TÜRKİYE İŞ BANKASI ANONİM ŞİRKETİ THE CONSOLIDATED INTERIM FINANCIAL REPORT AS AT AND FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2016

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4 TÜRKİYE İŞ BANKASI ANONİM ŞİRKETİ THE CONSOLIDATED INTERIM FINANCIAL REPORT AS AT AND FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2016 Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: Fax: Web Site: The consolidated interim financial report as at and the for the three-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 special Purpose 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. Special Purpose Entities TIB CARD RECEIVABLES FUNDING COMPANY LIMITED TIB DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY Associates ARAP-TÜRK BANKASI A.Ş. The consolidated three 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 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 Page: 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 2 Methods 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 12 III. Information on the Consolidated Companies 13 IV. Forward, Option Contracts and Derivative Instruments 15 V. Interest Income and Expenses 15 VI. Fees and Commission Income and Expenses 15 VII. Financial Assets 15 VIII. Impairment of Financial Assets 16 IX. Offsetting Financial Instruments 17 X. Sale and Repurchase Agreements and Securities Lending Transactions 17 XI. Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities 17 XII. Goodwill and Other Intangible Assets 18 XIII. Tangible Assets 18 XIV. Investment Property 19 XV. Leasing Transactions 19 XVI. Insurance Technical Income and Expense 19 XVII. Insurance Technical Reserves 19 XVIII. Provisions and Contingent Liabilities 20 XIX. Contingent Assets 20 XX. Liabilities Regarding Employee Benefits 20 XXI. Taxation 22 XXII. Borrowings 24 XXIII. Equity Shares and Issuance of Equity Shares 24 XXIV. Bank Acceptances and Bills of Guarantee 24 XXV. Government Incentives 24 XXVI. Segment Reporting 24 XXVII. Other Disclosures 24 SECTION IV Information on the Financial Position and Risk Management of the Group I. Explanations on Shareholders Equity 25 II. Explanations on Consolidated Currency Risk 30 III. Explanations on Consolidated Interest Rate Risk 32 IV. Explanations on Equity Shares Risk Arising from Banking Book 35 V. Explanations on Consolidated Liquidity Risk and Consolidated Liquidity Coverage Ratio 35 VI. Explanations on Consolidated Leverage Ratio 41 VII. Explanations on Risk Management Objectives and Policies 41 VIII. Explanations on Consolidated Business Segmentation 42 SECTION V Disclosures and Footnotes on the Consolidated Interim Financial Statements I. Disclosures and Footnotes on Consolidated Assets 44 II. Disclosures and Footnotes on Consolidated Liabilities 60 III. Disclosures and Footnotes on Consolidated Off-Balance Sheet Items 69 IV. Disclosures and Footnotes on Consolidated Income Statement 71 V. Disclosures and Footnotes on the Group s Risk Group 75 VI. Subsequent Events 77 SECTION VI Other Explanations I. Explanation on the Group s Credit Ratings 78 SECTION VII Limited Review Report I. Explanations on the Limited Review Report 80 II. Explanations and Footnotes of the Independent Auditors 80 SECTION VIII Interim Activity Report I. General Information 81 II. Turkish Economy and Banking Sector Outlook 83 III. Financial Information and Assessment on Bank 84 IV. Information About the Meetings of the Board of Directors 87 V. Information About the Activities of the Committee of Internal Systems 87 VI. Information About the Activities of the Credit Committee 88 VII. Corporate Governance Committee 88 VIII. Information on the Transactions Relating to Banks Risk Group 88 IX. Information on Dividend Distribution 88 X. Basis of Consolidation and Consolidated Subsidiaries 89 XI. Additional Information about the 1 January March

6 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 31 March 2016, 40.15% 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 31.76% are on free float (31 December 2015: 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 Board of Directors: Name and Surname Areas of Responsibility H. Ersin Özince Chairman of the Board and the Remuneration Committee Füsun Tümsavaş Deputy Chairman, Audit Committee, TRNC Internal Systems Committee and the Risk Committee, Chairman of the Corporate Governance Committee, 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 Hasan Koçhan Director, Member of the Credit Committee Mustafa Kıcalıoğlu Hüseyin Yalçın Murat Vulkan Prof.Dr.Turkay Berksoy Kemal Meral Ulaş Moğultay Feray Demir Director Director Director Director, Audit Committee, TRNC Internal Systems Committee, Remuneration Committee, and Corporate Governance Committee, Alternate Member of the Credit Committee Director Director, Member of Corporate Social Responsibility Committee Director, Member of the Corporate Social Responsibility Committee, Alternate Member of the Credit Committee Chief Executive Officer and Deputy Chief Executives: Name and Surname Adnan Bali Mahmut Magemizoğlu Hakan Aran Levent Korba Ertuğrul Bozgedik Yalçın Sezen Senar Akkuş İlhami Koç Yılmaz Ertürk Ergün Yorulmaz Murat Bilgiç Nevzat Burak Seyrek Areas of Responsibility Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of Executive Committee, Chairman of the Human Resources Committee Financial Management, Investor Relations, Strategy and Corporate Performance Management, Managerial Reporting and Internal Accounting, Member of the Risk Committee Information Technology Management, Digital Banking Operations, Data Management Banking Operations, Retail Loan and Card Operations, Support Services and Purchasing, Foreign Trade and Commercial Loan Operations, Internal Operations Management, Construction and Real Estate Management, Branch Network Development Corporate Loans, SME Loans, Commercial Loans and Consumer Loans Underwriting, Loans Portfolio Management, Member of the Risk Committee Consumer Loans, Card Payment Systems, Retail Banking Marketing, Sales and Product Management, Retail Loans and Card Operations, Digital Banking, Private Banking Marketing and Sale Management, Member of the Corporate Social Responsibility Committee Treasury Management, Corporate Communication Management, Corporate Social Responsibility Committee Member of the Risk Committee Associates, Cross-Border Banking and Foreign Subsidiaries, Branches and Representative Offices, Capital Markets Management and the Risk Committee (1) Economic Research, International Financial Institutions Commercial Banking, Retail Banking and General Legal Counsellorship, Financial Analysis, Commercial and Corporate Loans and Retail Loans Monitoring and Recovery Management Corporate and Commercial Banking Marketing, Sales and Product Management, SME and Business Banking Sales, Free Zone Branches Enterprise Architecture, Human Resources, and Talent Management, Coordination of Consumer Relations Officer (1) İlhami Koç, participates in the meetings of the Risk Committee on a consolidated basis. 