ICBC Turkey 2019 Annual Report

ICBC Turkey

ANNUAL REPORT

2019 Section 1 Section INTRODUCTION

A CONTACT INFORMATION

ICBC Turkey Bank Anonim Şirketi (ICBC Turkey) conducts operations as a foreign-capitalized deposit bank in Turkey. The contact information of our branches can be reached on our website under the heading of the “Contact Us”/ “Branch-ATMs”.

Period of the Report 01.01.2019 - 31.12.2019 Trade Name of the Bank ICBC Turkey Bank A.Ş. Unless indicated otherwise, all of the amounts are indicated in Currency of the Report thousand TL. Trade Registry Number of the Bank 224058 – İstanbul Chamber of Commerce Head Office Address Maslak Mah. Dereboyu/2 Cad. No:13 34398 Sarıyer - İstanbul Head Office Phone No. 0212 335 53 35 Head Office Fax No. 0212 328 13 28 Internet Site Address www.icbc.com.tr Electronic Mail [email protected] b) The Bank's management prepares its annual report in such a way that it reflects the operations of the year and CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S the consolidated financial position of the Bank accurately, completely, directly, true and fairly in all respects. In this REPORT ON THE BOARD OF DIRECTORS’ ANNUAL REPORT ORIGINALLY report, the financial position is assessed in accordance with the Bank’s consolidated financial statements. The annual ISSUED IN TURKISH report shall also clearly indicates the details about the Bank’s development and risks that might be encountered. The assessment of the Board of Directors on these matters is included in the report. To the General Assembly of ICBC Turkey Bank Anonim Şirketi

c) The annual report also includes the matters below: Opinion

- Significant events occurred in the Bank after the reporting period, We have audited the annual report of ICBC Turkey Bank Anonim Şirketi (the “Bank”) and its financial subsidiaries - The Bank's research and development activities. (together the “Group”) for the period between 1 January 2019 and 31 December 2019, since we have audited the - Financial benefits such as wages, premiums and bonuses paid to board members and key management personnel, complete set financial statements for this period. appropriations, travel, accommodation and representation expenses, benefits in cash and kind, insurance and similar guarantees. In our opinion, the consolidated financial information included in the annual report and the analysis of the Board of Directors by using the information included in the audited financial statements regarding the position of the Bank are When preparing the annual report, the Board of Directors also considers the secondary legislation arrangements issued consistent, in all material respects, with the audited complete set of consolidated financial statements and information by the Ministry of Trade and related institutions. obtained during the audit and provides a fair presentation.

Auditor’s Responsibility for the Audit of the Annual Report Basis for Opinion

Our objective is to express an opinion on whether the consolidated financial information included in the annual We conducted our audit in accordance with “Regulation on Independent Audit of the Banks” published in the Official report in accordance with the TCC and the Regulation, and analysis of the Board of Directors by using the information Gazette No.29314 dated 2 April 2015 by Banking Regulation and Supervision Agency (“BRSA Auditing Regulation”) included in the audited financial statements regarding the position of the Bank are consistent with the audited and Standards on Auditing which is a component of the Turkish Auditing Standards published by the Public Oversight consolidated financial statements of the Bank and the information obtained during the audit and give a true and fair Accounting and Auditing Standards Authority (“POA”) (“Standards on Auditing issued by POA”). Our responsibilities view and form a report that includes this opinion. under those standards are further described in the Auditor’s Responsibilities for the Annual Report section of our report. We declare that we are independent of the Bank in accordance with the Code of Ethics for Auditors issued by We conducted our audit in accordance with BRSA Auditing Regulation and Standards on Auditing issued by POA. POA (POA’s Code of Ethics) and the ethical requirements in the regulations issued by POA that are relevant to audit of Those standards require compliance with ethical requirements and planning of audit to obtain reasonable assurance on financial statements, and we have fulfilled our other ethical responsibilities in accordance with the POA’s Code of Ethics whether the consolidated financial information included in the annual report and analysis of the Board of Directors by and regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis using the information included in the audited financial statements regarding the position of the Bank are consistent with for our opinion. the consolidated financial statements and the information obtained during the audit and provides a fair presentation.

Auditor's Opinion on Complete Set of Consolidated Financial Statements KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of KPMG International Cooperative We have expressed an unqualified opinion on the complete set of consolidated financial statements of the Bank for the period between 1 January 2019 and 31 December 2019 on 27 February 2020.

Board of Directors’ Responsibility for the Annual Report

In accordance with the Articles 514 and 516 of the Turkish Commercial Code numbered 6102 (“TCC”) and Orhan Akova, SMMM Regulation on the Principles and Procedures Concerning the Preparation of and Publishing Annual Reports by the Partner Bank (“Regulation”) published in the Official Gazette dated 1 November 2006 and Numbered 26333, the Bank’s management is responsible for the following regarding the annual report: 27 February 2020 Istanbul, Turkey a) The Bank’s management prepares its annual report within the first three months following the date of statement of financial position and submits it to the general assembly. CONTENTS ICBC Turkey provides leadership in bringing Section I Section III together the Turkish- Chinese culture that GENERAL INFORMATION UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT drives excellence and 4 Vision, Mission and Strategic Targets 6 Historical Development 104 Assessment of Operation of the Internal Control, Internal Audit 10 Letter from the Chairman and the Risk Management Systems by the Audit Committee innovation. 14 Letter from the General Manager 105 Informations Regarding the 2019 Activities of the Internal 18 Outlook for 2020 Control, Internal Audit and the Risk Management Systems 20 Financial Indicators 108 Risk Management 22 Assessment of the Bank’s Activities in the Year 2019 112 Informations on the Financial Position, Profitability and Solvency 42 Share Capital and Shareholding Structure of the Bank 43 The Subsidiaries and the Associates 114 Credit Ratings of the Bank and Related Explanations 44 Organizational Structure 114 Financial Informations Summary for the a Period of Five Years 46 Information on the Privileged Shares and the Voting Rights Including the Report Period 47 Information about Amendments in the Articles of Association, 114 Other Issues – Explanations Regarding the Post Balance Sheet The Special Audit and The Public Audits and Material Lawsuits Events Brought Against the Bank

48 Research and Development Practices Section II Section IV

MANAGEMENT AND CORPORATE CONSOLIDATED FINANCIAL INFORMATION GOVERNANCE PRACTICES

50 Board of Directors and Top Management 116 Consolidated Financial Information Summary and the Financial 52 Profiles Ratios for a Period of Five Years Including the Report Period 58 Financial Rights 117 Information Related to the Consolidated Subsidiaries 59 Independent Board Member's Independancy Declaration 60 Committees INDEPENDENT AUDIT REPORT • Other Committees

67 Human Resources Policy 119 Independent Auditors’ Report - Consolidated Financial 70 Agenda of the Ordinary General Assembly Meeting Statements as at and for the year Ended 31 December 2019 with 71 Summary Board of Directors Annual Report Independent Auditors' Report Thereon Section 1 73 ICBC Turkey Bank A.Ş. Profit Distribution Policy and Proposal for Profit Distribution for the year of 2019

74 Risk Groups, Support Services and Information About Non-Competition Activities GENERAL INFORMATION

76 Donations and Social Responsibility Projects 79 Corporate Governance Principles Compliance Report for the Year of 2019 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

VISION, MISSION AND STRATEGIC TARGETS

• In light of the political movements in the Within the context of the international nearby geography and the global financial banking conception, to become a bank fluctuations, achieve a deliberate that is innovative, open to developments, and sustainable growth by protecting VISION expeditious and meticulous in its services the Bank’s steady balance sheet and

and the most favoured by its customers strong capital structure by identifying Section 1 Section

Section 1 Section with its prudential risk management risks correctly, approach. • Grow in the corporate, commercial, and INTRODUCTION investment banking segments, INTRODUCTION OUR • Sustain the growth in the retail banking STRATEGIC area, TARGETS • Closely monitor the costs and taking savings measures as practicable as possible. To generate tailor-made solutions to our customers’ for their current and future The Bank’s budget is approved by the Board needs, to establish long-lasting relations of Directors. Realization of the budget is through our high-quality service approach being regularly scrutinized based on the based on knowledge and creativity, to MISSION performance criteria. contribute to our country’s economy by creating social and economic values, to continuously generate added value for our customers, employees and shareholders.

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HISTORICAL DEVELOPMENT

1986 1990 2006 2007 2008 2015

st Section 1 Section

Section 1 Section ICBC Turkey Bank Shares of the Bank The Bank has grown GSD Holding A.Ş. In 2008, the Bank’s The Bank belonged to GSD Group until May 21 2015. shareholder of the Bank, made a mandatory bid offer A.Ş. (formerly have started publicly until 2006 based on acquired 75.5% of share capital was With its resolution dated April 2nd 2015 and numbered pursuant to the “Communiqué on Mandatory Bid named as Tekstil traded and listed the banking strategy the Tekstil Bankası increased from 6262, the Banking Regulation and Supervision Agency Offers” with Serial II, No.26.1, which expired on August INTRODUCTION INTRODUCTION Bankası A.Ş.) was on Borsa İstanbul predominantly A.Ş.’s shares and 300 million TL (the BRSA) authorized the transfer of all of the shares 14th 2015, as a result of which the shares of the Bank incorporated as a (İstanbul Stock focusing on became the majority to 420 million TL; owned by GSD Holding A.Ş. corresponding to 75.5% of held by ICBC increased from 75.50% to 92.82%. The privately owned bank Exchange - BIST) as commercial and shareholder in 2007; 60 million TL out of the Tekstil Bankası A.Ş.’s shares, to Industrial Commercial trade name of our Bank has been changed from “Tekstil and authorized to of May 23rd 1990. corporate banking. and the remaining this 120 million TL Bank of China Limited (ICBC), domiciled at the People’s Bankası A.Ş.” to “ICBC Turkey Bank A.Ş.” pursuant to the accept deposits, on In 2006, the Bank shares at 24.5% incremental share Republic of China. On April 28th 2015, the Bank made general assembly resolution taken on November 5th 2015 April 29th 1986 and restructured its retail continued to publicly capital raise was an announcement in the “Public Disclosure Platform” and this matter was registered with the trade registry started its operations banking organization trade at the BIST. obtained from the related to the transfer transaction and calling for an on November 13th 2015 and published in the Turkish on October 13th and since then has internal sources and Extraordinary General Assembly to be held on May 22nd Trade Registry Gazette dated November 19th 2015 and 1986. started providing the remaining 2015 to resolve on the approval of the existing Board of numbered 8950. services in this area 60 million TL was Directors and reappoint the new ones to substitute them. as well. The Bank paid in cash. May 22nd 2015 was determined to be the date on which On the other hand, capital markets and investment has continued to the shares were to be transferred in accordance with banking services out of the banking services, are meet the needs the share purchase and sale agreement and the share provided by ICBC Turkey Yatırım Menkul Değerler A.Ş., of its customers transfer was realized on the same date. As of 99.998% of which is owned by the Bank. with boutique May 22nd 2015, the Bank was included in the group banking concept of foreign banks incorporated in Turkey. Tekstil Portföy Yönetimi A.Ş., 100% of the share capital by closely following of which is held by ICBC Turkey Yatırım A.Ş., has been the developments Pursuant to the Article 11, related to the mandatory bid incorporated on the date of April 21st 2015 and by the in the banking offer transactions, of the Communiqué on Mandatory resolution taken at the extraordinary general assembly sector, including Bid Offers issued by the Capital Markets Board, with meeting held on November 5th 2015, its trade name has the commercial- Serial Number II. 26.1, ICBC became obligated to make been changed as “ICBC Turkey Portföy Yönetimi A.Ş.”. corporate banking, a share purchase proposal to purchase the remaining Main field of activities of the company is to establish and retail banking and shares belonging to the other shareholders as a result manage investment funds. the investment of its purchase of the shares owned by GSD Holding banking areas. A.Ş. representing 75.50% of the share capital of Tekstil Bankası A.Ş. In this context, ICBC, the majority

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ICBC has been incorporated in the People’s Republic of China in 1984 and it provides a broad range of financial products and services to its customers. By cross markets, an international and integrated business model has been formed. Shares of ICBC have been listed on Hong Kong Stock Exchange and Shanghai Stock Exchange concurrently, in October 2006. Following the years of international development, as of the end of 2018, operations of ICBC have expanded six continents, covering 47 countries and regions. By its widespread global coverage network, ICBC offers comprehensive financial 2017 2019 products and services to approximately 7 million corporate customers and 607 million individual customers through its distribution channels consisting of 426 overseas institutions, 26,786 self-service banking services and 89,646 ATMs, and its e-banking network composed of internet and telephone banking services constituting the diversified, international information based operation structure and the self-service banking services. It is audited by, and is subject to the regulations of, the China Banking and

Insurance Regulatory Commission (CBIRC), the banking authority in the People’s Republic of China. Section 1 Section

Section 1 Section By the capital increase made in 2017, share capital of 2019 Our Bank conducts its operations through its Head the Bank, which used to be 420 million TL, has been Office located in İstanbul and 43 branches nationwide. increased by an amount of 440 million TL in cash, to 860 Aside from its branches, the Bank also provides banking INTRODUCTION INTRODUCTION million TL. As a result of the capital increase, shares hold services through its online retail and corporate branches. by the major shareholder ICBC in the share capital of the Bank, has increased from 92.82% to 92.84%. As of 3. Quarter/2019 of ICBC Turkey, according to the International Financial Reporting Standards (“IFRS”) By the resolution taken at the extraordinary general data, the share of its total consolidated assets among assembly meeting, held on the date of September the assets size of Industrial and Commercial Bank of 8th 2017, of ICBC Turkey Yatırım Menkul Değerler A.Ş., China Limited, is 0.074%. (Source: most recent 3. which is an affiliate of our bank and 99.998% of the Quarter Activity Report of ICBC for the Year 2019) share capital of which is held by our Bank; it has been decided to increase its share capital. In this context, it has been resolved by the Board of Directors of our Bank, to exercise our pre-emption right for an amount of 39,999,200.-TL, arising from the portion of the share capital increased in cash, and to pay the amount of pre-emption right within the period set by said affiliated company. Within the framework of said resolution, said amount pre-emption right amount was paid to ICBC Turkey Yatırım Menkul Değerler A.Ş. on the date of October 4th 2017. New share capital of the company has been registered as 76,000,000.-TL on the date of October 9th 2017.

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DEAR STAKEHOLDERS, 2019 has been a year of rebalancing in Turkish LETTER FROM economy. Following the financial turmoil that peaked 2019 has been a challenging year for the world. in August 2018, economic activity slowed down sharply THE CHAIRMAN According to IMF, the world economy is estimated to with contraction extending into the first half of 2019. In have grown by 3%. This has been the lowest since the order to restore price and financial stability, Central Bank global financial crisis. The US economy performed well, of Turkey (CBRT) stepped up and tightened its policy delivering a GDP growth rate of 2.1% in the third quarter rate in September 2018. The following period led to a of the year. The Federal Reserve (the Fed) hinted that the recovery in financial assets, also with the support of a current interest rate level was appropriate based on the positive global backdrop. Inflation, which had climbed to good macroeconomic condition and the low inflation. its highest level since 2003 in October 2018, came down. Economic growth in the euro zone was relatively weak, Amid economic slowdown and with the help of CBRT’s and the European Central Bank was expected to continue tight stance, Turkey’s vulnerabilities improved rapidly. the current loose monetary policy. While uncertainties With annual inflation rate falling more quickly than ICBC TURKEY WILL EARNESTLY SEIZE around Brexit process persisted, concerns about anticipated and central banks around the world easing THE OPPORTUNITIES BROUGHT whether other members would leave the EU abated. their policy stance, CBRT started easing its monetary BY THE ECONOMIC AND TRADE After UK elections, the new government committed to policy. With financial conditions improving, a pick-up in completing the Brexit process by the end of 2020. The economic activity is observed from the second half of INTERACTIONS BETWEEN CHINA AND issue will continue to be closely watched as the deal 2019 onwards.

TURKEY AND THE NEW ECONOMIC between UK and EU should be expected to have long- Section 1 Section 1 Section PLAN OF TURKEY, STRIVE TO term repercussions on region’s economy and business The recovery in global economy and sustained risk environment. appetite will likely be a positive factor for Turkish

INTRODUCTION INTEGRATE "THE BELT AND ROAD" INTRODUCTION economy and local markets. Turkish economy’s recovery INITIATIVE WITH "THE MIDDLE China has recently held the central economic work could be expected to continue with picking up pace in CORRIDOR" INITIATIVE, AND SERVE conference, which pointed out that the Chinese 2020. The maintenance of the delicate balance between TURKEY’S ECONOMIC AND SOCIAL economy would maintain the basic trend of stability growth and other indicators will be a significant factor and improvement in the long run. As for the trade that goes into investors’ decision making when analyzing DEVELOPMENT. tensions between China and US, authorities from both Turkish assets. countries handled the issue with a delicate approach. The uncertainty around how the two largest economies ICBC Turkey achieved impressive business results in Xiangyang GAO of the world would resolve the issue was main cause of 2019. ICBC Turkey has ended 2019 with its indicators Chairman of the Board of Directors the slowdown in global economy. While early on, two intact and continuously improving. Thanks to the prudent sides retaliated each other with increased tariffs, bans approach adopted from ICBC’s international practices, and other measures, towards the end of the year the two NPL ratio stands below the average of banking sector. sides agreed on the first phase of a three-part deal. Increasing our cooperation with our counterparties in the financial, real and public sector, we aim to increase the Amid the economic slowdown, central banks all around support provided to ideas and projects that will boost the globe have taken steps to ease their policy stance. Turkey’s economy in a sustainable manner. This helped both developed and developing economies to handle the slowdown in global economy, as well as In 2019, ICBC Turkey earnestly implemented the boost financial markets almost all around the globe. For internationalization strategy of ICBC Group, focused 2020, lagged effect of looser monetary policy could be on the business vision of building into a leading bank expected to boost global economic activity, especially in the implementation of the Belt and Road Initiative, a in the first half of the year. In the second half of the year, preferred bank featuring “Chinese elements”, a bank political uncertainty may increase around US presidential conducting the best practice in stable operations, elections. a featured bank engaged in retailbanking , and a naming card for cross-cultural integration, and

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practiced the business tenet of “bolstering up weak The Project and Cross- Border Finance Department Major indicators of retail banking business improved environment in Turkey. ICBC Turkey benefits from the spots, consolidating the foundation for development, continued to wrap up a number of major projects. steadily. The customer base continued to expand. knowledge and power of ICBC Group. supervising the fee-based business income, and reducing Marketing efforts targeted at Chinese-funded enterprises Through remote customer acquisition and mobile banking the non-performing assets (NPAs)”. produced remarkable results. We had increase number promotion, combined with a series of themed activities ICBC Turkey will continue to support Turkish economy of Chinese oriented customers, which included new including offline marketing competition attended by with an increasing effort through financing the real sector At the same time, we vigorously promoted business customers from sectors energy, infrastructure and real branches, remarkable results were achieved especially in and significant projects of Turkey and act as a bridge transformation, improved business quality and efficiency, estate. number of active customers and deposit volume. Number between Turkey and China, providing banking services and served the economic, industrial, and social of active customers and deposit volume increased by to corporations, financial institutions, governments and development of Turkey, and provided financial support The international business line secured major 25% and 31% respectively over the beginning of the year. public agencies in Turkey and the region. for the integration of the Belt and Road Initiative on progress. We introduced the most useful trade financing We also added new functions to mobile banking and the Chinese front and the Middle Corridor Initiative on businesses and products to the local market, which optimized the current ones, launching exclusive offers We will continue our strategy of creating added value for the Turkish front. As a result, we operated steadily and included the forfaiting business under a letter of credit for mobile banking users, and staged themed marketing our stakeholders and customers by establishing a bond developed progressively. In 2019, we won two prestigious with the domestic banks and Chinese banks and the competitions and SMS-enabled precision marketing. As between business partners and customers across a wide awards: the Best Commercial Bank of Turkey in 2019 letter of credit confirmation business with the Turkish a result, our active mobile banking users increased by range from Europe to Asia. and the Best Investment Bank of Turkey in 2019 granted correspondent banks. Besides, we dug the new drivers of 158%. In addition, we intensified the communication by The International Banker. It is especially noteworthy profit growth, intensified the approval and management and cooperation with many FinTech companies to seize In 2020, the final year of our three-year development that we are the only winner of such awards in the Turkish of trade financing business targeted at small and the excellent opportunities brought by the fast payment plan and the fifth year of ICBC Turkey in Turkey, we banking industry. medium-sized enterprises (SMEs), forestalled the risks market as early as possible. will earnestly seize the opportunities brought by the

arising from trade financing business substantially, and economic and trade interactions between China and

Section 1 Section 1 Section Corporate business and proposed projects came maintained zero NPL. We worked hard to foster the key Asset and liability business attained steady growth Turkey and the new economic plan of Turkey, strive to in great reserve, and marketing efforts achieved customer groups, cooperated with local high-quality relying on its optimal structure. We made full use integrate the Belt and Road Initiative with the Middle INTRODUCTION INTRODUCTION remarkable results. In 2019, the outstanding loans customers in trade finance businesses, mainly letters of of ICBC’s global network in continuing to raise funds Corridor Initiative, and serve Turkey’s economic and of the corporate banking and project business lines guarantee/standby letters of credit, and participated in with a favorable maturity and cost structure so that the social development. Our bank will keep the following accounted for 50% of our total loan balance. The loan the projects carried out by Chinese-funded enterprises in currency, interest rate and maturity sensitivities faced development plan: steady development and continuous structure got further optimized. Most of our loans were Turkey actively. during the process of loan disbursement and deposit improvement of assets, continuous enhancement of disbursed to Turkey’s top listed companies as well as collection could be managed smoothly. Loan processes profitability and profit structure optimization and keep leading enterprises in the aviation, infrastructure , and oil Financial institution business grew robust. While were constantly improved. Potential risk customers and improving assets quality and increasing the risk resilience. industries. developing the interbank bilateral and syndicated term NPL customers have been closely followed in 2019 and loans lending, we actively expanded the cooperation with maximum level had been achieved in the collection of the On behalf of the Board of Directors, I would like to thank Marketing capabilities were further strengthened. We local banks in various fields such as trade financing and said customers. Additional liquidation methods were also to all of our customers, employees and shareholders for wrapped up a host of major syndicate projects as one RMB settlement. We worked hard to expand the market applied to NPL customers for risk mitigation. As a result their valuable support and contributions. of the mandated lead arrangers, and maintained the share of RMB business, referred the Chinese interbank of effective credit management, our Bank’s NPL ratio and sound cooperation with other banks based in Europe and foreign exchange, bond market investment and other 2. group customer ratio remained quite below than the Yours Sincerely, America. We took the lead in promoting the payment businesses to the Turkish market. Now we are currently Banking sector average ratio throughout the year. project in Istanbul’s new airport. piloting the CIBM work. We intensified the classification Xiangyang GAO of anti-money laundering (AML) risks and the risk quota We are going to keep working in order to strengthen Chairman of the Board of Directors In terms of market development, risk control, and management of correspondent banks to consolidate the the ties between China and Turkey. In 2019 we supporting service, we devised one policy for each foundation for business development. celebrated ICBC’s fourth year in Turkey. The 4-year branch, so as to help them improve their operation and period ICBC had in Turkey has been a challenging and management standards. Breakthroughs were made in informative one. During this period, ICBC Turkey has business management and innovative development. started to establish its brand in Turkish financial sector. In the meantime, the account opening optimization ICBC Turkey’s solid performance since its entry into project for ICBC Group’s international customers in Turkish banking sector and the fruitful partnerships it Turkey would be put into place this year. The surrounding has forged with counterparties not only in finance, but regions marketing was started to promote the also in a vast array are a testament to the investment development of credit markets in surrounding regions.

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DEAR STAKEHOLDERS, significant volume of corporate banking, expanding our LETTER FROM THE product range with diversified sales and service channels In 2019 we celebrated ICBC Turkey’s fourth year in in digital banking, being the most preferred bank in GENERAL MANAGER Turkey. Turkey in RMB services market, and cooperating with Over the 4 years we have been in Turkey, ICBC Turkey local authorities to provide financial solutions tailored has become an important international subsidiary to the needs of our customers and keeping our traces in of ICBC Group. During this period, ICBC Turkey the market while continuing to follow new trends are our established its brand in Turkish financial sector. ICBC main focuses. Turkey has shown solid performance since its entry into Turkish banking sector. In the first four years in the country, ICBC Turkey made significant progress towards achieving its ICBC Turkey aims at long-term growth model by using goals. ICBC’s local and global service network, brand and As of 2019 year end, ICBC Turkey’s asset size reached ICBC TURKEY WILL CONTINUE resource advantages. Each passing day the Bank is TL 18.2 billion and had TL 9.1 billion cash loan in total. TO WORK ALONG WITH ALL transforming from a medium-sized boutique bank to Financial institutions (mainly banks but also leasing, STAKEHOLDERS TO INVEST IN KEY a strong regional financial institution. ICBC Turkey will factoring and consumer finance institutions) have the continue its strategy of creating added value for its biggest share. They were followed by energy and AREAS AND PROJECTS THAT WILL stakeholders and customers by establishing a bond real estate sectors. Besides domestically disbursed

HELP TURKEY TO MOVE FORWARD ON between business partners and customers across a wide loans, ICBC Turkey also became the arranger of about Section 1 Section 1 Section ACHIEVING SUSTAINABLE GROWTH. range from Europe to Asia. USD 2.3 billion loan from other ICBC subsidiaries to Turkish financial institutions and corporates operating INTRODUCTION INTRODUCTION ICBC Turkey’s foundation spurred Chinese investors’ in different sectors such as real estate, construction, interest in Turkey. Following ICBC, Chinese investors aviation and port management. Shaoxiong XIE participated in projects related to finance, maritime, General Manager retail & e-commerce, communication and energy ICBC Turkey put in reserve a dozen of projects (mega sectors. Turkey’s dynamic demographic structure and scale projects in insfrastructure and energy sectors), thus its location as an energy and a logistics hub provide laying a solid foundation for the business development attractive opportunities for foreign investors. With in 2020. We enhanced our ability and standard to ICBC’s strong and broad international network and promote related projects greatly, maintained close Turkey’s geopolitical advantage, ICBC Turkey offered communication with ICBC Group, and took effectively high-quality range of financial services for infrastructure joint actions with a dozen of overseas institutions such and social projects in Turkey. In fact, during this period, as ICBC (Macau), ICBC (Europe), and Dubai Branch. which could be considered as a short period, the Bank achieved numerous important business collaborations In 2019, we won two prestigious awards: the Best and successes. Bank’s main focus in Turkey is to boost Commercial Bank of Turkey in 2019 and the Best trade and investments of local Turkish enterprises and Investment Bank of Turkey in 2019 granted by The large-scale Chinese enterprises in connection with the International Banker. It is especially noteworthy that “Belt and Road Initiative” and “Middle Corridor Plan.” we are the only winner of such awards in the Turkish banking industry. ICBC Turkey undertook important projects in the sector with all our business lines, which continue to grow. Turkey is a country that offers unique opportunities for project financing. Therefore, enabling financing of large infrastructure and energy projects in Turkey to capture a

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These awards enabled our investment banking business ICBC Turkey paid close attention to credit access, review ICBC Turkey in 2020 to gain the unprecedented influence across ICBC and approval, recruited the banking, non-banking As a financial institution looking to grow in Turkey by Group and to be named by ICBC Group as the Regional and SME business review taskforce, and conducted making full use of local opportunities as well as regional Implementation Center for the Cross-border M&A special trainings on SME and retail credit business to ones that Turkey’s unique geographic location provides, Financial Advisory Business in the Middle East/North improve review efficiency.ICBC Turkey did a good job TL 18.2 billion ICBC Turkey will continue to work along with all Africa. in breaking down, monitoring, and supervising the Asset Size stakeholders to invest in key areas and projects that will annual business goals, spot weak spots in operation help Turkey to move forward on achieving sustainable In retail banking business ICBC Turkey’s customer by comparing with peer banks and other counterparts growth. base continued to expand. The balance of our retail within the ICBC Group, and put forth instructive deposits stood at TL 4.4 billion, up TL 1 billion from the suggestions for business development. Operational Moreover, ICBC Turkey is going to keep working in order beginning of the year. We took steady steps to boost risk control was lifted to a higher level. ICBC Turkey to strengthen the ties between China and Turkey. We SME business. Specifically, we preferentially selected managed to implement the comprehensive, professional TL 9.1 billion believe that improving the relations between the two SME customers and extended TR 12 million SME loans self-inspection aligned with the standards of ICBC countries and deepening the commercial cooperation Cash loan in total to them. Group for the first time, hence capable of raising the will be mutually beneficial not only for local economies overall risk control standards. their resource allocation. but also for regional economies and we continue to Within asset and liability management we shape our work in this direction. continuously analyzed market movements and The risk management system got further refined. The expectations. We defined fund transfer prices in the Bank, set up the risk management committee under the Our goal remains to grow profitably and create

short, medium and long terms reasonably. We guided Board of Directors as well as Senior Management Risk shareholder value by continuing to expand our high

Section 1 Section 1 Section all marketing departments and branches for the Committee with three sub-committees under it, with an TL 12 million quality services, whilst focusing on customer needs. optimum deposit pricing to form a solid foundation. aim to improve the comprehensive risk management SME loans INTRODUCTION INTRODUCTION Also we supported the expansion of loans for high framework. Also drafted a comprehensive risk As ICBC Turkey, we will continue to work hard to deliver quality projects and SMEs. Besides, we chose right management framework and the working rules for risk on the trust that customers, investors, our colleagues opportunities to step up investments in low-risk, high- management committees at all levels, issued material and all other stakeholders have granted to us. And on yield bonds, as a move to stabilize and improve the level risk management measures, and further clarified the behalf of the management team, I would like to thank of net interest margin. responsibilities of front-office, middle-office and back- to all of our customers, employees and shareholders for office department in terms of risk management as well their trust and support. as the lead management departments for various risks ICBC TURKEY WILL CONTINUE ITS to ensure that all risks could be managed effectively. Yours Sincerely, STRATEGY OF CREATING ADDED VALUE FOR ITS STAKEHOLDERS AND Shaoxiong XIE General Manager CUSTOMERS BY ESTABLISHING A BOND BETWEEN BUSINESS PARTNERS AND CUSTOMERS ACROSS A WIDE RANGE FROM EUROPE TO ASIA.

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Turkish banking sector proved its resiliency once OUTLOOK FOR again during 2018. Thanks to its solid capital structure 2020 and experienced management teams, Turkish banks weathered the turmoil and started to support Turkish economy in 2019. There remains several issues to be cleared before banking sector can revert to its peak performance of aiding Turkish businesses. With interest rates falling and economic activity picking up from a low base, growth in banking sector could be expected 2019 has been a challenging year for the world. The term repercussions on region’s economy and business to return its historic averages in 2020, after remaining most recent IMF estimation puts global GDP growth at environment. relatively low the previous year. To achieve sustainable 3%, which has been the lowest since the global financial growth, maintaining clear communication between crisis. Host of risk factors that have been at the forefront Amid the economic slowdown, central banks all around representatives of financial, real and public sector has in the recent years and kept financial institutions, the globe have taken steps to ease their policy stance. crucial significance. corporations and investors on edge continued to be the This helped both developed and developing economies main points of interest / concern throughout 2019. weather the slowdown in global economy, as well as ICBC Turkey has ended 2019 with its indicators intact boosting financial markets almost all around the globe. and continuously improving. Thanks to the prudent

At the top of the list came the trade tensions between For 2020, lagged effect of looser monetary policy could approach adopted from ICBC’s international practices, Section 1 Section

Section 1 Section China and US. For the better part of the year, all eyes be expected to boost global economic activity, especially NPL ratio stands below the average of sector. Increasing were on the developments whether the two sides could in the first half of the year. In the second half of the year, our cooperation with our counterparties in the financial, reach a deal. The uncertainty around how the two largest political uncertainty may increase around US presidential real and public sector, we aim to increase the support INTRODUCTION INTRODUCTION economies of the world would resolve the issue was main elections provided to ideas and projects that will boost Turkey’s cause of the slowdown in global economy. Authorities economy in a sustainable manner. from both countries handled the issue with a delicate A YEAR OF REBALANCING IN approach. While early on, two sides retaliated each other TURKISH ECONOMY PROJECTION FOR 2020 ECONOMY with increased tariffs, bans and other measures, towards the end of the year the two sides agreed on the first 2019 has been a year of rebalancing in Turkish economy. Most of the geopolitical risks that shaped 2019 are likely phase of a three-part deal. The constructive approach Following the financial turmoil that peaked in August to extend into 2020. The main drivers of the global and the Phase One deal are reasons to be optimistic for 2018, economic activity slowed down sharply with markets will be the policy stance of central banks. With 2020, yet it should be noted that there are important contraction extending into the first half of 2019. In order the support of monetary policy, global financial markets issues to resolve. to restore price and financial stability, Central Bank of stand on a more solid footing. Another important Turkey (CBRT) stepped up and tightened its policy rate discussion is the fiscal policy stance, especially by in late 2018. The following period led to a recovery in policymakers in the developed economies. Whether or ICBC TURKEY HAS ENDED 2019 financial assets, also with the support of a positive global not, these policymakers will remain reluctant to step up backdrop. Amid economic slowdown and with the help infrastructure investments that will improve the business WITH ITS INDICATORS INTACT AND of CBRT’s tight stance, Turkey’s vulnerabilities improved environment and help tackle environmental issues will be CONTINUOUSLY IMPROVING. rapidly. Inflation, which had climbed to its highest level a hot topic. since 2003 in October 2018, came down. Turkey’s current Another factor that has remained at the headlines account balance, which produced a deficit of over $50 The recovery in global economy and sustained risk has been Brexit. While the issue of what of an exit UK billion by mid-2018, turned to surplus in 2019. With appetite will likely be a positive factor for Turkish would achieve remained uncertain, concerns about annual inflation rate falling more quickly than anticipated economy and local markets. Turkish economy’s recovery whether other members would leave the EU abated. and central banks around the world easing their policy could be expected to continue with picking up pace in After UK elections, the new government committed to stance, CBRT started easing its monetary policy. With 2020. The maintenance of the delicate balance between completing the Brexit process by the end of 2020. The financial conditions improving a pick-up in economic growth and other indicators will be a significant factor issue will continue to be closely watched as the deal UK activity is observed from second half of 2019 onwards. that goes into investors’ decision making when analyzing and EU achieves should be expected to have long- Turkish assets.

18 19 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

• Total securities portfolio of our Bank increased by • Non-cash loans of our Bank increased by 194.7% FINANCIAL INDICATORS 21.6% whereas the total securities portfolio of the whereas the total non-cash loans of the sector sector increased by 43.6%, increased by 4.7%. • Total placements of our Bank increased by 13.7% whereas the total placements of the sector increased by 15.3%,

(TL Million) 31.12.2018 31.12.2019 Changes

ICBC Turkey Sector ICBC Turkey Sector¹ ICBC Turkey Sector¹ Asset size of our Bank was up by 17% in 2019, increasing EXPLANATIONS REGARDING THE from TL 15.5 billion to TL 18.2 billion in 2019. Credits BANK’S NUMBER OF PERSONNEL Cash and the CBRT 1,807 223,971 2,073 237,952 14.8% 6.2% increased by 16% to TL 9.1 billion when compared with AND BRANCHES, SERVICE TYPES Placements with the Banks and 2018. Securities of the Bank increased by 22% from 2018 PROVIDED BY THE BANK AND Receivables from the Money 2,023 183,366 2,300 211,399 13.7% 15.3% year end and reached TL 4.7 billion. ITS AREA OF ACTIVITY AND THE Mar-kets ASSESSMENT OF ITS POSITION Securities Portfolio 3,860 473,219 4,693 679,476 21.6% 43.6% Operating income of ICBC Turkey in 2019 has increased IN THE SECTOR BASED ON THESE Loans 7,829 2,385,194 9,088 2,656,132 16.1% 11.4% to TL 545 million. Our Bank achieved a net profit level CRITERIA of TL 40.9 million at year-end 2019. Despite of restricted Loans (Including Non-performing 7,844 2,413,211 9,142 2,708,700 16.5% 12.2%

Loans) Section 1 Section

Section 1 Section growth interest income increased 3.8%, net fees and The Bank’s areas of operations consists of corporate commission income increased 21.5% compared with banking, fund management transactions (foreign Non-performing Loans (Gross) 93 91,845 168 150,763 80.1% 64.1% 2018 year end. currency, money markets and securities transactions), INTRODUCTION Special Provision for the 78 63,828 114 98,195 44.7% 53.8% INTRODUCTION international banking services, individual banking and Nonperforming Loans As of 2019 year end, based on unconsolidated financial the credit card transactions. Along with abovementioned Total of Deposits and Funds 8,208 1,995,199 10,614 2,566,897 29.3% 28.7% statements of ICBC Turkey prepared in accordance with banking services, the Bank also conducts insurance the regulations of BRSA; services operations as an agency of Sompo Japan Sigorta Non-cash Loan 2,371 782,122 6,987 814,961 194.7% 4.2%

A.Ş., Vakıf Emeklilik A.Ş., Fiba Emeklilik ve Hayat A.Ş., Total Assets 15,525 3,842,639 18,191 4,491,090 17.2% 16.9% Asset size reached TL 18.2 billion. HDI Sigorta A.Ş. and Axa Sigorta A.Ş. • ¹ Based on the data taken from BRSA’s December 2019 Monthly Sector Bulletin dated February 13th 2020. • Total cash loans were TL 9.1 billion and constituted 50% of the Bank’s balance sheet. As of 31 December 2019, the Bank has 43 branches • While the loans to assets ratio and deposits to • Consumer loans (excluding credit cards) constituted located nearby the industrial zones of Turkey. As of the liabilities ratio of the sector were 59% and 57%, 7% of the total cash loans and has decreased by 21% same date, the number of the employees of the Bank respectively, the Bank’s loans to assets ratio and compared to that of the previous year. is 731 (As of 31 December 2018, the numbers of the deposits to liabilities ratio were 50% and 58%, • Total customer deposits are TL 10.4 billion, increased branches and employees were 44 and 786, respectively). respectively. by 52% compared to that of 2018 and constituted 57% of the Bank’s total liabilities. The position of our Bank in the sector as of year-end (TL Million) 31.12.2018 2 31.12.2019 Changes Shareholders’ equity increased by 12% compared to 2019: • ICBC Turkey Sector ICBC Turkey Sector¹ ICBC Turkey Sector¹ that of the prior year-end. • Net profit for 2019 was TL 40.9 million. • Total assets of our Bank increased by 17.2% whereas Total Loans/Total Assets 50% 62% 50% 59% -0.9% -4.7% • Return on assets and return on equity are 0.2%, and total assets of the sector increased by 16.9%, Total Deposits/Total Liabilities 53% 52% 58% 57% 10.4% 10.1% 3.4%, respectively. • Total loans of our Bank increased by 16.1% whereas Securities/Total Assets 25% 12% 26% 15% 3.8% 22.9% • Capital adequacy ratio has been 18.6% (2018: 30.8%). the total loans of the sector increased by 11.4%, • Total deposits of our Bank (including the banks Non-performing Loans Ratio 1% 4% 2% 5% 54.1% 44.9% We have closely monitored the activities of the Audit deposits) increased by 29.3% whereas the total Liquid Assets/Total Assets 25% 11% 24% 10% -2.5% -5.6% Committee, Corporate Governance Committee and deposits of the sector increased by 28.7%, Remuneration Committee during the year and observed Non-cash Loans/Total Cash Loans 30% 32% 76% 30% 152.8% -7.2% that the committees have worked effectively. ¹Based on the data taken from BRSA’s December 2019 Monthly Sector Bulletin dated February 13th 2020. 2 Due to change in The Uniform Chart of Accounts as of 1 February 2019, financial asset’s as fair value through other comprehensive income, expected loss provisions are recorded under equity. Some adjustments have been made in prior period financial statements through “Communiqué on Amendments to the Communiqué on the Financial Statements and the Related Explanations and Footnotes to be Announced to Public by Banks”.

20 21 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

Improving the Bank’s asset quality is the most important Stronger International Organization and ASSESSMENT OF THE BANK’S target of the department. Risk monitoring, controlling Cross-Border Cooperation ACTIVITIES IN THE YEAR 2019 and close market overview is an essential work routine ICBC’s profound experience in international financing for the Corporate Banking department. In line with the and multinational structure handling, ICBC Turkey keeps strategic objectives of the bank, Corporate Banking has attaching importance to its international counterparts. successfully adopted an effective risk approach and kept The Bank continues to work with highly reputable the NPL level under the sector average considerably. All financial institutions such as EBRD, IFC and Sinosure companies are monitored in a financial and managerial on new investment opportunities to support corporate approach with widely accepted rules and methods. customers by new resources and relationships. CORPORATE BANKING CBRT’s (Central Bank of the Republic of Turkey) low interest rate strategy, with the effect of recovery in Supporting Customers with Long-Term Loans Wider credit region experience of international Turkish economy, showed a downward trend in overall The Bank aims to reach a well-coordinated infrastructure organizations supports ICBC Turkey’s business inside Better Service, credit prices in 2019. Low market rates caused highly for conducting studies and undertaking initiatives Turkey and abroad, which ICBC is present. The Bank aims Higher Customer Satisfaction competitive market prices. Corporate Banking continued to support the enhancements of customer-oriented to continue increased cooperation by years. supporting its customers in 2019 like it has been doing perspectives and effective customer relationship since the first day of ICBC Turkey. management. ICBC Turkey supports structured and Creating Synergy Between ICBC Turkey, ICBC Turkey meets all banking needs of the corporate project finance needs along with the short-term needs of Chinese Enterprises and Turkish Companies

customers in Corporate Banking business in line with ICBC Turkey’s aim is to become the primary financial its customers. Support for Chinese companies which have already Section 1 Section

Section 1 Section the motto “Yes We Can“. Empowering the competition institution with the better terms in all market conditions. invested in Turkey went on. Chinese enterprises were strength via innovative products for both local and Corporate Banking sustained its net profit through a Corporate Banking conducts project finance activities not supported not only with project loans but also with international businesses of its customers have been rough year of 2019. Cash and non-cash loan balances only in main sectors such as infrastructure (for example; customer visits together. Cooperation opportunities INTRODUCTION INTRODUCTION the main and important focus of Corporate Banking progressed positively through 2019. Turkey’s top and ports, highways, airports and railways), aviation, energy were discussed together and agreements were realized. Department. strongest companies were assisted in every loan needs (production and distribution) and real estate; but also New and innovative supply and loan solutions were as well as deposit side. Loan and deposit balances privatization and acquisition finance transactions in line discussed together to create synergy between ICBC In line with its motto, the development strategy of the increased with a win-win approach for both our important with the Bank’s strategies. Turkey, Chinese enterprises and Turkish companies. Corporate Banking is: customers and ICBC Turkey. Corporate Banking introduced Chinese enterprises to top Some examples of the projects financed by ICBC Turkey companies of Turkey. In this manner, one of the biggest • To improve corporate banking services for existing Strategies for Strengthening Corporate are as follows: energy companies of China was brought together with customers as well as new customers, Customer Base in 2019 our large corporate customers. • To seek and promote all possible business In line with the target of being among the top 10 • ICBC Turkey provided EUR 142 million financing to opportunities for using ICBC global network to banks of Turkey, Corporate Banking aims to undertake Turkish Airlines for the movement from Atatürk Airport become a strategic partner to its customers and multidirectional service vision. Exploring all types of to the Istanbul Airport. Total financing amount in last IN LINE WITH THE STRATEGIC develop solid business relationships, customer needs in and outside of Turkey enables more 1,5 years reached EUR 230 million. Turkish Airlines OBJECTIVES OF THE BANK, • To become the leading bank for corporate customers’ compact structure, and increase in profitability and is an important actor for Belt and Road Initiative. It multi-product needs to enhance the profitability and efficiency of ICBC Turkey. has direct flights from the Istanbul New Airport to 3 CORPORATE BANKING HAS ensure strong, long-term relationship, destinations in China and has intention to add new SUCCESSFULLY ADOPTED AN • To increasing the limit utilization of corporate In line with ICBC Turkey’s strategy; investment projects direct flight destinations. In short the company has EFFECTIVE RISK APPROACH AND customers along with cross-selling opportunities; such as energy, infrastructure, and superstructure of very important contribution to increase the capacity • Striving to become the leading bank for the Belt and corporate customers is tightly followed in coordination for tourism, trade, culture and economy connections KEPT THE NPL LEVEL UNDER THE Road initiative, and premier business partner for the with the other departments. The Corporate Banking between two countries. SECTOR AVERAGE CONSIDERABLY. customers carrying Chinese Element, Department, works closely with the branches and other USD 40 million provided to Kumport, which is an • ALL COMPANIES ARE MONITORED • To increase communication and business departments to establish systems, which will enable the important port management company not only for opportunities with wider credit region including Israel, Bank’s target of enlarging customer base. İstanbul but also for Turkey. The company increased IN A FINANCIAL AND MANAGERIAL Azerbaijan, Macedonia and Georgia. its capacity through the investment in recent years to APPROACH WITH WIDELY ACCEPTED serve import and export activities more effectively. RULES AND METHODS.

