Türkiye İş Bankası Anonim Şirketi

Transcription

1 (Convenience Translation of Consolidated Interim Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note I in Section Three) Türkiye İş Bankası Anonim Şirketi Consolidated Financial Statements As at and For the Nine-Month Period Ended 30 September 2017 With Limited Review Report Thereon (Convenience Translation of Consolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) This report includes Limited Review Report comprising 2 pages and; "Consolidated Financial Statements and Related Disclosures and Footnotes comprising 93 pages.

2 Convenience Translation of the Review Report Originally Prepared and Issued in Turkish to English (See Note I in Section Three) Independent Auditors Report on Review of Consolidated Interim Financial Information To the Board of Directors of Türkiye İş Bankası Anonim Şirketi; Introduction We have reviewed the consolidated statement of financial position of Türkiye İş Bankası A.Ş. ( the Bank ) and its consolidated financial subsidiaries (together will be referred as the Group ) at 30 September 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-month-period 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 and Turkish Accounting Standard 34 Interim Financial Reporting for those matters not regulated by BRSA Legislation (together referred as BRSA Accounting and Financial Reporting 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. Basis of Qualified Conclusion The accompanying consolidated financial statements as at 30 September 2017 include a free provision for possible risks amounting to TL thousands which is carried forward from prior periods, which is provided by the Bank management for the possible effects of the negative circumstances which may arise from the possible changes in the economy and market conditions. Qualified Conclusion Based on our review, except for the effect of the matter referred in the basis of qualified conclusion paragraph on the consolidated financial statements, 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 Türkiye İş Bankası A.Ş. and its financial subsidiaries at 30 September 2017 and of the results of its operations and its cash flows for the nine-month-period then ended in all aspects in accordance with the BRSA Accounting and Financial Reporting Legislation.

3 Other Matter The consolidated financial statements of the Bank as at 31 December 2016 and 30 September 2016 prepared in accordance with BRSA Accounting and Financial Reporting Legislation were audited and reviewed by another auditor who expressed a qualified opinion and a qualified conclusion in the report of the relevant audit firm issued on 2 February 2017 and 1 November 2016, respectively due to the effect of the general provision for possible risks amounting to TL thousands which had been recognized as expense in the prior periods, which is provided by the Bank management for the possible effects of the negative circumstances which may arise in the economy and market conditions. 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 VIII, are not consistent with the consolidated financial statements and disclosures in all material respects. 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 Financial 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 30 October 2017 Istanbul, Turkey (2)

4 TÜRKİYE İŞ BANKASI ANONİM ŞİRKETİ THE CONSOLIDATED INTERIM FINANCIAL REPORT AS AT AND FOR THE NINE-MONTH PERIOD ENDED 30 September 2017 Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: Fax: Web Site: The consolidated interim financial report as at and the for the nine-month period ended prepared in accordance with the communiqué of Financial Statements and Related Disclosures and Footnotes to be Announced to Public by Banks as regulated by Banking Regulation and Supervision Agency, comprises the following sections: GENERAL INFORMATION ABOUT THE PARENT BANK CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE PARENT BANK EXPLANATIONS ON THE ACCOUNTING POLICIES INFORMATION ON FINANCIAL STRUCTURE AND RISK MANAGEMENT OF THE GROUP DISCLOSURES AND FOOTNOTES ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OTHER EXPLANATIONS LIMITED REVIEW REPORT INTERIM ACTIVITY REPORT Associates, subsidiaries and structured entities whose financial statements have been consolidated in the consolidated financial report are as follows: Subsidiaries ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ ANADOLU HAYAT EMEKLİLİK A.