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 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 ) Cumhuriyet Halk Partisi Republican People s Party (Atatürk s Shares) 1,806, % 1,806,553 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 Parent 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 Line-By-Line 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 information about the organizations 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. - IŞ FAKTORING A.Ş. - IŞ FINANSAL KIRALAMA A.Ş. - IŞ GAYRIMENKUL YATIRIM ORTAKLIĞI A.Ş. - IŞ GIRIŞIM SERMAYESI YATIRIM ORTAKLIĞI A.Ş. - IŞ 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 Special Purpose Entities, - TIB Diversified Payment Rights Finance Company - TIB Card Receivables Funding Company Limited are fully consolidated, 2

8 Its associate; - ARAP-TÜRK BANKASI A.Ş. is accounted under equity accounting method. 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. The 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 24 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. 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

9 İşbank AG İşbank AG was founded to carry out the banking transactions in Europe. İşbank AG has 17 branches in total, 13 branches in Germany, 1 branch in Netherlands, France, Switzerland and Bulgaria. 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 7 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. 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 None. VIII. 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 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED FINANCIAL STATEMENTS (STATEMENT OF FINANCIAL POSITION) THOUSAND TL CURRENT PERIOD PRIOR PERIOD ASSETS Footnotes (31/03/2016) (31/12/2015) TL FC Total TL FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK V-I-a 4,327,470 26,856,803 31,184,273 3,329,033 29,160,943 32,489,976 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) V-I-b 1,161,740 1,228,690 2,390,430 1,160,527 1,342,922 2,503, Financial Assets Held for Trading 1,161,740 1,228,690 2,390,430 1,160,527 1,342,922 2,503, Government Debt Securities 320,658 9, , ,672 9, , Equity Securities 141, ,651 79, , Derivative Financial Assets Held for Trading 194,353 1,190,512 1,384, ,282 1,302,717 1,451, Other Marketable Securities 505,155 28, , ,206 31, , Financial Assets at Fair Value Through Profit and Loss Government Debt Securities Equity Securities Loans Other Marketable Securities III. BANKS V-I-c 3,332,220 3,087,822 6,420,042 1,658,379 4,717,715 6,376,094 IV. MONEY MARKET PLACEMENTS 1,634,585-1,634,585 1,297,194 11,009 1,308, Interbank Money Market Placements Istanbul Stock Exchange Money Market Placements 1,625,831-1,625,831 1,287,534-1,287, Receivables from Reverse Repurchase Agreements 8,754-8,754 9,660 11,009 20,669 V. FINANCIAL ASSETS AVAILABLE-FOR-SALE (Net) V-I-d 37,180,322 11,525,496 48,705,818 35,679,613 11,329,729 47,009, Equity Securities 68, , ,328 82, , , Government Debt Securities 36,484,981 9,932,988 46,417,969 34,968,833 9,802,942 44,771, Other Marketable Securities 627,139 1,323,382 1,950, ,120 1,260,287 1,888,407 VI. LOANS AND RECEIVABLES V-I-e 114,833,713 77,392, ,225, ,229,454 77,708, ,937, Loans and Receivables 113,790,132 77,371, ,161, ,215,974 77,693, ,909, Loans to the Bank's Risk Group 185, , , , , , Government Debt Securities Other 113,604,971 77,255, ,860, ,056,795 77,526, ,583, Non-Performing Loans 4,111, ,545 4,266,152 3,791, ,697 3,920, Specific Provisions (-) 3,068, ,832 3,201,858 2,778, ,809 2,891,863 VII. FACTORING RECEIVABLES 1,284, ,829 1,551,444 1,617, ,483 1,951,278 VIII. HELD TO MATURITY INVESTMENTS (Net) V-I-f 4,484, ,064 4,752,337 4,224, ,513 4,497, Government Debt Securities 4,407, ,162 4,557,578 4,153, ,408 4,310, Other Marketable Securities 76, , ,759 71, , ,765 IX. INVESTMENTS IN ASSOCIATES (Net) V-I-g 170, , , , Associates Accounted for Using the Equity Method 129, , , , Unconsolidated Associates 40,552-40,552 40,552-40, Financial Investments Non-Financial Investments 40,552-40,552 40,552-40,552 X. INVESTMENTS IN SUBSIDIARIES (Net) V-I-h 5,425,157-5,425,157 4,779,842-4,779, Unconsolidated Financial Subsidiaries Unconsolidated Non-Financial Subsidiaries 5,425,157-5,425,157 4,779,842-4,779,842 XI. JOINTLY CONTROLLED ENTITIES (JOINT VENTURES) (Net) V-I-i 2,260-2,260 2,260-2, Jointly Controlled Entities Accounted for Using the Equity Method Unconsolidated Jointly Controlled Entities 2,260-2,260 2,260-2, Jointly Controlled Financial Entities Jointly Controlled Non-Financial Entities 2,260-2,260 2,260-2,260 XII. LEASE RECEIVABLES V-I-j 1,150,026 1,943,091 3,093,117 1,147,324 2,051,987 3,199, Finance Lease Receivables 1,375,715 2,171,216 3,546,931 1,379,133 2,300,873 3,680, Operating Lease Receivables 5,537-5,537 2,776-2, Other Unearned Income (-) 231, , , , , ,471 XIII. DERIVATIVE FINANCIAL ASSETS HELD FOR HEDGING V-I-k - 46,689 46,689-4,093 4, Fair Value Hedges - 46,689 46,689-4,093 4, Cash Flow Hedges Net Foreign Investment Hedges XIV. TANGIBLE ASSETS (Net) 5,820,703 50,085 5,870,788 5,817,603 51,059 5,868,662 XV. INTANGIBLE ASSETS (Net) 450,977 58, , ,906 48, , Goodwill 35,974-35,974 35,974-35, Other 415,003 58, , ,932 48, ,787 XVI. INVESTMENT PROPERTY (Net) V-I-l 2,998,942-2,998,942 2,962,675-2,962,675 XVII. TAX ASSETS V-I-m 775,029 17, , ,442 21, , Current Tax Assets 82,077 13,629 95,706 51,752 10,374 62, Deferred Tax Assets 692,952 4, , ,690 11, ,861 XVIII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-n 64,167 14,488 78,655 55,522 11,797 67, Held for Sale 64,167 14,488 78,655 55,522 11,797 67, Discontinued Operations XIX. OTHER ASSETS V-I-o 16,079,146 2,939,900 19,019,046 14,430,339 2,783,345 17,213,684 TOTAL ASSETS 201,175, ,696, ,872, ,649, ,849, ,498,972 5

