reserves reserves losses Income equity

Balances at 1 January 2005 40.000.000 91.460.568 36.502 172.860 2.351 (252.561) (44.410.378) - 87.009.342

Translation reserves - - - - - 60.540 - - 60.540Transfers - - 2.509 - - - (2.509) - -Net Income - - - - - - - 5.179.121 5.179.121

Balances at 31 December 2005 40.000.000 91.460.568 39.011 172.860 2.351 (192.021) (44.412.887) 5.179.121 92.249.003

Balances at 1 January 2006 40.000.000 91.460.568 39.011 172.860 2.351 (192.021) (44.412.887) 5.179.121 92.249.003

Translation reserves - - - - - 629.000 - - 629.000Transfers - - 2.427 - - - 5.176.694 (5.179.121) -Net Income - - - - - - - 6.216.680 6.216.680

Balances at 31 December 2006 40.000.000 91.460.568 41.438 172.860 2.351 436.979 (39.236.193) 6.216.680 99.094.683




CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS

Yap› Kredi Koray Gayrimenkul Ortakl›¤› A.fi. (“YK Koray” or the “Company”) is mainly engaged in the formation and improvement of real estateportfolios and investing in capital market instruments related with real estate. The Company was established on 25 December 1996. The addressof the registered head office of the Company is as follows; Büyükdere Caddesi, Yap› Kredi Plaza, C Blok, Kat: 2 Levent, 34330, Istanbul, Turkey.

The Company is registered with the Capital Markets Board and its shares have been publicly traded on the Istanbul Stock Exchange (“ISE”) since1998. The Company is obliged to conform to the Capital Markets Board's operational rules, portfolio investment politics, management-basedregulations and relevant legislation. As of 31 December 2006, 49% of the Company's shares are quoted on the ISE. The principal shareholders andtheir respective shareholdings in YK Koray are as follows (Note 25):

%

Yap› ve Kredi Bankas› A.fi. 26Koray Yap› Endüstrisi ve Ticaret A.fi. 5Murat Koray 5Selim Koray 5Semra Turgut 5Hüseyin Ayduk Esat Koray 2,2Süleyman Yerçil 1,4Mustafa Zeki Gönül 1Zeynel Abidin Erdo¤an 0,4Other (publicly traded) 49

100,00

As of 28 September 2005, 57.43% of the total shares of Yap› ve Kredi Bankas› A.fi (“YKB”) owned by Çukurova Group Comanies and Savings DepositInsurance Fund, was acquired to Koçbank A.fi. (Koçbank). Koçbank also took over 9.09% of the total YKB's shares listed in ISE, and 0.79% of thetotal shares owned by an investment fund which is in available for sales portfolio of YKB, and raised its shareholding in YKB to 67.31%.

Company's subsidiary and joint venture are explained in Note 2.

The average number of personnel employed in Group is 89 (31 December 2005: 80).

NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

Accounting standards

The Company, its subsidiary and joint venture which are registered in Turkey maintain their books of account and prepare their statutory financialstatements (“Statutory Financial Statements”) in YTL in accordance with the Turkish Commercial Code (the “TCC”), tax legislation, and the UniformChart of Accounts issued by the Ministry of Finance. These consolidated financial statements are based on the statutory records, which aremaintained under historical cost conversion, with the required adjustments and reclassifications reflected for the purpose of fair presentation inaccordance with the accounting standards published by the CMB in Communiqué XI No.25 “The Accounting Standards in the Capital Markets”dated 15 November 2003. These consolidated financial statements and the related notes have been presented in accordance with the formatsrequired by the CMB with the announcement dated 20 December 2004.

CONVENIENCE TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINAL ISSUED IN TURKISH

YAPI KRED‹ KORAY GAYR‹MENKUL YATIRIM ORTAKLI⁄I A.fi

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2006 AND 2005(Amounts expressed in New Turkish lira [“YTL”] unless otherwise indicated).


Translation of financial statements of foreign subsidiaries and joint ventures

The joint venture of the Company maintains its books of accounts in accordance with the laws and regulations in force in the countries in which itis registered and necessary adjustments and reclassifications have been made for fair presentation in accordance with CMB Accounting Principles.The assets and liabilities of foreign joint ventures of the Company are translated into Turkish lira at the closing rate for the year. The results offoreign joint venture are translated into Turkish lira at average rates for the period. Exchange differences between the average and year-end ratesare included in the translation reserve under shareholders' equity.

Basis of consolidation

(a) The consolidated financial statements include the accounts of the parent company, YK Koray, its subsidiary and joint ventures (altogetherreferred to as the “Group”) on the basis set out in sections (b) to (e) below. The financial statements of the companies included in the scope ofconsolidation have been prepared as of the date of the consolidated financial statements and have been prepared in accordance with CMBAccounting Standards and the application of uniform accounting policies and presentation.

(b) Subsidiaries are companies in which YK Koray has the power to control the financial and operating policies for the benefit of YK Koray either (a)through the power to exercise more than 50% of voting rights relating to shares in the companies owned directly and indirectly by or (b) althoughnot having the power to exercise more than 50% of the voting rights, otherwise by having the power to exercise control over the financial andoperating policies.

The table below sets out the subsidiary and shows its shareholding structure as of 31 December 2006 and 2005.

Direct and indirect Direct and indirectcontrol control

31 December 2006 31 December 2005

YKS Tesis Yönetim Hizmetleri A.fi. 51,00 51,00

51 % of YKB Koray Tesis Yönetim A.fi was purchased by the YKB Koray through the purchase of a 43,65% share from Yap› Kredi Bankas› A.fi andthe purchase of a 7.35% share from Bay›nd›rl›k ‹flleri A.fi. YKS Tesis Yönetim A.fi was established at 25 October 1988 and is engaged inmanagement and operating, consultancy and project services to Yap› Kredi Plaza and other complex organizations.

The balance sheets and statements of income of the subsidiary are consolidated on a line-by-line basis and the carrying value of the investmentheld by YK Koray is eliminated against the related shareholders' equity. Intercompany transactions and balances between YK Koray and itssubsidiary are eliminated on consolidation. The cost of, and the dividends arising from, shares held by YK Koray in its subsidiary are eliminatedfrom shareholders' equity and income for the period, respectively.

(c) Joint ventures are companies in respect of which there are contractual arrangements through which an economic activity is under takensubject to joint control by the Company.

Jointly controlled partnerships are consolidated using a proportionate consolidation method. By this method; assets, liabilities, equity, income andexpenses in the financials tables are subject to consolidation though the voting power of the Company.





The table below sets out the joint venture and shows its shareholding structure as of 31 December 2006 and 2005.

Direct and indirect Direct and indirectControl control


GKY Real Estate Investments S.A. 49,90 49,90Yap› Kredi Koray GYO A.fi.-Garanti GYO A.fi. Ortak Giriflimi (“Ortak Giriflim”) 50,00 50,00

GKY Real Estate Investments S.A. is mainly engaged in the building of residences and the development of commercial projects in Romania. Thename of the company, which was Koray Real Estate Investments S.A. at 31 December 2004, has been changed to GKY Real Estate InvestmentsS.A. as of 25 May 2005.

