SİNPAŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. AND ITS SUBSIDIARIES

AND ITS SUBSIDIARIES CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2017 TOGETHER WITH INDEPENDENT AUDITOR S REPORT (ORIGINALLY ISSUED IN TURKISH)

INDEX CONTENTS PAGE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION... 1-2 CONSOLIDATED PROFIT OR LOSS AND COMPREHENSIVE INCOME STATEMENTS... 3 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY... 4 CONSOLIDATED STATEMENTS OF CASH FLOWS... 5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS... 6-71 NOTE 1 GROUP S ORGANISATION AND NATURE OF OPERATIONS... 6-7 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS... 8-29 NOTE 3 CASH AND CASH EQUIVALENTS... 29-30 NOTE 4 FINANCIAL INVESTMENTS... 30-31 NOTE 5 FINANCIAL LIABILITIES... 31-33 NOTE 6 TRADE RECEIVABLES AND PAYABLES... 34-35 NOTE 7 OTHER RECEIVABLES AND PAYABLES... 36 NOTE 8 OTHER ASSETS AND LIABILITIES... 36-37 NOTE 9 INVENTORIES...... 38 NOTE 10 INVESTMENTS ACCOUNTED UNDER EQUITY METHOD... 38-39 NOTE 11 INVESTMENT PROPERTIES... 39-40 NOTE 12 PROPERTY, PLANT AND EQUIPMENT...... 40-41 NOTE 13 INTANGIBLE ASSETS... 41-42 NOTE 14 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES... 42-45 NOTE 15 EMPLOYEE BENEFITS... 46-47 NOTE 16 PREPAID EXPENSES... 47 NOTE 17 OTHER CURRENT AND NON-CURRENT ASSETS... 48 NOTE 18 DEFERRED INCOME... 48 NOTE 19 EQUIY... 48-51 NOTE 20 REVENUE AND COST OF REVENUE... 52 NOTE 21 MARKETING AND GENERAL ADMINISTRATIVE EXPENSES... 52-53 NOTE 22 EXPENSES BY NATURE... 53 NOTE 23 OTHER OPERATING INCOME... 54 NOTE 24 OTHER OPERATING EXPENSE... 54 NOTE 25 INVESTMENT ACTIVITIES INCOME/EXPENSE... 54 NOTE 26 FINANCIAL INCOME... 55 NOTE 27 FINANCIAL EXPENSES... 55 NOTE 28 TAX ASSETS AND LIABILITIES... 55 NOTE 29 EARNINGS PER SHARE... 55 NOTE 30 RELATED PARTY DISCLOSURES... 56-60 NOTE 31 FINANCIAL RISK MANAGEMENT... 60-68 NOTE 32 FINANCIAL INSTRUMENTS... 68-69 NOTE 33 SUBSEQUENT EVENTS... 69 ADDITIONAL NOTES: CONTROL OF COMPLIANCE WITH THE PORTFOLIO LIMITATIONS... 70-71

