ASYA KATILIM BANKASI A.Ş. AND ITS FINANCIAL SUBSIDIARY

Transcription

1 AND ITS FINANCIAL SUBSIDIARY INDEPENDENT AUDITORS LIMITED REVIEW REPORT, CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 2008 (Convenience Translation of the Financial Statements and Related Disclosures and Footnotes originally issued in Turkish)

2 To the Board of Directors of Asya Katılım Bankası A.Ş. Istanbul ASYA KATILIM BANKASI A.Ş. AND ITS FINANCIAL SUBSIDIARY INDEPENDENT AUDITORS LIMITED REVIEW REPORT FOR THE PERIOD JANUARY 1, 2008 SEPTEMBER 30, 2008 We have reviewed the accompanying consolidated balance sheet of Asya Katılım Bankası A.Ş. and its financial subsidiary ( the Group ) as at September 30, 2008, and the related consolidated statements of income, changes in shareholders equity and cash flows for the period then ended. These financial statements are the responsibility of the Group s management. As independent accountants our responsibility is to issue a report based on the review performed on these financial statements. We conducted our review in accordance with the accounting rules and policies, and the accounting and auditing standards, set out as per the Banking Act No: Those standards require that we plan and perform the review to obtain limited assurance as to whether the financial statements are free of material misstatement. A review is principally limited to reviewing financial statements by applying analytical procedures, inquiring as to the integrity of the financial statements and making inquiries of management to obtain information; it is substantially less in scope than an audit and therefore provides a lesser assurance. We have not performed an audit and accordingly we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not give a true and fair view of the financial position, the results of its operations and its cash flows, of the Group for the period ended September 30, 2008 in accordance with the prevailing accounting principles and standards set out as per the Articles No: 37 and 38 of the Banking Act No: 5411, and other regulations, communiqués and circulars in respect of accounting and financial reporting and pronouncements made by Banking Regulation and Supervision Agency. Additional paragraph for English translation: The effect of the differences between the accounting principles summarized in Section 3 and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Group s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS. DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU Istanbul, November 28, 2008 Sibel Türker Partner

3 THE CONSOLIDATED FINANCIAL REPORT OF ASYA KATILIM BANKASI A.Ş. FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2008 Address of the Headquarter of the Bank : Küçüksu Caddesi Akçakoca Sokak No: Ümraniye/İSTANBUL Phone and Fax Numbers of the Bank : / Website of the Bank : Electronic Mail Address : raporlama@bankasya.com.tr The consolidated financial report designed by the Banking Regulation and Supervision Agency in line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and Disclosures consists of the sections listed below: -GENERAL INFORMATION ABOUT THE PARENT BANK -CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE PARENT BANK -INFORMATION ON THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT BANK -INFORMATION ON FINANCIAL STRUCTURE OF THE GROUP -EXPLANATORY DISCLOSURES AND FOOTNOTES ON CONSOLIDATED FINANCIAL STATEMENTS -INDEPENDENT AUDITORS LIMITED REVIEW REPORT The subsidiary consolidated within the framework of the reporting package is as follows: Subsidiary: 1) Işık Sigorta A.Ş. The consolidated financial statements for the nine months and the explanatory footnotes and disclosures, unless otherwise indicated, are prepared in Thousands of the New Turkish Lira, in accordance with the Communiqué on Banks Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards, related communiqués and the Banks records, have been reviewed and presented as attached. November 28, 2008 Tahsin TEKOĞLU Ünal KABACA Yusuf İzzettin İMRE Kamil YILMAZ Chairman of the Board of Directors General Manager Assistant General Manager Responsible of Financial Reporting Manager In Charge of Financial Reporting Cemil ÖZDEMİR Member of the Audit Committee M. Şevki KAVURMACI Member of the Audit Committee Responsible personnel for the questions that can be raised on the financial statements: Name-Surname : Mehmet Arslan Title : Assistant Manager in Charge of Budgeting and Financial Controlling Telephone Number : Fax Number :

4 THE CONSOLIDATED FINANCIAL STATEMENTS OF ASYA KATILIM BANKASI A.Ş. PAGE SECTION ONE GENERAL INFORMATION I. Incorporation Date, Initial Status and Subsequent Changes in the Existing Status of the Parent Bank... 1 II. Shareholders Structure, Shareholders Having Direct or Indirect, Joint or Individual Control Over the Management of the Parent Bank and Disclosures on Any Related Changes in the Current Year.. 1 III. Disclosures on the Chairman & Members of Board of Directors, Audit Committee, General Managers and Assistant General Managers and Their Shares in the Parent Bank IV. Individuals and Institutions that have Qualified Shares in the Parent Bank V. Summary on the Functions and Areas of Activity of the Parent Bank... 3 SECTION TWO THE CONSOLIDATED FINANCIAL STATEMENTS I. Consolidated Balance Sheet-Assets... 4 II. Consolidated Balance Sheet-Liabilities.. 5 II. Consolidated Statement of Off-Balance Sheet Contingencies and Commitments... 6 III. Consolidated Statement of Income... 7 IV. Consolidated Statement of Profit and Loss Items Accounted under Equity... 8 V. Consolidated Statement of Changes in Shareholders Equity... 9 VI. Consolidated Statement of Cash Flow. 10 SECTION THREE ACCOUNTING PRINCIPLES I. Basis of Presentation II. Usage Strategy of Financial Assets and Foreign Currency Transactions III. Forward and Option Contracts and Derivative Instruments IV. Profit Share Income and Expenses V. Fees and Commission Income and Expenses VI. Financial Assets VII. Impairment of Financial Assets VIII. Offsetting Financial Assets and Liabilities IX. Sale and Repurchase Agreements and Lending of Securities X. Assets Held For Sale and Discontinued Operations XI. Goodwill and Other Intangible Assets XII. Tangible Assets XIII. Leasing Transactions XIV. Provisions and Contingent Liabilities XV. Liabilities for Employee Benefits XVI. Taxation XVII. Additional Disclosures on Borrowings XVIII. Share Certificates XIX. Acceptances XX. Government Incentives XXI. Segment Reporting XXII. Other Matters SECTION FOUR INFORMATION ON THE CONSOLIDATED FINANCIAL STRUCTURE I. Consolidated Capital Adequacy Standard Ratio II. Consolidated Market Risk III. Consolidated Operational Risk IV. Consolidated Currency Risk V. Consolidated Interest Rate Risk VI. Consolidated Liquidity Risk... 26