22 23 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

PROJECT AND • and focusing on energy projects either backed by CROSS BORDER FINANCE the government via FIT mechanism or having risk coverage mechanisms like Sinosure,

• or infrastructure projects backed by the government BASED ON THE FACT THAT THE via traffic or passenger guarantees, or financing PRIVATE SECTOR INVESTMENTS ARE needs of state-owned companies providing treasury guarantee CONCENTRATED AROUND ENERGY

AND INFRASTRUCTURE SECTORS IN have served to this end. 2019, ICBC TURKEY HAS FOLLOWED THE MARKET DYNAMICS AND Projects of the Year In 2019, ICBC Turkey successfully closed 4 deals with the SUCCESSFULLY CLOSED 4 DEALS total ticket size of USD 380 million. 3 of these projects WITH THE TOTAL TICKET SIZE OF were in energy sector whereas the other one was real estate. The Bank, preferred strong sponsor structure USD 380 MILLION. while assessing projects. In this respect, one of the

financing which was completed in 2019 has the Turkish Section 1 Section

Section 1 Section Treasury repayment guarantee as well as all the shares of Cross Border Finance Department had been established the borrower belongs to Turkey Wealth Fund. in 2015 with the objective to provide funding to INTRODUCTION INTRODUCTION investments of Chinese enterprises in Turkey. After ICBC Turkey had participated to the medium term loan completing successful financings and marketing activities facility syndication of Karadeniz Holding as USD 30 in 4 year period so far, the department had been merged million ticket size out of USD 165 million with the title of ICBC Turkey also supports Chinese companies in dealing with the cash flow of the Bank’s customers. In with Project and Structured Finance Department in original lender. Turkey, also provides support for Turkish companies to 2019, the Bank pursued a strategy to improve its existing 2019 under the new name of "Project and Cross Border facilitate their business in China and abroad. It promotes products and increase its volume and profit. Finance Department" which combines local project Another important participation was Efeler Geothermal Turkish investors in many aspects from RMB transfers to finance expertise with the Chinese expats’ global Power Plant by Güriş Group which is the biggest participation in China Expo Fair with information and Primary products which are served by the Bank to network strength. geothermal power plant in Turkey with its installed relationship support. corporate and commercial customers are collection and capacity of 260 MW. ICBC Turkey ticket size is USD 30 payment systems undertaken through both electronic With its portfolio-based and customer-oriented service million out of USD 350 million total loan amount. In addition, ICBC Turkey continues to offer customized and classic methods with Direct Debit, Bulk EFT / Money approach Project and Cross Border Finance provides solutions that meet the needs of companies doing Transfer, Continuous Check Printing System, Electronic services in the area of developing project finance The last but not least deal of 2019 was disbursement businesses in international markets thanks to strong Reconciliation-Accounting Integration and Corporate strategies that are in line with the Bank’s overall strategies of a long term loan to a real estate company in order relationship with ICBC Group Entities such as ICBC Dubai Internet Banking products allowing customers to conduct and market targets. to refinance a shopping mall as EUR 110 million ICBC and ICBC Macau in bookkeeping transactions. Guidance their banking transactions smoothly and safely. Turkey loan amount. The Bank arranged this deal as the of ICBC China Head Office led the way of increase in Focused on Balancing Risk and Income sole lender. better understanding of sectors and world banking In 2019, many large companies which are located in Since risk mitigation is always ICBC Turkey’s priority, market. Turkey started to work with the Bank in the context all transactions to be added to the loan portfolio have of web service. By the end of the year, ICBC Turkey's been prudently selected after careful consideration. The Cash Management Solutions in Technological collection volume increased by 197%, corporate internet Department has focused on balance between risk and Perspective branch usage by 16% and electronic transfer system income while meeting the market demand. The main target of ICBC Turkey’s Cash Management transaction volume by 87%. business is to satisfy the demands of its customers with • Having a balanced energy portfolio which consists of a wide range of services and products depending on the coal-fired, wind, hydro, solar and geothermal power developing market and technological conditions while plant financings;

24 25 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

Achievements and Awards INTERNATIONAL BUSINESS ICBC Turkey has Registered in the China Inter-bank Bond Market ERG İNŞAAT AND FINANCIAL INSTITUTIONS In 2019, some projects financed by a group of lenders In 2019, ICBC Turkey has registered in the China Inter- including ICBC Turkey, received awards from reputable ANKARA - NİĞDE In 2019, ICBC Turkey has successfully disbursed bilateral bank Bond Market (CIBM) as a qualified investor and magazines and organizations such as The Bonds & Loans MOTORWAY PROJECT loans to Türk Eximbank and Fibabanka for the amount expanded the RMB business from traditional RMB Turkey, of USD 350 million with three years tenor and USD 50 business, such as clearing, settlement, deposit, etc., million with two years tenor, respectively, as a Financial to invest in China Bond Market being the first one from IJGlobal Awards, and EMEA Finance in those following Transport Finance Deal of the Year Institutions Business Department with full confidence in Turkey. Meanwhile, ICBC Turkey also integrates RMB categories; the Turkish banking sector. into the marketing on every perspective, from retails st to corporates, from correspondent banks to financial 1 In addition to the exciting rewarding longstanding market, to maintain and improve the RMB business relationship, there has been several new financial and volumes in the Turkish market. Furthermore, ICBC institutions, Financial Institutions Department considers Turkey has been providing operational service for RMB expanding its already established cooperation scope on payments of Turkish banks by opening RMB accounts in Infrastructure Finance Deal of the Year KOÇ GROUP the fields of syndication, trade finance, accounts, treasury ICBC Turkey’s book. MENZELET & KILAVUZLU HEPP nd and other DCM business to offer cross-sell to each other. PRIVITIZATION 2 Financial Institutions Business has also been focusing in

Financial Institutions Business continues to enjoy its introducing new product base to utilize and leverage the Section 1 Section

Section 1 Section leverage as well as full benefits offered by being the full benefits availed by cross currency swap agreement, largest bank in China and indeed the world, ICBC and Panda bonds to be considered as another good M&A / Acquisition Finance Deal of the Year operates in 47 countries and territories through its example to be brought into the attention and rewarding INTRODUCTION INTRODUCTION internationalized and diversified operating model and benefits of our selected sovereign and eligible st international operations. Additionally, ICBC Group correspondent bank clients in the near future. 1 operates in 20 African countries through its shares in the KARADENİZ GROUP Standard Bank of South Africa. ICBC Turkey offers the clout of its parent’s extensive SYNDICATION LOAN network of services and experience in international European Hydro Power Deal of the Year As the first Chinese bank invested in the Turkish market, trade and settlements, providing wide access to global ICBC Turkey, strives to be the preferred bank for RMB resources and competitive advantages in trade finance st business in Turkey, has the advantage to offer the most avenues while also providing its customers with the 1 Structured Loan Deal of the Year comprehensive products and services on RMB. opportunity not only to have their transactions executed flawlessly but also to obtain structured funding facilities 2nd in international markets. Project Finance Deal of the Year nd 2 Syndicated Loan Deal of the Year rd Natural Resources Finance Deal of the Year 3 3rd

26 27 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

In line with the strategic objectives of the Bank, TREASURY function and allocation of funds for the ICBC Turkey’s Most banks in Turkish banking sector have treasury International Business Department has been playing other business units, in order to manage the currency, teams with separate sales and trading units. That makes a focal point role not only by serving to selected Trade wars between US and China and interest rate interest rate and maturity sensitivities during the process the pricing and position covering processes lengthy clients with enriched product range of ICBC but also policies from major central banks, prolonged Brexit story of loan disbursement and deposit collection. as there is an internal pricing process between these continuously expanding its clientele portfolio consist of were the main global points of interest during 2019. Back separate units. ICBC Turkey on the other hand, has a Chinese companies as well in order to further grasp the in 2018 volatility was high as investors around the world Throughout the earlier parts of 2019, banking sector financial market department structuring, which enables unique advantages offered by the middle corridor plan expected Fed to tighten its monetary policy. However, activity has remained relatively subdued. However, a running both sales and trading functions from the same and Belt & Road Initiative. throughout 2019, concerns about a slowdown in global pickup can be observed especially in the second half of source leading to fast and efficient pricing of the clients, economy pushed the Fed to loosen its monetary policy. the year. Loan growth in 2019 hovers slightly below 10%, ultimately to client satisfaction. Cooperation with ICBC One ICBC Business Policy Joined with the ECB, who re-started its asset-purchasing while deposit growth in the Turkish banking sector has branches worldwide enables ICBC Turkey to access main This deliberate business policy, called “One ICBC” program in the second half of 2019 the monetary policy exceeded 20% within the year. ICBC Turkey’s competitive financial centers and their prices directly and efficiently, service focusing on customer oriented business approach led to an improvement in global financial conditions and pricing allowed its deposits growth rate to surpass that of leading to more competitive prices for the clients. complemented with innovative but tailor made wide liquidity. sector’s rate. As a relatively small bank in the sector, ALM Moreover, the experience of ICBC Turkey FMD staff, range of services and products brings forth ultimate will continue to support our business lines in order to in-depth knowledge of financial markets, products and loyalty. In Turkey, local agenda was full with geopolitical maintain a healthy and sustainable growth rate that will associated risks and regulatory implementations results in developments and local politics. Two local elections held lead to increase in overall volumes. an efficient communication with clients and branches and As per its longstanding and deliberately set strategies, in H1, Turkey-US relations, Turkey-EU relations, Turkish a successful financial cooperation.

ICBC Turkey follows the footprints and operations of its military operation in Syria and interest rate policy of Making full use of ICBC’s global network, ALM Section 1 Section

Section 1 Section selected customers and their projects in the countries Central Bank of Turkey as well tighter local regulations Department continued to raise funds with favorable For 2020, November US presidential elections will also assigned by ICBC Headquarter as well as neighboring put in force were the main market drivers (i.e. fx maturity and cost structure so that contributions to Bank’s be on the agenda. Local wise, in terms of Central Bank countries and regions, and supports them with various transaction taxes and limitations). balance sheet remains elevated. of Turkey interest rate policy, the 1200 bps rate cut in INTRODUCTION INTRODUCTION financing models, risk sharing programs, innovative 2019 with the diminishing inflationary pressures will business solutions and ICBC’s respective bank/branch After a period where local assets decoupled from its Most of the risks that shaped global financial markets leave its place to minor cuts as the current interest rate network. The Bank thereby is going to wittingly continue peers in emerging markets due to a host of factors, a in 2019 will be carried into 2020. In domestic markets, level leaves TL vulnerable to cases of global and local to add unprecedented value by placing the utmost recovery started in the financial markets in the second financial conditions may continue to improve given that risk awareness. Turkey-US relations, the content of these priority on customer satisfaction and equally important half of the year. With the fall in inflation rate, CBRT the supportive global backdrop is likely to extend into possible sanctions (whether targeting banking sector, continuously enhancing long lasting and value adding was able to ease its monetary policy leading to better the coming year. ALM business line will maintain its payment systems, etc.), geopolitical events will be customer relationships in line with the Bank’s motto domestic financial conditions. The relatively positive cautious stances, keep other business lines informed and closely monitored. Markets should also be wary of a snap “Yes, We Do”. mood was reflected in overall economy as well. In second will take necessary precautions to keep up with the new presidential and parliamentary election in Turkey by the half of the year economic activity showed signs of a developments throughout the year. end of 2020. gradual recovery. Financial Market IN 2019, DESPITE THE SLOW-DOWN ICBC Turkey’s Treasury Group focused on observing the Financial Markets Department (FMD) covers the bond, ICBC TURKEY’S ACTIVITIES WERE trends in financial markets and enabling ICBC Turkey’s derivative and foreign exchange positions arising from IN THE TURKISH MARKET, SUPPORTED BY CONTINUOUS SYSTEM other business lines to manage their operations with client business on a daily basis, leaving no positions by ICBC TURKEY HAS ADAMANTLY minimal impact from volatility in the markets. the end of the day as the part of a cautious stance. IMPROVEMENTS FOR OPERATIONAL, CONTINUED ITS STRATEGY TO Therefore,aggressive pricing, but timely covering of LEGAL, REGULATORY EXCELLENCY Asset and Liability Management positions has led to consistent profits and increasing ENJOY BEING THE BANK FOR BANKS. AND EFFICIENCY. Asset and Liability Management (ALM) Department acts client number / satisfaction. Additionally, FMD offers a in line with the Bank’s overall prudent growth strategy product range where the risks related to products can to achieve sustainable profitability by managing interest be clearly understood and managed by the client base. Additionally, local regulations will be a major area of and exchange rate risk and exercising dynamic pricing No excessive risk instruments are served in the product concern. Recently tax for FX purchases have been strategies in local and international markets. ALM’s range in order to prevent any future monetary losses of increased to 0.2% from 0.1%. The regulation also leaves responsibilities include management of liquidity for all clients due to unexpected derivative / spot market crashes. room for further hikes. Every tax hike has a negative currencies in use with money market transactions, bond effect on market volumes. The spot FX market volume transactions and performing the Fund Transfer Pricing decreased by (approximately) 26%, forward and options

28 29 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

market by 47% in 2019 according to data by Central 2019 Activities and Achievements M&A ICBC Securities arranged the facility alongside Citi by Bank of Turkey. FMD expects the markets to downsize In 2019 ICBC Securities as lead coordinator successfully ICBC Securities provided tender support advisory coordinating 10 major financial institutions from across in a similar manner in 2020. In 2019, swaps market grew completed arrangement of a successful syndicated services to HongBo Co. Ltd (“HongBo”), a leading lottery North America, Western Europe, Asia and the Middle by 101%, however with the recent regulation that limits financing facility of EUR 1 billion for a sovereign service provider in China in its planned participation to East. derivatives to 10% of equity on FX buy side, should institution-Turkish Wealth Fund in its debut international the the tender initiated by Milli Piyango for privatization expect only a moderate growth (if not downsizing) in borrowing. of the games of chance licence through a private ICBC Securities acted as the Mandated Lead Arranger swaps market (Data Source: Central Bank of Turkey). management contract. and Bookrunner for Akbank’s USD 810 million equivalent Market volumes will be closely linked to ongoing and Brokerage income has increased to TL 38 millions with Syndicated Dual Currency Term Loan Facility, one of potential regulatory changes. a 28% increase, YoY. Sichuan Tourism Investment Group has mandated ICBC the leading private sector banks in Turkey where 31 Securities as its exclusive financial advisor on the planned globally esteemed institutions from North America, FX deposits of residents in Turkey will be a figure to As a new service Corporate Coaching was introduced acquisition of a majority stake in a low cost airline Western Europe, Asia and the Middle East supported this be closely watched which is approximately at USD 193 at the beginning of 2019 and earned TL 2.60 millions in company in Turkey. syndication. billion level as of December 20. The figure is hovering Commissions in its first year managing a portfolio of TL around all time high levels. For a meaningful appreciation 350 millions. ICBC Securities is advising the shareholders of a leading Debt Capital Markets in Turkish Lira, should be seen a reversal in the rising cotton yarn manufacturer in Turkey regarding the sale of Turkish Treasury mandated (Bank of China-HSBC-ICBC) as trend in FX deposits triggered by an increase in investor its entire stake to an Asian strategic investor. Joint Bookrunner and Joint Lead Underwriters for Turkey’s confidence. Volatility is excepting to continue in markets inaugural Panda bond issuance in China’s onshore Panda

in 2020, which leads Bank to preserve its cautious stance ICBC TURKEY, AS WELL AS MEETING Syndications bond market with a plan to establish a Chinese bond Section 1 Section Section 1 Section in our financial market strategies. THE LONG TERM STRUCTURED FINANCE ICBC Securities acted as the Lead Bookrunner and program with a minimum size of CNY 3 billion. Joint Coordinator for Turkey Wealth Fund’s debut EUR NEEDS IN PRIMARY SECTORS, SUCH

INTRODUCTION ICBC SECURITIES 1,000,000,000 Term Loan Facility, one of the most Chinese Yuan Market Activities INTRODUCTION AS INFRASTRUCTURE, ENERGY AND successful and landmark transactions of 2019. In 2019 ICBC Securities-Investment Banking Group HEALTHCARE, PROVIDES FINANCING With a more concentrated sight on the Chinese primarily focused on projects that fitted well into the Belt Yuan in the markets, both because of contemporary TO INDUSTRIAL INVESTMENTS, and Road Initiative where Turkey is strategically located developments and globalization even more on the verge, as a hub connecting Central Asia, Europe and Africa. PRIVATIZATION AND ACQUISITION more counterparties have shown interest in CNHTRY FINANCE TRANSACTIONS IN LINE WITH Futures contracts. With a 35% increase in number of ICBC Securities’ strong capabilities in Turkey and the counterparties which have traded CNHTRY Futures on THE BANK’S STRATEGIES. region combined with ICBC’s knowledge of the Asian the Borsa Istanbul Futures Market, ICBC Securities has 23 markets, contributed to the successful completion of counterparties as the only market-maker. The volume has landmark transactions in 2019, where ICBC Securities been actualized just over 201 million Yuan. navigated Turkish sovereign, FI and corporate clients In 2019, the Group focused on Institutional Sales and along business opportunities in the areas of deal advisory Trading business was to add new accounts and increase OTC Market for Sell-side/Buy-side M&A, Project Finance, Structured foreign and local institutional investors’ Turkish cash Treasury and Trading had a genuine year in 2019 in terms Finance, DCM (with focus on RMB bond market) and equity transactions through ICBC Securities. of OTC markets’ intermediary services. While business advisory on arranging and raising funds through global lines and counterparties being expanded, transaction syndicated loan markets as well as serving domestic and In 2019, the Bank increased its foreign revenues by 48% volumes have increased significantly while at least international clients with excellent brokerage services on YoY, while its domestic institutional revenues surged conserving profitability. Total revenue in OTC transactions and asset management products. by 145% on YoY basis, total execution volume reached has skyrocketed to 277% of what was in 2018; number TL 1,3 billion. of clients using custodian services through the Bank has In order to fully utilize ICBC’s strong global network, increased approximately 50%. Transaction volume has ICBC Securities focused on strengthening cooperation In June, ICBC Securities organized Turkish Consumer surpassed TL 5,7 billions. with ICBC Headquarters, ICBCI HK and ICBC Standard Day for UK and US based institutional investors at London in order to reach out to the Asian companies ICBCS London offices. This was the first investor event seeking to invest in Turkey’s prominent industries such as organized by ICBC Securities. financial services, real estate, logistics and manufacturing.

30 31 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

Project Finance Sarpıncık & Demircili Wind Power Plant Project is to RETAIL BANKING State Banks has also been effective in decreasing the ICBC Turkey’s main focus industries are energy, finance 2 Wind Power Plants located in İzmir named as loan share of Private Banks. infrastructure and healthcare. During 2017 and 2018, the Demircili and Sarpıncık WPPs with a total capacity of 72,5 Bank took part in 4 Hospital Public Private Partnership MW. The licenses for the projects were acquired in May. In this economic environment, ICBC Turkey Retail Projects (İzmir, Kocaeli, Bursa, Elazığ) and the Çanakkale This project covers debt sizing of two operational WPPs. Banking focused on increasing deposit volume Bridge Project. Demircili WPP started its operations in July 2016 and The number of active customers increased (especially demand deposit), number of active Sarpıncık WPP started to operate in October 2016. customers and asset quality in 2019. 2019 projects had the same focus as previous years: In the healthcare sector, the bridge funding of 600-bed by 25% with a sustainable increase. • The number of active customers increased by 25% In the infrastructure sector; the Bank finalized the USD capacity Kütahya PPP Hospital that is the first Bridge with a sustainable increase. 4,5 billion refinancing of Northern Marmara Motorway Loan to Project Finance Loan of ICBC Turkey has closed. • One open product customer number increased by Project, which connects Turkey’s Asian and European The project will be constructed on a land of 150.000. 8%. sides via Istanbul’s 3rd Bridge. The Project is to construct The construction area of the general hospital is • Positive results were achieved in the challenging and operate the motorway between Kınalı-Odayeri 145.000 m2. market conditions in deposits, especially in demand (“Europe Section”) and Kurtköy-Akyazı (“Asia Section”) Retail deposits increased by 31% deposits. with c.200 km by 4x4 lanes. The total project cost of • Retail deposits reached TL 4,430 million, marking an and reached TL 4,430 million NMM is equal to USD 5,6 billion. The project loan increase of 31% YoY.

amount is USD 2,840 billion for Asia Section and USD Number of debit cards increased by • Retail TL Demand Deposits and FX Demand Deposits Section 1 Section

Section 1 Section 1,595 billion for Europe Section. The authority of the increased by 55% and 68% respectively. project is General Directorate of Highways (KGM) which • Car Loan NPL decreased from 3.4% to 1.6%. provides Traffic Guarantee. 22% Number of debit cards increased by 22% and INTRODUCTION • INTRODUCTION number of credit cards increased by 3%. In the energy sector; the Bank closed EUR 260 million privatization financing of the Torul, Kürtül and Doğankent New Products and Services (TKD) Hydroelectic Power Plant Project with 262,7 MW Daily time deposit account (an innovative product which capacity. TKD HPP Projects are operative power plants Retail Banking business has been prioritized at ICBC combines demand and time deposit) is launched in which are tendered by Privatization Administration with Turkey since the acquisition. Being one of the widest order to increase active retail customer number and “Operate and Transfer Method” from EÜAŞ in 2016. overseas institutions with 43 branches in ICBC Global, deposit volume. Since 2016, the power plants have been operated by The Bank knows the importance of Retail Banking TKD Kuzey Enerji Üretim A.Ş. business for ICBC. In order to increase customer satisfaction and reduce operational work for branches Account Opening Tatlıpınar Wind Power Plant Project holds license for Main strategy of ICBC Turkey Retail Banking is; due to Documents and Procedures were simplified for both operating Wind Power Plant with installed capacity of being a smaller bank in the Turkish market arena, to local and foreign customers. 124.8 MW in Balıkesir. The Project is to construct and seek to be an attractive bank in selected areas where operate in several different phases consecutively where a niche market can be exploited. ICBC Turkey aims A payment system project is in progress and it is aimed the 1st planned phase covers construction and operation at laying the fundamentals for a good retail banking to be launched in the first quarter of 2020. The project of 19.5 MW installed capacity with 5 wind turbines. business infrastructure, diversifying its sales and service is part of the bigger process that involves dissemination channels with e-banking, while enjoying the lower cost of ICBC Turkey payment systems capabilities. Designed structure of having small number of branches. to provide an alternative system to the current payment methodologies as a faster, easier and reliable service. Due to reasons of current economic and political environment of Turkey such as fluctuation in exchange rates and decrease in consumer confidence index, retail customers prefer not to take any risk and do not plan to invest in short term in last two-year period. Decreasing domestic consumption and the pricing policy of the

32 33 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

In order to boost remote customer acquisition via DIGITAL BANKING the Bank. In 2019, the number of active users of ICBC website, “Be Our Customer” form to collect customer Turkey’s mobile banking service increased by 158%. ICBC TURKEY AIMS AT LAYING information is designed for prospect customers. THE FUNDAMENTALS FOR A The unique ATM waiver campaign, which was launched Transactions realized through digital channels All necessary processes and developments regarding GOOD RETAIL BANKING BUSINESS together with mobile banking, attracted new customers citizenship applications for foreigners have been with an increased loyalty. In 2019, critical functions were INFRASTRUCTURE, DIVERSIFYING completed in February 2019 and application acceptance reached 71% as of end of 2019. added to Mobile Branch such as loan payment, buy & has been started. ITS SALES AND SERVICE sell mutual fund and open daily time deposit account to HANNELS WITH E-BANKING, attract more customers. An agreement with an insurance Fintech company was WHILE ENJOYING THE LOWER signed. With this collaboration, the Bank will have easy For promoting the ICBC Turkey Mobile Branch, and quick access to many insurance offers (22 different COST STRUCTURE OF HAVING The number of active users of ICBC Turkey’s an internal campaign is launched to promote the insurance company) and will have the chance of finding SMALL NUMBER OF BRANCHES. mobile banking service increased by application. Within this campaign all branch employees and choosing the most suitable product. Sales will promoted our new mobile banking application and begin via branches and enlarge to Mobile Branch. gained points according to the number of customers 158% in 2019. logged in for the first time. The campaign contributed to To increase the marketing ability and competitiveness of the mobile branch user target realization vigorously.

branches; Section 1 Section

Section 1 Section In the last decade, the rise of digital technologies In order to contribute to the active customer target, • Operational process and workflow of mortgage loan fundamentally transformed financial markets in Turkey. remote customer acquisition mechanism is launched with pre-interest payment revised and announced to Within this scope, one of the strategic objectives of ICBC in the Bank’s website, icbc.com.tr on July 2019. With INTRODUCTION INTRODUCTION all branches. Turkey is to use the digital channels to give excellent this mechanism, the prospect customers initiated the • School Payments Implementation Instruction service to its customers. acquisition process just by giving a few information and updated. In addition, School Payments proposal selecting the branch they want to work with. prepared for branches in order to acquire customers ICBC Turkey aims to provide an excellent and the fluent and institutions easily. experience for the customers through digital channels, by Telephone Branch is Transformed to placing the customer oriented mindset at the heart of all a Solution Center Retail Banking started to serve SME segment customers its processes. Along its branches, the Bank’s customers Telephone Branch is transformed to a Solution Center as of May 2019. In this context, necessary workflows have the opportunity to receive service through Internet to increase service quality and efficiency. Necessary and documents were prepared and announced to all & Mobile Branch, ATMs, Telephone Branch and official improvements are continuously done under Learn-Fix- branches. Additionally, SME credit rules instructions web site icbc.com.tr on a 24/7 basis. Test-Launch iteration cycle, which decreased number of were revised and financial analysis trainings for branch calls and complaints. In addition to all, IVR (Interactive marketing teams were organized. SME loan risk balance In order to increase the efficiency and profitability of the Voice Response) system is simplified to decrease waiting reached to 12 Million TL with a total approved limit of Bank and customer loyalty, ICBC Turkey continued to times and to increase customer satisfaction. 154 Million TL and 271 SMEs were acquired as new invest on digital channels in 2019. As a result of these customer as of December 2019. efforts, transactions realized through digital channels reached 71% as of end of 2019. ICBC TURKEY AIMS TO MEET THE NEEDS ICBC Turkey Retail Banking will continue to manage AND EXPECTATIONS OF ITS CUSTOMERS its products,and channels in line with bank strategies Mobile Branch has Become the Primary in order to enhance the number of active customers, Service Channel BY MAKING USE OF DIGITAL PRODUCTS income share in total of the bank and adequate deposit ICBC Turkey Mobile Branch was renewed and launched AND SERVICES. volume for funding needs. in 2018. The Bank has worked to a strategy of being one of the most popular banks and gaining new customers through the services offered on the Mobile Branch with its user-friendly design. As a result of the efforts, Mobile Branch has become the primary service channel of

34 35 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

FINANCIAL TECHNOLOGY • Initiation of ICBC Global Core Banking Systems CREDIT AND INVESTMENT • Leading the related parties to the reduction or DEPARTMENT (FOVA) to provide enhanced capabilities of products elimination of the amount of loans which have supply, business expansion and risk control for ICBC become NPL for any reason, obtaining the objectives Turkey. of NPL ratio and its amount that is set by ICBC CREDIT AND INVESTMENT MANAGEMENT • Initiation WeChat Payment Project that will provide Headquarters. ICBC TURKEY FOCUSED DIGITAL more convenient and innovative service model for DEPARTMENT CLOSELY FOLLOWED TRANSFORMATION TO WELL-INTEGRATE customers. THE CUSTOMERS IN POTENTIAL RISK The following major achievements were carried out • Implementation of new functionality of mobile in 2019; FINANCIAL ECOSYSTEMS THAT WILL BE CUSTOMER LIST IN 2019 AND THE RATIO banking application. OF POTENTIAL RISK CUSTOMERS RAPIDLY CHANGED, TRANSFORMED AND • The customers in potential risk customer list were ACROSS THE INDUSTRY AS WELL IN 2019. While technology used as a major part of the Bank’s DECREASED FROM 4.26 TO 2.22 BY THE closely followed in 2019 and maximum level had been business, laws and regulations is an issue that needs END OF 2019. achieved in the collection of the said customers. While to be managed well within the risk and compliance the ratio of potential risk customers at the end of 2018 management. As a high-priority strategic objective, was 4.26, this ratio decreased to 2.22 by the end of Data as a “business precious asset” processed by the the Bank also prioritizes information and data security. Credit and Investment Management Department 2019. banks are dramatically increasing every year. One of the Many systems implemented in the last five years and is responsible for Post-loan Management (Credit • As a result of the efforts to reduce the NPL amount most important issues of today is digital transformation. important steps has also taken within the scope of Monitoring, Potential Risk Customer Management, and rate throughout the year, the Bank`s 2019 year-

ICBC Turkey closely follows the ICBC digital information technologies plans in 2019: NPL Management), Credit Policy Preparation, Credit end NPL ratio is 1.89%. (Banking sector average NPL Section 1 Section

Section 1 Section transformation strategy that already initiated by ICBC Assessment, Branch Self Inspection, Non-interest Bearing ratio 5.23% for November 2019.) Headquarter. Accordingly, ICBC Turkey focused digital • End-to-end data loss and prevention solutions have Asset Management, Archieve Management. transformation to well-integrate financial ecosystems been implemented. In addition; INTRODUCTION INTRODUCTION that will be rapidly changed, transformed and across the • A central information and cyber security monitoring Credit and Investment Management Department is the industry as well in 2019. and alerting system have been implemented. leading department in NPL Management and Potential • Post-loan Management and other credit policies • The extending scope of central access management Risk Customer Management. The main goals of the have been prepared and/or revised on regular basis Financial Technology Department included many projects activities continued. Department are; throughout the year. in to the project portfolio that address to make the • Network security has strengthened with • Our department have centralized all Istanbul branch information technology infrastructure convenient for implementation of network level access control. • Not allowing the customers in the potential risk legal-person customer's credit archives, and have digital transformation from many aspects. Reforming • Cyber Intelligence Assessment process including re- customer list to turn into NPL. Liquidation and centralized more than 90% of retail customer credit ICBC Turkey’s Information Technology (IT) infrastructure establishment of bank level Cyber Incident Response restructuring plans are set for each customer archives of Istanbul branch in 2019. and services to better meet ever-changing stakeholder Team has been activated. individually and effective monitoring is provided after • In 2019 three properties were sold with total profit requirements and support the achievement of mission • Securing of remote access to the Bank’s network the necessary approvals have been received, until the of TL 1,512,868. was in the priority. Increased protection level of increased. risk is removed or the potential customer is removed information assets, improved data and information • The test for HQ Terminal Management System from the list. security processes and enhance information security completed and pilot deployment, which will provide related internal controls on IT systems under the well- higher level data protection and information security, controlled budget and effective resource management started. was also in high priority. • Provided on-site information security training for all employees. For this purpose Financial Technology Department • The test for implementation of specific data protection invested new generation hardware, increased data components for core banking systems such as data processing capability, implemented new generation voice masking, multi level access protection, and encryption communication infrastructure and prepared technology completed. park that need to be ready for digital transformation. The preparation of technology infrastructure is also included for staged transformation of business management systems such as;

36 37 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

OPERATION MANAGEMENT business functions undertaken by the ex-Organization HUMAN RESOURCES Bank intends to create a work environment suitable for DEPARTMENT AND OPERATIONS Department, thus focusing on the core functions of its employees to unravel their energies and creativity and CENTER operation management. present their competencies.

Basing on this, citing for ICBC Group’s duty division ICBC TURKEY KNOWS THAT ITS POSITION The Bank has adopted gross salary policy for base and between operation management function and centralized IN THE INDUSTRY AND ITS CORPORATE flexible salaries. The base salaries are paid at the end of IN 2019, OPERATION BUSINESS LINE processing function, the organizational structure of HO each month and flexible payments under the name of IDENTITY HAVE BEEN ACHIEVED WITH SUCCESSFULLY REALIZED THE SAFE, Operation, was reconstructed by unifying the group’s Performance Appraisals & Bonus Payments in quarter operation system and local management fundamentals. THE CONTRIBUTION OF ITS EMPLOYEES based in accordance with employee’s performance. STABLE AND EFFICIENT BACKGROUND AND BELIEVES THAT EACH EMPLOYEE Furthermore, in addition to this system, at the initiative, OPERATION FOR THE WHOLE BANK. Operational Risk Control Management was some groups are granted by incentive bonuses to WORKING WITH AN PERSPECTIVE THAT Improved strengthen their sprit in 2019, which named as “Incentive The initial construction of the professional self-inspection EVERYONE HAS TO BE THE “LEADER OF Premium” “Piece by Piece” and “Credits in Follow-up Main targets of the Operation Business line in 2019 were; mechanism was completed at the beginning of HIS/HER WORK”, IS ESSENTIAL. Process Incentive Premium” based on employees target • providing the whole bank with a basic platform for 2019. Since then, Headquarter’s self-inspection work achievements. operations of all services and products, deployment has taken as an opportunity and combined • realizing the safe, stable and efficient operation in with local business characteristics. Finally ICBC Turkey’s Recruitment and Career Management

long-term; self-inspection plan supplemented and adjusted with Under the objective of turning ICBC into a global leading Job descriptions, authorizations and responsibilities Section 1 Section Section 1 Section • adjusting operation functions and reconstructing the digestion of Headquarter core operational risk points, bank with the best profitability, performance and prestige of the Bank’s personnel have been determined based organizational structure, accordingly implemented the first and comprehensive and in accordance with the corporate philosophy of on each title and position. General human resources to build an integrated and efficient operation system; professional self-inspection with benchmarking of HQ to focusing on the primary elements of our people, ICBC policies, being implemented in order for the Bank to

INTRODUCTION • INTRODUCTION publishing branch operation assessment standards improve the Bank’s overall operational risk control. executes a strategy of “A Bank of Best Talent” to build a perform in the best way possible, are based on the and periodically carry out them, workplace for all staff to work and grow with the Bank. principles summarized below and published on the • to improve the quality and efficiency of branch Branch Operation Evaluation Rules were Bank’s intranet environment as well as on its website. operation management; Formulated and Published ICBC Turkey determined bank’s vision, mission and • constructing operation self-inspection mechanism, to The document refined branches’ operational assessment employee value proposition’s (EVP) in the light of the ICBC Turkey believes that it will achieve its goals with a control the operational risk strictly; standards, to promote the improvement of operational Turkey’s current situation and in order to follow its main personnel structure in which employees place importance • pushing the construction of operation management management efficiency and optimization of resource shareholder ICBC Group’s vision and mission. to a future in a prominent bank, who knows that their indicators set, allocation of branches. career development will come with disciplined and • supporting the Bank’s products and services ICBC Turkey Bank Human Resources Management acts intense training and they value human relationships. innovation, Supported the Bank’s business transformation and in coordination with the Top Management and other • to promote the contribution of operational development. Realized the extension of the back-office Departments of the bank in line with the Bank’s business The Bank knows that its position in the industry and management value. service, appropriately matching with various product and goals and strategies. ICBC Turkey’s EVP is mainly consists its corporate identity have been achieved with the business innovations of the bank, continuously improved of compensation which includes bonuses, promotions contribution of its employees and believes that each In 2019, the Operations Business Group successfully the quality and efficiency of back-office business and benefits includes insurance, allowances, paid time employee working with an perspective that everyone has realized the safe, stable and efficient background processing, strongly supported the front-office business off and also career training and education at work, to be the “Leader of His/her Work”, is essential. Trainings operation for the whole bank and completely reached lines in expanding customer marketing. evaluation and feedback that help employees to improve to be provided and the criteria for promotion for anyone the annual targets, consolidating the foundation of their skills. starting to work at ICBC Turkey Bank, has already been operation management, enhancing internal operation Telephone Banking was transferred to Digital Banking set. All employees have knowledge about their career risk control and improving the Bank’s operational quality Department to support and realize the integration of Human Resources Policies paths. The Bank provides feedback to its employees and efficiency. incoming and outgoing calls centralized processing and The Bank’s human resources policy is to determine regarding their career development through open management. and increase the salaries based on the efficiency and performance assessment system. Main Achievements of 2019 happiness of its employees in accordance with the Bank’s A localized and characterized operation system was built. For centralized operations, the retail loan disbursement targets and strategies and by using the performance Not only vertical promotions are available for the Bank’s Referencing to the division of functions of ICBC Group project was launched within 2019. Resource inputting assessment system, career planning, training and similar personnel, but horizontal career paths also exist. Face to Operation, the Business Line comprehensively sorted out and technical demand designing will be ongoing in 2020. human resources sources. With this understanding, the face, interviews are made with the personnel each year and stripped away all administrative and non-operational

38 39 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

2019 Activities Human Resources Profile in 2019 With the guidance of Head Office of ICBC Group, Management Committee and the support from all Departments and Branches, Human Resource employees work The number of 358 Department completed the first stage of “Human at Branches Resource Improvement Project” with the assistance the personnel of Korn Ferry, in 2019. ICBC Turkey Human Resources policies has been analyzed in order to improve processes 373 employees work according to employees needs and to initiate more 731 at Head Office efficient HR Management.

In 2019 the Salary Adjustment and Title System Gender Distribution Implementation has partially completed. And the Promotion- Salary Adjustment and Training Regulations have been revised and will be regulated within next year. 395 336 Women Men Finally, Human Resources Team kicked of a new software 54% 46%

system for employee database, which will bring the Section 1 Section

Section 1 Section technology to infrastructure of the team. The average age of the Bank’s personnel is

INTRODUCTION Training and Development Activities INTRODUCTION in 2019 and thereby, an open performance assessment system The Bank’s 2019 training process consisted of the training 3 7,5 is applied. During said process, the Bank’s personnel programs provided by the Bank’s internal instructors, ICBC TURKEY CREATES SUSTAINABLE are evaluated based on their personal development, professional training companies, conferences and competencies and targets and the results are shared with ENVIRONMENT FOR THE EMPLOYEES seminars held by the Banks Association of Turkey (BAT). The average age of the The average age of the them. In accordance with the Bank’s human resources TO SHOW THEIR TALENTS, ABILITIES Bank’s personnel is branches is policy, each personnel is treated equally and no one is AND CREATIVE NATURE BY During 2019 totally 3,330 employees enrolled in training discriminated. programs, including in-house training, outside training IMPLEMENTING EFFICIENT, EMPLOYEE and e-learning. 7,73 8,89 Social Rights and Benefits ORIENTED PRACTICES AND ADOPT Years Years • All of the personnel are granted with private health PRINCIPLES TO HAVE HIGHLY On this basis, e-learning was provided to 1,320 participants insurance and life insurance. in 18 different topics. In-house and external training were MOTIVATED, LOYAL EMPLOYEES. • Personnel working at the branches of the Bank receive provided to 1,228 participants in 121 different topics. Education profile in 2019 meal cards of the Bank’s contractual supplier. The personnel working at the Head Office may use As of 31 December training time per employee has been • High School 10.9% the cafeteria located in the Headquarter. calculated as 5.36 hours in advance. Two-Year • All of the personnel are granted with Transportation Awards Degree 6.3% Fee. • Personnel receive awards based on 5, 10, 15, 20, 25 Training Programs Participations Undergraduate 68.4% • Clothing aid is provided to Security Staff and the and 30 years of seniority. Support Personnel twice a year. The “CEO Bonus Payment” is made to the personnel Double Major • External Training 779 0.1% • All of the personnel are granted with Birthday Gift at the position of manager and below. Graduate Card. • World Contest has been organized twice a year and In-house Training 1,228 12.4% winners awarded. PhD E-Learning 1,320 0.4% • The “Best Commercial Bank Award in Turkey” has Other been allocated to all of the employees. Abroad: 3 1.3%

40 41 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

SHARE CAPITAL AND THE THE SUBSIDIARIES AND SHAREHOLDING STRUCTURE THE ASSOCIATES

Shareholding structure of our Bank as of the dates December 31st 2018 and December 31st 2019, Company Affiliates Field of Activities Share (%) are specified below.

ICBC Turkey Yatırım Menkul Investment Banking 99.998 Finance Sector Değerler A.Ş.

Shareholding Trade Name of the Shareholder - 2018 Share (%) Amount (in full TL) ICBC Securities, a subsidiary of ICBC Turkey Bank A.Ş ICBC Securities is ideally placed as a regional

Industrial and Commercial Bank of China Limited* (ICBC) 798,428,227 92.84 was incorporated in 1996 in İstanbul. Its paid-in capital investment banking management platform to serve Section 1 Section

Section 1 Section is 76.000.000.-TL. ICBC Securities provides a regional sovereign, financial institution, and corporate clients Public 61,571,773 7.16 platform for wide range of investment banking services with unparalleled financing power and ability to create 860,000,000 100.00 Grand Total including M&A advisory, debt capital markets, equity innovative structures using ICBC’s global capabilities, INTRODUCTION INTRODUCTION capital markets, project finance and syndicated loans as strong overseas network composed of various ICBC Shareholding Trade Name of the Shareholder - 2019 Share (%) well as securities brokerage, over the counter financial investment banks and commercial banking centers. Amount (in full TL) products and cross currency and interest rate hedging solutions to sovereign institutions, corporate and retail Through its subsidiary ICBC Turkey Asset Management Industrial and Commercial Bank of China Limited* (ICBC) 798,428,227 92.84 customers. company, alternative investment instruments are Public 61,571,773 7.16 provided with different risk and return categories and

Grand Total 860,000,000 100.00 ICBC Securities offers full range of brokerage services discretionary asset management services to corporate through 21 branches across Turkey with 21 years and retail clients besides pension funds. (*) The company named Industrial and Commercial Bank of China Limited, is the legal entity shareholder of the Bank holding qualified shares. of expertise to local clients as well as international institutional clients through strategic alliances with ICBC ICBC Securities is licensed as a Broadly Authorised There is no share of our Bank which has been acquired Shares Held by the Managers Group investment banks based in London and Hong Securities company by Capital Markets Board on by it within the scope of article 379 of the Turkish According to the share book records regarding the Kong. January 1st 2016 together with enlarging its scope of Commercial Code no.6102. shareholding structure of the Bank, there is no share held activities into investment banking. by the Board Members, the General Manager and the ICBC Securities plays an important role in financing and Assistant General Managers. refinancing of large infrastructure, energy investments as well as M&A financing in Turkey and its region. The The share capital of the Bank amounts to 860,000,000- Company is active in coordination and book-running of Turkish Liras. This share capital is divided into syndications and bond issuances for sovereign, financial 8,600,000,000 shares, each with a nominal value of and corporate institutions. 10 (ten) Kuruş. Shares of the Bank are traded at Borsa İstanbul A.Ş. (Stock Exchange) and are listed on the Stock ICBC Securities provides research and sales reports for Exchange, since the date of May 23rd 1990. international clients along with corporate road shows for public companies. ICBC Securities is appointed as market maker for Yuan / TL future contracts in Borsa Istanbul.

42 43 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

ORGANIZATIONAL ORGANIZATIONAL STRUCTURE STRUCTURE

Board of Directors

Chairman

Section 1 Section 1 Section INTRODUCTION INTRODUCTION General Manager

Audit Committee Remuneration Credit Corporate Governance Board of Directors Risk Committee Committee Committee Management Committee Deputy General Manager Assistant General Manager

Internal Internal Risk Corporate Retail Digital Project Investment International Financial Financial Asset and Economic Board of Human Credit and Credit Operation Operations Legal Financial Financial Technology Administrative Executive Audit Control and Management Banking Banking Banking and Banking Business Institutions Market Liability Research Director's Resources Investment Allocation Management Center Affairs Control and Technology Center Affairs Office Department Compliance Department Department Department Department Cross Department Department Business Department Department Department Office Department Management Department Department Department Accounting Department Center Department Border Department Department Department Finance Department

44 45 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

INFORMATION ON THE INFORMATION ABOUT AMENDMENTS IN THE PRIVILEGED SHARES AND ARTICLES OF ASSOCIATION, THE SPECIAL THE VOTING RIGHTS AUDIT AND THE PUBLIC AUDITS AND MATERIAL LAWSUITS BROUGHT AGAINST THE BANK

According to article 35 of the Articles of Association of According to article 19 of the Articles of Association CHANGES IN THE ARTICLES our Bank, of the 5 members of the Board of Directors of our Bank upon written demand of the shareholders OF ASSOCIATION (excluding the General Manager); 3 members shall holding at least one twentieth of the Bank’s share be elected by the General Assembly among the capital, indicating the obligatory reasons and the No changes were made in Bank’s Articles of Association candidates to be nominated by Group (A) shareholders, agenda; the Board of Directors shall be obliged to invite in 2019. provided that 1 of them holds the independent member the General Assembly for a meeting, or if a General qualifications specified in the Corporate Governance Assembly meeting is already scheduled, to include the INFORMATION RELATED TO THE principles of the Capital Markets Board and 2 members articles, they demand to be discussed, in the agenda. MATERIAL LAWSUITS BROUGHT

shall be elected by the General Assembly among the The shareholders may, via notary public, request an AGAINST THE BANK DURING THE Section 1 Section Section 1 Section candidates to be nominated by Group (B) shareholders, item to the agenda of the General Assembly Meeting YEAR 2019 AND THEIR POTENTIAL provided that 1 of them holds the independent member be added. The request for an additional agenda item OUTCOMES qualifications specified in the Corporate Governance should be submitted to the Board of Directors prior INTRODUCTION INTRODUCTION principles of the Capital Markets Board. to depositing the registration fee of the Turkish Trade There is no significant lawsuit file, commenced against Registry Gazette with respect to convening a General our Bank during the year 2019. The table which shows group (A) and (B) shares within the Assembly. If the request of these shareholders pertaining scope of the shareholding structure of our Bank, is given to the convention of a General Assembly Meeting or below. the addition of an item to the agenda is rejected by INFORMATION RELATED TO THE the Board of Directors, or if an affirmative reply is not SPECIAL AUDIT AND THE PUBLIC given within seven work days, the commercial court AUDIT CONDUCTED IN THE YEAR of first instance that has jurisdiction over the address 2019 of the headquarters of the Bank may resolve upon the convention of a General Assembly meeting upon an Saving Deposit Insurance Fund (TMSF) premium and application by the same shareholders. credit limit oversight reviews has been conducted by Banking Regulation and Supervision Agency (BRSA). At the Ordinary and Extraordinary General Assembly Financial structure audit studies have started by the end meetings of our Bank, shareholders or their proxies shall of the year. each have one voting right and there shall not be any privilege with regards to votes. Bank Information Systems, Banking Processes and financial audit for the accuracy of the financial statements Nominal Nominal Total Nominal % Total % % Name / Trade Name Of The Shareholder Shareholding Shareholding Share Capital Share Group A Group B have been conducted by the independent audit firm, Group A (Tl) Group B (Tl) (Tl) Rate Shares Shares KPMG. Industrial and Commercial Bank of China Limited 540,428,227 258,000,000 798,428,227 89.77 100 (ICBC)* 92.84

Other (Public) 61,571,773 None 61,571,773 7.16 10.23 None

Industrial and Commercial Bank of China 602,000,000 258,000,000 860,000,000 100.00 100.00 100.00 Limited (ICBC)*

(*) The company named Industrial and Commercial Bank of China Limited, is the legal entity shareholder of the Bank holding qualified shares.

46 47 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

RESEARCH AND DEVELOPMENT PRACTICES

ICBC Turkey attaches importance to corporate banking, which constitutes majority portion of its operations, as well as retail banking. All types of new products have ICBC Turkey is an been developed and offered to the Bank’s customers with the view of customer satisfaction and considering the developments related to the retail banking business outstanding symbol

in the markets and the economy. of the financial Section 1 Section Section 1 Section communication

INTRODUCTION between China INTRODUCTION and Turkey.

Section 2

MANAGEMENT AND CORPORATE PRACTICES

48 49 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

GENERAL MANAGER AND BOARD OF DIRECTORS ASSISTANT GENERAL MANAGERS AND TOP MANAGEMENT

Date of Banking or Name- Educational Areas of Position Commencement Management Surname Status Responsibility to Work Experience

Member of the Undergraduate Degree Vice Chairman Shaoxiong Xie Board of Directors- 29.11.2018 Abroad, Graduate 28 of the Credit General Manager Degree Abroad Committee NAMES AND SURNAMES, TERMS OF OFFICE, RESPONSIBILITY AREAS, EDUCATIONAL BACKGROUND AND PROFESSIONAL EXPERIENCE OF THE CHAIRMAN AND MEMBERS OF THE BOARD OF DIRECTORS, AUDIT Deputy General Undergraduate Degree Financial Affairs, Jinhong Li Manager/Assistant 25.07.2018 Abroad, Graduate Degree 21 Operations COMMITTEE MEMBERS, GENERAL MANAGER AND THE ASSISTANT GENERAL MANAGERS AND THE General Manager Abroad and Legal

OFFICERS OF THE DEPARTMENTS WITHIN THE SCOPE OF THE INTERNAL SYSTEMS

Section 2 Section 2 Section

Domestic Undergraduate Treasury and Assistant General 02.11.2007 Degree - Boğaziçi University, 29 Investor Hüseyin H. İmece Manager Department of Economics Relations Group MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE CHAIRMAN AND MEMBERS OF

THE BOARD OF DIRECTORS Domestic Undergraduate Assistant General Bozok 21.05.2010 Degree - Ankara University 30 Loans Group Manager Evrenosoğlu Department of Economics

Whether He/ Domestic Undergraduate She is an Date of Banking or Degree - İstanbul Technical Name- Educational Areas of Independent Assistant General International Position Commencement Management 04.01.2005 Uni. Mining Engineering 26 Surname Status Responsibility Membe D. Halit Döver Manager Business Group to Work Experience Domestic Graduate Degree – of the Board İstanbul Technical University of Directors Domestic Undergraduate Degree-METU-Faculty Chairman of the Credit Undergraduate Degree Not an Assistant General of Architecture Domestic Retail Banking Chairman of the Committee, Member Kadir Karakurum 09.01.2017 18 22.05.2015 Abroad, Graduate 22 Independent Manager Graduate Degree –METU- Group Xiangyang Gao Board of Directors of Risk Management Degree Abroad Member Social Sciences Institute Committee of BoD Department

Vice Chairman Mr. Yubao Chen, who was the Deputy of General Manager and Assistant General Manager resigned from his duties as of January 31th 2020. Member of Undergraduate Degree of the Credit Not an the Board of 29.11.2018 Abroad, Graduate 28 Committee, Member Independent Shaoxiong Xie Directors-General Degree Abroad of Risk Management Member Manager MANAGERS OF THE UNITS Committee of BoD Chairman of the WITHIN THE SCOPE OF THE Audit Committee, Undergraduate Degree INTERNAL SYSTEMS Member of the Member of the Credit Independent 02.01.2017 Abroad, Graduate 23 Peiguo Liu Board of Directors Committee, Member Member Degree Abroad of Risk Management Committee of BoD Date of Banking or Name- Educational Areas of Position Commencement Management Member of the Surname Status Responsibility Corporate Governance to Work Experience Committee, Member Undergraduate Degree of the Remuneration Not an Member of the Managing Director Jianfeng Zheng 22.5.2015 Abroad, Graduate 22 Committee, Alternate Independent Domestic Undergraduate Board of Directors of the Board of 01.12.2017 16 Board of Inspections Degree Abroad Member of the Credit Member Celal Efe Şeran Degree Committee, Member Inspections of Risk Management Committee of BoD Managing Director Domestic Undergraduate Internal Control Internal Control and Member of the Audit Gürdoğan 01.09.2003 Degree, Domestic Graduate 24 and Compliance Compliance Committee, Chairman Yurtsever Degree Department of the Remuneration Independent Undergraduate Degree Committee, Alternate Independent Ying Wang Member of the 22.05.2015 Abroad, Graduate 27 Managing Member of the Credit Member Domestic Undergraduate Board of Directors Degree Abroad Director of Risk Committee, Member 01.02.2009 Degree, Domestic 26 Risk Management Berrin Gencal Management of Risk Management Graduate Degree Committee of BoD Department

Mehmet Hilmi Güler, who was the Independent member of the Board of Directors resigned from his duties as of October 25th 2020. As of February 24th 2020 Serhat Yanık has been appointed as an Independent Board member with the decision of the Board of Directors.