CONVENIENCE TRANSLATION INTO ENGLISH OF THE FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH SİNPAŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2017 AND 2016 (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated) Restated Audited Audited Audited 31 December 31 December 31 December Notes 2017 2016 2015 LIABILITIES Current Liabilities 520,483,585 364,607,426 399,059,102 Short term portion of long term borrowings 5,30 438,258,475 252,945,263 326,308,092 - Short term portion of long term borrowings to related parties 5,30 18,910,664 8,877,381 - - Short term portion of long term borrowings to third parties 5 419,347,811 244,067,882 326,308,092 Trade payables 6,30 35,601,026 89,981,854 33,019,863 - Trade payables to related parties 6,30 811,246 1,118,620 1,318,777 - Trade payables to third parties 6 34,789,780 88,863,234 31,701,086 Debts for employee benefits 15 1,464,314 1,876,804 404,011 Other payables 7,30 11,646,220 15,388,384 27,725,698 - Other payables to related parties 7,30 60,217 70,000 865,725 - Other payables to third parties 7 11,586,003 15,318,384 26,859,973 Deferred revenue - - 4,187 Short term provisions 15 983,499 859,028 678,619 - Provisions for employee benefits 15 983,499 859,028 678,619 Deriative financial instruments 8 29,450,359-7,346,812 - Derivative financial instruments for protection from risks 8 29,450,359-7,346,812 Other current liabilities 3,079,692 3,556,093 3,571,820 - Other current liabilities to third party 3,079,692 3,556,093 3,571,820 Non-current liabilities 580,995,438 881,272,597 554,205,394 Long-term borrowings 5,30 545,930,435 595,729,860 301,985,631 - Long-term borrowings to related parties 5,30 2,586,147 1,281,170 - - Long-term borrowings to third parties 5 543,344,288 594,448,690 301,985,631 Deferred revenue 18 27,233,700 269,674,282 245,125,901 Long-term provisions 15 1,293,012 1,565,062 1,282,408 - Long-term provision for employee benefits 15 1,293,012 1,565,062 1,282,408 Deriative instruments 8 6,538,291 14,303,393 5,811,454 - Derivative instruments for protection from risks 8 6,538,291 14,303,393 5,811,454 EQUITY 893,180,910 972,447,765 1,048,572,827 Equity attributable to equity holders of the parent 893,180,910 972,447,765 1,048,572,827 Share capital 19 600,000,000 600,000,000 600,000,000 Share reserves 19 212,888,864 212,888,864 212,888,864 Treasury shares (-) 19 (5,664,156) (5,664,156) (5,664,156) Share Premium 19 62,419,923 62,419,923 62,419,923 Other comprehensive income/expense not to be reclassified to profit or loss (379,615) (754,504) (633,446) Gain/loss on revaluation and remeasurement (379,615) (754,504) (633,446) - Actuarial loss of employee benefits (379,615) (754,504) (633,446) Other comprehensive income/expense to be reclassified to profit or loss 19 - (7,397,851) (11,084,340) Gain/loss on revaluation and remeasurement 19 - (7,397,851) (11,084,340) -Fair value gains from financial assets reflected in other comprehensive income/(expense) 19 - (7,397,851) (11,084,340) Restricted reserves 19 35,261,185 35,261,185 35,261,185 Retained earnings 19 75,694,304 155,384,797 207,605,333 Net loss for the period 19 (87,039,595) (79,690,493) (52,220,536) TOTAL LIABILITIES AND EQUITIES 1,994,659,933 2,218,327,788 2,001,837,323 The accompanying notes form an integral part of these consolidated financial statements. 2

CONVENIENCE TRANSLATION INTO ENGLISH OF THE FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH SİNPAŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 DECEMBER 2017 AND 2016 Restated Audited Audited 1 January- 1 January- PROFIT AND LOSS Notes 31 December 2017 31 December 2016 Revenue 20 776,394,402 303,522,495 Cost of sales (-) 20 (668,310,377) (257,212,141) GROSS PROFIT 108,084,025 46,310,354 Marketing expenses (-) 21 (40,523,196) (41,590,570) General administrative expenses (-) 21 (41,645,754) (40,825,367) Fair value gain on investment properties 11 1,994,679 8,498,960 Other operating income 23 75,343,445 42,804,042 Other operating expenses (-) 24 (9,153,748) (11,813,251) OPERATING PROFIT 94,099,451 3,384,168 Income from investing activities 25 1,533,594 1,462,767 Expense from investing activities (-) 25 (10,109,495) - Share of profit of investments accounted under equity method (123,896) (1,713,031) OPERATING PROFIT BEFORE FINANCIAL INCOME AND EXPENSES 85.399.654 3,133,904 Financial income 26 9,849,184 5,813,316 Financial expenses (-) 27 (182,288,433) (88,637,713) (LOSS) / PROFIT BEFORE TAX FROM CONTINUING OPERATIONS (87.039.595) (79,690,493) Continuing operations tax income/expense Current tax income/expenses - - Defered tax income/expenses - - CONTINUING OPERATIONS NET LOSS (87.039.595) (79,690,493) NET LOSS (87,039,595) (79,690,493) Earnings per share Earning per share from continuing operations 29 (0.1451) (0.1328) OTHER COMPREHENSIVE INCOME Other comprehensive income/loss not to be reclassified to profit or loss 15 374,889 (121,058) Profit/(loss) on revaluation and measurement 15 374,889 (121,058) Items to be reclassified to profit or loss in subsequent periods 7,397,851 3,686,489 Profit/(loss) from revaluation of financial assets 7,397,851 3,686,489 OTHER COMPREHENSIVE INCOME 7,772,740 3,565,431 TOTAL COMPREHENSIVE INCOME (79,266,855) (76,125,062) The accompanying notes form an integral part of these consolidated financial statements. 3