5 THE CONSOLIDATED FINANCIAL STATEMENTS OF ASYA KATILIM BANKASI A.Ş. PAGE SECTION FIVE I. Explanations Related to the Consolidated Assets II. Explanations Related to the Consolidated Liabilities III. Explanations Related to the Consolidated Off-Balance Sheet Items IV. Explanations Related to the Consolidated Income Statement V. Other Explanations for the Activities of the Group SECTION SIX INDEPENDENT AUDITORS LIMITED REVIEW REPORT I. Explanations on the Independent Auditors Limited Review Report. 64 II. Other Footnotes and Explanations Prepared by the Independent Auditors

6 SECTION ONE GENERAL INFORMATION I. Incorporation Date, Initial Status and Subsequent Changes in the Existing Status of the Parent Bank: Incorporation of the Parent Bank is permitted with the decision of the Council of Ministers No: 96/8041 on April 11, 1996 as published in the Official Gazette dated April 25, The Bank was registered on September 20, 1996 and the Articles of Association was published in the Trade Registry Gazette on September 25, The Decision regarding the change in the title of the Bank was settled in the Extraordinary General Board of Directors meeting dated December 22, 2005 and the title was changed from Asya Finans Kurumu A.Ş. into Asya Katılım Bankası A.Ş. and it was published in the Trade Registry Gazette on December 26, Information on Consolidated Subsidiary Işık Sigorta A.Ş Işık Sigorta A.Ş. ( the Company ) was established in 1995 in Istanbul and operates in various insurance and reinsurance sectors excluding life insurance. The Company is registered in Turkey, and its headquarter is located in Küçüksu Cad. Akçakoca Sok. No: Ümraniye, İstanbul. The Company currently has 174 personnel as of September 30, Işık Sigorta A.Ş. currently has 4 regional management office, 2 regional representation office and 618 agencies. II. Shareholders Structure, Shareholders Having Direct or Indirect, Joint or Individual Control Over The Management of the Parent Bank and the Disclosures on Any Related Changes in the Current Year: The Parent Bank has no shareholders having more than 10% of shareholder s equity, or direct or indirect, joint or individual control over the management of the Parent Bank. The Parent Bank does not belong to any group. 1

7 SECTION ONE GENERAL INFORMATION III. Disclosures on the Chairman & Members of Board of Directors, Audit Committee, General Managers and Assistant General Managers and Their Shares in the Parent Bank: Title Name Experience in the Banking and Educational Administration Sector Degree Before Assignment Ownership Percentage % Chairman of the Board of Directors Tahsin TEKOĞLU Bachelor s 46 years 0,0003 Members of the Board of Directors Mustafa Şevki KAVURMACI Bachelor s 31 years 0,13 Abdurrahman Selçuk BERKSANMaster s 35 years 0,0025 Salih SARIGÜL Doctorate 13 years 0,13 Tacettin NEGIŞ Elementary 33 years 0,88 Cemil ÖZDEMİR Bachelor s 21 years 0,0003 General Manager Ünal KABACA Master s 15 years 0,027 Assistant General Managers Ünsal SÖZBİR Bachelor s 10 years - Ayhan KESER Bachelor s 6 years 0,0017 Mustafa BÜYÜKATEŞ Bachelor s 19 years - Yusuf İzzettin İMRE Bachelor s 19 years - Buket GEREÇCİ Bachelor s 17 years - Dr.Mahmut DEMİRKAN Doctorate 9 years - Ali TUĞLU Master s 14 years - Auditors Ali AKBULUT Bachelor s 15 years 0,0002 Ahmet ÇELİK Bachelor s 19 years 0,45 Atıf BİLGİN Bachelor s 23 years 0,27 IV. Individuals and Institutions that have Qualified Shares in the Parent Bank: Name / Commercial Name Share Amount Share Ratio Paid Shares Unpaid Shares ORTADOĞU TEKSTİL TİC. SAN. A.Ş , BJ TEKSTİL TİCARET VE SANAYİ A.Ş , OSMAN CAN PEHLİVAN , BİRİM BİRLEŞİK İNŞAATÇILIK MÜMESSİLLİK SAN. VE TİC. A.Ş , ABDULKADİR KONUKOĞLU , FORUM İNŞAAT DEKORASYON TURİZM SAN. VE TİC. A.Ş , HASAN SAYIN , MUAMMER İHSAN KALKAVAN , NEGİŞ GİYİM İMALAT VE İHRACAT A.Ş , İBRAHİM SAYIN , İRFAN HACIOSMANOĞLU , FEHİM ARICI , Other ,

