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

Transcription

1 (CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT ORIGINALLY ISSUED IN TURKISH, SEE IN NOTE I. OF SECTION THREE) PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED DISCLOSURES TOGETHER WITH INDEPENDENT LIMITED REVIEW REPORT AT 31 MARCH 2017

2 INTERIM REVIEW REPORT ON INTERIM FINANCIAL INFORMATION (Convenience translation of the independent auditor s report originally issued in Turkish, See Note I of Section three) To the Board of Directors of Burgan Bank A.Ş.; Introduction We have reviewed the consolidated statement of financial position of Burgan Bank A.Ş. ( the Bank ) and its subsidiaries (together will be referred as the Group ) at 31 March 2017 and the related consolidated income statement, consolidated statement of income and expense items under shareholders equity, consolidated statement of changes in shareholders equity, consolidated statement of cash flows and a summary of significant accounting policies and other explanatory notes to the consolidated financial statements for the nine-monthperiod then ended. The Bank Management is responsible for the preparation and fair presentation of interim financial statements in accordance with the 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 and circulars and interpretations published by Banking Regulation and Supervision Authority, (together referred as BRSA Accounting and Reporting Legislation ) and Turkish Accounting Standard 34 Interim Financial Reporting for those matters not regulated by BRSA Legislation. Our responsibility is to express a conclusion on these interim financial statements based on our review. Scope of Review We conducted our review in accordance with the Standard on Review Engagements (SRE) 2410, Limited Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial reporting process, and applying analytical and other review procedures. A review of interim financial information is substantially less in scope than an independent audit performed in accordance with the Independent Auditing Standards and the objective of which is to express an opinion on the financial statements. Consequently, a review of the interim financial information does not provide assurance that the audit firm will be aware of all significant matters which would have been identified in an audit. Accordingly, we do not express an opinion. Conclusion 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 view of the financial position of Burgan Bank A.Ş. and its subsidiaries at 31 March 2017 and of the results of its operations and its cash flows for the three-month-period then ended in all aspects in accordance with the BRSA Accounting and Financial Reporting Legislation. Report on other regulatory requirements arising from legislation Based on our review, nothing has come to our attention that causes us to believe that the financial information provided in the accompanying interim activity report in Section VII, are not consistent with the consolidated financial statements and disclosures in all material respects.

3 Additional paragraph for convenience translation to English: As explained in detail in Note I of Section Three, the effects of differences between accounting principles and standards set out by regulations in conformity with BRSA Accounting and Reporting Legislation and Turkish Accounting Standard 34 Interim Financial Reporting except for the matters regulated by BRSA 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 Partner, SMMM İstanbul, 12 May 2017

4 (CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE) THE CONSOLIDATED INTERIM FINANCIAL REPORT OF AS OF 31 MARCH 2017 Address : Maslak Mahallesi, Eski Büyükdere Caddesi, No: Sarıyer/İstanbul Telephone : Fax : Web site : bilgi@burgan.com.tr The consolidated three months financial 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 EXPLANATIONS ON INDEPENDENT LIMITED REVIEW REPORT Section Seven EXPLANATIONS ON INTERIM ACTIVITY 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 three months 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 reviewed. 12 May 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... 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 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 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. Share position risk resulting from banking accounts VI. Explanations on consolidated liquidity risk 38 VII. Explanations on consolidated leverage ratio VIII. Explanations on hedge transactions IX. Explanation on the activities carried out on behalf and account of other parties.. 45 X. Explanations on operating segments 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 SECTION SIX EXPLANATIONS ON INDEPENDENT LIMITED REVIEW REPORT I. Explanations on independent limited review report II. Explanations and notes prepared by independent auditor SECTION SEVEN EXPLANATIONS ON INTERIM ACTIVITY REPORT I. Reviews of chairman of board of directors and general manager with respect to operating cycle and their future expectations. 83

6 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED 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 CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED 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 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), Jordan (Jordan Kuwait Bank) and Tunisia (Tunis International Bank). 2

8 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED 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 CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED 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 March 2017, the Parent Bank has 49 branches operating in Turkey (31 December 2016: 49). The Parent Bank s core business activities include corporate and commercial banking, retail banking and banking services in treasury fields. As of 31 March 2017, the Group has (31 December 2016: 1.089) 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

11 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED BALANCE SHEETS (STATEMENT OF FINANCIAL POSITION) AT 31 MARCH 2017 AND 31 DECEMBER 2016 I. BALANCE SHEET Note (Section (31/03/2017) (31/12/2016) 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) XV. INTANGIBLE ASSETS (Net) Goodwill Other XVI. INVESTMENT PROPERTY (Net) I-l XVII. TAX ASSET Current Tax Asset Deferred Tax Asset I-m XVIII. ASSETS HELD FOR RESALE AND DISCONTINUED OPERATIONS (Net) I-n Held for Resale Discontinued Operations XIX. OTHER ASSETS I-o TOTAL ASSETS The accompanying explanations and notes form an integral part of these financial statements. 6

