(CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS AND AUDIT REPORT ORIGINALLY ISSUED IN TURKISH, SEE IN NOTE I.Ş.

Transcription

1 (CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS AND AUDIT REPORT ORIGINALLY ISSUED IN TURKISH, SEE IN NOTE I. OF SECTION THREE) PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED DISCLOSURES TOGETHER WITH INDEPENDENT AUDIT REPORT AT 31 DECEMBER 2016

2 (Convenience translation of the independent auditor s report originally issued in Turkish, See Note I. of Section three) Independent auditor report To the Board of Directors of Burgan Bank A.Ş. Report on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Burgan Bank A.Ş. ( the Bank ) and its subsidiaries (together will be referred as the Group ) as at December 31, 2016, and the related consolidated income statement, consolidated statement of income and expense items accounted under shareholders equity, consolidated statement of cash flows and consolidated statement of changes in shareholders equity for the year then ended and a summary of significant accounting policies and other explanatory notes to the financial statements. Responsibility of the Bank s Board of Directors for the Consolidated Financial Statements Bank management is responsible for the preparation and fair presentation of the consolidated financial statement in accordance with Regulation on Accounting Applications for Banks and Safeguarding of Documents published in the Official Gazette no dated 1 November 2006 and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency (BRSA), circulars, interpretations published by BRSA and the provisions of Turkish Accounting Standards for the matters which are not regulated by these regulation; BRSA Accounting and Reporting Legislation and for such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. Independent Auditor s Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with communique Independent Audit of Banks published by BRSA on the Official Gazette No dated April 2, 2015 and with the Independent Auditing Standards which is a part of Turkish Auditing Standards promulgated by the Public Oversight Accounting and Auditing Standards Authority ( POA ). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An independent audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the independent auditor s professional judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the independent auditor considers the internal control relevant to bank s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank s internal control. An independent audit also includes evaluating the appropriateness of accounting policies used by the reasonableness of accounting estimates made by the management as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 Opinion In our opinion the accompanying consolidated financial statements presents fairly, in all material respects, the financial position of Burgan Bank A.Ş. and its subsidiaries as at December 31, 2016 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as in accordance with BRSA Accounting and Reporting Legislation. Reports on arising from other regulatory requirements: In accordance with Article 402 paragraph 4 of the Turkish Commercial Code ( TCC ) no 6102; no significant matter has come to our attention that causes us to believe that the Bank s bookkeeping activities for the period January 1 December 31, 2016 are not in compliance with the code and provisions of the Bank s articles of association in relation to financial reporting. In accordance with Article 402 paragraph 4 of the TCC; the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. Additional paragraph for convenience translation to English: As explained in detail in Note I. of Section Three, accounting principles and standards set out by regulations in conformity with BRSA Accounting and Reporting Legislation, accounting principles generally accepted in countries in which the accompanying consolidated financial statements are to be distributed and International Financial Reporting Standards ( IFRS ) have not been quantified in the accompanying consolidated financial statements. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position, results of operations and changes in financial position and cash flows in accordance with the accounting principles generally accepted in such countries and IFRS. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited Fatma Ebru Yücel, SMMM Partner Istanbul, Turkey March 10, 2017

4 (CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE) THE CONSOLIDATED FINANCIAL AUDIT REPORT OF AS OF 30 DECEMBER 2016 Address : Maslak Mahallesi, Eski Büyükdere Caddesi, No: Sarıyer/İstanbul Telephone : Fax : Web site : bilgi@burgan.com.tr The consolidated financial audit report includes the following sections in accordance with the Communiqué on Financial Statements and Related Explanations and Notes that will be Publicly Announced as sanctioned by the Banking Regulation and Supervision Agency. Section One GENERAL INFORMATION ABOUT THE GROUP Section Two CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP Section Three EXPLANATIONS ON ACCOUNTING POLICIES Section Four INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP Section Five EXPLANATIONS AND NOTES RELATED TO CONSOLIDATED FINANCIAL STATEMENTS Section Six OTHER EXPLANATIONS Section Seven EXPLANATIONS ON INDEPENDENT AUDIT REPORT Investments in associates, subsidiaries and joint ventures whose financial statements have been consolidated in this reporting package are as follows: Subsidiaries Investment in Associates Joint Ventures 1. Burgan Finansal Kiralama A.Ş Burgan Yatırım Menkul Değerler A.Ş Burgan Portföy Yönetimi A.Ş Burgan Wealth Limited - - The accompanying consolidated financial statements and notes to these financial statements which are expressed, unless otherwise stated, in thousands of Turkish Lira, have been prepared and presented based on the accounting books of the Bank in accordance with the Regulation on Accounting Applications for Banks and Safeguarding of Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards, and related appendices and interpretations of these, and have been audited. 10 March 2017 Mehmet N. ERTEN Ali Murat DİNÇ Mehmet YALÇIN Ahmet CIĞA Chairman of the Financial Affairs Board of Directors Vice General Manager Member of the Board of Directors and General Manager Head of Accounting, Tax, and Reporting Unit Halil CANTEKİN Head of the Audit Committee Adrian Alejandro GOSTUSKI Member of the Audit Committee Osama T. AL GHOUSSEIN Member of the Audit Committee Contact information of the personnel in charge of the addressing of questions about this financial report: Name-Surname / Title : Ahmet CIĞA / Head of Accounting Tax and Reporting Unit Telephone Number : Fax Number :