8 SECTION ONE GENERAL INFORMATION V. Summary on the Functions and Areas of Activity of the Parent Bank: The Parent Bank operates in accordance with the principles of interest-free banking as a participation bank, by collecting funds through current accounts and profit sharing accounts, and lending such funds through production support, finance lease and profit/loss sharing partnership. The Parent Bank has two ways of collecting funds; current accounts and profit sharing accounts. The Parent Bank classifies current accounts and profit sharing accounts in accordance with their maturities in its accounting system. Profit sharing accounts are categorized into five different maturity groups; one month, up to three months (three months included), up to six months (six months included), up to one year and one year and more than one year (one month, three months, six months and one year profit share payment). The Parent Bank is able determine the participation rates on profit/loss sharing accounts with respect to the maturity group of TRY and foreign currency accounts, seperately under the limitation that the participation rate on loss shall not be less than 50%, for different currency type, amount and maturity groups specifically. The Parent Bank constitutes specific fund pools, allocated to the individually predetermined projects for financing purposes. Profit sharing accounts, which are part of the funds collected for project financing purpose, are distinguished from others with respect to the terms, accounted seperately from the others and it is not allowed to make any transfers from these accounts to any other maturity groups. Specific fund pools are clarified at the end of the financing period. The Parent Bank has no specific fund pools as of September 30, In addition to the regular banking activities, the Parent Bank operates as an agency on behalf of Işık Sigorta A.Ş., through its branches. 3

9 SECTION TWO THE CONSOLIDATED FINANCIAL STATEMENTS

10 CONSOLIDATED BALANCE SHEET THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD Reviewed Audited ASSETS Note (30/09/2008) (31/12/2007) TRY FC Total TRY FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK (1) 440, , , , , ,499 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) (2) 14, ,209 15,043 4,833 19, Trading financial assets 14,376-14,376 15,043-15, Public sector debt securities Share certificates 14,373-14,373 15,043-15, Other marketable securities Financial assets at fair value through profit and loss Public sector debt securities Share certificates Other marketable securities Derivative financial assets held for trading ,833 4,833 III. BANKS (3) 20, , ,827 38, , ,339 IV. MONEY MARKET PLACEMENTS V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) (4) Share certificates Public sector debt securities Other marketable securities VI. LOANS (5) 5,585, ,779 5,838,669 4,158, ,271 4,318, Loans 5,453, ,779 5,706,152 4,067, ,271 4,227, Loans to risk group of the Bank 102,628 8, ,057 20,814 5,955 26, Other 5,350, ,350 5,595,095 4,047, ,316 4,200, Non-performing loans 332, , , , Specific provisions (-) (200,375) - (200,375) (144,706) (77) (144,783) VII. HELD TO MATURITY INVESTMENTS (Net) (6) VIII. INVESTMENTS IN ASSOCIATES (Net) (7) 23,975-23, Accounted for under equity method Unconsolidated associates 23,975-23, Financial associates Non-financial associates 23,975-23, IX. INVESTMENTS IN SUBSIDIARIES (Net) (8) 94,843-94,843 94,843-94, Unconsolidated financial subsidiaries Unconsolidated non-financial subsidiaries 94,759-94,759 94,759-94,759 X. ENTITIES UNDER COMMON CONTROL (Net) (9) Consolidated under equity method Unconsolidated Financial subsidiaries Non-financial subsidiaries XI. FINANCE LEASE RECEIVABLES (Net) (10) 226, , , , Finance lease receivables 262, , , , Operating lease receivables Other Unearned income ( - ) (36,242) - (36,242) (53,889) - (53,889) XII. DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES (11) Fair value hedge Cash flow hedge Hedge of net investment risks in foreign operations XIII. TANGIBLE ASSETS (Net) (12) 201, , , ,939 XIV. INTANGIBLE ASSETS (Net) (13) 9,860-9,860 8,711-8, Goodwill 4,111-4,111 4,111-4, Other 5,749-5,749 4,600-4,600 XV. INVESTMENT PROPERTY (Net) (14) XVI. TAX ASSET (15) 5,956-5,956 1,247-1, Current tax asset Deferred tax asset 5,956-5,956 1,247-1,247 XVII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) (16) ,037-1, Held for Sale ,037-1, Discontinued Operations XVIII. OTHER ASSETS (17) 74,154 4,466 78,620 46,691 2,373 49,064 TOTAL ASSETS 6,700, ,977 7,651,293 5,473, ,107 6,302,917 The accompanying notes are integral part of these financial statements. 4

