Contents

Presentation

1 İşbank at the onset of 2010 2 Turkey’s Bank 4 İşbank since 1924 5 İşbank’s Vision, Objectives, and Strategy 6 Pioneering Activities 7 İşbank’s Financial Indicators and Shareholder Structure 8 Chairman’s Message 12 CEO’s Message 18 İşbank’s transformation journey: Customer Centric Transformation (MOD) 20 The Economic Outlook in 2009 26 İşbank in 2009 49 Subsidiaries 54 Corporate Social Responsibility at İşbank 60 Annual Report Compliance Opinion

Management and Corporate Governance at İşbank

62 Board of Directors & Auditors 64 Executive Committee 66 Organization Chart 68 Managers of Internal Systems 68 Information About the Meetings of the Board of Directors 69 İşbank Committees 71 Human Resources Functions at İşbank 72 Information on the Transactions Carried out with İşbank’s Risk Group 72 Activities for which Support Services are Received in Accordance with the Regulation on Procurement of Support Services for Banks and Authorization of Organizations Providing this Service 73 İşbank’s Dividend Distribution Policy 74 Agenda of the Annual General Meeting 75 Report of the Board of Directors 76 Auditors’ Report 77 Dividend Distribution Proposal 78 Corporate Governance Principles Compliance Report

Financial Information and Assessment on Risk Management

89 Audit Committee’s Assessments on the Operation of Internal Control, Internal Audit and Risk Management Systems, and Their Activities in the Reported Period 91 Independent Auditors’ Report 92 Unconsolidated Financial Statements 102 Financial Highlights and Key Ratios for the Five Years Period Including the Reported Period 103 Explanations on İşbank’s Financial Condition, Profitability and Solvency 105 Information on Risk Management Policies Applied per Risk Types 107 İşbank’s Credit Ratings 108 The Unconsolidated Year End Financial Report as of December 31, 2009 168 Information to Shareholders İşbank Annual Report 2009 İşbank at the onset of 2010 1

İşbank at the onset of 2010

Largest private bank in Turkey in terms of assets

Since its establishment in 1924 in Ankara, İşbank has made ever-increasing contributions to the Turkish economy, and has been an icon, pioneer, and leader of the modern banking in Turkey by introducing innovative business practices, products and services.

In line with its mission, which can best be summarized as “Turkey’s Bank”, İşbank provides products and services in retail, private, commercial, and corporate banking, embracing the whole society.

İşbank assumes key roles in every aspect of both the economic and business operating cycles, and is the largest private bank in Turkey in terms of assets.

The only Turkish bank in the Global Top 100 Banking Brands

İşbank, whose total assets have reached TL 113.2 billion as of year-end 2009,

• ranked 91st in The Banker magazine’s “Top 500 Banking Brands” list compiled in cooperation with Brand Finance Plc. İşbank was the only Turkish bank in the top 100 banks of the list. • numbered 331st in the Forbes magazine’s annual “Global 2000” list, ahead of all other Turkish companies on the list. (*) • took the 101st place in the “Top 1000 World Banks” list by The Banker magazine, a prestigious global publication. (**)

Strong and wide service network

İşbank’s large scale and service delivery strength is defined by its extensive domestic service delivery network. This consists of,

• 22,473 employees • 1,078 domestic and 15 international branches • 3,591 ATMs • Over 1,000 kiosks

Financial participations operating in a variety of business lines from investment banking to portfolio management, and leasing to private pension, complement İşbank’s competency in product and service delivery and also maximize its competitiveness.

İşbank, as a significant contributor to the development of the industrial sector in Turkey, has a participation portfolio comprised of leading companies active in a wide range of business lines.

İşbank’s shares are traded on the Istanbul Stock Exchange (ISE). In addition, İşbank’s shares are traded as American Depositary Receipts (ADR) by Qualified Institutional Buyers on over the counter markets and as Global Depositary Receipts (GDR) on the London Stock Exchange.

(*) Based on the annual rankings among public companies. (**) Based on the Tier I capital of banks as reported in their 2008 consolidated financial statements. İşbank Annual Report 2009 Turkey’s Bank 2

Turkey’s Bank

Growing through our strength…

The “İş” brand The “İş” brand, identified with the phrase “Turkey’s Bank,” unites long-standing tradition, trust, a pioneering spirit, and innovation all under one roof.

Sustainable and strong financial structure With its sustainable and strong financial structure, İşbank contributes to the domestic economy, generates value for its shareholders and stakeholders, and manages its assets effectively and efficiently. İşbank Annual Report 2009 Turkey’s Bank 3

Skilled human resources The Bank’s workforce of more than 22,000 employees comprises one of the cornerstones that give the competitive advantage to İşbank, known as the “banking academy” of Turkey since its establishment. İşbank encourages its employees to be creative and strides confidently into the future with them.

Ubiquitous service İşbank provides service ubiquitously to millions of customers via a multi-channel delivery network and more than 1,000 branches.

İşbank continues to grow through its strength. It is confidently progressing toward completion of its first centennial with the same fundamental mission established 85 years ago. İşbank Annual Report 2009 İşbank since 1924 4

İşbank since 1924

• İşbank has taken on important duties in Turkey’s economic development in the first years of the Republic when capital accumulation was scarce. • Founded to put even the smallest amount of savings to good use and allocate it to economic development, İşbank has played a major role in inculcating and developing the fundamental concept of saving among the Turkish people. • In the years that followed, İşbank started to expand its presence, growing across the country by opening branches. • Setting up its first overseas branches in 1932 in Hamburg, Germany, and Alexandria, Egypt, İşbank became the first Turkish bank to establish a branch in a foreign country. • The 1950s was a period when İşbank expanded its participations portfolio. • As the Bank’s participations became the engines of Turkish industry, many investments were made in a wide range of commercial sectors, led by the manufacturing industries, and were supplemented with additional financial support. Continuing the momentum of expanding its branch network in the 1960s and 1970s, İşbank placed special emphasis on the development of its overseas branch network in the 1980s. • During the 1980s, İşbank begins to provide an extensive array of services to its customers in line with its multi-channel banking vision. • In 1982, İşbank introduces ATMs to Turkey and effectively brands the term “Bankamatik.” • In 1997, by rolling out the “Blue Line” and introducing internet banking for the first time in Turkey, İşbank also becomes the pioneer in these areas. • In an effort to increase its service level and product range in line with customer demands and expectations, İşbank has conducted Research & Development activities and led in the deployment of new technologies in successive years. • Relocating its headquarters from Ankara to Istanbul in 2000, İşbank sustained its steady growth trajectory. • The Bank launched the biggest transformation project in its history, adeptly foreseeing the changes the world and national economies would undergo: İşbank focuses on customer oriented restructuring in line with its strategic goals. • In parallel with the accelerated advancement of technology in recent years, İşbank continues to expand its multi-channel delivery network to enable customers to complete all of their transactions easily, securely, and quickly via their most preferred alternative distribution channel 24/7. İşbank Annual Report 2009 İşbank’s Vision, Objectives, and Strategy 5

İşbank’s Vision, Objectives, and Strategy

Our Vision “To be the most preferred bank in Turkey by customers, shareholders and employees by maintaining our leading, pioneering, and trusted position.”

Our Objectives For our customers; • To be the bank that is the most preferred service provider in all the sectors and customer groups that we target, • To provide our customers complete, reliable, and high quality service by means of our highly competent employees, extensive branch network, and non-branch banking channels, • To abide by our high business ethics and principles without exception.

For our shareholders; • To consistently increase the value of our shares, • To manage risk effectively in whatever we do.

For our employees; • To be a preferred employer and offer employees programs and training opportunities that will foster their personal and professional development, • To propagate our customer-focused approach among all our personnel, • To support and encourage loyalty, assuming responsibility, and creativity, • To deploy an employee hiring, evaluation, appointment, and advancement system that is based on competencies and performance and that is fair and trustworthy.

In summary: “İşbank’s goal is to consistently increase the value that it creates for its shareholders by being a bank that responds to its customers’ needs quickly, effectively, and with high-quality solutions and that encourages its employees to achieve a high level of performance in their jobs.”

Our Strategy Our strategy is based on “the Bank Closest to Customers” philosophy in an effort to fulfill our vision and objectives. İşbank Annual Report 2009 Pioneering Activities 6

Pioneering Activities

Some of the pioneering activities İşbank introduced to the Turkish banking sector… • Introduced “money box” to the Turkish people to create and foster the key concept of saving • Originated the practice of using checks in ordinary expenditure payments • Set up electronic banking in Turkey with “Bankamatik” ATMs • Established the first Turkish bank branches in Europe and Cyprus • Offered the first investment account service in Turkey • Founded the first mutual funds • Initiated trading in investment securities by a bank in Turkey • Launched the first interactive telephone banking service • Introduced the first internet branch • Started WAP telephone banking transactions • Began the first Java-based Mobile Phone Banking service • Introduced the “Floating Account,” Turkey’s first time deposit product with TRLIBOR market-indexed returns • Set up “Environmentally Responsible Growth Fund” Turkey’s first mutual fund focused on social responsibility • Launched “Environment Friendly Housing Loan” product to support the development and widespread use of environment friendly technologies in the housing sector • Started mobile signature implementation that enables borrowing without visiting a bank branch, and card-free cash withdrawal • Introduced the “Return Wizard,” a return comparison tool that uses the Multi-touch feature • Launched the “İş’te Yatırım,” the first financial iPhone application that provides live ISE data • Initiated Video Phone Banking via the third generation (3G) mobile phone technology • Offered the “Mobile Key” product, which enhances security in Internet Banking and Mobile Banking and also enables customers to withdraw money from ATMs card-free. İşbank Annual Report 2009 İşbank’s Financial Indicators and Shareholder Structure 7

İşbank’s Financial Indicators and Shareholder Structure

Key Financial Highlights (TL million) 31/12/2008 31/12/2009 Change (%) 16.1% Total Assets 97,552 113,223 16.1 Total Assets Loans 47,610 48,335 1.5 In 2009, İşbank’s total assets increased Deposits 63,539 72,177 13.6 by 16.1% and reached TL 113.2 billion. Shareholders’ Equity 9,449 13,494 42.8 Net Profit 1,509 2,372 57.2 Gross Profit 3,412 5,232 53.3 42.8% Key Financial Ratios (%) Shareholders’ Equity 31/12/2008 31/12/2009 Shareholders’ equity reached TL 13.5 Interest Earning Assets / Total Assets 92.8 91.7 billion in 2009, with a rise of 42.8%. Loans / Total Assets 48.8 42.7 Loans / Deposits 74.9 67.0 NPL Ratio 4.4 5.4 NPL Coverage Ratio 100.0 100.0 13.6% Demand Deposits / Total Deposits 13.8 15.6 Total Deposits Shareholders’ Equity / Total Liabilities 9.7 11.9 With an increase of 13.6%, total deposits Capital Adequacy Ratio 15.2 18.3 reached TL 72.2 billion. Return on Average Assets 1.7 2.3 Return on Average Equity 15.1 20.7 Cost /Income Ratio 45.2 34.0

Shareholder Structure as of 31 December 2009 (%) 41.5 28.1 İşbank Personnel Supplementary Atatürk Shares Pension Fund (Republican People’s Party)

30.4 Free Float

• No changes occured in the Bank’s shareholder structure in 2009. • The Bank’s shares attributable to the Directors and members of the Audit Committee, to the Chief Executive Officer and the Deputy Chief Executives are of minor importance. • Details about the changes in the Bank’s capital during the reporting period are presented on page 158 (Notes to the Financial Statements, Part: 5, II., 11(c)) İşbank Annual Report 2009 Chairman’s Message 8

Chairman’s Message

Dear shareholders,

Before presenting İşbank’s annual report and independently audited accounts for your review, I would like to share our view on the economic transformation that took place in the world and in our country during 2009, the initiatives our Bank undertook, and our expectations for the future. İşbank Annual Report 2009 Chairman’s Message 9

The major difference The year 2009 saw the global economy in contraction and stagnation at the same time. between the 2008 economic The global crisis deepened in the second half of 2008 and its effects on the Turkish crisis and similar past economy were felt more severely in the first six months of 2009. Throughout the experiences is that central world, industrial production, trading volumes, and employment rates have all dropped significantly. banks, governmental authorities and treasuries The contraction in demand caused inflation rates in some of the developed countries have quickly implemented to actually become negative. Meanwhile, this contraction resulted in uncommonly low inflation rates in developing economies that have been battling with chronically high extraordinary monetary and rates of inflation in the recent past. fiscal policies, most of which were in a simultaneous and The major difference between the 2008 economic crisis and similar past experiences is that central banks, governmental authorities and treasuries have quickly implemented coordinated fashion. extraordinary monetary and fiscal policies, most of which were in a simultaneous and coordinated fashion. This uniform approach played a significant role in shortening the expected post-crisis recession period and we began to see the first signs of recovery in the first half of 2009. Though varying between countries, the monetary and fiscal policies implemented globally have all been based on the rapid reduction of interest rates and rescuing the financial services sector from problematic assets. Data obtained in the second and third quarters of 2009 have led many to believe that the worst part of the crisis has passed. Having achieved positive growth in the third quarter of 2009, the United States and the Euro Zone have technically come out of the recessionary period.

High levels of public debt in the developed countries, some ongoing problems with the credit markets, and high rates of unemployment by the end of 2009 are all indicators that permanent solutions to the problems of global economy will take a long time.

Since the fourth quarter of 2008, domestic macroeconomic performance and risks associated with it have been in parallel with global developments. Having foreseen a sharp decline in inflation rates, the Central Bank of Turkey has focused on limiting the negative effects of global crisis on economic performance.

A balanced liquidity policy was administered while short-term interest rates were rapidly pulled down and eliminating the bottleneck in the credit market was set as the main objective. The Central Bank cut its policy rate from 16.75% to 6.50% between November 2008 and November 2009. Hence, Turkey’s policy rates have approached the average of developing countries which practice inflation targeting.

Recent data from the Turkish economy indicate that economic activity continues to recover moderately. Nevertheless, following the abolishment of the tax relief initiative, a slowdown, albeit minor, in private consumption has been observed.

Taking into consideration the uncertainty in the market conditions and low industrial capacity utilization rates, regarding the partial recovery of investment in the second half of 2009, it is forecast that it will take a long time for the level of expenditures to reach that of pre-crisis period. İşbank Annual Report 2009 Chairman’s Message 10

In a year when there has Though tightened due to the crisis, credit conditions have shown signs of recovery in the second half of 2009. An improvement regarding the tightened financial conditions been macroeconomic in this period and the ongoing downward trend in credit rates have strengthened the contraction, our Bank, having expansionary effect of the monetary policy. Credit demand has revived starting from the reached its goals to a great third quarter of 2009. extent in its major business İşbank has successfully managed to tackle the impact of the global crisis on the lines by using its Turkish economy and on our sector. competencies effectively, has No matter how difficult the conditions were, İşbank continued to contribute to the national economy in 2009, much as it has done for the past 85 years. In a year when sustained its material growth there has been macroeconomic contraction, our Bank, having reached its goals to a great and realized the highest extent in its major business lines by using its competencies effectively, has sustained its employment in the banking material growth and realized the highest employment in the banking sector. sector. İşbank has continued to improve the capabilities and resources necessary to understand its customers better and to make a difference in their lives. Understanding customers and their needs, establishing long-term and respectful relationships with them, and providing them in a simple way with products and solutions that will make a difference in their lives through the service channels they prefer…

These three tenets summarize the fundamental philosophy behind İşbank’s customer centric transformation in recent years. The Customer Centric Transformation Program we began to implement at the end of 2006 aimed to further improve İşbank’s ability to provide services with the mission of being the closest bank to customers.

In this three-year period, we have finished the majority of the multifaceted improvement and development initiative for İşbank’s organizational structure, processes, products, and technologies; and we can proudly say that the transformation is now complete. This transformation has started yielding important gains in productivity and efficiency while equipping our Bank with stronger tools on the eve of a new growth phase.

We are well aware that the geography surrounding Turkey will continue to carry political risks in 2010. Caucasia and the Middle East will continue to be on the global agenda. Nonetheless, we are also well aware that Turkey is in the center of a region that is our natural area of significant future economic development and that is home to many growth opportunities.

With the help of our growth-centered approach and the momentum we currently have, we intend to carry the unique brand we have formed in Turkey to neighboring countries and become an even stronger regional player. İşbank has the necessary scale, human resources, know-how, and most importantly the strong and unwavering support of our shareholders to make that happen. İşbank Annual Report 2009 Chairman’s Message 11

İşbank is determined to Dear shareholders, increase its presence multi- Investing in the future of Turkey, as prescribed by Atatürk, the Great Leader, during our directionally in the economic establishment, has always formed the foundation of our social responsibility projects. cycle through its nation-wide We live in a world where the success of companies is measured by not only their achievements in their sector, but also by their contribution to sustainable social branch network, development and where social responsibility is becoming increasingly important. technological infrastructure, Since its establishment, our Bank has been aware of its corporate social responsibility and customer centric service and has constantly worked to fulfill the needs of this responsibility. İşbank has carried capabilities in 2010. out its social responsibility activities in the fields of education, environment, and arts and culture with a corporate philosophy that is summed up in the phrase “Turkey’s Bank.” This philosophy,

• Contributes to enhancing social development and the quality of life of the Turkish people, • Contributes to the preservation and development of social values established by the Republic, • Supports raising the generations that will carry our country to a highly developed level, • Creates opportunities for Turkish arts and culture to develop and to be represented worldwide, • Aims to preserve sustainable living and the environment.

Our Bank carries out large-scale social projects that have a wide societal impact while encouraging participation and sharing. We will continue these social responsibility projects in 2010 with the same sensitivity we have always shown.

New achievements to come in 2010... We have optimistic forecasts for both the global and Turkish economies in 2010. We believe the recession brought on by the crisis will linger on for a while longer; however, recovery will begin much sooner than expected.

Having products and services that are used by millions and that can reach all economic activities in Turkey, İşbank is determined to increase its presence multi-directionally in the economic cycle through its nation-wide branch network, technological infrastructure, and customer centric service capabilities in 2010.

We have full faith in Turkey, Turkish people, and Turkish entrepreneurs. As long as the Turkish people’s hardworking and entrepreneurial spirit endures, İşbank will continue to achieve new successes in domestic and international markets and to further its leadership. We would like to thank the Turkish people for trusting İşbank for generations, our employees, our customers who preferred us, and to you, our distinguished shareholders.

Yours Sincerely,

Caner Çimenbiçer Chairman of the Board of Directors İşbank Annual Report 2009 CEO’s Message 12

CEO’s Message

Distinguished shareholders, customers, business partners, and colleagues,

The year 2009 has been a successful one for İşbank in every aspect. İşbank Annual Report 2009 CEO’s Message 13

Adding the 64 branches that In 2009, our Bank has, • shown a strong performance that enhances shareholder value , were inaugurated this year • proved the sustainability and appropriateness of its growth strategy once again, to its service network, İşbank • demonstrated its ability to create value for all of its stakeholders by managing its has created employment for business effectively. nearly 2,500 young bankers; Growth and development... this has countered the İşbank has continued to improve its infrastructure and growth uninterruptedly in a time contraction in employment in where stagnation due to the economic crisis was felt on a global scale. the sector. Adding the 64 branches that were inaugurated this year to its service network, İşbank has created employment for nearly 2,500 young bankers; this has not only increased the level of service provided, but also countered the contraction in employment in the sector. In times when even maintaining the current level of activity can be a cause for hesitation, İşbank is rightfully proud to have successfully increased its investment in its future.

Stability and trust... With its combination of geographic location, demography, and economic structure that all suggest the potential for rapid growth, Turkey is a candidate to be one of the leading economies in the region in the medium term. As always, our faith in Turkey’s future and its economic potential is the real source behind our strength today.

Although the demand in the country’s major urban areas for many banking services like credit cards approach the levels found in mature markets, most of Turkey still has significant growth potential that can be translated into increased business opportunity.

The trust of the Turkish people, the strong interest of our customers, and the consistent demeanor and strong support of our shareholders have continued to be the fundamental factors that have enabled us to reach our growth targets in challenging times like these.

With this interest and support, İşbank continued to make investments throughout 2009 and succeeded to become one of the focal points of growth in the country.

Continuous improvement... İşbank has placed great importance on improving its capabilities while maintaining its growth trajectory. After a three-year period, our Bank has come to the final stage of its Customer Centric Transformation Program, the most comprehensive transformation initiative completed in the Turkish banking sector to date.

This program, combining traditional values with the requirements of customer service and competitiveness at İşbank, has provided our Bank with the corporate structure, methodology, and technological infrastructure necessary to develop an expansion policy and compete on an international level.

Basically, this program aims to provide İşbank with a flexible and robust structure that allows us to compete easily with strong and well-capitalized international competitors İşbank Annual Report 2009 CEO’s Message 14

In 2009, İşbank’s total assets in both Turkey and the surrounding region. The comprehensive transformation projects we have completed have aimed to establish the foundation of a banking culture that can increased by 16.1%, to TL expand easily beyond the borders of Turkey. İşbank has maintained its core founding 113.2 billion. principles as a guide during this historical transformation, and has always kept these values at the center of all its projects.

Headlines from 2009 results... The banking sector has had a positive year in 2009. In this framework, İşbank has been one of the actors who has strongly and consistently maintained its profitability.

In 2009, İşbank’s total assets increased by 16.1%, to TL 113.2 billion. The Bank’s total deposits grew by 13.6% and shareholders’ equity rose by 42.8%. Affected by the crisis and a decline in demand, loans grew by 1.5% for the year.

Although the growth of our balance sheet slowed a bit due to the stagnating effects of the economic crisis in 2009, we achieved a 34.5% increase in net interest income, which constitutes the majority of our income. The level we have reached in net interest margin clearly shows the positive results of our risk-sensitive, prudent, and proactive policies.

In a year when policy and market interest rates have plummeted to the lowest levels in recent history, our Bank has successfully managed interest expenses as well as interest income in prevailing market conditions. This growth in net interest income is mainly a result of the policies geared towards creating efficient and high-quality assets and the fact that the Bank has steered clear of relatively high-cost resources.

Sustainable, strong financial structure... Our financial structure, supported by internal resources created as a result of our Bank’s activities over a very long period of time, shows healthy and sustainable growth.

Our Bank has successfully maintained a high level of capital adequacy through the policies that not only allowed İşbank to sustain but also improve its strength in an increasingly competitive market environment in recent years. Nonetheless, the growth in the shareholders’ equity of both the Bank and its subsidiaries as of year-end 2009 provides İşbank with the opportunity to create the strongest shareholder value in the financial sector in the future, as well. Moreover, this growth reinforces our conduct that constitutes as a driving force and an example of stability for the Turkish economy and the financial sector.

Away from crisis worries... We managed, to a large extent, to keep our Bank and our customers protected from the reservations felt both in the financial and real sector during the year 2009, when there has been stagnation due to the global crisis. İşbank Annual Report 2009 CEO’s Message 15

Having faith in Turkey and In 2009, with the prudent and risk-sensitive policies determined, our market share in the economic activities was maintained and our efforts to provide funds to the real sector, the future of its real sector, which is one of the basic duties of banking, continued with determination. Customers İşbank signed project finance have entrusted İşbank with their assets throughout the year and continued their deals with maturities of up businesses with the comfort of finding the resources they need at favorable market terms. to 10 years. The year 2009 has been one where our activities in project financing have been in the forefront. Having faith in Turkey and the future of its real sector, İşbank signed project finance deals with maturities of up to 10 years during a crisis period when global investment banking giants were forced into bankruptcy or a take-over. The resources our Bank provides for projects that constitute as foundation stones for the future of Turkey, especially in the energy sector, have reached significant levels.

Our determination to participate in economic activities and our sound lending policies have not only met with the approval of our customers from across Turkey, but also confirmed our objectives of creating value and long-term growth for our shareholders.

Regional strength... İşbank has an international service culture and experience honed over many years. Shortly after its establishment in 1924, the Bank opened its first international branches in Alexandria and Hamburg in1932.

İşbank Alexandria and Hamburg branches are milestones in our country’s financial history as they were the first international branches of a Turkish bank. Since this pioneering development, İşbank has created an effective international service network and has come to a point where it provides distinctive services to not only its Turkish customer base, but also to its international customers.

At the onset of 2010, İşbank is evaluating investment opportunities presented by international markets, primarily in the neighboring region.

Preparing to take its international organizational structure to a new level, our Bank’s assessment for investment in markets in the surrounding region is ongoing. Moreover, the process of opening new İşbank branches or representative offices in the geographic region around Turkey continues.

Our representative office in Cairo, the capital city of Egypt, is now ready to launch and a significant progress was made to open a branch in Azerbaijan.

Our Bank believes that just like Turkey, the region in which we are located has all the right dynamics for future growth. İşbank is equipped with the necessary strength, know-how, and experience to benefit from these dynamics in the most efficient way. İşbank Annual Report 2009 CEO’s Message 16

We will continue expanding Growth at the onset of the 100th anniversary... İşbank will grow in all business areas in which it can provide services to its customers. our service network primarily In Turkey, where utilization of banking services is quite low in comparison to the through new branches in developed countries, we strongly believe that the banking sector will continue to 2010. grow and that the financial sector will expand and further develop. We will continue expanding our service network primarily through new branches in 2010.

As a result of the Customer Centric Transformation Program that has been ongoing for the past three years, our Bank is prepared in every aspect to provide high-quality and high-value added products and services to a growing customer base. Structural strength deriving from the improved technological infrastructure and a well-qualified workforce will act as a leverage to increase our market share. This will positively reflect in our revenue and İşbank will continue its journey to 2024, the Bank’s 100th anniversary, as a healthy growing, sound and reliable banking institution.

“Turkey’s Bank” is the foundation of social responsibility projects... In addition to its banking activities, İşbank, founded upon the mandate of Atatürk as part of the initiatives of the Turkish Republic, has deemed it as its mission to contribute to many social fields, including the arts and culture, education, science, and sports, within this development movement. İşbank has always considered contributing to the social development of Turkey and social solidarity among its highest institutional priorities. We believe that this guiding principle has manifested itself strongly in our 2009 activities, as well.

Today, when the impact of globalization is ubiquitous, education is the primary driver of competition. Countries that provide a good and equal education to all their youth can accelerate the growth of their economies and improve their social welfare. Our Bank places particular importance on education in accordance with the founding objective set by our founder Atatürk, the Great Leader. For that reason, İşbank became the main sponsor of the Turkish Chess Federation in 2005. In 2009, the number of chess classes in elementary schools reached 2,000, while the number of students taking chess classes exceeded 1.7 million. We are proud to see that the developments that arose as a result of our support of the highly educational sport of chess are shown as an example throughout the world. Last year, we initiated the “81 Students from 81 Cities” project in cooperation with Darüşşafaka, one of the leading non-governmental organizations in Turkey, to support educational equality. The first group of students of this project passed on to the next grade and the group of new students that passed the exam in 2009 began their education with the opportunities provided by İşbank. In addition, İşbank launched in 2008 the “Show Your Report Card, Get Your Book” project, one of the largest book campaigns so far. In 2009, this project continued at full speed and 2 million books were distributed to 2 million children. İşbank Annual Report 2009 CEO’s Message 17

We expect the Turkish Global climate change has been scientifically proven to be caused by human activity. Last year, we initiated the “81 Forests in 81 Cities” project in an effort to leave our children a economy to return to its greener world with cleaner air. As of year-end 2009, areas in 32 cities have been forested growth path in 2010 and with the help of volunteers from the TEMA Foundation, employees from the Ministry of business opportunities to Environment and Forestry, Turkish children, members of the local community, and our employees. İşbank is pleased to be sponsoring the largest and most extensive forestation increase with this project in Turkey. revitalization. Wide investor base and unique capital structure... İşbank has one of Turkey’s widest investor bases and has consistently represented Turkey’s capital strength. As an institution supported mainly by domestic capital, İşbank has a unique position and is among the Turkish companies whose shares are most demanded by international investors.

Its unique capital structure and corporate conduct create a competitive edge and constitute a regional source of prestige. İşbank has been creating value unceasingly for the past 85 years and this ability has brought rightfully earned acclaim to İşbank. İşbank will continue contributing to the Turkish economy, at an increasing rate, while being guided by this recognition and acclaim in its journey to the future.

We expect the Turkish economy to return to its growth path in 2010 and business opportunities to increase with this revitalization.

The momentum we have gained and the importance we place on growth will increase the added value we provide to our shareholders, employees, and Turkey. We gained this momentum as a result of the capabilities of our employees and their devotion to their work under the leadership of our Board of Directors.

I would like to thank all our shareholders, Board Members, customers, business partners, and colleagues.

Sincerely Yours,

Ersin Özince Member of the Board and Chief Executive Officer İşbank Annual Report 2009 MOD Program 18

İşbank’s transformation journey: Customer Centric Transformation (in Turkish: MOD)

İşbank launched the Customer Centric The objective of the transformation at İşbank is to provide services with a more customer-focused approach. Transformation Program at the end of MOD aims to implement the ongoing improvement in areas 2006 in line with its vision “to be the most of organizational structure, processes, human resources, and technology at İşbank with a systematic and integrated approach. preferred bank in Turkey by customers, In order to reinforce İşbank’s position in the increasingly shareholders, and employees by competitive Turkish banking sector and to respond to these maintaining its leading, pioneering, and changing market conditions, the MOD Program is structured around these four main objectives: trustworthy position.” With this Program, • To increase operational efficiency and commercial İşbank aims to further advance its position effectiveness through improvement of sales competency and reduction of costs in Turkey and in the sector. • To form a more effective and efficient organizational structure to meet customer needs • To improve the current performance management system • To improve and increase the efficiency and capabilities of the technological infrastructure.

2007

Customer segmentation Customers were divided into segments to better understand customer needs and to provide diversified value propositions. Products and services were restructured specifically for each of these segments. Four business units 2006 were formed for customers: Retail, Private, Commercial, and Corporate.

Regional structuring The MOD Program established 24 retail and 24 commercial banking sales regions. In addition, 20 SME Loans Underwriting regions and 8 Credit Intelligence and Financial Analysis regions were established in parallel with the restructuring of the credit and information functions. The MOD Program was launched at Change management and training the end of 2006. Intensive training and coaching programs were planned in order to prepare the organization for the cultural change. Competency assessments were completed for all employees.

IT infrastructure Initial applications of data mining, campaign management, and sales lead management of the Customer Relationship Management (CRM) project were launched. İşbank Annual Report 2009 MOD Program 19

2009

Customer Relationship Management A “Customer Experience Platform” that will manage the “multi-channel customer experience” was launched.

2008 Centralization Operational tasks equivalent to a 3,500-person workforce were shifted from branches to the operations units, where the size of workforce needed to manage the same amount of operational work was only 1500 employees. This reduction not only decreased costs, but also allowed branches to focus Branch business model more on sales activities. The new “branch business model” that clearly distinguishes between sales and operation activities began to be rolled- Branch business model out to branches. İşbank has completed the implementation of the new “branch business model” in all of its branches. Customer Relationship Management The Customer Relationship Management program was ADC structuring rolled out in all branches and became ready to be used The Alternative Distribution Channel functions have been effectively by the sales teams. restructured within the scope of the MOD’s fundamental principles. Centralization Processes centralized and/or improved during 2008 have Performance management been influential in the reduction of operational tasks and Performance scorecards, which allow the integration of increasing focus on sales at branches. strategies with employee targets, are ready to be used for all employees. Human resources applications have been Lean organizational structure restructured within the context of MOD perspective. Human Resources, Information Technologies, and Finance functions have been restructured. As a result of Change management and training improvements to other functions as well, the organizational İşbank has established a training system that aims to structure has become leaner. promote and to enhance the competencies of the Bank’s sales force. To achieve these objectives, each İşbank Change management and training employee was given an average of 55 hours of training. The Sales Academy was established within the scope Change management activities have been resumed in order of training activities directed at enhancing the sales to acclimate the workforce to the new business culture. competencies of employees and MOD trainings were given to nearly 19,000 İşbank employees. In addition, coaching sessions were held with managers from branches and the Bank’s headquarters in line with the change leadership role they would undertake during the transformation. İşbank has fulfilled the fundamental IT infrastructure objectives of the Customer Centric The Bank developed the Credit Management Application Transformation Program and has (CMA), which was rolled out in all of the branches. implemented the changes necessary to strengthen its leading position in the increasingly competitive Turkish banking sector. Moreover, İşbank has restructured its approach to its customers via MOD and has successfully fulfilled an important step in becoming “The Most Preferred Bank by Customers.” İşbank Annual Report 2009 The Economic Outlook in 2009 20

The Economic Outlook in 2009

A year after the deepening THE GLOBAL ECONOMY of the crisis, global economic Developments in 2009 activity is slowly increasing and financial conditions are Global economy began to recover in the second half of 2009. returning to normal. The indicators regarding the second half of 2009 show that the recovery of the global economy, as a result of the loose monetary policies and fiscal stimulus put into practice against the deepest crisis since the Great Depression, is underway. A year after the deepening of the crisis, global economic activity is slowly increasing and financial conditions are returning to normal.

Global interest rates were at low levels in 2009. As of year-end 2009, short-term interest rates were at 0% - 0.25% in the USA, 1% in the Euro Zone, and 0.10% in Japan.

The dollar fluctuated against major currencies due to expectations regarding the global financial markets, debates about its international reserve currency status, changes in the global risk perception and the macroeconomic data disclosures. After having risen to 1.5139 during 2009, euro/dollar parity dropped to 1.4316 at year-end.

Remaining below USD 40 per barrel at year-end 2008, the spot market price of Brent oil rose to USD 45 per barrel during the first quarter of 2009 due to the ongoing uncertainties regarding the global economy. Starting from the second quarter, the spot price of oil started to climb as the global economy began to show the first signs of recovery. At year-end 2009, the spot price of Brent oil reached USD 78 per barrel.

Real GDP (Annual Change %)

12 10 8 6 4 2 0 -2 -4 -6 -8 -10 2006 2007 2008 2009 2010 2011

Developing countries World Developed countries

Source: IMF İşbank Annual Report 2009 The Economic Outlook in 2009 21

IMF forecasts the global 2010 Forecasts economy to grow by 3.9% in Recovery of global economy is expected to continue in 2010. 2010. Economic indicators like the high rates of unemployment worldwide, the tight credit conditions, and the deterioration in fiscal balances suggest that the global economic recovery would be gradual.

IMF forecasts that the global economy will grow by 3.9% in 2010.

The fundamental risk regarding the exit strategies is “timing”. Implementing the exit strategies prematurely might halt the economic recovery. On the other hand, keeping the monetary and fiscal support for an extended period might raise concerns about the solvency of the public sector and moral hazard.

Thus, the following have a crucial role in ending loose monetary and fiscal policies:

• Following a coordinated strategy on a global scale, • Not acting before the recovery clearly has taken hold, • Adopting a “strong, balanced, and sustainable” economic growth model based on a more balanced global demand in order to avoid similar global crises in the future.

A rise in interest rates is not foreseen before the economic recovery gains consistency globally.

Despite the fact that the relative upward trend in economic activity has caused oil demand to increase, it is still below the demand levels of previous years. This will prevent oil prices from skyrocketing. In 2010, Brent oil prices are expected to remain around USD 75 per barrel on average.

Euro / Dollar Parity Change

1.7

1.6

1.5 1.3927

1.4 1.3678 1.3

1.2

1.1

Jan.08Feb.08Mar.08Apr.08May.08Jun.08Jul.08 Aug.08Sep.08Oct.08Nov.08Dec.08Jan.09Feb.09Mar.09Apr.09May.09Jun.09Jul.09 Aug.09Sep.09Oct.09Nov.09Dec.09Jan.10Feb.10

€/$ Moving average (*)

(*) 22 days’ moving average İşbank Annual Report 2009 The Economic Outlook in 2009 22

Although the weakness in TURKISH ECONOMY domestic demand in the first The economy contracted in 2009. quarter of 2009 weighed on In Turkey, the negative effects of the global crisis were felt most acutely in the real the economy, tax cuts sector. A decrease in demand from the EU, Turkey’s largest export market, has caused implemented during the manufacturing in the export sector to shrink significantly, resulting in reduced employment. Furthermore, an increase in the global risk perception has toughened the second and third quarters financing conditions for the real sector. slowed down the decline in private consumption In 2009, production, consumption, and investment decisions were postponed due to the decrease in economic predictability in Turkey, as well as experience acquired from expenditures. previous crises. The Turkish economy contracted by 14.7%, 7.9%, and 3.3% in the first, second, and third quarters of 2009, respectively; this translated into a contraction of 8.4% for the first three quarters of the year.

Although the weakness in domestic demand in the first quarter of 2009 weighed on the economy, tax cuts implemented during the second and third quarters slowed down the decline in private consumption expenditures.

Looking at the year in general, the current account deficit contracted due to the decline in the foreign trade deficit. A review of the financing of the current account deficit showed that capital inflows to Turkey remained significantly below the previous year’s level.

GDP - Sectoral Growth Rates (%)

2008 2009 (*) 5

0

-5

-10

-15

-20 Agriculture Industry Services Construction GDP

(*) as of January-September İşbank Annual Report 2009 The Economic Outlook in 2009 23

Beginning in November In 2009, budget performance deteriorated compared to previous year. Rapid increase of current transfers in the first quarter of 2009 and the limited growth in 2008, the Central Bank of tax revenues as a result of contraction in economic activity have been the main factors to the Republic of Turkey have a negative impact on Turkey’s 2009 budget performance. (CBRT) has steadily lowered Weakening in domestic demand in 2009 has created downward pressure on inflation. short-term interest rates As of year-end 2009, consumer price index (CPI) rose by 6.53% and producer price from 16.75% to 6.50%. index (PPI) increased by 5.93% annually. In addition to the base year effect, fluctuations in commodity prices, primarily oil, are expected to be reflected in inflation rates in 2010.

CBRT lowered policy rates in 2009. Beginning in November 2008, the Central Bank of the Republic of Turkey (CBRT) has steadily lowered short-term interest rates from 16.75% to 6.50%. Weak demand, worsening employment conditions, and uncertainties in the global economy have played a significant role in the rapid lowering of short-term interest rates.

Inflation and FX Basket (Monthly Annualized Changes %)

35

25

15

5

-5

-15 j F M A M J J A S O N D J F M A M J J A S O N D 2008 2009

PPI CPI FX Basket İşbank Annual Report 2009 The Economic Outlook in 2009 24

Declining policy rates BANKING SECTOR together with the rise in Despite the contraction in the economy, the banking sector continued to grow in banks’ securities portfolios 2009. have played a significant role Declining policy rates together with the rise in banks’ securities portfolios have played a in the growth of the banking significant role in the growth of the banking sector in 2009. sector in 2009. The downward trend in credit volume that had begun in the last quarter of 2008 resumed in the first quarter of 2009. In the following period, spot loans grew as well as consumer loans and retail credit cards, both as a result of the domestic stimulus package targeted to revive domestic demand. However, installment commercial loan and other loan volumes continued to fall in general.

In 2009, the drop in CBRT’s policy rates and the non-competitive conditions in the sector helped in reducing costs of deposits, which is the major funding source for banks. On the other hand, since deposit interest rates were not attractive for investors, growth in deposit volumes remained constrained compared to 2008.

Deposits and Loans in 2009 (*) (% change according to year-end 2008)

16 14 12 10 8 6 4 2 0 -2 -4 J F M A M J J A S O N D

TL Deposits FX Deposits Loans

(*) Participation banks are included. İşbank Annual Report 2009 The Economic Outlook in 2009 25

In 2010, inflationary 2010 EXPECTATIONS pressures will remain weak Recent data releases indicate that economic contraction in Turkey slows down. under the assumption that Data announced in the second half of 2009 indicate that the economic contraction in economic recovery will be Turkey is coming to an end. Nonetheless, the weakness in real sector and consumer slow and gradual. confidence indices coupled with expectations for slow global recovery from the economic crisis suggest that the Turkish economy will recover gradually in the coming period.

In 2010, economic developments in Turkey’s main export markets, primarily the European Union, will affect the growth rate of the Turkish economy. The Turkish economy is forecasted to grow by 3.5% in 2010.

In 2010, inflationary pressures will remain weak under the assumption that economic recovery will be slow and gradual. Thanks to the reduced inflationary pressures, interest rates will remain at the current historically low levels in the first half of 2010, while CBRT policy rates are likely to increase gradually in the second half of 2010, depending on the pace of economic recovery.

Improvements in Turkey’s credit rating will increase capital inflows. The Institute of International Finance expects a significant increase in capital inflows to developing countries in 2010. Turkey is predicted to have a larger share of international capital inflows thanks to improvements in its credit rating. The Turkish Lira is not expected to be under significant pressure in the coming period, considering that the current account deficit is at much lower levels compared to previous years.

Credit volume of the banking sector is expected to rise in 2010. The credit volume of the banking sector is expected to continue rising in the next period, considering the relative improvements in global risk perception as well as forecasts that CBRT will keep interest rates at low levels for a while. However, the real sector’s weak propensity to invest and the negative trend in employment suggest that this increase will be gradual. İşbank Annual Report 2009 İşbank in 2009 26

İşbank in 2009

With its steady performance İşbank in 2009 in all its business segments, • At year-end 2009, İşbank reached TL 113.2 billion in asset size, registering 16.1% İşbank showed an exemplary growth. sustainability performance • Total lending was up 1.5% at TL 48.3 billion. • At year-end 2009, İşbank’s total deposits reached TL 72.2 billion, while Turkish Lira in 2009. savings deposits increased to TL 30.0 billion. The Bank’s market share in savings deposits is 15.0%, and 14.0% for total deposits. (*) • İşbank’s Corporate Banking cash loans portfolio was up by 7.7% in 2009. • With over 5 million credit cards, a total of TL 28.6 billion in credit card turnover, and a 14.1% market share based on turnover, İşbank is a significant player in the card payment market in Turkey. • The number of Private Banking customers at İşbank surpassed 36,000 in 2009. The total amount of customer assets managed by İşbank as of year-end 2009 is over TL 25 billion. Total Loans • İşbank, always a leader in the capital markets arena, has 22.5% market share in (TL million) investment funds with an investment funds portfolio worth TL 6,776 million. • Once again, İşbank has proven to be a highly capable institution by originating foreign 47,610 48,335 currency financing in 2009, despite the global crisis. The Bank has provided a total of USD 605 million and EUR 518.8 million as a result of two syndicated loans. • In 2009, İşbank continued to expand its branch network. As of year-end 2009, İşbank provides services at 1,078 domestic and 15 international branches with over 22,000 employees. • İşbank saw 61.2% of its banking transactions in 2009 performed via alternative distribution channels. The number of ATMs, the most common alternative distribution 1.5% channel of İşbank, reached 3,591 at year-end 2009. • İşbank’s Web site, “isbank.com.tr” won the “Outstanding Web Site” award at the Internet Advertising Competition (IAC), one of the most prestigious online advertising 2008 2009 competitions. • İşbank continued to provide its customers with innovative and value added products and services in 2009. Total Deposits • İşbank diligently continued its social responsibility projects within the scope of (TL million) “sharing with society and participation” principles in 2009. “Chess,” “81 Students from 81 Cities,” “Show Your Report Card, Get Your Book,” “81 Forests in 81 Cities” are 72,177 just a selection of İşbank’s social responsibility projects. 63,539

13.6%

2008 2009

(*) Market shares are based upon the monthly sectoral data (including participation banks, and development and investment banks) published by the Banking Regulation and Supervision Agency and are calculated excluding interest accruals and rediscounts. İşbank Annual Report 2009 İşbank in 2009 27

Increasing its net interest Assets Composition Liabilities Composition income by 34.5%, İşbank (TL million) (TL million) achieved a rise of 57.2 % in 97,552 113,223 97,552 113,223 its net profit in 2009. 19.1% 15.2%

25.6% 34.7% 65.1% 63.8%

48.8% 16.1% 42.7% 18.5% 16.1% 18.3%

6.7% 6.0% 3.2% 4.4% 9.7% 11.9% 3.3% 3.0% 2008 2009 2008 2009

Net Profit Cash and Banks Deposits (TL million) Securities Funds Borrowed and Money Market Funds 2,372 Loans Other Liabilities

Participations Shareholders’ Equity

1,509 Others

57.2%

2008 2009

Net Interest Income Cost/Income Ratio (TL million) (%)

4,867 45.2

3,618 34.0

34.5%

2008 2009 2008 2009 İşbank Annual Report 2009 İşbank in 2009 28

İşbank’s corporate cash loans Corporate Banking grew by 7.7% in 2009. İşbank has acted with the responsibility of its pioneering position in the banking sector, even under the macroeconomic conditions that affected the markets adversely during the year 2009. İşbank supports the real sector through its knowledge base, deeply rooted experience, strong risk perception, the trust engendered by its capital base, and innovative solutions developed by focusing on customer needs. In 2009, İşbank continued to be the preferred bank for corporate customers.

With a comprehensive range of services provided at each of the nine corporate branches staffed with specially trained professionals, İşbank aims to deliver a high level of customer satisfaction. Corporate banking places great strategic importance on being in comprehensive and long-term relationships with large national and multi-national customers. Corporate banking also helps its customer achieve a competitive edge in both national and international markets through individualized financing solutions created especially for them. With nine corporate branches, four of which are in Istanbul, staffed with highly capable and specially trained professionals, İşbank provides customer-focused services in the corporate banking field.

Corporate Banking loan portfolio successfully grew in 2009. With a growth objective based on profitability and high-quality assets in the corporate banking field, İşbank’s corporate cash loans grew by 7.7% in 2009.

İşbank continues to contribute to the development of Turkey’s economy via funds allocated and solutions provided in project financing. Without sacrificing its selective and risk-sensitive approach, İşbank has maintained its strong position in the sector through shares from financing of privatization, acquisition, and merger projects as well as large investments in sectors that play an important role in the development of Turkey’s economy, such as the energy, transportation and warehousing, iron-steel, and retail sectors.

The sector distribution of recent years in project financing remained unchanged in 2009 and İşbank provided a total of USD 888 million, of which USD 677 million was in cash, in new project financing.

İşbank will continue to be an effective player in project financing during and after 2010. The Bank will allocate funds to privatizations as well as significant investments in the energy, production, and service sectors, whose growth will gain momentum depending on Turkey’s need and on the improvement in the local and global economic indicators.

Projects to which İşbank allocates funds receive awards. Among projects to which İşbank has allocated funds is the USD 1.2 billion Eren Çatalağzı Thermal Power Plant Project, the largest thermal power plant project of the private sector in Turkey. As part of the banking consortium, İşbank has provided USD 330 million as a long-term loan for the Eren Çatalağzı Thermal Power Plant Project. In addition, İşbank has allocated USD 170 million as a long-term loan for the MMK Atakaş Project, the second largest flat steel facility, in Iskenderun. The MMK Atakaş Project, worth USD 1.7 billion, is expected to create significant value for the Turkish economy and the İşbank Annual Report 2009 İşbank in 2009 29

İşbank’s extensive branch production and employment in the flat iron area, in which Turkey has a supply deficit. Euromoney, one of the most prestigious financial publications in the world, named the network, advanced Eren Çatalağzı Thermal Power Plant Project as the Europe Power Deal of the Year in the technological infrastructure, energy sector, and the MMK Atakaş Project as the Europe Metals Deal of the Year in the and competitive edge in metals sector. creating solutions tailored to Risk and cash management services were in demand by customers in 2009. customers and/or the sector Increasing globalization has complicated commercial and industrial relationships. İşbank are among the factors that has retained its expert position in the application of the quality and diversity of risk and cash management solutions required by this complex relationship. A wide network strengthen the Bank in risk of branches, an innovative technological infrastructure, a competitive edge in creating and cash management customer and/or sector specific solutions are some of the other advantages that make services. İşbank a strong player in the field of risk and cash management services.

İşbank has continued its efforts to expand and develop derivative products that aim to protect customers from exchange and interest rate risks resulting from medium to long-term liabilities. İşbank has also increased its number of contracted customers, cash management transaction volumes, and market share.

İşbank checks continued to be the most commonly cleared checks. The number of primary firms grew by 28% to exceed 200 and the number of customers serviced surpassed 12,500, achieving a 10% growth rate, in direct debiting and dealership card implementations, which are the most fundamental products of the cash management package. Additionally, collection of customs tax rose by 40%. According to data from the Chamber of Bank Clearance, İşbank checks were the most commonly cleared checks with a 14% share in 2009, and İşbank continued to lead the market in this area.

In order to help companies monitor their cash flows more closely, easily, and with less cost, İşbank has accelerated its efforts to automate a larger number and wider range of transactions. Furthermore, within the framework of cash management services, İşbank has worked on improving and expanding especially electronic reporting tools tailored for companies and cash pools in cash management services. In addition, the Bank provided tailored solutions to numerous customers as part of the e-statement initiative and expanded the use of the web service application that allows instant reporting of companies’ account activities.

İşbank continued to create tailored solutions for corporate customers participating in the lump sum e-payment service and signed new contracts with companies in keeping up with its vision to turn the internet branch into a payment collection platform. Other examples of the improvements made to the cash management services include the e-signature feature and foreign trade solutions. In 2009, İşbank also became a member of SCORE, a system of SWIFT, that allows institutions to communicate securely with banks.

In 2010, İşbank will continue to bolster its position in cash management services by creating diversified and tailored solutions to meet the needs of prominent corporations. İşbank Annual Report 2009 İşbank in 2009 30

As in the past 85 years, in Commercial Banking 2009, İşbank continued to Continuous support of commerce and industry stand by Turkish As in the past 85 years, in 2009, İşbank continued to stand by Turkish industrialists and industrialists and traders and traders and carried on its activities by offering a more customer centric service to its carried on its activities by customers. offering a more customer İşbank improves its collaboration with professional societies and institutions. centric service to its İşbank continued to sign cooperation agreements with chambers, associations, and customers. professional societies in an effort to improve relationships with SMEs and commercial concerns in 2009, taking the regional needs into account. Furthermore, İşbank signed protocols with the Turkish Hotels Federation (TÜROFED) and the EU Turkey Business Center in Izmir (Izmir ABIGEM) that allow extending credit and using cash management products under special conditions.

Improving cooperation with KOSGEB The ongoing cooperation between İşbank and the Authority for Developing and Supporting Small and Medium Industry (KOSGEB) was enriched in 2009 through the following initiatives: “SME Export Financing Support Credit Protocol”; “Zero Interest Working Capital Support Credit Protocol for the City of Diyarbakır”; “100,000 SME Support Credit Protocol”; “Machinery & Equipment Credit Interest Support Program for the GAP Region” and “Emergency Support Credit Program.”

İşbank – Credit Guarantee Fund (KGF) collaboration is a crucial component of the support to commerce and industry. The existing cooperation between the Credit Guarantee Fund (KGF) and İşbank was expanded in 2009. KGF is an entity offering suretyship to Small and Medium sized Enterprises in order to help them overcome the difficulties in finding credit guarantees, without implementing any sector restrictions, thus enabling them to borrow money from banks.

Funds created as part of SELP II was extended to small-scale enterprises operating in 49 cities. EUR 20 million obtained from KfW Bankengruppe in February 2009 as part of the Small Enterprises Loan Programme II (SELP II) was used to finance working capital needs and fixed capital investments of small enterprises operating in 49 cities within government incentive program.

An additional EUR 3.6 million was acquired from KfW Bankengruppe in September 2009 as part of SELP II, to be used in financing of small enterprises operating in Muş, Hakkari, Van, and Bitlis. İşbank Annual Report 2009 İşbank in 2009 31

İşbank is the sector leader in Sectoral packages and improvements to products İşbank further developed its sector packages and products in 2009. Sector packages, installment-based products, and services rolled out to the market in 2009 include: commercial loans with 21.8% (*) (**) market share. • “Export Support Package,” a package developed by İşbank to meet various funding needs of exporters, while considering the increasing importance of exports for SMEs İşbank’s installment-based and the Turkish economy, commercial credits portfolio • “Working Capital Loan for Gold” and “Gold Export Loan” that are extended to reached TL 8,451 million (**) companies working in precious metals production or trade, foreign currency loans offered in Russian Rubles and clean export foreign currency revolving loans. at year-end 2009. • “MaxiPOS Credit,” which allows extending loans to participating businesses in exchange for the blocking of their receivables.

İşbank uses campaign management activities to deepen and strengthen its relationships with commercial customers. During 2009, İşbank continued to execute various campaigns while taking into consideration seasonality and sectoral differences, as well as commercial customers’ needs and attitudes.

İşbank organized campaigns that made use of analytical models introduced in the Customer Centric Transformation Program, and made efforts to increase product usage ratios, expand customer portfolios, and turn inactive customers into active ones.

İşbank is the leader in installment-based commercial loans. While providing SMEs with investment financing and working capital, İşbank also continued to support their purchases of commercial vehicles and property through loans in 2009.

İşbank is the sector leader in installment-based commercial loans. With 21.8% (*) (**) market share, İşbank maintained its unrivalled superiority in installment-based commercial loans. İşbank’s installment-based commercial credits portfolio reached TL 8,451 million (**) at year-end 2009.

With 30.8% market share in 2009, up from 28.1% in 2008, İşbank is the leader in commercial vehicle loans. (*)

(*) Market shares are based upon the monthly sectoral data (including participation banks, and development and investment banks) published by the Banking Regulation and Supervision Agency and are calculated excluding interest accruals and rediscounts. (**) Includes overdraft accounts. İşbank Annual Report 2009 İşbank in 2009 32

İşbank continued to organize Efforts to improve the quality of customer relationships continued in 2009 at full speed. “Meetings with İş” in 2009 as İşbank continued to organize “Meetings with İş” in 2009 as part of its knowledge sharing part of its knowledge sharing and consultancy services that adds value to its customers. and consultancy services “Meetings with İş”, organized under timely headline topics by convening different that adds value to its departments and disciplines within the Bank, were held in İstanbul, İzmir, Çorlu, customers. Diyarbakir, and Samsun. The “EU Donation Funds and R&D Support Guidance Meetings,” another event held by İşbank, also continued in 2009.

When taking a detailed look at events that add value for customers, İşbank has reached nearly 9,000 customers in total, of which 3,000 are from the 7 meetings held in 2009.

“SMEs at İş” “SMEs at İş”, located online at www.istekobi.com.tr, is an informative program that facilitates development, training, and information sharing among SMEs, and communication efforts targeting this segment of the commercial sector. The website is designed to contain information and resources that İşbank SME customers seek.

With the “SMEs at İş” initiative, SMEs can ask questions to specialists as well as watch videos and read content on opinions and commentary of sector representatives and specialists. “SMEs at İş” has dedicated web pages that promote companies, as well as specially selected news, research, reports, calculation tools, short videos on success stories, and the most recent information on İşbank products, services, and operations.

Commercial branch structuring The number of Specialized Commercial Branches rose to 32 during 2009 as a result of the ongoing Commercial Branch reorganization initiative that began in 2008. The goal is to offer high-quality banking services to commercial concerns, and to further develop first-rate relationship management.

İşbank sees commercial banking as a key driver on the road to the future growth of the sector and will continue to focus on this area.

İşbank Annual Report 2009 İşbank in 2009 33

The fundamental strategy of Retail Banking İşbank’s retail banking It is İşbank’s objective to offer the perfect customer experience at all stages of life. business line is to be “the Bank closest to customers.” The fundamental strategy of İşbank’s retail banking business line is to be “the Bank closest to customers.”

Acting with the guiding principle of “Turkey’s Bank,” İşbank develops customer centric solutions for millions of customers from all segments of society using its advanced technological infrastructure and highly capable human resources and offers a range of products and services that provide the maximum added value to customers.

A wide network of branches, a customer centric orientation, highly skilled human resources, innovative products and services that meet customer needs and expectations, and multi-functional alternative distribution channels are the main factors that make İşbank the bank closest to customers in retail banking.

Customer information is extremely valuable in retail banking. For this reason, İşbank places great importance on customer analytics. In order to get to know its customers better and to contribute to effectively managing relationships with them, İşbank has begun using analytical models such as segmentation, life-long value, customer churn, and next best product model in creating a comprehensive customer strategy.

Lifecycle Strategies in Banking: İşbank from childhood to retirement Children in Turkey are introduced to İşbank very early in their lives. Child Account and Money Box Fund, one of the most prestigious investment funds of Turkey, allows young individuals to make contact with İşbank in their childhood years.

Children introduced to İşbank in the first stages of life begin to carry out their banking transactions on their own between the ages of 12 and 18 through the First Signature Account. The First Signature Account allows young customers to bank with İşbank until they enter university.

The “University Banking Package at İş” is the answer to all financial and banking needs during the young adult years. The University Credit Card at İş is the first step in the life- long credit card relationship. İşbank aims to maintain the relationships established with credit card holders during their university years as they progress through life. With that goal in mind, İşbank updates the credit limit of cardholders upon their graduation. İşbank Annual Report 2009 İşbank in 2009 34

İşbank has maintained its İşbank serves customers with a wide range of retail products throughout their professional lives and continues to stand by them during their retirement years. İşbank leadership position in both provides retail banking services with increased added value through the “Pension total deposits and TL savings Package” to customers during their retirement. deposits among privately Relationship Banking: For deepening and sustaining banking relationships... owned banks. The Bank had İşbank focuses on establishing and sustaining customer relationships based on long- a 15.0% market share for TL term and mutual returns. Therefore, İşbank has implemented relationship banking savings deposits and a applications and practices across various channels of its retail banking operations. İşbank actively implements new customer acquisition, welcome, activation, promotion, 14.0% share for total loyalty, and re-acquisition programs. The Bank tries to make sincere contact with newly deposits. (*) acquired customers while promoting the use of its products and channels. İşbank also implements systematic marketing campaigns in order to deepen relationships with existing customers, retain high-potential customers, and motivate low-activity or inactive customers.

İşbank maintained its leading position in deposits among privately owned banks in Market Share in TL Savings 2009. Deposits (*) (%) In 2009, İşbank outperformed the sector in terms of both total deposits and TL savings deposits. 15.0 İşbank has maintained its leadership position in both total deposits and TL savings 14.0 deposits among privately owned banks. At year-end 2009, İşbank’s total deposits reached TL 72.2 billion, while TL savings deposits stood at TL 30.0 billion. The Bank had a 15.0% market share for TL savings deposits and a 14.0% share for total deposits. (*) With its strong brand and extensive branch network, İşbank is a trustworthy and safe place for savings of customers across all segments. İşbank continues to develop its deposit base with the philosophy that “sees the customer as its focus.”

Retail cash management products: innovative solutions aiming to ease the lives of 2008 2009 individuals İşbank offers and continually improves the quality of innovative cash management products that individuals need in their daily life.

As of year-end 2009, İşbank intermediates bill payments for 342 institutions. Today, bill payment is at the top of high-volume retail banking transactions and being able to pay bills hassle-free is crucially important.

(*) Market shares are based upon monthly sectoral data (including participation banks, and development and investment banks) published by the Banking Regulation and Supervision Agency and are calculated excluding interest accruals and rediscounts. İşbank Annual Report 2009 İşbank in 2009 35

In 2009, regarding housing The Unlimited Automated Service – SOS allows customers’ automated payments to be made from current accounts to which the automated payment order is linked, as well as loans, İşbank has offered from liquid funds and overdraft accounts within customers’ investment accounts linked new products to its to these current accounts. The number of SOS orders increased by 48% in 2009 to a total customers and diversified its of 302,576. The number of orders submitted for the Maximum Account, which allows the automated purchase of funds with deposits above a certain balance in the current TL distribution channels account, rose by 187% to 120,190. especially via the Housing Loan Call Center (444 24 İşbank has continued to provide a variety of advantages to both homeowners and lessees, with the “Rent Package” service when paying and collecting rent through banks, as per 68), which can also function the legal regulations on rent payment. via 3G - the most advanced mobile phone technology in Developments in salary payment As of year-end 2009, İşbank intermediated the wage and salary payments of around 1.3 Turkey. million people.

Customers with wage and salary agreements can take advantage of various İşbank Market Share in Housing Loans (*) services and are considered to be a significant segment and target audience for (%) marketing of retail banking products. Special offers, products, and services targeted to

9.1 customers with automated salary payment contribute to the loyalty of these customers to 8.9 İşbank.

İşbank’s total housing loan volume reaches TL 4.3 billion. İşbank’s total volume for housing loans grew to TL 4.3 billion by supporting projects under construction, reinforcing relationship with real estate agents and creating solutions tailored to a wide range of customer needs.

İşbank has diversified the distribution channels for housing loan applications by accepting applications via the Housing Loan Call Center (444 24 68), which can also

2008 2009 function via 3G - the most advanced mobile phone technology, www.isteevim.com.tr and websites of selected real estate agencies.

Market Share in Vehicle Loans (*) The Appointment Center application allows customers who visit www.isteevim.com. (%) tr to review detailed information on new generation housing loans or to request an appointment at any İşbank branch of their choice on a date they prefer. 18.4 İşbank is the market leader in vehicle loans with a share of 18.4%. (*) 17.2 As of year-end 2009, İşbank raised its vehicle loans market share to 18.4%, and became the market leader. (*) This was achieved through campaigns and cooperation as per the vehicle loans for certain automotive brands active in Turkey.

2008 2009

(*) Market shares are based upon the monthly sectoral data (including participation banks, and development and investment banks) published by the Banking Regulation and Supervision Agency and are calculated excluding interest accruals and rediscounts. İşbank Annual Report 2009 İşbank in 2009 36

İşbank offers individualized İşbank is the market leader among privately owned banks in general purpose consumer loans. solutions to customers with İşbank continues to be the market leader among privately owned banks in general diverse needs through İşbank purpose consumer loans with a volume of over TL 5 billion and market share of 12.1%. (*) Maximum Card, Contactless İşbank’s objective is to further strengthen its position in the retail credit market.

Maximum Card, and Card payment systems at İşbank Maximum Virtual Card With over 5 million credit cards issued, TL 28.6 billion in total credit card revenue, and products. a 14.1% market share based on revenue, İşbank is a key player in the card payment systems market in Turkey.

İşbank offers individualized solutions to customers with diverse needs through İşbank Maximum Card, Contactless Maximum Card, and Maximum Virtual Card products.

Maximiles: New member of the İşbank card payment services portfolio İşbank expanded its product range during 2009 by launching the new “Maximiles” credit card. This newcomer functions with a frequent flyer program infrastructure and aims to offer a diverse range of customized options to customers.

Maximiles credit cards offers customers not only the chance to earn MaxiPoints from Maximum member merchants, but also the opportunity to earn MaxiMiles from domestic and international shopping transactions and to use these MaxiMiles when purchasing plane tickets.

Customer Relationship Stages in credit cards business Credit card customers were segmented based on the stages of their relationship with the Bank, and different campaigns and offers were provided to customers at various stages. İşbank, that also conducts regular customer analysis in order to promote the prevalent use of Maximum Card, maximize portfolio return, and manage this return in the most effective manner, arranges special campaigns to increase customer affiliation and profitability.

Below is a summary of headlines from the developments in İşbank’s card payment services during 2009: • Credit card applications can now be submitted via SMS and ATM channels. In addition, detailed information about the customers for their applications can be received via the homepage of the İşbank website, the Internet Branch, and Interactive Telephone Banking (444 0202). In addition, İşbank accepts Quick Credit Card Applications from these channels. • KGS booths at bridges and toll roads have been added to the list of merchants where low-amount transactions can be completed using İşbank’s contactless credit card product. As a result, customers’ low-amount contactless transaction volume has been increased and customer satisfaction has been improved. • As part of the “81 Forests in 81 Cities” Project, one of the largest environmental campaigns in Turkey, customers can now contribute to the TEMA foundation by choosing “A Sapling Planted in My Name” instead of “MaxiPoints” when they request to receive their İşbank account statements electronically instead of via regular mail.

(*) Market shares are based upon the monthly sectoral data (including participation banks, and development and investment banks) published by the Banking Regulation and Supervision Agency and are calculated excluding interest accruals and rediscounts. General purpose consumer loans include loans categorized under “Others” and overdraft accounts. İşbank Annual Report 2009 İşbank in 2009 37

The number of private Synergistic collaboration with subsidiaries in non-life and life insurance products İşbank works in close cooperation with Anadolu Hayat Emeklilik and Anadolu Sigorta, pension account products each of which are leading institutions in their fields. With this collaboration, İşbank sold by İşbank increased by offers a wide range of non-life and life insurance products to its customers. 19.2% to 307,662 through The Unemployment Insurance service offered to cash, vehicle, and house loan customers campaigns and sales during last year through the İşbank-Anadolu Hayat Emeklilik collaboration was expanded initiatives conducted to credit card customers as Credit Card Support Insurance. throughout 2009. More than 307,000 new private pension accounts Aiming to establish a long-term relationship with customers, the private pension account is a product that strengthens customer loyalty. İşbank branches, acting as Anadolu Hayat Emeklilik agencies, offer besides private pension products, many life insurance products. The number of private pension account products sold by İşbank increased by 19.2% to 307,662 through campaigns and sales initiatives conducted throughout 2009.

Coordination with Anadolu Sigorta on all non-life insurance products İşbank carries out its non-life insurance activities in full coordination with Anadolu Sigorta. Accordingly, various joint campaigns and projects were conducted during 2009.

Private Banking

Value of customized services İşbank provides its private banking customers, who make up a significant portion of the Bank’s total assets, with financial products and services tailored to their needs and expectations with a “personalized service” approach. Mutual trust, confidentiality, and high-quality services form the foundation of İşbank private banking activities. İşbank aims to meet customer needs from a single point and with complete customer satisfaction.

36,000 private banking customers Starting in 2010, İşbank’s private banking customers should have a net worth of TL 250,000 and above. According to this criteria, the Bank manages more than TL 25 billion in assets for more than 36,000 private banking customers.

In 2009, İşbank launched capital protected and capital guaranteed funds made up of various underlying assets and deposit products that have been developed to meet various investment needs of private banking customers and the sector dynamics. İşbank Annual Report 2009 İşbank in 2009 38

İşbank has gathered all its Capital protected and capital guaranteed funds rolled out during 2009 were high in demand. most privileged services for Of the demand for capital protected and capital guaranteed funds offered to the public private banking customers during 2009, most originated from private banking customers. In 2009, advantageous under the “Privia” brand. retail loan packages, prepared according to personalized limits, were offered through direct communication within the scope of providing diversified products and services to private banking customers.

Firmly believing in the fact that high-quality market information has a significant role in asset management, İşbank continued to share daily, weekly, and monthly reports on money and capital markets with customers on a regular basis in 2009.

İşbank provides services to private banking customers at 22 locations. İşbank offers high-quality private banking services with complete customer confidentiality at 22 locations in select branches in Istanbul, Ankara, and Izmir. In addition, İşbank inaugurated its Istanbul Private Banking Branch, the Bank’s first specialized branch to offer private banking services, in 2009.

Customer Relationship Managers, serving a limited number of customers in their portfolios, located in the branches offer all types of traditional banking products and services as well as a wide array of investment opportunities, including products tailored to the risk profile of each customer.

Privia Program İşbank has gathered all its most privileged services for private banking customers under the “Privia” brand.

The Privia Card offers İşbank customers personalized services, like priority and one on one services at all domestic and international İşbank branches, cost-free banking transactions, Type-A and Type-B Privia Funds, Privia Pension Plans underwritten by Anadolu Hayat Emeklilik, benefits in the health and culture areas, and Millennium Lounge service at airports with an unlimited number of guests.

İşbank will further strengthen its presence in the private banking business line. İşbank will continue to focus on improving its services and presence in the private banking business line in 2010. The Bank will also continue to enhance and improve privileges offered through the Privia Card.

İşbank is determined to evaluate the opportunities to provide new products and services to customers in light of the changing and improving market conditions. In 2010, the Bank will focus on acquiring new customers and enhancing relationships with existing customers in order to expand its private banking portfolio. İşbank Annual Report 2009 İşbank in 2009 39

As of year end 2009, Capital Markets İşbank had a 22.5% market Leading bank in the development of capital markets in Turkey share in the mutual funds İşbank is without a doubt the leader and pioneer of capital markets in Turkey. market, 7.4 percentage points ahead of its closest İşbank continued to increase its strength on mutual fund, stock, bond & bill, repo, and Eurobond trading in capital markets during 2009 through: competitor. İşbank’s mutual • New product and services designed according to market conditions, forecasts, and funds reached a portfolio customer preferences, size of TL 6,776 million. • A competitive pricing policy, • An ability to offer uninterrupted and high-quality services from all service channels.

İşbank has a 22.5% market share in mutual funds. In 2009, in the mutual funds market that expands with changing investor preferences, İşbank grew its funds above the sectoral average.

İşbank expanded its funds portfolio and maintained its leadership through the year with a total of 20 mutual funds and 8 capital protected and capital guaranteed funds, diversified according to different risk/return profiles, in the mutual funds market. As of December 31, 2009, the Bank had a 22.5% market share in the mutual funds market, 7.4 percentage points ahead of its closest competitor. İşbank’s mutual funds reached a portfolio size of TL 6,776 million as of year end 2009.

Money Box Fund: Largest fund in terms of investors With 147,000 participants, İşbank’s “Money Box Fund” is the Type-A fund most preferred by investors in Turkey and is the first of its kind in the country to be targeted specifically at children. In 2009, this fund grew above the average sectoral rate for mutual funds with a 55.0% growth rate and reached a portfolio size of TL 185 million.

Market Share in Mutual Funds (%)

23.0

22.0

21.0

20.0

31.12.200831.01.200931.02.200931.03.200931.04.200931.05.200931.06.200931.07.200931.08.200931.09.200931.10.200931.11.200931.12.2009

İşbank’s market share İşbank Annual Report 2009 İşbank in 2009 40

With a 7.9% market share in Leader in the volume of share trading With a 7.9% market share in the volume of share trading in 2009, İş Yatırım, İşbank’s the volume of share trading subsidiary, successfully preserved its leading position among the 89 brokerages active in in 2009, İş Yatırım, İşbank’s the ISE equities market. subsidiary, successfully Highest ISE Bond and Repo Markets Trading Volume preserved its leading position İşbank had a trading volume of TL 825 billion in 2009 in the ISE bond and repo markets, among the 89 brokerages and was able to maintain its leadership. active in the ISE equities İşbank is the only local bank offering international custody services. market. İşbank has provided custodial services to investors residing in foreign countries since 1992. The Bank offers service to non-resident customers in settlement and custody for securities, exercise of shareholding rights and participation in annual general meetings, cash management, foreign exchange transactions, and tax representation and consultancy.

İşbank is the leader in asset custody service. İşbank is the first bank to get “Asset Custody Agency” authorization from the Capital Markets Board. The Bank manages 40% of the market’s custody services for assets subject to the management of individual portfolios of asset management companies.

TurkDEX brokerage services are becoming more widespread. The brokerage services offered from 50 İşbank branches and via the Internet Branch by the end of 2008 continued to expand in 2009. As of year-end 2009, the number of İşbank branches from which TurkDEX services are provided reached to 141, and further efforts to expand are ongoing.

Number of Gold Accounts reached almost 60,000. Offering gold trading services to customers through investment accounts and Gold Accounts, İşbank increased the number of these accounts to 59,250 and the size of customer custodies to 8.7 tons of gold during 2009.

Also in 2009, İşbank offered gold regular purchasing order products to customers, enabling the Bank to continue to lead the market in gold banking.

İşbank continued to improve its products and services while bearing in mind not only the current economic environment, but the demand and expectations of investors as well.

iPhone application “İş’te Yatırım” Portal In March 2009, İşbank rolled out the “İş’te Yatırım” application for iPhones.

İş’te Yatırım was the first iPhone application to provide live ISE data. In July 2009, the content offered to customers was expanded through the addition of international stock indices, currency exchange rates, parities, and gold prices.

As of year-end 2009, the İş’te Yatırım iPhone application has over 16,000 users, the majority of whom are in Turkey. İşbank Annual Report 2009 İşbank in 2009 41

As of December 2009, “Return Wizard” at “İş’te Yatırım” Portal The Return Wizard application was released after completion of its development in İşbank has increased the November 2009. The Return Wizard was designed as an application to enable İş’te total value of its capital Yatırım Portal users to compare returns in a quick and easy to understand manner. protected and capital The Return Wizard supports the Multi Touch feature of Windows 7, the operating system guaranteed funds to TL 145 released by Microsoft in 2009, and has been a success story in the launching of Windows million, translating into a 7. The Wizard has attracted wide interest as the first financial application to support the 22.7% market share. multi touch feature.

Capital protected and capital guaranteed funds offered to public İşbank completed the public offering of capital protected and capital guaranteed funds including various underlying assets in order to meet customers’ diverse investment needs during the current low interest rates and fluctuating market environment.

In 2009, a total of 8 funds indexed to underlying assets such as gold, ISE 30 Index, USD/TL, and EUR/TL have been offered to the public. As of December 2009, İşbank has increased the total value of its capital protected and capital guaranteed funds to TL 145 million, translating into a 22.7% market share.

İşbank aims to develop its leadership in Turkish capital markets. İşbank’s primary objectives in its capital markets business line are to carry the strength and continuous synergy created with its subsidiaries to the highest level, be innovative in developing products and services, and to lead the development of the Turkish capital markets.

Treasury Management

Along with the proportional increase in global risk appetite for financial market instruments, the risk premiums of Turkey and many other developing countries have returned to their pre-crisis levels. Moreover, the currencies of these countries have appreciated against the dollar as a result of capital inflows. When looking at the general economic developments throughout the world, both the US and European economies grew in the third quarter of 2009, for the first time since the beginning of the crisis, meaning that they have technically emerged from the recessionary period.

When market players seeking relatively high returns turned to the commodity markets and developing countries’ financial markets, oil and gold prices as well as the stock and bond markets of these countries have risen rapidly. İşbank Annual Report 2009 İşbank in 2009 42

In 2009, the share of Nonetheless, in the last quarter of 2009, Dubai World, an investment company owned by the Dubai Government, filed to defer payment of company debts. Furthermore, securities portfolio in Spain’s credit outlook was downgraded to negative and the credit ratings of 52 other İşbank’s total assets has nations, including Greece, Hungary, Ireland, Thailand, and Mexico, were lowered. These increased, parallel to the developments indicate that the effects of the global crisis and the uncertainty in the markets are lingering. tendency in the sector. In 2009, the common strategy of the banking sector was to increase assets in securities portfolios. In parallel with the contraction of the credit market and the recession in the overall economy in 2009, the CBRT resumed its flexible monetary policy and continued to cut interest rates throughout the year.

The consolidated balance sheet of the banking sector was up by 13.8% in 2009, compared to 2008, and reached TL 834 billion. Demand for credit was reduced in tandem with the contraction in business activities, and the number of non-performing loans increased.

All these developments during 2009 have prompted the Turkish banking system to widely adopt the strategy to increase assets in their securities portfolios, which continue to yield relatively high returns.

The securities share in the total assets of the sector has grown by 5 percentage points compared to 2008 year-end, reaching 31.5%. The ratio of total loans to total assets for the same period decreased to 47.1%, down by 3.1 percentage points compared to end-of-year 2008.

İşbank has taken a similar course parallel to the sector insofar as the balance sheet composition for 2009 is concerned.

Balance sheet management at İşbank The Treasury at İşbank is responsible for effectively managing the Bank’s liquidity position to have the appropriate amount of funds needed for all types of products and services provided by the extensive branch network and also investment portfolios and FX positions as per the decisions of the Asset and Liability Committee.

These responsibilities are conducted by employing the most current risk management techniques, taking into account global market developments and other risk factors.

Derivative products as well as instruments for money, FX, and capital markets were utilized for the management of liquidity, investment portfolios, and FX positions, which are among the Treasury’s main activities. The objective of these transactions is to keep interest rate, exchange rate, and liquidity risks at minimum levels. İşbank Annual Report 2009 İşbank in 2009 43

In 2009, İşbank has shown International Banking once again its capabilities as İşbank is a strong leader in foreign trade and foreign currency transfers. an institution in securing İşbank meets the needs and expectations of its customers in foreign trade financing with foreign funding, despite the a range of high quality products and services. İşbank’s customers active in the foreign global crisis conditions. trade sector conduct their transactions in a secure and efficient manner via İşbank’s correspondent bank network of more than 1,400 banks and financial institutions in 124 countries. Despite the fluctuating market conditions of 2009 and the contraction in demand, İşbank has further strengthened its market position in foreign trade and foreign currency transfers.

İşbank’s perfectionist approach and quality are regularly recognized with awards. İşbank has continued its track record of high quality service performance in international banking through 2009. The Bank has been recognized with quality awards (Straight Through Processing - STP) from many international banks since 1997, thanks to the high rate of error-free international foreign currency transfers. This tradition continued in 2009; İşbank received STP quality awards from The Bank of New York Mellon, JPMorgan Chase Bank, and Commerzbank.

İşbank was the focus of attention at SIBOS in Hong Kong. İşbank had a major role in the international promotion of Turkey through its stand at the SWIFT International Banking Operations Seminar (SIBOS), held by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in Hong Kong on September 14-18, 2009. Drawing great interest throughout the seminar, the İşbank stand was the only one opened by a Turkish bank during SIBOS organizations and contributed to the promotion of Turkey in an international arena.

İşbank sponsored the annual IIF summit held in Istanbul. The 2009 Institute of International Finance Annual Membership Meeting was held in Turkey, the country host of the event for the second time, on October 2-4, 2009, just before the IMF/World Bank Summit.

İşbank sets an example in its ability to secure foreign funding İşbank has led Turkish banks in the syndicated loan arena. In 2009, İşbank has shown once again its capabilities as an institution in securing foreign funding, despite the global crisis conditions. In May 2009, İşbank signed a syndicated loan agreement in two tranches, in the amounts of USD 255 million and EUR 225.3 million, with a one-year maturity with the option to renew for an additional year. In September, İşbank exercised the option to extend a syndicated loan agreement from last year for another year; hence creating an additional syndicated loan of USD 350 million and EUR 293.5 million. İşbank Annual Report 2009 İşbank in 2009 44

İşbank plans to expand its Having obtained the second syndicated loan in times when the level of global risk- premium is still uncertain, İşbank has led other Turkish banks in the international international network by markets by establishing a establishing a reference point reference point in setting the opening a branch in cost of funding for syndicated loans. İşbank received the “Best Turkish Loan” award Azerbaijan and a from the “Syndicated Loans and Leveraged Finance” awards held by Euroweek for its September 2009 syndicated loan. representative office in both Egypt and Syria in 2010. European Investment Bank (EIB) gives EUR 250 million to İşbank with a final maturity of 12 years On April 13, 2009, İşbank signed a framework agreement with the European Investment Bank (EIB) for a loan of EUR 250 million with a maturity period of up to 12 years. This loan will be extended to small and medium sized enterprises and government and private sector institutions active in the health, environmental protection, infrastructure, education and energy efficiency sectors for project financing.

Agreement outlining the cooperation with China Eximbank in letter of import credit refinancing İşbank signed a Letter of Import Credit Refinancing Master Agreement totaling USD 100 million at maximum with the Export-Import Bank of China on October 7, 2009. The agreement aims to provide financing for specified goods or services Turkish companies will import from China for up to a year.

A step toward creating long term funding for the shipping industry İşbank signed an agreement with the Japan Bank for International Cooperation (JBIC) on December 3, 2009 to arrange a 12-year funding facility in the amount of JPY 10 billion for shipping financing. This agreement is JBIC’s first credit facility in the world only for financing of shipping. In addition, it serves as a significant example of İşbank’s high credit value in the international arena global prestige.

Developments in the international service network İşbank has increased its branch number in TRNC to 13. İşbank has opened 4 new branches in the Turkish Republic of Northern Cyprus (TRNC) in 2009, increasing the total number of its branches there to 13. İşbank protects the title of having the widest branch network in TRNC among Turkish banks.

International branches and representative offices are building blocks of İşbank’s global service capability. İşbank continues to expand its activities in international banking via its branches in London and Bahrain and representative office in Shanghai.

İşbank plans to expand its international network by opening a branch in Azerbaijan and a representative office in both Egypt and Syria in 2010. İşbank Annual Report 2009 İşbank in 2009 45

In 2009, İşbank customers İşbank GmbH prepares to expand its service network in Romania and Bulgaria. İşbank GmbH, an İşbank subsidiary located in Germany, offers retail, commercial, and carried out 61.2% of their corporate banking services through 14 branches in Germany, France, the Netherlands banking transactions via and Switzerland, where a significant number of Turks reside. alternative distribution In 2010, İşbank GmbH aims to continue its organizational structuring in Romania and channels. Bulgaria.

İşbank will also continue to conduct research about the feasibility of providing banking services in Russia and Kazakhstan.

Additionally, the Bank will step up its research of markets in regions neighboring Turkey, where it sees great potential and where it believes establishing a physical presence will be beneficial.

Alternative Distribution Channels

İşbank is among the most successful providers of alternative distribution channels in Turkey. İşbank makes a difference in the banking sector with its practices and capability to successfully blend the use of technology, reaching customers, and serving customers. In 2009, İşbank customers carried out 61.2% of their banking transactions via alternative distribution channels.

Lowering the costs is one of the most important aims of İşbank’s long-term transformation program. The expansive and intensive improvement efforts conducted within this program, primarily for the branch network, have aimed to bring operational costs down and to improve productivity via extensive deployment of technology.

The gradual shift of the operational burden on the Bank’s physical branch network to alternative distribution channels has been a major priority in meeting this objective.

In addition to the expansive branch network spread throughout Turkey, İşbank provides uninterrupted and diversified banking services via its • Internet Branch, • Bankamatik (ATMs), • Telephone Branch / Videophone Branch, • Call Center/ Video Call Center, • İşCep, • İşWap, and • Netmatik (Kiosks). İşbank Annual Report 2009 İşbank in 2009 46

With the largest ATM Alternative Distribution Channels utilization rates İşbank steadily expanded its alternative distribution channel products and service network in Turkey, İşbank offerings along with transaction volumes in 2009. participated in the “Common ATM” platform as of October The transfer of banking activities from branch channels to alternative distribution channels accelerated; while the efforts to increase the variety and number of transactions 1, 2009. performed via alternative distribution channels continued intensively.

As a result of these initiatives, the rate of transactions performed at branches dropped to 38.8% in 2009 from the 42.6% level of 2008. The rate of transactions performed through interactive channels, call centers, and ATMs for the same period rose to 61.2%, from 57.4% in the previous year.

Important developments on ATMs during 2009 • In 2009, the total number of ATMs reached 3,591, of which 1,890 are ATMs and 1,701 are ATM (+). • The ability to return change in coins and read barcodes has now been added to the majority of ATMs. • As of October 1, 2009, the ATM Debit Card Sharing Platform has been established under the coordination of the Interbank Card Center (BKM). With the largest ATM network in Turkey, İşbank is participating in the “Common ATM” platform. • As of year-end, the Bank has received commissions over TL 1 million via the Common ATM platform.

Internet Branch • The application process for commercial internet banking has been simplified. Transactional capability for both member merchants and commercial loans in particular has been improved. • In response to customer needs, the retail Internet Branch has been enriched with new investment transaction functionalities such as fund bouquet, regular mutual fund purchasing and gold account transactions. • The application process for New Generation Housing Loans has been renewed based on user experience feedback in order to allow for easier and faster submission via the internet.

