9.05 AAA(Trk)/aa (STABLE)

Corporate Governance Score & Outlook Corporate Governance Rating Report This Report has been prepared by JCR-ER in compliance to the regulations of Capital Market Board of Turkey Shareholders Public Disclosure & Transparency Stakeholders Board of Directors 9.05 AAA(Trk)/aa (STABLE) 9.01 AAA(Trk)/aa () 9.04 AAA(Trk)/aa () 8.90 AAA(Trk)/a () 9.15 AAA(Trk)/aa () Analyst: Ceyhun KIR/ +90 212 352 56 73 ceyhunk@jcrer.com.tr Analyst:Abdurrahman TUTĞAÇ+90 212 352 56 73 abdurrahman.tutgac@jcrer.com.tr Trade Name Address Chairman CEO Investor Relations Web Company Information IŞ YATIRIM MENKUL DEGERLER A.Ş. İş Kuleleri-2 Kat: 12 4. Levent 34330 Beşiktaş/ISTANBUL Mr. İlhami KOÇ Mr. A. Erdal ARAL Deputy CEO, Ms. Çağlan Mursaloğlu Head of IR, Mr. Ozan Altan IR Specialist, Mr. Alper Alkan Phone: +90.212.350.28.72 yatirimciiliskileri @isyatirim.com.tr www.isyatirim.com.tr www.isinvestment.com Strengths Taking necessary measures and provided training regarding occupational health and safety Board members and top managers were provided assurance with liability insurance Well organized the Investors Relation Department and sufficient activities Utilization of Company website as an effective transparency platform in Turkish and English Exiting the sufficient risk management system İS YATIRIM MENKUL DEĞERLER A.Ş. TURKEY Revised Report Brokerage House F i n a n c i a l D a t a 2014* 2013* 2012* 2011* 2010* Total Assets (000 USD) 2.309.345 2.316.638 2.343.855 1.621.751 1.746.684 Total Assets (000 TRY) 5.355.140 4.935.366 4.166.436 3.063.325 2.685.702 Equity (000 TRY) 957.977 917.423 853.622 687.521 650.022 Total Sales (000 TRY) 400.305 388.509 340.618 244.535 221.054 Net Profit (000 TRY) 92.570 125.312 137.364 84.893 98.191 ROAA (%) 1,80 2,75 3,80 2,95 3,76 ROAE (%) 9,87 14,15 17,83 12,69 15,74 Net Working Capital / T. Assets (%) 16,65 17,77 18,65 19,80 20,19 Debt Ratio (%) 82,11 81,41 79,51 77,56 75,80 Asset Growth Rate (%) 8,51 18,46 36,01 14,06 5,79 *End of the Year Overview İş Yatırım Menkul Değerler A.Ş. (referred hereinafter as İş Yatırım or the Company), established by T. İş Bankası A.Ş. in 1996, is an investment company which offers the services of local and international brokerage, investment advisory, portfolio management and corporate finance. Beginning trading on the BIST (Borsa Istanbul) in 2007, 29.3% of the Company s shares are publicly traded while the remaining shares are owned by T. İş Bankası A.Ş. and its subsidiaries. The Company has 6 subsidiaries, two of which operate abroad and two are traded on the BIST. The Company, having a widespread service network of 11 branches, 5 representative offices and T. İş Bankası A.Ş. branches utilized as its agencies, employs a staff force of 390. As a leading institution in terms of both market share and transaction volume for years, İş Yatırım is the market s leader with market share of 7.7% in terms of transaction volume of equity market as of the end of 2014. Board of Directors consists of 9 members, two of them are independent, and two of them women and 7 of the members are determined by İşbank and elected from among the experienced managers working in the relevant capital market departments of the Bank. The audit, Risk and Corporate Governance committees exist within scope of the board. Constraints A group share privilege to determine majority of the Board members Absence of internal regulations to broaden the exercise of minority rights beyond the current legislation, Lack of disclosure of senior management s remunerations per person Absence of an objective performance evaluation method for the Board members Publication Date: September 04, 2015 Global Knowledge supported by Local Experience Copyright 2011 by JCR Eurasia Rating. 19 Mayıs Mah. 19 Mayıs Cad. Nova Baran Plaza No:4 Kat:12 34360 Şişli /İST Telephone: +90.212.352.56.73 Fax: +90 (212) 352.56.75 Reproduction is prohibited except by permission. All rights reserved. All of the information has been obtained from sources JCR ER believes are reliable. However, JCR-ER does not guaranty the truth, accuracy, adequacy of this information. A JCR ER Rating is an objective and independent opinion as to the creditworthiness of a security and issuer, not a recommendation to buy, hold, sell any security and to issue a loan. This rating report has been composed within the frameworks of SPK (Capital Markets Board of Turkey) regulations and internationally accepted rating principles and guidelines. http://www.jcrer.com.tr