11 CONSOLIDATED BALANCE SHEET THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD Reviewed Audited LIABILITIES AND EQUITY Note (30/09/2008) (31/12/2007) TRY FC Total TRY FC Total I. FUND COLLECTED (1) 3,051,012 2,462,417 5,513,429 2,532,953 2,131,953 4,664, Fund from risk group of the Bank 30,711 58,938 89,649 37,302 30,454 67, Other 3,020,301 2,403,479 5,423,780 2,495,651 2,101,499 4,597,150 II. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING (2) III. FUNDS BORROWED (3) - 388, , , ,921 IV. MONEY MARKET BALANCES V. MARKETABLE SECURITIES ISSUED (NET) VI. SUNDRY CREDITORS 183,506 4, , ,104 4, ,454 VII. OTHER LIABILITIES (4) 22,180 5,347 27, ,857 12, ,182 VIII. FINANCE LEASE PAYABLES (Net) (5) , , Finance lease payables , , Operating lease payables Other Deferred finance lease expenses ( - ) (9) - (9) (675) (10) (685) IX. DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES (6) Fair value hedge Cash flow hedge Hedge of net investment in foreign operations X. PROVISIONS (7) 153,519 11, , ,478 6, , General loan loss provisions 56,601 10,118 66,719 38,763 5,419 44, Restructuring provisions Reserve for employee benefits 14,251-14,251 10,436-10, Insurance technical reserves (Net) 65,425-65,425 52,180-52, Other provisions 17,242 1,210 18,452 14, ,982 XI. TAX LIABILITY (8) 36, ,517 33, , Current tax liability 36, ,517 33, , Deferred tax liability XII. PAYABLES RELATED TO ASSETS HELD FOR SALE (Net) (9) Held for sale Discontinued operations XIII. SUBORDINATED LOANS (10) XIV. SHAREHOLDERS' EQUITY (11) 1,332,602-1,332, , , Paid-in capital 900, , , , Capital reserves 7,582-7, , , Share premium 3,307-3, , , Share cancellation profits Marketable securities revaluation reserve Tangible assets revaluation reserve 4,275-4, Intangible assets revaluation reserve Investment property revaluation reserve Bonus shares obtained from associates, subsidiaries and jointly controlled entities Hedging funds (Effective portion) Value increase on assets held for resale Other capital reserves Profit reserves 250, , , , Legal reserves 26,053-26,053 14,756-14, Status reserves Extraordinary reserves 224, , , , Other profit reserves Profit or loss 156, , , , Prior year income / (losses) 1,329-1,329 (4,511) - (4,511) Current year income / (losses) 155, , , , Minority shares 17,948-17,948 17,803-17,803 TOTAL LIABILITIES AND EQUITY 4,779,611 2,871,682 7,651,293 3,835,027 2,467,890 6,302,917 The accompanying notes are an integral part of these financial statements. 5

12 CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET CONTINGENGIES AND COMMITMENTS THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD Reviewed Audited (30/09/2008) (31/12/2007) Note TRY FC Total TRY FC Total A. OFF BALANCE SHEET COMMITMENTS AND CONTINGENCIES (I+II+III) 6,754,788 5,370,636 12,125,424 5,045,739 3,821,299 8,867,038 I. GUARANTEES (1), (2) 4,829,993 5,275,645 10,105,638 3,823,419 3,626,442 7,449, Letters of Guarantees 4,822,480 3,611,084 8,433,564 3,822,554 2,354,364 6,176, Guarantees subject to State Tender Law Guarantees given for foreign trade operations Other letters of guarantee 4,822,480 3,611,084 8,433,564 3,822,554 2,354,364 6,176, Bank loans - 180, , , , Import letter of acceptances - 180, , , , Other bank acceptances Letter of credits 41 1,377,403 1,377,444-1,092,444 1,092, Documentary letter of credits Other letter of credits 41 1,377,403 1,377,444-1,092,444 1,092, Prefinancing given as guarantee Endorsements Endorsements to the Central Bank of Turkey Other endorsements Other guarantees 7, , , ,962 70, Other collaterals II. COMMITMENTS (1), (2) 1,828,682 1,794 1,830,476 1,040,146 20,523 1,060, Irrevocable commitments 1,828,682 1,794 1,830,476 1,040,146 20,523 1,060, Forward asset purchase commitments - 1,794 1,794-20,523 20, Share capital commitment to associates and subsidiaries 6,869-6, Loan granting commitments 176, , Securities underwriting commitments Commitments for reserve deposit requirements Payment commitment for checks 435, , , , Tax and fund liabilities from export commitments Commitments for credit card expenditure limits 1,200,988-1,200, , , Commitments for promotions related with credit cards and banking activities 8,713-8,713 5,239-5, Receivables from short sale commitments Payables for short sale commitments Other irrevocable commitments Revocable commitments Revocable loan granting commitments Other revocable commitments III. DERIVATIVE FINANCIAL INSTRUMENTS (3) 96,113 93, , , , , Derivative financial instruments for hedging purposes Fair value hedge Cash flow hedge Hedge of net investment in foreign operations Held for trading transactions 96,113 93, , , , , Forward foreign currency buy/sell transactions 96,113 93, , , , , Forward foreign currency transactions-buy 96,113-96, , , Forward foreign currency transactions-sell - 93,197 93, , , Other Forward buy/sell transactions Other B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 67,650,205 46,406, ,056,771 53,754,350 33,390,906 87,145,256 IV. ITEMS HELD IN CUSTODY 623, ,076 1,420, , , , Assets under management Investment securities held in custody 2,885-2,885 2,885-2, Checks received for collection 484, , , ,897 57, , Commercial notes received for collection 135,678 72, , ,112 47, , Other assets received for collection - 471, , , , Assets received for public offering Other items under custody Custodians V. PLEDGED ITEMS 67,026,830 45,609, ,636,320 53,294,222 32,889,589 86,183, Marketable securities 297, , , , , , Guarantee notes 23,096,254 17,284,541 40,380,795 18,413,926 12,759,393 31,173, Commodity 912, ,367 1,172, , , , Warranty Properties 9,927,868 1,040,585 10,968,453 7,654, ,110 8,566, Other pledged items 32,792,146 26,781,275 59,573,421 26,438,451 18,928,654 45,367, Pledged items-depository VI. ACCEPTED INDEPENDENT GUARANTEES AND WARRANTIES TOTAL OFF BALANCE SHEET ACCOUNTS (A+B) 74,404,993 51,777, ,182,195 58,800,089 37,212,205 96,012,294 The accompanying notes are an integral part of these financial statements. 6