Ortak Giriflim, established by Garanti Gayrimenkul Yat›r›m Ortakl›¤› A.fi. and YK Koray with a 50%-50% joint venture agreement at 19 March 2004in order to build residences on the land of Ana Konut A.fi. called “Evidea”, is located in Ümraniye, ‹stanbul. This joint venture has no commercialname or capital. However, according to the mentioned joint venture agreement, each company will share all the liabilities of this investment 50-50and will reflect all the income, expense and balance sheet items 50-50 in their financial statements.

(d) The results of operations of the subsidiary and joint venture are either included or excluded from their effective dates of acquisition ordisposal, respectively.

(e) The minority shareholders' share in the net assets and results for the year of the subsidiary are separately classified as minority interest in theconsolidated balance sheets and statements of income (Note 24).

Comparative information and restatement of prior periods' financial statements

Comparative figures are reclassified, where necessary, to conform to changes in presentation in the current period so that the reclassification willresult in a more appropriate presentation of events and transactions.

Offsetting

Financial statements that present significant amounts and content separately, even when they have similar characteristics, and unimportantamounts are consolidated under essential and functional as similar statements. When the nature of transactions and cases necessitatesoffsetting, recognition of these transactions and cases as net-off amounts or the follow-up of assets with amounts obtained following thededuction of impairment, are not considered as a violation of the rule of non-offsetting. As a consequence of the Group's daily transactions,revenue is presented at net value on condition that it is convenient to the nature of transactions other than sales on revenue.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed in the preparation of these consolidated financial statements are summarized below:

Related parties

For the purpose of these consolidated financial statements, shareholders, key management personnel and Board members, in each case togetherwith their families and companies controlled by or affiliated with them and associated companies are considered and referred to as related parties(Note 9).





Trade receivables

Trade receivables that are created by the Group by way of providing goods or services directly to a debtor are carried at net deferred financeincome. Short duration receivables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest issignificant.

A credit risk provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due.The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows,including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originatedreceivables at inception.

If the amount of the doubtful receivables subsequently decreases due to a collection of all or part of the receivables after the provision fordoubtful receivables is established, then the collected doubtful receivable is written-down from the doubtful receivables account and recorded asincome to the income statement (Note 7).

Financial assets

The Group classifies its financial assets as: i)Trading Securities, ii) Held-to-Maturity Investments, and iii)Available-for-sale financial assets.Financial assets gathered for trading purposes in response to changes in the market prices are classified as trading securities and are included incurrent assets. Financial assets, which have a certain and fixed return with a certain maturity date and which management has both the intentand the ability to hold to maturity are classified as held-to-maturity investments. However the Group has no financial assets classified under thiscategory as of 31 December 2006 and 2005. The Group classifies its remaining financial assets under available-for-sale financial assets (Note 5and Note 16).

“Trading investments” are either acquired for generating a profit from short-term fluctuations in price or dealer's margin, or are securitiesincluded in a portfolio in which a pattern of short-term profit making exists. Trading securities are initially recognized at cost of purchaseincluding the transaction costs. Trading securities are subsequently re-measured at fair value based on quated bid prices or prices quoted by theCentral Bank of Turkey. All related realized and unrealized gains and losses are included in the profit and loss statement.

Government bonds and treasury bills with a fixed maturity, where management has both the intent and the ability to hold to them to maturity,are classified as “held-to-maturity investments.”

Held-to-maturity investments are initially recognized at cost and are subsequently carried at amortized cost using the effective yield method.

Available-for-sale investments are initially recognized at cost. Available-for-sale investments are subsequently re-measured at fair value. Fairvalues are obtained either from market prices or discounted cash flow models, as appropriate.

“Available-for-sale investments” are securities other than trading securities and held-to-maturity securities. These are included in non-currentassets unless management has the expressed intention of holding the investments for less than 12 months from the balance sheet date or unlessthey will need to be sold to raise operating capital, in which case they are included in current assets. Unrealized gains and losses arising fromchanges in the fair value of securities classified as available-for-sale are deferred in the equity.





Inventories

Inventories are valued at the lower of cost or net realizable value. Inventories comprise of land held for the development of real estate, rawmaterial costs, personnel costs and production costs at appropriate levels. Lands and costs for the development of real estate projects, related tothe projects that have not started as at the balance sheet date, are classified as “raw materials”; land and costs related to ongoing projects areclassified under “semi-finished goods”; and finalized projects developed by the Group are classified under “finished goods”. Finished projectspurchased from third parties are classified under “trade goods”. The unit cost of inventories is determined using the moving weighted averagemethod (Note 12).

Property, plant and equipment and related depreciation

Property, plant and equipment acquired prior to 31 December 2004 are carried at acquisition costs adjusted for inflation; whereas thosepurchased after 1 January 2005 are carried at acquisition costs less accumulated depreciation. Depreciation is provided on a straight-line basis(Note 19). The depreciation periods for property, plant and equipment, which show the economic useful lives of such assets, are as follows:

Years

Buildings 50Machinery and equipment 4-10Fixture and furniture 4-10Motor vehicles 5Special costs 5

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverableamount.

Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their carrying amounts and areincluded in the related income and expense accounts, as appropriate.

Investment properties

Buildings and land held to earn rent or for capital appreciation or both rather than for use in the production or supply of goods or services or foradministrative purposes or sale in the ordinary course of business are classified as investment property and are carried at fair values. The gain orlosses resulting from the fair values are recognized in the profit and loss statement (Note 18).

Intangible assets

Intangible assets include acquired rights, computer programs, software and other identifiable rights. Intangibles acquired prior to 31 December2004 are carried at acquisition costs adjusted for inflation; whereas those purchased in the year 2005 are carried at acquisition costs lessaccumulated depreciation. The acquired amount is amortized over a maximum of 5 years useful life using the normal amortization method. Whenthe carrying amount of any intangible asset is greater than its recoverable amount, it is immediately written down to its recoverable amount (Note20).





Impairment of the assets

The Group determines whether there are any indicators for impairment at every balance sheet date. In the case of an indicator, the recoverablevalue of that asset is estimated. If the cash generated from the recordable value of the asset is higher than the recoverable value, which representssales and usage, it is accepted that impairment for that asset exists. The recoverable value is determined by comparing the sales realizable valueand usage value and the higher one is chosen.

The usage value is the current value, which is estimated cash flows resulting from the operations using that asset and the sales of the asset at theend of its useful life. Impairment loss is not reflected in the income statement. Impairment loss of any asset is reversed if it does not exceed theprevious allowance for impairment, if the increase in the recoverable value of that asset can be correlated with an event which occurred in theperiod when the impairment booking is done.

Deferred income taxes

Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax base of assets and liabilities andtheir carrying values for financial reporting purposes. Currently enacted tax rates are used to determine deferred income taxes.

Deferred tax liabilities are recognized for all taxable temporary differences, whereas deferred tax assets resulting from deductible temporarydifferences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporarydifference can be utilized.

Deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority and deferred tax assets and liabilitiesare offset accordingly (Note 14).

Provision for employment termination benefits

The provision for employment termination benefits represents the present value of the estimated total reserve of the future probable obligation ofthe Group arising from the retirement of the employees calculated in accordance with the Turkish Labor Law (Note 23).

Foreign currency transactions and translation

Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetaryassets and liabilities denominated in foreign currencies have been translated at the exchange rates prevailing at year-end. Exchange gains orlosses arising on the settlement and translation of foreign currency items have been included in the consolidated statements of income (Note 29).