11 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED FINANCIAL STATEMENTS (STATEMENT OF FINANCIAL POSITION) THOUSAND TL CURRENT PERIOD PRIOR PERIOD LIABILITIES Footnotes (31/03/2016) (31/12/2015) TL FC Total TL FC Total I. DEPOSITS V-II-a 76,180,254 82,312, ,493,159 71,476,389 82,724, ,201, Deposits from the Bank's Risk Group 915,272 2,794,150 3,709, ,932 2,996,451 3,496, Other 75,264,982 79,518, ,783,737 70,976,457 79,728, ,704,907 II. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING V-II-b 197,009 1,283,264 1,480, , ,942 1,206,148 III. FUNDS BORROWED V-II-c 4,390,451 40,105,588 44,496,039 4,572,972 40,895,562 45,468,534 IV. MONEY MARKET FUNDS 18,082,432 3,925,410 22,007,842 21,440,842 3,183,591 24,624, Interbank Money Market Funds 162, , Istanbul Stock Exchange Money Market Funds 1,754,220-1,754,220 1,788,893-1,788, Funds Provided Under Repurchase Agreements 16,166,212 3,925,410 20,091,622 19,651,949 3,183,591 22,835,540 V. MARKETABLE SECURITIES ISSUED (Net) V-II-d 8,585,588 13,681,834 22,267,422 8,612,253 15,467,305 24,079, Bills 7,399, ,694 8,196,685 7,461,176 1,927,381 9,388, Asset-backed Securities Bonds 1,185,597 12,885,140 14,070,737 1,151,077 13,539,924 14,691,001 VI. FUNDS 982 3,848 4,830 1,690 28,987 30, Borrower funds 982 3,848 4,830 1,690 28,987 30, Other VII. MISCELLANEOUS PAYABLES 18,310,100 1,231,871 19,541,971 16,618,658 1,222,965 17,841,623 VIII. OTHER LIABILITIES V-II-e 2,010,249 1,001,353 3,011,602 2,050, ,637 2,869,727 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 MANAGEMENT V-II-g ,799 5, Fair Value Hedges ,799 5, Cash Flow Hedges Net Foreign Investment Hedges XII. PROVISIONS V-II-h 12,617, ,857 13,591,932 12,596, ,251 13,562, General Loan Loss Provisions 2,962,071 41,219 3,003,290 2,972,728 42,664 3,015, Provision for Restructuring Reserves for Employee Benefits 648,101 2, , ,598 2, , Insurance Technical Reserves (Net) 5,576, ,696 6,482,884 5,231, ,929 6,130, Other Provisions 3,430,715 24,476 3,455,191 3,778,106 22,607 3,800,713 XIII. TAX LIABILITIES V-II-i 920,707 10, , ,474 12, , Current Tax Liabilities 909,963 10, , ,575 12, , Deferred Tax Liabilities 10,744-10,744 5,899-5,899 XIV. LIABILITIES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Held for Sale Discontinued Operations XV. SUBORDINATED DEBT - 2,985,297 2,985,297-4,192,969 4,192,969 XVI. SHAREHOLDERS' EQUITY V-II-j 37,687, ,559 38,061,196 36,544, ,151 36,683, Paid-in Capital 4,500,000-4,500,000 4,500,000-4,500, Capital Reserves 6,580, ,339 6,866,257 5,516,657 45,977 5,562, Share premium 33,941-33,941 33,941-33, Share Cancellation Profits Marketable Securities Value Increase Fund 2,256, ,264 2,541,325 1,191,800 44,411 1,236, Tangible Assets Revaluation Reserve 2,707, ,707,553 2,707,478 1,566 2,709, 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 1,584,617-1,584,617 1,584,617-1,584, Profit Reserves 20,992, ,942 21,184,935 18,567, ,783 18,748, Legal Reserves 3,041,719 1,363 3,043,082 2,773,526 1,363 2,774, Statutory Reserves 81,638-81,638 71,201-71, Extraordinary Reserves 17,930,272 26,761 17,957,033 15,770,545 26,761 15,797, Other Profit Reserves (60,636) 163, ,182 (47,959) 152, , Profit or Loss 1,065,313 (117,431) 947,882 3,402,686 (91,074) 3,311, Prior Years' Profit/Loss 146,152 (91,074) 55,078 73,186 (92,314) (19,128) Current Period Profit/Loss 919,161 (26,357) 892,804 3,329,500 1,240 3,330, Non-controlling Interest V-II-k 4,548,413 13,709 4,562,122 4,557,719 3,465 4,561,184 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 178,982, ,890, ,872, ,066, ,431, ,498,972 6

12 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET ITEMS THOUSAND TL OFF-BALANCE SHEET ITEMS CURRENT PERIOD PRIOR PERIOD Footnotes (31/03/2016) (31/12/2015) TL FC Total TL FC Total A. OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III) 97,015, ,154, ,170, ,375, ,624, ,999,525 I. GUARANTEES AND SURETYSHIPS V-III 20,309,024 29,590,035 49,899,059 20,849,553 32,062,712 52,912, Letters of Guarantee 20,093,669 18,518,906 38,612,575 20,561,735 19,279,873 39,841, Guarantees Subject to State Tender Law 781,654 2,411,292 3,192, ,216 2,524,859 3,329, Guarantees Given for Foreign Trade Operations 3,474,415 6,579,047 10,053,462 3,540,122 6,843,585 10,383, Other Letters of Guarantee 15,837,600 9,528,567 25,366,167 16,217,397 9,911,429 26,128, Bank Acceptances 2, , ,597 4, , , Import Letters of Acceptance - 133, , , , Other Bank Acceptances 2, , ,308 4, , , Letters of Credit 3,942 9,211,182 9,215,124 5,655 10,900,839 10,906, Documentary Letters of Credit 1,624 7,011,924 7,013,548 5,067 8,404,696 8,409, Other Letters of Credit 2,318 2,199,258 2,201, ,496,143 2,496, Prefinancing Given as Guarantee Endorsements Endorsements to the Central Bank of Turkey Other Endorsements Purchase Guarantees for Securities Issued Factoring Guarantees 48,182 13,513 61,695 50,022 14,269 64, Other Guarantees 160, ,356 1,112, , ,972 1,144, Other Suretyships II. COMMITMENTS 44,507,536 16,679,654 61,187,190 43,118,249 15,796,161 58,914, Irrevocable Commitments 43,866,605 8,374,771 52,241,376 42,559,743 5,229,275 47,789, Forward Asset Purchase Commitments 504,552 6,200,995 6,705, ,436 3,063,854 3,272, Forward Deposit Purchase and Sale Commitments Capital Commitment for Associates and Subsidiaries Loan Granting Commitments 10,559, ,369 11,019,743 10,355, ,173 10,782, Securities Underwriting Commitments Commitments for Reserve Deposit Requirements Commitments for Cheque Payments 5,906,267-5,906,267 5,654,056-5,654, Tax and Fund Liabilities from Export Commitments 11,339-11,339 11,630-11, Commitments for Credit Card Expenditure Limits 21,868,088-21,868,088 21,219,999-21,219, Commitments for Credit Cards and Banking Services Promotions 90,551-90, , , Receivables from Short Sale Commitments Payables for Short Sale Commitments 9,658-9,658 12,960-12, Other Irrevocable Commitments 4,916,776 1,713,407 6,630,183 4,997,124 1,738,248 6,735, Revocable Commitments 640,931 8,304,883 8,945, ,506 10,566,886 11,125, Revocable Loan Granting Commitments 640,931 8,304,883 8,945, ,506 10,566,886 11,125, Other Revocable Commitments III. DERIVATIVE FINANCIAL INSTRUMENTS 32,199, ,884, ,083,860 37,407, ,765, ,172, Derivative Financial Instruments held for risk management - 4,571,640 4,571,640-4,689,900 4,689, Fair Value Hedges - 4,571,640 4,571,640-4,689,900 4,689, Cash Flow Hedges Net Foreign Investment Hedges Derivative Financial Instruments Held for Trading 32,199,410 