1- Executive Summary and Rating Rationale This revised report was prepared in light of JCR Eurasia Rating s original methodological procedures in accordance with the Corporate Governance Principles (the code) set by the Capital Market Board (CMB) and states the Company s level of compliance with corporate governance principles as of September 2015. The Capital Market Board s Corporate Governance Principles were first published in 2003. Important revisions and changes were made at the beginning of 2012 and again in January 3, 2014, as detailed in the Communiqué II-17.1 (accessible on www.spk.gov.tr) An additional important change regarding the method of calculation of compliance notes was made in the beginning of 2014. Based on the recent CMB legislation, the new scoring methodology consists of two stages in which companies given a base and full score. In the new system, companies are first assigned a base score of a maximum of 85 points determining their compliance with the rules and practices outlined in the Code. In the second stage, an additional 15 points may be awarded depending on the efficient implementation and value creation achieved through practices exceeding those in the articles. Practices not stated in the Code but determined by JCR Eurasia Rating as best governance practices are also considered as criteria in assigning the additional points. The code consists of four main section; Shareholders, Public Disclosure and Transparency, Stakeholders and Board of Directors. These main sections coefficients, which were determined by the CMB, have been recently changed as below; Shareholders: 25% Public Disclosure and Transparency: 25% Stakeholders: 15% Board of Directors: 35% These coefficients were 25%, 35%, 15% and 25%, respectively, in the previous reports. Subject to the preservation of integrity of regulations by the CMB and compliance with the limitations thereof, this report also covers such topics as implementations regarding Outlook determinations and Financial Efficiency analyses all of which exist in JCR Eurasia Rating s original methodological structure. Findings and assessments within the content of the report are based on information and documents disclosed by the Company to the public through various channels and also submitted to JCR Eurasia in writing and verbally, as well as reports and statistics by the CMB and Central Registry Agency (CRA). In compliance with changes in the Corporate Governance Ratings Methodology was made by CMB, JCR Eurasia Rating has revised and announced the compliance notes and outlooks of Is Yatırım in March 3, 2014. Details of the adjusted notes can be seen in the table below. Fields Numerical Value Shareholders 8.54 Public Disclosures and Transparency 9.04 Stakeholders 8.51 Board of Directors 8.96 Overall 8.81 March 03, 2014 Convergence Notch Degree Outlook Level a Through the analysis of JCR ER s original methodology, the general compliance level of the Company with corporate governance principles as of September 2014 can be seen in the table below. Fields September 05, 2014 Numerical Value Shareholders 8.83 Public Disclosures and Transparency 9.04 Stakeholders 8.51 Board of Directors 9.05 Overall 8.91 Convergence Notch Degree Outlook Level a a Through both 12 months of observation from September 05, 2014 as well as a comprehensive review done in September 2015, the conclusions reached by JCR ER and corresponding notation can be seen below; Numerical value is 9.05, Convergence Level AAA(Trk) representing the category of Distinctive Compliance, Notch degree (aa) representing the category of Superior, Outlook () Distinct levels of 4 main categories regarding compliance with the corporate governance principles are exhibited in the following table. Overall score has been assigned based on weightings assessed for these 4 categories by CMB regulations. İş Yatırım Menkul Değerler A. Ş. 2

