Short-Form Audit Report

ZIRAAT BANK INTERNATIONAL AKTIENGESELLSCHAFT Frankfurt am Main Annual Financial Statements as of December 31, 2016 and Manage- ment Report for the Financial Year 2016

Auditor's Report (Translation - the German text is authoritative)

Contents Page

Management Report for 2016...... 1 Auditor's Report...... 1

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2 Ziraat Bank 2016 Annual Report Ziraat Bank Management Report for 2016

1. Ziraat Bank International AG in brief;

2. Course of the fiscal year 2016

3. Financial position

4. Risk report

5. General economic conditions, business environment & opportunities

Ziraat Bank 2016 Annual Report 1 Ziraat Bank Management Report for 2016

1. Ziraat Bank International AG in brief;

Ziraat Bank International AG is a operating under German law and full subsidiary of state owned T.C. Ziraat Bankasi A.S.

With its head Offices in Frankfurt and 9 branches in major cities throughout Germany, the Bank provides wide range of to its clients from all segments.

Financing the trade between Germany / EU Countries and , supporting corporate and retail customers with short and medium term loans, providing saving products, clearing of local currency transfers for correspondent banks, international transfer services to retail customers via its branch network, documentary collection and remittances, providing online banking solutions for its retail and corporate customers are among the services the Bank provides to its clientele.

The Board of Managing Directors (The Board) is responsible for the management of the Bank. The Supervisory Board, as defined by law and articles of association, supervises the Board of Managing Directors on strategic decisions through periodic meetings held in Germany, while conducting continuous control, compliance and risk management functions. In this capacity, Supervisory Board held 5 meetings in 2016.

The segregation of responsibilities of the Board of Managing Directors are defined with an organizational chart.

The Bank conducts its functions through 14 operational departments including Risk Management & Control, Organisation and AML & Compliance.

The parent bank, T.C. Ziraat Bankası A.Ş. has been established in 1863. The Undersecretariat of Treasury of the Republic of Turkey is the sole owner. It is one of the biggest banks in Turkey with 25.697 employees, 1812 branches and 97 operational units in 18 countries worldwide.

2. Course of the fiscal year 2016

2.1. 2016; Another successful chapter for Ziraat Bank International AG

Since 2013, Ziraat Bank International AG has been going through a transformation; new vision, mission, risk & business approach followed by elevated expectations from the shareholder who has already transformed itself to become the largest and most profitable bank in Turkey...

The new strategy, and the new commercial banking approach which has been put in force without any delays paved the way for a commercially acceptable return on equity and healthy profit base which formed a solid platform for transformation and structural investments. With the help of this clear road map, we managed to generate profits and the results in the very first full year, 2014. This, we consider as an approval of the new strategy in a quantitative form.

This provided an environment enabling us to build the new Ziraat Bank International AG in 2016. Our vision, mission and ultimate goals remaining the same, we shifted our focus slightly to structural issues and technical infrastructure investments.

The healthy leverage achieved by the 45% growth in 2014 continued to provide sufficient profitability in 2016 to both satisfy the return on equity target det