13 CONSOLIDATED STATEMENT OF INCOME THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD CURRENT PERIOD PRIOR PERIOD STATEMENT OF INCOME Note Reviewed Reviewed Reviewed Reviewed (01/01/ /09/2008) (01/01/ /09/2007) (01/07/ /09/2008) (01/07/ /09/2007) I. PROFIT SHARE INCOME (1) 759, , , , Profit share on loans 673, , , , Profit share on reserve deposits 18,869 14,971 6,745 5, Profit share on banks 43,316 44,438 12,906 18, Profit share on money market placements Profit share on marketable securities portfolio 61 2, , Held-for-trading financial assets 27 2, , Financial assets at fair value through profit and loss Available-for-sale financial assets Investment-held for maturity Finance lease income 23,184 26,071 6,508 8, Other profit share income II. PROFIT SHARE EXPENSE (2) (397,461) (274,880) (145,911) (102,519) 2.1 Expense on profit sharing accounts (380,509) (259,459) (142,514) (96,531) 2.2 Profit share expense on funds borrowed (15,609) (13,752) (3,316) (4,982) 2.3 Profit share expense on money market borrowings Expense on securities issued Other profit share expense (1,343) (1,669) (81) (1,006) III. NET PROFIT SHARE INCOME (I - II) 361, , , ,583 IV. NET FEES AND COMMISSIONS INCOME 157, ,459 53,298 38, Fees and commisions received 205, ,953 71,763 48, Non-cash loans 103,274 81,042 35,133 27, Other (11) 102,314 57,911 36,630 20, Fees and commisions paid (48,570) (37,494) (18,465) (10,162) Non-cash loans (378) (192) (94) (74) Other (11) (48,192) (37,302) (18,371) (10,088) V. DIVIDEND INCOME VI. NET TRADING INCOME (3) 37,799 8,061 8,117 (2,322) 6.1 Securities trading gains / (losses) (4,010) - (5,786) Foreign exchange gains / (losses) 41,809 8,061 13,903 (2,322) VII. OTHER OPERATING INCOME (4) 107,772 87,694 33,998 34,689 VIII. NET OPERATING INCOME (III+IV+V+VI+VII) 664, , , ,312 IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) (5) (125,749) (100,942) (24,480) (35,083) X. OTHER OPERATING EXPENSES (-) (6) (340,490) (227,330) (123,206) (83,779) XI. NET OPERATING INCOME/(LOSS) (VIII-IX-X) 198, ,883 68,659 75,450 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER XIII. GAIN / (LOSS) ON EQUITY METHOD XIV. GAIN / (LOSS) ON NET MONETARY POSITION XV. PROFIT/(LOSS) FROM CONTINUED OPERATIONS BEFORE TAXES (XI+ +XIV) (7) 198, ,883 68,659 75,450 XVI. TAX PROVISION FOR CONTINUED OPERATIONS (±) (8) (43,703) (33,511) (12,418) (13,904) 16.1 Provision for current income taxes (48,412) (29,923) (15,320) (11,176) 16.2 Provision for deferred taxes 4,709 (3,588) 2,902 (2,728) XVII. NET PROFIT/(LOSS) FROM CONTINUED OPERATIONS (XV±XVI) 154, ,372 56,241 61,546 XVIII. INCOME ON DISCONTINUED OPERATIONS Income on assets held for sale Income on sale of associates, subsidiaries and jointly controlled entities (Joint Vent.) Income on other discontinued operations XIX. LOSS FROM DISCONTINUED OPERATIONS (-) Loss from assets held for sale Loss on sale of associates, subsidiaries and jointly controlled entities (Joint vent.) Loss from other discontinued operations XX. PROFIT / (LOSS) ON DISCONTINUED OPERATIONS BEFORE TAXES (XVIII-XIX) XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) Provision for current income taxes Provision for deferred taxes XXII. NET PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) XVIII. NET PROFIT/LOSS (XVII+XXII) (10) 154, ,372 56,241 61, Group s profit/loss 155, ,000 56,890 60, Minority shares (1,084) 2,372 (649) 1,277 Earnings per share The accompanying notes are an integral part of these financial statements. 7