CONVENIENCE TRANSLATION INTO ENGLISH OF THE FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH SİNPAŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD AND 2016 Share capital Adjustment to share capital Treasury shares Share premium Other comprehensive income/loss to be reclassified to profit or loss Profit/(loss) from revaluation of financial assets Other comprehensive income/loss not to be reclassified to profit or loss Profit/(loss) on revaluation and measurement Restricted reserves Retained Earnings Retained earnings Net loss/profit for the year Total shareholders equity 1 January 2016 600,000,000 212,888,864 (5,664,156) 62,419,923 (11,084,340) (633,446) 35,261,185 207,605,333 (52,220,536) 1,048,572,827 Transfers - - - - - - - (52,220,536) 52,220,536 - Total comprehensive income - - - - 3,686,489 (121,058) - - (54,846,914) (51,281,483) Increase/(decrease) due to other changes (*) - - - - - - - - (24,843,579) (24,843,579) 31 December 2016 (Restated) 600,000,000 212,888,864 (5,664,156) 62,419,923 (7,397,851) (754,504) 35,261,185 155,384,797 (79,690,493) 972,447,765 1 January 2017 600,000,000 212,888,864 (5,664,156) 62,419,923 (7,397,851) (754,504) 35,261,185 155,384,797 (79,690,493) 972,447,765 Transfers - - - - - - - (79,690,493) 79,690,493 - Total comprehensive income - - - - 7,397,851 374,889 - - (87,039,595) (79,266,855) 31 December 2017 600,000,000 212,888,864 (5,664,156) 62,419,923 - (379,615) 35,261,185 75,694,304 (87,039,595) 893,180,910 (*) Refer to Note: 2.1. The accompanying notes form an integral part of these consolidated financial statements. 4

CONVENIENCE TRANSLATION INTO ENGLISH OF THE FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH SİNPAŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD AND 2016 Notes Restated Audited Audited 1 January - 1 January - 31 December 31 December 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES (49,051,301) (277,148,385) (Loss)/Profit for the year (87,039,595) (79,690,493) Adjuustments related to reconciliation of profit for the period 168,171,519 67,073,668 Adjustments related with unrealized foregin exchange differences 129,785,270 65,082,489 Adjustments related with interest income and expenses 26,27 24,372,799 6,006,081 Adjustments related with depreciation and amortiziation 22 2,242,151 2,381,394 Adjustments related with provisions 2,530,508 - - Provision for employee benefits 525,931 - - Adjustments related to other provisions (cancellations) 2,004,577 - Adjustments to other items that cause cash flows from investing or financing activities 8,583,106 (1,462,767) Change in fair vaule of investment properties (1,994,679) (8,498,960) - Adjustments related to fair value gains on investment properties (1,994,679) (8,498,960) Adjustments related to undistributed profits of investments valued by equity method 123,896 3,686,489 Other adjustments related to profit/loss reconciliation 2,528,468 (121,058) Changes in working capital (129,884,604) (264,238,044) Adjustments related to increase/decrease in trade receivables (108,935,805) 38,975,228 Adjustments related to increase/decrease in trade payables (54,380,828) 56,961,991 Adjustments related to increase/decrease in inventory 310,807,122 (332,287,291) Adjustments related to increase/decrease in prepaid expenses (15,794,170) 12,038,100 Adjustments related to increase/decrease in deferred incomes (242,440,582) 24,544,194 Adjustments related to increase/decrease in working capital (19,140,341) (64,470,266) - Adjustments related to operating increase/decrease in other assets (14,509,286) (54,346,597) - Adjustements related to operating increase/decrease in other liatbilities (4,631,055) (10,123,669) Net cash generated by operating activities (48,752,680) (276,854,869) Employment termination benefits paid 15 (298,621) (293,516) CASH FLOWS FROM INVESTING ACTIVITIES 52,552,860 28,664,778 Dividends received - 1,462,767 Cash inflow from purchase of tangible and intangible assets 12,13 (3,751,211) (1,196,828) Cash outflow from sales of tangible and intangible assets 1,340,212 - Cash inflow/(outflow) from purchas of investment properties 276,275 5,824,042 Other cash inflows / (outflows) - 22,574,797 Cash inflow from sales of other non-current assets 54,687,584 - CASH FLOWS FROM FINANCING ACTIVITIES 3,567,824 150,746,047 Cash inflow from borrowings 259,378,019 391,106,526 Cash outflow from borrowings (248,771,986) (235,807,615) Interest received 10,376,033 6,121,406 Interest paid (17,414,242) (11,819,397) Cash inflow from derivative instruments - 1,145,127 Net increase / decrease in cash and cash equivalents before the effect of foreign currency translation differences 7,069,383 (97,737,560) EFFECT ON FOREIGN CURRENCY TRANSLATION DIFFERENCES ON CASH AND CASH EQUIVALENTS - - NET CHANGE IN CASH AND CASH EQUIVALENTS 7,069,383 (97,737,560) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 3 20,434,204 118,171,764 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 3 27,503,587 20,434,204 The accompanying notes form an integral part of these consolidated financial statements. 5