98,312, ,512,220 37,407, ,075, ,482, Forward Foreign Currency Buy/Sell Transactions 4,018,506 7,612,588 11,631,094 3,450,436 9,706,595 13,157, Forward Foreign Currency Buy Transactions 2,035,187 3,774,592 5,809,779 1,693,095 4,859,603 6,552, Forward Foreign Currency Sell Transactions 1,983,319 3,837,996 5,821,315 1,757,341 4,846,992 6,604, Currency and Interest Rate Swaps 22,875,637 77,982, ,858,548 28,757,554 81,872, ,629, Currency Swap Buy Transactions 3,765,812 27,959,337 31,725,149 6,368,873 29,957,234 36,326, Currency Swap Sell Transactions 17,986,253 11,186,852 29,173,105 19,470,401 13,851,644 33,322, Interest Rate Swap Buy Transactions 561,786 19,418,361 19,980,147 1,459,140 19,031,667 20,490, Interest Rate Swap Sell Transactions 561,786 19,418,361 19,980,147 1,459,140 19,031,667 20,490, Currency, Interest Rate and Security Options 4,892,189 7,049,452 11,941,641 4,771,805 8,141,048 12,912, Currency Call Options 3,085,352 2,263,034 5,348,386 3,282,994 2,575,568 5,858, Currency Put Options 1,685,908 3,403,492 5,089,400 1,454,146 4,063,038 5,517, Interest Rate Call Options - 675, , , , Interest Rate Put Options - 675, , , , Securities Call Options 72,456 30, ,452 19,718-19, Securities Put Options 48,473-48,473 14,947-14, Currency Futures 5,242 5,244 10, , Currency Buy Futures 4, , Currency Sell Futures 561 4,683 5, Interest Rate Futures Interest Rate Buy Futures Interest Rate Sell Futures Other 407,836 5,662,615 6,070, ,004 5,354,757 5,781,761 B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 354,401, ,599, ,001, ,870, ,824, ,694,369 IV. ITEMS HELD IN CUSTODY 103,096,639 12,512, ,608, ,258,716 12,739, ,997, Customers Securities Held Investment Securities Held in Custody 83,679,916 1,223,563 84,903,479 92,530, ,273 93,496, Cheques Received for Collection 13,827,317 3,656,580 17,483,897 14,310,435 3,962,914 18,273, Commercial Notes Received for Collection 3,074,413 6,355,448 9,429,861 2,990,258 6,503,195 9,493, Other Assets Received for Collection 13,327 2,067 15,394 13,560 2,638 16, Assets Received for Public Offering 2,541-2,541 2,541-2, Other Items under Custody 406,773 1,274,474 1,681, ,881 1,304,228 1,715, Custodians 2,092,352-2,092,352 2,000,451-2,000,451 V. PLEDGED ITEMS 251,305, ,087, ,393, ,611, ,085, ,696, Marketable Securities 15,943,731 18,687,806 34,631,537 15,932,469 18,680,578 34,613, Guarantee Notes 6,457,808 14,242,836 20,700,644 6,195,668 12,822,301 19,017, Commodity 54,809,466 12,142,083 66,951,549 51,707,000 12,762,242 64,469, Warranty Real Estates 153,900,542 98,766, ,667, ,817,573 98,649, ,467, Other Pledged Items 20,193,781 62,248,382 82,442,163 16,958,590 60,170,312 77,128, Pledged Items-Depository VI. ACCEPTED BILL GUARANTEES AND SURETIES TOTAL OFF-BALANCE SHEET ITEMS (A+B) 451,417, ,754, ,171, ,245, ,448, ,693,894 7

13 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF INCOME INCOME STATEMENT Footnotes THOUSAND TL CURRENT PERIOD PRIOR PERIOD (01/01-31/03/2016) (01/01-31/03/2015) I. INTEREST INCOME V-IV-a 5,908,295 4,899, Interest Income on Loans 4,484,683 3,749, Interest Income on Reserve Deposits 42,532 7, Interest Income on Banks 102,196 69, Interest Income on Money Market Placements 44,887 6, Interest Income on Marketable Securities Portfolio 1,117, , Financial Assets Held for Trading 28,939 20, Financial Assets at Fair Value Through Profit and Loss Financial Assets Available for Sale 977, , Held to Maturity Investments 110,350 27, Finance Lease Income 67,146 59, Other Interest Income 49,615 35,468 II. INTEREST EXPENSE V-IV-b 3,042,791 2,655, Interest on Deposits 1,697,540 1,481, Interest on Funds Borrowed 296, , Interest on Money Market Funds 602, , Interest on Securities Issued 432, , Other Interest Expense 12,833 15,114 III. NET INTEREST INCOME / EXPENSE (I - II) 2,865,504 2,243,648 IV. NET FEES AND COMMISSIONS INCOME / EXPENSE 499, , Fees and Commissions Received 779, , Non-cash Loans 104,782 84, Other 674, , Fees and Commissions Paid 280, , Non-cash Loans 1,489 2, Other 278, ,842 V. DIVIDEND INCOME 194,722 41,025 VI. TRADING INCOME / LOSS (NET) V-IV-c (474,408) 178, Gains/Losses on Securities Trading 90, , Derivative Financial Transactions Gains/Losses (774,277) (194,799) 6.3 Foreign Exchange Gains/Losses 209, ,132 VII. OTHER OPERATING INCOME V-IV-d 1,463,372 1,460,357 VIII. TOTAL OPERATING INCOME / EXPENSE (III+IV+V+VI+VII) 4,548,284 4,347,552 IX. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES (-) V-IV-e 694, ,895 X. OTHER OPERATING EXPENSES (-) V-IV-f 2,666,769 2,398,883 XI. NET OPERATING INCOME (VIII-IX-X) 1,186,697 1,260,774 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER - - XIII. PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD 3,469 3,374 XIV. NET MONETARY POSITION GAIN/LOSS - - XV. PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XI+ +XIV) 1,190,166 1,264,148 XVI. TAX PROVISION FOR CONTINUING OPERATIONS (±) V-IV-g 191, , Current Tax Provision 425,271 90, Deferred Tax Provision (233,335) 164,087 XVII. NET PERIOD PROFIT/LOSS FROM CONTUNUING OPERATIONS (XV±XVI) 998,230 1,010,034 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-h Current Tax Provision Deferred Tax Provision - - XXII. NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) - - XXIII. NET PERIOD PROFIT/LOSS (XVII+XXII) V-IV-i 998,230 1,010, Group s Profit / Loss 892, , Non-controlling Interest (-) 105, ,629 Earnings per Share (in full TL)

14 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF INCOME AND EXPENSE ITEMS UNDER SHAREHOLDERS EQUITY THOUSAND TL INCOME AND EXPENSE ITEMS UNDER SHAREHOLDERS EQUITY CURRENT PERIOD PRIOR PERIOD (01/01-31/03/2016) (01/01-31/03/2015) I. ADDITIONS TO MARKETABLE SECURITIES VALUE INCREASE FUND FROM FINANCIAL ASSETS AVAILABLE FOR SALE 782,497 (679,832) II. REVALUATION SURPLUS ON TANGIBLE ASSETS (1,793) - III. REVALUATION SURPLUS ON INTANGIBLE ASSETS IV. TRANSLATION ADJUSTMENT FOR FOREIGN CURRENCY TRANSACTIONS (1,483) 22,232 V. PROFIT/LOSS ON DERIVATIVE FINANCIAL ASSETS HELD FOR CASH FLOW HEDGES (Effective Portion of the Changes in Fair Value) - - VI. PROFIT/LOSS ON DERIVATIVE FINANCIAL ASSETS HELD FOR NET FOREIGN INVESTMENT HEDGES (Effective Portion of the Changes in Fair Value) - - VII. THE EFFECT OF CORRECTIONS OF THE ERRORS AND CHANGES IN THE ACCOUNTING POLICIES - - VIII. OTHER INCOME AND EXPENSES RECOGNISED UNDER SHAREHOLDERS EQUITY ACCORDANCE WITH TAS 649,115 (472,668) IX. DEFERRED TAX EFFECT OF REVALUATION AND VALUE INCREASES (126,231) 137,263 X. NET INCOME/EXPENSE DIRECTLY RECOGNISED UNDER SHAREHOLDERS EQUITY (I+II+ +IX) 1,302,105 (993,005) XI. PROFIT/LOSS FOR THE PERIOD 892, , Net Changes in the Fair Values of Marketable Securities (Transfer to Profit/Loss) (28,716) (101,071) 11.2 The Portion of Derivative Financial Assets Held for Cash Flow Hedges Reclassified in and Transferred to Income Statement The Portion of Derivative Financial Assets Held for Net Foreign Investment Hedges Reclassified in and Transferred to Income Statement Other 921,520 1,008,476 XII. TOTAL PROFIT/LOSS RECOGNISED FOR THE PERIOD (X±XI) 2,194,909 (85,600) 9