14 CONSOLIDATED STATEMENT OF PROFIT AND LOSS ITEMS ACCOUNTED UNDER EQUITY THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD Reviewed Reviewed STATEMENT OF PROFIT AND LOSS ITEMS ACCOUNTED UNDER EQUITY (30/09/2008) (30/09/2007) I. Additions to marketable securities revaluation differences for available for sale financial assets - - II. Tangible assets revaluation differences(*) 4,275 - III. Intangible assets revaluation differences - - IV. Foreign exchange differences for foreign currency transactions - - V. Profit/Loss from derivative financial instruments for cash flow hedge purposes (Effective portion of fair value differences) - - VI. Profit/Loss from derivative financial instruments for hedge of net investment in foreign operations (Effective portion of fair value differences) VII. The effect of corrections of errors and changes in accounting policies - - VIII. Other profit loss items accounted under equity due to TAS - - IX. Deferred tax of valuation differences - - X. Total Net Profit/Loss accounted under equity (I+II+ +IX) 4,275 - XI. Profit/Loss Change in fair value of marketable securities (Transfer to Profit/Loss) Reclassification and transfer of derivatives accounted for cash flow hedge purposes to Income Statement Transfer of hedge of net investments in foreign operations to Income Statement Other - - XII. Total Profit/Loss accounted for the period (X±XI) 4,275 - (*) The gain on sale of properties amounting to TRY Thousand recognized in the accumulated profit/loss transferred to capital reserves with the board of directors decision dated April 10, 2008 and numbered The accompanying notes are an integral part of these financial statements. 8

15 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY THOUSAND NEW TURKISH LIRA Effect of inflation Share Note Accounting on Certificate Current Period Marketable STATEMENT OF CHANGES OF SHAREHOLDER'S EQUITY Paid-in Capital Capital and Other Capital Reserves Share Premium Cancellation Profits Legal Reserves Statutory Reserves Extraordinary Reserve Other Reserve Net Income / (Loss) Securities Net Income / (Loss) Revaluation Reserve Total Equity Before Minority Shares Minority Shares Total Equity PRIOR PERIOD REVIEWED (01/01-30/09/2007) I. Balance 300, ,000-7,544-31, ,195 (4,708) - 628,056 7, ,652 Changes in period II. Increase/Decrease related to merger III. Marketable securities revaluation differences IV. Hedging Funds (Effective Portion) Cash-flow hedge Hedge of net investment in foreign operations V. Tangible assets revaluation differences VI. Intangible assets revaluation differences VII. Bonus shares obtained from associates, subsidiaries and jointly controlled VIII. Foreign exchange differences IX. The disposal of assets X. The reclassification of assets XI. The effect of change in associate s equity XII. Capital increase ,885 6, Cash ,885 6, Internal sources XIII. Share premium XIV. Share cancellation profits XV. Inflation adjustment to paid-in capital XVI. Other XVII. Period net income/(loss) , ,000 2, ,372 XVIII. Profit distribution , ,786 - (144,195) Dividends distributed Transfers to reserves , , (143,998) Other (144,195) 144, Closing Balance (I+II+III+-...+XVI+XVII+XVIII) 300, ,000-14, , ,000 (4,511) - 773,056 16, ,909 CURRENT PERIOD REVIEWED (01/01-30/09/2008) I. Balance 300, ,000-14, , ,621 (4,511) - 855,677 17, ,480 Changes in period II. Increase/Decrease related to merger III. Marketable securities revaluation differences IV. Hedging Funds (Effective Portion) Cash-flow hedge Hedge of net investment in foreign operations V. Tangible assets revaluation differences ,275 - (4,275) VI. Intangible assets revaluation differences VII. Bonus shares obtained from associates, subsidiaries and jointly controlled VIII. Foreign exchange differences IX. The disposal of assets X. The reclassification of assets XI. The effect of change in associate s equity XII. Capital increase 600,000 - (150,000) (150,000) ,000 1, , Cash 300, ,000 1, , Internal sources 300,000 - (150,000) (150,000) XIII. Share premium - - 3, ,307-3,307 XIV. Share cancellation profits XV. Inflation adjustment to paid-in capital XVI. Other XVII. Period net income/(loss) , ,670 (1,084) 154,586 XVIII. Profit distribution , ,209 - (227,621) 10, Dividends distributed Transfers to reserves , , (217,506) Other (227,621) 227, Closing Balance (I+II+III+-...+XVI+XVII+XVIII) 900,000-3,307-26, ,020 4, ,670 1,329-1,314,654 17,948 1,332,602 The accompanying notes are an integral part of these financial statements. 9