5 INDEX SECTION ONE GENERAL INFORMATION ABOUT THE GROUP PAGE I. Parent Bank s foundation date, start-up statute, history about the changes in this mentioned statute... 1 II. Explanation about the Parent Bank s capital structure, shareholders of the Parent Bank who are in charge of the management and/or auditing of the Parent Bank directly or indirectly, changes in these matters (if any) and the group the Parent Bank belongs to... 2 III. Explanation on the Board of directors, members of the audit committee, president and executive vice presidents, changes in these matters (if any) and shares of the Parent Bank they possess... 3 IV. Explanation on shareholders having control shares in the Parent Bank... 4 V. Information on the Parent Bank s service type and field of operations... 4 VI. Current or likely actual or legal barriers to immidate transfer of equity or repayment of debts between parent bank and its subsidiaries... 4 SECTION TWO CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP I. Consolidated balance sheet (Statement of Financial Position)... 6 II. Consolidated off-balance sheet commitments... 8 III. Consolidated income statement... 9 IV. Statement of income and expense items accounted in equity V. Consolidated statement of changes in shareholders equity VI. Consolidated statement of cash flows VII. Statement of profit appropriation SECTION THREE EXPLANATIONS ON ACCOUNTING POLICIES I. Basis of presentation II. Explanations on strategy of using financial instruments and foreign currency transactions III. Explanations on investments in associates, subsidiaries and joint ventures IV. Explanations on forward transactions, options and derivative instruments V. Explanations on interest income and expense VI. Explanations on fee and commission income and expense VII. Explanations on financial assets VIII. Explanations on impairment of financial assets IX. Explanations on offsetting financial assets X. Explanations on sales and repurchase agreements and securities lending transactions XI. Explanations on tangible assets held for resale and discontinued operations XII. Explanations on goodwill and other intangible assets XIII. Explanations on property and equipment XIV. Explanations on leasing transactions XV. Explanations on provisions and contingent commitments XVI. Explanations on contingent assets XVII. Explanations on obligations related to employee rights XVIII. Explanations on taxation XIX. Explanations on borrowings XX. Explanations on issuance of share certificates XXI. Explanations on avalized drafts and acceptances XXII. Explanations on government grants XXIII. Explanations on profit reserves and profit distribution XXIV. Explanations on earnings per share XXV. Explanations on related parties XXVI. Explanations on cash and cash equivalents XXVII. Explanations on segment reporting XXVIII. Reclassifications SECTION FOUR INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP I. Explanations on equity II. Explanations on risk management III. Explanations on consolidated currency risk IV. Explanations on consolidated interest rate risk V. Explanations on consolidated liquidity risk VI. Explanations on consolidated leverage ratio VII. Explanations on hedge transactions VIII. Explanations on operating segments IX. Explanations on leverage ratio X. Explanations on hedge transactions.. 81 XI. Explanations regarding the presentation of financial assets and liabilities at their fair values XII. Explanations on the activities carried out on behalf and account of other persons XIII. Explanations on operating segments. 84 SECTION FIVE EXPLANATIONS AND NOTES RELATED TO CONSOLIDATED FINANCIAL STATEMENTS I. Explanations and notes related to consolidated assets II. Explanations and notes related to consolidated liabilities III. Explanations and notes related to consolidated off-balance sheet accounts IV. Explanations and notes related to consolidated income statement V. Explanations and notes related to Group s risk group VI. Explanations and notes related to subsequent events VII. Explanations and notes related to Bank s risk group VIII. Explanations and notes related to the domestic, foreign, off-shore branches and foreign representatives of the parent bank IX. Explanations and notes related to subsequent events. 124 SECTION SIX OTHER EXPLANATIONS I. Other Explanations related to Bank s operations SECTION SEVEN EXPLANATIONS ON INDEPENDENT AUDIT REPORT I. Explanations on independent audit report II. Explanations and notes prepared by independent auditor