15 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY THOUSAND TL CHANGES IN SHAREHOLDERS EQUITY Footnotes Paid-in Capital Share Share Cancellation Legal Statutory Extraordinary Other Net Current Prior Period Marketable Securities Tangible and Intangible Bonus Shares from Hedge Accumulated Rev. Reserve on Asset Total Shareholders'Equity Non-controlling Total Shreholder's Capital Inflation Adjustment Premium Profits Reserves Reserves Reserves Reserves Period Profit/(Loss) Profit / (Loss) Value Increase Fund Assets Revaluation Reserve Equity Participations Reserves Held for Sale and Discontinued Oper. Except Non-controlling Interest Interest Equity PRIOR PERIOD (31/03/2015) I. Beginning Balance 4,500,000 1,615,938 33,941-2,511,627 64,234 13,300,346 39,375-3,415,578 3,439,122 - (1,179) ,918,982 4,085,584 33,004,566 II. Corrections Made According to TAS The Effect of Corrections of Errors The Effect of Changes in Accounting Policies III. Adjusted Beginning Balance (I+II) 4,500,000 1,615,938 33,941 2,511,627 64,234 13,300,346 39,375-3,415,578 3,439,122 (1,179) 28,918,982 4,085,584 33,004,566 Changes During the Period IV. Increase/Decrease Due to Mergers V. Marketable Securities Value Increase Fund (1,015,237) (1,015,237) (42,545) (1,057,782) VI. Hedge Reserves (Effective Portion) Cash Flow Hedges Net Foreign Investment Hedges VII. Revaluation Surplus on Tangible Assets VIII. Revaluation Surplus on Intangible Assets IX. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) X. Translation Differences , ,232 (1,023) 21,209 XI. The Effect of Disposal of Assets XII. The Effect of Reclassification of Assets XIII. The Effect of Changes in the Equity of Subsidiaries on the Equity of the Bank XIV. Capital Increase Cash Internal Sources XV. Share Issue XVI. Share Cancellation Profits XVII. Paid-in-Capital Inflation Adjustment XVIII. Other (*) XIX. Net Profit / Loss for the Period , , ,629 1,010,034 XX. Profit Distribution ,005 6,967 2,492, (3,472,625) (710,388) (129,170) (839,558) 20.1 Dividend Paid (841,011) (841,011) (129,817) (970,828) 20.2 Transfer to Reserves ,005 6,967 2,361, (2,631,614) Other (**) , , ,270 Ending Balance (III+IV+V...+XVIII+XIX+XX) 4,500,000 1,615,938 33,941-2,774,632 71,201 15,792,611 61, ,405 (57,047) 2,423,885 - (1,179) ,122,994 4,015,475 32,138,469 CURRENT PERIOD (31/03/2016) I. Beginning Balance 4,500,000 1,615,938 33,941-2,774,889 71,201 15,797,306 73,379-3,311,612 1,236,211 2,709,044 (1,179) ,122,342 4,561,184 36,683,526 Changes During the Period II. Increase/Decrease Due to Mergers III. Marketable Securities Value Increase Fund ,305, ,305,079 20,627 1,325,706 IV. Hedge Reserves (Effective Portion) Cash Flow Hedges Net Foreign Investment Hedges V. Revaluation Surplus on Tangible Assets (1,491) (1,491) - (1,491) VI. Revaluation Surplus on Intangible Assets VII. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) VIII. Translation Differences (1,518) (1,483) 459 (1,024) IX. The Effect of Disposal of Assets X. The Effect of Reclassification of Assets XI. The Effect of Changes in the Equity of Subsidiaries on the Equity of the Bank XII. Capital Increase Cash Internal Sources XIII. Share Issue XIV. Share Cancellation Profits XV. Paid-in-Capital Inflation Adjustment XVI. Other (*) , ,469 (8,503) (7,034) XVII. Net Profit / Loss for the Period , , , ,230 XVIII. Profit Distribution ,193 10,437 2,159, (3,258,003) (819,646) (117,071) (936,717) 18.1 Dividend Paid (936,132) (936,132) (118,060) (1,054,192) 18.2 Transfer to Reserves ,193 10,437 2,043, (2,321,871) Other (**) , , ,475 Ending Balance (I+II+III...+XVI+XVII+XVIII) 4,500,000 1,615,938 33,941-3,043,082 81,638 17,957,033 71, ,804 55,078 2,541,325 2,707,553 (1,179) ,499,074 4,562,122 38,061,196 (*) Includes changes in Group's shares. (**) According to the Articles of Incorporation of the Bank, since a portion of the net profit for the period is distributed to the employees as a dividend, the provision provided for employee dividend distribution within the scope of TAS 19-Employee Benefits, has been added to distributable profit. 10

16 TÜRKİYE İŞ BANKASI A.Ş. CONSOLIDATED STATEMENT OF CASH FLOWS Footnotes THOUSAND TL CURRENT PERIOD PRIOR PERIOD (01/01-31/03/2016) (01/01-31/03/2015) A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating Profit Before Changes in Operating Assets and Liabilities 1,311,148 2,203, Interest Received 5,901,865 4,809, Interest Paid (2,770,435) (2,452,007) Dividend Received 24,644 15, Fees and Commissions Received 779, , Other Income 1,385,473 1,395, Collections from Previously Written Off Loans and Other Receivables 282, , Cash Payments to Personnel and Service Suppliers (1,453,739) (1,114,528) Taxes Paid (415,787) (500,080) Other (2,422,141) (862,336) 1.2 Changes in Operating Assets and Liabilities 5,343,412 1,968, Net (Increase) Decrease in Financial Assets Held for Trading 46,568 (18,915) Net(Increase) Decrease in Financial Assets at Fair Value through Profit or Loss Net (Increase) Decrease in Due From Banks 2,035,575 (2,582,802) Net (Increase) Decrease in Loans 448,231 (6,414,504) Net (Increase) Decrease in Other Assets (1,590,527) (869,187) Net Increase (Decrease) in Bank Deposits (191,430) (141,872) Net Increase (Decrease) in Other Deposits 5,521,702 7,930, Net Increase (Decrease) in Funds Borrowed (365,396) 5,327, Net Increase (Decrease) in Matured Payables Net Increase (Decrease) in Other Liabilities (561,311) (1,262,174) I. Net Cash Provided From Banking Operations 6,654,560 4,172,190 B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net Cash Provided from / Used in Investing Activities (1,891,642) (2,878,876) 2.1 Cash Paid for Purchase of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) - (250) 2.2 Cash Obtained from Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) (146,483) Tangible Asset Purchases (87,765) (164,941) 2.4 Tangible Asset Sales 28,670 39, Cash Paid for Purchase of Financial Assets Available for Sale (3,984,120) (5,716,685) 2.6 Cash Obtained from Sales of Financial Assets Available for Sale 2,573,241 2,866, Cash Paid for Purchase of Investment Securities Held to Maturity (388,229) (45,452) 2.8 Cash Obtained from Sales of Investment Securities Held to Maturity (*) 179, , Other (66,739) (125,669) C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net Cash Provided from / Used in Financing Activities (3,742,468) 42, Cash Obtained from Funds Borrowed and Securities Issued 4,842,079 4,454, Cash Used for Repayment of Funds Borrowed and Securities Issued (7,530,355) (4,281,952) 3.3 Equity Instruments Dividends Paid (1,054,192) (129,817) 3.5 Payments for Finance Leases Other - - IV. Effect of Change in Foreign Exchange Rate on Cash and Cash Equivalents (115,920) (11,216) V. Net Increase / (Decrease) in Cash and Cash Equivalents 904,530 1,324,894 VI. Cash and Cash Equivalents at Beginning of the Period 14,467,773 13,562,316 VII. Cash and Cash Equivalents at End of the Period 15,372,303 14,887,210 (*) Redeemed invesment securities are included. 11

17 SECTION THREE: EXPLANATIONS ON ACCOUNTING POLICIES I. Basis of Presentation 1. Basis of Presentation The consolidated financial statements, related notes and explanations in this report are prepared in accordance with the Regulation on Accounting Applications for Banks and Safeguarding of Documents 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 requirements of Turkish Accounting Standards published the Public Oversight Accounting and Auditing Standards Authority for the matters not regulated by the aforementioned legislations. Accounting policies applied and valuation methods used in the preparation of the consolidated financial statements are expressed in detail below. 2. Additional paragraph for convenience translation to English The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying consolidated financial statements are to be distributed, and International Financial Reporting Standards ( IFRS ), may have significant influence on the accompanying consolidated financial statements. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries and IFRS. II. Strategy for Use of Financial Instruments and on Foreign Currency Transactions 1. The Group s Strategy on Financial Instruments The Group s main financial activities comprise a wide range of activities such as banking, insurance and reinsurance services, brokerage services, investment consulting, real estate portfolio and asset management, financial lease, factoring services, portfolio and asset management. The liabilities on the Group s balance sheet are mainly composed of relatively short-term deposits, parallel to general liability structure of the banking system, which is its main field of other activity. As for the non-deposit liabilities, funds are collected through medium and short-term instruments. The liquidity risk that may arise from this liability structure can be easily controlled through deposit continuity, as well as widespread network of the correspondent banks, market maker status (The Parent Bank is one of the market maker banks) and by the use of liquidity facilities of the Central Bank of the Republic of Turkey (CBRT). The liquidity of the Group and the banking system can be easily monitored. On the other hand, foreign currency liquidity requirements are met by the money market operations and currency swaps. Most of the funds collected bear fixed-interest, and by monitoring the developments in the sector fixed and floating rate placements are made according to the yields of alternative investment instruments. The fixed rate Eurobond issued and a portion of fixed rate funds borrowed are subject to fair value hedge accounting. The Group enter into interest rate swap agreements in order to hedge the change in fair values of its fixed rate financial liabilities. The changes in the fair value of the hedged fixed rate financial liabilities and hedging interest rate swaps are recognized under the statement of profit/loss. At the beginning and later period of the hedging transaction, the aforementioned hedging transactions are expected to offset changes occurred in the relevant period of the hedging transaction and hedged risk (attributable to hedging risk) and effectiveness tests are performed in this regard. The hedge accounting is discontinued when the hedging instrument expires, is exercised, sold or no longer effective. When discontinuing fair value hedge accounting, the cumulative fair value changes in carrying value of the hedged item arising from the hedged risk are amortized and recognized in income statement over the life of the hedged item from that date of the hedge accounting is discontinued. By taking into account the global and national economic outlook, market conditions, current and potential credit customers expectations and tendencies, and risks such as; interest rate, liquidity and currency risks, the Group s placements are focused on high yielding and low risk assets and safety principle has always been the top priority. Generally a pricing policy aiming at high return is implemented in the long-term placements of the Group, and attention is paid to the maximum use of noninterest income generation opportunities. In management of Financial Statements, this strategy is parallel to and acts within legal limits. The primary objectives related to balance sheet components are set by the long-term plans shaped along with budgeting; and the Parent Bank takes the required positions against the short-term currency, interest rates and price fluctuations in accordance with these plans and the course of the market conditions. 12