50 51 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

PROFILES

PROFILES OF THE CHAIRMAN AND MEMBERS OF THE BOARD OF DIRECTORS, AUDIT COMMITTEE MEMBERS, GENERAL MANAGER AND THE ASSISTANT GENERAL MANAGERS AND THE MANAGERS OF THE UNITS WITHIN THE SCOPE OF THE INTERNAL SYSTEMS

BOARD OF DIRECTORS

Xiangyang Gao Shaoxiong Xie Peiguo Liu Jianfeng Zheng Ying Wang Section 2 Section Section 2 Section Chairman of the Board of Directors General Manager/Board Member Member of the Board of Directors Member of the Board of Directors Independent Member of the Board of Directors MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Mr. Jianfeng Zheng graduated from Mr. Xiangyang Gao graduated from Beijing University Mr. Shaoxiong Xie graduated from Xiamen University Mr. Peiguo Liu graduated from Ms. Wang graduated from Liaoning Shandong University of Finance and Tianjin University Industrial Business International Finance Undergraduate Program in 1997 Department of Finance/School of Economy in 1990 and University in 1986, she graduated Economics–Investment Economics Administration Undergraduate Program in 1988, from Tianjin from Shaanxi Finance Institute in and from Beijing University Business Administration received his Master’s Degree in Business Administration Management Program in 1996 and University Industrial Business 1989 and received a Master`s degree Graduate Program (MBA) in 2004. Mr. Xiangyang (EMBA) from Hunan University in 2010. Mr. Xie started to received a master’s degree from Administration Graduate Program in Economics. Ms. Wang joined Gao has started to work at Industrial and Commercial work at Industrial and Commercial Bank of China Limited Beijing University of Technology- in 1991 and from England York ICBC in 1989. She served in several Bank of China Limited (ICBC) in 1997 and he worked, (ICBC) in 1990 and worked respectively as Customer MBA Program in 2005. He joined University Finance Graduate Program positions including Deputy Chief ICBC in 1998. Mr. Liu served in respectively, as a Clerk at the Headquarters Banking Manager/Branch Manager in ICBC Hunan Branch in 2006. He worked, respectively, as of division of International Business several positions including Asset the Vice Chairman of the Operations Department, Chief of division of Audit Transactions Department between July 1997-September between September 1990-November 2010, as Deputy Management Department, Asset Evaluation and Market and Industry and Supervision Bureau, Internal Audit 1997, Senior Manager at the Headquarters Human General Manager in ICBC Malaysia between December Risk Management-Monitoring Analysis Department Unit at the State Bureau, Manager of Audit Department Development Bank Headquarters Resources Department between July 1997-October 2010 - December 2016 and as an expert in ICBC Hunan and Inspection Department, Risk of ICBC Sydney Branch. She was Reporting Department, Operational between 1998-2000, as the Vice 2001, Senior Manager at Luwan District Branch and Branch between January 2017-October 2018. Mr. Xie Chairman of the Bank of China appointed as Specialist of the Strategic Risk Measurement Management Fuxing Road Sub-Branch (Shanghai) between August has been appointed as General Manager of ICBC Turkey Agricultural Department Audit Board Management and Investor Relations Department. Then he came to Turkey 2000-May 2001, Senior Manager at the Headquarters on November 29th 2018 and he has also been serving as Unit at the Basic State Council State Department ICBC Head Quarters. Ms. as the member of the Tekstil Bankasi Financial Institutions Audit Boards Wang has served as an Independent International Trade Department between October Board Member and Vice President of Credit Committee Project Team, then he appointed as (Under the Central Financial Business Member of the Board of Directors 2001-August 2008, Chairman at Ningde City Branch and Member of Risk Management Committee of BoD. the Coordinator of General Secretariat Committee) between 2000-2002. of ICBC Turkey on May 22nd 2015, between August 2010-February 2014, Vice Chairman at in ICBC Turkey. He has served as a Mr. Zheng has started to work as presently she also serves as a Member ICBC Fujian Branch between December 2011–May 2015. Member of the Board of Directors Industrial and Commercial Bank of of the Audit Committee and Member since January 2nd 2017, presently China Limited (ICBC) in 2002 and he of Risk Management Committee of Mr. Xiangyang Gao has been appointed as the General worked, respectively, as Unit Chief he also serves as a Member of the BoD and the President of Manager of ICBC Turkey on the date of May 22nd 2015 at the Office of Board of Supervisor, Credit Committee and Member of the Remuneration Committee. th Audit Board Surveillance Commissar, and pursued his duty until July 24 2018. Currently, he Risk Management Committee of Deputy General Manager of the Office is the Chairman of the BoD, Credit Committee and Risk BoD. Mr. Liu has been appointed as of Board of Supervisor. Since 2014, he Management Committee of BoD. Furthermore, he has President of the Audit Committee on works as a specialist at the Strategic th been appointed as a Member of the Board of Directors at July 24 2018. At present, he is also Management and Investor Relations concurrently a Member of the Board Department at ICBC Headquarters and ICBC Turkey Yatırım Menkul Değerler A.Ş., an affiliate of of Directors of ICBC Yatırım Menkul he continues to serve as non-executive nd ICBC Turkey, on the date of May 22 2015 and he serves as Değerler A.Ş. member of the Board of Directors the Chairman of the Board of Directors of ICBC Yatırım. and non-executive supervisor at some ICBC Group companies. Mr. Zheng has been elected as the Member of the Board of Directors on the date of May 22nd 2015 and at the same time, he serves as a Member of the Corporate Governance Committee, Risk Management Committee of BoD and a Member of the Remuneration Committee. 52 53 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

SENIOR MANAGEMENT

Jinhong Li Hüseyin H. İmece Bozok Evrenosoğlu D. Halit Döver Section 2 Section Section 2 Section Assistant General Manager / Financial Affairs / Assistant General Manager Assistant General Manager (Loans) Assistant General Manager (International Business) Operations and Legal Department / (Treasury and Investor Relations)

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Deputy General Manager MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE

Jinhong Li graduated from Guangxi Normal University Hüseyin İmece graduated from Boğaziçi University Bozok Evrenosoğlu graduated from Ankara University Halit Döver, graduated from Istanbul Technical University Political and Economics Faculty-Department of Law in 1990 and started his professional career the same School of Political Sciences Department of Economics of Mining Engineering in 1988 and obtained his post- in 1995 and Guangxi Normal University Master of year at Yapı ve Kredi Bankası, where he was promoted in 1983. Mr. Evrenosoğlu started his career in the Board graduate degree from the same university. Between 1990 Philosophy programme in 1998. Mrs. Li started to work at to Assistant General Manager in charge of Treasury of Auditors of a private bank in 1985 and joined ICBC and 1993, he worked as a certified engineer in different Industrial and Commercial Bank of China Limited (ICBC) in 1999. He also undertook the management of the Turkey as Assistant Manager of ICBC Turkey İzmir Branch companies in South Africa and started his banking career Nanning Branch in 1998 and worked respectively as staff bank’s Financial Institutions and Investor Relations in January 1990. Subsequently, he worked as a Branch as Manager and Director in the Correspondent Relations between July 1998-May 1999 in Nanning Branch Law department. In the same period, Mr. İmece acted as Manager in several banks and rejoined ICBC Turkey as and International Marketing Department at Pamukbank Department, as manager between June 1999-December an Executive Board Member in the same bank’s local the Branch Manager of ICBC Turkey İzmir Branch in 2004. in 1993. He started working for ICBC Turkey as Head of 2005 in Guangxi Branch Law Department, as Deputy Portfolio Management, Leasing, Factoring and Real In March 2005, he was promoted from his position of the International Relations Department in 2000 and was General Manager between January 2006-June 2013 in Estate Investment Trust subsidiaries, as well as foreign Branch Manager of the ICBC Turkey İzmir Branch to the appointed as Assistant General Manager responsible for Guangxi Branch Law Department, as General Manager subsidiaries in Germany, Netherlands, Russia and Ireland. Assistant General Manager Responsible for the Loans the International Business Group in 2005. He also served between July 2013-April 2015 in Guangxi Branch Law He served as member at the bank’s Asset-Liability position, effective as of May 2010. as Customer Relations Coordination Officer from 2015 to Department and as Deputy General Manager between Committee, as well as Technology, HR and Commercial 2017. May 2015-April 2018 in Nanning Branch. Mrs. Li has Committees. He played a leading role in the bank’s been appointed as Deputy General Manager and merger with Koçbank. He joined Tekstilbank in 2007 Assistant General Manager in charge of Operations and as AGM in charge of Treasury, where he oversaw physical, Legal departments on July 25th 2018. Ms. Li currently functional and procedural changes in the department, responsible for Operations and Legal Departments as well as establishment of Investor Relations department. has been appointed as Assistant General Manager In 2014, he played an active leading role in the bank’s responsible for Financial Affairs, Legal and Operations sale to ICBC, one of world’s most prominent banks departments as of December 4th 2018. and the takeover has been successfully completed in 2015. Continuing at the same capacity after ICBC’s takeover, he contributed significantly to the orientation and integration process and worked on issues such as asset quality, profitability, risk and capital management. He still serves as a member of ICBC Turkey’s Executive Management.

54 55 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

MANAGERS OF THE UNITS has also published a lot of articles related to topics WITHIN THE SCOPE OF THE such as economy, finance, banking, internal control, INTERNAL SYSTEMS internal audit, compliance, corporate governance, audit committee and ethics. He has published five books, two Celal Efe Şeran out of which are published by Banks of Association of Managing Director of the Board of Inspections Turkey (BAT).

Celal Efe Şeran graduated from İstanbul University Berrin Gencal Department of Economics in 2002 and worked as Managing Director of the Risk Management Inspector at Fortisbank A.Ş. in 2004 and the Senior Department Manager of Risk Management Department at TEB Cetelem in 2011. As of February 2015, he has started to Berrin Gencal graduated from ITU Faculty of Business

work at ICBC Turkey Bank A.Ş. as the Head Of Individual Administration, Department of Management Engineering

Section 2 Section 2 Section Kadir Karakurum Oraj Özel Credits Allocation Department and since December 1st in 1990. After graduating from Boğaziçi University, Assistant General Manager (Retail Banking) General Manager 2017, he continues to serve as the Managing Director Department of Economics in 1993, she began her career

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE (ICBC Turkey Yatırım Menkul Değerler A.Ş.) of the Board of Inspections at ICBC Turkey Bank A.Ş. in the Treasury Department of ICBC Turkey Bank A.Ş. MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Mr. Şeran holds CIA (Certified Internal Auditor), CFE Since February 2009, she has been in charge of the Head Kadir Karakurum graduated from the Middle East Technical Oraj Özel is CEO and Board member of ICBC Securities. (Certified Fraud Examiner), the CMB Level 3 and of Risk Management Department. University Faculty of Architecture in 1993 and he had Mr. Özel was one of the first floor brokers at the Istanbul Corporate Governance Rating certificates and has an his graduate degree at the same university, Faculty Stock Exchange founded in 1987. Mr. Özel worked in experience of approximately 16 years in the fields of of Economics and Business Administration, Business senior management of major Turkish banks and securities Internal Audit, Risk Management and Credits. Administration Department. Between 1992-2012, firms until he joined ICBC Turkey (then Tekstilbank) group he served at various positions at the private sector in April 2007 as General Manager of ICBC Securities. Gürdoğan Yurtsever companies and banks and in February 2014, he started During his career, Mr. Özel introduced several new Managing Director of the of the Internal Control to work at ICBC Turkey as the Head of Individual Sales products to Turkish Capital Markets such as first equity and Marketing Department and as of January 9th 2017, research, first mutual fund, first commercial paper issue Gürdoğan Yurtsever graduated from Istanbul University he has been appointed as the Assistant General Manager by a government owned institution, first asset backed Faculty of Political Sciences in 1991 and obtained his in charge of Retail Banking. security issue. Mr. Özel is awarded a level 3 licenses from master’s degree from the same school in 2002. He Capital Markets Board of Turkey and holds a BS Degree started working as an assistant auditor in the Board of in Economics from Middle East Technical University at Auditors of a bank in 1995. He joined our Bank as an Ankara. auditor in 1998. Subsequently, he worked as an assistant manager in the Credit Control Department and Internal Control Center. He was appointed as the Head of Internal Control Department in 2003, also he was appointed as the Head of Internal Control and Compliance Department in 2008. He was started working as the Managing Director of Internal Control and Compliance Department in April 2019. Mr. Yurtsever also has been serving as Chief Compliance Officer since 2008 as well. He has Certified Public Accountant (CPA), Independent Auditor (IA), Certified Fraud Examiner (CFE), Certification in Risk Management Assurance (CRMA), Capital Markets Level 3 License, Capital Markets Derivative License, Capital Markets Credit Rating License, Capital Markets Corporate Governance Rating License and certificates. He has Chief Editor of the Internal Audit Journal. He

56 57 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

FINANCIAL RIGHTS INDEPENDENT BOARD MEMBER'S INDEPENDENCY DECLARATION

FINANCIAL RIGHTS PROVIDED At the Ordinary General Assembly held on March 30th agreements entered into, primarily auditing (including TO THE MEMBERS OF THE BOARD 2018, Ying Wang and Mehmet Hilmi Güler were elected tax audit, legal audit, internal audit), rating of and OF DIRECTORS AND THE SENIOR as Independent Members of the Board of Directors for 3 providing consultancy to the Company during the

EXECUTIVES years. Mehmet Hilmi Güler, Independent Board Member period in which such services and products were being Section 2 Section Section 2 Section and Chairman of Corporate Governance Committee, purchased or sold, This information is stated in the Section II of this Report, resigned from his duty on October 25th 2019. The c. I possess the vocational education, knowledge and

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE under the section of Corporate Governance Compliance declaration of independence of the independent board experience necessary to perform the duties I would be MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Report. member Ying Wang is given below. assuming as an independent member of the Board of Directors, Within the scope of the articles of association of ICBC d. provided that it is applicable to the legislation I am Turkey Bank A.Ş. and the Corporate Governance bound with, I have not and, upon my appointment Principles set out in the Communiqué of Corporate as an independent member of the Board of Governance (Serial No.II-17.1) issued by the Capital Directors, shall not work for any state institutions and Markets Board, I hereby declare that I am a candidate to organizations as full time employee, except for being be an “independent member” of the Boards of Directors a faculty member, of ICBC Turkey Bank A.Ş. and within this context, I further e. I possess strong ethical standards, occupational declare that; reputation and experience in order to positively contribute to the activities of the Company, be neutral a. within the last five years, there have been no to any conflicts of interests among the Company and employment relationship requiring to assume its shareholders and freely decide by considering the material duties and responsibilities in the capacity rights of the beneficiaries, of a manager between myself, my spouse and my f. I shall devote enough time to follow the operational next of kin and relatives by blood and marriage up to activities of the Company and completely fulfill the second degree and the Company, partnerships and responsibilities I would be assuming, the shareholders holding the control of or possessing g. I have been a member of the Board of Directors of the substantial impact on the Company and the legal Company for more than six years within the last ten persons who are substantially controlled by such years, shareholders, I do not hold, alone or jointly, more than h. I have not been an independent member of the Board 5% of the share capital or voting rights or privileged of Directors of the Company or no more than three of shares of the Company nor do I have any material the companies that are controlled by the controlling commercial relationship with the Company, shareholders of the Company and that of no more b. within the last five years, I have not been a than total of five publicly trading companies, shareholder (more than 5%), an employee or a i. I have not been registered for and on behalf of any member of the Board of Director requiring to assume legal person who has been appointed as a member of material duties and responsibilities in the capacity the Board of Directors. of a manager of any company from or to whom the Company purchases or sells services or products Ying Wang in substantial amounts within the framework of the

58 59 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

departments and the related policies and regulations COMMITTEES falling under the scope of these systems,

• Evaluates the information and the reports regarding the activities provided by the departments falling under the scope of these systems and the independent audit firms,

• Prepares the financial reports of the Bank in INFORMATION REGARDING THE Compliance Department and the Risk Management compliance with the related legislations, regulations COMMITTEES ESTABLISHED WITHIN Department operate under supervision of the Audit and the standards, THE BODY OF THE BOARD OF Committee. Audit Committee meets four times a

DIRECTORS year with the units operating under its supervision, by • Requests information, documents or reports from all Section 2 Section Section 2 Section participation of other related departments at the Head of the departments of the Bank, contracted institutions Several committees have been formed in order to help Office. Audit Committee informs the Board of Directors providing support services and independent audit

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE the Board of Director in performing their duties under regularly in every three months, regarding its activities. firms, if necessary and receives consultancy services MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE their responsibility more efficiently and these committees from persons, who are specialized in their fields of are given special responsibilities in certain areas. Following are the main activities of the Audit Committee activity, provided that this is subject to the approval of Information regarding the committees operating under and the principles of authorities and responsibilities the Board of Directors, the Board of Directors is provided below: thereof, all of which are published under the title “Committees” in the section named “Investor Relations” • Fulfills their responsibilities given by the prevailing AUDIT COMMITTEE on our website. legislations and the duties assigned to them by the Board of Directors within this framework, Audit Committee Duty at the Member Definition of the Member • Monitors the efficiency and sufficiency of the Bank’s • Notifies or reports the results of its activities and the Committee internal systems, whether these systems and the measures need to be taken in order for the Bank’s accounting and reporting systems operate within the activities to be conducted sustainably and safely within

Independent Member of framework of the related legislation and the policies the framework of the related legislation and the policies Peiguo Liu Chairman the Board of Directors (*) of the Bank and the integrity of the information of the Bank and its findings, opinions and proposals produced, related to the other issues which it deems material.

Independent Member of the Member Ying Wang Board of Directors • Performs the necessary preliminary evaluations Declarations stating the qualifications of the Members regarding election of the independent audit firms, of the Audit Committee of the Bank within the scope rating companies and the institutions providing of the Article 24 of the Banking Law no.5411 and the (*) Members of the audit committee of banks are considered as independent members within the scope of “Corporate Governance Communiqué” no. II-17.1, appraisal and support services and regularly monitors Regulation on Internal Systems, issued by the Banking issued by the Capital Markets Board. the activities of these institutions that are assigned by Regulation and Supervision Agency, are as follows: the Board of Director Within the framework of article 24 of the Banking Law numbered 5411 that requires formation of an audit • Ensures that the internal audit functions of the committee, the Board of the Directors of the Bank partnerships that are included in the consolidation appointed two non-executive members of the board, conducted coordinately within the scope of the who possessed the conditions stated in the prevailing related legislation, legislation, in order to perform the auditing and monitoring activities, as the members of the “Bank’s • Submits reports and provides opinions and Audit Committee”, on October 30th 2006. The Bank’s proposals to the Board of Directors regarding the Board of Inspections, Internal Control Centre and internal systems and the operations, activities of the

60 61 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

TO THE BANKING REGULATION AND 3. neither my spouse nor my children has been TO THE BANKING REGULATION 3. neither my spouse nor my children has been SUPERVISION AGENCY General Manager, Assistant General Manager or in AND SUPERVISION AGENCY General Manager, Assistant General Manager or in an equivalent position of ICBC Turkey Bank Anonim an equivalent position of ICBC Turkey Bank Anonim 1. Within the last two years prior to my being Sirketi or any of its partnerships that are included in 1. Within the last two years prior to my being Sirketi or any of its partnerships that are included in appointed as the member of the audit committee, the consolidation, appointed as the member of the audit committee, the consolidation, I declare that neither myself nor my spouse or my I declare that neither myself nor my spouse or my children; 4. have directly managed any the executive units of children; 4. have directly managed any the executive units of ICBC Turkey Bank Anonim Sirketi within the last ICBC Turkey Bank Anonim Sirketi within the last a. have been a shareholder or employee two years, a. have been a shareholder or employee two years, of any institution providing independent of any institution providing independent audit, rating, appraisal or support services 5. have worked in any units of ICBC Turkey Bank audit, rating, appraisal or support services 5. have worked in any units of ICBC Turkey Bank to ICBC Turkey Bank Anonim Sirketi or Anonim Sirketi or any of its partnerships that to ICBC Turkey Bank Anonim Sirketi or Anonim Sirketi or any of its partnerships that

any of its partnerships that are included are included in the consolidation, except for the any of its partnerships that are included are included in the consolidation, except for the Section 2 Section Section 2 Section in the consolidation, have participated in internal audit, internal control, risk management, in the consolidation, have participated in internal audit, internal control, risk management, the independent audit, rating or appraisal financial control and accounting units. the independent audit, rating or appraisal financial control and accounting units.

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE processes of the bank or any of its processes of the bank or any of its MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE partnerships included in the consolidation, 6. Not having duty in another commercial institution partnerships included in the consolidation, other than the below-mentioned ones; b. have been a shareholder or employee b. have been a shareholder or employee Ying Wang of any institutions providing consultancy a. Partnerships subject to ICBC Turkey Bank of any institutions providing consultancy Audit Committee Member and support services to ICBC Turkey Bank A.Ş.’s consolidated audit on condition and support services to ICBC Turkey Bank Anonim Sirketi or any of its partnerships to be limited with the duty of board Anonim Sirketi or any of its partnerships that are included in the consolidation nor membership that are included in the consolidation nor have provided such services thereto, have provided such services thereto, b. Domestic or abroad legal entity c. hold any qualified shares of ICBC partnerships having direct or indirect c. hold any qualified shares of ICBC Turkey Bank Anonim Sirketi or any of shares in ICBC Turkey Bank A.Ş. Turkey Bank Anonim Sirketi or any of its partnerships that are included in the its partnerships that are included in the consolidation, c. Domestic or abroad credit institutions and consolidation, financial institutions which are directly or 2. is the spouse or next of kin and relative by blood indirectly jointly or alone controlled by 2. is the spouse or next of kin and relative by blood and marriage up to second degree (including this natural person partners of ICBC Turkey and marriage up to second degree (including this degree) of the majority shareholder or the General Bank A.Ş. stated in sub-paragraph (b) or in degree) of the majority shareholder or the General Manager of ICBC Turkey Bank Anonim Sirketi which they are participating with unlimited Manager of ICBC Turkey Bank Anonim Sirketi have served in any of the banks’ audit committee responsibility have served in any of the banks’ audit committee for more than nine years regularly or in intervals, for more than nine years regularly or in intervals, have received any income, whether as fee or have received any income, whether as fee or anything similar under any name whatsoever, from anything similar under any name whatsoever, from ICBC Turkey Bank Anonim Sirketi or any of its Peiguo Liu ICBC Turkey Bank Anonim Sirketi or any of its partnerships that are included in the consolidation Chairman of Audit Committee partnerships that are included in the consolidation based on their profitability, except for the based on their profitability, except for the payments made all of the employees in accordance payments made all of the employees in accordance with provisions of their articles of association or with provisions of their articles of association or general assembly resolutions, general assembly resolutions,

62 63 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

CREDIT COMMITTEE CORPORATE GOVERNANCE membership of the Board of Directors, including also the BOARD OF DIRECTORS RISK COMMITTEE management and shareholders, taking into consideration MANAGEMENT COMMITTEE Features of the members of the Credit Committee, are whether a candidate bears independency criteria and shall shown in the following table. Features of the members of the Corporate Governance explain its evaluation in this regard in a report and shall The qualifications of the members of the Board of Committee, are shown in the following table. present it for approval of the Board of Directors. In order Directors Risk Management Committee are shown in the to comply with article 11 of the Corporate Governance table below. Duty at the Member Definition of the Member Committee Communiqué no.II-17.1, published in the Official Duty at the Member Definition of the Member Committee Gazette dated January 3rd 2014 and has come into effect Duty at the Chairman of the Board of Member Definition of the Member Xiangyang Chairman accordingly, by the resolution of the Board of Directors of Committee Gao Directors Member of the Zheng Member the Bank dated June 30th 2014 and no.1276/01, Manager Jianfeng Board of Directors of the Shareholder Relations and the Board of Directors Xiangyang Gao Chairman Chairman Vice Member of the Board of Directors- Shaoxiong Manager of the Shareholder Secretariat Unit has been appointed as a member of Chairman General Manager Xie Relations and the Board of General Manager-

the Corporate Governance Committee. The committee Shaoxiong Xie Member

Section 2 Section Section 2 Section Directors Secretariat Unit (Capital Board Member Member Levent İşcan Markets Activities Level 3 Licence convenes whenever required by the business of the Bank, and Corporate Governance Peiguo Liu Member Member of the Board of Directors not be less than once a year. Rating Licence) Peiguo Liu Member Board Member MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE

Alternate th REMUNERATION COMMITTEE Member Board Member Jianfeng Member of the Board of Directors As of February 24 2020, Serhat Yanık has been appointed as an Chairman of the Jianfeng Zheng Zheng Member Corporate Governance Committee with the decision of the Board of Directors. Mr. Hilmi Güler, who was the Independent Board Member and Chairman of the Corporate Governance Committee, resigned from his duties as of October 25th Features of the members of the Remuneration Committee, Independent Board Member 2019. Ying Wang Member Alternate Independent Member of are shown in the following table. Ying Wang Member the Board of Directors By the resolution of the Bank’s Board of Directors dated th February 4 2005 and number 758/1, the “Corporate Duty at the Definition of With the resolution of the Board of Director dated Member Governance Committee” has been formed in order to Committee the Member January 30th 2019; A Board of Directors Risk Management By the resolution of the Bank’s Board of Directors monitor the compliance with the corporate governance Committee has been established so as to assist the nd Independent Member dated May 22 2015 and with number 1324/01, it has principles, to conduct improvement activities in this Chairman Board of Directors in reviewing and determining the Ying Wang of the Board of Directors been resolved to form a Credit Committee consisting regard and to submit proposals to the Board of Directors, Bank’s risk strategy, risk appetite, risk management policy, of three persons, namely two members of the Board to coordinate activities of the Shareholder Relationships Independent Member risk management procedures and internal control process Member of Directors and the General Manager of our Bank, in and the Secretariat of the Board of Directors. Within Jianfeng Zheng of the Board of Directors and assisting the Board of Directors in supervising and order to perform the duties relating to credits to be the scope of the Article 4.5.1 of the “Communiqué on evaluating the risk management activities of the related assigned by the Board of Directors, within the scope of the Determination and Application of the Corporate senior managers and risk management departments. Pursuant to the “Regulation on Corporate Governance the Banking Law no.5411 and the Regulation on Banks Governance Principles” Serial:IV No:56 issued by the Principles of Banks” of the Banking Resolution and Credit Transactions which has been published in the Capital Markets Board, entered into force and effect The Committee carries out its activities within the Supervision Agency and by the resolution of the Bank’s Official Gazette dated November st1 2006 and issue at a later time; the Corporate Governance Committee framework of the Board of Directors Risk Management Board of Directors dated July 11th 2011, a “Remuneration no.26333 and has come to effect accordingly. Duties of has been additionally authorized by the Bank’s Board Committee Regulation, which was put into action by the Committee” has been formed in order to monitor and the Credit Committee are; to take credit decision within of Directors’ resolution dated March 20th 2012 and Board of Directors’ resolution dated October 23rd 2019 supervise the remuneration practices on behalf of the the scope of its powers and to take the decisions relating number 1165/01, to perform functions as a “Nomination and numbered 1605/01. Board of Directors. The Committee shall evaluate the to other works designated by the Board of Directors. Committee” as well. Main duties and powers of the remuneration policy and implementations thereof within Credit Committee conducts its activities within the Corporate Governance Committee, are; to monitoring the framework of the risk management and prepare and framework of the Credit Committee Regulation, which whether the Bank complies with the corporate governance submit a report regarding its recommendations in relation has been adopted by the Board of Directors resolution principles, to conduct improvement activities in this regard thereto, to the Board of Directors, on an annual basis. dated August 23rd 2017 and numbered 1451/02. Credit and to present proposals to the Board of Directors; if the Committee generally convenes once a week. corporate governance principles are not implemented, shall determine the reason thereof and the conflicts of interest that occur due to failure to implement them and to ensure formation of necessary policies for this purpose. It shall evaluate the proposals for independent

64 65 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

OTHER COMMITTEES INFORMATION REGARDING THE ATTENDANCE BY THE BOARD OF HUMAN RESOURCES Management Committee DIRECTORS AND THE COMMITTEE POLICY With the resolution of the Board of Director dated MEMBERS TO THE RELATED MEETINGS January 30th 2019; A Management Committee has been DURING THE ACCOUNTING PERIOD established to help improving the Bank’s management structure, management standards and effectiveness, Timing, place and method of the Board of Directors and to take decisions on important issues, to regulate Meeting shall be subject to the provisions of the Turkish operating rules and operating procedures for the Commercial Code and the Bank’s Articles of Association. regulation of important projects and the use of large Board of Directors shall convene as frequently as the JOB APPLICATIONS – Training Practices amounts of funds. Management Committee; Management businesses of the Bank necessitates. Participating in the RECRUITMENT PRACTICES In 2019, our training process consisted of the training Committee; consists of the Chairman, the General meetings in person or through electronic environment is programs provided by the Bank’s internal instructors,

Manager consists of the Chairman, the General Manager possible. Board of Directors is called for meeting by the Job Applications conferences and seminars held by the Banks Association Section 2 Section Section 2 Section and other senior management executives. Chairman of the Board of Director and in his/her absence The Bank accepts job applications through www. of Turkey (BAT), training programs organized by several The Chairman of the Committee duty is fulfilled by by the Vice President of the Board of Directors. Each kariyer.net website. Received applications are assessed training institutions, overseas training programs and

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Xiangyang GAO, who is Chairman of the Board of Board Member may request in writing from the Chairman according to their conformity to open positions in the online trainings. On this basis, e-learning trainings in 55 MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Directors. The Chairman’s Assistant of the Committee duty of the Board that the Board of Directors be convened. Bank. different topics were provided with a participation of 1,320 is fulfilled by Shaoxiong Xie, who is General Manager and Board of Directors consists of 6 members, including the participants. In-house and external training and overseas Board Member. The Committee carries out its activities General Manager. Calling procedure of the Board of Recruitment Practices training were provided in 117 different topics with 2,035 within the framework of the working rules by the Board of Directors Meeting is subject to provisions of the Turkish Open positions are determined at our Bank; considering participations / 689 different participants, respectively. Directors resolution dated January 30th 2019. Commercial Code and the Bank’s Article of Associations. the norm staff, current business volume, organizational The quorum for the Board of Directors meeting is the chart, changes in personnel structure and future plans Remuneration Committee and Practices Assets and Liabilities Committee (ALCO) presence of majority of the members. Resolutions of are considered. For the open positions, the Bank prefers Implemented in the year of 2019 Assets and Liabilities Committee is the committee where the Board of Directors may be passed by the votes of to meet the need first from the Bank’s organization. For By the resolution of the Board of Directors dated July 11th the volume and cost/return of the balance sheet items of the majority of the members present in person at the hiring staff externally, as a result of interviews made 2011, the “Remuneration Committee” has been set up the Bank, economic developments affecting these items meeting as well as, pursuant to article 40 of the Articles by the Human Resources and the Managing Director for following and auditing the remuneration applications are evaluated; strategies regarding the management of Association of our Bank and paragraph 4 of article 390 of related department and the researches regarding on behalf of the Board of Directors. By the resolution of of the balance sheet are determined and the topics of the Turkish Commercial Code with number 6102, with references, proposal is made to a candidate who is the Board of Directors dated May 22nd 2015, Jianfeng related to the ways to increase the Bank’s performance the method by which a written proposal of one of the considered convenient. After the personnel complete Zheng and Ying Wang who have not had any executive are discussed. This Committee convenes once every members is approved in writing by the other members. required documents, they are actually allowed to start duty at the Bank, have been appointed as the members two weeks under the chairmanship of the General performing their job. of the “Remuneration Committee”. Ying Wang has been Manager. General Manager, Assistant General Managers The Board of Directors convened with all of the members elected as the Chairman of the committee. Remuneration and the Heads of all Departments in charge of banking being present in person, 4 times and passed 37 Promotion Practices Committee has carried out its activities during the term transactions shall participate in the meeting. resolutions in 2019. Pursuant to article 40 of the Articles Following the evaluations made within the scope of between the dates of January 1st 2019 and December 31st of Association of our Bank and the paragraph 4 of article promotion rules set by our Bank, persons who are 2019, in accordance with the Bank’s corporate governance Risk Management Committee 390 of the Turkish Commercial Code, by circular Board of considered eligible shall be entitled to promotion. principles. As an element of corporate governance, Risk Management Directors has taken 324 resolutions. Committee ensures the bank to achieve effective risk Profile of the Bank’s Human Resources HUMAN RESOURCES POLICY management, according to Bank’s risk strategy and In 2019, the Audit Committee convened with the As of December 31st 2019, total number of the policies. Risk Management Committee shall act as a members being present in person, 4 times and passed 29 employees is 731; 358 work at the branches and 373 Human Resources Policy of our Bank is published on our decision-making organization as well as control and resolutions; passed 18 resolutions by circulation. In 2019, at the Head Office. Number of the branches as of 2019 website under the heading of “Policies”. This policy has monitoring mechanism on all significant matters related the Credit Committee convened to examine the credit files year-end is 43. 2019 seniority average is 8.3 years and entered into force pursuant to the Board of Directors’ to enterprise risk management. Committee is presided by within the scope of its powers and passed 157 resolutions. the average age of the Bank’s personnel is 37.5. 87.67% resolution. the General Manager. of the Bank’s personnel have university diplomas whose In 2019, the Corporate Governance Committee passed breakdown is as follows: PhD degrees and graduate Job descriptions, authorizations and responsibilities of the 2 decisions; and the Remuneration Committee passed 3 degrees at 10.67%, undergraduate degrees at 77%. Bank’s personnel have been determined based on each decisions.

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title and position. General human resources policies, Recruitment Process Furthermore, for operations staff at our Branches, CODE OF ETHICS AND SOCIAL being implemented in order for the Bank to perform According to the annual workforce planning, experience according to the needs, examinations are made and the RESPONSIBILITY in the best way possible, are based on the principles and inexperienced staff are hired for required positions. candidates who can be successful in the examinations summarized below and published on the Bank’s intranet As a result of evaluation of applications made through made and the interviews, shall be appointed to related Ethical Code environment as well as its website. related career sites, job offer is made to the candidates positions at our Branches, following a “Basic Banking Within our corporate governance approach, “Banking who pass the examination and interview phases. Training”. Code of Ethics” published by Banks Association of Turkey Our human resources policy enhances the productivity is accepted and applied by our Bank. Ethical Principles and happiness of the employees, by using the Recruitment of experienced staff shall be made as Training Activities which includes the purpose of arranging behaviors and remuneration, performance evaluation, career planning, a result of interviews by related managers and our Renovation and development are indispensable elements attitudes of our Bank employees at every level and their training and similar human resources tools, in line Department, with the candidates specified in related of contemporary banking. Our Bank considers these relations with persons and organizations within and out of with the targets and strategies of our Bank. With subject according to the requirements of that job. We elements as a basis and has consolidated with the the Bank and which the Bank employees have to follow this understanding, we intend to create a workplace have no examination phase for hiring experienced staff learning organisation concept. In this context, at our are explained under the 5th article titled “Principles” of

environment suitable for our employees to reveal their and English interview process shall be made depending Bank targeting to improve its employees and all its the Personnel Regulations and are approved and put into Section 2 Section Section 2 Section energy and creativity, to discover their talents. on the nature of related job. surrounding to who it provides services, within the scope effect by the Board of Directors with the decision dated of constantly developing system; training is the leading December 9th 2002. These rules are announced to public

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE We believe that we may be able to reach our targets For hiring inexperienced staff, in addition to the interview matter among those with the highest priority. Training within the framework of the Bank’s Information Policy MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE by a composition of staff, who considers it important to process; English, general aptitude and personality test, vision of ICBC Turkey, is based on a long-term career through internet site. All our personnel are informed on a future in a reputable bank and is conscious that his/ depending on the nature of related job. planning perspective. Training programs to be attended ethical principles and requested to apply these principles her career will develop by well-disciplined and intense by the employees according to their qualifications in their works and they’ve put their signatures under. By training processes and who value human relations. MT Program and competencies, beginning from the date when the proposal of the Corporate Governance Committee of ICBC Turkey, by its efficient and people oriented human MT exam, which we make to train the managers of the they start their banking career, targets are defined and our Bank, the “Banking Code of Ethics” published by the resources policy, adopts the principle to have highly future within the scope of our organisation, in line with implemented accordingly. For our young employees who Banks Association of Turkey is updated and published on motivated employees, loyal to the institution they the strategies of our Bank and the conditions prevailing participate in the organisation of ICBC Turkey; on-the- our internet site. work at. We are aware that the position and corporate in the sector; is a different practice with regards to the job, orientation and long-term development trainings identity of our Bank in the sector, has developed by the recruitment. Among the candidates who apply for a are provided and afterwards, they continue their job in Social Responsibility contribution of our employees and we believe in the vacancy announcement we make and who graduated related specialization areas. And, our other employees Our Bank pays great attention on supporting social and importance of the principle that everyone should work from the Economy, Business Administration, Law, Public working at our Bank complete their managerial and cultural events in the light of protecting social benefits with a consciousness of being in a leading position in his/ Finance, Labour Economics, International Relations, specialization programs, according to determined career and principles of respect to environment along with her job. Training courses to be given to each employee, English or American Language and Literature, Public planning, by means of the training courses they attend the reputation, benefits and profitability of the bank in who starts to work at ICBC Turkey, at every title and Administration, Econometrics, Banking and Finance, both in Turkey and abroad. Our training programs cover all practices and investments, looks after the matters the criteria to be observed for their promotion to a Management Engineering, Computer Engineering the Career Training Programs, Personal Development of developing banking sector and maintaining trust in higher position, are clearly defined. All our employees or Industrial Engineering departments of universities, Training Programs, Manager Development Training sector, and contributes in health development of society are informed about their career path. Employees of providing 4 years undergraduate education in foreign Programs, MT and Basic Banking Training programs. by following arrangements on consumer and public ICBC Turkey are informed by feedbacks regarding language, speak English fluently, for male candidates Advance training courses are provided by trainers from health. their career development, by means of a performance completed military service obligation or postponed prominent private training companies and by in-house assessment system. During said process, our employees it at least 2 years, have strong self-expression and trainers of the Bank. Within the scope of social responsibility; the bank fights are evaluated according to their personal development, communication skills, have the ability to think analytically, against all crimes as extortion, bribery, all kinds of competence and targets and the results are shared with those who are successful in examinations made and corruption, money laundering and terrorism financing, them. According to our human resources policy, no who are successful in collective and individual interview and illegal gambling and betting. discrimination shall be made among our employees for phases, shall be employed at related departments of our any reason, all our staff shall be treated equally. Bank, where it is required to hire new staff.

Furthermore, premium payments are made in parallel with the contribution of our employees to our Bank and their achievements.

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AGENDA OF THE ORDINARY SUMMARY BOARD OF DIRECTORS GENERAL ASSEMBLY MEETING ANNUAL REPORT

(TL million) AGENDA OF THE ORDINARY Asset size of our Bank was up by 17% in 2019, increasing TOTAL ASSETS GENERAL ASSEMBLY MEETING from TL 15.5 billion in 2018 year-end to TL 18.2 billion. TH DATED MARCH 27 2020 Credits increased by 16% to TL 9.1 billion when compared 2016 8,218 with 2018 year-end. Securities of the Bank increased by

2017 Section 2 Section Section 2 Section 12,888 1. Opening and formation of the meeting presidency, 22% from 2018 year end to reach TL 4.7 billion. 2. Authorization of the Meeting Presidency to sign 2018 15,525 MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE the minutes of the Ordinary General Meeting of Operating income of ICBC Turkey has reached to TL 545 MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE 2019 Shareholders, million. Our Bank achieved a net profit level of TL 40,9 18,191 3. Reading and discussion of the Board of Directors’ million at year-end 2019. Despite of restricted growth 2019 Annual Activity Report and Independent interest income increased 3.8%, net fees and commission Audit Report Summary, income increased 21.5%. Reading, discussion and approval of the 2019 4. CUSTOMER DEPOSITS (TL million) financial statements, As of 2019 year end, based on unconsolidated financial 5. Approval of the membership of the new board statements of ICBC Turkey prepared in accordance with member who elected according to Turkish the regulations of BRSA; 2016 2,929 Commercial Code, Article 363, 2017 3,288 6. Release of the board members, • Asset size reached TL 18.2 billion, 7. Discussion on dividend distribution for the year • Total cash loans were TL 9.1 billion and constituted 2018 6,886 2019 according to the Board of Directors’ proposal, 50% of the Bank’s balance sheet, 2019 10,438 8. Discussion and approval of the 2020 Dividend • Consumer loans (excluding credit cards) constituted Distribution Policy, 7% of the total cash loans and has decreased by 21% 9. Determination of the remuneration of the Board compared to that of the previous year, members, • Total customer deposits were TL 10.4 billion, up by 10. Election of the Independent Auditor in accordance 52% compared to that of 2018 and constituted 57% of with the Article 399 of Turkish Commercial Code, the Bank’s total liabilities, CASH LOANS (TL million) 11. Informing the shareholders about the donations • Shareholders’ equity increased by 12% compared to made in 2019, that of the previous year-end, 2016 12. Determination of an upper limit for the donations • Net profit for 2019 was TL 40.9 million, 5,071 to be made in 2020 in accordance with Banking • Return on assets and return on equity are 0.2%, and 2017 7,631 legislation and Capital Markets Board’s regulations, 3.4%, respectively, 13. Informing the shareholders about the • Capital adequacy ratio has been 18.6% (2018: 30.8%). 2018 7,829 Remuneration Policy, 2019 9,088 14. Informing the shareholders regarding CMB’s We have closely monitored the activities of the Audit Corporate Governance Principles, clause 1.3.6. Committee, Corporate Governance Committee and Remuneration Committee during the year and observed that the committees have worked effectively.

Your Sincerely,

Board of Directors 70 71 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

ICBC TURKEY BANK A.Ş. PROFIT MARKETABLE SECURITIES (TL million) NPL RATIO DISTRIBUTION POLICY AND PROPOSAL

2016 1,723 FOR PROFIT DISTRIBUTION FOR 2,2 2017 2,482 1,85 THE YEAR OF 2019 1,3 1,19 2018 3,890 2016 2017 2018 2019 2019 4,694 ICBC TURKEY BANK A.Ş. PROFIT PROPOSAL FOR PROFIT DISTRIBUTION POLICY DISTRIBUTION FOR THE YEAR OF 2019

Considering the growth of the Bank in line with its targets Section 2 Section Section 2 Section within the sector, in light of the investment and financing In the meeting of the Board of Directors of our Bank held RETAIL LOANS (TL million) CASH AND NON-CASH LOANS DISTRIBUTION (TL million) needs and within the framework of the Banking Law, on the date of February 27th 2020 it has been resolved to

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Turkish Commercial Code and the Capital Markets Law propose to the General Assembly that, from the amount MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE 2016 649 2016 1,390 5,071 and related legislation and the provisions of its Articles of 40.869.412,43 TL which constitutes the after tax net of Association, the Bank adopted a basic dividend policy balance sheet profit of ICBC Turkey Bank A.Ş. for the 2017 2017 848 1,789 7,631 by which the profits are to be retained within the Bank in year 2019, legal reserves in the amount of 2.043.470,62 2018 792 2018 2,371 7,829 extraordinary reserves in order to finance its growth and TL at the rate of 5% be set aside according to article be distributed as shares in capital increases by bonus 519/1 of the Turkish Commercial Code, the amount of of 2019 623 2019 6,987 9,088 issue. 696.761,71 TL previously booked under fixed asset sales account to be hold under a special fund in shareholders' This policy shall be reviewed annually based on the equity according to Corporate Tax Law 5/1-e item and regulations of the Capital Markets Board regarding the that all of the remaining profit amount of 38.129.180,10 dividend distribution and the Bank’s liquidity position. TL be transferred to extraordinary legal reserves and the Board of Directors be authorized with regards to NON-CASH LOANS (TL million) BORROWINGS FROM FOREIGN BANKS (TL million) utilization of the legal reserves.

2016 1,390 2016 3,760

2017 1,789 2017 6,975

2018 2,371 2018 2,920 2019 6,987 2019 4,235

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INFORMATIONS REGARDING THE RISK GROUPS, SUPPORT SERVICES TRANSACTIONS MADE BY THE AND INFORMATION ABOUT MEMBERS OF THE BOARD OF DIRECTORS WITH THE BANK IN NON-COMPETITION ACTIVITIES THE NAME OF THEMSELVES OR ON BEHALF OF ANOTHER PERSON WITHIN THE FRAMEWORK OF THE PERMISSIONS GIVEN BY THE BOARD OF DIRECTORS OF THE BANK AND INFORMATIONS REGARDING THE “Loomis Güvenlik Hizmetleri A.Ş.” THE ACTIVITIES WITHIN THE SCOPE INSTITUTIONS FROM WHICH THE transportation of cash services, OF NON-COMPETITION BANK RECEIVES SUPPORT SERVICES

Banksoft Bilişim Bilgisayar Hizmetleri Permissions specified in articles 395 and 396 of the

Section 2 Section 2 Section Information regarding the institutions from which the Limited Şirketi” Turkish Commercial Code regarding prohibition Bank obtains support services and their authorizations card payment systems, leasing of software and resource of making transaction with the company and non-

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE and services received are specified below. allocation software development services, competition, have been given by the General Assembly MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE to the members of our Board of Directors, provided “Güzel Sanatlar Çek Basım Limited Şirketi” “Konut Kredisi Com Tr Danışmanlık A.Ş.” that the transactions conducted in this context should checks printing and coding services, credit marketing and sale through alternative channels be out of the scope of those prohibited by the Banking service, Law no.5411. Any situation out of the framework set by “FU Gayrimenkul Yatırım Danışmanlık A.Ş.” related rules and regulations, has been encountered. creation of mortgages in favour of the Bank based on “Treo Bilgi Teknolojileri Ltd. Şti.” power of attorney service, outsource staff supply services, INFORMATIONS REGARDING THE TRANSACTIONS CONDUCTED BY “İpoteka Gayrimenkul Yatırım Danışmanlık A.Ş.” “Securitas Güvenlik Hizmetleri A.Ş.” THE BANK WITH THE RISK GROUP creation of mortgages in favour of the Bank based on security services, THAT THE BANK IS INVOLVED IN power of attorney service, “Hangisi İnternet ve Bilgi Hizmetleri A.Ş.” The relationship between the Bank and the risk group “Fineksus Bilişim Çözümleri Ticaret A.Ş.” services related to directing loan customers from to which it belongs includes all types of banking maintenance of Swift Alliance and ODM office services, Hangikredi.com website to the bank, transactions conducted in compliance with the Banking main connection of the Swift service to the office, sale Law and within the framework of the normal bank- and service of Paygate products, “Iron Mountain Arşivleme Hizmetleri A.Ş.” customer relationships and based on the market archive services, conditions. Explanations regarding such transactions “Asseco See Teknoloji A.Ş.” are stated in the footnote VII. of the Section 5 of the technical maintenance and license services for the Call “BGA Bilgi Güvenliği A.Ş.” Independent Audit Report, Unconsolidated Financial Centre System, services related to data leakage tests, Statements as of December 31st 2019 and the Related Explanations and Footnotes Prepared to be Disclosed to “E-Kart Elektronik Kart Sistemleri Sanayi ve “Magis Teknoloji A. Ş.” the Public. Ticaret A.Ş.” card printing (personalization) services, mobile banking software services,

“Kuryenet Motorlu Kuryecilik ve Dağıtım “Luckyeye Bilgisayar Tanıtım Hizmetleri Hizmetleri A.Ş.” Yayıncılık ve Tic. A.Ş.” distribution of the Bank’s credit and ATM cards service, Web page design service.

“Printkom Doküman Baskı ve Bilgi İşlem Hizmetleri Limited Şirketi” folding and enveloping of the credit card statements of the Bank service,

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ICBC Turkey supported to the event of the Shanghai DONATIONS AND SOCIAL Philharmonic Orchestra’s first concert in Istanbul with RESPONSIBILITY PROJECTS world renowned Turkish piano virtuous Fazil Say to promote socio-cultural cooperation and exchange between China and Turkey.

ICBC Turkey supported project caring for autistic children and sponsored the 18th "Chinese Bridge" Chinese Competition of World University Student in Turkey. Information Related to the Donations and the Disbursements Made within the Scope of ICBC Silk Road Cup table tennis tournament is among Corporate Social Responsibility Projects in the initiations started by the Bank and organised

the Year 2019 annually. In the honour of 70th year anniversary of the Section 2 Section Section 2 Section People’s Republic of China, ICBC Turkey organised an List of donation(s) made by the Bank to various institutions Exhibition on Successful Stories of Chinese Enterprises in

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE as of the date of December 31th 2019, is given below: Istanbul and a Panel about China-Turkey Economic and MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Cultural Cooperation and invited Turkish and Chinese scholars (from prestigious universities such as Sabanci Amount Donee Institution (full amount) University, Tsinghua University and Peking University (TL) and etc.) and businessmen to share their experiences,

Türk Eğitim Vakfı (Turkish Education Foundation) 400 theories enable two sides to learn from each other.

Other 1.307 The Bank also supported and sponsored small-scale activities throughout the year. ICBC Turkey initiated to Total 1,707 support and occasionally sponsor the group of runners formed by its employees to raise funds to support SOCIAL RESPONSIBILITY PROJECTS NGO’s, organized charity donations for the Darüşşafaka Orphanage. In the past ICBC Turkey took part in the In 2019, ICBC Turkey firmly seized the strategic “Yuvarla” project by the Retail Banking, which is donation opportunities brought by the Belt and Road initiative through the credit card payments to NGOs in Turkey and and deepened relationship between Turkey and planned to re-enter in 2020. China, committed to high quality financial service for the infrastructure and energy projects as well as top ICBC Turkey won two awards, "Best Commercial Bank of companies in Turkey, and served the economic and social Turkey 2019" and "Best Investment Bank of Turkey 2019" development of Turkey. ICBC Turkey played a important by British International Banker magazine. ICBC Turkey role in improving the trade and investment ties between is the only award-winning bank in the Turkish banking Turkey and China. industry in the list of winners of the magazine.