6 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED SECTION ONE GENERAL INFORMATION I. PARENT BANK S FOUNDATION DATE, START-UP STATUTE, HISTORY ABOUT THE CHANGES IN THIS MENTIONED STATUTE: Tekfen Yatırım ve Finansman Bankası A.Ş. was established as an investment bank with the permission of the Council of Ministers No. 88/13253 on 26 August 1988 and authorised to conduct finance investment and foreign trade activities. Banking operations commenced on 7 August Bank Ekspres A.Ş. ( Bank Ekspres ) was established with the permission of the Council of Ministers in decision No. 91/2316 on 22 September 1991; The Decree of Establishment Permission was published in the Official Gazette numbered and dated 10 October The Articles of Association was published in the Trade Registry Gazette numbered 2969 and dated 18 February The Turkish Savings Deposit and Insurance Fund ( SDIF ) took over the management of Bank Ekspres A.Ş. due to the poor fiscal structure of the bank on 23 October According to the Share Transfer Agreement signed between the SDIF and Tekfen Holding A.Ş. on 30 June 2001, shares with a nominal value of Kr1 each and which amount to 99,46% of the capital of Bank Ekspres A.Ş. under the control of the SDIF in accordance with Banking Law were transferred to Tekfen Holding A.Ş.. Based on this agreement, the acquisition of Tekfen Yatırım ve Finansman Bankası A.Ş., where Tekfen Holding A.Ş. owns 57,69% of the Bank, by Bank Ekspres A.Ş. was permitted by the Banking Regulation and Supervision Agency s ( BRSA ) decision numbered 489 dated 18 October The share transfers were realised on 26 October 2001 and the bank s name was changed to Tekfenbank Anonim Şirketi (the Bank ), which had two main shareholders: Tekfen Holding A.Ş. with 57,30% and TST International S.A. with 40,62%. EFG Eurobank Ergasias S.A. ( Eurobank EFG ) and Tekfen Holding A.Ş. ( Tekfen Group ) signed an agreement as of 8 May 2006, that anticipated Eurobank EFG to purchase Tekfen Group s 70% share in Tekfenbank and Tekfen Leasing which is fully owned by Tekfenbank; where Tekfen Group retained its strategic partnership by keeping all remaining shares. On 23 February 2007, the sale of Tekfenbank A.Ş. to Eurobank EFG Holding (Luxembourg) S.A. ( Eurobank EFG Holding ) was approved by the BRSA and the sale was completed after the share transfer on 16 March Under the agreement regarding the sale of Eurobank Ergasias S.A. s Turkey operations to Burgan Bank K.P.S.C., 70% of the bank shares belonging to Eurobank EFH Holding (Luxemburg) S.A. and 29,26% of the shares belonging to Tekfen Holding A.Ş. are bought by Burgan Bank K.P.S.C. in 7 December 2012 in accordance with the Banking Regulation and Supervision Agency s authorization, and then 99,26% of the bank shares are turned over to Burgan Bank K.P.S.C. in 21 December At the Extraordinary Board of Directors meeting on 23 January 2013, the title of the bank has been decided to change from Eurobank Tekfen A.Ş. to Burgan Bank A.Ş. ( the Bank ), and has been registered to the Turkish Trade Registry as of 25 January

7 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED GENERAL INFORMATION II. EXPLANATION ABOUT THE PARENT BANK S CAPITAL STRUCTURE, SHAREHOLDERS OF THE PARENT BANK WHO ARE IN CHARGE OF THE MANAGEMENT AND/OR AUDITING OF THE PARENT BANK DIRECTLY OR INDIRECTLY, CHANGES IN THESE MATTERS (IF ANY) AND THE GROUP THE PARENT BANK BELONGS TO: The Parent Bank s registered capital ceiling is 1 million TL. There are no changes to the Bank's shareholder structure. Founded in 1977, Burgan Bank K.P.S.C., as an affiliate of KIPCO Group (Kuwait Projects Company), one of the largest holding groups of the Middle East and North Africa (MENA) region, is among the significant banking groups in the region. Besides Kuwait, Burgan Bank Group also operates as a main shareholder with its affiliate banks in Algeria (Gulf Bank Algeria), Iraq (Bank of Baghdad) and Tunisia (Tunis International Bank). 2