18 Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the legal limits, the Parent Bank s own transaction and control limits are also effectively monitored in order to avoid limit overrides. The Parent Bank s asset-liability management is executed by the Asset-Liability Management Committee, within the risk limits determined by the Board of Directors, in order to keep the liquidity risk, interest rate risk, currency risk and credit risk within certain limits depending on the equity adequacy and to maximize profitability. 2. Foreign Currency Transactions The financial statements of the Parent Bank s branches and financial institutions that have been established abroad are prepared in functional currency prevailing in the economic environment that they operate in; and when they are consolidated, they are presented in TL, which are the functional currency of the Parent Bank and also the currency used in presentation of the financial statements. Foreign currency monetary assets and liabilities on the balance sheet are converted into Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary items in foreign currencies carried at fair value are converted into Turkish Lira by the rates at the date of which the fair value is determined. Exchange rate differences arising from the conversions of monetary foreign currency items and the collections of and payments in foreign currency transactions are reflected to the income statement. In accordance with TAS 21 Effects of Changes In Foreign Exchange Rates, net investments in non-domestic companies are considered as non-monetary items, measured on the basis of historical cost and converted into Turkish Currency at the currency rates at the transaction date, and also in accordance with TAS 29 Financial Reporting In Hyperinflationary Economics, the inflation adjusted value is calculated by using the inflation indices prevailing between the date of transaction and final date that the inflation adjustment is applied, 31 December 2004, and it is accounted by allocating provision amounts for any permanent impairment losses. While the Parent Bank and Türkiye Sınai Kalkınma Bankası A.Ş., one of the consolidated subsidiaries, use their own foreign currency exchange rates for their foreign currency transactions, other institutions residing domestically use the CBRT rates for their foreign currency transactions. Assets and liabilities of the foreign branches of the Parent Bank and financial institutions that have been established abroad are converted into TL by using the prevailing exchange rates at the balance sheet date. Income and expenses are converted by at exchange rates at the dates of the transactions. Incomes and expenses of foreign financial institutions are converted into TL at average foreign currency rates as long as there is not a significant fluctuation in currency rates during the period. The exchange rate differences arising from the conversion are recognized in the Other Profit Reserves account under the shareholders equity. III. Information on the Consolidated Companies 1. Basis of Consolidation: The consolidated financial statements have been prepared in accordance with the procedures listed in the Communiqué Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks published in the Official Gazette numbered dated 8 November a. Basis of consolidation of subsidiaries: A subsidiary is an entity that is controlled by the Parent. Control is the power of the Parent Bank to appoint or remove from office the decision-taking majority of members of board of directors through direct or indirect possession of the majority of a legal person s capital irrespective of the requirement of owning minimum fifty-one per cent of its capital; or by having control over the majority of the voting right as a consequence of holding privileged shares or of agreements with other shareholders although not owning the majority of capital. As per the Communiqué Related to the Preparation of Consolidated Financial Statements of Banks published in the Official Gazette numbered dated 8 November 2006, as at the current period, the Parent Bank has no subsidiaries, qualified as credit institutions or financial institutions, excluded from consolidation. Detailed information about the consolidated subsidiaries is given in Section Five, Note I.h.3. Under full consolidation method, the assets, liabilities, income and expenses and off-balance sheet items of subsidiaries are combined with the equivalent items of the Parent Bank on a line-by-line basis. The book value of the Parent Bank's investment in each of the subsidiaries and the Group s portion of equity of each subsidiary are eliminated. All significant transactions and balances between the Parent Bank and its consolidated subsidiaries are eliminated reciprocally. Noncontrolling interests in the net income and in the equity of consolidated subsidiaries are calculated separately from the Group s net income and the Group s shareholders' equity. Non-controlling interests are presented separately in the balance sheet and in the income statement. 13

19 Accounting policies used by the subsidiaries, that are included in the consolidated financial statements, are not different than the Parent Bank s. TFRS 3 Business Combinations standard prescribes no depreciation to be recognized for goodwill arising on the acquisitions on or after 31 March 2004, realizing positive goodwill as an asset and application of impairment analysis as of balance sheet dates. In the same standard, it is also required from that date onwards that the negative goodwill, which occurs in the case of the Group s interest in the fair value of acquired identifiable assets and liabilities exceeds the acquisition cost to be recognized in profit or loss. Details of positive goodwill arising from Bank s investments to its subsidiaries in investment basis are as follows: Name of the Investment Amount of the Positive Consolidation Goodwill İş Finansal Kiralama A.Ş. 611 Türkiye Sınai Kalkınma Bankası A.Ş. 4,792 Anadolu Anonim Türk Sigorta Şirketi 1,767 JSC İşbank 28,804 Total 35,974 Due to the Bank does not have any associates and subsidiaries, the special purpose entities established within the Bank s securitization loan transactions are included to the financial statements. b. Basis of consolidation of associates: An associate is a domestic or foreign entity which the Parent Bank participates in its capital and over which it has a significant influence but no control. Significant influence is the power to participate in the financial and operating policy of the investee. If the Parent Bank holds qualified shares in the associate, it is presumed that the Parent Bank has significant influence unless otherwise demonstrated. A substantial or majority ownership by another investor does not necessarily preclude the Parent Bank from having significant influence. Qualified share is the share that directly or indirectly constitutes ten or more than ten percent of an entity s capital or voting rights and irrespective of this requirement, possession of privileged shares giving right to appoint members of board of directors. Equity accounting method is an evaluation method of associates by which the Parent Bank s share in the associates equity is compared with the book value of the associate accounted in the Parent Bank s balance sheet. The difference is recognized in profit or loss in the consolidated income statement. Accounting policies of Arap Türk Bankası A.