ICBC cares about local communities and values. Organize and participate in various public welfare activities, dedicate love, and show the role of big business.

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CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT FOR THE YEAR OF 2019

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE DECLARATION

ICBC Turkey Bank A.Ş. (“ICBC Turkey” or the “Bank”) is subject to provisions relevant to Corporate Governance

Principles stipulated for banks in Banking and Capital Market legislation. Within this scope, ICBC Turkey, adopted a Section 2 Section Section 2 Section management method based on caution, stability and trust.

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE The Bank is in compliance with compulsory principles except number of independent board members among the MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Corporate Governance Principles taking place in the Corporate Governance Communiqué and Banking Regulation and Supervision Agency (BRSA) Regulation on Corporate Governance Principles of the Bank.

The Bank’s independent board member number decreased to two due to the resignation of Mehmet Hilmi Güler on October 25th 2019 who was independent board member and Chairman of Corporate Governance Committee. The works for a new independent board member have been proceeding according to Article 6.3 of Corporate Governance Communique and Article 35 of the Articles of Association of the bank.

According to Capital Markets Board’s resolution dated January 10th 2019 and numbered 2/49 Corporate Governance Compliance Reporting has been done by Compliance and Corporate Governance Information forms on Public Disclosure Platform. The bank has disclosed CRF and CGIF on www.kap.gov.tr link February 22nd 2019 by Annual Report disclosed before three weeks ago from the date of Ordinary General Assembly Meeting.

In accordance with the new Corporate Governance Reporting frame accepted by CMB’s dated January 10th 2019 resolution; Corporate Governance Information Form gives information about shareholders, General Assembly, voting rights, minority rights, dividend rights, public disclosure and transparency, stakeholders and Board.

The principles which are not obligatory and only advisory are disclosed by Compliance Form according to apply or explain principle. The principles that are still not complied with have been mentioned below.

There hasn’t been any conflict of interest arising from these not applied principles.

• For the principle number 1.5.2., minority rights are not granted to those holding less than one twentieth of the capital with the Articles of Association of the Bank. • For the principle number 3.1.2., no written indemnity policy is issued for the bank employees. All applications relevant to the Bank employees are subject to Labor Law and other relevant legislations, and as contradictory provisions are not set forth in in-Bank regulations, a separate indemnity policy is not issued. • For the principle number 4.2.8., against the damages the Members of the Board of Directors may cause in the Company during their duties, they are not insured with a value exceeding 25% of the company capital. However, there is a Financial Corporations Management Liability Insurance for the members of the Board of Directors of our Bank with a lower value and the policy period is between August 31th 2019 - September 1st 2020

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• According to the principle number 4.3.9., no target rate or target time is specified for the female member rate in the Within the scope of Banking and Capital Market legislation, the Audit Committee is established on October 30th 2006, Board of Directors and there is 1 female member in the Board of Directors of our Bank. the Corporate Governance Committee is established on March 30th 2005, and Remuneration Committee is established • According to the principle number 4.4.7., due to the business experiences and sectorial experiences of the Members on July 11th 2011. Within the year of 2012, considering the structuring of the Board of Directors and duties our of the Board of Directors having significant contribution to the Board of Directors, they are not restricted in taking independent members have undertaken in the committees they take part, it is decided the “Nominating Committee” part in duties other than the Bank. While duties of some members continue in in-group companies, some members not to be constituted separately and duties of this committee to be performed by the Corporate Governance take office only at our Bank. The members allocate sufficient time for the Bank. Committee”. The activities of the committees are detail explained in “Information Regarding the Committees • According to the principle number 4.5.5., as the number of our members of the Board of Directors is limited, Established Within the Body of the Board of Directors” part. assignment at the committees is carried out by considering knowledge and experiences of the Members of the Board of Directors, in line with the relevant legislation, and one Member of the Board of Directors may be assigned CORPORATE GOVERNANCE COMPLIANCE REPORT in more than one committee. • According to the principle number 4.6.5., salaries paid to and fringe benefits provided for the Members of the Board CORPORATE GOVERNANCE of Directors and the executives are announced to public through the annual activity report. However, the explanation COMPLIANCE REPORT Company Compliance Status

made is in a way to separate the Board of Directors and the executives, not on person basis.

Section 2 Section 2 Section 1.1. FACILITATING THE EXERCISE OF Not Yes Partial No Exempted Explanation According to the announcement in CMB Bulletin dated January 9th 2020 and with number 2020/4, in the grouping SHAREHOLDER RIGHTS Applicable

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE determined as a result of the evaluation made by CMB, our Bank has taken place in the Second Group companies. MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE 1.1.2 – Up-to-date information and disclosures which Within this scope, exceptions/exemptions in the practice of the Corporate Governance Principles of the companies in may affect the exercise of shareholder rights are X the second group is applicable also for our Bank. available to investors at the corporate website.

1.2. RIGHT TO OBTAIN AND REVIEW Within this scope; INFORMATION It is stated in the 3rd item of the 6th article of the Communiqué on exceptions independent member of the Board of Directors for the banks is in discretion of the bank provided that the number of these members should not be less than 1.2.1- Management did not enter into any transaction X three and the members of the Board of Directors assigned for the audit committee membership within the structuring that would complicate the conduct of special audit. of the Board of Directors of the banks shall be considered as the independent member of the Board of Directors within the framework of this Communiqué. Besides, it is stated that qualifications determined in the Corporate Governance 1.3. GENERAL ASSEMBLY Principle number 4.3.6. shall not be looked for in the audit committee members of the banks and Principles number 4.3.7. and 4.3.8. on selecting these members shall not be applied. Again in the same Communiqué; it is ensured that 1.3.2 - The company ensures the clarity the General Assembly agenda, and that an item on the agenda does X qualifications determined in the Principle number 4.3.6. shall be looked for any way for the independent members not cover multiple topics. of the Board of Directors who shall not take place in the audit committee, and shall be looked for only one member in case all of the independent members of the Board of Directors take place in the audit committee, and Principles 1.3.7 – Insiders with privileged information have number 4.3.7. and 4.3.8. on selecting these independent members shall be applied. informed the board of directors about transactions conducted on their behalf within the scope of the X company’s activities in order for these transactions to be presented at the General Shareholders’ Meeting. As the Bank is in the second group companies, we are exempted from;

• The Principle number 4.3.7. of Communiqué as “…the Board of Directors prepares the nominee list of the 1.3.8 – Members of the board of director who are independent member within the framework of the report of the nominating committee and sends to the Capital concerned with specific agenda items, auditors, and other related persons, as well as the officers who X Markets Board at least 60 days before the general meeting along with the related report of the nominating are responsible for the preparation of the financial committee and the decision of the Board of Directors”, statements were present at the General Shareholders’ Meeting. • The Principle number 4.3.8. of Communiqué as “in case independent membership is vacant, the Board of Directors send the nominee list determined within the framework of the report of the nominating committee to the Capital 1.3.10 - The agenda of the General Shareholders’ Meeting included a separate item detailing the amounts X Markets Board within 30 days”. and beneficiaries of all donations and contributions.

According to the announcement in CMB Bulletin dated January 9th 2020 and with number 2020/4, in the grouping As specified in the Article of Association, General determined as a result of the evaluation made by CMB, our Bank has taken place in the Second Group companies. Assembly Meeting was open to all shareholders. However, th 1.3.11 – The General Shareholders’ Meeting was held According to the provision 11 article of the Communiqué, manager of the investor relations department shall have a It was closed to media and open to the public, including stakeholders, without X public. The minutes of the “Capital Market Activities Level 3 Licence” and “Corporate Governance Rating License”. The Manager of the Unit of having the right to speak. General Assembly Meeting the Shareholder Relations and Board Secretariat performing duty within this scope at our Bank holds Capital Market has been submitted to all Activities Level 3 Licence and Corporate Governance Rating Licence. stakeholders via PDP and website by the Bank.

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Not Not 1.4. VOTING RIGHTS Yes Partial No Exempted Explanation 2.1. CORPORATE WEBSITE Yes Partial No Exempted Explanation Applicable Applicable

1.4.1 – There is no restriction preventing shareholders 2.1.1 – The company website includes all elements X X from exercising their shareholder rights. listed in Corporate Governance Principle

1.4.2 - The company does not have shares that carry There is no X 2.1.2 - The shareholding structure (names, privileges, privileged voting rights. shareholder number, ratio of shares, and beneficial owners of more X who has more than 5% of the issued share capital) is updated on the than 5% of the website at least every 6 months. paid-in capital. 1.4.3 – The company withholds from exercising its There is no mutual voting rights at the General Shareholders’ Meeting of shareholding relationship in X any company with which it has cross-ownership, in case the structure of the Bank's The Bank’s website is also such cross-ownership provides management control. capital. 2.1.4 – The company website is prepared in other available in English version,

selected foreign languages, in a way to present exactly X and the majority of Turkish Section 2 Section

Section 2 Section the same information with the Turkish content. content is available in English version. 1.5. MINORITY RIGHTS MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE 2.2. ANNUAL REPORT 1.5.1- The company pays maximum diligence to the X exercise of minority rights.

2.2.1 – The board of directors ensures that the annual Bank adopted its rates strictly report represents a true and complete view of the X which is outlooked for the company’s activities. 1.5.2 - The Articles of Association extend the use public-held company in of minority rights to those who own less than one the regulation and minority X 2.2.2 – The annual report includes all elements listed in twentieth of the outstanding shares, and expand the rights has been determined X scope of the minority rights. according to Article 19 of the Corporate Governance Principle 2.2.2. Bank’s Article of Association at a rate of 1/20 at capital. 3.1. CORPORATION’S POLICY ON STAKEHOLDERS

1.6. DIVIDEND RIGHT 3.1.1 - The rights of the stakeholders are protected pursuant to the relevant regulations, contracts and X 1.6.1 – The dividend policy approved by the General within the framework of bona fides principles. Shareholders’ Meeting is posted on the company X website. No specific policy has 1.6.2 – The dividend distribution policy comprises the been generated for stakeholders. Stakeholders’ minimum information to ensure that the shareholders 3.1.3 – Policies or procedures addressing stakeholders’ X X rights are protected within can have an opinion on the procedure and principles rights are published on the company’s website of dividend distributions in the future. the framework of general regulations, contracts and goodwill rules. 1.6.3 - The reasons for retaining earnings, and their X allocations, are stated in the relevant agenda item.

3.1.4 – A whistleblowing programme is in place for X 1.6.4 – The board reviewed whether the dividend reporting legal and ethical issues. policy balances the benefits of the shareholders and X those of the company. 3.1.5 - The company addresses conflicts of interest X among stakeholders in a balanced manner.

1.7. TRANSFER OF SHARES X

1.7.1 – There are no restrictions preventing shares X from being transferred.

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3.2. SUPPORTING THE PARTICIPATION OF Not 3.4. RELATIONS WITH CUSTOMERS AND Not THE STAKEHOLDERS IN THE CORPORATION’S Yes Partial No Exempted Explanation Yes Partial No Exempted Explanation Applicable SUPPLIERS Applicable MANAGEMENT

3.2.1 - The Articles of Association, or the internal 3.4.1 - The company measured its customer satisfaction, X regulations (terms of reference/ manuals), regulate the X and operated to ensure full customer satisfaction. participation of employees in management.

3.4.2 - Customers are notified of any delays in handling X 3.2.2 - Survey/other research techniques, consultation, their requests. interviews, observation method etc. Were conducted X to obtain opinions from stakeholders on decision that 3.4.3 - The company complied with the quality significantly affect them. X standards with respect to its products and services.

3.3. HUMAN RESOURCES POLICY

3.4.4 - The company has in place adequate controls to Section 2 Section

Section 2 Section protect the confidentiality of sensitive information and X business secrets of its customers and suppliers. The bank has an employment 3.3.1 - The company has adopted an employment policy ensuring equal policy ensuring equal opportunities, and a succession X MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE opportunity, succession plan MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE plan for all key managerial positions. works have been going on. 3.5. ETHICAL RULES AND SOCIAL RESPONSIBILITY

3.5.1 - The board of the corporation has adopted a 3.3.2 - Recruitment criteria are documented. X X code of ethics, disclosed on the corporate website.

3.3.3 - The company has a policy on human resources X 3.5.2 - The company has been mindful of its social development, and organizes trainings for employees. responsibility and has adopted measures to prevent X corruption and bribery.

3.3.4 - Meetings have been organized to inform employees on the financial status of the company, X remuneration, career planning, education and health. 4.1. ROLE OF THE BOARD OF DIRECTORS

Employees are notified 4.1.1 - The board of directors has ensured strategy 3.3.5 - Employees, or their representatives, were directly, However, and risks do not threaten the long-term interests of notified of decisions impacting them. The opinion of the X X there is no governing the company, and that effective risk management is in related trade unions was also taken. body like the union. place.

3.3.6 - Job descriptions and performance criteria 4.1.2 - The agenda and minutes of board meetings have been prepared for all employees, announced to indicate that the board of directors discussed and X them and take into account to determine employee approved strategy, ensured resources were adequately X remuneration. allocated, and monitored company and management performance. 3.3.7 - Measures (procedures, trainings, raising awareness, goals, monitoring, complaint mechanisms) 4.2. ACTIVITIES OF THE BOARD OF DIRECTORS have been taken to prevent discrimination, and to X protect employees against any physical, mental, and emotional mistreatment. 4.2.1 - The board of directors documented its meetings X and reported its activities to the shareholders. 3.3.8 - The company ensures freedom of association X and supports the right for collective bargaining. 4.2.2 - Duties and authorities of the members of the X board of directors are disclosed in the annual report. 3.3.9 - A safe working environment for employees in X maintained. 4.2.3 - The board has ensured the company has an internal control framework adequate for its activities, X size and complexity.

4.2.4 - Information on the functioning and effectiveness of the internal control system is provided in the annual X report.

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Not Not Yes Partial No Exempted Explanation 4.5. BOARD COMMITTEES Yes Partial No Exempted Explanation Applicable Applicable

4.2.5 – The roles of the Chairman and Chief Executive Due to the limited number of X Officer are separated and defined. members of the Bank’s Board of Director, committees are appointed in accordance with 4.2.7- The board of directors ensures that the Investor 4.5.5 - Board members serve in only one of the Board's the relevant legislation by Relations department and the corporate governance X committees. taking into consideration the committee work effectively. The board works closely X knowledge and experience of with them when communicating and settling disputes the board members and one with shareholders. board member may serve in more than one committee. The Bank’s paid-in capital is 860 Million.-TL and due to the defects of the Board 4.2.8 – The company has subscribed to a Directors and 4.5.6 - Committees have invited persons to the members during their duties, X Officers liability insurance covering more than 25% of X meetings as deemed necessary to obtain their views. they are insured with a limit the capital.

of 10 Million USD under the

Section 2 Section 2 Section responsibility insurance policy 4.5.7 - If external consultancy services are used, the Committee didn’t need to against the risk of loss. independence of the provider is stated in the annual X receive external consultancy report services until today. MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE 4.3. STRUCTURE OF THE BOARD OF DIRECTORS 4.5.8 - Minutes of all committee meetings are kept and X There is no policy for the reported to board members. 4.3.9- The board of directors has approved the policy women membership in the on its own composition, setting a minimal target of Board of Director. There is 25% for female directors. The board annually evaluates X consisted in 1 woman Board 4.6. FINANCIAL RIGHTS its composition and nominates directors so as to be member out of 6 Board compliant with the policy. Members. Woman members are at a rate of 17%. 4.6.1 – The board of directors has conducted a board performance evaluation to review whether it has X 4.3.10 - At least one member of the audit committee discharged all its responsibilities effectively. has 5 years of experience in audit/accounting and X finance. The loans to be granted to the members of the Board of 4.4. BOARD MEETING PROCEDURES 4.6.4 – The company did not extend any loans to its Directors and employees are board directors and executives, nor extended their subject to restrictions set forth lending period or enhanced the amount of those loans, X in Article 50 of the Banking 4.4.1 – Each board member attended the majority of or improve conditions thereon, and did not extend X Regulation. No other loans the board meeting in person. loans under a personal credit title by third parties or are granted to the members provided guarantees such as surety in favor of them. of the Board of Directors or 4.4.2 - The board has formally approved a minimum employees. time by which information and documents relevant X to the agenda items should be supplied to all board members. Annual salaries paid to 4.4.3 – The opinions of the board members that could the members of the Board not attend the meeting, but did submit their opinion in X 4.6.5 - The individual remuneration of board members of Directors and Top written format, were presented to other members. X and executives is disclosed in the annual report. Management has been disclosed in the Annual Report totally. 4.4.4 - Each member of the board has one vote. X

4.4.5 - The board has a charter/written internal rules X defining the meeting procedures of the board.

4.4.6 -Board minutes document that all items on the agenda are discussed, and board resolutions include X director's dissenting opinions if any.

There is no restriction for the Board members to have 4.4.7 – There are limits to external commitments of duties outside of the Bank. board members. Shareholders are informed of board Duties held by the Board X member’s external commitments at the General members out of the bank is Shareholders’ Meeting. included in the Annual Report submitted to the General Assembly. 86 87 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

CORPORATE GOVERNANCE INFORMATION FORM 1.4. VOTING RIGHTS

1. SHAREHOLDERS Whether the shares of the company have differential voting rights No

1.1. FACILITATING THE EXERCISE There are no voting privileges but there are privileges in the structure of the Board of Director, in the election of the member of OF SHAREHOLDERS RIGHTS In case that there are voting privileges, indicate the owner and Board and in the election of liquidator. 860.000.000.-TL of our total percentage of the voting majority of shares capital, which is 602.000.000.-TL consist of A Group shares and The number of investor meetings (conference, seminar/etc.) 258.000.000.-TL B Group shares. None. organized by the company during the year

The percentage of ownership of the largest shareholder 92.84% 1.2. RIGHT TO OBTAIN AND EXAMINE INFORMATION

1.5. MINORITY RIGHTS

Section 2 Section 2 Section The number of special audit request(s) None. Whether the scope of minority rights enlarged (in terms of content No or the ratio) in the articles of the association MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE The number of special audit requests that were accepted at the None. General Shareholders' Meeting If yes, specify the relevant provision of the articles of association There is no provision of the Article of Association.

1.3. GENERAL ASSEMBLY 1.6. DIVIDEND RIGHT

Link to the PDP announcement that demonstrates the information https://www.kap.org.tr/tr/Bildirim/741512 requested by Principle 1.3.1. (a-d) The name of the section on the corporate website that describes https://www.icbc.com.tr/tr/images/pdf/ICBC_Turkey_2019_ the dividend distribution policy KarDag%C4%B1t%C4%B1m_Politikas%C4%B1.pdf

The documents related to the General Assembly Meeting are presented on the Bank’s website in Turkish and English. Prepared by the Board , the proposal for the distribution of the Banks’ Whether the company provides materials for the General Related web site Turkish version: https://www.icbc.com.tr/tr/yatirimci- Commercial profit for the year 2019 was submitted to the approval of Shareholders' Meeting in English and Turkish at the same time iliskileri/akordeon-pdf-liste/Olagan-Genel-Kurul-Toplantilari/149/0/0, the Ordinary General Assembly held on 29.03.2019 and approved by Related web site English version: https://www.icbc.com.tr/en/investor- Minutes of the relevant agenda item in case the board of directors majority vote. The information provided to the shareholders regarding relations/pdf-list/Ordinary-General-Meetings/329/0/0 proposed to the general assembly not to distribute dividends, the the undistributed part of 2019 profit is provided in article 7 of the The links to the PDP announcements associated with the reason for such proposal and information as to use of the dividend following link. transactions that are not approved by the majority of independent None. directors or by unanimous votes of present board members in the https://www.icbc.com.tr/en/images/pdf/EN29032019_GENEL_KURUL_ context of Principle 1.3.9 TOPLANTI_TUTANAGI_ENG.pdf

The links to the PDP announcements associated with related party transactions in the context of Article 9 of the Communique on None. PDP link to the related general shareholder meeting minutes in Corporate Governance (II-17.1) case the board of directors proposed to the general assembly not https://www.kap.org.tr/tr/Bildirim/750820 to distribute dividends The links to the PDP announcements associated with common and continuous transactions in the context of Article 10 of the None. Communique on Corporate Governance (II-17.1)

The name of the section on the corporate website that https://www.icbc.com.tr/tr/images/pdf/Bagis_ve_Yardim_ demonstrates the donation policy of the company Politikasi_2017.pdf

The relevant link to the PDP with minute of the General Shareholders' Meeting where the donation policy has been https://www.kap.org.tr/tr/Bildirim/750820 approved

The number of the provisions of the articles of association that discuss the participation of stakeholders to the General None. Shareholders' Meeting

Some stakeholders such as Independent Auditor and employees Identified stakeholder groups that participated in the General attended the General Assembly Meeting within the knowledge of our Shareholders' Meeting, if any Bank as observer.

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GENERAL ASSEMBLY MEETINGS

Specify the name of the page of the Specify the name The number of the The number of corporate website of the page of the relevant item or The number information requests Shareholder that contains corporate website Percentage paragraph of General of declarations received by the company participation Percentage of shares the General that contains The link to the related General Meeting of shares Shareholders' by insiders regarding the rate to the General directly present Shareholders' all questions PDP general shareholder Date represented Meeting minutes received clarification of the Shareholders' at the GSM Meeting minutes, asked in the meeting notification by proxy in relation to by the board agenda of the General Meeting and also indicates general assembly related party of directors Shareholders' Meeting for each resolution meeting and all transactions the voting levels responses to them for or against

Investor Relations /General There is no agenda about https://www.kap.org.tr/tr/

29.03.2019 0 92.94% - 92.94% Assembly/ Ordinary General No Addressed Question 138 Section 2 Section

Section 2 Section related parties Bildirim/750820 Assembly Meeting MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE

2. DISCLOSURE AND TRANSPARENCY c) The page numbers and/or name of the sections in the Annual 2019 Annual Report –Section II Management and Corporate Governance Report that demonstrate the information on the number of board Practice > Information Regarding The Attendance By The Board of meetings in a year and the attendance of the members to these Directors and The Committee Members To The Related Meetings During 2.1. CORPORATE WEBSITE meetings. The Accounting Period

Specify the name of the sections of the website providing the Home Page > Investor Relations ç) The page numbers and/or name of the sections in the Annual information requested by the Principle 2.1.1 Report that demonstrate the information on amendments in In 2019, there weren’t any important legislative changes that could the legislation which may significantly affect the activities of the significantly affect the Bank’s operations. corporation. If applicable, specify the name of the sections of the website https://www.icbc.com.tr/en/investor-relations/detail/Shareholding- providing the list of shareholders (ultimate beneficiaries) who Structure/317/852/0 directly or indirectly own more than 5% of the shares. d) The page numbers and/or name of the sections in the Annual 2019 Annual Report Section I- General Information> Information Related Report that demonstrate the information on significant lawsuits to the Material Lawsuits Brought Against The Bank During the Year 2019 List of languages for which the website is available Turkish and English filed against the corporation and the possible results thereof and Their Potential Outcomes

2.2. ANNUAL REPORT e) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on the conflicts of interest of the corporation among the institutions that it purchases services The page numbers and/or name of the sections in the Annual None on matters such as investment consulting and rating and the Report that demonstrate the information requested by principle measures taken by the corporation in order to avoid from these 2.2.2. conflicts of interest a) The page numbers and/or name of the sections in the Annual 2019 Annual Report –Section II Management and Corporate Governance Report that demonstrate the information on the duties of the Practice> Duties Held By Board Members out of the bank members of the board of directors and executives conducted f) The page numbers and/or name of the sections in the Annual 2019 Annual Report –Section II Management and Corporate Governance There is no mutual shareholding relationship in the out of the company and declarations on independence of board Report that demonstrate the information on the cross ownership Practice > Board Members Declaration of Independence. structure of the Bank's capital. members. subsidiaries that the direct contribution to the capital exceeds 5%

b) The page numbers and/or name of the sections in the Annual 2019 Annual Report –Section II Management and Corporate Governance g) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on committees formed Practice > Information Regarding The Committees Established Within Report that demonstrate the information on social rights and 2019 Annual Report Section II- Management and Corporate Governance within the board structure. The Body of the Board of Directors professional training of the employees and activities of corporate Practice> Human Resources Practices> social responsibility in respect of the corporate activities that arises Ethic Rules and Social Responsibility social and environmental results

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3. STAKEHOLDERS Human Resources Policy is published on the Corporate website. Equality and transparency in recruitment and carrier planning are mentioned in Internal Personnel Regulation. Recruitment standards are set in written and the Bank complies with 3.1. CORPORATION’S POLICY ON STAKEHOLDERS these standards. Employees’ personnel rights are treated fairly and form a training program within the scope of policies aimed at improving the experience, skills and Professional ethics of the employees. There is no severance policy for Bank’s employees. All implementations The Bank holds information meetings for all employees and consults with The name of the section on the corporate website that employees on issues such as financial position of the Bank, salary, career, for the Bank’s employees depend on labour law legislation and other The name of the section on the corporate website that demonstrates the employee remedy or severance policy training and health. relevant regulations. As there is no inconsistency in the internal demonstrates the human resource policy covering discrimination The bank announces job descriptions and structures in accordance with regulations of the Bank, no severance pay policy has been issued. and mistreatments and the measures to prevent them. Also provide performance and reward criteria. And the bank takes into consideration a summary of relevant parts of the human resource policy. efficiency in determining the salaries and other benefits of the The number of definitive convictions the company was subject to in employees. 14 relation to breach of employee rights The Bank’s Human Resources policy is based on the principle of comprehensive opportunities and principle of equal opportunities in order to enhance occupational safety and personal development of The position of the person responsible for the alert mechanism the employee professionally. The Bank takes precautions against racial,

Head of Internal Audit religious, and gender discrimination among its employees and against

Section 2 Section Section 2 Section (i.e. whistleblowing mechanism) physical, mental and mistreatment in the Bank’s internal environment.

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE The contact detail of the company alert mechanism. [email protected] MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE The number of definitive convictions the company is subject to in None relation to health and safety measures 3.2. SUPPORTING THE PARTICIPATION OF THE STAKEHOLDERS IN THE CORPORATION’S MANAGEMENT 3.5. ETHICAL RULES AND SOCIAL RESPONSIBILITY

There is no written internal regulation addressing the participation of Name of the section on the corporate website that demonstrates employees on management bodies. However, within the scope of Bank’s the internal regulation addressing the participation of employees priorities, employees, medium and high level managers are provided to The name of the section on the corporate website that on management bodies. Home Page>Investor Relations> Banking Ethic Rules participate to decision and assessments by the committees. demonstrates the code of ethics

The name of the section on the company website that Medium and high level managers are able to attend the decision demonstrates the corporate social responsibility report. If such a mechanisms through committees. In addition, for employees at all levels None report does not exist, provide the information about any measures Corporate bodies where employees are actually represented convey their suggestions and ideas through “ Suggestion System” in taken on environmental, social and corporate governance issues. order to benefit from their innovative ideas and ensure that employees able to be active in decision-making mechanisms.

On-site and remote inspection and control activities carried out by 3.3. HUMAN RESOURCES POLICY Internal Audit and Internal Control and Compliance Department; It is one of the most prominent measures within the scope of anti-corruption, including embezzlement and bribery. In addition, personnel are informed about these issues and their awareness is expanded during the trainings Succession planning is made for Top Management and the appointments The role of the board on developing and ensuring that the aimed at combating Laundering Proceeds of Crime and Financing of General Manager and Assistant General Managers are carried out by company has a succession plan for the key management positions of Terrorism. In our Bank, scenario-based AML (laundering- money the Board of Directors. detection) program is used; The warnings generated by the said program Any measures combating any kind of corruption including are examined and the transactions related to the warning are examined embezzlement and bribery within the scope of monitoring and control activities aimed at preventing money laundering and financing of terrorism. When necessary, the Summary of Human Resources Policy under the Policies in the Investor branches or units are contacted to obtain detailed information about the Relations section of the Bank’s corporate website www.icbc.com.tr. The nature of the transactions, the customer's risk profile, and the funding Bank’s objective and strategy is to increase employees efficiency and The name of the section on the corporate website that sources on which the transactions are based on. Transactions that cause happiness by using charging system, performance evaluation, career demonstrates the human resource policy covering equal suspicion that corruption may be related to all kinds of corruption planning and developing, training and similar motivational tools and opportunities and hiring principles. Also provide a summary of including embezzlement and bribery are reported to MASAK by filling in to create a suitable working environment that will reveal the creativity relevant parts of the human resource policy. the Suspicious Transaction Notification Form. of our employees through these methods. Issues related to equality of opportunity are included in the personnel regulation and not disclosed on the corporate website.

Whether the company provides an employee stock There is no employee stock ownership programme. ownership programme

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4. BOARD OF DIRECTORS-I COMPOSITION OF BOARD OF DIRECTORS

4.2. Activity of the Board of Directors Whether The Director Whether the Whether She/He Has At Date of the last board evaluation conducted 21.02.2019 The Link to PDP Independent Name, Whether Whether is the Director Least 5 First Notification That Director Surname Executive Independent Who Ceased Years’ Election Includes The Considered of Board Director Or Director to Satisfy The Experience Date To Independency By The Whether the board evaluation was externally facilitated No Member Not Or Not Independence On Audit, Board Declaration Nomination or Not Accounting Committee And/Or Whether all board members released from their duties at the GSM Yes Finance Or Not

XIANGYANG Name(s) of the board member(s) with specific delegated duties and Xiangyang Gao- Chairman, Executive Member (In charge of Human 22.05.2015 Executive Not - No No Yes

authorities, and descriptions of such duties Resources, BoD Office) GAO

Section 2 Section 2 Section

JIANFENG Non- Number of reports presented by internal auditors to the audit 22.05.2015 Not - No No Yes 41 ZHENG Executive committee or any relevant committee to the board MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Non- Independent https://www.kap.org. YING WANG 22.05.2015 Yes No Yes 2019 Annual Report Section III - Assessment of Operation of Executive Member tr/tr/Bildirim/741509 Number of reports presented by internal auditors to the audit Internal Control, Internal Audit and Risk Management Systems committee or any relevant committee to the board By The Audit Committee Non- Independent PEIGUO LIU 02.01.2017 - No No Yes Executive Member Name of the Chairman Xiangyang Gao SHAOXIONG XIE 29.11.2018 Executive Not - No No Yes

Name of the CEO Shaoxiong Xie

If the CEO and Chair functions are combined: provide the link to the relevant PDP announcement providing the rationale for such The Chairman and the General Manager are different persons. combined roles 4. BOARD OF DIRECTORS-II Damages that may be caused by the members of the Board of Directors Link to the PDP notification stating that any damage that may during the discharge of their duties have been insured under the liability be caused by the members of the board of directors during the insurance policy within the limit of USD 10 million. However, as stated 4.4. Meeting Procedures of the Board of Directors discharge of their duties is insured for an amount exceeding 25% in the Corporate Governance Principles Communiqué, the amount of of the company's capital insurance is not determined in excess of 25% of the Bank's capital and Number of physical board meetings in the reporting period the issue is not disclosed in the PDP. 4 (meetings in person) The name of the section on the corporate website that There is no policy for the women membership of the Board of Director. demonstrates current diversity policy targeting women directors Director average attendance rate at board meetings 100%

The number and ratio of female directors within the Board of There is consisted in 1 woman Board member out of 6 Board Members. Whether the board uses an electronic portal to support its work or Directors Woman members are at a rate of %17. (No) not

Number of minimum days ahead of the board meeting to provide Information and related documents are submitted information to directors, as per the board charter to the members 12 business days in advance.

The name of the section on the corporate website that Home Page> Investor Relations> Articles of Association demonstrates information about the board charter

Number of maximum external commitments for board members There is no restriction for the Board members to have external duties as per the policy covering the number of external duties held by outside the Bank. Duties held outside of the bank by the Board members directors are included in the Annual Report submitted to the General Assembly.

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4.5. BOARD COMMITTEES 4. BOARD OF DIRECTORS-III

4.5. BOARD COMMITTEES-II 2019 Annual Report Section II- Management and Corporate Governance Page numbers or section names of the annual report where Practice / Information Regarding the Committees Established within the information about the board committees are presented. Body of the Board of Directors Specify where the activities of the audit committee are presented 2019 Annual Report Section II- Management and Corporate Governance in your annual report or website (Page number or section name in Practices- Information Regarding the Committees Established within the the annual report/website) Body of the Board of Directors https://www.kap.org.tr/tr/Bildirim/795100 https://www.kap.org.tr/tr/Bildirim/697417, https://www.kap.org.tr/tr/ Bildirim/672968 Specify where the activities of the corporate governance 2019 Annual Report Section II- Management and Corporate Governance committee are presented in your annual report or website (Page Practices - Information Regarding the Committees Established within the Link to the PDP announcement(s) with the There is no PDP link to have been disclosed to the public relevant to number or section name in the annual report/website) Body of the Board of Directors. board committee charters working principles. The responsibilities of the committees are explained in Section II of the Annual Report - Management and Corporate Governance Practices / Information Regarding the Committees Specify where the activities of the nomination committee are The functions of the Nomination Committee are performed by the Established within the Body of the Board of Directors. presented in your annual report or website (Page number or Corporate Governance Committee.

section name in the annual report/website)

Section 2 Section 2 Section

Within the scope of banking legislation, Credit and Risk Committees Specify where the activities of the early detection of risk committee 2019 Annual Report Section II Management and Corporate Governance MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE are presented in your annual report or website (Page number or MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE COMPOSITION OF BOARD COMMITTEES-I Practices- Information Regarding the Committees Established within the section name in the annual report/website) Body of the Board of Directors.

Name Of Committees Whether Names Of The Board Name-Surname of Whether Board Member Defined As "Other" In The Committee Specify where the activities of the remuneration committee are 2019 Annual Report Section II- Management and Corporate Governance Committees Committee Members Or Not First Column Chair Or Not presented in your annual report or website (Page number or Practices-Information on the Committees Established Within the Board section name in the annual report/website) of Directors

Audit Committee Peiguo LIU Yes Board Member 4.6. FINANCIAL RIGHTS Audit Committee Ying WANG No Board Member Specify where the operational and financial targets and their 2019 Annual Report Section II- Management and Corporate Governance Corporate Governance achievement are presented in your annual report (Page number or Jianfeng ZHENG No Board Member Practices-Summary of the Board of Directors Activity Report Committee section name in the annual report)

Corporate Governance Levent İŞCAN No No member of Board Specify the section of website where remuneration policy for Committee Investor Relations-Corporate Governance /Management/Committees executive and non-executive directors are presented.

Remuneration Committee Ying WANG Yes Board Member Specify where the individual remuneration for board members 2019 Annual Report Section II Management and Corporate Governance and senior executives are presented in your annual report (Page Practices / Corporate Governance Principles Compliance Report Remuneration Committee Jianfeng ZHENG No Board Member number or section name in the annual report) Additional Information / -Financial Rights

Other Credit Committee Xiangyang GAO Yes Board Member

COMPOSITION OF BOARD COMMITTEES-II Other Credit Committee Shaoxiong XIE No Board Member

The The Number Other Credit Committee Peiguo LIU No Board Member The The Percentage Number Name Of Committees of Reports on Names Of The Board Percentage Of Of Independent Of Defined As "Other" its Activities Committees Non-executive Directors In The Meetings In The First Column Submitted Board - Risk Management Directors Committee Held In Other Xiangyang GAO Yes Board Member to the Board Committee Person Board - Risk Management Other Shaoxiong XIE No Board Member Committee Audit Committee 100% 100% 4 4

Board - Risk Management Corporate Governance Other Peiguo LIU No Board Member 67% 33% 1 3 Committee Committee

Board - Risk Management Remuneration Committee 100% 50% 1 1 Other Ying WANG No Board Member Committee Other Credit Committee 33% 33% 43 0 Board - Risk Management Other Jianfeng ZHENG No Board Member Committee Other Risk Management Committee 60% 40% 0 0

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ADDITIONAL INFORMATION ABOUT CORPORATE GOVERNANCE The Board of Directors may meet with the majority of the full number of the members. Decisions of the Board of Directors may be taken as a result of the physically attended meeting with the majority of the members present at The Structure of The Board the meeting as well as by the written approval of the other members upon written proposal of one of the members The Bank is managed and represented by the Board of Directors. The Members of the Board of Directors and their according to the 4th sub-clause of the 390th article of the Turkish Commercial Code numbered 6102. Board resolutions number are determined at the General Meeting. According to the Articles of Association of the Bank, the Board of were taken unanimously in 2019. Number of meetings of the Members of the Board of Directors, their attendance Directors is consisted of 6 members including the General Manager. Term of office of the members elected for the status to the meetings are included in the “Management and Corporate Governance Practices” section of the activity Board of Directors is maximum three years, except for the General Manager. report.

According to the 23rd article of the Banking Law; excluding Mr. Shaoxiong Xie, the General Manager who is the natural Duties of the Board of Directors Outside of the Bank member of the Board of Directors and Mr. Xiangyang Gao, Executive Board member, the board members are not involved in the administrative structure, do not take part in the daily business flow or the ordinary activities of the bank Positions Held out of the Bank Positions Assumed at the Bank and do not have operational duties. Name / Surname (Segregated as Within the Group at the Last 5 Years

and Out of the Group) Section 2 Section Section 2 Section Mr. Mehmet Hilmi Güler and Ms. Ying Wang were elected as independent board members for three years at the March 30th 2018 dated Ordinary General Assembly Meeting. Mr. Mehmet Hilmi Güler, Independent Board Member and Member of the Board of Directors, General Manager, MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Chairman of Corporate Governance Committee, resigned from his duties on October 25th 2019. Vice Chairman of the Credit Committee, Chairman of Intra-Group: Chairman of the Board of MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE Xiangyang GAO the Board of Directors and Credit Committee, Executive Directors at ICBC Turkey Yatırım Menkul Member, Member of the Risk Management Committee of Değerler A.Ş., an affiliate of the Bank According to the Capital Markets Board's Corporate Governance Principles, the number of independent board the Board of Directors members for banks has been determined to be at least three. As the members of the Board of Directors appointed for the audit committee membership are deemed as independent board members within the scope of these principles, Mr. Peiguo Liu is currently an Independent Board Member of the Bank, who elected as the Chairman of the Audit General Manager/Member of the Board of Directors, Committee. As Peiguo Liu assigned for the Audit Committee Membership within the structuring of the Board of Shaoxiong XIE Vice President of Credit Committee, Member of the Risk He holds no other position out of the Bank. Management Committee of the Board of Directors Directors of the Bank is considered directly the Independent Member of the Board of Directors according to the 3rd item of the 6th Article of the Corporate Governance Communiqué number II-17.1.

Member of the Board of Directors, Member of the Credit Intra-Group: Member of the Board of Directors The permission was granted to the members of the Board of Directors to enable them to conduct transactions within Committee, Coordinator of the General Secretariat Peiguo LIU at ICBC Turkey Yatırım Menkul Değerler A.Ş., an Group, Chairman of the Audit Committee, Member of the the framework of the Turkish Commercial Code, Article 395 "Prohibition to Do Business with the Company" and Article affiliate of the Bank Risk Management Committee of the Board of Directors 396 "Prohibition of Competition" on General Meeting held on March 30th 2018.

Activity Principles of The Board Intra-Group: Industrial and Commercial Bank The Board of Directors meet any time the Bank business requires. The Board of Directors is invited to the meeting Member of the Board of Directors, Member of the of China Ltd.(ICBC) Head Office – Corporate Corporate Governance Committee, Member of the Strategy and Investor Relations Department Senior by the Chairman or the Deputy Chairman if he is absent. Each of the members has the right to request invitation of Jianfeng ZHENG Remuneration Committee, Alternate Member of the Specialist, Non-Executive Member of the Board the Board of Directors and include to the agenda the matters they wish to discuss. The meetings are held within the Credit Committee, Member of the Risk Management of Directors in ICBC Mexico Ltd. and ICBC (Thai) Committee of the Board of Directors Public Company Ltd., ICBC Credit Suisse Asset framework of the agenda distributed to the members by the Chairman beforehand. Management Co. Ltd. Supervisor

For the delegation of management; the Board of Directors of the Bank is authorized to delegate the management Intra-Group: Industrial and Commercial Bank authority completely or partially to one or more Members of the Board of Directors or to third parties by an internal of China Ltd.(ICBC) Corporate Strategy and Independent Member of the Board of Directors, Member th Investor Relations Department- Senior Specialist, directive which shall be prepared according to the 367 article of the Turkish Commercial Code. Within this scope, of the Audit Committee, Chairman of the Remuneration Non-Executive Member of the Board of Ying WANG Committee, Alternate Member of the Credit Committee, an Internal Directive has been put into force by the Board of Directors with the resolution dated January 16th 2017 Directors in ICBC-AXA Assurance Co. Ltd., ICBC Member of the Risk Management Committee of the Credit Suisse Asset Management Co. Ltd., ZAO according to Article 367th and 371th of the TCC and Article 44th of the Articles of Association. The Internal Directive was Board of Directors Industrial and Commercial Bank of China Ltd. registered on March 8th 2017 and announced in the Trade Registry Gazette on March 13th 2017. Internal Directive was (Moscow) and ICBC Europe S.A. revised by May 31th 2019 dated and 1580/03 numbered Board Resolution and was registered on July 31st 2019 and announced in 9884 numbered and dated September 6th 2019 Trade Registry Gazette.

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FINANCIAL RIGHTS the Bank’s corporate internet site. Besides, as from the date of announcement, agenda, a sample of power of attorney, activity report, the Articles of Association of the Bank, financial tables and footnotes, independent audit reports, the According to the 48th article of the Articles of Association of the Bank, salaries to be paid to the members of the Board old and new versions of the amendments along with the related resolution of the Board of Directors in case there of Directors are determined and set by the general meeting. Salaries of the members of the Board of Directors are is an amendment in the Articles of Association, in case there is dismissal, change or election of the Members of the announced to the public through the general meeting minutes published at KAP and internet site of the Bank. Board of Directors among the items of the agenda, reasons for dismissal and change, information on the member and independent member nominees specified in the Corporate Governance Principles, and other documents related to the The Bank’s current Remuneration Policy is submitted for the shareholders’ information with a separate agenda item at agenda are available at the General Management of the Bank and on our corporate internet site for the review of the the ordinary general meeting held on March 29th 2019 and published on KAP and the website of the Bank. shareholders. Documents related to the agenda items are published in EGMS separately.

According to the principle number 4.6.5 of the “Corporate Governance Principles” set forth in the Corporate According to the provisions of the Articles of Association of the Bank, it is possible to vote by proxy. According to the Governance Communiqué annex number II-17.1 published in the Official Gazette dated January rd3 2014 with number 28th article of our Articles of Association, the shareholders may personally attend the general meetings as well as being 28871 and put into effect by CMB, salaries given and fringe benefits provided for the members of the Board of presented at these meetings by a proxy they choose among the shareholders or from outside. Provisions of the 29th

Directors and the executives should be announced to public through the activity report. However, the declaration article of the Capital Markets Law are applied in the invitation of the shareholders. General Meeting minutes are always Section 2 Section Section 2 Section shall be made as the total of the financial rights provided for the members of the Board of Directors and the assistant available for the shareholders on our Bank’s internet site and at E-Company information portal which is accessible also General Managers, not on person basis. Allowances paid to the members of the Board of Directors and the assistant from our Bank’s internet site with the Electronic General Meeting System, within the scope of the related provisions

MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE General Manager, health/life insurance expenses, travel, accommodations and representing expenses and other various of the Turkish Commercial Code, and which is specialized for Information public services and the infrastructure of it is MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE expenses are summarized below. provided by the Central Securities Depository.

All shareholders have the right to declare opinions on the subjects related to the agenda and ask questions at the Thousand TL 31.12.2018 31.12.2019 General Meetings. Suggestions given in relation with the agenda are resulted by voting in compliance with the legal procedure. Allowances and Insurances 10,604 25,282 In 2019, there hasn’t been any operation which majority Yes votes of the independent members of the Board of Directors Other Expenses 6,862 6,005 are required for deciding at the Board of Directors or its decision is left to the general meeting for No votes given.

In line with the Bank’s Donation and Aid Policy approved in the ordinary general meeting of our Bank held on March Total Expenses 17,466 31,287 31st 2014, information on that there hasn’t been any change in the policy and donations and aids made in 2018 are given to the shareholders at the ordinary general meeting held on March 29th 2019, with a separate agenda item. General Assembly Meetings General Assembly Meetings are held within the framework of the Banking Law, the Turkish Commercial Code and the At the general meetings held on March 29th 2019, the shareholders are informed about that there has been no Capital Markets Law. significant transaction which may cause an interest conflict between the shareholders holding the management control, the members of the Board of Directors, managers having administrative responsibility and their spouses and blood In 2019, including ordinary electronic general meeting, to which physical or electronic attendance is possible, was held. relatives and relatives by marriage up to second degree and the Bank or the subsidiaries. The ordinary general meeting was held on March 29th 2019 with the quorum of 92.94%. The decisions made in the general meetings have been implemented. Dividend Right In the Articles of Association of the Bank, there is no provision regulating privilege in participating profit share. Profit Regulations on general meetings of shareholders set forth in “The Articles of Association of ICBC Turkey Bank A.Ş.” Distribution is carried out within the framework of the provisions of the Articles of Association. Each shareholder has the which take place in the Bank’s internet site open to public and in the “Internal Regulations on the Working Principles right to get profit share over the distributed profit share in his share rate. and Procedures of the General Meeting”. Suggestion of the Board of Directors of our Bank on Profit Distribution is proposed to the General Assembly Meeting The Bank makes the invitation to the general assembly meeting at least three weeks before the meeting, excluding and to the information of the shareholders by the activity report before the General Assembly Meeting every year and the announcement and meeting dates. Calls/invitations and announcements for the General Meeting are published decided by discussing at the general meeting. At the ordinary General Meeting of the Bank dated March 29th 2019, it in the Turkish Trade Registry Gazette, a newspaper published in Istanbul where the registered address of the Bank is, is decided “2018 annual net profit in the amount of 62.069.246,22 TL and restricting 5% of the remaining 3.103.462,31 at Merkezi Kayıt Kuruluşu A.Ş. (MKK) (Central Securities Depository Institution), at Electronic General Meeting System TL as the legal reserves as shown below, then transfer the whole remaining amount of 58.965.783,91 TL to the (EGMS), on e-YÖNET- Corporate Governance and Investor Relations Portal, on Public Disclosure Platform (KAP) and on extraordinary reserves, and authorization of the Board of Directors regarding for the use of the legal reserves.”