Revenue recognition

Revenue is recognized when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with thetransaction will flow to the Group. Revenue is presented after deducting value added and sales taxes. The following criteria are necessary for therecognition of revenue:

Sales of real estate

Income is recognized when the risk and benefit of real estate is transferred to the buyer and when it is possible to measure income reliably.

Rent income obtained from real estate

Rent income from real estate is recognized on an accrual basis. Income is realized when economic benefits arising from the transaction can bepassed to the Group, and when the amount of such income can be reliably measured.





Service income

Income from services is recognized when such income can be reliably measured. Where such income cannot be measured reliably from theagreement made, income is accepted to be the portion of the expense amount that the Group is able to regain.

Interest

In situations where the collection is not doubtful, income is recognized on an accrual basis.

Financial instruments and financial risk management

The Group's activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currencyexchange rates and interest rates. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks tominimize potential adverse affects on the financial performance of the Group.

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. These exposures aremanaged by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities.

Funding risk

The ability to fund existing and prospective debt requirements is managed by maintaining the availability of adequate committed funding linesfrom high quality lenders.

Foreign currency risk

The Group is exposed to the foreign exchange risk through the impact of rate changes at the translation of foreign currency denominatedliabilities to local currency. These risks are monitored and limited by the analysis of foreign currency position.

Fair value of financial instruments

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in aforced sale or liquidation, and is best evidenced by a quoted market price, if one exists.

The estimated fair values of financial instruments have been determined by the Group using available market information and appropriatevaluation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimatespresented herein are not necessarily indicative of the amounts the Group can realize in a current market exchange.





The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimatefair value:

Monetary assets

The fair values of balances denominated in foreign currencies, which are translated at year-end exchange rates, are considered to approximatecarrying values.

The fair values of certain financial assets carried at cost, including cash and amounts due from banks, are considered to approximate theirrespective carrying values due to their short-term nature and negligible credit losses.

The carrying values of trade receivables along with the related allowances for uncollectability are estimated to be their fair values.

It is assumed that fair values of financial assets approach their registered values.

Monetary liabilities

The fair values of monetary liabilities are considered to approximate their respective carrying values due to their short-term nature.

Trading liabilities have been estimated at their fair values.

Provisions

The conditions to recognize a provision in the consolidated financial statements are: that the Group should have a present obligation, legal orconstructive, as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation; and that the amount can be measured reliably.

Commitments and contingent assets

Liabilities or assets that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or moreuncertain future events which are not wholly within the control of the Group should not be recognized as liabilities or assets, however they shouldbe disclosed as contingent liabilities or assets (Note 31).

Earnings per share

Earnings per share disclosed in the consolidated statements of income are determined by dividing net profit by the weighted average number ofshares that have been outstanding during the year concerned.

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonus shares”) to existing shareholders fromretained earnings and revaluation surplus. For the purpose of earnings per share computations, such bonus share issuances are regarded as issuedshares. Accordingly the weighted average number of shares used in earnings per share computations is derived by giving retroactive effect to theissuances of the shares without consideration.

There are no bonus shares, issued during the period (Note 42).

Reporting of cash flows

The statements of cash flows consist of cash and cash equivalents include bank deposits and receivables from reverse repurchase agreementtransactions (Note 43).





NOTE 4 - CASH AND CASH EQUIVALENTS


Cash in hand 339 2.205Cash at banks

- time deposits 2.058.807 34.253.284- demand deposits 984.981 2.598.579

Receivables from reverse repo 801.020 992.522

3.845.147 37.846.590

Maturity of time deposits is one month. Interest rates of YTL time deposits are between 16% and 17,5% (31 December 2005: 8,0% and 14,0%).Interest rate of foreign currency time deposits is 3,83% (31 December 2005: 2,08% and 2,85%).

NOTE 5 - MARKETABLE SECURITIES

Short-term financial assets consist of trading securities.

Details of trading securities as of 31 December 2006 and 2005 are as below:


Investment funds 179.113 4.513.967Government bonds - 4.350.650Share certificates - 654.069

179.113 9.518.686

Maturities and interest rates of trading securities as of 31 December 2006 and 2005 are as below:


3-6 months - 521.2566-12 months - 1.945.571Over 12 months - 1.883.823Demand (*) 179.113 5.168.036

179.113 9.518.686

At 31 December 2005, interest rates of trading securities are between 13,88% and 14,29%.

(*) Demand trading securities consist of investment funds. (As of 31 December 2005, trading securities with no maturity comprise of sharecertificates amounting to YTL 654.069 and investment funds amounting to YTL 4.513.967.)





NOTE 6 - BORROWINGS

As of 31 December 2006 the details of short term and long term borrowings are as below (31 December 2005: None):

Interest rate % Original currency YTL

Short-term bank borrowings:-YTL 20,00%-21,75% 14.064.552 14.064.552

Total 14.064.552

Short-term portion of long- term long term bank borrowings:-USD USD Swap rate+2% 869.237 1.221.800

Total 1.221.800

Long-term bank borrowings:-USD USD Swap rate+2% 27.108.983 38.104.386

Total 38.104.386

The redemption schedule of the long-term bank borrowings is as follows:

Payment Year Principle (USD)

2008 1.537.1072009 1.886.4502010 1.956.3182011 1.956.3182012 1.956.3182013 17.816.472

27.108.983





NOTE 7 - TRADE RECEIVABLES AND PAYABLES

Details of trade receivables as of 31 December 2006 and 2005 are as follows:

Short term trade receivables: 31 December 2006 31 December 2005

Trade receivables 1.913.202 3.697.169Notes receivables 5.758.852 7.942.807Checks received 123.284 228.998

7.795.338 11.868.974

Provision for doubtful receivables (79.188) (89.656)

Trade receivables, net 7.716.150 11.779.318

Long-term trade receivables:

Notes receivables 11.914 1.899.949Deposits and guarantees given 29.482 21.458

41.396 1.921.407

Details of trade payables as of 31 December 2006 and 2005 are as follows:

Short-term trade payables:

Trade Payables 9.808.993 5.086.411

9.808.993 5.086.411

Short term trade payables:

Notes payable 6.983 6.983

6.983 6.983





NOTE 8 - LEASING RECEIVABLES AND PAYABLES

The Group has no leasing receivables and payables at 31 December 2006 and 2005.