8 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED GENERAL INFORMATION III. EXPLANATION ON THE BOARD OF DIRECTORS, MEMBERS OF THE AUDIT COMMITTEE, PRESIDENT AND EXECUTIVE VICE PRESIDENTS, CHANGES IN THESE MATTERS (IF ANY) AND SHARES OF THE PARENT BANK THEY POSSESS: Title Name Responsibility Education Chairman of the Board of Directors: Mehmet Nazmi Erten Chairman of Board of Directors Undergraduate Board of Directors Members: Faisal M.A. Al Radwan Vice President Undergraduate Eduardo Eguren Linsen Member Undergraduate Majed E.A.A. Al Ajeel Member Graduate Adrian Alejandro Gostuski Member Graduate Mehmet Alev Göçmez Member Graduate Halil Cantekin Member Undergraduate Osama T. Al Ghoussein Member Undergraduate Ali Murat Dinç Member and General Manager Graduate General Manager: Ali Murat Dinç Member and General Manager Graduate Vice General Managers: Robbert J. R. Voogt Operation, IT and Undergraduate Private Banking Senior Vice General Manager Operations & Management Esra Aydın Services Undergraduate Mutlu Akpara Treasury, Capital Market and Graduate Financial Institutions Hüseyin Cem Öge Corporate Banking Graduate Cihan Vural Internal Systems Undergraduate Rasim Levent Ergin Human Resources Graduate Emine Pınar Kuriş Retail Banking PHD Suat Kerem Sözügüzel Commercial Banking Undergraduate Hasan Hüseyin Uyar Loans Graduate Mehmet Yalçın Financial Affairs Undergraduate Audit Committee: Halil Cantekin Committee President Undergraduate Adrian Alejandro Gostuski Member Graduate Osama T. Al Ghoussein Member Undergraduate There is no share of the above individuals in the Parent Bank. 3

9 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED GENERAL INFORMATION IV. EXPLANATION ON SHAREHOLDERS HAVING CONTROL SHARES IN THE PARENT BANK: Name/Commercial title Share Amounts Share percentage Paid-in Capital Unpaid portion Burgan Bank K.P.S.C ,26% 99,26% - Based on the Principal Agreement, the Bank has 1 million founder's shares. According to the Principal Agreement, after allocating 5% to legal reserves and distributing 5% of the paid in capital, 10% of distributable amount is distributed to the owners of the founder's shares. V. INFORMATION ON THE PARENT BANK S SERVICE TYPE AND FIELD OF OPERATIONS: As of 31 December 2016, the Parent Bank has 49 branches operating in Turkey (31 December 2015: 56). The Parent Bank s core business activities include corporate and commercial banking, retail banking and banking services in treasury fields. As of 31 December 2016, the Group has (31 December 2015: 1.164) employees. VI. CURRENT OR LIKELY ACTUAL OR LEGAL BARRIERS TO IMMIDATE TRANSFER OF EQUITY OR REPAYMENT OF DEBTS BETWEEN PARENT BANK AND ITS SUBSIDIARIES: None. 4

10 SECTION TWO CONSOLIDATED FINANCIAL STATEMENTS I. Consolidated balance sheet (Statement of financial position) II. Consolidated off-balance sheet commitments III. Consolidated income statement IV. Statement of income and expense items accounted in equity V. Consolidated statement of changes in shareholders equity VI. Consolidated statement of cash flows VII. Statement of profit appropriation

11 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED BALANCE SHEETS (STATEMENT OF FINANCIAL POSITION) AT 31 DECEMBER 2016 AND 31 DECEMBER 2015 I. BALANCE SHEET Note (Section 6 (31/12/2016) (31/12/2015) ASSETS Five) TL FC Total TL FC Total I. CASH AND BALANCES WITH CENTRAL BANK I-a II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT or LOSS (Net) I-b Trading Financial Assets Government Debt Securities Share Certificates Trading Derivative Financial Assets Other Marketable Securities Financial Assets Designated at Fair Value through Profit or Loss Government Debt Securities Share Certificates Loans Other Marketable Securities III. BANKS I-c IV. MONEY MARKETS Interbank Money Market Placements Receivables from Istanbul Stock Exchange Money Market Receivables from Reverse Repurchase Agreements V. AVAILABLE-FOR-SALE FINANCIAL ASSETS (Net) I-d Share Certificates Government Debt Securities Other Marketable Securities VI. LOANS I-e Loans Loans to Bank s Risk Group Government Debt Securities Other Loans under Follow-up Specific Provisions (-) VII. FACTORING RECEIVABLES I-e VIII. HELD-TO-MATURITY SECURITIES (Net) I-f Government Debt Securities Other Marketable Securities IX. INVESTMENTS IN ASSOCIATES (Net) I-g Consolidated Based on Equity Method Unconsolidated Financial Investments in Associates Non-financial Investments in Associates X. SUBSIDIARIES (Net) I-h Unconsolidated Financial Subsidiaries Unconsolidated Non-Financial Subsidiaries XI. JOINT VENTURES (Net) I-i Consolidated Based on Equity Method Unconsolidated Financial Joint Ventures Non-Financial Joint Ventures XII. LEASE RECEIVABLES (Net) I-j Financial Lease Receivables Operational Lease Receivables Other Unearned Income ( - ) XIII. HEDGING DERIVATIVE FINANCIAL ASSETS I-k Fair Value Hedge Cash Flow Hedge Foreign Net Investment Hedge XIV. PROPERTY AND EQUIPMENT (Net) I-l XV. INTANGIBLE ASSETS (Net) I-m Goodwill Other XVI. INVESTMENT PROPERTY (Net) I-n XVII. TAX ASSET Current Tax Asset Deferred Tax Asset I-o XVIII. ASSETS HELD FOR RESALE AND DISCONTINUED OPERATIONS (Net) I-p Held for Resale Discontinued Operations XIX. OTHER ASSETS I-r TOTAL ASSETS The accompanying explanations and notes form an integral part of these financial statements.