Ş. EFES VARLIK YÖNETİM A.Ş. IS INVESTMENTS GULF LTD. İŞ FAKTORİNG A.Ş. İŞ FİNANSAL KİRALAMA A.Ş. İŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. İŞ GİRİŞİM SERMAYESİ YATIRIM ORTAKLIĞI A.Ş. İŞ PORTFÖY YÖNETİMİ A.Ş. İŞ YATIRIM MENKUL DEĞERLER A.Ş. İŞ YATIRIM ORTAKLIĞI A.Ş R İŞBANK AG JOINT STOCK COMPANY İŞBANK (JSC İŞBANK) JOINT STOCK COMPANY İŞBANK GEORGIA (JSC İŞBANK GEORGIA) MAXIS INVESTMENTS LTD. MİLLİ REASÜRANS T.A.Ş. TSKB GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. YATIRIM FİNANSMAN MENKUL DEĞERLER A.Ş. Structured Entities TIB DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY Associates ARAP-TÜRK BANKASI A.Ş. The consolidated nine month period ended financial statements and related disclosures and footnotes in this report are prepared, in accordance with the Regulation on the Procedures and Principles for Accounting Practices and Retention of Documents by Banks. Banking Regulation and Supervision Agency (BRSA) regulations, Turkish Accounting Standards, Turkish Financial Reporting Standards and the related statements and guidance and in compliance with the financial records of our Bank. Unless otherwise stated the accompanying consolidated financial report is presented in thousands of Turkish Lira (TL), and has been subjected to limited review and presented as the attached. Prof. Dr. Turkay Berksoy Füsun Tümsavaş H. Ersin Özince Member of the Board and Deputy Chairman of the Board of Directors Chairman of the Board of Directors the Audit Committee and Chairman of the Audit Committee and Member of the Audit Committee Ali Tolga Ünal Mahmut Magemizoğlu Adnan Bali Head of Financial Management Division Deputy Chief Executive Chief Executive Officer In Charge of Financial Reporting The authorized contact person for questions on this consolidated financial report: Name Surname / Title: Süleyman H. Özcan / Head of Investor Relations Division Phone No : Fax No : Suleyman.Ozcan@isbank.com.tr investorrelations@isbank.com.tr

5 SECTION I General Information about the Parent Bank I. Explanations on the Establishment Date and Initial Status of the Parent Bank, and History Including the Changes in the Former Status 1 II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Parent Bank any Changes in the Period, and Information on the Parent Bank s Risk Group 1 III. Explanations on the Chairman s, Directors, Auditors, Chief Executive Officer s and Deputy Chief Executives Shares,if any, and the Areas of their Responsibility at the Bank 1 IV. Information on the Parent Bank s Qualified Shareholders 2 V. Summary Information on the Parent Bank s Functions and Business Lines 2 VI. Differences between the Communiqué on Preparation of Consolidated Financial Statements of Banks and Turkish Accounting Standards and Explanation about the Institutions Subject to Line-By-Line Method or Proportional Consolidation and Institutions which are Deducted from Equity or not Included in These Three Methods 2 VII. Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholders Equity Between the Parent Bank and its Subsidiaries or the Reimbursement of Liabilities 4 VIII. Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of the Related Disclosures 4 SECTION II Consolidated Interim Financial Statements I. Consolidated Balance Sheet (Statement of Financial Position) Assets 5 II. Consolidated Balance Sheet (Statement of Financial Position) Liabilities and Equity 6 III. Consolidated Off-Balance Sheet Items 7 IV. Consolidated Income Statement 8 V. Consolidated Statement of Income and Expense Items Accounted under Shareholders Equity 9 VI. Consolidated Statement of Changes in the Shareholders Equity 10 VII. Consolidated Statement of Cash Flows 11 SECTION III Explanations on Accounting Policies I. Basis of Presentation 12 II. Strategy for Use of Financial Instruments and on Foreign Currency Transactions 13 III. Information on the Consolidated Companies 14 IV. Forward, Option Contracts and Derivative Instruments 15 V. Interest Income and Expenses 16 VI. Fees and Commission Income and Expenses 16 VII. Financial Assets 16 VIII. Impairment of Financial Assets 17 IX. Offsetting Financial Instruments 18 X. Sale and Repurchase Agreements and Securities Lending Transactions 19 XI. Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities 19 XII. Goodwill and Other Intangible Assets 19 XIII. Tangible Assets 20 XIV. Investment Property 20 XV. Leasing Transactions 20 XVI. Insurance Technical Income and Expense 23 XVII. Insurance Technical Reserves 25 XVIII. Provisions and Contingent Liabilities 25 XIX. Contingent Assets 22 XX. Liabilities Regarding Employee Benefits 22 XXI. Taxation 23 XXII. Borrowings 25 XXIII. Equity Shares and Issuance of Equity Shares 25 XXIV. Bank Acceptances and Bills of Guarantee 26 XXV. Government Incentives 26 XXVI. Segment Reporting 26 XXVII. Other Disclosures 26 SECTION IV Information on the Financial Position and Risk Management of the Group I. Explanations on Shareholders Equity 27 II. Explanations on Consolidated Currency Risk 35 III. Explanations on Consolidated Interest Rate Risk 37 IV. Explanations on Equity Shares Risk Arising from Banking Book 40 V. Explanations on Consolidated Liquidity Risk and Consolidated Liquidity Coverage Ratio 40 VI. Explanations on Consolidated Leverage Ratio 44 VII. Explanations on Risk Management Objectives and Policies 46 VIII. Explanations on Consolidated Business Segmentation 47 SECTION V Disclosures and Footnotes on the Consolidated Financial Statements I. Disclosures and Footnotes on Consolidated Assets 50 II. Disclosures and Footnotes on Consolidated Liabilities 67 III. Disclosures and Footnotes on Consolidated Off-Balance Sheet Items 75 IV. Disclosures and Footnotes on Consolidated Income Statement 77 V. Disclosures and Footnotes on the Group s Risk Group 81 VI. Subsequent Events 83 SECTION VI Other Explanations I. Explanation on the Group s Credit Ratings 83 II. Explanations on Special Purpose Audit and Public Audit 84 SECTION VII Explanations on the Limited Review Report I. Explanations on the Limited Review Report 85 II. Explanations and Footnotes of the Independent Auditors 85 SECTION VIII Interim Activity Report I. General Information 86 II. Turkish Economy and Banking Sector Outlook 87 III. Financial Information and Assessment on Bank 88 IV. Information About the Meetings of the Board of Directors 91 V. Information About the Activities of the Committee of Internal Systems 91 VI. Information About the Activities of the Credit Committee 92 VII. Corporate Governance Committee 92 VIII. Information on the Transactions Relating to Banks Risk Group 92 IX. Information on Dividend Distribution 92 X. Basis of Consolidation and Consolidated Subsidiaries 93 XI. Additional Information about the 1 July September

6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 September 2017 SECTION ONE: GENERAL INFORMATION ABOUT THE PARENT BANK I. Explanations on the Establishment Date and Initial Status of the Parent Bank, and History Including the Changes in the Former Status TÜRKİYE İŞ BANKASI A.Ş. ( the Bank or the Parent Bank ) was established on 26 August 1924 to operate in all kinds of banking activities and to initiate and/or participate in all kinds of financial and industrial sector undertakings when necessary. The Bank status has not been changed since its establishment. II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Parent Bank, any Changes in the Period, and Information on the Parent Bank s Risk Group As at 30 September 2017, 39.95% of the Bank s shares are owned by T. İş Bankası A.Ş. Supplementary Pension Fund (Fund), 28.09% are owned by the Republican People s Party- CHP (Atatürk s shares) and 31.96% are on free float (31 December 2016: Fund 40.15%, CHP 28.09%, Free float 31.76%). III. Explanations on the Chairman s, Directors, Auditors, Chief Executive Officer s and Deputy Chief Executives Shares, if any, and the Areas of their Responsibility at the Bank Chairman and Members of the Board of Directors: Name and Surname Areas of Responsibility H. Ersin Özince Chairman of the Board and the Remuneration Committee, Member of the Audit Committee, TRNC Internal Systems Committee and Substitute Member of the Credit Committee Füsun Tümsavaş Deputy Chairman, Audit Committee, TRNC Internal Systems Committee, Chairman of the Risk Committee and the Corporate Governance Committee, Substitute Member of the Credit