Fields September 04, 2015 Numerical Value Shareholders 9.01 Public Disclosures and Transparency 9.04 Stakeholders 8.90 Board of Directors 9.15 Overall 9.05 Convergence Notch Degree Outlook Level a a a a JCR ER s notation system may be viewed at: http://www.jcrer.com.tr/administrator/files/436_kyder_notation.pdf 2. Company Overview İş Yatırım was established in 1996 by the major shareholder T. İş Bankası A.Ş. to offer services of intermediation in local and international financial markets. The company offers the services of brokerage of securities traded in secondary markets, investment advisory, portfolio management and corporate finance. The Company, breaking new ground in the capital markets following its establishment, offered nearly 30% of its shares in 2007 to the public and its shares began trading on the Borsa Istanbul (BIST-). Currently, 29.3% of the Company s shares are publicly traded. With regard to 1H2015 financial statements, the Company, with an asset size of TL5.436 bn, had equity in the amount of TL906 mn and a net profit of TL23 mn. Key balance sheet items and ratios can be found in first page. İş Yatırım also has the largest amount of paid-in capital at TL355 mn. According to the current shareholder structure disclosed on the Company s website, T. İş Bankası A.Ş. is the major shareholder, holding a 65.7% share. Additionally, T. İş Bankası A.Ş. holds 150,000 shares with the privilege of determining the majority of the Board members. Of the other remaining shares, İş Factoring owns 2.4%, İş Leasing 2.4% and 0.2% Cam İş Yatırım Holding, while 29.3% are publicly traded. The Company s consolidated subsidiaries are given in Table: 2 in the Appendices. Shares of İş Girişim and İş Yatırım Ortaklığı, which offer financial services locally and internationally, are publicly traded while two other companies are located outside Turkey. Corporate Governance Overall Results 9,05 AAA (Trk)/aa Outlook (Corporate Governance): JCR-ER believes that İş Yatırım will maintain its high level of compliance during the 12 month monitoring period following the publication of the revised report. For this reason, the Company Outlook has been determined as for this rating period. The Company has 11 branches in the cities of Istanbul, Ankara, Izmir, Bursa, Adana and Antalya and 5 representative offices in Kazakhstan, Istanbul, Mersin, Kırıkkale, and Diyarbakır. In addition, more than 1,300 İşbank branches in Turkey also act as agencies of İş Yatırım. The Company has maintained an uninterrupted leading position as of end of 2014 in the stock market since 2003 and in the derivatives market since its establishment in 2005 through its widespread service network. A workforce of 390 was employed as of August, 2015. İş Yatırım s Board consists of 9 members. There are two independent and two women members in the Board. Currently, 7 of the members are determined by İşbank and elected from among the experienced managers working in the relevant capital market departments of the Bank. Detailed information on the Board is presented in Table: 3. The General Manager and 6 Assistant General Managers compose the top level management of the Company. 3. Shareholders The Company s Shareholder score has been raised to 9.01 from 8.83. Undertaking the responsibility by the Investor Relations Department for the Company s strategic planning and improving its operations efficiency have been effective in this increase. The company s level in this section and their corresponding notes are outlined below; İş Yatırım Menkul Değerler A. Ş. 3

Numerical value is 9.01, Convergence Level AAA(Trk) representing the category of Distinctive Compliance, Notch degree (aa) representing the category of Superior, Outlook () Shareholders Results 9,01 AAA (Trk)/aa Activities carried out during the monitoring period in the Shareholder field: The 2014 general meeting was held on March 24, 2015 at İş Kuleleri Kule-1 kat: 41 4.Levent/Beşiktaş, İSTANBUL. The meeting was observed by a JCR-ER analyst and the works undertaken by the Company were closely observed prior, during and following the meeting. Premeeting preparations, announcements and invitations were carried out by the Investor Relations Department according to the Code. Within the framework of democratic principles, all shareholders were treated equally, the Company s 2014 activities were outlined, all shareholders were given the right to address each agenda item and voting was done by an open show of hands during the meeting. Following the meeting, the relevant documents were disclosed to investors on the Company s internet site. 6th clause in the articles of association which is about the capital increase was changed in 2015 general