12 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED BALANCE SHEETS (STATEMENT OF FINANCIAL POSITION) AT 31 DECEMBER 2016 AND 31 DECEMBER 2015 I. BALANCE SHEET Note (Section (31/12/2016) (31/12/2015) LIABILITIES Five) TL FC Total TL FC Total I. DEPOSITS II-a Deposits of Bank s Risk Group Other II. TRADING DERIVATIVE FINANCIAL LIABILITIES II-b III. BORROWINGS II-c IV. MONEY MARKETS Funds from Interbank Money Market Funds from Istanbul Stock Exchange Money Market Funds Provided Under Repurchase Agreements V. MARKETABLE SECURITIES ISSUED (Net) II-d Bills Asset Backed Securities Bonds VI. FUNDS Borrower Funds Other VII. MISCELLANEOUS PAYABLES VIII. OTHER LIABILITIES II-e IX. FACTORING PAYABLES X. LEASE PAYABLES (Net) II-f Financial Lease Payables Operational Lease Payables Other Deferred Financial Lease Expenses (-) XI. HEDGING DERIVATIVE FINANCIAL LIABILITIES II-g Fair Value Hedge Cash Flow Hedge Foreign Net Investment Hedge XII. PROVISIONS II- h General Loan Loss Provision Restructuring Provisions Reserve for Employee Rights Insurance Technical Provisions (Net) Other Provisions XIII. TAX LIABILITY II-i Current Tax Liability Deferred Tax Liability XIV. PAYABLES FOR ASSET HELD FOR RESALE AND DISCONTINUED OPERATIONS (Net) II-j Held for Resale Discontinued Operations XV. SUBORDINATED LOANS II-k XVI. SHAREHOLDERS' EQUITY II-l (5.014) (857) Paid-in Capital Capital Reserves (5.014) (857) Share Premium Share Cancellation Profits Marketable Securities Valuation Reserve (872) (6.999) (7.871) (1.521) (857) (2.378) Tangible Assets Revaluation Reserve Intangible Assets Revaluation Reserve Investment Property Revaluation Reserve Bonus Shares Obtained from Investments in Associates, Subsidiaries and Joint Ventures Hedging Reserves (Effective portion) Value Differences of Assets Held for Resale and Discontinued Operations Other Capital Reserves (2.375) - (2.375) (2.547) - (2.547) 16.3 Profit Reserves Legal Reserves Status Reserves Extraordinary Reserves Other Profit Reserves Income or (Loss) Prior Years Income or (Loss) (46.285) - (46.285) Current Year Income or (Loss) Minority Shares TOTAL LIABILITIES The accompanying explanations and notes form an integral part of these financial statements. 7