Committee Adnan Bali Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of the Executive Committee, Chairman of the Human Resources Committee Prof. Dr. Turkay Berksoy Director, Audit Committee, TRNC Internal Systems Committee and Member of the Remuneration Committee Feray Demir Ertuğrul Bozgedik Ersin Önder Çiftçioğlu Murat Karayalçın Özcal Korkmaz Müslim Sarı Rahmi Aşkın Türeli Director, Credit Committee,Member of Corporate Social Responsibility Committee Director, Credit Committee Director, Corporate Governance Committee Director Director, Corporate Governance Committee Director, Member of Corporate Social Responsibility Committee Director, Member of Corporate Social Responsibility Committee Chief Executive Officer and Deputy Chief Executives: Name and Surname Adnan Bali Mahmut Magemizoğlu Hakan Aran Yalçın Sezen Senar Akkuş Yılmaz Ertürk Ergün Yorulmaz Murat Bilgiç Nevzat Burak Seyrek Mehmet Şencan Ömer Karakuş Areas of Responsibility Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of the Executive Committee, Chairman of the Human Resources Committee Senior Deputy Chief Executive, Financial Management, Strategy and Corporate Performance Management, Investor Relations, Managerial Reporting and Internal Accounting, Subsidiaries, Member of the Risk Committee Information Technologies, Digital Banking Operations, Data Management Consumer Loans, Card Payment Systems, Retail Banking Marketing-Sales and Products, Retail Loan and Card Operations, Digital Banking, Private Banking Marketing and Sales, Member of the Corporate Social Responsibility Committee Treasury, Corporate Communication, Capital Markets, Member of the Corporate Social Responsibility Committee and the Risk Committee Economic Research, International Financial Institutions Commercial Banking, Retail Banking and General Deliberation Legal Counsellorship, Commercial and Corporate Loans and Retail Loans Monitoring and Recovery Corporate, SME, Commercial, Retail Banking Allocation, Credit Portfolio Management, Financial Analysis and Member of the Risk Committee Enterprise Architecture, Human Resources and Talent Management, Consumer Relations Coordination Officer Commercial Banking Marketing, Sales and Product, SME and Business Banking Sales, Corporate Banking Marketing and Sales, Free Zone Branches, Cross-Border Banking Banking Basic Operations, Support Services and Purchasing, Foreign and Commercial Credit Operations, Internal Operations, Construction and Property Management, Branch Network Development The Parent Bank s shares attributable to the Directors and members of the Audit Committee, to the CEO and the Deputy Chief Executives are of minor importance. 1

7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED IV. Information on the Parent Bank s Qualified Shareholders Name Surname/Company Shares Ownership Paid-in Capital T, İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı ( İşbank Members Supplementary Pension Fund ) 1,797, % 1,797,653 Cumhuriyet Halk Partisi Republican People s Party (Atatürk s Shares) 1,264, % 1,264,142 Unpaid Capital V. Summary Information on the Parent Bank s Functions and Business Lines In line with the relevant legislation and principles stated in the Articles of Incorporation of the Bank, the Bank s activities include operating in retail, commercial, corporate and private banking, foreign currency and money market operations, marketable securities operations, international banking services and other banking operations, as well as initiating or participating in all kinds of financial and industrial sector corporations as may be required. VI. Differences between the Communiqué on Preparation of Consolidated Financial Statements of Banks and Turkish Accounting Standards and Explanation about the Institutions Subject to Full Consolidation Method or Proportional Consolidation and Institutions which are deducted from Equity or not included in these Three Methods Banks are obligated to prepare consolidated financial statements for credit institutions and financial subsidiaries for creating legal restrictions on a consolidated basis based on the Communiqué on Preparation of Consolidated Financial Statements of Banks by applying Turkish Accounting Standards. There is not any difference between the related Communiqué and the consolidation operations that is based on Turkish Accounting Standards and Turkish Financial Reporting Standards. The consolidated financial statement includes the subsidiaries of the Bank which are credit institutions or financial institutions accordance with the BRSA regulations. As of current there is no credit institution or financial institution subsidiaries which are excluded in the scope of the consolidation. The Parent Bank and its subsidiaries; - ANADOLU ANONIM TÜRK SIGORTA ŞİRKETİ - ANADOLU HAYAT EMEKLILIK A.