1. GROUP S ORGANISATION AND NATURE OF OPERATIONS Sinpaş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi ( Sinpaş REIC or the Company ) which was registered as Sinpaş İnşaat A.Ş. ( Sinpaş İnşaat ) in İstanbul, Turkey, has been applied with a change in the Articles of Association published on Trade Registry Gazette on 22 December 2006, the Company has been converted into Real Estate Investment Company ( REIC ) with the trade name Sinpaş Gayrimenkul Yatırım Ortaklığı A.Ş. and was registered on 3 May 2007. The Company s main scope of operation is to develop residential real estate projects to primarily for sale. The Company operates under Sinpaş Group Companies which is one of the leading real estate investment and development groups in Turkey. Main shareholders of the Company is Sinpaş Yapı Endüstrisi A.Ş. and Avni Çelik. Total number of employees of the Company is 178 as of 31 December 2017 (31 December 2016: 194). The registered address of the Company is Sinpaş Plaza, Dikilitaş Mahallesi Yenidoğan Sokak. No: 36 34349 Beşiktaş, Istanbul. The Company and its subsidiaries will be collectively referred to as the Group. Approval of Consolidated Financial Statements: Consolidated financial statements have been approved by the Board of Directors and authorized for publication on 12 March 2018. The General Assembly has the right to change the consolidated financial statements. Subsidiaries of the Group are operating in Turkey and the main activities are as follows: Subsidiaries Samandıra Mobilya Sanayi ve Ticaret Anonim Şirketi ( Samandıra Mobilya ) S.S. Modern Bursa Konut Yapı Kooperatifi ( S.S. Modern Bursa ) Sinpaş CO. Nature of business Manufacture, import and export of the, home garden and office furniture made of wood, plastic, marble, steel and all kinds of metal and materials. Puchasing and combining of land, preparation and costing of infrastructure investments. To invest in real estate projects. 31 December 2017 31 December 2016 Direct Effective Direct and indirect Effective ownership ownership ownership ownership rate (%) rate (%) rate (%) rate (%) Samandıra Mobilya 100.00 100.00 100,00 100,00 S.S. Modern Bursa 99.37 99.37 99,37 99,37 Sinpaş CO. 100.00 100.00 100,00 100,00 Samandıra Mobilya Samandıra Mobilya manifactures, imports and exports of the home, garden and Office furniture products made of wood, plastic, marble, steel and all kind of metal and materials. Sinpaş REIC has 100% share of the capital of Samandıra Mobilya. 6

1. GROUP S ORGANISATION AND NATURE OF OPERATIONS (Continued) S.S. Modern Bursa There are activities such as meeting the need for housing of the partners, purchasing and combining the land, preparing, planning and costing the infrastructure, projects and costs and making the houses for the residents, establishing facilities to meet the social cultural and economic needs of the partners. Sinpaş REIC has 99.37% share of S.S Modern Bursa. Sinpaş CO. According to the laws of the Kingdom of Saudi Arabia, as a result of the invitations made to the Turkish construction sector by the Saudi Arabian Kingdom within the scope of the zoning studies initiated to build a residence with qualified housing production and citizens' maturity ratios, Sinpaş CO. The legal foundations of the named company have been completed. Sinpaş CO, invests in real estate projects in the Kingdom of Saudi Arabia. 100% share of the Company belongs to Sinpaş REIC. Subsidiaries of the Group are operating in Turkey and the main activities are as follows: Affiliates Ottoman Gayrimenkul Yat. İnş. ve Tic. A.Ş. ( Ottoman Gayrimenkul ) Nature of business Engaged in developing and selling real estate projects for residence purpose. Promotors Otomotiv Turizm Yatçılık ve Taşımacılık Renting all types of motor vehicles, Elektronik Sanayi ve Dış Ticaret Ltd. Şti. ( Promotors ) such as yachts, boats and similar engines for tourism. 31 December 2017 31 December 2016 Direct Effective Direct Effective ownership ownership ownership ownership rate (%) rate (%) rate (%) rate (%) Ottoman 24.90 24.90 24.90 24.90 Promotors - - 25.00 25.00 Ottoman Gayrimenkul The company was established on 14 March 2007 in Istanbul, Turkey. The main activity of the company is to develop residents' interests, real estate projects for sale, and Sinpaş GYO has 24.90% of Ottoman real estate capital. Promotors The main activity of the Company is to purchase, rent or rent all types of motor vehicles, such as yachts, boats and similar engines for tourism, all kinds of air and sea vehicles, to manufacture and manufacture all kinds of yachts, boats and engines and other activities written in the main contract. Sinpaş REIC has 25% share of the Promotors. As of 31 December 2017, the Promotors subsidiary owned by the Group a 25% share was sold on 13 September 2017 which amounting to TRY5.000.000. 7