13 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED OFF-BALANCE SHEET COMMITMENTS AT 31 DECEMBER 2016 AND 31 DECEMBER 2015 II. OFF-BALANCE SHEET (31/12/2016) (31/12/2015) Note (Section Five)Five) TL FC Total TL FC Total A OFF-BALANCE SHEET COMMITMENTS (I+II+III) I. GUARANTEES AND WARRANTIES III-a Letters of Guarantee Guarantees Subject to State Tender Law Guarantees Given for Foreign Trade Operations Other Letters of Guarantee Bank Acceptances Import Letter of Acceptance Other Bank Acceptances Letters of Credit Documentary Letters of Credit Other Letters of Credit Prefinancing Given as Guarantee Endorsements Endorsements to the Central Bank of the Republic of Turkey Other Endorsements Securities Issue Purchase Guarantees Factoring Guarantees Other Guarantees Other Collaterals II. COMMITMENTS III-a Irrevocable Commitments Asset Purchase and Sales Commitments Deposit Purchase and Sales Commitments Share Capital Commitments to Associates and Subsidiaries Commitments for Loan Limits Securities Issue Brokerage Commitments Commitments for Reserve Deposit Requirements Commitments for Cheques Tax and Fund Liabilities from Export Commitments Commitments for Credit Card Limits Promotion Commitments for Credit Cards and Banking Services Receivables from Short Sale Commitments of Marketable Securities Payables for Short Sale Commitments of Marketable Securities Other Irrevocable Commitments Revocable Commitments Revocable Commitments for Loan Limits Other Revocable Commitments III. DERIVATIVE FINANCIAL INSTRUMENTS III-b Hedging Derivative Financial Instruments Transactions for Fair Value Hedge Transactions for Cash Flow Hedge Transactions for Foreign Net Investment Hedge Trading Derivative Financial Instruments Forward Foreign Currency Buy/Sell Transactions Forward Foreign Currency Transactions-Buy Forward Foreign Currency Transactions-Sell Swap Transactions Related to Foreign Currency and Interest Rates Foreign Currency Swap-Buy Foreign Currency Swap-Sell Interest Rate Swap-Buy Interest Rate Swap-Sell Foreign Currency, Interest rate and Securities Options Foreign Currency Options-Buy Foreign Currency Options-Sell Interest Rate Options-Buy Interest Rate Options-Sell Securities Options-Buy Securities Options-Sell Foreign Currency Futures Foreign Currency Futures-Buy Foreign Currency Futures-Sell Interest Rate Futures Interest Rate Futures-Buy Interest Rate Futures-Sell Other B. CUSTODY AND PLEDGES RECEIVED (IV+V+VI) IV. ITEMS HELD IN CUSTODY Customer Fund and Portfolio Balances Investment Securities Held in Custody Cheques Received for Collection Commercial Notes Received for Collection Other Assets Received for Collection Assets Received for Public Offering Other Items Under Custody Custodians V. PLEDGES RECEIVED Marketable Securities Guarantee Notes Commodity Warranty Immovable Other Pledged Items Pledged Items-Depository VI. ACCEPTED INDEPENDENT GUARANTEES AND WARRANTIES TOTAL OFF-BALANCE SHEET COMMITMENTS (A+B) The accompanying explanations and notes form an integral part of these financial statements. 8

14 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED INCOME STATEMENT AS AT 31 DECEMBER 2016 AND 31 DECEMBER 2015 III. INCOME STATEMENT Note (Section 01/01/ /01/2015- INCOME AND EXPENSE ITEMS Five) 31/12/ /12/2015 I. INTEREST INCOME IV-a Interest on Loans Interest Received from Reserve Requirements Interest Received from Banks Interest Received from Money Market Transactions Interest Received from Marketable Securities Portfolio Trading Financial Assets Financial Assets at Fair Value through Profit or Loss Available-for-sale Financial Assets Held-to-maturity Investments Financial Lease Income Other Interest Income IV II. INTEREST EXPENSE (-) IV-b Interest on Deposits Interest on Funds Borrowed Interest Expense on Money Market Transactions Interest on Securities Issued Other Interest Expenses IV III. NET INTEREST INCOME (I + II) IV. NET FEES AND COMMISSIONS INCOME/EXPENSE Fees and Commissions Received Non-cash Loans Other Fees and Commissions Paid (-) Non-cash Loans (-) Other (-) IV-l V. DIVIDEND INCOME IV-c VI. TRADING INCOME / ( LOSS) (Net) IV-d Trading Gains/(Losses) on Securities Trading Gains/(Losses) on Derivative Financial Instruments (9.028) 6.3 Foreign Exchange Gains/(Losses) VII. OTHER OPERATING INCOME IV-e VIII. TOTAL OPERATING INCOME (III+IV+V+VI+VII) IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) IV-f X. OTHER OPERATING EXPENSES (-) IV-g XI. NET OPERATING INCOME/(LOSS) (VIII+IX+X) XII. EXCESS AMOUNT RECORDED AS INCOME AFTER MERGER - - INCOME/(LOSS) FROM INVESTMENTS IN SUBSIDIARIES CONSOLIDATED BASED ON EQUITY METHOD - - XIII. XIV. INCOME/(LOSS) ON NET MONETARY POSITION - - XV. INCOME/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (XI+ +XIV) IV-h XVI. TAX PROVISION FOR CONTINUING OPERATIONS (-) IV-i Current Tax Provision Deferred Tax Provision XVII. NET INCOME/(LOSS) FROM CONTINUING OPERATIONS (XV+ XVI) IV-j XVIII. INCOME FROM DISCONTINUED OPERATIONS Income from Non-Current Assets Held for Resale Sale Income from Associates, Subsidiaries and Joint Ventures Other Income from Discontinued Operations - - XIX. EXPENSES FROM DISCONTINUED OPERATIONS (-) Expense from Non-Current Assets Held for Resale Sale Losses from Associates, Subsidiaries and Joint Ventures Other Expenses from Discontinued Operations - - XX. INCOME/(LOSS) BEFORE TAX FROM DISCONTINUED OPERATIONS (XVIII+XIX) - - XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (-) Current tax provision Deferred tax provision - - XXII. NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS (XX+XXI) - - XXIII. NET INCOME/(LOSS) (XVII+XXII) IV-k Earnings / (Loss) per share (1.000 nominal in TL full) 0,796 0,580 The accompanying explanations and notes form an integral part of these financial statements. 9