NOTE 9 - DUE TO AND DUE FROM RELATED PARTIES

Due to and due from related parties as of 31 December 2006 and 2005 and transactions with related parties for the years then ended are asbelow:

Due from related parties:31 December 2006 31 December 2005

Yap› Kredi Bankas› A.fi. 70.109 47.175Koray Yap› Endüstrisi A.fi. 33.477 48.275Yap› Kredi Emeklilik A.fi. 27.315 1.090Yap› Kredi Sigorta A.fi. 17.719 1.931Yap› Kredi Kültür Sanat Yay›n A.fi. 14.998 15.162Koray ‹nflaat Sanayi Ticaret A.fi. - 26.349Yap› Kredi Finansal Kiralama A.fi. - 22.215Koray Yap› A.fi. - 19.118Yap› Kredi Faktoring A.fi. - 14.007Other 5.923 4.874

169.541 200.196

Due to related parties 31 December 2006 31 December 2005

Koray Yap› Endüstrisi A.fi. 769.819 -Do¤ufl Yap› Koray ‹nflaat Adi Ortakl›¤› 632.563 228.808Arçelik A.fi. 376.069 -Koray ‹nflaat Sanayi Tic. A.fi. 355.298 -Koray Sigorta Arac›l›k Hizmetleri A.fi. 95.656 79.190Beko Ticaret A.fi. 30.204 -Yap› Kredi Bankas› A.fi. 1.999 7.187Yap› Kredi Yat›r›m A.fi. - 3.771Other 1.915 5.067

2.263.523 324.023

Deposits 31 December 2006 31 December 2005

Yap› Kredi Bankas› A.fi. time deposits 1.976.734 33.925.377Yap› Kredi Bankas› A.fi, demand deposits 509.953 459.442Yap› Kredi Yat›r›m Menkulde¤erler A.fi. 801.020 1.725.090

3.287.707 36.109.909





Investment funds 31 December 2006 31 December 2005

Yap› Kredi Bankas› A.fi. 179.113 -

179.113 -

Sales to related parties 2006 2005

Yap› Kredi Bankas› A.fi. 861.550 47.175Yap› Kredi Sigorta A.fi. 603.359 -Yap› Kredi Emeklilik A.fi. 331.570 1.090Yap› Kredi Finansal Kiralama A.fi. 237.170 22.215Yap› Kredi Yat›r›m Menkul De¤erler A.fi. 183.088 -Koray Yap› Endüstrisi A.fi. 163.336 48.275Yap› Kredi Kültür Sanat A.fi. 115.785 15.162Yap› Kredi Factoring A.fi. 63.424 14.007Koç Portföy Yönetimi A.fi. 48.535 -Yap› Kredi Portföy Yönetimi A.fi. 27.487 -Koray ‹nflaat San. Ve Tic. A.fi. 20.000 26.349Koray Yap› A.fi. - 19.118Other 3.107 6.805

2.658.411 200.196

Remunerations paid to the Board of Directors during the year ended 31 December 2006 amount to YTL 101.066 (2005: YTL 82.152 ).

NOTE 10 - OTHER RECEIVABLES AND PAYABLES

31 Aral›k 2006 ve 2005 tarihleri itibariyle k›sa vadeli di¤er alacaklar›n detaylar› afla¤›da verilmifltir:

Other short-term receivables 31 December 2006 31 December 2005

Value Added Tax (“VAT”) receivables 24.318.457 5.040.739Prepaid taxes and stoppage 11.860 38.219

24.330.317 5.078.958

31 Aral›k 2006 ve 2005 tarihleri itibariyle k›sa vadeli di¤er borçlar›n detaylar› afla¤›da verilmifltir:

Other liabilities 31 December 2006 31 December 2005

Taxes and funds payable 692.782 410.948Withholdings tax payable 110.495 75.492

803.277 486.440





NOTE 11 - BIOLOGICAL ASSETS

None.

NOTE 12 - INVENTORIES


Raw materials 51.994.813 40.727.117Semi-finished goods 129.512.782 44.971.222Finished goods 155.968 -Trade goods 1.051.925 3.986.130Other inventories 40.462 28.817Advances given 43.740.689 28.188.513

226.496.639 117.901.799

Provision for inventories - (2.411.130)

226.496.639 115.490.669

Details of inventories at 31 December 2006 and 2005 are as below:

Raw materials:

Details of the raw materials at 31 December 2006 and 2005 are as follows:


Project Riva 37.619.227 37.094.684Project Hofldere-‹nan 10.581.704 -Project Romania 3.793.882 3.632.433

51.994.813 40.727.117

Project Riva:

Riva is land of 480.000 m2, which will house the project residence development project.

Project Hofldere-‹nan:

Hofldere-Inan is the residence development project covers 53.730 m2, includes 750 flats that half of the land is belonging to the Company.

Project Romania:

Romania is the residence development project in Romania.





Semi-finished goods:

The details of the semi-finished products as of 31 December 2006 and 2005 are explained below;


Project Eskiflehir Neo 65.446.698 6.281.742Project Evidea 22.301.590 11.022.988Project Istanbul Bis 27.055.665 9.662.326Project Ankara Ankara (Bilkent) 10.869.480 162.053Project Istanbul Istanbul Faz III 1.017.651 909.627Project Ankara Çankaya 1.712.979 247.330Project Istanbul Zen (*) - 16.344.613Other 1.108.719 340.543

129.512.782 44.971.222

(*) The Project is completed and reclassified to finished goods as of 4 April 2006.

Project Eskisehir:

This project plans to be constructed between the two villages of Eskiflehir and Tepebafl›.The Project that was started January 2006, will expected tobe finished as of March 2007.

Project Evidea:

Evidea Project is built on land of 34.022 m2 in Umraniye, Istanbul belonging to Ana Konut A.fi. The project has three phases and consists of 473flats and social facilities. In November 2004, sales for the project started and sales agreements for 473 flats have been signed as of 31 December2006, from these units 193 flats have been handed over to the owners (31 December 2005: None).

Project BIS, ‹stanbul:

The Istanbul Bis Project is built on land in Eyüp, Istanbul, Göktürk and Harmanlar covering 9858m2 bought by the Company on 19 October 2005and 7 January 2005. This project consists of 112 flats; the preselling of the flats started on 28 July 2005. On 5 September 2005, constructionbegan and sales agreements for 91 flats have been signed as of 31 December 2006 (31 December 2005: 80 flats).

Project Istanbul, ‹stanbul Phase III:

The Istanbul, Istanbul Project is a flat project positioned in Eyüp, Istanbul, and Göktürk on the Kemerburgaz - Yass›ören highway, and is 1km toGöktürk and 2km to Kemer Country.

Project Ankara Ankara (Bilkent):

Project Zen, Istanbul is located in the Ankara positioned in Çankaya. The land belongs to Koray Yap› Endüstrisi ve Ticaret A.fi., covers 17.952 m2and As of 20 July September 2006 construction began. This project consists of 182 flats. On 24 April 2006, pre-selling has begun, salesagreements for 126 flats have been signed as of 31 December 2006.





Finished goods:

Details of finished goods as of 31 December 2006 and 2005 are as follows:


Evidea 155.968 -

155.968 -

Trade goods:

The details of the trade goods as of 31 December 2006 and 2005 are as below:


Kemerburgaz Yal›konaklar 2 flat (2005: 4 flat) 818.015 1.575.000Kemerburgaz Beyaz Konaklar› 1 flat 233.910 -

1.051.925 1.575.000

Since the book value of finished goods is lower than the recoverable amount as of 31 December 2006 and 2005, there provision is provided foramounting to YTL 2.411.130. As of 31 December 2006 there is no impairment provision on remaining 2 flats.

Kemer Country, Yal›konaklar :

This project consists of 2 separated unrelated units (31 December 2005: 4 units) which are located in Kemer Country and the borough Eyüp inIstanbul.

Advances given

Advances given as of 31 December 2006 and 2005 cover various projects.

NOTE 13 - CONSTRUCTION CONTRACT RECEIVABLES AND PROGRESS BILLING

None.