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The Profit Distribution Policy of the Bank is approved at the ordinary General Meeting held on March 29th 2019. This policy is published in the Bank’s corporate internet site and in the activity report as “Regarding our Bank’s ICBC Turkey aims target-directed growth in the sector and under the light of investment and financial needs, within the framework of the Banking Law, the Turkish Commercial Code and the Capital Markets Law and related legal legislation and the to add social and provisions of our Articles of Association, a basic profit distribution policy based on saving profits in the extraordinary reserves for the finance of growth by holding profits in the body and distributing as shares in free capital increases from economic values for its internal sources is adopted. This policy shall be evaluated every year by considering regulations of the Capital Markets Board on profit distribution and liquidity status of our Bank.” customers and society by establishing long

and strong relations Section 2 Section and create sustainable MANAGEMENT AND CORPORATE GOVERNANCE PRACTICE

growth. Section 1 Section INTRODUCTION

Section 3

UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT

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ASSESSMENT OF OPERATION OF THE INFORMATION REGARDING THE 2019 INTERNAL CONTROL, INTERNAL AUDIT ACTIVITIES OF THE INTERNAL CONTROL,

AND THE RISK MANAGEMENT SYSTEMS INTERNAL CONTROL, INTERNAL AUDIT AND Section 3 Section

Section 3 Section BY THE AUDIT COMMITTEE THE RISK MANAGEMENT SYSTEMS UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT Developments in recent years showed once again how an important function is risk management in banking. Risk INTERNAL AUDIT management, which have always been the main function of banking and implemented most effectively at all times, have started to be implemented more differently and delicately in the recent years compared to the previous years due to more technical applications being implemented, risk sensitivity being further considered and the special attention paid to the matter Internal Audit Department of the Bank has been operating pursuant to the Banking Law no.5411 and the Regulation by the local authorities and the support of the legislation. on the Internal Systems and Assessment of the Internal Capital Adequacy Processes of the Banks issued pursuant to the Banking Law. The purpose of the Board is to ensure the Bank’s senior management that the banking operations are At our Bank, the framework of the Risk Management has been determined by the Board of Directors and the Risk being conducted in compliance with the laws and the related legislation and the internal strategies, policies, principles Management Department and risk committees consisting of the senior executives of the business lines have been assigned to and targets of the Bank and the efficiency and sufficiency of the Bank’s internal control and risk management systems. deal with this issue. Together with the parties responsible for the processes, the Risk Management Department is responsible The Board performs its duties independently and objectively, under supervision of the Board of Directors through the for establishing the risk policies and procedures, computing, analyzing, monitoring and reporting the risks, within the Audit Committee. framework of the principles approved by the Board of Directors.

st The Internal Audit Board of our Bank has been operating pursuant to the Banking Law numbered 5411 and the Regulation As of December 31 2019, the Internal Audit Department consisted of 10 people; 1 Managing Director, 6 Auditors, 1 on the Internal Systems of the Banks and the Internal Capital Adequacy Assessment Process issued pursuant to the Banking Authorized Assistant Auditor, 1 Assistant Auditor and 1 Expat. Law. The purpose of the Board is to ensure our Bank’s senior management that the banking operations are being conducted in compliance with the laws and the related legislation and the internal strategies, policies, principles and targets of our Bank Branches, Head Office departments and the Bank’s Affiliate(s) and the processes and activities implemented and and the efficiency and sufficiency of our Bank’s internal control and risk management systems. The Board performs its duties conducted therein, are included in the annual inspection plan based on periodicity and risk management. The Internal independently and objectively directly under supervision of the Board of Directors. Audit Department presents its opinions and recommendations as to the deficiencies and mistakes identified as a result of such inspections, utilization of the Bank’s resources more effectively and efficiently and limitation of the risks. At our Bank, an Internal Control and Compliance Department directly operating under supervision of the Board of Directors, has been formed in order to design the internal control activities and collaboration. Within the scope of the internal control activities included are the controlling of the operational transactions for the conducting of the activities, communication As a result of the risk assessments, activities of the Internal Audit Department in 2019 have concentrated on the credit channels, information technologies and financial reporting and the compliance controls. Regulations as to the requisite of risks and operational risks. Among its other responsibilities, the Internal Audit Department is also responsible for obtaining approvals from the Internal Control and Compliance Department for the new products and transactions and the coordination of all external audits. activities planned to be conducted prior to submitting them to the Board of Directors have been implemented. Within the scope of the legislation on prevention of laundering proceeds of crime and financing of terrorism, a Compliance Program Information technologies systems are inspected based on the adaptation of the methods set out in the “Controlling of has been initiated in our Bank and the risk management, monitoring and controlling and training activities within the scope the Information Technologies Targets (COBIT)”, an international standard in this area. In order to enhance these types of the aforementioned legislation are conducted by the Internal Control and Compliance Department. Our Bank recognizes of inspections, one auditor and one assistant auditor within the Internal Audit Department have been assigned to this the importance of the risk management, internal control and inspection functions that are the subject matter of the internal systems and closely monitors the developments in this matter and benefits from the outputs thereof. In this context, task and inspection of the information technologies systems has been an on-going process. assessments and decisions taken at the quarterly Audit Committee meetings made in quarterly periods with the presence of the department heads of the Internal Controls have been submitted to the Board of Directors for their attention and approval. Internal Audit Department is authorized to investigate and identify whether the personnel working in the Headquarters’ Units, branches and the affiliates of the Bank commit any acts that have been determined as crime and fault in the In the period ahead, as has been so far, our Bank shall continue its decisiveness with regards to the risk oriented approach and related legislation. These investigations include determination of the degrees of such crime and recommendation of closely monitor the internal systems and the implementation results as well as the proposals by the independent auditors and suitable penalties, identification and elimination remedy works of the losses and deficiencies incurred or threatened to necessary remediation shall be put in place and addressed at the Audit Committee meetings. incur. Furthermore, investigations continue to be carried out in case of significant personnel wrongdoings or significant

Sincerely yours, wrong implementations as determined by the "Internal Control and Compliance" Department regarding loans transferred to legal proceedings and / or administrative penalties from regulatory authorities. Peiguo Liu, Chairman of the Audit Committee Ying Wang, Member of the Audit Committee

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Auditors submit their reports containing the findings of their inspections to the Senior Management and the Audit are conducted by the Internal Control and Compliance Department. In addition within the department, activities Committee through the Board, as practicable as possible. For the auditors to perform their duties with the professional are conducted for following-up of Banking and other relevant legislation, making necessary announcements and care and attention, all kinds of measures are taken and attention is paid for their professional training activities and notifications to the relevant departments and branches in case of changes in the legislation, researching and answering personal development. the questions encountered in the implementation of the legislation.

INTERNAL CONTROL AND COMPLIANCE DEPARTMENT As of the end of 2019, there are 14 persons working in the Internal Control and Compliance Department, 1 Managing Section 3 Section Section 3 Section Director, 1 Manager, 10 Assistant Manager, 1 Senior Specialist, 1 Specialist. Internal control and compliance personnel An internal control system has been established, in compliance with the BRSA regulations and covering all the activities perform their duties in the branches where the operations are conducted, in the Head Office and the affiliates included

UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT of the branches, Head Office units and the Bank’s affiliates included in the consolidation, in order to protect the Bank’s in the consolidation. There are two units operating under the Internal Control and Compliance Department: Head UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT assets, conduct the Bank’s activities effectively and efficiently in compliance with the Banking Law and other related Office and Branches Control Unit, Legislation and Compliance Unit. Within the scope of branch control activities, legislation, the Bank’s internal policies and rules and the general practices of the banking sector, ensure that the regional structures have been set up, hence the Branches are subject to on-site control activities frequently within the accounting and financial reporting systems are secured, integrated and the information is obtained on a timely basis. scope of the control planning.

The Bank has already established and announced to all of its personnel its strategies and policies regarding the control Internal Control and Compliance Department conducts its compliance works as an integral part of its daily routine both activities and the measures necessary to maintain the internal control systems effectively within the Bank have been at the Head Office and information systems and the branches periodically, on the spot and on the ground and prepares taken by the Board of Directors. In order to achieve the foreseen purpose from the internal control systems, functional reports based on the content of the works performed. In the reports prepared, great importance is attached to the segregation of duties have been identified, responsibilities have been allocated, accounting and financial reporting development of the internal control system and recommendations to create an internal control culture throughout the systems, information technologies and internal communication channels have been established to work effectively, Bank. In its activities, areas that may create high risks are concentrated on and preventive control points are created. business sustainability plan has been prepared, internal control activities have been determined and the work flow During 2019 operating period, each internal control employee was given the responsibility of 10-11 branches in charts indicating the controls over the work processes and business steps have been prepared. average and within this context, 4 internal control personnel were continuously conducting control activities in the branches; all of the branches were controlled on the ground 2 times in average during the year. Aside from these, Within the scope of the internal control activities included are the controlling of the operational transactions for among the personnel, who perform operational duties in certain departments and units at the Head Office and in the conducting of the activities, communication channels, information technologies and financial reporting and the branches, some were assigned as control responsible who performed controls within the scope of the pre-prepared compliance controls. Control of the uninterrupted compliance is conducted by the Internal Control and Compliance control lists and in other matters necessary and reported their findings to the department. Department. Regulations as to the requisite of obtaining the Internal Control and Compliance Department’s opinion for the new products and transactions and the activities planned to be conducted prior to submitting them to the Board of Directors have been implemented. Internal control activities have been designed as an integral part of the Bank’s daily operations. Written policies and the implementation procedures of the internal controls have being developed and all of the Bank’s personnel have been and are being informed regarding the policies and implementation procedures related to internal control activities developed for their lines of activities.

In the Bank, an Internal Control Department directly operating under the Board of Directors was formed in 2001 in accordance with the regulations issued by the Banking Regulation and Supervision Agency (the BRSA) in order to design the internal control activities and collaboration and on March 10th 2008, with the integration of the compliance function, the name of the department was changed to Internal Control and Compliance Department. Legislation Unit has also been operating under the department since April 1st 2011. The department fulfilled its responsibilities to the Board of Directors through the Audit Committee until November 5th 2019. With the publication of the Enterprise Risk Management regulation on November 5th 2019, the department fulfils its responsibilities to the Board of Directors through the Risk Management Committee of Board of Directors.

Internal control systems and activities and how they shall be implemented are designed by the Internal Control and Compliance Department in coordination with the senior managers of the related units by taken the characteristics of all of the activities that the Bank conducts into account. Within the scope of the prevention of laundering of crime revenues and financing terrorism legislation, a Compliance Program has been initiated by the Bank and the risk management, monitoring and controlling and training activities within the scope of the aforementioned legislation

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Risk Policies reflecting the risk taking approach of the Bank, set out the standards and principles applicable throughout RISK the Bank. MANAGEMENT Credit Risk Policy, formed to ensure efficient risk management considering asset quality and risk/return balance,

includes also the limits relating to credit risk determined in accordance with the risk tolerance. Section 3 Section Section 3 Section In risk management, different ratings models are used for corporate and commercial banking, enterprise banking and individual banking segments and credit cards. UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT Credit performances of the customers are followed by a system, containing early warning signals. Thereby, necessary actions may be taken automatically. INFORMATION RELATED TO THE RISK MANAGEMENT POLICIES IMPLEMENTED BASED ON THE RISK TYPES At ICBC Turkey, operational risk management activities are conducted in compliance with local and international regulations in line with Basel II. Operational Risk Policies, Operational Risk Monitoring Rules and Operational Risk Risk management activities are conducted by the Risk Management Committee of Board of Directors that reports Mitigation Principles which have been prepared in this direction, are in force and effect. directly to the Board of Directors and the Risk Management Department which fulfils its responsibilities against the Board of Directors through said committee and the Risk Management Committee, composed of the senior Business continuity activities are conducted by the Operational Risk Committee, according to the Bank’s Business management and chaired by the General Manager and sub risk management committees chaired by the persons Continuity Strategy. who are responsible for related risks. Risk management sub-committees are; the Market Risk Committee, Credit Risk Committee, Operational Risk Committee. The sub-committees hold meeting to analyze the related risk management At ICBC Turkey, market risk management activities include quantification, monitoring and reporting the risks works and report to Risk Management Department monthly. The Risk Management Department prepares the enterprise encountered due to price, exchange rate, interest fluctuations that occur at financial markets and effects of such risks on risk management report accordingly. liquidity. Market Risk Policy sets out the market risk management framework.

The division of leading management responsibilities for various risks as follow: To manage market risk, the Bank benefits from the results obtained by it by Basel II advanced quantification techniques, • Risk Management Department is responsible for enterprise risk, market risk and country risk management, for setting the limits intended to limit the risk. In this context, advance quantification models are used and risk • Credit and Investment Management Department takes the lead in credit risk management, quantifications and daily limits controls are made and various scenario analysis and stress tests are applied. • Internal Control & Compliance Department takes the lead in operational risk , compliance and AML risk management, Results of calculations and analysis made by the Risk Management Department, are reported to related business units • Asset & Liability Management Department is responsible for liquidity risk, interest rate risk and exchange rate risk and to the senior management in daily, weekly and monthly periods. management of banking book, • Executive Office is responsible for reputational risk management, Market Risk Management • Economic Researches Department is responsible for strategic risk management, Market risk refers to the risk of loss that may be incurred due to fluctuations in the value of positions included in trading • Legal Affairs Department is responsible for legal risk management. accounts of the Bank, in interest rates, equity prices and exchange rates.

Risk management policies are determined in accordance with the Bank's operations size, quality and complexity and At our Bank, for market risk management, quantification methods such as the Value at Risk (VaR), stress test and are based on the Bank's past experience and performance. Bank’s main risk policies including risk appetite and limits scenario analysis, duration gap and sensitivity analysis are used. for each risk are credit risk, market risk, operational risk, country risk, interest rate risk, liqudity risk, strategic risk, VaR, as quantification of maximum potential loss that may be sustained in the market value of the trading portfolio in reputaional risk policies. hand, in a certain time period; in calculated on daily basis by Historical Simulation, Variation-Co variation and Monte- Carlo Simulation methods for 99% confidence interval and for one day holding period. VaR calculated by internal The Bank has set out the ICAAP management implementation principles, covering all risks on consolidated basis, models is used for market risk management of trading transactions. consistent with the risk appetite, based on adequate and convenient quantification- assessment methods and processes and with a forward looking perspective, as a part of the Bank’s internal governance processes and decision In order to manage the market risk encountered due to the positions carried in trading accounts, efficiently and in making culture. consistent with the Bank’s risk tolerance; risk limits linked to the ratio of VaR to equity capital, are set out. Compliance with the limits is monitored by the Market Risk Unit and the VaR results are reported regularly. ICAAP (Internal Capital Adequacy Assessment Process) is to be under responsibility of the Risk Management Department and it is planned to be revised in annual periods or more frequently, if needed.

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By the risk quantification method used, estimated earnings/losses are compared with realised values and thereby, Monitoring of the credit policy limits and the assessments related to the rating models used are performed by the Risk retrospective test is applied and the reliability of the model is monitored. Durability of the share capital against the Management Department. Scenario analyses are also used in managing the credit risk and due precautions are taken risks that may occur at the times when fluctuations are at very high level at the market, is measured by stress tests and without delay, for credit quality in compliance with the risk appetite. scenario analysis. In accordance with existing legal regulations, legal capital requirement for market risk is calculated by using standard method and is reported to the BRSA. Operational Risk Management

Priority of the Bank in terms of the works performed within the scope of the operational risk management, is the Section 3 Section Section 3 Section Managing the Interest Rate Risk Arising from the Banking Accounts compliance with Basel II in every stage. Additionally, importance is attached to the works intended to make the Interest Rate Risk Arising from the Banking Accounts refers to the risk incurred by the Bank due to inconsistency operational risk awareness as part of the corporate culture as well.

UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT in maturity periods in its balance sheet. The risk is managed by the Treasury Department within the framework of UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT the strategies set by the Assets and Liabilities Committee, in accordance with the policy approved by the Board of Operational risks are classified and monitored in groups as recommended by Basel II. Data regarding losses are Directors. collected by the operational risk loss database.

To measure the risk; the duration gap reports prepared according to the current values calculated by using the market Operational risks are identified through risk control and self-evaluation works which ensure taking actions for material interest rates on cash flows, of all interest-sensitive assets and liabilities in and out of the balance sheet, on the basis risks. of each transaction; are used. Impact of change in interest rates on the net economic value, is measured by scenario analysis. In the scenario analysis, as a shock scenario, for TL assets-liabilities +%5/-%4, for FX assets-liabilities +%2/-%2 Business Continuity Management interest shock is applied in accordance with legal regulations and they are reported to the BRSA. With regards to business continuity, the Bank has prepared a Business Continuity and Emergency Plan and Emergency Manual Operations Application Instruction in order to minimize the losses in case the banking activities cannot be Impact of changes in Exchange rates and interests, on the net balance sheet value, is followed regularly by various conducted during any internal and external emergency situations and in the unexpected circumstances. Emergency scenarios and the impact of change on equity capital, is followed closely. tests for critical business processes identified through consolidated business-impact analysis are conducted at the Business Continuity Center. In addition, Emergency Manual Operations Application Instruction, restore, communication Liquidity Risk Management network tests, as well as emergency evacuation drills are performed in all branches and headquarters. Liquidity risk refers to the risk of inability to fulfil, fully and on time, the obligations due to market conditions and inconsistencies in cash flow which may arise from the Bank’s balance sheet structure. Liquidity management is Country Risk Management conducted by the Treasury Department within the framework of the strategies set by the Assets and Liabilities Country risks that may be exposed to due to international lending and investment activities are monitored periodically Committee, in accordance with the policy approved by the Board of Directors. in order to take the necessary measures despite the deterioration in the economic, political and social factors that may arise. The Bank monitors the liquidity risk within the framework of the early warning signals and the actions that may be taken, set out in writing in the Principles on Liquidity Management. Various liquidity ratios are calculated within the framework Strategic Risk Management of the Principles on Liquidity Management and their Management and their development is followed. Scenario analysis The Bank closely monitors the risks that may arise as a result of wrong business choices or improper implementation of is also used within the scope of liquidity management. business choices or the failure to analyze and interpret sectoral changes well, and not to make decisions and to act in accordance with the opportunities and threats that may arise from these changes in the future. Credit Risk Management Credit risk means the probability of losses that may occur as a result of partial or whole non-fulfilment of the Reputational Risk Management responsibilities under the credit agreements by the customers who have utilized credits. Decreasing trust in the Bank or the potential loss of reputational risk towards the Bank as a result of negative opinions of the parties, such as existing or potential customers, partners, competitors and supervisors, or failure to comply with The Bank manages its credit risk on a portfolio basis by considering the balance of risk and return and the asset quality the current legal regulations, is an important part of all business decisions. of the Bank. As a result of the legal share capital need to be allocated for the credit risk being very high due to the weight of the loans in the balance sheet, credit risk management policies are established in such a way as to minimize the foreseeable risks related to the loans and target to interfere, control and take action on a timely basis in order to ensure that the credit process works effectively.

The Bank has adopted concentration limits – degree, sector, product, collateral, size of the risk, currency, maturity –, all determined internally and approved by the Board of Directors in order to keep the structure and the quality of the credit portfolio at a determined level.

110 111 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

INFORMATIONS ON THE FINANCIAL Liabilities 15,525 100 18,191 100 2,666 17.17 Deposits (**) 6,885.5 44.4 10,437.5 57.4 3,552 51.6

POSITION, PROFITABILITY TL Deposits 2,064.4 13.3 2,958.6 16.3 894 43.3 AND SOLVENCY OF THE BANK Demand Deposits 70.0 0.5 132.0 0.7 62 88.6

Time Deposits 1,994.4 12.8 2,826.6 15.5 832 41.7 Section 3 Section Section 3 Section FC Deposits 4,821.1 31.1 7,478.9 41.1 2,658 55.1

Demand Deposits 321.2 2.1 449.9 2.5 129 40.1

UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT Time Deposits 4,499.9 29.0 7,029.0 38.6 2,529 56.2 UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT FINANCIAL POSITION Money Markets 1,668.7 10.7 195.3 1.1 -1,473 -88.3

As of year-end 2019, the Bank’s total asset size reached TL 18.2 billion with an increase of 17% year-on-year. Total loans Borrowings 5,661.7 36.5 6,020.4 33.1 359 6.3

increased by 16% and accounted for 50% of the total assets. In 2019, non-performing loans ratio was 1.8% (2018: Provisions 59.1 0.4 127.4 0.7 68 115.6 1.2%). Customer Desposits increased by 52% from last year to TL 10.4 billion. Other 121.8 0.8 150.7 0.8 29 23.7

Shareholders’ Equity 1,128.0 7.3 1,259.8 6.9 132 11.7 The share of deposits in total liabilities was 58%. The Bank’s total shareholders’ equity was TL 1.3 billion as of year-end 2019. Unconsolidated capital adequacy ratio was 18.6%. Paid in Capital 860.0 5.5 860.0 4.7 0 0.0 Reserves 268.0 1.7 399.8 2.2 132 49.2

Change Profit / Loss 62.1 0.4 40.9 0.2 -21 -34.1 TL Million 20181 % 2019 % Change (%) (amount) (**) Excluding bank deposits. Assets 15,525 100 18,191 100 2,666 17.18

Current Assets 3,822.9 24.6 4,365.3 24.0 542 14.2 PROFITABILITY Cash and Cash Equivalents 1,806.9 11.6 2,073.5 11.4 267 14.8 & Central Bank The Bank’s net profit decreased compared to that of the previous year and reached TL 40.9 million. In 2019, the return Banks and Other Financial 2,022.5 13.0 2,299.7 12.6 277 13.7 on assets and return on equity ratios of the Bank were 0.2% (2018: 0.4%) and 3.4% (2018: 5.6%), respectively. Institutions Operating income of ICBC Turkey in 2019 was TL 545 million. Our Bank achieved a net profit level of TL 40.9 million at Placements 11,508.1 74.1 13,573.3 74.6 2,065 17.9 year-end 2019. Despite of restricted growth interest income increased 3.8%, net fees and commission income increased Financial Placements 3,889.6 25.1 4,693.5 25.8 804 20.7 21.5%.

Securities Held for Trading (*) 2,509.1 16.2 1,804.4 9.9 -705 -28.1 Income Statement 2018 2019 Change (amount) Change (%) Securities Held to Maturity 1,380.5 8.9 2,889.1 15.9 1,509 109.3 Interest Income 1,225.8 1,272.7 46.9 3.8 Commercial Placements 7,618.5 49.1 8,879.8 48.8 1,261 16.6 Interest Expense 766.6 889.9 123.3 16.1 TL Loans 2,531.2 16.3 1,943.1 10.7 -588 -23.2 Net Interest Income 459.2 382.8 -76.4 -16.6 FC Loans 5,298.2 34.1 7,415.0 39.3 1,847 34.9 Net Fees and Commission Income 76.1 92.5 16.4 21.5 Non-Performing Loans 93.2 0.6 167.9 0.9 75 80.2 Net Trading Profit / Loss -41.8 24.8 66.5 159.2 Provisions 210.9 1.4 208.3 1.1 -3 -1.2 Other Operating Income 62.1 44.8 -17.3 -27.9

Fixed Assets 119.3 0.8 201.2 1.1 82 68.7 Total Operating Income 555.6 544.9 -10.8 -1.9

Subsidiaries and Affiliates 76.0 0.5 76.0 0.4 0 0.0 Other Operating Expenses (*) 285.2 373.0 87.9 30.8

Tangible Assets 35.4 0.2 117.2 0.6 82 231.1 Provisions for Loans and Other Receivables 175.1 89.7 -85.4 -48.8

Intangible Assets 7.9 0.1 8.0 0.0 0 1.3 Profit/Loss Before Tax 95.4 82.1 -13.3 -13.9

Other Assets 74.3 0.5 51.3 0.3 -23 -31.0 Provision for Taxes 33.3 41.3 7.9 23.7

(*) Including derivative financial assets. Net Profit/Loss for the Period 62.1 40.9 -21.2 -34.2 1 Due to change in The Uniform Chart of Accounts as of February 1st 2019, financial asset’s as fair value through other comprehensive income, expected loss provisions are recorded under equity. Some adjustments have been made in prior period financial statements through “Communiqué on Amendments to the Communiqué on the (*) Staff costs are included. Financial Statements and the Related Explanations and Footnotes to be Announced to Public by Banks”.

112 113 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

CREDIT RATINGS OF THE BANK AND RELATED EXPLANATIONS

Fitch Ratings, revised ICBC Turkey’s Long-Term FC IDR and Long-Term LC IDR’s Outlooks as “Stable”

on November 12th 2019.

Section 3 Section 3 Section The current rating notes of the Bank has been mentioned below.

UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT Fitch Ratings UNCONSOLIDATED FINANCIAL INFORMATION AND THE ASSESSMENTS RELATED TO THE RISK MANAGEMENT Long term credit rating denominated in TL BB- Long term credit rating denominated in foreign currency B+ National long term credit rating AA(tur) Short term credit rating denominated in foreign currency and in TL B Viability rating b+ Support Rating 4 Outlook Stable ICBC Turkey is FINANCIAL INFORMATIONS SUMMARY FOR THE PERIOD OF FIVE YEARS INCLUDING committed to; being a THE REPORT leading bank for the

TL thousand 2015 2016 2017 20181 2019 belt and road financing Total Assets 6,654,517 8,217,724 12,888,024 15,524,795 18,191,150 Total Deposits (*) 2,256,775 2,929,000 3,287,840 6,885,541 10,437,573 service, the premier Total Loans 4,120,400 5,071,404 7,630,620 7,829,445 9,088,109 Shareholders’ Equity 589,665 594,507 1,093,724 1,127,994 1,259,775 Net Profit -17,016 13,700 42,484 62,069 40,869 bank for chinese (*) Excluding bank deposits. 1 Due to change in The Uniform Chart of Accounts as of February 1st 2019, financial asset’s as fair value through other comprehensive income, expected loss provisions are recorded under equity. Some adjustments have been made in prior period financial statements through “Communiqué on Amendments to the Communiqué on the elements and the best Financial Statements and the Related Explanations and Footnotes to be Announced to Public by Banks”. practicing bank for OTHER ISSUES - EXPLANATIONS REGARDING prudent operations. THE POST BALANCE SHEET EVENTS PERIOD

Detailed explanations on the matters occurred after the balance sheet date, are given in the footnote no. 5. of the Section 4 Section IX. of the “Unconsolidated Financial Statements to be Disclosed to Public for the Reporting Period ended as of December 31st 2019, the Explanations and Footnotes Related Thereto and the Independent Audit Report”.

THE UNCONSOLIDATED YEAR-END FINANCIAL STATEMENTS PREPARED AS CONSOLIDATED OF DECEMBER 31ST 2019 The Unconsolidated Financial Statements of ICBC Turkey for the reporting period ended as of December 31st 2019, FINANCIAL INFORMATIONS Explanations and Footnotes Related Thereto and the Independent Audit Report are available at the Bank’s website at the address of "http://www.icbc.com.tr" under the heading “Investor Relations” / “Financial Information”.

114 115 ICBC Turkey 2019 Annual Report ICBC Turkey 2019 Annual Report

CONSOLIDATED Financial Ratios % 31.12.2018 31.12.2019 %

FINANCIALS Return on Assets 0.6 0.4 -27

Return on Equity 7.3 5.7 -22

Capital Adequacy Ratio 30.2 18.7 -38

CONSOLIDATED FINANCIAL Loans/Total Assets 49.7 49.7 0 INFORMATION SUMMARY AND THE FINANCIAL RATIOS FOR A PERIOD 42.3 53.2 26 OF FIVE YEARS INCLUDING THE Deposits/Total Assets (*) REPORT PERIOD

NPL Ratio 1.2 1.8 57

Section 3 Section 3 Section

TL Thousand 2015 2016 2017 20181 2019 (*) Excluding deposits from banks. CONSOLIDATED FINANCIAL INFORMATIONS CONSOLIDATED FINANCIAL INFORMATIONS Total Assets 6,670,222 8,308,619 13,315,560 15,852,490 18,391,481 Information Related to the Consolidated Subsidiaries

Total Deposits 2,134,152 2,850,077 3,273,860 6,699,689 9,790,304 Stake in Bank’s Company Address (City/Country) Stake (%) Risk Group

Total Loans 4,150,620 5,098,106 7,680,821 7,874,592 9,132,429 ICBC Turkey Yatırım Menkul Değerler A.Ş. Istanbul/Turkey 99.998 99.998

Shareholders’ Equity 597,194 607,007 1,112,294 1,116,569 1,329,312 Summary financials of the above-mentioned subsidiary (31 December 2019):

Net Profit -13,542 18,749 48,283 83,549 71,510

Shareholders’ Interest Income from Prior Period Total Assets Fixed Assets Net Income Fair Value 1 Due to change in The Uniform Chart of Accounts as of February 1st 2019, financial asset’s as fair value through other comprehensive income, expected loss provisions Equity Income Securities Net Income are recorded under equity. Some adjustments have been made in prior period financial statements through “Communiqué on Amendments to the Communiqué on the Financial Statements and the Related Explanations and Footnotes to be Announced to Public by Banks”. 923,623 145,537 1,558 16,675 374 30,641 925 -

Financial Highlights (TL million) 31.12.2018 31.12.2019 %

The Consolidated Year-end Financial Statements Prepared as of December 31st 2019 Total Assets 15,852 18,391 16

The Consolidated Financial Statements of ICBC Turkey for the reporting period ended as of December 31st 2019, Deposits (*) 6,700 9,790 46 Explanations and Footnotes Related Thereto and the Independent Audit Report are available at the Bank’s website at the address of "http://www.icbc.com.tr" under the heading “Investor Relations” / “Financial Information”. Loans 7,875 9,132 16

Shareholders’ Equity 1,167 1,329 14

Net Profit 83.5 71,5 -14

(*) Excluding deposits from banks.

116 117 ICBC TURKEY BANK ANONİM ŞIRKETİ

CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 WITH INDEPENDENT AUDITORS’ REPORT THEREON

27 FEBRUARY 2020 THIS REPORT INCLUDES “INDEPENDENT AUDITORS’ REPORT” COMPRISING 4 PAGES AND; "CONSOLIDATED FINANCIAL STATEMENTS AND RELATED DISCLOSURES AND FOOTNOTES” COMPRISING 101 PAGES.

(CONVENIENCE TRANSLATION OF CONSOLIDATED YEAR ENDED FINANCIAL STATEMENTS AND RELATED DISCLOSURES AND FOOTNOTES ORIGINALLY ISSUED IN TURKISH)

Section 4 INDEPENDENT AUDIT REPORT

118 119 CONVENIENCE TRANSLATION OF THE INDEPENDENT AUDITOR’S REPORT Impairment of loans measured at amortised cost ORIGINALLY PREPARED AND ISSUED IN TURKISH TO ENGLISH The details of accounting policies and significant estimates and assumptions for impairment of loans measured at To the General Assembly of ICBC Turkey Bank A.Ş. amortised cost is presented Section Three, Note VIII to the consolidated financial statements.

A) Report on the Audit of the Consolidated Financial Statements KEY AUDIT MATTER HOW THE MATTER IS ADDRESSED IN OUR AUDIT

Opinion As of 31 December 2019, loans measured at amortised cost Our procedures for testing the expected credit loss included comprise 50% of the Group's total assets. below:

We have audited the consolidated financial statements of ICBC Turkey Bank A.Ş (“the Bank”) and its subsidiaries The Group recognizes its loans measured at amortised cost in • We tested the design and operating effectiveness of the controls accordance with the Regulation on the Procedures and Principles on lending, collateralization, collection, follow-up, classification (together will be referred as “the Group”) which comprise the consolidated balance sheet as at 31 December 2019 and for Classification of Loans by Banks and Provisions to be set aside and impairment procedures are tested with the involvement of the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, (the "Regulation") published on the Official Gazette No. 29750 information risk management specialists. dated 22 June 2016 and TFRS 9 Financial Instruments standard • The contractual cash flow tests prepared for the financial assets consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year then ("the Standard"). of the Group were examined and the results of the tests were checked for compliance with the loan agreements. ended, and consolidated notes, comprising significant accounting policies and other explanatory information. As of 1 January 2018, due to the adoption of the Regulation and • The conformity of the subjective and objective criteria defined in the Standard, in determining the impairment of loans the Group the Group's impairment model has been checked for compliance has begun to apply "expected credit loss model" instead of with the Regulation and the Standard. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the the "incurred loss model". The new model contains significant • We evaluated the Group's business model and methodology and consolidated financial position of the Group as at 31 December 2019, and its consolidated financial performance assumptions and estimates. the evaluation of the calculations were carried out with the control testing and detailed analysis by the involvement of specialists. and its consolidated cash flows for the year then ended in accordance with the “Banking Regulation and Supervision The significant assumptions and estimates of the Group's • We performed loan reviews for selected loan samples which Agency (“BRSA”) Accounting and Financial Reporting Legislation” which includes the “Regulation on Accounting management are as follows: include a detailed examination of loan files and related information and testing their classification. In this context, the current status Applications for Banks and Safeguarding of Documents” published in the Official Gazette No. 26333 dated 1 • assessment of significant increase in credit risk of the loan customer has been evaluated by including prospective November 2006, and other regulations on accounting records of banks published by Banking Regulation and • incorporating the forward looking macroeconomic information and macroeconomic expectations. information in calculation of credit risk; and • We evaluated the adequacy of the expected credit loss Supervision Board and circulars and interpretations published by BRSA and requirements of Turkish Financial Reporting • design and implementation of expected credit loss model. calculations by selecting sample for the loans which are assessed Standards (“TFRS”) for the matters not regulated by the aforementioned legislations. on individual basis. The determination of the impairment of loans measured at • We tested the accuracy and completeness of the data in the amortised cost depends on the credit default status, the model calculation models for the loans which are assessed on collective based on the change in the credit risk subsequent to the initial basis. The expected credit loss calculation has been tested Basis for Opinion recognition date and the classification of the loans measured through recalculation. The models used for the calculation of at amortised cost according to the model. Establishing an the risk parameters were examined and the risk parameters were appropriate loans classification is a significant process as the recalculated. We conducted our audit in accordance with the “Regulation on Independent Audit of the Banks” published in the calculation of expected credit loss varies to the staging of the • We assessed the macroeconomic models which are used to Official Gazette No.29314 dated 2 April 2015 by BRSA and Standards on Auditing which is a component of the financial assets. reflect forward looking expectations and tested the effect of the risk parameters by recalculation method. Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) The Group calculates expected credit losses on both an individual • We evaluated the criteria which are used in determining the (“Standards on Auditing issued by POA”). Our responsibilities under those standards are further described in the and a collective basis. Individual provisions consider the estimated significant increase in credit risk. future cash flows and the fair value of the collateral provided for • Additionally, we also evaluated the adequacy of the consolidated Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We declare that credit transactions. financial statement disclosures related to impairment provisions. we are independent of the Group in accordance with the Ethics for Auditors issued by POA (“POA’s Code of Ethics”) The collective provisions are modelled by using current and past and the ethical requirements in the regulations that are relevant to audit of consolidated financial statements, and we data sets and forward looking expectations. have fulfilled our other ethical responsibilities in accordance with these requirements and the POA’s Code of Ethics. We Impairment on loans measured at amortised cost was considered believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. to be a key audit matter, due to the significance of the estimates, assumptions, the level of judgements and its complex structure as explained above. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate The Group management is responsible for the preparation and fair presentation of these consolidated financial opinion on these matters. statements in accordance with the “BRSA Accounting and Financial Reporting Legislation”, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to We communicate with those charged with governance regarding, among other matters, the planned scope and timing continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern of the audit and significant audit findings, including any significant deficiencies in internal control that we identify basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic during our audit. alternative but to do so. We also provide those charged with governance with a statement that we have complied with relevant ethical Those charged with governance are responsible for overseeing the Group’s financial reporting process. requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements From the matters communicated with those charged with governance, we determine those matters that were of most Responsibilities of auditors in an audit are as follows: significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in benefits of such communication. accordance with Regulation on Independent Audit of the Banks and Standards on Auditing issued by POA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users B) Report on Other Legal and Regulatory Requirements taken on the basis of these consolidated financial statements. 1) Pursuant to the fourth paragraph of Article 402 of the Turkish Commercial Code (“TCC”) No. 6102; no significant As part of an audit in accordance with Regulation on Independent Audit of the Banks and Standards on Auditing issued matter has come to our attention that causes us to believe that the Bank’s bookkeeping activities for the period 1 by POA, we exercise professional judgment and maintain professional scepticism throughout the audit. January - 31 December 2019 are not in compliance with TCC and provisions of the Bank’s articles of association in relation to financial reporting. We also: 2) Pursuant to the fourth paragraph of Article 402 of the TCC; the Board of Directors provided us the necessary • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud explanations and required documents in connection with the audit. or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting Additional paragraph for convenience translation to English: from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. The accounting principles summarized in Note I Section Three, differ from the accounting principles generally accepted • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are in countries in which the accompanying consolidated financial statements are to be distributed and International appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Financial Reporting Standards (“IFRS”). Accordingly, the accompanying consolidated financial statements are not Group’s internal control. intended to present the financial position and results of operations in accordance with accounting principles generally • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and accepted in such countries of users of the consolidated financial statements and IFRS. related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast A member firm of KPMG International Cooperative significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Orhan Akova, SMMM Group to cease to continue as a going concern. Partner • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a 27 February 2020 manner that achieves fair presentation. Istanbul, Turkey • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. SECTION ONE - GENERAL INFORMATION PAGE NO

I. Parent Bank’s Date of Establishment, Beginning Statute, Its History Including Changes on Its Statute 126 Capital Structure, Shareholders Controlling the Management and Supervision of the Parent Bank Directly or Indirectly, and, If Exists, Changes on These Issues and the ICBC TURKEY BANK A.Ş. II. 126 Group That the Parent Bank Belongs to and Information About the Persons and Institutions That Have Qualified Shares in the Parent Bank Information Related to President and Members of the Board of Directors, Audit Committee Members, General Manager and Executive Vice Presidents, and If Exists, III. 127 CONSOLIDATED FINANCIAL REPORT AS OF Changes in These Positions and Parent Bank’s Shares They Hold IV. Type of Services Provided and the Areas of Operations of Tthe Parent Bank 127 Differences Between the Communiqué on Preparation of Consolidated Financial Statements of Banks and Turkish Accounting Standards and Short Explanation About V. 128 31 DECEMBER 2019 the Institutions Subject to Line-by-Line Method or Proportional Consolidation and Institutions Which are Deducted from Equity or Not Included in These Three Methods The Existing or Potential, Actual or Legal Obstacle on the Transfer of Shareholder’s Equity Between the Parent Bank and Its Subsidiaries or the VI. 128 Reimbursement of Liabilities Maslak Mah. Dereboyu/2 Caddesi VII. Other Information 128 No:13 34398 Sarıyer - İstanbul SECTION TWO - CONSOLIDATED FINANCIAL STATEMENTS Telephone Number: (0212) 335 53 35 I. Consolidated Balance Sheet (Statement of Financial Position) 130 Fax: (0212) 328 13 28 www.icbc.com.tr II. Consolidated Statement of Off-Balance Sheet Items 132 [email protected] III. Consolidated Statement of Profit or Loss 134 IV. Consolidated Statement of Profit or Loss and Other Comprehensive Income 136 V. Consolidated Statement of Changes in Shareholders’ Equity 137 VI. Consolidated Statement of Cash Flows 139 The year-end consolidated financial report prepared in accordance with the “Communiqué on the Financial Statements VII. Parent Bank Statement of Profit Distribution 140 to be announced to public by Banks as well as Explanations and Footnotes Thereof” as required by the Banking SECTION THREE - ACCOUNTING POLICIES Regulation and Supervision Agency (BRSA), is comprised of the following sections. I. Explanations on Basis of Presentation 141 II. Explanations on Strategy for the Use of Financial Instruments and the Foreign Currency Transactions 142 • General Information About the Parent Bank III. Explanations on Subsidiaries and Associates 143 IV. Derivative Financial Assets 143 • Consolidated Financial Statements V. Explanations on Interest Income and Expense 144 • Disclosures on Applied Accounting Policies in Related Period VI. Explanations on Fees And Commissions Income And Expense 144 VII. Explanations on Financial Assets 145 • Information Related to Financial Position of the Consolidated Group and Risk Management VIII. Explanations on Impairment of Financial Assets 146 IX. Explanations on Offsetting Financial Instruments 147 • Disclosures and Footnotes to Consolidated Financial Statements X. Explanations on Sale and Repurchase Agreements and Transactions Related to the Lending of Securities 147 • Other Explanations XI. Explanations on Assets Held for Sale and Discontinued Operations and Liabilities Related With These Assets 147 XII. Explanations on Goodwill and Other Intangible Assets 147 • Explanations on the Independent Audit Report XIII. Explanations on Tangible Assets 148 XIV. Explanations on Leasing Activities 149 XV. Explanations on Provisions and Contingent Liabilities 149 The financial statements of the subsidiary“ICBC Turkey Yatırım Menkul Değerler A.Ş.” is consolidated in this XVI. Contingent Assets 149 consolidated financial report. XVII. Explanations on Obligations Related to Employee Rights 149 XVIII. Explanations on Taxation 150 XIX. Additional Explanations on Borrowings 151 The consolidated financial statements and related disclosures and footnotes that were subject to independent XX. Explanations on Issued Stock 151 XXI. Explanations on Acceptances 151 audit, are prepared in accordance with the “Regulation on the Procedures and Principles for Accounting Practices XXII. Explanations on Government Grants 151 and Retention of Documents by Banks”, Turkish Accounting Standards, Turkish Financial Reporting Standards and XXIII. Profit Reserves and Profit Distribution 152 XXIV. Related Parties 152 the related statements, and in compliance with the financial records of our Bank. Unless stated otherwise, the XXV. Cash and Cash Equivalents 152 accompanying consolidated financial statements are presented inthousands of Turkish Lira. XXVI. Explanations on Segment Reporting 152 XXVII. Reclassifications 152 XXVIII. Explanations on Other Matters 153

SECTION FOUR - INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK MANAGEMENT

XIANGYANG GAO PEIGUO LIU SHAOXIONG XIE I. Explanations on Consolidated Equity 154 Chairman of Board of Directors Chairman of General Manager and II. Explanations and Footnotes on Consolidated Credit Risk 163 III. Explanations on Consolidated Operational Risk 170 Audit Committee and Member of Board of Directors IV. Explanation and Footnotes pn Consolidated Foreign Currency Exchange Rate Risk 170 Member of Board of Directors V. Explanation and Footnotes on Consolidated Interest Rate Risk 172 VI. Explanations and Footnotes on Consolidated Liquidity Risk 175 VII. Explanations on Consolidated Leverage Ratio 180 VIII. Explanations and Footnotes on Consolidated Securitization Position Risk 181 IX. Explanations on Consolidated Risk Management 181 X. Explanations on Presentation of Financial Assets and Liabilities at Their Fair Value 190 JINHONG LI XI. Explanation and Footnotes on Consolidated Segment Reporting 193 Deputy General Manager, Responsible for Financial YAFENG HE SECTION FIVE - EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED FINANCIAL STATEMENTS Control and Accounting, Operations Center, Operations Managing Director I. Explanations and Footnotes on Consolidated Assets 195 Management and Legal Consultancy Group II. Explanations and Footnotes on Consolidated Liabilities 213 III. Explanation ond Footnotes on Consolidated Off-Balance Sheet Items 221 IV. Explanation ond Footnotes on Consolidated Profit or Loss Statement 223 V. Explanations and Footnotes on Consolidated Statement of Changes in Shareholders’ Equity 229 VI. Explanations and Footnotes on Consolidated Cash Flow Statement 230 Contact information of the charged person for questions on this financial report: VII. Explanation on the Parent Bank’s Risk Group 232 Name-Surname : Yafeng He VIII. Information on Domestic, Foreign, Off-Shore Branches and Foreign Representative Offices of Parent Bank 234 IX. Explanations and Footnotes on Subsequent Events 234 Tel No : 0212 335 52 18 Fax No : 0212 328 13 23 SECTION SIX - EXPLANATIONS ON THE INDEPENDENT AUDIT REPORT I. Explanations on the Independent Audit Report 235 II. Explanations and Footnotes Prepared by the Independent Auditors 235 ICBC TURKEY BANK ANONİM ŞİRKETİ AND ICBC TURKEY BANK ANONİM ŞİRKETİ AND ITS SUBSIDIARY ITS SUBSIDIARY Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

SECTION ONE III. INFORMATION RELATED TO PRESIDENT AND MEMBERS OF THE BOARD OF DIRECTORS, AUDIT COMMITTEE MEMBERS, GENERAL MANAGER AND EXECUTIVE VICE PRESIDENTS, AND IF EXISTS, GENERAL INFORMATION CHANGES IN THESE POSITIONS AND PARENT BANK’S SHARES THEY HOLD I. PARENT BANK’S DATE OF ESTABLISHMENT, BEGINNING STATUTE, ITS HISTORY INCLUDING CHANGES ON ITS STATUTE Title Name Job Desciption Education

Chairman of the Board of Xiangyang Gao Chairman of the Board of Directors Graduate “The Parent Bank” was established with trade name as Tekstil Bankası A.Ş. on 24 September 1985, to carry out all types of banking Directors Chairman of the Audit Chairman of the Audit Committee and Member activities according to the Banking Law and later changes in the laws and regulations, with the permission of the Council of Ministers Peiguo Liu Graduate Committee of the Board of Directors in accordance with the resolution numbered 85/9890 and dated 29 April 1986 and started it operations on 13 October 1986. Member of the Audit Audit Committee Member and Ying Wang Graduate “Articles of Association” of the Parent Bank was published in Turkish Trade Registry Gazette no.1511, dated 9 May 1986. The statute Committee Independent Member of the Board of Directors of the Parent Bank was not changed since its establishment. Trade name of the Parent Bank has been changed and registered as Shaoxiong Xie General Manager and Member of the Board of Directors Graduate disclosed in Note No. II as ICBC Turkey Bank A.Ş. on 13 November 2015. Member of the Board Jianfeng Zheng Independent Member of the Board of Directors Graduate of Directors Serhat Yanık (**) Independent Member of the Board of Directors Doctorate

II. CAPITAL STRUCTURE, SHAREHOLDERS CONTROLLING THE MANAGEMENT AND SUPERVISION OF THE General Manager and Member of the Board Shaoxiong Xie Graduate PARENT BANK DIRECTLY OR INDIRECTLY, AND IF EXISTS, CHANGES ON THESE ISSUES AND THE GROUP General Manager of Directors THAT THE PARENT BANK BELONGS TO AND INFORMATION ABOUT THE PERSONS AND INSTITUTIONS Deputy General Manager - Financial Reporting, Assistant General Managers Jinhong Li Graduate THAT HAVE QUALIFIED SHARES IN THE PARENT BANK Operations and Legal Consultancy Group Deputy General Manager - Cross Border Finance, Yubao Chen(*) Graduate Corporate and Commercial Banking Group The capital of the Parent Bank is TL 860,000 as at 31 December 2019 and is fully paid. The Parent Bank was controlled by GSD Group Hüseyin H. İmece Treasury and Investor Relations Group Under-Graduate until 21 May 2015. As at 29 April 2014, GSD Holding A.Ş., the major shareholder of the Parent Bank, has come to conclusion to sell 75.50% shares of the Parent Bank to Industrial and Commercial Bank of China (ICBC) and with respect to the sale transaction, it was Bozok Evrenosoğlu Loans Group Under-Graduate declared to be approved by China Banking Regulatory Commission (CBRC) on 20 March 2015, and in Turkey, it was approved by D.Halit Döver International Relations Group Graduate Competition Authority in accordance with decision dated 20 August 2014 and numbered 14-29/593-259 and Banking Regulation and Kadir Karakurum Retail Banking Group Graduate

Head of the Board of Supervision Agency (BRSA), in accordance with decision dated 2 April 2015 and numbered 6262. Celal Efe Şeran President of Inspectors’ Group Under-Graduate Inspectors

(*) As of 31 January 2020, Yubao Chen who was Deputy General Manager and Assistant General Manager in-charge of Cross Border Finance, Corporate and Commercial Banking Group resigned from his position. Following the completion of relevant permissions with respect to the sale transaction, the Parent Bank appealed Extraordinary General (**) Upon resignation of Mr. Mehmet Hilmi Güler, the Board of Directors decided on 24 February 2020 to appoint Mr. Serhat Yanık as Independent Board Member representing (A) shares as of 24 February 2020 on the condition that his appointment to be submitted to the general meeting of shareholders for approval and to complete Mr. Mehmet Hilmi Güler’s duty term pursuant to the Turkish Commercial Code, Article 363. Assembly on 22 May 2015 for approving the resignation of members of Board of Directors and selecting new members on 28 April 2015 in the Public Disclosure Platform (KAP). Within the context of share purchase agreement, 22 May 2015 date was defined as share The aforementioned persons do not have any shares in the Parent Bank. transfer date and the share transfer was carried out on this date and processed to the Parent Bank’s share ledger. IV. TYPE OF SERVICES PROVIDED AND THE AREAS OF OPERATIONS OF THE PARENT BANK

As a result of acquisition of shares representing 75.50% of Tekstil Bankası A.Ş., which was owned by GSD Holding A.Ş., an obligation The operations of the Parent Bank consist of corporate and commercial banking services, fund management transactions (foreign occurs to propose take-over bids in order to purchase the shares of other shareholders in accordance with the provision of Article 11 currency, money market and securities trading), international banking services, retail banking services and credit card business. The of Take-Over Bids Communique numbered Serial II. 26.1 of Capital Markets Board of Turkey related to mandatory bid. In this context, Parent Bank also operates, through its branches, as insurance agent of Sompo Japan Sigorta A.Ş, Vakıf Emeklilik A.Ş., Fiba Emeklilik share ownership of ICBC in the Parent Bank has risen to 92.82% from 75.50% as a result of mandatory bid call transactions ending as ve Hayat A.Ş., HDI Sigorta A.Ş. and Axa Sigorta A.Ş. at 14 August 2015 realized in accordance with the Take-Over Bids Communique numbered Serial II. 26.1 by ICBC, which is controlling shareholder of the Parent Bank. As at 31 December 2019, the Parent Bank has 43 branches close to industrial zones of Turkey. The Parent Bank has 731 employees as at 31 December 2019 (As at 31 December 2018 number of branches was 44, number of employees was 786). In accordance with the decision of the general extraordinary meeting of the Bank dated 9 February 2017, the Bank’s capital has The Parent Bank and its subsidiary, ICBC Turkey Yatırım Menkul Değerler A.Ş. (“ICBC Yatırım”) have been consolidated. As at 31 decided to increase and the decision was registered by İstanbul Trade Registry Office at 29 June 2017. At this content, the Bank’s December 2019, ICBC Portföy Yönetimi A.Ş. has been consolidated in ICBC Yatırım by full consolidation method. "ICBC Yatırım", the capital has increased in cash amounting to TL 440,000 from TL 420,000 to TL 860,000 and the whole increase was made in cash. With consolidated subsidiary of the Parent Bank, represents ICBC Portföy and ICBC Yatırım as a whole. The Parent Bank and its subsidiary this increase, ICBC’s shareholding ratio at the Bank has increased from 92.82% to 92.84%. are referred to as “the Group” as a whole.