Usage of Delivery Channels (%)

42.6 38.8 34.9 30.8

24.5 24.1

2.1 2.2

2008 2009 2008 2009 2008 2009 2008 2009

Branch Bankamatik (ATM) Interactive Channels (1) Call Center

(1) Internet, Kiosk, Interactive Telephone, Mobile Bank İşbank Annual Report 2009 İşbank in 2009 47

Interest in mobile delivery Mobile Banking channels: İşCep and İşWap Interest in mobile delivery channels has grown with the improvement and popularization channels has grown with the of mobile phones and the arrival of the 3G infrastructure. The capabilities of İşCep have improvement and been improved in 2009 in parallel with this trend. popularization of mobile The visual and content richness of wap.isbank.com.tr, İşbank’s first mobile banking phones and the arrival of the channel serving customers since 2000, has been improved and wap.isbank.com.tr has 3G infrastructure. The been refreshed as a portal in 2009. The İşWap service allows users to access information capabilities of İşCep have about the Bank’s products and services and to quickly complete retail loan and credit card applications. Customers using the Wap Branch accessed through İşWap are able to been improved in 2009 in complete banking transactions with speed and ease. parallel with this trend. Mobile Key The communiqué for additional security measures in internet banking in Turkey went into effect on January 1, 2010. Accordingly, the Mobile Key feature, allowing customers to create One Time Passwords through software they can install on their mobile phones, was launched in November 2009.

İşbank customers are able to not only easily access the Internet Branch, İşCep, and Wap Branch via Mobile Key, but also withdraw money card-free from ATMs.

Telephone Branch With the switch in Turkey to the 3G infrastructure, İşbank has begun offering video call service to its customers via Telephone Banking and Call Center at 444 02 02.

Call Center 112,889 calls have been made and 70,948 customers have been contacted via the Call Center within the scope of marketing, promotional, and informational activities conducted in 2009. The success rate for sales calls has been 30%.

Portals: Maximiles and Sihirli Ada Both maximiles.com.tr and sihirliada.com.tr have gone live on the web in 2009. While maximiles.com.tr promotes the Maximiles card and allows customers to purchase plane tickets using the miles they have earned, sihirliada.com.tr appeals to children, the future customers of İşbank.

Multi-channel Banking Vision In light of its multi-channel banking vision, İşbank will continue to improve the services offered through alternative distribution channels continuously changing and developing in parallel with İşbank’s objectives to: • offer a wide range of services to customers from all contact points, • effectively meet customer needs. İşbank Annual Report 2009 İşbank in 2009 48

In order to increase added Information Technologies value for its customers, Throughout 2009, İşbank continued to improve the capability and effectiveness of the İşbank conducts intensive Bank’s technological infrastructure as well as the quality of products and services offered business development to customers. activities in its operational As a result of efforts aiming to establish a more flexible IT infrastructure, İşbank plans processes within the to accelerate the completion of software, product, and service development in line with framework of quality concept market conditions. and lean principles. Operations

The objective is to increase added value offered to the customer... In order to increase added value for its customers, İşbank conducts intensive business development activities in its operational processes within the framework of quality concept and lean principles. These initiatives carried out in 2009 have positively affected the Bank’s operational efficiency and effectiveness, capacity utilization, and transaction volumes.

Intensive technology utilization within the context of service improvement activities In 2009, İşbank has closely followed developments in technology that can be used within the scope of service improvement activities. In addition, İşbank has conducted activities to integrate tools and systems that will enhance operational productivity and efficiency into its processes.

As a result, İşbank has adopted the following new technological applications in 2009: Smart Pen, Virtual Counter (Gişematik), and Signature Pad. İşbank plans to introduce these innovative practices to all of its branches.

SmartPen The SmartPen can scan and digitize handwriting when used on specially printed paper. The use of the SmartPen, being a first in the banking sector, has been initiated in some pilot branches. A high rate of customer satisfaction is achieved as the customers just need to complete missing information.

Virtual Counter – Gişematik The Virtual Counter – Gişematik application allows an employee at the Bank’s headquarters to interact with a customer and complete customer transactions like a teller at a branch via a monitor during times when counters have a high workload volume. This innovative technological application aims to encourage use of alternative distribution channels by customers and to increase customer satisfaction.

Signature Pad İşbank is in the process of integrating the Signature Pad, a qualified e-signature application as part of the objective to obtain transaction approvals in bank branches electronically. With the use of this application, İşbank plans to reduce its scanning and document archiving workload.

İşbank will continue to improve its operational processes with the objective to increase added value offered to customers through a perfect blend of • the most advanced technology, • applied know-how, • service capabilities. İşbank Annual Report 2009 Subsidiaries 49

Subsidiaries

Constituting 66.4% of the Having been contributing to the industrial development in Turkey since 1924, İşbank has direct participations in 31 companies functioning in finance, glass, İşbank’s subsidiaries and telecommunication and service sectors. affiliates (S&A) portfolio are public companies traded on During its 85-year history, İşbank has taken equity stakes in a total of 290 companies and has divested itself of 259 of them over time. As of year-end 2009, the Bank now has the ISE National Market. The direct participations in 31 firms. (*) Currently, İşbank has direct or indirect stakes in ratio of the S&A portfolio to over 106 companies. İşbank’s total assets stands 66.4% of İşbank’s subsidiaries and affiliates (S&A) portfolio is traded on the ISE at 4.5%. National Market. Constituting 66.4% of the İşbank’s S&A portfolio, Türkiye Sınai Kalkınma Bankası (TSKB), Anadolu Sigorta, Anadolu Hayat Emeklilik, İş Finansal Kiralama, İş Gayrimenkul Yatırım Ortaklığı, İş Yatırım Menkul Değerler, and Şişecam are public companies traded on the ISE National Market. The ratio of the S&A portfolio to İşbank’s total assets stands at 4.5%.

Efficiency and profitability make up the foundation of İşbank’s subsidiary strategy. İşbank places much importance to enhancing the efficiency of its S&A portfolio while evaluating its equity investments. Within the framework of its strategy of focusing on the financial services sector, İşbank will continue its efforts to enhance the yield of its S&A portfolio in 2010 in parallel with market conditions.

Overview of Developments and Strategies at Major Subsidiaries and Affiliates

Financial Services

İşbank has financial services subsidiaries active in the banking, insurance, private pension, capital markets brokerage, asset management, venture capital, factoring, reinsurance, financial leasing, investment banking, and real estate investment trust sectors. Financial services subsidiaries enrich the range of products and services the Bank offers to millions of customers via diverse business lines, while also creating cross and complementary product delivery and sales opportunities.

Türkiye Sınai Kalkınma Bankası – Turkey’s First Investment and Development Bank to have Private Capital Türkiye Sınai Kalkınma Bankası (TSKB) will be celebrating its 60th anniversary in 2010. Since its establishment in 1950, TSKB has taken a key role in the development of the Turkish economy. With its economic, environmental, and societal contributions, TSKB has gained the approval and support of its stakeholders and has been one of the leaders of the banking sector through its many “firsts.”

(*) Includes companies monitored in the account for financial assets available for sale. İşbank Annual Report 2009 Subsidiaries 50

TSKB offers corporate loans, project finance, investment banking, and corporate finance services along with capital markets brokerage services, financial leasing, and portfolio management services to a wide customer base. TSKB makes steadily increasing contributions to the sustainable development of the Turkish economy through long- term funding of investment projects, customer specific consultancy and brokerage services offered to customers. TSKB takes into consideration the environmental impact of the loans it extends and supports investments in various sectors via renewable energy, energy efficiency, environmental, and SME loans obtained from supranational institutions.

As of year-end 2009, TSKB has TL 1,041 million in shareholders’ equity and TL 6,905 million in total assets. In December 2009, Fitch Ratings raised TSKB’s long-term foreign currency credit rating from “BB” to “BB+” and confirmed its long-term Turkish currency credit rating as “BB+”, and its long-term national credit rating as “AA+ (tur).”

TSKB has continued to locate long-term low-cost financing through its strong funding network. TSKB has secured long-term funding in the amount of USD 1 billion from international and supranational institutions in 2009. www.tskb.com.tr

İşbank GmbH – One of Europe’s Leading Turkish-owned Financial Institutions Founded by İşbank in 1992 in Germany to operate in commercial banking, İşbank GmbH is one of the leading Turkish-owned financial institutions in Europe.

Headquartered in Frankfurt, İşbank GmbH pursues its activities via a total of 14 branches located in Germany (11), the Netherlands (1), France (1), and Switzerland (1). As of year-end 2009, its total assets were EUR 684 million and shareholders’ equity totaled EUR 69 million. The Bank offers trade finance, corporate banking, and retail banking products and services to customers in both Turkey and Europe, as well as financing services for real estate in Turkey. www.isbank.de

Anadolu Hayat Emeklilik – The First Life Insurance Company in Turkey Anadolu Hayat Emeklilik A.Ş. is the only publicly traded private pension and life insurance company in Turkey. Being the first life insurance company in Turkey, Anadolu Hayat Emeklilik reached to TL 4,281 million asset size and TL 414 million shareholders’ equity as of September 2009. www.anadoluhayat.com.tr İşbank Annual Report 2009 Subsidiaries 51

Anadolu Sigorta – One of the Leading Companies in Non-Life Insurance One of Turkey’s top insurance companies and active in non-life insurance, Anadolu Anonim Türk Sigorta Şirketi generated TL 1,243 million in premium production as of December 2009. The Company had TL 1,750 million in total assets and TL 729 million in shareholders’ equity as of September 2009. www.anadolusigorta.com.tr

Milli Reasürans – Reinsurance Services Uninterrupted since 1929 The longest operating company in the Turkish reinsurance industry, Millî Reasürans T.A.Ş. (Milli Re) was founded in 1929. Milli Re alone meets nearly 25% of the reinsurance coverage needs of the Turkish insurance industry.

A.M. Best Company, widely considered the most prestigious insurance rating agency in the world, reconfirmed Milli Re’s financial strength rating as “B++” in August 2009. In line with the Company’s strategy to transfer its vast knowledge and reinsurance experience built domestically to international markets, Milli Re established a branch in Singapore. The Company had TL 1,573 million in total assets and TL 781 million in shareholders’ equity at year-end 2009. www.millire.com

İş Leasing – Leading Company in the Financial Leasing Sector İş Finansal Kiralama stands out as one of the pioneers in the leasing sector. The Company pursues its operations with the mission of giving priority to the funding of SMEs, building and managing an extensive portfolio of high-quality leasing contracts, and fulfilling customer demands through fast, effective, and high quality solutions.

At year-end 2009, the Company’s consolidated assets totaled TL 1,441 million, its shareholders’ equity amounted to TL 405 million, and the value of its portfolio was TL 829 million. www.isleasing.com.tr

İş GYO – Largest Publicly Traded Real Estate Investment Trust in Terms of Value of Net Assets İş GYO is Turkey’s largest publicly traded real estate investment trust (REIT) in terms of the value of its net assets.

While continuing to work toward increasing the quality of its existing portfolio, the Company also develops projects to further expand and diversify its portfolio.

At year-end 2009, İş GYO had TL 1,012 million in assets, a net asset value of TL 1,250 million, and TL 952 million in shareholders’ equity. www.isgyo.com İşbank Annual Report 2009 Subsidiaries 52

İş Yatırım Menkul Değerler – At the Top among Capital Market Brokers in Terms of ISE Trading Volumes İş Yatırım Menkul Değerler A.Ş. offers services in trading of capital markets instruments, investment consultancy, portfolio management, corporate finance, repo-reverse repo contracts, margin trading, and securities lending in national and international markets. İş Yatırım is the only brokerage traded on the stock exchange.

İş Yatırım ranks first among brokerages in terms of business volume in the ISE equities market. Furthermore, the Company has sustained its leadership position as the “market maker” on TurkDEX, the Turkish Derivatives Exchange.

In 2009, İş Yatırım was recognized by Euromoney magazine, the influential and well respected publication of the international finance circuit, for its superior performance and success in company mergers and acquisitions with the “Best M&A House in Turkey” award. The award is given to only the very best in the sector as part of the “Euromoney Awards for Excellence” granted every year in every country.

Being the only brokerage that has a credit rating in Turkey, “AAA” National Long Term credit rating with a stable outlook was affirmed by the international rating agency Fitch Ratings in December 2009. As of September 2009, İş Yatırım Menkul Değerler had TL 2.2 billion in consolidated assets and TL 497 million in shareholders’ equity. www.isyatirim.com.tr

Glass

Şişecam – Founder and Unrivaled Leader of the Turkish Glass Industry Türkiye Şişe ve Cam Fabrikaları is the flagship company of the Şişecam Group, which consists of 57 companies active in flat glass, glassware, glass packaging, chemicals, and services business lines.

The Şişecam Group continually increases its production strength through investments to create new capacity both in Turkey and in countries such as Russia, Bulgaria, Bosnia- Herzegovina, Egypt, Italy and Georgia. With the latest investments, the capacity of the glass packaging production facilities in Russia has exceeded the installed capacity in Turkey.

The Şişecam Group numbers among the largest companies in its industry both in Europe and the world, ranking anywhere from 3rd to 8th in the world and 2nd to 4th in Europe depending on the criteria used.

As of September 2009, the Türkiye Şişe ve Cam Fabrikaları had total consolidated assets of TL 6.7 billion and shareholders’ equity of TL 3.7 billion. www.sisecam.com.tr İşbank Annual Report 2009 Subsidiaries 53

Telecommunications

Avea – Turkey’s Only GSM 1800 Mobile Communications Operator As of year-end 2009, Avea İletişim Hizmetleri A.Ş. (Avea) has an 19% share in the mobile communications market in Turkey with more than 12 million subscribers.

According to financial statements drawn up in line with International Accounting Standards, Avea has reached TL 6,660 million in asset size and TL 2,073 million in shareholders’ equity as of year-end 2009. Avea began offering 3G Mobile Communications services in July 2009. www.avea.com.tr

Other

Nemtaş – Logistics Services Provider Active in the areas of ship owning, ship management, chartering, and brokering, Nemtaş Nemrut Liman İşletmeleri A.Ş. provides logistics services with a fleet of five vessels with a total capacity of 252,959 DWT.

Controlling a 54% stake in Gemport Gemlik Liman ve Depolama İşletmeleri, Turkey’s first privately owned port operations company, Nemtaş, at year-end 2009, had TL 402 million in assets and TL 246 million in shareholders’ equity.

As of year-end 2009, Gemport Gemlik Liman ve Depolama İşletmeleri had total assets of TL 148 million and shareholders’ equity of TL 128 million. www.nemtas.com.tr İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 54

Corporate Social Responsibility at İşbank

The main reason İşbank has The pillar of İşbank’s corporate social responsibility policy is to contribute to Turkish society as prescribed by Atatürk, the Bank’s founder, in order to protect and develop undertaken the sponsorship the social values created in line with the fundamental principles of the Republic in a of the sport, chess, is that it permanent and sustainable manner. is an educational tool that Planning all the social projects undertaken as long-term initiatives and acting on the contributes to the mental principle of focusing on those projects that will create the greatest social benefit, İşbank and character development continued to implement a wide range of social responsibility projects in 2009. These of children and youth, while projects are established with a scalable, sustainable, and expandable organizational structure that will propel Turkish society forward in protecting them from • Education harmful activities. • Environment • Arts & Culture.

EDUCATION

Chess İşbank has become the principal sponsor of the Turkish Chess Federation, continuing the cooperation with that organization that began in December 2005.

The main reason İşbank has undertaken the sponsorship of the sport, chess, is that it is an educational tool that contributes to the mental and character development of children and youth, while protecting them from harmful activities.

İşbank views sponsorship of chess as a comprehensive corporate social responsibility initiative and aims to • Disseminate chess, especially among children, • Make up for the shortage in chess education and to render it as a sport all children can access easily, • Make chess a popular and highly demanded sport throughout Turkey, • Spread chess across the student population base and reach more children talented in the sport, and hence achieve a higher rate of success in chess internationally.

From the beginning of the sponsorship to December 2009, a total of 76 medals, 35 gold, 18 silver, and 23 bronze, have been won in international tournaments. The number of chess players has reached 155,000, while the number of students who have chosen chess as an elective class has exceeded 1.7 million.

Opening chess class in elementary schools İşbank’s sponsorship has prompted the decision to include chess as an elective course in elementary and middle school curriculums throughout Turkey. İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 55

In 2009, 12 chess players İşbank establishes chess classrooms in schools in order to encourage elementary school students to play the sport, draw teachers’ attention to this developmental tool, and to from 10 countries attended provide the necessary materials to schools with limited resources. İşbank Atatürk FIDE Women Masters Chess Tournament. As of year-end 2009, the number of schools, in which chess classrooms were established throughout Turkey has reached 2,000.

Satrancoyna.com.tr During 2008, İşbank realized a comprehensive cooperation project with Playchess, the world’s largest online chess platform with 250,000 registered users. Under this cooperation, licensed chess players from Turkey are able to access and play online chess at playchess.com on a free-of-charge basis.

In 2009, over 200,000 users have benefited from satrancoyna.com.tr.

İşbank Under-8 Chess Festival Since 2006, the İşbank Under-8 Chess Festival is held every year in June in an effort to provide an entertaining chess environment to children and to encourage a positive approach to chess by parents.

The 4th İşbank Under-8 Chess Festival was held at the Association of İşbank Employees Çamlıca Sports Facilities in 2009 with the participation of 548 young chess enthusiasts. In addition to playing chess for four full days, participating children found the opportunity to have fun through various games and other activities.

İşbank Atatürk FIDE Women Masters Chess Tournament İşbank and the Turkish Chess Federation collaboratively organize the “İşbank Atatürk FIDE Women Masters Chess Tournament” in order to support women masters and increase women’s interest in chess.

As a result of the success of the tournament held in 2008, and its impact in the international arena, the World Chess Federation (FIDE) suggested that the tournament in 2009 becomes the first leg of the “Women’s Grand Prix Tournament” organized by FIDE.

In 2009, 12 chess players, including the world’s most prominent chess players, from 10 countries attended the tournament.

İşbank Chess League Matches were organized within the scope of the İşbank Chess League, and the champion of the 2008–2009 season in the league was the Adana Truva Chess Club. İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 56

A total of 2 million students “81 Students from 81 Cities” Project As one of İşbank’s largest scale educational projects, the “81 Students from 81 Cities” have been united with books project was launched at the start of the academic year 2008-2009. in two years within the scope of the “Show Your Report İşbank covers all expenses including education, clothing, food, and accommodation of 81 students who successfully pass the Darüşşafaka admission exam. Card, Get Your Book” campaign. İşbank will continue to support the students should they go on to pursue their studies at the university level. It is projected that the number of student participants will exceed 1,000 by the 14th year of the project, the same year in which the first group of 81 students that started their education at Darüşşafaka will graduate.

While the first group of students, who have started their education at Darüşşafaka at the beginning of the academic year 2008-2009, have successfully started 5th grade as of the academic year 2009-2010, there have been new students from the 4th grade that have been accepted to the project.

“Show Your Report Card, Get Your Book” Campaign With the “Show Your Report Card, Get Your Book” campaign, İşbank has accomplished one of the largest book campaigns so far. The “Show Your Report Card, Get Your Book” project, started at the end of the 2007-2008 academic year, aims to foster reading as a routine habit for children and to unite them with classics of both world and Turkish literature.

In the second year of the campaign, “Stories and Fairy Tales from our Writers” was given as a present to 1 million elementary school students who brought their report cards to any İşbank branch in Turkey and the TRNC. A total of 2 million students have been united with books during the two years of the project.

İşbank’s other social responsibility activities in the education field in 2009 included • Firefly Mobile Educational Unit in cooperation with the Educational Volunteers Foundation of Turkey (TEGV) • Annual “Golden Youths” award • Scholarships to earthquake victim students. İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 57

Over 950,000 saplings have THE ENVIRONMENT been planted on an area “81 Forests in 81 Cities” Project covering 600 hectares in a İşbank initiated the “81 Forests in 81 Cities” project in 2008 in an effort to create a total of 32 cities since the livable environment, contribute to the preservation of natural resources, draw interest to “81 Forests in 81 Cities” deforestation and related environmental issues, and to create environmental awareness among the public in general, and especially our children. Project began in 2008. İşbank plans to plant over 2 million saplings on an area of 1,470 hectares within five years as part of the project conducted in cooperation with the TEMA Foundation and the Ministry of Environment and Forestry. Another important aspect of the project is that each of the saplings will be tended for a five year period to ensure that they turn into healthy trees. Within this project, the following cities were forested:

During 2008, 15 cities, including Adana, Amasya, Balıkesir, Bursa, Denizli, Gaziantep, Isparta, İzmir, Kahramanmaraş, Kilis, Manisa, Mardin, Mersin, Sivas, and Uşak,

During 2009, 17 cities, including Afyon, Ankara, Antalya, Ardahan, Çanakkale, Çorum, Düzce, Edirne, Erzincan, Eskişehir, Istanbul, Kastamonu, Kayseri, Kırşehir, Kütahya, Sakarya, and Yozgat.

Over 950,000 saplings have been planted on an area covering 600 hectares in a total of 32 cities since the project began in 2008.

The project’s planting ceremonies are held in a festival-like atmosphere in the cities; the participants include local authorities, İşbank managers, TEMA Foundation volunteers, and members of the press. Also, additional importance is placed on the participation of elementary school students and Yavru Tema members in the planting ceremonies in order to establish environmental awareness and love of nature in children.

ARTS AND CULTURE

Kültür Yayınları Established in 1956, Kültür Yayınları continued and even furthered its publishing activities during 2009. Having collected its publications under 13 main headings, Kültür Yayınları published 391 titles, 225 of which were new and 166 reprint editions, and sold over 962,000 books. Kültür Yayınları also continued its initiatives in children’s books, to which Kültür Yayınları places significant importance, in 2009.

İş Sanat In its 10th season as of November 2009, İş Sanat continues to unite Turkish arts enthusiasts with world class stars. İş Sanat held 46 concerts, 27 children’s events, and 7 poetry readings during the 2008-2009 season. Kurt Elling, Bonnie Taylor, Emmanuel Pahud, Michel Camilo, Roby Lakatos, Paquito d’Rivera, the Prague Philharmonic Orchestra, and the Brückner Orchestra were among the performers, groups, and orchestras in İş Sanat’s program during the 2008-2009 season. İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 58

İşbank Museum is the only İş Sanat started the 2009-2010 season on November 8, 2009 with a concert in which pianist Muhiddin Dürrüoğlu was accompanied by the Borusan Istanbul Philharmonic museum specializing in the Orchestra, one of the best symphonic groups in Turkey, conducted by Maxim Vengerow, economic history and the famous violin virtuoso. İş Sanat plans to showcase world famous performers, groups, banking of the Republic and orchestras such as Yuri Bashmet, Shlomo Mintz, Gidon Kremer, Andreas Scholl, Mischa Masky, Sarah Chang, Joshua Bell, Moscow Soloists, Academy of St. Martin in the period. Fields, Kremerata Baltica, Dave Holland, John McLaughlin, Monica Molina, Mariza, Pink Martini, and the Paul Taylor Dance Company in the 2009-2010 season.

İş Sanat has also staged plays for children ““Pictures from an Exhibition,” “Peter Pan,” “You Should Know...,” and “Things Not in the Notes for Children”.

İşbank Museum İşbank Museum was inaugurated on November 14, 2007 with the mission to tell the story of İşbank’s history and development and to share with society the Bank’s place in everyday life and the services it has provided to the public over many generations. With 100,000 visitors as of year-end 2009, the Museum is the only one to specialize in economic history and banking of the Republic period.

“Atatürk and the Republic in Pictures – Building a Nation (1923 – 1938)” Exhibition The “Atatürk and the Republic in Pictures – Building a Nation” exhibition ended at the İşbank Museum on February 8, 2009, and reopened at Van Yüzüncü Yıl University Prof. Dr. Cengiz Andiç Culture Center from May 7 – 29, 2009. Upon its closure there on May 29, 2009, the exhibit reopened at Pamukkale University Congress and Culture Center from October 28 – November 22, 2009.

Galleries İşbank Painting Collection, whose foundation goes all the way back to the purchasing of Hikmet Onat’s Ortaköy painting in 1940, is the largest privately owned collection in From the İşbank Museum Turkey today.

Engaged in gallery and related activities since 1976, İşbank has two galleries, one of which is in Istanbul and the other in Izmir.

During 2009, İş Sanat Kibele Art Gallery continued to host the most pre-eminent names in Turkish painting in its exhibition programs, while İzmir Art Gallery exhibited the works of promising artists. During the 2008-2009 season, İş Sanat Kibele Art Gallery hosted to the retrospective exhibitions of Güngör Taner, Mehmet Güleryüz, and Sadi Diren.

The works of 16 artists were displayed at the nine exhibitions held at the İzmir Art Gallery during the 2008-2009 season. A total of 6,300 people visited these exhibitions during this period.

İşbank’s other social responsibility activities in the field of arts and culture in 2009 included the sponsorship of • Istanbul Foundation for Culture and Arts International Istanbul Music Festival • State Opera and Ballet Ankara Leyla Gencer Stage. İşbank Annual Report 2009 Corporate Social Responsibility at İşbank 59

İşbank’s social responsibility AWARDS projects are widely Award Project About the Award appreciated and awarded SABRE Award Support of chess İşbank’s support of the Turkish Chess both in the local and Federation has been chosen among international arena. over 1,800 projects to be awarded with the Superior Achievement in Branding and Reputation (SABRE) award, accepted as one of the most prestigious awards in communications in the world, in the “sponsorship” category. Active Academy Show Your Report Card, İşbank’s “Show Your Report Card, Get Award Get Your Book Campaign Your Book” campaign and “81 Forests and 81 Forests in 81 in 81 Cities” projects have received Cities Projects the Active Academy Corporate Social Responsibility award in 2009. The Golden Show Your Report Card, İşbank’s “Show Your Report Card, Compass Award Get Your Book Campaign Get Your Book” campaign was chosen among 130 projects to be awarded in the education category during the 8th Golden Compass Awards organized by the Public Relations Association of Turkey (TÜHİD) in order to increase the level of service in the public relations industry and to support professional development. İşbank Annual Report 2009 Annual Report Compliance Opinion 60

Annual Report Compliance Opinion

To the General Assembly of Türkiye İş Bankası A.Ş.:

We have audited the accuracy and compliance of the financial information in the accompanying annual report of Türkiye İş Bankası A.Ş. (the “Bank”) with the audit report issued as of December 31, 2009. The Board of Directors of the Bank is responsible for the annual report. As independent auditors, our responsibility is to express an opinion on the audited annual report based on the compliance of financial information provided in the annual report with the audited financial statements and explanatory notes.

Our audit was performed in accordance with the accounting standards and principles and procedures of preparing and issuing annual reports as set out by the Banking Act No: 5411. Those standards require that we plan and perform our audit to obtain reasonable assurance whether the annual report is free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the financial information provided in the accompanying annual report presents fairly, in all material respects, the financial position of Türkiye İş Bankası A.Ş. as of December 31, 2009 in accordance with the prevailing accounting principles and standards set out as per the Article 40 of the Banking Act No: 5411. The financial information provided in the annual report is in compliance with the audited financial statements and explanatory notes, and also includes the summary Management report and our audit opinion on these financial statements.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU

Sibel Türker Partner

İstanbul, March 4, 2010 İşbank Annual Report 2009 61

Management and Corporate Governance at İşbank

62 Board of Directors & Auditors 64 Executive Committee 66 Organization Chart 68 Managers of Internal Systems 68 Information About the Meetings of the Board of Directors 69 İşbank Committees 71 Human Resources Functions at İşbank 72 Information on the Transactions Carried out with İşbank’s Risk Group 72 Activities for which Support Services are Received in Accordance with the Regulation on Procurement of Support Services for Banks and Authorization of Organizations Providing this Service 73 İşbank’s Dividend Distribution Policy 74 Agenda of the Annual General Meeting 75 Report of the Board of Directors 76 Auditors’ Report 77 Dividend Distribution Proposal 78 Corporate Governance Principles Compliance Report İşbank Annual Report 2009 62

Board of Directors & Auditors

CANER ÇİMENBİÇER Chairman Born in Bursa in 1952, Caner Çimenbiçer graduated from the Business Administration Department of Faculty of Administrative Sciences, Middle East Technical University. He started his professional career at Koç-Burroughs in 1973. In 1974, he started his career at İşbank as an Assistant Inspector. He was appointed to İşbank’s Accounting Department as an Assistant Manager, Group Manager and Head of Accounting Department. He became Deputy Chief Executive in 1990, and Senior Deputy Chief Executive on October 28, 1998. He also served as the acting CEO. Besides his post at İşbank, Caner Çimenbiçer served as a Board Member at 20 various sector companies such as, VISA EU, The Interbank Card Center, Istanbul Stock Exchange and Aria and he served as a Chairman at 14 various companies such as MAN A.Ş., İzmir Demir Çelik Sanayi A.Ş., İşbank GmbH, Petrol Ofisi A.Ş. and Milli Reasürans T.A.Ş. since 1983. He was appointed to İşbank’s Board as a member on March 31, 2005 and on March 28, 2008 respectively. Caner Çimenbiçer, who is the Chairman of İşbank, is also the Chairman of İşbank Audit Committee, the Turkish Republic of Northern Cyprus Internal Systems Committee of İşbank and responsible for İşbank’s Board of Inspectors.

H. FEVZİ ONAT Vice Chairman Born in Ankara in 1959, H. Fevzi Onat graduated from the Economics Department of the Faculty of Social and Administrative Sciences, Hacettepe University. He started his professional career at İşbank as an Assistant Inspector in 1981. He was appointed to İşbank’s Corporate Loans Department as an Assistant Manager and as a Regional Manager. Then, he was appointed as the Head of Credit Information and Financial Analysis Department and later Corporate Loans Department and then he became Yenişehir/Ankara Branch Manager. He was appointed as Deputy Chief Executive in 2002. H. Fevzi Onat was appointed to İşbank’s Board of Directors on March 28, 2008. He is Deputy Chairman of the İşbank’s Board of Directors and also Head of Risk Committee and member of the Credit Committee and the Director in charge of Internal Systems.

H. ERSİN ÖZİNCE Member of the Board and Chief Executive Officer H. Ersin Özince was born in 1953. His banking career began in 1976 at İşbank by joining the Board of Inspectors after graduating from Middle East Technical University in Ankara with a BS degree in Management in 1975. After working at various managerial positions at İşbank, Ersin Özince was promoted to the post of Deputy Chief Executive in 1994 and until he became the CEO of İşbank in 1998, his responsibilities encompassed the Treasury, Financial Management, Capital Markets, Commercial Loans and the Credit Information and Financial Analysis Departments of the Bank. Ersin Özince was elected as Chairman of the Banks’ Association of Turkey on May 31, 2002. He is the Chairman and the member of the Board of Directors of Industrial Development Bank of Turkey (TSKB), a member of the Board of Directors of Vehbi Koç Foundation and The Turkish Foundation for Combating Soil Erosion, for Reforestation and the Protection of Natural Habitats (TEMA) along with his memberships at Institut Internationale d’Etudes Bancaires (IIEB), The Institute of International Finance (IIF), Turkish Industrialists’ & Businessmen’s Association and The Board of Trustees of Bilkent University and Education Volunteers Foundation of Turkey. Also he is an Advisory Board Member of World Wildlife Fund-Turkey (WWF).

PROF. DR. SAVAŞ TAŞKENT Member of the Board Born in İyidere in 1943, Prof. Dr. Savaş Taşkent graduated from the Faculty of Law, İstanbul University. He started his academic career as an assistant in 1971, in the Department of Law of The Faculty of Basic Sciences, İstanbul Technical University. He received his Ph.D. degree from the Faculty of Law of İstanbul University in 1980, and became assistant professor at İstanbul Technical University, Faculty of Management Science and Engineering and associate professor in the Department of Labour and Social Security Law and professor in 1990, in the same Department. He served as the vice-dean and the vice-rector. He served as an advisor to the Ministry of Labour and Social Security and attended ILO Conferences in Geneva as the advisor to the Government. He is currently a professor in Management Department of Faculty of Management, in İstanbul Technical University. Prof. Dr. Savaş Taşkent was appointed to İşbank’s Board on March 31, 2005, and on March 28, 2008. He is also the Member of İşbank Audit Committee and the member of the Turkish Republic of Northern Cyprus Internal Systems Committee of İşbank.

İSMET ATALAY Member of the Board Born in Göle in 1937, İsmet Atalay graduated from the Faculty of Law, İstanbul University. He started his professional career as an independent lawyer in Kars and served as Kars Provincial Chairman of Republican People’s Party (CHP) for 10 years. He entered to the Turkish Parliament (TBMM) as a representative of Kars in 1977, of Ardahan in 1995 and of İstanbul in 2002. In CHP, he served as a member of the Group Board, the General Administrative Committee, and the Central Executive Committee, and as a General Accountant. He is serving as a member of Party’s District Committee. İsmet Atalay was appointed to İşbank’s Board of Directors on March 28, 2008 and he is also member of the İşbank’s Social Responsibility Committee.

TÜLİN AYKIN Member of the Board Born in İzmir in 1963, Tülin Aykın graduated from the Industrial Engineering Department of Boğaziçi University. She started her professional career at İşbank as an Assistant Specialist in 1986. She was appointed to İzmir Branch as a Branch Assistant Manager and became the Manager of the Aegean I. Regional Department. She was appointed as the Head of İşbank’s Human Resources Department and later, as İzmir Branch Manager. She became Deputy Chief Executive in 2006. Tülin Aykın was appointed to İşbank’s Board of Directors on March 28, 2008 and she is also member of the İşbank’s Social Responsibility Committee and deputy member of the Credit Committee of İşbank. İşbank Annual Report 2009 63

TUNCAY ERCENK Member of the Board Born in Şanlıurfa in 1950, Tuncay Ercenk graduated from the Faculty of Law, İstanbul University. Between 1978 and 2002, he worked as an independent lawyer in Antalya. Between 2002 and 2007, he was a member of the Turkish Parliament (TBMM) as a representative of Antalya and he served as a member of the Parliament’s Commission of Constitution. He is currently member of the Republican People’s Party (CHP). Tuncay Ercenk was appointed to İşbank’s Board of Directors on March 28, 2008.

ADNAN KESKİN Member of the Board Born in Denizli in 1942, Adnan Keskin graduated from the Faculty of Law, Ankara University. He started his professional career as an independent lawyer in Denizli in 1970 and served as Denizli Provincial Chairman of Republican People’s Party (CHP) from 1972 to 1977. He entered to the Turkish Grand National Parliament as a representative of Denizli in 1977, in 1987, in 1991 and in 1995. Until 1992, he served as Denizli Provincial Chairman of Social Democratic Party (SODEP), after union of SODEP and Social Democratic Populist Party (SHP) became SHP’s Denizli Provincial Chairman and Vice General Secretary. After reopening of CHP, he served as a Vice President and General Secretary. He also served as a Ministry of Public Works and Settlement in 1995 and he is currently member of the Republican People’s Party. Adnan Keskin was appointed to İşbank’s Board of Directors on March 28, 2008.

ALİ SÖZEN Member of the Board Born in Gürün in 1934, Ali Sözen graduated from the Faculty of Law, İstanbul University. Between 1967 and 2000, he worked as an independent lawyer. He was a member of SODEP City Board of Directors between 1983 and 1986. He has been member of CHP since 1994. Ali Sözen was appointed to İşbank’s Board of Directors on March 28, 2008.

FÜSUN TÜMSAVAŞ Member of the Board Born in Ankara in 1957, Füsun Tümsavaş graduated from the Economics and Finance Department of Ankara University, Faculty of Political Sciences. She started her professional career at Central Bank of the Republic of Turkey’s Ankara Branch in 1979. In 1981, she started to work at İşbank’s I. Loans Department as a candidate officer and became assistant superintendent at the same department and then she became an Assistant Loan Specialist. She was appointed to İşbank’s I. Loans Department as an Assistant Manager in 1994, as a Regional Manager in 1999, and to the Commercial Loans Department as Manager in 2004. Füsun Tümsavaş was appointed to İşbank’s Board of Directors on March 28, 2008 and she is also member of the Credit Committee of İşbank.

HASAN KOÇHAN Member of the Board Born in Trabzon in 1957, Hasan Koçhan graduated from the Ankara Academy of Economic and Commercial Sciences, Banking Insurance Trade Institution of Higher Education, Banking Department. He started his professional career at İşbank’s Maçka/Trabzon Branch in 1984 and was appointed as an assistant superintendent to Bayburt Branch, Yomra/Trabzon Branch, Bulancak/Giresun Branch and Trabzon Branch. After serving at Trabzon Branch as second manager and assistant manager, he was appointed to Park/Trabzon Branch, Ordu Branch, Gaziantep Branch and İzmit/Kocaeli Branch as a Branch Manager. Hasan Koçhan was appointed to İşbank’s Board of Directors on November 3, 2008 and he is also alternate member of the Credit Committee of İşbank.

PROF.DR. TURKAY BERKSOY Auditor Born in Elazığ in 1951, Prof. Dr. Turgay Berksoy graduated from İstanbul Academy of Economics and Commercial Sciences in 1975. He started his academic career in the School of Political Sciences, İstanbul Academy of Economic and Commercial Sciences at the same year. He received his M.A (in economics) from Boğaziçi University, and his Ph.D. (in finance) from Marmara University, the Faculty of Economics and Administrative Sciences. He was visiting lecturer at University of East Anglia School of Development Studies, England, assistant professor and associate professor at Finance Department of the Faculty of Economics and Administrative Sciences, Marmara University. He became professor in 1993. He served as the co-head of finance department, vice director and acting director of the Institute of Social Sciences, the vice dean and acting dean in the Faculty of Economics and Administrative Sciences of Marmara University. He was administrative board member and faculty committee member at the same faculty. In addition to his posts at university, he was adviser to Şekerbank, Turkish Eximbank and Emlakbank and he served as board member at various corporations. He is currently a professor and the chairman of the board of directors at the Center of Finance Research and Application, Marmara University and he is also the chairman of the Finance Department at the Faculty of Economics and Administrative Sciences, at the same university, since 1998 and also Ministry of Finance Tax Council member. Prof. Dr. Turkay Berksoy is İşbank’s Auditor since March 31, 2005.

A. TACİSER BAYER Auditor Born in İstanbul in 1953, A. Taciser Bayer graduated from Faculty of Economics, İstanbul University. She started her professional career at İşbank’s Arapcamii Branch as a candidate Officer in 1973. She became assistant superintendent at Kadıköy/İstanbul Branch and Necatibey/Ankara Branch. She was appointed to İşbank’s Corporate Loan Department, she became a Superintendent, a Second Manager and an Assistant Manager at the same branch. She was appointed to Secretariat to the Board of Directors. She became an Assistant Manager, Group Manager and Manager at the same department. A. Taciser Bayer retired on February 27, 2009 and was appointed as İşbank’s Auditor at the General Assembly on March 31, 2009. İşbank Annual Report 2009 64

Executive Committee

H. ERSİN ÖZİNCE Member of the Board and Chief Executive Officer H. Ersin Özince was born in 1953. His banking career began in 1976 at İşbank by joining the Board of Inspectors after graduating from Middle East Technical University in Ankara with a BS degree in Management in 1975. After working at various managerial positions at İşbank, Ersin Özince was promoted to the post of Deputy Chief Executive in 1994 and until he became the CEO of İşbank in 1998, his responsibilities encompassed the Treasury, Financial Management, Capital Markets, Commercial Loans and the Credit Information and Financial Analysis Departments of the Bank. Ersin Özince was elected as Chairman of the Banks’ Association of Turkey on May 31, 2002. He is the Chairman and the member of the Board of Directors of Industrial Development Bank of Turkey (TSKB), a member of the Board of Directors of Vehbi Koç Foundation and The Turkish Foundation for Combating Soil Erosion, for Reforestation and the Protection of Natural Habitats (TEMA) along with his memberships at Institut Internationale d’Etudes Bancaires (IIEB), The Institute of International Finance (IIF), Turkish Industrialists’ & Businessmen’s Association and The Board of Trustees of Bilkent University and Education Volunteers Foundation of Turkey. Also he is an Advisory Board Member of World Wildlife Fund-Turkey (WWF).

A. AYKUT DEMİRAY Deputy Chief Executive 1954, Balıkesir. A. Aykut Demiray is a graduate of Middle East Technical University (Faculty of Administrative Sciences, Department of Business Administration). He began his career at İşbank in 1979 on the Board of Inspectors and undertook various duties in a number of the Bank’s units and branches. He was appointed Deputy Chief Executive on 28 October 1998.

ÖZCAN TÜRKAKIN Deputy Chief Executive 1958, Afyon. Özcan Türkakın is a graduate of Boğaziçi University (Faculty of Administrative Sciences, Department of Economics) and received a master’s degree from the same department. He joined İşbank in 1984 as an Assistant Economics Specialist in the Department of Economic Research and Planning and has served in a number of the Bank’s units and İş Investment. He was appointed Deputy Chief Executive on 27 February 2002.

ZAFER MEMİŞOĞLU Deputy Chief Executive 1952, Ceyhan. Zafer Memişoğlu is a graduate of the Adana Academy of Economic and Commercial Sciences. He joined İşbank in 1981 as an Assistant Inspector. After serving in a number of the Bank’s units and branches, he was appointed Deputy Chief Executive on 30 March 2004.

HÜLYA ALTAY Deputy Chief Executive 1958, Çanakkale. Hülya Altay is a graduate of Ankara University (Faculty of Political Sciences). She joined İşbank in 1982 as an Assistant Economics Specialist. After serving in a number of the Bank’s units and branches, she was appointed Deputy Chief Executive on 30 March 2004. İşbank Annual Report 2009 65

MAHMUT MAGEMİZOĞLU Deputy Chief Executive 1959, Antakya. Mahmut Magemizoğlu is a graduate of Middle East Technical University (Faculty of Administrative Sciences, Department of Business Administration). He holds a master’s degree in investment analysis from the University of Stirling (UK). Mr. Magemizoğlu began his career at İşbank in 1982 on the Board of Inspectors and served in a number of the Bank’s units. He was appointed Deputy Chief Executive on 18 May 2005.

HAKAN BARUT Deputy Chief Executive 1957, İzmir. Hakan Barut is a graduate of Middle East Technical University (Faculty of Administrative Sciences, Department of Economics). He joined İşbank in 1981 and has served in a number of the Bank’s units and branches. He was appointed Deputy Chief Executive on 30 May 2006.

ADNAN BALİ Deputy Chief Executive 1962, İslahiye. Adnan Bali is a graduate of Middle East Technical University (Faculty of Administrative Sciences, Department of Economics). He joined İşbank as an Assistant Inspector on the Board of Inspectors in 1986 and has served in a number of Bank’s units and branches. He was appointed Deputy Chief Executive on 30 May 2006.

SUAT İNCE Deputy Chief Executive 1964, Ankara. Suat İnce is a graduate of Middle East Technical University (Faculty of Economic and Administrative Sciences, Department of Economics). He began his career at İşbank as an Assistant Inspector on the Board of Inspectors in 1987 and served in a number of the Bank’s units and branches. He was appointed Deputy Chief Executive on 2 April 2008.

SERDAR GENÇER Deputy Chief Executive 1967, Siverek. Serdar Gençer is a graduate of Middle East Technical University (Faculty of Engineering, Department of Industrial Engineering). He holds a master’s degree in business administration from the University of Nottingham (UK). He began his career at İşbank as an Assistant Inspector on the Board of Inspectors in 1990 and served in a number of the Bank’s units. He was appointed Deputy Chief Executive on 17 July 2008.

HAKAN ARAN Deputy Chief Executive 1968, Antakya. Hakan Aran is a graduate of Middle East Technical University (Faculty of Engineering, Department of Computer Engineering). He holds a master’s degree in business administration from the Başkent University, Institute of Social Sciences. He began his career at İşbank as a Software Specialist in the IT Department in 1990 and served in different positions in IT & software development department. He was appointed Deputy Chief Executive on 17 July 2008. İşbank Annual Report 2009 66

Organization Chart (*)

BOARD OF DIRECTORS

AUDIT COMMITTEE Caner Çimenbiçer Prof. Dr. Savaş Taşkent CHIEF EXECUTIVE OFFICER H. Ersin Özince

GENERAL SECRETARIAT

DEPUTY CEO BOARD OF Hakan Aran DEPUTY CEO DEPUTY CEO DEPUTY CEO INSPECTORS Zafer Memişoğlu Mahmut Magemizoğlu A. Aykut Demiray

ALTERNATIVE DISTRIBUTION CHANNELS OPERATIONS DIVISION SUPPORT SERVICES FINANCIAL INTERNAL CONTROL & PURCHASING MANAGEMENT TREASURY DIVISION DIVISION ALTERNATIVE DIVISION DIVISION DISTRIBUTION CHANNELS STRATEGY DIVISION

BANKING OPERATIONS RISK MANAGEMENT & PAYMENT HR MANAGEMENT INVESTOR RELATIONS ECONOMIC RESEARH DIVISION OPERATIONS DIVISION DIVISION DIVISION DIVISION

IT SOLUTION DEVELOPMENT MANAGERIAL DIVISION HR BUSINESS SECRETARIAT TO THE REPORTING & INTERNATIONAL PARTNERSHIP BOARD OF DIRECTORS INTERNAL BANKING DIVISION DIVISION IT ARCHITECTURE & ACCOUNTING DIVISION SECURITY DIVISION

BRANCHES CORPORATE IT PROJECT HR SERVICE CENTER ABROAD & FOREIGN COMPLIANCE MANAGEMENT DIVISION REPRESENTATIVES DIVISION DIVISION (OFFICES)

IT SYSTEM & OPERATIONS CONSTRUCTON DIVISION & REAL ESTATE MANAGEMENT IT PRODUCT & DIVISION SERVICE DELIVERY DIVISION TALENT RETAIL LOAN & CARD MANAGEMENT OPERATIONS DIVISION DIVISION

FOREIGN TRADE & COMMERCIAL LOAN OPERATIONS DIVISION

INTERNAL OPERATIONS DIVISION

OPERATIONS PLANNING DIVISION

BRANCH OPERATIONS DIVISION

(*) As of 31.01.2010 İşbank Annual Report 2009 67

DEPUTY CEO DEPUTY CEO DEPUTY CEO DEPUTY CEO DEPUTY CEO DEPUTY CEO Hakan Barut Suat İnce Adnan Bali Özcan Türkakın Hülya Altay Serdar Gençer

SME LOANS CORPORATE BANKING CORPORATE LEGAL AFFAIRS RETAIL BANKING BOARD OF CHANGE UNDERWRITING MARKETING & SALES COMMUNICATIONS DIVISION MARKETING DIVISION MANAGEMENT DIVISION DIVISION DIVISION

CREDIT INFORMATION CORPORATE LOANS ENTERPRISE CORPORATE BANKING SUBSIDIARIES RETAIL BANKING AND FINANCIAL UNDERWRITING ARCHITECTURE PRODUCT DIVISION DIVISION PRODUCT DIVISION ANALYSIS DIVISION DIVISION DIVISION

COMMERCIAL & STRATEGY & RETAIL LOANS COMMERCIAL CORPORATE LOANS PRIVATE BANKING RETAIL BANKING CORPORATE MONITORING & BANKING MONITORING & MARKETING DIVISION SALES DIVISION PERFORMANCE RECOVERY DIVISION MARKETING DIVISION RECOVERY DIVISION MANAGEMENT DIVISION

COMMERCIAL LOANS COMMERCIAL PRIVATE BANKING CONSUMER LOANS UNDERWRITING BANKING SALES SALES DIVISION DIVISION DIVISION DIVISION

COMMERCIAL CAPITAL MARKETS CARD PAYMENT BANKING PRODUCT DIVISION SYSTEMS DIVISION DIVISION

FREE ZONE BRANCHES İşbank Annual Report 2009 68

Türkiye İş Bankası A.Ş. Managers of Internal Systems

Names and surnames, terms of office, areas of responsibility, academic backgrounds and professional experiences of managers of Internal Systems, which consists of Board of Inspectors, Risk Management Division, Corporate Compliance Division and Internal Control Division, are presented below.

Chairman of the Board of Inspectors: Ertuğrul Bozgedik

Term of Office Professional Experience Departments Worked Previously Academic Background 1 year 8 months 23 years Board of Inspectors, Non Performing B.A. Degree from a Domestic Loans Division, Corporate Loans Division University

Head of Risk Management: Rıza İhsan Kutlusoy

Term of Office Professional Experience Departments Worked Previously Academic Background 1 year 8 months 21 years Board of Inspectors, Capital Markets Division B.A. Degree from a Domestic İstanbul/Galata Branch University

Head of Corporate Compliance Division (Compliance Officer): Mehmet Ali Madendere

Term of Office Professional Experience Departments Worked Previously Academic Background 1 year 3 months 23 years Board of Inspectors, İstanbul III. B.A. Degree from a Domestic Regional Division, Loans Division, University Internal Control Division

Head of Internal Control: Aydın Erendil

Term of Office Professional Experience Departments Worked Previously Academic Background 1 year 3 months 21 years Board of Inspectors, Electronic Data B.A. Degree from a Domestic Processing Division University

Information About the Meetings of the Board of Directors

The Board meetings are normally held once a month, yet interim meetings might be held in case of need. Meeting agendas are prepared in accordance with the proposals of head office departments. Moreover, various reports requested by the Board of Directors from the Bank management and off the agenda topics put forward by the Board members are discussed during the meetings. Meeting agendas and related documents are distributed to the Board members and auditors before the meetings according to the principles determined by the Board.

14 Board meetings were held in 2009. Generally, full participation is achieved at the meetings. In 2009, 13 meetings were held by full participation and one member did not attend in one of the meetings. 610 pages of meeting minutes were taken at the Board meetings in 2009. 899 resolutions were made both during the meetings and by examining files. İşbank Annual Report 2009 69

Türkiye İş Bankası A.Ş. İşbank Committees

The Audit Committee The Committee has two members and is chaired by Mr. Caner Çimenbiçer, Chairman of the Board of Directors. The other member of the Committee is Prof. Dr. Savaş Taşkent, who is also a member of the Board.

The Committee is responsible for holding meetings within the framework of the related regulation and is obliged to inform the Board of Directors about the results of its activities and the measures to be taken by the Bank, practices that are required and its opinions on other matters that are deemed to be significant for the Bank to conduct its business safely.

The Audit Committee is in charge of: • Ensuring that the internal systems of the Bank function efficiently and sufficiently, that these systems and the accounting and reporting systems operate within the framework of the related regulations and the Bank’s policies and that the information produced has integrity, • Carrying out the preliminary assessment of independent audit firms and companies providing rating, valuation and support services to be selected and monitoring the firms, that are appointed by the Board, on a regular basis, • Ensuring that the internal audit functions of subsidiaries that are subject to consolidation are coordinated in line with the related regulations, • Reporting, presenting opinions and making recommendations to the Board on the functions, operations and related policies and regulations of the internal systems and the divisions that are part of the internal systems, • Evaluating the information and reports received from the independent audit firms and the divisions, that are part of the internal systems, about their operations, • Ensuring that the Bank’s financial reports are prepared in line with the related legislation, regulations and standards, • If required, gathering information, documents or reports from all Bank units, support service contractors and independent auditors and being subject to Board approval, receiving consultancy from those who are specialists in their respective fields, • Fulfilling other responsibilities determined by the related legislations and the duties given by the Board within this framework, • Reporting to and informing the Board about the results of its own operations, the measures needed to be taken in order for the Bank’s operations to be within the framework of the related legislation and Bank policies in a continuous and secure way and its evaluation, opinion and recommendation on any other issues that are deemed to be important.

In 2009, Audit Committee held 32 meetings and adopted 37 resolutions.

Turkish Republic of Northern Cyprus (TRNC) Internal Systems Committee As per the resolution of the Board of Directors, dated 15.06.2009, Nr.35546, due to the branches in TRNC, TRNC Internal Systems Committee is established within the framework of TRNC Banking Law and related regulations. The committee has 2 members and is chaired by Mr. Caner Çimenbiçer, who is the Chairman of the Board of Directors. The other member of the committee is Prof. Dr. Savaş Taşkent, who is also a member of the Board. The Committee informs the Board of Directors on the results of its own activities, its opinion on the measures needed to be taken and the necessary practices to be implemented by the TRNC branches and other important issues in order for these branches to operate in a secure way.

TRNC Internal Systems Committee is responsible for ensuring the efficiency and sufficiency of the internal systems provided by the Bank in relation to the operation of the TRNC branches; ensuring the operation of the internal systems, accounting and reporting systems in line with the law and related regulations and ensuring the integrity of the produced information; carrying out the preliminary assessment of independent audit firms and other companies providing services directly related to other banking operations to be selected by the Board; and monitoring regularly and coordinating these companies that are selected and contracted by the Board.

In 2009, the TRNC Internal Systems Committee held 3 meetings and adopted 3 resolutions.

Credit Committee İşbank’s Credit Committee makes resolutions on credit allocation within its authorization limit; makes decisions on demands to change the credit allocation conditions within its authorization limit and carries out any assignments regarding credits, given by the Board.

İşbank’s Credit Committee consists of three members; one of them is the Chief Executive Officer, who is also the chairman of the Committee and two members of the Board. Each year, at the first Board meeting after the Annual General Meeting, the Board members of the Credit Committee are determined until the next General Meeting. Two alternate Committee Members are also designated who will stand if need arises. The Committee makes decision on the credit allocation with consensus, after each Committee Member examines and signs the files. Resolutions made by the Committee with consensus are applied directly; and resolutions made by the Committee unanimously are applied after the approval of the Board of Directors.

By the end of 2009, 130 files were evaluated under the authority of the Board.

The Credit Committee of January-March 2009 consisted of three members: Chief Executive Officer, H. Ersin Özince; Deputy Chairman of the Board of Directors, H. Fevzi Onat and Board Member, Füsun Tümsavaş, with two deputy members Chairman of the Board of Directors, Caner Çimenbiçer and Board Member, Tülin Aykın. The members of the current Credit Committee that was established after the Bank’s Annual General Meeting dated 31.03.2009 are permanent member, Chairman of the Committee and Chief Executive Officer, H. Ersin Özince, Deputy Chairman of the Board of Directors, H. Fevzi Onat and Board Member, Füsun Tümsavaş. Deputy members of the Credit Committee are Board members Tülin Aykın and Hasan Koçhan. İşbank Annual Report 2009 70

Türkiye İş Bankası A.Ş. İşbank Committees

Committee Members Duty Primary Duty H. Ersin Özince Chairman of the Committee Chief Executive Officer and Board Member H. Fevzi Onat Member Deputy Chairman of the Board Füsun Tümsavaş Member Board Member

2009 January-March deputy members: Caner Çimenbiçer – Tülin Aykın 2009 April-December deputy members: Tülin Aykın – Hasan Koçhan

Credit Revision Committee Being one of the committees of the Board of Directors, the Credit Revision Committee was founded as per the article of Revision of Limits within the context of Credit Risk Policy, which came into effect by the resolution of the Board of Directors dated 30.09.2003 and nr 30249, within the framework of the policy of reviewing the loan portfolio, evaluating the relations with credit customers at the end of the year and revising, when necessary, the credit limits allocated to the said persons and corporations. Within this framework, as per the resolution of the Board dated 17.12.2008 and nr 35143, the Credit Revision Committee, consisting of Deputy Chairman of the Board, H. Fevzi Onat and Board Members Tülin Aykın, Füsun Tümsavaş and Hasan Koçhan, reviewed all firms and risk groups under the authority of the Board of Directors and Credit Committee and completed, within this context, limit revision examinations of 6.313 group or individual firms and 376 correspondent banks in two parts as on 03.03.2009 and on 09.06.2009.

As per the resolution of the Board of Directors dated 31.12.2009 and nr 36077, the current Credit Revision Committee, consisting of Deputy Chairman of the Board, H. Fevzi Onat and Board members Tülin Aykın, Füsun Tümsavaş and Hasan Koçhan, is responsible for determining the credit limits of the related firms and institutions for the year 2010.

Corporate Social Responsibility Committee The Corporate Social Responsibility Committee was established as per the Regulation on Social Responsibility Practice, which was adopted with the resolution of the Board, and its members are Board Members İsmet Atalay and Tülin Aykın, Deputy Chief Executives Özcan Türkakın and Hülya Altay and Head of the Corporate Communications Division Suat E. Sözen. The Committee operates in accordance with the Regulation principles, by considering the basic fields of contribution, which are determined as Education, Culture and Art, Health, Protection of the Environment and Other Activities.

In 2009, Corporate Social Responsibility Committee held 10 meetings and adopted 40 resolutions.

Risk Committee Risk Committee is responsible for formulating the risk management strategies and policies İşbank will adhere to both on a consolidated and unconsolidated basis, presenting them to the İşbank Board of Directors for approval, and monitoring compliance with them. Committee is the common communication platform with the Bank’s executive divisions in terms of assessing the risk the Bank is exposed, making suggestions about the precautions to be taken and methods to be followed. The Committee’s principal duties are the following:

• Prepare the risk strategies and policies, and present to the Board for approval. • Adjudicate by negotiating the issues addressed by Risk Management Division. • Recommend to the Board the level of risk limits for exposures, monitor the breach of limits and recommend to the Board regarding elimination of those breaches. • Recommend to the Board changes in risk policies if diverse circumstances require. • Monitor risk identification, definition, measurement, assessment, and management processes carried out by Risk Management Division. • Monitor accuracy and reliability concerning the risk measurement methodologies and their results.

Committee Members:

• H. Fevzi Onat: Deputy Chairman and Member of Board of Directors • H. Ersin Özince: CEO, Head of Credit Committee • Aykut Demiray: Deputy Chief Executive, Head of Asset & Liability Management Committee • Suat İnce: Deputy Chief Executive • Rıza İhsan Kutlusoy: Head of Risk Management Division

Risk Committee is chaired by H. Fevzi Onat.

Risk Committee contributes to the configuration of Group risk policies also through consolidated group meetings. In the activities that the Risk Committee carries out on a consolidated basis,

• Özcan Türkakın, Deputy Chief Executive • Burhanettin Kantar, Head of Equity Participations Division also attend the meetings.

In 2009, the Risk Committee met a total of 12 times 4 of which were on a consolidated basis. In addition to the risk management evaluations of İşbank and its participations under consolidation, 12 risk management reports were submitted to the Committee and 15 resolutions were adopted. İşbank Annual Report 2009 71

Türkiye İş Bankası A.Ş. Human Resources Functions at İşbank

It was aimed that, the conformity between the priorities of the human resources function that has been restructured in 2009, and the priorities of the corporate strategy is maintained more efficiently, proactive human resources solutions in line with the Bank’s goals and plans are developed, motivation and loyalty of the employees are sustained increasingly by adopting high performance culture, the Bank’s position as “Preferred Employer” is strengthened, and competitive advantage provided by qualified work-force is increased.

In line with this, the Human Resources Management Division, Human Resources Partnership Division, Human Resources Service Center Division and Talent Management Division carried out their operations according to the aforementioned principles.

In 2009, partnerships were carried out with most of the divisions in the Bank. Within this context, the needs of all Head Office Divisions, primarily the Retail, Private, Commercial and Corporate Banking Divisions were dealt with related to various fields of human resources such as hiring, placement, career development, employee performance, training and employee communication, which would contribute to their business objectives.

Our practices were carried out intensely in 2009 in order to closely monitor the employee performance, take measures for their improvement, strengthen the feedback mechanism between the managers and employees and to improve the performance management process, with the aim of improving employee performance constantly and maximizing their contribution to the Bank’s business results.

Wide range of trainings, which are appropriate for the needs of both the employees and business units, were provided for personal and professional development of the employees.

With advisory assistance regarding assessments, activities were conducted for the “Establishment of the Center of Measurement, Assessment and Development” and within this context, primarily the prevailing competence model was revised in accordance with the Bank’s new business model. In this context, the new competencies were used for the first time in the employment processes during the year.

In the year 2009, efforts were continued to be made on the implementation of the technological solution of the new Human Resources Management System in the area of Human Resources technologies. The first phase of the project is planned to be completed in 2010.

“Business Life Evaluation Survey”, which will provide a basis for the sharing of opinions of the employees, by measuring employee loyalty and satisfaction to lead the development and improvement activities in the Bank, was realized in October 2009. Required planning and organization in 2010 is projected in order for the actions to be taken in the areas of development and improvement which were determined in the light of the evaluation of results of the mentioned survey. Human Resources Help Desk, which is aimed to register and reply all inquiries, issues and demands regarding Human Resources functions from the employees, retired personnel and the candidates, who want to work at İşbank through a single center and report systematically in order to provide input regarding Human Resources operations, began to operate on September 1st, 2009.

Centralization of HR operations are being continued taking into consideration the operational efficiency principles. İşbank Annual Report 2009 72

Türkiye İş Bankası A.Ş. Information on the Transactions Carried out with İşbank’s Risk Group

All İşbank Risk Group companies are provided with the same kind of financial assistance, by the same procedures and policies, as those provided for third parties. The Risk Management Division analyses the approved credit lines and other lending procedures in favor of İşbank Group companies, and monitors to ensure compliance with legal requirements.

In 2009, the loans extended to the group companies had all been within the regulatory risk limits. Group companies had mainly been involved in credit products and deposits. The cash loans approved for the Risk Group was 1.26% of the total approved credit lines.

Activities for which Support Services are Received in Accordance with the Regulation on Procurement of Support Services for Banks and Authorization of Organizations Providing this Service

It is thought that services listed below, which are received by İşbank, are appraisable within the context of the Regulation on Procurement of Support Services of Banks and Authorization of Organizations Providing this Service:

• Support service received from IBM for Emergency Center located in Izmir for back up of the system, • Support service received from Provus Bilişim Hizmetleri A.Ş. for printing, enveloping and delivery of credit card abstracts to The General Directorate of Post and Telegraph Organization, • Secure e-payment infrastructure service received from EST Elektronik Sanal Tic. Bil. Hiz. A.Ş. for electronic commerce, • Support service received from E-Kart Elektronik Kart Sistemleri San ve Tic. A.Ş. for customization of our credit cards equipped by chip technology, • Carrying of cheques and bills between Group Centers and Basic Banking Operations Division by ERK Armored Güvenlik Hizmetleri A.Ş. İşbank Annual Report 2009 73

Türkiye İş Bankası A.Ş. İşbank’s Dividend Distribution Policy

İşbank’s principles of dividend distribution are set by article 58 of the Articles of Incorporation. According to this article,

After deducting all general expenses from the income arising from the operations of the Bank within a year, including premiums and bonuses and similar payments to the personnel of the Bank, and funds for all kinds of depreciations, as well as necessary provisions, the net profit obtained shall partly be set aside as contingency reserves and partly distributed in the order, manner and at the rates indicated below: a) 5% to statutory reserve fund (a/1), 5% as provision for probable future losses (a/2), 10% as first contingency reserve (a/3)

If the cause for setting aside of a provision and fund for a probable future loss and/or risk doesn’t exist any more, the remaining fund will be added to first contingency reserve (a/3) after distribution of net profit referred to in paragraph (a). b) From the balance of the net profit after the reserve fund referred to in paragraph (a) above have been set aside, an amount equal to 6% of the paid up capital represented by Group A, B and C share certificates, shall be distributed to shareholders as the “first dividend”. Should the profit realized in any year be insufficient to provide for the first dividend of 6% referred to above, the balance shall be made up and distributed out of the contingency reserve fund. Provided, however, that any amount thus taken out of the reserve fund shall constitute a charge to be made up out of the profits to be realized in the subsequent years. c) After the reserved fund and the first dividend referred to in paragraphs (a) and (b) above have been provided for, the balance of the net profit shall be set aside and distributed as follows: 10% for founder shares (limited to the portion of TL 250 thousand – two hundred and fifty - of paid capital) 2.5‰ among the members of the Board of Directors and the General Manager equally, 20% to the employees of the Bank, and 10% as second contingency reserve. d) After the amounts set forth in paragraphs (a), (b) and (c) have been set aside and distributed, the balance shall be distributed to the shareholders as “second dividend” in the manner stated below and taking into consideration paragraph (e). 1) The net total of the dividends to be distributed to the holders of Group (A) shares as first and second dividends under paragraphs (b) and (d) may not exceed 60% of the capital paid up by them, the net total of the dividends to be distributed to holders of Group (B) shares may not exceed 30 % of the capital paid up by them, and the net total of the dividends to be distributed to holders of Group (C) shares may not exceed 25% of the capital paid up by them. 2) After the amounts set forth in paragraphs (a), (b) and (c) have been set aside and distributed, should the balance be insufficient to distribute the second dividend in the manner specified by the paragraph (1) above, twice the amount of the paid up capital represented by Group (A) shares the actual amount of the capital represented by Group (B) shares, and the 5/6 (five sixth) amount of the capital represented by Group (C) shares shall be taken as the basis, and, total dividends to be paid to the three Groups of shares shall be calculated separately in the distribution of the second dividend. e) Furthermore, the amount required to be added to contingency reserve under paragraph 3 of of Article 466 of the Turkish Commercial Code, shall be set aside. f) Following the allocation and the distribution of the net profits in accordance with the foregoing provisions, upon the proposal of the Board of Directors, it shall be resolved at the General Assembly whether the outstanding balance should be set aside as contingency reserves or be transferred to the subsequent year, or, should up to 80% (net) of this balance be divided to the number of share certificates and net worth distributed to holders of share certificates and the remainder be set aside as contingency reserve or transferred to the subsequent year.

In the calculation of the dividends to be paid to all three Groups of shares; group A shares will be considered as 40 times the share quantity, due to the reason that 20 Group (A) shares each with a nominal value of TL 500 have been changed with 1 Group (A) share with a nominal value of 1 New Kurus, group B shares will be considered as 1.5 times of the share quantity, and group C shares will be considered as the same quantity. İşbank Annual Report 2009 74

Türkiye İş Bankası A.Ş. Agenda of the Annual General Meeting

1. Opening Ceremony, establishment of Chairmanship Council and authorization of the Chairmanship Council to sign Minutes of the General Meeting,

2. Presentation of and discussion on the Board of Directors’, Auditors’ and Independent Auditors’ Reports,

3. Examination and ratification of 2009 Balance Sheet and Income Statement,

4. Discharge of the Board of Directors from their responsibilities for the transactions and accounts of the year 2009,

5. Discharge of the Auditors from their responsibilities for the transactions and accounts of the year 2009,

6. Determination of the dividend distribution and the method and date of allotment of dividends,

7. Determination of the allowance for the members of the Board of Directors,

8. Election of the Auditors for 2010,

9. Determination of the Auditors’ salaries,

10. Presenting information to shareholders about the donations made during the year 2009,

11. Presenting information to shareholders about the Independent Audit Firm that will provide services on independent audit and information systems audit during the accounting period 2010-2012. İşbank Annual Report 2009 75

Türkiye İş Bankası A.Ş. Report of the Board of Directors

Dear Shareholders,

Welcome to the 86th Ordinary General Assembly of our Bank.

Before presenting the Board of Directors Report, Auditors’ Report and the Profit and Loss Statement including the operating results of the financial year 2009 for your review, we respectfully greet you.

2009 was a year in which the adverse effects of the global crisis were intensely felt in our country, as well. Especially due to the serious slowdown in the economy in the first half of the year, the economy contracted by 8.4% in the first 9 months of 2009. In 2009, current account deficit decreased significantly compared to previous year, to USD 13.9 billion, in parallel with the contraction of foreign trade deficit. On the other hand, the weakening domestic demand exerted a downward pressure on inflation, and at the end of 2009, inflation declined to 6.53% according to Consumer Price Index (CPI) and 5.93% according to Producer Price Index (PPI).

Banking sector continued to grow in 2009, despite the contraction in the economy. Due to the decrease in demand for loans, share of securities as a percentage of total assets increased. Beginning from the second quarter of the year, consumer loans and personal credit card loans increased, although at a limited rate, as a result of the financial incentive packages aiming to increase domestic demand, in the same period short term loans as well increased at a limited rate. Due to the slowdown in the economy and increasing unemployment, asset quality was one of the main focuses of the banks throughout the year. While the volume of deposits in the sector increased at a limited rate, Central Bank’s substantial policy rate cuts during the year contributed significantly to the decline in funding costs.

For İşbank, despite the adverse economic conditions in 2009, our Bank enhanced its performance and continued to grow. As of 31.12.2009, compared to previous year; • Our deposits reached TL 72,177,063 thousand, increasing by 13.6%, • Our loans reached TL 48,334,786 thousand, increasing by 1.5%, • Our assets reached TL 113,223,304 thousand, increasing by 16.1%, • Our shareholders’ equity reached TL 13,493,528 thousand, increasing by 42.8% and our profit was TL 2,372,407 thousand.

Recent indicators show that a partial recovery in the economy has started and the recovery will continue gradually in 2010. In the upcoming period, in line with the economic recovery, it is anticipated that loan volume will increase and there will be a tendency of improvement in problems regarding asset quality of the banking sector.

Dear Shareholders,

We hereby submit our Balance Sheet and Profit and Loss Statement within our 2009 Annual Report for your examination and approval.

We would like to express our gratitude to Turkish public for their unswerving trust in our Bank, to the institutions of the Turkish State for their continuous support, to our employees for unstinting contribution, and to our distinguished shareholders who have honored this General Assembly with their presence.

TÜRKİYE İŞ BANKASI A.Ş. BOARD OF DIRECTORS İşbank Annual Report 2009 76

Türkiye İş Bankası A.Ş. Auditors’ Report

TO THE GENERAL ASSEMBLY OF TÜRKİYE İŞ BANKASI A.Ş.

İSTANBUL

The operations, accounts and records of Türkiye İş Bankası A.Ş. for the year 2009 have been examined, the explanations of the Bank executives have been assessed and it is concluded that operations have been conducted in conformity with the rules and regulations while the balance sheet and income statement are in conformity with accounting records.

The main balance sheet items as well as the profit of the Bank as of December 31st 2009, compared to the previous year, are presented below.

(TL thousand) 31.12.2009 31.12.2008 Cash and Central Bank of Turkey 8,759,973 11,836,821 Banks 8,432,564 6,788,148 Financial Assets Available for Sale 25,980,621 21,250,457 Loans 48,334,786 47,610,332 Participations and Subsidiaries 5,031,079 3,095,507 Investments Held to Maturity 12,929,454 3,461,854 Tangible and Intangible Assets 1,894,746 1,935,146 Deposits 72,177,063 63,539,185 Money Market Funds 10,983,878 7,006,556 Funds Borrowed 9,743,859 11,033,237 Provisions 3,493,802 3,099,532 Shareholders’ Equity 13,493,528 9,449,011 Profit/Loss 2,372,407 1,509,408

The Board of Directors has prepared the proposal for the distribution of profit in accordance with the Bank’s Articles of Incorporation and the related legislation.

We respectfully request your approval of the Balance Sheet and Profit/Loss Account for 2009.

Sincerely,

Auditor Auditor Prof. Dr. Turkay Berksoy A. Taciser Bayer İşbank Annual Report 2009 77

Türkiye İş Bankası A.Ş. Dividend Distribution Proposal

• As a result of activities in 2009, a net profit of TL 2,372,407,037.66 was made. TL 7,764,995.00 of the net profit figure is the income from sale of participations and real estates. As per the resolution of the Board of Directors, this amount is booked to a special account under liabilities and is to be used for capital increase when necessary, in order to benefit from the exemption clauses of the fifth article of Corporate Tax Law no. 5520. It is proposed that the amount of TL 7,764,995.00 which is not subject to dividend distribution, be transferred to related reserves.

• It is proposed that the distributable balance amount of TL 2,364,642,042.66 to be distributed in accordance with the relevant legislation and article 58 of the Articles of Incorporation of Türkiye İş Bankası A.Ş. as detailed below, including the allocation of TL 432,961,446.46 to type one extraordinary reserves as increased within the framework of the provisions of the Banking Law and the Turkish Commercial Code from the amount to be allocated to type one extraordinary reserves, which is 10% of the balance amount of TL 2,364,642,042.66 :

TL NET PERIOD PROFIT 2,372,407,037.66 NON-DISTRIBUTABLE PROFIT 7,764,995.00 DISTRIBUTABLE PROFIT 2,364,642,042.66

I. FIRST DIVIDEND (Articles of Incorporation Art. 58/a-b) - For Legal Reserves 5% 118,232,102.13 - Type One Extraordinary Reserve 1,462,261,393.05 - First Dividend To Group A Shares 60.00 To Group B Shares 1,740.00 To Group C Shares 184,776,520.26 1,765,271,815.44 599,370,227.22 II. SECOND DIVIDEND (Articles of Incorporation Art.58/c-d-e) - To Founders’ Shares 4,865.59 - 0.25% to the Board Members and the CEO in Equal Amounts 1,498,425.57 - 20% to Bank Employees 119,874,045.44 - 10% to Legal Reserves 51,839,053.75 - 10% to Type Two Extraordinary Reserves 59,937,022.72 - Second Dividend To Group A Shares 285.40 To Group B Shares 4,138.25 To Group C Shares 366,212,390.50 599,370,227.22

In case the said proposal is approved by the Bank’s General Assembly, gross dividend will be distributed as follows to each group of shares with a nominal value of TL 1:

Gross (TL)

For each Group A share with a nominal value of TL 1 0.345397

For each Group B share with a nominal value of TL 1 0.202698

For each Group C share with a nominal value of TL 1 0.178915

For each of the founders’ shares 1.979491 İşbank Annual Report 2009 78

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

1. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT İşbank operates in compliance primarily with the Banking Law Nr. 5411 and the regulations pertaining to the Banking Law, as well as all other legal provisions that banks are subject to.

Making public disclosures to the Istanbul Stock Exchange promptly, and providing access to this information on the Bank’s website, keeping shareholders up-to-date with İşbank’s Articles of Incorporation, annual reports and all other information and documents, which will affect the exercise of shareholder rights through the website, are the main practices that largely cover the provisions of the “Corporate Governance Principles” published by the Capital Markets Board.

Mr. Caner Çimenbiçer (Chairman) and Prof. Dr. Savaş Taşkent (Director) are members of the “Audit Committee”, which was established in line with the requirement of article 24 of the Banking Law Nr. 5411.

Without prejudice to the provisions of the Banking Law, explanations regarding the Corporate Governance Principles of the Capital Markets Board, which should be covered in the annual reports of the publicly traded companies, are presented below.

PART I - SHAREHOLDERS

2. Shareholders Relations Unit Investor Relations Unit of İşbank was founded in 1998 in order to foster communication between the company and the shareholders. The Investor Relations Unit became a separate division starting from 01.04.2009. Following list presents the names and contact details of employees who are working at the Investor Relations Division, which works under Mr. Mahmut Magemizoğlu, who is the Deputy Chief Executive of İşbank.

Name, Surname Title Telephone Number E-mail Address Süleyman H. Özcan Manager 0212 - 316 16 00 [email protected] Alper Turgal Assistant Manager 0212 - 316 16 10 [email protected] Ebru Nuhoğlu Assistant Manager 0212 - 316 16 08 [email protected] Elif Yılmaz Assistant Specialist 0212 - 316 16 17 [email protected] Ece Oktar Assistant Specialist 0212 - 316 16 15 [email protected] Alev Özer Assistant Specialist 0212 - 316 16 14 [email protected] İpek Taşkın Senior Section Head 0212 - 316 16 18 [email protected] Gürkan Ali Gülyüz Section Head 0212 – 316 16 19 [email protected] Zeynep Eylem Baş Senior Officer 0212 – 316 16 20 [email protected] Müge Baburşah Senior Officer 0212 – 316 16 02 [email protected]

Following are the principal activities performed by the Investor Relations Division:

• Responding to both the existing and potential investors’, rating agencies’, international lenders’ and other related institutions’ information requests, which are not categorized as trade secrets or customer secrets, within the framework of related regulations, • Participating in domestic and overseas investor meetings and conferences on behalf of İşbank and making presentations to the related parties when necessary, • Informing the shareholders and making public disclosures about the material events through related media and institutions including Istanbul Stock Exchange (ISE), • Keeping the contents of English and Turkish pages of the “Investor Relations” website updated, • Working on research and development regarding Bank’s corporate governance practices, • Coordination of preparations of General Meeting and Annual Report, • Carrying out the registration of Bank’s shareholders.

In the year 2009, more than 500 inquiries were sent to the Investor Relations Division via telephone and e-mail, and all inquiries have been promptly replied. In the same year, Investor Relations Division participated in 10 international investor conferences and roadshows, meeting with 247 investment companies representatives. Furthermore, the Investor Relations Division hosted around 100 investor meetings and 22 conference calls in its head office.

3. Use of Shareholders’ Right to Obtain Information Information requests of shareholders regarding dividend distribution, capital increase, general meeting, annual report, Bank’s financial statements and related issues, received by İşbank via mail, telephone, e-mail and other media are evaluated and replied in the most effective and fastest way by the Investor Relations Division. Furthermore, individual or group meetings and teleconferences are held with current and potential investors and analysts. In 2009, more than 500 information requests were received from shareholders and replied by İşbank. Furthermore, any developments and information on İşbank concerning the shareholders are regularly disclosed to the related parties through Istanbul Stock Exchange, the website and e-mail.

Necessary announcements regarding capital increase, dividend distribution and General Meeting are made to the shareholders and public via Public Disclosure, media and the Bank’s websites per the provisions of the Turkish Commercial Code, and the Capital Markets Law. İşbank Annual Report 2009 79

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

Furthermore, regarding the use of shareholders’ right to obtain information, shareholders and investors are provided with access to the following information, both in English and Turkish via the Bank’s website;

• Periodical financial statements and footnotes, • İşbank’s Investor Presentation, • Annual and interim reports, • Credit ratings, • Articles of Incorporation, • Information concerning equity participations, • Organization chart, • Backgrounds of the Directors and the Senior Executives, • Ownership structure, • Information on capital increases and dividend distribution, • Calendar of events, • Disclosures of material events, • Proxy Voting Form and information on General Shareholders’ Meeting, • Activities implemented within the framework of Corporate Governance Principles and İşbank’s Corporate Governance Principles Compliance Report.

İşbank’s website covering the aforementioned information and documents is revised and updated periodically.

İşbank is audited regularly both by independent external auditors as required by the Banking Law, and by two other auditors who are appointed at the General Shareholders’ Meeting within the framework of the Turkish Commercial Code and mentioned in the Articles of Incorporation of İşbank.

On the other hand, the “Audit Committee”, established as required by the article 24 of the Banking Law, consists of Mr. Caner Çimenbiçer (Chairman) and Prof. Dr. Savaş Taşkent (Director). As per article 11 of Capital Market Law and article 348 of the Turkish Commercial Code, in case of need, the Bank’s General Assembly can elect a special auditor for the investigation and inspection of specific subjects. Shareholders representing at least 5 % of the share capital may request a special auditor at the general meeting to be appointed for the investigation of the subjects envisaged in the related regulations. If this request is rejected at the general meeting, then shareholders would have the right to apply to the court against the rejection decision. İşbank’s Articles of Incorporation do not have a separate regulation for the appointment of a special auditor.

4. Information on General Shareholders’ Meeting Regulations related to the General Shareholders’ Meetings are stated in the Articles of Incorporation, which is publicly disclosed and also available on İşbank’s website. As per the related regulations, the agenda of Shareholders’ Meetings and other related issues are made publicly available by means of media and internet before the Shareholders’ Meetings. In addition, İşbank’s annual reports prepared for the Shareholders’ Meeting are also presented to the shareholders for their information and examination before the General Shareholders’ Meeting. Besides shareholders, the representatives of related legal institutions who are entitled to attend General Shareholders’ Meetings as per related regulations, attend the General Meetings.

İşbank held an Ordinary General Shareholders’ Meeting on 31.03.2009. Announcements, including the agenda of the meeting and sample of proxy statement, were published on the Trade Registry Gazette, and made public via media and website of İşbank within the legal periods.73.19 % of the shareholders were represented at the aforementioned meeting. Invitations to Shareholders’ Meetings are made within the framework of Capital Market Law and the Turkish Commercial Code as well as the Articles of Incorporation of İşbank. Balance sheet, financial statement footnotes, independent auditors’ report, bank auditors’ report, dividend distribution proposal of the Board of Directors and similar detailed information in the annual reports are made available at branches of İşbank to the shareholders before the Shareholders’ Meetings within the legal time period required by related regulations. Upon request, annual reports are provided to the shareholders before the General Shareholders’ Meetings.

At İşbank’s Shareholders’ Meetings, all shareholders have the right to express their opinions and ask questions on the subjects of the agenda. Moreover, proposals regarding the agenda, which are put forward by shareholders at the Shareholders’ Meetings, are submitted to the voting and approval of shareholders as per the legal procedures.

Real estate related activities of İşbank are regulated by article 63 of the Articles of Incorporation. In addition, the real estate related transactions of the Banks are regulated as follows according to article nr.57 of the Banking Law: “Banks shall not engage in purchase and sale of real estate or commodities for commercial purposes, excluding the real estate and commodity contracts under the Capital Markets Law Nr. 2499 or contracts on precious metals deemed appropriate by the Board; or participate in companies, whose core business is real estate trading, except mortgage and real estate investment trusts.” According to İşbank’s Articles of Incorporation such transactions are under the authority of Board of Directors within the framework of the Banking Law. Such decisions taken either by the Board of Directors or by the Bank management with the consent of Board of Directors, are also made public as “disclosures on material events” under certain conditions.

Minutes of the Shareholders’ Meetings are published on the Trade Registry Gazette and they are available from the related unit of İşbank and the website. İşbank Annual Report 2009 80

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

5. Voting and Minority Rights There are explanations on the Bank’s capital structure and qualifications of shares both in the Articles of Incorporation and annual report and these explanations are submitted to the shareholders for their information.

Currently İşbank does not have any Board member elected by the minority shareholders. There is no regulation in the Articles of Incorporation regarding cumulative voting procedures. However, this does not prevent minority shareholders from using their voting rights through the same proxy.

6. Dividend Policy and Dividend Payout Date İşbank’s dividend distribution principles are explained in detail in the Articles of Incorporation, which is also available on İşbank’s website. Thus, the Bank’s dividend distribution policy is shared with the shareholders. İşbank’s dividend payment is made within the legal periods.

On the other hand, dividend distribution proposal of the Board of Directors is also published in the annual report, which is provided to the shareholders prior to the annual Ordinary General Shareholders’ Meetings. Dividend distribution is a regular item on the agenda of the General Shareholders’ Meeting and is presented for the approval of shareholders and implemented after the approval.

7. Transfer of Shares Transfer of shares can be done in accordance with the related legislation and the Articles of Incorporation of İşbank.

PART II - PUBLIC DISCLOSURE AND TRANSPARENCY

8. Public Information Policy İşbank’s current information policy is presented below and is also available on the website:

General Framework of Information Policy İşbank discloses all kinds of financial and other information required within the framework of primarily the Banking Law and the related regulations; the Capital Markets Board regulations; Turkish Commercial Code; the regulations of Istanbul Stock Exchange and London Stock Exchange where the Bank’s shares are quoted; and the regulations due to the ADR program in the U.S.A., where the Bank’s shares are registered, by also considering the generally accepted accounting principles and corporate governance principles. The Bank conducts a detailed policy of disclosure and public information.

The main purpose of information policy is to submit the required information and disclosures, other than trade secrets, to the shareholders, investors, employees, clients, creditors and other related parties with equal treatment, in a timely, accurate, complete, and clear manner and to make them easily available with the lowest cost.

İşbank, who has an active approach towards adopting and implementing Corporate Governance Principles, puts great effort in carrying out the requirements of the related regulations and the international best practices with regards to public disclosure and information. Being set in accordance with the above- mentioned context, İşbank’s Information Policy has been ratified and put into effect by the Board of Directors.

Authority and Responsibility Information Policy has been formed by the Board of Directors. Monitoring and improvement of the public disclosure and information policy of İşbank are under the authority and responsibility of the Board of Directors. Managers in charge of financial management and reporting and the Investor Relations Division have been assigned for the coordination of information function. The authorities of the aforementioned Division fulfill their responsibilities by close cooperation with the Audit Committee and the Board of Directors.