meeting. This change was submitted to the shareholders before the meeting. One investor conference was organized in Istanbul. There were 22 portfolio managers and research analyst from 18 different institutions attended the meeting. The Company also attended Hidden Riches Conference in London. The company also organized an Investor Relations Seminar in February, 2015. More than 60 investor relations and finance professionals were given a seminar by a foreign speaker with over 15 years of international experience. The company made the presentations to investors via tele-conference in every quarter of monitoring period. The audio s records of these presentations in English language are available in the Company s web site. Shareholders, stakeholders and prospective investors were regularly informed by the investor relations department via the web site, e-mail, teleconference, PDP (public disclosure platform) and e-governance platform of Central Registry Agency. Additionally, the managers of the department responded questions and inquiries received by telephone from the shareholders and stakeholders. No complaints were made by the shareholders in the observation period. No shareholders have canceled any agreement or opened any lawsuit against the Company. No findings of discrimination against any shareholder were found. The company realized a net profit of TL62.895.770 in 2014 and the decision to distribute TL 39.950.000 as the net cash and TL 23.000.000 as the stock dividend of this to shareholders was made in the general meeting on March 24, 2015. The dividend distribution table was disclosed to the public via the company s website and the PDP following the general meeting. Outlook JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Shareholders field during the following monitoring period. For this reason, the Outlook for this section has been determined as. 4. Public Disclosure and Transparency In this important section focusing on the disclosure of information and documents needed by shareholders and stakeholders while protecting trade secrets. The Company s level in this field and their corresponding notes are outlined below; Numerical value of 9.04, Convergence Level AAA(Trk) representing the category of Distinctive Compliance, Notch degree (aa) representing the category of Superior, Outlook () İş Yatırım Menkul Değerler A. Ş. 4

Public Disclosures & Transparency Results 9,04 AAA (Trk)/aa been effective in this increase. The Company s level in this field and their corresponding notes are outlined below; Numerical value of 8.90, Convergence Level AAA(Trk) representing the category of Distinctive Compliance, Notch degree (a) representing the category of Excellent, Outlook () Activities carried out during the monitoring period in this field: The 2014 annual report was published with high compliance level with the code. The company also publishes quarterly activity reports that include compliance report with the code. The Company s quarterly financial statements were released to the public within the period specified by CMB legislation and posted on its internet site. The company s website is kept up to date in Turkish and English. A link to the PDP is included. Significant improvements in the Company s organizational structure and operations are published in a timely manner. İş Yatırım disclosed 49 notifications to the Public Disclosure Platform (PDP) in the monitoring period. Following these disclosures, the Company was not delisted on the BIST and no additional information was requested. The Company s 2014 financial tables were audited by the independent audit firm Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş KPMG. The same firm will audit 2015 year s financial statements. Outlook JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Public Disclosure and Transparency field during the upcoming monitoring period. For this reason, the Outlook for this section has been determined as. 5. Stakeholders With the exception of upper-level managers, a company s employees, customers, suppliers, creditors, public authorities and the public in general are considered stakeholders of an institution. The rules and practices in this main section primarily aim to secure the rights of stakeholders, facilitate the exercise of their rights and thus to maximize their contributions to the institution. This main section