The shares, except for the shares owned by ICBC, are traded at Istanbul Stock Exchange (BIST).

In the context of the decision taken at the Extraordinary General Meeting on 5 November 2015, the Parent Bank's trade title has been changed and registered as ICBC Turkey Bank A.Ş. at the Trade Registry Gazette on 13 November 2015.

126 127 ICBC TURKEY BANK ANONİM ŞİRKETİ AND ITS SUBSIDIARY SECTION TWO Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 CONSOLIDATED FINANCIAL STATEMENTS (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

V. DIFFERENCES BETWEEN THE COMMUNIQUÉ ON PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS OF BANKS AND TURKISH ACCOUNTING STANDARDS AND SHORT EXPLANATION ABOUT I. CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) THE INSTITUTIONS SUBJECT TO LINE-BY-LINE METHOD OR PROPORTIONAL CONSOLIDATION AND II. CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET ITEMS INSTITUTIONS WHICH ARE DEDUCTED FROM EQUITY OR NOT INCLUDED IN THESE THREE METHODS III. CONSOLIDATED STATEMENT OF PROFIT OR LOSS There is no difference for the Parent Bank regarding consolidation methods between the Communiqué on Preparation of IV. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Consolidated Financial Statements of Banks and Turkish Accounting Standards (TAS). Information about consolidated subsidiaries and explanation about consolidation methods are disclosed on Section Three, Footnote III. V. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

VI. CONSOLIDATED STATEMENT OF CASH FLOWS VI. THE EXISTING OR POTENTIAL, ACTUAL OR LEGAL OBSTACLE ON THE TRANSFER OF SHAREHOLDERS’ EQUITY BETWEEN THE PARENT BANK AND ITS SUBSIDIARIES OR THE REIMBURSEMENT OF LIABILITIES VII. PARENT BANK STATEMENT OF PROFIT DISTRIBUTION

None.

VII. OTHER INFORMATION

Bank’s Official Title : ICBC Turkey Bank A.Ş. Reporting Period : 1 January – 31 December 2019 Address of Bank’s Headquarters : Maslak Mah. Dereboyu/2 Caddesi No:13 34398 Sarıyer - İstanbul Telephone number : (0212) 335 53 35 Fax number : (0212) 328 13 28 Bank’s Internet Address : www.icbc.com.tr Reporting Currency : Thousands of Turkish Lira

128 129 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Consolidated Balance Sheet (Statement of Financial Position) as at 31 December 2019 Consolidated Balance Sheet (Statement of Financial Position) as at 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

THOUSANDS OF TURKISH LIRA THOUSANDS OF TURKISH LIRA Audited Audited Footnotes Audited Audited CURRENT PERIOD RESTATED PRIOR PERIOD (*) EQUITY AND LIABILITIES (Section Footnotes CURRENT PERIOD RESTATED PRIOR PERIOD (*) 31/12/2019 31/12/2018 (Section Five) ASSETS 31/12/2019 31/12/2018 TL FC TOTAL TL FC TOTAL Five) TL FC TOTAL TL FC TOTAL I. DEPOSIT (5.II.1) 2,981,092 6,985,670 9,966,762 2,282,066 5,740,176 8,022,242 I. FINANCIAL ASSETS (Net) 1,602,486 4,777,063 6,379,549 2,001,416 4,670,616 6,672,032 II. FUNDS BORROWED (5.II.3) 2,052 4,235,955 4,238,007 1,162,755 2,919,795 4,082,550 1.1 Cash and Cash Equivalents 796,812 3,761,749 4,558,561 878,850 3,271,010 4,149,860 III. MONEY MARKET FUNDS 18,841 - 18,841 257,264 88,881 346,145 1.1.1 Cash and Balances at Central Bank (5.I.1) 135,417 1,938,038 2,073,455 529,798 1,277,101 1,806,899 IV. MARKETABLE SECURITIES (Net) ------1.1.2 Banks (5.I.3) 1,115 1,836,919 1,838,034 339 2,000,440 2,000,779 4.1 Bills ------1.1.3 Receivables from Money Markets 662,583 - 662,583 349,622 - 349,622 4.2 Asset Backed Securities ------1.1.4 Expected Loss Provisions (-) 2,303 13,208 15,511 909 6,531 7,440 4.3 Bonds ------

1.2 Financial Assets at Fair Value Through Profit or Loss 16,613 - 16,613 12,879 - 12,879 V. FUNDS ------1.2.1 Public Debt Securities ------5.1 Borrowers’ Funds ------1.2.2 Equity Securities 39 - 39 46 - 46 5.2 Other ------1.2.3 Other Financial Assets 16,574 - 16,574 12,833 - 12,833 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT VI. ------Financial Assets at Fair Value Through Other OR LOSS 1.3 (5.I.4) 788,543 1,015,163 1,803,706 1,079,785 1,399,407 2,479,192 Comprehensive Income VII. DERIVATIVE FINANCIAL LIABILITIES (5.II.2) 66 3,864 3,930 749 373 1,122 1.3.1 Public Debt Securities 788,543 531,683 1,320,226 1,079,785 518,314 1,598,099 7.1 Derivative Financial Liabilities at Fair Value Through Profit or Loss 66 3,864 3,930 749 373 1,122 1.3.2 Equity Securities - 10,057 10,057 - 6,255 6,255 Derivative Financial Liabilities at Fair Value Through Other 7.2 ------Comprehensive Income 1.3.3 Other Financial Assets - 473,423 473,423 - 874,838 874,838 VIII. FACTORING PAYABLES ------1.4 Derivative Financial Assets (5.I.2) 518 151 669 29,902 199 30,101 IX. LEASE PAYABLES (Net) (5.II.5) 82,288 - 82,288 - - - 1.4.1 Derivative Financial Assets at Fair Value Through Profit or Loss 518 151 669 29,902 199 30,101 X. PROVISIONS (5.II.7) 95,096 36,053 131,149 58,285 4,183 62,468 Derivative Financial Assets at Fair Value Through Other 1.4.2 ------Comprehensive Income 10.1 Provision for Restructuring ------

II. FINANCIAL ASSETS MEASURED AT AMORTISED COST (Net) 2,420,593 9,394,621 11,815,214 3,304,439 5,743,086 9,047,525 10.2 Reserves for Employee Benefits 20,975 - 20,975 17,917 - 17,917 2.1 Loans (5.I.5) 2,090,009 7,042,420 9,132,429 2,879,559 4,995,033 7,874,592 10.3 Insurance Technical Reserves (Net) ------2.2 Receivables from Leasing Transactions (5.I.10) ------10.4 Other Provisions 74,121 36,053 110,174 40,368 4,183 44,551 2.3 Factoring Receivables ------XI. CURRENT TAX LIABILITIES (5.II.8) 23,915 - 23,915 38,591 - 38,591 2.4 Other Financial Assets Measured at Amortised Cost (5.I.6) 454,464 2,436,763 2,891,227 533,733 850,266 1,383,999 XII. DEFERRED TAX LIABILITIES ------2.4.1 Public Debt Securities 454,464 1,491,780 1,946,244 533,733 459,739 993,472 LIABILITIES RELATED TO NON-CURRENT ASSETS “HELD FOR XIII. (5.II.9) ------SALE” AND “DISCONTINUED OPERATIONS” (Net 2.4.2 Other Financial Assets - 944,983 944,983 - 390,527 390,527 13.1 Held for Sale ------2.5 Allowance for Expected Credit Losses (-) 123,880 84,562 208,442 108,853 102,213 211,066 13.2 Related to Discontinued Operations ------NON-CURRENT ASSETS OR DISPOSAL GROUPS “HELD FOR III. (5.I.16) ------SALE” AND RELATED TO DISCONTINUED OPERATIONS (Net) XIV. SUBORDINATED DEBT (5.II.10) - 1,782,420 1,782,420 - 1,579,084 1,579,084 3.1 Held for Sale ------14.1 Loans - 1,782,420 1,782,420 - 1,579,084 1,579,084 3.2 Held from Discontinued Operations ------14.2 Other Debt Instruments ------INVESTMENTS IN ASSOCIATES, SUBSIDIARIES IV. ------XV. OTHER LIABILITIES (5.II.4) 108,595 706,262 814,857 68,769 484,950 553,719 AND JOINT VENTURES XVI. SHAREHOLDERS` EQUITY (5.II.11) 1,321,997 7,315 1,329,312 1,197,857 (31,288) 1,166,569 4.1 Investments in Associates (Net) (5.I.7) ------16.1 Paid-in Capital 860,000 - 860,000 860,000 - 860,000 4.1.1 Associates Accounted by Using Equity Method ------16.2 Capital Reserves (587) - (587) (587) - (587) 4.1.2 Non-Consolidated Associates ------16.2.1 Equity Share Premiums (587) - (587) (587) - (587) 4.2 Investments in Subsidiaries (Net) (5.I.8) ------16.2.2 Share Cancellation Profits ------4.2.1 Non-Consolidated Financial Subsidiaries ------16.2.3 Other Capital Reserves ------4.2.2 Non-Consolidated Non-Financial Subsidiaries ------Other Accumulated Comprehensive Income that will not be (5.I.9) 16.3 16,310 - 16,310 12,892 - 12,892 4.3 Jointly Controlled Partnership (Joint Ventures) (Net) ------Reclassified in Profit or Loss 4.3.1 Jointly Controlled Partnerships Accounted by Using Equity Method ------Other Accumulated Comprehensive Income that will be 16.4 (2,733) 7,315 4,582 (51,945) (31,288) (83,233) 4.3.2 Non-Consolidated Jointly Controlled Partnerships ------Reclassified in Profit or Loss

V. TANGIBLE ASSETS (Net) (5.I.12) 118,559 - 118,559 36,239 - 36,239 16.5 Profit Reserves 328,778 - 328,778 246,680 - 246,680 VI. INTANGIBLE ASSETS (Net) (5.I.13) 8,194 - 8,194 8,171 - 8,171 16.5.1 Legal Reserves 18,842 - 18,842 14,737 - 14,737 6.1 Goodwill ------16.5.2 Statutory Reserves ------6.2 Others 8,194 - 8,194 8,171 - 8,171 16.5.3 Extraordinary Reserves 252,570 - 252,570 174,577 - 174,577 VII. INVESTMENT PROPERTIES (Net) (5.I.14) ------16.5.4 Other Profit Reserves 57,366 - 57,366 57,366 - 57,366 VIII. CURRENT TAX ASSETS 215 - 215 - - - IX. DEFERRED TAX ASSETS (5.I.15) 30,918 - 30,918 44,596 - 44,596 16.6 Profit or Loss 120,229 - 120,229 130,817 - 130,817 X. OTHER ASSETS (Net) (5.I.17) 35,961 2,871 38,832 41,061 2,866 43,927 16.6.1 Prior Years' Profit or Loss 48,719 - 48,719 47,268 - 47,268 TOTAL ASSETS 4,216,926 14,174,555 18,391,481 5,435,922 10,416,568 15,852,490 16.6.2 Current Period Net Profit or Loss 71,510 - 71,510 83,549 - 83,549

(*) Details of prior period’s restatement are explained on Section Three footnote XXVII. 16.7 Minority Shares ------

The accompanying notes are an integral part of these consolidated financial statements. TOTAL LIABILITIES 4,633,942 13,757,539 18,391,481 5,066,336 10,786,154 15,852,490

(*) Details of prior period’s restatement are explained on Section Three footnote XXVII. The accompanying notes are an integral part of these consolidated financial statements. 130 131 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Consolidated Statement of Off-Balance Sheet Items as at 31 December 2019 Consolidated Statement of Off-Balance Sheet Items as at 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

THOUSANDS OF TURKISH LIRA Audited Audited Footnotes CURRENT PERIOD PRIOR PERIOD THOUSANDS OF TURKISH LIRA (Section 31/12/2019 31/12/2018 Five) Audited Audited TL FC TOTAL TL FC TOTAL Footnotes CURRENT PERIOD PRIOR PERIOD (Section 31/12/2019 31/12/2018 A. OFF BALANCE SHEET COMMITMENTS (I+II+III) 1,118,031 8,180,953 9,298,984 861,082 2,733,144 3,594,226 Five) TL FC TOTAL TL FC TOTAL I. GUARANTEES AND WARRANTIES (5.III.1) 572,605 6,414,803 6,987,408 585,675 1,785,507 2,371,182 1.1. Letters of Guarantee 572,605 1,700,759 2,273,364 585,675 1,454,768 2,040,443 3.2.2.2 Currency Swap Sale Transactions - 795,624 795,624 109,270 326,378 435,648 1.1.1. Guarantees Subject to State Tender Law ------3.2.2.3 Interest Rate Swap Purchase Transactions ------1.1.2. Guarantees Given for Foreign Trade Operations ------3.2.2.4 Interest Rate Swap Sale Transactions ------1.1.3. Other Letters of Guarantee 572,605 1,700,759 2,273,364 585,675 1,454,768 2,040,443 3.2.3 Currency, Interest Rate and Securities Options 3,410 5,781 9,191 - 10,056 10,056 1.2. Bank Acceptances ------3.2.3.1 Currency Purchase Options 1,709 2,900 4,609 - 5,028 5,028 1.2.1. Import Letter of Acceptance ------3.2.3.2 Currency Sale Options 1,701 2,881 4,582 - 5,028 5,028 1.2.2. Other Bank Acceptances ------3.2.3.3 Interest Rate Purchase Options ------1.3. Letters of Credit - 294,068 294,068 - 217,850 217,850 3.2.3.4 Interest Rate Sale Options ------1.3.1. Documentary Letters of Credit - 104,396 104,396 - 100,678 100,678 3.2.3.5 Securities Purchase Options ------1.3.2. Other Letters of Credit - 189,672 189,672 - 117,172 117,172 3.2.3.6 Securities Sale Options ------1.4. Prefinancing Given as Guarantee ------3.2.4 Currency Futures ------1.5. Endorsements ------3.2.4.1 Currency Purchase Futures ------1.5.1. Endorsements to the Central Bank of Turkey ------3.2.4.2 Currency Sale Futures ------1.5.2. Other Endorsements ------3.2.5 Interest Rate Futures ------1.6. Purchase Guarantees for Securities Issued ------3.2.5.1 Interest Rate Purchase Futures ------1.7. Factoring Guarantees ------3.2.5.2 Interest Rate Sale Futures ------1.8. Other Guarantees - 4,419,976 4,419,976 - 112,889 112,889 3.2.6 Other ------1.9. Other Warranties ------B. CUSTODY AND PLEDGED SECURITIES (IV+V+VI) 13,436,713 29,456,396 42,893,109 10,855,685 23,103,018 33,958,703

II. COMMITMENTS (5.III.1) 121,766 12,185 133,951 122,855 107,531 230,386 IV. ITEMS HELD IN CUSTODY 5,418,774 4,641,317 10,060,091 5,245,377 4,292,713 9,538,090 2.1. Irrevocable Commitments 121,766 12,185 133,951 122,855 107,531 230,386 4.1. Assets Under Management ------2.1.1. Asset Purchase and Sales Commitments 2,975 12,185 15,160 5,020 107,531 112,551 4.2. Securities Held in Custody 1,546,929 18,892 1,565,821 1,486,234 15,833 1,502,067 2.1.2. Deposit Purchase and Sales Commitments ------4.3. Checks Received for Collection 28,928 12,131 41,059 51,270 9,844 61,114 2.1.3. Share Capital Commitment to Associates and Subsidiaries ------4.4. Commercial Notes Received for Collection 6,879 7,170 14,049 7,592 7,573 15,165 2.1.4. Loan Granting Commitments 30,415 - 30,415 29,325 - 29,325 4.5. Other Assets Received for Collection ------2.1.5. Securities Issue Brokerage Commitments ------4.6. Securities Received for Public Offering ------2.1.6. Commitments for Reserve Requirements ------4.7. Other Items Under Custody 3,831,407 4,602,827 8,434,234 3,694,639 4,257,204 7,951,843 2.1.7. Commitments for Checks Payments 6,989 - 6,989 7,720 - 7,720 4.8. Custodians 4,631 297 4,928 5,642 2,259 7,901 2.1.8. Tax and Fund Liabilities from Export Commitments 9 - 9 6 - 6 V. PLEDGED ITEMS 8,017,939 24,815,079 32,833,018 5,610,308 18,810,305 24,420,613 2.1.9. Commitments for Credit Expenditure Limits 80,622 - 80,622 73,480 - 73,480 5.1. Marketable Securities 11,097 - 11,097 18,426 - 18,426 Commitments for Credit Cards and Banking Services 5.2. Guarantee Notes 921 59 980 921 53 974 2.1.10. 192 - 192 199 - 199 Promotions 5.3. Commodity 65,573 61,140 126,713 71,445 262,792 334,237 Receivables from Short Sale Commitments of Marketable 2.1.11. ------Securities 5.4. Warrant - - - 230 - 230 Payables for Short Sale Commitments of Marketable 5.5. Immovables 3,179,455 15,502,429 18,681,884 3,747,100 12,587,299 16,334,399 2.1.12. ------Securities 5.6. Other Pledged Items 4,760,893 9,251,451 14,012,344 1,772,186 5,960,161 7,732,347 2.1.13. Other Irrevocable Commitments 564 - 564 7,105 - 7,105 5.7. Depositories Receiving Pledged Items ------2.2. Revocable Commitments ------VI. ACCEPTED GUARANTEES AND WARRANTEES ------2.2.1. Revocable Loan Granting Commitments ------2.2.2. Other Revocable Commitments ------TOTAL OFF BALANCE SHEET ITEMS (A+B) 14,554,744 37,637,349 52,192,093 11,716,767 25,836,162 37,552,929

III. DERIVATIVE FINANCIAL INSTRUMENTS 423,660 1,753,965 2,177,625 152,552 840,106 992,658 3.1 Derivative Financial Instruments Held for Hedging ------The accompanying notes are an integral part of these consolidated financial statements. 3.1.1 Fair Value Hedges ------3.1.2 Cash Flow Hedges ------

3.1.3 Hedges For Investment Made in Foreign Countries ------

3.2 Trading Transactions 423,660 1,753,965 2,177,625 152,552 840,106 992,658 3.2.1 Forward Foreign Currency Purchase and Sale Transactions 271,470 308,806 580,276 43,282 43,200 86,482 3.2.1.1 Forward Foreign Currency Purchase Transactions 270,804 19,763 290,567 42,372 1,308 43,680 3.2.1.2 Forward Foreign Currency Sale Transactions 666 289,043 289,709 910 41,892 42,802 3.2.2 Currency and Interest Rate Swaps 148,780 1,439,378 1,588,158 109,270 786,850 896,120 3.2.2.1 Currency Swap Purchase Transactions 148,780 643,754 792,534 - 460,472 460,472

132 133 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Consolidated Statement of Profit or Loss for the Year Ended 31 December 2019 Consolidated Statement of Profit or Loss for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

PROFIT/LOSS BEFORE TAXES FROM CONTINUING OPERATIONS THOUSANDS OF TURKISH LIRA XVII. (5.IV.7) 121,550 122,913 (XIII+XIV+XV+XVI) XVIII. PROVISION FOR TAXES ON INCOME FROM CONTINUING OPERATIONS (±) (5.IV.8) 50,040 39,364 Footnotes Audited Audited INCOME AND EXPENSE ITEMS (Section CURRENT PERIOD PRIOR PERIOD 18.1 Current Tax Provision 58,851 32,110 Five) 01/01/2019 - 31/12/2019 01/01/2018 - 31/12/2018 18.2 Expense Effect of Deferred Tax (+) 17,204 7,619

I. INTEREST INCOME (5.IV.1) 1,288,325 1,240,100 18.3. Income Effect of Deferred Tax (-) (26,015) (365) 1.1 Interest on Loans 700,434 758,136 XIX. NET PROFIT/(LOSS) FROM CONTINUING OPERATIONS (XVII±XVIII) (5.IV.9) 71,510 83,549 1.2 Interest Received from Reserve Deposits 30,994 36,097 XX. INCOME FROM DISCONTINUED OPERATIONS - - 1.3 Interest Received from Banks 89,435 8,740 20.1 Income from Assets Held for Sale - - 1.4 Interest Received from Money Market Transactions 19,909 26,993 20.2 Profit from Sale of Associates, Subsidiaries and Joint Ventures - - 1.5 Interest Received from Marketable Securities Portfolio 307,297 396,554 20.3 Other Income from Discontinued Operations - - 1.5.1 Financial Assets at Fair Value Through Profit or Loss - - XXI. EXPENSES FROM DISCONTINUED OPERATIONS (-) - - 1.5.2 Financial Assets at Fair Value Through Other Comprehensive Income 141,555 302,028 21.1 Expenses on Assets Held for Sale - - 1.5.3 Financial Assets Measured at Amortised Cost 165,742 94,526 21.2 Losses from Sale of Associates, Subsidiaries and Joint Ventures - - 1.6 Finance Lease Income - - 21.3. Other Expenses from Discontinued Operations - - 1.7 Other Interest Income 140,256 13,580 XXII. PROFIT/LOSS BEFORE TAXES FROM DISCONTINUED OPERATIONS (±) (XX-XXI) (5.IV.7) - - II. INTEREST EXPENSES (5.IV.2) 888,831 764,529 XXIII. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) (5.IV.8) - - 2.1. Interest on Deposits 627,504 459,053 23.1 Current Tax Provision - - 2.2 Interest on Funds Borrowed 230,875 258,220 23.2 Expense Effect of Deferred Tax (+) - - 2.3 Interest on Money Market Transactions 16,815 46,770 23.3 Income Effect of Deferred Tax (-) - - 2.4 Interest on Securities Issued - - CURRENT PERIOD NET PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS XXIV. - - (XXII±XXIII) 2.5 Interest on Leases 12,942 - XXV. CURRENT PERIOD NET PROFIT/(LOSS) (XIX+XXIV) (5.IV.10) 71,510 83,549 2.6 Other Interest Expenses 695 486 25.1 Group’s Profit/Loss 71,510 83,549 III. NET INTEREST INCOME/EXPENSE (I - II) 399,494 475,571 25.2 Minority Shares (-) - -

IV. NET FEES AND COMMISSIONS INCOME/EXPENSES 124,409 96,576 Profit/Loss of Per Share (Full TL) 0.0083 0.0097 4.1 Fees and Commissions Received 131,475 104,952

4.1.1 Non-Cash Loans 19,223 13,099 The accompanying notes are an integral part of these consolidated financial statements. 4.1.2 Other 112,252 91,853

4.2 Fees and Commissions Paid 7,066 8,376

4.2.1 Non-Cash Loans 18 66

4.2.2. Other 7,048 8,310

V. DIVIDEND INCOME 1 152

VI. TRADING PROFIT/LOSS (Net) (5.IV.3) 57,920 (16,793) 6.1 Profit/Losses from Capital Market Transactions 12,246 10,378

6.2 Profit/Losses from Derivative Financial Transactions 9,463 227,960

6.3 Foreign Exchange Profit/Losses 36,211 (255,131)

VII. OTHER OPERATING INCOME (5.IV.4) 42,984 59,371

VIII. GROSS OPERATING INCOME (III+IV+V+VI+VII) 624,808 614,877

IX. ALLOWANCES FOR EXPECTED CREDIT LOSSES (-) (5.IV.5) 85,568 175,413

X. OTHER PROVISION EXPENSES (-) (5.IV.5) 10,792 25,564

XI. PERSONNEL EXPENSES (-) 212,213 180,011

XII. OTHER OPERATING EXPENSES (-) (5.IV.6) 194,685 110,976

XIII. NET OPERATING PROFIT/LOSS (VIII-IX-X-XI-XII) 121,550 122,913

XIV. SURPLUS WRITTEN AS GAIN AFTER MERGER - -

XV. PROFIT/LOSS FROM EQUITY METHOD APPLIED SUBSIADIRIES - -

XVI. NET MONETARY POSITION GAIN / LOSS - -

134 135 The accompanyingnotesare anintegralpartoftheseconsolidatedfinancialstatements. III. 2.2.6 2.2.5 2.2.4 2.2.3 2.2.2 2.2.1 2.2 2.1.5 2.1.4 2.1.3 2.1.2 2.1.1 2.1 II. I. (Amounts expressed inthousandsofTurkish Lira(“TL”)unlessotherwisestated) Consolidated StatementofProfit orLossandOtherComprehensive Incomeforthe Year Ended31December2019 ICBC TURKEYBANKANONİMŞİRKETİ TOTAL COMPREHENSIVEINCOME(I+II) Reclassified To Profit orLoss Taxes RelatingTo Be ComponentsofOtherComprehensive IncomeThatWill to OtherProfit orLoss BeReclassified Other ComponentsofComprehensive IncomeThatWill Income (Loss)RelatedwithHedgesofNetInvestmentsinForeign Operations Income (Loss)RelatedwithCashFlowHedges Other Comprehensive Income Valuation and/orReclassificationProfit orLoss from FinancialAssetsatFair ValueThrough Exchange Differences onTranslation ComprehensiveOther BeReclassifiedtoProfit IncomeThatWill orLoss Not BeReclassified To Profit orLoss Taxes RelatingTo ComponentsofOtherComprehensive IncomeThatWill Not BeReclassifiedtoProfit orLoss Other ComponentsofComprehensive IncomeThatWill Gains (Losses)onRemeasurements ofDefinedBenefitPlans Gains (Losses)onRevaluationofIntangibleAssets Gains (Losses)onRevaluationofProperty, PlantandEquipment ComprehensiveOther NotBeReclassifiedtoProfit IncomeThatWill orLoss OTHER COMPREHENSIVEINCOME CURRENT PERIODPROFIT/(LOSS) 136 (01/01/2019 -31/12/2019) CURRENT PERIOD CURRENT Audited 162,743 110,201 (22,386) THOUSANDS OF TURKISH LIRA TURKISH OF THOUSANDS 87,815 91,233 71,510 3,418 1,849 1,672 (103) ------(01/01/2018 -31/12/2018) PRIOR PERIOD PRIOR (104,058) Audited Audited (83,246) (82,182) 83,549 20,812 1,367 1,064 1,708 (765) 121 ------

ICBC TURKEY BANK ANONİM ŞİRKETİ Consolidated Statement of Changes in Shareholders’ Equity for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

Other Accumulated Other Accumulated Comprehensive Income That Comprehensive Income Will Not Be Reclassified In Profit That Will Be Reclassified In and Loss Profit and Loss

Share Prior Current Total Certificate Other Period Period Equity Paid-in Share Profit Minority Total Cancellation Capital 1 2 3 4 5 6 Profit/ Profit/ Without Capital Premium Reserves Shares Equity Profits Reserves (Loss) (Loss) Minority Shares

PRIOR PERIOD - (31/12/2018)

I. Balances at the Beginning of the Period 860,000 (587) - 182 11,646 - - - (5,596) - 201,682 (3,316) 48,283 1,112,294 - 1,112,294

II. Adjustment in Accordance with TAS 8 ------5,609 - - 47,764 - 53,373 - 53,373

2.1 Effect of Adjustment ------

2.2 Effect of Changes in Accounting Policies ------5,609 - - 47,764 - 53,373 - 53,373

III. New Balance (I+II) 860,000 (587) - 182 11,646 - - - 13 - 201,682 44,448 48,283 1,165,667 - 1,165,667

IV. Total Comprehensive Income - - - - 1,622 (558) - - (83,246) - - - 83,549 (82,182) - 1,367

V. Capital Increase in Cash ------

VI. Capital Increase Through Internal Reserves ------

VII. Issued Capital Inflation Adjustment Difference ------

VIII. Convertible Bonds ------

IX. Subordinated Debt ------Increase / (Decrease) Through X. - - - (182) - 182 - - - - 31 (496) - (465) - (465) Other Changes, Equity XI. Profit Distribution ------44,967 3,316 (48,283) - - -

11.1 Dividends Distributed ------

11.2 Transfers to Legal Reserves ------44,967 - - 44,967 - 44,967

11.3 Others ------3,316 (48,283) (44,967) - (44,967)

Balances at the end of the Period (III+IV+… 860,000 (587) - - 13,268 (376) - - (83,233) - 246,680 47,268 83,549 1,166,569 - 1,166,569 +X+XI) 31/12/2018

1. Tangible and Intangible Assets Revaluation Reserve, 2. Accumulated Gains / Losses on Remeasurements of Defined Benefit Plans, 3. Other (Other Comprehensive Income of Associates and Joint Ventures Accounted for Using Equity Method that will not be Reclassified to Profit or Loss and OtherAccumulated Amounts of Other Comprehensive Income that will not be Reclassified to Profit or Loss) 4. Exchange Differences on Translation, 5. Accumulated gains (losses) due to revaluation and/or reclassification of financial assets measured at fair value through other comprehensive income, 6. Other (Accumulated Gains or Losses on Cash Flow Hedges, Other Comprehensive Income of Associates and Joint Ventures Accounted for Using Equity Method that will be Reclassified to Profit or Loss and Other Accumulated Amounts of Other Comprehensive Income that will be Reclassified to Profit or Loss)

137 The accompanying notes are an integral part of these consolidated financial statements. ------Total Equity

162,743 ICBC TURKEY BANK ANONİM ŞİRKETİ 1,166,569 1,166,569 1,329,312 Consolidated Statement of Cash Flows for the Year Ended 31 December 2019 ------(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) Shares Minority Minority THOUSANDS OF TURKISH LIRA ------Audited Audited Total Footnotes Equity Equity

Shares CURRENT PERIOD PRIOR PERIOD

162,743 (Section Without Without M i n o r i t y (01/01/2019 - 31/12/2019) (01/01/2018 - 31/12/2018) 1,166,569 1,166,569 1,329,312 Five) ------A. CASH FLOWS FROM BANKING OPERATIONS (Loss) 83,549 83,549 71,510 71,510 Period

Profit/ 1.1 Operating Profit Before Changes in Operating Assets and Liabilities 334,858 (207,101) (83,549) (83,549) Current Current 1.1.1 Interest Received 1,310,234 936,964 ------1.1.2 Interest Paid (921,915) (694,602) Prior 1,451 1.1.3 Dividends Received 1 152 83,549 (Loss) 47,268 47,268 48,719 Period (82,098) Profit/ 1.1.4 Fees And Commissions Received 125,276 105,241 ------1.1.5 Other Income 96,648 31,635 1.1.6 Collections from Previously Written-Off Loans and Other Receivables 17,308 8,329 Profit 82,098 82,098

246,680 246,680 328,778 1.1.7 Cash Payments to Personnel and Service Suppliers (212,071) (179,806) Reserves 1.1.8 Taxes Paid (98,751) (40,717) ------

6 1.1.9 Other (5.VI.3) 18,128 (374,297)

1.2 Changes in Operating Assets and Liabilities Subject to Banking Operations 275,346 1,665,268 ------5 1.2.1 Net (Increase) Decrease in Financial Assets at Fair Value Through Profit or Loss (3,734) 17,686 4,582 87,815 (83,233) (83,233) 1.2.2 Net (Increase) Decrease in Due From Banks (413,811) 703,026 ------4 1.2.3 Net (Increase) Decrease in Loans (1,367,590) (45,078) Profit and Loss

Other Accumulated Accumulated Other 1.2.4 Net (Increase) Decrease in Other Assets (5.VI.3) 7,721 42,825 Comprehensive Income Income Comprehensive That Will Be Reclassified In ------1.2.5 Net (Increase) Decrease in Bank Deposits (1,142,603) 1,247,814 3 1.2.6 Net Increase (Decrease) in Other Deposits 3,109,073 3,397,393 1.2.7 Net Increase (Decrease) in Financial Liabilities at Fair Value Through Profit or Loss ------2 1.2.8 Net Increase (Decrease) in Funds Borrowed (160,714) (3,747,302) (376) (376) 1,592 1,216 1.2.9 Net Increase (Decrease) in Matured Payables - -

138 1.2.10 Net Increase (Decrease) in Other Liabilities (5.VI.3) 247,004 48,904 ------1 I. Net Cash Provided from Banking Operations 610,204 1,458,167 In Profit and Loss Other Accumulated Accumulated Other 1,826 13,268 13,268 15,094 Comprehensive Income Income Comprehensive B. CASH FLOWS FROM INVESTING ACTIVITIES That Will Not Be Reclassified ------II. Net Cash Provided from Investing Activities (704,101) (1,221,766) 2.1 Cash Paid for Purchase of Associates, Subsidiaries and Joint Ventures - - Other

Capital 2.2 Cash Obtained From Sale of Associates, Subsidiaries and Joint Ventures - - Reserves ------2.3 Cash Paid For Tangible And Intangible Asset Purchases (28,129) (4,884) 2.4 Cash Obtained from the Sale of Tangible And Intangible Assets 2,054 914,547 Share Share Profits Cash Paid for Purchase of Financial Assets at Fair Value Through Other 2.5 57,056 (871,755)

Certificate Comprehensive Income Cancellation Cash Obtained from Sale of Financial Assets at Fair Value Through Other ------2.6 703,462 - Comprehensive Income ehensive Income of Associates and Joint Ventures Accounted for Using Equity Method ehensive Income of Associates and Joint Ventures (587) (587) (587) Share Share 2.7 Cash Paid for Purchase of Financial Assets Measured at Amortised Cost (1,407,720) (830,911)

Premium 2.8 Cash Obtained from Sale of Financial Asset Measured at Amortised Cost ------2.9 Other (5.VI.3) (30,824) (428,763) Paid-in Paid-in Capital C. CASH FLOWS FROM FINANCING ACTIVITIES 860,000 860,000 860,000

III. Net Cash Flows from Financing Activities - 1,579,084 3.1 Cash Obtained from Funds Borrowed and Securities Issued - 1,579,084 3.2 Cash Outflow Arised from Funds Borrowed and Securities Issued - - 3.3 Equity Investments Issued - - 3.4 Dividends Paid - - 3.5 Payments for Liabilities Leases - - 3.6 Other - -

IV. Effect of Change in Foreign Exchange Rate on Cash and Cash Equivalents (5.VI.3) 106,011 70,377

V. Net Increase/Decrease in Cash and Cash Equivalents (I+II+III+IV) 12,114 1,885,862

VI. Cash and Cash Equivalents at the Beginning of the Period 3,854,231 1,968,369

VII. Cash and Cash Equivalents at the End of the Period (V+VI) (5.VI.1) 3,866,345 3,854,231 CURRENT PERIOD (31/12/2019) Balances at the Beginning of the Period 8 with TAS Adjustment in Accordance of Adjustment Effect of Changes in Accounting Policies Effect New Balance (I+II) Income Comprehensive Total in Cash Capital Increase Internal Reserves Through Capital Increase Issued Capital Inflation Adjustment Difference Convertible Bonds Debt Subordinated Other Changes, Through / (Decrease) Increase Equity Distribution Profit Dividends Distributed to Legal Reserves Transfers Others Balances at the end of the Period (III+IV… +X+XI) 31/12/2019 ICBC TURKEY BANK ANONİM ŞİRKETİ Ended 31 December 2019 Equity for the Year Consolidated Statement of Changes in Shareholders’ Lira (“TL”) unless otherwise stated) in thousands of Turkish (Amounts expressed I. II. 2.1 2.2 III. IV. V. VI. VII. VIII. IX. X. XI. 11.1 11.2 11.3 and Intangible Assets Revaluation Reserve, 1. Tangible of Defined Benefit Plans, 2. Accumulated Gains / Losses on Remeasurements or Loss and Accounted for Using Equity Method that will not be Reclassified to Profit Income of Associates and Joint Ventures 3. Other (Other Comprehensive or Loss) Income that will not be Reclassified to Profit OtherAccumulated Amounts of Other Comprehensive on Translation, 4. Exchange Differences income, other comprehensive at fair value through of financial assets measured and/or reclassification 5. Accumulated gains (losses) due to revaluation 6. Other (Accumulated Gains or Losses on Cash Flow Hedges, Compr Profit or Loss) Income that will be Reclassified to or Loss and Other Accumulated Amounts of Comprehensive that will be Reclassified to Profit an integral part of these consolidated financial statements. The accompanying notes are The accompanying notes are an integral part of these consolidated financial statements. 139 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Parent Bank Statement of Profit Distribution for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

THOUSANDS OF TURKISH LIRA

CURRENT PERIOD(1) (3) PRIOR PERIOD(2) (01/01/2019 - 31/12/2019) (01/01/2018 - 31/12/2018) SECTION THREE I. DISTRIBUTION OF CURRENT YEAR PROFIT 1.1 CURRENT YEAR INCOME 82,128 95,413 EXPLANATIONS ON ACCOUNTING POLICIES 1.2 TAXES AND LEGAL DUTIES PAYABLES (-) 41,259 33,344 1.2.1 Corporate Tax (Income Tax) 49,173 25,758 I. EXPLANATIONS ON THE BASIS OF PRESENTATION 1.2.2 Income Withholding Tax - - 1.2.3 Other Taxes and Duties (7,914) 7,586 Explanations and disclosures in the financial statements of Bank of Turkish Accounting Standards and Accounting Practices and Retention of Documents Procedures and Principles Regarding the preparation in accordance with A. NET INCOME FOR THE YEAR (1.1-1.2) 40,869 62,069 1.3 PRIOR YEAR LOSSES (-) - - Regulation: 1.4 FIRST LEGAL RESERVES (-) - 3,103 The consolidated financial statements are prepared in accordance with the “Banking Regulation and Supervision Agency (“BRSA”) 1.5 OTHER STATUTORY RESERVES (-) - - Accounting and Financial Reporting Legislation” which includes the “Regulation on Accounting Applications for Banks and B. NET INCOME AVAILABLE FOR DISTRIBUTION [(A-(1.3+1.4+1.5)] - - 1.6 FIRST DIVIDEND TO SHAREHOLDERS (-) - - Safeguarding of Documents” published in the Official Gazette No. 26333 dated 1 November 2006, and other regulations on 1.6.1 To Owners of Ordinary Shares - - accounting records of banks published by Banking Regulation and Supervision Board and circulars and interpretations published 1.6.2 To Owners of Preferred Shares - - by BRSA and requirements of Turkish Financial Reporting Standards (“TFRS”) put into effect by Public Oversight Accounting and 1.6.3 To Owners of Redeemed Shares - - Auditing Standards Authority (“POA”) for the matters not regulated by the aforementioned legislations. 1.6.4 To Profit Sharing Bonds - - 1.6.5 To Holders of Profit and Loss Sharing Certificates - - Consolidated financial statements have been prepared in TL, under the historical cost convention except for financial assets at fair 1.7 DIVIDENDS TO PERSONNEL (-) - - value through profit or loss, financial assets at fair value through other comprehensive income and derivative financial assets and 1.8 DIVIDENDS TO BOARD OF DIRECTORS (-) - - liabilities at fair value through profit or loss carried at fair value and revalued buildings. 1.9 SECOND DIVIDEND TO SHAREHOLDERS (-) - - 1.9.1 To Owners of Ordinary Shares - - The preparation of consolidated financial statements in conformity with BRSA Accounting and Financial Reporting regulation 1.9.2 To Owners of Preferred Shares - - requires the use of certain accounting estimates and assumptions by the Parent Bank management to exercise its judgment on the 1.9.3 To Owners of (preemptive rights) Shares - - assets and liabilities of the balance sheet and contingent issues as the balance sheet date. These estimates are being reviewed 1.9.4 To Profit Sharing Bonds - - regularly and, when necessary, suitable corrections are made and the effects of these corrections are reflected to the statement of 1.9.5 To Holders Of Profit And Loss Sharing Certificates - - profit or loss. Assumptions and estimates that are used in the preparation of the accompanying financial statements are explained 1.10 STATUTORY RESERVES (-) - - in the following related footnotes. 1.11 EXTRAORDINARY RESERVES - 58,966 1.12 OTHER RESERVES - - Unless stated otherwise, the consolidated financial statements and balances in related disclosures are presented in thousands of 1.13 SPECIAL FUNDS - - Turkish Lira. II. DISTRIBUTION OF RESERVES 2.1 APPROPRIATED RESERVES - - 2.2 DIVIDENDS TO SHAREHOLDERS (-) - - As of 1 January 2019, the Parent Bank has started to apply for the first time the TFRS 16 Leases standard published in the Official 2.2.1 To Owners of Ordinary Shares - - Gazette dated 16 April 2018 and numbered 29826 and entered into force as of 1 January 2019. The application and effects for the 2.2.2 To Owners of Preferred Shares - - transition of TFRS 16 are explained in footnote XXVII in Section Three. 2.2.3 To Owners of Redeemed Shares - - 2.2.4 To Profit Sharing Bonds - - In addition, some other changes in standards have also come into force since 1 January 2019. However, these changes do not 2.2.5 To Holders of Profit and Loss Sharing Certificates - - have significant impact on the Bank’s financial statements. 2.3 DIVIDENDS TO PERSONNEL (-) - - 2.4 DIVIDENDS TO BOARD OF DIRECTORS (-) - - Accounting policies and valuation principles used in the preparation of consolidated financial statements are as follows: III. EARNINGS PER SHARE 3.1 TO OWNERS OF ORDINARY SHARES (FULL TL) 0.0048 0.0072 Accounting policies and valuation principles adopted when preparing financial statements are in line with the BRSA Accounting and 3.2 TO OWNERS OF ORDINARY SHARES (%) 4.8 7.2 3.3 TO OWNERS OF PRIVILEGED SHARES - - Financial Reporting Legislation. 3.4 TO OWNERS OF PRIVILEGED SHARES (%) - - IV. DIVIDEND PER SHARE Since the Parent Bank made use of all the facilitative provisions in the first pass to TFRS 16, the Group has applied a partial 4.1 TO OWNERS OF ORDINARY SHARES - - retrospective approach resulting in the existence of right of use and the equal amount of the lease debt. Accordingly, the 4.2 TO OWNERS OF ORDINARY SHARES (%) - - comparative information presented in accordance with TAS 17 and related comments for 2018 has not been restated. 4.3 TO OWNERS OF PRIVILEGED SHARES - - 4.4 TO OWNERS OF PRIVILEGED SHARES (%) - -

(1) The authorised body of the Bank for the distribution of the current period’s profit is the General Assembly. The Bank’s annual ordinary General Assembly meeting had not been held as of the date on which these financial statements were prepared. (2) The profit distribution table for the previous period has been finalized with the decision of the Ordinary General Assembly dated 29 March 2019, after the issuance of the audited financial statements dated 31 December 2018 and restated accordingly. At the Bank's Ordinary General Assembly Meeting held on 29 March 2019, a legal reserve fund of TL 3,103 was allocated at a rate of 5% and TL 58,966 remaining from 62,069 TL, which constitutes the profit after tax. has been decided to be transferred to extraordinary reserves. (3) Statement of profit distribution above belongs to the Parent Bank.

140 141 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS ON STRATEGY FOR THE USE OF FINANCIAL INSTRUMENTS AND THE FOREIGN III. EXPLANATIONS ON SUBSIDIARIES AND ASSOCIATES (CONTINUED) CURRENCY TRANSACTIONS ICBC Yatırım, which is financial subsidiary of the Parent Bank is consolidated in the accompanying consolidated financial Strategy for the use of financial instruments: statements by using full consolidation method as at 31 December 2018 and 31 December 2019.

The Parent Bank’s main area of activities consist corporate, commercial and retail banking, fund management transactions and The Parent Bank and its consolidated subsidiary are referred to as “the Group”. international banking services. The Parent Bank gives loans mainly to domestic customers by external sources of funds comprised mainly of domestic deposits and foreign borrowings and invests in marketable securities and banks placements to maintain Control is defined as the power over the investee, exposure or rights to variable returns from its involvement with the investee and liquidity. the ability to use its power over the investee to affect the amount of the Bank’s returns.

The liability side of the balance sheet is intensively composed of short-term deposits and medium/long term borrowings in line The carrying amount of the Parent Bank’s investment in its subsidiary and the Parent Bank’s portion of equity of its subsidiary are with the general trend in the banking sector. Foreign currency borrowings are predominately floating rate and thus, the Parent netted off. All intercompany transactions and intercompany balances between the consolidated subsidiary and the Parent Bank are Bank aims to minimize the effects of fluctuations in currency and interest rates in the market. Deposits collected are fixed rate eliminated. and balanced with fixed rate loans and other investments. The fundamental strategy to manage the liquidity risk is to expand the deposit base through customer-oriented banking philosophy, and to increase customer transactions and retention rates. The The financial statements, which have been used in the consolidation, are prepared as at 31 December 2019 and appropriate Parent Bank invests some of its resources to domestic government bonds and short-term placements to reduce liquidity risk. adjustments are made to financial statements to use uniform accounting policies for similar transactions and events in same circumstances. There is no obstacle on the transfer of shareholders’ equity between the Parent Bank and its subsidiary or on the In order to avoid currency risk, the Parent Bank aims to balance foreign currency assets and liabilities through currency swaps. reimbursement of liabilities. Currency risk, interest rate risk and liquidity risk are monitored and measured instantly by various risk management systems, and the balance sheet is managed under the limits set by these systems and the limits legally required. Asset-liability management and IV. DERIVATIVE FINANCIAL ASSETS value at risk models, stress tests and scenario analysis are used for this purpose. The derivative transactions of the Group mainly consist of foreign currency swaps, foreign currency options and forward contracts. The Parent Bank designates its loan strategy considering international and national economic data and expectations, market Spot currency buying-selling transactions and currency swaps with two days value date of the Group are classified under assets conditions, interest, liquidity, currency, credit and other risks. Loan portfolio of the Parent Bank is not concentrated on a specific purchase and sale commitments. segment and concentration risk is taken in consideration as much as possible. Derivative instruments are classified as “Derivative Financial Assets Designated at Fair Value Through Profit or Loss” in accordance Transactions denominated in foreign currencies: with TFRS 9. The Parent Bank does not have any embedded derivatives.

Monetary assets and liabilities denominated in foreign currencies are translated by using currency exchange rates on the balance The liabilities and receivables arising from the derivative transactions are recorded as off-balance sheet items at their contract sheet date. The resulting exchange differences are recorded in the statement of profit or loss as “Foreign Exchange Gain/Loss”. values.

As of 31 December 2019, foreign currency denominated balances are translated into Turkish Lira at fair value through (TL Full); The derivative transactions are initially recognized at fair value and measured at fair value subsequent to initial recognition and USD: TL 5.9402, EUR: TL 6.6506, GBP: TL 7.7765, and JPY: TL 0.0543. are presented in the “Derivative Financial Assets Designated at Fair Value Through Profit or Loss” under the “Derivative Financial Assets” or “Derivative Financial Liabilities Designated at Fair Value Through Profit or Loss” under the “Derivative Financial There is no goodwill amount related to the Parent Bank's foreign subsidiaries. Liabilities” items of the balance sheet depending on the resulting positive or negative amounts of the fair value. Gains and losses arising from a change in the fair value of trading purpose derivatives are recognized in the consolidated statement of profit or loss. III. EXPLANATIONS ON SUBSIDIARIES AND ASSOCIATES Fair values of derivatives are determined using quoted market prices in active markets or using discounted cash flow techniques within current market interest rates. As of 31 December 2018 and 31 December 2019, the Parent Bank has no associates. Fair values of option agreements are calculated using option pricing models and unrealized profit and loss amounts are presented On 21 April 2015, Tekstil Portföy Yönetimi A.Ş. was established with TL 2,000,000 - full amount - capital from ICBC Yatırım. On in the statement of profit or loss for the current period. 23 November 2015, the trade name of the company has been changed and registered as ICBC Turkey Portföy Yönetimi A.Ş. (ICBC Portföy). ICBC Portföy is a subsidiary of ICBC Yatırım with 100% partnership and an indirect subsidiary of the Parent Bank. An embedded derivative is a component of a hybrid contract that also includes a non-derivative host with the effect that some of As at 31 December 2018, ICBC Portföy has been consolidated in ICBC Yatırım by full consolidation method. "ICBC Yatırım", the the cash flows of the combined instrument vary in a way similar to stand alone derivative. An embedded derivative causes some consolidated subsidiary of the Parent Bank, represents ICBC Portföy and ICBC Yatırım as a whole. or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to contract. A derivative that is attached to a financial instrument but is contractually transferable independently of that instrument, or has a different counterparty, is not an embedded derivative but a separate financial instrument.