12 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED BALANCE SHEETS (STATEMENT OF FINANCIAL POSITION) AT 31 MARCH 2017 AND 31 DECEMBER 2016 I. BALANCE SHEET Note (Section (31/03/2017) (31/12/2016) 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 (440) (5.014) Paid-in Capital Capital Reserves (440) (5.014) Share Premium Share Cancellation Profits Marketable Securities Valuation Reserve (1.214) (2.840) (4.054) (872) (6.999) (7.871) 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) (2.375) - (2.375) 16.3 Profit Reserves Legal Reserves Status Reserves Extraordinary Reserves Other Profit Reserves Income or (Loss) Prior Years Income or (Loss) 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 FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED OFF-BALANCE SHEET COMMITMENTS AT 31 MARCH 2017 AND 31 DECEMBER 2016 II. OFF-BALANCE SHEET (31/03/2017) (31/12/2016) 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 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 FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED INCOME STATEMENT AS AT 31 MARCH 2017 AND 31 DECEMBER 2016 Note (Section 01/01/ /01/2016- III. INCOME STATEMENT Five) 31/03/ /03/2016 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-k II. INTEREST EXPENSE (-) IV-b ( ) 2.1 Interest on Deposits (-) (91.246) 2.2 Interest on Funds Borrowed (-) (25.273) 2.3 Interest Expense on Money Market Transactions (-) (5.440) 2.4 Interest on Securities Issued (-) (2.362) 2.5 Other Interest Expenses (-) IV-k (66.282) III. NET INTEREST INCOME (I - II) IV. NET FEES AND COMMISSIONS INCOME/EXPENSE Fees and Commissions Received Non-cash Loans Other IV-k Fees and Commissions Paid (-) (2.483) Non-cash Loans (-) 151 (112) Other (-) IV-k (2.371) V. DIVIDEND INCOME VI. TRADING INCOME / ( LOSS) (Net) IV-c Trading Gains/(Losses) on Securities Trading Gains/(Losses) on Derivative Financial Instruments 559 (5.190) 6.3 Foreign Exchange Gains/(Losses) VII. OTHER OPERATING INCOME IV-d VIII. TOTAL OPERATING INCOME (III+IV+V+VI+VII) IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) IV-e (26.455) X. OTHER OPERATING EXPENSES (-) IV-f (80.564) XI. NET OPERATING INCOME/(LOSS) (VIII-IX-X) XII. EXCESS AMOUNT RECORDED AS INCOME AFTER MERGER - - XIII. INCOME/(LOSS) FROM INVESTMENTS IN SUBSIDIARIES CONSOLIDATED BASED ON EQUITY METHOD - - XIV. INCOME/(LOSS) ON NET MONETARY POSITION - - XV. INCOME/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (XI+ +XIV) IV-g XVI. TAX PROVISION FOR CONTINUING OPERATIONS (-) IV-h (3.572) 16.1 Current Tax Provision (-) (7.579) 16.2 Deferred Tax Provision (-) XVII. NET INCOME/(LOSS) FROM CONTINUING OPERATIONS (XV- XVI) IV-i 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-j Earnings / (Loss) per share (1.000 nominal in TL full) 0,232 0,069 The accompanying explanations and notes form an integral part of these financial statements. 9

15 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED IN EQUITY FOR THE 31 MARCH 2017 AND 2016 IV. STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED IN EQUITY 31/03/ /03/2016 I. ADDITIONS TO THE MARKETABLE SECURITIES VALUATION RESERVE FROM THE AVAILABLE FOR SALE FINANCIAL ASSETS 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) (8.739) 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 IX. DEFERRED TAX ON VALUATION DIFFERENCES (2.039) 270 X. NET INCOME/LOSS ACCOUNTED DIRECTLY IN EQUITY (I+II+...+IX) (1.081) 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 11.2 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 FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AS AT 31 MARCH 2016 V. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY PRIOR PERIOD 31/03/2016 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/(Lo ss) 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 AHS and Discontinued Operations Total Equity Except for Minority Interest Minority Interest Total Shareholders Equity I. Prior Period End Balance (31/12/2015) II-l (2.547) (46.285) (2.378) II. Corrections according to TAS Effect of Corrections of Errors Effect of Amendments in Accounting Policies III. New Balance (I + II) (2.547) (46.285) (2.378) Changes in the Period IV. Increase/Decrease due to the Merger V. Marketable Securities Valuation Differences VI. Hedging Reserves (Effective Portion) (6.991) - (6.991) - (6.991) 6.1 Cash Flow Hedge (6.991) - (6.991) - (6.991) 6.2 Foreign Investment for Purpose of Hedge VII. Revaluation Differences of Tangible Assets VIII. Revaluation Differences of Intangible Assets Bonus Shares Obtained from Investments in IX. Associates, Subsidiaries and Joint Ventures X. Foreign Exchange Difference XI. Changes due to the Disposal of Assets XII. Changes due to the Reclassification of the Assets Effects of Changes in Equity of Investments in XIII. Associates XIV. Capital Increase Cash Internal Resources XV. Share Premium XVI. Share Cancellation Profits XVII. Adjustment to Share Capital XVIII. Other XIX. Current Year Income or Loss XX. Profit Distribution (52.169) Dividend Paid Transfers to Reserves (52.169) Other Period End Balance (III+ +XX) (2.547) The accompanying explanations and notes form an integral part of these financial statements. 11