16 CONSOLIDATED STATEMENT OF CASH FLOWS THOUSAND NEW TURKISH LIRA CURRENT PERIOD PRIOR PERIOD Reviewed Reviewed Note (01/01-30/09/2008) (01/01-30/09/2007) A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and liabilities 186, , Profit share income received 654, , Profit share expense paid (389,414) (268,924) Dividend received Fees and commissions received 205, , Other income 108,039 66, Collections from previously written off loans 9,403 7, Payments to personnel and service suppliers (139,441) (92,507) Taxes paid (60,960) (23,432) Others (201,806) (126,989) 1.2 Changes in operating assets and liabilities (667,399) (218,708) Net (increase) decrease in financial assets (12,830) (13,055) Net (increase) decrease in financial assets at fair value through profit or los Net (increase) decrease in due from banks and other financial institution (69,427) (83,293) Net (increase) decrease in loans (1,438,240) (1,444,398) Net (increase) decrease in other assets (31,846) 29, Net increase (decrease) in bank deposits 11,087 3, Net increase (decrease) in other deposits 859,956 1,078, Net increase (decrease) in funds borrowed 74, , Net increase (decrease) in due payables Net increase (decrease) in other liabilities (60,593) 25,112 I. Net cash provided from banking operations (481,366) 31,819 B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities (130,003) (40,021) 2.1 Cash paid for purchase of entities under common control, associates and subsidiarie (23,975) (38,307) 2.2 Cash obtained from sale of entities under common control, associates and subsidiarie Fixed assets purchases (108,023) (29,842) 2.4 Fixed assets sales 1,995 28, Cash paid for purchase of financial assets available for sal Cash obtained from sale of financial assets available for sal Cash paid for purchase of investment securities Cash obtained from sale of investment securities Other - - C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net cash provided from financing activities 289,717 1, Cash obtained from funds borrowed and securities issued Cash used for repayment of funds borrowed and securities issued Capital increase(*) 303, Dividends paid Payments for finance leases (13,590) (5,463) 3.6 Other - 6,885 IV. Effect of change in foreign exchange rate on cash and cash equivalents (598) (2,648) V. Net increase in cash and cash equivalents (322,250) (9,428) VI. Cash and cash equivalents at the beginning of the year (1) 1,127, ,682 VII. Cash and cash equivalents at the end of the year (1) 805, ,254 (*)TRY Thousand of the balance refers to share premium occurred during the capital increase made on June 30, 2008 and the remaining TRY Thousand refers to capital increase made through cash injection. The accompanying notes are an integral part of these financial statements 10

17 SECTION THREE ACCOUNTING PRINCIPLES I. Basis of Presentation 1. Presentation of Financial Statements: The Parent Bank prepares its financial statements and notes in accordance with the Communiqué on Banks Accounting Practice and Maintaining Documents, Turkish Accounting Standards ( TAS ), Turkish Financial Reporting Standards ( TFRS ), other communiqués, pronouncements and explanations about accounting and financial reporting issued by the Banking Regulation and Supervision Agency (BRSA), Turkish Commercial Code and the Tax Legislation. Banks shall not settle their balance sheets without ensuring reconciliation with the legal and auxiliary books and records, branches and domestic and foreign correspondents. The Parent Bank prepares consolidated financial statements by applying accounting policies and basis of accounting in accordance with the Turkish Accounting Standards ( TAS ) and related communiqués, pronouncements and explanations issued by the Banking Regulation and Supervision Agency (BRSA). The related accounting policies and basis of accounting are explained below. 2. Basis of Accounting: The accompanying consolidated financial statements are based on the Group s legal books. The Group has recorded the adjustments of inflation accounting to its legal books beginning from June 30, 2004 to December 31, 2004 in accordance with Act No: 5024 of the Tax Procedural Code. As of December 31, 2003 the consolidated financial statements are prepared in accordance with the legal books and historical cost principle except for the revaluation of fixed assets and includes adjustments and reclassifications, including restatement for the changes in the general purchasing power of the Turkish Lira in accordance with International Accounting Standard No: 29 Financial Reporting in Hyperinflationary Economies ( TAS 29 ) before December 31, 2004 for the purpose of fair presentation. II. Usage Strategy of Financial Assets and Foreign Currency Transactions The Group manages its strategies on the financial instruments, depending on the financing sources. The sources constitute of current and profit sharing accounts. As of the balance sheet date, the Group s assets and equity structure are sufficient to cover its liabilities. Due to existing floating exchange rate regime, the Group does not carry significant foreign currency position risk. The investment decisions are made by taking into consideration of the maturity structure of the balance sheet items. The Bank determines specific limits for the balance sheet. The allocations of asset items are designated, and yield analysis are made based on this designation. In the statutory books of the Group, the transactions recorded in foreign currencies (all other currencies except New Turkish Lira) are translated into the New Turkish Lira at the exchange rates prevailing at the transaction dates. Monetary asset and liabilities denominated in foreign currencies are translated into the New Turkish Lira at the year end exchange rates of the Bank. Foreign exchange gains or losses arising from the translation of monetary items and foreign currency denominated collections or disbursements are recognized in the income statement. 11

18 SECTION THREE ACCOUNTING PRINCIPLES III. Forward and Option Contracts and Derivative Instruments The Group s derivative financial instruments consist of forward agreements. Forwards are recorded at their fair values at the contract date and remeasured at their prevailing fair value in the following reporting periods. Even though some derivative transactions economically provide risk hedging, since all necessary conditions to be defined as items suitable for financial risk hedging accounting are not met, they are recognized as for trading purposes within the framework of the Turkish Accounting Standard for Accounting and Measuring of Financial Instruments ( TAS 39 ) and the related gain or loss is reflected to the income statement. IV. Profit Share Income and Expenses Profit share income and expenses are recognized in the income statement on an accrual basis. Realized and unrealized interest accruals of the non-performing loans are reversed and interest income in connection with these loans is recorded as interest income only when they are collected. V. Fees and Commission Income and Expenses Fees and commission income and expenses are recorded on an accrual or collection basis, depending on the nature of the transaction. VI. Financial Assets Financial instruments comprise of financial assets, financial liabilities and derivative instruments. Financial assets and financial liabilities are recognized on the Group s consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument. Basically, financial assets form majority of the commercial activities and operations of the Group. Financial instruments expose, change or reduce the liquidity and credit risks of the Group s financial statements. Fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable willing parties in an arms length transaction. Fair value is best evidenced by a market price, being the amount obtainable from the sale or payable on the acquisition, of a financial instrument in an active market, if one exists. Estimated fair values of financial assets are determined by the Group by using the information about the market and relevant valuation methods. However, interpretation of market information is necessary to determine fair value. Therefore, estimated fair values presented in this report may not be necessarily equivalent of the disposal values of such assets derived from current market conditions. Some carrying values of the financial instruments (which are same with their cost values) are assumed to be equal to their fair values because of their short term nature. The methods and assumptions used in determining the reasonable estimated values of all financial instruments are mentioned below. Cash, Banks, and Other Financial Institutions: Cash and cash equivalents comprise of cash on hand, demand deposits, and highly liquid short-term investments not bearing risk of significant value change, and that are readily convertible to a known amount of cash. The book value of these financial assets approximates to their fair value. 12