Practices and Methods and Devices Used in Public Disclosure The practices and devices and methods used in public disclosure within the framework of banking regulations, Capital Markets Board Regulations, Turkish Commercial Code and other related regulations, are listed below:

• Bank-only and consolidated financial statements and related notes and explanations together with the independent auditors’ report, prepared on a quarterly basis in accordance with the regulations of the Banking Regulation and Supervision Agency (BRSA), are sent to the Istanbul Stock Exchange (ISE) within the legal time frame and are published on İşbank’s website. The related financial statements are signed by the members of the Audit Committee and the managers of the Bank, who are in charge of financial reporting together, with a statement of accuracy. Furthermore, the Bank makes a press release related to the quarterly published financial statements and informs the public about the operations during the related period, İşbank’s market position, general financial performance and other significant subjects.

The Bank translates both the financial statements and the press releases into English and submits them to the related parties and publishes them on its official website. On the date of annual general meetings following the announcement of financial statements as of year ends, regularly a review of the previous year is made in the press conference held by the Chairman of the Board and/or the Chief Executive Officer and the questions of the press are answered. İşbank Annual Report 2009 81

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

• Bank-only financial statements and related notes and explanations together with the independent auditor’s review report thereon, prepared in accordance with the International Financial Reporting Standards on a quarterly basis, are sent to specific creditor institutions and also published on the Bank’s official website.

• Consolidated financial statements and related notes and explanations together with the independent auditors’ report, prepared in accordance with the International Financial Reporting Standards on a yearly basis are published on İşbank’s official website.

• Disclosures of material events required as per the regulations of the Capital Markets Board (CMB) are sent to the ISE and the CMB within the deadlines. Although disclosures of material events are signed on principle by the officials in charge of relations with shareholders, sometimes as an exception they are also signed by the managers in charge of the departments related to the subject and presented to the related authorities. Material disclosures are announced on İşbank’s website not later than the day after the related public announcement is made.

In order to secure the confidentiality of material events until they are publicly disclosed, the Bank’s employees with access to inside information are informed on their responsibilities arising from the related regulation. In the agreements made with the entities and firms which have access to inside information due to providing a certain service for the Bank, a confidentiality article is added, when necessary. On the other hand, in accordance with the Banking Law Nr. 5411 and the related regulations, İşbank strictly complies with its legal obligation in terms of keeping the Bank’s and its customers’ secrets and not disclosing to any authorities other than those which have been expressly authorized by law. This obligation is valid also for the support service contractors and their employees as well as the Bank’s employees.

• In cases such as changes in the Articles of Incorporation, general meetings and capital increases, necessary announcements are made via Trade Registry Gazette and Dailies.

• Before each annual general meeting, an annual report, including the necessary information and disclosures, is prepared both in Turkish and in English in accordance with the regulations of the BRSA, and presented to the shareholders for their information and it is also published on İşbank’s website (www. isbank.com.tr). Hard copies of the annual reports can be obtained from the Investor Relations Division of the Bank, upon request.

• When necessary, press releases are made through written and visual media. Press releases to the written and visual media can be made by the Chairman of the Board, Chief Executive Officer or Deputy Chief Executive, or by the ones authorized by the said persons.

News on İşbank which take place in local media are followed by a professional media monitoring agency. Within this framework, in case there is a need to make a disclosure within the scope of the regulations related to material disclosures, an announcement is made after the completion of the necessary inquiry through related divisions.

When a disclosure is made related to news and rumors that take place in media, but which do not create any obligation for the Bank to make a material disclosure as per the related regulations, the method and the content of the disclosure is determined by considering the factors like the quality of the news, the extent of the audience reached by the media and whether the news detracts the Bank’s reputation or not. When a disclosure is made upon such news and rumors, if the content of the disclosure includes anything which requires a public disclosure, a material disclosure is also made in accordance with the related regulations regarding the subject matter. If the published news is a violation of article 74 of the Banking Law, related to the protection of reputation, the Bank has the right to make an attempt to take necessary legal actions.

• Occasionally, shareholders and related parties are informed through conference calls. These conference calls are coordinated by the Investor Relations Division.

• Shareholders and other related parties are kept informed through investor meetings and road shows in Turkey and abroad. These meetings are conducted by the Investor Relations Division and the Chief Executive Officer, managers in charge financial management and reporting and the managers of the Investor Relations Division participate in these meetings and road-shows, depending on their availability. If necessary, participation can be extended.

In order to allow all market participants to get information simultaneously and equally, the information and presentation meetings held with investors, presentations and reports announced at press conferences are made available on the Investor Relations pages of the Bank’s official website.

• By e-mail, the Investor Relations Division sends regularly and periodically the financial statements and related disclosures to the shareholders, creditors, rating institutions and analysts that prepare reports about İşbank.

• Detailed information on İşbank is available on the Investor Relations pages of the corporate website both in Turkish and in English in line with the corporate governance principles. The said pages are monitored and updated by the Investor Relations Division. All kinds of inquiries sent by the shareholders and related parties via e-mail, letter or telephone are responded to in coordination with the Investor Relations Division within the shortest time possible.

Other Disclosures Public disclosures other than the ones mentioned above are made within the boundaries determined by the framework of the Bank’s authorized signatures. İşbank Annual Report 2009 82

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

Specifying the Persons Discharging Management Responsibility The criteria of specifying the persons discharging management responsibility are the administrative functions of the persons in the Bank’s organization and the content of the information accessed. Within this context, apart from the Board Members, Chief Executive Officer and Deputy Chief Executives, some division managers who have access to holistic information on the Bank and who are authorized to make administrative decisions that may significantly affect factors like asset-liability structure, profit-loss, cash flow, strategic targets, are also specified as persons discharging management responsibility.

9. Disclosures on Material Events In 2009, İşbank made 92 disclosures of material events to the ISE in compliance with the “Material Events Disclosure Requirement Communiqué” of the Capital Markets Board. Regarding the public disclosures in 2009, no further information was requested by Istanbul Stock Exchange nor Capital Markets Board. There was no penal sanctions by Capital Markets Board against İşbank because of untimely public disclosures.

İşbank’s depositary receipts issued in the USA are listed and currently traded on the London Stock Exchange. Certain disclosures made to the ISE are also regularly sent to the London Stock Exchange and the Bank of New York Mellon, which is the sponsor of İşbank’s DR program.

10. Türkiye İş Bankası Company Website (www.isbank.com.tr) İşbank’s website is actively and intensely used for public disclosures and communicating information. The website includes the information and data required by the Corporate Governance Principles and regulatory authorities, both in Turkish and in English. Information available on the website include organization and ownership structure, information about shares, Articles of Incorporation, Public Disclosures, annual reports, financial statements, Corporate Governance Principles Compliance Report, notices on the general meetings, agenda of the general meetings, information circular related to the agenda, other information, documents and reports related to the agenda, and methods of participation in the general meeting. Utmost care is given to keep the website up to date.

11. Disclosure on Ultimate Controlling Real Person Shareholder/Shareholders There is no ultimate controlling real person shareholder of İşbank. Moreover, İşbank’s ownership structure is disclosed to public and this information is updated and disclosed in the footnotes of the financial statements published at the ISE and on the web pages of the Investor Relations Division on a quarterly basis. On the other hand, principles and rules of indirect shareholding at banks, namely indirect shareholding of a real person or a legal person at a bank, are regulated by the Regulation Regarding the Establishment and Operation of Banks.

12. Disclosure on People Who can Have Access to Insider Information As per article 73 of the Banking Law, banks’ shareholders, directors, employees, representatives and officials shall not disclose trade secrets related to banks or their clients thereof which they have received in connection with their positions and duties, to any authority other than those which have been expressly authorized by law.

This obligation shall continue after leaving office, too. Any person, who has been found to infringe this provision of the article, shall be sentenced to a heavy imprisonment term from one year to three years and a judicial fine starting from a thousand days up to two thousand days.

Same penalties are also applicable to any third party who has disclosed trade secrets related to a bank and its clients. If the confidential information and documents are disclosed with a view to acquiring benefits for one-self or for others, the penalties shall be increased by one sixth. Furthermore, depending on the importance of the offense, the responsible persons shall be prohibited from working at the institutions subject to this Law temporarily for a period that is not less than two years or permanently.

İşbank fully complies with the legal regulations on insider trading. İşbank has also adopted anti-insider trading policies as an indispensable part of its corporate culture. For this reason, using information in order to obtain benefits for one-self or for others by employees who are able to deal with insider trading activities, is strictly prohibited. In this context, for instance, employees of the Capital Markets Division are prohibited from buying and selling equities including İşbank shares.

PART III - STAKEHOLDERS

13. Informing Stakeholders İşbank’s stakeholders are regularly informed about required subjects through press release, press conference, interviews, news on the website, disclosures and various meetings. Within this context, the necessary corporate organizational structure has been formed to satisfy the information demands of shareholders, employees and customers.

Functions related to informing the employees about the human resources practices and policies are conducted by Human Resources People Communications Unit. Human Resources Help Desk operates in order to answer the questions of the employees and to find solutions.

14. Participation of Stakeholders in the Bank Management İşbank employees participate in the management of the Bank via İşbank Members’ Supplementary Pension Fund, which controls 41.5 % of the Bank’s share capital. Other shareholders are represented in the management of İşbank in line with the regulations of the Articles of Incorporation. İşbank Annual Report 2009 83

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

15. Human Resources Policy Human Resources Policies of the Bank were defined and based on the principles of equal opportunity, fairness, transparency and performance. The related policies are implemented with the aim of increasing the means for employee progress adhering to basic rules of conduct and ethical values. Human resources needs are met in line with İşbank’s vision and mission in respect of human resources, through recruiting people who have the required qualifications for the job using convenient evaluation methods and instruments.

Performances of the employees are evaluated within the framework of personnel evaluation criteria periodically by face to face interviews with the employees; strengths and/or weaknesses of the employees are defined to increase their performances and also to prepare them for a higher position, related development and education schemes are formed; activities are designed for the purpose of realization of these plans and meeting the educational needs. In line with a career management philosophy based on constant development, by taking into account their skills, staff is employed according to their skills at positions that they fit best, in terms of satisfying the needs of the Bank and productivity.

The Bank’s employee candidates are informed about Human Resources practices and hirings through the Human Resources pages of the Bank’s corporate website.

Through İşbank’s Corporate Intranet Portal, which was formed in order to enhance information sharing within the corporation and to communicate with employees more effectively, all the employees are given the opportunity to have quick access to the Bank’s regulations, activities of divisions, up-to-date announcements and to supplementary sources.

Labor union representatives who are assigned by “Basisen (Labor Union of Banks and Insurance Companies) Labor Union” under which İşbank employees are organized, conducts relations with the employees. Labor union representatives have a constructive and effective role in forming communication between the Bank and the employees.

Every two years a Collective Bargaining Agreement is signed by the Bank and Basisen Labor Union. The last Collective Bargaining Agreement that was signed covers the period between 01.04.2008 – 31.03.2010.

It is essential for İşbank that there is not any race, religion, language and sex discrimination and violation of human rights.

16. Information on Relations with Customers and Suppliers A Customer Relations Unit was established within the Bank to ensure the customer satisfaction and this unit is accessible through the website, call center, mail, fax and via e-mail. All types of customer complaints received by İşbank are followed, assessed and resolved by this unit and relevant feedback is communicated to the related units to improve the product and services processes.

17. Social Responsibility Together with its equity participations, İşbank is one of the biggest economic players in Turkey due to its contribution to economy; public interest oriented vision; high level of employment creation and awareness of social responsibility, which is among İşbank’s basic management principles.

In addition to İşbank’s contributions to the Turkish economy, it also provides support in the social fields to non-governmental organizations, educational institutions, scientific studies, sports, art and cultural activities. Detailed information regarding these activities can be found on the Bank’s website and annual reports. For the aforementioned purposes, Corporate Social Responsibility Committee was founded as per the resolution of the Board of Directors dated 07.11.2007. There is no violation of environmental legislation regarding İşbank’s operations, and the Bank has never faced legal sanctions thereon.

PART IV - BOARD OF DIRECTORS

18. Structure and Composition of the Board of Directors and Independent Members İşbank’s Board of Directors has 11 members as listed below:

Name, Surname Position Caner Çimenbiçer Chairman H. Fevzi Onat Deputy Chairman H.Ersin Özince Director and CEO Prof. Dr. Savaş Taşkent Director İsmet Atalay Director Tülin Aykın Director Tuncay Ercenk Director Adnan Keskin Director Ali Sözen Director Füsun Tümsavaş Director Hasan Koçhan Director İşbank Annual Report 2009 84

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

Board of Directors, excluding the chief executive officer, comprise of non-executive members.

The election of İşbank Board members is implemented according to article 25 of the Articles of Incorporation and the Banking Law. As per the Banking Law, the chief executive officer of the Bank and, in his absence, his deputy shall be a natural member of the Board.

Although there is no restriction for the Board members to work elsewhere, some activities of Board members have been defined as “Forbidden Activities” in article 32 of the Articles of Incorporation of İşbank.

19. The Qualifications of the Board Members The principles governing the election of Board Members are stated in the Bank’s Articles of Incorporation.

The Banking Law describes the qualifications required for a Board member and İşbank complies with the aforementioned regulations in the election of Board members.

As per article 23 of the Banking Law, the qualifications required for the chief executive officer (The chief executive officer of a bank must have at least an undergraduate degree in the disciplines of law, economics, finance, banking, business administration, public administration and related fields and those that have undergraduate degrees in engineering fields must have a graduate degree in the aforementioned fields, and in both cases they must have at least ten years of professional experience in the field of banking or business administration), shall also be required for majority of the Board of Directors.

20. Vision, Mission and Strategic Goals of the Bank The vision and general strategic goals of İşbank were approved by the Board of Directors and disclosed to public via the Bank’s website. In this context, İşbank’s vision is to be the most preferred bank in Turkey by customers, shareholders and employees by maintaining its leading, pioneering and reliable position. İşbank’s mission, in general, is described as meeting the needs of its customers with fast, efficient and high standard solutions, increasing the value it created for its shareholders constantly and encouraging employees for the maximum performance. The Board of Directors regularly monitors and supervises the performance of the Bank in terms of achieving the strategic goals.

21. Risk Management and Internal Control As per article 29 of the Banking Law, banks are obliged to establish and operate adequate and efficient internal control, risk management and internal audit systems that are in harmony with the scope and structure of their activities, that can respond to changing conditions and that cover all their branches and participations subject to consolidation in order to monitor and control the risks that they encounter. Internal controlling activities are carried out by the Internal Control Division and the internal control personnel reporting to the Board of Directors, and risk management activities are performed by the Risk Management Division and personnel reporting to the Board of Directors. Furthermore, banks have to establish internal audit systems that involve all their units, branches and participations subject to consolidation. In this context, bank inspectors investigate the conformity of the banking activities to the legislation, articles of association, internal regulations and banking principles.

İşbank’s risk management and internal control systems have been established in accordance with the international best practices as well as domestic regulations. The units constituting the internal systems are the Board of Inspectors, Internal Control, Risk Management, and Corporate Compliance Divisions. The units constituting the internal systems work under the Board of Directors.

Corporate Compliance Division works under the Board of Directors on issues regarding compliance with the regulation and anti money laundering. The basic objective of the corporate compliance practices is to make the maximum contribution to ensure that the compliance risk at the Bank is managed effectively and as targeted, thus kept under control. Within this framework, the structure and implementation of the Bank’s operations are carried out constantly in accordance with the rules, regulations and standards. In addition, the Corporate Compliance Division, which is also responsible for the coordination of duties and activities related with compliance and compliance risk, has a mutual communication and cooperation with other related Divisions and employees.

22. The Authorities and Responsibilities of the Board of Directors and the Management Authorities and responsibilities of the Board members, the CEO and the auditors are clearly defined in the Banking Law, the related provisions of the Banking Law, the Turkish Commercial Code and the Articles of Incorporation of İşbank.

23. Fundamentals of the Functions of the Board of Directors Secretariat to the Board of Directors is in charge of providing all the necessary support and communication activities for the functions of the Board to be carried out.

The Board meetings are normally held once a month, yet interim meetings might be held in case of need. Meetings agenda are prepared in accordance with the proposals of head office departments. Moreover, various reports requested by the Board of Directors from the Bank management and off the agenda topics put forward by the Board members are discussed during the meetings. Meetings agenda and related documents are distributed to the Board members and auditors before the meetings. İşbank Annual Report 2009 85

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

All the discussions during the Board meetings are recorded in the minutes of the Board meetings. As per article 28 of the Articles of Incorporation, the minutes of the Board meetings were recorded to the Board Record Book, but within the framework of the change in regulations, starting from 11 June 2008 separate record books are being kept for the Board Resolutions and the minutes of the Board meetings.

14 Board meetings were held in 2009. Generally, full participation is achieved at the meetings. In 2009, 13 meetings were held by full participation and one member did not attend in one of the meetings. 610 pages of meeting minutes were taken for the Board meetings in 2009. 899 resolutions were made both during the meetings and by examining files.

24. Prohibition of Transaction and Competition with the Company As per the article 32 of İşbank’s Articles of Incorporation; Board members cannot directly or indirectly do commercial business with the Bank for themselves or on behalf of others unless they take the consent of the General Assembly.

25. Ethical Rules For the aims to preserve stabilization and trust, to improve the service quality, to maintain society’s respect to banking business by preventing unfair competition in the banking sector, the banks, including İşbank, that constitute the Turkish banking sector, united under the “Banks Association of Turkey” and formed the “Code of Banking Ethics” for regulating ethical rules to be effective for the banks’ transactions between each other, with their customers, employees and other institutions. Banks Association of Turkey disclosed the aforementioned Code of Banking Ethics to public with a communiqué.

Within the same framework, the Association of Capital Market Intermediary Institutions of Turkey disclosed “Capital Markets Code of Profession” to public according to the resolution of General Assembly dated 13.12.2001 that contains rules for banks and other intermediary institutions to be applied in their business transactions and relations between each other, with their customers and employees in order to form a respectful society of the members of the profession. The aforementioned codes of ethics that describe the culture of behaviors within the organization have also been adopted by İşbank and shared with its employees through internal communication channels (intranet). On the other hand, İşbank has formed its policies and procedures on anti-money laundering and shared them with its employees through the intranet.

26. Number, Structure and Independency of the Committees Established within the Board The administrative and organizational structuring required by the Banking Law Nr. 5411 and related legislation, exists in İşbank.

The Audit Committee The Committee has two members and is chaired by Mr. Caner Çimenbiçer, Chairman of the Board of Directors. The other member of the Committee is Prof. Dr. Savaş Taşkent, who is also a member of the Board.

The Committee is responsible for holding meetings within the framework of the related regulation and is obliged to inform the Board of Directors about the results of its activities and the measures to be taken by the Bank, practices that are required and its opinions on other matters that are deemed to be significant for the Bank to conduct its business safely.

The Audit Committee is in charge of: • Ensuring that the internal systems of the Bank function efficiently and sufficiently, that these systems and the accounting and reporting systems operate within the framework of the related regulations and the Bank’s policies and that the information produced has integrity, • Carrying out the preliminary assessment of independent audit firms and companies providing rating, valuation and support services to be selected and monitoring the firms, that are appointed by the Board, on a regular basis, • Ensuring that the internal audit functions of subsidiaries that are subject to consolidation are coordinated in line with the related regulations, • Reporting, presenting opinions and making recommendations to the Board on the functions, operations and related policies and regulations of the internal systems and the divisions that are part of the internal systems, • Evaluating the information and reports received from the independent audit firms and the divisions, that are part of the internal systems, about their operations, • Ensuring that the Bank’s financial reports are prepared in line with the related legislation, regulations and standards, • If required, gathering information, documents or reports from all Bank units, support service contractors and independent auditors and being subject to Board approval, receiving consultancy from those who are specialists in their respective fields, • Fulfilling other responsibilities determined by the related legislations and the duties given by the Board within this framework, • Reporting to and informing the Board about the results of its own operations, the measures needed to be taken in order for the Bank’s operations to be within the framework of the related legislation and Bank policies in a continuous and secure way and its evaluation, opinion and recommendation on any other issues that are deemed to be important.

In 2009, Audit Committee held 32 meetings and adopted 37 resolutions. İşbank Annual Report 2009 86

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

Turkish Republic of Northern Cyprus (TRNC) Internal Systems Committee As per the resolution of the Board of Directors, dated 15.06.2009, Nr.35546, due to the branches in TRNC, TRNC Internal Systems Committee is established within the framework of TRNC Banking Law and related regulations. The committee has 2 members and is chaired by Mr. Caner Çimenbiçer, who is the Chairman of the Board of Directors. The other member of the committee is Prof. Dr. Savaş Taşkent, who is also a member of the Board. The Committee informs the Board of Directors on the results of its own activities, its opinion on the measures needed to be taken and the necessary practices to be implemented by the TRNC branches and other important issues in order for these branches to operate in a secure way.

TRNC Internal Systems Committee is responsible for ensuring the efficiency and sufficiency of the internal systems provided by the Bank in relation to the operation of the TRNC branches; ensuring the operation of the internal systems, accounting and reporting systems in line with the law and related regulations and ensuring the integrity of the produced information; carrying out the preliminary assessment of independent audit firms and other companies providing services directly related to other banking operations to be selected by the Board; and monitoring regularly and coordinating these companies that are selected and contracted by the Board.

In 2009, the TRNC Internal Systems Committee held 3 meetings and adopted 3 resolutions.

Credit Committee İşbank’s Credit Committee makes resolutions on credit allocation within its authorization limit; makes decisions on demands to change the credit allocation conditions within its authorization limit and carries out any assignments regarding credits, given by the Board.

İşbank’s Credit Committee consists of three members; one of them is the Chief Executive Officer, who is also the chairman of the Committee and two members of the Board. Each year, at the first Board meeting after the Annual General Meeting, the Board members of the Credit Committee are determined until the next General Meeting. Two alternate Committee Members are also designated who will stand if need arises. The Committee makes decision on the credit allocation with consensus, after each Committee Member examines and signs the files. Resolutions made by the Committee with consensus are applied directly; and resolutions made by the Committee unanimously are applied after the approval of the Board of Directors.

By the end of 2009, 130 files were evaluated under the authority of the Board.

The Credit Committee of January-March 2009 consisted of three members: Chief Executive Officer, H. Ersin Özince; Deputy Chairman of the Board of Directors, H. Fevzi Onat and Board Member, Füsun Tümsavaş, with two deputy members Chairman of the Board of Directors, Caner Çimenbiçer and Board Member, Tülin Aykın. The members of the current Credit Committee that was established after the Bank’s Annual General Meeting dated 31.03.2009 are permanent member, Chairman of the Committee and Chief Executive Officer, H. Ersin Özince, Deputy Chairman of the Board of Directors, H. Fevzi Onat and Board Member, Füsun Tümsavaş. Deputy members of the Credit Committee are Board members Tülin Aykın and Hasan Koçhan.

Committee Members Duty Primary Duty H. Ersin Özince Chairman of the Committee Chief Executive Officer and Board Member H. Fevzi Onat Member Deputy Chairman of the Board Füsun Tümsavaş Member Board Member

2009 January-March deputy members: Caner Çimenbiçer – Tülin Aykın 2009 April-December deputy members: Tülin Aykın – Hasan Koçhan

Credit Revision Committee Being one of the committees of the Board of Directors, the Credit Revision Committee was founded as per the article of Revision of Limits within the context of Credit Risk Policy, which came into effect by the resolution of the Board of Directors dated 30.09.2003 and nr 30249, within the framework of the policy of reviewing the loan portfolio, evaluating the relations with credit customers at the end of the year and revising, when necessary, the credit limits allocated to the said persons and corporations. Within this framework, as per the resolution of the Board dated 17.12.2008 and nr 35143, the Credit Revision Committee, consisting of Deputy Chairman of the Board, H. Fevzi Onat and Board Members Tülin Aykın, Füsun Tümsavaş and Hasan Koçhan, reviewed all firms and risk groups under the authority of the Board of Directors and Credit Committee and completed, within this context, limit revision examinations of 6,313 group or individual firms and 376 correspondent banks in two parts as on 03.03.2009 and on 09.06.2009.

As per the resolution of the Board of Directors dated 31.12.2009 and nr 36077, the current Credit Revision Committee, consisting of Deputy Chairman of the Board, H. Fevzi Onat and Board members Tülin Aykın, Füsun Tümsavaş and Hasan Koçhan, is responsible for determining the credit limits of the related firms and institutions for the year 2010.

Corporate Social Responsibility Committee The Corporate Social Responsibility Committee was established as per the Regulation on Social Responsibility Practice, which was adopted with the resolution of the Board, and its members are Board Members İsmet Atalay and Tülin Aykın, Deputy Chief Executives Özcan Türkakın and Hülya Altay and Head of the Corporate Communications Division Suat E. Sözen. The Committee operates in accordance with the Regulation principles, by considering the basic fields of contribution, which are determined as Education, Culture and Art, Health, Protection of the Environment and Other Activities. İşbank Annual Report 2009 87

Türkiye İş Bankası A.Ş. Corporate Governance Principles Compliance Report

In 2009, Corporate Social Responsibility Committee held 10 meetings and adopted 40 resolutions.

Risk Committee Risk Committee is responsible for formulating the risk management strategies and policies İşbank will adhere to both on a consolidated and unconsolidated basis, presenting them to the İşbank Board of Directors for approval, and monitoring compliance with them. Committee is the common communication platform with the Bank’s executive divisions in terms of assessing the risk the Bank is exposed, making suggestions about the precautions to be taken and methods to be followed. The Committee’s principal duties are the following:

• Prepare the risk strategies and policies, and present to the Board for approval. • Adjudicate by negotiating the issues addressed by Risk Management Division. • Recommend to the Board the level of risk limits for exposures, monitor the breach of limits and recommend to the Board regarding elimination of those breaches. • Recommend to the Board changes in risk policies if diverse circumstances require. • Monitor risk identification, definition, measurement, assessment, and management processes carried out by Risk Management Division. • Monitor accuracy and reliability concerning the risk measurement methodologies and their results.

Committee Members:

• H. Fevzi Onat: Deputy Chairman and Member of Board of Directors • H. Ersin Özince: CEO, Head of Credit Committee • Aykut Demiray: Deputy Chief Executive, Head of Asset & Liability Management Committee • Suat İnce: Deputy Chief Executive • Rıza İhsan Kutlusoy: Head of Risk Management Division

Risk Committee is chaired by H. Fevzi Onat.

Risk Committee contributes to the configuration of Group risk policies also through consolidated group meetings. In the activities that the Risk Committee carries out on a consolidated basis,

• Özcan Türkakın, Deputy Chief Executive • Burhanettin Kantar, Head of Equity Participations Division also attend the meetings.

In 2009, the Risk Committee met a total of 12 times 4 of which were on a consolidated basis. In addition to the risk management evaluations of İşbank and its participations under consolidation, 12 risk management reports were submitted to the Committee and 15 resolutions were adopted.

27. The Remuneration of the Board of Directors Monthly remunerations of the Board members and auditors are determined annually at İşbank’s General Shareholders’ Meetings and disclosed to the Istanbul Stock Exchange.

On the other hand, restrictions related with the loans to be extended by İşbank to the Board members are defined in Article 50 of the Banking Law and İşbank complies with the requirements of the related legislation. In this context, İşbank does not extend loans to its Board members other than those allowed by the law.

As for the remuneration of the Board of Directors; article 58 of İşbank’s Articles of Incorporation contains the following expression: “After the legal and extraordinary reserves fund and the first dividend have been allocated from the net profit, 0.25% of the remaining balance is distributed among the members of the Board of Directors and the Chief Executive Officer equally.” Within the context of this regulation, financial rights of the Board members are determined with an approach that is sensitive to the financial performance and profitability of İşbank to a large extent. İşbank Annual Report 2009 88

Financial Information and Assessment on Risk Management

89 Audit Committee’s Assessments on the Operation of Internal Control, Internal Audit and Risk Management Systems, and Their Activities in the Reported Period 91 Independent Auditors’ Report 92 Unconsolidated Financial Statements 102 Financial Highlights and Key Ratios for the Five Years Period Including the Reported Period 103 Explanations on İşbank’s Financial Condition, Profitability and Solvency 105 Information on Risk Management Policies Applied per Risk Types 107 İşbank’s Credit Ratings 108 The Unconsolidated Year End Financial Report as of December 31, 2009 168 Information to Shareholders İşbank Annual Report 2009 89

Türkiye İş Bankası A.Ş. Audit Committee’s Assessments on the Operation of Internal Control, Internal Audit and Risk Management Systems, and Their Activities in the Reported Period

Internal Audit The İşbank Board of Inspectors reports to the Board of Directors via Audit Committee and is responsible for the auditing functions. The İşbank Board of Inspectors audits the activities of the Bank’s head office units (including internal control, risk management and compliance units), domestic and foreign branches and the companies under its control, in accordance with the Bank’s mission, strategies and policies, as well as relevant laws and regulations. In this context, it carries out preparatory inquiries, fraud examinations and investigations when necessary. Having been certified to be in conformance with the international quality standards, the İşbank Board of Inspectors combines the Board’s deep-rooted audit traditions with advanced technology in a modern, risk- focused approach to auditing in the performance of its duties, with its 186 inspectors and assistant inspectors. The board’s auditing functions are carried out by on-site inspections as well as remotely by making use of the Bank’s data processing infrastructure.

Depending on their content and priority, the reports of the results of the board’s inspections are classified and submitted to the Board of Directors,the Audit Committee, the senior management and related Head Office units. The measures taken related to identified issues are monitored by the Board of Inspectors.

During 2009, The Board undertook 360 branch, 2 head office unit and 4 subsidiary company and 3 process audits. In addition to their audit-related activities, members of the İşbank Board of Inspectors also undertake duties on major projects that the Bank is involved in.

With the help of the risk focused audit plan, The Board could audit a considerable portion of İşbank’s entire credit portfolio in 2009. The remote auditing activities of the Board has enabled the Bank to monitor the major risks especially in loans, accounts and human resources applications regularly and given the Bank the ability to counteract before the risks grow further.

Internal Control The Bank’s internal control system is structured in order to make it possible for all financial and operational risks identified as being related to the Bank’s activities, to be kept continuously under control and at reasonable levels. Activity-related procedures, work-flows, duties, authorities, and limits are set down in writing and announced to all personnel and they are continuously reviewed and updated in line with changing requirements, risks, and conditions.

Activity-related work-flows incorporate all of the necessary and appropriate controls capable of responding to the particular risks of that activity. Activity-based functional duties, transaction conducts and approval authorities and limits, systemic controls, post-transaction controls, and other processing related controls all work together to ensure that the Bank’s activities and transactions are continuously carried out effectively, correctly, systematically, and securely. This activity and internal control structure play a determining role also on the reliability, effectiveness and efficiency of the operations, processes and controls in the background of financial reporting.

The Internal Control Division, which operates under the direction of and reports to the Board of Directors, is responsible for ensuring that the risks associated with the Bank’s activities are kept under control in a sound, strong and effective internal control structure that is also functioning in compliance with the related laws, regulations and international standards. The Division is also responsible for examining, controlling, monitoring and evaluating the appropriateness, sufficiency and effectiveness of the controls regarding the Bank’s activities and reporting the results to the parties concerned.

By means of risk-focused analysis and controls performed in the Bank’s head office units and branches, it is ensured that the Bank’s internal control system operates regularly, effectively, and reliably so that the activities can be conducted effectively, efficiently and the findings can be reported reliably to the related parties.

The control, evaluation and reporting facilities related to internal control system of our subsidiaries, subject to financial consolidation, have also been taken into the range of our Bank’s internal control activities. An Internal Control Assessment and Reporting Model is being used for the subsidiaries, that is developed based on the COSO Internal Control Assessment Model, and this model provides the system of evaluating the internal control system within the related organization and periodically reporting to the Internal Control Division of the Bank.

The findings, opinions, and recommendations resulting from internal control activities are shared at first with those performing the activities and evaluated with them. This makes it possible for complementary and preventive measures to be quickly identified and put into effect while also allowing adequate and practicable solutions for improving processes and activities to be implemented. All of these proceedings are continuously and closely monitored while evaluated by those responsible for the conduct of the activities as well as by internal control personnel.

The results of all these internal control activities are periodically reviewed and assessed by the Bank’s Audit Committee and by the Board of Directors.

In Türkiye İş Bankası A.Ş. information and communication mechanisms function efficiently and effectively. In addition, activities and control processes are monitored and assessed continuously and regularly.

On the basis of aforementioned statements, it is concluded that the Türkiye İş Bankası A.Ş. Internal Control System is risk-focused, strong, and healthy at every level regarding its structure and functioning. Besides, it is functioning productively and effectively in line with the Bank’s goals and objectives. İşbank Annual Report 2009 90

Türkiye İş Bankası A.Ş. Audit Committee’s Assessments on the Operation of Internal Control, Internal Audit and Risk Management Systems, and Their Activities in the Reported Period

Compliance Compliance is the foremost duty and responsibility of all managers and employees of the Bank at any level. The coordination of functions and activities regarding compliance executed in the Head Office Divisions and Branches of the Bank is managed through the corporate compliance activities conducted within the Corporate Compliance Division, which reports to the Board of Directors.

Corporate Compliance Division operates with the purpose to provide maximum contribution in order to manage the compliance risk and control this risk in an appropriate and efficient manner and in this regard to execute and manage the activities of the Bank continuously in compliance with the relevant laws, regulations and standards.

The necessary researching, analyzing, monitoring, assessing, informing, conducting, coordinating and reporting activities regarding compliance issues are conducted within the Corporate Compliance Division, which consists of three sub-units, namely, Regulatory Compliance, Banking Activities Compliance and Anti-Money Laundering Compliance.

The duties and responsibilities of the Compliance Officer as stated in the Prevention of Laundering Proceeds of Crime Law and other related regulations in effect are fulfilled by the Head of Corporate Compliance Division, who is the legal “Compliance Officer” of the Bank as well. The activities regarding the prevention of laundering proceeds of crime and finance of terror in our Bank are executed in an express and efficient manner within the context of related legislations and the Bank’s Policy and the Compliance Program, which have been prepared in accordance with these legislations.

Bank’s Compliance and Compliance Risk Management Policy and Policy for the Prevention of Laundering of Criminal Proceeds and Terrorism Financing are stated in “Investor Relations / Corporate Governance” link at our Bank’s website www.isbank.com.tr in English and Turkish.

The results of the activities regarding compliance are also regularly monitored and evaluated by the senior management and the Board of the Bank.

Risk Management Besides banking activities, both financial and non-financial risks encompassing the whole group are required to be analyzed, monitored and reported from the standpoint of group risk management in addition to that of banking-specific risk management principles. This aspect of risk management, beyond being a regulatory reporting requirement has become an industry standard for corporate governance.

The risk management process, organized within the framework of advanced risk management methodologies and favors a common risk management culture throughout the establishment, is structured to emphasize good corporate governance, assuring independency of units responsible for monitoring and controlling risk from executive functions, so that risk definition, measurement, analysis, monitoring, reporting, and control functions are carried out within the same framework.

A general assessment of risk by categories suggests that the most significant risk Bank was exposed in 2009 was credit risk, just as was also the case in 2008. This was followed by market risk, especially interest rate risk. In 2009, capital allocation was done for nonfinancial operational risk according to framed policy beside financial risk.

The process of risk management and the functions involved in that process are among the highest-priority responsibilities of the İşbank Board of Directors. Acting through the Risk Committee that is under the authority of the Board of Directors, the Bank Credit Committee and together with the Risk Management Division in its capacity as a functional component of risk management are engaged in efforts to bring the Bank into compliance with Basel II capital adequacy rules.

Sub-committees of Risk Management Division are Asset-Liability Management Risk Unit, Credit Risk and Economical Capital Unit, Operational Risk, Model Validation and Subsidiary Risk Unit.

Prof. Dr. Savaş Taşkent Caner Çimenbiçer Board Member and Chairman of the Board Audit Committee Member and Audit Committee İşbank Annual Report 2009 91

Türkiye İş Bankası A.Ş. Independent Auditors’ Report

To the Board of Directors of Türkiye İş Bankası A.Ş. İstanbul

TÜRKİYE İŞ BANKASI A.Ş.

INDEPENDENT AUDITORS’ REPORT FOR THE PERIOD 1 JANUARY 2009 – 31 DECEMBER 2009

1. We have audited the accompanying balance sheet of Türkiye İş Bankası A.Ş. (“the Bank”) as at 31 December 2009, and the related statements of income, cash flows and changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements 2. The Board of Directors of the Bank is responsible for the preparation and fair presentation of the financial statements in accordance with the regulation on “Procedures And Principles Regarding Banks’ Accounting Practices And Maintaining Documents” published in the Official Gazette dated 1 November 2006 and numbered 26333 and Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and other regulations, circulars, communiqués and pronouncements in respect of accounting and financial reporting made by Banking Regulation and Supervision Agency (“BRSA”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the regulation on “Licensing and Operations of Audit Firms in Banking” published in the Official Gazette no: 26333 on 1 November 2006 and the International Standards on Auditing. We planned and performed our audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the consideration of the effectiveness of internal control and appropriateness of accounting policies applied relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4. As of the balance sheet date, the accompanying financial statements include TL 950,000 Thousand of free provision allocated by the Bank management for the purpose of the conservatism principle considering the potential circumstances which may arise from any changes in the economy or market conditions and net TL 130,000 Thousand of such provision has been charged to the current period income statement as an expense.

Independent Auditors’ Opinion 5. In our opinion, except for such adjustments as may be necessary in respect of the matter set out in paragraph 4 above, the accompanying financial statements present fairly, in all material respects, the financial position of Türkiye İş Bankası A.Ş. as at 31 December 2009 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as per the Article 37 of the Banking Act No: 5411 and other regulations, communiques and circulars in respect of accounting and financial reporting and pronouncements made by BRSA.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU

Sibel Türker Partner

İstanbul, 15 February 2010

Additional paragraph for the English translation: (The effect of the differences between the accounting principles applied in the accompanying financial statements and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank’s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS.) İşbank Annual Report 2009 92

Türkiye İş Bankası A.Ş. Unconsolidated Balance Sheet

TL THOUSAND CURRENT PERIOD PRIOR PERIOD ASSETS (31/12/2009) (31/12/2008) Note TL FC Total TL FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK V-I-1 5,793,452 2,966,521 8,759,973 8,930,930 2,905,891 11,836,821 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) V-I-2 406,452 92,554 499,006 328,053 123,825 451,878 2.1 Financial Assets Held for Trading 406,452 92,554 499,006 328,053 123,825 451,878 2.1.1 Government Debt Securities 376,462 3,117 379,579 264,769 3,823 268,592 2.1.2 Share Certificates 63 0 63 91 0 91 2.1.3 Derivative Financial Assets Held for Trading 29,927 89,437 119,364 63,169 120,002 183,171 2.1.4 Other Marketable Securities 0 0 0 24 0 24 2.2 Financial Assets at Fair Value Through Profit and Loss 0 0 0 0 0 0 2.2.1 Government Debt Securities 0 0 0 0 0 0 2.2.2 Share Certificates 0 0 0 0 0 0 2.2.3 Loans 0 0 0 0 0 0 2.2.4 Other Marketable Securities 0 0 0 0 0 0 III. BANKS V-I-3 201,621 8,230,943 8,432,564 218,335 6,569,813 6,788,148 IV. MONEY MARKET PLACEMENTS 0 0 0 0 0 0 4.1 Interbank Money Market Placements 0 0 0 0 0 0 4.2 Istanbul Stock Exchange Money Market Placements 0 0 0 0 0 0 4.3 Receivables from Reverse Repurchase Agreements 0 0 0 0 0 0 V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) V-I-4 15,416,637 10,563,984 25,980,621 8,605,962 12,644,495 21,250,457 5.1 Share Certificates 12,622 0 12,622 10,622 0 10,622 5.2 Government Debt Securities 15,404,015 8,290,340 23,694,355 8,595,340 10,313,447 18,908,787 5.3 Other Marketable Securities 0 2,273,644 2,273,644 0 2,331,048 2,331,048 VI. LOANS AND RECEIVABLES V-I-5 34,435,319 13,899,467 48,334,786 32,791,807 14,818,525 47,610,332 6.1 Loans and Receivables 34,435,319 13,899,467 48,334,786 32,791,807 14,818,525 47,610,332 6.1.1 Loans to the Bank’s Risk Group 165,212 441,480 606,692 110,555 536,446 647,001 6.1.2 Government Debt Securities 0 0 0 0 0 0 6.1.3 Other 34,270,107 13,457,987 47,728,094 32,681,252 14,282,079 46,963,331 6.2 Non-Performing Loans 2,714,836 53,360 2,768,196 2,143,081 52,412 2,195,493 6.3 Specific Provisions (-) 2,714,836 53,360 2,768,196 2,143,081 52,412 2,195,493 VII. FACTORING RECEIVABLES 0 0 0 0 0 0 VIII. INVESTMENTS HELD TO MATURITY (Net) V-I-6 11,603,314 1,326,140 12,929,454 3,452,201 9,653 3,461,854 8.1 Government Debt Securities 11,597,684 0 11,597,684 3,447,236 0 3,447,236 8.2 Other Marketable Securities 5,630 1,326,140 1,331,770 4,965 9,653 14,618 IX. INVESTMENTS IN ASSOCIATES (Net) V-I-7 743,262 0 743,262 743,262 0 743,262 9.1 Associates Accounted for Using the Equity Method 0 0 0 0 0 0 9.2 Unconsolidated Associates 743,262 0 743,262 743,262 0 743,262 9.2.1 Financial Investments 88,314 0 88,314 88,314 0 88,314 9.2.2 Non-Financial Investments 654,948 0 654,948 654,948 0 654,948 X. INVESTMENTS IN SUBSIDIARIES (Net) V-I-8 4,246,075 41,742 4,287,817 2,310,503 41,742 2,352,245 10.1 Unconsolidated Financial Subsidiaries 2,302,259 41,742 2,344,001 1,020,414 41,742 1,062,156 10.2 Unconsolidated Non-Financial Subsidiaries 1,943,816 0 1,943,816 1,290,089 0 1,290,089 XI. JOINTLY CONTROLLED ENTITIES (JOINT VENTURES) (Net) V-I-9 0 0 0 0 0 0 11.1 Jointly Controlled Entities Accounted for Using the Equity Method 0 0 0 0 0 0 11.2 Unconsolidated Jointly Controlled Entities 0 0 0 0 0 0 11.2.1 Jointly Controlled Financial Entities 0 0 0 0 0 0 11.2.2 Jointly Controlled Non-Financial Entities 0 0 0 0 0 0 XII. LEASE RECEIVABLES V-I-10 0 0 0 0 0 0 12.1 Finance Lease Receivables 0 0 0 0 0 0 12.2 Operating Lease Receivables 0 0 0 0 0 0 12.3 Other 0 0 0 0 0 0 12.4 Unearned Income (-) 0 0 0 0 0 0 XIII. DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES V-I-11 0 0 0 0 0 0 13.1 Fair Value Hedging 0 0 0 0 0 0 13.2 Cash Flow Hedging 0 0 0 0 0 0 13.3 Net Foreign Investment Hedging 0 0 0 0 0 0 XIV. TANGIBLE ASSETS (Net) V-I-12 1,859,390 2,602 1,861,992 1,875,794 2,678 1,878,472 XV. INTANGIBLE ASSETS (Net) V-I-13 32,754 0 32,754 56,674 0 56,674 15.1 Goodwill 0 0 0 0 0 0 15.2 Other 32,754 0 32,754 56,674 0 56,674 XVI. INVESTMENT PROPERTY (Net) V-I-14 0 0 0 0 0 0 XVII. TAX ASSETS V-I-15 510,519 0 510,519 340,289 0 340,289 17.1 Current Tax Asset 0 0 0 0 0 0 17.2 Deferred Tax Asset 510,519 0 510,519 340,289 0 340,289 XVIII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-16 27,273 0 27,273 17,674 0 17,674 18.1 Held for Sale 27,273 0 27,273 17,674 0 17,674 18.2 Discontinued Operations 0 0 0 0 0 0 XIX. OTHER ASSETS V-I-17 477,169 346,114 823,283 502,964 260,852 763,816

TOTAL ASSETS 75,753,237 37,470,067 113,223,304 60,174,448 37,377,474 97,551,922 İşbank Annual Report 2009 93

Türkiye İş Bankası A.Ş. Unconsolidated Balance Sheet

TL THOUSAND CURRENT PERIOD PRIOR PERIOD LIABILITIES (31/12/2009) (31/12/2008) Note TL FC Total TL FC Total I. DEPOSITS V-II-1 44,671,672 27,505,391 72,177,063 40,390,875 23,148,310 63,539,185 1.1 Deposits from the Bank’s Risk Group 1,374,938 1,258,858 2,633,796 1,470,843 694,868 2,165,711 1.2 Other 43,296,734 26,246,533 69,543,267 38,920,032 22,453,442 61,373,474 II. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING V-II-2 325,302 161,520 486,822 358,623 159,542 518,165 III. FUNDS BORROWED V-II-3 2,395,190 7,348,669 9,743,859 2,774,574 8,258,663 11,033,237 IV. MONEY MARKET FUNDS 6,384,073 4,599,805 10,983,878 3,936,950 3,069,606 7,006,556 4.1 Interbank Money Market Funds 0 0 0 0 0 0 4.2 Istanbul Stock Exchange Money Market Funds 0 0 0 0 0 0 4.3 Funds Provided Under Repurchase Agreements 6,384,073 4,599,805 10,983,878 3,936,950 3,069,606 7,006,556 V. MARKETABLE SECURITIES ISSUED (Net) 0 0 0 0 0 0 5.1 Bills 0 0 0 0 0 0 5.2 Asset-backed Securities 0 0 0 0 0 0 5.3 Bonds 0 0 0 0 0 0 VI. FUNDS 0 0 0 0 0 0 6.1 Borrower Funds 0 0 0 0 0 0 6.2 Other 0 0 0 0 0 0 VII. SUNDRY CREDITORS 1,776,575 160,958 1,937,533 1,439,870 168,455 1,608,325 VIII. OTHER LIABILITIES V-II-4 420,971 166,575 587,546 350,005 639,141 989,146 IX. FACTORING PAYABLES 0 0 0 0 0 0 X. LEASE PAYABLES (Net) V-II-5 0 18,014 18,014 14 53,451 53,465 10.1 Finance Lease Payables 2 19,493 19,495 17 58,995 59,012 10.2 Operating Lease Payables 0 0 0 0 0 0 10.3 Other 0 0 0 0 0 0 10.4 Deferred Finance Lease Expenses (-) 2 1,479 1,481 3 5,544 5,547 XI. DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES V-II-6 0 0 0 0 0 0 11.1 Fair Value Hedging 0 0 0 0 0 0 11.2 Cash Flow Hedging 0 0 0 0 0 0 11.3 Net Foreign Investment Hedging 0 0 0 0 0 0 XII. PROVISIONS V-II-7 3,478,059 15,743 3,493,802 2,996,582 102,950 3,099,532 12.1 General Loan Loss Provision 504,551 0 504,551 465,232 357 465,589 12.2 Provision for Restructuring 0 0 0 0 0 0 12.3 Reserves for Employee Benefits 165,580 0 165,580 150,600 0 150,600 12.4 Insurance Technical Reserves (Net) 0 0 0 0 0 0 12.5 Other Provisions 2,807,928 15,743 2,823,671 2,380,750 102,593 2,483,343 XIII. TAX LIABILITY V-II-8 301,097 162 301,259 255,097 203 255,300 13.1 Current Tax Liability 301,097 162 301,259 255,097 203 255,300 13.2 Deferred Tax Liability 0 0 0 0 0 0 XIV. PAYABLES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS V-II-9 0 0 0 0 0 0 14.1 Held for Sale 0 0 0 0 0 0 14.2 Discontinued Operations 0 0 0 0 0 0 XV. SUBORDINATED LOANS V-II-10 0 0 0 0 0 0 XVI. SHAREHOLDERS’ EQUITY V-II-11 13,457,393 36,135 13,493,528 9,431,405 17,606 9,449,011 16.1 Paid-in Capital 3,079,639 0 3,079,639 2,756,585 0 2,756,585 16.2 Capital Reserves 3,271,389 36,135 3,307,524 1,341,430 17,606 1,359,036 16.2.1 Share premium 3,694 0 3,694 3,694 0 3,694 16.2.2 Share Cancellation Profits 0 0 0 0 0 0 16.2.3 Marketable Securities Revaluation Reserve 1,288,821 36,135 1,324,956 -639,755 17,606 -622,149 16.2.4 Tangible Assets Revaluation Reserve 0 0 0 0 0 0 16.2.5 Intangible Assets Revaluation Reserve 0 0 0 0 0 0 16.2.6 Investment Property Revaluation Reserve 0 0 0 0 0 0 16.2.7 Bonus Shares Obtained from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 1,383 0 1,383 0 0 0 16.2.8 Hedging Funds (Effective Portion) 0 0 0 0 0 0 16.2.9 Accumulated Revaluation Reserves on Assets Held for Sale and Discontinued Operations 0 0 0 0 0 0 16.2.10 Other Capital Reserves 1,977,491 0 1,977,491 1,977,491 0 1,977,491 16.3 Profit Reserves 4,733,958 0 4,733,958 3,823,982 0 3,823,982 16.3.1 Legal Reserves 1,274,405 0 1,274,405 1,154,745 0 1,154,745 16.3.2 Statutory Reserves 0 0 0 0 0 0 16.3.3 Extraordinary Reserves 3,468,758 0 3,468,758 2,675,926 0 2,675,926 16.3.4 Other Profit Reserves -9,205 0 -9,205 -6,689 0 -6,689 16.4 Profit or Loss 2,372,407 0 2,372,407 1,509,408 0 1,509,408 16.4.1 Prior Years’ Profit/Loss 0 0 0 0 0 0 16.4.2 Current Year Profit/Loss 2,372,407 0 2,372,407 1,509,408 0 1,509,408

TOTAL LIABILITIES AND EQUITY 73,210,332 40,012,972 113,223,304 61,933,995 35,617,927 97,551,922 İşbank Annual Report 2009 94

Türkiye İş Bankası A.Ş. Unconsolidated Off-Balance Sheet Commitments

TL THOUSAND CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008) Note TL FC Total TL FC Total A. OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III) 38,662,350 30,893,921 69,556,271 27,511,946 18,599,755 46,111,701 I. GUARANTEES AND SURETYSHIPS V-III 5,059,671 7,441,602 12,501,273 3,948,290 7,763,886 11,712,176 1.1. Letters of Guarantee 5,005,625 4,559,696 9,565,321 3,946,819 4,100,395 8,047,214 1.1.1. Guarantees Subject to State Tender Law 386,021 670,598 1,056,619 304,266 515,910 820,176 1.1.2. Guarantees Given for Foreign Trade Operations 307,059 755,296 1,062,355 389,095 887,518 1,276,613 1.1.3. Other Letters of Guarantee 4,312,545 3,133,802 7,446,347 3,253,458 2,696,967 5,950,425 1.2. Bank Loans 2,997 148,198 151,195 1,020 129,696 130,716 1.2.1. Import Letters of Acceptance 0 110,744 110,744 0 109,595 109,595 1.2.2. Other Bank Acceptances 2,997 37,454 40,451 1,020 20,101 21,121 1.3. Letters of Credit 0 2,575,767 2,575,767 0 3,457,163 3,457,163 1.3.1. Documentary Letters of Credit 0 1,674,671 1,674,671 0 2,449,629 2,449,629 1.3.2. Other Letters of Credit 0 901,096 901,096 0 1,007,534 1,007,534 1.4. Prefinancing Given as Guarantee 0 0 0 0 0 0 1.5. Endorsements 0 41,538 41,538 0 0 0 1.5.1. Endorsements to the Central Bank of Turkey 0 41,538 41,538 0 0 0 1.5.2. Other Endorsements 0 0 0 0 0 0 1.6. Purchase Guarantees for Securities Issued 0 0 0 0 0 0 1.7. Factoring Guarantees 0 0 0 0 0 0 1.8. Other Guarantees 51,049 116,403 167,452 451 76,632 77,083 1.9. Other Suretyships 0 0 0 0 0 0 II. COMMITMENTS 26,213,192 10,863,202 37,076,394 15,709,204 3,176,721 18,885,925 2.1. Irrevocable Commitments 26,213,192 10,863,202 37,076,394 15,709,204 3,176,721 18,885,925 2.1.1. Forward Asset Purchase Commitments 15,882 101,562 117,444 0 0 0 2.1.2. Forward Deposit Purchase and Sale Commitments 0 0 0 0 0 0 2.1.3. Capital Commitment for Affiliates 2,000 0 2,000 0 0 0 2.1.4. Loan Granting Commitments 3,530,717 850,729 4,381,446 3,067,697 1,716,328 4,784,025 2.1.5. Securities Underwriting Commitments 0 0 0 0 0 0 2.1.6. Commitments for Reserve Deposit Requirements 6,853,863 8,077,031 14,930,894 0 0 0 2.1.7. Commitments for Check Payments 3,978,131 0 3,978,131 2,042,966 0 2,042,966 2.1.8. Tax and Fund Liabilities from Export Commitments 22,852 0 22,852 0 0 0 2.1.9. Commitments for Credit Card Expenditure Limits 11,278,482 513,700 11,792,182 10,442,811 427,529 10,870,340 2.1.10. Commitments for Credit Cards and Banking Services Promotions 34,041 0 34,041 19,862 0 19,862 2.1.11. Receivables from Short Sale Commitments 0 0 0 0 0 0 2.1.12. Payables for Short Sale Commitments 0 0 0 0 0 0 2.1.13. Other Irrevocable Commitments 497,224 1,320,180 1,817,404 135,868 1,032,864 1,168,732 2.2. Revocable Commitments 0 0 0 0 0 0 2.2.1. Revocable Loan Granting Commitments 0 0 0 0 0 0 2.2.2. Other Revocable Commitments 0 0 0 0 0 0 III. DERIVATIVE FINANCIAL INSTRUMENTS 7,389,487 12,589,117 19,978,604 7,854,452 7,659,148 15,513,600 3.1. Derivative Financial Instruments for Hedging Purposes 0 0 0 0 0 0 3.1.1. Fair Value Hedges 0 0 0 0 0 0 3.1.2. Cash Flow Hedges 0 0 0 0 0 0 3.1.3 Net Foreign Investment Hedges 0 0 0 0 0 0 3.2. Derivative Financial Instruments Held for Trading 7,389,487 12,589,117 19,978,604 7,854,452 7,659,148 15,513,600 3.2.1. Forward Foreign Currency Buy/Sell Transactions 712,940 1,963,753 2,676,693 2,652,631 3,260,727 5,913,358 3.2.1.1. Forward Foreign Currency Buy Transactions 346,520 992,270 1,338,790 2,451,269 420,011 2,871,280 3.2.1.2. Forward Foreign Currency Sell Transactions 366,420 971,483 1,337,903 201,362 2,840,716 3,042,078 3.2.2. Currency and Interest Rate Swaps 5,338,957 8,457,266 13,796,223 2,515,066 1,664,262 4,179,328 3.2.2.1. Currency Swap Buy Transactions 5,598 2,099,026 2,104,624 183,075 755,848 938,923 3.2.2.2. Currency Swap Sell Transactions 1,813,359 271,020 2,084,379 31,991 908,414 940,405 3.2.2.3. Interest Rate Swap Buy Transactions 1,760,000 3,043,610 4,803,610 1,150,000 0 1,150,000 3.2.2.4. Interest Rate Swap Sell Transactions 1,760,000 3,043,610 4,803,610 1,150,000 0 1,150,000 3.2.3. Currency, Interest Rate and Security Options 1,337,590 2,151,876 3,489,466 2,192,250 2,165,099 4,357,349 3.2.3.1. Currency Call Options 1,064,795 276,998 1,341,793 1,523,050 615,200 2,138,250 3.2.3.2. Currency Put Options 272,795 1,021,998 1,294,793 669,200 1,505,702 2,174,902 3.2.3.3. Interest Rate Call Options 0 426,440 426,440 0 0 0 3.2.3.4. Interest Rate Put Options 0 426,440 426,440 0 0 0 3.2.3.5. Securities Call Options 0 0 0 0 44,197 44,197 3.2.3.6. Securities Put Options 0 0 0 0 0 0 3.2.4. Currency Futures 0 0 0 0 0 0 3.2.4.1. Currency Buy Futures 0 0 0 0 0 0 3.2.4.2. Currency Sell Futures 0 0 0 0 0 0 3.2.5. Interest Rate Futures 0 0 0 0 0 0 3.2.5.1. Interest Rate Buy Futures 0 0 0 0 0 0 3.2.5.2. Interest Rate Sell Futures 0 0 0 0 0 0 3.2.6. Other 0 16,222 16,222 494,505 569,060 1,063,565 İşbank Annual Report 2009 95

Türkiye İş Bankası A.Ş. Unconsolidated Off-Balance Sheet Commitments

TL THOUSAND CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008) TL FC Total TL FC Total B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 79,399,361 17,551,927 96,951,288 78,600,493 15,595,336 94,195,829 IV. ITEMS HELD IN CUSTODY 25,628,164 4,152,807 29,780,971 37,687,474 4,162,797 41,850,271 4.1. Assets under management 0 0 0 0 0 0 4.2. Investment securities held in custody 17,661,904 25,134 17,687,038 30,232,311 1,310,032 31,542,343 4.3. Checks received for collection 4,685,274 626,262 5,311,536 4,515,125 459,789 4,974,914 4.4. Commercial notes received for collection 1,932,760 1,932,235 3,864,995 1,664,748 2,192,157 3,856,905 4.5. Other assets received for collection 2,783 9,948 12,731 0 16,378 16,378 4.6. Assets received for public offering 68,166 0 68,166 68,166 0 68,166 4.7. Other items under custody 1,272,488 1,559,228 2,831,716 1,202,231 184,441 1,386,672 4.8. Custodians 4,789 0 4,789 4,893 0 4,893 V. PLEDGED ITEMS 53,771,197 13,399,120 67,170,317 40,913,019 11,432,539 52,345,558 5.1. Marketable securities 398,252 0 398,252 355,238 0 355,238 5.2. Guarantee notes 2,325,311 3,824,984 6,150,295 1,039,167 3,409,485 4,448,652 5.3. Commodity 10,391,911 31,588 10,423,499 6,243,206 0 6,243,206 5.4. Warranty 0 0 0 0 0 0 5.5. Real Estates 40,261,229 9,416,568 49,677,797 33,180,723 7,941,519 41,122,242 5.6. Other pledged items 394,494 76,804 471,298 94,685 81,535 176,220 5.7. Pledged items-depository 0 49,176 49,176 0 0 0 VI. ACCEPTED BILL GUARANTEES AND SURETIES 0 0 0 0 0 0

TOTAL OFF-BALANCE SHEET ACCOUNTS (A+B) 118,061,711 48,445,848 166,507,559 106,112,439 34,195,091 140,307,530 İşbank Annual Report 2009 96

Türkiye İş Bankası A.Ş. Unconsolidated Income Statement

TL THOUSAND CURRENT PERIOD PRIOR PERIOD INCOME STATEMENT Note 01/01-31/12/2009) 01/01-31/12/2008) I. INTEREST INCOME V-IV-1 10,200,437 10,596,147 1.1 Interest Income on Loans 6,764,725 6,785,345 1.2 Interest Received from Reserve Deposits 180,606 297,729 1.3 Interest Received from Banks 93,727 260,123 1.4 Interest Received from Money Market Placements 86,809 26,901 1.5 Interest Received from Marketable Securities Portfolio 3,017,404 3,175,427 1.5.1 Financial Assets Held for Trading 69,553 55,825 1.5.2 Financial Assets at Fair Value Through Profit and Loss 0 0 1.5.3 Financial Assets Available for Sale 1,955,896 2,614,843 1.5.4 Investments Held to Maturity 991,955 504,759 1.6 Finance Lease Income 0 0 1.7 Other Interest Income 57,166 50,622 II. INTEREST EXPENSE V-IV-2 5,332,949 6,977,852 2.1 Interest on Deposits 4,567,578 5,501,616 2.2 Interest on Funds Borrowed 586,219 768,714 2.3 Interest on Money Market Funds 166,190 669,183 2.4 Interest on Securities Issued 0 0 2.5 Other Interest Expense 12,962 38,339 III. NET INTEREST INCOME/EXPENSE (I - II) 4,867,488 3,618,295 IV. NET FEES AND COMMISSIONS INCOME/EXPENSE 1,252,604 1,204,214 4.1 Fees and Commissions Received 1,354,749 1,314,780 4.1.1 Non-cash Loans 111,549 88,101 4.1.2 Other 1,243,200 1,226,679 4.2 Fees and Commissions Paid 102,145 110,566 4.2.1 Non-cash Loans 774 65 4.2.2 Other 101,371 110,501 V. DIVIDEND INCOME V-IV-3 325,037 284,846 VI. TRADING INCOME (NET) V-IV-4 408,373 472,650 6.1 Gains/Losses on Securities Trading 424,298 -20,454 6.2 Derivative Financial Transactions Gains/Losses 340,394 -441,477 6.3 Foreign Exchange Gains/Losses -356,319 934,581 VII. OTHER OPERATING INCOME V-IV-5 1,073,275 651,536 VIII. TOTAL OPERATING INCOME/EXPENSE (III+IV+V+VI+VII) 7,926,777 6,231,541 IX. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES (-) V-IV-6 2,286,474 1,613,989 X. OTHER OPERATING EXPENSES (-) V-IV-7 2,694,687 2,819,538 XI. NET OPERATING INCOME (VIII-IX-X) 2,945,616 1,798,014 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER 0 0 XIII. PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD 0 0 XIV. NET MONETARY POSITION GAIN/LOSS 0 0 XV. PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XI+…+XIV) V-IV-8 2,945,616 1,798,014 XVI. TAX PROVISION FOR CONTINUING OPERATIONS (±) V-IV-9 573,209 288,606 16.1 Current Tax Provision 783,467 385,259 16.2 Deferred Tax Provision -210,258 -96,653 XVII. NET PERIOD PROFIT/LOSS FROM CONTINUING OPERATIONS (XV±XVI) V-IV-10 2,372,407 1,509,408 XVIII. INCOME ON DISCONTINUED OPERATIONS 0 0 18.1 Income on Assets Held for Sale 0 0 18.2 Gain on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 0 0 18.3 Other Income on Discontinued Operations 0 0 XIX. EXPENSE ON DISCONTINUED OPERATIONS (-) 0 0 19.1 Expense on Assets Held for Sale 0 0 19.2 Loss on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 0 0 19.3 Other Expense on Discontinued Operations 0 0 XX. PROFIT/LOSS ON DISCONTINUED OPERATIONS BEFORE TAX (XVIII-XIX) V-IV-8 0 0 XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) V-IV-9 0 0 21.1 Current Tax Provision 0 0 21.2 Deferred Tax Provision 0 0 XXII. NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) V-IV-10 0 0 XXIII. NET PERIOD PROFIT/LOSS (XVII+XXII) V-IV-11 2,372,407 1,509,408 Earnings Per Share (*) 0.030813195 0.019604428

(*) Indicated in full TL. İşbank Annual Report 2009 97

Türkiye İş Bankası A.Ş. Statement of Income and Expense Items Accounted Under Equity

TL THOUSAND CURRENT PERIOD PRIOR PERIOD STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED UNDER EQUITY (31/12/2009) (31/12/2008) I. ADDITIONS TO MARKETABLE SECURITIES REVALUATION RESERVES FROM FINANCIAL ASSETS AVAILABLE FOR SALE 629,021 -152,751 II. TANGIBLE ASSETS REVALUATION RESERVES 0 0 III. INTANGIBLE ASSETS REVALUATION RESERVES 0 0 IV. TRANSLATION ADJUSTMENT FOR FOREIGN CURRENCY TRANSACTIONS -2,516 5,037 V. PROFIT/LOSS ON CASH FLOW HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Portion of the Changes in Fair Value) 0 0 VI. PROFIT/LOSS ON NET FOREIGN INVESTMENT HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Portion of the Changes in Fair Value) 0 0 VII. THE EFFECT OF CORREECTIONS OF THE ERRORS AND CHANGES IN THE ACCOUNTING POLICY 0 0 VIII. OTHER INCOME AND EXPENSES RECOGNISED IN EQUITY IN ACCORDANCE WITH TAS 1,768,463 -1,852,861 IX. DEFERRED TAX EFFECT OF REVALUATION -40,028 18,277 X. NET INCOME/EXPENSE DIRECTLY RECOGNISED IN EQUITY (I+II+…+IX) 2,354,940 -1,982,298 XI. PROFIT/LOSS FOR THE PERIOD -410,351 47,171 1.1 Net Changes in the Fair Values of Marketable Securities (Transfer to Profit/Loss) -410,351 47,171 1.2 The Portion of Cash-flow Hedge Derivative Financial Assets Reclassified in and Transferred to Income Statement 0 0 1.3 The Portion of Net Foreign Investment Hedge Derivative Financial Assets Reclassified in and Transferred to Income Statement 0 0 1.4 Other 0 0 XII. TOTAL PROFIT/LOSS RECOGNISED FOR THE PERIOD (X±XI) 1,944,589 -1,935,127 İşbank Annual Report 2009 98

Türkiye İş Bankası A.Ş. Unconsolidated Statement of Changes in Shareholders’ Equity

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY TL THOUSAND Marketable Tangible and Accumulated Rev. Share Securities Intangible Bonus Shares Reserve on Assets Held Total Paid-in Paid-in Capital Share Cancellation Legal Statutory Extraordinary Other Net Current Prior Period Revaluation Assets Revaluation from Equity Hedge for Sale and Shareholders’ Note Capital Inflation Adjustment Premium Profits Reserves Reserves Reserves Reserves Period Profit/(Loss) Profit/(Loss) Reserve Reserve Participations Funds Discontinued Oper. Equity PRIOR PERIOD V-V (31/12/2008) I. Beginning Balance 2,756,585 1,977,491 3,694 - 1,012,375 - 1,845,621 -11,726 - 1,701,807 1,318,015 - - - - 10,603,862 II. Corrections Made According to TAS 8 2.1. The Effect of Corrections of Errors 2.2. The Effect of Changes in Accounting Policies III. Adjusted Beginning Balance (I+II) 2,756,585 1,977,491 3,694 - 1,012,375 - 1,845,621 -11,726 - 1,701,807 1,318,015 - - - - 10,603,862 Changes During the Period IV. Increase/Decrease Due to Mergers V. Marketable Securities Revaluation Reserve -1,940,164 -1,940,164 VI. Hedge Funds (Effective Portion) 6.1. Cash Flow Hedges 6.2. Net Foreign Investment Hedges VII. Tangible Assets Revaluation Reserve VIII. Intangible Assets Revaluation Reserve IX. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) X. Foreign Exchange Differences 5,037 5,037 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 14.1. Cash 14.2. Internal Sources XV. Share Issue XVI. Share Cancellation Profits XVII. Paid-in-Capital Inflation Adjustment XVIII. Other XIX. Net Profit/Loss for the Period 1,509,408 1,509,408 XX. Profit Distribution 20.1. Dividend Paid -729,132 -729,132 20.2. Transfer to Reserves 142,370 830,305 -972,675 - 20.3. Other

Ending Balance (III+IV+V...+XVIII+XIX+XX) 2,756,585 1,977,491 3,694 - 1,154,745 - 2,675,926 -6,689 1,509,408 - -622,149 - - - - 9,449,011

CURRENT PERIOD V-V (31/12/2009) I. Beginning Balance 2,756,585 1,977,491 3,694 - 1,154,745 - 2,675,926 -6,689 1,509,408 -622,149 - - - - 9,449,011 Changes During the Period II. Increases/Decreases Due to Mergers III. Marketable Securities Revaluation Reserve 1,947,105 1,947,105 IV. Hedge Funds (Effective Part) 4.1 Cash-flow Hedge 4.2 Net Foreign Investment Hedges V. Tangible Assets Revaluation Reserve VI. Intangible Assets Revaluation Reserve VII. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) -1,383 1,383 - VIII. Foreign Exchange Differences -2,516 -2,516 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 12.1 Cash 12.2 Internal Sources 323,054 -323,054 - XIII. Share Premium XIV. Share Cancellation Profits XV. Paid-in-Capital Inflation Adjustment XVI. Other XVII. Net Profit/Loss for the Period 2,372,407 2,372,407 XVIII. Profit Distribution 18.1 Dividend Paid -272,479 -272,479 18.2 Transfer to Reserves 119,660 794,215 -913,875 - 18.3 Other

Ending Balance (I+II+III+…+XVI+XVII+XVIII) 3,079,639 1,977,491 3,694 - 1,274,405 - 3,468,758 -9,205 2,372,407 - 1,324,956 - 1,383 - - 13,493,528 İşbank Annual Report 2009 99

Türkiye İş Bankası A.Ş. Unconsolidated Statement of Changes in Shareholders’ Equity

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY TL THOUSAND Marketable Tangible and Accumulated Rev. Share Securities Intangible Bonus Shares Reserve on Assets Held Total Paid-in Paid-in Capital Share Cancellation Legal Statutory Extraordinary Other Net Current Prior Period Revaluation Assets Revaluation from Equity Hedge for Sale and Shareholders’ Note Capital Inflation Adjustment Premium Profits Reserves Reserves Reserves Reserves Period Profit/(Loss) Profit/(Loss) Reserve Reserve Participations Funds Discontinued Oper. Equity PRIOR PERIOD V-V (31/12/2008) I. Beginning Balance 2,756,585 1,977,491 3,694 - 1,012,375 - 1,845,621 -11,726 - 1,701,807 1,318,015 - - - - 10,603,862 II. Corrections Made According to TAS 8 2.1. The Effect of Corrections of Errors 2.2. The Effect of Changes in Accounting Policies III. Adjusted Beginning Balance (I+II) 2,756,585 1,977,491 3,694 - 1,012,375 - 1,845,621 -11,726 - 1,701,807 1,318,015 - - - - 10,603,862 Changes During the Period IV. Increase/Decrease Due to Mergers V. Marketable Securities Revaluation Reserve -1,940,164 -1,940,164 VI. Hedge Funds (Effective Portion) 6.1. Cash Flow Hedges 6.2. Net Foreign Investment Hedges VII. Tangible Assets Revaluation Reserve VIII. Intangible Assets Revaluation Reserve IX. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) X. Foreign Exchange Differences 5,037 5,037 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 14.1. Cash 14.2. Internal Sources XV. Share Issue XVI. Share Cancellation Profits XVII. Paid-in-Capital Inflation Adjustment XVIII. Other XIX. Net Profit/Loss for the Period 1,509,408 1,509,408 XX. Profit Distribution 20.1. Dividend Paid -729,132 -729,132 20.2. Transfer to Reserves 142,370 830,305 -972,675 - 20.3. Other

Ending Balance (III+IV+V...+XVIII+XIX+XX) 2,756,585 1,977,491 3,694 - 1,154,745 - 2,675,926 -6,689 1,509,408 - -622,149 - - - - 9,449,011

CURRENT PERIOD V-V (31/12/2009) I. Beginning Balance 2,756,585 1,977,491 3,694 - 1,154,745 - 2,675,926 -6,689 1,509,408 -622,149 - - - - 9,449,011 Changes During the Period II. Increases/Decreases Due to Mergers III. Marketable Securities Revaluation Reserve 1,947,105 1,947,105 IV. Hedge Funds (Effective Part) 4.1 Cash-flow Hedge 4.2 Net Foreign Investment Hedges V. Tangible Assets Revaluation Reserve VI. Intangible Assets Revaluation Reserve VII. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) -1,383 1,383 - VIII. Foreign Exchange Differences -2,516 -2,516 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 12.1 Cash 12.2 Internal Sources 323,054 -323,054 - XIII. Share Premium XIV. Share Cancellation Profits XV. Paid-in-Capital Inflation Adjustment XVI. Other XVII. Net Profit/Loss for the Period 2,372,407 2,372,407 XVIII. Profit Distribution 18.1 Dividend Paid -272,479 -272,479 18.2 Transfer to Reserves 119,660 794,215 -913,875 - 18.3 Other

Ending Balance (I+II+III+…+XVI+XVII+XVIII) 3,079,639 1,977,491 3,694 - 1,274,405 - 3,468,758 -9,205 2,372,407 - 1,324,956 - 1,383 - - 13,493,528 İşbank Annual Report 2009 100

Türkiye İş Bankası A.Ş. Unconsolidated Cash Flow Statement

(TL THOUSAND) CURRENT PERIOD PRIOR PERIOD Note (01/01 - 31/12/2009) (01/01 - 31/12/2008) A. CASH FLOWS FROM BANKING OPERATIONS V-VI

1.1. Operating Profit Before Changes in Operating Assets and Liabilities 5,003,471 2,506,629

1.1.1. Interest Received 10,970,598 10,301,373 1.1.2. Interest Paid -5,601,202 -6,860,002 1.1.3. Dividend Received 122,366 98,134 1.1.4. Fees and Commissions Received 1,354,749 1,314,780 1.1.5. Other Income 907,049 73,216 1.1.6. Collections from Previously Written Off Loans and Other Receivables 564,313 471,017 1.1.7. Cash Payments to Personnel and Service Suppliers -1,415,610 -1,251,804 1.1.8. Taxes Paid -715,991 -450,450 1.1.9. Other -1,182,801 -1,189,635

1.2. Changes in Operating Assets and Liabilities 8,943,996 693,294

1.2.1. Net (Increase) Decrease in Financial Assets Held for Trading -102,794 330,502 1.2.2. Net (Increase) Decrease in Financial Assets at Fair Value through Profit or Loss 0 0 1.2.3. Net (Increase) Decrease in Due From Banks 28,387 300,282 1.2.4. Net (Increase) Decrease in Loans -4,386,034 -11,774,667 1.2.5. Net (Increase) Decrease in Other Assets -71,052 -397,088 1.2.6. Net Increase (Decrease) in Bank Deposits 485,613 610,384 1.2.7. Net Increase (Decrease) in Other Deposits 9,415,550 11,306,157 1.2.8. Net Increase (Decrease) in Borrower Funds -621,377 -798,681 1.2.9. Net Increase (Decrease) in Matured Payables 0 0 1.2.10. Net Increase (Decrease) in Other Liabilities 4,195,703 1,116,405

I. Net Cash Provided From Banking Operations 13,947,467 3,199,923

B. CASH FLOWS FROM INVESTING ACTIVITIES

II. Net Cash Provided from Investing Activities -14,856,181 1,815,427

2.1. Cash Paid for Purchase of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) -29,234 -31,583 2.2. Cash Obtained from Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 0 95,951 2.3. Tangible Asset Purchases -172,982 -250,289 2.4. Tangible Asset Sales 138,919 207,918 2.5. Cash Paid for Purchase of Financial Assets Available for Sale -21,348,164 -6,578,275 2.6. Cash Obtained from Sales of Financial Assets Available for Sale 15,976,844 9,256,784 2.7. Cash Paid for Purchase of Investment Securities -10,695,855 -885,079 2.8. Cash Obtained from Sales of Investment Securities 1,274,291 0 2.9. Other 0 0

C. CASH FLOWS FROM FINANCING ACTIVITIES

III. Net Cash Provided from Financing Activities -311,945 -768,688

3.1. Cash Obtained from Funds Borrowed and Securities Issued 0 0 3.2. Cash Used for Repayment of Funds Borrowed and Securities Issued 0 0 3.3. Share Certificates Issued 0 0 3.4. Dividends Paid -272,479 -729,132 3.5. Payments for Finance Leases -39,466 -39,556 3.6. Other 0 0

IV. Effect of Change in Foreign Exchange Rate on Cash and Cash Equivalents -21,989 48,356

V. Net Increase in Cash and Cash Equivalents (I+II+III+IV) -1,242,648 4,295,018

VI. Cash and Cash Equivalents at Beginning of the Period 16,104,468 11,809,450

VII. Cash and Cash Equivalents at End of the Period (V+VI) 14,861,820 16,104,468 İşbank Annual Report 2009 101

Türkiye İş Bankası A.Ş. Profit Distribution Table

(TL THOUSAND) CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008)

I. DISTRIBUTION OF CURRENT YEAR PROFIT (1)

1.1. CURRENT PERIOD PROFIT 2,945,616 1,798,014 1.2. TAXES AND DUES PAYABLE (-) 573,209 288,606 1.2.1. Corporate Tax (Income Tax) 780,959 384,943 1.2.2. Income Tax Withholding 2,508 316 1.2.3. Other Taxes and Dues Payable (2) -210,258 -96,653

A. NET PROFIT FOR THE PERIOD (1.1-1.2) 2,372,407 1,509,408

1.3. PRIOR YEARS’ LOSSES (-) 0 0 1.4. FIRST LEGAL RESERVES (-) 0 73,890 1.5. OTHER STATUTORY RESERVES (-) 0 741,337

B. NET PROFIT ATTRIBUTABLE TO [(A-(1.3+1.4+1.5)] 2,372,407 694,181

1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) 0 165,395 1.6.1. To Owners of Ordinary Shares 0 165,393 1.6.2. To Owners of Preferred Shares 0 2 1.6.3. To Preferred Shares (Preemptive Rights) 0 0 1.6.4. To Profit Sharing Bonds 0 0 1.6.5. To Holders of Profit/Loss Share Certificates 0 0 1.7. DIVIDENDS TO PERSONNEL (-) 0 105,757 1.8. DIVIDENDS TO THE BOARD OF DIRECTORS (-) 0 1,322 1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) 0 323,059 1.9.1. To Owners of Ordinary Shares 0 323,049 1.9.2. To Owners of Preferred Shares 0 5 1.9.3 To Preferred Shares (Preemptive Rights) 0 5 1.9.4. To Profit Sharing Bonds 0 0 1.9.5. To Holders of Profit/Loss Share Certificates 0 0 1.10. SECOND LEGAL RESERVES (-) 0 45,770 1.11. STATUTORY RESERVES (-) 0 0 1.12. EXTRAORDINARY RESERVES 0 52,878 1.13. OTHER RESERVES 0 0 1.14. SPECIAL FUNDS 0 0

II. DISTRIBUTION FROM RESERVES

2.1. DISTRIBUTED RESERVES 0 0 2.2. SECOND LEGAL RESERVES (-) 0 0 2.3. DIVIDENDS TO SHAREHOLDERS (-) 0 0 2.3.1. To Owners of Ordinary Shares 0 0 2.3.2 To Owners of Preferred Shares 0 0 2.3.3. To Preferred Shares (Preemptive Rights) 0 0 2.3.4. To Profit Sharing Bonds 0 0 2.3.5. To Holders of Profit/Loss Share Certificates 0 0 2.4. DIVIDENDS TO PERSONNEL (-) 0 0 2.5. DIVIDENDS TO THE BOARD OF DIRECTORS (-) 0 0

III. EARNINGS PER SHARE

3.1. TO OWNERS OF ORDINARY SHARES (3) 0.0308 0.0219 3.2. TO OWNERS OF ORDINARY SHARES (%) 77 55 3.3. TO OWNERS OF PREFERRED SHARES (3) 0 0 3.4. O OWNERS OF PREFERRED SHARES (%) 0 0

IV. DIVIDEND PER SHARE

4.1. TO OWNERS OF ORDINARY SHARES (3) 0 0.0071 4.2. TO OWNERS OF ORDINARY SHARES (%) 0 18 4.3. TO OWNERS OF PREFERRED SHARES (3) 0 0.0054 4.4. TO OWNERS OF PREFERRED SHARES (%) 0 54

(1) The decision for dividend payment is made at the Annual General Meeting. Annual General Meeting has not been held as of the balance sheet date. (2) The amount included in Other Taxes and Dues Payable refers to Deferred Tax Income, which will not be included into the profit distribution. (3) Expressed in full TL İşbank Annual Report 2009 102

Türkiye İş Bankası A.Ş. Financial Highlights and Key Ratios for the Five Years Period Including the Reported Period

ASSETS (TL thousand) (*) 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 Cash and Equivalents 293,277 466,809 502,828 593,329 884,514 Banks and Receivables from Interbank Money Markets (1) 11,815,711 11,583,465 13,542,273 18,031,640 16,308,023 Securities (Net) 22,366,477 26,318,932 24,326,340 24,981,018 39,289,717 Loans (2) 21,858,602 29,818,316 33,979,841 47,610,332 48,334,786 Associates and Subsidiaries (Net) 4,756,394 4,695,007 4,816,760 3,095,507 5,031,079 Fixed Assets (Net) 1,762,105 1,796,508 1,977,708 1,952,820 1,922,019 Other Assets 902,224 525,721 1,035,167 1,287,276 1,453,166 Total Assets 63,754,790 75,204,758 80,180,917 97,551,922 113,223,304 LIABILITIES (TL thousand) (*) 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 Deposits 37,221,823 46,399,355 48,533,145 63,539,185 72,177,063 Funds Borrowed and Interbank Money Market 13,997,544 15,894,208 15,765,440 18,039,793 20,727,737 Provisions 1,690,522 1,843,147 2,568,896 3,099,532 3,493,802 Other Liabilities 1,556,971 1,657,890 2,709,574 3,424,401 3,331,174 Shareholders’ Equity 9,287,930 9,410,158 10,603,862 9,449,011 13,493,528 Total Liabilities 63,754,790 75,204,758 80,180,917 97,551,922 113,223,304 INCOME STATEMENT (3) (TL thousand) 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 Interest Income 5,458,716 7,671,519 9,134,079 10,596,147 10,200,437 Interest Expenses 2,844,770 5,084,205 6,173,858 6,977,852 5,332,949 Net Interest Income 2,613,946 2,587,314 2,960,221 3,618,295 4,867,488 Net Trading Income 249,091 63,870 426,164 472,650 408,373 Net Fees and Commissions Income 861,593 978,059 1,074,511 1,204,214 1,252,604 Dividend Income 190,914 117,121 503,063 284,846 325,037 Other Operating Income 845,096 651,324 910,969 651,536 1,073,275 Total Operating Income 4,760,640 4,397,688 5,874,928 6,231,541 7,926,777 Operating Expenses 2,099,301 1,857,939 2,154,043 2,819,538 2,694,687 NET OPERATING PROFIT/LOSS 2,661,339 2,539,749 3,720,885 3,412,003 5,232,090 Provision for Impairment Losses 805,517 909,161 1,617,804 1,613,989 2,286,474 PROFIT/(LOSS) BEFORE TAXES AND MONETARY POSITION 1,855,822 1,630,588 2,103,081 1,798,014 2,945,616 Net Monetary Position Profit/(Loss) 0 0 0 0 0 PROFIT/(LOSS) BEFORE TAXES 1,855,822 1,630,588 2,103,081 1,798,014 2,945,616 Provision for Taxes 693,496 521,370 401,274 288,606 573,209 NET PERIOD PROFIT /(LOSS) 1,162,327 1,109,218 1,701,807 1,509,408 2,372,407 GROSS INCOME (4) 7,692,180 9,561,422 12,148,581 13,319,959 13,361,871 GROSS PROFIT (5) 2,661,340 2,539,749 3,720,885 3,412,003 5,232,090 KEY RATIOS 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 Interest Earning Assets / Total Assets 87.1% 89.9% 89.5% 92.8% 91.7% Interest Earning Assets / Interest Bearing Liabilities 108.3% 108.5% 111.7% 111.0% 111.8% Securities / Total Assets 35.1% 35.0% 30.3% 25.6% 34.7% Loans / Total Assets 34.3% 39.6% 42.4% 48.8% 42.7% Loans / Deposits 58.7% 64.3% 70.0% 74.9% 67.0% Retail Loans / Total Loans 32.1% 30.8% 34.7% 30.6% 31.2% NPL Ratio 4.6% 3.8% 4.2% 4.4% 5.4% Coverage Ratio 100.0% 100.0% 100.0% 100.0% 100.0% Demand Deposits / Total Deposits 18.2% 16.5% 16.5% 13.8% 15.6% Shareholders’ Equity / Total Liabilities 14.6% 12.5% 13.2% 9.7% 11.9% Capital Adequacy Standard Ratio 25.0% 23.9% 20.5% 15.2% 18.3% Return on Average Assets (6) 2.3% 1.6% 2.2% 1.7% 2.3% Return on Average Equity (6) 13.7% 11.9% 17.0% 15.1% 20.7% Cost / Income (7) 43.6% 42.0% 36.7% 45.2% 34.0% OTHER INFORMATION (TL thousand) 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 Regulatory Capital 7,754,594 8,793,538 10,834,242 10,638,323 13,963,036 Core Capital 6,787,006 8,163,778 10,055,847 10,804,828 12,932,571 Free Capital (8) 4,738,323 4,847,755 5,827,798 5,551,154 8,972,745 Demand Deposits 6,759,272 7,678,420 7,990,755 8,787,962 11,258,761

(*) Interest accruals are included in all interest related items

(1) Includes Deposits at the Central Bank and Reserve Requirements (2) Excludes Receivables under Follow-up (3) Fees and Commissions Received from Cash Loans are showed under Interest Income; Fees and Commisssions Paid to Cash Loans are shown under Interest Expense. (4) Gross Income = Interest Income + Net Trading Income + Fees and Commissions Income (Gross) + Dividend Income + Other Operating Income (5) Gross Profit = Net Period Profit/(Loss) + Provision for Taxes + Provision for Impairment Losses (6) Averages are calculated over year-end figures. (7) Operating Income and Operating Expenses are adjusted for the Gains/Losses due to FX indexed items. (8) Free Equity = Shareholders’ Equity - (Fixed Assets+Non-Financial Associates and Subsidiaries + Receivables Under Follow-Up - Specific Provisions)

İşbank Annual Report 2009 103

Türkiye İş Bankası A.Ş. Explanations on İşbank’s Financial Condition, Profitability and Solvency

Assets In 2009, İşbank grew its total assets by 16.1%, and continued its leadership among private-sector banks with TL 113.2 billion of total assets. While loan growth was limited to 1.5% due to the slowdown in the economy, poor credit demand and contraction in foreign trade volume, increase in securities portfolio was realized as 57.3%. On the other hand, associates and subsidiaries grew by 62.5%, mainly due to the mark-to market gains in listed participations.