NOTE 14 - DEFERRED TAX ASSETS AND LIABILITIES

Deferred taxes:


Deferred tax assets 2.528 4.462Deferred tax liabilities - -

Deferred tax assets - net 2.528 4.462

The Company recognizes deferred tax assets and liabilities based upon temporary differences arising between their financial statements asreported for communiqué purposes and their statutory tax financial statements. Current deferred taxes and liabilities are reflected to financialstatements in the ratio of the increase and the decrease that will be made on taxes and funds payable at the following period where temporarydifferences in question will disappear (Note 41).

Deferred income taxes will be calculated on temporary differences that are expected to be realized or settled based on the taxable income incoming years under the liability method using a principal tax rate of 20%.(31 December 2005: 30%)

The breakdown of cumulative temporary differences and the resulting deferred tax assets/(liabilities) provided at 31 December 2006 and 2005using the enacted future tax rates are as follows:

Cumulative temporary deferred taxdifferences assets / (liabilities)

31 December 2006 31 December 2005 31 December 2006 31 December 2005

Employment termination benefits 12.640 14.874 2.528 4.462

Deferred tax assets 2.528 4.462

NOTE 15 - OTHER CURRENT/NON-CURRENT ASSETS AND SHORT-LONG TERM LIABILITIES

Other current assets


Prepaid expenses 604.775 326.477Advances given 178.171 310.021Others 901 8

783.847 636.506





Other short-term liabilities


Deferred income 381.891 119.983Expense accruals 124.316 37.663Payables to personnel 3.613 4.325VAT payable - 32.415Other 237.861 70.967

747.681 265.353

NOTE 16 - FINANCIAL ASSETS

Available-for-sale investments:

The Group sold its 37,26% share in Anadolu Turizm Yat›r›m A.fi at 1 March 2005 at a selling price of YTL5.753.250. The loss amounting toYTL331.961 has been accounted under other expenses (Note 38).

NOTE 17 - GOODWILL/NEGATIVE GOODWILL

None.

NOTE 18 - INVESTMENT PROPERTY

Fairvalue

1 January 2006 change (*) Disposal Addition 31 December 2006

Yap› Kredi Plaza C Blok 10.496.000 1.168.000 - - 11.664.000Elit Residence 5.335.000 390.000 - - 5.725.000Narmanl› Han 3.146.590 290.000 - 163.303 3.599.893

18.977.590 1.848.000 163.303 20.988.893





Fairvalue Transfer

1 January 2005 change (*) Disposal (**) Addition 31 December 2005

Yap› Kredi Plaza A Blok 12.150.000 - (12.150.000) - - -Yap› Kredi Plaza C Blok 10.327.500 824.500 - (656.000) - 10.496.000Elit Residence 4.720.000 615.000 - - - 5.335.000Narmanl› Han 2.675.827 205.000 - 265.763 3.146.590

29.873.327 1.644.500 (12.150.000) (656.000) 266.363 18.977.590

(*) The decrease or increase in the fair value of real estate for investments is included in the income statement in the period in which it occurred.The Group's real estate for investment has been valued by experts and the fair values have been determined according to the reports prepared bythese licensed real estate experts. As of 31 December 2006, the change in the value of the real estate amounting to YTL1.848.000 (2005: YTL1.596.000) has been booked as income under non-operating income and profits (Note 38).

(**) Sperated unrelated Office in Yap› Kredi Plaza C Blok with 0.5 portion is transfered from investment property to property, plant and equipmentsince this office is began to be used by the Group (Note 19).

Yap› Kredi Plaza:

Yap› Kredi Plaza A Block consists of a total of 5 floors and 10 separated unrelated offices.

The Group sold its shares in Yap› Kredi Plaza A block on 3 September 2005 for a sales price of YTL11.870.815. This YTL11.870.815 sales price hasbeen booked as “revenue”, and the cost of the assets amounting to YTL12.150.000 has been booked as “cost of sales”.

Yap› Kredi Plaza C Block consists of a total of 5 floors and 8 separated unrelated offices.

Elit Residence:

Elit Residence is a 40-storey apartment block located in fiiflli built on land block 1905 and parcel No.48. The Group purchased 8 independentoffices on floors 11, 13, 15 and 17. The project started in 1998 and a total of 5 units have been delivered.

Narmanl› Project:

This project consists of reviving of Narmanl› Yurdu in Istanbul's Beyo¤lu district, Asmal›mescit ward off ‹stiklal Street, in the context of historicaltransformation. In this extent, the Company signed an agreement with 60% Yap› Kredi Koray and 40% Narmanl› family ownership on 25 of May,2005 and became a 15% shareholder of the aforementioned real estate, paying YTL904.307, equivalent to USD786.000 (inflation-adjustedpurchase price YTL2.002.386) based on this agreement. The balance will be transferred to the Group with the delivery of 33% of 45% of the totalshares in return for the construction to be built; the remaining 12% is due upon the delivery of the empty real estate as an additional payment ofUSD 600.000.

The temporary delivery time for the construction subject to the agreement is 24 months after the acquisition of the construction license,excluding unavoidable excuses. It is expected that the license will not be obtained by the report date, that the permission process will becompleted in 2007 and that the project work will be accelerated.





NOTE 19 - PROPERTY, PLANT AND EQUIPMENT

1 January 2006 Addition Disposal 31 December 2006

Cost

Land and buildings 3.469.672 23.769 (48.708) 3.444.733Machinery and equipment 30.934 19.178 (1.770) 48.342Motor vehicles 935.245 63.990 (181.858) 817.377Furniture and fixtures 1.718.166 747.825 (96.792) 2.369.199Special costs 330.646 10.054 - 340.700

6.484.663 864.816 (329.128) 7.020.351

Accumulated depreciation

Buildings (721.648) (56.394) 4.059 (773.983)Machinery and equipment (13.512) (7.970) 1.770 (19.712)Motor vehicles (313.673) (153.011) 143.516 (323.168)Furniture and fixtures (1.232.509) (241.120) 87.724 (1.385.905)Special costs (174.122) (73.461) - (247.583)

(2.455.464) (531.956) 237.069 (2.750.351)

Net book value 4.029.199 4.270.000

There is no mortgage over tangible fixed assets as of 31 December 2006 and 2005.





Transfers Reversal of1 January 2005 Addition Disposal (*) impairment 31 December 2005

Cost

Land and buildings 2.498.901 261.904 - 656.000 52.867 3.469.672Machinery and equipment 21.039 9.895 - - - 30.934Motor vehicles 593.335 694.558 (352.648) - - 935.245Furniture and fixtures 1.461.096 257.070 - - - 1.718.166Special costs 321.599 9.783 (736) - - 330.646

4.895.970 1.233.210 (353.384) 656.000 52.867 6.484.663


Buildings (676.401) (45.247) - - - (721.648)Machinery and equipment (9.654) (3.858) - - - (13.512)Motor vehicles (544.868) (120.643) 351.838 - - (313.673)Furniture and fixtures (1.108.136) (124.373) - - - (1.232.509)Special costs (49.302) (125.556) 736 - - (174.122)

(2.388.361) (419.677) 352.574 - - (2.455.464)

Net book value 2.507.609 4.029.199

(*) Sperated unrelated Office in Yap› Kredi Plaza C Blok with 0.5 portion is transfered from investment property to property, plant and equipmentsince this office is began to be used by the Group (Note 18).