19 SECTION THREE ACCOUNTING PRINCIPLES VI. Financial Assets Financial Assets at Fair Value Through Profit and Loss: Marketable securities at fair value through profit or loss are classified in two categories; i) marketable securities classified as trading securities: acquired or incurred principally for the purpose of selling or repurchasing it in the near term in order to benefit from short-term profit opportunities; ii) marketable securities classified as marketable securities at fair value through profit or loss at initial recognition. The Parent Bank uses the above-mentioned classification when permitted, or for the purposes of providing a more appropriate presentation. Trading securities that are accounted in this group are initially recognized at cost and measured at fair value on the financial statements. Fair value of debt securities traded in an active market is determined based on the quoted prices or current market prices. The difference between initial cost and fair value of financial assets at fair value through profit and loss is reflected to profit share income or diminution in value of marketable securities accounts. Profit share income from financial assets at fair value through profit and loss is reflected in profit share income. Investments held to maturity include securities with fixed or determinable payments and fixed maturity when there is an intention of holding till maturity and the relevant conditions for fulfillment of such intention, including the funding ability. This portfolio excludes loans and receivables. Subsequent to initial recognition, held to maturity investments are measured at amortized cost by using the effective interest rate less impairment losses, if any. The Parent Bank has no financial assets acquired and classified as held to maturity investments that cannot be subject to such classification for two years because of the nonperformance of tainting rules. The profit share income received from held to maturity investments is recorded as profit share income in the income statement. Marketable securities classified as available for sale are initially recognized at cost including the transaction costs. After initial recognition, available for sale securities are measured at fair value and unrealized gains/losses originating from the difference between the amortized cost and the fair value are recorded in Marketable Securities Value Increase Fund under equity. At the disposal of available for sale financial assets, value increase/decrease recorded in Marketable Securities Value Increase Fund under equity is transferred to the income statement. As of September 30, 2008, the Group has TRY 833 Thousand of derivative financial assets held for trading at fair value through profit or loss. As of September 30, 2008, the Bank has TRY Thousand trading financial assets. Loans and Receivables: Loans and receivables are recognized at amortized cost. Fees, transaction costs and other similar costs in connection with the guarantees of loans and receivables are not considered as part of the transaction cost and recognized in the income statement. Loans are transferred to the relevant accounts in cash amounts and income accruals are calculated by using the internal rate of return method and the related income is recorded in the profit share income item. Foreign currency and foreign currency indexed loans are evaluated and evaluation differences are accounted under Foreign Exchange Gains and/or Foreign Exchange Losses in the income statement. 13

20 SECTION THREE ACCOUNTING PRINCIPLES VI. Financial Assets In presence of evidence on any doubts on the collection of loans, classification and provisioning of such loans are accounted in conformity with the prevailing regulations and such specific provisions are recognized in the income statement. Collections made from these loans are recognized in the account of profit share income received from Doubtful Loans and Receivables. Released provisions are accounted as a cancellation of such provisions if realized in the current year, and the remaining amounts are recognized in the account of collections from the prior year expenses. VII. Impairment of Financial Assets At each balance sheet date, the Group evaluates the carrying amounts of its financial asset or a group of financial assets to determine whether there is an objective indication that those assets have suffered an impairment loss. If such an indication exists, the Group determines the related impairment. A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to the occurrence (loss/damage event) of one or more than one event (or occurrence) subsequent to initial recognition of that asset; and such loss event causes an impairment loss as a result of the effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Any amounts attributable to expected losses arising from any future events is not recognized under no circumstances. VIII. Offsetting Financial Assets and Liabilities Financial assets and liabilities are offset when the Group has a legally enforceable right to set off, and when the Parent Bank has the intention of collecting or paying the net amount of related assets and liabilities. IX. Sale and Repurchase Agreements and Lending of Securities The Group does not have any repurchase agreements or lending of securities. X. Assets Held for Sale and Discontinued Operations The principles on accounting, assessment and disposal of assets held for sale are determined based on the Communiqué of Principles and Procedures on Bank s Disposal of Precious Metals and Assets Held for Sale published on November 1, 2006 in the official Gazette numbered Although the Parent Bank has assets held for sale in the balance sheet, due to the fact that the Parent Bank does not have a formal plan to dispose of these assets in one year subsequent to their classification date, such assets are continued to be depreciated. For this reason, these assets are classified as tangible assets instead of assets held for sale in the accompanying financial statements. 14