142 143 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

V. EXPLANATIONS ON INTEREST INCOME AND EXPENSE VII. EXPLANATIONS ON FINANCIAL ASSETS (CONTINUED)

Interest income and expenses are accounted for in accordance with the effective interest method in TFRS 9 (the ratio of the future b. Financial Assets at Fair Value Through Other Comprehensive Income: cash flows of the financial asset to the present value of the future cash flows). Interest income and expenses calculated using the internal rate of return method are recognized on an accrual basis. Pursuant to the related legislation, the Parent Bank ceases A financial asset is measured at fair value through other comprehensive income when both of the following conditions are met accrued interest income on non-performing loans and other interest income accruals which are considered as doubtful, cancels the accruals recorded and does not record until the collection is made. - Financial assets within a business model that aim to hold to collect contractual cash flows and aim to hold to sell, - Financial assets with contractual terms that lead to cash flows are solely payments of principal and interest at certain dates. VI. EXPLANATIONS ON FEES AND COMMISSIONS INCOME AND EXPENSE Financial assets measured at fair value through other comprehensive income are measured at their fair values subsequently. Fees and commissions income and expenses are accounted on accrual or collection basis in accordance with the nature of the Unrealized gains or losses arising from changes in the fair value of securities carried at fair value through profit and loss at transaction. The advance commissions obtained from cash and non-cash loans are allocated to the related periods in accordance fair value through profit or loss are expressed in equity as “Other Comprehensive Income That Will Be Reclassified to Profit with the periodicity principle and recorded as income. Prepaid fees for loans are discounted by using effective interest rate or Loss”. In case of disposal of marketable securities at fair value through other comprehensive income as a result of fair method and recorded as income in the related period due to periodicity principle. value application, the value in the shareholders’ equity accounts is reflected to the statement of profit or loss. However, the Bank may prefer the method of reflecting changes in fair value to other comprehensive income is irrevocable for the first time VII. EXPLANATIONS ON FINANCIAL ASSETS in the financial statements for certain investments in equity instruments measured at fair value through profit or loss under normal circumstances. The Group recognizes its financial assets as “Fair Value Through Profit or Loss”, “Fair Value Through Other Comprehensive Income” or “Measured at Amortized Cost”. Such financial assets are recognized or derecognized according to TFRS 9 Financial c. Financial Assets Measured at Amortized Cost: Instruments. The Group recognizes a financial asset or financial liability on its balance sheet only when it is party to the contractual provisions of the financial lease. The Group derecognizes a financial asset only when the contractual rights to cash flows from the A financial asset is measured at amortized cost when both of the following conditions are met: financial asset have expired or the financial assets have been transferred and the conditions for derecognition have been met. A financial liability (or part of a financial liability) is only recognized when the liability has expired; in other words, it is removed from - Financial assets within a business model that aim to hold to collect contractual cash flows, the statement of financial position when the obligation specified in the contract is fulfilled, canceled or time out. - Financial assets with contractual terms that lead to cash flows are solely payments of principal and interest at certain dates.

Financial assets are measured at fair value at initial recognition in the financial statements. During the initial recognition of financial Subsequent to the initial recognition, financial assets measured at amortized cost are accounted at amortized cost calculated by assets other than "Financial Assets at Fair Value Through Profit or Loss", transaction costs are added to fair value or deducted from using the effective interest rate method. Interest income on financial assets measured at amortized cost is recorded as interest fair value. income in the statement of profit or loss.

The Group categorizes its financial assets as “Fair Value Through Profit/Loss”, “Fair Value Through Other Comprehensive Income” Loans: or “Measured at Amortized Cost” based on the matters below: Loans are financial assets created by providing money, goods or services to the debtor. Such loans are initially recognized at - The business model used by the entity for the management of financial assets, acquisition cost plus transaction costs presenting their fair value and thereafter measured at amortized cost using the “Effective - Characteristics of contractual cash flows of the financial asset. Interest Rate (internal rate of return) Method”. Charges paid for assets acquired as collateral and other similar expenses are not considered as part of the transaction cost and are reflected in the expense items. All the loans of the Parent Bank are recorded When the business model determined by the Group management is changed, all financial assets affected by this change are under the “Measured at Amortized Cost” account. reclassified. Reclassification of financial assets is applied prospectively from the date of reclassification. In such cases, there no adjustment to earnings, losses (including impairment gain or loss) or interest received previously in the financial statements is VIII. EXPLANATIONS ON IMPAIRMENT OF FINANCIAL ASSETS made. Explanation on Expected Credit Losses: a. Financial Assets at Fair Value Through Profit or Loss: The Parent Bank makes provisions for financial assets measured at fair value through other comprehensive income, assets An asset is measured as financial assets at fair value through profit or loss for which fair values could not be measured at amortized measured at amortized cost, and expected losses related to non-cash loans and credit commitments. As of 1 January 2018, the cost or fair value through other comprehensive income. Financial assets valued at fair value through profit or loss are valued at Parent Bank recognizes provisions for impairment in accordance with TFRS 9 requirements according to the “Regulation on the their fair values and gain/loss arising on those assets is recorded in the statement of profit or loss. Procedures and Principles for Classification of Loans by Banks and Provisions to be set aside” published in the Official Gazette dated 22 June 2016 numbered 29750.

There is no provision for impairment of equity instruments.

144 145 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VIII. EXPLANATIONS ON IMPAIRMENT OF FINANCIAL ASSETS (CONTINUED) IX. EXPLANATIONS ON OFFSETTING FINANCIAL INSTRUMENTS

The Parent Bank measured the expected credit losses for a financial asset based on the probabilities that are weighted and unbiased Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet only when there is by probable outcomes, the time value of money and the estimates of past events, current and future economic conditions that are a legally enforceable right to offset the recognized amounts and there is an intention to settle the related financial assets and reasonable, in a way that reflects supportable information. liabilities on a net basis, or realize the asset and settle the liability simultaneously.

As of the date of initial recognition, financial assets at are subject to expected loss provision calculation have been followed in Provisions for foreign exchange gain/loss on foreign currency indexed loans are netted with loans on asset side of consolidated accordance with the following three-stage model below: balance sheet. Otherwise, the financial assets and liabilities are netted off only when there is a legal right to do so.

Stage 1: From initial recognition of a financial asset to the date on which an asset has experienced a significant increase in credit risk X. EXPLANATIONS ON SALE AND REPURCHASE AGREEMENTS AND TRANSACTIONS RELATED TO THE relative to its initial recognition, a loss allowance is recognized equal to the credit losses expected to result from its default occurring LENDING OF SECURITIES over the earlier of the next 12 months or its maturity date. Securities sold under repurchase agreements (“repo”) are classified as “fair value through profit or loss”, “fair value through other Stage 2: An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting comprehensive income” or “financial assets measured at amortized cost” based on the Parent Bank management’s intention and period by considering the change in the risk of default occurring over the remaining life of the financial instrument and measures measured with the same valuation principles of the portfolio above. Funds received through repurchase agreements are classified the provision for impairment on this financial instrument at an amount equal to the lifetime expected credit losses. The purpose of separately under liability accounts and the related interest expenses are accounted on an accrual basis based on the difference impairment provisions matters are recognizing the risk of default occurring over the remaining life of the financial instrument that between selling and repurchase prices using effective interest rate (internal rate of return) method. Securities purchased under credit risk has increased significantly since initial recognition is performed at each reporting period. resale agreements (“reverse repo”) are classified under “Receivables from Reverse Repurchase Agreements”. An income accrual using the effective interest rate method is accounted for the positive difference between the purchase and resale prices earned Stage 3: When one or more events that negatively affect future estimated cash flows of a financial asset occur, the related financial during the period. The Parent Bank does not have any securities related to the lending. asset has met with credit-impairment. For these assets, expected lifetime loss of credit is recorded. XI. EXPLANATIONS ON ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS AND LIABILITIES Review of the Parent Bank's Business Model: RELATED WITH THESE ASSETS The Parent Bank classifies its financial assets based on the business model used for the management of financial assets. Based on the Assets held for sale consist of assets that have high sales probability, have been planned to be sold, and an active program has determined business model, the Bank evaluates whether the financial assets meet the classification requirements set out in TFRS 9. been started to complete the plan and determine the buyers. Asset should be marketed the price compatible with fair value. This assessment requires consideration of all evidence available at the time the assessment was made, including, but not limited to, Furthermore, the sales, starting from the day of classifications as held for sale, should be expected to be completed at within a the following: year and the necessary activities should demonstrate that the possibility of having significant change in the plan or the cancellation - How the performance of the business model and the financial assets held within that business model are evaluated and reported to of the plan is low. the Bank management - The risks that affect the performance of the business model (and the financial assets held within that business model) and, in The Group does not have any assets held for sale as of 31 December 2019 (31 December 2018 – None). particular, the way in which those risks are managed and - How the additional payments to the Parent Bank management are determined. The Group has no discontinued operations as of 31 December 2019 (31 December 2018 – None).

Assessment on Contractual Cash Flows Whether Include Only Principal and Interest on Principal Payments are Related to Capital: XII. EXPLANATIONS ON GOODWILL AND OTHER INTANGIBLE ASSETS

The financial asset is classified on the basis of its contractual cash flow characteristics if the financial asset is held within a business There is no goodwill in the accompanying consolidated financial statements as at 31 December 2018 and 31 December 2019. model whose objective is to hold assets to collect contractual cash flows or within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. For this purpose, the Parent Bank determines whether contractual Intangible assets are initially recognized at their cost that includes expenditures that are directly attributable to the acquisition of cash flows are solely payments of principal and interest. In assessing whether the contractual cash flows are solely payments of the asset. Intangibles are reflected in the consolidated balance sheet at cost less amortization and any accumulated impairment principal and interest, the Parent Bank will consider the consistency of loan agreement. In a basic lending arrangement, consideration losses. Intangible assets are subsequently measured at cost less any accumulated depreciation and any accumulated impairment for the time value of money and credit risk are typically the most significant elements of interest. In assessing whether the contractual losses. cash flows are solely payments of principal and interest, the Parent Bank will consider the contractual terms of the instrument. This will include assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash Intangible assets are amortized on amortization rates between 6.66% and 33.33%. flows such that it would not meet this condition. In making the assessment, the Parent Bank considers: Intangible assets are amortized on a straight-line basis based on their estimated useful lives. Useful life of an asset is estimated by - Contingent events that would change the amount and timing of cash flows assessment of the expected life span of the asset and technical and technological wear outs of the asset. The amortization rates - Leverage features used approximate the useful lives of the assets. - Prepayment and extension terms - Terms that limit the Bank’s claim to cash flows from specified assets - Features that modify consideration for the time value of money

146 147 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

XIII. EXPLANATIONS ON TANGIBLE ASSETS XIV. EXPLANATIONS ON LEASING ACTIVITIES

Tangible assets are initially recognized at their cost that includes expenditures that are directly attributable to the acquisition of The Group has started to apply TFRS 16 Leases standard starting from 1 January 2019. the asset. Tangible assets, except buildings as stated below, are reflected in the consolidated financial statements at cost less accumulated depreciation and any accumulated impairment. The Group undertakes leases in the building, vehicle and software asset groups.

Tangible assets are depreciated on a straight-line basis based on the in estimated useful lives. The estimated useful lives are as As a lessee, the Group has included the right to lease assets and leasing liabilities for most of its leases in accordance with TFRS follows: 16, even though the Group has previously been classified as operating or financial leasing based on the assessment of whether all the risks and rewards of ownership of the asset have been transferred or not. In other words, these leases are presented in the statement of financial position. The Group classifies the right of use assets in classes of tangible assets and intangible assets that Buildings 50 years are of the same nature as their assets. Furniture, office machinery and vehicles 3 – 50 years The Group takes into the financial statements the right of use and the obligation of the lessee on the date of the lease start. Leasehold improvements Shorter of the economic life or lease term Tenure asset is initially measured at cost and subsequently accumulated depreciation and accumulated impairment losses deducted and the restated cost of the lessor's liability. Properties which are accounted for as right of use are subject to The depreciation of an asset held for a period less than a full financial year is calculated as a proportion of the full year depreciation and related depreciation standards are used for TAS 16 “Property, Plant and Equipment” and TAS 38 “Intangible depreciation charge from the date of acquisition to the financial year end. Assets”. TAS 36 “Impairment of Assets” standard is applied to determine whether the immovable properties have been impaired and to account for impairment. In cases where the expected future benefits of the assets are less than their “net realizable value”, the book values of such assets are reduced to their “net realizable values” and impairment losses are recorded as expense. At the date of the effective date of the lease, the lease liability is measured at the present value of the lease payments not paid at that date. If the interest rate on the lease is easily determined, this rate is discounted using the Group's alternative borrowing Gain and losses sourcing from disposal of plant, property and equipment are determined through deduction of net book value interest rate. In general, the Group used the alternative borrowing interest rate as the discount rate. from the sales revenue of the related plant, property and equipment.

XV. EXPLANATIONS ON PROVISIONS AND CONTINGENT LIABILITIES The regular maintenance and repair expenditures are accounted as expense. The investment expenditures, made to increase the future benefits of the asset by improving the capacity of the asset, are added to the cost of the asset. Investment expenditures Provisions and contingent liabilities are accounted in accordance with the “Turkish Accounting Standard for Provisions, Contingent comprised of the costs, which increase the useful life of the asset, improve the capacity of the asset, increase the quality or Liabilities and Contingent Assets” (“TAS 37”). decrease the cost of production. Provisions are accounted for immediately when obligations arise as a result of past events and a reliable estimate of the obligation The Parent Bank applies revaluation model for the buildings as permitted by TAS 16 “Property, Plant and Equipment”. For this is made by the Parent Bank management. Whenever the amount of such obligations can not be measured, they are regarded as purpose, fair values of the buildings are determined by a third party appraiser, which is commissioned by BRSA and Capital “Contingent”. If the possibility of an outflow of resources embodying economic benefits becomes probable and the amount of Markets Board. The fair value surplus is recognized in “Revaluation Fund on Tangible Assets” within the equity items. the obligation can be measured with sufficient reliability, a provision is recognized. A provision for contingent liabilities arising from past events should be recognized in the same period of occurrence in accordance with the periodicity principle. If the amount of the obligation can not be measured with sufficient reliability or the possibility of an outflow of resources embodying economic benefits is remote, such liabilities are disclosed in the notes to the consolidated financial statements.

XVI. CONTINGENT ASSETS

The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Group. Since recognizing 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. If an inflow of economic benefits has become probable, then the contingent asset is disclosed in the notes to the consolidated financial statements. Developments related to the contingent assets are constantly evaluated to be reflected rightly in the consolidated financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the consolidated financial statements of the period in which the change occurs.

XVII. EXPLANATIONS ON OBLIGATIONS RELATED TO EMPLOYEE RIGHTS

Obligations related to employment termination and vacation rights “Turkish Accounting Standards Regarding Employee Benefits” (“TAS 19”) are accounted for in accordance with the provisions.

148 149 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

XVII. EXPLANATIONS ON OBLIGATIONS RELATED TO EMPLOYEE RIGHTS (CONTINUED) XVIII. EXPLANATIONS ON TAXATION (CONTINUED)

Under the Turkish Labor Law, the Bank and its subsidiaries operating in Turkey are required to pay a specific amount to the Deferred tax liabilities are recognized for all deductible temporary differences, however deferred tax assets composed of employees who have retired or whose employment is terminated other than the reasons specified in the Turkish Labor Law. deductible temporary differences and tax losses are accounted with considering that it is probable that taxable profit will be According to the related regulation, the Bank is obliged to pay termination benefits for employees who retire, quit for their military available and such deductible temporary differences and tax losses can be utilized. service obligations, who have been dismissed as defined in the related regulation or who have completed at least one year of service. The reserve for employment termination benefits represents the present value of the estimated total reserve for the future Deferred tax assets and liabilities of the Parent Bank have been offset in the Parent Bank’s financial statements. Net deferred tax probable obligation of the Group arising from this liability. assets or liabilities of the entities in the Group which are calculated individually have not been offset.

XVIII. EXPLANATIONS ON TAXATION The Group has calculated deferred tax based on the principles above and reflected to the consolidated financial statements. a. Current tax: c. Transfer Pricing:

While the corporate tax rate was at the rate of 20% since 1 January 2006, for all companies, such rate has been set as 22% for the In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of tax bases of the years 2019, 2020 and 2021 based on the legislation of the Amendment on Certain Tax Laws and Other Laws no. “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, 7061. Furthermore, the Council of Ministers has been authorized to reduce the rate of 22% down to 20%. dated 18 November 2007 sets details about implementation.

This rate is applied to tax base which is calculated by adding certain non deductible expenses for tax purposes and deducting If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are certain exemptions (like dividend income) and other deductions on accounting income. If there is no dividend distribution, no not set in accordance with arm's length principle, then related profits are considered to be distributed in a disguised manner further tax charges are made. through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes. Dividends paid to the resident institutions and the institutions working through local offices or representatives in Turkey are not subject to withholding tax. Accordingly, the withholding tax rate on the dividend payments other than the ones paid to the Corporate tax payers required in “section 7.1 annual documentation” part of related communiqué, have to fill the “form relating non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident to transfer pricing, controlled foreign companies and thin capitalization” as associated with purchasing and selling goods or institutions is 15%. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not services with related parties in an accounting period and send it to the tax office submitted as an appendix to the corporate tax subject to withholding tax. return.

In accordance with the tax legislation, corporate taxes are paid in advance based on the tax base calculated on the quarterly XIX. ADDITIONAL EXPLANATIONS ON BORROWINGS earnings of the companies at the rate of 20%. These payments can be deducted from the annual corporate tax calculated for the whole year earnings. Such taxes paid in advance are deducted from the final corporate tax liability. Financial liabilities held for trading and negative value of derivative instruments are carried at fair value and all other financial liabilities are carried at amortized cost using “effective interest rate (internal rate of return) method”. In accordance with the Turkish tax legislation, the tax losses can be carried forward to offset against future taxable income for up to 5 years. Tax losses can not be carried back to offset profits from previous periods. XX. EXPLANATIONS ON ISSUED STOCK

In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their There is no issued stock in the current period. tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the XXI. EXPLANATIONS ON ACCEPTANCES right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Acceptances are realized simultaneously with the customer payments and recorded in “off-balance sheet accounts”, if any. b. Deferred Tax: XXII. EXPLANATIONS ON GOVERNMENT GRANTS

In accordance with TAS 12 “Income Taxes”, the Group accounts for deferred taxes based on the tax effect of temporary As at 31 December 2018 and 31 December 2019, the Group does not have any government grants. differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are based on tax rates that have been enacted at the balance sheet date.

If transactions and other occurrences are accounted at profit or loss; tax effects which are related to these transactions and other occurrences are also accounted at profit or loss. If transactions and other occurrences are directly accounted at equity balances; tax effects which are related to these transactions and other occurrences are also accounted at equity accounts. Tax provision of items that are directly related to equity is offsett with related equity accounts.

150 151 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

XXIII. PROFIT RESERVES AND PROFIT DISTRIBUTION XXVII. RECLASSIFICATIONS (CONTINUED)

Retained earnings at statutory books are allowed for distribution except for the following clause on legal reserves. a. First implementation of TFRS 16 (Continued):

The legal reserves consist of first and second reserves, in accordance with the Turkish Commercial Code. The first legal reserve is The following table shows the classification and adjustment records for the first application of TFRS 16 Leases Standard as of 1 appropriated out of the statutory profit at the rate of 5% until the total reserve reaches a maximum of 20% of the Company’s paid- January 2019. in capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the Company’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital. TFRS 16 TFRS 16 31 December 2018 1 January 2019 Classification Effect Transition Effect At the Ordinary General Assembly Meeting of the Parent Bank held on 29 March 2019 it was decided TL 62,069 of the net income Tangible Assets (Net) 35,357 2,855 77,478 115,690 after the net tax for the year 2018 to be used for calculation of legal reserve of 5% of with amount of TL 3,103 in accordance with the TCC 519/1 and the remaining TL 58,966 to be transferred to extraordinary reserves. Intangible Assets (Net) 7,914 93 1,644 9,651

Other Assets (Net) 31,067 (2,948) - 28,119 XXIV. RELATED PARTIES Lease Payables (Net) - - 79,122 79,122 For the purpose of the consolidated financial statements, shareholders, members of board of directors, related companies managed by their own and families, associates and jointly controlled entities are accepted as related party in accordance with the b. Uniform account plan change article 49 of the Banking Law No.5411. Transactions regarding related parties are presented in footnote VII of Section Five. Due to change in The Uniform Chart of Accounts as of 1 February 2019, expected loss provisions on financial assets at fair value XXV. CASH AND CASH EQUIVALENTS through other comprehensive income are started to be recorded under equity. Restatements in prior period financial statements in accordance with “Communiqué on amendments to the communiqué on the financial statements and the related explanations and For the purposes of the consolidated statement of cash flows, cash and cash equivalents comprise cash and balances with footnotes to be announced to public by banks” are presented below: central banks, deposits with banks and other financial institutions, other money market placements with an original maturity of nine months or less and receivables from reverse repo. The reserve requirements blocked at the Central Bank of Turkey are not Published Reclassifications Restated recognized as “cash equivalent assets” in the statement of cash flows.

31 December 2018 XXVI. EXPLANATIONS ON SEGMENT REPORTING Financial Assets

Expected Loss Provisions 15,766 (8,326) 7,440 A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. Segment reporting is presented in Section Four, footnote XI. Financial Assets Measured With Amortized Costs

Expected Loss Provisions 208,350 2,716 211,066 XXVII. RECLASSIFICATIONS Other Comprehensive Incomes or Expenses to be (88,843) 5,610 (83,233) a. First implementation of TFRS 16: Reclassified in Profit or Loss

The Bank has started to apply TFRS 16 Leases standard starting from 1 January 2019. XXVIII. EXPLANATIONS ON OTHER MATTERS

TFRS 16 introduces a single leasing accounting model for tenants. As a result, the Bank, as a lessee, has acquired the lease rights The accounting policies applied in the prior period and which are not applicable together with the application of TFRS 16 standard representing the lease rights representing the right to use the underlying asset and the lease payments to the financial statements. in the current period are presented below: Accounting for the lessor is similar to the previous accounting policies. Explanations on Leasing Activities: The Bank has applied a partial retrospective approach resulting from the use of all the facilitating provisions in the first pass to TFRS 16, resulting in the existence of right to use and the equal amount of the lease debt. Accordingly, the comparative Assets acquired by financial leasing are recorded by considering the lower of the fair value of the leased asset and the present information presented in accordance with TAS 17 and related comments for 2018 has not been restated. value of leasing payments. Fixed assets obtained through financial leasing are classified as tangible asset and depreciated over their estimated useful lives. When there is a decrease in the value of the fixed assets obtained through financial leasing, the “provision for losses” is allocated. The obligations under financial leases arising from the lease contracts are presented under “Financial Lease Payables” account in the balance sheet. Interest expense and currency exchange rate differences related to leasing activities are recognized in the statement of profit or loss. The Group does not perform financial lease transactions as the “lessor”.

In operating leases, the rent payments are charged accrual basis in accordance with the relevant contractual provisions.

152 153 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

SECTION FOUR I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED)

EXPLANATIONS ON CONSOLIDATED FINANCIAL POSITION AND RISK MANAGEMENT Information about consolidated total capital (Continued):

I. EXPLANATIONS ON CONSOLIDATED EQUITY Amounts Related Amount to Treatment Information about consolidated total capital: Before 1/1/2014(1) Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation - Equity amount and capital adequacy standard ratio have been calculated within the framework of “Regulation on Measurement where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation and Evaluation of Banks' Capital Adequacy”. - where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank

Portion of mortgage servicing rights exceeding 10% of the Common Equity - The capital adequacy standard ratio of the Group is 18.71% (31 December 2018: 30.22%). Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity -

Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the Regulation on the Equity of Banks - Amounts Related Current Period Amount to Treatment Excess amount arising from the net long positions of investments in common equity items of banks and financial institutions outside the scope of (1) - Before 1/1/2014 consolidation where the Bank owns 10% or more of the issued common share capital

COMMON EQUITY TIER 1 CAPITAL Excess amount arising from mortgage servicing rights -

Paid-in capital following all debts in terms of claim in liquidation of the Bank 860,000 Excess amount arising from deferred tax assets based on from temporary differences -

Other items to be defined by the BRSA - Share issue premiums (587) Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - Reserves 328,778 Total Deductions From Common Equity Tier I Capital 9,172 Gains recognized in equity as per TAS 20,892 Total Common Equity Tier I Capital 1,320,140 Profit 120,229 ADDITIONAL TIER 1 CAPITAL

Current period profit 71,510 Preferred stock not included in common equity and the related share premiums -

Prior period profit/loss 48,719 Debt instruments and premiums approved by BRSA -

Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be Debt instruments and premiums approved by BRSA (Temporary article 4) - - recognized within profit for the period Additional Tier I Capital before Deductions - Common Equity Tier 1 Capital Before Deductions 1,329,312 Deductions from Additional Tier I Capital DEDUCTIONS FROM COMMON EQUITY TIER 1 CAPITAL Direct and indirect investments of the Bank in its own Additional Tier I Capital - Common Equity as per the 1st clause of Provisional Article 9 of the Regulation of the Equity of Banks - Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by financial institutions with compatible with - Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected in equity in accordance with TAS - Article 7.

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or Improvement costs for operating leasing 2,966 - less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital

Goodwill (net of related tax liability) - The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of Unconsolidated Banks and Financial Institutions - where the Bank Owns more than 10% of the Issued Share Capital Other intangibles other than mortgage-servicing rights (net of related tax liability) 4,916 Other items to be defined by the BRSA - Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) 1,290

Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk -

Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based Approach, total expected loss amount - exceeds the total provision

Gains arising from securitization transactions -

Unrealized gains and losses due to changes in own credit risk on fair valued liabilities -

Defined-benefit pension fund net assets -

Direct and indirect investments of the Bank in its own Common Equity -

Shares obtained contrary to the 4th clause of the 56th Article of the Law -

154 155 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED) I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED)

Information about consolidated total capital (Continued): Information about consolidated total capital (Continued):

Amounts Related Amounts Related Amount to Treatment Amount to Treatment Before 1/1/2014(1) (1) Before 1/1/2014 The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity - Transition from the Core Capital to Continue to deduce Components which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds Goodwill or other intangibles and deferred tax liabilities of which the regulation concerning Provisional Article 2 of subsection of core capital not 3,278 The Sum of net long positions of investments in the common stock of banking, financial and insurance entities that are outside the scope of reduced from (-) regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity, mortgage servicing - rights, deferred tax assets arising from temporary differences which will not deducted from Common Equity Tier 1 capital for the purposes of the Net deferred tax asset/liability which is not deducted from Common Equity Tier 1 capital for the purposes of the sub-paragraph of the Provisional 860 first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds Article 2 of the Regulation on Banks’ Own Funds (-)

TOTAL CAPITAL Deductions to be made from common equity in the case that adequate Additional Tier I Capital or Tier II Capital is not available (-) - Total capital (The Sum of Tier I Capital and Tier II) 3,208,722 Total Deductions From Additional Tier I Capital 4,138 Total risk weighted amounts 17,154,261 Total Additional Tier I Capital - CAPITAL ADEQUACY RATIOS

Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 1,316,002 Consolidated Core Capital Adequacy Ratio (%) 7.67

TIER II CAPITAL Consolidated Tier 1 Capital Adequacy Ratio (%) 7.67

Consolidated Capital Adequacy Standard Ratio (%) 18.71 Debt instruments and share issue premiums deemed suitable by the BRSA(2) 1,782,420 BUFFERS Debt instruments and share issue premiums deemed suitable by BRSA (Temporary article 4) - Total buffer requirement 2.77

st Provisions (1 clause of Article 8 of the Regulation on the Equity of Banks) 110,481 Capital conservation buffer requirement (%) 2.50

Bank specific countercyclical buffer requirement (%) 0.27 Tier II Capital Before Deductions 1,892,901 The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the Article 4 of Regulation on Capital - Deductions From Tier II Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets (%)

Direct and indirect investments of the Bank on its own Tier II Capital (-) - Amounts below the Excess Limits as per the Deduction Principles

Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions declared in Portion of the total of net long positions of investments in equity items of unconsolidated banks and financial institutions where the bank owns - - Article 8 10% or less of the issued share capital exceeding the 10% threshold of above Tier I capital

Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation Portion of the total of investments in equity items of unconsolidated banks and financial institutions where the bank owns 10% or less of the issued - - where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank (-) share capital exceeding the 10% threshold of above Tier I capital

Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and financial institutions outside the scope Amount arising from mortgage servicing rights - of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank Amount arising from deferred tax assets based on temporary differences - Other items to be defined by the BRSA (-) - Limits related to provisions considered in Tier II calculation Total Deductions from Tier II Capital - General provisions for standard based receivables (before tenthousandtwentyfive limitation) - Total Tier II Capital 1,892,901 Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used - Total Capital (The sum of Tier I Capital and Tier II Capital) 3,208,903 Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in accordance with the Communiqué on the - Calculation Deductions from Total Capital Excess amount of total provision amount to 0.6 % of risk weighted receivables of credit risk Amount of the Internal Ratings Based Approach in - Deductions from Capital Loans granted contrary to the 50th and 51st Article of the Law - accordance with the Communiqué on the Calculation

Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Debt instruments subjected to Temporary article 4 (to be implemented between 1 January 2018 and 1 January 2022) Acquired against Overdue Receivables and Held for Sale but Retained more than Five Years - Upper limit for Additional Tier I Capital subjected to temporary article 4 - Other items to be defined by the BRSA 181 Amounts Excess the Limits of Additional Tier I Capital subjected to temporary article 4 -

Regulatory Adjustments which will be deducted from Total Capital during the transition period Upper limit for Additional Tier II Capital subjected to temporary article 4 -

The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity) in the capital of banking, financial Amounts Excess the Limits of Additional Tier II Capital subjected to temporary article 4 - and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of - the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (1) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the temporary articles of “Regulations regarding to changes on Regulation on Equity of Banks” and taken into consideration at the end of transition process. (2) As of 31 December 2019, the Parent Bank has taken into consideration the subordinated loan amounting to TL 1,782,420 from its main shareholders, Industrial and Commercial Bank of China Limited Liability Company (ICBC) for capital adequacy calculation. 156 157 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED) I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED)

Information about consolidated total capital (Continued): Information about consolidated total capital (Continued):

Total capital has been calculated in accordance with the “Regulations regarding to changes on Regulation on Equity of Banks” Amounts Related effective from date 31 December 2018, the information given in the prior period has been calculated pursuant to former Amount to Treatment Before 1/1/2014(1) regulation. Portion of mortgage servicing rights exceeding 10% of the Common Equity -

Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity - Amounts Related Prior Period Amount to Treatment Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the Regulation on the Equity of Banks - Before 1/1/2014(1) Excess amount arising from the net long positions of investments in common equity items of banks and financial institutions outside the scope of - COMMON EQUITY TIER 1 CAPITAL consolidation where the Bank owns 10% or more of the issued common share capital

Paid-in capital following all debts in terms of claim in liquidation of the Bank 860,000 Excess amount arising from mortgage servicing rights -

Share issue premiums (587) Excess amount arising from deferred tax assets based on from temporary differences -

Reserves 246,680 Other items to be defined by the BRSA - Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - Gains recognized in equity as per TAS 12,892 Total Deductions From Common Equity Tier I Capital 95,592 Profit 130,817 Total Common Equity Tier I Capital 1,154,210 Current period profit 83,549 ADDITIONAL TIER 1 CAPITAL Prior period profit/loss 47,268 Preferred stock not included in common equity and the related share premiums - Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and - cannot be recognized within profit for the period Debt instruments and premiums approved by BRSA - Common Equity Tier 1 Capital Before Deductions 1,249,802 Debt instruments and premiums approved by BRSA (Temporary article 4) -

DEDUCTIONS FROM COMMON EQUITY TIER 1 CAPITAL Additional Tier I Capital before Deductions -

st Common Equity as per the 1 clause of Provisional Article 9 of the Regulation of the Equity of Banks - Deductions from Additional Tier I Capital

Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected in equity in accordance with TAS 88,842 Direct and indirect investments of the Bank in its own Additional Tier I Capital -

Improvement costs for operating leasing 1,047 Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by financial institutions with compatible with - Article 7. Goodwill (net of related tax liability) - Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or - less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital Other intangibles other than mortgage-servicing rights (net of related tax liability) 4,903 The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of Unconsolidated Banks and Financial Institutions - where the Bank Owns more than 10% of the Issued Share Capital Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) 800 Other items to be defined by the BRSA -

Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk -

Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based Approach, total expected loss amount - exceeds the total provision

Gains arising from securitization transactions -

Unrealized gains and losses due to changes in own credit risk on fair valued liabilities -

Defined-benefit pension fund net assets -

Direct and indirect investments of the Bank in its own Common Equity -

Shares obtained contrary to the 4th clause of the 56th Article of the Law -

Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation - where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank

Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation - where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank

158 159 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED) I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED)

Information about consolidated total capital (Continued): Information about consolidated total capital (Continued):

Amounts Related Amounts Related Amount to Treatment Amount to Treatment Before 1/1/2014(1) Before 1/1/2014(1) The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking, financial and insurance entities that Transition from the Core Capital to Continue to deduce Components are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity - which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of Goodwill or other intangibles and deferred tax liabilities of which the regulation concerning Provisional Article 2 of subsection of core capital not the Provisional Article 2 of the Regulation on Banks’ Own Funds 3,268 reduced from (-) The Sum of net long positions of investments in the common stock of banking, financial and insurance entities that are outside the scope of Net deferred tax asset/liability which is not deducted from Common Equity Tier 1 capital for the purposes of the sub-paragraph of the Provisional regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity, mortgage servicing 533 - Article 2 of the Regulation on Banks’ Own Funds (-) rights, deferred tax assets arising from temporary differences which will not deducted from Common Equity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds Deductions to be made from common equity in the case that adequate Additional Tier I Capital or Tier II Capital is not available (-) - TOTAL CAPITAL

Total Deductions From Additional Tier I Capital 3,801 Total capital (The Sum of Tier I Capital and Tier II) 2,874,823

Total risk weighted amounts 9,514,657 Total Additional Tier I Capital - CAPITAL ADEQUACY RATIOS(2) Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 1,150,409 Consolidated Core Capital Adequacy Ratio (%) 12.09

TIER II CAPITAL Consolidated Tier 1 Capital Adequacy Ratio (%) 12.09

Debt instruments and share issue premiums deemed suitable by the BRSA(2) 1,579,084 Consolidated Capital Adequacy Standard Ratio (%) 30.22

BUFFERS Debt instruments and share issue premiums deemed suitable by BRSA (Temporary article 4) - Total buffer requirement 9.08 Provisions (1st clause of Article 8 of the Regulation on the Equity of Banks) 145,529 Capital conservation buffer requirement (%) 1.88

Tier II Capital Before Deductions 1,724,613 Bank specific countercyclical buffer requirement (%) 7.20

The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the Article 4 of Regulation on Capital - Deductions From Tier II Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets (%)

Direct and indirect investments of the Bank on its own Tier II Capital (-) - Amounts below the Excess Limits as per the Deduction Principles

Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions declared in Portion of the total of net long positions of investments in equity items of unconsolidated banks and financial institutions where the bank owns - - Article 8 10% or less of the issued share capital exceeding the 10% threshold of above Tier I capital

Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation Portion of the total of investments in equity items of unconsolidated banks and financial institutions where the bank owns 10% or less of the issued - - where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank (-) share capital exceeding the 10% threshold of above Tier I capital

Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and financial institutions outside the scope Amount arising from mortgage servicing rights - - of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank Amount arising from deferred tax assets based on temporary differences - Other items to be defined by the BRSA (-) - Limits related to provisions considered in Tier II calculation

Total Deductions from Tier II Capital - General provisions for standard based receivables (before tenthousandtwentyfive limitation) -

Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used - Total Tier II Capital 1,724,613 Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in accordance with the Communiqué on the - Total Capital (The sum of Tier I Capital and Tier II Capital) 2,875,022 Calculation

Excess amount of total provision amount to 0.6 % of risk weighted receivables of credit risk Amount of the Internal Ratings Based Approach in Deductions from Total Capital - accordance with the Communiqué on the Calculation Deductions from Capital Loans granted contrary to the 50th and 51st Article of the Law - Debt instruments subjected to Temporary article 4 (to be implemented between 1 January 2018 and 1 January 2022)

Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Upper limit for Additional Tier I Capital subjected to temporary article 4 - Acquired against Overdue Receivables and Held for Sale but Retained more than Five Years - Amounts Excess the Limits of Additional Tier I Capital subjected to temporary article 4 -

Other items to be defined by the BRSA 199 Upper limit for Additional Tier II Capital subjected to temporary article 4 - Amounts Excess the Limits of Additional Tier II Capital subjected to temporary article 4 - Regulatory Adjustments which will be deducted from Total Capital during the transition period (1) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the temporary articles of “Regulations regarding to changes on Regulation on Equity of Banks” and The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity) in the capital of banking, financial taken into consideration at the end of transition process. and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common (2) As of 31 December 2018, the Parent Bank has taken into consideration the subordinated loan amounting to TL 1,579,084 from its main shareholders, Industrial and Commercial Bank of China Limited Liability Company - (ICBC) for capital adequacy calculation. share capital of the entity which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds

160 161 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED) I. EXPLANATIONS ON CONSOLIDATED EQUITY (CONTINUED)

Information on the issues subject to temporary implementation in capital calculation: Information on borrowing instruments included in equity calculation (continued):

None. Convertible to stock

-Elimination of activity permit Information on the agreement of equity items and balance sheet amounts: Triggering events / events that can cause conversion if they can be converted to a stock -Possibility of transfer to SDIF -In the event of regulatory reason, the decision of BRSA will be converted to share

The difference between the consolidated “Equity” in the preceding table and “Equity” in the consolidated balance sheet mainly Full or partial conversion if convertible Subject to BRSA approval arises from the general provision. In the calculation of Total Capital, general provision is taken into consideration as Tier II Capital. If convertible, conversion rate Subject to BRSA approval and convertible

In addition, in the calculation of the Total Capital, improvement costs for operating leases followed under tangible assets in If forced to convert to stock, forced or optional conversion feature Subject to BRSA approval the balance sheet, intangible assets and related deferred tax liabilities, net book value of immovables that are acquired against Convertible vehicle types if converted to stock Stock overdue receivables and retained more than five years, other items defined by the regulator are taken into consideration as amounts deducted from Total Capital. Issuer of a debt instrument to be converted - Value reduction feature

Information on borrowing instruments included in equity calculation: Trigger events / events that will cause a reduction if it has a value reduction feature -

Total or partial value reduction if value reduction is available -

Lender INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED Continuous or transient feature -

Descriptive elements of debt instrument (CUSIP, ISIN, etc.) - Value increment mechanism if the value can be temporarily reduced -

Implementing Regulation on the Equity of Banks published in the Official Gazette In the case of the right to take in the case of liquidation in the order of the right Before the borrowing instruments to be included in the calculation of the additional Legislation subject to debt instrument dated 5 September 2013 and numbered 28756 (the vehicle just above this debt instrument) capital of the owner to the owner, after the depositors and all other debts Whether the banks do not have the requirements of Articles 7 and 8 of the Although it has all the requirements of Article 8, it does not meet the requirements Consideration in equity calculation Regulation on Shareholders' Equity of Article 7

Subject to 10% deduction as of 1 January 2015 No Which of the requirements of the articles 7 and 8 of the Regulation on Equity of Although it has all the requirements of Article 8, it does not meet the requirements Banks are not of Article 7 Validity status on consolidated or unconsolidated basis or on both Consolidated and Unconsolidated Basis consolidated and unconsolidated basis II. EXPLANATION ON CONSOLIDATED CREDIT RISK Type of debt instrument Secondary Subordinated Loan

Amount considered in the calculation of equity (as of the last reporting date) 1,782,420 1. Credit risk represents the risk generating from the counter party’s not fulfilling its responsibilities stated in the agreement either partially or totally. Nominal value of debt instrument 300 M USD

Accountable account of the debt instrument 347 In the Parent Bank, Credit Allocation Department and Problematic Loans Follow-up Department is responsible for managing the credit risk. The Group determines credit limits to counter parties and does not allocate loans more than these limits so as to Date of issuance of debt instrument Maturity structure of debt instrument (Demand / Term) 28.12.2018 subject credit risk to risk limitation. Credit limits are determined individually for each customer, company, company groups and Maturity structure of debt instrument (Demand / Term) Term risk groups. The Group assesses several criteria such as financial power of customers, business capacity, industry, geographical

Maturity of debt instrument 28.12.2028 segment and equity structure when determining credit limits. The review of financial position of the customers is based on financial statements obtained in accordance with relevant legislation and other information. The geographical distribution of In the case of a regulatory cause after the 5th anniversary, the BRSA has the right to Whether the issuer has the right of reimbursement due to BRSA approval reimbursement upon approval credit customers is appropriate to branch network, country, industry, trade and service activities allocation. The credibility of the

Reimbursement option date, contingent repayment options and refund amount - debtors is assessed periodically with taking notice of the financial statements of the debtors obtained thoroughly to be audited in accordance with the relevant legislation. Subsequent reimbursement option dates -

Interest / dividend payments The Group gives importance to credit guarantees. Guarantees are generally in form of real estate and movable mortgages, commercial enterprise pledges, secured investment securities, letters of guarantee of other banks and sureties. Fixed or variable interest / dividend payments Variable interest

Interest rate and interest rate index value 6 M USD LIBOR +1.75% The Bank classified overdue loans in accordance with TFRS 9 and “Regulation on the Procedures and Principles for Determination of Classification of Loans by Banks and Provisions to be set aside” in current period. General loan loss provision is calculated for Whether there are any restrictions that stop the payment of dividends Payable in accordance with BRSA communiqués and regulations past due loans and specific provision is calculated for impaired loans in accordance with “Regulation on Procedures and Principles Fully optional, partially optional or mandatory Mandatory for Determination of Qualifications of Loans and Other Receivables by Banks and Provisions to be set aside” in the prior periods.

Whether there is an element that will encourage repayment, such as interest rate increases -

Being non-cumulative or cumulative Non-cumulative

162 163 – TL129,763). 7. and 21.80%oftheaggregate oftotalassetsandoff-balance sheetitems(31December 2018–17%and18%),respectively. c) Asat31December2019,the Group’s totalcashandnon-cash loansfrom itstop 100and200loancustomerscomprise21.73% of thetotalnon-cashloansportfolio(31December2018–99.6% and99.9%),respectively. b) Asat31December2019,theshares ofthetop100and200non-cashloancustomersGroup constitute 99.9%and100% the totalcashloansportfolio(31December2018–89.7%and 91.9%),respectively. 6. concentration. interbankcredityet. Whentheinternational transactionsof Group are assessed,there credit isnosignificantinternational risk risks are analyzedalthoughtheGroup’s credit portfoliodoesnotincludesignificantforeign operations andcredit transactions 5. followed-up inaccordance withthemonitoringmethodsdefinedbybanking regulations. 4. 3. risk arisingfrom theseinstrumentsare managedtogether withotherpotentialrisksresulting from marketfluctuations. 2. process. rate conversion credit after mitigation, risk credit before amounts present amounts (1) Risk Other receivables Undertakings forcollectiveinvestmentsinmutualfunds corporatereceivables institutionsandshort-term claimsonbanksandintermediary Short-term Securitization positions Secured bymortgages Higher riskcategoriesdecidedbytheBoard Past dueloans Claims secured byresidential property Claims onretail Claims oncorporate institutions Claims onbanksandintermediary organizationsClaims oninternational Claims onmultilateraldevelopmentbanks Claims onadministrativebodiesandnon-commercial undertakings Claims onregional orlocalauthorities governments andCentralBanks Claims oncentralgovernments Risk Classifications exposure amountsthatare classifiedindifferent riskgroups andtypes: relatedInformation tototalamountofexposures afteroffsetting transactionsbutbefore applyingriskmitigationsandtheaverage II. EXPLANATION ONCONSOLIDATED CREDITRISK(CONTINUED) (Amounts expressed inthousandsofTurkish Lira(“TL”)unlessotherwisestated) Notes toConsolidatedFinancialStatementsfortheYear Ended31December2019 ICBC TURKEYBANKANONİMŞİRKETİ Asat31December2019,the Group’s 1 a)Asat31December2019,theshares ofthetop100and200cashloancustomersGroup constitute91.5% and92%of There isariskevaluation structure withintheParent Bankforforeign fundingtransactions,where thecountriesandtheirmarket Indemnifiednon-cashloansare treated loans.Standard asnon-performing loans, restructured and rescheduled loansare Regarding forward transactions,ifitisrequired, reverse positions ofthecurrent positionsare purchased tominimizetherisk. TheParent Bankhascontrol limitsoverthepositions offorward transactions,optionsandothersimilaragreements. Thecredit st and2 nd stageexpectedloanlossprovision amountstoTL92,185 (31December2018 164 Current Period Risk Amount Amount Risk Period Current 8,661,431 1,081,452 9,507,851 5,559,486 121,452 217,923 54,388 (1) ------Average Risk Amount Amount Risk Average 10,175,104 5,807,960 1,230,947 4,516,907 232,089 131,403 46,695 6,923 ------

ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATION ON CONSOLIDATED CREDIT RISK (CONTINUED) 8. a) Profile of Significant Exposures in Major Regions:

31 DECEMBER 2019(4) RISK CLASSIFICATIONS (1) TOTAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Domestic 5,559,486 - - - - 9,012,279 7,961,488 121,374 1,081,452 54,388 - - - - - 217,923 24,008,390 European Union Countries - - - - - 43,761 398,539 2 ------442,302 OECD Countries(2) - - - - - 1,628 32,710 ------34,338 Off-Shore Banking Regions ------USA, Canada - - - - - 110,618 ------110,618 Other Countries - - - - - 339,565 268,694 76 ------608,335 Investments and associates, subsidiaries and joint ------ventures Undistributed Assets/Liabilities(3) ------Total 5,559,486 - - - - 9,507,851 8,661,431 121,452 1,081,452 54,388 - - - - - 217,923 25,203,983

31 DECEMBER 2018(4) RISK CLASSIFICATIONS (1) TOTAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Domestic 4,485,288 - 40,125 - - 6,045,620 4,238,589 144,674 1,330,070 14,820 - - - - - 123,718 16,422,904 European Union Countries - - - - - 60,520 212,231 2 ------272,753 OECD Countries(2) - - - - - 1,079 84,250 ------85,329 Off-Shore Banking Regions ------USA, Canada - - - - - 314,168 ------314,168 Other Countries - - - - - 178,010 298,761 8 2 ------476,853 Investments and associates, subsidiaries and joint ------ventures Undistributed Assets/Liabilities(3) ------Total 4,485,288 - 40,125 - - 6,599,397 4,833,831 144,758 1,330,070 14,820 - - - - 123,718 17,572,007

(1) Risk classifications in the “Regulation on Measurement and Evaluation of Capital Adequacy of Banks’’ have been used.

1 Claims on central governments and Central Banks 9 Claims secured by residential property 2 Claims on regional governments or local authorities 10 Past due loans 3 Claims on administrative bodies and other non-commercial undertakings 11 Higher risk categories decided by the Board 4 Claims on multilateral development banks 12 Secured by mortgages 5 Claims on international organizations 13 Securitization positions 6 Claims on banks and intermediary institutions 14 Short-term claims on banks and intermediary institutions and short-term corporate receivables 7 Claims on corporate 15 Undertakings for collective investments in mutual funds 8 Claims included in the regulatory retail portfolios 16 Other receivables

(2) Includes OECD countries other than EU countries, USA and Canada (3) Includes asset and liability items that cannot be allocated on a consistent basis (4) Risk amounts present amounts before credit risk mitigation, after credit conversion rate process. 165 ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS ON CONSOLIDATED CREDIT RISK (CONTINUED) 8. b) Risk profile by industries or counterparties:

31 DECEMBER 2019(2) RISK CLASSIFICATIONS (1) TL FC TOTAL

INDUSTRIES/COUNTERPARTIES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Agriculture ------630 3 ------633 - 633

Farming and Raising Livestock ------105 3 ------108 - 108

Forestry ------

Fishery ------525 ------525 - 525

Manufacturing ------3,038,793 983 124,472 615 ------67,990 3,096,873 3,164,863

Mining and Quarrying ------6,846 57 ------6,632 271 6,903

Production ------1,061,102 884 124,172 615 ------22,585 1,164,188 1,186,773

Electric, Gas and Water ------1,970,845 42 300 ------38,773 1,932,414 1,971,187

Construction ------1,213,923 146 12,806 45,446 ------256,214 1,016,107 1,272,321

Services 5,557,390 - - - - 9,507,851 3,714,550 2,310 441,482 4,942 ------3,215,922 16,012,603 19,228,525

Wholesale and Retail Trade ------1,341,564 994 6 4,942 ------127,249 1,220,257 1,347,506

Hotel, Food and Beverage ------1,529 137 202,081 ------1,668 202,079 203,747 Transportation and ------1,124,536 473 ------110,320 1,014,689 1,125,009 Telecommunication Financial Institutions 5,557,390 - - - - 9,507,851 494,754 40 ------2,887,733 12,672,302 15,560,035

Real Estate and Rental Services ------94,408 224 239,331 ------87,416 246,547 333,963

Self Employment Services ------657,474 196 64 ------1,171 656,563 657,734

Educational Services ------19 ------19 - 19

Health and Social Services ------266 246 ------346 166 512

Other 2,096 - - - - - 693,535 118,010 502,692 3,385 - - - - - 217,923 904,647 632,994 1,537,641

Total 5,559,486 - - - - 9,507,851 8,661,431 121,452 1,081,452 54,388 - - - - - 217,923 4,445,406 20,758,577 25,203,983

(1) Risk classifications in the “Regulation on Measurement and Evaluation of Capital Adequacy of Banks’’ have been used. 1 Claims on central governments and Central Banks 9 Claims secured by residential property 2 Claims on regional governments or local authorities 10 Past due loans 3 Claims on administrative bodies and other non-commercial undertakings 11 Higher risk categories decided by the Board 4 Claims on multilateral development banks 12 Secured by mortgages 5 Claims on international organizations 13 Securitization positions 6 Claims on banks and intermediary institutions 14 Short-term claims on banks and intermediary institutions and short-term corporate receivables 7 Claims on corporate 15 Undertakings for collective investments in mutual funds 8 Claims included in the regulatory retail portfolios 16 Other receivables (2) Risk amounts present amounts before credit risk mitigation, after credit conversion rate process.. 166

ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS ON CONSOLIDATED CREDIT RISK (CONTINUED)

8. b) Risk profile by industries or counterparties (Continued):

31 DECEMBER 2018(2) RISK CLASSIFICATIONS (1) TL FC TOTAL INDUSTRIES/COUNTERPARTIES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Agriculture ------779 4 - 8 ------791 - 791

Farming and Raising Livestock ------753 4 - 8 ------765 - 765

Forestry ------

Fishery ------2 6 ------2 6 - 2 6

Manufacturing - - 40,125 - - - 2,382,429 1,383 141,027 1,510 ------315,180 2,251,294 2,566,474

Mining and Quarrying ------9,620 85 - 221 ------9,686 240 9,926

Production - - 40,125 - - - 1,018,194 1,253 140,727 1,289 ------134,311 1,067,277 1,201,588

Electric, Gas and Water ------1,354,615 45 300 ------171,183 1,183,777 1,354,960

Construction ------570,675 410 120,219 1,486 ------404,334 288,456 692,790

Services 4,484,951 - - - - 6,202,459 1,793,657 2,502 435,631 9,935 ------4,035,987 8,893,148 12,929,135

Wholesale and Retail Trade ------100,526 1,502 838 9,935 ------40,709 72,092 112,801

Hotel, Food and Beverage ------1,864 45 214,812 ------1,940 214,781 216,721

Transportation and Telecommunication ------741,076 392 ------190,366 551,102 741,468

Financial Institutions 4,484,951 - - - - 6,202,459 388,194 61 ------3,540,720 7,534,945 11,075,665

Real Estate and Rental Services ------266,445 145 219,396 ------245,214 240,772 485,986

Self Employment Services ------295,003 229 56 ------15,953 279,335 295,288

Educational Services ------1 - 529 ------530 - 530 Health and Social Services ------548 128 ------555 121 676

Other 337 - - - - 396,938 86,291 140,459 633,193 1,881 - - - - - 123,718 986,494 396,323 1,382,817

Total 4,485,288 - 40,125 - - 6,599,397 4,833,831 144,758 1,330,070 14,820 - - - - - 123,718 5,742,786 11,829,221 17,572,007

(1) Risk classifications in the “Regulation on Measurement and Evaluation of Capital Adequacy of Banks’’ have been used.