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1. Basis of preparation a Preparation of the financial statements The Group, the accounting records and the statutory financial statements in preparing the CMB issued by the principles and conditions of the Turkish Commercial Code ("TCC"), tax legislation and the Ministry of Finance issued by the Uniform Chart of Accounts complies with the requirements.the financial statements have been prepared in Turkish Liras on the basis of historical cost, to the legal records for the purpose of fair presentation in accordance with TAS adjustments and reclassifications are reflected. The financial statements for the financial period of 31 December 2017 have been approved by the Board of Directors on 12 March 2018. b Declaration of conformity to TAS The consolidated financial statements of the Group have been prepared in accordance with the communiqué numbered II-14,1 Communiqué on the Principles of Financial Reporting In Capital Markets ( the Communiqué ) announced by the Capital Markets Board ( CMB ) (hereinafter will be referred to as the CMB Accounting Standards ) on 13 June 2013 which is published on Official Gazette numbered 28676. In accordance with article 5th of the CMB Accounting Standards, companies should apply Turkish Accounting Standards/Turkish Financial Reporting Standards ( TAS/TFRS ) and interpretations regarding these standards as adopted by the Public Oversight Accounting and Auditing Standards Authority ( POA ). c Adjustment of financial statements in periods of high inflation Inflation accounting application is terminated for the companies operating in Turkey and preparing their financial statements in accordance with the provisions of the CMB according to the decision taken by CMB dated on 17 March 2005 and numbered 11/367, to be effective from 1 January 2005. Accordingly, "Financial Reporting in Hyperinflationary Economies" Standard ("TAS 29") published by the Public Oversight Agency, did not apply as from 1 January 2005. d Functional and presentation currency Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The Group s functional and presentation currency is TRY. e Comparatives and restatement of prior periods' financial statements The condensed interim consolidated financial statements of the Group include comparative financial information to enable the determination of the financial position and performance. Comparative figures are reclassified, where necessary, to conform to changes in presentation in the current period condensed interim consolidated financial statements. Where necessary, comparative figures are reclassified to conform to changes in presentation in the current period and material differences are disclosed. 8

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.1. Basis of preparation (Continued) Additional costs of the completed projects, which were recognised under cost of goods sold by the Group as of 31 December 2016, were realised in 2017 and since these costs should have been recognised under cost of goods sold in previous years, consolidated financial statements released by the Group in previous years were rearranged retrospectively. The Group corrected the effects of these changes retrospectively as per TMS 8 Accounting Policies, Changes in Accounting Estimates and Errors. TAS 1 (Revised) Presentation of Financial Statements states that the balance sheet and the relevant footnotes must be presented as three periods if the financial statements of previous periods are rearranged. Since the projects were completed as of 31 December 2016, and additional costs do not affect the consolidated financial statements dated 31 December 2015, only the consolidated balance sheet dated 31 December 2016 and consolidated statement of comprehensive income dated 31 December 2016 were presented in comparison. As of 31 December 2016, the effects of restatements losses for previous years and net profit for the period are as follows: Restated 31 December 2016 31 December 2016 Inventories 1.486.708.968 1.494.434.334 Trade payables (57.412.909) (89.981.854) Net loss (54.846.914) (79.690.493) Cost of sales (232.368.562) (257.212.141) f Going concern The Group's consolidated financial statements are prepared under the going concern assumption. 2.2 Changes and mistakes in accounting policies and accounting forecasts Changes in accounting estimates are applied prospectively, both in the period in which the change is made and in future periods if the change relates to the current period in the current period in which the change is related to the future periods. There has been no significant change in the accounting estimates of the Group during the current period. 2.3 Turkish Financial Reporting Standards Change and Comparative Information and reclassifications in the Previous Period s Financial Statements 2.3.1 Changes in Turkish Financial Reporting Standards a. Standards, amendments and interpretations applicable as of 31 December 2017: - Amendments to IAS 7, Statement of cash flows ; on disclosure initiative effective from annual periods beginning on or after 1 January 2017. These amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. 9