As at the end of 2009, İşbank continued to be the market leader in TL loans, which constituted 71.2% of its total loans. The share of housing loans, which grew by 14.0% throughout the year, reached 8.9% of the total loan portfolio. On the other hand, due to adverse economic conditions, non-performing loans (NPLs) increased in parallel with the trend in the sector, throughout the year, TL 223.9 million of NPL sale was realized, and in this context the ratio of NPLs to total loans increased by one percentage point compared to the end of the previous year, reaching 5.4 %. While the NPL coverage ratio was 83.5% in the sector at the end of the year, İşbank continued with its 100% provisioning policy.

Total Assets Loans TL million TL million

120,000 113,223 60,000 97,552 48,335 100,000 50,000 47,610

80,000 40,000

60,000 30,000

40,000 20,000

20,000 10,000

0 0 2008 2009 2008 2009

Liabilities In 2009, increase in İşbank’s total deposits was 13.6%. As of 2009, İşbank was the market leader among private-sector banks in TL deposits, foreign currency deposits and total deposits. Its widespread deposit base resulting from the Bank’s mainly deposit based funding structure and widespread branch network in Turkey, contributed to the Bank to retain its strong liquidity profile during the crisis. The share of demand deposits, which grew by 28.1% compared to previous year, reached 15.6% of total deposits. This improvement in the composition of deposits was one of the factors that affected the funding cost of the Bank positively in 2009.

On the other hand, İşbank, by obtaining syndicated loans, repo and other non-deposit funds, benefited from the arising opportunities regarding duration and cost of funding. The share of non-deposit funding sources in total liabilities did not change considerably compared to the previous year and was realized at 18.3%.

Total Deposits TL million

80,000 72,177 70,000 63,539 60,000 50,000 40,000 30,000 20,000 10,000 0 2008 2009 İşbank Annual Report 2009 104

Türkiye İş Bankası A.Ş. Explanations on İşbank’s Financial Condition, Profitability and Solvency

Profitability In 2009, while interest paid for deposits declined by 17.0% due to decreasing borrowing costs and short-term maturity structure of deposits, interest income from TL loans and TL securities increased by a limited amount based on volume growth. As a result, net interest income increased by 34.5% in 2009. In the same period, net fees and commission income increased by 4.0%.

In 2009, there was a 4.4% reduction in operating expenses due to policies focusing on controlling monitored costs. Cost to income ratio, an important indicator of efficiency, improved from 45.2% in 2008, to 34.0% in 2009. Return on equity and return on assets, which were respectively 20.7% and 2.3% at the end of 2009, showed considerable improvement compared to previous year. İşbank’s net profit rose by 57.2% in 2009.

Net Interest Income Net Profit TL million TL million

5,000 4,867 2,500 2,372

4,000 2,000 3,618 1,509

3,000 1,500

2,000 1,000

1,000 500

0 0 2008 2009 2008 2009

Solvency Due to high profitability and mark-to market gains in listed participations, shareholders’ equity reached 11.9% of total liabilities, increasing by 42.8% in 2009 compared to previous year.. In line with this development, capital adequacy ratio increased from 15.2% at the end of 2008, to 18.3% at the end of 2009. Both the capital adequacy ratio and the loans/deposits ratio, which was 67.0%, indicate that the Bank is in a favorable position to support growth in the upcoming period. Furthermore, the liquidity ratios of the Bank were above the legal requirements.

Capital Adequacy Ratio Shareholders’ Equity Loans/Deposits (%) TL million (%)

20% 16,000 80% 74.9 18.3 13,494 14,000 70% 67.0 15.2 12,000 15% 60% 10,000 9,449 50% 8,000 10% 6,000 40% 4,000 30% 5% 2,000 20% 1,000 10% 0 0 0 2008 2009 2008 2009 2008 2009 İşbank Annual Report 2009 105

Türkiye İş Bankası A.Ş. Information on Risk Management Policies Applied per Risk Types

Bank risk policies and procedures constitute the internal rules and principles which are approved and enforced by the Board considering Risk Management Division suggestions and executed by the senior management.

Segregated by credit, market, liquidity and operational risk categories, the policies in line with best practice approved by the Board of Directors stipulate general standards including the organization and scope of risk management function, risk measurement methods, roles and responsibilities of the risk management group, risk limit setting methodology, rules governing the breach of limits.

To ensure the conformity of the Bank’s risk appetite with business plan and prevailing market environment, risk limits set by the Board of Directors are monitored. In this context, breaches in market, liquidity and credit risk limits are analyzed by Risk Management Division taking market and industry conditions into consideration , and findings are reported to the Audit Committee.

Credit Risk Policy Credit risk policy sets the framework for credit risk management, control and monitoring, roles and responsibilities and credit risk limits. Credit risk is defined as any situation where the counterparty obligation will not or cannot be fulfilled partially or fully on maturity as affirmed in the agreement.

İşbank maintains identification, measurement and management of credit risk across all products and activities. The Board reviews credit risk policies and strategies annually at minimum. Senior management is responsible for the execution of credit risk policies.

The findings of review of loans and credit risk are reported to the Board and the senior management regularly. Monitoring credit risk is based on the risk levels and composition of the loan portfolio. The monitoring process includes parameters such as maturity, industry, collateral, geography, currency, loan type, and credit risk ratings as a whole, in addition to the assessments on the obligor and the facility. Credit risk monitoring encompasses any additional risks that could stem from possible macroeconomic changes and potential adverse conditions.

Bank’s credit risk management policy entails credit portfolio diversification. Segmentation is used to execute dispersion of diversified risk strategy. Segmentation is the separation of portfolio into wide customer groups according to geography, sector, product and similarly affected by the negative changes at the economic and financial sector.

Internal audit and risk management functions regularly assess the internal credit risk rating system as to its compatibility with the structure, size and complexity of the Bank’s operations. If diverse circumstances required, necessary adjustments and/or modifications are made to the system.

Credit Risk audition implies independent control of compatibility of credit quality and crediting process with the Bank’s policy and application principles by legal arrangements and assessment of credit and other asset provision adequacy.

Asset and Liability Management Risk Policy Asset and liability management risk is defined as; loss risk caused by Bank’s failure to effectively manage all financial risks arising from the bank’s assets, liabilities and off-balance sheet transactions. Market risk of trading book, structural interest rate risk of banking book and liquidity risk are all within the scope of asset and liability management risk.

All principles and procedures related to constitution and management of Bank’s asset-liability structure and Bank’s risk appetite is established by the Board of Directors. Ensuring asset and liability management risk being within the levels imposed by legal legislation and internal risk limits is the primary priority. Internal risk limits are determined by Board of Directors taking into consideration liquidity, target income level, general expectations about the changes in risk factors and risk appetite of the Bank.

Board of Directors and Audit Committee are obliged to track that Bank’s capital is used optimally. For this purpose they have to keep risk limits under control and ensure necessary actions being taken.

Asset-Liability Committee is responsible for governance of asset and liability management risk in accordance with the risk appetite and risk limits determined by Board of Directors and within the principles and procedures expressed in this policy.

Measuring asset and liability management risk, reporting the results and monitoring the compliance with the risk limits are the responsibilities of Risk Management Division. Under different scenarios the course of the risk taken is reviewed. Measurement results are tested in terms of reliability and integrity. Asset and liability management risk is reported to Risk Committee and reported to the Board of Directors through Audit Committee.

Compliance with risk limits is closely and continuously monitored by Risk Management Division, Asset-Liability Committee and related business units. In the event of a breach in the risk limits, the breach and its reasons are instantly reported to Board of Directors through Audit Committee. Course of action needed to be taken in order to eliminate the breach is determined by the Board.

Asset and liability management processes and compliance with the policy rules are audited by internal audit system. The principles regarding the audit process, audit reports and fulfillment of action plans to eliminate the errors and gaps determined by internal audit are established by the Board of Directors. İşbank Annual Report 2009 106

Türkiye İş Bankası A.Ş. Information on Risk Management Policies Applied per Risk Types

Operational Risk Policy Operational risk is defined as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”. Risk Management Division is responsible for the risk management activity on this particular risk. Operational risk management activities comprise defining, measuring, analyzing, monitoring and reporting of operational risks, following up the new techniques on management of operational risks besides regulatory and internal reporting.

Categorization of inherited operational risks within the activities and processes is made possible by the Enterprise Risk Framework. It serves as the basic document to define and classify the risks and is subject to alteration as conditions change.

The methodology employed to identify operational risks is “self-assessment”. This methodology requires staff with roles and responsibilities in a particular activity to get involved in the risk and control assessment process of that activity. Operational risk management process combines both qualitative and quantitative approaches in measurement and assessment. The measurement process uses data obtained from “impact - likelihood analysis” and “loss database”.

All operational risks inherited in the activities, risk levels of new products and processes, operational losses incurred by the Bank are monitored continuously, risk assessments are updated regularly and reported to the Risk Committee and the Board in a timely manner.

Employees have the understanding of the Bank’s objective to attain a working environment aiming to reduce the probability of loss, considering that the entire internal rules and procedures, led by operational risk policy, and act sensitively to the inherited operational risks and controls.

Consolidated Risk Policies Compliance with risk management principles related to the Bank’s subsidiaries are monitored through Bank’s “Consolidated Risk Policies” by Subsidiary Risk Unit. Subsidiaries identify their specific risk management policies that cannot divert from or conflict with consolidated risk policies. Subsidiary boards approve company risk policies that form the framework of their risk management systems and processes.

Information Systems Management Policy The purpose of Information Systems Management Policy is to determine the principles which will constitute a basis for the management of information systems that the Bank uses to fulfill its activities and the procedures in order to define, measure, control, monitor, report and manage the risks derived from using information technologies. With the Policy, the information technologies which is an important element for sustaining Bank activities is intended to be managed effectively as information systems management, being handled as a part of corporate governance practices. On the management of Bank’s information systems and all the elements relating to those systems articles of this Policy are applied.

Risks derived from information technologies are basically assessed within the scope of Bank’s operational risk management. It is essential that those risks which could be seen as multipliers of the other risks derived from activities of the Bank are measured, closely monitored and controlled within the framework of Bank’s integrated risk management. İşbank Annual Report 2009 107

Türkiye İş Bankası A.Ş. İşbank’s Credit Ratings (*)

Rating Outlook (**)

MOODY’S Bank Financial Strength C- Stable Long Term Foreign Currency Deposit Ba3 Stable Long Term Local Currency Deposit Baa2 Stable Short Term Foreign Currency Deposit NP - Short Term Local Currency Deposit P-2 -

FITCH RATINGS Long Term Foreign Currency Issuer Default Rating BBB- Stable Long Term Local Currency Issuer Default Rating BBB- Stable Short Term Foreign Currency Issuer Default Rating F3 - Short Term Local Currency Issuer Default Rating F3 - National Long-term Rating AAA(tur) Stable Individual Rating C - Support Rating 3 -

STANDARD & POOR’S Long-term Counterparty Credit Rating BB Positive Long-term Certificate of Deposit BB - Short-term Counterparty Credit Rating B - Short-term Certificate of Deposit B - Long-term National Scale Rating trAA - Short Term National Scale Rating trA-1 -

(*) İşbank’s latest credit rating updates: Moody’s : 08/01/2010 Fitch Ratings : 11/12/2009 Standard & Poor’s : 22/02/2010

(**) Outlook: Stable: Indicates that the current rating will not be changed in the short term. Positive: Indicates that the current rating is very likely to be upgraded. Negative: Indicates that the current rating is very likely to be downgraded. İşbank Annual Report 2009 108

Türkiye İş Bankası A.Ş. The Unconsolidated Year End Financial Report as of December 31, 2009

Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: 0212 316 00 00 Fax: 0212 316 09 00 Web site: www.isbank.com.tr E-mail: [email protected]

The unconsolidated year-end financial report prepared in accordance with the Communiqué on “Presentation & Disclosure of Financial Statements and the Related Notes to be Publicly Announced” of Banking Regulation and Supervision Agency (BRSA), comprises the following sections:

• GENERAL INFORMATION ABOUT THE BANK • UNCONSOLIDATED FINANCIAL STATEMENTS • EXPLANATIONS ON THE ACCOUNTING POLICIES APPLIED IN THE CURRENT PERIOD • INFORMATION ON THE BANK’S FINANCIAL STRUCTURE • DISCLOSURES AND NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS • DISCLOSURES ON INDEPENDENT AUDITORS’ REPORT

The unconsolidated financial statements, related disclosures and notes in this report are prepared, unless otherwise indicated, in thousands of the Turkish Lira (TL), in accordance with the Communiqué on “Principles and Procedures on the Accounting Practice and Documentation of Banks”, Banking Regulation and Supervision Agency (BRSA) regulations, Turkish Accounting Standards, Turkish Financial Reporting Standards and the related appendices and interpretations and the Bank’s financial records, and they have been independently audited and presented as the attached.

Aziz Ferit Eraslan Mahmut Magemizoğlu H. Ersin Özince Prof. Dr. Savaş Taşkent Caner Çimenbiçer Head of Financial Deputy Chief Executive Chief Executive Officer Member of the Board and Chairman of Management Division In Charge of Financial the Audit Committee the Board of Directors Reporting and the Audit Committee

Information on the authorized personnel to whom questions related to this financial report may be directed.

Name – Surname/Title: H. Süleyman Özcan/Head of Investor Relations Division Phone Nr.: +90 212 316 16 02 Fax Nr.: +90 212 316 08 40 E-mail: [email protected] [email protected] Web: www.isbank.com.tr

İşbank Annual Report 2009 109

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Page PART I General Information about the Bank I. Explanations on the Establishment Date and Initial Status of the Bank, and History Including the Changes in the Former Status 111 II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Bank, any Changes in the Period, and Information on the Bank’s Risk Group 111 III. Explanations on the Shares of the Chairman of the Board, Directors, Auditors, Chief Executive Officer and Deputy Chief Executives, if any, and their Areas of Responsibility at the Bank 111 IV. Information on the Bank’s Qualified Shareholders 112 V. Summary Information on the Bank’s Functions and Business Lines 112

PART II Unconsolidated Financial Statements Presented starting from page 92.

PART III Explanations on Accounting Policies I. Explanations on the Basis of Presentation 112 II. Explanations on the Usage Strategy of Financial Instruments and on Foreign Currency Transactions 112 III. Explanations on Investments in Associates and Subsidiaries 113 IV. Explanations on Forward and Option Contracts and Derivatives Instruments 113 V. Explanations on Interest Income and Expenses 113 VI. Explanations on Fee and Commission Income and Expenses 113 VII. Explanations on Financial Assets 113 VIII. Explanations on Impairment of Financial Assets 115 IX. Explanations on Offsetting Financial Instruments 115 X. Explanations on Sale and Repurchase Agreements and Securities Lending Transactions 115 XI. Explanations on Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities 115 XII. Explanations on Goodwill and Other Intangible Assets 116 XIII. Explanations on Tangible Assets 116 XIV. Explanations on Leasing Transactions 116 XV. Explanations on Provisions and Contingent Liabilities 116 XVI. Explanations on Contingent Assets 117 XVII. Explanations on Liabilities Regarding Employee Benefits 117 XVIII. Explanations on Taxation 117 XIX. Additional Explanations on Borrowings 118 XX. Explanations on Share Certificates and Issues 118 XXI. Explanations on Bank Acceptances and Bills of Guarantee 118 XXII. Explanations on Government Incentives 119 XXIII. Explanations on Segment Reporting 119 İşbank Annual Report 2009 110

Türkiye İş Bankası A.Ş.

Page PART IV Information on the Financial Structure I. Explanations on Capital Adequacy Standard Ratio 119 II. Explanations on Credit Risk 121 III. Explanations on Market Risk: 126 IV. Explanations on Operational Risk 127 V. Explanations on Currency Risk 127 VI. Explanations on Interest Rate Risk 129 VII. Explanations on Liquidity Risk 133 VIII. Explanations on Other Price Risks 136 IX. Explanations on Presentation of Assets and Liabilities at Fair Value 136 X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions 137 XI. Explanations on Business Segmentation 137

PART V Explanations and Notes to the Unconsolidated Financial Statements I. Explanations and Notes on Assets 139 II. Explanations and Notes on Liabilities 154 III. Explanations and Notes on Off-Balance Sheet Commitments 159 IV. Explanations and Notes on the Income Statement 161 V. Explanations and Notes on the Statement of Changes in Shareholders’ Equity 164 VI. Explanations and Notes on the Cash-Flow Statement 164 VII. Explanations and Notes on the Bank’s Risk Group 165 VIII. Explanations on the Bank’s Domestic, Foreign, Off-Shore Branches and Representative Offices 167

PART VI Explanations on the Independent Auditors’ Report I. Explanations on the Independent Auditors’ Report 167 II. Explanations and Notes of the Independent Auditors 167 İşbank Annual Report 2009 111

Türkiye İş Bankası A.Ş. Part One: General Information About the Bank

PART ONE: GENERAL INFORMATION ABOUT THE BANK

I. Explanations on the Establishment Date and Initial Status of the Bank, and History Including the Changes in the Former Status TÜRKİYE İŞ BANKASI A.Ş. (“the Bank”) was established on August 26th 1924 as a private firm, with the authorization to collect deposits in order to operate in corporate and retail banking areas and to initiate and/or participate in all kinds of financial and industrial sector undertakings when necessary. There is no change in the Bank’s status since its establishment.

II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Bank, any Changes in the Period, and Information on the Bank’s Risk Group As of December 31, 2009, 41.54% of the Bank’s shares are owned by T. İş Bankası A.Ş. Pension Fund, 28.09% are owned by the Republican People’s Party (Atatürk’s shares) and 30.37% are on free float. There has been no change in the capital structure during the year.

III. Explanations on the Shares of the Chairman of the Board, Directors, Auditors, Chief Executive Officer and Deputy Chief Executives, if any, and their Areas of Responsibility at the Bank

Board of Directors and Auditors:

Name Areas of Responsibility Caner Çimenbiçer Chairman of the Board, the Audit Committee and TRNC Internal Systems Committee; Board of Inspectors H. Fevzi Onat Deputy Chairman, Board Member in Charge of Internal Systems, Chairman of the Risk Committee, Member of the Credit Committee H. Ersin Özince Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of Executive Committee Prof. Dr. Savaş Taşkent Director, Member of the Audit Committee and TRNC Internal Systems Committee İsmet Atalay Director, Member of the Social Responsibility Committee Tülin Aykın Director, Alternate Member of the Credit Committee, Member of the Social Responsibility Committee Tuncay Ercenk Director Adnan Keskin Director Ali Sözen Director Füsun Tümsavaş Director, Member of the Credit Committee Hasan Koçhan Director, Alternate Member of the Credit Committee Prof. Dr. Turkay Berksoy Auditor A. Taciser Bayer Auditor

Chief Executive Officer and Deputy Chief Executives*:

Name Administrative Position H. Ersin Özince Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of Executive Committee A. Aykut Demiray Treasury, Economic Research, International Banking, Foreign Branches and Foreign Representative Offices, Member of the Risk Committee Özcan Türkakın Corporate Communications, Equity Participations, Capital Markets, Private Banking Marketing and Sales Management, Member of the Risk Committee** Zafer Memişoğlu Support Services and Purchasing, Human Resources, Human Resources Partnership and Human Resources Service Center, Construction and Real Estate, and Talent Management Hülya Altay Consumer Loans, Card Payment Systems, Retail Banking Marketing, Sales and Product Management Mahmut Magemizoğlu Financial Management, Investor Relations, Managerial Reporting and Internal Accounting Hakan Barut Legal Affairs, Credit Information and Financial Analysis, Commercial and Corporate Loans Monitoring and Recovery Management Adnan Bali Corporate Banking Marketing, Sales and Product Management, Commercial Banking Marketing, Sales and Product Management, Free Zone Branches Suat İnce Corporate Loans, SME Loans and Commercial Loans Underwriting, Retail Loans Monitoring and Recovery Management, Member of the Risk Committee Serdar Gençer Change Management, Enterprise Architecture, Strategy and Corporate Performance Management Hakan Aran Alternative Distribution Channels Operations, Alternative Distribution Channels Strategy, Banking Operations and Payment Operations, IT Solution Development, IT Architecture & Security, IT Project Management, IT System & Operations, IT Product & Service Delivery, Retail Loan and Card Operations, Foreign Trade and Commercial Loan Operations, Internal Operations, Operations Planning and Branch Operations Management

* Deputy Chief Executive, Mr. M. Sırrı Erkan has retired as of May 29th, 2009 and Deputy Chief Executives Kadir Akgöz and F. Kayhan Söyler have retired as of January 31st, 2010. ** Mr. Türkakın attends the meetings of the Risk Committee that are held on a consolidated basis. İşbank Annual Report 2009 112

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

The 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.

IV. Information on the Bank’s Qualified Shareholders

Name Surname/Company Shares Ownership Paid-in Capital Unpaid Capital T. İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı (İşbank Members’ Supplementary Pension Fund) 1,279,382 41.54% 1,279,382 0 Cumhuriyet Halk Partisi – Republican People’s Party -(Atatürk’s Shares) 865,134 28.09% 865,134 0

V. Summary Information on the Bank’s Functions and Business Lines In line with the relevant legislation and principles stated in the Articles of Incorporation of the Bank, the Bank’s activities include operating in retail, commercial, corporate and private banking, foreign currency and money market operations, marketable securities operations, international banking services and other banking operations, as well as initiating or participating in all kinds of financial and industrial sector corporations as may be required.

Part Two: Unconsolidated Financial Statements Unconsolidated financial statements are presented starting from page 92.

Part Three: Explanations on Accounting Policies

I. Explanations on the Basis of Presentation The unconsolidated financial statements and related disclosures and notes in this report are prepared in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and the Communiqué on ”Principles and Procedures on the Accounting Practice and Documentation of Banks”, and the other regulations, disclosures and circulars related to the accounting and financial reporting principles published by the Banking Regulatory and Supervisory Agency (“BRSA”).

Accounting policies and valuation principles used in the preparation of the financial statements are presented in detail below:

II. Explanations on the Usage Strategy of Financial Instruments and on Foreign Currency Transactions

1. The Bank’s Strategy for the Use of Financial Instruments The Bank’s main activities comprise private, retail, commercial and corporate banking, money market and securities market operations, as well as activities related to international banking services.

In conformity with the general liability structure of the banking system, the Bank’s liabilities are mainly composed of short-term deposits and other medium and long-term liabilities. 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 Bank is one of the market maker banks) and by the use of liquidity facilities of the Central Bank of Turkey. As a result, the liquidity of the Bank 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 sectoral developments and the yields of alternative investment instruments, fixed and floating rate placements are made and some of the funds are transferred to the Treasury guaranteed projects. On the other hand, high yielding Eurobonds and government debt securities portfolios are of sufficient quality and quantity to reduce the risk which may arise from the fluctuations in the interest rates.

Safety principle has always been the top priority in placements and the placements are focused on high yielding and low risk assets by considering their maturity structure. Accordingly, a pricing policy aiming at high return is implemented in the long-term placements and attention is paid to the maximum use of non-interest income generation opportunities. The Bank determines its lending strategy by taking into consideration the international and national economic data and expectations, market conditions, current and potential credit customers’ expectations and tendencies, and risks such as; interest rate, liquidity, currency and credit risks. Furthermore, in conformity with this strategy, the Bank acts within the legal limits in terms of asset-liability management.

Main growth targets for different asset classes are set by the long-term plans shaped along with budgeting; and the 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.

Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the legal limits, the Bank’s own transaction and control limits are effectively monitored in order to avoid limit overrides.

The 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. İşbank Annual Report 2009 113

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

2. Explanations on Foreign Currency Transactions Foreign currency monetary assets and liabilities on the balance sheet are converted to Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary foreign currency items measured at fair value are converted by the rates at the date of the fair value assessments. Exchange rate differences arising from the conversion of monetary items and the collections and payments in foreign currency are recognized in the income statement. In accordance with the Turkish Accounting Standard Nr:21 “Effects of Changes In Foreign Exchange Rates” (TAS 21), net investments in non-domestic companies are considered as non-monetary items, measured on the basis of historical cost and converted to Turkish Currency at the currency rates at the transaction date, and also in accordance with the Turkish Accounting Standard Nr:29 “Financial Reporting In Hyperinflationary Economics” (TAS 29), 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.

The financial statements of the Bank’s foreign branches are prepared in currencies (functional currency) prevailing in the economic environment that they operate in and expressed in TL, which is the functional currency of the Bank and the presentation currency of the financial statements. For the conversion of the assets and liabilities of the foreign branches to TL, end of period foreign currency closing rates are used, and for the conversion of income and expenses foreign currency rates on the transaction date are taken into account. The exchange rate differences arising from the conversion are recorded in the “Other Profit Reserves” account under the shareholders’ equity.

III. Explanations on Investments in Associates and Subsidiaries Investments in associates and subsidiaries are recorded within the scope of the “Turkish Accounting Standard Nr.39: Financial Instruments: Recognition and Measurement” (TAS 39). Investments in subsidiaries, whose shares are traded in an active market (stock market), are shown in the financial statements with their fair values by taking into account their prices recorded in the related market (stock market). Investments in subsidiaries and associates, whose shares are not traded in an active market (stock market) are followed at their cost of acquisition and these assets are shown in the financial statements with their cost values after the deduction of, if any, impairment provisions.

IV. Explanations on Forward and Option Contracts and Derivatives Instruments The Bank’s derivative transactions predominantly consist of currency and interest rate swaps, forward foreign currency trading and currency options. The Bank has no derivative products that are separated from the host contract.

Derivative transactions 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 measured by 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. Even though some derivative transactions economically provide risk hedging, since not all the necessary conditions are met for them to be defined as items suitable for financial risk hedging accounting, they are recognized as “held for trading purposes” within the scope of Turkish Accounting Standard Nr:39 “Financial Instruments: Recognition And Measurement” (TAS 39). The valuation differences arising from the valuation of derivative transactions are associated with the income statement.

On the other hand, on the off-balance sheet table, the options that generate assets for the Bank are presented under “call options” line and the ones that generate liabilities are presented under “put options” line.

V. Explanations on Interest Income and Expenses Interest income and expenses are recorded on accrual basis by using the effective interest method (the ratio which equalizes the future cash flows of a financial asset or liability to net present book value) within the framework of TAS 39 “Financial Instruments: Recognition And Measurement”.

As per the relevant legislation, accrued interests and other interest receivables on loans and other receivables that are classified as non-performing are cancelled and the relevant figures are recorded as interest income only when collected.

VI. Explanations on Fee and Commission Income and Expenses Fee and commission income and expenses are recorded on accrual or collection basis, depending on the nature of the transaction.

VII. Explanations on Financial Assets Financial instruments comprise financial assets, financial liabilities and derivative instruments. Financial instruments are presented in the balance sheet when the Bank becomes contractually a party of such instruments.

Financial instruments constitute the basis of the Bank’s commercial activities and operations. These financial instruments expose, affect and diminish the liquidity, credit and interest rate risks in the financial statements.

Fair value is the amount for which an asset could be exchanged or a liability could be settled between knowledgeable willing parties in an arms length transaction. Fair value of a financial instrument is equal to the market price obtainable from the sale, or payable on the acquisition of the instrument in an active market, if one exists.

The Bank determines the estimated fair value of its financial instruments by using the current market information and appropriate valuation methods. However, estimating the fair values through assessing the market information requires interpretation and judgement. As a result, the estimations presented İşbank Annual Report 2009 114

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

herein cannot be an indicator of the amounts that could be obtained by the Bank in case of disposal of assets at the current market conditions. Book value of some financial instruments, which equals to the acquisition cost, is assumed to be equal to fair value due to their short-term maturities.

The methods and assumptions used to determine the estimated fair value of each financial instrument are given below.

1. Cash and Banks Cash consists of cash in vault, foreign currency cash, money in transit, cheques purchased and precious metals. Foreign currency cash and banks are shown in the balance sheet by their amounts converted to TL at the foreign exchange rate on the balance sheet date. The carrying values of both the cash and banks, are their estimated fair values.

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.

Financial assets held for trading are recognized at their fair values in the balance sheet and thereafter carried at fair values. In cases where values that form the basis for the fair value do not exist in active market conditions, it is accepted that the fair value is not reliably determined and “amortized cost”, calculated by the internal rate of return method, is taken into account as the fair value. Any gains or losses resulting from such valuation are recorded in the profit and loss accounts. Interest income resulting from financial assets held for trading is presented as part of interest income in the profit/loss statement and dividends are presented within dividend income. Any profit or loss resulting from the disposal of those assets before their maturity date is recognized under the accounts of “Interest Income/Expense” and “Gains/losses on securities trading”, as per the Uniform Code of Accounts, and presented in the income statement. a.2. Financial Assets at Fair Value through Profit and Loss Financial Assets Classified at Fair Value through Profit and Loss are financial assets which have not been acquired for trading purposes, but classified as at fair value through profit and loss at the initial accounting. The recognition of such assets at fair value is accounted similar with the financial assets held for trading. b. Explanations on Financial Assets Available for Sale and Investments Held to Maturity b.1. Financial assets available for sale are non-derivative financial assets other than loans and receivables originated by the Bank, other than those classified at fair value through profit and loss, and other than investments held to maturity. Initial recognition and the subsequent valuation of financial assets available for sale, including their transaction costs, is made on a fair value basis and the difference between the cost and the “amortized cost” calculated using the “Internal Rate of Return Method” is reflected to the income statement. In conditions where values that form the basis of fair value do not exist under active market conditions, it is deemed that the fair value is not reliably determined and the amortized cost calculated using the “Internal Rate of Return Method” is taken into account as the fair value. Unrealized profit and loss resulting from the changes in fair values of the financial assets available for sale, are not reflected to the income statement until the corresponding values are realized through sale or disposal, rather they are recognized in the “Marketable Securities Revaluation Reserve” account under the shareholders’ equity. In the event of any disposal or redemption of the relevant asset, the fair value differences accumulated in the shareholders’ equity, resulting from market valuation are reflected to the income statement. b.2. Investments held to maturity are non-derivative financial assets, other than loans and receivables originated by the Bank, and other than those which are classified at fair value through profit and loss at initial recognition and other than those which are defined as available for sale. These financial assets are held with the intention of being retained until the maturity date, and for which the required conditions, including the capability of being funded, are secured for holding until maturity, and they have a fixed maturity date or a maturity date that can be deemed fixed due to its determinable payments. Investments held to maturity, that are initially recorded at their fair values including the cost of transaction, are carried at amortized cost, calculated using the internal rate of return method, less any impairment losses. Interest income generated from investments held to maturity is accounted as interest income on the profit/loss account.

There are no financial assets that have been previously classified as held to maturity investments but cannot be classified as held to maturity for two consecutive years due to “tainting” rules.

3. Loans and Receivables Loans and receivables are financial assets, which are generated by providing funds, goods or services to the debtor, with fixed or determinable repayment schedules and they are not traded in an active market.

The initial recognitions of loans and receivables are made at the cost of acquisition and subsequent valuations are made at amortized cost, which is calculated using the internal rate of return method. Any fees, transaction costs and other similar costs attributable to assets taken as collaterals for loans are reflected in the profit/loss accounts.

Retail and corporate loans that are followed under cash loans are accounted at original balances, based on their types, under the accounts defined by the Uniform Code of Accounts (UCA) and the Explanatory Manual. İşbank Annual Report 2009 115

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

Foreign currency indexed retail and commercial loans are converted to Turkish Lira at the rates prevailing at the opening date; they are followed under the Turkish Currency (“TL”) accounts, and amount of increases or decreases in the principal amount of the loans, depending on the exchange rate of the following periods being higher or lower than the ones on the lending date, are recognized in the profit/loss accounts. Repayment amounts are calculated at the exchange rate on the repayment date and the foreign exchange differences are reflected in the “Foreign Exchange Gains/Losses” account.

VIII. Explanations on Impairment of Financial Assets At each balance sheet date, the Bank evaluates the carrying amount of its financial assets or a group of its financial assets to determine whether there is an objective indication if those assets have suffered an impairment loss. Where there is an impairment, the Bank measures the related impairment amount.

A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to the occurrence (loss/damage event) of one or more than one event (or occurrence) subsequent to initial recognition of that asset; and such loss event causes an impairment loss as a result of the effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Irrespective of the materiality, no estimated loss that might arise from future events is recognized in the financial statements.

If there is an impairment loss in investments held to maturity, the amount of loss is measured as the difference between the book value and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate, and the book value of the asset shall be reduced by recognizing such loss. In the following periods, if the amount of impairment loss decreases, the previously recognized amount shall be reversed.

In case an available-for-sale financial asset, which is accounted at fair value and whose value increases and decreases are recognized directly in equity, is impaired, accumulated profit or loss that had been recognized directly in equity shall be removed from equity and recognized in period net profit or loss. If, in a subsequent period, the fair value of the related financial asset increases, the impairment loss is reversed.

Loans are classified and followed in line with the provisions of the “Regulation on Identification of Loans and Other Receivables and Provisioning against Them”, published on the Official Gazette nr.26333 dated 1 November 2006. Specific provision is allocated for the total amount of loans and other receivables, which is deemed non-performing, without being restricted by the minimum legal requirements stated in the related regulation, and such specific provisions are recognized in the income statement. The provisions, which are released within the same year, are credited to the “Provision Expenses” account and the released parts of the provisions from the previous years are transferred to and recognized in the “Other Operating Income” account.

Apart from specific provisions, the Bank also allocates general provisions against loans and other receivables, in line with the requirements set out in the regulation mentioned above.

IX. Explanations on Offsetting Financial Instruments Financial assets and liabilities are offset when the Bank has a legally enforceable right to offset, and when the Bank has an intention of collecting or paying the net amount of related assets and liabilities or when the Bank has the right to offset the assets and liabilities simultaneously.

X. Explanations on Sale and Repurchase Agreements and Securities Lending Transactions Securities subject to repo (repurchase agreements) are classified as “Financial Assets at Fair Value through Profit and Loss”, “Financial Assets Available for Sale”or “Investments Held to Maturity” according to their purposes to be held in the Bank’s portfolio and evaluated within the principles of the relevant portfolio.

Funds obtained from repurchase agreements are followed under the “Funds from Repo Transactions” account in liabilities, and interest expense accruals are calculated using the internal rate of return method on the difference between the sales and repurchase prices corresponding to the period designated by a repurchase agreement.

Reverse repo transactions are recorded under the “Receivables from Reverse Repurchase Agreements” account. Interest income accruals are calculated according to the internal rate of return method on the difference between the purchase and resale prices corresponding to the period designated by a reverse repo agreement. There are no reverse repurchase agreements as of December 31, 2009.

XI. Explanations on Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Assets held for sale are measured at the lower of the carrying value of assets and fair value less any cost incurred for disposal. Assets held for sale are not amortized and presented in the financial statements separately. An asset shall be classified as held for sale, only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Highly saleable condition requires a plan by the management regarding the sale of the asset to be disposed of (or else the group of assets), together with an active program for the determination of buyers as well as for the completion of the plan. Also the asset (or else the group of assets) shall be actively marketed in conformity with its fair value. Various events and conditions may extend the completion period of the disposal more than a year. If such delay arises from any events and conditions beyond the control of the entity and if there is sufficient evidence that the entity has an ongoing disposal plan for these assets, such assets (or else group of assets) are continued to be classified as assets held for sale (or else group of assets).

A discontinued operation is a part of the Bank’s business classified as sold or held-for-sale. The results of the discontinued operations are disclosed separately in the income statement. İşbank Annual Report 2009 116

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XII. Explanations on Goodwill and Other Intangible Assets As at the balance sheet date, The Bank does not have any goodwill in its accompanying unconsolidated financial statements.

Intangible assets are composed of software programs. The ones which were purchased before 1 January 2005, are presented at their inflation adjusted acquisition cost as of December 31, 2004, and the ones which were purchased in the following periods are presented with their acquisition costs less the accumulated amortization and impairment provisions. The related assets are amortized by the straight-line method in 1-3 years. The amortization method and period are periodically reviewed at the end of each year.

XIII. Explanations on Tangible Assets Tangible assets purchased before 1 January 2005, are presented in the financial statements at their inflation adjusted acquisition costs as of December 31, 2004, and the items purchased in the subsequent periods are presented at acquisition costs less accumulated amortization and impairment provisions.

Assets under construction for leasing or for administrative purposes or for other objectives, which are not presently determined, are amortized when they are ready for use.

The acquisition costs of tangible assets other than the land and the fixed assets under construction, are amortized by the straight-line method, according to their estimated useful lives. The estimated useful life, residual amount and the method of amortization are reviewed every year for the possible effects of the changes that occur in the estimates and if there is any change in the estimates, they are recognized prospectively.

Assets acquired through finance lease are amortized at the estimated useful life or the leasing period, whichever is shorter.

The difference between the sales proceeds arising from the disposal of tangible assets or the inactivation of a tangible asset and the book value of the tangible assets are recognized in the income statement.

Regular maintenance and repair costs incurred for tangible assets, are recorded as expense.

There are no restrictions such as pledges, mortgages on tangible assets.

The depreciation rates used in amortization of tangible assets and their estimated useful lives are as follows:

Estimated Economic Life (Year) Depreciation Rate Buildings 4-50 2-25% Safe Boxes 2-50 2-50% Other Movables 2-25 4-50% Leased Assets 4-5 20-25%

XIV. Explanations on Leasing Transactions Assets acquired through finance lease are capitalized by the lower of the fair values or the discounted values of the leasing payments, and the total amount of leasing payments are recorded as liabilities while the interest amounts are recorded as deferred interest expense. Finance lease payments are separated as financial expense and principal amount payment, which provides a decrease in finance lease liability, thus helps a fixed rate interest on the remaining principal amount of the debt to be calculated. Within the context of the Bank’s general borrowing policy, financial expenses are recognized in the income statement. Leased assets are recorded under “Tangible Assets” account and they are amortized by straight-line method.

The Bank conducts no leasing operations as a “Lessor”.

Transactions related to operating lease are accounted as per the provisions of the relevant agreement and on accrual basis.

XV. Explanations on Provisions and Contingent Liabilities Provision is set aside in the financial statements in case that a liability resulting from past events exists, that an outflow funds, which have economic use is probable in order to fulfill the liability and that the amount of the related liability can be estimated reliably.

The provision amount is calculated by estimating in the most reliable way the expense to be made as at the balance sheet date to fulfill the liability by considering the risks and uncertainties related to the liability.

In case the provision is measured by using the estimated cash flows required to fulfill the existing liability, the book value of the related liability is equal to the present value of the related cash flows.

In case there is no probability of resource outflow in order to fulfill the liability and that the amount of liability cannot be measured in a sufficiently reliable way, the liability is considered as “Contingent Liability” and information is provided thereon in the notes. İşbank Annual Report 2009 117

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XVI. Explanations on Contingent Assets Contingent Assets consist of unplanned or other unexpected events that usually cause a probable entry of economic uses in the Bank. Since showing the contingent assets in the financial statements may result in the accounting of an income, which will never be generated, the related assets are not included in the financial statements, but on the other hand, if the entry of the economic uses of these assets in the Bank is probable, an explanation is made thereon in the notes of the financial statements. Nevertheless, the developments related to the contingent assets are constantly evaluated and in case the entry of the economic use in the Bank is almost certain, the related asset and the respective income is shown in the financial statements of the period in which the change occurred.

XVII. Explanations on Liabilities Regarding Employee Benefits

1. Seniority Pay and Leave Entitlement According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay termination benefits for employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or (for the female employees) who have voluntarily quit within one year after the date of their marriage. Within the scope of TAS 19 “Employee Benefits”, the Bank allocates seniority pay provisions for employee benefits by estimating the present value of the probable future liabilities. The Bank also allocates provision for the unused vacation pay.

2. Retirement Rights Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (İşbank Pension Fund), of which each Bank employee is a member, has been established according to the provisional Article 20 of the Social Security Act No. 506. As per provisional article nr.23 of the Banking Law Nr.5411, it is ruled that Bank pension funds, which were established within the framework of Social Security Institution Law, will be transferred to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been determined as per the Cabinet decision dated 30 November 2006 nr. 2006/11345. However, the related article of the act has been cancelled upon the President’s request dated 02.11.2005, by the Supreme Court’s decision dated 22.03.2007, nr. E.2005/39, K.2007/33, which was published on the Official Gazette dated 31.03.2007 and nr. 26479 and the execution decision was ceased as of the issuance date of the related decision.

After the justified decree related to cancelling the provisional article 23 of the Banking Law was announced by the Constitutional Court on the Official Gazette dated 15 December 2007 and nr.26731, Turkish Grand National Assembly started to work on establishing new legal regulations, and after it was approved at the General Assembly of the TGNA, the Law nr. 5754 “Emendating Social Security and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated 08.05.2008 and nr. 26870, came into effect. The new law decrees that the contributors of the bank pension funds, the ones who receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject to this Law within 3 years after the release date of the related article, without any need for further operation, and that the three-year transfer period can be prolonged for maximum 2 years by the Cabinet decision. The above mentioned law also states that

• Related to the transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their income and expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8% will be used in the actuarial calculation of the value in cash, • And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered social rights and payments, despite being included in the trust indenture that they are subject to, will be continued to be covered by the pension funds and the employers of pension fund contributors.

On the other hand, on June 19th, 2008, the Republican People’s Party applied to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers. As at the date of publication of financial statements, there are no decisions announced by the Constitutional Court on the related issue.

In line with the new law, the Bank had an actuarial audit made for the aforementioned pension fund as of 31.12.2009 and set aside additional provisions for the difference between the amount of actuarial and technical deficit and the amount of provision set aside in the financial statements until the current period. The actuarial assumptions used in the related actuarial report are given in Part Five Note II-7.

Up to now, there has not been any deficit in Türkiye İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik Yardımlaşma Sandığı Vakfı (İşbank Members’ Supplementary Pension Fund), which has been founded by the Bank employees in accordance with the rules of the Civil Code and which provides subsequent retirement benefits; and the Bank has made no payment for this purpose. It is believed that the assets of this institution are capable of covering its total obligations, and that it shall not constitute an additional liability for the Bank.

XVIII. Explanations on Taxation In accordance with Article nr. 32 of the Corporate Tax Law nr. 5520, 20% rate is used in the calculation of the corporate tax. As per the related law, temporary tax is calculated and paid quarterly in line with the principles of the Income Tax Law and at the corporate tax rate. The temporary tax payments are deducted from the current period’s corporate tax. The temporary tax for the end of 2009 will be paid in February 2010 and will be offset with the current period’s corporate tax. İşbank Annual Report 2009 118

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Tax expense is the total amount of current tax and deferred tax. Tax liability for the current period is calculated over the taxable part of the period profit. Taxable profit differs from the profit reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax asset or liability is recognized by calculating the temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which are used in the computation of taxable profit and this calculation is made by using the balance sheet liability method based on enacted tax rates. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The general provisions and other provisions that are allocated for possible future risks are included in the tax base and they are not subject to deferred tax calculation. No tax assets or liabilities are recognized for the temporary timing difference that affects neither the taxable profit nor the accounting profit and that arises from the initial recognition in the balance sheet, of assets and liabilities, other than the goodwill and mergers.

The carrying values of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is measured at enacted tax rates prevailing in the period when the assets are realized or liabilities are settled, and the tax is recorded as income or expense in the income statement. Nonetheless, if the deferred tax is related to assets directly associated with the equity in the same or different period, it is directly recognized in the equity accounts.

Current taxes are offset with prepaid taxes due to being levied by the same taxation authority. Deferred tax assets and liabilities are also offset.

XIX. Additional Explanations on Borrowings The Bank resorts to obtaining funds from domestic or foreign institutions, as may be required. Such transactions are at first carried at acquisition cost, and in the following periods they are valued at amortized cost measured by using the internal rate of return method.

While the policies carried out are aiming at acquiring assets that would generate higher yields than the costs of borrowing instruments such as syndication, securitization, and collateralized borrowing, an effort is also made to ensure that the assets acquired are, as much as possible, of equal maturity or shorter, in order to avoid interest rate and liquidity risks.

Furthermore, the Bank aims to achieve an asset composition that is compatible, as much as possible, with the fixed/variable cost structure of borrowing instruments.

No convertible bonds or debt instruments are issued.

XX. Explanations on Share Certificates and Issues Costs incurred during the issue of shares are accounted as expenses.

Dividend payments are determined by the resolution of the General Assembly of Shareholders.

In the Ordinary General Meeting, which was held on March 31, 2009, resolution was made to distribute group C bonus shares to shareholders by way of injecting the capital with TL 323,054 of the 2008 profit. The process, which was started according to this resolution, to increase the paid-in capital by the same amount to TL 3,079,639, has been completed and the Bank’s paid-in capital was registered as TL 3,079,639. As a result of this increase, 8,076,341,775 group C shares were issued.

Weighted average number of shares outstanding is taken into account in the calculation of earnings per share. In case the number of shares increases by way of bonus issues as a result of the capital increases made by using the internal sources, the calculation of earnings per share is made by adjusting the weighted average number of shares, which were previously calculated as at the comparable periods. The adjustment means that the number of shares used in calculation is taken into consideration as if the bonus issue occurred at the beginning of the comparable period. In case such changes in the number of shares occur after the balance sheet date, but before the ratification of the financial statements to be published, the calculation of earnings per share are based on the number of new shares. The Bank’s earnings per share calculations taking place in the income statement are as follows.

Current Period Prior Period Profit attributable to shareholders 2,372,407 1,509,408 Weighted average number of share certificates ('000) 76,993,217 76,993,217 Earnings per share – in exact TL 0.030813195 0.019604428

XXI. Explanations on Bank Acceptances and Bills of Guarantee The Bank’s acceptances and bills of guarantee are accounted concurrently with the payments by customers, and are shown as potential liabilities and commitments under off-balance sheet items. İşbank Annual Report 2009 119

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

XXII. Explanations on Government Incentives The Bank has received no government incentives during the current or prior accounting periods.

XXIII. Explanations on Segment Reporting For the segmental reporting, focus is made on the field of activity method by taking into consideration the basic sources and qualities of the Bank’s risks and returns. Field of activity is a part of a company which presents a single product or a single service, or a correlated group of product or service, and which has distinguished characteristics that separate it from other fields of activities in terms of risk and return.

Information on the Bank’s activity segmentation is given in Part Four Note XI.

Part Four: Information on the Financial Structure

I. Explanations on Capital Adequacy Standard Ratio The Bank’s capital adequacy standard ratio is 18.31%.

The capital adequacy standard ratio is calculated by risk weighting of risk-weighted assets and non-cash loans in accordance with the ratios in the relevant legislation, and by adding the Value at Market Risk which is determined by the Standard Method, and the Value at Operational Risk which is determined by the Basic Indicator Approach, to the risk-weighted assets.

Information related to capital adequacy ratio:

Risk Weights Bank Only 0% 10% 20% 50% 100% 150% 200% Value at Credit Risk Balance Sheet Items (Net) 24,764,779 8,516,460 10,768,154 42,744,233 231,520 102,327 Cash 884,319 195 Securities in Redemption Balances with the Central Bank of Turkey 6,083,364 Balances with Domestic and Foreign Banks, Foreign Head Offices and Branches 8,108,064 309,477 Interbank Money Market Placements Receivables from Reverse Repo Transactions Reserve Deposits 1,761,360 Loans 1,938,603 200,011 10,557,873 34,505,152 231,520 102,327 Non-performing Loans (Net) Lease Receivables Financial Assets Available for Sale Investments Held to Maturity 12,399,910 14,797 Receivables From Installment Sale of Assets Sundry Debtors 6 521,896 Interest and Income Accruals 566,745 17,337 210,281 595,968 Investments in Associates, Subsidiaries and Jointly-Controlled Entities (Net) 5,030,817 Tangible Assets 1,713,974 Other Assets 1,130,472 190,853 52,152 Off Balance Sheet Items 3,064,406 419,325 624,902 10,809,388 Non-cash Loans and Commitments 3,064,406 62,332 624,902 10,714,447 Derivative Financial Instruments 356,993 94,941 Non- Risk-Weighted Accounts Total Risk Weighted Assets 27,829,185 8,935,785 11,393,056 53,553,621 231,520 102,327

Summary information about the bank only capital adequacy ratio:

Current Period Prior Period Value at Credit Risk (VaCR) 61,589,240 57,131,601 Value at Market Risk (VaMR) 5,692,075 5,215,625 Value at Operational Risk (VaOR) 8,984,569 7,699,174 Shareholders’ Equity 13,963,036 10,638,323 Shareholders’ Equity/(VaCR+VaMR+VaOR)*100 18.31 15.19 İşbank Annual Report 2009 120

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Information about the shareholders’ equity items:

Current Period Prior Period (31.12.2009) (31.12.2008) CORE CAPITAL (TIER I) Paid-In Capital 3,079,639 2,756,585 Nominal Capital 3,079,639 2,756,585 Capital Commitments (-) Paid-in Capital Inflation Adjustments 1,977,491 1,977,491 Share Premium 3,694 3,694 Share Cancellation Profits Legal Reserves 1,274,405 1,154,745 I. Legal Reserve (Turkish Commercial Code 466/1) 1,091,369 1,017,480 II. Legal Reserve (Turkish Commercial Code 466/2) 183,036 137,265 Other Legal Reserve Per Special Legislation Statutory Reserves Other Profit Reserves -9,205 -6,689 Extraordinary Reserves 3,468,758 2,675,926 Reserves Allocated by the General Assembly 2,964,085 2,592,410 Retained Earnings 504,673 83,516 Accumulated Loss Foreign Currency Share Capital Exchange Difference Legal, Statutory and Extraordinary Reserves Inflation Adjustments Profit 2,372,407 1,509,408 Current Period Profit 2,372,407 1,509,408 Prior Periods’ Profit Provision for Possible Losses (up to 25% of the Core Capital) 950,000 820,000 Gain on Sale of Associates, Subsidiaries and Real Estates Primary Subordinated Loans (up to 15% of the Core Capital) Losses Excess of Reserves (-) Current Period Loss Prior Periods’ Loss Leasehold Improvements (-) 103,854 Prepaid Expenses (-) 48,010 29,658 Intangible Assets (-) 32,754 56,674 Deferred Tax Asset excess of 10% of the Core Capital (-) Limit Excesses as per Paragraph 3 of Article 56 of the Banking Law (-) Total Core Capital 12,932,571 10,804,828 SUPPLEMENTARY CAPITAL (TIER II) General Loan Loss Provision 504,551 465,589 45% of Movables’ Revaluation Reserve 45% of Immovables’ Revaluation Reserve Bonus Shares of Associates, Subsidiaries and Jointly-Controlled Entities (Joint Ventures) 1,383 Primary Subordinated Loans Excluding the Portion included in the Core Capital Secondary Subordinated Loan 45% of Marketable Securities Revaluation Reserve (*) 596,230 -631,832 Associates and Subsidiaries 518,696 -615,805 Financial Assets Available for Sale 77,534 -16,027 Capital Reserves, Profit Reserves and Prior Periods’ Profit/Loss Inflation Adjustments (excluding the inflation adjustments to legal reserves, status reserves and extraordinary reserves) Total Supplementary Capital 1,102,164 -166,243

İşbank Annual Report 2009 121

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Current Period Prior Period (31.12.2009) (31.12.2008) TIER III CAPITAL CAPITAL 14,034,735 10,638,585 DEDUCTIONS FROM THE CAPITAL 71,699 262 Investments in unconsolidated entities (domestic/foreign) of which the Bank Keeps 10% or More of the Shares and Operating in Banking and Financial Sectors 262 262 Investments in entities (domestic/foreign) operating in Banking and Financial Sectors of which the Bank keeps the shares less than 10%, but exceeding 10% or more of the total core and supplementary capitals Loans to banks, financial institutions (domestic/foreign), holders of qualified shares in the form of secondary subordinated loan and loan instruments purchased from those parties qualified as primary or secondary subordinated loan Loans granted non-compliant with the articles 50 and 51 of the Banking Law Net book values of real estates exceeding 50% of the capital and of assets acquired against overdue receivables and held for sale as per article 57 of the Banking Law but retained more than five years 71,437 Others TOTAL SHAREHOLDERS’ EQUITY 13,963,036 10,638,323

(*) According to the related regulation, when calculating the supplementary capital, total balance amount is taken into consideration if the items subject to the Marketable Securities Revaluation Reserve have a negative balance, and 45% of the balance amount is taken into consideration if their balance is positive.

II. Explanations on Credit Risk

1. Credit risk is defined as the possibility of incurring loss where the counterparty in a transaction, partially or completely fails to meet its contractual obligations in due time in an agreement with the Bank.

The Bank’s position against the credit risk limits defined by the current legislation is monitored by the Board. Within this framework, loans extended to Risk Groups and the Bank’s Risk Group, including the Bank; large loans and limitations regarding the shares in participations are monitored according to the limits determined in connection with the size of the shareholders’ equity.

Credit risk limits of customers are determined depending on the financial situation and loan requirements of the borrowers, in strict compliance with the relevant banking legislation, within the framework of loan authorization limits of Branches, Regional Offices, Loan Divisions, the Deputy Chief Executives responsible for loans, the CEO, the Credit Committee and the Board of Directors. These limits may be changed as may be deemed necessary by the Bank. Moreover, all commercial credit limits are revised periodically, provided that each period does not exceed a year. Furthermore, the borrowers and borrower groups forming a large proportion of the overall placement are subject to risk limits in order to provide further minimization of potential risk.

The geographical distribution of borrowers is consistent with the concentration of industrial and commercial activities in Turkey.

The distribution of borrowers by sector is monitored closely for each period and sectoral risk limits have been determined to prevent concentration of risk in sectoral sense.

The credit-worthiness of customers is monitored on a consistent basis by using company rating and scoring models specially developed for this purpose, and the audit of statements of account received is assured to have been made in accordance with the provisions as stipulated by the relevant legislation.

Utmost importance is given to ensure that loans are furnished with collaterals. Most of the loans extended are collateralized by taking real estate, movable or commercial enterprise under pledge, promissory notes and other liquid assets as collateral, or by acceptance of bank letters of guarantee and individual or corporate guarantees.

2. There are certain control limits on forward transactions in terms of counter parties, and the risks taken for derivative instruments are evaluated along with other potential risks resulting from the market fluctuations.

3. As a result of the current level of customers’ needs and the progress in the domestic market in this particular area, the Bank uses derivative transactions either for hedging or for commercial purposes.

Derivative instruments, which consist a remarkable volume, are monitored with consideration that they can always be liquidated in case of need.

4. Liquidated non-cash loans are considered as having the same risk weights as unpaid cash loans. İşbank Annual Report 2009 122

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The rating and scoring systems applied by the Bank, includes detailed company analysis and enables rating of all companies and loans without any restrictions regarding credibility. Loans and companies, which have been renewed, restructured or rescheduled, are rated within the scope of this system. Specialized Loans are evaluated by a special rating system, which is based on the credibility of the counterparty as well as the feasibility and risk analysis of the cash flows created mainly by the projects undertaken or the asset financed.

5. Lending transactions abroad are conducted by determining the country risks of related countries within the context of the current rating system and by taking the market conditions, country risks, and the relevant legal limitations into account. Furthermore, the credibility of banks and other financial institutions established abroad is examined within the framework of the rating system that has been developed and credit limits are assigned accordingly.

6. (i) The share of the Bank’s receivables from the top 100 cash loan borrowers in the overall cash loan portfolio stands at 28% (31.12.2008: 26%).

(ii) The share of the Bank’s receivables from the top 100 non-cash loan borrowers in the overall non-cash portfolio stands at 44% (31.12.2008: 44%).

(iii) The share of the Bank’s cash and non-cash receivables from the top 100 borrowers in the overall cash and non-cash loans stands at 15% (31.12.2008: 16%).

Companies that are among the top 100 credit customers ranked according to cash, non-cash and total risks are leaders in their own sectors, the loans advanced to them are in line with their volume of industrial and commercial activity. A significant part of such loans is extended on a project basis, with their repayment sources being analyzed in accordance with the banking principles to be considered as satisfactory, and associated risks are determined and duly covered by obtaining appropriate guarantees when deemed necessary.

7. The total value of the general provisions allocated for credit risk stands at TL 504,551.

8. The following table shows maximum credit exposure to credit risk for the components of the financial statements.

Current Period Prior Period Financial Assets at Fair Value through Profit/Loss 499,006 451,878 Banks 8,432,564 6,788,148 Financial Assets Available for Sale 25,980,621 21,250,457 Loans 48,334,786 47,610,332 Investments Held to Maturity 12,929,454 3,461,854 Total 96,176,431 79,562,669 Guarantees and Suretyships 12,501,273 11,712,176 Commitments 37,076,394 18,885,925 Total Sensitivity to Credit Risk 145,754,098 110,160,770

9. Within the framework of the Bank’s rating and scoring system, classification of cash commercial and corporate loans and explanations of rating/scoring codes are as follows. (Following figures are in full amount.)

The Bank evaluates

- its customers, whose General Limit is below USD 60,000 or whose yearly net sales are below USD 1,000,000 with micro scoring,

- its customers whose General Limit is between USD 60,000 and USD 1,000,000 or whose yearly net sales are below USD 5,000,000 with SME scoring,

- its customers whose General Limit is above USD 1,000,000 or whose yearly net sales are above USD 5,000,000 with rating.

The rating/scoring results related to the cash commercial and corporate loans portfolio are classified as “Strong”, “Standard” and “Below Standard” by considering their default features. The loans whose borrowers’ capacity to fulfill their obligations is very good, are defined as “Strong”, whose borrowers’ capacity to fulfill its obligations in due time is reasonable, are defined as “Standard” and whose borrowers’ capacity to fulfill their obligations is poor, are defined as “Below Standard”. The percentage of the portfolio according to the rating/scoring results is as follows.

Strong 30.20% Standard 54.95% Below Standard 10.60% Not Rated/Scored 4.25%

İşbank Annual Report 2009 123

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10. The net values of the collaterals of the closely monitored loans are given below in terms of collateral types and risk matches.

Current Period Prior Period Type of Collateral Net Value of the Collateral Credit Balance Net Value of the Collateral Credit Balance Real Estate Mortgage (*) 1,008,533 1,008,533 625,473 625,473 Vehicle Pledge 163,244 163,244 180,305 180,305 Cash Collateral (Cash provisions, securities pledge, etc.) 14,243 14,243 17,080 17,080 Earnings Pledge 55,125 55,125 27,245 27,245 Cheques & Bills 35,632 35,632 33,918 33,918 Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 174,856 174,856 108,265 108,265 Non-collateralized 745,380 723,613 Interest and Income Accruals (**) 72,068 Total 1,451,633 2,197,013 992,286 1,787,967

(*) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports; and after comparing the results to the mortgage/pledge amounts and credit balances, the smallest figures are considered to be the net value of collaterals. (**) Interest and income accruals in the current period are shown in the related credit balances.

11. The net values of the collaterals of non-performing loans are given below in terms of collateral types and risk matches.

Current Period Prior Period Type of Collateral Net Value of the Collateral Credit Balance Net Value of the Collateral Credit Balance Real Estate Mortgage (*) 659,434 659,434 616,565 616,565 Cash Collateral 95 95 342 342 Vehicle Pledge 167,882 167,882 146,979 146,979 Other (suretyship, commercial enterprise under pledge, commercial papers, etc.) 70,334 70,334 124,139 124,139

(*) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports, and after comparing the results to the mortgage/pledge amounts and credit balances the smallest figures are considered to be the net value of collaterals.

12. As of December 31, 2009, loan quality in terms of financial assets is as follows:

Neither Past Due Past Due but Past Due Current Period nor Impaired not Impaired and Impaired Total Cash and Balances with the Central Bank of Turkey 8,759,973 8,759,973 Financial Assets at Fair Value through Profit/Loss 499,006 499,006 Banks 8,432,564 8,432,564 Financial Assets Available for Sale 25,980,621 25,980,621 Loans: Corporate/Commercial Loans (*) 32,928,975 (**)118,173 (***) 33,047,148 Consumer Loans 10,439,215 (**)57,202 (***) 10,496,417 Credit Cards 4,585,103 206,118 (***) 4,791,221 Investments Held to Maturity 12,929,454 12,929,454 Associates and Subsidiaries 5,031,079 5,031,079

* Corporate credit cards balance amounting to TL 219,509 is included in Credit Cards Balance. (The amount of overdue corporate credit cards is TL 4,862). **Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans, the principal amounts which are not due as of the balance sheet date are equal to TL 471,974 and TL 240,381 respectively. *** 100% Provisioning was made for all the impaired loans. İşbank Annual Report 2009 124

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Neither Past Due Past Due but Past Due Prior Period nor Impaired not Impaired and Impaired Total Cash and Balances with the Central Bank of Turkey 11,836,821 11,836,821 Financial Assets at Fair Value through Profit/Loss 451,878 451,878 Banks 6,788,148 6,788,148 Financial Assets Available for Sale 21,250,457 21,250,457 Loans: Corporate/Commercial Loans (*) 32,631,670 (**)208,619 (***) 32,840,289 Consumer Loans 10,126,328 (**)60,981 (***) 10,187,309 Credit Cards 4,346,825 235,909 (***) 4,582,734 Investments Held to Maturity 3,461,854 3,461,854 Associates and Subsidiaries 3,095,507 3,095,507

* Corporate credit cards balance amounting to TL 184,060 is included in Credit Cards Balance. (The amount of overdue corporate credit cards is TL 11,046). **Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans, the principal amounts which are not due as of the balance sheet date are equal to TL 518,476 and TL 281,945 respectively. *** 100% Provisioning was made for all the impaired loans.

13. The aging analysis of the past due but unimpaired loans in terms of financial asset classes is as follows:

Current Period 31-60 Days 61-90 Days Total Loans Corporate/Commercial Loans (*) 76,000 42,173 118,173 Consumer Loans (*) 37,581 19,621 57,202 Credit Cards 98,146 107,972 206,118 Total 211,727 169,766 381,493

(*) Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans; the principal amounts which are not due as of the balance sheet date are equal to TL 471,974 and TL 240,381 respectively.

Prior Period 31-60 Days 61-90 Days Total Loans Corporate/Commercial Loans (*) 98,724 109,895 208,619 Consumer Loans (*) 36,899 24,082 60,981 Credit Cards 136,827 99,082 235,909 Total 272,450 233,059 505,509

(*) Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans; the principal amounts which are not due as of the balance sheet date are equal to TL 518,476 and TL 281,945 respectively.

14. Carrying values of the financial assets, of which terms have been renegotiated, are shown below:

Current Period Prior Period Cash and Balances with the Central Bank of Turkey Financial Assets at Fair Value through Profit/Loss Banks Financial Assets Available for Sale Loans: 1,079,785 76,024 Corporate/Commercial Loans 695,989 55,936 Consumer Loans 124,595 Credit Cards 259,201 20,088 Investments Held to Maturity Associates and Subsidiaries İşbank Annual Report 2009 125

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15. Credit risk by types of borrowers and geographical concentration:

Loans to Individuals Loans to Banks and and Entities Other Financial Institutions Securities (*) Other Loans (**) Current Period Prior Period Current Period Prior Period Current Period Prior Period Current Period Prior Period Borrowers’ Concentration Private Sector 30,148,479 30,498,241 1,404,428 740,734 92,161 88,194 20,696,510 16,124,000 Public Sector 1,481,908 1,652,709 35,671,618 22,624,639 792,249 994,220 Banks 231,842 132,665 3,513,253 2,257,472 17,720,128 15,526,785 Retail Customers 15,068,129 14,585,983 13,385,775 12,266,001 Share Certificates 12,685 10,713 5,031,079 3,095,507 Geographical Concentration Domestic 46,088,472 46,021,658 1,261,000 650,633 35,736,773 22,667,089 39,543,583 32,276,189 European Union (EU) 85,666 107,812 367,069 213,425 3,537,755 2,295,778 12,324,582 13,317,880 OECD Countries (***) 1,543 367 1,973,152 842,131 Off-Shore Banking Regions USA, Canada 149 81 59 3,254,048 891,101 Other Countries 524,229 605,839 7,775 9,341 15,189 18,151 530,376 679,212 Total 46,698,516 46,736,933 1,636,270 873,399 39,289,717 24,981,018 57,625,741 48,006,513

(*) Includes financial assets at fair value through profit or loss, financial assets available for sale and investments held to maturity. (**) Includes banks, non-cash loans, commitments qua loans, share certificates, and derivative instruments. (***) OECD countries other than EU countries, USA and Canada.

16. Information on geographical concentration:

Fixed Capital Assets (*) Liabilities (**) Non-Cash Loans Investments Net Profit Current Period Domestic 95,235,236 81,303,839 11,975,626 12,622 2,822,620 European Union Countries 10,308,354 14,988,567 206,484 41,742(***) 5,582 OECD Countries (****) 892,650 360,012 83,882 Off-Shore Banking Regions -471,440 USA, Canada 887,109 1,269,072 28,696 Other Countries 856,254 1,808,286 206,585 15,645 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 4,989,337 Unallocated Assets/Liabilities Total 108,179,603 99,729,776 12,501,273 5,043,701 2,372,407

Prior Period Domestic 84,237,350 70,124,711 11,063,976 10,622 1,161,921 European Union Countries 8,155,085 13,496,505 242,613 41,742(***) 540 OECD Countries (****) 234,351 1,614,178 92,179 Off-Shore Banking Regions 325,925 USA, Canada 867,988 739,127 11,082 Other Countries 951,019 2,128,390 302,326 21,022 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 3,053,765 Unallocated Assets/Liabilities Total 94,445,793 88,102,911 11,712,176 3,106,129 1,509,408

(*) The sum of assets and fixed capital investments reflect total assets in the balance sheet. (**) Among Liabilities, the Shareholders’ Equity items are not taken into consideration. (***) The Balance indicates our subsidiaries located in EU countries. (****) OECD countries other than EU countries, the USA, and Canada. İşbank Annual Report 2009 126

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17. Sector concentration of cash loans:

Current Period Prior Period TL (%) FC (%) TL (%) FC (%) Agricultural 623,774 1.81 20,176 0.14 735,654 2.24 20,565 0.14 Farming and Raising Livestock 528,653 1.54 12,835 0.09 619,926 1.89 15,156 0.10 Forestry 69,923 0.20 1,893 0.01 86,885 0.26 1,210 0.01 Fishing 25,198 0.07 5,448 0.04 28,843 0.09 4,199 0.03 Industry 5,828,995 16.93 6,139,526 44.17 4,571,628 13.94 6,666,217 44.99 Mining 504,602 1.47 307,179 2.21 227,621 0.69 146,260 0.99 Production 5,155,849 14.97 4,516,814 32.50 4,268,923 13.02 5,952,836 40.17 Electricity, gas, and water 168,544 0.49 1,315,533 9.46 75,084 0.23 567,121 3.83 Construction 1,465,818 4.26 996,449 7.17 1,439,939 4.39 825,302 5.57 Services 11,166,801 32.43 5,261,372 37.85 10,596,017 32.32 5,745,663 38.77 Wholesale and Retail Trade 5,780,355 16.79 1,464,807 10.54 5,425,733 16.55 1,607,114 10.84 Hotel, Food and Beverage Services 388,175 1.13 250,121 1.80 401,466 1.22 122,449 0.83 Transportation and Telecommunication 2,402,855 6.98 2,100,601 15.11 2,413,419 7.36 1,610,208 10.86 Financial Institutions 1,032,987 3.00 488,301 3.51 621,860 1.90 1,118,261 7.55 Real Estate and Renting Services 562,781 1.63 527,880 3.80 782,437 2.39 706,896 4.77 Self-Employment Services 542,165 1.57 180,812 1.30 595,533 1.82 443,057 2.99 Education Services 154,389 0.45 172,382 1.24 121,701 0.37 99,707 0.67 Health and Social Services 303,094 0.88 76,468 0.55 233,868 0.71 37,971 0.26 Other 15,349,931 44.57 1,481,944 10.67 15,448,569 47.11 1,560,778 10.53 Total 34,435,319 100.00 13,899,467 100.00 32,791,807 100.00 14,818,525 100.00

III. Explanations on Market Risk: The market risk carried by the Bank is measured by two separate methods known respectively as the Standard Method and the Value at Risk Model in accordance with the local regulations adopted from internationally accepted practices. In this context, interest rate risk emerges as the most important component of the market risk.

The market risk measurements are carried out by applying the Standard Method at the end of each month and the results are included in the statutory reports as well as being reported to the Bank’s top management.

The Value at Risk Model (VAR) is another alternative for the Standard Method used for measuring and monitoring market risk. This model is used to measure the market risk on a daily basis in terms of interest rate risk, exchange rate risk and equity share risk and is a part of the Bank’s daily internal reporting. Further retrospective testing (back-testing) is carried out on a daily basis to determine the reliability of the daily risk calculation by the VAR model, which is used to estimate the maximum possible loss for the following day.

Scenario analyses which support the VAR model used to measure the losses that may occur in the ordinary market conditions are conducted, and the possible impacts of scenarios, that are developed based on the future predictions and the past crises, on the value of the Bank’s portfolio are determined and the results are reported to the Top Executive Management.

The limits set for the market risk management within the framework of the Bank’s asset liability management risk policy, are monitored by the Risk Committee and reviewed in accordance with the market conditions.

The following table shows details of the market risk calculations carried out with the “Standard Method for Market Risk Measurement” and within the context of “Regulation for Evaluating and Measuring the Capital Adequacy of Banks” as of December 31, 2009. İşbank Annual Report 2009 127

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1. Information on the market risk:

Amount (I) Capital to be Employed for General Market Risk – Standard Method 259,626 (II) Capital to be Employed for Specific Risk – Standard Method 36,265 (III) Capital to be Employed for Currency Risk – Standard Method 159,217 (IV) Capital to be Employed for Commodity Risk – Standard Method (V) Capital to be Employed for Settlement Risk – Standard Method (VI) Capital to be Employed for Market Risk of Options – Standard Method 258 (VII) Capital to be Employed for Market Risks of Banks Applying Risk Measurement Models (VIII) Total Capital to be Employed for Market Risk (I+II+III+IV+V+VI) 455,366 (IX) Value at Market Risk (12.5 x VIII) or (12.5 x VII) 5,692,075

2. Table of the average market risk related to the market risk calculated at the ends of months during the period:

Current Period Prior Period Average Highest Lowest Average Highest Lowest Interest Rate Risk 332,074 393,666 349,967 280,304 351,389 252,090 Share Certificate Risk 7,344 7,065 6,871 6,708 6,475 6,979 Currency Risk 123,580 161,687 26,879 107,468 164,518 56,338 Commodity Risk Settlement Risk Options Risk 171 100 122 875 444 2,464 Total Value at Risk 5,789,613 7,031,475 4,797,988 4,941,938 6,535,325 3,973,388

IV. Explanations on Operational Risk Operational risk is defined in general as “the risk of loss that may be arising from inadequate or ineffective internal processes, people, systems or other external factors”.

The classification of operational risks that might be encountered during the activities is followed by preparing the “Risk Catalog of the Bank”. This Risk Catalogue is the basis to be used in the definition and classification of all risks that may be exposed to and is updated parallel to the changing conditions.

The definitions related to operational risk, the methodology of its measurement and evaluation, and the responsibilities regarding operational risk management are stated in the “Operational Risk Policy”.

In the assessment of operational risk, “Self-Assessment Methodology” is applied. This method requires identifying the risks through the participation of the personnel who is responsible for undertaking the operation. Both qualitative and quantitative methods are used in the measurement and evaluation of operational risk. Information derived from the “Impact-Likelihood Analysis”, “Control Culture Survey” and “Loss Database” are used in the measurements.

All the operational risks that are carried during the operations, the risk levels of the operations and/or new products/services, together with the losses of the Bank arising from operational risks are regularly monitored by the Risk Management Department, and if deemed necessary, the risk levels are updated and periodically reported to the Risk Committee and the Board of Directors.

The operational risk, to which the Bank is exposed, is measured using the Basic Indicator Approach in which the average of 15% of the year-end gross incomes of the last three years is multiplied by 12.5, in line with the domestic regulations. The operational risk amount used for the current period is TL 8,984,569.

V. Explanations on Currency Risk The currency risk for the Bank is a result of the difference between the Bank’s assets denominated in foreign currencies and indexed to foreign currencies and liabilities denominated in foreign currencies. On the other hand, parity fluctuations of different foreign currencies are also another element of the currency risk.

The currency risk is managed by the internal currency risk limits which are established as a part of the Bank’s risk policies. The Assets and Liabilities Committee and the Assets and Liabilities Management Unit meet regularly to take the necessary decisions for hedging exchange rate and parity risks, within the limits of “Net FC Overall Position/Shareholders’ Equity” ratio, which is a part of the legal requirement, and decisions made on such compliance are strictly applied.

In measuring exchange rate risk, both the Standard Method and the Value at Risk Model (VAR) are used as applied in the statutory reporting.

Measurements made within the scope of the Standard Method are carried out on a monthly basis and form the basis of determining the capital requirement for hedging exchange rate risk. İşbank Annual Report 2009 128

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Risk measurements made within the context of the Value at Risk Model (VAR) are made on a daily basis using the historical and Monte Carlo simulation methods. Furthermore, scenario analyses are conducted to support the calculations made within the VAR context.

The results of the measurements made on exchange rate risk are reported to the Top Management and the risks are closely monitored by taking into account the market and the economic conditions.

Foreign exchange buying rates of the Bank at the date of the balance sheet and for the 5 working days prior to the related date:

Date USD EURO YEN 31.12.2009 1.4900 2.1322 0.0160 30.12.2009 1.5000 2.1450 0.0162 29.12.2009 1.5000 2.1608 0.0163 28.12.2009 1.5000 2.1600 0.0164 25.12.2009 1.5000 2.1600 0.0165 24.12.2009 1.4790 2.1253 0.0161

The Bank’s average FC buying rate over a period of thirty days preceding the date of the financial statement:

USD: 1.4765 TL EURO: 2.1481 TL YEN: 0.0164 TL

Sensitivity to currency risk: The Bank’s sensitivity to any potential change in foreign currency rates has been analyzed. In the analysis presented below 10% change, which is also the amount used for the internal reporting purposes, is anticipated in USD, EUR and GBP.

% Change in Foreign Currency Effects on Profit/Loss (*) Current Period Prior Period USD 10% increase 185,539 -37,663 10% decrease -185,539 37,663 EURO 10% increase -110,011 90,934 10% decrease 110,011 -90,934 GBP 10% increase 4,042 -6,595 10% decrease -4,042 6,595 (*) Indicates the values before tax. İşbank Annual Report 2009 129

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Information on currency risk:

EURO USD Yen Other FC Total Current Period Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 2,739,613 110,397 105 116,406 2,966,521 Banks 4,201,704 3,125,277 1,911 902,051 8,230,943 Financial Assets at Fair Value through Profit/Loss (1) 27,374 42,878 70,252 Money Market Placements Financial Assets Available for Sale 1,162,891 9,401,093 10,563,984 Loans (2) 4,523,819 10,711,009 94,212 124,013 15,453,053 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 41,742 41,742 Investments Held to Maturity 1,318,530 2,146 5,464 1,326,140 Derivative Financial Assets Held for Hedging Purposes Tangible Assets 60 2,542 2,602 Intangible Assets Other Assets (1) 3,480 306,137 11 1,131 310,759 Total Assets 14,019,153 23,698,997 96,239 1,151,607 38,965,996

Liabilities Banks Deposits 619,725 245,094 23 207,775 1,072,617 Foreign Currency Deposits (3) 11,049,314 14,337,633 7,956 1,037,871 26,432,774 Money Market Funds 1,441,894 3,157,911 4,599,805 Funds Provided from Other Financial Institutions 1,850,682 5,494,759 229 2,999 7,348,669 Marketable Securities Issued Sundry Creditors 65,996 87,994 1,471 5,497 160,958 Derivative Financial Liabilities Held for Hedging Purposes Other Liabilities (1) 52,543 246,795 16 2,795 302,149 Total Liabilities 15,080,154 23,570,186 9,695 1,256,937 39,916,972

Net On Balance Sheet Position -1,061,001 128,811 86,544 -105,330 -950,976 Net Off Balance Sheet Position -42,012 969,870 -3,771 179,710 1,103,797 Derivative Financial Assets (4) 511,143 2,711,017 8,811 187,321 3,418,292 Derivative Financial Liabilities (4) 553,155 1,741,147 12,582 7,611 2,314,495 Non-Cash Loans 2,776,017 4,515,524 83,998 66,063 7,441,602 Prior Period Total Assets 12,221,611 25,958,799 202,924 951,627 39,334,961 Total Liabilities 11,537,236 22,979,544 43,788 1,023,944 35,584,512 Net Balance Sheet Position 684,375 2,979,255 159,136 -72,317 3,750,449 Net Off Balance Sheet Position 134,031 -3,612,072 91,496 -3,386,545 Derivative Financial Assets 756,523 1,314,414 94,682 2,165,619 Derivative Financial Liabilities 622,492 4,926,486 3,186 5,552,164 Non-Cash Loans 2,735,460 4,836,720 121,434 70,272 7,763,886

(1) In accordance with the principles of the “Regulation on Measurement and Practices of Banks’ Net Overall FC Position/Shareholders’ Equity Ratio on a Consolidated and Unconsolidated Basis”, Derivative Financial Instruments Foreign Currency Income Accruals (TL 22,302), Prepaid Expenses (TL 35,355) in assets and Derivative Financial Instruments Foreign Currency Expense Accruals (TL 59,865) and Shareholders’ Equity (TL 36,135) in liabilities are not taken into consideration in the currency risk measurement, (2) Includes foreign currency indexed loans, which are followed under TL accounts, Of the total amount of TL 1,553,586 of the aforementioned loans; TL 946,885 is USD indexed, TL 497,709 is EUR indexed, TL 20,388 is CHF indexed, TL 814 is GBP indexed, TL 87,766 is JPY indexed and TL 24 is CAD indexed, (3) The item includes TL 112,695 precious metals deposit accounts, (4) The derivative transactions are taken into consideration within the context of the forward foreign currency trading definitions in the above mentioned Regulation.

VI. Explanations on Interest Rate Risk Interest rate risk is defined as the increase or decrease that can arise in the value of interest sensitive assets and liabilities of the bank as a result of interest rate fluctuations. Measurement of interest rate risk is conducted through the scenario analysis on structural interest rate. İşbank Annual Report 2009 130

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Potential effects of interest rate risk on the Bank’s assets and liabilities, market developments, the general economic environment and expectations are regularly covered in meetings of the Asset-Liability Committee, where further measures to reduce risk are taken when necessary.

The Bank’s on and off-balance sheet interest sensitive accounts other than the assets and liabilities exposed to market risk are monitored and controlled by the limits above the average maturity gaps according to the repricing periods determined by the Board within the scope of asset-liability management risk policy. Moreover, scenario analyses formed in line with the expectations are also used in the management of the related risk.

Interest rate sensitivity: In this part, the sensitivity of the Bank’s assets and liabilities to the interest rates has been analyzed assuming that the year end balance figures were the same throughout the year.

During the measurement of the Bank’s interest rate sensitivity, the difference between the portfolio values of the asset and liability items evaluated with market value and the portfolio value calculated by using the interest shock applied discount curve, is considered as the reflection of the interest shock to the income statement accounts.

On the other hand, in the profit/loss calculation of assets and liabilities that are not evaluated by the current market prices, it is assumed that assets and liabilities with fixed interest rates will be renewed at maturity date and the assets and liabilities having variable interest rates will be renewed at the end of repricing period with the market interest rates generated after the interest shock.

Within this context, ceteris paribus, the possible changes that may occur in the Bank’s profit and shareholders’ equity in case of 3 and 5 points increase/ decrease in TL interest rates, and 1 and 2 points increase/decrease in FC interest rates on the reporting day are given below.

% Change in the Interest Rate (*) Effect On Profit/Loss (**) Effect on Equity (***) TL FC (****) Current Period Prior Period Current Period Prior Period 3% increase 1% increase -583,858 -649,248 -211,892 -56,706 3% decrease 1% decrease 324,762 489,229 242,425 62,706 5% increase 2% increase -1,032,216 -1,121,333 -339,368 -91,614 5% decrease 2% decrease 503,130 820,224 425,267 108,370

(*) The effects on the profit/loss and shareholders’ equity are stated with their before tax values. (**) The effect on the profit/loss is mainly arising from the fact that the average maturity of the Bank’s fixed rate liabilities is shorter than the average maturity of its fixed rate assets. (***) The effect on the shareholders’ equity is arising from the change of the fair value of securities followed under Financial Assets Available for Sale. (****) Due to the reason that the LIBOR rates were at low levels in both of the periods, the negative shock imposed on FC interest rates in some maturity brackets remained below the aforementioned rates.