Ş., the only associate that is included in the consolidated financial statements by using the equity accounting method are not different than the Parent Bank s. Detailed information about Arap Türk Bankası A.Ş. is given in Section Five Note I.g.2 c. Basis of consolidation of joint ventures: A joint venture is an agreement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. The Bank does not have any jointly controlled entities which are financial institutions in nature and to be consolidated in the financial statements by the equity method. d. Principles applied during share transfer, merger and acquisition: None. 2. Presentation of unconsolidated subsidiaries, associates and jointly controlled entities in consolidated financial statements: In the consolidated financial statements, unconsolidated subsidiaries, associates and jointly controlled entities are accounted in accordance with TAS 27 Consolidated and Separate Financial Statements and TAS 28 - Investments in Associates and Joint Ventures. Subsidiaries, associates and jointly controlled entities are categorized into two groups; equity shares which are traded in an active market (stock market) and equity shares which are not traded in an active market. Equity shares which are traded in an active market (quoted) are recognized with respect to their market values. Unquoted equity shares are recognized in historical cost basis less impairment, if any. 14

20 IV. Forward, Option Contracts and Derivative Instruments Derivative transactions of the Group consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate options. The Group has no derivative instruments decomposed from the main contract. The derivative instruments including both economic hedges and derivatives specified as hedging items are classified as either derivatives held for trading or derivatives held for hedging as per the Turkish Accounting Standard ( TAS 39 ) Financial Instruments: Recognition and Measurement. Derivative instruments held for trading are carried at their fair values at the contract dates and the receivables and payables arising from these transactions are followed under off-balance sheet accounts. Derivative transactions are valued at their fair values in the reporting periods following their recording and the valuation differences are shown under the accounts, Derivative Financial Assets Held for Trading and Derivative Financial Liabilities Held for Trading, depending on the difference being positive or negative. Although some derivative transactions are qualified as economical hedging items, they do not meet all the definition requirements of hedge accounting items. Therefore, under the Turkish Accounting Standard No: 39 Financial Instruments: Recognition and Measurement (TAS 39), these derivative instruments are recognized as held for trading. The valuation differences arising from the valuation of derivative transactions are associated with the income statement. Derivatives are designated as derivative financial instruments held for hedging if all necessary conditions are met to evaluate those as financial instruments for hedge accounting. Those derivatives are recognized initially at fair value; and subsequent to initial recognition, derivatives are measured at fair value, and notional amounts are recognized in off-balance sheet. Changes in fair value are recognized in derivative financial assets held for hedging and derivative financial liabilities held for hedging and therein recognized in profit or loss. On off-balance sheet items table, options which generated assets for the Parent Bank are presented under call options line and which generated liabilities are presented under put options line. V. Interest Income and Expenses Interest income and expenses are recognized on an accrual basis using the effective interest method (the rate that equals the future cash flows of a financial asset or liability to its present net book value) in conformity with TAS 39 Financial Instruments: Recognition and Measurement. In accordance with the related legislation, realized and unrealized interest accruals of the non-performing loans are reversed and interest income related to these loans are recognized as an interest income only when they are collected. VI. Fees and Commission Income and Expenses Fees and commission income and expenses are recognized either on accrual basis or by using the effective interest method. Income earned in return for services rendered contractually or due to operations like sale or purchase of assets on behalf of a third party real person or corporate body are recognized in income accounts in the period of collection. VII. Financial Assets Financial assets are comprised of cash, contractual rights to obtain cash or another financial asset from or to exchange financial instruments with the counterparty, or the capital instrument transactions of the counterparty. According to the Parent Bank management s purpose of holding, the financial assets are classified into four groups as Financial Assets at Fair Value through Profit And Loss, Financial Assets Available for Sale, Held to Maturity Investments and Loans and Receivables. 1. Cash and Banks Cash consists of cash in vault, foreign currency cash, and money in transit, cheques purchased and precious metals. Foreign currency cash and banks are shown in the balance sheet by their amounts converted into TL at the foreign exchange rate on the balance sheet date. 2. Marketable Securities a. Financial Assets at Fair Value through Profit And Loss a.1. Financial Assets Held for Trading Financial assets held for trading are those acquired for the purpose of generating profit from short term market fluctuations in prices or similar elements, or securities which are part of a portfolio set up to realize short term profit regardless of the purpose of acquisition. 15