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Turkish Financial Reporting Standards Change and Comparative Information and reclassifications in the Previous Period s Financial Statements (Continued) a. Standards, amendments and interpretations applicable as of 31 December 2017: - Amendments IAS 12, Income Taxes ; effective from annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset s tax base. It also clarify certain other aspects of accounting for deferred tax assets. - Annual improvements 2014-2016, effective from annual periods beginning on or after 1 January 2017: - IFRS 12, Disclosure of interests in other entities ; regarding clarification of the scope of the standard. These amendments should be applied retrospectively for annual periods beginning on or after 1 January 2017. This amendment clarifies that the disclosures requirement of IFRS 12 are applicable to interest in entities classified as held for sale except for summarized financial information. b. Standards, amendments and interpretations effective after 1 January 2018: - IFRS 9, Financial instruments ; effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. - IFRS 15, Revenue from contracts with customers ; effective from annual periods beginning on or after 1 January 2018. IFRS 15, Revenue from contracts with customers is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. - Amendment to IFRS 15, Revenue from contracts with customers, effective from annual periods beginning on or after 1 January 2018. These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The IASB has also included additional practical expedients related to transition to the new revenue standard. - Amendments to IFRS 4, Insurance contracts regarding the implementation of IFRS 9, Financial Instruments ; effective from annual periods beginning on or after 1 January 2018. These amendments introduce two approaches: an overlay approach and a deferral approach. The amended standard will: Give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued; and Give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments standard IAS 39. 10

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Turkish Financial Reporting Standards Change and Comparative Information and reclassifications in the Previous Period s Financial Statements (Continued) - Amendment to IAS 40, Investment property relating to transfers of investment property; effective from annual periods beginning on or after 1 January 2018. These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. - Amendments to IFRS 2, Share based payments on clarifying how to account for certain types of share-based payment transactions; effective from annual periods beginning on or after 1 January 2018. This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equitysettled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee s tax obligation associated with a share-based payment and pay that amount to the tax authority. - Annual improvements 2014-2016; effective from annual periods beginning on or after 1 January 2018. These amendments impact 2 standards: IFRS 1, First time adoption of IFRS, regarding the deletion of short-term exemptions for first-time adopters regarding IFRS 7, IAS 19 and IFRS 10, IAS 28, Investments in associates and joint venture regarding measuring an associate or joint venture at fair value. - IFRIC 22, Foreign currency transactions and advance consideration ; effective from annual periods beginning on or after 1 January 2018. This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. - Amendment to IFRS 9, Financial instruments ; effective from annual periods beginning on or after 1 January 2019. This amendment confirm that when a financial liability measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised immediately in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. This means that the difference cannot be spread over the remaining life of the instrument which may be a change in practice from IAS 39. - Amendment to IAS 28, Investments in associates and joint venture ; effective from annual periods beginning on or after 1 January 2019. These amendments clarify that companies account for long-term interests in associate or joint venture to which the equity method is not applied using IFRS 9. 11

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Turkish Financial Reporting Standards Change and Comparative Information and reclassifications in the Previous Period s Financial Statements (Continued) - IFRS 16, Leases ; effective from annual periods beginning on or after 1 January 2019, this standard replaces the current guidance in IAS 17 and is a farreaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right of use asset for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. - IFRIC 23, 'Uncertainty over income tax treatments'; effective from annual periods beginning on or after 1 January 2019. This IFRIC clarifies how the recognition and measurement requirements of IAS 12 'Income taxes', are applied where there is uncertainty over income tax treatments. The IFRS IC had clarified previously that IAS 12, not IAS 37 'Provisions, contingent liabilities and contingent assets', applies to accounting for uncertain income tax treatments. IFRIC 23 explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. For example, a decision to claim a deduction for a specific expense or not to include a specific item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under tax law. IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. - IFRS 17, Insurance contracts ; effective from annual periods beginning on or after 1 January 2021. This standard replaces IFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. The Group will assess the affect of the regarding changes mentioned above and apply accordingly. 12