s score has been raised to 8.90 from 8.51. Taking necessary measures and providing training regarding occupational health and safety, additionally providing professional and managerial training to the all staff have Stakeholders Results 8,90 AAA(Trk)/a Activities carried out during the monitoring period in the Stakeholders field: İş Yatırım hired 32 new employees, 48 employees left the company and 1 employee retired. No loss in employee rights was observed during these developments. Only one lawsuit was opened by an employee against the Company in the monitoring period. Four lawsuits were filed by the customers against the Company. These are not related with corporate governance. No lawsuits were filed against the Company by suppliers. The company carries out a project called Trade Master Campus to increase the level of financial literacy with various universities in Turkey. Additionally, within the scope of social responsibility, the Company granted the amount of TL19.587 out of the 2014 profit to various institutions. Outlook JCR-ER is of the opinion that during the following monitoring period the Company will maintain its level of compliance with the code in the Stakeholders field. For this reason, the Outlook for this section has been determined as. İş Yatırım Menkul Değerler A. Ş. 5

6. Board of Directors This section consists of the board functions, qualifications, duties, powers and responsibilities of its members and upperlevel managers, and the rules and practices related with established systems for effective supervision and control. The company s compliance in the field of Board of Directors was increased to 9.15 from 9.05. Investments to the Risk Management Department and as a result more effective risk calculations and reporting have been effective in this increase. The company s level in this field and their corresponding notes are outlined below: Numerical value is 9.15, Convergence Level AAA(Trk) representing the category of Distinctive Compliance, Notch degree (aa) representing the category of Superior, Outlook () 12 Board of Director meetings were held in the last twelve months. All Board of Director Meeting preparations, applications and follow-ups were handled in accordance to Corporate Governance principles. The Corporate Governance Committee held 7, the Audit committee 12 and the Risk committee 12 meetings in monitoring period. Recommendations made in these meetings were presented to the Board. The company discloses the remunerations of board members on an individual basis, the top managers totally in the annual report. Outlook JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Board of Directors field during the following monitoring period. For this reason, the Outlook for this section has been determined as. 7. Financial Efficiency İş Yatırım which is the biggest brokerage company in Turkey. As per the resolution of Capital Markets Board, IS Investment is fully authorised pursuant to the Communique on the Principles Regarding Investment Services and Ancillary Services (III-37.1) for the following capital market services: Board of Directors Results 9,15 AAA(Trk)/aa Activities carried out during the monitoring period in this field: Liability insurance for board members and top managers was renewed by the Company. At the general meeting held on March 24, 2015 the shareholders approved the 2014 activities of the Board of Directors. Mr. Refet Soykan Gürkaynak was elected as the new independent member to the Board replacing independent member Mr. Abdullah Akyüz in the general meeting. This change was disclosed in a timely manner to the PDP. Mr. Mehmet Yiğit Arıkök was appointed as new the Assistant General Manager in April 04, 2015. The assistant General Managers Mr. Mert Erdoğmuş and Mr. Ufuk Ümit Onbaşı resigned on December 31, 2014 and on May 29, 2015 respectively. Authorization Licenses Obtained from CMB Activity of Dealing on Own Account (Market Maker) Activity of Intermediation for Public Offering (Underwriting and Best Effort) Investment Advisory Activity Individual Portfolio Management Activity of Execution of Orders Activity of Reception and Transmission of Orders Limited Custody Service İş Yatırım s market shares in terms of trading volume are shown in the table below, which indicate its extent and effectiveness across most of the transaction types. Market Shares (In terms of transaction volume) Markets and Activities 2010 2011 2012 2013 2014 Equity Market Volume 6.9% 7.3% 7.6% 8.4% 7.7% Fixed Income Securities Trading Volume* Turkish Derivatives Exchange Trading Volume 20.0% 10.2% 12.4% 6.8% 7.1% 11.5% 12.6% 14.8% 13.5% 11.1% Eurobond Trading Volume 0.3% 0.2% 0.2% 0.3% 0.3% *Among Brokerage Houses İş Yatırım Menkul Değerler A. Ş. 6