İşbank Annual Report 2009 131

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Interest rate sensitivity of assets, liabilities and off balance sheet items (Based on repricing periods)

Up to 5 Years Non-interest Current Period 1 Month 1-3 Months 3-12 Months 1-5 Years and Over Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 5,230,494 3,529,479 8,759,973 Banks 6,307,481 124,699 1,936,668 63,716 8,432,564 Financial Assets at Fair Value through Profit/Loss 152,429 129,789 145,345 69,748 1,632 63 499,006 Money Market Placements Financial Assets Available for Sale 5,280,866 9,693,036 1,856,205 5,394,247 3,687,928 68,339 25,980,621 Loans 17,022,605 5,452,088 9,999,431 14,470,975 1,369,182 20,505 48,334,786 Investments Held to Maturity 151,358 5,170,661 3,352,194 4,255,241 12,929,454 Other Assets 117,196 15 7 89 8,169,593 8,286,900 Total Assets 34,262,429 20,570,288 17,289,850 24,190,300 5,058,742 11,851,695 113,223,304

Liabilities Banks Deposits 1,434,486 254,819 86,067 83,648 1,859,020 Other Deposits 48,080,176 10,702,129 4,096,421 80,056 7,359,261 70,318,043 Money Market Funds 6,693,783 2,586,845 1,564,630 138,620 10,983,878 Sundry Creditors 1,130 1,936,403 1,937,533 Marketable Securities Issued Funds Provided from Other Financial Institutions 545,778 5,744,394 1,411,802 1,997,485 44,400 9,743,859 Other Liabilities* 117,142 270,681 175,667 9,631 17,807,850 18,380,971 Total Liabilities 56,872,495 19,558,868 7,334,587 2,225,792 44,400 27,187,162 113,223,304

Balance Sheet Long Position 1,011,420 9,955,263 21,964,508 5,014,342 37,945,533 Balance Sheet Short Position -22,610,066 -15,335,467 -37,945,533 Off Balance Sheet Long Position 1,303,757 1,982,250 3,286,007 Off Balance Sheet Short Position -244,480 -3,013,200 -3,257,680 Total Position -21,306,309 2,993,670 9,710,783 18,951,308 5,014,342 -15,335,467 28,327

(*) Shareholders’ equity is shown in “non-interest bearing” column. İşbank Annual Report 2009 132

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Interest rate sensitivity of assets, liabilities and off balance sheet items (Based on repricing periods)

Up to 5 Years Non-interest 1 Month 1-3 Months 3-12 Months 1-5 Years and Over Bearing Total Prior Period Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 11,243,492 593,329 11,836,821 Banks 4,084,659 259,529 2,266,444 177,516 6,788,148 Financial Assets at Fair Value through Profit/Loss 95,529 155,360 112,013 88,204 681 91 451,878 Money Market Placements Financial Assets Available for Sale 2,172,341 7,536,411 2,910,871 4,570,181 4,012,650 48,003 21,250,457 Loans 16,256,644 6,249,630 9,979,874 13,589,453 1,477,832 56,899 47,610,332 Investment Held to Maturity 811,400 2,650,454 3,461,854 Other Assets 21 118 258 48 6,151,987 6,152,432 Total Assets 33,852,686 15,012,448 17,919,914 18,247,886 5,491,163 7,027,825 97,551,922

Liabilities Banks Deposits 1,234,232 90,365 6,422 56,810 1,387,829 Other Deposits 37,369,042 14,850,753 3,714,718 121,109 6,095,734 62,151,356 Money Market Funds 5,952,468 558,434 495,654 7,006,556 Sundry Creditors 1,608,325 1,608,325 Marketable Securities Issued Funds Provided from Other Financial Institutions 2,155,582 5,715,444 952,035 2,165,776 44,400 11,033,237 Other Liabilities* 157,897 104,058 663,156 173,330 13,266,178 14,364,619 Total Liabilities 46,869,221 21,319,054 5,831,985 2,460,215 44,400 21,027,047 97,551,922

Balance Sheet Long Position 12,087,929 15,787,671 5,446,763 33,322,363 Balance Sheet Short Position -13,016,535 -6,306,606 -13,999,222 -33,322,363 Off Balance Sheet Long Position 130,000 1,064,197 19,325 1,213,522 Off Balance Sheet Short Position -1,117,640 -1,117,640 Total Position -12,886,535 -5,242,409 12,107,254 14,670,031 5,446,763 -13,999,222 95,882

(*) Shareholders’ equity is shown in “non-interest bearing” column.

İşbank Annual Report 2009 133

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Average interest rates applied to monetary financial instruments:

EURO USD Yen TL Current Period % % % % Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 5.20 Banks 0.22 1.03 6.19 Financial Assets at Fair Value through Profit/Loss 3.43 5.13 10.83 Money Market Placements Financial Assets Available for Sale 4.40 5.14 9.79 Loans 4.66 3.95 4.14 16.45 Investments Held to Maturity 0.44 1.00 13.16 Liabilities Banks Deposits 1.07 2.18 7.18 Other Deposits 1.89 2.21 0.02 7.67 Money Market Funds 0.78 2.18 6.67 Sundry Creditors Marketable Securities Issued Funds Provided from Other Financial Institutions 2.81 1.43 2.78 15.99

EURO USD Yen TL Prior Period % % % % Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 1.18 0.15 12.00 Banks 1.90 2.97 0.04 13.88 Financial Assets at Fair Value through Profit/Loss 7.13 8.64 15.66 Money Market Placements Financial Assets Available for Sale 4.99 5.94 18.91 Loans 6.68 4.27 3.71 23.40 Investments Held to Maturity 1.00 2.00 18.45 Liabilities Banks Deposits 2.69 1.67 1.00 17.58 Other Deposits 3.14 3.63 0.13 16.83 Money Market Funds 3.19 2.88 14.34 Sundry Creditors Marketable Securities Issued Funds Provided from Other Financial Institutions 3.61 2.71 1.57 16.15

VII. Explanations on Liquidity Risk Liquidity risk can arise as a result of funding long-term assets with short-term resources. Utmost care is taken to maintain the consistency between the maturities of assets and liabilities; strategies are used to acquire funds over longer terms.

The Bank’s principal source of funding is deposits. While the average maturity of deposits is shorter than the average maturity of assets as a result of the market conditions, the Bank’s wide network of branches and steady residual deposit base are its most important safeguards of the supply of funds. On the other hand, medium and long-term funds are acquired from institutions abroad.

In order to meet the liquidity requirements that may emerge from market fluctuations, considerable attention is paid to preserve liquid assets, efforts in this framework are supported by TL and FC cash flows projections. The term structure of TL and FC deposits, their costs and movements in the total amounts are monitored on a daily basis, also accounting for developments in former periods and expectations for the future. Furthermore, foreign currency and total liquidity adequacy ratio, which are subject to weekly legal reporting and calculated separately for 7 and 31 days following the reporting date, and liquidity adequacy ratios calculated under the classification of foreign currencies for maturity segments of 7 days, 31 days, 1 month, 3 months and 12 months are also used as indicators to monitor liquidity. Based on cash flow projections, prices are differentiated for different maturities and thereby measures are taken to meet liquidity requirements; moreover liquidity that may be required for extraordinary circumstances is estimated and alternative liquidity sources are determined for possible utilization.

Evaluated within the framework of the Bank’s asset-liability management risk policy, the limits determined related to the liquidity risk management are monitored by the Risk Committee and in case of extraordinary situations where a quick action should be taken due to the unfavorable market conditions, emergency measures and funding plans related to liquidity risk are put into effect. İşbank Annual Report 2009 134

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

As per the Communiqué on “Measurement and Assessment of the Adequacy of Banks’ Liquidity”, the liquidity ratios that are measured for terms of 7 and 31 days should not be less than 80% and 100%, respectively. Foreign currency liquidity adequacy ratio means the ratio of foreign currency assets to foreign currency liabilities and the total liquidity adequacy ratio means the ratio of total assets to total liabilities. The highest, lowest and average liquidity adequacy ratios for 2009 are given below, compared to the prior period.

Current Period First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) 274.43 267.63 143.14 146.45 Highest (%) 426.40 347.42 179.13 165.92 Lowest (%) 172.63 200.73 114.21 126.64

Prior Period First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) 247.23 194.81 170.51 136.78 Highest (%) 395.63 297.36 245.77 174.18 Lowest (%) 158.42 154.42 126.77 116.79

Presentation of assets and liabilities according to their remaining maturities:

Up to 1 5 Years Current Period Demand Month 1-3 Months 3-12 Months 1-5Years and Over Unallocated (*) Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 8,729,238 30,735 8,759,973 Banks 298,566 5,774,632 65,099 133,767 2,115,800 44,700 8,432,564 Financial Assets at Fair Value through Profit/Loss 63 58,709 22,810 81,568 334,222 1,634 499,006 Money Market Placements Financial Assets Available for Sale 68,339 1,170,332 4,479,903 3,186,113 12,682,560 4,393,374 25,980,621 Loans 5,329,774 8,338,826 4,512,827 11,862,203 16,197,025 2,094,131 48,334,786 Investments Held to Maturity 1,316,590 15,180 11,446,326 151,358 12,929,454 Other Assets 815 379,438 28,115 422 236,050 121,000 7,521,060 8,286,900 Total Assets 14,426,795 15,721,937 10,456,079 15,279,253 43,011,983 6,806,197 7,521,060 113,223,304

Liabilities Bank Deposits 198,125 1,320,009 254,819 86,067 1,859,020 Other Deposits 11,060,636 44,378,715 10,702,118 4,096,518 80,056 70,318,043 Funds Provided from Other Financial Institutions 169,369 733,447 3,915,676 4,715,743 209,624 9,743,859 Money Market Funds 6,471,285 2,527,143 1,392,466 223,064 369,920 10,983,878 Marketable Securities Issued Sundry Creditors 964,650 888,186 1,249 6,858 76,590 1,937,533 Other Liabilities 45,745 291,203 443,106 84,276 103,400 17,413,241 18,380,971 Total Liabilities 12,269,156 53,518,767 14,661,882 9,581,861 5,198,853 579,544 17,413,241 113,223,304 Liquidity Gap 2,157,639 -37,796,830 -4,205,803 5,697,392 37,813,130 6,226,653 -9,892,181

Prior Period (31.12.2008) Total Assets 17,189,301 11,567,757 6,019,106 15,993,968 33,280,297 8,073,669 5,427,824 97,551,922 Total Liabilities 9,618,405 42,508,368 16,878,867 9,237,170 6,193,569 207,047 12,908,496 97,551,922 Liquidity Gap 7,570,896 -30,940,611 -10,859,761 6,756,798 27,086,728 7,866,622 -7,480,672

(*) Asset items, such as Tangible Assets, Subsidiaries and Associates, Office Supply Inventory, Prepaid Expenses and Non-Performing Loans, which are required for banking operations and which cannot be converted to cash in short-term, other liabilities such as Provisions which are not considered as payables and Shareholders’ Equity, are shown in “Unallocated” column. İşbank Annual Report 2009 135

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

In compliance with the Turkish Financial Reporting Standard nr.7, the following table indicates the maturities of the Bank’s major financial assets and liabilities which are not qualified as derivatives. The following tables have been prepared by referencing the earliest dates of collections and payments without discounting the assets and liabilities. The interest to be collected from and paid to the related assets and liabilities is included in the following table. Adjustments column shows the items that may cause possible cash flows in the following periods. The values of the related assets and liabilities registered in balance sheet do not include these amounts.

Up to 1 1-3 3-12 5 Years Balance Current Period Demand Month Months Months 1-5 Years and Over Total Adjustments Sheet Value Assets Financial Assets Held for Trading 63 3,949 19,271 76,476 302,028 2,491 404,278 24,636 379,642 Banks 298,566 5,774,860 65,340 143,123 2,172,012 45,851 8,499,752 67,188 8,432,564 Financial Assets Available for Sale 68,339 1,486,219 4,914,918 4,000,625 15,568,681 6,916,750 32,955,532 6,974,911 25,980,621 Loans 5,329,774 8,486,776 5,041,608 13,792,721 19,256,299 2,372,005 54,279,183 5,944,397 48,334,786 Investments Held to Maturity 3,459 1,792,989 731,653 14,052,669 163,875 16,744,645 3,815,191 12,929,454

Liabilities Deposits 11,258,761 45,855,947 11,051,512 4,261,024 84,751 72,511,995 334,932 72,177,063 Funds Provided from Other Financial Institutions 185,881 750,060 4,153,060 5,331,935 339,861 10,760,797 1,016,938 9,743,859 Money Market Funds 6,475,967 2,552,451 1,423,201 270,575 408,521 11,130,715 146,837 10,983,878

Up to 1 1-3 3-12 5 Years Balance Prior Period Demand Month Months Months 1-5 Years and Over Total Adjustments Sheet Value Assets Financial Assets Held for Trading 91 8,368 23,190 43,843 273,237 1,144 349,873 81,166 268,707 Banks 478,317 3,704,205 183,709 216,636 2,389,504 50,572 7,022,943 234,795 6,788,148 Financial Assets Available for Sale 48,003 398,523 1,405,508 2,658,071 16,928,676 7,743,595 29,182,376 7,931,919 21,250,457 Loans 4,888,281 7,602,063 5,433,400 14,547,409 19,702,330 2,534,607 54,708,090 7,097,758 47,610,332 Investments Held to Maturity 75,947 2,368,812 1,690,314 768,667 4,903,740 1,441,886 3,461,854

Liabilities Deposits 8,787,962 36,163,826 15,205,241 3,834,725 130,093 64,121,847 582,662 63,539,185 Funds Provided from Other Financial Institutions 571,377 685,474 4,511,658 6,746,521 229,589 12,744,619 1,711,382 11,033,237 Money Market Funds 5,014,902 1,124,584 658,835 211,559 7,009,880 3,324 7,006,556

The following table shows the remaining maturities of non-cash loans.

Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Letters of Credit 245,552 324,374 583,584 935,417 486,840 2,575,767 Endorsements 5,960 23,658 11,920 41,538 Letters of Guarantee 5,508,944 166,582 592,251 2,059,381 1,090,028 148,135 9,565,321 Acceptances 41,332 17,985 36,725 43,501 11,652 151,195 Other 167,452 167,452 Total 5,963,280 514,901 1,236,218 3,050,219 1,588,520 148,135 12,501,273

Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Letters of Credit 634,881 228,494 557,463 1,210,347 822,769 3,209 3,457,163 Endorsements Letters of Guarantee 4,689,046 141,775 378,372 1,601,465 1,167,134 69,422 8,047,214 Acceptances 21,557 16,594 27,647 49,738 15,180 130,716 Other 77,083 77,083 Total 5,422,567 386,863 963,482 2,861,550 2,005,083 72,631 11,712,176 İşbank Annual Report 2009 136

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

The following table shows the remaining maturities of derivative financial assets and liabilities.

Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Forwards Contracts- Buy 291,742 304,076 586,811 156,161 1,338,790 Forwards Contracts- Sell 291,626 303,868 586,389 156,020 1,337,903 Swaps-Buy 1,134,812 34,229 302,333 4,246,955 1,189,905 6,908,234 Swaps-Sell 1,144,544 33,821 248,813 4,270,906 1,189,905 6,887,989 Futures-Buy Futures-Sell Options-Call 663,115 167,404 511,274 426,440 1,768,233 Options-Put 642,115 156,404 496,274 426,440 1,721,233 Other 16,222 16,222 Total 4,167,954 1,016,024 2,731,894 9,682,922 2,379,810 19,978,604

Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Forwards Contracts- Buy 941,186 821,120 1,057,743 51,231 2,871,280 Forwards Contracts- Sell 1,039,152 857,750 1,093,983 51,193 3,042,078 Swaps-Buy 847,471 91,452 1,150,000 2,088,923 Swaps-Sell 847,629 92,776 1,150,000 2,090,405 Futures-Buy Futures-Sell Options-Call 254,594 225,373 1,220,680 481,800 2,182,447 Options-Put 284,530 188,592 1,230,180 471,600 2,174,902 Other 480,725 582,840 1,063,565 Total 4,214,562 2,277,063 5,083,311 3,938,664 15,513,600

VIII. Explanations on Other Price Risks The Bank is exposed to the equity share risk arising from its investments in companies which are traded on the ISE. Equity shares are generally obtained for investment purposes.

As of the reporting date, Bank’s sensitivity to equity shares price risk has been analyzed. In the analysis, it is assumed that all the other variables are constant and the data used in the valuation method (share prices) are 10% more/less. According to this assumption TL 334,797 (31.12.2008: TL 143,765) increase/ decrease is expected in the Marketable Securities Revaluation Reserve account under the Shareholders’ Equity. This, in fact, is arising from the increase/ decrease in the fair values of the publicly-traded subsidiaries and associates.

IX. Explanations on Presentation of Assets and Liabilities at Fair Value

1. Information on fair values of financial assets and liabilities

Book Value Fair Value Current Period Prior Period Current Period Prior Period Financial Assets 95,677,425 79,110,791 98,019,978 78,674,018 Money Market Placements Banks 8,432,564 6,788,148 8,439,838 6,802,486 Financial Assets Available for Sale 25,980,621 21,250,457 25,980,621 21,250,457 Investments Held to Maturity 12,929,454 3,461,854 13,801,721 3,488,485 Loans 48,334,786 47,610,332 49,797,798 47,132,590 Financial Liabilities 83,858,455 76,180,747 84,208,159 76,099,681 Banks Deposits 1,859,020 1,387,829 1,860,610 1,388,956 Other Deposits 70,318,043 62,151,356 70,365,943 62,158,338 Funds Provided from Other Financial Institutions 9,743,859 11,033,237 10,044,073 10,944,062 Marketable Securities Issued Sundry Creditors 1,937,533 1,608,325 1,937,533 1,608,325

Fair values of investments held to maturity are determined by using the market prices; in cases where market prices cannot be measured, quoted market prices of other securities that are subject to amortization having similar interest, maturity and other conditions are taken as the basis for the fair value determination.

Market prices are taken into account in determining the fair values of the securities available for sale. When the prices cannot be measured in an active market, fair values are not deemed to be reliably determined and amortized cost, calculated by the internal rate of return method, are taken into account as the fair values. İşbank Annual Report 2009 137

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Fair values of banks, loans granted, deposits and funds borrowed from other financial institutions are calculated by discounting the amounts in each maturity bracket formed according to repricing periods, using the rate corresponding to relevant maturity bracket in the discount curves based on current market conditions.

2. Information on fair value measurements recognized in the financial statements TFRS 7 “Financial Instruments: Disclosures” standard requires the items, which are recognized in the balance sheet at their fair values to be shown in the notes by being classified within a range. According to this, the related financial instruments are classified into three levels in such a way that they will express the significance of the data used in fair value measurements. At the first level, there are financial instruments, whose fair values are determined according to quoted prices in active markets for identical assets or liabilities, at the second level, there are financial instruments, whose fair values are determined by directly or indirectly observable market data, and at the third level, there are financial instruments, whose fair values are determined by the data, which are not based on observable market data. The financial assets, which are recognized in the balance sheet at their values, are shown below as classified according to the aforementioned principles of ranking.

Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities 379,579 Share Certificates 63 Derivative Financial Assets Held for Trading 119,364 Other Financial Assets Available-for-Sale* Debt Securities 15,404,015 10,508,267 Other 55,717 Investments in Subsidiaries and Associates** 3,347,970 Derivative Financial Liabilities 486,822

* The fair values of debt securities, which are classified at the third level are determined by the internal rate of return method. Since they are not traded in an active market, the share certificates (TL 12,622) under the financial assets available-for-sale are shown in the financial statements at acquisition cost and the related securities are not shown in this table. ** Since the unlisted investments in associates and subsidiaries are recognized at acquisition cost within the framework of TAS 39, these companies are not included in the table.

There has not been any transition between level 1 and level 2 during the period.

The movement table of financial assets available-for-sale at level 3 are given below.

Balance at the Beginning of the Period 12,607,114 Purchases 8,375,417 Redemption or Sales 9,860,015 Valuation Difference -614,249 Balance at the end of the Period 10,508,267

X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions

1. Transactions in connection with the trading of government bonds and repo intermediation are being carried out on the ISE (Istanbul Stock Exchange) Bond Market in the name and on the account of certain participations and customers with a portfolio larger than a certain size. Furthermore, all securities in customer portfolios are kept under custody. Due to the provisions of the Capital Market Law, the Bank is not able to provide management and consultancy services in connection with transactions on capital markets.

2. The Bank has no fiduciary transactions.

XI. Explanations on Business Segmentation The Bank’s operations are classified as corporate, commercial, retail and private banking, as well as treasury/investment banking.

The Bank provides services to the large corporations, SMEs and other trading companies (excluding real person merchants) through various financial media within the course of its corporate and commercial operations. Services such as project financing, operating and investment loans, deposit and cash management, credit cards, cheques and bills, foreign trade transactions and financing, letter of guarantee, letter of credit, forfaiting, foreign currency trading, bill collections, payrolls, investment accounts, tax collections and other banking services are provided for the aforementioned customer segments. İşbank Annual Report 2009 138

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Services are provided to individuals, real-person merchants and non-trading corporations and institutions within the context of “Retail Banking”. The requirements of this customer segment are met by performing banking services such as deposits, consumer loans, overdraft accounts, credit cards, bill collections, remittances, foreign currency trading, safe-deposit boxes, insurance, tax collections, investment accounts and by other banking services. For the private banking category, any kind of financial and cash management related services are provided for individuals within the high-income segment.

Within the context of treasury transactions, medium and long term funding is being fulfilled by tools such as securities trading, money market transactions, spot and forward TL and foreign currency trading, and derivative transactions such as forwards, swaps, futures and options, as well as syndications and securitizations.

The Bank’s investments in associates and subsidiaries operating in the financial and non-financial sector are evaluated within the context of investment banking. The details about the aforementioned investments are stated in note I.7 and I.8 section of Part Five.

Statement of information related to business segmentation is given below.

Current Period Corporate Commercial Retail Private Treasury/Investment Unallocated Total OPERATING INCOME/EXPENSE Interest Income 10,200,437 Interest Income from Loans 1,112,604 2,490,166 2,965,067 64,963 131,925 6,764,725 Interest Income from Banks 93,727 93,727 Interest Income from Securities 3,017,404 3,017,404 Other Interest Income 267,415 57,166 324,581 Interest Expense 5,332,949 Interest Expense on Deposits 1,000,227 196,641 1,601,032 1,769,678 4,567,578 Interest Expense on Funds Borrowed 586,219 586,219 Interest Expense on Money Market Transactions 166,190 166,190 Other Interest Expense 12,962 12,962 Net Interest Income 4,867,488 Net Fees and Commissions Income 1,252,604 Fees and Commissions Received 100,640 368,884 503,160 68,812 313,253 1,354,749 Fees and Commissions Paid 102,145 102,145 Dividend Income 325,037 325,037 Trading Income/Loss (Net) 408,373 408,373 Other Income 1,073,275 1,073,275 Prov. for Loans and Other Receivables 64,849 2,221,625 2,286,474 Other Operating Expense 155,740 455,253 1,003,753 50,074 1,029,867 2,694,687 Income Before Tax 2,945,616 Tax Provision 573,209 Net Period Profit 2,372,407 SEGMENT ASSETS Fin. Assets At Fair Value Through P/L 499,006 499,006 Banks and Other Financial Institutions 8,432,564 8,432,564 Financial Assets Available for Sale 25,980,621 25,980,621 Loans 18,487,764 13,766,333 15,585,265 495,424 48,334,786 Investments Held to Maturity 12,929,454 12,929,454 Associates and Subsidiaries 5,031,079 5,031,079 Other 12,015,794 12,015,794 113,223,304 SEGMENT LIABILITIES Deposits 16,339,229 6,355,123 26,509,703 22,973,008 72,177,063 Derivative Financial Liabilities Held for Trading 486,822 486,822 Funds Borrowed 9,743,859 9,743,859 Money Market Funds 10,983,878 10,983,878 Other Liabilities 2,844,352 2,844,352 Provisions 3,493,802 3,493,802 Shareholders’ Equity 13,493,528 13,493,528 113,223,304

İşbank Annual Report 2009 139

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Prior Period Corporate Commercial Retail Private Treasury/Investment Unallocated Total OPERATING INCOME/EXPENSE Interest Income 10,596,147 Interest Income from Loans 1,196,862 2,419,192 2,935,009 62,159 172,123 6,785,345 Interest Income from Banks 260,123 260,123 Interest Income from Securities 3,175,427 3,175,427 Other Interest Income 324,630 50,622 375,252 Interest Expense 6,977,852 Interest Expense on Deposits 1,424,006 200,824 1,718,459 2,158,327 5,501,616 Interest Expense on Funds Borrowed 768,714 768,714 Interest Expense on Money Market Transactions 669,183 669,183 Other Interest Expense 38,339 38,339 Net Interest Income 3,618,295 Net Fees and Commissions Income 1,204,214 Fees and Commissions Received 75,612 348,939 497,278 66,518 326,433 1,314,780 Fees and Commissions Paid 110,566 110,566 Dividend Income 284,846 284,846 Trading Income/Loss (Net) 472,650 472,650 Other Income 70,612 580,924 651,536 Prov. for Loans and Other Receivables 7,633 1,606,356 1,613,989 Other Operating Expense 150,776 295,377 759,257 46,218 9 1,567,901 2,819,538 Income Before Tax 1,798,014 Tax Provision 288,606 Net Period Profit 1,509,408 SEGMENT ASSETS Fin. Assets At Fair Value Through P/L 451,878 451,878 Banks and Other Financial Institutions 6,788,148 6,788,148 Financial Assets Available for Sale 21,250,457 21,250,457 Loans 17,165,064 14,534,204 15,520,141 390,923 47,610,332 Investments Held to Maturity 3,461,854 3,461,854 Associates and Subsidiaries 3,095,507 3,095,507 Other 14,893,746 14,893,746 97,551,922 SEGMENT LIABILITIES Deposits 16,050,993 4,518,057 21,457,153 21,512,982 63,539,185 Derivative Financial Liabilities Held for Trading 518,165 518,165 Funds Borrowed 11,033,237 11,033,237 Money Market Funds 7,006,556 7,006,556 Other Liabilities 2,906,236 2,906,236 Provisions 3,099,532 3,099,532 Shareholders’ Equity 9,449,011 9,449,011 97,551,922

Part Five: Explanations and Notes to the Unconsolidated Financial Statements

I. EXPLANATIONS AND NOTES ON ASSETS

1. Cash and Central Bank of Turkey: a. Information on Cash and Balances with the Central Bank of Turkey:

Current Period Prior Period TL FC TL FC Cash in TL/Foreign Currency 562,958 214,628 365,286 218,597 Central Bank of Turkey 5,230,494 2,644,965 8,565,644 2,677,848 Other 106,928 9,446 Total 5,793,452 2,966,521 8,930,930 2,905,891 İşbank Annual Report 2009 140

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

b. Information on Balances with the Central Bank of Turkey:

Current Period Prior Period TL FC TL FC Unrestricted Demand Deposit 5,230,494 883,605 8,565,644 890,437 Unrestricted Time Deposit Restricted Time Deposit Other (*) 1,761,360 1,787,411 Total 5,230,494 2,644,965 8,565,644 2,677,848

(*) The amount of reserve deposits held at the Central Bank of Turkey regarding the foreign currency liabilities c. Information on reserve requirements: As per the Communiqué nr.2005/1 “Reserve Deposits” of the Central Bank of Turkey (CBT), banks keep reserve deposits at the CBT for their TL and FC liabilities mentioned in the communiqué at the rates of 5% (6% before 16.10.2009) and 9%, respectively. Reserves are calculated and set aside every two weeks on Fridays for 14-day periods in TL for TL liabilities and in US Dollar and/or Euro for FC liabilities. Within the framework of the aforementioned communiqué, the CBT pays interest in quarterly periods for TL reserves at the rates determined by itself (31.12.2009: 5.20%). No interest is paid for FC reserve requirements by the CBT.

2. Information on Financial Assets at Fair Value through Profit and Loss: a. Financial assets at fair value through profit and loss, which are given as collateral or blocked: Financial assets at fair value through profit and loss, which are given as collateral or blocked as of December 31, 2009 are amounting to TL 72 (December 31, 2008: TL 62). b. Financial assets at fair value through profit and loss, which are subject to repurchase agreements: Financial assets at fair value through profit and loss, which are subject to repurchase agreements as of December 31, 2009 are amounting to TL 362,023 (December 31, 2008: TL 242,872). c. Positive differences on derivative financial assets held for trading:

Derivative Financial Instruments Held for Trading Current Period Prior Period TL FC TL FC Forward Transactions 28,514 12,447 25,433 16,207 Swap Transactions 1,084 70,438 37,736 66,054 Futures Options 329 6,552 37,741 Other Total 29,927 89,437 63,169 120,002

3. Banks: a. Information on banks:

Current Period Prior Period TL FC TL FC Banks Domestic Banks 3,153 86,379 1,034 1,969 Foreign Banks 198,468 8,144,564 217,301 6,567,844 Foreign Head Office and Branches Total 201,621 8,230,943 218,335 6,569,813 İşbank Annual Report 2009 141

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

b. Information on foreign banks:

Unrestricted Amount Restricted Amount Current Period Prior Period Current Period Prior Period EU Countries 6,280,454 5,381,850 USA, Canada 861,346 867,830 75 77 OECD Countries (*) 892,124 217,738 Off-shore Banking Regions Other 309,033 317,650 Total 8,342,957 6,785,068 75 77

(*) OECD countries other than the EU countries, USA and Canada

4. Information on Financial Assets Available for Sale: a. Information on financial assets available for sale, which are given as collateral or blocked: Financial assets available for sale, which are given as collateral or blocked amount to TL 2,528,803 as of December 31, 2009. (December 31, 2008: TL 1,886,528). b. Information on financial assets available for sale, which are subject to repurchase agreements: Financial assets available for sale which are subject to repurchase agreements amount to TL 7,629,755 as of December 31, 2009. (December 31, 2008: TL 7,776,697). c. Information on financial assets available for sale:

Current Period Prior Period Debt Securities 25,914,573 21,491,988 Traded on the Stock Exchange 15,406,306 8,637,180 Not Traded on the Stock Exchange (*) 10,508,267 12,854,808 Share Certificates 12,622 10,622 Traded on the Stock Exchange Not Traded on the Stock Exchange (*) 12,622 10,622 Impairment Provision (-) 2,291 289,534 Other 55,717 37,381 Total 25,980,621 21,250,457

(*) Indicates unlisted debt securities, and debt securities that have not been traded at the end of the related periods although they are listed.

5. Information related to loans: a. Information on all types of loans and advances given to shareholders and employees of the bank:

Current Period Prior Period Cash Non-Cash Cash Non-Cash Direct Lending to Shareholders Corporate Shareholders Real Person Shareholders Indirect Lending to Shareholders Lending to Employees 336,972 288,468 Total 336,972 288,468 İşbank Annual Report 2009 142

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

b. Information about the first and second group loans and other receivables including loans that have been restructured or rescheduled:

Loans and Other Receivables Cash Loans Standard Loans and Other Receivables Under Close Monitoring Loans and Restructured or Loans and Restructured or Other Receivables Rescheduled Other Receivables Rescheduled Non-Specialized Loans 45,984,704 153,069 1,270,297 926,716 Discount Notes 777 529 58 Export Loans 2,916,016 48,169 9,919 Import Loans 4,619 Loans Extended to Financial Sector 1,261,000 International Loans 985,281 33 Consumer Loans 10,090,145 483 281,677 124,112 Credit Cards 4,426,981 152,586 105,039 106,615 Precious Metal Loans 7,738 Other 26,292,147 834,850 686,012 Specialized Lending Other Receivables Total 45,984,704 153,069 1,270,297 926,716 c. Cash Loans according to their maturity structures:

Loans and Other Receivables Standard Loans and Other Receivables Under Close Monitoring Loans and Restructured or Loans and Restructured or Other Receivables Rescheduled Other Receivables Rescheduled Short-term Loans and Other Receivables 18,016,635 152,609 421,372 169,263 Non-Specialized Loans 18,016,635 152,609 421,372 169,263 Specialized Loans Other Receivables

Medium and long-term Loans and Other Receivables 27,968,069 460 848,925 757,453 Non-Specialization Loans 27,968,069 460 848,925 757,453 Specialized Loans Other Receivables İşbank Annual Report 2009 143

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

d. Information on consumer loans, retail credit cards, personnel loans and personnel credit cards:

Short-Term Medium and Long-Term Interest and IncomeAccruals Total Consumer Loans-TL 653,139 8,856,101 219,408 9,728,648 Real Estate Loans 36,318 3,823,747 163,380 4,023,445 Auto Loans 27,291 768,690 8,016 803,997 General Purpose Consumer Loans 588,329 4,171,634 47,237 4,807,200 Other Consumer Loans 1,201 92,030 775 94,006 Consumer Loans – FC Indexed 82 180,793 49,443 230,318 Real Estate Loans 10 171,808 47,413 219,231 Auto Loans 72 8,638 1,924 10,634 General Purpose Consumer Loans 200 84 284 Other Consumer Loans 147 22 169 Consumer Loans – FC Real Estate Loans Auto Loans General Purpose Consumer Loans Other Consumer Loans Retail Credit Cards-TL 4,191,684 279,008 31,816 4,502,508 With Installments 1,337,348 279,008 1,616,356 Without Installments 2,854,336 31,816 2,886,152 Retail Credit Cards-FC With Installments Without Installments Personnel Loans-TL 23,703 211,947 4,587 240,237 Real Estate Loans 890 54,695 2,672 58,257 Auto Loans 145 7,918 82 8,145 General Purpose Consumer Loans 22,668 144,900 1,778 169,346 Other Consumer Loans 4,434 55 4,489 Personnel Loans- FC Indexed 2,141 500 2,641 Real Estate Loans 2,129 496 2,625 Auto Loans 12 4 16 General Purpose Consumer Loans Other Consumer Loans Personnel Loans-FC Real Estate Loans Auto Loans General Purpose Consumer Loans Other Consumer Loans Personnel Credit Cards-TL 68,449 755 69,204 With Installments 23,179 23,179 Without Installments 45,270 755 46,025 Personnel Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (real persons) 285,504 9,069 294,573 Overdraft Accounts – FC (real persons) Total 5,222,561 9,529,990 315,578 15,068,129

İşbank Annual Report 2009 144

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

e. Installment based commercial loans and corporate credit cards:

Short-Term Medium and Long Term Interest and Income Accruals Total Commercial Loans With Installments-TL 553,325 6,603,693 111,513 7,268,531 Real Estate Loans 2,837 451,723 7,947 462,507 Auto Loans 79,025 1,781,753 20,810 1,881,588 General Purpose Commercial Loans 469,769 4,316,506 76,365 4,862,640 Other Commercial Loans 1,694 53,711 6,391 61,796 Commercial Loans With Installments-FC Indexed 15,176 434,864 61,241 511,281 Real Estate Loans 0 38,962 9,680 48,642 Auto Loans 1,202 181,461 25,211 207,874 General Purpose Commercial Loans 13,974 214,441 26,350 254,765 Other Commercial Loans Commercial Loans With Installments-FC Real Estate Loans Auto Loans General Purpose Commercial Loans Other Commercial Loans Corporate Credit Cards-TL 219,330 11 168 219,509 With Installments 13,702 11 13,713 Without Installments 205,628 168 205,796 Corporate Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (corporate) 645,295 25,944 671,239 Overdraft Accounts – FC (corporate) Total 1,433,126 7,038,568 198,866 8,670,560 f. Allocation of loan by customers:

Current Period Prior Period Public Sector 1,525,045 1,652,709 Private Sector 46,809,741 45,957,623 Total 48,334,786 47,610,332 g. International and domestic loans:

Current Period Prior Period Domestic Loans 47,349,472 46,672,291 International Loans 985,314 938,041 Total 48,334,786 47,610,332 h. Lending to subsidiaries and associates:

Current Period Prior Period Direct Lending to Subsidiaries and Associates 164,571 328,478 Indirect Lending to Subsidiaries and Associates Total 164,571 328,478 İşbank Annual Report 2009 145

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

i. Specific provisions provided against loans:

Specific Provisions Current Period Prior Period Loans and Receivables with Limited Collectibility 1,370,825 585,912 Loans and Receivables with Doubtful Collectibility 474,859 335,054 Uncollectible Loans and Receivables 922,512 1,274,527 Total 2,768,196 2,195,493 j. Information on non-performing loans (Net): j.1. Information on loans and other receivables included in non-performing loans, which are restructured or rescheduled:

Group III Group IV Group V Loans and Receivables with Loans and Receivables with Uncollectible Loans Limited Collectibility Doubtful Collectibility and Receivables Current Period (Gross amounts before the specific provisions) 42,398 15,407 63,183 Loans and Other Receivables which are Restructured Rescheduled Loans and Other Receivables 42,398 15,407 63,183 Prior Period (Gross amounts before the specific provisions) 1,515 9,719 126,014 Loans and Other Receivables which are Restructured 73,475 Rescheduled Loans and Other Receivables 1,515 9,719 52,539 İşbank Annual Report 2009 146

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

j.2. Movement of total non-performing loans:

Group III Group IV Group V Loans and Receivables with Loans and Receivables with Uncollectible Loans Limited Collectibility Doubtful Collectibility and Receivables Prior Period Ending Balance 585,912 335,054 1,274,527 Corporate and Commercial Loans 398,678 192,824 1,042,203 Retail Loans 103,533 58,733 90,464 Credit Cards 83,701 64,443 141,860 Other 19,054 Additions (+) 1,726,094 62,732 191,051 Corporate and Commercial Loans 943,127 33,121 174,355 Retail Loans 382,774 22,781 13,101 Credit Cards 400,191 4,515 3,595 Other 2 2,315 Transfers from Other Non-performing Loans Accounts (+) 481,663 178,733 Corporate and Commercial Loans 309,294 115,048 Retail Loans 92,967 31,068 Credit Cards 79,402 32,617 Other Transfers to Other Non-performing Loans Accounts (-) 481,663 178,733 Corporate and Commercial Loans 309,294 115,048 Retail Loans 92,967 31,068 Credit Cards 79,402 32,617 Other Collections (-) 455,217 213,620 314,188 Corporate and Commercial Loans 242,740 133,336 254,809 Retail Loans 105,655 50,378 33,236 Credit Cards 106,822 29,102 26,143 Other 804 Write-Offs (-)(*) 4,301 12,237 407,611 Corporate and Commercial Loans 3,569 11,644 399,413 Retail Loans 41 270 3,639 Credit Cards 691 170 4,559 Other 153 Current Period Ending Balance 1,370,825 474,859 922,512 Corporate and Commercial Loans 786,202 275,211 677,384 Retail Loans 287,644 92,765 97,758 Credit Cards 296,977 86,471 147,370 Other 2 20,412 Specific Provisions (-) 1,370,825 474,859 922,512 Corporate and Commercial Loans 786,202 275,211 677,384 Retail Loans 287,644 92,765 97,758 Credit Cards 296,977 86,471 147,370 Other 2 20,412 Net Balance on Balance Sheet - - -

(*) TL 37,824 of the NPL portfolio were transferred in the current year to LBT Asset Management A.S. in exchange for TL 9,550, and TL 186,114 of it were transferred to Standard Varlık Yönetim A.Ş. in exchange of payment of TL 8,500 in cash and payment of 40% of the gross collections made by the company with respect to the NPL portfolio on sale. İşbank Annual Report 2009 147

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

j.3. Information on non-performing foreign currency loans and other receivables:

Group III Group IV Group V Loans and Receivables with Loans and Receivables with Uncollectible Loans Limited Collectibility Doubtful Collectibility and Receivables Current Period: Period Ending Balance 1,160 1,122 51,078 Specific Provisions (-) 1,160 1,122 51,078 Net Balance on Balance Sheet Prior Period: Period Ending Balance 48,959 480 2,973 Specific Provisions (-) 48,959 480 2,973 Net Balance on Balance Sheet j.4. Information on gross and net non-performing loans and receivables as per customer categories:

Group III Group IV Group V Loans and Receivables with Loans and Receivables with Uncollectible Loans Limited Collectibility Doubtful Collectibility and Receivables Current Period (Net) Loans to Individuals and Corporates (Gross) 1,370,823 454,447 922,404 Specific Provisions (-) 1,370,823 454,447 922,404 Loans to Individuals and Corporates (Net) Banks (Gross) 108 Specific Provisions (-) 108 Banks (Net) Other Loans and Receivables (Gross) 2 20,412 Specific Provisions (-) 2 20,412 Other Loans and Receivables (Net) Prior Period (Net) Loans to Individuals and Corporates (Gross) 585,912 316,000 1,274,419 Specific Provisions (-) 585,912 316,000 1,274,419 Loans to Individuals and Corporates (Net) Banks (Gross) 108 Specific Provisions (-) 108 Banks (Net) Other Loans and Receivables (Gross) 19,054 Specific Provisions (-) 19,054 Other Loans and Receivables (Net) k. Main guidelines used in the liquidation policy on uncollectible loans and other receivables: In order to ensure liquidation of non-performing loans, all possible alternatives within the existing legislation are evaluated in a way that repayments are maximized. First, administrative initiatives are taken to reach an agreement with the borrower; in case the negotiations for collection, liquidation or restructuring of receivables fail, legal action is taken for collection. l. Information on “Write-off” policies: In case there is still a residual receivable despite all the borrowers’ assets are liquidated in terms of legal follow-up, or a legal follow-up fails due to the fact that the borrowers do not have any assets to be liquidated, the Bank’s receivables are reduced to one if an evidence of borrowers’ insolvency is obtained; when no such evidence is available, totally uncollectible receivables are written-off.

6. Investments Held to Maturity: a. Information on investments held to maturity, which are given as collateral or blocked:

Investments held to maturity, which are given as collateral or blocked amount to TL 512,671 as of December 31, 2009. (December 31, 2008: TL 0). b. Information on investments held to maturity, which are subject to repurchase agreements: Investments held to maturity, which are subject to repurchase agreements amount to TL 4,295,249 as of December 31, 2009. (December 31, 2008: TL 0). İşbank Annual Report 2009 148

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

c. Information on government securities held to maturity:

Current Period Prior Period Government Bonds 11,597,684 3,447,236 Treasury Bills Other Public Debt Securities Total 11,597,684 3,447,236 d. Information on investments held-to-maturity:

Current Period Prior Period Debt Securities 12,929,454 3,461,854 Not traded on a Stock Exchange 11,597,684 3,447,236 Not Traded 1,331,770 14,618 Impairment Provision (-) Total 12,929,454 3,461,854 e. Movement of the investments held to maturity during the year:

Current Period Prior Period Beginning Balance 3,461,854 1,955,393 Foreign Exchange Differences Arising on Monetary Assets Purchases During the Year 11,212,522 885,079 Transfers 294,242 Disposals through Sales and Redemption -1,678,312 Impairment Provision (-) Changes in amortized costs of the investments -66,610 327,140 Balance at the end of the Period 12,929,454 3,461,854

7. Information on associates (Net): a. General information on associates:

Bank’s Share Percentage- Bank’s Risk Group Seq. No. Title Address (City/Country) If Different, Voting Percentage (%) Share Percentage (%) 1- Arap Türk Bankası A.Ş. İstanbul/TURKEY 20.58 20.58 2- Avea İletişim Hizmetleri A.Ş. İstanbul/TURKEY 13.86 18.63 3- Bankalararası Kart Merkezi A.Ş. İstanbul/TURKEY 9.98 9.98 4- Kredi Kayıt Bürosu A.Ş. İstanbul/TURKEY 9.09 9.09 b. Information on financial statements of associates in the above order:

Seq. Total Shareholders’ Total Interest Securities Current Period Prior Period No. Assets(1) Equity(1) Tangible Assets (1) Income (1)(2) Income(1) Profit/Loss(1) Profit/Loss(3) Fair Value 1- 866,365(4) 280,687(4) 21,519(4) 58,513(4) 317(4) 21,977(4) 25,720(5) - 2- 10,755,988 7,733,355 9,703,399 55,234 -514,343 -516,440 - 3- 16,962 13,333 5,734 1,665 1,533 1,157 - 4- 24,925 19,399 1,837 3,266 6 6,693 3,457 -

(1) Indicates value as of 31.12.2008. (2) Includes Interest Income on Securities. (3) Indicates value as of 31.12.2007. (4) Indicates value as of 30.09.2009. (5) Indicates value as of 30.09.2008. İşbank Annual Report 2009 149

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

c. Information on associates (movement table):

Current Period Prior Period Beginning balance 743,262 766,434 Movements during the period Purchases (*) 39,419 Bonus shares acquired Dividends received from the current year profit Sales -117,538 Revaluation Increase Impairment 54,947(**) Balance at the end of the period 743,262 743,262 Capital commitments Contribution in equity at the end of the period (%)

(*) Also includes the acquisitions related to capital increases through retained earning. (**) The amount of released provisions related to the companies disposed of in current period. d. Sectoral information on financial associates and the related carrying amounts:

Associates Current Period Prior Period Banks 85,295 85,295 Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Participations 3,019 3,019 e. Associates traded on a stock exchange: None. f. Associates disposed of in the current period: None. g. Associates acquired in the current period: None. İşbank Annual Report 2009 150

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

8. Information on subsidiaries (Net): a. General information on subsidiaries:

Bank’s Share Percentage- Bank’s Risk Group Seq. No. Title Address (City/Country) If Different, Voting Percentage (%) Share Percentage (%) 1- Anadolu Anonim Türk Sigorta Şirketi İstanbul/TURKEY 35.53 57.31 2- Anadolu Hayat Emeklilik A.Ş. İstanbul/TURKEY 62.00 83.00 3- Antgıda Gıda Tarım Turizm Enerji ve Demir Çelik Sanayi Ticaret A.Ş. İzmir/TURKEY 99.89 99.99 4- Bayek Tedavi Sağlık Hizmetleri ve İşletmeciliği A.Ş. Ankara/TURKEY 78.07 89.46 5- Camiş Madencilik A.Ş. İstanbul/TURKEY 78.46 100.00 6- Camiş Yatırım Holding A.Ş. İstanbul/TURKEY 99.97 100.00 7- Çayırova Cam Sanayii A.Ş. Kocaeli/TURKEY 31.57 100.00 8- İş Dublin Financial Services Plc Dublin/IRELAND 99.99 100.00 9- İş Finansal Kiralama A.Ş. İstanbul/TURKEY 27.79 57.70 10- İş Gayrimenkul Yatırım Ortaklığı A.Ş. İstanbul/TURKEY 42.23 57.67 11- İş Merkezleri Yönetim ve İşletim A.Ş. İstanbul/TURKEY 86.33 100.00 12- İş Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim Hizmetleri A.Ş. İstanbul/TURKEY 94.65 100.00 13- İş Yatırım Menkul Değerler A.Ş. İstanbul/TURKEY 65.65 72.14 14- İşbank GmbH Frankfurt-Main/GERMANY 100.00 100.00 15- Kültür Yayınları İş-Türk Limited Şirketi İstanbul/TURKEY 99.17 100.00 16- Milli Reasürans T.A.Ş. İstanbul/TURKEY 76.64 77.06 17- Mipaş Mümessillik İthalat İhracat ve Pazarlama A.Ş. İstanbul/TURKEY 99.98 100.00 18- Nemtaş Nemrut Liman İşletmeleri A.Ş. İzmir/TURKEY 99.81 100.00 19- Trakya Yatırım Holding A.Ş. İstanbul/TURKEY 65.34 100.00 20- Türkiye Sınai Kalkınma Bankası A.Ş. İstanbul/TURKEY 40.52 50.10 21- Türkiye Şişe ve Cam Fabrikaları A.Ş. İstanbul/TURKEY 64.11 71.99 b. Financial statement information related to subsidiaries in the above order:

Seq. Total Shareholders’ Total Interest Securities Current Period Prior Period No. Assets(1) Equity(1) Tangible Assets (1) Income (1)(2) Income(1) Profit/Loss(1) Profit/Loss(3) Fair Value 1- 1,659,340 (6) 638,406(6) 38,251(6) 64,966(6) 54,801(6) 50,904(6) 96,349(7) 205,363 2- 4,280,937(6) 414,097(6) 23,953 (6) 205,842(6) 31,485(6) 62,275(6) 52,945(7) 765,700 3- 39,679 34,893 5,546 1,060 -3,111 -6,333 4- 47,150 10,929 21,624 24 18 -7,667 -4,711 5- 150,017 106,209 49,903 2,018 904 -8,585 187 6- 83,883 83,883 393 1,258 3,422 -2,873 7- 67,873 64,832 21,920 1,398 16 5,185 4,954 8- 1,079(4) 1,513(4) 307(4) 12(4) 1,122(4) 99(5) 9- 1,440,580(8) 404,502(8) 2,546(8) 133,370(8) 692(8) 105,388(8) 76,309(1) 72,265 10- 1,011,678(8) 951,603(8) 1,634(8) 6,674(8) 3,662(8) 60,299(8) 53,095(1) 315,495 11- 20,984 8,268 1,365 1,499 246 2,605 4,402 12- 21,936 19,425 5,858 293 324 1,170 908 13- 2,182,590(6) 496,594(6) 6,810(6) 97,461(6) 1,589(6) 94,777(6) 36,811(7) 230,441 14- 1,440,750(8) 145,652(8) 34,288(8) 70,003(8) 9,589(8) 7,737(1) 15- 6,478 2,385 96 69 263 111 16- 1,565,545(8) 773,051(8) 24,757(8) 130,000(8) 42,843(8) 91,705(8) 141,457(1) 17- 24,978 24,741 979 313 286 928 -43 18- 422,146 232,476 257,432 331 7,512 41,232 35,268 19- 436,442 436,442 156 131 200 20- 7,270,042(8) 1,140,609(8) 34(8) 503,147(8) 20,115(8) 260,898(8) 116,464(1) 440,018 21- 6,747,399(6) 2,828,000(6) 3,489,818(6) 48,384(6) 1,404(6) 78,696(6) 217,391(7) 1,318,688

(1) Indicates values as of 31.12.2008 . (2) Includes Interest Income on Securities. (3) Indicates value as of 31.12.2007. (4) Indicates values as of 30.06.2009. (5) Indicates values as of 30.06.2008. (6) Indicates values as of 30.09.2009. (7) Indicates values as of 30.09.2008. (8) Indicates values as of 31.12.2009.

İşbank Annual Report 2009 151

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c. Information on subsidiaries (movement table):

Current Period Prior Period Balance at the Beginning of the Period 2,352,245 4,050,326 Movements in the Period Purchases (*) 231,905 184,719 Bonus Shares Acquired Dividends Received from the Current Year Profit Sales -91,733 Revaluation Surplus (**) 1,768,463 -1,852,861 Impairment -64,796(****) 61,794(***) Balance at the End of the Period 4,287,817 2,352,245 Capital Commitments Contribution in equity at the end of the period (%)

(*) Also includes the acquisitions related to capital increases through retained earning. (**) The relevant amounts represent the increases and decreases in the market value of participations traded on the stock exchange. (***) The amount of released provisions related to the companies disposed of. (****) The amount of provisions set aside within the scope of the appraisal report prepared on Antgıda Tarım Turizm Enerji ve Demir Çelik Sanayi Ticaret A.Ş. d. Sectoral information on financial subsidiaries and the related carrying amounts:

Subsidiaries Current Period Prior Period Banks 481,498 221,782 Insurance Companies 1,244,040 613,378 Factoring Companies Leasing Companies 72,265 26,738 Finance Companies 262 262 Other Financial Subsidiaries 545,936 199,996 Total 2,344,001 1,062,156 e. Subsidiaries traded on stock exchange:

Current Period Prior Period Traded on domestic stock exchanges 3,347,970 1,437,654 Traded on international stock exchanges Total 3,347,970 1,437,654 f. Subsidiaries disposed of in the current period: None. g. Subsidiaries acquired in the current period: As per the resolution of the Board of Directors dated 10.06.2009, regarding the exercise of the Bank’s pre-emptive rights of TL 22,825 in TL 33,500 cash capital increase of its subsidiary Bayek Tedavi Sağlık Hizmetleri İşletmeciliği A.Ş., and its commitment to pay the unused pre-emptive rights in cash and in one payment, the Bank’s share of TL 22,825 call payment was made on August 21, 2009. As of August 28, 2009, TL 6,409 was transferred to the subsidiary accounts related to the unused pre-emptive rights. The Bank’s 68.13% share in its subsidiary before the capital increase, reached 78.07% as a result of the use of pre-emptive rights.

9. Information on jointly controlled entities: There are no jointly controlled associates of the Bank.

10. Information regarding finance lease receivables of the Bank (Net): The Bank has no finance lease receivables.

11. Explanations on derivative financial assets held for hedging purposes: The Bank has no derivative financial assets held for hedging purposes.

İşbank Annual Report 2009 152

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

12. Information on Tangible Assets (Net):

Current Period Land Buildings Construction in Progress Vehicles Other Total Acquisition Cost Balance at the Beginning of the Period 81,479 3,494,061 70,209 15,499 954,424 4,615,672 Movements in the Period - Additions 15,351 38,935 32,312 2,195 147,233 236,026 - Disposals -9,740 -99,042 -2,178 -2,163 -25,764 -138,887 - Transfers 450 42,592 -38,803 4,239 - Impairment Release (-) -3,073 27 -3,046 Balance at End of Current Period 84,467 3,476,573 61,540 15,531 1,075,893 4,714,004

Accumulated Depreciation Balance at the Beginning of the Period -2,128,102 -7,989 -601,109 -2,737,200 Movements in the Period - Depreciation Charge -51,835 -2,734 -93,972 -148,541 - Disposals 17,820 2,082 13,565 33,467 - Transfers 262 262 - Impairment Release (-) Balance at the End of Current Period -2,161,855 -8,641 -681,516 -2,852,012 Net Book Value at the End of Prior Period 81,479 1,365,959 70,209 7,510 353,315 1,878,472 Net Book Value at the End of Current Period 84,467 1,314,718 61,540 6,890 394,377 1,861,992

As of the balance sheet date the book value of tangible assets purchased through finance lease amounts to TL 52,045 (2008: TL 97,453). The additions in the current period are TL 88 (2008: TL 14,275). The book value of tangible assets required during the period due to receivables amount s to TL 62,956.

Prior Period Land Buildings Construction in Progress Vehicles Other Total Acquisition Cost Balance at the Beginning of the Period 82,858 3,637,212 72,060 13,692 833,631 4,639,453 Movements in the Period - Additions 6,764 50,709 34,877 3,639 146,823 242,812 - Disposals -8,055 -122,653 -2,165 -1,832 -26,030 -160,735 - Transfers -88 -72,253 -34,563 -106,904 - Impairment Release (-) 1,046 1,046 Balance at End of Current Period 81,479 3,494,061 70,209 15,499 954,424 4,615,672

Accumulated Depreciation Balance at the Beginning of the Period -2,179,659 -7,619 -530,149 -2,717,427 Movements in the Period - Depreciation Charge -53,970 -2,134 -87,980 -144,084 - Disposals 17,285 1,764 17,020 36,069 - Transfers 88,389 88,389 - Impairment Release (-) -147 -147 Balance at the End of Current Period -2,128,102 -7,989 -601,109 -2,737,200 Net Book Value at the End of Prior Period 82,858 1,457,553 72,060 6,073 303,482 1,922,026 Net Book Value at the End of Current Period 81,479 1,365,959 70,209 7,510 353,315 1,878,472 İşbank Annual Report 2009 153

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

13. Information on Intangible Assets:

Current Period Prior Period Acquisition Cost Balance at the Beginning of the Period 112,165 63,024 Movements in the Period 21,453 49,141 - Acquired 21,453 49,141 - Disposed (-) - Impairment Balance at the End of the Period 133,618 112,165

Accumulated Amortization Balance at the Beginning of the Period 55,491 14,221 Movements in the Period 45,373 41,270 - Amortization Charge (-) 45,373 41,270 - Disposed - Impairment Balance at the End of the Current Period 100,864 55,491 Net Book Value at the End of the Prior Period 56,674 48,803 Net Book Value at the End of the Period 32,754 56,674

14. Information on investment property: None.

15. Information on deferred tax asset: The Bank has TL 510,519 deferred tax asset as of December 31, 2009. Such deferred tax asset is calculated based on the temporary differences between the book value of the Bank’s assets and liabilities and their tax basis measured as per the prevailing tax regulation. When the items comprising the temporary differences are followed under equity, the related tax asset/liability is directly recognized under equity items. As of December 31, 2009, the Bank does not have any deferred tax asset arising from either carry forward losses or tax rebates.

Current Period Prior Period Deferred Tax (Asset)/Liability: Tangible Assets Base Differences 25,011 18,996 Provisions (*) -332,750 -291,548 Valuation of Financial Assets -202,780 -67,737 Net Deferred Tax (Asset)/Liability: -510,519 -340,289

(*) Comprises of employee termination benefits, actual and technical deficits of the Pension Fund, the provisions for credit card bonus points, and other provisions.

Movements of deferred tax asset:

Current Period Prior Period Balance at the Beginning of the Period 340,289 225,359 Deferred Tax Benefit/(Charge) (Net) 210,258 96,653 Deferred Tax Recognized under Equity -40,028 18,277 Deferred Tax Asset 510,519 340,289

16. Information on Assets held for sale and discontinued operations:

Current Period Prior Period Balance at the Beginning of the Period 17,674 6,879 Additions 27,273 21,754 Transfers -4,501 18,515 Disposals (-) 13,173 29,474 Impairment Losses (-) Balance at End of Current Period (Net) 27,273 17,674

The Bank has no discontinued operations. The assets classified as “Assets Held for Sale” consist of real estates. Those real estates subject to sale are announced on the Bank’s web site. Announcements about the real estates subject to sale are also made by means of newspaper advertisements and similar media. İşbank Annual Report 2009 154

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17. Information on Other Assets: The “other assets” item of the balance sheet does not exceed 10% of total assets.

II. EXPLANATIONS AND NOTES ON LIABILITIES

1. Information on Deposits: a.1. The maturity structure of deposits (Current period):

With 7 Days Up to 1 1-3 3-6 6 Months 1 Year and Accumulated Demand Maturity Month Months Months to 1 Year Over Deposits Total Savings Deposits 3,338,969 15,914,795 9,273,682 708,481 466,735 335,613 30,038,275 Foreign Currency Deposits 4,295,737 9,592,029 8,253,769 851,525 1,121,030 2,205,989 26,320,079 Residents in Turkey 4,130,871 9,065,682 7,984,478 709,280 603,845 1,544,407 24,038,563 Residents Abroad 164,866 526,347 269,291 142,245 517,185 661,582 2,281,516 Deposits of Public Institutions 286,394 87,419 281,271 3,363 12,194 670,641 Commercial Deposits 2,829,524 1,700,936 2,919,136 391,335 32,177 707,583 8,580,691 Other Institutions Deposits 197,317 1,062,704 2,994,142 12,642 740 328,117 4,595,662 Precious Metals Deposits 112,695 112,695 Interbank Deposits 198,125 516,554 894,874 205,026 2,989 41,452 1,859,020 The Central Bank of Turkey 62,546 62,546 Domestic Banks 9,538 111,701 500,793 1,108 623,140 Foreign Banks 124,244 404,853 394,081 205,026 2,989 40,344 1,171,537 Special Finance Institutions 1,797 1,797 Other Total 11,258,761 28,874,437 24,616,874 2,172,372 1,623,671 3,630,948 72,177,063 a.2. The maturity structure of deposits (Prior period):

With 7 Days Up to 1 1-3 3-6 6 Months 1 Year and Accumulated Demand Maturity Month Months Months to 1 Year Over Deposits Total Savings Deposits 2,420,962 15,014,145 7,302,844 700,944 88,838 211,483 25,739,216 Foreign Currency Deposits 3,969,984 9,373,001 5,007,240 844,215 673,764 2,288,065 22,156,269 Residents in Turkey 3,756,704 8,922,314 4,849,236 772,288 242,329 1,713,253 20,256,124 Residents Abroad 213,280 450,687 158,004 71,927 431,435 574,812 1,900,145 Deposits of Public Institutions 336,837 185,132 71,008 3,008 410 596,395 Commercial Deposits 1,763,659 3,701,335 2,501,042 100,127 157,780 43,099 8,267,042 Other Institutions Deposits 172,401 970,127 2,734,801 134,777 1,355,519 16,744 5,384,369 Precious Metals Deposits 8,065 8,065 Interbank Deposits 116,054 934,715 291,491 32,837 6,273 6,459 1,387,829 The Central Bank of Turkey 17,234 17,234 Domestic Banks 7,463 322,130 212,073 48 541,714 Foreign Banks 89,926 612,585 79,418 32,837 6,225 6,459 827,450 Special Finance Institutions 1,431 1,431 Other Total 8,787,962 30,178,455 17,908,426 1,815,908 2,282,174 2,566,260 63,539,185 b.1. Savings deposits which are under the guarantee of Savings Deposits Insurance Fund and which exceed the limit of deposit insurance:

Under the Guarantee of Savings Exceeding the Limit of Savings Deposits Deposits Insurance Fund Deposit Insurance Fund Current Period Prior Period Current Period Prior Period Savings Deposits 13,768,529 12,149,886 16,015,035 13,312,241 Foreign Currency Savings Deposits 5,999,584 5,831,968 11,005,466 8,581,817 Other Deposits in the Form of Savings Deposits Foreign Branches’ Deposits Under Foreign Authorities’ Insurance 600,848 628,267 65,140 139,210 Off-shore Banking Regions’ Deposits Under Foreign Authorities Insurance 51,867 80,040 İşbank Annual Report 2009 155

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

b.2. Savings deposits which are not under the guarantee of deposit insurance fund:

Current Period Prior Period Foreign Branches’ Deposits Under Foreign Authorities Insurance 117,007 219,250 Deposits and Other Accounts held by Main Shareholders and their Relatives Deposits and Other Accounts of the Chairman and Members of Board of Directors, Chief Executive Officer, Senior Executive Officers and their Relatives 7,175 6,784 Deposits and Other Accounts held as Assets subject to the Crime defined in the Article 282 of the Turkish Criminal Code no. 5237 dated 26 September 2004 Deposits at Depository Banks established for Off-Shore Banking Activities in Turkey

2. Information on Derivative Financial Liabilities Held for Trading:

Negative differences on derivative financial liabilities held for trading:

Derivative Financial Liabilities Held for Trading Current Period Prior Period TL FC TL FC Forward Transactions 303 39,504 259,342 7,308 Swap Transactions 324,706 109,879 99,281 10,374 Futures Options 293 12,137 141,860 Other Total 325,302 161,520 358,623 159,542

3. Banks and Other Financial Institutions: a. Information on banks and other financial institutions:

Current Period Prior Period TL FC TL FC Funds borrowed from the Central Bank of Turkey Funds borrowed from Domestic Banks and Institutions 139,928 161,485 208,086 78,775 Funds borrowed from Foreign banks, institutions and funds 2,255,262 7,187,184 2,566,488 8,179,888 Total 2,395,190 7,348,669 2,774,574 8,258,663 b. Maturity analysis of funds borrowed:

Current Period Prior Period TL FC TL FC Short-term 139,928 2,995,027 208,086 2,003,093 Medium and Long-term 2,255,262 4,353,642 2,566,488 6,255,570 Total 2,395,190 7,348,669 2,774,574 8,258,663 c. Concentration of the liabilities of the Bank: 64% of the Bank’s liabilities are comprised of deposits, 10% are of funds obtained through repurchase transactions and 9% are of borrowings. Deposits are distributed among a large variety of customers with different characteristics. The borrowings, on the other hand, are comprised of various funds obtained from financial institutions through syndication, securitization, post-financing and money market operations. No risk concentration exists related to the Bank’s liabilities.

4. Other Liabilities: Other liabilities do not exceed 10% of the balance sheet total.

5. Information on lease payables (net): a. Finance lease contracts are signed with purchasing options and the payments are made in equal installments. There has not been any change in finance lease contracts during the current and previous periods. İşbank Annual Report 2009 156

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b. Liabilities resulting from finance lease transactions:

Current Period Prior Period Gross Net Gross Net Less than 1 Year 16,193 14,949 38,979 34,934 1-4 Years 3,302 3,065 20,033 18,531 More Than 4 Years Total 19,495 18,014 59,012 53,465 c. Information on operating lease transactions: Transactions related to operating lease are accounted on accrual basis. d. Sale and lease-back transactions: None.

6. Information on derivative financial liabilities held for hedging purposes: The Bank does not have any derivative financial liabilities held for hedging purposes.

7. Information on provisions: a. Information on general provisions:

Current Period Prior Period General Provisions 504,551 465,589 Provision for Group I Loans and Receivables 301,034 296,210 Provision for Group II Loans and Receivables (*) 44,733 36,589 Provision for Non-cash Loans 52,956 45,220 Other 105,828 87,570

(*) Also includes general provision for Group II Non-cash Loans. b. Reserves for employee benefits: According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay employee termination benefits to employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or to the female employees who have voluntarily quit within one year after the date of their marriage. In accordance with the related regulations, the amount of employee termination benefits is one month salary for each service year. The base salary ceiling for employee termination benefits as of 01.01.2010 stands at TL 2,427.04 (in full TL amount).The Bank books provisions for employee termination benefits by calculating the present value of potential liabilities. The Bank’s liabilities for employee termination benefits have been determined by an actuarial report prepared by an independent valuations firm and within this context, the provision set aside and shown in the financial statements as of 31.12.2009 stands at TL 150,371 (31.12.2008: TL 133,002).

The main actuarial assumptions used in the calculation of the employee termination benefits: - the discount rate used for the current year is 5.92%. - TL 2,427.04 salary ceiling, which was effective as at 01.01.2010 was taken into account in the current year calculations. - it is assumed that the amount of the salary ceiling will increase each year in line with the inflation rate. - the age of retirement is considered as the earliest age possible that an individual can retire. - CSO 1980 table is used for the mortality rate for female and male employees

The movements related to provision for employee termination benefits are given below.

Current Period Prior Period Defined benefit obligation at the beginning of the period 133,002 125,851 Service Cost 9,407 8,576 Interest Cost 13,186 11,284 Benefits paid -19,240 -17,309 Loss/(Gain) due to Settlements/Reductions/Terminations 258 Actuarial loss/(gain) 13,758 4,600 Defined benefit obligation at the end of the period 150,371 133,002

In addition to the employee termination benefits, the Bank also allocates provision for the unused vacation pay. Provision for unused vacation pay for the year 2009 stands at TL 15,209 (31.12.2008: TL 17,598). İşbank Annual Report 2009 157

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c. Provisions for exchange losses in the principal amount of foreign currency indexed loans: Since foreign currency indexed loans are followed based on the rates on the lending date, the Bank incurs a loss if the exchange rates decrease and makes profit if the exchange rate increases. As of 31.12.2009, provision amount for the currency evaluation losses in the principal amount of foreign currency indexed loans is TL 8,868 and this amount is offset against foreign currency indexed loan balance in the financial statements. d. Special provisions for non-cash loans, which are not indemnified and not converted into cash: TL 190,801 provision (31.12.2008: TL 212,472) is allocated for the non-cash loans of companies whose loans are followed under “Non-performing Loans” accounts. e. Information on other provisions: e.1. Provisions for potential risks: Taking the potential risks in the economy and in the markets into account, TL 950,000 provision was allocated in total in accordance with the precautionary principle. e.2. Liabilities arising from retirement rights:

• Liabilities of pension funds founded as per the Social Security Act:

Within the scope of the explanations given in Part Three Note XVII, in the actuarial report which was prepared as of 31.12.2009 for Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (İşbank Pension Fund), of which each Bank employee is a member, and which has been established according to the provisional Article 20 of the Social Security Act No. 506, the amount of actuarial and technical deficit stands at TL 1,295,985. Additional provision was allocated for TL 19,547,which is the difference between the above mentioned deficit amount and the TL 1,276,438 provision, which was allocated for the related pension fund until the current period.

The above mentioned actuarial audit, which was made in accordance with the principles of the related law, measures the cash value of the liability as of 31.12.2009 in other words, it measures the amount to be paid to the Social Security Institution by the Bank. CSO 1980 mortality table, 9.8% technical deficit interest rate and 33.5% premium rate were taken into account in calculations. Below table shows the cash values of premium and salary payments as of 31.12.2009, taking the health expenses within the Social Security Institution limits into account.

Current Period Prior Period Cash Value of Total Liabilities Other Than Health (2,922,287) (2,712,478) Cash Value of Long Term Insurance Line Premiums 1,254,471 1,126,994 Net Cash Value of Total Liabilities Other Than Health (1,667,816) (1,585,484)

Cash Value of Health Liabilities (398,851) (345,314) Cash Value of Health Premiums 613,297 550,974 Net Cash Value of Health Liabilities 214,446 205,660

Pension Fund Assets 157,385 103,386 Amount of Actuarial and Technical Deficit (1,295,985) (1,276,438)

The assets of the pension fund are as follows.

Current Period Prior Period Cash 104.361 66.620 Securities Portfolio 43.975 29.907 Other 9.049 6.859 Total 157.385 103.386

On the other hand, after the transfer, the currently paid health benefits will be revised within the framework of the Social Security Institution legislation and related regulations. e.3. Provisions for the Lawsuits: TL 112,306 provision is set aside related to the ongoing lawsuits due to tax disputes and TL 50,040 provision is set aside related to the lawsuits for dispute on lending.

8. Information on Tax Liability: a. Explanations related to current tax liability: a.1. Information on tax provision: Explanations in relation to taxation and tax calculations were stated in Note XVIII of Part 3. The remaining corporate tax liability after the deduction of the temporary tax amount stands at TL 172,428 as of December 31, 2009. İşbank Annual Report 2009 158

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

a.2. Information on taxes payable:

Current Period Prior Period Corporate Tax Payable 172,428 66,123 Tax on Securities Income 72,215 126,202 Tax on Real Estate Income 1,215 976 Banking Insurance Transaction Tax 38,225 47,631 Foreign Exchange Transaction Tax 25 23 Value Added Tax Payable 481 626 Other 15,134 12,313 Total 299,723 253,894 a.3. Information on premiums:

Current Period Prior Period Social Security Premiums - Employees 31 27 Social Security Premiums - Employer 36 24 Bank Pension Fund Premiums - Employees Bank Pension Fund Premiums - Employer Pension Fund Membership Fees and Provisions-Employees Pension Fund Membership Fees and Provisions-Employer Unemployment Insurance - Employees 490 452 Unemployment Insurance – Employer 979 903 Others Total 1,536 1,406 b. Information on deferred tax liabilities: None.

9. Information on payables for assets held for sale and discontinued operations: None.

10. Subordinated loans used by the Bank: None.

11. Information on shareholders’ equity: a. Presentation of paid-in capital:

Current Period Prior Period Ordinary shares 3,079,609 2,756,555 Preferred shares 30 30 Total 3,079,639 2,756,585 b. Explanation as to whether the registered share capital system ceiling is applicable at bank, if so, the amount of registered share capital:

Capital System Paid-in Capital Ceiling Registered Capital System 3,079,639 7,000,000 c. The capital increase made in current period:

Date of Increase Increased Amount Cash Profit Reserves Subject to Increase Capital Reserves Subject to Increase 04.05.2009 323,054 - 323,054 -

At the Ordinary General Meeting, which was held on March 31, 2009, resolution was made to distribute group C bonus shares to shareholders by way of injecting the capital with TL 323,054 of the 2008 profit. The process, which was started according to this resolution, to increase the paid-in capital by the same amount to TL 3,079,639, has been completed and the Bank’s paid-in capital was registered as TL 3,079,639. d. Capital increase through transfer from capital reserves during the period: None İşbank Annual Report 2009 159

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

e. Significant commitments of the Bank related to capital expenditures within the last year and the following quarter, the general purpose thereof, and the estimation of funds required for them: There are no capital commitments. f. Previous periods’ indicators related to income, profitability and liquidity, and the estimated effects of forecasts, which are to be made by taking into consideration the uncertainties of these indicators, on the Bank’s equity: The Bank’s balance sheet is managed in a prudent way to ensure that the effect of risks arising from interest rates, exchange rates and loans is at the lowest level. This contributes to the development of the Bank’s income on a continuously rising trend. g. Privileges Granted to Shares: Group (A) shares each with a nominal value of 1 Kurus have the privileges of;

- receiving 20 times more shares in the distribution of bonus shares issued from conversion of extraordinary and revaluation reserves generated in accordance with the relevant laws (Article 18 of the Articles of Incorporation)

- exercising 20 times more of the preference rights (Article 19 of the Articles of Incorporation), and

- 20 shares of voting rights (Article 49 of the Articles of Incorporation)

Despite having a lower nominal value, Group (B) shares, each with a nominal value of 1 Kurus, have the same rights with the Group (C) shares having a nominal value of 4 Kurus each. Furthermore, Group (A) and (B) shares, each with a nominal value of 1 Kurus, are granted privileges in distribution of profits pursuant to Article 58 of the Articles of Incorporation. h. Information on marketable securities revaluation reserve:

Current Period Prior Period TL FC TL FC Associates, Subsidiaries and Jointly Controlled Entities 1,152,658 -615,805 Revaluation Reserve 1,152,658 -615,805 Foreign Exchange Differences Financial Assets Available for Sale 136,163 36,135 -23,950 17,606 Revaluation Reserve 170,203 36,135 -29,938 17,606 Deferred Tax Effect on Revaluation -34,040 5,988 Foreign Exchange Differences Total 1,288,821 36,135 -639,755 17,606

III. EXPLANATIONS AND NOTES ON OFF-BALANCE SHEET COMMITMENTS

1. Explanations to liabilities related to off-balance items: a. Types and amounts of irrevocable loan commitments: Commitment for customer credit card limits amounts to TL 11,792,182 and commitment for overdraft account limits amounts to TL 3,530,717. The Bank has project loans commitments amounting to TL 850,729, which are yet to be utilized. TL 194,302 of the mentioned commitments consist of project loans under the guarantee of the Undersecretariat of Turkish Treasury. The amount of commitment for the forward purchase of assets is TL 58,102 and for the forward sale of assets is TL 59,342. b. The structure and amount of probable losses and commitments resulting from off-balance sheet items, including those below: There are no probable losses related to off-balance sheet items, Commitments are shown in the table of “Off-Balance Sheet Liabilities”. b.1. Guarantees, bank acceptances, collaterals that qualify as financial guarantees, and non-cash loans including other letters of credit:

Current Period Prior Period Bank Acceptances 151,195 130,716 Letters of Credit 2,575,767 3,457,163 Other Guarantees 208,990 77,083 Total 2,935,952 3,664,962 İşbank Annual Report 2009 160

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

b.2. Definite guarantees, provisional guarantees, suretyships and similar transactions:

Current Period Prior Period Provisional Letters of Guarantee 332,779 281,490 Definite Letters of Guarantee 7,130,630 5,386,419 Advance Letters of Guarantee 1,507,720 1,788,219 Letters of Guarantee Addressed to Customs 333,680 239,116 Other Letters of Guarantee 260,512 351,970 Total 9,565,321 8,047,214 c. 1. Total Non-cash Loans:

Current Period Prior Period Non-cash Loans against Cash Risks 245,507 315,591 With Original Maturity of 1 Year or Less 77,408 192,738 With Original Maturity More Than 1 Year 168,099 122,853 Other Non-cash Loans 12,255,766 11,396,585 Total 12,501,273 11,712,176 c. 2. Sectoral Risk Concentration of Non-cash Loans:

Current Period Prior Period TL (%) FC (%) TL (%) FC (%) Agriculture 91,111 1.80 6,874 0.09 66,871 1.69 5,501 0.07 Farming and Stockbreeding 43,269 0.86 6,192 0.08 33,484 0.85 4,746 0.06 Forestry 46,225 0.91 461 0.01 31,215 0.79 387 0.01 Fishery 1,617 0.03 221 0.00 2,172 0.05 368 0.00 Industry 1,388,159 27.43 3,610,387 48.51 1,121,259 28.40 3,458,287 44.54 Mining and Quarrying 46,492 0.92 79,953 1.07 41,111 1.04 55,649 0.72 Manufacturing 1,144,723 22.62 2,706,073 36.36 998,029 25.28 2,923,467 37.65 Electricity, Gas, Water 196,944 3.89 824,361 11.08 82,119 2.08 479,171 6.17 Construction 533,339 10.54 878,111 11.80 469,747 11.90 1,365,006 17.58 Services 2,934,413 58.00 1,750,269 23.53 2,186,779 55.39 1,446,882 18.64 Wholesale and Retail Trade 2,013,098 39.79 1,153,498 15.50 1,537,032 38.93 977,614 12.59 Hotel and Restaurant Services 79,809 1.58 12,891 0.17 43,297 1.10 15,652 0.20 Transportation and Communication 246,662 4.88 156,363 2.10 163,945 4.15 106,023 1.37 Financial Institutions 303,991 6.01 188,703 2.54 225,955 5.72 139,042 1.79 Real Estate and Rental Services 126,231 2.49 182,129 2.45 92,640 2.35 166,756 2.15 Self-Employed Services 116,439 2.30 26,532 0.36 81,331 2.06 18,731 0.24 Educational Services 11,574 0.23 17,508 0.24 10,457 0.27 10,085 0.13 Health and Social Services 36,609 0.72 12,645 0.17 32,122 0.81 12,979 0.17 Others 112,649 2.23 1,195,961 16.07 103,634 2.62 1,488,210 19.17 Total 5,059,671 100.00 7,441,602 100.00 3,948,290 100.00 7,763,886 100.00 c. 3. Non-cash Loans classified under Group I and Group II:

Group I Group II TL FC TL FC Non-cash Loans 4,969,034 7,308,513 90,637 133,089 Letters of Guarantee 4,914,988 4,444,325 90,637 115,371 Bank Acceptances 2,997 134,081 14,117 Letters of Credit 2,572,166 3,601 Endorsements 41,538 Underwriting Commitments of the Securities Issued Factoring Related Guarantees Other Guaranties and Warranties 51,049 116,403 İşbank Annual Report 2009 161

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

2. Information on Derivative Financial Instruments: Majority of the Bank’s derivative transactions comprise currency and interest rate swaps, forward foreign exchange trading and currency trading options. Even though some derivative transactions economically provide risk hedging, since all necessary conditions to be defined as items suitable for financial risk hedging accounting are not met, they are recognized as “held for trading purposes” within the framework of Turkish Accounting Standard No: 39 “Financial Instruments: Recognition and Measurement” (TAS 39).

3. Explanations Related to Contingencies and Commitments: Total amount of letters of guarantees submitted by the Bank pursuant to its own internal affairs stands at TL 499,932. The profit/loss statement shall also be affected in the event of materialization on commitments undertaken by the Bank in connection with these guarantee letters. TL 3,978,131 which is the liability of the bank regarding the checks given to customers is presented under off balance sheet commitments, as per Law nr. 3167. Starting from 20.12.2009, in case the check presented for payment is not covered, the Bank has an obligation to pay the uncovered amount up to TL 600 (exact amount). The Bank will try to collect the amount paid for the customer and the uncollected amount will be followed under “Indemnified Non-Cash Loans”.

4. Explanations related to transactions made on behalf of or on the account of others: It is explained in Note X under Part Four.

IV. EXPLANATIONS AND NOTES ON THE INCOME STATEMENT

1.a. Information on interest income on loans:

Current Period Prior Period TL FC TL FC Interest Income on Loans(*) Short-term Loans 2,741,005 166,538 2,820,010 160,527 Medium and Long-term Loans 3,214,120 511,137 3,048,027 584,657 Interest on Non-performing Loans 131,843 82 172,082 42 Premiums Received from State Resource Utilization Support Fund

(*) Includes fee and commission income on cash loans.

1.b. Information on interest income on banks:

Current Period Prior Period TL FC TL FC The Central Bank of Turkey 35 Domestic Banks 373 250 191 1,619 Foreign Banks 14,511 78,593 22,633 235,645 Foreign Head Offices and Branches Total 14,884 78,843 22,824 237,299

1.c. Information on interest income from securities:

Current Period Prior Period TL FC TL FC Interest Income on Financial Assets Held for Trading 69,533 20 55,717 108 Interest Income on Financial Assets at Fair Value through Profit and Loss Interest Income on Financial Assets Available for Sale 1,332,147 623,749 1,818,768 796,075 Investments Held to Maturity 991,308 647 504,651 108 Total 2,392,988 624,416 2,379,136 796,291

1.d. Information on interest income received from associates and subsidiaries:

Current Period Prior Period Interest Received from Associates and Subsidiaries 10,642 17,423

İşbank Annual Report 2009 162

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

2.a. Information on interest expense from funds borrowed:

Current Period Prior Period TL FC TL FC Banks 395,730 114,857 457,143 154,798 Central Bank of Turkey Domestic Banks 26,195 5,987 27,671 3,323 Foreign Banks 369,535 108,870 429,472 151,475 Foreign Head Offices and Branches Other Institutions 75,632 156,773 Total (*) 395,730 190,489 457,143 311,571

(*) Includes fee and commission expenses regarding to cash loans.

2.b. Information on interest paid to associates and subsidiaries:

Current Period Prior Period Interest Paid to Associates and Subsidiaries 122,596 173,486

2.c. Information on interest paid to marketable securities issued: None.

2.d. Information on Interest Expense on Deposits According to Maturity Structure:

Demand Deposits Time Deposits Up to One Up to Three Up to Six Up to Over Accumulated Month Months Months One Year One Year Deposits Total TL Bank Deposits 646 16,415 31,895 3 3,304 52,263 Savings Deposits 5,008 1,718,577 883,280 78,064 20,070 37,986 2,742,985 Public Sector Deposits 302 12,198 8,834 300 253 21,887 Commercial Deposits 2,091 264,640 424,701 110,067 14,281 3,041 818,821 Other Institutions Deposits 457 169,061 117,035 17,017 30,508 3,221 337,299 Deposits with 7 Days Maturity Total 8,504 2,180,891 1,465,745 205,451 68,163 44,501 3,973,255 FC Foreign Currency Deposits 353 237,047 192,029 26,270 14,463 99,750 569,912 Bank Deposits 95 10,423 9,206 3,246 318 1,123 24,411 Deposits with 7 Days Maturity Precious Metals Deposits Total 448 247,470 201,235 29,516 14,781 100,873 594,323 Grand Total 8,952 2,428,361 1,666,980 234,967 82,944 145,374 4,567,578

3. Information on dividend income:

Current Period Prior Period Financial Assets Held for Trading Financial Assets at Fair Value Through Profit and Loss Financial Assets Available for Sale 1,547 18,679 Other 323,490 266,167 Total 325,037 284,846 İşbank Annual Report 2009 163

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4. Information on trading income/losses (Net):

Current Period Prior Period Profit Securities Trading Gains 425,132 85,528 Gains on Derivative Financial Instruments 2,069,283 2,514,653 Foreign Exchange Gains 48,349,046 51,707,392 Losses (-) Securities Trading Losses 834 105,982 Losses on Derivative Financial Instruments 1,728,889 2,956,130 Foreign Exchange Losses 48,705,365 50,772,811

5. Information on other operating income: An important part of the other operating income is composed of collections and cancellations of the provisions set aside in prior years for various reasons mainly for non-performing loans, and of the fee income received from customers on various banking services.

6. Information on provision for loans and other receivables:

Current Period Prior Period Specific Provisions for Loans and Other Receivables 1,471,079 1,054,196 Group III Loans and Receivables 1,295,443 1,008,810 Group IV Loans and Receivables 35,730 19,958 Group V Loans and Receivables 139,906 25,428 General Provision Expenses 70,263 169,427 Provision Expenses for Possible Risks 292,000 50,000 Marketable Securities Impairment Losses 53 100,669 Financial Assets at Fair Value through Profit and Loss 53 1,151 Financial Assets Available for Sale 99,518 Impairment Losses on Investments in Associates, Subsidiaries, Jointly Controlled Entities and Investments Held to Maturity 64,796 Investment in Associates Subsidiaries 64,796 Jointly Controlled Entities Investments Held to Maturity Others 388,283 239,697 Total 2,286,474 1,613,989

7. Other operating expenses:

Current Period Prior Period Personnel Expenses 1,404,808 1,251,804 Reserve for Employee Termination Benefits 17,369 7,151 Bank Pension Fund Deficit Provisions 19,547 68,037 Impairment Losses on Tangible Assets 12 Depreciation Expenses of Tangible Assets 139,874 134,025 Impairment Losses on Intangible Assets Impairment Losses on Goodwill Amortization Expenses of Intangible Assets 45,373 41,270 Impairment Losses on Share of Participations Accounted for Using the Equity Method Impairment Losses on Assets to be Disposed 3,073 Depreciation Expenses of Assets to be Disposed 8,667 10,059 Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations Other Operating Expenses 816,030 942,129 Operating Lease Expenses 116,374 88,906 Repair and Maintenance Expenses 18,256 13,747 Advertisement Expenses 100,822 106,807 Other Expenses 580,578 732,669 Loss on Sale of Assets 19,073 130,143 Other 220,873 234,908 Total 2,694,687 2,819,538

İşbank Annual Report 2009 164

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8. Information on Profit/loss before taxes including profit/loss from continuing and discontinued operations The Bank’s profit before tax is generated from its continuing operations. The profit before tax consists of net interest income of TL 4,867,488, net fee and commission income of TL 1,252,604 and the other operation expenses amount to TL 2,694,687.