Ş. - EFES VARLIK YÖNETİM A.Ş. - IS INVESTMENTS GULF LTD. - İŞ FAKTORING A.Ş. - İŞ FINANSAL KIRALAMA A.Ş. - İŞ GAYRIMENKUL YATIRIM ORTAKLIĞI A.Ş. - İŞ GIRIŞIM SERMAYESI YATIRIM ORTAKLIĞI A.Ş. - İŞ PORTFÖY YÖNETIMI A.Ş. - İŞ YATIRIM MENKUL DEĞERLER A.Ş. - İŞ YATIRIM ORTAKLIĞI A.Ş. - IŞBANK AG - JSC İŞBANK - JSC İŞBANK GEORGIA - MAXIS INVESTMENTS LTD. - MILLI REASÜRANS T.A.Ş. - TSKB GAYRIMENKUL YATIRIM ORTAKLIĞI A.Ş. - TÜRKIYE SINAI KALKINMA BANKASI A.Ş. - YATIRIM FINANSMAN MENKUL DEĞERLER A.Ş. and Structured Entity; - TIB Diversified Payment Rights Finance Company is included in the consolidated financial statements with full consolidation method. The Parent Bank s associate acting as a credit institution, - ARAP-TÜRK BANKASI A.Ş. is accounted under equity accounting method in the consolidated financial statements. 2

8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED Consolidated companies are active in the areas of banking, insurance and reinsurance, private pensions, finance leasing, factoring, real estate investment, venture capital investment. Brokerage, investment consulting, portfolio and asset management. Those companies are explained below. Anadolu Anonim Türk Sigorta Şirketi The Company was established in 1925 and operates in almost all non-life insurance service. Headquarter of the Company is in Istanbul. The Company s shares are traded in the Borsa İstanbul A.Ş. Anadolu Hayat Emeklilik A.Ş. The Company was founded in 1990 and its headquarter is in Istanbul. The company s main activities are private individual or group pension and life/death insurance and due to this branch are engaged in all kinds of insurance. There are 26 private pension funds founded by the company. The company s shares are traded in the Borsa Istanbul A.Ş. Efes Varlık Yönetim A.Ş. The field of activity of the company, which was founded in February 2011 is to purchase and sell the receivables with other assets of deposit banks, participation banks and other financial institutions. The Company s headquarter is located İstanbul. Is Investments Gulf Ltd. The purpose of the Company, which was founded in Dubai in the year 2011, is to operate brokerage activities mainly capital markets in the gulf region and it is in the liquidation phase. İş Faktoring A.Ş. The field of operation of the Company, which operates in the factoring sector since 1993, is domestic and foreign factoring operations. The Company s headquarter is in Istanbul. İş Finansal Kiralama A.Ş. The Company, whose field of activity is financial leasing within the country and abroad started its business in The headquarters of the Company is in Istanbul. The Company s shares are traded in the Borsa İstanbul A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. The Company whose main field of activity is investing in real estate, capital market instruments backed by real estate, real estate projects and capital market instruments is conducting its business in the sector as a real estate investment trust since The Company s shares are traded in the Borsa İstanbul A.Ş. since its establishment. İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. Having started its venture capital business in the year 2000, the aim of the company is performing long-term investments to venture companies which have potential development and need resources where was founded and established in Turkey. The company s shares are traded in the Borsa İstanbul A.Ş. since the year İş Portföy Yönetimi A.Ş. The purpose of the Company, which was founded in 2000, is to engage in capital market operations stated in its articles of association. Among the capital market operations, the company offers portfolio management and investment consulting services only to corporate investors. İş Yatırım Menkul Değerler A.