İş Yatırım provides extensive capital market instruments to a wide range of corporate and individual customers and is the largest brokerage house in Turkey with an asset size of TRY 5,525mn as of FYE2014. Despite harsh economic and political conditions both in and out of Turkey İs Yatırım has managed to display a 8.51% annual asset growth positively diverging from the weak sector performance in 2014, thanks to its solid capital structure, wide service network and substantial integration with international financial markets. Despite a gradually decreasing trend of equity to total liabilities ratio, İş Yatırım comfortable meets the capital adequacy level which recently announced by the Capital Market Board. Moreover, the Company s leverage ratio stood at a reasonable level as of FYE2014. The ability to offer wide range of services helps the Company to benefit from steady income stream from commissions and fees while interest and trade income are wider exposed to volatility of the financial markets. İş Yatırım achieved a transaction volume of TRY 134.7bn, corresponding to 7,7% of market volume. A slight increase of 3% in the gross earnings of the Company in the volatile and fierce competition environment was downwardly affected by the increase in the operational and financing expenses in 2014 and led to a decrease in ROAA and ROAE, to 1.8% and 9.87 respectively, mirrored that of the Sector. As a result, high levels of İş Yatırım s equity capital structure, asset quality and internal profit generation capacity are maintained and these contribute to the sustainability and improvement of compliance level with the corporate governance principles. 8. Appendix (3 Tables) İş Yatırım Menkul Değerler A. Ş. 7

BROKERAGE HOUSE Table:1 İŞ YATIRIM MENKUL DEĞERLER A.Ş. SHAREHOLDING STRUCTURE Years 2011 2012 2013 2014 September,2015 TL (000) 260.000 286.000 310.500 332.000 355.000 USD (000) 137.646 161.318 160.051 153,000 125,000 Shareholders Share Share Share Share Share İş Bankası A.Ş. (A Group) 0,08% 0,05% 0,05% 0,05% 0,05% İş Bankası A.Ş. (B Group) 65,57% 65,60% 65,60% 65,60% 65,60% Publicly Traded (B Group) 29,31% 29,32% 29,32% 29,32% 29,32% Other (B Group) 5,04% 5,03% 5,03% 5,03% 5,03% Total 100,00% 100,00% 100,00% 100,00% 100,00% İş Yatırım Menkul Değerler A. Ş. 8

BROKERAGE HOUSE Table: 2 AFFILIATES AND SUBSIDIARIES as of September 2015 Consolidated Subsidiaries Head Quarters Fields Of Activities Interest Share % Acquisition Date Efes Varlık Yönetim A.Ş. Turkey Asset Management 74 14.02.2011 İŞ Girişim Sermayesi Yat. Ortaklığı A.Ş. Turkey Private equity 29 23.10.2000 İş Portföy Yönetimi A.Ş. Turkey Portfolio management 70 04.10.2000 İş Yatırım Ortaklığı A.Ş. Turkey Investment trust 28.93 03.06.2003 Maxis Investments Ltd. United Kingdom Securities brokerage 100 29.09.2005 Is Investments Gulf Ltd. Dubai Securities brokerage 100 01.07.2011 İş Yatırım Menkul Değerler A. Ş. 9

BROKERAGE HOUSE Table: 3 BOARD OF DIRECTORS Name Task Profession Election Date Experience Education (Years) Executive/Non Executive Independent/Not Independent Committee Membership İlhami KOÇ Chairman Banker 30.01.2013 29 Graduate Non Executive Not Independent Feray DEMİR Vice- Chairwoman Banker 26.04.2010 27 Graduate Non Executive Not Independent Volkan KUBLAY Member Banker 16.08.2012 15 Graduate Non Executive Not Independent Corporate Governance and Risk committees member Sezai SEVGİN Member Banker 25.03.2014 25 Graduate Non Executive Not Independent Işıl DADAYLI Member Banker 01.04.2013 24 Graduate Non Executive Not Independent Mete UĞURLU Member Insurance 17.07.2014 37 Graduate Non Executive Not Independent Özgür TEMEL Member Banker 30.04.2013 21 Master Degree Non Executive Not Independent Refet Soykan GÜRKAYNAK Member Academician 24.03.2015 17 Ph. D. Non Executive Independent Audit Committees member Behzat YILDIRIMER Member Banker 09.05.2012 32 Graduate Non Executive Independent Audit, Corporate Governance and Risk Committees chairman İş Yatırım Menkul Değerler A. Ş. 10