9. Information on Provision for taxes including taxes from continuing and discontinued operations As of December 31, 2009 the Bank’s total tax provision of TL 573,209 consists of current tax expense of TL 783,467 and deferred tax income of TL (210,258).

10. Information on Net operating profit/loss after taxes including net profit/loss from continuing and discontinued operations: The Bank’s net profit generated from its continuing operations amounts to TL 2,372,407.

11. Explanation on Net Period Profit/Loss: a. Income and expense resulting from regular banking activities: No further explanation on operating results is needed for better understanding of the Bank’s performance in the period 01.01.2009-31.12.2009. b. Any changes in estimations that might have a material effect on current and subsequent period results: No disclosure is required. c. Other items do not exceed 10% of the total amount of the income statement.

V. EXPLANATIONS AND NOTES ON THE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY The paid-in capital is TL 3,079,639 in legal records. As of balance sheet date, the balance of legal reserves is TL 1,274,405 and the balance of extraordinary reserves is TL 3,468,758.

In the current period, the change in other reserves item is a result of the conversion losses of foreign branches.

The details of revaluation surplus of securities are shared in the Note nr. V-II-11-h. TL (34,040) of this amount is the deferred tax effect on available for sale securities. (December 31, 2008: TL 5,988)

VI. EXPLANATIONS AND NOTES ON THE CASH-FLOW STATEMENT The operating profit of TL 5,003,471 before the changes in operating assets and liabilities, consists of TL 10,970,598 of interest received predominantly from loans and securities, and TL 5,601,202 of interest paid predominantly on deposits, interbank money market transactions and funds borrowed by the Bank.

The effect of changes in foreign exchange rates on cash and cash equivalents is approximately TL (21,989) as of December 31, 2009. (December 31, 2008: TL 48,356).

Cash, cash in foreign currency, unrestricted deposits in Central Bank of Turkey, reserve deposits at the Central Bank, money in transit, cheques purchased, interbank money market transactions and time deposits up to 3 months are defined as cash and cash equivalents. İşbank Annual Report 2009 165

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

Cash and cash equivalents at beginning of period:

Current Period 31.12.2008 Prior Period 31.12.2007 Cash 11,754,813 7,025,497 Cash in TL and Foreign Currency 583,883 500,284 Central Bank of Turkey and Other 11,170,930 6,525,213 Cash Equivalents 4,349,655 4,783,953 Banks’ Demand Deposits and Time Deposits Up to 3 Months 4,349,655 4,783,953 Total Cash and Cash Equivalents 16,104,468 11,809,450

The total amount resulting from the transactions made in the previous period, shows the total cash and cash equivalents as of the beginning of the current period.

Cash and Cash equivalents as of end of the period:

Current Period 31.12.2009 Prior Period 31.12.2008 Cash 8,729,238 11,754,813 Cash in TL and Foreign Currency 777,586 583,883 Central Bank of Turkey and Other 7,951,652 11,170,930 Cash Equivalents 6,132,582 4,349,655 Banks’ Demand Deposits and Time Deposits Up to 3 Months 6,132,582 4,349,655 Total Cash and Cash Equivalents 14,861,820 16,104,468

VII. EXPLANATIONS AND NOTES ON THE BANK’S RISK GROUP

1. Information on the volume of transactions relating to the Bank’s risk group, incomplete loan and deposit transactions and period’s profit and loss: a. Current Period:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have been Bank’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Loans and other receivables Balance at the beginning of the period 328,466 1,067,977 1 9 318,534 110,846 Balance at the end of the period 162,500 1,381,322 10 444,192 102,324 Interest and commission income received 10,642 517 29,920 1,310 b. Prior Period:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have been Bank’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Loans and other receivables Balance at the beginning of the period 317,870 858,320 1 212,780 88,731 Balance at the end of the period 328,466 1,067,977 1 9 318,534 110,846 Interest and commission income received 17,406 277 20,794 945 İşbank Annual Report 2009 166

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

c.1. Information on deposits held by the Bank’s risk group:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have been Bank’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank Included in the Risk Group Deposits Current Period Prior Period Current Period Prior Period Current Period Prior Period Balance at the beginning of the period 1,722,749 1,126,005 152,957 70,837 290,005 187,060 Balance at the end of the period 1,514,269 1,722,749 237,295 152,957 882,232 290,005 Interest expense on deposits 120,544 171,116 12,112 20,803 28,360 32,089 c.2. Information on forward and option agreements and other similar agreements made with the Bank’s risk group:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have been Bank’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank Included in the Risk Group Current Period Prior Period Current Period Prior Period Current Period Prior Period Transactions at Fair Value Through Profit and Loss Beginning of the period 41,148 71,134 End of the period 3,581 41,148 Total Profit/Loss -2,579 455 Transactions for hedging purposes Beginning of the period End of the period Total Profit/Loss

2. In connection with the Bank’s risk group: a. The relationship of the Bank with corporations in its risk group and under its control regardless of any transactions between the parties: All types of corporate and retail banking services are provided to these corporations in line with the articles of Banking Law. b. The type and amount of transaction carried out, and its ratio to the overall transaction volume, values of principal items and their ratios to overall items, pricing policy and other items in addition to the structure of the relationship: The transactions carried out are mainly loan and deposit transactions. The ratio of loans extended to the risk group to the overall loans is 1.26%, while the ratio to the overall assets is 0.54%; the ratio of deposits of the risk group corporations to the overall deposits is 3.65%, while the ratio to overall liabilities is 2.33%. Comparable price method is used in pricing the transactions. c. Purchase and sale of real estates, other assets and services, agency agreements, finance lease contracts, transfer of information obtained through research and development, license agreements, funding (including loans and provision of support as cash capital or capital-in-kind), guarantees and collaterals, and management agreements: The Bank acquires its properties through its associate, İş Finansal Kiralama A.Ş., when required. The Bank’s branches also act as agents for Anadolu Sigorta A.Ş., Anadolu Hayat Emeklilik A.Ş., and İş Yatırım Menkul Değerler A.Ş. İş Portföy Yönetimi A.Ş. manages the portfolios of 22 mutual funds which were founded by the Bank.

If requested, cash and non-cash loan requirements of corporations within the risk group are met in accordance with the limits imposed by the Banking Law and the prevailing market conditions.

3. Total salaries and similar benefits paid to the key management personnel Benefits paid to key management personnel in the year 2009 amount to TL 14,074 (December 31, 2008: TL 13,348).

İşbank Annual Report 2009 167

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Unconsolidated Financial Statements

VIII. EXPLANATIONS ON THE BANK’S DOMESTIC, FOREIGN, OFF-SHORE BRANCHES AND REPRESENTATIVE OFFICES

Number Employees Domestic Branches (*) 1,078 22,281 Country of Incorporation Foreign Representative Offices 1 1 China

Total Assets Legal Capital

Foreign Branches 1 29 England 3,312,665 241 13 153 TRNC 1,039,873 30,522

Off-Shore Branches 1 9 Bahrain 20,804,227

(*) The Branches located in Free Trade Zones in Turkey are included among domestic branches.

Part Six: Explanations on the Independent Auditors’ Report

I. EXPLANATIONS ON THE INDEPENDENT AUDITORS’ REPORT: The Bank’s unconsolidated financial statements prepared for the financial period as of December 31, 2009, have been audited by DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of Deloitte Touche Tohmatsu).

II. EXPLANATIONS AND NOTES OF THE INDEPENDENT AUDITORS There are no significant issues or necessary disclosures or notes in relation to the Bank’s operations other than those mentioned above.

İşbank Annual Report 2009 168

Türkiye İş Bankası A.Ş. Information to Shareholders

Annual General Meeting: As per the decision of the Board of Directors of İşbank, the Annual General Meeting of the Bank will be held at 14:00 hours on 31 March 2010 in the İş Kuleleri Headquarters Auditorium, 34330 Levent-İstanbul.

Independent Auditors (*): DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Muşavirlik A.Ş. Member of DELOITTE TOUCHE TOHMATSU İstanbul Headquarters Deloitte Sun Plaza Dereboyu Sok. No:24, 34398 Maslak-İstanbul Telephone: (90 212) 366 60 00 Fax: (90 212) 366 60 10

(*) As per the resolution of the İşbank Board of Directors dated 17.12.2009, it is concluded that the independent audit service will be received from Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi (a member firm of KPMG International) starting from 31.03.2010 for a period of 3 years.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Member of KPMG INTERNATIONAL İstanbul Headquarters Yapı Kredi Plaza C Blok Kat:17 34330 Levent/ İstanbul Telephone: (90 212) 317 74 00 Fax: (90 212) 317 73 00

Company Announcements and Financial Data: İşbank’s financial statements, independent auditor’s reports, annual reports, press releases and disclosures of material events are available on the Bank’s cor- porate website (www.isbank.com.tr) under the title of Investor Relations, in both Turkish and English. In addition, information may also be requested via letter or e-mail from the Bank’s Investor Relations Unit, the contact information for which is given below.

Investor Relations Division: Süleyman H. Özcan, Manager İş Kuleleri Kule:1 Kat:15 34330 Levent-İstanbul Telephone: (90 212) 316 16 00 E-mail: [email protected]

Dividend Payments: İşbank’s dividend payment policy is set out in detail in article 58 of the Bank’s articles of incorporation. Information about the policy is provided on page 73 of this annual report. The said information is also available on the Bank’s corporate website (www.isbank.com.tr) under the title of Investor Relations, in both Turkish and English.

Company Share information: İşbank has issued three classes of shares (A, B, and C), which are traded in the ISE National Market under the symbols ISATR, ISBTR and ISCTR respectively. They are also traded on over- the- counter markets in the U.S. as ADR-144 A (American Depositary Receipts) under the symbol TYABY and on the London Stock Exchange as GDR-REG S (Global Depositary Receipts) under the symbol TIBD. Produced by Tayburn Kurumsal Tel: (90 212) 227 04 36 Fax: (90 212) 227 88 57 www.tayburnkurumsal.com www.isbank.com.tr

TÜRKİYE İŞ BANKASI A.Ş. Head Office İş Kuleleri 34330 Levent/İstanbul TURKEY Telephone: (90 212) 316 00 00 Fax: (90 212) 316 09 00 Call Center: (90 212) 444 02 02 E-mail: [email protected] CONSOLIDATED FINANCIAL STATEMENTS 2009

İşbank Information on Consolidated Financial Statements 2009 1

Türkiye İş Bankası A.Ş. Independent Auditors’ Report For The Period 1 January 2009 – 31 December 2009

To the Board of Directors of Türkiye İş Bankası A.Ş. İstanbul

TÜRKİYE İŞ BANKASI A.Ş.

INDEPENDENT AUDITORS’ REPORT FOR THE PERIOD 1 JANUARY 2009 – 31 DECEMBER 2009

1. We have audited the accompanying consolidated balance sheet of Türkiye İş Bankası A.Ş. (“the Bank”) and its subsidiaries (“the Group”) as at 31 December 2009, and the related consolidated statements of income, cash flows and changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements 2. The Board of Directors of the Bank is responsible for the preparation and fair presentation of the financial statements in accordance with the regulation on “Procedures And Principles Regarding Banks’ Accounting Practices And Maintaining Documents” published in the Official Gazette dated 1 November 2006 and numbered 26333 and Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and other regulations, circulars, communiqués and pronouncements in respect of accounting and financial reporting made by Banking Regulation and Supervision Agency (“BRSA”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the regulation on “Licensing and Operations of Audit Firms in Banking” published in the Official Gazette no: 26333 on 1 November 2006 and the International Standards on Auditing. We planned and performed our audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the consideration of the effectiveness of internal control and appropriateness of accounting policies applied relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4. As of the balance sheet date, the accompanying consolidated financial statements include TL 950,000 Thousand of free provision allocated by the Group management for the purpose of the conservatism principle considering the potential circumstances which may arise from any changes in the economy or market conditions and net TL 130,000 Thousand of such provision has been charged to the current period income statement as an expense.

Independent Auditors’ Opinion 5. In our opinion, except for such adjustments as may be necessary in respect of the matter set out in paragraph 4 above, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2009 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as per the Articles 37 and 38 of the Banking Act No: 5411, and other regulations, communiques and circulars in respect of accounting and financial reporting and pronouncements made by Banking Regulation and Supervision Agency.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.

Member of DELOITTE TOUCHE TOHMATSU

Sibel Türker Partner

İstanbul, 15 February 2010

Additional paragraph for the English translation: (The effect of the differences between the accounting principles applied in the accompanying financial statements and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank’s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS.) İşbank Information on Consolidated Financial Statements 2009 2

Türkiye İş Bankası A.Ş. The Consolidated Year End Financial Report as of December 31, 2009

Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: 0212 316 00 00 Fax: 0212 316 09 00 Web site: www.isbank.com.tr E-mail: [email protected]

The consolidated year-end financial report prepared in accordance with the Communiqué on “Presentation & Disclosure of Financial Statements and the Related Notes to be Publicly Announced” of Banking Regulation and Supervision Agency (BRSA), comprises the following sections:

• GENERAL INFORMATION ABOUT THE PARENT BANK • CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT BANK • EXPLANATIONS ON THE ACCOUNTING POLICIES APPLIED IN THE CURRENT PERIOD • INFORMATION ON THE FINANCIAL STRUCTURE OF THE GROUP • DISCLOSURES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • DISCLOSURES ON INDEPENDENT AUDITORS’ REPORT

Associates and subsidiaries whose financial statements have been consolidated in this financial report are as follows:

Subsidiaries Associates 1. ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ ARAP-TÜRK BANKASI A.Ş. 2. ANADOLU HAYAT EMEKLİLİK A.Ş. 3. İŞBANK GMBH 4. İŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 5. İŞ FİNANSAL KİRALAMA A.Ş. 6. İŞ YATIRIM MENKUL DEĞERLER A.Ş. 7. MİLLİ REASÜRANS T.A.Ş. 8. TÜRKİYE SINAİ KALKINMA BANKASI A.Ş.

The consolidated financial statements, related disclosures and notes in this report are prepared, unless otherwise indicated, in thousands of the Turkish Lira (TL), in accordance with the Communiqué on “Principles and Procedures on the Accounting Practice and Documentation of Banks”, Banking Regulation and Supervision Agency (BRSA) regulations, Turkish Accounting Standards, Turkish Financial Reporting Standards and the related appendices and interpretations and the Bank’s financial records, and they have been independently audited and presented as the attached.

Aziz Ferit Eraslan Mahmut Magemizoğlu H. Ersin Özince Prof. Dr. Savaş Taşkent Caner Çimenbiçer Head of Financial Deputy Chief Executive Chief Executive Officer Member of the Board and Chairman of the Board of Directors Management Division In Charge of Financial the Audit Committee and the Audit Committee Reporting

Information on the authorized personnel to whom questions related to this financial report may be directed.

Name-Surname/Title : H. Süleyman Özcan / Head of Investor Relations Division Phone Nr. : +90 212 316 16 02 Fax Nr. : +90 212 316 08 40 E-mail : [email protected] [email protected] Web : www.isbank.com.tr

İşbank Information on Consolidated Financial Statements 2009 3

Türkiye İş Bankası A.Ş.

Page PART 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 4 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 Bank’s Risk Group 4 III. Explanations on the shares, if any, held by Chairman of the Board, Directors, Auditors, Chief Executive Officer and Deputy Chief Executives of the Parent Bank and on the Areas of their Responsibilities 4 IV. Information on the Parent Bank’s Qualified Shareholders 5 V. Summary Information on the Parent Bank’s Functions and Business Lines 5 VI. Explanations on the Consolidated Companies 5

PART II Consolidated Financial Statements I. Consolidated Balance Sheet - Assets 6 II. Consolidated Balance Sheet - Liabilities 7 III. Consolidated Off-Balance Sheet Commitments 8 IV. Consolidated Income Statement 10 V. Consolidated Statement of Income and Expense Items Accounted under Equity 11 VI. Consolidated Statement of Changes in the Shareholders’ Equity 12 VII. Consolidated Cash Flow Statement 14 VIII. Consolidated Profit Distribution Table 15

PART III Explanations on Accounting Policies I. Explanations on the Basis of Presentation 16 II. Explanations on the Usage Strategy of Financial Instruments and on Foreign Currency Transactions 16 III. Information about the Consolidated Companies 16 IV. Explanations on Forward and Option Contracts and Derivatives Instruments 17 V. Explanations on Interest Income and Expenses 18 VI. Explanations on Fee and Commission Income and Expenses 18 VII. Explanations on Financial Assets 18 VIII. Explanations on Impairment of Financial Assets 19 IX. Explanations on Offsetting Financial Instruments 19 X. Explanations on Sale and Repurchase Agreements and Securities Lending Transactions 19 XI. Explanations on Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities 19 XII. Explanations on Goodwill and Other Intangible Assets 19 XIII. Explanations on Tangible Assets 20 XIV. Explanations on Leasing Transactions 20 XV. Explanations on Insurance Technical Income and Expense 20 XVI. Explanations on Insurance Technical Provisions 20 XVII. Explanations on Provisions and Contingent Liabilities 21 XVIII. Explanations on Contingent Assets 21 XIX. Explanations on Liabilities Regarding Employee Benefits 21 XX. Explanations on Taxation 22 XXI. Additional Explanations on Borrowings 22 XXII. Explanations on Share Certificates and Issues 22 XXIII. Explanations on Bank Acceptances and Bills of Guarantee 23 XXIV. Explanations on Government Incentives 23 XXV. Explanations on Segment Reporting 23

PART IV Information on the Financial Structure of the Group I. Explanations on Consolidated Capital Adequacy Standard Ratio 23 II. Explanations on Credit Risk 26 III. Explanations on Market Risk 30 IV. Explanations on Operational Risk 31 V. Explanations on Currency Risk 31 VI. Explanations on Interest Rate Risk 33 VII. Explanations on Liquidity Risk 36 VIII. Explanations on Other Price Risks 39 IX. Explanations on Presentation of Assets and Liabilities at Fair Value 39 X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions 40 XI. Explanations on Business Segmentation 40

PART V Explanations and Notes to the Consolidated Financial Statements I. Explanations on Consolidated Capital Adequacy Standard Ratio 42 II. Explanation and Notes on Consolidated Liabilities 56 III. Explanations and Notes On Consolidated Off-Balance Sheet Commitments 61 IV. Explanations and Notes On The Consolidated Income Statement 62 V. Explanations and Notes On The Statement Of Changes In Consolidated Shareholders’ Equity 65 VI. Explanations and Notes On The Consolidated Cash-Flow Statement 65 VII. Explanations and Notes On The Group’s Risk Group 66 VIII. Explanations On The Group’s Domestic, Foreign, Off-Shore Branches And Representative Offices 67

PART VI Explanations on the Independent Auditors’ Report I. Explanations On The Independent Auditors’ Report 67 II. Explanations and Notes Of The Independent Auditors 67 İşbank Information on Consolidated Financial Statements 2009 4

Türkiye İş Bankası A.Ş. Part One: General Information About the Parent Bank

PART 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 August 26th 1924 as a private firm, with the authorization to collect deposits in order to operate in corporate and retail banking areas and to initiate and/or participate in all kinds of financial and industrial sector undertakings when necessary. There is no change in the Bank’s status 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 Bank’s Risk Group As of December 31, 2009, 41.54% of the Parent Bank’s shares are owned by T. İş Bankası A.Ş. Pension Fund, 28.09% are owned by the Republican People’s Party (Atatürk’s shares) and 30.37% are on free float. There has been no change in the capital structure during the year.

III. Explanations on the shares, if any, held by Chairman of the Board, Directors, Auditors, Chief Executive Officer and Deputy Chief Executives of the Parent Bank and on the Areas of their Responsibilities

Board of Directors and Auditors:

Name Areas of Responsibility Caner Çimenbiçer Chairman of the Board, the Audit Committee and TRNC Internal Systems Committee; the Board of Inspectors H. Fevzi Onat Deputy Chairman, Board Member in Charge of Internal Systems, Chairman of the Risk Committee, Member of the Credit Committee H. Ersin Özince Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of Executive Committee Prof. Dr. Savaş Taşkent Director, Member of the Audit Committee and TRNC Internal Systems Committee İsmet Atalay Director, Member of the Social Responsibility Committee Tülin Aykın Director, Alternate Member of the Credit Committee, Member of the Social Responsibility Committee Tuncay Ercenk Director Adnan Keskin Director Ali Sözen Director Füsun Tümsavaş Director, Member of the Credit Committee Hasan Koçhan Director, Alternate Member of the Credit Committee Prof. Dr. Turkay Berksoy Auditor A. Taciser Bayer Auditor

Chief Executive Officer and Deputy Chief Executives*:

Name Administrative Position H. Ersin Özince Chief Executive Officer and Director, Chairman of the Credit Committee, Member of the Risk Committee, Chairman of Executive Committee A. Aykut Demiray Treasury, Economic Research, International Banking, Foreign Branches and Foreign Representative Offices, Member of the Risk Committee Özcan Türkakın Corporate Communications, Equity Participations, Capital Markets, Private Banking Marketing and Sales Management, Member of the Risk Committee** Zafer Memişoğlu Support Services and Purchasing, Human Resources, Human Resources Partnership and Human Resources Service Center, Construction and Real Estate, and Talent Management Hülya Altay Consumer Loans, Card Payment Systems, Retail Banking Marketing, Sales and Product Management Mahmut Magemizoğlu Financial Management, Investor Relations, Managerial Reporting and Internal Accounting Hakan Barut Legal Affairs, Credit Information and Financial Analysis, Commercial and Corporate Loans Monitoring and Recovery Management Adnan Bali Corporate Banking Marketing, Sales and Product Management, Commercial Banking Marketing, Sales and Product Management, Free Zone Branches Suat İnce Corporate Loans, SME Loans and Commercial Loans Underwriting, Retail Loans Monitoring and Recovery Management, Member of the Risk Committee Serdar Gençer Change Management, Enterprise Architecture, Strategy and Corporate Performance Management Hakan Aran Alternative Distribution Channels Operations, Alternative Distribution Channels Strategy, Banking Operations and Payment Operations, IT Solution Development, IT Architecture & Security, IT Project Management, IT System & Operations, IT Product & Service Delivery, Retail Loan and Card Operations, Foreign Trade and Commercial Loan Operations, Internal Operations, Operations Planning and Branch Operations Management

* Deputy Chief Executive, Mr. M. Sırrı Erkan has retired as of May 29th, 2009 and Deputy Chief Executives Kadir Akgöz and F. Kayhan Söyler have retired as of January 31st, 2010. ** Mr. Türkakın attends the meetings of the Risk Committee that are held on a consolidated basis. The 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. İşbank Information on Consolidated Financial Statements 2009 5

Türkiye İş Bankası A.Ş. Part One: General Information About the Parent Bank

IV. Information on the Parent Bank’s Qualified Shareholders

Name Surname/Company Shares Ownership Paid-in Capital Unpaid Capital T. İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı (İşbank Members’ Supplementary Pension Fund) 1,279,382 41.54% 1,279,382 Cumhuriyet Halk Partisi – Republican People’s Party -(Atatürk’s Shares) 865,134 28.09% 865,134

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. Explanations on the Consolidated Companies

The Parent Bank and its subsidiaries;

- ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ - ANADOLU HAYAT EMEKLİLİK A.Ş. - İŞBANK GMBH - İŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. - İŞ FİNANSAL KİRALAMA A.Ş. - İŞ YATIRIM MENKUL DEĞERLER A.Ş. - MİLLİ REASÜRANS T.A.Ş. - TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. are consolidated according to the “line-by line basis method”,

Its subsidiary;

- ARAP-TÜRK BANKASI A.Ş. is consolidated according to the “equity method”. İşbank Information on Consolidated Financial Statements 2009 6

Türkiye İş Bankası A.Ş. Consolidated Balance Sheet - Assets

TL THOUSAND CURRENT PERIOD PRIOR PERIOD CONSOLIDATED ASSETS (31/12/2009) (31/12/2008) Note TL FC Total TL FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK V-I-1 5,794,532 2,995,196 8,789,728 8,932,001 2,959,867 11,891,868 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) V-I-2 1,196,162 121,982 1,318,144 914,077 144,189 1,058,266 2.1 Financial Assets Held for Trading 1,196,162 121,982 1,318,144 914,077 144,189 1,058,266 2.1.1 Government Debt Securities 949,774 26,486 976,260 725,479 20,500 745,979 2.1.2 Share Certificates 89,668 15 89,683 27,641 0 27,641 2.1.3 Derivative Financial Assets Held for Trading 52,837 93,771 146,608 82,221 122,305 204,526 2.1.4 Other Marketable Securities 103,883 1,710 105,593 78,736 1,384 80,120 2.2 Financial Assets at Fair Value Through Profit and Loss 0 0 0 0 0 0 2.2.1 Government Debt Securities 0 0 0 0 0 0 2.2.2 Share Certificates 0 0 0 0 0 0 2.2.3 Loans 0 0 0 0 0 0 2.2.4 Other Marketable Securities 0 0 0 0 0 0 III. BANKS V-I-3 1,811,893 8,639,852 10,451,745 1,031,512 6,977,481 8,008,993 IV. MONEY MARKET PLACEMENTS 0 0 0 17,057 7,584 24,641 4.1 Interbank Money Market Placements 0 0 0 0 7,584 7,584 4.2 Istanbul Stock Exchange Money Market Placements 0 0 0 1,283 0 1,283 4.3 Receivables from Reverse Repurchase Agreements 0 0 0 15,774 0 15,774 V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) V-I-4 19,193,341 11,366,092 30,559,433 11,608,621 13,251,463 24,860,084 5.1 Share Certificates 40,801 2,957 43,758 34,443 2,957 37,400 5.2 Government Debt Securities 19,131,543 8,882,923 28,014,466 11,553,924 10,865,554 22,419,478 5.3 Other Marketable Securities 20,997 2,480,212 2,501,209 20,254 2,382,952 2,403,206 VI. LOANS AND RECEIVABLES V-I-5 36,093,418 16,667,022 52,760,440 34,400,164 17,289,808 51,689,972 6.1 Loans and Receivables 36,093,418 16,667,022 52,760,440 34,400,164 17,289,808 51,689,972 6.1.1 Loans to the Bank’s Risk Group 313,424 393,191 706,615 188,902 322,681 511,583 6.1.2 Government Debt Securities 0 0 0 0 0 0 6.1.3 Other 35,779,994 16,273,831 52,053,825 34,211,262 16,967,127 51,178,389 6.2 Non-Performing Loans 2,730,826 86,997 2,817,823 2,161,045 86,336 2,247,381 6.3 Specific Provisions (-) 2,730,826 86,997 2,817,823 2,161,045 86,336 2,247,381 VII. FACTORING RECEIVABLES 0 0 0 0 0 0 VIII. INVESTMENTS HELD TO MATURITY (Net) V-I-6 12,014,860 1,332,447 13,347,307 3,720,182 45,677 3,765,859 8.1 Government Debt Securities 12,009,230 0 12,009,230 3,715,217 23,194 3,738,411 8.2 Other Marketable Securities 5,630 1,332,447 1,338,077 4,965 22,483 27,448 IX. INVESTMENTS IN ASSOCIATES (Net) V-I-7 735,900 0 735,900 729,375 0 729,375 9.1 Associates Accounted for Using the Equity Method 59,757 0 59,757 53,232 0 53,232 9.2 Unconsolidated Associates 676,143 0 676,143 676,143 0 676,143 9.2.1 Financial Investments 3,150 0 3,150 3,150 0 3,150 9.2.2 Non-Financial Investments 672,993 0 672,993 672,993 0 672,993 X. INVESTMENTS IN SUBSIDIARIES (Net) V-I-8 2,252,414 7,730 2,260,144 1,530,028 6,522 1,536,550 10.1 Unconsolidated Financial Subsidiaries 295,324 7,730 303,054 230,965 6,522 237,487 10.2 Unconsolidated Non-Financial Subsidiaries 1,957,090 0 1,957,090 1,299,063 0 1,299,063 XI. JOINTLY CONTROLLED ENTITIES (JOINT VENTURES) (Net) V-I-9 0 0 0 0 0 0 11.1 Jointly Controlled Entities Accounted for Using the Equity Method 0 0 0 0 0 0 11.2 Unconsolidated Jointly Controlled Entities 0 0 0 0 0 0 11.2.1 Jointly Controlled Financial Entities 0 0 0 0 0 0 11.2.2 Jointly Controlled Non-Financial Entities 0 0 0 0 0 0 XII. LEASE RECEIVABLES V-I-10 173,062 757,954 931,016 208,005 887,473 1,095,478 12.1 Finance Lease Receivables 213,273 881,757 1,095,030 263,675 1,026,126 1,289,801 12.2 Operating Lease Receivables 945 0 945 1,508 0 1,508 12.3 Other 0 0 0 0 0 0 12.4 Unearned Income (-) 41,156 123,803 164,959 57,178 138,653 195,831 XIII. DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES V-I-11 0 0 0 0 0 0 13.1 Fair Value Hedging 0 0 0 0 0 0 13.2 Cash Flow Hedging 0 0 0 0 0 0 13.3 Net Foreign Investment Hedging 0 0 0 0 0 0 XIV. TANGIBLE ASSETS (Net) V-I-12 2,003,437 36,836 2,040,273 2,016,483 37,323 2,053,806 XV. INTANGIBLE ASSETS (Net) V-I-13 44,598 649 45,247 67,302 1,167 68,469 15.1 Goodwill 7,170 0 7,170 7,170 0 7,170 15.2 Other 37,428 649 38,077 60,132 1,167 61,299 XVI. INVESTMENT PROPERTY (Net) V-I-14 810,782 0 810,782 797,873 0 797,873 XVII. TAX ASSETS V-I-15 637,809 143 637,952 382,167 4 382,171 17.1 Current Tax Asset 21,677 143 21,820 10,925 4 10,929 17.2 Deferred Tax Asset 616,132 0 616,132 371,242 0 371,242 XVIII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-16 28,801 0 28,801 20,542 0 20,542 18.1 Held for Sale 28,801 0 28,801 20,542 0 20,542 18.2 Discontinued Operations 0 0 0 0 0 0 XIX. OTHER ASSETS V-I-17 3,539,902 659,662 4,199,564 2,742,980 481,104 3,224,084 TOTAL ASSETS 86,330,911 42,585,565 128,916,476 69,118,369 42,089,662 111,208,031 İşbank Information on Consolidated Financial Statements 2009 7

Türkiye İş Bankası A.Ş. Consolidated Balance Sheet - Liabilities

TL THOUSAND CURRENT PERIOD PRIOR PERIOD CONSOLIDATED LIABILITIES (31/12/2009) (31/12/2008) Note TL FC Total TL FC Total I. DEPOSITS V-II-1 43,684,501 28,370,471 72,054,972 39,222,472 23,765,530 62,988,002 1.1 Deposits from the Bank’s Risk Group 387,310 1,098,107 1,485,417 302,031 577,865 879,896 1.2 Other 43,297,191 27,272,364 70,569,555 38,920,441 23,187,665 62,108,106 II. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING V-II-2 332,573 166,262 498,835 376,537 168,060 544,597 III. FUNDS BORROWED V-II-3 2,649,229 12,149,715 14,798,944 2,859,428 13,153,378 16,012,806 IV. MONEY MARKET FUNDS 8,826,423 4,646,214 13,472,637 5,590,527 3,110,854 8,701,381 4.1 Interbank Money Market Funds 0 0 0 0 0 0 4.2 Istanbul Stock Exchange Money Market Funds 1,128,031 0 1,128,031 889,268 0 889,268 4.3 Funds Provided Under Repurchase Agreements 7,698,392 4,646,214 12,344,606 4,701,259 3,110,854 7,812,113 V. MARKETABLE SECURITIES ISSUED (Net) 0 0 0 0 0 0 5.1 Bills 0 0 0 0 0 0 5.2 Asset-backed Securities 0 0 0 0 0 0 5.3 Bonds 0 0 0 0 0 0 VI. FUNDS 0 0 0 11 0 11 6.1 Borrower Funds 0 0 0 0 0 0 6.2 Other 0 0 0 11 0 11 VII. SUNDRY CREDITORS 4,291,750 285,486 4,577,236 3,030,598 233,115 3,263,713 VIII. OTHER LIABILITIES V-II-4 487,561 191,469 679,030 408,358 658,436 1,066,794 IX. FACTORING PAYABLES 0 0 0 0 0 0 X. LEASE PAYABLES (Net) V-II-5 0 0 0 0 0 0 10.1 Finance Lease Payables 0 0 0 0 0 0 10.2 Operating Lease Payables 0 0 0 0 0 0 10.3 Other 0 0 0 0 0 0 10.4 Deferred Finance Lease Expenses (-) 0 0 0 0 0 0 XI. DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES V-II-6 0 0 0 0 0 0 11.1 Fair Value Hedging 0 0 0 0 0 0 11.2 Cash Flow Hedging 0 0 0 0 0 0 11.3 Net Foreign Investment Hedging 0 0 0 0 0 0 XII. PROVISIONS V-II-7 6,842,895 269,414 7,112,309 5,967,355 300,100 6,267,455 12.1 General Loan Loss Provision 538,014 688 538,702 497,830 1,158 498,988 12.2 Provision for Restructuring 0 0 0 0 0 0 12.3 Reserves for Employee Benefits 183,026 780 183,806 165,183 785 165,968 12.4 Insurance Technical Reserves (Net) 3,233,574 252,102 3,485,676 2,868,307 192,053 3,060,360 12.5 Other Provisions 2,888,281 15,844 2,904,125 2,436,035 106,104 2,542,139 XIII. TAX LIABILITY V-II-8 340,411 834 341,245 300,448 944 301,392 13.1 Current Tax Liability 340,411 834 341,245 299,249 944 300,193 13.2 Deferred Tax Liability 0 0 0 1,199 0 1,199 XIV. PAYABLES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS V-II-9 0 0 0 0 0 0 14.1 Held for Sale 0 0 0 0 0 0 14.2 Discontinued Operations 0 0 0 0 0 0 XV. SUBORDINATED LOANS V-II-10 0 75,343 75,343 0 70,629 70,629 XVI. SHAREHOLDERS’ EQUITY V-II-11 15,206,519 99,406 15,305,925 11,948,350 42,901 11,991,251 16.1 Paid-in Capital 3,079,639 0 3,079,639 2,756,585 0 2,756,585 16.2 Capital Reserves 2,537,426 48,506 2,585,932 1,911,890 -12,453 1,899,437 16.2.1 Share premium 31,008 0 31,008 31,008 0 31,008 16.2.2 Share Cancellation Profits 0 0 0 0 0 0 16.2.3 Marketable Securities Revaluation Reserve 527,544 48,506 576,050 -96,609 -12,453 -109,062 16.2.4 Tangible Assets Revaluation Reserve 0 0 0 0 0 0 16.2.5 Intangible Assets Revaluation Reserve 0 0 0 0 0 0 16.2.6 Investment Property Revaluation Reserve 0 0 0 0 0 0 16.2.7 Bonus Shares Obtained from Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 1,383 0 1,383 0 0 0 16.2.8 Hedging Funds (Effective Portion) 0 0 0 0 0 0 16.2.9 Accumulated Revaluation Reserves on Assets Held for Sale and Discontinued Operations 0 0 0 0 0 0 16.2.10 Other Capital Reserves 1,977,491 0 1,977,491 1,977,491 0 1,977,491 16.3 Profit Reserves 5,058,557 50,906 5,109,463 4,158,484 47,793 4,206,277 16.3.1 Legal Reserves 1,404,488 0 1,404,488 1,257,046 0 1,257,046 16.3.2 Statutory Reserves 20,362 0 20,362 14,980 0 14,980 16.3.3 Extraordinary Reserves 3,681,786 23,523 3,705,309 2,891,904 18,719 2,910,623 16.3.4 Other Profit Reserves -48,079 27,383 -20,696 -5,446 29,074 23,628 16.4 Profit or Loss 2,567,799 -6 2,567,793 1,566,613 7,561 1,574,174 16.4.1 Prior Years’ Profit/Loss 72,862 -2,698 70,164 -14,596 -176 -14,772 16.4.2 Current Year Profit/Loss 2,494,937 2,692 2,497,629 1,581,209 7,737 1,588,946 16.5 Minority Shares V-II-12 1,963,098 0 1,963,098 1,554,778 0 1,554,778 TOTAL LIABILITIES AND EQUITY 82,661,862 46,254,614 128,916,476 69,704,084 41,503,947 111,208,031 İşbank Information on Consolidated Financial Statements 2009 8

Türkiye İş Bankası A.Ş. Consolidated Off-Balance Sheet Commitments

TL THOUSAND CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008) (NOTE: V-III) TL FC Total TL FC Total A. OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III) 41,024,481 34,002,926 75,027,407 29,525,256 20,611,519 50,136,775 I. GUARANTEES AND SURETYSHIPS 5,404,634 7,861,834 13,266,468 4,169,382 8,161,668 12,331,050 1.1.Letters of Guarantee 5,274,031 4,678,615 9,952,646 4,167,903 4,220,541 8,388,444 1.1.1.Guarantees Subject to State Tender Law 386,021 670,598 1,056,619 304,266 515,910 820,176 1.1.2.Guarantees Given for Foreign Trade Operations 307,059 755,296 1,062,355 389,095 887,518 1,276,613 1.1.3.Other Letters of Guarantee 4,580,951 3,252,721 7,833,672 3,474,542 2,817,113 6,291,655 1.2.Bank Loans 2,997 148,198 151,195 1,020 130,135 131,155 1.2.1.Import Letters of Acceptance 0 110,744 110,744 0 110,034 110,034 1.2.2.Other Bank Acceptances 2,997 37,454 40,451 1,020 20,101 21,121 1.3.Letters of Credit 0 2,775,336 2,775,336 0 3,726,838 3,726,838 1.3.1.Documentary Letters of Credit 0 1,872,776 1,872,776 0 2,717,171 2,717,171 1.3.2.Other Letters of Credit 0 902,560 902,560 0 1,009,667 1,009,667 1.4.Prefinancing Given as Guarantee 0 0 0 0 0 0 1.5.Endorsements 0 41,538 41,538 0 0 0 1.5.1.Endorsements to the Central Bank of Turkey 0 41,538 41,538 0 0 0 1.5.2.Other Endorsements 0 0 0 0 0 0 1.6.Purchase Guarantees for Securities Issued 0 0 0 0 0 0 1.7.Factoring Guarantees 0 0 0 0 0 0 1.8.Other Guarantees 127,606 218,147 345,753 459 84,154 84,613 1.9.Other Suretyships 0 0 0 0 0 0 II. COMMITMENTS 27,867,362 11,431,527 39,298,889 17,092,834 3,637,554 20,730,388 2.1.Irrevocable Commitments 27,678,100 11,071,729 38,749,829 16,733,110 3,270,915 20,004,025 2.1.1.Forward Asset Purchase Commitments 166,408 262,364 428,772 22,958 46,284 69,242 2.1.2.Forward Deposit Purchase and Sale Commitments 0 0 0 0 0 0 2.1.3 Capital Commitment for Affiliates 2,000 0 2,000 0 0 0 2.1.4.Loan Granting Commitments 3,530,717 850,729 4,381,446 3,067,697 1,716,328 4,784,025 2.1.5.Securities Underwriting Commitments 0 0 0 0 0 0 2.1.6.Commitments for Reserve Deposit Requirements 6,853,863 8,077,031 14,930,894 0 0 0 2.1.7.Commitments for Check Payments 3,978,131 0 3,978,131 2,042,966 0 2,042,966 2.1.8.Tax and Fund Liabilities from Export Commitments 22,852 0 22,852 0 0 0 2.1.9.Commitments for Credit Card Expenditure Limits 11,278,482 513,700 11,792,182 10,442,811 427,529 10,870,340 2.1.10. Commitments for Credit Cards and Banking Services Promotions 34,041 0 34,041 19,862 0 19,862 2.1.11. Receivables from Short Sale Commitments 0 0 0 0 0 0 2.1.12. Payables for Short Sale Commitments 2,468 0 2,468 0 0 0 2.1.13.Other Irrevocable Commitments 1,809,138 1,367,905 3,177,043 1,136,816 1,080,774 2,217,590 2.2.Revocable Commitments 189,262 359,798 549,060 359,724 366,639 726,363 2.2.1.Revocable Loan Granting Commitments 189,262 359,798 549,060 359,724 366,639 726,363 2.2.2.Other Revocable Commitments 0 0 0 0 0 0 III. DERIVATIVE FINANCIAL INSTRUMENTS 7,752,485 14,709,565 22,462,050 8,263,040 8,812,297 17,075,337 3.1. Derivative Financial Instruments for Hedging Purposes 0 0 0 0 0 0 3.1.1. Fair Value Hedges 0 0 0 0 0 0 3.1.2. Cash Flow Hedges 0 0 0 0 0 0 3.1.3 Net Foreign Investment Hedges 0 0 0 0 0 0 3.2. Derivative Financial Instruments Held for Trading 7,752,485 14,709,565 22,462,050 8,263,040 8,812,297 17,075,337 3.2.1.Forward Foreign Currency Buy/Sell Transactions 743,662 1,994,474 2,738,136 2,727,983 3,351,737 6,079,720 3.2.1.1. Forward Foreign Currency Buy Transactions 360,424 1,009,237 1,369,661 2,454,430 502,101 2,956,531 3.2.1.2. Forward Foreign Currency Sell Transactions 383,238 985,237 1,368,475 273,553 2,849,636 3,123,189 3.2.2. Currency and Interest Rate Swaps 5,449,889 8,606,552 14,056,441 2,662,341 1,906,362 4,568,703 3.2.2.1. Currency Swap Buy Transactions 81,501 2,151,912 2,233,413 249,065 886,592 1,135,657 3.2.2.2. Currency Swap Sell Transactions 1,848,388 362,871 2,211,259 113,276 1,019,359 1,132,635 3.2.2.3. Interest Rate Swap Buy Transactions 1,760,000 3,045,848 4,805,848 1,150,000 203 1,150,203 3.2.2.4. Interest Rate Swap Sell Transactions 1,760,000 3,045,921 4,805,921 1,150,000 208 1,150,208 3.2.3. Currency, Interest Rate and Security Options 1,470,122 2,405,957 3,876,079 2,283,438 2,333,344 4,616,782 3.2.3.1. Currency Call Options 1,131,822 374,172 1,505,994 1,588,144 642,102 2,230,246 3.2.3.2. Currency Put Options 338,295 1,120,750 1,459,045 695,294 1,578,083 2,273,377 3.2.3.3. Interest Rate Call Options 0 455,515 455,515 0 34,481 34,481 3.2.3.4. Interest Rate Put Options 0 455,515 455,515 0 34,481 34,481 3.2.3.5.Securities Call Options 5 0 5 0 44,197 44,197 3.2.3.6. Securities Put Options 0 5 5 0 0 0 3.2.4. Currency Futures 19,487 19,416 38,903 73,447 69,640 143,087 3.2.4.1.Currency Buy Futures 13,776 5,812 19,588 73,137 322 73,459 3.2.4.2. Currency Sell Futures 5,711 13,604 19,315 310 69,318 69,628 3.2.5. Interest Rate Futures 0 1,643,661 1,643,661 0 514,422 514,422 3.2.5.1.Interest Rate Buy Futures 0 0 0 0 0 0 3.2.5.2.Interest Rate Sell Futures 0 1,643,661 1,643,661 0 514,422 514,422 3.2.6.Other 69,325 39,505 108,830 515,831 636,792 1,152,623

İşbank Information on Consolidated Financial Statements 2009 9

Türkiye İş Bankası A.Ş. Consolidated Off-Balance Sheet Commitments

TL THOUSAND CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008) (NOTE: V-III) TL FC Total TL FC Total B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 113,177,673 30,291,284 143,468,957 120,573,869 25,743,148 146,317,017 IV. ITEMS HELD IN CUSTODY 58,439,212 5,204,617 63,643,829 79,351,692 4,821,833 84,173,525 4.1.Assets under management 3,935,034 651,634 4,586,668 2,543,507 397,721 2,941,228 4.2.Investment securities held in custody 45,201,151 425,310 45,626,461 68,002,515 1,571,347 69,573,862 4.3.Checks received for collection 4,685,426 626,262 5,311,688 4,515,165 459,789 4,974,954 4.4.Commercial notes received for collection 1,932,760 1,932,235 3,864,995 1,664,748 2,192,157 3,856,905 4.5.Other assets received for collection 2,783 9,948 12,731 0 16,378 16,378 4.6.Assets received for public offering 68,166 0 68,166 68,166 0 68,166 4.7.Other items under custody 1,277,080 1,559,228 2,836,308 1,655,252 184,441 1,839,693 4.8.Custodians 1,336,812 0 1,336,812 902,339 0 902,339 V. PLEDGED ITEMS 54,738,461 25,086,667 79,825,128 41,222,177 20,921,315 62,143,492 5.1.Marketable securities 398,272 513,643 911,915 355,254 514,285 869,539 5.2.Guarantee notes 2,375,786 5,574,033 7,949,819 1,124,322 5,334,481 6,458,803 5.3.Commodity 10,391,911 31,588 10,423,499 6,243,206 0 6,243,206 5.4.Warranty 0 0 0 0 0 0 5.5.Real Estates 40,368,598 13,300,130 53,668,728 33,302,027 11,501,179 44,803,206 5.6.Other pledged items 1,203,894 5,618,097 6,821,991 197,368 3,571,370 3,768,738 5.7.Pledged items-depository 0 49,176 49,176 0 0 0 VI. ACCEPTED BILL GUARANTEES AND SURETIES 0 0 0 0 0 0 TOTAL OFF-BALANCE SHEET ACCOUNTS (A+B) 154,202,154 64,294,210 218,496,364 150,099,125 46,354,667 196,453,792 İşbank Information on Consolidated Financial Statements 2009 10

Türkiye İş Bankası A.Ş. Consolidated Income Statement

TL THOUSAND CURRENT PERIOD PRIOR PERIOD Note (01/01/2009 - 31/12/2009) (01/01/2008 - 31/12/2008) I. INTEREST INCOME V-IV-1 11,370,516 11,769,369 1.1 Interest Income on Loans 7,042,088 6,998,647 1.2 Interest Received from Reserve Deposits 180,758 298,381 1.3 Interest Received from Banks 240,221 418,160 1.4 Interest Received from Money Market Placements 101,806 42,520 1.5 Interest Received from Marketable Securities Portfolio 3,644,342 3,840,229 1.5.1 Financial Assets Held for Trading 131,466 141,102 1.5.2 Financial Assets at Fair Value Through Profit and Loss 0 0 1.5.3 Financial Assets Available for Sale 2,476,046 3,163,508 1.5.4 Investments Held to Maturity 1,036,830 535,619 1.6 Finance Lease Income 103,441 112,982 1.7 Other Interest Income 57,860 58,450 II. INTEREST EXPENSE V-IV-2 5,630,372 7,175,786 2.1 Interest on Deposits 4,491,236 5,355,532 2.2 Interest on Funds Borrowed 767,418 901,816 2.3 Interest on Money Market Funds 362,312 887,109 2.4 Interest on Securities Issued 0 0 2.5 Other Interest Expense 9,406 31,329 III. NET INTEREST INCOME/EXPENSE (I - II) 5,740,144 4,593,583 IV. NET FEES AND COMMISSIONS INCOME/EXPENSE 1,159,630 1,165,780 4.1 Fees and Commissions Received 1,416,141 1,358,025 4.1.1 Non-cash Loans 114,905 90,641 4.1.2 Other 1,301,236 1,267,384 4.2 Fees and Commissions Paid 256,511 192,245 4.2.1 Non-cash Loans 3,654 1,847 4.2.2 Other 252,857 190,398 V. DIVIDEND INCOME V-IV-3 166,338 128,351 VI. TRADING INCOME (NET) V-IV-4 557,041 546,400 6.1 Gains/Losses on Securities Trading 520,537 -20,860 6.2 Derivative Financial Transactions Gains/Losses 393,497 -417,398 6.3 Foreign Exchange Gains/Losses -356,993 984,658 VII. OTHER OPERATING INCOME V-IV-5 3,499,043 2,707,938 VIII. TOTAL OPERATING INCOME/EXPENSE (III+IV+V+VI+VII) 11,122,196 9,142,052 IX. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES (-) V-IV-6 2,363,565 1,709,042 X. OTHER OPERATING EXPENSES (-) V-IV-7 5,397,647 5,217,181 XI. NET OPERATING INCOME (VIII-IX-X) 3,360,984 2,215,829 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER 0 0 XIII. PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD 6,525 -107 XIV. NET MONETARY POSITION GAIN/LOSS 0 0 XV. PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XI+…+XIV) V-IV-8 3,367,509 2,215,722 XVI. TAX PROVISION FOR CONTINUING OPERATIONS (±) V-IV-9 615,205 396,692 16.1 Current Tax Provision 923,537 497,552 16.2 Deferred Tax Provision -308,332 -100,860 XVII. NET PERIOD PROFIT/LOSS FROM CONTINUING OPERATIONS (XV±XVI) V-IV-10 2,752,304 1,819,030 XVIII. INCOME ON DISCONTINUED OPERATIONS 0 0 18.1 Income on Assets Held for Sale 0 0 18.2 Gain on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 0 0 18.3 Other Income on Discontinued Operations 0 0 XIX. EXPENSE ON DISCONTINUED OPERATIONS (-) 0 0 19.1 Expense on Assets Held for Sale 0 0 19.2 Loss on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 0 0 19.3 Other Expense on Discontinued Operations 0 0 XX. PROFIT/LOSS ON DISCONTINUED OPERATIONS BEFORE TAX (XVIII-XIX) V-IV-8 0 0 XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) V-IV-9 0 0 21.1 Current Tax Provision 0 0 21.2 Deferred Tax Provision 0 0 XXII. NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) V-IV-10 0 0 XXIII. NET PERIOD PROFIT/LOSS (XVII+XXII) V-IV-11 2,752,304 1,819,030 23.1 Group’s Profit/Loss 2,497,629 1,588,946 23.2 Minority Shares 254,675 230,084 Earnings Per Share (in full TL) 0.032439598 0.020637480 İşbank Information on Consolidated Financial Statements 2009 11

Türkiye İş Bankası A.Ş. Consolidated Statement of Income and Expense Items Accounted Under Equity

TL THOUSAND CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008)

I. ADDITIONS TO MARKETABLE SECURITIES REVALUATION RESERVES FROM FINANCIAL ASSETS AVAILABLE FOR SALE 756,408 -199,372 II. TANGIBLE ASSETS REVALUATION RESERVES 0 0 III. INTANGIBLE ASSETS REVALUATION RESERVES 0 0 IV. TRANSLATION ADJUSTMENT FOR FOREIGN CURRENCY TRANSACTIONS -44,324 34,146 V. PROFIT/LOSS ON CASH FLOW HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Portion of the Changes in Fair Value) 0 0 VI. PROFIT/LOSS ON NET FOREIGN INVESTMENT HEDGE DERIVATIVE FINANCIAL ASSETS (Effective Portion of the Changes in Fair Value) 0 0 VII. THE EFFECT OF CORRECTIONS OF THE ERRORS AND CHANGES IN THE ACCOUNTING POLICY 0 0 VIII. OTHER INCOME AND EXPENSES RECOGNISED IN EQUITY IN ACCORDANCE WITH TAS 616,097 -853,310 IX. DEFERRED TAX EFFECT OF REVALUATION -62,243 24,880 X. NET INCOME/EXPENSE DIRECTLY RECOGNISED IN EQUITY (I+II+…+IX) 1,265,938 -993,656 XI. PROFIT/LOSS FOR THE PERIOD -415,535 52,485 1.1 Net Changes in the Fair Values of Marketable Securities (Transfer to Profit/Loss) -415,535 52,485 1.2 The Portion of Cash-flow Hedge Derivative Financial Assets Reclassified in and Transferred to Income Statement 0 0 1.3 The Portion of Net Foreign Investment Hedge Derivative Financial Assets Reclassified in and Transferred to Income Statement 0 0 1.4 Other 0 0 XII. TOTAL PROFIT/LOSS RECOGNISED FOR THE PERIOD (X±XI) 850,403 -941,171

(*) The amounts include minority shares. İşbank Information on Consolidated Financial Statements 2009 12

Türkiye İş Bankası A.Ş. Consolidated Statement of Changes in Shareholders’ Equity

TL Thousand Accumulated Rev. Reserve on Paid-in Net Marketable Tangible and Assets Held Total Capital Share Current Securities Intangible Assets Bonus Shares for Sale and Shareholders’ Total Paid-in Inflation Share Cancellation Legal Statutory Extraordinary Other Period Prior Period Revaluation Revaluation from Equity Hedge Discontinued Equity Except Minority Shareholders’ Note Capital Adjustment Premium Profits Reserves Reserves Reserves Reserves Profit/(Loss) Profit/(Loss) Reserve Reserve Participations Funds Oper. Minority Shares Shares Equity PRIOR PERIOD V-V (31/12/2008) I. Beginning Balance 2,756,585 1,977,491 31,008 0 1,096,374 9,387 2,057,456 -10,518 0 1,733,792 786,084 0 0 0 0 10,437,659 1,438,811 11,876,470 II. Corrections Made According to TAS 8 2.1. The Effect of Corrections of Errors 2.2. The Effect of Changes in Accounting Policies III. Adjusted Beginning Balance (I+II) 2,756,585 1,977,491 31,008 1,096,374 9,387 2,057,456 -10,518 1,733,792 786,084 10,437,659 1,438,811 11,876,470 Changes During the Period IV. Increase/Decrease Due to Mergers V. Marketable Securities Revaluation Reserve -895,146 -895,146 -80,171 -975,317 VI. Hedge Funds(Effective Portion) 6.1. Cash Flow Hedges 6.2. Net Foreign Investment Hedges VII. Tangible Assets Revaluation Reserve VIII. Intangible Assets Revaluation Reserve IX. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) X. Foreign Exchange Differences 34,146 34,146 34,146 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 14.1. Cash 14.2. Internal Sources XV. Share Issue XVI. Share Cancellation Profits XVII. Paid-in-Capital Inflation Adjustment XVIII. Other XIX. Net Profit/Loss for the Period 1,588,946 1,588,946 230,084 1,819,030 XX. Profit Distribution 160,672 5,593 853,167 -1,748,564 -729,132 -33,946 -763,078 20.1. Dividend Paid -729,132 -729,132 -33,946 -763,078 20.2. Transfer to Reserves 160,672 5,593 853,167 -1,019,432 0 0 20.3. Other Ending Balance (III+IV+V...+XVIII+XIX+XX) 2,756,585 1,977,491 31,008 0 1,257,046 14,980 2,910,623 23,628 1,588,946 -14,772 -109,062 0 0 0 0 10,436,473 1,554,778 11,991,251

CURRENT PERIOD V-V (31/12/2009) I. Beginning Balance 2,756,585 1,977,491 31,008 0 1,257,046 14,980 2,910,623 23,628 1,574,174 -109,062 10,436,473 1,554,778 11,991,251 Changes During the Period II. Increases/Decreases Due to Mergers III. Marketable Securities Revaluation Reserve 685,112 685,112 209,615 894,727 IV. Hedge Funds (Effective Part) 4.1 Cash-flow Hedge 4.2 Net Foreign Investment Hedges V. Tangible Assets Revaluation Reserve VI. Intangible Assets Revaluation Reserve VII. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) -1,383 1,383 0 0 VIII. Foreign Exchange Differences -44,324 40,416 -3,908 -3,908 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 323,054 -323,054 0 0 12.1 Cash 12.2 Internal Sources 323,054 -323,054 0 0 XIII. Share Premium XIV. Share Cancellation Profits XV. Paid-in-Capital Inflation Adjustment XVI. Other XVII. Net Profit/Loss for the Period 2,497,629 2,497,629 254,675 2,752,304 XVIII. Profit Distribution 147,442 5,382 796,069 -1,221,372 -272,479 -55,970 -328,449 18.1 Dividend Paid -272,479 -272,479 -55,970 -328,449 18.2 Transfer to Reserves 147,442 5,382 796,069 -948,893 0 0 18.3 Other Ending Balance (I+II+III+…+XVI+XVII+XVIII) 3,079,639 1,977,491 31,008 0 1,404,488 20,362 3,705,309 -20,696 2,497,629 70,164 576,050 0 1,383 0 0 13,342,827 1,963,098 15,305,925

İşbank Information on Consolidated Financial Statements 2009 13

Türkiye İş Bankası A.Ş. Consolidated Statement of Changes in Shareholders’ Equity

TL Thousand Accumulated Rev. Reserve on Paid-in Net Marketable Tangible and Assets Held Total Capital Share Current Securities Intangible Assets Bonus Shares for Sale and Shareholders’ Total Paid-in Inflation Share Cancellation Legal Statutory Extraordinary Other Period Prior Period Revaluation Revaluation from Equity Hedge Discontinued Equity Except Minority Shareholders’ Note Capital Adjustment Premium Profits Reserves Reserves Reserves Reserves Profit/(Loss) Profit/(Loss) Reserve Reserve Participations Funds Oper. Minority Shares Shares Equity PRIOR PERIOD V-V (31/12/2008) I. Beginning Balance 2,756,585 1,977,491 31,008 0 1,096,374 9,387 2,057,456 -10,518 0 1,733,792 786,084 0 0 0 0 10,437,659 1,438,811 11,876,470 II. Corrections Made According to TAS 8 2.1. The Effect of Corrections of Errors 2.2. The Effect of Changes in Accounting Policies III. Adjusted Beginning Balance (I+II) 2,756,585 1,977,491 31,008 1,096,374 9,387 2,057,456 -10,518 1,733,792 786,084 10,437,659 1,438,811 11,876,470 Changes During the Period IV. Increase/Decrease Due to Mergers V. Marketable Securities Revaluation Reserve -895,146 -895,146 -80,171 -975,317 VI. Hedge Funds(Effective Portion) 6.1. Cash Flow Hedges 6.2. Net Foreign Investment Hedges VII. Tangible Assets Revaluation Reserve VIII. Intangible Assets Revaluation Reserve IX. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) X. Foreign Exchange Differences 34,146 34,146 34,146 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 14.1. Cash 14.2. Internal Sources XV. Share Issue XVI. Share Cancellation Profits XVII. Paid-in-Capital Inflation Adjustment XVIII. Other XIX. Net Profit/Loss for the Period 1,588,946 1,588,946 230,084 1,819,030 XX. Profit Distribution 160,672 5,593 853,167 -1,748,564 -729,132 -33,946 -763,078 20.1. Dividend Paid -729,132 -729,132 -33,946 -763,078 20.2. Transfer to Reserves 160,672 5,593 853,167 -1,019,432 0 0 20.3. Other Ending Balance (III+IV+V...+XVIII+XIX+XX) 2,756,585 1,977,491 31,008 0 1,257,046 14,980 2,910,623 23,628 1,588,946 -14,772 -109,062 0 0 0 0 10,436,473 1,554,778 11,991,251

CURRENT PERIOD V-V (31/12/2009) I. Beginning Balance 2,756,585 1,977,491 31,008 0 1,257,046 14,980 2,910,623 23,628 1,574,174 -109,062 10,436,473 1,554,778 11,991,251 Changes During the Period II. Increases/Decreases Due to Mergers III. Marketable Securities Revaluation Reserve 685,112 685,112 209,615 894,727 IV. Hedge Funds (Effective Part) 4.1 Cash-flow Hedge 4.2 Net Foreign Investment Hedges V. Tangible Assets Revaluation Reserve VI. Intangible Assets Revaluation Reserve VII. Bonus Shares from Associates, Subsidiaries and Jointly Controlled Entities(Joint Ventures) -1,383 1,383 0 0 VIII. Foreign Exchange Differences -44,324 40,416 -3,908 -3,908 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 323,054 -323,054 0 0 12.1 Cash 12.2 Internal Sources 323,054 -323,054 0 0 XIII. Share Premium XIV. Share Cancellation Profits XV. Paid-in-Capital Inflation Adjustment XVI. Other XVII. Net Profit/Loss for the Period 2,497,629 2,497,629 254,675 2,752,304 XVIII. Profit Distribution 147,442 5,382 796,069 -1,221,372 -272,479 -55,970 -328,449 18.1 Dividend Paid -272,479 -272,479 -55,970 -328,449 18.2 Transfer to Reserves 147,442 5,382 796,069 -948,893 0 0 18.3 Other Ending Balance (I+II+III+…+XVI+XVII+XVIII) 3,079,639 1,977,491 31,008 0 1,404,488 20,362 3,705,309 -20,696 2,497,629 70,164 576,050 0 1,383 0 0 13,342,827 1,963,098 15,305,925

İşbank Information on Consolidated Financial Statements 2009 14

Türkiye İş Bankası A.Ş. Consolidated Cash Flow Statement

(TL THOUSAND) CURRENT PERIOD PRIOR PERIOD Note (31/12/2009) (31/12/2008) A. CASH FLOWS FROM BANKING OPERATIONS V-VI

1.1. Operating Profit Before Changes in Operating Assets and Liabilities 5,815,396 3,082,386

1.1.1.Interest Received 12,112,040 11,362,309 1.1.2.Interest Paid -5,899,304 -7,115,221 1.1.3.Dividend Received 35,182 50,938 1.1.4.Fees and Commissions Received 1,416,141 1,358,025 1.1.5.Other Income 3,592,313 1,921,671 1.1.6.Collections from Previously Written Off Loans and Other Receivables 571,879 478,555 1.1.7.Cash Payments to Personnel and Service Suppliers -1,630,241 -1,448,930 1.1.8.Taxes Paid -896,398 -599,911 1.1.9. Other -3,486,216 -2,925,050

1.2. Changes in Operating Assets and Liabilities 9,871,216 976,903

1.2.1.Net (Increase) Decrease in Financial Assets Held for Trading -315,777 649,416 1.2.2. Net(Increase) Decrease in Financial Assets at Fair Value through Profit or Loss 0 0 1.2.3.Net (Increase) Decrease in Due From Banks 20,930 216,928 1.2.4.Net (Increase) Decrease in Loans -4,873,913 -12,813,324 1.2.5.Net (Increase) Decrease in Other Assets -851,441 -1,339,553 1.2.6.Net Increase (Decrease) in Bank Deposits 580,831 557,328 1.2.7.Net Increase (Decrease) in Other Deposits 9,747,570 11,278,599 1.2.8.Net Increase (Decrease) in Borrower Funds -388,336 634,798 1.2.9.Net Increase (Decrease) in Matured Payables 0 0 1.2.10.Net Increase (Decrease) in Other Liabilities 5,951,352 1,792,711

I. Net Cash Provided From Banking Operations 15,686,612 4,059,289

B. CASH FLOWS FROM INVESTING ACTIVITIES

II. Net Cash Provided from Investing Activities -15,842,610 1,319,725

2.1.Cash Paid for Purchase of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) -34,709 -56,739 2.2.Cash Obtained from Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 33 98,243 2.3.Tangible Asset Purchases -224,763 -336,914 2.4.Tangible Asset Sales 147,935 173,525 2.5.Cash Paid for Purchase of Financial Assets Available for Sale -24,561,546 -7,586,314 2.6.Cash Obtained from Sales of Financial Assets Available for Sale 18,160,016 10,034,151 2.7.Cash Paid for Purchase of Investment Securities -10,717,635 -1,019,598 2.8.Cash Obtained from Sales of Investment Securities 1,388,059 13,371 2.9.Other 0 0

C. CASH FLOWS FROM FINANCING ACTIVITIES

III. Net Cash Provided from Financing Activities -328,449 -763,079

3.1.Cash Obtained from Funds Borrowed and Securities Issued 0 0 3.2.Cash Used for Repayment of Funds Borrowed and Securities Issued 0 0 3.3.Share Certificates Issued 0 0 3.4.Dividends Paid -328,449 -763,079 3.5.Payments for Finance Leases 0 0 3.6.Other 0 0

IV. Effect of Change in Foreign Exchange Rate on Cash and Cash Equivalents -19,468 45,845 V. Net Increase in Cash and Cash Equivalents -503,915 4,661,780 VI. Cash and Cash Equivalents at Beginning of the Period 17,285,793 12,624,013 VII. Cash and Cash Equivalents at End of the Period 16,781,878 17,285,793 İşbank Information on Consolidated Financial Statements 2009 15

Türkiye İş Bankası A.Ş. Consolidated Profit Distribution Table

(TL THOUSAND) CURRENT PERIOD PRIOR PERIOD (31/12/2009) (31/12/2008)

I.DISTRIBUTION OF CURRENT YEAR PROFIT (1)

1.1. CURRENT PERIOD PROFIT 2,945,616 1,798,014 1.2.TAXES AND DUES PAYABLE (-) 573,209 288,606 1.2.1.Corporate Tax (Income Tax) 780,959 384,943 1.2.2.Income Tax Withholding 2,508 316 1.2.3.Other Taxes and Dues Payable (2) -210,258 -96,653

A. NET PROFIT FOR THE PERIOD (1.1-1.2) 2,372,407 1,509,408

1.3.PRIOR YEARS’ LOSSES (-) 0 0 1.4.FIRST LEGAL RESERVES (-) 0 73,890 1.5. OTHER STATUTORY RESERVES (-) 0 741,337

B. NET PROFIT ATTRIBUTABLE TO [(A-(1.3+1.4+1.5)] 2,372,407 694,181

1.6.FIRST DIVIDEND TO SHAREHOLDERS (-) 0 165,395 1.6.1.To Owners of Ordinary Shares 0 165,393 1.6.2.To Owners of Preferred Shares 0 2 1.6.3.To Preferred Shares (Preemptive Rights) 0 0 1.6.4.To Profit Sharing Bonds 0 0 1.6.5.To Holders of Profit/Loss Share Certificates 0 0 1.7.DIVIDENDS TO PERSONNEL (-) 0 105,757 1.8.DIVIDENDS TO THE BOARD OF DIRECTORS (-) 0 1,322 1.9.SECOND DIVIDEND TO SHAREHOLDERS (-) 0 323,059 1.9.1.To Owners of Ordinary Shares 0 323,049 1.9.2. To Owners of Preferred Shares 0 5 1.9.3 To Preferred Shares (Preemptive Rights) 0 5 1.9.4.To Profit Sharing Bonds 0 0 1.9.5.To Holders of Profit/Loss Share Certificates 0 0 1.10.SECOND LEGAL RESERVES (-) 0 45,770 1.11.STATUTORY RESERVES (-) 0 0 1.12.EXTRAORDINARY RESERVES 0 52,878 1.13.OTHER RESERVES 0 0 1.14.SPECIAL FUNDS 0 0

II. DISTRIBUTION FROM RESERVES

2.1.DISTRIBUTED RESERVES 0 0 2.2.SECOND LEGAL RESERVES (-) 0 0 2.3.DIVIDENDS TO SHAREHOLDERS (-) 0 0 2.3.1.To Owners of Ordinary Shares 0 0 2.3.2 To Owners of Preferred Shares 0 0 2.3.3. To Preferred Shares (Preemptive Rights) 0 0 2.3.4.To Profit Sharing Bonds 0 0 2.3.5.To Holders of Profit/Loss Share Certificates 0 0 2.4.DIVIDENDS TO PERSONNEL (-) 0 0 2.5.DIVIDENDS TO THE BOARD OF DIRECTORS (-) 0 0

III. EARNINGS PER SHARE

3.1. TO OWNERS OF ORDINARY SHARES (3) 0.0308 0.0219 3.2. TO OWNERS OF ORDINARY SHARES (%) 77 55 3.3. TO OWNERS OF PREFERRED SHARES (3) 0 0 3.4. TO OWNERS OF PREFERRED SHARES (%) 0 0

IV. DIVIDEND PER SHARE

4.1. TO OWNERS OF ORDINARY SHARES (3) 0 0.0071 4.2. TO OWNERS OF ORDINARY SHARES (%) 0 18 4.3. TO OWNERS OF PREFERRED SHARES (3) 0 0.0054 4.4. TO OWNERS OF PREFERRED SHARES (%) 0 54

(1) The decision for dividend payment is made at the Annual General Meeting. Annual General Meeting has not been held as of the reporting date. (2) The amount included in Other Taxes and Dues Payable refers to Deferred Tax Income, which will not be included within the profit distribution. (3) Expressed in full TL İşbank Information on Consolidated Financial Statements 2009 16

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

PART THREE: EXPLANATIONS ON ACCOUNTING POLICIES I. Explanations on the Basis of Presentation The consolidated financial statements and related disclosures and notes in this report are prepared in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and the Communiqué on “Principles and Procedures on the Accounting Practice and Documentation of Banks”, and the other regulations, disclosures and circulars related to the accounting and financial reporting principles published by the Banking Regulatory and Supervisory Agency (“BRSA”).

Accounting policies and valuation principles used in the preparation of the consolidated financial statements are presented in detail below:

II. Explanations on the Usage Strategy of Financial Instruments and on Foreign Currency Transactions

1. The Group’s Strategy for the Use of Financial Instruments The Group’s main financial activities comprise a wide range of activities such as banking, insurance, intermediary services, real estate portfolio management and financial lease. 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 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 Turkey. 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 financial system fixed and floating rate placements are made according to the yields of alternative investment instruments, and some of the funds are transferred to the Treasury guaranteed projects. On the other hand, high yielding Eurobonds and government debt securities portfolios are of sufficient quality and quantity to reduce the risk which may arise from the fluctuations in the interest rates.

By taking into account the international 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 non-interest income generation opportunities.

Main growth targets for different asset classes are set by the long-term plans shaped along with budgeting; and the 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.

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 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 specified 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. Other Explanations on Foreign Currency Transactions The financial statements of the Parent Bank’s foreign branches and its financial institutions that have been established abroad are prepared in currencies (functional currency) prevailing in the economic environment that they operate in and at the consolidation period they are presented in TL, which is 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 to Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary foreign currency items measured at fair value are converted by the rates at the date of the fair value assessments. Exchange rate differences arising from the conversion of monetary items and the collections and payments in foreign currency are recognized in the income statement.

In accordance with the Turkish Accounting Standard Nr:21 “Effects of Changes In Foreign Exchange Rates” (TAS 21), net investments in non-domestic companies are considered as non-monetary items, measured on the basis of historical cost and converted to Turkish Currency at the currency rates at the transaction date, and also in accordance with the Turkish Accounting Standard Nr:29 “Financial Reporting In Hyperinflationary Economics” (TAS 29), 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.

End of period foreign currency closing rates are used for conversion to TL of the assets and liabilities of the Parent Bank’s foreign branches and its financial institutions that have been established abroad. The income and expenses of foreign branches are converted to TL by using the foreign currency exchange rates on the transaction date and the income and expenses of the financial institutions that are established abroad are converted to TL by using the average currency rates unless there is a significant fluctuation in the rates during the period. The exchange rate differences arising from the conversions are recorded in the “Other Profit Reserves” account under the shareholders’ equity.

While the Parent Bank and Türkiye Sınai Kalkınma Bankası A.Ş. use their own exchange rates, the other consolidated financial institutions use the Central Bank of Turkey (CBT) exchange rates. Foreign exchange gains and losses arising from the conversion of monetary items and the collection and payment of foreign currency transactions are recognized in the income statement.

III. Information about the Consolidated Companies

1. Basis of Consolidation: The consolidated financial statements have been prepared in accordance with the procedures listed in the “Communiques Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks” published in the Official Gazette No.26340 dated 8 November 2006. a. Basis of consolidation of subsidiaries: A subsidiary is an entity that is controlled by the Parent.

Control: The Parent Bank’s power 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. İşbank Information on Consolidated Financial Statements 2009 17

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

In accordance with the procedures listed in the “Communiques Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks” published in the Official Gazette No.26340 dated 8 November 2006, some of the financial subsidiaries are not included in consolidation whose assets do not exceed one percent of the Parent Bank’s total assets or share totals do not exceed five percent of the Parent Bank’s total assets. In this context, as of 31.12.2009, İş Dublin Financial Services PLC, İş Factoring Finansman Hizmetleri A.Ş., İş Girişim Sermayesi Yatırım Ortaklığı A.Ş., İş Portföy Yönetimi A.Ş., İş Yatırım Ortaklığı A.Ş., Maxis Securities Ltd., TSKB Gayrimenkul Yatırım Ortaklığı A.Ş., TSKB Yatırım Ortaklığı A.Ş. and Yatırım Finansman Menkul Değerler A.Ş. whose assets do not exceed one percent of the Parent Bank’s total assets and whose share totals do not exceed five percent of the Parent Bank’s total assets are not included in the consolidation in the current period. Detailed information about the unconsolidated financial institutions is given in Part Five under the caption of “I. Explanations and Notes Related to the Consolidated Assets” at item 8.a.

Under line-by-line 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. Minority 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. Minority interests are presented separately in the balance sheet and in the income statement.

In preparing the consolidated financial statements, if a subsidiary uses accounting policies other than those adapted by the Parent Bank, appropriate adjustments are made to subsidiaries’ financial statements. There is no item where a different accounting policy is applied.

TFRS 3 “Business Combinations” standard prescribes no depreciation to be recognized for goodwill arising on the acquisitions on or after 31.03.2004, 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.

The details of positive goodwill obtained from Group’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 Total 7,170 b. Basis of consolidation of associates: An associate is a partnership which the Parent Bank participates in its capital and over which it has a significant influence but no control, established at home and abroad.

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 an investor 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 method is an evaluation method of associates, by which the book value of the Parent Bank’s share in the associate’s equity is increased or decreased by the proportional share of the Parent Bank in the change in the associate company’s equity and the dividend received by the Parent Bank is deducted.

The accounting policies of Arap-Türk Bankası A.Ş., the only associate that is consolidated using the equity method are not different than the Parent Bank’s. Thus, no adjustments of compliance have been applied. c. Basis of consolidation of joint ventures: The Bank does not have any partnership to be consolidated. d. Principles applied during share transfer, merger and acquisition: None.

2. Presentation of unconsolidated subsidiaries, associates and share certificates included in the available-for-sale portfolio in consolidated financial statements: Turkish Lira denominated unconsolidated subsidiaries, associates and investments in shares included in the available-for-sale portfolio are accounted in the financial statements by the value reached after the deduction of permanent impairment losses, if any, from their acquisition costs.

Unconsolidated and listed on the stock market subsidiaries, associates and investments in shares included in the available-for-sale portfolio are recognized in the consolidated financial statements at their market value.

Foreign currency denominated subsidiaries, associates and investments in shares included in the available-for-sale portfolio are measured at historical cost and translated into Turkish Lira using the exchange rates prevailing at the transaction date and recognized in financial statements at the inflation adjusted values calculated by using the inflation indices between the transaction date and 31.12.2004, the last date for the inflation adjustment, less any impairment losses.

IV. Explanations on Forward and Option Contracts and Derivatives Instruments The Group’s derivative transactions predominantly consist of currency and interest rate swaps, forward foreign currency trading and currency options. The Group has no derivative products that are separated from the host contract.

Derivative financial instruments are carried at their fair values at the contract dates and the receivables and payables arising in these transactions are followed under off-balance sheet accounts. Derivative transactions are remeasured 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. Even though some derivative transactions economically provide risk hedging, since not all the necessary conditions are met for them to be defined as items suitable for financial risk hedging accounting, they are recognized as “held for trading purposes” within the scope of TAS 39 “Turkish Accounting Standard for Financial Instruments: Recognition And Measurement”. The valuation differences arising from the valuation of derivative transactions are associated with the income statement. İşbank Information on Consolidated Financial Statements 2009 18

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

On the other hand, on the off-balance sheet table, the options that generate assets for the Group are presented under “call options” line and the ones that generate liabilities are presented under “put options” line.

V. Explanations on Interest Income and Expenses Interest income and expenses are recorded on accrual basis by using the effective interest method (the ratio which equalizes the future cash flows of a financial asset or liability to net present book value) within the framework of TAS 39 “Financial Instruments: Recognition And Measurement”.

As per the relevant legislation, accrued interests and other interest receivables on loans and other receivables that are classified as non-performing are cancelled and the relevant figures are recorded as interest income only when collected.

VI. Explanations on Fee and Commission Income and Expenses

Fee and commission income and expenses are recorded on accrual or collection basis, depending on the nature of the transaction.

VII. Explanations on Financial Assets Financial instruments include financial assets, financial liabilities and derivative instruments. Financial instruments are presented in the balance sheet when the Bank becomes contractually a party of such instruments.

Financial instruments constitute the basis of the Group’s commercial activities and operations. These financial instruments expose, affect and diminish the liquidity, credit and interest rate risks in the financial statements.

Fair value is the amount for which an asset could be exchanged or a liability could be settled between knowledgeable willing parties in an arms length transaction. Fair value of a financial instrument is equal to the market price obtainable from the sale, or payable on the acquisition of the instrument in an active market, if one exists.

The estimated fair value of financial instruments is determined by using the current market information and appropriate valuation methods. However, estimating the fair values through assessing the market information requires interpretation and judgment. As a result, the estimations presented herein cannot be an indicator of the amounts that could be obtained by the Group in case of disposal of assets at the current market conditions. Book value of some financial instruments, which equals to the acquisition cost, is assumed to be equal to fair value due to their short-term maturities.

The methods and assumptions used to determine the estimated fair value of each financial instrument are given below.

1. Cash and Banks Cash consists of cash in vault, foreign currency cash, money in transit, cheques purchased and precious metals. Foreign currency cash and banks are shown in the balance sheet by their amounts converted to TL at the foreign exchange rate on the balance sheet date. The carrying values of both the cash and banks, are their estimated fair values.

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.

Financial assets held for trading are recognized at their fair values in the balance sheet and thereafter carried at fair values. In cases where values that form the basis for the fair value do not exist in active market conditions, it is accepted that the fair value is not reliably determined and “amortized cost”, calculated by the internal rate of return method, is taken into account as the fair value. Any gains or losses resulting from such valuation are recorded in the profit and loss accounts. Interest income resulting from financial assets held for trading is presented as part of interest income in the profit/loss statement and dividends are presented within dividend income. Any profit or loss resulting from the disposal of those assets before their maturity date is recognized under the accounts of “Interest Income/Expense” and “Gains/losses on securities trading”, as per the Uniform Code of Accounts, and presented in the income statement. a.2. Financial Assets at Fair Value through Profit and Loss Financial Assets Classified at Fair Value through Profit and Loss are financial assets which have not been acquired for trading purposes, but classified as at fair value through profit and loss at the initial accounting. The recognition of such assets at fair value is accounted similar with the financial assets held for trading. b. Explanations on Financial Assets Available for Sale and Investments Held to Maturity b.1. Financial assets available for sale are non-derivative financial assets other than loans and receivables originated by the Parent Bank, other than, those classified as financial assets at fair value through profit and loss, and other than investments held to maturity. Initial recognition and the subsequent valuation of financial assets available for sale, including their transaction costs, is made on a fair value basis and the difference between the cost and the “amortized cost” calculated using the “Internal Rate of Return Method” is reflected to the income statement. In conditions where values that form the basis of fair value do not exist under active market conditions, it is deemed that the fair value is not reliably determined and the amortized cost calculated using the “Internal Rate of Return Method” is taken into account as the fair value. Unrealized profit and loss resulting from the changes in fair values of the financial assets available for sale, are not reflected to the income statement until the corresponding values are realized through sale or disposal, rather they are recognized in the “Marketable Securities Revaluation Reserve” account under the shareholders’ equity. In the event of any disposal or redemption of the relevant asset, the fair value differences accumulated in the shareholders’ equity, resulting from market valuation are reflected to the income statement. b.2. Investments held to maturity are non-derivative financial assets, other than loans and receivables originated by the Parent Bank, other than, those which are classified as financial assets at fair value through profit and loss at initial recognition and other than those which are defined as available for sale. These financial assets are held with the intention of being retained until the maturity date, and for which the required conditions, including the capability of being funded, are secured for holding until maturity, and they have a fixed maturity date or a maturity date that can be deemed fixed due to its determinable payments. Investments held to maturity, that are initially recorded at their fair values including the cost of transaction, are carried at amortized cost, calculated using the internal rate of return method, less any impairment losses. Interest income generated from investments held to maturity is accounted as interest income on the profit/loss account. İşbank Information on Consolidated Financial Statements 2009 19

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

The Group has no financial assets that have been previously classified as held to maturity investments but cannot be classified as held to maturity for two consecutive years due to “tainting” rules.

3. Loans and Receivables Loans and receivables are financial assets, which are generated by providing funds, goods or services to the debtor, with fixed or determinable repayment schedules and they are not traded in an active market.

The initial recognitions of loans and receivables are made at fair values including the cost of acquisition and subsequent valuations are made at amortized cost, which is calculated using the internal rate of return method. Any fees, transaction costs and other similar costs attributable to assets taken as collaterals for loans are reflected in the profit/loss accounts.

Retail and corporate loans that are followed under cash loans are accounted at original balances, based on their types, under the accounts defined by the Uniform Code of Accounts (UCA) and the Explanatory Manual.

Foreign currency indexed loans are converted to Turkish Lira at the rates prevailing at the opening date; they are followed under the Turkish Currency (“TL”) accounts, and amount of increases or decreases in the principal amount of the loans, depending on the exchange rate of the following periods being higher or lower than the ones on the lending date, are recognized in the profit/loss accounts. Repayment amounts are calculated at the exchange rate on the repayment date and the foreign exchange differences are reflected in the Foreign Exchange Gains/Losses” account.

VIII. Explanations on Impairment of Financial Assets At each balance sheet date, the Group companies evaluate the carrying amount of its financial assets or a group of its financial assets to determine whether there is an objective indication if those assets have suffered an impairment loss. Where there is an impairment, the related impairment amount is measured.

A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to the occurrence of one or more than one event (loss/damage event) subsequent to initial recognition of that financial asset; and such loss event (or events) causes an subsequent to initial recognition of that asset; and such loss event causes an impairment loss as a result of the effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Irrespective of the materiality, no estimated loss that might arise from future events is recognized in the financial statements.

If there is an impairment loss in investments held to maturity, the amount of loss is measured as the difference between the book value and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate, and the book value of the asset shall be reduced by recognizing such loss. In the following periods, if the amount of impairment loss decreases, the previously recognized amount shall be reversed.

In case an available-for-sale financial asset, which is accounted at fair value and whose value increases and decreases are recognized directly in equity, is impaired, accumulated profit or loss that had been recognized directly in equity shall be removed from equity and recognized in period net profit or loss. If, in a subsequent period, the fair value of the related financial asset increases, the impairment loss is reversed.

Loans are classified and followed in line with the provisions of the “Regulation on Identification of Loans and Other Receivables and Provisioning against Them”, published on the Official Gazette nr.26333 dated 1 November 2006. Specific provision is allocated for the total amount of loans and other receivables, which is deemed non-performing, without being restricted by the minimum legal requirements stated in the related regulation, and such specific provisions are recognized in the income statement. The provisions, which are released within the same year, are credited to the “Provision Expenses” account and the released parts of the provisions from the previous years are transferred to and recognized in the “Other Operating Income” account.

Apart from specific provisions, the Parent Bank and the financial institutions affiliated to the Group also allocate general provisions against loans and other receivables.

IX. Explanations on Offsetting Financial Instruments Financial assets and liabilities are offset when the Bank has a legally enforceable right to offset, and when it is possible to collect or pay the net amount of related assets and liabilities or when it is possible to offset the assets and liabilities simultaneously.