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Turkish Financial Reporting Standards Change and Comparative Information and reclassifications in the Previous Period s Financial Statements (Continued) As of the date of the report, the following standards, interpretations and amendments have been published by the Public Oversight Authority (POA) as a draft text open to public opinion: a. IFRS 16, Leases b. IFRIC 22, Foreign currency transactions and advance consideration As of the date of the report, the following standard amendments have not yet been published by the Public Oversight Authority (POA): IFRS 2, Share based payments changes, IFRS 15, Revenue from contracts with customers chenge, IAS 7, Statement of cash flows changes, IAS 12, Income Taxes changes, IAS 40, Investment property changes, Annual improvements 2014-2016, IFRS 4, Insurance contracts changes, IFRS 17, Insurance contracts, IFRIC 23, Uncertainty over income tax treatments. 2.4 TFRS that are released but have not become effective and have not been put into effect early New standards, comments and changes which were released as of the date the financial statements were approved but are not effective for the current reporting period and have not been put into effect early by the Group are stated below. Unless otherwise stated, the Group will make necessary changes that affect its financial statements and footnotes after new standards and comments become effective. TFRS 15 Revenue from contracts with customers In September 2016, Public Oversight, Accounting and Auditing Standards Authority released the standard for Revenue from contracts with customers TFRS 15. This standard includes the changes made by TASB in April 2016 to clarify TFRS 15. The new five-stage model in the standard explains the requirements for recognising and measuring revenue. The standard will be applied to revenue from contracts with customers and constitutes a model for accruing and measuring sales of certain nonfinancial assets that are not related with the ordinary activities of a business (e.g. outflow of tangible fixed assets). The implementation date of TFRS 15 is the annual accounting period starting on 1 January 2018 or later. Earlier implementation is permitted. Two alternatives were presented for transition to TFRS 15: full retrospective implementation or modified retrospective implementation. If the modified retrospective implementation is preferred, previous periods will not be rearranged, but comparative numerical information will be provided in financial statement footnotes. The change is not expected to have any impact on the financial conditions or performance of the Group. 13

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.4 TFRS that are released but have not become effective and have not been put into effect early (Continued) TFRS 9 Financial instruments Public Oversight, Accounting and Auditing Standards Authority released the final form of TFRS 9 Financial Instruments in January 2016. TFRS 9 combines the three aspects of the financial instruments recognition project (classification and measurement, impairment and hedge accounting). TFRS 9 relies on a single rational classification and measurement approach that reflects the business model under which the financial assets are managed and the features of the cash flow. Accordingly, with the prospective use of the expected credit loss model, which will ensure that the credit loss is recorded in a timely manner, a single model, which can be applied to all financial instruments subject to impairment accounting, is created. Moreover, when banks and other companies choose to measure their financial debts based on fair value, TFRS 9 handles the subject of their own credit risk arising from recording financial debt as income on the profit or loss statement, due to the decrease of the fair value of the financial debt in relation to the decrease of the credit value. The standard also includes a hedging model developed to better align the risk management economy with accounting practices. TFRS 9 is applicable for annual accounting periods that start on 1 January 2018 or later and all requirements of the standard may be applied earlier. Alternatively, businesses may choose the early implementation of the provisions concerning the presentation of earnings and losses of financial liabilities for which the fair value change is reflected in profits or losses, without implementing other conditions in the standard. The Group does not expect the standard to have any impact on its financial condition or performance. 2.5 Summary of critical account policies Consolidation principles The consolidated financial statements include the accounts of the parent company, Sinpaş REIC andits subsidiaries, joint ventures and associates on the basis set out in sections at the below. The financial statements of the companies included in the scope of consolidation are based on the statutory records which are maintained under historical cost conversion, with adjustments and reclassifications, for the purpose of fair presentations in accordance with TFRS and application of uniform accounting policies and presentation. Subsidiaries Control is provided with influence on financial and operational policy in order to obtain economic benefit from enterprise benefit. Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group has the power to govern the financial and operating policies of its Subsidiary for the benefit of the Group through the power to exercise more than 50% of the voting rights relating its shares in the Subsidiary. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. 14