15 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED IN EQUITY FOR THE 31 DECEMBER 2016 AND 2015 IV. STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED IN EQUITY 31/12/ /12/2015 I. ADDITIONS TO THE MARKETABLE SECURITIES VALUATION RESERVE FROM THE AVAILABLE FOR SALE FINANCIAL ASSETS (8.130) (4.423) II. REVALUATION DIFFERENCES OF TANGIBLE ASSETS III. REVALUATION DIFFERENCES OF INTANGIBLE ASSETS - - IV. FOREIGN EXCHANGE TRANSLATION DIFFERENCES FOR FOREIGN CURRENCY TRANSACTIONS - - V. INCOME/LOSS ON CASH FLOW HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Part of Fair Value Changes) VI. PROFIT/LOSS FROM FOREIGN INVESTMENT HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Part of Fair Value Changes) - - VII. EFFECTS OF CHANGES IN ACCOUNTING POLICY AND ERRORS(*) VIII. OTHER INCOME AND EXPENSE ITEMS ACCOUNTED IN EQUITY ACCORDING TO TAS 1011 (383) IX. DEFERRED TAX ON VALUATION DIFFERENCES (1.844) (1.826) X. NET INCOME/LOSS ACCOUNTED DIRECTLY IN EQUITY (I+II+...+IX) XI. CURRENT PERIOD INCOME/LOSS Net Change in Fair Value of Marketable Securities (Transfer to Income Statement) Portion of Cash Flow Hedge Derivative Financial Assets Reclassified and Presented on the Income Statement Portion of Foreign Investment Hedge Derivative Financial Assets Reclassified and Presented on the Income Statement Other XII. TOTAL INCOME/LOSS RELATED TO THE CURRENT PERIOD (X+XI) The accompanying explanations and notes form an integral part of these financial statements. 10

16 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AS AT 31 DECEMBER 2015 V. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY PRIOR PERIOD 31/12/2015 Note (Section Five) Paid-in Capital Adjustment to Share Capital Share Premium Share Cancellation Profits Legal Reserves Status Reserves Extraordinary Reserves Other Reserves Current Period Net Income / (Loss) Prior Period Net Income/(Loss) Marketable Securities Valuation Reserve Tangible and Intangible Assets Revaluation Reserve Bonus Shares Obtained from Investments Hedging Reserves Valuation Difference of Total Equity AHS and Except for Discontinued Minority Operations Interest Minority Interest Total Shareholders Equity I. Prior Period End Balance (31/12/2014) II-l (2.492) (46.285) Changes in the Period II. Increase/Decrease due to the Merger III. Marketable Securities Valuation Differences (3.538) (3.538) - (3.538) IV. Hedging Reserves (Effective Portion) Cash Flow Hedge Foreign Investment Hedge V. Revaluation Differences of Tangible Assets VI. Revaluation Differences of Intangible Assets VII. Bonus Shares Obtained from Investments in Associates, Subsidiaries and Joint Ventures VIII. Foreign Exchange Difference IX. Changes due to the Disposal of Assets X. Changes due to the Reclassification of the Assets XI. Effects of Changes in Equity of Investments in Associates XII. Capital Increase Cash Internal Resources XIII. Share Premium XIV. Share Cancellation Profits XV. Adjustment to Share Capital XVI Other (306) (306) - (306) XVII Current Year Income or Loss XVIII Profit Distribution (17.824) Dividend Paid Transfers to Reserves (17.824) Other Period End Balance (I+II+III..+XVIII) (2.547) (46.285) (2.378) The accompanying explanations and notes form an integral part of these financial statements. 11

17 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AS AT 31 DECEMBER 2016 V. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CURRENT PERIOD 31/12/2016 Note (Section Five) Paid-in Capital Adjustment to Share Capital Share Premium Share Cancellation Profits Legal Reserves Status Extraordinary Reserves Reserves Other Reserves Current Period Net Income / (Loss) Prior Period Net Income/(Loss) Marketable Securities Valuation Reserve Tangible and Intangible Assets Revaluation Reserve Bonus Shares Obtained from Investments Hedging Reserves Valuation Difference of Total Equity AHS and Except for Discontinued Minority Operations Interest Minority Interest Total Shareholders Equity I. Prior Period End Balance (31/12/2015) II-l (2.547) (46.285) (2.378) Changes in the Period II. Increase/Decrease due to the Merger III. Marketable Securities Valuation Differences (6.427) (6.427) - (6.427) IV. Hedging Reserves (Effective Portion) Cash Flow Hedge Foreign Investment Hedge V. Revaluation Differences of Tangible Assets VI. Revaluation Differences of Intangible Assets VII. Bonus Shares Obtained from Investments in Associates, Subsidiaries and Joint Ventures VIII. Foreign Exchange Difference IX. Changes due to the Disposal of Assets X. Changes due to the Reclassification of the Assets XI. Effects of Changes in Equity of Investments in Associates XII. Capital Increase Cash Internal Resources XIII. Share Premium XIV. Share Cancellation Profits XV. Adjustment to Share Capital XVI Other XVII Current Year Income or Loss XVIII Profit Distribution (52.169) Dividend Paid Transfers to Reserves (52.169) Other Period End Balance (I+..+XVIII) (2.375) (7.871) The accompanying explanations and notes form an integral part of these financial statements. 12