Ş. The Company s main field of activity is composed of intermediary, corporate finance, investment consulting and private portfolio management services. The Company s shares are traded in the Borsa İstanbul A.Ş. since May İş Yatırım Ortaklığı A.Ş. The aim of the Company, which was founded in İstanbul in the year 1995, is operating capital market activities which is located in the principal agreement, is portfolio management. The Company s shares are traded in the Borsa İstanbul A.Ş. since April İşbank AG İşbank AG was founded to carry out the banking transactions in Europe. İşbank AG has 14 branches in total, 10 branches in Germany, 1 branch in Netherlands, France, Switzerland and Bulgaria. 3

9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED JSC İşbank The Bank, which was founded in 1998 and headquartered in Moscow,operating banking services by focusing on deposit, loan and brokerage operations with its 3 branches in several regions of Russian Federation. JSC İşbank Georgia The Bank which was established in Georgia in the third quarter of 2015, is operating banking services mainly deposit, loan and exchange transactions. As part of the organizational structure of Parent Bank in abroad. Batumi and Tbilisi branches which were established in 2012 and 2014 respectively and proceed its operations as JSC Isbank Georgia. Maxis Investments Ltd. The purpose of the Company, which was founded in England in the year 2005, is to operate in activities in foreign capital markets. Milli Reasürans T.A.Ş. The Company, which was founded in 1929 to provide reinsurance services is located in Istanbul. TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. The major field of activity of the Company, which was founded in 2006, is to create and develop an investment property portfolio and to invest in capital market instruments that are based on investment properties. The Company s shares are traded in the Borsa İstanbul A.Ş. since April Türkiye Sınai Kalkınma Bankası A.Ş. Türkiye Sınai Kalkınma Bankası A.Ş. (TSKB) which is an industrial development and an investment bank is founded especially to support private sector investments in industry and to provide domestic and foreign capital to Turkish companies. The Bank s shares are traded in the Borsa İstanbul A.Ş. Yatırım Finansman Menkul Değerler A.Ş. The Company was founded in İstanbul in The purpose of the Company is to engage in capital market operations stated in its articles of association. The company's headquarters is in Istanbul. VII. None. VIII. Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholders Equity between the Parent Bank and its Subsidiaries or the Reimbursement of Liabilities Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of the Related Disclosures The Parent Bank has written policies on assessment of ensuring compliance on market discipline, disclosure obligations, frequency and accuracy of related disclosures. The mentioned policies which are agreed by Board can be obtained from the Parent Bank s website. 4

10 CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED FINANCIAL STATEMENTS (STATEMENT OF FINANCIAL POSITION) THOUSAND TL CURRENT PERIOD PRIOR PERIOD ASSETS Footnotes (30/09/2017) (31/12/2016) TL FC Total TL FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK V-I-a II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) V-I-b Financial Assets Held for Trading Government Debt Securities Equity Securities Derivative Financial Assets Held for Trading Other Marketable Securities Financial Assets at Fair Value Through Profit and Loss Government Debt Securities Equity Securities Loans Other Marketable Securities III. BANKS V-I-c IV. MONEY MARKET PLACEMENTS Interbank Money Market Placements Istanbul Stock Exchange Money Market Placements Receivables from Reverse Repurchase Agreements V. FINANCIAL ASSETS AVAILABLE-FOR-SALE (Net) V-I-d Equity Securities Government Debt Securities Other Marketable Securities VI. LOANS AND RECEIVABLES V-I-e Loans and Receivables Loans to the Bank's Risk Group Government Debt Securities Other Non-Performing Loans Specific Provisions (-) VII. FACTORING RECEIVABLES VIII. HELD TO MATURITY INVESTMENTS (Net) V-I-f Government Debt Securities Other Marketable Securities IX. INVESTMENTS IN ASSOCIATES (Net) V-I-g Associates Accounted for Using the Equity Method Unconsolidated Associates Financial Investments Non-Financial Investments X. INVESTMENTS IN SUBSIDIARIES (Net) V-I-h Unconsolidated Financial Subsidiaries Unconsolidated Non-Financial Subsidiaries XI. JOINTLY CONTROLLED ENTITIES (JOINT VENTURES) (Net) V-I-i Jointly Controlled Entities Accounted for Using the Equity Method Unconsolidated Jointly Controlled Entities Jointly Controlled Financial Entities Jointly Controlled Non-Financial Entities XII. LEASE RECEIVABLES V-I-j Finance Lease Receivables Operating Lease Receivables Other Unearned Income (-) XIII. DERIVATIVE FINANCIAL ASSETS HELD FOR HEDGING V-I-k Fair Value Hedges Cash Flow Hedges Net Foreign Investment Hedges XIV. TANGIBLE ASSETS (Net) XV. INTANGIBLE ASSETS (Net) Goodwill Other XVI. INVESTMENT PROPERTY (Net) V-I-l XVII. TAX ASSETS V-I-m Current Tax Assets Deferred Tax Assets XVIII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-n Held for Sale Discontinued Operations XIX. OTHER ASSETS V-I-o TOTAL ASSETS The accompanying explanations and notes form an integral part of these financial statements. 5

11 CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED FINANCIAL STATEMENTS (STATEMENT OF FINANCIAL POSITION) THOUSAND TL CURRENT PERIOD PRIOR PERIOD LIABILITIES Footnotes (30/09/2017) (31/12/2016) TL FC Total TL FC Total I. DEPOSITS V-II-a Deposits from the Bank's Risk Group Other II. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING V-II-b III. FUNDS BORROWED V-II-c IV. MONEY MARKET FUNDS Interbank Money Market Funds Istanbul Stock Exchange Money Market Funds Funds Provided Under Repurchase Agreements V. MARKETABLE SECURITIES ISSUED (Net) V-II-d Bills Asset-backed Securities Bonds VI. FUNDS Borrower funds Other VII. MISCELLANEOUS PAYABLES VIII. OTHER LIABILITIES V-II-e IX. FACTORING PAYABLES X. LEASE PAYABLES (Net) V-II-f Finance Lease Payables Operating Lease Payables Other Deferred Financial Lease Expenses (-) XI. DERIVATIVE FINANCIAL LIABILITIES HELD FOR RISK MANAGEMEN V-II-g Fair Value Hedges Cash Flow Hedges Net Foreign Investment Hedges XII. PROVISIONS V-II-h General Loan Loss Provisions Provision for Restructuring Reserves for Employee Benefits Insurance Technical Reserves (Net) Other Provisions XIII. TAX LIABILITIES V-II-i Current Tax Liabilities Deferred Tax Liabilities XIV. LIABILITIES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Held for Sale Discontinued Operations XV. SUBORDINATED DEBT XVI. SHAREHOLDERS' EQUITY V-II-j ( ) Paid-in Capital Capital Reserves (20.340) ( ) Share premium Share Cancellation Profits Marketable Securities Value Increase Fund (20.650) ( ) Tangible Assets Revaluation Reserve Intangible Assets Revaluation Reserve Investment Property Revaluation Reserve Bonus Shares Obtained from Associates, Subsidiaries and Jointly Controlled (1.179) - (1.179) (1.179) - (1.179) Entities (Joint Ventures) Hedging Reserves (Effective Portion) Accumulated Revaluation Reserves on Assets Held for Sale and Discontinued Operations Other Capital Reserves Profit Reserves Legal Reserves Statutory Reserves Extraordinary Reserves Other Profit Reserves ( ) (5.040) Profit or Loss ( ) ( ) Prior Years' Profit/Loss ( ) (94.377) Profit/Loss (10.602) (33.742) Non-controlling Interest V-II-k (19.927) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY The accompanying explanations and notes form an integral part of these financial statements. 6

12 CONSOLIDATED STATEMENT OF INCOME AND EXPENSE ITEMS UNDER SHAREHOLDERS EQUITY AS OF AND 30 SEPTEMBER 2016 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET ITEMS THOUSAND TL OFF-BALANCE SHEET ITEMS CURRENT PERIOD PRIOR PERIOD Footnotes (30/09/2017) (31/12/2016) TL FC Total TL FC Total A. OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III) I. GUARANTEES AND SURETYSHIPS V-III Letters of Guarantee Guarantees Subject to State Tender Law Guarantees Given for Foreign Trade Operations Other Letters of Guarantee Bank Acceptances Import Letters 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 Turkey Other Endorsements Purchase Guarantees for Securities Issued Factoring Guarantees Other Guarantees Other Suretyships II. COMMITMENTS Irrevocable Commitments Forward Asset Purchase Commitments Forward Deposit Purchase and Sale