As of 31 December 2005 there is an impairment provision for the due to the reason that the recoverable amount of the building is less than itscarrying value. At 31 December 2006 based on the valuation report prepared by a licensed real estate revaluation corporation, an increase of YTL52.867 has been identified in the recoverable amount of the building for which an allowance for loss had been allocated. Since this increase doesnot exceed the allowance for loss which was previously provided for, it has been entered into the accounts as other operating income as of 31 December 2005 (Note 38).





NOTE 20 - INTANGIBLE ASSETS

1 January 2006 Additions 31 December 2006

Cost

Rights 55.657 1.284 56.941Other intangible assets 684.278 104.228 788.506

739.935 105.512 845.447


Rights (65.747) (24.361) (90.108)Other intangible assets (525.048) (112.363) (637.411)

(590.795) (136.724) (727.519)

Net book value 149.140 117.928

1 January 2005 Additions 31 December 2005

Cost

Rights 54.382 1.275 55.657Other intangible assets 653.260 31.018 684.278

707.642 32.293 739.935


Rights (16.928) (48.819) (65.747)Other intangible assets (441.862) (83.186) (525.048)

(458.790) (132.005) (590.795)

Net book value 248.852 149.140





NOTE 21 - ADVANCES RECEIVED


Short-term advances received 78.172.334 25.456.187

78.172.334 25.456.187

Long-term advances received 44.407.184 81.502.727

44.407.184 81.502.727

Long-term advances received by the Company are in regard to projects undertaken, to be submitted within the framework projects' agreements.

NOTE 22 - RETIREMENT PLANS

None.

NOTE 23 - PROVISIONS


Short-term provisionsTax and legal provisions - -

- -

Long-term provisionsProvision for employment termination benefits 44.779 39.286

44.779 39.286





Provision for employment termination benefits

Provision for employment termination benefits is explained below:

Under Turkish Labour Law, the Company is required to pay termination benefits to each employee who has completed one year of service andwhose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service andachieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002 there are certain transitionalprovisions relating to length of service prior to retirement.

The amount payable consists of one month's salary limited to a maximum of YTL1.857,44 for each year of service as of 31 December 2006 (31December 2005: YTL1.727,15).

The liability is not funded, as there is no funding requirement.

The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement ofthe employees.

CMB Accounting Standards require actuarial valuation methods to be developed to estimate the enterprises' obligation under defined benefitplans. Accordingly, the following actuarial assumptions have been used in the calculation of the total liability:


Discount rate (%) 5,71 5,49Turnover rate to estimate the probability of retirement (%) 66 74

The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate appliedrepresents the expected real rate after adjusting for the anticipated effects of future inflation. Since the Group calculates a reserve foremployment termination benefits every six months, the maximum amount of YTL1.960,69, which is effective from 1 January 2007 (1 January 2006: YTL1.770,62), has been taken into consideration in the calculations.

Movements in the provision for employment termination benefits during the year are as follows:


Balance at 1 January 39.286 53.592Increase/(decrease) during the year 5.493 (4.200)Paid during the year - (10.106)

44.779 39.286





NOTE 24 - MINORITY INTEREST

Changes in minority interest during the period are as follows:


Balance at 1 January 216.308 210.205

Dividend paid (23.911) (23.652)Net income attributable to minority interest 8.927 29.755

201.324 216.308

NOTE 25 - SHARE CAPITAL/ADJUSTMENT TO SHARE CAPITAL

The Group's registered capital not adjusted for inflation as of 31 December 2006 and 2005 is stated below:


Limit on registered share capital 100.000.000 100.000.000Authorized and paid-in share capital 40.000.000 40.000.000

The composition of the Company's shareholding structure at 31 December 2006 and 2005 is as follows:

31 December 2006 31 December 2005Shareholders Share % Amount Share % Amount

Yap› ve Kredi Bankas› A.fi. 26,00 10.404.000 26,00 10.404.000Koray Yap› Endüstrisi ve Ticaret A.fi. 5,00 1.996.000 5,00 1.996.000Murat Koray 5,00 2.000.000 5,00 2.000.000Selim Koray 5,00 2.000.000 5,00 2.000.000Semra Turgut 5,00 2.000.000 5,00 2.000.000Hüseyin Ayduk Esat Koray - - - -Süleyman Yerçil 2,50 1.000.000 2,50 1.000.000Mustafa Zeki Gönül 2,50 1.000.000 2,50 1.000.000Zeynel Abidin Erdo¤an - - - -Other (publicly held) 49,00 19.600.000 49,00 19.600.000

Total 100,00 40.000.000 100,00 40.000.000

Adjustment to share capital 91.449.175 91.449.175

Total paid-in capital 131.449.175 131.449.175

20.400.000.000 units of the 40.000.000.000 first second and third stocks which form the Company's statutory capital of YTL40.000.000 are GroupA; the remaining 19.600.000.000 units are group B.





NOTE 26-27-28 CAPITAL RESERVES, PROFIT RESERVES, RETAINED EARNINGS

Retained earnings, as per the statutory financial statements, other than legal reserves, are available for distribution, subject to the legal reserverequirement referred to below.

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulatesthat the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of theCompany's paid-in capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of thepaid-in capital. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed50% of paid-in capital.

Quoted companies are subject to dividend requirements regulated by the CMB as follows:

In accordance with the Communiqué No.XI-25 Section 15 paragraph 399, the accumulated deficit amounts arising from the first application ofinflation adjustment, in line with the CMB's profit distribution regulations, are considered to be deductive when computing the distributable profit.The accumulated deficit will first be netted-off from net income and retained earnings, and the remaining amount of deficit from extraordinaryreserves, legal reserves and adjustment to share capital.

In accordance with Communiqué XI-25, effective from 1 January 2004, companies are obliged to distribute at least 20% of their distributableprofit arising from 2006 activity, which is calculated based on the financial statements prepared in accordance with CMB Accounting Standards.Based on the decision of the general assembly, the distribution of a minimum of 20% of the distributable profit can be made as cash or as bonusshares or as a combination of a certain percentage of cash and bonus shares. Net income of subsidiaries, joint-ventures and associates, includedin consolidated net income, is not considered in profit distribution if a decision of profit distribution has not been taken in the general assembly ofthese companies.

For the purposes of profit distribution in accordance with related CMB regulations, items of statutory shareholders' equity such as share capital,share premium, legal reserves, other reserves, special reserves and extraordinary reserves, are presented at their historical amounts. The differencebetween the inflated and historical amounts of these items is presented in shareholders' equity in total as restatement difference.

The restatement difference of shareholders' equity can only be netted-off against prior years' losses and used as an internal source in capitalincreases where extraordinary reserves can be netted-off against prior years' losses, and used in distribution of bonus shares and distributions ofdividends to shareholders.