18 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015 VI. STATEMENT OF CASH FLOWS Note 31/12/ /12/2015 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and liabilities (33.328) Interest received Interest paid ( ) ( ) Dividend received Fees and commissions received Other income Collections from previously written-off loans and other receivables Payments to personnel and service suppliers ( ) ( ) Taxes paid (15.507) (245) Other VI-b ( ) ( ) 1.2 Changes in operating assets and liabilities ( ) ( ) Net (increase)/decrease in trading securities Net (increase)/decrease in fair value through profit/loss financial assets Net increase/(decrease) in due from banks ( ) ( ) Net (increase)/decrease in loans ( ) ( ) Net (increase)/decrease in other assets ( ) ( ) Net (increase)/decrease in bank deposits (90.475) Net increase/(decrease) in other deposits Net increase/(decrease) in funds borrowed Net increase/(decrease) in payables Net increase/(decrease) in other liabilities VI-b (51.804) I. Net cash provided from banking operations ( ) ( ) B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities (94.015) Cash paid for acquisition of investments, associates and subsidiaries Cash obtained from disposal of investments, associates and subsidiaries Purchases of property and equipment (32.727) (37.243) 2.4 Disposals of property and equipment Cash paid for purchase of investments available-for-sale ( ) ( ) 2.6 Cash obtained from sale of investments available-for-sale 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 Cash obtained from funds borrowed and securities issued Cash used for repayment of funds borrowed and securities issued ( ) Issued capital instruments Dividends paid Payments for finance leases Other (197) - IV. Effect of change in foreign exchange rate on cash and cash equivalents V. Net (increase)/decrease in cash and cash equivalents (I+II+III+IV) (58.668) VI. Cash and cash equivalents at beginning of the period VII. Cash and cash equivalents at end of the period The accompanying explanations and notes form an integral part of these financial statements. 13

19 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED 31 DECEMBER 2016 AND 31 DECEMBER 2015 VII. PROFIT APPROPRIATION STATEMENT (31/12/2016)(*) (31/12/2015)(**) I. DISTRIBUTION OF CURRENT YEAR INCOME 1.1 CURRENT YEAR INCOME TAXES AND DUTIES PAYABLE (-) Corporate Tax (Income tax) Income withholding tax Other taxes and duties A. NET INCOME FOR THE YEAR ( ) PRIOR YEAR LOSSES (-) FIRST LEGAL RESERVES (-) OTHER STATUTORY RESERVES (-) - - B. NET INCOME AVAILABLE FOR DISTRIBUTION [(A-( )] FIRST DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit and Loss Sharing Certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit and Loss Sharing Certificates SECOND LEGAL RESERVES (-) STATUTORY RESERVES (-) EXTRAORDINARY RESERVES OTHER RESERVES SPECIAL FUNDS - - II. DISTRIBUTION OF RESERVES 2.1 APPROPRIATED RESERVES SECOND LEGAL RESERVES (-) DIVIDENDS TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of preferred shares To profit sharing bonds To holders of profit and loss sharing certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE 3.1 TO OWNERS OF ORDINARY SHARES TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES TO OWNERS OF PRIVILEGED SHARES ( % ) - - IV. DIVIDEND PER SHARE 4.1 TO OWNERS OF ORDINARY SHARES TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES TO OWNERS OF PRIVILEGED SHARES ( % ) - - (*)TL that seen in net profit, TAS 27 basis within the framework of the principles of the Bank's equity method applied the subsidiaries that can not be subject to distribution of net profit / loss refers to the amount. Authorized body for profit appropriation of the current period is General Assembly. As of the preparation date of these financial statements, yearly ordinary meeting of the General Assembly has not been held yet. (**) Contains Profit Appropriation Statement approved by the Bank s General Assembly held on 30 March Does not include the effects of TAS 27 standard. The accompanying explanations and notes form an integral part of these financial statements. 14