Commitments Capital Commitment for Associates and Subsidiaries Loan Granting Commitments Securities Underwriting Commitments Commitments for Reserve Deposit Requirements Commitments for Cheque Payments Tax and Fund Liabilities from Export Commitments Commitments for Credit Card Expenditure Limits Commitments for Credit Cards and Banking Services Promotions 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 Derivative Financial Instruments held for risk management Fair Value Hedges Cash Flow Hedges Net Foreign Investment Hedges Derivative Financial Instruments Held for Trading Forward Foreign Currency Buy/Sell Transactions Forward Foreign Currency Buy Transactions Forward Foreign Currency Sell Transactions Currency and Interest Rate Swaps Currency Swap Buy Transactions Currency Swap Sell Transactions Interest Rate Swap Buy Transactions Interest Rate Swap Sell Transactions Currency, Interest Rate and Security Options Currency Call Options Currency Put Options Interest Rate Call Options Interest Rate Put Options Securities Call Options Securities Put Options Currency Futures Currency Buy Futures Currency Sell Futures Interest Rate Futures Interest Rate Buy Futures Interest Rate Sell Futures Other B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) IV. ITEMS HELD IN CUSTODY Customers Securities Held 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. PLEDGED ITEMS Marketable Securities Guarantee Notes Commodity Warranty Real Estates Other Pledged Items Pledged Items-Depository VI. ACCEPTED BILL GUARANTEES AND SURETIES TOTAL OFF-BALANCE SHEET ITEMS (A+B) The accompanying explanations and notes form an integral part of these financial statements. 7

13 CONSOLIDATED STATEMENT OF INCOME AS OF AND 30 SEPTEMBER 2016 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF INCOME INCOME STATEMENT THOUSAND TL Footnotes CURRENT PERIOD PRIOR PERIOD CURRENT PERIOD PRIOR PERIOD (01/01-30/09/2017) (01/01-30/09/2016) (01/07-30/09/2017) (01/07-30/09/2016) I. INTEREST INCOME V-IV-a Interest Income on Loans Interest Income on Reserve Deposits Interest Income on Banks Interest Income on Money Market Placements Interest Income on Marketable Securities Portfolio Financial Assets Held for Trading Financial Assets at Fair Value Through Profit and Loss Financial Assets Available for Sale Held to Maturity Investments Finance Lease Income Other Interest Income II. INTEREST EXPENSE V-IV-b Interest on Deposits Interest on Funds Borrowed Interest on Money Market Funds Interest on Securities Issued Other Interest Expense III. NET INTEREST INCOME / EXPENSE (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 V. DIVIDEND INCOME VI. TRADING INCOME / LOSS (NET) V-IV-c ( ) ( ) ( ) ( ) 6.1 Gains/Losses on Securities Trading Derivative Financial Transactions Gains/Losses ( ) ( ) Foreign Exchange Gains/Losses (80.156) ( ) ( ) ( ) VII. OTHER OPERATING INCOME V-IV-d VIII. TOTAL OPERATING INCOME / EXPENSE (III+IV+V+VI+VII) IX. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES (-) V-IV-e X. OTHER OPERATING EXPENSES (-) V-IV-f XI. NET OPERATING INCOME (VIII-IX-X) XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER XIII. PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD XIV. NET MONETARY POSITION GAIN/LOSS XV. PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XI+ +XIV) XVI. TAX PROVISION FOR CONTINUING OPERATIONS (±) V-IV-g Current Tax Provision Deferred Tax Provision (82.960) ( ) XVII. NET PERIOD PROFIT/LOSS FROM CONTUNUING OPERATIONS (XV±XVI) V-IV-h XVIII. INCOME ON DISCONTINUED OPERATIONS Income on Assets Held for Sale Gain on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Income on Discontinued Operations XIX. EXPENSE ON DISCONTINUED OPERATIONS(-) Expense on Assets Held for Sale Loss on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Expense on Discontinued Operations XX. PROFIT/LOSS ON DISCONTINUED OPERATIONS BEFORE TAX (XVIII-XIX) XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) V-IV-g Current Tax Provision Deferred Tax Provision XXII. NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) XXIII. NET PERIOD PROFIT/LOSS (XVII+XXII) Group s Profit / Loss Non-controlling Interest (-) Earnings per Share (in full TL) 0, , , , The accompanying explanations and notes form an integral part of these financial statements. 8