In accordance with the Communiqué No.XI-25, at 31 December 2006 and 2005, the shareholders' equity schedule, on which basis the dividendwill be distributed, is as follows:


Share capital 40.000.000 40.000.000Legal reserves 41.438 39.011Extraordinary reserves 172.860 172.860Special reserves 2.351 2.351Shareholders' equity restatement differences 91.460.568 91.460.568Retained earnings (39.236.193) (44.412.887)Current period profit 6.216.680 5.179.121Translation reserve 436.979 (192.021)

Total shareholders' equity 99.094.683 92.249.003





At 31 December 2006 and 2005, the restated amounts and the shareholders' equity restatement differences of the aforementioned nominalvalues are as follows:

31 December 2006 31 December 2005Shareholders' Shareholder

equity equityHistorical Restated restatement Historical Restated restatement

values amounts differences values amounts differences

Share capital 40.000.000 131.449.175 91.449.175 40.000.000 131.449.175 91.449.175Legal reserves 41.438 45.594 4.156 39.011 43.167 4.156Extraordinary reserves 172.860 179.999 7.139 172.860 179.999 7.139Special reserves 2.351 2.449 98 2.351 2.449 98

Total 40.216.649 131.677.217 91.460.568 40.214.222 131.674.790 91.460.568

NOTE 29 - FOREIGN CURRENCY POSITION

The Group's foreign currency denominated assets and liabilities at carrying amounts at 31 December 2006 and 2005 are as below:


Assets 4.399.753 45.175.171Liabilities 42.379.734 9.106.338

Net foreign currency position (37.979.981) 36.068.833

YTL equivalent of foreign currency denominated assets and liabilities at carrying amounts, categorized by currency at 31 December 2006 are asbelow:

EUR USD Other Total Currency

Current assetsCash and cash equivalents 492.449 1.249.796 - 1.742.245Trade receivables 1.920.306 707.749 - 2.628.055

Non-current assetsTrade receivables - 29.453 - 29.453

Total assets 2.412.755 1.986.998 - 4.399.753






Short term liabilitiesShort term borrowings - 1.221.800 - 1.221.800Trade payables 869.491 722.051 - 1.591.542Advances received 1.462.006 - - 1.462.006

Long term liabilitiesLong term borrowings - 38.104.386 - 38.104.386

Total liabilities 2.331.497 40.048.237 - 42.379.734

Net foreign currency position 81.258 (38.061.239) - (37.979.981)

YTL equivalent of foreign currency denominated assets and liabilities at carrying amounts, categorized by currency at 31 December 2005 are asbelow:


Current assetsCash and cash equivalents 18.752.661 16.606.115 350.061 35.708.837Trade receivables 5.717.006 3.749.328 - 9.466.334

Total assets 24.469.667 20.355.443 350.061 45.175.171

Short term liabilities

Advances received 5.487.919 3.618.419 - 9.106.338

Total liabilities 5.487.919 3.618.419 9.106.338

Net foreign currency position 18.981.748 16.737.024 350.061 36.068.833

NOTE 30 - GOVERNMENT INCENTIVES AND GRANTS

The Group and its jointly controlled partnership (joint venture) are exempt from corporate tax according to 4-d subparagraph of article 8 ofCorporate Tax Law. According to 6-a subparagraph of article 94 of Income Tax Law, earnings of real estate investment partnerships are subject tostoppage and the withholding tax rate is set at “0” by cabinet decision, therefore the Company and joint venture have no tax liabilities for therelated periods.





NOTE 31- PROVISIONS, COMMITMENTS AND CONTINGENT LIABILITIES

Provisions

Details about the provisions in the consolidated financial statements are represented in Note 15 and Note 23.

Commitments and contingent liabilities

a) Collaterals and commitments between the periods 31 December 2006 and 2005:


Commitments taken 18.768.585 6.433.758Commitments given 58.909.699 322.073

b) The clauses, rights and liabilities according to the projects are as below as at 31 December 2006:

Narmanl› Han Project

With the agreement signed on 25 May 2001, all the shareholders of Narmanli Yurdu subscribed to Yap› Kredi Koray GYO A.S. forming 60% of thetotal shares; 27% are shares in advance and 33% are shares representing floor delivery.

Elit Residence

Elit Residence agreement has clauses; the construction clause is in favor of the Elit Insaat Sanayi ve Ticaret A.S. and the rent clause is in favor ofthe Bogazici Elektrik Dag›t›m A.fi.

Kemer Country ( 2 separate areas)

There are access rights over an area of 188.87m2 for 10 years, an area of 261m2 in favor of TEK for a continuous time, and an area of 427.11m2against parcel number 438 for a continuous period of time.

Yap› Kredi Plaza

There is rent clause in favor of TEK for 99 years, for transformer center numbered 3886-3887-3888 and the place of passage of YTL1.

Evidea, Zen and Riva Project

There are no clauses in the Evidea, Zen and Riva projects.

Neo Project

There is first degree of principal mortgage amounting to USD 40.000.000 over an area of 50.111,59 m2, located on Eskiflehir Merkez/2 Tepebafl›Mahallesi, Pafta 20L-2A, Parsel 1, Ada 749 in favor of Aareal Bank AG.





Housing Credits

The Company has signed a protocol with Yap› ve Kredi Bankas› A.S, Oyak Bank A.S. T.Garanti Bankas› A.S. ve Bank Europa A.S. on the availability ofYTL housing credits indexed to foreign exchange rates within the concept of projects: Istanbul, Istanbul, the pre-sale of which started on November1998; Istanbul Zen, the pre-sale of which started on September 2004; Evidea, the pre-sale of which started on October 2004; and Istanbul Bis, thepre-sale of which started on 2005. There are credits amounting to EUR3.862.271, USD2.092.678 and YTL17.026.552 as of 31 December 2006 (31December 2005: EUR3.342.837, USD5.619.542 and YTL24.157.511).

NOTE 32 - MERGERS AND ACQUISTIONS

There is no business combination in 2006.

NOTE 33 - SEGMENT INFORMATION

None.

NOTE 34 - SUBSEQUENT EVENTS

None.

NOTE 35 - DISCONTINUED OPERATIONS

None.

NOTE 36 - OPERATING INCOME

The details of sales fort he years ended at 31 December are as follows:

2006 2005

Domestic sales 60.132.786 23.881.245Other sales - 2.356

Gross sales 60.132.786 23.883.601

Less: Sales returns (27.754) (18.938)

Net sales 60.105.032 23.864.663





2006 2005

Gain on sale of office and building 47.998.333 12.908.108Building administration service income 8.139.945 6.682.989Rent income 1.303.847 1.050.513Security service income 826.669 675.721Technical service income 347.565 416.581Office cleaning income 99.542 1.230.189Other sales 1.416.885 917.144

Domestic sales 60.132.786 23.881.245

NOTE 37 - OPERATING EXPENSES

Details of operating expenses are as follows as of 31 December 2006:

2006 2005

General administrative expenses 3.630.965 2.993.510Sales, marketing and distribution expenses 3.343.806 2.157.152Research and development expenses 365.846 146.863

Operating expenses 7.340.617 5.297.525

2006 2005

Personnel expense 2.985.867 2.289.007Advertising expense 999.155 826.761Consulting expense 673.948 652.112Research and development expenses 365.846 146.863Depreciation expense 273.607 186.041Commission expense 190.095 126.980Travel expense 124.680 128.988Telecommunication expense 108.547 103.147Other 1.618.872 837.626

Operating expenses 7.340.617 5.297.525





NOTE 38 - OTHER OPERATING INCOME/EXPENSE

Details of other operating income and expenses for the year ended at 31 December are as follows:

2006 2005

Other operating income

Foreign exchange (gain/loss) - net 2.240.130 16.107Change in fair value on investment properties (Note 18) 1.848.000 1.644.500Interest income on marketable securities 1.022.447 2.616.730Bank deposit interest income 402.661 429.059Terminated provisions 99.495 39.628Fair value loss on inventories 80.000 6.929.164Income from sale of property, plant and equipment 55.955 98.081Reversal of impairment provision on property, plant and equipment (Note 19) - 52.867Other 1.100.998 235.472