X. Explanations on Sale and Repurchase Agreements and Securities Lending Transactions Securities subject to repo (repurchase agreements) are classified as “Financial Assets at Fair Value through Profit and Loss”, “Financial Assets Available for Sale” and “Investments Held to Maturity” according to their purposes to be held in the Group’s portfolio and evaluated within the principles of the relevant portfolio.

Funds obtained from repurchase agreements are followed under the “Funds Provided Under Repurchase Agreements” account in liabilities, and interest expense accruals are calculated using the internal rate of return method on the difference between the sales and repurchase prices corresponding to the period designated by a repurchase agreement.

Reverse repo transactions are recorded under the “Receivables from Reverse Repurchase Agreements” account. Interest income accruals are calculated according to the internal rate of return method on the difference between the purchase and resale prices corresponding to the period designated by a reverse repo agreement. There are no reverse repurchase agreements as of the balance sheet date.

XI. Explanations on Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Assets held for sale are measured at the lower of the carrying value of assets and fair value less any cost incurred for disposal. Assets held for sale are not amortized and presented in the financial statements separately. An asset shall be classified as held for sale, only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Highly saleable condition requires a plan by the management regarding the sale of the asset to be disposed of (or else the group of assets), together with an active program for the determination of buyers as well as for the completion of the plan. Also the asset (or else the group of assets) shall be actively marketed in conformity with its fair value. Various events and conditions may extend the completion period of the disposal more than a year. If such delay arises from any events and conditions beyond the control of the entity and if there is sufficient evidence that the entity has an ongoing disposal plan for these assets, such assets (or else group of assets) are continued to be classified as assets held for sale (or else group of assets).

A discontinued operation is a part of the Bank’s business classified as sold or held-for-sale. The results of the discontinued operations are disclosed separately in the income statement. Neither the Parent Bank nor its financial institutions have any discontinued operation.

XII. Explanations on Goodwill and Other Intangible Assets Intangible assets consist of consolidation goodwill and software programs. İşbank Information on Consolidated Financial Statements 2009 20

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

Goodwill arising from the acquisition of a subsidiary or joint venture, represents the excess of cost of acquisition over the fair value of Group’s share of the identifiable assets, liabilities, or contingent liabilities of the acquired subsidiary or joint venture at the date of acquisition. Goodwill is recognized as an asset at cost and then carried at cost less accumulated impairment losses. In impairment-loss test, goodwill is allocated among the Group’s every cash-generating unit that is expected to benefit from the synergies of the business merger. To control whether there is an impairment loss in the cash-generating units that goodwill is allocated, impairment- loss test is applied every year or more often if there is indications of impairment loss. In the cases, recoverable amount of cash-generating unit is smaller than its book value; impairment loss is firstly used in reduction of book value of the goodwill of the cash-generating unit, and than the other assets proportionally. Impairment losses, which are allocated for the goodwill, cannot be reversed. When a subsidiary or joint venture is to be sold, related goodwill amount is combined with the profit/loss relating to this disposal. Positive goodwill arising from the Group’s investments in its subsidiaries is recognized in Intangible Assets.

Intangible assets purchased before 1 January 2005, are presented with their inflation adjusted historical acquisition cost until December 31, 2004, end-date of the hyperinflationary period, and the intangible assets purchased in the subsequent periods are presented with their acquisition cost less the accumulated amortization, and impairment provisions. Such assets are amortized by the straight-line method, between 1-3 year considering their useful life. The amortization method and period are periodically reviewed at the end of each year.

XIII. Explanations on Tangible Assets Tangible assets purchased before 1 January 2005, are presented in the financial statements at their inflation adjusted acquisition costs as of December 31, 2004, and the items purchased in the subsequent periods are presented at acquisition costs less accumulated amortization and impairment provisions.

The acquisition costs of tangible assets other than the land and the fixed assets under construction, are amortized by the straight-line method, according to their estimated useful lives. The estimated useful life, residual amount and the method of amortization are reviewed every year for the possible effects of the changes that occur in the estimates and if there is any change in the estimates, they are recognized prospectively. Assets under construction for leasing or for administrative purposes or for other objectives, which are not presently determined, are amortized when they are ready for use.

The profits and losses arising from the disposal or inactivation of tangible assets are specified as the difference between the sales proceeds and the book value of the tangible asset and then recognized in the income statement. Regular maintenance and repair costs incurred for tangible assets, are recorded as expense.

There are no restrictions such as pledges, mortgages on tangible assets.

These explanations are the same for the property held to earn rentals and/or for capital appreciation or both and recognized as “Investment Property”.

The depreciation rates used in amortization of tangible assets and their estimated useful lives are as follows:

Estimated Economic Life (Year) Depreciation Rate Buildings 4-50 2-25% Safe Boxes 2-50 2-50% Other Movables 2-25 4-50% Leased Assets 4-5 20-25%

XIV. Explanations on Leasing Transactions Assets acquired through finance lease are capitalized by the lower of the market values or the discounted values of the leasing payments, and the total amount of leasing payments are recorded as liabilities while the interest amounts are recorded as deferred interest. Finance lease payments are separated as financial expense and principal amount payment, which provides a decrease in finance lease liability, thus helps a fixed rate interest on the remaining principal amount of the debt to be calculated. Within the context of the Group’s general borrowing policy, financial expenses are recognized in the income statement. Leased assets are recorded under “Tangible Assets” account and they are amortized by straight-line method.

There is one company which exclusively does finance leases (İş Finansal Kiralama A.Ş.) and one bank (Türkiye Sınai Kalkınma Bankası A.Ş.) which operates finance lease activities as per provisional article nr.4 of the Banking Law Nr.5411. Finance lease activities are carried out according to the “Law on Financial Leasing” nr. 3226.

In cases when the Group is the “lessor”, the value of the assets subject to leasing at the beginning of leasing transaction is recognized in the balance sheet as finance lease receivable. The interest income generated by the difference between the total finance lease receivables and the investment value of the asset subject to leasing are recorded to the related period’s income statement throughout its leasing period by allocating each period’s receivables with a fixed interest rate to periods and the interest income, which has not accrued in the related period are recognized in the unearned interest income account.

Transactions related to operating lease are accounted as per the provisions of the relevant agreement and on accrual basis.

XV. Explanations on Insurance Technical Income and Expense In insurance companies premium income is obtained subsequent to the share of reinsurers in policy income is deducted as they are reported and paid. Claims are recorded in expense as they are reported. Outstanding loss provisions are recognized for the claims reported but not paid yet and for the claims that incurred but not reported. Reinsurers’ share of claims paid and outstanding loss are offset in these provisions.

XVI. Explanations on Insurance Technical Provisions According to the current insurance regulation, insurance companies should recognize provisions for unearned premium claims, unexpired risk reserves, provision for outstanding claims, life-mathematical provisions and equalization provisions.

The provision for unearned premiums represents the amount of net premiums underwritten incurrent period but corresponding to period subsequent to balance sheet date and is calculated on a daily basis.

In case the expected loss premium ratio is over 95%, the unexpired risk reserves are recognized by the amount found as multiplication of this exceeding ratio with unearned premium provision for the branches specified by the Undersecretariat of Treasury.

Provision for outstanding losses is recognized for the claims reported at period end but not paid yet or for the incurred but not reported claims. The reassure shares of outstanding losses are offset in the provision for outstanding losses. İşbank Information on Consolidated Financial Statements 2009 21

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

Mathematical provision is recognized on actuarial bases in order to meet the requirements of policyholders and beneficiaries for life, health and personal accident insurance contracts for a period longer than a year.

Equalization provision is recognized in order to balance the fluctuations in the claim ratios that may occur in the following accounting periods.

On the other hand, actuarial chain ladder method is used to estimate the provision amount to be set aside in the current period by looking at the data of the past materialized losses. If the provision amount found as a result of this method exceeds the amount of provision for the amount of uncertain indemnity, additional provision must be set aside for the difference.

Reinsurance companies recognize for the outstanding claims that is declared by the companies, accrued and determined on account.

On the other hand, effective January 1, 2005, the Group’s insurance subsidiaries adopted TFRS 4, Insurance Contracts (“TFRS 4”). TFRS 4 represents the completion of phase I and is a transitional standard until the recognition and measurement of insurance contracts has more fully addressed. TFRS 4 requires that all contracts issued by insurance companies be classified as either insurance contracts or investment contracts. Contracts with significant insurance risk are considered insurance contracts. Insurance risk is defined as risk, other than financial risk, transferred from the holder of a contract to the issuer. TFRS 4 permits a company to continue with its previously adopted accounting policies with regard to recognition and measurement of insurance contracts. Only in case of presentation of more reliable figures a change in accounting policy shall be carried out. Contracts issued by insurance companies without significant insurance risk are considered investment contracts. Investment contracts are accounted for in accordance with TAS 39 revised.

Insurance companies of the Group cede premium and risks in the normal course of business in order to limit the potential for losses arising from risks accepted. Insurance premiums ceded to reinsurers on contracts that are deemed to transfer significant insurance risk are recognized as an expense in a manner that is consistent with the recognition of insurance premium revenue arising from the underlying risks being protected.

Costs which vary and are directly associated with the acquisition of insurance and reinsurance contracts including brokerage, commissions, underwriting expenses and other acquisition costs are deferred and amortized over the period of contract, consistent with the earning of premium.

XVII. Explanations on Provisions and Contingent Liabilities Provision is set aside in the financial statements in case that a liability resulting from past events exists, that an outflow funds, which have economic use is probable in order to fulfill the liability and that the amount of the related liability can be measured reliably. The provision amount is calculated by the most reliable estimates of the expense to be made by the Parent Bank’s and Group Companies’ management as at the balance sheet date to fulfill the liability by considering the risks and uncertainties related to the liability. In case the provision is measured by using the estimated cash flows required to fulfill the existing liability, the book value of the related liability is equal to the present value of the related cash flows.

In case there is no probability of cash outflow in order to fulfill the liability and that the amount of liability cannot be measured in a sufficiently reliable way, the liability is considered as “Contingent Liability” and disclosure is made thereon in the notes.

XVIII. Explanations on Contingent Assets Contingent Assets consist of unplanned or other unexpected events that usually cause a probable entry of economic uses in the Parent Bank. Since showing the contingent assets in the financial statements may result in the accounting of an income, which will never be generated, the related assets are not included in the financial statements, but on the other hand, if the entry of the economic uses of these assets in the Parent Bank is probable, an explanation is made thereon in the notes of the financial statements. Nevertheless, the developments related to the contingent assets are constantly evaluated and in case the entry of the economic use in the Parent Bank is almost certain, the related asset and the respective income is shown in the financial statements of the period in which the change occurred.

XIX. Explanations on Liabilities Regarding Employee Benefits

1. Employee Termination Benefits and Leave Entitlement Liabilities concerning the rights of employees are accounted within the scope of TAS 19 “Employee Benefits Standard”. In accordance with the requirements of Turkish Labor Law, there is an obligation to pay termination benefits for employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or (for the female employees) who have voluntarily quit within one year after the date of their marriage. In this context, the Parent Bank and consolidated Group companies (except İşbank GmbH) allocate retirement pay provisions for employee benefits by the way of estimating the present value of the probable future liabilities. As German legislation does not require retirement pay provision, no provision liability has been recognized for İşbank GmbH. In addition, provision is also allocated for the unused paid vacation.

2. Retirement Rights As per provisional article nr.23 of the Banking Law Nr.5411, it is ruled that the pension funds, which were established for the personnel of banks, insurance and reinsurance companies within the framework of Social Security Institution Law, shall be transferred to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been determined as per the Cabinet decision dated 30 November 2006 nr. 2006/11345. However, the related article of the act has been cancelled upon the President’s request dated 02.11.2005, by the Supreme Court’s decision dated 22.03.2007, nr. E.2005/39, K.2007/33, which was published on the Official Gazette dated 31.03.2007 and nr. 26479 and the execution decision was ceased as of the issuance date of the related decision.

After the justified decree related to cancelling the provisional article 23 of the Banking Law was announced by the Constitutional Court on the Official Gazette dated 15 December 2007 and nr.26731, Turkish Grand National Assembly started to work on establishing new legal regulations, and after it was approved at the General Assembly of the TGNA, the Law nr. 5754 “Emendating Social Security and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated 08.05.2008 and nr. 26870, came into effect. The new law decrees that the contributors of the bank pension funds, the ones who receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject to this Law within 3 years after the release date of the related article, without any need for further operation, and that the three-year transfer period can be prolonged for maximum 2 years by the Cabinet decision. The above mentioned law also states that

• Related to the transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their income and expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8% will be used in the actuarial calculation of the value in cash, • And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered social rights and payments, despite being included in the trust indenture that they are subject to, will be continued to be covered by the pension funds and the employers of pension fund contributors.

On the other hand, on June 19th, 2008, the Republican People’s Party applied to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers. As at the date of publication of financial statements, there are no decisions announced by the Constitutional Court on the related issue. İşbank Information on Consolidated Financial Statements 2009 22

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

In line with the new law, the Parent Bank had an actuarial audit made for the aforementioned pension fund as of 31.12.2009 and set aside additional provisions for the difference between the amount of actuarial and technical deficit in the actuarial report and the amount of provision set aside in the financial statements until the current period. The actuarial assumptions used in the related actuarial report are given in Part Five Note II-7. Besides the Parent Bank, Milli Reasürans T.A.Ş., one of the Group companies, also had an actuarial audit at 31.12.2009 for the pension fund and set aside TL 1,234 additional provision for the difference between the amount of actuarial and technical deficit in the actuarial report and the amount of provision set aside in the financial statements until the current period. In the current consolidated financial statements there are provisions equal to the amount of actuarial and technical deficit in the actuarial report.

Up to now, there has not been any deficit in Türkiye İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik Yardımlaşma Sandığı Vakfı (İşbank Members’ Supplementary Pension Fund), which has been founded by the Parent Bank employees in accordance with the rules of the Civil Code and which provides subsequent retirement benefits; and the Bank has made no payment for this purpose. It is believed that the assets of this institution are capable of covering its total obligations, and that it shall not constitute an additional liability for the Bank. The same is valid for the supplementary pension funds of the employees of Anadolu Anonim Türk Sigorta Şirketi, Milli Reasürans T.A.Ş. and Türkiye Sınai Kalkınma Bankası A.Ş., which are among the other financial institutions of the Group.

XX. Explanations on Taxation Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis.

In accordance with Article nr. 32 of the Corporate Tax Law nr. 5520, 20% rate is used in the calculation of the corporate tax. As per the related law, temporary tax is calculated and paid quarterly in line with the principles of the Income Tax Law and at the corporate tax rate. The temporary tax payments are deducted from the current period’s corporate tax. The temporary tax for the end of 2009 will be paid in February 2010 and will be offset with the current period’s corporate tax.

Tax expense is the total amount of current tax and deferred tax. Tax liability for the current period is calculated over the taxable part of the period profit. Taxable profit differs from the profit reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax asset or liability is recognized by calculating the temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which are used in the computation of taxable profit and this calculation is made by using the balance sheet liability method based on enacted tax rates. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The general provisions and other provisions that are allocated by the Bank for possible future risks are included in the tax base and they are not subject to deferred tax calculation. No tax assets or liabilities are recognized regarding the temporary timing difference that affects neither the taxable profit nor the accounting profit and that arises from the initial recognition in the balance sheet, of assets and liabilities, other than the goodwill and mergers.

The carrying values of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is measured at enacted tax rates prevailing in the period when the assets are realized or liabilities are settled, and the tax is recorded as income or expense in the income statement. Nonetheless, the deferred tax related to assets directly associated with the equity in the same or different period, is directly recognized in the equity accounts.

Current taxes are offset with prepaid taxes due to being levied by the same taxation authority. Deferred tax assets and liabilities are also offset.

XXI. Additional Explanations on Borrowings The Parent Bank and the consolidated Group companies resort to obtaining funds from domestic or foreign institutions, as may be required. Such transactions are carried at fair values on the transaction date including the acquisition cost, and in the following periods they are valued at amortized cost measured by using the internal rate of return method.

While the policies carried out are aiming at acquiring assets that would generate higher yields than the costs of borrowing instruments such as syndication, securitization, and collateralized borrowing, an effort is also made to ensure that the assets acquired are, as much as possible, of equal maturity or shorter, in order to avoid interest rate and liquidity risks.

Furthermore, the Bank aims to achieve an asset composition that is compatible, as much as possible, with the fixed/variable cost structure of borrowing instruments.

No convertible bonds or debt instruments have been issued.

XXII. Explanations on Share Certificates and Issues Costs incurred during the issue of shares are accounted as expenses.

Dividend payments are determined by the resolution of the General Assembly of Shareholders of the Parent Bank.

In the Ordinary General Meeting, which was held on March 31, 2009, resolution was made to distribute group C bonus shares to shareholders by way of injecting the capital with TL 323,054 of the 2008 profit. The process, which was started according to this resolution, to increase the paid-in capital by the same amount to TL 3,079,639, has been completed and the Bank’s paid-in capital was registered as TL 3,079,639. As a result of this increase, 8,076,341,775 group C shares were issued.

Weighted average number of shares outstanding is taken into account in the calculation of earnings per share. In case the number of shares increases by way of bonus issues as a result of the capital increases made by using the internal sources, the calculation of earnings per share is made by adjusting the weighted average number of shares, which were previously calculated as at the comparable periods. The adjustment means that the number of shares used in calculation is taken into consideration as if the bonus issue occurred at the beginning of the comparable period. In case such changes in the number of shares occur after the balance sheet date, but before the ratification of the financial statements to be published, the calculation of earnings per share are based on the number of new shares. The Bank’s earnings per share calculations taking place in the income statement are as follows.

Current Period Prior Period Profit attributable to shareholders 2,497,629 1,588,946 Weighted average number of share certificates (Thousand) 76,993,217 76,993,217 Earnings per share (in exact TL) 0.032439598 0.020637480 İşbank Information on Consolidated Financial Statements 2009 23

Türkiye İş Bankası A.Ş. Part Three: Explanations on Accounting Policies

XXIII. Explanations on Bank Acceptances and Bills of Guarantee Acceptances and bills of guarantee are accounted concurrently with the payments by customers, and are shown as potential liabilities and commitments under off-balance sheet items.

XXIV. Explanations on Government Incentives None.

XXV. Explanations on Segment Reporting For the segmental reporting, focus is made on the field of activity method by taking into consideration the basic sources and qualities of the Parent Bank’s risks and returns. Field of activity is a part of a company which presents a single product or a single service, or a correlated group of product or service, and which has distinguished characteristics that separate it from other fields of activities in terms of risk and return.

Information on the Group’s activity segmentation is given in Part Four Note XI.

Part Four: Information on the Financial Structure

I. Explanations on Consolidated Capital Adequacy Standard Ratio The Group’s and the Parent Bank’s capital adequacy standard ratios are 18.13% and 18.31% respectively.

Bank-Only and consolidated capital adequacy standard ratios are calculated according to the “Regulation on Measurement and Assessment of Capital Adequacy of the Banks” published in the Official Gazette No.26333 dated November 1, 2006, by risk weighting of risk-weighted assets and non-cash loans in accordance with the ratios in the relevant legislation, and by adding the Value at Market Risk which is determined by the Standard Method, and the Value at Operational Risk which is determined by the Basic Indicator Approach, to the risk-weighted assets.

Information related to capital adequacy ratio:

Risk Weights Bank Only 0% 10% 20% 50% 100% 150% 200% Value at Credit Risk Balance Sheet Items (Net) 24,764,779 8,516,460 10,768,154 42,744,233 231,520 102,327 Cash 884,319 195 Securities in Redemption Balances with the Central Bank of Turkey 6,083,364 Balances with Domestic and Foreign Banks, Foreign Head Offices and Branches 8,108,064 309,477 Interbank Money Market Placements Receivables from Reverse Repo Transactions Reserve Deposits 1,761,360 Loans 1,938,603 200,011 10,557,873 34,505,152 231,520 102,327 Non-performing Loans (Net) Lease Receivables Financial Assets Available for Sale Investments Held to Maturity 12,399,910 14,797 Receivables From Installment Sale of Assets Sundry Debtors 6 521,896 Interest and Income Accruals 566,745 17,337 210,281 595,968 Investments in Associates, Subsidiaries and Jointly-Controlled Entities (Net) 5,030,817 Tangible Assets 1,713,974 Other Assets 1,130,472 190,853 52,152 Off Balance Sheet Items 3,064,406 419,325 624,902 10,809,388 Non-cash Loans and Commitments 3,064,406 62,332 624,902 10,714,447 Derivative Financial Instruments 356,993 94,941 Non- Risk-Weighted Accounts Total Risk Weighted Assets 27,829,185 8,935,785 11,393,056 53,553,621 231,520 102,327 İşbank Information on Consolidated Financial Statements 2009 24

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Information related to consolidated capital adequacy ratio:

Risk Weights Consolidated 0% 10% 20% 50% 100% 150% 200% Value at Credit Risk Balance Sheet Items (Net) 27,462,186 0 11,241,463 11,785,746 48,026,967 231,520 102,327 Cash 893,235 195 Securities in Redemption 0 0 0 Balances with the Central Bank of Turkey 6,086,237 Balances with Domestic and Foreign Banks, Foreign Head Offices and Branches 25,592 10,091,366 309,477 Interbank Money Market Placements Receivables from Reverse Repo Transactions Reserve Deposits 1,779,326 Loans 1,965,541 793,598 11,299,565 37,373,333 231,520 102,327 Non-performing Loans (Net) Lease Receivables 67,321 10,317 209,879 625,633 Financial Assets Available for Sale(1) 1,696,570 Investments Held to Maturity 12,802,482 21,096 Receivables From Installment Sale of Assets Sundry Debtors 6 114,325 3,554,155 Interest and Income Accruals 774,385 40,809 276,302 736,277 Investments in Associates, Subsidiaries and Jointly-Controlled Entities (Net) 2,622,486 Tangible Assets 2,698,009 Other Assets 1,371,491 190,853 86,501 Off Balance Sheet Items 4,011,012 1,879,592 639,148 11,102,430 Non-cash Loans and Commitments 4,011,012 1,503,331 639,148 11,003,098 Derivative Financial Instruments 376,261 99,332 Non- Risk-Weighted Accounts Total Risk Weighted Assets 31,473,198 13,121,055 12,424,894 59,129,397 231,520 102,327

(1) Composed of marketable securities blocked on behalf of insurance clients of the group company Anadolu Hayat Emeklilik A.Ş. (Private Pension).

Summary information about the consolidated capital adequacy standard ratio:

Bank-Only Consolidated Current Period Prior Period Current Period Prior Period Value at Credit Risk (VaCR) 61,589,240 57,131,601 68,517,989 63,909,036 Value at Market Risk (VaMR) 5,692,075 5,215,625 6,540,925 5,954,363 Value at Operational Risk (VaOR) 8,984,569 7,699,174 11,161,297 9,135,920 Shareholders’ Equity 13,963,036 10,638,323 15,632,586 12,828,095 Shareholders’ Equity/(VaCR+VaMR+VaOR)*100 18.31 15.19 18.13 16.24

İşbank Information on Consolidated Financial Statements 2009 25

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Information about the consolidated shareholders’ equity items:

Current Period Prior Period CORE CAPITAL (TIER I) Paid-In Capital 3,079,639 2,756,585 Nominal Capital 3,079,639 2,756,585 Capital Commitments (-) Paid-in Capital Inflation Adjustments 1,977,491 1,977,491 Share Premium 31,008 31,008 Share Cancellation Profits Legal Reserves 1,404,488 1,257,046 I. Legal Reserve (Turkish Commercial Code 466/1) 1,170,088 1,083,396 II. Legal Reserve (Turkish Commercial Code 466/2) 234,398 173,648 Other Legal Reserve Per Special Legislation 2 2 Statutory Reserves 20,362 14,980 Other Profit Reserves -20,696 23,628 Extraordinary Reserves 3,705,309 2,910,623 Reserves Allocated by the General Assembly 3,170,414 2,798,729 Retained Earnings 534,895 111,894 Accumulated Loss Foreign Currency Share Capital Exchange Difference Legal, Statutory and Extraordinary Reserves Inflation Adjustments Profit 2,567,793 1,574,174 Current Period Profit(1) 2,497,629 1,588,946 Prior Periods’ Profit 70,164 -14,772 Provision for Possible Losses (up to 25% of the Core Capital) 950,000 845,000 Gain on Sale of Associates, Subsidiaries and Real Estates Primary Subordinated Loans (up to 15% of the Core Capital) Minority Shares 1,809,467 1,610,762 Losses Excess of Reserves (-) Current Period Loss Prior Periods’ Loss Leasehold Improvements (-) 109,738 Prepaid Expenses (-) 242,512 219,465 Intangible Assets (-) 38,077 61,299 Deferred Tax Asset excess of 10% of the Core Capital (-) Limit Excesses as per Paragraph 3 of Article 56 of the Banking Law (-) Consolidation Surplus (Net) (-) 7,170 7,170 Total Core Capital 15,127,364 12,713,363 SUPPLEMENTARY CAPITAL (TIER II) General Loan Loss Provision 538,702 498,988 45% of Movables’ Revaluation Reserve 45% of Immovables’ Revaluation Reserve Bonus Shares of Associates, Subsidiaries and Jointly-Controlled Entities (Joint Ventures) 1,383 Primary Subordinated Loans Excluding the Portion included in the Core Capital Secondary Subordinated Loan 74,850 75,800 45% of Marketable Securities Revaluation Reserve (2) 259,223 -109,062 Associates and Subsidiaries 146,771 -80,325 Financial Assets Available for Sale 112,452 -28,737 Capital Reserves, Profit Reserves and Prior Periods’ Profit/Loss Inflation Adjustments (excluding the inflation adjustments to legal reserves, status reserves and extraordinary reserves) Minority Shares 69,134 -55,984 Total Supplementary Capital 943,292 409,742

İşbank Information on Consolidated Financial Statements 2009 26

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Current Period Prior Period TIER III CAPITAL CAPITAL 16,070,656 13,123,105 DEDUCTIONS FROM THE CAPITAL 438,070 295,010 Investments in Unconsolidated Banks and Financial Institutions 306,204 240,638 Loans to banks, financial institutions (domestic/foreign) or qualified shareholders in the form of secondary subordinated debt and debt instruments purchased from such parties qualified as primary or secondary subordinated debt Investments in Banks and Financial Institutions, to which Equity Method has been applied but whose Assets and Liabilities are Unconsolidated 59,757 53,232 Loans granted against the articles 50 and 51 of the Banking Law Net book values of immovables exceeding 50% of the capital and of assets acquired against overdue receivables and held for sale as per article 57 of the Banking Law but retained more than five years 72,109 1,140 Others TOTAL SHAREHOLDERS’ EQUITY 15,632,586 12,828,095

(1) Difference between effective and direct shareholding was TL 20,289 in the current period (December 31, 2008: TL 23,219). (2) According to the related regulation, when calculating the supplementary capital ,total balance amount is taken into consideration if the items subject to the Marketable Securities Revaluation Reserve have a negative balance, and 45% of the balance amount is taken into consideration if their balance is positive.

II. Explanations on Credit Risk

1. Credit risk is defined as the possibility of incurring loss where the counterparty in a transaction, partially or completely fails to meet its contractual obligations in due time in an agreement with the Group.

Banks and financial institutions affiliated to the Group, carry out their placement activities in accordance with the credit limitations stipulated by legal regulations of the countries in which they operate.

The Parent Bank’s position against the credit risk limits defined by the current legislation is monitored by the Board. Within this framework, loans extended to Risk Groups and the Bank’s Risk Group, including the Bank; large loans and limitations regarding the shares in participations are monitored according to the limits determined in connection with the size of the shareholders’ equity calculated on a bank-only and consolidated basis.

Credit risk limits of customers are determined depending on the financial situation and loan requirements of the borrowers, in strict compliance with the relevant banking legislation, within the framework of loan authorization limits of Branches, Regional Offices, Loan Divisions, the Deputy Chief Executive responsible for loans, the CEO, the Credit Committee and the Board of Directors. These limits may be changed when deemed necessary by the Bank. Moreover, all commercial credit limits are revised periodically, provided that each period does not exceed a year. Furthermore, the borrowers and borrower groups forming a large proportion of the overall placement are subject to risk limits in order to provide further minimization of potential risk.

The geographical distribution of borrowers is consistent with the concentration of industrial and commercial activities in Turkey.

The distribution of borrowers by sector is monitored closely for each period and sectoral risk limits have been determined to prevent concentration of risk in sectoral sense.

The credit-worthiness of customers is monitored on a consistent basis by using company rating and scoring models specially developed for this purpose, and the audit of statements of account received is assured to have been made in accordance with the provisions as stipulated by the relevant legislation.

The Parent Bank and its financial affiliates give utmost importance to ensure that loans are furnished with collaterals. Most of the loans extended are collateralized by taking real estate, movable or commercial enterprise under pledge, promissory notes and other liquid assets as collateral, or by acceptance of bank letters of guarantee and individual or corporate guarantees.

2. There are certain control limits on forward transactions in terms of counter parties, and the credit risk taken for derivative instruments is evaluated along with other potential risks resulting from the market fluctuations.

3. As a result of the current level of customers’ needs and the progress in the domestic derivatives market in this particular area, the Bank uses derivative transactions more frequently both for hedging and and commercial purposes.

Derivative instruments, which consist a remarkable volume, are monitored with consideration that they can always be liquidated in case of need.

4. Indemnified non-cash loans are considered as having the same risk weights as unpaid cash loans.

The rating and scoring systems applied by the Parent Bank, includes detailed company analysis and enables rating of all companies and loans without any restrictions regarding credibility. Loans and companies, which have been renewed, restructured or rescheduled, are rated within the scope of this system. Specialized Loans are evaluated by a special rating system, which is based on the credibility of the counterparty as well as the feasibility and risk analysis of the cash flows created mainly by the projects undertaken or the asset financed.

5. Lending transactions abroad are conducted by determining the country risks of related countries within the context of the current rating system and by taking the market conditions, country risks, and the relevant legal limitations into account. Furthermore, the credibility of banks and other financial institutions established abroad is examined within the framework of the rating system that has been developed and credit limits are assigned accordingly.

6. (i) The share of the Group’s receivables from the top 100 cash loan customers in the overall cash loan portfolio stands at 28% (31.12.2008: 25%). İşbank Information on Consolidated Financial Statements 2009 27

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

(ii) The share of the Group’s receivables from the top 100 non-cash loan customers in the overall non-cash portfolio stands at 44% (31.12.2008: 44%). (iii) The share of the Group’s cash and non-cash receivables from top 100 loan customers in the overall cash and non-cash loans stands at 28% (31.12.2008: 15%).

Companies that are among the top 100 loan customers ranked according to cash, non-cash and total risks are leaders in their own sectors, the loans advanced to them are in line with their volume of industrial and commercial activity. A significant part of such loans is extended on a project basis, with their repayment sources being analyzed in accordance with the banking principles to be considered as satisfactory, and associated risks are determined and duly covered by obtaining appropriate guarantees when deemed necessary.

7. The total value of the general provisions allocated for credit risk carried by the Group stands at TL 538,702.

8. The following table shows maximum credit exposure to credit risk for the components of the financial statements.

Current Period Prior Period Financial Assets at Fair Value through Profit/Loss 1,318,144 1,058,266 Banks 10,451,745 8,008,993 Financial Assets Available for Sale 30,559,433 24,860,084 Loans 52,760,440 51,689,972 Investments Held to Maturity 13,347,307 3,765,859 Lease Receivables 931,016 1,095,478 Insurance Receivables 515,815 514,430 Total 109,883,900 90,993,082 Guarantees and Suretyships 13,266,468 12,331,050 Commitments 39,298,889 20,730,388 Total Sensitivity to Credit Risk 162,449,257 124,054,520

9. Within the framework of the Parent Bank’s rating and scoring system, classification of cash commercial and corporate loans and explanations of rating/scoring codes are as follows (Following figures are in full amount.). Other credit institutions within the Group also have their own internal rating systems.

The Parent Bank evaluates

- its customers, whose General Limit is below USD 60,000 or whose yearly net sales are below USD 1,000,000 with micro scoring system,

- its customers whose General Limit is between USD 60,000 and USD 1,000,000 or whose yearly net sales are below USD 5,000,000 with SME scoring system,

- its customers whose General Limit is above USD 1,000,000 or whose yearly net sales are above USD 5,000,000 with rating system.

The rating/scoring results related to the cash commercial and corporate loans portfolio are classified as “Strong”, “Standard” and “Below Standard” by considering their default features. The loans whose borrowers’ capacity to fulfill their obligations is very good, are defined as “Strong”, whose borrowers’ capacity to fulfill its obligations in due time is reasonable, are defined as “Standard” and whose borrowers’ capacity to fulfill their obligations is poor, are defined as “Below Standard”. The breakdown of the portfolio according to the rating/scoring results is as follows.

Strong 30.20% Standard 54.95% Below Standard 10.60% Not Rated/Scored 4.25%

10. The net values of the collaterals of the Group’s closely monitored loans are given below in terms of collateral types and risk matches.

Current Period Prior Period Type of Collateral Net Value of the Collateral Credit Balance Net Value of the Collateral Credit Balance Real Estate Mortgage (1) 1,008,533 1,008,533 625,473 625,473 Vehicle Pledge 167,539 167,539 180,305 180,305 Cash Collateral (Cash provisions, securities pledge, etc.) 14,243 14,243 17,080 17,080 Pledge on Wages 55,125 55,125 27,245 27,245 Cheques & Notes 35,632 35,632 33,918 33,918 Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 244,246 244,246 172,470 172,470 Non-collateralized 745,380 723,613 Interest and Income Accruals (2) 72,068 Total 1,525,318 2,270,698 1,056,491 1,852,172

(1) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports; and after comparing the results to the mortgage/pledge amounts and credit balances, the smallest figures are considered to be the net value of collaterals. (2) Interest and income accruals in the current period are shown in the related loan balances. İşbank Information on Consolidated Financial Statements 2009 28

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

11. The net values of the collaterals of the Group’s non-performing loans are given below in terms of collateral types and risk matches.

Current Period Prior Period Type of Collateral Net Value of the Collateral Credit Balance Net Value of the Collateral Credit Balance Real Estate Mortgage (1) 679,915 679,915 637,931 637,931 Cash Collateral 95 95 2,105 2,105 Vehicle Pledge 167,882 167,882 146,979 146,979 Other (suretyship, commercial enterprise under pledge, commercial papers, etc.) 78,821 78,821 126,768 126,768 Total 926,713 926,713 913,783 913,783

(1) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports, and after comparing the results to the mortgage/pledge amounts and credit balances the smallest figures are considered to be the net value of collaterals.

12. As of December 31, 2009, loan quality in terms of financial asset classes is as follows:

Current Period Neither Past Due nor Impaired Past Due but not Impaired Past Due and Impaired Total Cash and Balances with the Central Bank of Turkey 8,789,728 8,789,728 Financial Assets at Fair Value through Profit/Loss 1,318,144 1,318,144 Banks 10,451,745 10,451,745 Money Market Placements Financial Assets Available for Sale 30,559,433 30,559,433 Loans: Corporate/Commercial Loans (1) 37,210,395 (2) 118,518 (4) 37,328,913 Consumer Loans 10,583,104 (2) 57,202 (4) 10,640,306 Credit Cards 4,585,103 206,118 (4) 4,791,221 Investments Held to Maturity 13,347,307 13,347,307 Associates and Subsidiaries 2,996,044 2,996,044 Lease Receivables 916,178 (3) 14,838 931,016 Insurance Receivables 468,748 47,067 515,815

(1) Corporate credit cards balance amounting to TL 219,509 is included in Credit Cards Balance. (The amount of overdue corporate credit cards is TL 4,862). (2) Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans, the principal amounts which are not due as of the balance sheet date are equal to TL 471,974 and TL 240,381 respectively. (3) Includes only overdue installments and the principal amount which is not due as of the balance sheet date is TL 167.209. (4) 100% Provisioning was made for all the impaired loans.

Prior Period Neither Past Due nor Impaired Past Due but not Impaired Past Due and Impaired Total Cash and Balances with the Central Bank of Turkey 11,891,868 11,891,868 Banks 8,008,993 8,008,993 Financial Assets at Fair Value through Profit/Loss 1,058,266 1,058,266 Money Market Placements 24,641 24,641 Financial Assets Available for Sale 24,860,084 24,860,084 Loans: Corporate/Commercial Loans (1) 36,581,833 (2) 209,715 (4) 36,791,548 Consumer Loans 10,254,709 (2) 60,981 (4) 10,315,690 Credit Cards 4,346,825 235,909 (4) 4,582,734 Investments Held to Maturity 3,765,859 3,765,859 Associates and Subsidiaries 2,265,925 2,265,925 Lease Receivables 1,086,136 (3) 9,342 1,095,478 Insurance Receivables 467,133 47,297 514,430

(1) Corporate credit cards balance amounting to TL 184,060 is included in Credit Cards Balance. (The amount of overdue corporate credit cards is TL 11,046). (2) Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans, the principal amounts which are not due as of the balance sheet date are equal to TL 518,476 and TL 281,945 respectively. (3) Includes only overdue installments and the principal amount which is not due as of the balance sheet date is TL 119,589. (4) 100% Provisioning was made for all the impaired loans.

13. The aging analysis of the past due but not impaired loans in terms of financial asset classes is as follows:

Current Period 31-60 Days 61-90 Days 91 + Total Loans Corporate/Commercial Loans (1) 76,052 42,466 118,518 Consumer Loans (1) 37,581 19,621 57,202 Credit Cards 98,146 107,972 206,118 Lease Receivables (2) 5,405 3,449 5,985 14,839 Insurance Receivables 15,371 6,933 24,763 47,067 Total 232,555 180,441 30,748 443,744

(1) Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans; the principal amounts which are not due as of the balance sheet date are equal to TL 471,974 and TL 240,381 respectively. (2) Includes only overdue installments, the principal amount which is not due as of the balance sheet date is TL 167,206. İşbank Information on Consolidated Financial Statements 2009 29

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Prior Period 31-60 Days 61-90 Days 91 + Total Loans Corporate/Commercial Loans (1) 99,623 110,092 209,715 Consumer Loans (1) 36,899 24,082 60,981 Credit Cards 136,827 99,082 235,909 Lease Receivables (2) 5,422 2,125 1,795 9,342 Insurance Receivables 22,643 6,935 17,719 47,297 Total 301,414 242,316 19,514 563,244

(1)Related figures show only overdue amounts of installment based commercial loans and installment based consumer loans; the principal amounts which are not due as of the balance sheet date are equal to TL 518,476 and TL 281,945 respectively. (2) Includes only overdue installments, the principal amount which is not due as of the balance sheet date is TL 119,589.

14. Carrying values of the financial assets, of which terms have been renegotiated, are shown below:

Current Period Prior Period Cash and Balances with the Central Bank of Turkey Financial Assets at Fair Value through Profit/Loss Financial Assets Available for Sale Banks Loans: 1,146,733 76,501 Corporate/Commercial Loans 762,937 56,413 Consumer Loans 124,595 Credit Cards 259,201 20,088 Investments Held to Maturity Associates and Subsidiaries Lease Receivables Insurance Receivables

15. Credit risk by types of borrowers and geographical concentration:

Loans to Individuals Loans to Banks and and Entities Other Financial Institutions Securities (1) Other Loans (2) Current Period Prior Period Current Period Prior Period Current Period Prior Period Current Period Prior Period Borrowers’ Concentration Private Sector 33,444,983 33,795,113 1,872,824 1,017,009 318,384 240,949 22,445,287 18,468,892 Public Sector 1,481,908 1,652,709 40,999,956 26,903,892 831,254 1,020,471 Banks 708,912 513,173 3,626,495 2,269,801 21,646,556 18,163,594 Retail Customers 15,251,813 14,711,968 13,400,560 12,267,227 Share Certificates 133,441 65,041 2,996,044 2,265,925 Geographical Concentration Domestic 48,805,665 48,722,187 2,142,654 1,302,505 41,307,773 27,084,405 42,546,291 36,034,290 European Union (EU) 770,995 749,000 377,900 213,425 3,682,811 2,351,760 12,719,055 13,657,943 OECD Countries (3) 7,106 9,976 367 2,222,766 847,767 Off-Shore Banking Regions 1,257 52,981 25,452 101 100 USA, Canada 14,603 8,951 59 47,051 25,367 3,280,746 894,512 Other Countries 580,335 668,419 7,775 14,252 15,189 18,151 550,742 751,497 Total 50,178,704 50,159,790 2,581,736 1,530,182 45,078,276 29,479,683 61,319,701 52,186,109

(1) Includes financial assets at fair value through profit or loss, financial assets available for sale and investments held to maturity. (2) Includes banks, non-cash loans, commitments, share certificates, and derivative instruments. (3) OECD countries other than EU countries, USA and Canada.

İşbank Information on Consolidated Financial Statements 2009 30

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

16. Information on geographical concentration:

Fixed Capital Assets (1) Liabilities(2) Non-Cash Loans Investments (1) Net Profit Current Period Domestic 111,824,338 89,551,220 12,698,633 40,801 2,936,980 European Union Countries 11,158,868 18,568,082 247,637 (3) 10,687 14,758 OECD Countries (4) 912,300 404,561 84,895 413 Off-Shore Banking Regions 116,337 111,040 -470,167 USA, Canada 952,460 3,164,484 28,718 Other Countries 912,371 1,811,164 206,585 15,645 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 2,988,314 Unallocated Assets/Liabilities Total 125,876,674 113,610,551 13,266,468 3,039,802 2,497,629

Prior Period Domestic 97,619,008 76,056,081 11,643,133 34,443 1,221,886 European Union Countries 9,027,237 16,884,468 281,446 9,479 7,502 OECD Countries (4) 248,051 1,704,550 93,063 775 Off-Shore Banking Regions 18,889 215,136 337,761 USA, Canada 905,636 2,219,835 11,082 0 Other Countries 1,085,885 2,136,710 302,326 21,022 Investments in Associates,Subsidiaries and Jointly Controlled Entities (Joint Ventures) 2,259,403 Unallocated Assets/Liabilities Total 108,904,706 99,216,780 12,331,050 2,303,325 1,588,946

(1) The sum of assets and fixed capital investments reflect total assets in the balance sheet. (2) Among Liabilities, the Shareholders’ Equity items are not taken into consideration. (3) The balance indicates our subsidiaries and other capital investments in EU countries. (4) OECD countries other than EU countries, the USA, and Canada.

17. Sector concentration of cash loans:

Current Period Prior Period TL (%) FC (%) TL (%) FC (%) Agricultural 623,774 1.72 21,124 0.13 762,213 2.22 21,891 0.13 Farming and Raising Livestock 528,653 1.46 13,773 0.08 646,485 1.88 16,482 0.10 Forestry 69,923 0.19 1,903 0.01 86,885 0.25 1,210 0.01 Fishing 25,198 0.07 5,448 0.04 28,843 0.09 4,199 0.02 Industry 6,602,278 18.29 7,461,411 44.77 5,278,960 15.35 7,820,397 45.23 Mining 514,177 1.42 307,357 1.84 233,587 0.68 146,595 0.85 Production 5,526,359 15.31 5,164,762 30.99 4,626,778 13.45 6,652,523 38.47 Electricity, gas, and water 561,742 1.56 1,989,292 11.94 418,595 1.22 1,021,279 5.91 Construction 1,470,951 4.08 1,184,929 7.11 1,448,540 4.21 1,045,555 6.05 Services 11,970,894 33.17 6,352,430 38.11 11,419,480 33.19 6,626,034 38.32 Wholesale and Retail Trade 5,781,744 16.02 1,600,476 9.60 5,432,997 15.79 1,810,101 10.47 Hotel, Food and Beverage Services 456,366 1.26 350,731 2.10 465,388 1.35 255,125 1.48 Transportation and Telecommunication 2,469,236 6.84 2,296,451 13.79 2,463,233 7.16 1,791,661 10.36 Financial Institutions 1,656,991 4.59 948,459 5.69 1,272,610 3.70 1,273,157 7.36 Real Estate and Renting Services 567,349 1.57 586,503 3.52 783,288 2.28 780,111 4.51 Self-Employment Services 557,443 1.54 278,837 1.67 615,737 1.79 552,928 3.20 Education Services 175,172 0.49 177,045 1.06 152,359 0.44 105,313 0.61 Health and Social Services 306,593 0.86 113,928 0.68 233,868 0.68 57,638 0.33 Other (1) 15,425,521 42.74 1,647,128 9.88 15,490,971 45.03 1,775,931 10.27 Total 36,093,418 100.00 16,667,022 100.00 34,400,164 100.00 17,289,808 100.00

(1) Interest income and accruals are included in the “Other” item.

III. Explanations on Market Risk: The market risk carried by the Group is measured by two separate methods known respectively as the Standard Method and the Value at Risk Model in accordance with the local regulations adopted from internationally accepted practices. In this context, interest rate risk emerges as the most important component of the market risk.

The consolidated market risk measurements are carried out on a quarterly basis, using the Standard Method, and the results are taken into consideration in the calculation of the capital adequacy standard ratio. İşbank Information on Consolidated Financial Statements 2009 31

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

The Value at Risk Model (VAR) is another alternative for the Standard Method in measuring and monitoring market risk carried by the Parent Bank. This model is used to measure the market risk on a daily basis in terms of interest rate risk, exchange rate risk and equity share risk and is a part of the Bank’s daily internal reporting. Further retrospective testing (back- testing) is carried out on a daily basis to determine the reliability of the daily risk calculation by the VAR model, which is used to estimate the maximum possible loss for the following day.

Scenario analyses which support the VAR method used to measure the losses that may occur in the ordinary market conditions are conducted, and the possible impacts of scenarios, that are developed based on the future predictions and the past crises, on the value of the Parent Bank’s portfolio are determined and the results are reported to the Top Executive Management. Financial participations also make VAR calculations within the frame determined by the Bank, and the results are reported to the Top Executive Management.

The limits set for the market risk management within the framework of the Parent Bank’s asset liability management risk policy, are monitored by the Risk Committee and reviewed in accordance with the market conditions.

The following table shows details of the market risk calculations carried out with the “Standard Method for Market Risk Measurement” and within the context of “Regulation for Evaluating and Measuring the Capital Adequacy of Banks” as of December 31, 2009. a. Information on the market risk:

Amount (I) Capital to be Employed for General Market Risk – Standard Method 287,108 (II) Capital to be Employed for Specific Risk – Standard Method 54,441 (III) Capital to be Employed for Currency Risk – Standard Method 181,463 (IV) Capital to be Employed for Commodity Risk – Standard Method (V) Capital to be Employed for Settlement Risk – Standard Method (VI) Capital to be Employed for Market Risk of Options – Standard Method 262 (VII) Capital to be Employed for Market Risks of Banks Applying Risk Measurement Models (VIII) Total Capital to be Employed for Market Risk (I+II+III+IV+V+VI) 523,274 (IX) Value at Market Risk (12.5 x VIII) or (12.5 x VII) 6,540,925 b. Table of the average market risk related to the market risk calculated quarterly during the period:

Current Period Prior Period Average Highest Lowest Average Highest Lowest Interest Rate Risk 365,256 420,653 398,123 319,801 308,377 317,785 Share Certificate Risk 30,958 27,671 20,578 22,985 33,457 20,086 Currency Risk 154,689 176,038 91,122 122,712 147,548 91,455 Commodity Risk 968 868 2,971 89 207 Settlement Risk Options Risk 209 117 143 834 1,475 1,366 Total Value at Risk 6,900,991 7,816,838 6,411,713 5,830,269 6,135,713 5,386,238

IV. Explanations on Operational Risk Operational risk is defined in general as “the risk of loss that may be arising from inadequate or ineffective internal processes, people, systems or other external factors”.

The operational risks that might be encountered by the Parent Bank during the activities are tracked by preparing the “Risk Catalog of the Bank”. This Risk Catalogue is the basis to be used in the definition and classification of all risks that may be exposed to and is updated parallel to the changing conditions.

The definitions related to operational risk, the methodology of its measurement and evaluation, and the responsibilities regarding operational risk management are stated in the “Operational Risk Policy”.

In the assessment of operational risk, “Self-Assessment Methodology” is applied. This method requires identifying the risks through the participation of the personnel who is responsible for undertaking the operation. Both qualitative and quantitative methods are used in the measurement and evaluation of operational risk. Information derived from the “Impact-Likelihood Analysis”, “Control Culture Survey” and “Loss Database” are used in the measurements.

All the operational risks that are carried during the operations, the risk levels of the operations and/or new products/services, together with the losses of the Parent Bank arising from operational risks are regularly monitored by the Risk Management Department of the Bank, and if deemed necessary, the risk levels are updated and periodically reported to the Risk Committee and the Board of Directors.

The operational risk, to which the Group is exposed, is measured using the Basic Indicator Approach, in which the average of 15% of the year-end gross income figures of the last three years is multiplied by 12.5, in line with the provisions of the “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”. The operational risk amount calculated for the current period is TL 11,161,297.

V. Explanations on Currency Risk The currency risk for the Group is a result of the difference between the Group’s assets denominated in and indexed to foreign currencies and liabilities denominated in foreign currencies. On the other hand, parity fluctuations of different foreign currencies are also another element of the currency risk.

The currency risk for the Parent Bank is managed by the internal currency risk limits which are established as a part of the Bank’s risk policies. The Assets and Liabilities Committee and the Assets and Liabilities Management Unit meet regularly to take the necessary decisions for hedging exchange rate and parity risks, within the limits of “Net FC Overall Position/ Shareholders’ Equity” ratio, which is a part of the legal requirement, and decisions made on such compliance are strictly applied.

In measuring currency risk, which the Group is exposed to, both the Standard Method and the Value at Risk Model (VAR) are used as applied in the statutory reporting. İşbank Information on Consolidated Financial Statements 2009 32

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Measurements made for the Parent Bank within the scope of the Standard Method are carried out on a monthly basis and form the basis of determining the capital requirement arising from exchange rate risk.

Risk measurements made within the context of the Value at Risk Model (VAR) are made on a daily basis using the historical and Monte Carlo simulation methods. Furthermore, scenario analyses are conducted to support the calculations made within the VAR context.

The results of the measurements made on exchange rate risk are reported to the Top Management and the risks are closely monitored by taking into account the market and the economic conditions.

Foreign exchange buying rates of the Parent Bank at the date of the balance sheet and for the 5 working days prior to the related date:

Date USD EURO YEN 31.12.2009 1.4900 2.1322 0.0160 30.12.2009 1.5000 2.1450 0.0162 29.12.2009 1.5000 2.1608 0.0163 28.12.2009 1.5000 2.1600 0.0164 25.12.2009 1.5000 2.1600 0.0165 24.12.2009 1.4790 2.1253 0.0161

The Bank’s average FC buying rate over a period of thirty days preceding the date of the financial statement:

USD: 1.4765 TL EURO: 2.1481 TL YEN: 0.0164 TL

Sensitivity to currency risk: The impact of a 10% change in USD, EUR and GBP rates on the profit/loss and shareholders’ equity is analyzed in the following table. 10% is the ratio that is also used in the internal reporting of the Parent Bank.

% Change in Foreign Currency Effects on Profit/Loss (1) Current Period Prior Period USD 10% increase 200,374 -29,512 10% decrease -200,374 29,512 EURO 10% increase -88,897 104,441 10% decrease 88,897 -104,441 GBP 10% increase 12,339 -5,694 10% decrease -12,339 5,694 (1) Indicates the values before tax. İşbank Information on Consolidated Financial Statements 2009 33

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Information on currency risk:

EURO USD Yen Other FC Total Current Period Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 2,767,788 110,767 105 116,536 2,995,196 Banks 4,548,934 3,170,899 2,675 917,344 8,639,852 Financial Assets at Fair Value through Profit/Loss (1) 35,262 64,346 99,608 Money Market Placements Financial Assets Available for Sale 1,400,533 9,965,559 11,366,092 Loans (2) 7,107,344 12,397,696 115,405 131,120 19,751,565 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 262 7,468 7,730 Investments Held to Maturity 1,324,837 2,146 5,464 1,332,447 Derivative Financial Assets Held for Hedging Purposes Tangible Assets 34,073 212 2,551 36,836 Intangible Assets (1) Other Assets (1) 541,783 731,376 3,062 101,924 1,378,145 Total Assets 17,760,816 26,443,001 121,247 1,282,407 45,607,471

Liabilities Banks Deposits 688,247 282,924 23 206,727 1,177,921 Foreign Currency Deposits (3) 11,869,496 14,269,922 7,688 1,045,444 27,192,550 Money Market Funds 1,461,044 3,185,170 4,646,214 Funds Provided from Other Financial Institutions 4,400,230 7,782,119 39,227 3,482 12,225,058 Marketable Securities Issued Sundry Creditors 99,668 176,032 1,473 8,313 285,486 Derivative Financial Liabilities Held for Hedging Purposes Other Liabilities (1) 125,408 428,776 168 12,318 566,670 Total Liabilities 18,644,093 26,124,943 48,579 1,276,284 46,093,899

Net On Balance Sheet Position -883,277 318,058 72,668 6,123 -486,428 Net Off Balance Sheet Position -4,219 919,065 9,730 179,732 1,104,308 Derivative Financial Assets (4) 654,077 2,821,597 33,298 188,068 3,697,040 Derivative Financial Liabilities (4) 658,296 1,902,532 23,568 8,336 2,592,732 Non-Cash Loans 2,926,862 4,783,898 83,998 67,076 7,861,834 Prior Period Total Assets 15,646,215 28,676,268 261,535 975,379 45,559,397 Total Liabilities 14,807,347 25,474,261 124,527 1,038,805 41,444,940 Net Balance Sheet Position 838,868 3,202,007 137,008 -63,426 4,114,457 Net Off Balance Sheet Position 189,554 -3,721,262 21,878 93,204 -3,416,626 Derivative Financial Assets 835,533 1,471,440 21,878 96,390 2,425,241 Derivative Financial Liabilities 645,979 5,192,702 3,186 5,841,867 Non-Cash Loans 2,922,097 5,015,343 122,396 101,832 8,161,668

(1) In accordance with the principles of the “Regulation on Measurement and Practices of Banks’ Net Overall FC Position/Shareholders’ Equity Ratio on a Consolidated and Unconsolidated Basis”, Derivative Financial Instruments Foreign Currency Income Accruals (TL 22,374), Prepaid Expenses and Taxes (TL 39,614), Intangible Assets (TL 649) in assets and General Reserves (TL 688), Derivative Financial Instruments Foreign Currency Expense Accruals (TL 60,621) and Shareholders’ Equity (TL 99,406) in liabilities are not taken into consideration in the currency risk measurement. (2) Includes foreign currency indexed loans, which are followed under TL account. Of the total amount of TL 3,084,543 of the aforementioned loans; TL 1,569,708 is USD indexed, TL 1,399,551 is EUR indexed, TL 20,388 is CHF indexed, TL 814 is GBP indexed, TL 94,058 is JPY indexed and TL 24 is CAD indexed. (3) The item includes TL 112,695 precious metals deposit accounts, (4) The derivative transactions are taken into consideration within the context of the forward foreign currency trading definitions in the above mentioned Regulation.

VI. Explanations on Interest Rate Risk Interest rate risk is defined as the increase or decrease that can arise in the value of interest sensitive assets and liabilities as a result of interest rate fluctuations. Measurement of interest rate risk is conducted through the scenario analysis on structural interest rate.

Potential effects of interest rate risk on the Parent Bank’s assets and liabilities, market developments, the general economic environment and expectations are regularly covered in meetings of the Asset-Liability Committee, where further measures to reduce risk are taken when necessary.

The Parent Bank’s on and off-balance sheet interest sensitive accounts other than the assets and liabilities exposed to market risk are monitored and controlled by the limits above the average maturity gaps according to the repricing periods determined by the Board within the scope of asset-liability management risk policy. Moreover, scenario analyses formed in line with the expectations are also used in the management of the related risk.

Interest rate sensitivity: In this part, the sensitivity of the Group’s assets and liabilities to the interest rates has been analyzed assuming that the year end balance figures were the same throughout the year. İşbank Information on Consolidated Financial Statements 2009 34

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

During the measurement of the Group’s interest rate sensitivity, the difference between the portfolio values of the asset and liability items evaluated with market value and the portfolio value calculated by using the interest shock applied discount curve, is considered as the reflection of the interest shock to the income statement accounts.

On the other hand, in the profit/loss calculation of assets and liabilities that are not evaluated by the current market prices, it is assumed that assets and liabilities with fixed interest rates will be renewed at maturity date and the assets and liabilities having variable interest rates will be renewed at the end of repricing period with the market interest rates generated after the interest shock.

Within this context, ceteris paribus, the possible changes that may occur in the Group’s profit and shareholders’ equity in case of 3 and 5 points increase/decrease in TL interest rates, and 1 and 2 points increase/decrease in FC interest rates on the reporting day are given below.

% Change in the Interest Rate (1) Effect On Profit/Loss (2) Effect on Equity (3) TL FC (4) Current Period Prior Period Current Period Prior Period 3% increase 1% increase -590,997 -665,084 -250,138 -82,091 3% decrease 1% decrease 331,756 505,978 283,791 90,271 5% increase 2% increase -1,045,662 -1,153,740 -401,584 -132,860 5% decrease 2% decrease 517,504 855,561 496,195 155,705

(1) The effects on the profit/loss and shareholders’ equity are stated with their before tax values. (2) The effect on the profit/loss is mainly arising from the fact that the average maturity of the Group’s fixed rate liabilities is shorter than the average maturity of its fixed rate assets. (3) The effect on the shareholders’ equity is arising from the change of the fair value of securities followed under the Group’s Financial Assets Available for Sale. (4) Due to the reason that the LIBOR rates were at low levels in both periods, the negative shock imposed on FC interest rates in some maturity brackets remained below the aforementioned rates.

Interest rate sensitivity of assets, liabilities and off balance sheet items (Based on repricing periods):

Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5Years 5 Years and Over Non-interest Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 5,248,460 3,541,268 8,789,728 Banks 7,996,402 282,539 2,070,666 102,138 10,451,745 Financial Assets at Fair Value through Profit/Loss 215,797 277,408 524,513 133,121 1,632 165,673 1,318,144 Money Market Placements Financial Assets Available for Sale 5,990,286 11,184,062 2,892,990 6,260,178 4,128,991 102,926 30,559,433 Loans 18,546,007 7,045,744 11,015,502 14,685,069 1,447,613 20,505 52,760,440 Investments Held to Maturity 176,132 5,369,695 3,363,930 4,437,550 13,347,307 Other Assets 585,026 109,916 230,098 464,849 19,982 10,279,808 11,689,679 Total Assets 38,758,110 24,269,364 20,097,699 25,980,767 5,598,218 14,212,318 128,916,476

Liabilities Banks Deposits 1,458,289 269,643 126,579 110,055 1,964,566 Other Deposits 47,602,754 10,474,059 4,455,267 186,517 31,882 7,339,927 70,090,406 Money Market Funds 8,876,285 2,834,762 1,622,970 138,620 13,472,637 Sundry Creditors 484,587 660 5,183 4,086,806 4,577,236 Marketable Securities Issued Funds Provided from Other Financial Institutions 2,443,762 7,764,725 2,532,487 2,034,212 99,101 14,874,287 Other Liabilities (1) 115,908 270,450 172,521 13,167 23,365,298 23,937,344 Total Liabilities 60,981,585 21,614,299 8,909,824 2,377,699 130,983 34,902,086 128,916,476

Balance Sheet Long Position 2,655,065 11,187,875 23,603,068 5,467,235 42,913,243 Balance Sheet Short Position -22,223,475 -20,689,768 -42,913,243 Off Balance Sheet Long Position 1,982,239 1,982,239 Off Balance Sheet Short Position -340,680 -244,316 -3,008,058 -3,593,054 Total Position -22,564,155 4,637,304 10,943,559 20,595,010 5,467,235 -20,689,768 -1,610,815

(1) Shareholders’ equity is shown in “non-interest bearing” column.

İşbank Information on Consolidated Financial Statements 2009 35

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Interest rate sensitivity of assets, liabilities and off balance sheet items (Based on repricing periods):

Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Non-interest Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 11,284,227 607,641 11,891,868 Banks 5,049,008 362,955 2,366,822 230,208 8,008,993 Financial Assets at Fair Value through Profit/Loss 146,575 268,183 318,633 268,590 681 55,604 1,058,266 Money Market Placements 23,358 1,283 24,641 Financial Assets Available for Sale 2,177,160 9,016,127 3,972,128 5,181,858 4,435,287 77,524 24,860,084 Loans 17,958,161 7,529,232 10,589,213 13,897,538 1,658,929 56,899 51,689,972 Investments Held to Maturity 20,236 955,529 2,790,094 3,765,859 Other Assets 65,454 203,422 299,624 492,626 33,288 8,813,934 9,908,348 Total Assets 36,724,179 18,335,448 20,336,514 19,840,612 6,128,185 9,843,093 111,208,031

Liabilities Banks Deposits 1,231,285 90,365 6,422 70,214 1,398,286 Other Deposits 36,981,566 14,337,546 3,834,244 224,437 18,518 6,193,405 61,589,716 Money Market Funds 7,112,542 1,092,535 496,304 8,701,381 Sundry Creditors 3,263,713 3,263,713 Marketable Securities Issued Funds Provided from Other Financial Institutions 3,708,806 7,829,923 2,174,299 2,287,155 83,263 16,083,446 Other Liabilities (1) 161,837 106,455 647,046 158,318 19,097,833 20,171,489 Total Liabilities 49,196,036 23,456,824 7,158,315 2,669,910 101,781 28,625,165 111,208,031

Balance Sheet Long Position 13,178,199 17,170,702 6,026,404 36,375,305 Balance Sheet Short Position -12,471,857 -5,121,376 -18,782,072 -36,375,305 Off Balance Sheet Long Position 123,910 1,064,211 1,188,121 Off Balance Sheet Short Position -499,806 -1,108,005 -1,607,811 Total Position -12,347,947 -4,057,165 12,678,393 16,062,697 6,026,404 -18,782,072 -419,690

(1) Shareholders’ equity is shown in “non-interest bearing” column.

Average interest rates applied to monetary financial instruments:

EURO USD Yen TL Current Period % % % % Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 5.20 Banks 0.37 1.06 9.35 Financial Assets at Fair Value through Profit/Loss 8.28 8.41 11.02 Money Market Placements 5.50 Financial Assets Available for Sale 4.48 5.23 10.32 Loans 5.02 3.41 4.71 16.42 Investments Held to Maturity 0.45 1.00 13.17 Liabilities Banks Deposits 1.03 2.04 7.18 Other Deposits 2.01 2.22 0.02 7.67 Money Market Funds 0.78 2.17 6.81 Sundry Creditors Marketable Securities Issued Funds Provided from Other Financial Institutions 2.26 1.46 1.96 15.02 İşbank Information on Consolidated Financial Statements 2009 36

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

EURO USD Yen TL Prior Period % % % % Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 1.18 0.15 12.00 Banks 2.15 2.94 0.04 19.82 Financial Assets at Fair Value through Profit/Loss 8.86 7.81 18.82 Money Market Placements 2.00 14.71 Financial Assets Available for Sale 5.11 6.03 18.99 Loans 6.82 4.42 4.78 23.39 Investments Held to Maturity 4.02 2.00 18.64 Liabilities Banks Deposits 2.75 1.67 1.00 17.58 Other Deposits 3.19 3.63 0.13 16.83 Money Market Funds 3.17 2.86 14.64 Sundry Creditors Marketable Securities Issued Funds Provided from Other Financial Institutions 4.48 2.95 1.96 16.16

VII. Explanations on Liquidity Risk Liquidity risk can arise as a result of funding long-term assets with short-term resources. Utmost care is taken by the Parent Bank and its financial institutions to maintain the consistency between the maturities of assets and liabilities; and strategies are used to acquire funds over longer terms.

TL and FC liquidity needs are principally met by deposits. While the average maturity of deposits is shorter than the average maturity of assets as a result of the market conditions, the Bank’s wide network of branches and steady deposit base are its most important safeguards of the supply of funds. On the other hand, medium and long-term funds can also be acquired from international funding institutions.

In order to meet the liquidity requirements that may emerge from market fluctuations, considerable attention is paid to preserve liquid assets, efforts in this framework are supported by cash flows projections. The term structure of TL and FC deposits, their costs and movements in the total amounts are monitored on a daily basis, also accounting for developments in former periods and expectations for the future. Furthermore, foreign currency and total liquidity adequacy ratio, which are subject to weekly legal reporting and calculated separately for 7 and 31 days following the reporting date, and liquidity adequacy ratios calculated under the classification of foreign currencies for maturity segments of 7 days, 31 days, 1 month, 3 months and 12 months are also used as indicators to monitor liquidity. Based on cash flow projections, prices are differentiated for different maturities and thereby measures are taken to meet liquidity requirements; moreover liquidity that may be required for extraordinary circumstances is estimated and alternative liquidity sources are determined for possible utilization.

Evaluated within the framework of the Bank’s asset-liability management risk policy, the limits determined related to the liquidity risk management are monitored by the Risk Committee of the Bank and in case of extraordinary situations where a quick action should be taken due to the unfavorable market conditions, emergency measures and funding plans related to liquidity risk are put into effect.

As per the Communiqué on “Measurement and Assessment of the Adequacy of Banks’ Liquidity”, the liquidity ratios that are measured for terms of 7 and 31 days should not be less than 80% and 100%, respectively. Foreign currency liquidity adequacy ratio means the ratio of foreign currency assets to foreign currency liabilities and the total liquidity adequacy ratio means the ratio of total assets to total liabilities. The highest, lowest and average liquidity adequacy ratios of the Parent Bank in 2009 are given below, compared to the prior period.

Current Period First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) 274.43 267.63 143.14 146.45 Highest (%) 426.40 347.42 179.13 165.92 Lowest (%) 172.63 200.73 114.21 126.64

Prior Period First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) 247.23 194.81 170.51 136.78 Highest (%) 395.63 297.36 245.77 174.18 Lowest (%) 158.42 154.42 126.77 116.79

İşbank Information on Consolidated Financial Statements 2009 37

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Presentation of assets and liabilities according to their remaining maturities:

Current Period Demand Up to 1Month 1-3Months 3-12 Months 1-5 Years 5 Years and Over Unallocated (1) Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 8,758,993 30,735 8,789,728 Banks 337,047 7,463,494 222,939 267,765 2,115,800 44,700 10,451,745 Financial Assets at Fair Value through Profit/Loss 165,673 89,279 146,279 425,481 489,486 1,946 1,318,144 Money Market Placements Financial Assets Available for Sale 102,927 1,206,359 4,716,667 4,785,749 14,808,996 4,938,735 30,559,433 Loans 5,510,414 8,519,150 4,743,643 12,549,696 18,643,055 2,794,482 52,760,440 Investments Held to Maturity 11,440 1,353,193 15,180 11,816,136 151,358 13,347,307 Other Assets 2,810,271 840,548 92,736 229,651 756,229 140,982 6,819,262 11,689,679 Total Assets 17,685,325 18,130,270 11,306,192 18,273,522 48,629,702 8,072,203 6,819,262 128,916,476

Liabilities Bank Deposits 224,532 1,343,812 269,643 126,579 1,964,566 Other Deposits 11,207,750 43,719,874 10,466,615 4,477,770 186,517 31,880 70,090,406 Funds Provided from Other Financial Institutions 596,825 890,619 4,574,332 6,387,387 2,425,124 14,874,287 Money Market Funds 8,653,787 2,775,060 1,450,806 223,064 369,920 13,472,637 Marketable Securities Issued Sundry Creditors 3,119,191 1,371,043 1,909 3,320 81,773 4,577,236 Other Liabilities 46,482 293,453 477,205 76,205 106,936 22,937,063 23,937,344 Total Liabilities 14,597,955 55,978,794 14,881,051 10,709,012 6,985,677 2,826,924 22,937,063 128,916,476 Liquidity Gap 3,087,370 -37,848,524 -3,574,859 7,564,510 41,644,025 5,245,279 -16,117,801

Prior Period Total Assets 20,244,095 12,768,011 6,504,013 18,001,072 38,566,426 9,585,957 5,538,457 111,208,031 Total Liabilities 11,313,010 43,699,164 16,945,043 10,302,351 7,860,075 2,363,821 18,724,567 111,208,031 Liquidity Gap 8,931,085 -30,931,153 -10,441,030 7,698,721 30,706,351 7,222,136 -13,186,110

(1) Asset items, such as Tangible Assets, Subsidiaries and Associates, Office Supply Inventory, Prepaid Expenses and Non-Performing Loans, which are required for banking operations and which cannot be converted to cash in short-term, other liabilities such as Provisions which are not considered as payables and Shareholders’ Equity, are shown in ”Unallocated” column.

İşbank Information on Consolidated Financial Statements 2009 38

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

In compliance with the Turkish Financial Reporting Standard No.7, the following table indicates the maturities of the Group’s major financial assets and liabilities which are not qualified as derivatives. The following tables have been prepared by referencing the earliest dates of collections and payments without discounting the assets and liabilities. The interest to be collected from and paid to the related assets and liabilities is included in the following table. Adjustments column shows the items that may cause possible cash flows in the following periods. The values of the related assets and liabilities registered in balance sheet do not include these amounts.

Up to 1 5 Years Balance Current Period Demand Month 1-3 Months 3-12 Months 1-5 Years and Over Total Adjustments Sheet Value Assets Financial Assets Held for Trading 165,673 34,605 125,854 426,601 450,937 2,793 1,206,463 34,927 1,171,536 Banks 337,047 7,391,224 260,291 324,536 2,172,012 45,851 10,530,961 79,216 10,451,745 Financial Assets Available for Sale 102,927 1,547,895 5,199,315 5,721,374 17,902,914 7,545,300 38,019,725 7,460,292 30,559,433 Loans 5,510,414 8,633,182 5,315,740 14,631,933 22,012,910 3,139,283 59,243,462 6,483,022 52,760,440 Investments Held to Maturity 14,959 1,829,582 737,024 14,479,763 163,875 17,225,203 3,877,896 13,347,307

Liabilities Deposits 11,432,282 45,220,809 10,831,456 4,693,874 213,547 46,297 72,438,265 383,293 72,054,972 Funds Provided from Other Financial Institutions 565,753 924,699 4,854,693 7,150,621 2,669,403 16,165,169 1,290,882 14,874,287 Money Market Funds 8,661,777 2,802,304 1,486,716 270,575 408,521 13,629,893 157,256 13,472,637

Up to 1 5 Years Balance Prior Period Demand Month 1-3 Months 3-12 Months 1-5 Years and Over Total Adjustments Sheet Value Assets Financial Assets Held for Trading 55,604 33,898 94,626 292,157 497,135 6,144 979,564 125,824 853,740 Banks 531,011 4,670,715 301,134 319,092 2,389,504 50,572 8,262,028 253,035 8,008,993 Financial Assets Available for Sale 77,524 457,789 1,629,863 3,726,524 19,196,930 8,683,842 33,772,472 8,912,388 24,860,084 Loans 5,198,986 7,769,919 5,529,143 15,056,937 22,469,554 3,311,358 59,335,897 7,645,925 51,689,972 Investments Held to Maturity 75,947 2,511,647 1,854,863 780,411 5,222,868 1,457,009 3,765,859

Liabilities Deposits 8,940,172 35,732,772 14,693,363 3,956,498 252,896 28,104 63,603,805 615,803 62,988,002 Funds Provided from Other Financial Institutions 918,163 769,361 5,610,576 8,294,456 3,092,951 18,685,507 2,672,690 16,012,817 Money Market Funds 6,179,963 1,667,289 659,489 211,559 8,718,300 16,919 8,701,381

The following table shows the remaining maturities of non-cash loans of the Group.

Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Letters of Credit 296,272 326,511 594,014 948,089 514,415 96,035 2,775,336 Endorsements 5,960 23,658 11,920 41,538 Letters of Guarantee 5,537,147 166,628 626,830 2,245,484 1,181,373 195,184 9,952,646 Acceptances 41,332 17,985 36,725 43,501 11,652 151,195 Other 244,009 3,637 98,107 345,753 Total 6,118,760 517,084 1,281,227 3,252,631 1,707,440 389,326 13,266,468

Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Letters of Credit 747,203 230,959 558,732 1,257,307 841,508 91,129 3,726,838 Endorsements Letters of Guarantee 4,753,002 142,866 384,551 1,837,919 1,200,030 70,075 8,388,444 Acceptances 21,557 16,594 27,647 50,177 15,180 131,155 Other 77,091 7,522 84,613 Total 5,598,853 390,419 970,930 3,152,925 2,056,718 161,204 12,331,050

The following table shows the remaining maturities of derivative financial assets and liabilities of the Group.

Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Forwards Contracts- Buy 306,559 319,221 587,720 156,161 1,369,661 Forwards Contracts- Sell 306,238 318,925 587,292 156,020 1,368,475 Swaps-Buy 1,167,133 34,621 340,929 4,306,673 1,189,905 7,039,261 Swaps-Sell 1,177,827 34,224 287,245 4,327,979 1,189,905 7,017,180 Futures-Buy 13,901 5,687 19,588 Futures-Sell 13,656 5,659 1,123,134 520,527 1,662,976 Options-Call 686,448 187,790 631,761 455,515 1,961,514 Options-Put 665,448 176,790 616,812 455,515 1,914,565 Other 828 65,587 42,415 108,830 Total 4,338,038 1,148,504 4,174,893 10,420,805 2,379,810 22,462,050 İşbank Information on Consolidated Financial Statements 2009 39

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Forwards Contracts- Buy 947,203 900,354 1,057,743 51,231 2,956,531 Forwards Contracts- Sell 1,045,199 932,814 1,093,983 51,193 3,123,189 Swaps-Buy 903,501 100,117 68,265 1,213,977 2,285,860 Swaps-Sell 903,211 99,530 72,980 1,207,122 2,282,843 Futures-Buy 73,459 73,459 Futures-Sell 584,050 584,050 Options-Call 297,199 233,117 1,262,326 481,800 34,482 2,308,924 Options-Put 333,620 196,336 1,271,820 471,600 34,482 2,307,858 Other 46,092 480,923 625,608 1,152,623 Total 4,429,933 3,165,869 5,308,040 4,102,531 68,964 17,075,337

VIII. Explanations on Other Price Risks The Group is exposed to the equity share risk arising from its investments in companies which are traded on the ISE. Equity shares are generally obtained for investment purposes.

As of the reporting date, Group’s sensitivity to equity shares price risk has been analyzed. In the analysis, it is assumed that all the other variables are constant and the data used in the valuation method (share prices) are 10% more/less.

According to this assumption TL 141,991 (31.12.2008: TL 73,561) increase/decrease is expected in the Marketable Securities Revaluation Reserve account under the Shareholders’ Equity. This, in fact, is arising from the increase/decrease in the fair values of the publicly-traded subsidiaries and associates.

IX. Explanations on Presentation of Assets and Liabilities at Fair Value

1. Information on fair values of financial assets and liabilities

Book Value Fair Value Current Period Prior Period Current Period Prior Period Financial Assets 107,118,925 88,349,549 109,460,499 87,790,684 Money Market Placements 24,641 24,641 Banks 10,451,745 8,008,993 10,458,886 8,019,907 Financial Assets Available for Sale 30,559,433 24,860,084 30,559,433 24,860,084 Investments Held to Maturity 13,347,307 3,765,859 14,219,574 3,797,469 Loans 52,760,440 51,689,972 54,222,606 51,088,583 Financial Liabilities 91,506,495 82,335,161 91,841,011 82,268,396 Banks Deposits 1,964,566 1,398,286 1,966,661 1,399,399 Other Deposits 70,090,406 61,589,716 70,126,421 61,619,805 Funds Provided from Other Financial Institutions 14,874,287 16,083,446 15,170,693 15,985,479 Marketable Securities Issued Sundry Creditors 4,577,236 3,263,713 4,577,236 3,263,713

Fair values of investments held to maturity are determined by using the market prices; in cases where market prices cannot be measured, quoted market prices of other securities that are subject to amortization having similar interest, maturity and other conditions are taken as the basis for the fair value determination.

Market prices are taken into account in determining the fair values of the securities available for sale. When price formation is not realized under active market conditions, fair values are not deemed to be reliably determined and amortized cost, calculated by the internal rate of return method, are taken into account as the fair values.

Fair values of banks, loans granted, deposits and funds borrowed from other financial institutions are calculated by discounting the amounts in each maturity bracket formed according to repricing periods, using the rate corresponding to relevant maturity bracket in the discount curves based on current market conditions. İşbank Information on Consolidated Financial Statements 2009 40

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

2. Information on fair value measurements recognized in the financial statements TFRS 7 “Financial Instruments: Disclosures” standard requires the items, which are recognized in the balance sheet at their fair values to be shown in the notes by being classified within a range. According to this, the related financial instruments are classified into three levels in such a way that they will express the significance of the data used in fair value measurements. At the first level, there are financial instruments, whose fair values are determined according to quoted prices in active markets for identical assets or liabilities, at the second level, there are financial instruments, whose fair values are determined by directly or indirectly observable market data, and at the third level, there are financial instruments, whose fair values are determined by the data, which are not based on observable market data. The financial assets, which are recognized in the balance sheet at their values, are shown below as classified according to the aforementioned principles of ranking.

Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities 976,260 Share Certificates 89,683 Derivative Financial Assets Held for Trading 15,822 130,786 Other 103,883 1,710 Financial Assets Available-for-Sale Debt Securities 19,511,896 10,944,610 Share Certificates (1) 8,285 Other 3,452 55,717 Investments in Subsidiaries and Associates(2) 1,419,763 Derivative Financial Liabilities 498,835

(1) The fair values of debt securities, which are classified at the third level are determined by the internal rate of return method. Since they are not traded in an active market, the share certificates (TL 35,473) under the financial assets available-for-sale are shown in the financial statements at acquisition cost and the related securities are not shown in this table. (2) Since the unlisted investments in associates and subsidiaries are recognized at acquisition cost within the framework of TAS 39, these companies are not included in the table.

There has not been any transition between level 1 and level 2 during the period.

The movement table of financial assets whose fair values are determined according to data that are not based on market figures, are given below.

Financial Assets available for Sale Balance at the Beginning of the Period 13,008,813 Purchases 8,496,809 Redemption or Sales -9,980,283 Valuation Difference -580,729 Balance at the end of the Period 10,944,610

X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions

1. Transactions both in national and international capital markets in connection with the trading and custody on behalf of others are carried out, and portfolio management and investment consulting services are provided.

2. The Group has no fiduciary transactions.

XI. Explanations on Business Segmentation The Group’s operations are classified as corporate, commercial, retail and private banking, as well as treasury/investment banking. While the commercial and corporate operations are differentiated by the Parent Bank and its financial institutions , according to their own criterion, in the classification of other operations, the same methods are applied by the Group.

Services to the large corporations, SMEs and other trading companies (excluding real person merchants) are provided through various financial media within the course of the corporate and commercial banking operations. Services such as project financing, operating and investment loans, deposit and cash management, credit cards, cheques and bills, foreign trade transactions and financing, letter of guarantee, letter of credit, forfeiting, foreign currency trading, bill collections, payrolls, investment accounts, tax collections and other banking services are provided for the aforementioned customer segments.

Services are provided to individuals, real-person merchants and non-trading corporations and institutions within the context of “Retail Banking”. The requirements of this customer segment are met by performing banking services such as deposits, consumer loans, overdraft accounts, credit cards, bill collections, remittances, foreign currency trading, safe-deposit boxes, insurance, tax collections, investment accounts and by other banking services. For the private banking category, any kind of financial and cash management related services are provided for individuals within the high-income segment.

Within the context of treasury transactions, medium and long term funding is being fulfilled by tools such as securities trading, money market transactions, spot and forward TL and foreign currency trading, and derivative transactions such as forwards, swaps, futures and options, as well as syndications and securitizations.

The Group’s investments in unconsolidated associates and subsidiaries are evaluated within the context of investment banking. The details about the aforementioned investments are stated in note I.7 and I.8 section of Part Five. İşbank Information on Consolidated Financial Statements 2009 41

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Statement of information related to business segmentation as of 31.12.2009 is given below.

Current Period Corporate Commercial Retail Private Treasury/Investment Unallocated Total OPERATING INCOME/EXPENSE Interest Income 11,370,516 Interest Income from Loans 1,284,094 2,569,390 2,988,436 64,963 135,205 7,042,088 Interest Income from Banks 240,221 240,221 Interest Income from Money Market Transactions 101,806 101,806 Interest Income from Securities 3,644,342 3,644,342 Finance Lease Income 28,774 74,667 103,441 Other Interest Income 89 542 32 180,758 57,197 238,618 Interest Expense 5,630,372 Interest Expense on Deposits 891,788 213,684 1,616,086 1,769,678 4,491,236 Interest Expense on Funds Borrowed 181,199 586,219 767,418 Interest Expense on Money Market Transactions 362,312 362,312 Other Interest Expense 404 9,002 9,406 Net Interest Income 5,740,144 Net Fees and Commissions Income 1,159,630 Fees and Commissions Received 109,561 375,078 518,577 68,812 63,096 281,017 1,416,141 Fees and Commissions Paid 438 457 12,261 243,355 256,511 Dividend Income 166,338 166,338 Trading Income/Loss (Net) 557,041 557,041 Other Income 794,754 500,405 1,010,580 101,291 1,098,538 3,505,568 Prov. for Loans and Other Receivables 64,849 2,298,716 2,363,565 Other Operating Expense 1,033,062 930,202 2,115,253 50,074 129,184 1,139,872 5,397,647 Income Before Tax 3,367,509 Tax Provision 615,205 Net Period Profit 2,752,304 Group Profit/Loss 2,497,629 Minority Shares’ Profit/Loss 254,675 SEGMENT ASSETS Fin. Assets At Fair Value Through P/L 1,318,144 1,318,144 Banks and Other Financial Institutions 10,451,745 10,451,745 Money Market Placements Financial Assets Available for Sale 30,559,433 30,559,433 Loans and Receivables 20,989,634 15,457,782 15,817,600 495,424 52,760,440 Investments Held to Maturity 13,347,307 13,347,307 Associates and Subsidiaries 2,996,044 2,996,044 Lease Receivables 354,939 575,132 945 931,016 Other 1,438,468 15,113,879 16,552,347 128,916,476 SEGMENT LIABILITIES Deposits 15,270,840 6,849,942 26,961,182 22,973,008 72,054,972 Derivative Financial Liabilities Held for Trading 498,835 498,835 Funds Borrowed 5,130,428 9,743,859 14,874,287 Money Market Funds 13,472,637 13,472,637 Other Liabilities 497,634 5,099,877 5,597,511 Provisions 7,112,309 7,112,309 Shareholders’ Equity 15,305,925 15,305,925 128,916,476

İşbank Information on Consolidated Financial Statements 2009 42

Türkiye İş Bankası A.Ş. Part Four: Information on the Financial Structure

Prior Period Corporate Commercial Retail Private Treasury/Investment Unallocated Total OPERATING INCOME/EXPENSE Interest Income 11,769,369 Interest Income from Loans 1,327,304 2,478,314 2,958,747 62,159 172,123 6,998,647 Interest Income from Banks 418,160 418,160 Interest Income from Money Market Transactions 42,520 42,520 Interest Income from Securities 3,840,229 3,840,229 Finance Lease Income 28,293 84,689 0 112,982 Other Interest Income 1,445 104 304,646 50,636 356,831 Interest Expense 7,175,786 Interest Expense on Deposits 1,254,731 218,346 1,724,128 2,158,327 5,355,532 Interest Expense on Funds Borrowed 38,574 863,242 901,816 Interest Expense on Money Market Transactions 887,109 887,109 Other Interest Expense 31,329 31,329 Net Interest Income 4,593,583 Net Fees and Commissions Income 1,237,128 Fees and Commissions Received 80,277 351,970 512,302 66,518 49,612 297,346 1,358,025 Fees and Commissions Paid 78 492 9,142 111,185 120,897 Dividend Income 128,351 128,351 Trading Income/Loss (Net) 546,400 546,400 Other Income 732,033 487,777 773,691 146,408 567,922 2,707,831 Prov. for Loans and Other Receivables 3,267 14,308 1,691,467 1,709,042 Other Operating Expense 930,287 733,170 1,822,732 46,218 140,671 1,615,451 5,288,529 Income Before Tax 2,215,722 Tax Provision 396,692 Net Period Profit 1,819,030 Group Profit/Loss 1,588,946 Minority Shares’ Profit/Loss 230,084 SEGMENT ASSETS Fin. Assets At Fair Value Through P/L 1,058,266 1,058,266 Banks and Other Financial Institutions 8,008,993 8,008,993 Money Market Placements 24,641 24,641 Financial Assets Available for Sale 24,860,084 24,860,084 Loans and Receivables 19,493,141 16,161,927 15,643,981 390,923 51,689,972 Investments Held to Maturity 3,765,859 3,765,859 Associates and Subsidiaries 2,265,925 2,265,925 Lease Receivables 311,843 782,127 1,508 1,095,478 Other 1,099,747 17,339,066 18,438,813 111,208,031 SEGMENT LIABILITIES Deposits 14,606,391 5,207,304 21,661,325 21,512,982 62,988,002 Derivative Financial Liabilities Held for Trading 544,597 544,597 Funds Borrowed 543,636 15,539,810 16,083,446 Money Market Funds 8,701,381 8,701,381 Other Liabilities 4,631,899 4,631,899 Provisions 6,267,455 6,267,455 Shareholders’ Equity 11,991,251 11,991,251 111,208,031

Part Five: Explanations and Notes to the Consolidated Financial Statements

I. EXPLANATIONS AND NOTES ON CONSOLIDATED ASSETS

1. Cash and Central Bank of Turkey: a. Information on Cash and Balances with the Central Bank of Turkey:

Current Period Prior Period TL FC TL FC Cash in TL/Foreign Currency 563,586 222,916 365,873 229,701 Central Bank of Turkey 5,230,946 2,665,352 8,566,128 2,720,720 Other 106,928 9,446 Total 5,794,532 2,995,196 8,932,001 2,959,867 İşbank Information on Consolidated Financial Statements 2009 43

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

b. Information on Balances with the Central Bank of Turkey:

Current Period Prior Period TL FC TL FC Unrestricted Demand Deposit 5,230,946 886,026 8,566,128 892,574 Unrestricted Time Deposit Restricted Time Deposit Other (1) 1,779,326 1,828,146 Total 5,230,946 2,665,352 8,566,128 2,720,720

(1) The amount of reserve deposits held at the Central Bank of Turkey regarding the foreign currency liabilities c. Information on reserve requirements: As per the Communiqué nr.2005/1 “Reserve Deposits” of the Central Bank of Turkey (CBT), banks keep reserve deposits at the CBT for their TL and FC liabilities mentioned in the communiqué at the rates of 5% (6% before 16.10.2009) and 9%, respectively. Reserves are calculated and set aside every two weeks on Fridays for 14-day periods in TL for TL liabilities and in US Dollar and/or Euro for FC liabilities. Within the framework of the aforementioned communiqué, the CBT pays interest in quarterly periods for TL reserves at the rates determined by itself (31.12.2009: 5.20%). No interest is paid for FC reserve requirements by the CBT.