17 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AS AT 31 MARCH 2017 V. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CURRENT PERIOD 31/03/2017 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 (31/12/2016) II-l (2.375) (7.871) Changes in the Period II. Increase/Decrease due to the Merger III. Marketable Securities Valuation Differences 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 (71.673) Dividend Paid Transfers to Reserves (71.673) Other Period End Balance (I+..+XVIII) (2.375) (4.054) 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 MARCH 2017 AND 31 MARCH 2016 VI. STATEMENT OF CASH FLOWS Note (Section Five) 31/03/ /03/2016 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and liabilities (70.136) 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 (43.314) (40.603) Taxes paid (1.110) (345) Other ( ) ( ) 1.2 Changes in operating assets and liabilities ( ) Net (increase)/decrease in trading securities (20.399) (27.385) Net (increase)/decrease in fair value through profit/loss financial assets Net increase/(decrease) in due from banks (54.501) (57.786) Net (increase)/decrease in loans ( ) ( ) Net (increase)/decrease in other assets ( ) ( ) Net (increase)/decrease in bank deposits (6.900) (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 ( ) I. Net cash provided from banking operations ( ) B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities Cash paid for acquisition of investments, associates and subsidiaries Cash obtained from disposal of investments, associates and subsidiaries Purchases of property and equipment (3.876) (15.091) 2.4 Disposals of property and equipment Cash paid for purchase of investments available-for-sale (50.651) (45.247) 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 (49.445) Cash obtained from funds borrowed and securities issued (49.445) Cash used for repayment of funds borrowed and securities issued Issued capital instruments Dividends paid Payments for finance leases Other - - 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) 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 I. BASIS OF PRESENTATION: SECTION THREE ACCOUNTING POLICIES a. The preparation of the consolidated financial statements and related notes and explanations in accordance with the Turkish Accounting Standards and Regulation on the Principles and Procedures numbered 5411 Regarding Banks Accounting Application and Keeping Documents: The consolidated financial statements are prepared within the scope of the Regulation on Accounting Applications for Banks and Safeguarding of Documents related with Banking Act numbered 5411 published in the Official Gazette no dated 1 November 2006 and in accordance with the regulations, Turkish Accounting Standards (TAS), Turkish Financial Reporting Standards (TFRS) and annexes and comments (collectively "Turkish Accounting Standards" or "TAS") implemented by the the Public Oversight Auditing and Accounting Standards Authority (POA), other regulations, communiqués and circulars in respect of accounting and financial reporting promulgated by the Banking Regulatory and Supervision Agency (BRSA), announcements by BRSA, Turkish Commercial Code and Tax Legislation.The format and the details of the publicly announced financial statements and related disclosures to these statements have been prepared in accordance with the Communiqués Related to Publicly Announced Financial Statements of Banks and Explanations and Notes Related to these Financial Statements published in the Official Gazette No dated 28 June 2012 and changes in the related communiqué. The consolidated financial statements have been prepared in TL, under the historical cost convention as modified, except for the financial assets and liabilities, which are carried at fair value. Amounts in the consolidated financial statments and related notes and explanations are expressed in thousand of Turkish Lira unless otherwise stated. The preparation of consolidated financial statements in conformity with TAS requires the use of certain critical accounting estimates by the Parent Bank management to exercise its judgment on the assets and liabilitiesof the balance sheet and contingent issues as of the balance sheet date. These estimates, which include the fair value calculations of financial instruments and impairments of financial assets are being reviewed regularly and, when necessary, suitable corrections are made and the effects of these corrections are reflected to the income statement. Assumptions and estimates that are used in the preparation of the accompanying financial statements are explained in the following related disclosures. The amendments of TAS and TFRS which have entered into force as of 1 January 2016 have no material impact on the the parent bank s accounting policies, financial position and performance. The amendments of TAS and TFRS, except TFRS 9 Financial Instruments (extracted TAS 9 Financial Instruments Standard version of 2011), which have been published as of reporting date but havenot been effective yet, have no impact on the accounting policies, financial condition and performance of the Parent Bank. The Parent Bank assesses the impact of TFRS 9 Financial Instruments standard.the accounting policies and valuation principles applied in the preparation of consolidated financial statements are determined and applied in accordance with TAS and TFRS and are consistent with the accounting policies applied in the annual financial statements of the year ended 31 December Those accounting policies and valuation principles are explained in Notes II to XXVIII below. 14