Other operating income 6.849.686 12.061.608

Details of other operating income and expenses are as follows as of 31 December 2006:

Other operating expenses 31 December 2006 31 December 2005

Interest expense for home loans 1.794.222 497.716Loss on fixed asset sales 93.285 52.022Loss on financial asset sales - 331.961Commission expenses 72.545 998.190Other 535.115 556.324

Other operating expenses 2.495.167 2.436.213

NOTE 39 - FINANCIAL EXPENSES

Financial expenses are as folows as of 31 December 2006:

2006 2005

Interest expense 543.249 -

543.249 -





NOTE 40 - MONETARY GAIN/LOSS

For the period beginning after 1 January 2005 inflation accounting has been ceased, accordingly there is no gain/loss on net monetaryposition.(Note 2)

NOTE 41 - TAXATION


Corporate and income tax - -Less: Prepaid taxes (-) - -

Taxes on income/expense, net - -

Deferred tax asset-net 2.528 4.462

Total tax asset/liability, net 2.528 4.462

Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, asreflected in these consolidated financial statements, have been calculated on a separate-entity basis.

The Group and its jointly controlled partnership (joint venture) are exempt from corporate tax according to 4-d subparagraph of article 8 ofCorporate Tax Law. According to 6-a subparagraph of article 94 of Income Tax Law, earnings of real estate investment partnerships are subject tostoppage and the withholding tax rate is set as “0” by cabinet decision; therefore the Company and its joint venture have no tax liabilities for therelated periods.

YKS Tesis Yönetim Hizmetleri A.fi which is the subsidiary of the Company, is subject to tax regulation and practices in Turkey.

GKY Real Estate Investment S.A, which is subject to joint control, is liable to pay tax using the profit stated in its balance sheet and applicable taxrates in Romania where the trade registry of the Group resides. As the profit of GKY Real Estate Investment S.A has not been realized as of 31December 2006 and 2005, any tax liabilities and expenses have been shown in the consolidated balance sheet and income statement of theCompany.

Turkish Corporate Tax Law has been amended by Law No. 5520 dated 13 June 2006. Most of the articles of this new Law No. 5520 have come intoforce effective from 1 January 2006. The Corporation tax rate for the fiscal year 2006 is 20% (2005: 30%). Corporation tax rate is applicable on thetotal income of the companies after adjusting for certain disallowable expenses, income tax exemptions (participation exemption, investmentallowance exemption, etc) and income tax deductions (for example research and development expenses deduction). No further tax is payableunless the profit is distributed (except withholding tax at the rate of 19.8% on the investment incentive allowance utilized within the scope of theIncome Tax Law transitional article 61).

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax.Otherwise, dividends paid are subject to withholding tax at the rate of 15%. An increase in capital via the issuing of bonus shares is not consideredas a profit distribution and thus does not incur withholding tax.





Corporations are required to pay advance corporation tax quarterly at the rate of 20% on their corporate income. Advance tax is payable by the17th of the second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporation taxliability. The balance of the advance tax paid may be refunded or used to set off against other liabilities to the government.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within the 25th of thefourth month following the close of the financial year to which they relate.

Tax returns are open for 5 years from the beginning of the year that follows the date of filing during which time the tax authorities have the rightto audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.

Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to 5 years. Tax losses can notbe carried back to offset profits from previous periods.

New Corporate Tax Law No 5520, effective as of 1 January 2006, introduced changes in the Corporate Tax Law no 5422 related to Exemption ofReal Estate, and Participation Share Sales Earnings from any Tax.

A 75% portion of the gains derived from the sale of preferential rights, usufruct shares and founding shares from investment equity and realproperty which has remained in assets for more than two full years are exempt from corporate tax. To be entitled to the exemption, the relevantgain is required to be held in a fund account in the liabilities and it must not be withdrawn from the entity for a period of 5 years. The salesconsideration has to be collected up until the end of the second calendar year following the year the sale was realized.

The taxation on income for the years ended 31 December 2005 are summarized as follows:


Total tax expense- Current period corporate tax 2.604 2.464- Deferred tax expense 1.934 1.116

Total taxation on income 4.538 3.580

NOTE 42 - EARNINGS PER SHARE

Earnings per share based on share groups are as below:


Net profit for the period 6.216.680 5.179.121Number of shares with face value of YTL 0,001 each 40.000.000.000 40.000.000.000

Earnings per share 0,1554 0,1295





NOTE 43 - STATEMENT OF CASH FLOW

Details of the changes in assets and liabilities shown in the consolidated cash flow table of 31 December 2006 are shown below:


Changes in operating assets and liabilities

Change in marketable securities 9.339.573 (3.551.001)Change in short-term trade receivable 4.052.700 (4.539.199)Change in due from related parties 30.655 772.670Change in other receivables (19.251.359) (4.374.485)Change in inventories (110.925.970) (55.664.276)Change in other current assets (147.341) 104.189Change in long-term trade receivables 1.880.011 (14.093.552)Change in trade payables 4.722.582 3.704.930Change in due to related parties 1.939.500 162.281Change in other financial liabilities 314.233 160.563Change in short-term received advances 52.716.147 25.375.089Change in other liabilities 482.328 (139.703)Change in long-term trade payables - (9.726)Change in long-term received advances (37.095.543) 68.827.486

(91.942.484) 16.735.266





NOTE 44 - DISCLOSURE OF MATTERS THAT HAVE A SIGNIFICANT EFFECT ON CONSOLIDATED FINANCIAL STATEMENTS OR THAT NEED TOBE EXPLAINED FOR THE CLEAR INTERPRETATION AND COMPREHENSION OF THE CONSOLIDATED FINANCIAL STATEMENTS

1. In the environmental plan drawn to a scale of 1/100.000, announced on 28 August 2006 and prepared by Istanbul Metropolitan Municipality, apart of the region in the province of ‹stanbul, Beykoz district, Riva region in which there are building plots of 479.639 m_ and which was includedin the company portfolio on 7 March and 19 July 2000, was designated as a "daily recreational area" and another part as an "agricultural area". Asan objection was raised with Istanbul Metropolitan Municipality on the grounds that the previous plan with a scale of 1/5.000 related to the abovementioned building plots was in contradiction to these designations, the Company filed a lawsuit with the Istanbul 3. Administrative Court on 24January 2007.

2. An agreement was reached for the sale of Neo Shopping Center, which is being built at the address: Province of Eskiflehir, Merkez/2 District,Tepebafl› Quarter, ‹kiköyaras› Field, plot number 20L-2A, section number 7492, Parcel number 1, in consideration of USD94.000.000 afterpreliminary talks in the scope of the letter of intent signed on 2 February 2007 by Bosphorus Real Estate Partners I, Ltd, a 50%- 50% associate ofKrea Real Estate Holdings and Bosphorus Holdings, a Merrill Lynch participation. In the board meeting held on 15 February 2007, the decision hasunanimously been reached to authorize S. Kemal Kaya, the Board chairman, and his assistant chairman, Süleyman Yerçil, to properly prepare allsales documents and to sign off the agreements and documents.




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