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of critical account policies (Continued) The subsidiaries fully consolidated sets out Note 1, the proportion of ownership interest and the effective interest of the Group in these subsidiaries as of 31 December 2017 and 2016. The Company consolidates its Subsidiary from the date of establishment of the Subsidiary by the Group and subsidiaries are excluded from the consolidation at the date on which control is lost. Where necessary, accounting policies for the Subsidiary can been changed to ensure consistency with the policies adopted by the Company. The result of operations of subsidiaries acquired or sold during the year are included in the consolidated statement of comprehensive income from the date of acquisition or until the date of sale. The balance sheets and statements of income of the subsidiaries are consolidated on line-by-line basis and the carrying value of the investment held by the Group and its subsidiaries is netted off against the related shareholders equity. Intercompany transactions and balances between the Group and its subsidiaries are netted off during the consolidation. The cost of, and the dividends arising from, shares held by the Group in its subsidiaries are netted off from shareholders' equity and income for the period, respectively. The share of non-controlling parties in the net assets and the results of subsidiaries for the period are separately classified as non-controlling interest in the consolidated balance sheets and statements of income. The non-controlling interests consist of shares from initial business combinations and the noncontrolling shares from the changes in equity after the acquisition date. When the loss applicable to the non-controlling shareholders exceeds the non-controlling interest in the equity of the subsidiary, the excess loss and the further losses applicable to the non-controlling shareholders are charged against the non-controlling interest. Associates If an investor holds, directly or indirectly (eg through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Significan influence; a substantial or majority ownership by another company does not necessarily preclude an investor from having significant influence. The existence of significant influence by an investor is usually evidenced in one or more of the following ways: - Representation on the board of directors or equivalent governing body of the investee, - Participation in policy-making processes, including participation in decisions about dividends or other distributions, - Material transactions between the investor and the investee, - Interchange of managerial personnel, or - Provision of essential technical information. The Group's associates are accounted for using the equity method in accordance with TAS 28, Investments in Associates. 15

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of critical account policies (Continued) The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor s share of net assets of the investee. The investor s share of the profit or loss of the investee is recognised in the investor s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor s proportionate interest in the investee arising from changes in the investee s other comprehensive income. The associate prepared its financial statements by using the accounting policies and calculation methods based on the preparation of the latest annual financial statements taking into account the uniform accounting principles and practices as of the date of the financial statements. The results of the associate's activities are included or excluded from the effective date of such transactions in accordance with the acquisition, elimination or partnership transaction. An investment in an associate is accounted for using the equity method from the date on which it becomes an associate. On acquisition of the investment any difference between the cost of the investment and the investor s share of the net fair value of the associate s identifiable assets and liabilities is accounted for as follows: - Goodwill relating to an associate is included in the carrying amount of the investment. Amortisation of that goodwill is not permitted. - Any excess of the investor s share of the net fair value of the associate s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the investor s share of the associate s profit or loss in the period in which the investment is acquired. Revenue Revenue is recognized on accrual basis at the fair value of the amount received or to be received based on the assumptions that revenue is measured reliably. Revenue is presented net of sales returns, discounts and provisions. Revenue from buyers Revenue from the sale of residence is recongnized when the Group has transferred to the buyer the significant risks and rewards of ownership, retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably and recorded as revenue when delivery form is signed. 16

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of critical account policies (Continued) The processes with the land owner The Group guarantees to develop housing project in the land owned by others according to the construction in return for flat agreement and revenue sharing agreement and in return to it the Group guarantees to transfer the percentage of construction in return for flat agreement by the agreed rate in agreement, in revenue sharing agreement they guarantee to transfer the sales revenue percentage by the agreed rate in agreement. Return for flat agreement the value of the land transferred to the group is calculated according to the agreement date fair value and after the Groupfully performs all the assignments in agreement and after the land owner signs the delivery record, when all the risks and advantages are transferred to the land owner arises fromhaving an asset, it is accounted revenue by the land owner. Revenue sharing agreements, when there is sales revenue it is transferred to land owners and the transferred amount is recorded as the advance which s given to the land owners in tranfer date and when the issues, which has been mentioned in the paragraph of revenue earned from customers, is fully performed, the real value of the land given to the Goup is accounted by yhe revenue earned by the land owner. Inventories Work-in-progress products of residential construction projects are consist of direct cost and indirect costs which can be related to the project subject and charged to the project. Also, they are stated at their lower of cost and realizable value. Landed properties are purchased for evaluation in residential construction projects are recognized under Land and are stated at their lower of cost and realizable value. Completed residential units are consists of completed and available for sale house projects and are stated at their lower of cost and realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When there is a decrease in value of finished houses, a provision is included in the statement of profit/(loss) in the period when the diminution of value occurred. The Group, classified lands and incomplete housing units which will be completed more than 12 months, are classified as long term inventories, complited housing units and commercial units which will be completed within a year, are classified as short term inventories in the financial statements. Property, plant and equipment and related depreciation Property and equipment are carried at cost less accumulated depreciation and provision for impairment, if any. Any directly attributable costs of setting the asset in working order for its intended use are included in the initial measurement. The assets which are to be buildng process but not yet are classified as to be rent or administrative process or other purposes, is featured by impairment losses calculated. Legal fees are involved to the cost. İf it is to mentioned about the assest which takes long time to be ready for to use and sell, the loan costs is being activated according to the related companys accounting processes. These assets are to be depreciated like which is used in other fixed assets depreciation method. 17