2. Information on Financial Assets at Fair Value through Profit and Loss: a. Financial assets at fair value through profit and loss, which are given as collateral or blocked: Financial assets at fair value through profit and loss, which are given as collateral or blocked as of December 31, 2009 are amounting to TL 4,258 (December 31, 2008: TL 1,046). b. Financial assets at fair value through profit and loss, which are subject to repurchase agreements: Financial assets at fair value through profit and loss, which are subject to repurchase agreements as of December 31, 2009 are amounting to TL 447,269 (December 31, 2008: TL 242,872). c. Positive differences on derivative financial assets held for trading:

Current Period Prior Period TL FC TL FC Forward Transactions 28,514 12,469 25,787 16,210 Swap Transactions 7,874 73,179 56,434 66,721 Futures 15,822 Options 627 8,123 39,374 Other Total 52,837 93,771 82,221 122,305

3. Banks: a. Information on banks:

Current Period Prior Period TL FC TL FC Banks Domestic Banks 1,613,424 331,350 814,210 37,959 Foreign Banks 198,469 8,308,502 217,302 6,939,522 Foreign Head Office and Branches Total 1,811,893 8,639,852 1,031,512 6,977,481 b. Information on foreign banks:

Unrestricted Amount Restricted Amount Current Period Prior Period Current Period Prior Period EU Countries 6,407,047 5,661,597 USA, Canada 865,408 871,241 75 77 OECD Countries (1) 904,882 222,489 Off-shore Banking Regions 101 100 Other 329,458 401,320 Total 8,506,896 7,156,747 75 77

(1) OECD countries other than the EU countries, USA and Canada.

4. Information on Financial Assets Available for Sale: a. Information on financial assets available for sale, which are given as collateral or blocked: Financial assets available for sale, which are given as collateral or blocked amount to TL 4,757,220 as of December 31, 2009. (December 31, 2008: TL 3,733,761). b. Information on financial assets available for sale, which are subject to repurchase agreements: Financial assets available for sale which are subject to repurchase agreements amount to TL 8,705,551 as of December 31, 2009. (December 31, 2008: TL 8,645,455). İşbank Information on Consolidated Financial Statements 2009 44

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

c. Information on financial assets available for sale:

Current Period Prior Period Debt Securities 30,466,371 25,110,217 Traded on the Stock Exchange 19,521,761 11,880,887 Not Traded on the Stock Exchange (1) 10,944,610 13,229,330 Share Certificates 51,704 43,918 Traded on the Stock Exchange 8,545 6,122 Not Traded on the Stock Exchange 43,159 37,796 Impairment Provision (-) 17,811 334,174 Other 59,169 40,123 Total 30,559,433 24,860,084

(1) Indicates unlisted debt securities, and debt securities that have not been traded at the end of the related periods although they are listed.

5. Information related to loans: a. Information on all types of loans and advances given to shareholders and employees of the group:

Current Period Prior Period Cash Non-Cash Cash Non-Cash Direct Lending to Shareholders Corporate Shareholders Real Person Shareholders Indirect Lending to Shareholders Lending to Employees 339,264 81 290,543 98 Total 339,264 81 290,543 98 b. Information about the first and second group loans and other receivables including loans that have been restructured or rescheduled:

Cash Loans Standard Loans and Other Receivables Closely Monitored Loans and Other Receivables Loans and Restructured Loans and Restructured Other Receivables or Rescheduled Other Receivables or Rescheduled Non-Specialized Loans 50,331,596 158,146 1,282,111 988,587 Discount Notes 48,591 529 58 Export Loans 2,916,016 48,169 9,919 Import Loans 4,619 Loans Extended to Financial Sector 1,955,073 International Loans 1,637,771 33 Consumer Loans 10,234,034 483 281,677 124,112 Credit Cards 4,426,981 152,586 105,039 106,615 Precious Metal Loans 7,738 Other 29,100,773 5,077 846,664 747,883 Specialized Lending Other Receivables Total 50,331,596 158,146 1,282,111 988,587 c. Loans according to their maturity structure:

Standard Loans and Other Receivables Closely Monitored Loans and Other Receivables Loans and Restructured Loans and Restructured Other Receivables or Rescheduled Other Receivables or Rescheduled Short-term Loans and Other Receivables 18,387,616 152,609 421,372 169,263 Non-Specialized Loans 18,387,616 152,609 421,372 169,263 Specialized Loans Other Receivables Medium and long-term Loans and Other Receivables 31,943,980 5,537 860,739 819,324 Non-Specialized Loans 31,943,980 5,537 860,739 819,324 Specialized Loans Other Receivables İşbank Information on Consolidated Financial Statements 2009 45

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

d. Information on consumer loans, retail credit cards, personnel loans and personnel credit cards:

Short-Term Medium and Long-Term Interest and Income Accruals Total Consumer Loans-TL 653,139 8,856,101 219,408 9,728,648 Real Estate Loans 36,318 3,823,747 163,380 4,023,445 Vehicle Loans 27,291 768,690 8,016 803,997 General Purpose Consumer Loans 588,329 4,171,634 47,237 4,807,200 Other Consumer Loans 1,201 92,030 775 94,006 Consumer Loans – FC Indexed 789 322,112 49,443 372,344 Real Estate Loans 10 171,808 47,413 219,231 Vehicle Loans 72 8,638 1,924 10,634 General Purpose Consumer Loans 707 141,519 84 142,310 Other Consumer Loans 147 22 169 Consumer Loans – FC Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Consumer Loans Retail Credit Cards-TL 4,191,684 279,008 31,816 4,502,508 With Installments 1,337,348 279,008 1,616,356 Without Installments 2,854,336 31,816 2,886,152 Retail Credit Cards-FC With Installments Without Installments Personnel Loans-TL 23,886 212,013 4,587 240,486 Real Estate Loans 890 54,695 2,672 58,257 Vehicle Loans 145 7,918 82 8,145 General Purpose Consumer Loans 22,668 144,900 1,778 169,346 Other Consumer Loans 183 4,500 55 4,738 Personnel Loans- FC Indexed 2,141 500 2,641 Real Estate Loans 2,129 496 2,625 Vehicle Loans 12 4 16 General Purpose Consumer Loans Other Consumer Loans Personnel Loans-FC 52 1,562 1,614 Real Estate Loans Vehicle Loans General Purpose Consumer Loans 52 1,562 1,614 Other Consumer Loans Personnel Credit Cards-TL 68,449 755 69,204 With Installments 23,179 23,179 Without Installments 45,270 755 46,025 Personnel Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (real persons) 285,504 9,069 294,573 Overdraft Accounts – FC (real persons) Total 5,223,503 9,672,937 315,578 15,212,018

İşbank Information on Consolidated Financial Statements 2009 46

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

e. Installment based commercial loans and corporate credit cards:

Short-Term Medium and Long Term Interest and Income Accruals Total Commercial Loans With Installments-TL 553,325 6,603,693 111,513 7,268,531 Real Estate Loans 2,837 451,723 7,947 462,507 Vehicle Loans 79,025 1,781,753 20,810 1,881,588 General Purpose Commercial Loans 469,769 4,316,506 76,365 4,862,640 Other Commercial Loans 1,694 53,711 6,391 61,796 Commercial Loans With Installments-FC Indexed 15,176 434,864 61,241 511,281 Real Estate Loans 38,962 9,680 48,642 Vehicle Loans 1,202 181,461 25,211 207,874 General Purpose Commercial Loans 13,974 214,441 26,350 254,765 Other Commercial Loans Commercial Loans With Installments-FC 950 90,183 91,133 Real Estate Loans Vehicle Loans General Purpose Commercial Loans 950 90,183 91,133 Other Commercial Loans Corporate Credit Cards-TL 219,330 11 168 219,509 With Installments 13,702 11 13,713 Without Installments 205,628 168 205,796 Corporate Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (corporate) 645,295 25,944 671,239 Overdraft Accounts – FC (corporate) Total 1,434,076 7,128,751 198,866 8,761,693 f. Allocation of loan by customers:

Current Period Prior Period Public Sector 1,525,045 1,652,709 Private Sector 51,235,395 50,037,263 Total 52,760,440 51,689,972 g. International and domestic loans:

Current Period Prior Period Domestic Loans 50,948,319 50,024,692 International Loans 1,812,121 1,665,280 Total 52,760,440 51,689,972 h. Lending to subsidiaries and associates:

Current Period Prior Period Direct Lending to Subsidiaries and Associates 211,116 51,850 Indirect Lending to Subsidiaries and Associates Total 211,116 51,850 i. Specific provisions provided against loans:

Specific Provisions Current Period Prior Period Loans and Receivables with Limited Collectibility 1,398,777 612,372 Loans and Receivables with Doubtful Collectibility 474,859 335,054 Uncollectible Loans and Receivables 944,187 1,299,955 Total 2,817,823 2,247,381 İşbank Information on Consolidated Financial Statements 2009 47

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

j. Information on non-performing loans (Net): j.1. Information on loans and other receivables included in non-performing loans, which are restructured or rescheduled by the Group:

Group III Group IV Group V Loans and Receivables Loans and Receivables Uncollectible with Limited Collectibility with Doubtful Collectibility Loans and Receivables Current Period (Gross Amounts Before the Specific Provisions) 42,398 15,407 69,532 Restructured Loans and Other Receivables Rescheduled Loans and Other Receivables 42,398 15,407 69,532 Prior Period (Gross Amounts Before the Specific Provisions) 1,515 9,719 131,350 Restructured Loans and Other Receivables 73,475 Rescheduled Loans and Other Receivables 1,515 9,719 57,875 j.2. Movement of total non-performing loans:

Group III Group IV Group V Loans and Receivables Loans and Receivables Uncollectible with Limited Collectibility with Doubtful Collectibility Loans and Receivables Prior Period Ending Balance 612,372 335,054 1,299,955 Corporate and Commercial Loans 422,256 192,824 1,067,631 Retail Loans 106,415 58,733 90,464 Credit Cards 83,701 64,443 141,860 Other 19,054 Additions (+) 1,737,930 62,736 192,288 Corporate and Commercial Loans 951,838 33,125 175,592 Retail Loans 385,899 22,781 13,101 Credit Cards 400,191 4,515 3,595 Other 2 2,315 Transfers from Other Non-performing Loan Accounts (+) 481,663 178,914 Corporate and Commercial Loans 309,294 115,229 Retail Loans 92,967 31,068 Credit Cards 79,402 32,617 Other Transfers to Other Non-performing Loan Accounts (-) 481,844 178,733 Corporate and Commercial Loans 309,475 115,048 Retail Loans 92,967 31,068 Credit Cards 79,402 32,617 Other Collections (-) 458,173 213,624 319,246 Corporate and Commercial Loans 245,419 133,340 259,867 Retail Loans 105,932 50,378 33,236 Credit Cards 106,822 29,102 26,143 Other 804 Write-Offs (-)(*) 11,508 12,237 407,724 Corporate and Commercial Loans 8,661 11,644 399,526 Retail Loans 2,156 270 3,639 Credit Cards 691 170 4,559 Other 153 Current Period Ending Balance 1,398,777 474,859 944,187 Corporate and Commercial Loans 810,539 275,211 699,059 Retail Loans 291,259 92,765 97,758 Credit Cards 296,977 86,471 147,370 Other 2 20,412 Specific Provisions (-) 1,398,777 474,859 944,187 Corporate and Commercial Loans 810,539 275,211 699,059 Retail Loans 291,259 92,765 97,758 Credit Cards 296,977 86,471 147,370 Other 2 20,412 Net Balance on Balance Sheet

(*) TL 37,824 of the NPL portfolio of the Parent Bank were transferred in the current year to LBT Asset Management A.S. in exchange for TL 9,550, and TL 186,114 of it were transferred to Standard Varlık Yönetim A.Ş. in exchange of payment of TL 8,500 in cash and payment of 40% of the gross collections made by the company with respect to the NPL portfolio on sale. İşbank Information on Consolidated Financial Statements 2009 48

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

j.3. Information on the Group’s non-performing foreign currency loans and other receivables:

Group III Group IV Group V Loans and Receivables Loans and Receivables Uncollectible with Limited Collectibility with Doubtful Collectibility Loans and Receivables Current Period: Period Ending Balance 29,112 1,122 56,763 Specific Provisions (-) 29,112 1,122 56,763 Net Balance on Balance Sheet Prior Period: Period Ending Balance 75,419 480 10,437 Specific Provisions (-) 75,419 480 10,437 Net Balance on Balance Sheet j.4. Information on gross and net non-performing loans and receivables as per customer categories:

Group III Group IV Group V Loans and Receivables Loans and Receivables Uncollectible with Limited Collectibility with Doubtful Collectibility Loans and Receivables Current Period (Net) Loans to Individuals and Corporates (Gross) 1,398,703 454,447 938,735 Specific Provisions (-) 1,398,703 454,447 938,735 Loans to Individuals and Corporates (Net) Banks (Gross) 72 108 Specific Provisions (-) 72 108 Banks (Net) Other Loans and Receivables (Gross) 2 20,412 5,344 Specific Provisions (-) 2 20,412 5,344 Other Loans and Receivables (Net) Prior Period (Net) Loans to Individuals and Corporates (Gross) 612,154 316,000 1,294,504 Specific Provisions (-) 612,154 316,000 1,294,504 Loans to Individuals and Corporates (Net) Banks (Gross) 218 108 Specific Provisions (-) 218 108 Banks (Net) Other Loans and Receivables (Gross) 19,054 5,343 Specific Provisions (-) 19,054 5,343 Other Loans and Receivables (Net) k. Main guidelines used in the liquidation policy on uncollectible loans and other receivables: In order to ensure liquidation of non-performing loans, all possible alternatives within the existing legislation are evaluated in a way that repayments are maximized. First, administrative initiatives are taken to reach an agreement with the borrower; in case the negotiations for collection, liquidation or restructuring of receivables fail, legal action is taken for collection. l. Information on “Write-off” policies: In case there is still a residual receivable despite all the borrowers’ assets are liquidated in terms of legal follow-up, or a legal follow-up fails due to the fact that the borrowers do not have any assets to be liquidated, the Bank’s receivables are reduced to one if an evidence of borrowers’ insolvency is obtained; when no such evidence is available, totally uncollectible receivables are written-off.

6. Investments Held to Maturity: a. Information on investments held to maturity, which are given as collateral or blocked: Investments held to maturity, which are given as collateral or blocked amount to TL 597,775 as of December 31, 2009. (December 31, 2008: TL 116,994). b. Information on investments held to maturity, which are subject to repurchase agreements: Assets held to maturity, which are subject to repurchase agreements amount to TL 4,306,196 as of December 31, 2009. (December 31, 2008: TL 168). c. Information on government securities held to maturity:

Current Period Prior Period Government Bonds 12,009,230 3,697,672 Treasury Bills 40,739 Other Public Debt Securities Total 12,009,230 3,738,411 İşbank Information on Consolidated Financial Statements 2009 49

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

d. Information on investments held-to-maturity:

Current Period Prior Period Debt Securities 13,347,307 3,765,859 Traded on the Stock Exchange 12,009,230 3,715,217 Not Traded on the Stock Exchange 1,338,077 50,642 Impairment Provision (-) Total 13,347,307 3,765,859 e. Movement of the investments held to maturity during the year:

Current Period Prior Period Beginning Balance 3,765,859 2,127,556 Foreign Exchange Differences Arising on Monetary Assets -343 7,575 Purchases During the Year 11,234,302 1,019,598 Transfers 273,581 -10,729 Disposals through Sales and Redemption -1,855,318 291,600 Impairment Provision (-) Changes in amortized costs of the investments -70,774 330,259 Balance at the end of the Period 13,347,307 3,765,859

7. Associates (Net): a.1. Information on unconsolidated subsidiaries: In accordance with the article nr.5 of the “Communiqué Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks” published in the Official Gazette No.26340 dated 8 November 2006, by taking the materiality principle into account as well, associates whose assets do not exceed one percent of the Parent Bank’s total assets and whose share totals do not exceed five percent of the Parent Bank’s total assets by taking into account materiality principle and whose titles and other information are presented below, are not included in the consolidation.

The amount of unconsolidated subsidiaries at the consolidated financial statements is TL 3,150.

Bank’s Share Percentage-If Bank’s Risk Group Share Title Address (City/Country) Different, Voting Percentage (%) Percentage (%) 1- Bankalararası Kart Merkezi A.Ş. İstanbul/TURKEY 9.98 9.98 2- Kredi Kayıt Bürosu A.Ş. İstanbul/TURKEY 9.09 9.09 a.2. Financial statement information of associates according to the order above:

Total Shareholders’ Total Securities Current Period Prior Period Assets Equity Tangible Assets Interest Income (2) Income Profit/Loss Profit/Loss (3) Fair Value 1- 16,962 13,333 5,734 1,665 1,533 1,157 (1) 2- 24,925 19,399 1,837 3,266 6 6,693 3,457 (1)

(1) Indicates value as of 31.12.2008. (2) Includes Interest Income on Securities. (3) Indicates profit/loss as of 31.12.2007. b.1. Information on consolidated associates:

Bank’s Share Percentage-If Bank’s Risk Group Share Title Address (City/Country) Different, Voting Percentage (%) Percentage (%) Arap Türk Bankası A.Ş. İstanbul/TURKEY 20.58 79.42

Information on financial statements of associates in the above order:

Total Shareholders’ Total Securities Current Period Prior Period Assets Equity Tangible Assets Interest Income (1) Income Profit/Loss Profit/Loss(2) Fair Value 866,365 280,687 21,519 58,513 317 21,977 25,720

(1) Includes Interest Income on Securities. (2) Indicates profit/loss as of 30.09.2008. İşbank Information on Consolidated Financial Statements 2009 50

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b.2. Movement table on consolidated associates:

Current Period Prior Period Beginning balance 85,295 48,895 Movements during the period Purchases (1) 36,400 Bonus shares acquired Dividends received from the current year profit Sales Revaluation Increase Impairment Balance at the end of the period 85,295 85,295 Capital commitments Contribution in equity at the end of the period (%)

(1) Also includes the acquisitions related to capital increases through retained earning. b.3. Sectoral information on consolidated associates and the related carrying amounts:

Current Period Prior Period Banks 85,295 85,295 Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Participations Total 85,295 85,295 b.4. Consolidated associates traded on a stock exchange: None. b.5. Consolidated associates disposed of in the current period: None. b.6. Consolidated associates acquired in the current period: None.

8. Information on subsidiaries (Net): a. Information on unconsolidated subsidiaries: In accordance with the procedures nr.5 of the “Communique Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks” published in the Official Gazette No.26340 dated 8 November 2006, subsidiaries whose assets do not exceed the one percent of the Parent Bank’s total assets or share totals do not exceed five percent of the Parent Bank’s total assets by taking into account materiality principle and whose title and other information are presented below, are not included in the consolidation.

The amount of unconsolidated subsidiaries at the consolidated financial statements is TL 303,054.

Bank’s Share Percentage-If Bank’s Risk Group Share Title Address (City/Country) Different, Voting Percentage (%) (1) Percentage (%) 1- Camiş Menkul Değerler A.Ş. İstanbul/TURKEY 67.60 68.89 2- İş Dublin Financial Services PLC Dublin/IRELAND 100.00 100.00 3- İş Factoring Finansman Hizmetleri A.Ş. İstanbul/TURKEY 40.51 44.02 4- İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. İstanbul/TURKEY 33.95 35.33 5- İş Portföy Yönetimi A.Ş. İstanbul/TURKEY 66.12 67.74 6- İş Yatırım Ortaklığı A.Ş. İstanbul/TURKEY 19.69 20.06 7- Maxis Securities Ltd. London/ENGLAND 67.61 68.90 8- TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. İstanbul/TURKEY 41.68 47.59 9- TSKB Yatırım Ortaklığı A.Ş. (2) İstanbul/TURKEY 17.15 18.91 10- Yatırım Finansman Menkul Değerler A.Ş. İstanbul/TURKEY 41.34 47.79

(1) The Group’s indirect shares are taken into account as The Parent Bank’s share. (2) As of 19.06.2009, Yatırım Finansman Yatırım Ortaklığı A.Ş. was transferred to TSKB Yatırım Ortaklığı A.Ş. with its all rights, receivables, debts and liabilities by ending its legal entity. İşbank Information on Consolidated Financial Statements 2009 51

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Financial statement information related to unconsolidated subsidiaries in the above order:

Total Shareholders’ Total Securities Current Period Prior Period Assets Equity Tangible Assets Interest Income (1) Income Profit/Loss Profit/Loss(2) Fair Value 1- 13,244 2,897 286 714 96 -369 50 2- 1,079 1,513 307 12 1,122 99 (3) (4) 3- 276,112 41,069 104 20,103 382 7,194 20,016 4- 131,920 129,052 710 14,165 1,144 8,250 19,833 (5) (6) 5- 49,962 47,417 892 3,575 1,643 12,707 8,644 6- 232,812 230,782 7 2,021 43,369 51,751 -7,090 (5) (6) 7- 40,206 2,263 561 12 -342 -1,478 8- 298,351 164,133 25 844 7 55,346 3,063 9- 39,166 38,856 851 10,548 10,040 -6,793 (5) (6) 10- 332,211 50,419 1,653 9,915 4,773 6,434 715

(1) Includes interest income on Securities . (2) Period profit/loss as of 31.12.2008. (3) Values are related to İş Dublin Financial Services PLC as of 30.06.2009 . (4) Prior period values of İş Dublin Financial Services indicate period profit/loss as of 30.06.2008. (5) Values are related to İş Girişim Sermayesi Yatırım Ortaklığı A.Ş, İş Yatırım Ortaklığı A.Ş. and TSKB Yatırım Ortaklığı A.Ş. as of 30.09.2009. (6) Prior period values of İş Girişim Sermayesi Yatırım Ortaklığı A.Ş., İş Yatırım Ortaklığı A.Ş. and TSKB Yatırım Ortaklığı A.Ş. indicate period profit/loss as of 30.09.2008 . b.1. Information on consolidated subsidiaries:

Bank’s Share Percentage-If Bank’s Risk Group Share Title Address (City/Country) Different, Voting Percentage (%) (1) Percentage (%) 1- Anadolu Anonim Türk Sigorta Şirketi İstanbul/TURKEY 52.22 47.78 2- Anadolu Hayat Emeklilik A.Ş. İstanbul/TURKEY 73.21 26.79 3- İşbank GmbH Frankfurt/GERMANY 100.00 0.00 4- İş Gayrimenkul Yatırım Ortaklığı A.Ş. İstanbul/TURKEY 50.69 49.31 5- İş Finansal Kiralama A.Ş. İstanbul/TURKEY 39.94 60.06 6- İş Yatırım Menkul Değerler A.Ş. İstanbul/TURKEY 66.62 33.38 7- Milli Reasürans T.A.Ş. İstanbul/TURKEY 76.64 23.36 8- Türkiye Sınai Kalkınma Bankası A.Ş. İstanbul/TURKEY 42.56 57.44

(1) As of Parent Bank’s share percentage, the indirect share of the Group is considered.

Financial statement information related to consolidated subsidiaries in the above order:

Total Shareholders’ Total Securities Current Period Prior Period Assets Equity Tangible Assets Interest Income (1) Income Profit/Loss Profit/Loss(2) Fair Value 1- 1,659,340 638,406 38,251 64,966 54,801 50,904 96,349 (3) (4) 2- 4,280,937 414,097 23,953 205,842 31,485 62,275 52,945 (3) (4) 3- 1,440,750 145,652 34,288 70,003 9,589 7,737 4- 1,011,678 951,603 1,634 6,674 3,662 60,299 53,095 5- 1,440,580 404,502 2,546 133,370 692 105,388 76,309 6- 2,182,590 496,594 6,810 97,461 1,589 94,777 36,811 (3) (4) 7- 1,565,545 773,051 24,757 130,000 42,843 91,705 141,457 8- 7,270,042 1,140,609 34 503,147 20,115 260,898 116,464

(1) Includes interest income on Securities . (2) Period profit/loss as of 31.12.2008. (3) Since the financial statements of Anadolu Anonim Türk Sigorta Şirketi, Anadolu Hayat Emeklilik A.Ş. and İş Yatırım Menkul Değerler A.Ş., prepared according to the CMB Communiqué Serial:XI No:29, are not published as of the date of the report, the values are related to 30.09.2009. (4) Prior period values of Anadolu Anonim Türk Sigorta Şirketi, Anadolu Hayat Emeklilik A.Ş. and İş Yatırım Menkul Değerler A.Ş. indicate profit/loss as of 30.09.2008. b. 2. Information on consolidated subsidiaries (movement table):

Current Period Prior Period Balance at the Beginning of the Period 1,061,894 1,969,247 Movements in the Period Purchases (1) 81,734 119,828 Bonus Shares Acquired Dividends Received from the Current Year Profit Sales Revaluation Surplus (2) 1,200,111 -1,027,181 Impairment Balance at the End of the Period 2,343,739 1,061,894 Capital Commitments Contribution in equity at the end of the period (%)

(1) Also includes the acquisitions related to capital increases through retained earning. (2) The relevant amounts represent the increases and decreases in the market value of participations traded on the stock exchange during the related periods. İşbank Information on Consolidated Financial Statements 2009 52

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

b. 3. Sectoral information on consolidated subsidiaries and the related carrying amounts:

Subsidiaries Current Period Prior Period Banks 481,498 221,782 Insurance Companies 1,244,040 613,377 Factoring Companies Leasing Companies 72,265 26,738 Finance Companies Other Financial Subsidiaries 545,936 199,997 Total 2,343,739 1,061,894 b. 4. Consolidated subsidiaries traded on stock exchange:

Current Period Prior Period Traded on domestic stock exchanges 2,029,282 747,437 Traded on international stock exchanges b. 5. Consolidated subsidiaries disposed of in the current period: None. b. 6. Subsidiaries acquired in the current period: None

9. Information on jointly controlled entities (Net): There are no jointly controlled entities of the Parent Bank.

10. Information regarding finance lease receivables (Net): a. 1. Presentation of finance lease receivables according to their remaining maturities:

Current Period Prior Period Gross Net Gross Net Less than 1 Year 416,567 342,330 476,273 393,587 1-4 Years 596,162 512,313 748,396 645,455 More than 4 Years 82,301 75,428 65,132 54,928 Total 1,095,030 930,071 1,289,801 1,093,970 a. 2. Information regarding net investments made on finance lease:

Current Period Prior Period Gross Finance Lease Investment 1,095,030 1,289,801 Unearned Financial Revenue from Financial Lease (-) 164,959 195,831 Net Finance Lease Investment 930,071 1,093,970 b. Presentation of operating lease receivables according to their remaining maturities:

Current Period Prior Period Gross Net Gross Net Less than 1 Year 945 945 1,508 1,508 1-4 Years More than 4 Years Total 945 945 1,508 1,508

11. Explanations on derivative financial assets held for hedging purposes: The Group has no derivative financial assets held for hedging purposes.

İşbank Information on Consolidated Financial Statements 2009 53

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

12. Information on Tangible Assets (Net):

Current Period Land Buildings Construction in Progress Vehicles Other Total Acquisition Cost Balance at the Beginning of the Period 154,373 3,600,186 70,896 18,116 1,047,523 4,891,094 Movements in the Period - Acquisitions 15,354 39,317 32,312 3,232 165,265 255,480 - Disposals -12,262 -99,416 -2,178 -2,649 -35,013 -151,518 - Impairment -3,041 27 -525 -3,539 - Transfers -58,627 113,697 -39,490 525 16,105 Balance at the End of the Current Period 95,797 3,653,811 61,540 18,699 1,177,775 5,007,622

Accumulated Depreciation Balance at the Beginning of the Period -2,156,941 -9,225 -671,122 -2,837,288 Movements in the Period - Depreciation Charge -54,788 -3,225 -104,143 -162,156 - Disposals 17,914 2,474 15,194 35,582 - Impairment - Transfers -3,487 -3,487 Balance at the End of the Current Period -2,197,302 -9,976 -760,071 -2,967,349 Net Book Value at the End of the Prior Period 154,373 1,443,245 70,896 8,891 376,401 2,053,806 Net Book Value at the End of the Current Period 95,797 1,456,509 61,540 8,723 417,704 2,040,273

(*) As of the balance sheet date, the book value of tangible assets acquired during the period due to receivables amounts to TL 64,836.

Prior Period Land Buildings Construction in Progress Vehicles Other Total Acquisition Cost Balance at the Beginning of the Period 115,489 3,735,350 72,747 17,023 913,027 4,853,636 Movements in the Period - Acquisitions 48,855 59,992 34,877 4,357 162,285 310,366 - Disposals -8,174 -93,170 -2,165 -3,264 -26,985 -133,758 - Impairment -1,709 399 -1,310 - Transfers -88 -102,385 -34,563 -804 -137,840 Balance at End of Current Period 154,373 3,600,186 70,896 18,116 1,047,523 4,891,094

Accumulated Depreciation Balance at the Beginning of the Period -2,205,124 -9,946 -589,697 -2,804,767 Movements in the Period - Depreciation Charge -57,481 -2,462 -96,608 -156,551 - Disposals 9,169 3,183 14,880 27,232 - Impairment -48 -48 - Transfers 96,543 303 96,846 Balance at the End of the Current Period -2,156,941 -9,225 -671,122 -2,837,288 Net Book Value at the End of the Prior Period 115,489 1,530,226 72,747 7,077 323,330 2,048,869 Net Book Value at the End of the Current Period 154,373 1,443,245 70,896 8,891 376,401 2,053,806 İşbank Information on Consolidated Financial Statements 2009 54

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

13. Information on Intangible Assets: Explanation regarding consolidation goodwill that is included in intangible assets is given in Section Three under the caption of “XII. Explanations on Goodwill and Other Intangible Assets.” The table consisting movements of other intangible assets are presented below.

Current Period Prior Period Acquisition Cost Balance at the Beginning of the Period 126,420 74,392 Movements in the Period - Acquisitions 24,485 52,407 - Disposals -1,905 -379 - Impairment - Transfers - Effect of Inclusion of Subsidiary in Consolidation Balance at the End of the Period 149,000 126,420

Accumulated Amortization Balance at the Beginning of the Period -65,121 -22,363 Movements in the Period - Amortization Charge -47,607 -42,879 - Disposals 1,805 121 - Impairment - Transfers - Effect of Inclusion of Subsidiary in Consolidation Balance at the End of the Current Period -110,923 -65,121 Net Book Value at the End of the Prior Period 61,299 52,029 Net Book Value at the End of the Period 38,077 61,299

14. Information on investment property: Investment properties are properties that the Group holds to earn rentals. These properties are also subject to the same course of action with the other properties in terms of recognition and valuation. Explanations on these subjects are given in “Section Three: XIII. Explanations on Tangible Assets” section.

Current Period Prior Period Acquisition Cost Balance at the Beginning of the Period 983,620 966,083 Movements in the Period - Acquisitions 34,119 4,696 - Disposals -15,600 -20,175 - Impairment 8,937 -276 - Transfers -11,866 33,292 Balance at the End of the Period 999,210 983,620

Accumulated Amortization Balance at the Beginning of the Period -185,747 -162,796 Movements in the Period - Amortization Charge -22,030 -22,573 - Disposals 15,600 2,790 - Impairment - Transfers 3,749 -3,168 Balance at the End of the Current Period -188,428 -185,747 Net Book Value at the End of the Prior Period 797,873 803,287 Net Book Value at the End of the Period 810,782 797,873 İşbank Information on Consolidated Financial Statements 2009 55

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

15. Information on deferred tax asset: The Parent Bank and the other consolidated Group companies have TL 616,132 deferred tax asset as of December 31, 2009. Such deferred tax asset is calculated based on the temporary differences between the book value of assets and liabilities and their tax basis measured as per the prevailing tax regulation. When the items comprising the temporary differences are followed under equity, the related tax asset/liability calculated on such temporary differences is recognized under related equity items. As of December 31, 2009, the Group does not have any deferred tax asset arising from either carry forward losses or tax rebates.

Current Period Prior Period Tangible Assets Base Differences 20,677 14,748 Provisions (1) -364,280 -311,344 Valuation of Financial Assets -199,879 -68,744 Other (2) -72,650 -5,902 Net Deferred Tax (Asset)/Liability: -616,132 -371,242

(1) Comprises of employee termination benefits, actual and technical deficits of the Pension Fund, insurance technical provisions, the provisions for credit card bonus points, and other provisions. (2) The investment incentive application has been removed starting from January, 1 2006 and since the taxable income of the companies are not enough, the investment incentives not used as of December, 31 2005 are enabled to be used by deducting from incomes of years 2006, 2007 and 2008; and it is stated that the amount, if not deducted from the 2008 income, will not be transferred to other periods. On the other hand, the Court of Constitution has cancelled this regulation that removes the gained rights at the meeting on 15 October 2009, finding it against the Constitution, and in this way, the time limitation with respect of the deferred tax amount calculated was removed as of the date of reporting. The related decision was published on the Official Gazette dated January, 8 2010. Within this context, the Group’s subsidiary, İş Finansal Kiralama A.Ş. has TL 447,107 investment incentive not used with regard to the aforementioned periods and TL 62,431 of the item “Other” on the table above consists of the deferred tax amount calculated taking this investment incentive into consideration.

Movements of deferred tax asset:

Current Period Prior Period Balance at the Beginning of the Period 370,043 244,303 Deferred Tax Benefit/(Charge) (Net) 308,332 100,860 Deferred Tax Recognized under Equity -62,243 24,880 Deferred Tax Asset 616,132 370,043

16. Information on Assets held for sale and discontinued operations:

Current Period Prior Period Balance at the Beginning of the Period 20,542 17,389 Additions 27,298 21,852 Transfers -4,501 10,870 Disposals (-) -13,377 -29,569 Impairment Losses (-) -1,161 Balance at the End of the Current Period (Net) 28,801 20,542

The Group has no discontinued operations. The assets classified as “Assets Held for Sale” of the Group consist of real estates. Those real estates of the Parent Bank subject to sale are announced on the Bank’s web site. Announcements about the real estates subject to sale are also made by means of newspaper advertisements and similar media.

17. Information on Other Assets of the Group: The “other assets” item does not exceed 10% of total assets. İşbank Information on Consolidated Financial Statements 2009 56

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

II. Explanation and Notes on Consolidated Liabilities

1. Information on Deposits: a.1. The maturity structure of deposits (Current Period):

With 7 Days Up to 1 6 Months 1 Year and Accumulated Demand Maturity Month 1-3 Months 3-6 Months to 1 Year Over Deposits Total Savings Deposits 3,338,969 15,914,795 9,273,682 708,481 466,735 335,613 30,038,275 Foreign Currency Deposits 4,448,444 9,600,625 8,179,852 974,103 1,426,653 2,450,178 27,079,855 Residents in Turkey 4,167,426 9,035,866 7,874,404 708,472 626,787 1,571,979 23,984,934 Residents Abroad 281,018 564,759 305,448 265,631 799,866 878,199 3,094,921 Deposits of Public Institutions 286,394 87,419 281,271 3,363 12,194 670,641 Commercial Deposits 2,823,931 1,571,523 2,066,729 391,335 32,177 707,583 7,593,278 Other Institutions Deposits 197,317 1,062,704 2,994,142 12,642 740 328,117 4,595,662 Precious Metals Deposits 112,695 112,695 Interbank Deposits 224,532 516,554 927,104 254,147 42,229 1,964,566 The Central Bank of Turkey 62,546 62,546 Domestic Banks 36,842 161,763 564,789 1,108 764,502 Foreign Banks 123,347 354,791 362,315 254,147 41,121 1,135,721 Participation Banks 1,797 1,797 Other Total 11,432,282 28,753,620 23,722,780 2,344,071 1,926,305 3,875,914 72,054,972 a.2. The maturity structure of deposits (Prior Period):

With 7 Days Up to 1 6 Months 1 Year and Accumulated Demand Maturity Month 1-3 Months 3-6 Months to 1 Year Over Deposits Total Savings Deposits 2,420,962 15,014,145 7,302,844 700,944 88,838 211,483 25,739,216 Foreign Currency Deposits 4,112,842 9,212,640 5,176,184 1,007,299 798,543 2,455,743 22,763,251 Residents in Turkey 3,755,740 8,706,346 4,963,523 864,985 260,482 1,723,058 20,274,134 Residents Abroad 357,102 506,294 212,661 142,314 538,061 732,685 2,489,117 Deposits of Public Institutions 336,837 185,132 71,008 3,008 410 596,395 Commercial Deposits 1,759,607 3,228,791 1,809,016 100,127 157,780 43,099 7,098,420 Other Institutions Deposits 172,401 970,127 2,734,801 134,777 1,355,519 16,744 5,384,369 Precious Metals Deposits 8,065 8,065 Interbank Deposits 129,458 892,822 330,437 32,837 6,273 6,459 1,398,286 The Central Bank of Turkey 17,234 17,234 Domestic Banks 13,045 298,355 235,848 48 547,296 Foreign Banks 97,748 594,467 94,589 32,837 6,225 6,459 832,325 Participation Banks 1,431 1,431 Other Total 8,940,172 29,503,657 17,424,290 1,978,992 2,406,953 2,733,938 62,988,002 b.1. Savings deposits which are under the guarantee of Savings Deposits Insurance Fund and which exceed the limit of deposit insurance:

Savings Deposits Under the Guarantee of Savings Deposits Insurance Fund Exceeding the Limit of Deposit Insurance Fund Current Period Prior Period Current Period Prior Period Savings Deposits 13,768,529 12,149,886 16,015,035 13,312,241 Foreign Currency Savings Deposits 5,999,584 5,831,968 11,005,466 8,581,817 Other Deposits in the Form of Savings Deposits Foreign Branches’ Deposits Under Foreign Authorities’ Insurance 1,428,195 1,231,801 65,140 139,210 Off-shore Banking Regions’ Deposits Under Foreign Authorities Insurance 51,867 80,040 b.2. Savings deposits which are not under the guarantee of deposit insurance fund:

Current Period Prior Period Foreign Branches’ Deposits Under Foreign Authorities Insurance 251,869 501,683 Deposits and Other Accounts held by Main Shareholders and their Relatives Deposits and Other Accounts of the Chairman and Members of Board of Directors, Chief Executive Officer, Senior Executive Officers and their Relatives 7,175 6,784 Deposits and Other Accounts held as Assets subject to the Crime defined in the Article 282 of the Turkish Criminal Code no. 5237 dated 26 September 2004 Deposits at Depository Banks established for Off-Shore Banking Activities in Turkey İşbank Information on Consolidated Financial Statements 2009 57

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

2. Information on Derivative Financial Liabilities Held for Trading:

Negative differences on derivative financial liabilities held for trading:

Current Period Prior Period TL FC TL FC Forward Transactions 303 39,539 259,342 8,388 Swap Transactions 331,679 113,065 117,195 9,046 Futures Options 591 13,658 150,368 Other 258 Total 332,573 166,262 376,537 168,060

3. Banks and Other Financial Institutions: a. Information on banks and other financial institutions:

Current Period Prior Period TL FC TL FC Funds borrowed from the Central Bank of Turkey Funds borrowed from Domestic Banks and Institutions 389,813 456,196 232,062 520,826 Funds borrowed from Foreign banks, institutions and funds 2,259,416 11,693,519 2,627,366 12,632,552 Total 2,649,229 12,149,715 2,859,428 13,153,378 b. Maturity analysis of funds borrowed:

Current Period Prior Period TL FC TL FC Short-term 417,261 3,848,143 316,438 2,917,015 Medium and Long-term 2,231,968 8,301,572 2,542,990 10,236,363 Total 2,649,229 12,149,715 2,859,428 13,153,378 c. Concentration of the liabilities of the Group: Of the Group’s liabilities, 66% are comprised of deposits and funds provided from repurchase agreements and 11% are comprised of borrowings. Deposits are distributed among a large variety of customers with different characteristics. The borrowings, on the other hand, are comprised of various funds obtained from financial institutions through syndication, securitization, post-financing and money market operations. No risk concentration exists related to the Group’s liabilities.

4. Other Liabilities: Other liabilities do not exceed 10% of the balance sheet total.

5. Information on lease payables (Net): a. Clauses that subject the Group to important liabilities about criteria used in defining rent installments of finance lease contracts, renewal and buy options, and limitations taking place at the arrangements: Finance lease contracts are signed with purchasing options and the payments are made in equal installments. b. The detailed information on changes of contracts and new liabilities formed by these contract changes: There have not been any changes. c. Liabilities resulting from finance lease transactions: None. d. Information on operating lease transactions: Transactions related to the operating lease are accounted on accrual basis according to the articles of the agreement. e. Sale and lease-back transactions: There are no sale and lease-back transactions of the Group.

6. Information on derivative financial liabilities held for hedging purposes: The Group does not have any derivative financial liabilities held for hedging purposes.

7. Information on provisions: a. Information on general provisions:

Current Period Prior Period General Provisions 538,702 498,988 Provision for Group I Loans and Receivables 328,331 322,100 Provision for Group II Loans and Receivables(1) 46,432 37,969 Provision for Non-cash Loans 54,079 46,038 Other 109,860 92,881

(1) Also includes general provision for Group II Non-cash Loans. İşbank Information on Consolidated Financial Statements 2009 58

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

b. Reserves for employee benefits: According to the related regulation and the collective bargaining agreements, the Group is obliged to pay employee termination benefits to employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or to the female employees who have voluntarily quit within one year after the date of their marriage. In accordance with the related regulations, the amount of employee termination benefits is one month salary for each service year. The base salary ceiling for employee termination benefits as of 01.01.2010 stands at TL 2,427.04 (in full TL amount).The Bank books provisions for employee termination benefits by calculating the present value of potential liabilities. The Parent Bank’s liabilities for employee termination benefits have been determined by an actuarial report prepared by an independent valuations firm.

On Group basis, the provision set aside and shown in the financial statements as of 31.12.2009 stands at TL 166,068 (31.12.2008: TL 146,343).

The main actuarial assumptions used in the calculation of the employee termination benefits: - the discount rate used for the current year is 5.92%. - TL 2,427.04 (in full amount) salary, which was effective as at 01.01.2010 was taken into account in the current year calculations. - it is assumed that the amount of the salary ceiling will increase each year in line with the inflation rate. - the age of retirement is considered as the earliest age possible that an individual can retire. - CSO 1980 table is used for the mortality rate for female and male employees

The movements related to provision for employee termination benefits are given below.

Current Period Prior Period Defined benefit obligation at the beginning of the period 146,343 138,698 Service Cost 12,838 10,301 Interest Cost 13,782 11,804 Benefits paid -20,911 -19,060 Actuarial Loss/(gain) 14,016 4,600 Effect of inclusion of subsidiary in consolidation Defined benefit obligation at the end of the period 166,068 146,343

In addition to the employee termination benefits, the Bank and consolidated Group companies also allocate provision for the unused vacation pay. Provision for unused vacation pay as of 31.12.2009 stands at TL 17,738 (31.12.2008: TL 19,625). c. Provisions for exchange losses in the principal amount of foreign currency indexed loans: Since foreign currency indexed loans are followed based on the rates on the lending date, the Bank incurs a loss if the exchange rates decrease and makes profit if the exchange rates increase. As of 31.12.2009, provision amount for the currency evaluation losses in the principal amount of foreign currency indexed loans is TL 20,689 and this amount is offset against foreign currency indexed loan balance in the financial statements. d. Special provisions for non-cash loans, which are not indemnified and not converted into cash: TL 190,805 provision (31.12.2008: TL 212,476) is allocated for the non-cash loans of companies whose loans are followed under non-performing loans accounts. e. Information on other provisions: e.1. Provisions for potential risks: Taking the potential risks in the economy and in the markets into account, TL 950,000 provision was allocated in total in accordance with the precautionary principle. e.2. Liabilities arising from retirement rights: Within the scope of the explanations given in Part Three Note XIX, in the actuarial report which was prepared as of 31.12.2009 for Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (İşbank Pension Fund), of which each Bank employee is a member, and which has been established according to the provisional Article 20 of the Social Security Act No. 506, the amount of actuarial and technical deficit stands at TL 1,295,985. Additional provision was allocated for TL 19,547, which is the difference between the above mentioned deficit amount and the TL 1,276,438 provision, which was allocated for the related pension fund until the current period. Besides the Bank, as a result of the actuarial audit of Milli Reasürans T.A.Ş as of 31.12.2009, TL 1,234 additional provision is kept and has been presented in the financial statements as TL 19,417 provision.

The above mentioned actuarial audit, which was made in accordance with the principles of the related law, measures the cash value of the liability as of 31.12.2009. In other words, it measures the amount to be paid to the Social Security Institution by the Bank. CSO 1980 mortality table, 9.8% technical deficit interest rate and 33.5% premium rate were taken into account in calculations. Below table shows the cash values of premium and salary payments as of 31.12.2009, taking the health expenses within the Social Security Institution limits into account.

Current Period Prior Period Cash Value of Total Liabilities Other than Health (2,922,287) (2,712,478) Cash Value of Long Term Insurance Line Premiums 1,254,471 1,126,994 Net Cash Value of Total Liabilities Other than Health (1,667,816) (1,585,484)

Cash Value of Health Liabilities (398,851) (345,314) Cash Value of Health Premiums 613,297 550,974 Net Cash Value of Health Liabilities 214,446 205,660

Pension Fund Assets 157,385 103,386 Amount of Actuarial and Technical Deficit (1,295,985) (1,276,438) İşbank Information on Consolidated Financial Statements 2009 59

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

The assets of the pension fund are as follows.

Current Period Prior Period Cash 104.361 66.620 Securities Portfolio 43.975 29.907 Other 9.049 6.859 Total 157.385 103.386

Actuarial assumptions used in the calculation: - Discount rate is taken as 9.8%. - There is not any real increase/decrease expected in salary and health expenses. - The forecasts related to future mortality rates are based on the current statistics and mortality tables.

On the other hand, after the transfer, the currently paid health benefits will be revised within the framework of the Social Security Institution legislation and related regulations. e.3. Provisions for the Lawsuits: The Parent Bank has set aside TL 50,040 provision related to the ongoing lawsuits due to tax disputes and TL 49,913 provision related to the lawsuits for dispute on lending. Besides the Bank, TL 1,803 provision related to the ongoing lawsuits due to tax disputes on consolidated Group companies is reflected on the consolidated financial statements.

8. Information on Tax Liability: a. Explanations related to current tax liability: a.1. Information on tax provision: Explanations in relation to taxation and tax calculations were stated in Note XX of Part 3. The remaining corporate tax liability of the Parent Bank after the deduction of the temporary tax amount stands at TL 172,428 as of December 31, 2009. a.2. Information on taxes payable:

Current Period Prior Period Corporate Tax Payable 186,941 85,469 Tax on Securities Income 77,149 130,276 Tax on Real Estate Income 1,253 1,006 Banking Insurance Transaction Tax 46,302 55,679 Foreign Exchange Transaction Tax 25 23 Value Added Tax Payable 1,668 1,203 Other 24,066 22,689 Total 337,404 296,345 a.3. Information on premiums:

Current Period Prior Period Social Security Premiums - Employees 521 465 Social Security Premiums - Employer 554 487 Bank Pension Fund Premiums - Employees Bank Pension Fund Premiums - Employer Pension Fund Membership Fees and Provisions-Employees 830 872 Pension Fund Membership Fees and Provisions-Employer 34 1 Unemployment Insurance - Employees 615 578 Unemployment Insurance – Employer 1,084 999 Other 203 446 Total 3,841 3,848 b. Information on deferred tax liabilities: None.

9. Information on payables for assets held for sale and discontinued operations: None.

10. Explanations on subordinated loans:

Current Period Prior Period TL FC TL FC Domestic Banks Other Domestic Institutions Foreign Banks Other Foreign Institutions 75,343 70,629 Total 75,343 70,629

T.S.K.B A.Ş., consolidated affiliate of the Bank, has used a subordinated loan amounting USD 50 Million from International Finance Corporation through direct financing on 5 November 2004. The maturity date of the subordinated loan with interest rate of Libor + 2.5% and without any repayment of principal in the first five years, is 15.10. 2016. İşbank Information on Consolidated Financial Statements 2009 60

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

11. Information on consolidated shareholders’ equity: a. Presentation of paid-in capital:

Current Period Prior Period Ordinary shares 3,079,609 2,756,555 Preferred shares 30 30 Total 3,079,639 2,756,585 b. Explanation as to whether the registered share capital system ceiling is applicable at bank, if so, the amount of registered share capital:

Capital System Paid-in Capital Ceiling Registered Capital System 3,079,639 7,000,000 c. The capital increase made in current period:

Date of Increase Increased Amount Cash Profit Reserves Subject to Increase Capital Reserves Subject to Increase 04.05.2009 323,054 - 323,054 -

At the Ordinary General Meeting, which was held on March 31, 2009, resolution was made to distribute group C bonus shares to shareholders by way of injecting the capital with TL 323,054 of the 2008 profit. The process, which was started according to this resolution, to increase the paid-in capital by the same amount to TL 3,079,639, has been completed and the Bank’s paid-in capital was registered as TL 3,079,639. d. Capital increase through transfer from capital reserves during the period: None e. Significant commitments of the Bank related to capital expenditures within the last year and the following quarter, the general purpose thereof, and the estimation of funds required for them: There are no capital commitments. f. Previous periods’ indicators related to income, profitability and liquidity, and the estimated effects of forecasts, which are to be made by taking into consideration the uncertainties of these indicators, on the Group’s equity: The Parent Bank’s and the Group companies’ balance sheets are managed in a prudent way to ensure that the effect of risks arising from interest rates, exchange rates and loans is at the lowest level and this contributes to the development of the Group’s income on a continuously rising trend. g. Privileges Granted to Shares:

Group (A) shares each with a nominal value of 1 Kurus have the privileges of;

- receiving 20 times the number of shares in the distribution of bonus shares issued from conversion of extraordinary and revaluation reserves generated in accordance with the relevant laws (Article 18 of the Articles of Incorporation) - exercising the preference rights as 20 times (Article 19 of the Articles of Incorporation), and - 20 voting rights (Article 49 of the Articles of Incorporation)

Despite having a lower nominal value, Group (B) shares, each with a nominal value of 1 Kurus, have the same rights with the Group (C) shares having a nominal value of 4 Kurus each. Furthermore, Group (A) and (B) shares, each with a nominal value of 1 Kurus, are granted privileges in distribution of profits pursuant to Article 58 of the Articles of Incorporation. h. Information on marketable securities revaluation reserve:

Current Period Prior Period TL FC TL FC Associates, Subsidiaries and Jointly Controlled Entities 479,788 -136,309 Revaluation Reserve 479,788 -136,309 Foreign Exchange Differences Financial Assets Available for Sale 201,387 48,506 -16,284 -12,453 Revaluation Reserve 253,769 48,506 -26,145 -12,453 Deferred Tax Effect on Revaluation -52,382 9,861 Foreign Exchange Differences Total (*) 681,175 48,506 -152,593 -12,453

(*) The minority shares are included and the related values are TL 153,631 for the current period and TL (55,984) for the prior period. İşbank Information on Consolidated Financial Statements 2009 61

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

12. Explanations on Minority Shares:

Current Period Prior Period Paid-in Capital 1,109,128 1,000,725 Share Premium 13,791 13,791 Marketable Securities Revaluation Reserve 153,631 -55,984 Legal Reserves 76,568 54,186 Statutory Reserves 19,252 14,792 Extraordinary Reserves 124,861 122,650 Other Profit Reserves 1,677 1,677 Prior Years’ Profit/Loss 189,226 149,638 Current Year Profit/Loss (1) 274,964 253,303 Period Ending Balance 1,963,098 1,554,778

(1) Difference between effective and direct share holding was TL 20,289 in the current period. (31.12.2008: TL 23,219)

III. EXPLANATIONS AND NOTES ON CONSOLIDATED OFF-BALANCE SHEET COMMITMENTS

1. a. Types and amounts of irrevocable loan commitments: Commitment for customer credit card limits amounts to TL 11,792,182 and commitment for overdraft account limits amounts to TL 3,530,717. The Bank has project loans commitments amounting to TL 850,729, which are yet to be utilized. TL 194,302 of the mentioned commitments consist of project loans under the guarantee of the Undersecretariat of Turkish Treasury. The amount of commitment for the forward purchase of assets is TL 58,102 and for the forward sale of assets is TL 59,342. b. The structure and amount of probable losses and commitments resulting from off-balance sheet items, including those below: There are no probable losses related to off-balance sheet items, Commitments are shown in the table of “Off-Balance Sheet Liabilities”. b.1. Guarantees, bank acceptances, collaterals that qualify as financial guarantees, and non-cash loans including other letters of credit:

Current Period Prior Period Bank Acceptances 151,195 131,155 Letters of Credit 2,775,336 3,726,838 Other Guarantees 387,291 84,613 Total 3,313,822 3,942,606 b.2. Definite guarantees, provisional guarantees, suretyships and similar transactions:

Current Period Prior Period Provisional Letters of Guarantee 332,779 281,490 Definite Letters of Guarantee 7,488,391 5,386,419 Advance Letters of Guarantee 1,507,720 1,788,219 Letters of Guarantee Addressed to Customs 333,680 239,116 Other Letters of Guarantee 290,076 693,200 Total 9,952,646 8,388,444 c.1. Total Non-cash Loans:

Current Period Prior Period Non-cash Loans against Cash Risks 343,614 323,121 With Original Maturity of 1 Year or Less 77,408 192,738 With Original Maturity More Than 1 Year 266,206 130,383 Other Non-cash Loans 12,922,854 12,007,929 Total 13,266,468 12,331,050 İşbank Information on Consolidated Financial Statements 2009 62

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

c. 2. Sectoral Risk Concentration of Non-cash Loans:

Current Period Prior Period TL (%) FC (%) TL (%) FC (%) Agriculture 91,111 1.69 6,874 0.09 66,871 1.60 5,505 0.07 Farming and Stockbreeding 43,269 0.80 6,192 0.08 33,484 0.80 4,750 0.07 Forestry 46,225 0.86 461 0.01 31,215 0.75 387 0.00 Fishery 1,617 0.03 221 0.00 2,172 0.05 368 0.00 Industry 1,503,606 27.82 3,745,640 47.64 1,186,187 28.45 3,614,738 44.28 Mining and Quarrying 46,896 0.87 79,953 1.02 45,612 1.10 55,649 0.68 Manufacturing 1,152,489 21.32 2,731,432 34.74 1,007,039 24.15 2,955,601 36.21 Electricity, Gas, Water 304,221 5.63 934,255 11.88 133,536 3.20 603,488 7.39 Construction 563,510 10.43 908,438 11.56 478,870 11.49 1,415,914 17.35 Services 3,057,201 56.57 1,981,676 25.21 2,333,807 55.97 1,617,291 19.82 Wholesale and Retail Trade 2,013,098 37.25 1,263,285 16.07 1,537,032 36.86 1,130,541 13.85 Hotel and Restaurant Services 79,809 1.48 14,357 0.18 43,297 1.04 18,010 0.22 Transportation and Communication 246,664 4.56 256,957 3.27 163,947 3.93 109,344 1.34 Financial Institutions 422,610 7.82 198,514 2.53 368,976 8.85 148,636 1.82 Real Estate and Rental Services 126,398 2.34 182,557 2.32 92,645 2.22 167,059 2.05 Self-Employed Services 120,439 2.23 35,853 0.46 85,331 2.05 20,633 0.25 Educational Services 11,574 0.21 17,508 0.22 10,457 0.25 10,085 0.13 Health and Social Services 36,609 0.68 12,645 0.16 32,122 0.77 12,983 0.16 Others 189,206 3.50 1,219,206 15.51 103,647 2.49 1,508,220 18.48 Total 5,404,634 100.00 7,861,834 100.00 4,169,382 100.00 8,161,668 100.00 c. 3. Non-cash Loans classified under Group I and Group II:

Group I Group II TL FC TL FC Non-cash Loans 5,313,997 7,728,745 90,637 133,089 Letters of Guarantee 5,183,394 4,563,244 90,637 115,371 Bank Acceptances 2,997 134,081 14,117 Letters of Credit 2,771,735 3,601 Endorsements 41,538 Underwriting Commitments of the Securities Issued Factoring Related Guarantees Other Guaranties and Warranties 127,606 218,147

2. Information on Derivative Financial Instruments: Majority of the Group’s derivative transactions comprise of foreign currency and interest rate swaps, forward foreign exchange trading and currency trading options. Even though some derivative transactions economically provide risk hedging, since all necessary conditions to be defined as items suitable for financial risk hedging accounting are not met, they are recognized as “held for trading purposes” within the framework of Turkish Accounting Standard No: 39 “Financial Instruments: Recognition and Measurement” (TAS 39).

3. Explanations Related to Contingencies and Commitments: Total amount of letters of guarantees submitted by the Parent Bank pursuant to its own internal affairs stands at TL 499,932. The profit/loss statement shall also be affected in the event of materialization on commitments undertaken by the Bank in connection with these guarantee letters. TL 3,978,131 which is the liability of the bank regarding the checks given to customers is presented under off balance sheet commitments, as per Law nr. 3167. Starting from 20.12.2009, in case the check presented for payment is not covered, the Parent Bank has an obligation to pay the uncovered amount up to TL 600 (exact amount) and will try to collect the amount paid for the customer and the uncollected amount will be followed under “Indemnified Non-Cash Loans”.

4. Explanations related to transactions made on behalf of or on the account of others: It is explained in Note X under Part Four.

IV. EXPLANATIONS AND NOTES ON THE CONSOLIDATED INCOME STATEMENT

1.a. Information on interest income on loans:

Current Period Prior Period TL FC TL FC Interest Income on Loans (1) 6,196,102 845,986 6,126,646 872,001 Short-term Loans 2,748,358 182,096 2,832,925 170,158 Medium and Long-term Loans 3,312,621 663,808 3,118,538 701,356 Interest on Non-performing Loans 135,123 82 175,183 487 Premiums Received from State Resource Utilization Support Fund

(1) Includes fee and commission income on cash loans. İşbank Information on Consolidated Financial Statements 2009 63

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

1.b. Information on interest income on banks:

Current Period Prior Period TL FC TL FC The Central Bank of Turkey 35 Domestic Banks 133,589 9,830 141,132 6,933 Foreign Banks 14,755 82,047 22,650 247,410 Foreign Head Offices and Branches Total 148,344 91,877 163,782 254,378

1.c. Information on interest income from securities:

Current Period Prior Period TL FC TL FC Interest Income on Financial Assets Held for Trading 128,664 2,802 139,810 1,292 Interest Income on Financial Assets at Fair Value through Profit and Loss Interest Income on Financial Assets Available for Sale 1,817,387 658,659 2,336,678 826,830 Investments Held to Maturity 1,034,492 2,338 534,069 1,550 Total 2,980,543 663,799 3,010,557 829,672

1.d. Information on interest income received from associates and subsidiaries:

Current Period Prior Period Interest Received from Associates and Subsidiaries 9,237 6,780

2.a. Information on interest expense from funds borrowed:

Current Period Prior Period TL FC TL FC Banks 404,075 157,560 470,434 223,440 Central Bank of Turkey 28 48 Domestic Banks 33,909 23,625 33,008 21,819 Foreign Banks 370,138 133,935 437,378 201,621 Foreign Head Offices and Branches Other Institutions 205,783 207,942 Total (1) 404,075 363,343 470,434 431,382

(1) Includes fee and commission expenses regarding to cash loans.

2.b. Information on interest paid to associates and subsidiaries:

Current Period Prior Period Interest Paid to Associates and Subsidiaries 19,484 13,276

2.c. Information on Interest Expense on Deposits According to Maturity Structure:

Demand Deposits Time Deposits Up to Up to Three Up to Six Up to Accumulated One Month Months Months One Year Over One Year Deposits Total TL Bank Deposits 646 16,415 31,895 3 3,304 52,263 Savings Deposits 5,008 1,718,577 883,280 78,064 20,070 37,986 2,742,985 Public Sector Deposits 302 12,198 8,834 300 0 253 21,887 Commercial Deposits 2,091 246,066 351,788 104,575 9,229 2,913 716,662 Other Institutions Deposits 457 169,061 117,035 17,017 30,508 3,221 337,299 Deposits with 7 Days Maturity Total 8,504 2,162,317 1,392,832 199,959 63,111 44,373 3,871,096 FC Foreign Currency Deposits 353 239,446 196,497 30,723 21,747 106,635 595,401 Bank Deposits 73 10,338 10,079 3,126 0 1,123 24,739 Deposits with 7 Days Maturity Precious Metals Deposits Total 426 249,784 206,576 33,849 21,747 107,758 620,140 Grand Total 8,930 2,412,101 1,599,408 233,808 84,858 152,131 4,491,236 İşbank Information on Consolidated Financial Statements 2009 64

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

3. Information on dividend income:

Current Period Prior Period Financial Assets Held for Trading 4,732 2,692 Financial Assets at Fair Value Through Profit and Loss Financial Assets Available for Sale 6,489 23,757 Other 155,117 101,902 Total 166,338 128,351

4. Information on trading income/losses (Net):

Current Period Prior Period Profit 54,124,114 58,127,052 Securities Trading Gains 589,356 185,827 Gains on Derivative Financial Instruments 2,286,134 2,909,352 Foreign Exchange Gains 51,248,624 55,031,873 Losses (-) 53,567,073 57,580,652 Securities Trading Losses 68,819 206,687 Losses on Derivative Financial Instruments 1,892,637 3,326,750 Foreign Exchange Losses 51,605,617 54,047,215

5. Information on other operating income: TL 2,284,514 of other operating income sources from inclusion and classification of operations of insurance and reinsurance companies; 95% of which is from insurance premiums. Other items of the other operating income are composed of collections and cancellations of the provisions set aside in prior years for various reasons mainly for non-performing loans, and of the fee income received from customers on various banking services.

In prior period, operating income of insurance and reinsurance companies in this item is TL 1,931,145; 96% of which is from insurance premiums.

6. Information on provision for loans and other receivables:

Current Period Prior Period Specific Provisions for Loans and Other Receivables 1,493,497 1,085,753 Group III Loans and Receivables 1,317,170 1,030,535 Group IV Loans and Receivables 35,734 19,958 Group V Loans and Receivables 140,593 35,260 General Provision Expenses 71,127 182,629 Provision Expenses for Potential Risks 292,000 75,000 Marketable Securities Impairment Losses 5,139 102,137 Financial Assets at Fair Value through Profit and Loss 130 1,167 Financial Assets Available for Sale 5,009 100,970 Impairment Losses on Investments in Associates, Subsidiaries, Jointly Controlled Entities and Investments Held to Maturity 64,796 Investment in Associates Subsidiaries 64,796 Jointly Controlled Entities Investments Held to Maturity Other 437,006 263,523 Total 2,363,565 1,709,042

7. Other operating expenses:

Current Period Prior Period Personnel Expenses 1,619,438 1,433,603 Reserve for Employee Termination Benefits 19,725 7,948 Bank Pension Fund Deficit Provisions 20,781 68,037 Impairment Losses on Tangible Assets 1,997 Depreciation Expenses of Tangible Assets 174,178 167,407 Impairment Losses on Intangible Assets Impairment Losses on Goodwill Amortization Expenses of Intangible Assets 47,607 42,879 Impairment Losses on Share of Participations Accounted for Using the Equity Method Impairment Losses on Assets to be Disposed 3,780 548 Depreciation Expenses of Assets to be Disposed 10,008 11,717 Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations 1,161 Other Operating Expenses 900,334 1,072,428 Operating Lease Expenses 104,409 105,046 Repair and Maintenance Expenses 21,789 16,444 Advertisement Expenses 125,676 135,302 Other Expenses 648,460 815,636 Loss on Sale of Assets 19,099 134,871 Other 2,581,536 2,275,746 Total 5,397,647 5,217,181 İşbank Information on Consolidated Financial Statements 2009 65

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

On the table above, TL 2,452,118 of other operating expenses include expenses of insurance and reinsurance companies’ operations, 14% of which is from technical provisions, 69% from paid claims.

In prior period, operating expenses of insurance and reinsurance companies in this item is TL 2,218,292; 14% of which is from technical provisions and 67% from paid claims.

8. Information on Profit/loss before taxes including profit/loss from continuing and discontinued operations The Group’s profit before tax is generated from its continuing operations. The profit before tax consists of net interest income of TL 5,740,144, net fee and commission income of TL 1,159,630 and the other operation expenses amount to TL 5,397,647.

9. Information on Provision for taxes including taxes from continuing and discontinued operations As of December 31, 2009 the Group’s total tax provision of TL 615,205 consists of current tax expense of TL 923,537 and deferred tax income of TL (308,332).

10. Information on Net operating profit/loss after taxes including net profit/loss from continuing and discontinued operations: The Group’s net profit generated from its continuing operations amounts to TL 2,752,304.

11. Explanation on Net Period Profit/Loss: a. Income and expense resulting from regular banking activities: No further explanation on operating results is needed for better understanding of the Group’s performance in the period 01.01.2009-31.12.2009. b. Any material effect of the changes in accounting estimations on current and subsequent period results: No disclosure is required. c. Net profit/loss of minority shares:

Current Period Prior Period Net Profit/Loss of Minority Shares 254,675 230,084

12. Other Items of the Income Statement: Other items do not exceed 10% of the total amount of the income statement.

V. EXPLANATIONS AND NOTES ON THE STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY The paid-in capital is TL 3,079,639 in legal records. As of balance sheet date, the balance of legal reserves is TL 1,404,488 and the balance of extraordinary reserves is TL 3,705,309.

In the current period, the change in other reserves item is a result of the conversion losses of foreign branches and financial institutions.

The details of revaluation surplus account of securities are shared in the Note nr. V-II-11-g. TL (52,382) of this amount is the deferred tax effect on available for sale securities. (December 31, 2008: TL 9,860)

VI. EXPLANATIONS AND NOTES ON THE CONSOLIDATED CASH-FLOW STATEMENT The operating profit of TL 5,815,396 before the changes in operating assets and liabilities, consists of interests received at TL 12,112,040 predominantly from loans and securities, and TL 5,899,304 of interest paid predominantly on deposits, interbank money market transactions and funds borrowed by the Bank. An important part of other revenues, TL 3,592,313, consists of premium collections of insurance companies. Other commissions and claims expenses of insurance composes the major part of the items that results in fund outflow, TL 3,486,216 and foreign exchange losses (net), fees and commissions expense, advertisement and rent expenses are the other expenses of this type.

The effect of changes in foreign exchange rates on cash and cash equivalents is approximately TL (19,468) as of December 31, 2009. (December 31, 2008: TL 45,845).

Cash, cash in foreign currency, unrestricted deposits in Central Bank of Turkey, reserve deposits at the Central Bank, money in transit, cheques purchased, interbank money market transactions and time deposits up to 3 months are defined as cash and cash equivalents.

Cash and cash equivalents at beginning of period:

31.12.2008 31.12.2007 Cash 11,809,860 7,073,441 Cash in TL and Foreign Currency 595,574 508,766 Central Bank of Turkey and Other 11,214,286 6,564,675 Cash Equivalents 5,475,933 5,550,572 Money Market Placements 24,187 3,595 Banks’ Demand Deposits and Time Deposits Up to 3 Months 5,451,746 5,546,977 Total Cash and Cash Equivalents 17,285,793 12,624,013

The total amount resulting from the transactions made in the previous period, shows the total cash and cash equivalents as of the beginning of the current period.

Cash and Cash equivalents as of end of the period:

31.12.2009 31.12.2008 Cash 8,758,993 11,809,860 Cash in TL and Foreign Currency 786,502 595,574 Central Bank of Turkey and Other 7,972,491 11,214,286 Cash Equivalents 8,022,885 5,475,933 Money Market Placements 24,187 Banks’ Demand Deposits and Time Deposits Up to 3 Months 8,022,885 5,451,746 Total Cash and Cash Equivalents 16,781,878 17,285,793

İşbank Information on Consolidated Financial Statements 2009 66

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

VII. EXPLANATIONS AND NOTES ON THE GROUP’S RISK GROUP

1. Information on the volume of transactions relating to the Group’s risk group, incomplete loan and deposit transactions and period’s profit and loss: a. Current Period:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have Group’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Loans and other receivables Balance at the beginning of the period 43,453 1,067,977 1 141,768 468,129 111,034 Balance at the end of the period 48,578 1,498,801 10 658,037 102,675 Interest and commission income received 2,910 901 41,054 1,313 b. Prior Period:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have Group’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Loans and other receivables Balance at the beginning of the period 109,569 858,320 1 24,347 277,795 88,899 Balance at the end of the period 43,453 1,067,977 1 141,768 468,129 111,034 Interest and commission income received 4,136 277 28,256 946 c.1. Information on deposits held by the Group’s risk group:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have Group’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank been Included in the Risk Group Current Period Prior Period Current Period Prior Period Current Period Prior Period Deposits Balance at the beginning of the period 347,729 222,564 152,957 70,837 379,210 340,482 Balance at the end of the period 349,909 347,729 237,295 152,957 898,213 379,210 Interest expense on deposits 116,432 4,100 12,112 20,803 28,794 34,308 c.2. Information on forward and option and other similar agreements made with the Group’s risk group:

Investments in Associates, Other Real Persons and Subsidiaries and Jointly Direct and Indirect Corporate Bodies that have Group’s Risk Group Controlled Entities (Joint Ventures) Shareholders of the Bank been Included in the Risk Group Current Period Prior Period Current Period Prior Period Current Period Prior Period Transactions at Fair Value Through Profit and Loss Beginning of the period 71,134 End of the period 3,581 Total Profit/Loss -2,579 Transactions for hedging purposes Beginning of the period End of the period Total Profit/Loss

2. In connection with the Group’s risk group: a. The relationship of the Group with corporations in its risk group and under its control regardless of any transactions between the parties: All types of corporate and retail banking services are provided to these corporations in line with the articles of Banking Law. b. The type and amount of transaction carried out, and its ratio to the overall transaction volume, values of principal items and their ratios to overall items, pricing policy and other items in addition to the structure of the relationship: The ratio of loans extended to the risk group to the overall loans is 1.34%, while the ratio to the overall assets is 0.55%; the ratio of deposits of the risk group corporations to the overall deposits is 2.06%, while the ratio to overall liabilities is 1.15%. Comparable price method is used in pricing the transactions. c. Purchase and sale of real estates, other assets and services, agency agreements, finance lease contracts, transfer of information obtained through research and development, license agreements, funding (including loans and provision of support as cash capital or capital-in-kind), guarantees and collaterals, and management agreements: The bank acquires generally its properties via leasing through one of its group companies, İş Finansal Kiralama A.Ş, in general. The Parent Bank’s branches also act as agents for Anadolu Anonim Türk Sigorta Şirketi., Anadolu Hayat Emeklilik A.Ş., and İş Yatırım Menkul Değerler A.Ş. İş Portföy Yönetimi A.Ş. manages the portfolios of 22 mutual funds which were founded by the Parent Bank.

If requested, cash and non-cash loan requirements of corporations within the risk group are met in accordance with the limits imposed by the Banking Law and the prevailing market conditions. İşbank Information on Consolidated Financial Statements 2009 67

Türkiye İş Bankası A.Ş. Part Five: Explanations and Notes to the Consolidated Financial Statements

3. Total salaries and similar benefits paid to the key management personnel Benefits the Parent Bank provided to key management personnel during the current period amount to TL 14,074 (December 31, 2008: TL 13,348).

VIII. EXPLANATIONS ON THE GROUP’S DOMESTIC, FOREIGN, OFF-SHORE BRANCHES AND REPRESENTATIVE OFFICES

The Parent Bank – Türkiye İş Bankası A.Ş. Number Employees Domestic Branches(*) 1,078 22,281 Country of Incorporation Foreign Representative Offices 1 1 China

Total Assets Legal Capital Foreign Branches 1 29 England 3,312,665 241 13 153 TRNC 1,039,873 30,522 Off-Shore Branches 1 9 Bahrain 20,804,227

(*) The Branches located in Free Trade Zones in Turkey are included among domestic branches.

İşbank GmbH Number Employees Domestic Branches(*) 11 147 Country of Incorporation Foreign Representative Offices Total Assets Legal Capital Foreign Branches 3 23 The Netherlands 357,093 France 49,579 Switzerland 19,189 Off-Shore Branches

(*) Germany is meant by the term “domestic”.

Türkiye Sınai Kalkınma Bankası A.Ş. Number Employees Domestic Branches 2 308 Country of Incorporation Foreign Representative Offices Total Assets Legal Capital Foreign Branches Off-Shore Branches 1 2 Bahrain 257,037

Milli Reasürans T.A.Ş. Number Employees Domestic Branches 1 210 Country of Incorporation Foreign Representative Offices Total Assets Legal Capital Foreign Branches Off-Shore Branches 1 9 Singapore 37,868

Number of employees of consolidated companies that does not have agencies and branches abroad:

Employees Anadolu Anonim Türk Sigorta Şirketi 819 Anadolu Hayat Emeklilik A.Ş. 678 İş Gayrimenkul Yatırım Ortaklığı A.Ş. 36 İş Finansal Kiralama A.Ş. 93 İş Yatırım Menkul Değerler A.Ş. 92

Part Six: Explanations on the Independent Auditors’ Report

I. EXPLANATIONS ON THE INDEPENDENT AUDITORS’ REPORT: The Parent Bank’s and financial institutions’ consolidated financial statements as of December 31, 2009 have been audited by DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of Deloitte Touche Tohmatsu).

II. EXPLANATIONS AND NOTES OF THE INDEPENDENT AUDITORS There are no significant issues or necessary disclosures or notes in relation to the Group’s operations other than those mentioned above. İşbank Information on Consolidated Financial Statements 2009 68

Türkiye İş Bankası A.Ş. Financial Highlights and Key Ratios for the Five Years Period Including the Reported Period

ASSETS (TL thousand) * 2005/12 2006/12 2007/12 2008/12 2009/12 Cash and Cash Equivalents 299,198 477,110 511,311 605,020 893,430 Banks and Money Market Placements (1) 12,105,160 12,221,022 14,388,777 19,320,482 18,348,043 Securities (Net) 25,793,919 29,802,637 28,689,213 29,479,683 45,078,276 Loans (2) 23,388,631 32,136,918 36,800,215 51,689,972 52,760,440 Associates and Subsidiaries (Net) 3,028,897 3,006,775 3,058,096 2,265,925 2,996,044 Finance Lease Receivables (Net) 791,444 940,199 921,614 1,095,478 931,016 Fixed Assets (Net) 2,752,442 2,846,717 2,928,744 2,940,690 2,925,103 Other Assets 1,569,588 1,595,301 2,780,352 3,810,781 4,984,124 Total Assets 69,729,279 83,026,679 90,078,322 111,208,031 128,916,476 LIABILITIES (TL thousand) * 2005/12 2006/12 2007/12 2008/12 2009/12 Deposits 36,959,507 46,306,374 48,063,949 62,988,002 72,054,972 Funds Borrowed and Interbank Money Market 16,989,113 19,804,992 20,875,569 24,784,827 28,346,924 Provisions 4,022,517 4,254,578 5,250,533 6,267,455 7,112,309 Other Liabilities 1,946,338 2,407,187 4,011,801 5,176,496 6,096,346 Shareholders’ Equity 9,811,804 10,253,548 11,876,470 11,991,251 15,305,925 Total Liabilities 69,729,279 83,026,679 90,078,322 111,208,031 128,916,476 INCOME STATEMENT (3) (TL thousand) 2005/12 2006/12 2007/12 2008/12 2009/12 Interest Income 5,939,257 8,413,588 10,096,731 11,769,369 11,370,516 Interest Expense 2,948,822 5,194,852 6,387,105 7,175,786 5,630,372 Net Interest Income 2,990,435 3,218,736 3,709,626 4,593,583 5,740,144 Net Trading Income 256,860 35,060 434,530 546,400 557,041 Net Fees and Commissions Income 853,671 982,355 1,090,624 1,165,780 1,159,630 Dividend Income 164,616 50,116 408,459 128,351 166,338 Other Operating Income 4,251,127 3,537,813 3,193,837 2,707,831 3,505,568 Total Operating Income 8,516,709 7,824,080 8,837,076 9,141,945 11,128,721 Operating Expenses 5,543,358 4,936,678 4,671,405 5,217,181 5,397,647 NET OPERATING PROFIT/LOSS 2,973,351 2,887,402 4,165,671 3,924,764 5,731,074 Provision for Impairment Losses 827,396 881,738 1,650,772 1,709,042 2,363,565 PROFIT/(LOSS) BEFORE TAXES AND MONETARY POSITION 2,145,955 2,005,664 2,514,899 2,215,722 3,367,509 Net Monetary Position Profit/(Loss) 0 0 0 0 0 PROFIT/(LOSS) BEFORE TAXES 2,145,955 2,005,664 2,514,899 2,215,722 3,367,509 Provision for Taxes 766,015 590,401 488,104 396,692 615,205 NET PERIOD PROFIT/(LOSS) 1,379,940 1,415,263 2,026,795 1,819,030 2,752,304 GROSS INCOME (4) 11,556,592 13,088,221 15,337,669 16,509,976 17,015,604 GROSS PROFIT (5) 2,973,351 2,887,402 4,165,671 3,924,764 5,731,074 KEY RATIOS 2005/12 2006/12 2007/12 2008/12 2009/12 Interest Earning Assets/Total Assets 88.19% 90.23% 89.50% 91.25% 90.74% Interest Earning Assets/Interest Bearing Liabilities 113.99% 113.31% 116.94% 115.62% 116.52% Securities/ Total Assets 36.99% 35.90% 31.85% 26.51% 34.97% Loans / Total Assets 33.54% 38.71% 40.85% 46.48% 40.93% Loans/ Deposits 63.28% 69.40% 76.57% 82.06% 73.22% Retail Loans / Total Loans 29.15% 28.73% 32.20% 28.47% 28.83% NPL Ratio 4.59% 3.63% 3.98% 4.17% 5.07% Coverage Ratio 100.00% 100.00% 100.00% 100.00% 100.00% Demand Deposits / Total Deposits 18.60% 16.78% 16.92% 14.19% 15.87% Shareholders’ Equity / Total Liabilities 14.07% 12.35% 13.18% 10.78% 11.87% Capital Adequacy Standard Ratio 29.06% 24.82% 21.13% 16.24% 18.13% Return on Average Assets (6) 2.42% 1.85% 2.34% 1.81% 2.29% Return on Average Equity (6) 14.96% 14.11% 18.32% 15.24% 20.17% Cost / Income (7) 43.52% 43.24% 37.01% 43.31% 33.95% OTHER INFORMATION (TL thousand) 2005/12 2006/12 2007/12 2008/12 2009/12 Regulatory Capital 9,963,533 9,835,719 12,210,735 12,828,095 15,632,586 Core Capital 8,383,189 9,518,667 11,829,029 12,994,127 15,127,364 Free Capital (8) 4,233,273 4,606,592 6,121,964 7,078,506 9,750,739 Demand Deposits 6,875,300 7,771,005 8,132,787 8,940,172 11,432,282

* Interest accruals are included in all interest related items.

(1) Includes Deposits at the Central Bank and Reserve Requirements. (2) Excludes receivables under Follow-up. (3) Fees and Commissions Received from Cash Loans are showed under Interest Income; Fees and Commissions Paid to Cash Loans are shown under Interest Expense. (4) Gross Income = Interest Income + Foreign Exchange Gains/Losses + Trading Gains/Losses on Securities + Fees and Commissions Income (Gross) + Dividend Income + Other Operating Income (5) Gross Profit = Net Period Profit/(Loss) + Provision for Taxes + Provision for Impairment Losses (6) Averages are calculated over year-end figures. (7) Operating Income and Operating Expenses are adjusted for the Gains/Losses due to FX indexed items and Insurance Technical Gains/Losses. (8) Free Equity = Shareholders’ Equity - (Fixed Assets + Non-Financial Associates and Subsidiaries + Receivables under Follow-Up - Specific Provisions)

Produced by Tayburn Kurumsal Tel: (90 212) 227 04 36 Fax: (90 212) 227 88 57 www.tayburnkurumsal.com www.isbank.com.tr

TÜRKİYE İŞ BANKASI A.Ş. Head Office İş Kuleleri 34330 Levent/İstanbul TURKEY Telephone: (90 212) 316 00 00 Fax: (90 212) 316 09 00 Call Center: (90 212) 444 02 02 E-mail: [email protected]