1 Claims on central governments and Central Banks 9 Claims secured by residential property 2 Claims on regional governments or local authorities 10 Past due loans 3 Claims on administrative bodies and other non-commercial undertakings 11 Higher risk categories decided by the Board 4 Claims on multilateral development banks 12 Secured by mortgages 5 Claims on international organizations 13 Securitization positions 6 Claims on banks and intermediary institutions 14 Short-term claims on banks and intermediary institutions and short-term corporate receivables 7 Claims on corporate 15 Undertakings for collective investments in mutual funds 8 Claims included in the regulatory retail portfolios 16 Other receivables

(2) Risk amounts present amounts before credit risk mitigation, after credit conversion rate process. 167 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATION ON CONSOLIDATED CREDIT RISK (CONTINUED) II. EXPLANATION AND FOOTNOTES ON CONSOLIDATED CREDIT RISK (CONTINUED)

8.c) Analysis of maturity-bearing exposures according to remaining maturities: 8.e) Information of major industries or type of counterparties:

Term to Maturity Impaired and past due loans and value adjustments and methods related to provisions are explained at Section Four, article no. 1 1-3 3-6 1 month 6-12 months Over 1 Year of Footnote II. months months

Risk Classifications(1) Loans Provisions

(3) Claims on central governments and Central Banks 1,130,373 56,166 656,230 - 2,413,588 Impaired (TFRS 9) Expected Credit Claims on regional governments or local authorities - - - - - Significant Increase in Credit-Impaired Loss Provisions Credit Risk Losses (TFRS 9) Major Industries/Counterparties (Stage II) (Stage III) Claims on administrative bodies and other non-commercial undertakings - - - - - Agriculture - 397 399 Claims on multilateral development banks - - - - - Farming and Raising Livestock - 397 397 Claims on international organizations - - - - - Forestry - - - Claims on banks and intermediary institutions 1,692,904 43,225 1,835,405 997,178 3,854,342 Fishery - - 2

Claims on corporate 861,491 1,396,629 607,192 91,769 5,146,710 Manufacturing 218,126 3,934 58,404

Claims on retail portfolios 17,533 1,034 2,528 9,848 66,130 Mining and Quarrying - - 33

Claims secured by residential property 352 279 3,055 11,438 1,065,400 Production 218,126 3,933 46,192 Electricity, Gas and Water 1 12,179 Past due loans(2) ------Construction 9,074 140,750 101,981 Higher risk categories decided by the Board - - - - - Services 13,029 15,684 41,047 Secured by mortgages - - - - - Wholesale and Retail Trade 13,029 13,955 10,905 Securitization positions - - - - - Accommodation and Dining Services - 802 1,768 Short-term claims on banks and intermediary institutions and short-term - - - - - corporate receivables Transportation and Telecommunication - 341 3,533 Equity investments - - - - - Financial Institutions - - 20,376

Undertakings for collective investments in mutual funds - - - - - Real Estate and Lending Services - - 177

Other receivables - - - - - Self Employment Services - 586 4,287

TOTAL(2) 3,702,653 1,497,333 3,104,410 1,110,233 12,546,170 Educational Services - - - Health and Social Services (1) Risk figures present amounts before credit risk mitigation, after credit conversion rate process. - - 1 (2) Net impaired loans amounting to TL 54,388 and other risk amounts not bearing maturity exposures amounting to TL 3,260,244 are not included. (3) The amount of restricted time deposits kept at Central Bank of Turkey is presented under the 1-month column. Other 5,667 7,289 4,020 Total 245,896 168,054 205,851 8.d) Information related to Credit Ratings: (1) Includes information related to cash loans

While determining the risk classifications explained in the article No. 6 of the “Regulation on Measurement and Evaluation of 8.f) Information related with value adjustments and loan loss provisions: Capital Adequacy of Banks”, ratings given by authorized rating companies are not used.

Opening Provision within Provision Other Closing Balance Risk amounts according to risk weights: Balance the Period Reversals Adjustments(1)

Stage III Provision(2) 78,587 92,695 (7,736) (49,880) 113,666 Deducted From Risk Weights 0% 10% 20% 35% 50% 75% 100% 150% 200% Equity(1) Stage I and II Provisions 129,763 22,310 (59,888) - 92,185 Exposures Before Credit 3,347,701 - 305,622 478,461 9,808,883 121,449 11,140,142 1,725 - 11,341 Risk Mitigation (1) Other adjustments in specific provisions includes amounts related to credits which are written off and sold from loans under follow-up portfolio. (2) Includes information related to cash loan. Exposures After Credit 3,481,871 - 983,570 478,237 9,147,383 104,794 11,006,403 1,725 - 11,341 Risk Mitigation

(1) Includes the amounts deducted from core capital.

168 169 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

III. EXPLANATIONS ON CONSOLIDATED OPERATIONAL RISK IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED FOREIGN CURRENCY EXCHANGE RATE RISK (CONTINUED) The Group used the “Basic Indicators Approach” in computation of its operational risk. In accordance with the 3rd section ‘Computation of the Operational Risk’ of the “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”, published Information on consolidated foreign currency exchange rate risk: in the Official Gazette no. 29111 dated 6 September 2014, operational risk is computed using the gross income of the Group for the years ended 2019, 2018 and 2017. Operational risk used in computation of capital adequacy ratio per article I of this section is 8% of 31 December 2019 EURO USD OTHER FC TOTAL

TL 769,103 which is TL 61,528. TL 61,528 represents also the minimum capital amount to eliminate the operational risk. Assets Cash (cash in vault, effectives, money in transit, checks purchased) and balances with the 254,400 1,682,939 699 1,938,038 CBRT (1) Information related with operational risk that is calculated with Basic Indicator Approach Banks 210,755 1,605,408 20,756 1,836,919 Financial assets at fair value through profit or loss - - - - Total/Number of years of 2 PP Amount 1 PP Amount CP Amount Rate (%) Total positive gross Money market placements - - - - Financial assets at fair value through other comprehensive income 10,094 1,005,069 - 1,015,163 Gross Income 256,826 395,666 578,072 3 15 61,528 Loans (3) 3,067,513 4,077,468 - 7,144,981 Value at Operational Risk (Total*12.5) 769,103 Investment in associates, subsidiaries and joint ventures - - - - Financial Assets Measured at Amortized Cost - 2,436,763 - 2,436,763 IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED FOREIGN CURRENCY EXCHANGE RATE RISK Hedging Derivative Financial Assets - - - - Foreign currency risk indicates the possibilities of the potential losses that banks are subject to due to adverse movements between Tangible assets - - - - currencies. The Parent Bank monitors foreign currency exchange rate risk in currency/TL and parity basis and uses different risk methods Intangible assets - - - - and tools for each. The Parent Bank hedges parity risks through spot/ forward arbitrage transactions. Other assets 251 2,618 2 2,871 Total assets(2) (3) (7) 3,543,013 10,810,265 21,457 14,374,735 The Parent Bank’s foreign currency exchange rate risk is measured by Standard Method and Value at Risk Method. Liabilities Interbank deposits 28,931 59,883 3,639 92,453 Foreign currency deposits 2,124,700 4,698,868 69,649 6,893,217 The Group considers all foreign currency assets and liabilities and currency forward transactions in measuring capital obligation against Funds provided from Money Market - - - - currency risk. Net short and long positions of TL equivalents of all types of currencies are calculated. Position with the higher absolute Funds provided from other financial institutions 801 6,017,574 - 6,018,375 value, which is the basis for the capital obligation, is used measuring the capital obligation for currency risk. Marketable securities issued - - - - Miscellaneous payables - - - - The Parent Bank’s Board of Directors determines the Parent Bank’s limits, within regulatory limitations, related to short/long positions at Derivative financial liabilities held for hedging - - - - any period. The Treasury Department of the Parent Bank is responsible from the management of price and liquidity risks on Turkish Lira Other liabilities 678,072 12,700 15,490 706,262 or foreign currency in the domestic and international markets. Risk Management Department exercises continuous control on risks in the Total liabilities (2) (6) (8) 2,832,504 10,789,025 88,778 13,710,307 money markets and transactions creating these risks and reports to the Asset-Liability Committee of the Parent Bank weekly. Net On Balance Sheet Position 710,509 21,240 (67,321) 664,428 Net Off Balance Sheet Position (623,421) 135,000 70,249 (418,172) The Parent Bank’s spot foreign exchange bid rates as at the balance sheet date and for each of the five days prior to that date (TL full): Financial Derivative Assets(5) 665 588,028 85,296 673,989 Financial Derivative Liabilities(5) 624,086 453,028 15,047 1,092,161

24.12.2019 25.12.2019 26.12.2019 27.12.2019 30.12.2019 31.12.2019 Non-cash Loans(4) 2,133,845 4,260,459 20,499 6,414,803 USD 5.9291 5.9364 5.9293 5.9302 5.9370 5.9402 31 Aralık 2018 GBP 7.6979 7.6664 7.6773 7.6854 7.7375 7.7765 Total Assets(2) (3) (7) 2,273,364 8,539,063 15,736 10,828,163 EURO 6.5714 6.5773 6.5755 6.5759 6.6117 6.6506 Total Liabilities(2) (6) (8) 1,827,474 8,934,816 50,596 10,812,886 JPY 0.0541 0.0541 0.0541 0.0540 0.0541 0.0543 Net On Balance Sheet Position 445,890 (395,753) (34,860) 15,277 The basic arithmetical average of the Parent Bank’s foreign exchange bid rates for the last thirty one days ending 31 December Net Off Balance Sheet Position (231,251) 291,313 36,359 96,421 2019 (TL full): Financial Derivative Assets(5) 89,000 383,482 49,547 522,029 Financial Derivative Liabilities(5) 320,251 92,169 13,188 425,608 Monthly Average FC Exchange Bid Rates Non-cash Loans(4) 464,938 1,316,828 3,741 1,785,507

USD 5.8377 (1) As at 31 December 2019 and 31 December 2018, the Group does not have precious metals balance in the Central Bank accounts. (2) As at 31 December 2019, accrual differences of derivative transactions presented in “Derivative Financial Assets at Fair Value Through Profit or Loss” and “Derivative Financial Liabilities at Fair Value Through Profit GBP 7.6289 or Loss” amounting to TL 151 and TL 3,864 respectively, (31 December 2018 – TL 199 and TL 373) are not included in the table. (3) As at 31 December 2019, “Loans” balance includes, in addition to the balance sheet amount, foreign currency indexed loans and their accruals amounting to TL 102,561 (31 December 2018 – TL 303,209). EURO 6.4806 (4) Has no effect on net off balance sheet position. (5) As at 31 December 2019, value dated FX buying and FX selling transactions amounting to TL 7,572 and TL 4,613 respectively, presented under “Asset Purchase and Sale Commitments” of off-balance sheet items JPY 0.0533 are included (31 December 2018 – TL 55,221 and TL 52,310). (6) “Valuation Differences of Securities” amounting to TL 7,315 (31 December 2018 – TL (31,288)) classified under Equity as at 31 December 2019 is not included. (7) As at 31 December 2019, assets amounting to TL 97,770 (31 December 2018 – 108,744) are not included “Expected Credit Losses”. (8) As at 31 December 2019, liabilities amounting to TL 36,053 (31 December 2018 – TL 4,183) are not included “Other Provisions”.

170 171 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED FOREIGN CURRENCY EXCHANGE RATE RISK V. EXPLANATION AND FOOTNOTES ON CONSOLIDATED INTEREST RATE RISK (CONTINUED) (CONTINUED) Interest sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates):

5 Years and Non-Interest Up to 1 Month 1 – 3 Months 3 –12 Months 1 – 5 Years Total The table below demonstrates prospective increase and decrease in equity and profit/loss as at 31 December 2019 and 31 Over Bearing(1) December 2018 (excluding tax effect) on condition that 10% revaluation/devaluation of the foreign currencies below against TL. 31 December 2019 This analysis has been prepared assuming that other variables, particularly interest rates, remain constant. Assets Cash (cash in vault, effectives, money in transit, checks purchased) 1,781,633 - - - - 291,822 2,073,455 and balances with the CBRT 31 December 2019 Banks 1,685,168 - - - - 152,866 1,838,034 (1) Statement of Profit or Loss Equity Financial assets at fair value through profit or loss 582 86 1 - - 16,613 17,282 10% increase 10% decrease 10% increase 10% decrease Money market placements 662,583 - - - - - 662,583 USD 15,624 (15,624) 15,624 (15,624) Financial assets at fair value through other comprehensive income 626,834 134,879 530,535 395,465 105,936 10,057 1,803,706 EURO 8,709 (8,709) 8,709 (8,709) Loans 1,204,729 3,190,978 2,365,710 1,471,340 899,672 - 9,132,429 Other FC 293 (293) 293 (293) Financial assets measured at amortized cost 113,727 218,574 335,385 2,111,294 112,247 - 2,891,227 Total 24,626 (24,626) 24,626 (24,626) Other assets 2 - - - - (27,237) (27,235) Total Assets 6,075,258 3,544,517 3,231,631 3,978,099 1,117,855 444,121 18,391,481 (1) Equity effect includes statement of profit or loss effect in the table. Liabilities Bank Deposits 59,408 - - - - 117,050 176,458 31 December 2018 Other Deposits 7,672,644 1,442,347 97,190 3,224 - 574,899 9,790,304 Statement of Profit or Loss Equity(1) Interbank Money Market Borrowings 18,841 - - - - - 18,841 10% increase 10% decrease 10% increase 10% decrease Miscellaneous Payables ------USD (10,444) 10,444 (10,444) 10,444 Securities Issued ------EURO 21,464 (21,464) 21,464 (21,464) Funds Borrowed from Other Fin. Inst. 237,624 1,500,618 2,448,704 1,833,481 - - 6,020,427 Other FC 150 (150) 150 (150) Other Liabilities 773,040 32 54 - - 1,612,325 2,385,451 Total 11,170 (11,170) 11,170 (11,170) Total Liabilities 8,761,557 2,942,997 2,545,948 1,836,705 - 2,304,274 18,391,481 Balance Sheet Long Position - 601,520 685,683 2,141,394 1,117,855 - 4,546,452 (1) Equity effect includes statement of profit or loss effect in the table. Balance Sheet Short Position (2,686,299) - - - - (1,860,153) (4,546,452) Off Balance Sheet Long Position ------V. EXPLANATION AND FOOTNOTES ON CONSOLIDATED INTEREST RATE RISK Off Balance Sheet Short Position ------Consolidated interest rate risk is the probability of loss due to changes in interest rates depending on the Group’s Total Position (2,686,299) 601,520 685,683 2,141,394 1,117,855 (1,860,153) - (1) Tangible and intangible assets amounting to TL 126,753, tax assets amounting to TL 31,133, expected loan loss provisions amounting to TL (223,953), other assets amounting to TL 38,830 are presented within position regarding the interest bearing financial instruments. other assets as non-interest bearing; provisions amounting to TL 131,149, tax liability amounting to TL 23,915, other liabilities amounting to TL 127,949 and equity amounting to TL 1,329,312 are presented within other liabilities as non-interest bearing. Interest rate risk arises as a result of timing differences on the re-pricing of assets and liabilities, changes in correlation of 5 Years and Non-Interest Up to 1 Month 1 – 3 Months 3 –12 Months 1 – 5 Years Total interest rates between different financial instruments and, unexpected changes in the shape and slope of yield curves. Over Bearing(1) Exposure to interest rate movements arises when there is a mismatch between rate sensitive assets and liabilities. 31 December 2018 Assets Cash (cash in vault, effectives, money in transit, checks purchased) - 1,757,893 - - - 49,006 1,806,899 Interest rate risk is a key component of the Parent Bank’s market risk and asset and liability management. and balances with the CBRT Banks 1,659,503 - - - - 341,276 2,000,779 As part of asset and liability management, duration and sensitivity analysis are used to measure the effects of changes in Financial assets at fair value through profit or loss 239 29,862 - - - 12,879 42,980 yield curves on the balance sheet. The Parent Bank’s management daily monitors interest rate movements in the market Money market placements 349,622 - - - - - 349,622 and revises the Parent Bank’s interest rates. Financial assets at fair value through other comprehensive income 315,476 490,012 644,186 916,984 106,279 6,255 2,479,192 Loans 685,954 2,048,483 2,575,320 1,383,072 1,181,763 - 7,874,592 Financial assets measured at amortized cost 1,605 130,093 328,395 824,434 99,472 - 1,383,999 Other assets 85 - - - - (85,658) (85,573) Total Assets 3,012,484 4,456,343 3,547,901 3,124,390 1,387,514 323,758 15,852,490 Liabilities Bank Deposits 664,060 - 605,719 - - 52,774 1,322,553 Other Deposits 5,203,544 1,042,768 67,978 - - 385,399 6,699,689 Interbank Money Market Borrowings 346,145 - - - - - 346,145 Miscellaneous Payables ------Securities Issued ------Funds Borrowed from Other Fin. Inst. 533,932 1,594,227 3,533,475 - - - 5,661,634 Other Liabilities 467,376 746 - - - 1,354,347 1,822,469 Total Liabilities 7,215,057 2,637,741 4,207,172 - - 1,792,520 15,852,490

Balance Sheet Long Position - 1,818,602 - 3,124,490 1,387,514 - 6,330,606 Balance Sheet Short Position (4,202,573) - (659,271) - - (1,468,762) (6,330,606) Off Balance Sheet Long Position ------Off Balance Sheet Short Position ------Total Position (4,202,573) 1,818,602 (659,271) 3,124,490 1,387,514 (1,468,762) -

(1) Tangible and intangible assets amounting to TL 44,410, tax assets amounting to TL 44,596, expected loan loss provisions amounting to TL (218,506), non-performing financial assets amounting to TL 160 and other assets amounting to TL 43,842 are presented within other assets as non-interest bearing; provisions amounting to TL 62,468, tax liability amounting to TL 38,591, other liabilities amounting to TL 86,719 and equity amounting to TL 1,160,960 are presented within other liabilities as non-interest bearing. 172 173 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

V. EXPLANATION AND FOOTNOTES ON CONSOLIDATED INTEREST RATE RISK (CONTINUED) V. EXPLANATION AND FOOTNOTES ON CONSOLIDATED INTEREST RATE RISK (CONTINUED)

Interest rates applied to monetary financial instruments: The interest rate risk of the banking book items (Continued):

EURO USD JPY TL Present values of the net positions obtained over related cash flows are calculated by yield curves formed by using market % % % % interest rates. The proportion of the differences arising from implementation of positive and negative standard shocks to equity is 31 December 2019(1) followed. Assets Cash (Cash in Vault, Foreign Currencies, Cash in Transit, Checks Purchased) and - 1.74 - 11.36 Balances with the CBRT For products with non-specified maturities, maturity is determined based on interest rate setting frequency and customer Banks - 4.57 - - behaviors. These results are supported by periodical sensitivity and scenario analysis against prospective fluctuations in the Financial Assets at Fair Value Through Profit or Loss - - - - market. Interbank Money Market Placements - - - 11.73 Financial Assets at Fair Value Through Other Comprehensive Income 1.78 4.48 - 14.43 The interest rate risk of the banking book items is measured legally in accordance with the “Regulation on Measurement and Loans 2.60 4.71 6.04 14.59 Evaluation of Interest Rate Risk Arising from Banking Accounts via Standard Shock Method”, published in the Official Gazette no. Financial Assets Measured at Amortized Cost - 6.54 - 10.02 28034 dated 23 August 2011, and the legal limit based on this measurement is monitored and reported monthly. Liabilities Bank Deposits - 1.71 - - Other Deposits 0.40 2.29 - 11.41 The interest rate risks of financial instruments on trading portfolio are considered within the scope of the market risk. Interbank Money Market Borrowings - - - 12.00 Miscellaneous Payables - - - - The following table presents the economic value differences arising from fluctuations in interest rates in accordance with the Securities Issued - - - - Regulation on Measurement and Evaluation of Interest Rate on Banking Accounts by Standard Shock, divided by different Funds Borrowed from Other Financial Institutions 2.98 3.13 - 16.89 currencies as of 31 December 2019. Tax effects are excluded in the study.

(1) Stated at compound interest rates. Shocks Applied Gains/Equity- Type of Currency Gains/Losses (+/- basis points) Losses/Equity EURO USD JPY TL % % % % 500 (85,956) (2.7%) TL 31 December 2018(1) (400) 80,789 2.6% Assets 200 (45,759) (1.5%) EURO Cash (Cash in Vault, Foreign Currencies, Cash in Transit, Checks Purchased) (200) (4,993) (0.2%) - 1.56 - 8.79 and Balances with the CBRT 200 4,130 0.1% Banks - 5.35 - 27.08 USD (200) 881 (0.0%) Financial Assets at Fair Value Through Profit or Loss - - - - Total (for negative shocks) 74,915 2.4% Interbank Money Market Placements - - - 24.21 Total (for positive shocks) (127,585) (4.1%) Financial Assets at Fair Value Through Other Comprehensive Income 1.78 4.41 - 21.14 Loans 2.86 5.23 6.04 16.93 Financial Assets Measured at Amortized Cost - 5.82 - 13.81 VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK

Liabilities Liquidity risk is the risk generated as a result of not having an effect or cash inflow at a level which can meet cash outflow, formed Bank Deposits 1.16 2.49 - 23.33 Other Deposits 2.50 4.88 - 25.40 because of an imbalance in cash flow, timely and completely. Interbank Money Market Borrowings - - - 27.93 Miscellaneous Payables - - - - Liquidity risk can also be formed as a result of not closing positions with appropriate prices and in required time because of market Securities Issued - - - - conditions. Funds Borrowed from Other Financial Institutions - 3.30 - 8.15

(1) Stated at compound interest rates. The Parent Bank established Liquidity Management Principles in order to monitor, audit and manage its liquidity position and liquidity requirement. Liquidity risk of the Parent Bank is managed through taking potential funding sources, unexpected situation The interest rate risk of the banking book items: plans and legal limits into consideration within the framework of limits which are updated at least annually. The interest rate risk of the banking book items is prepared via the cash flow of interest sensitive balance sheet and off-balance sheet positions for bank accounts, over the maturity for fixed interest rate instruments and over the re-pricing period for variable It is aimed to carry out activities through ensuring a liquidity level which can provide to make payments at any time to sustain interest rate instruments. the trustable bank image of the Parent Bank in the sector via taking risk/return balance of the Parent Bank into consideration. Cash inflow and outflows in Turkish Lira and foreign currencies are tried to be kept under control continuously in liquidity risk management approach, long-term cash flow tables are formed and scenario analysis based on expectations and stress tests are performed to determine the resistance against the sudden crisis.

174 175 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK (CONTINUED) VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK (CONTINUED)

Liquidity risk management is performed by Assets and Liability Committee (ALC) and Treasury Department under the guidance of Audit Committee. Liquidity risk management under stress conditions is performed in the framework of Emergency Situation Unweighted Amounts(2) Weighted Amounts(2) Funding Plan. ALC is responsible to measure, monitor and manage liquidity risk and net funding requirement periodically and Current Period - 31 December 2019 follow its implementations and to plan necessary precautions for urgent and unexpected conditions occurring related to liquidity TL+FC FC TL+FC FC of the Parent Bank. Treasury Department is responsible to plan the access of the Parent Bank to the market for short, medium and HIGH QUALITY LIQUID ASSETS long term fund requirements, monitor and evaluate funding requirement under different scenarios and plan necessary precautions High Quality Liquid Assets 4,705,539 3,333,548 for urgent and unexpected conditions occurring related to liquidity of the Parent Bank. CASH OUTFLOWS Retail and Small Business Customers Deposits 4,227,757 2,361,046 359,842 216,570 The Parent Bank’s Risk Management Department is responsible to define, measure, monitor the liquidity risk periodically Stable deposits 1,258,675 390,687 62,934 19,534 and report to senior management. Risk Management Department also provides coordination in the management of liquidity Less stable deposits 2,969,082 1,970,359 296,908 197,036 Unsecured Funding other than Retail and Small Business management process. Risk Management Department monitors the liquidity risk via specific ratios and submit it to ALC weekly. 5,571,519 4,059,590 2,470,674 1,680,539 Customers Deposits

Operational Deposits 12,596 - 2,893 - Liquidity management is not performed centrally. The Parent Bank does not function as a central funding institution in its relation Non-Operational Deposits 5,266,734 4,042,663 2,197,516 1,665,555 with partners. Funding management of the Parent Bank is operated in the framework of ALC decisions. The liabilities of the Parent Other Unsecured Funding 292,189 16,927 270,265 14,984 Bank are mainly liabilities provided in TL, USD and EUR currencies. Foreign currency funds are used to generate TL assets via swap Secured funding - - - - transactions for the purpose of liquidity management. Derivative transactions are used in scope of liquidity reduction techniques. Other Cash Outflows 960,025 917,513 924,143 904,183 Cash flow analysis is made on the basis of TL and FC and estimated liquidity requirement is calculated. The action plans are Liquidity needs related to derivatives and market 900,222 895,296 900,222 895,296 prepared and the liquidity position is evaluated through warnings applied to assets and liabilities of the Parent Bank to determine valuation changes on derivatives transactions stresses which can occur on the liquidity position of the Parent Bank. The Parent Bank makes scenario analysis taking delays and Debts related to the structured financial products - - - - non-payment in credit payments, deposit withdrawn, and non-liquidation of securities into consideration as stress cases. It is Commitments related to debts to financial markets and 59,803 22,217 23,921 8,887 detailed in emergency liquidity management process and Liquidity Emergency Funding Plan. This plan determines the gradation other off balance sheet liabilities of resources which shall be used for responsibilities, communication channels, funding sources and urgent requirements. Commitments that are unconditionally revocable at any 274,707 269,417 13,735 13,471 time by the Bank and other contractual commitments

Liquidity coverage ratios calculated weekly on bank only basis and monthly on consolidated basis are subject to regulatory Other irrevocable or conditionally revocable commitments 1,812,253 1,115,613 176,487 111,583 reporting starting from 1 January 2015 as per “Regulation on Liquidity Coverage Ratio Calculation” published in the Official Gazette no. 28948, dated 21 March 2014. Liquidity coverage ratios should be at least 80% for foreign currency denominated TOTAL CASH OUTFLOWS 3,944,881 2,926,346 assets and liabilities and 100% for total assets and liabilities for 2019. Monthly consolidated liquidity coverage ratios for the last CASH INFLOWS three months including the reporting period are as follows: Secured Lending Transactions - - - - Unsecured Lending Transactions 2,273,378 1,987,979 2,201,150 1,961,888 Other contractual cash inflows 241,283 218,834 241,283 218,834 FC Liquidity Total Liquidity Liquidity Coverage Ratios Coverage Ratio Coverage Ratio TOTAL CASH INFLOWS 2,514,661 2,206,813 2,442,433 2,180,722 Upper Limit Applied Accounts 31 December 2019 174.98% 235.46% Average 386.04% 342.47% TOTAL HIGH LIQUIDITY ASSETS 4,705,539 3,333,548 TOTAL NET CASH OUTFLOWS(1) 1,502,448 745,624

Min FC Min Sum Max FC Max Sum LIQUIDITY COVERAGE RATIO (%) 313.19% 447.08% (%) (%) (%) (%) (1) The part of total cash inflows which exceeds 75% of total cash outflows is not being taken into account during the calculation of related amounts. (2) Monthly simple arithmetic average of consolidated liquidity coverage ratios for the last three month of 2019 is calculated. Month 30 December 2019 17 October 2019 11 December 2019 17 December 2019 Ratio (%) 221.18% 149.95% 504.95% 516.96%

176 177 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK (CONTINUED) VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK (CONTINUED)

Presentation of assets and liabilities according to their remaining maturities: Unweighted Amounts(2) Weighted Amounts(2) Current Period - 31 December 2018 Up to 1 1-3 3-12 1-5 5 Years and 31 December 2019 Demand Undist.(1) Total TL+FC FC TL+FC FC Month Months Months Years Over

HIGH QUALITY LIQUID ASSETS Assets High Quality Liquid Assets 3,922,664 2,031,262 Cash (Cash in Vault, Foreign Currencies, Cash in Transit, Cheques Purchased) and Balances with the Central Bank 1,132,490 940,965 - - - - - 2,073,455 CASH OUTFLOWS of Turkey Retail and Small Business Customers Deposits 2,887,734 1,435,693 289,684 150,818 Due from Banks 152,866 1,685,168 - - - - - 1,838,034 Stable deposits 897,868 216,316 50,409 12,362 Financial Assets at Fair Value Through Profit or Loss 16,613 582 86 1 - - - 17,282 Less stable deposits 1,989,866 1,219,377 239,275 138,456 Interbank Money Market Placements - 662,583 - - - - - 662,583 Unsecured Funding other than Retail and Small Business Customers 4,117,305 3,769,180 1,898,145 1,609,962 Deposits Financial Assets at Fair Value Through Other 10,057 266,881 - 528,470 892,363 105,935 - 1,803,706 Comprehensive Income Operational Deposits 12,097 - 1,321 - Loans - 1,089,480 1,385,460 1,734,642 3,161,233 1,761,614 - 9,132,429 Non-Operational Deposits 3,540,018 3,306,974 1,851,007 1,602,001 Financial Assets Measured at Amortised Cost - 113,727 57,488 213,222 2,394,544 112,246 - 2,891,227 Other Unsecured Funding 565,190 462,206 45,817 7,961 Other Assets - 30,018 1,603 2,149 381 30,918 (92,304) (27,235) Secured funding - - - - Total Assets 1,312,026 4,789,404 1,444,637 2,478,484 6,448,521 2,010,713 (92,304) 18,391,481 Other Cash Outflows 797,886 614,518 671,178 642,882 Liabilities Liquidity needs related to derivatives and market valuation 637,235 495,490 592,129 583,649 changes on derivatives transactions Interbank Deposits 117,050 59,408 - - - - - 176,458 Debts related to the structured financial products - - - - Other Deposits 574,899 7,672,644 1,442,347 97,190 3,224 - - 9,790,304 Commitments related to debts to financial markets and other off 160,651 119,028 79,049 59,233 balance sheet liabilities Funds Provided from Other Financial Institutions - 237,622 260 367,763 3,632,362 1,782,420 - 6,020,427

Money Market Funds - 18,841 - - - - - 18,841 Commitments that are unconditionally revocable at any time by the 311,187 311,187 9,576 9,516 Bank and other contractual commitments Marketable Securities Issued ------Other irrevocable or conditionally revocable commitments 1,857,622 1,408,478 174,955 124,617 Miscellaneous Payables ------

TOTAL CASH OUTFLOWS 3,043,538 2,537,795 Other Liabilities - 20,435 7,388 4,439 41,998 35,873 2,275,318 2,385,451

CASH INFLOWS Total Liabilities 691,949 8,008,950 1,449,995 469,392 3,677,584 1,818,293 2,275,318 18,391,481 Secured Lending Transactions - - - - Net Liquidity Gap 620,077 (3,219,546) (5,358) 2,009,092 2,770,937 192,420 (2,367,622) - Unsecured Lending Transactions 1,473,868 976,827 1,481,041 1,077,012 Net Off Balance Sheet Position - (2,236) 51 (34) - - - (2,219) Other contractual cash inflows 640,564 636,633 281,570 275,861 Derivative Financial Assets(3) - 1,062,581 29,148 3,554 - - - 1,095,283

TOTAL CASH INFLOWS 2,114,432 1,613,460 1,762,611 1,352,873 Derivative Financial Liabilities(3) - 1,064,817 29,097 3,588 - - - 1,097,502 Upper Limit Applied Accounts Non-Cash Loans(2) 863,011 263,979 110,602 603,120 1,864,379 3,282,317 - 6,987,408 TOTAL HIGH LIQUIDITY ASSETS 3,922,664 2,031,262

TOTAL NET CASH OUTFLOWS(1) 1,280,927 1,184,922 31 December 2018

LIQUIDITY COVERAGE RATIO (%) 306.24% 171.43% Total Assets 1,879,577 2,418,086 1,240,856 3,326,142 5,298,400 1,652,140 37,289 15,852,490

(1) The part of total cash inflows which exceeds 75% of total cash outflows is not being taken into account during the calculation of related amounts. Total Liabilities 438,173 6,231,154 1,330,629 2,363,369 798,660 2,907,749 1,782,756 15,852,490 (2) Monthly simple arithmetic average of consolidated liquidity coverage ratios for the last three month of 2018 is calculated. Net Liquidity Gap 1,441,404 (3,813,068) (89,773) 962,773 4,499,740 (1,255,609) (1,745,467) -

The Parent Bank accepts required reserves, deposit and drawing accounts in Central Bank of the Republic of Turkey, cash and Net Off Balance Sheet Position - 31 25,674 - - - - 25,705 borrowing instruments issued by the Undersecretariat of Treasury as premium quality liquid assets. Credits, provided from Derivative Financial Assets(3) - 423,070 142,387 - - - - 565,457 abroad, are the main fund resources while deposit and repo are other resources regarding funding. The opposite parties of repo Derivative Financial Liabilities(3) - 423,039 116,713 - - - - 539,752 transactions are the Central Bank of the Republic of Turkey and banks and there is no concentration. A significant part of funds, Non-Cash Loans(2) 1,008,878 263,040 175,396 357,797 566,073 - - 2,371,182 provided from abroad, is provided by the risk group of the Bank. (1) Assets on the balance sheet which are not convertible into cash in short period; tangible and intangible assets amounting to TL 126,753, stationary supplies amounting to TL 720, assets to be disposed of amounting to TL 4,176, expected loan loss provision amounting to TL (223,953) and liabilities on the balance sheet which are necessary for the banking operations; provisions amounting to TL 131,149, other liabilities amounting to TL 814,857 and equity amounting to TL 1,329,312 are included here. (2) The letters of guarantee without a defined maturity date due to their business nature are presented at demand column. (3) As at 31 December 2019, spot foreign currency purchase and sale transactions with value date amounting to TL 7,573 and TL 7,587, respectively, are presented under “Asset Purchase and Sale Commitments” of off-balance sheet items (31 December 2018 – TL 56,277 and TL 56,274).

178 179 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED LIQUIDITY RISK (CONTINUED) VIII. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED SECURITIZATION POSITION RISK

Collaterals on Risk Classes: As at 31 December 2019, Group has no securitization position risk generated by banking accounts.

Financial Other/ Tangible Guarantees and Risk Classification Amount(**) IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT Collaterals Collaterals Credit Derivatives Contingent and Non-Contingent Receivables from Central Governments or Central Banks 5,559,486 - - - Contingent and Non-Contingent Receivables from Regional Governments or Local Risk Management contains all processes of identifying, measuring, monitoring, limit determination, identifying the areas of risk - - - - Authorities Contingent and Non-Contingent Receivables from Administrative Units and Non- concentration and reporting the risks the Parent Bank is or will be exposed to due to its facilities. - - - - commercial Enterprises Contingent and Non-Contingent Receivables from Multilateral Development Banks - - - - Risk Management organization constituted to systematically manage the risks the Parent Bank is or will be exposed to, consists Contingent and Non-Contingent Receivables from International organizations - - - - of the Independent Audit Committee connected directly to the Board of Directors, Risk Management Department fulfilling the Contingent and Non-Contingent Receivables from banks and Intermediaries 9,507,851 679,051 - - responsibilities to Board of Directors via this committee and certain individual risk management committees including senior Contingent and Non-Contingent Corporate Receivables 8,661,431 126,824 - 73,565 management or relevant processes. Contingent and Non-Contingent Retail Receivables 121,452 20,780 - - Contingent and Non-Contingent Receivables Secured by Residential Property(*) 1,081,452 309 - - Non-Performing Receivables 54,388 - - - Risk Management Department consists of market risk unit and credit and operational risk unit, business continuity is performed by Receivables Identified as High Risk by the Board - - - - business continuity committee within the framework of Parent Bank Business Continuity Strategy. Risk management committees Secured by Mortgages - - - - are market risk committee, credit risk committee, operational risk committee and business continuity committee. Securitization Positions - - - - Short-term Receivables from Banks, Brokerage Houses and Corporates - - - - Necessary manners are identified to update, adjust for changing circumstances, implement and manage the policies determined Investments Similar to Collective Investment Funds - - - - to identify and manage the risks the Parent Bank is exposed to. These risks are measured and managed with accepted Stock Investment - - - - international procedures and procedures complied with international and local regulations, policies and procedures of the Parent Other Receivables 217,923 - - - Bank.

Total 25,203,983 826,964 - 73,565 The Parent Bank data and market data are monitored regularly in order to manage the risk. To restrain the risks, certain in-bank (*) According to Article 6 of the Regulation on Measurement and Assessment of Capital Adequacy of Banks, real estate mortgages used to determine the risk class have not been taken into account. (**) Includes the total amounts after the off-balance sheet conversion rates, before taking into account the effects of the Credit Risk Mitigation. limits are determined besides the legal limits. Probable economic changes and risks confronted under tough conditions are taken into consideration. VII. EXPLANATION ON CONSOLIDATED LEVERAGE RATIO

Consolidated leverage ratio of the Group calculated based on last 3 months average amounts is 5.39% as at 31 December 2019 Reporting units that are responsible for all risks, the frequency and the address of reporting is determined separately in policy (31 December 2018 – 6.41%). This ratio is above the minimum ratio. documents including each risk management process. Additionally, Risk Management Department regularly reports the risk analysis of the Parent Bank, periodical progress and limit usage of risks and state of chanciness to Asset-Liability Committee and Audit Current Period Prior Period Committee. 31 December 2019(1) 31 December 2018(1) On-balance sheet exposures Footnotes and related explanations are given in this section prepared based on “Communiqué About Public Disclosures On-balance sheet assets (Excluding derivative financial instruments and credit derivatives, including collaterals) 17,363,797 15,662,768 (Assets amounts deducted in determining Tier 1 capital) 181 206 Regarding to Banks Risk Management” published in Official Gazette No. 29511 at 23 October 2015 and became effective as at Total on-balance sheet exposures 17,363,616 15,662,562 31 March 2016. Based on this communique, the tables under the internal rating and internal model must be presented for each 3

Derivative financial instruments and credit derivatives month-period are not presented because standard approach is used in calculation of the Parent Bank’s capital adequacy. Replacements cost of derivative financial instruments and credit derivatives - - Potential credit risk of derivative financial instruments and credit derivatives 7,724 41,874 Total derivative financial instruments and credit derivatives exposure 7,724 41,874

Securities financial instruments and credit derivatives Total risk of gross securities financing transactions (excluding on-balance sheet exposure) 538 91,701 Agent transaction exposure - - Total securities financing transactions exposures 538 91,701

Off-balance sheet items Off-balance sheet exposure at gross notional amount 7,045,035 2,343,992 (Adjustments for conversions to credit equivalent amounts) - - Total risk of off-balance sheet items 7,045,035 2,343,992

Capital and total exposure Tier 1 capital 1,316,229 1,162,658 Total exposures 24,416,913 18,140,129 Leverage ratio %5.39 %6.41

(1) The arithmetic average of the last 3 months in the related periods. 180 181 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED) IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED)

1. General Information on Risk Management and Risk Weighted Amount 2. Connections between Financial Statements and Risk Amounts a) Overview of RWA: a) Differences between accounting consolidation and legal consolidation scope and matching:

Carrying values of items in accordance with Turkish Accounting Standards Risk Weighted Minimum capital Amount requirement Not subject Carrying to capital Subject to Subject to Current Period Prior Period Current Period values in Subject to Subject to requirements Counterparty Securitization 31 December 2019 31 December 2018 31 December 2019 financial Credit Risk Market Risk or subject to credit risk positions Current Period – statements deduction from 1 Credit risk (excluding counterparty credit risk) (CCR) 15,881,894 8,762,255 1,270,552 31 December 2019 capital 2 Standardised approach (SA) 15,881,894 8,762,255 1,270,552 Assets

3 Internal rating-based (IRB) approach - - - Cash and Cash Equivalents 4,558,561 4,558,561 - - - - Financial Assets at Fair Value Through Profit or Loss 16,613 - - - - - 4 Counterparty credit risk 143,657 38,477 11,493 Financial Assets at Fair Value Through Other Comprehensive 5 Standardised approach for counterparty credit risk (SA-CCR) 143,657 38,477 11,493 1,803,706 1,803,706 - - - - Income 6 Internal model method (IMM) - - - Financial Assets Measured at Amortised Cost 2,891,227 2,891,227 - - - -

Derivative Financial Asset 669 - 11,373 - 1,089,547 - 7 Basic risk weight approach to internal models equity position in the banking account - - - Non-Performing Asset ------

8 Investments made in collective investment companies - look-through approach - - - Expected Loss Provisions (-) 15,511 15,511 - - - - Loans (Net) 8,923,987 8,923,987 - - - - 9 Investments made in collective investment companies - mandate-based approach - - - Loans 9,132,429 9,132,429 - - - - 10 Investments made in collective investment companies - 1250% weighted risk approach - - - Leasing Receivables ------11 Settlement risk - - - Factoring Receivables ------

12 Securitization positions in banking accounts - - - Non-Performing Loans 168,054 168,054 - - - -

13 IRB ratings-based approach (RBA) - - - Expected Credit Loss (-) 208,442 208,442 - - - - Assets Held For Sale And Discontinued Operations (Net) ------14 IRB supervisory formula approach (SFA) - - - Equity Investment ------15 SA/simplified supervisory formula approach (SSFA) - - - Tangible assets (Net) 118,559 118,559 - - - -

16 Market risk 359,607 187,425 28,769 Intangible assets (Net) 8,194 - - - - 8,194

17 Standardised approach (SA) 359,607 187,425 28,769 Investment Property (Net) ------Current Tax Asset 215 215 - - - - 18 Internal model approaches (IMM) - - - Deferred Tax Asset 30,918 30,918 - - - - 19 Operational risk 769,103 526,500 61,528 Other Assets (Net) 38,832 38,832 - - - 2,966 20 Basic indicator approach 769,103 526,500 61,528 Total Assets 18,391,481 18,366,005 11,373 - 1,089,547 11,160

21 Standard approach - - - Liabilities Deposits 9,966,762 - - - - - 22 Advanced measurement approach - - - Funds Borrowed 4,238,007 - - - - - 23 The amount of the discount threshold under the equity (subject to a 250% risk weight) - - - Money Market Funds 18,841 679,534 132,284 - - -

24 Floor adjustment - - - Marketable Securities Issued (Net) ------Funds ------25 Total (1+4+7+8+9+10+11+12+16+19+23+24) 17,154,261 9,514,657 1,372,342 Financial Liabilities At Fair Value Through P/L ------Derivative Financial Liabilities 3,930 - - - - - Factoring Liabilities ------Lease Liabilities (Net) 82,288 - - - - - Provisions 131,149 - - - - - Current Tax Liability 23,915 - - - - - Deferred Tax Liability ------

Liabilities For Property And Equipment Held For Sale ------

And Related To Discontinued Operations (Net) 1,782,420 - - - - - Subordinated Debt Instruments 814,857 - - - - - Other Liabilities 1,329,312 - - - - - Total Liabilities 18,391,481 679,534 132,284 - - -

182 183 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED) IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED)

2. Connections between Financial Statements and Risk Amounts (Continued): 2. Connections between Financial Statements and Risk Amounts (Continued): a) Differences between accounting consolidation and legal consolidation scope and matching (Continued): b) Main Sources of Differences between the Risk Amounts and the Valuation Amounts in the Financial Statements in accordance with TAS: Carrying values of items in accordance with Turkish Accounting Standards

Not subject Subject to Carrying to capital Subject to Securitization Subject to Subject to Subject to Current Period – 31 December 2019 Total counterparty values in Subject to Subject to requirements credit risk positions market Risk Counterparty Securitization credit risk financial Credit Risk Market Risk or subject to credit risk positions Prior Period – statements deduction from 1 Asset carrying value amount under scope of regulatory consolidation 18,391,481 18,381,517 - 11,373 1,089,547 31 December 2018 capital

Assets 2 Liabilities carrying value amount under regulatory scope of consolidation - 679,534 - 132,284 - Cash and Cash Equivalents 4,149,860 4,149,860 - - - - 3 Total net amount under regulatory scope of consolidation 18,391,481 19,061,051 - 143,657 1,089,547 Financial Assets at Fair Value Through Profit or Loss 12,879 - - - - - 4 Off-balance Sheet Amounts 9,298,984 5,829,085 - - - Financial Assets at Fair Value Through Other Comprehensive 2,479,192 2,479,192 - - - - Income 5 Differences in valuations - - - - - Financial Assets Measured at Amortised Cost 1,383,999 1,383,999 - - - - Differences due to different netting rules (other than those already included 6 - - - - - Derivative Financial Asset 30,101 - 35,764 - 559,501 - in row 2) Non-Performing Asset ------7 Differences due to consideration of provisions - - - - -

Expected Loss Provisions (-) 7,440 7,440 - - - - 8 Differences due to prudential filters - - - - - Loans (Net) 7,663,526 7,663,546 - - - - 9 Differences due to risk reduction - - - - - Loans 7,874,592 7,874,592 - - - - 10 Risk amounts 27,690,465 24,890,136 - 143,657 1,089,547 Leasing Receivables ------Factoring Receivables ------Non-Performing Loans 93,407 93,407 - - - - 3. Explanations of credit risk Expected Credit Loss (-) 211,066 211,066 - - - - Assets Held For Sale And Discontinued Operations (Net) ------a) Credit quality of assets: Equity Investment ------Tangible assets (Net) 36,239 36,239 - - - - Gross carrying value as per TAS Allowances/ Net Intangible assets (Net) 8,171 - - - - 8,171 amortization and values impairments Investment Property (Net) ------Defaulted Non-defaulted Current Tax Asset ------1 Loans 168,054 8,964,376 198,221 8,934,208 Deferred Tax Asset 44,596 44,596 - - - - 2 Debt instruments - 4,694,933 10,221 4,684,712 Other Assets (Net) 43,927 43,927 - - - 1,047 3 Off-balance sheet exposures 6,643 7,114,716 40,640 7,080,719 Total Assets 15,852,490 15,801,339 35,764 - 559,501 9,218

Liabilities 4 Total 174,697 20,774,025 249,082 20,699,639 Deposits 8,022,242 - - - - - Funds Borrowed 4,082,550 - - - - - b) Changes in Stock of Default Loans and Debt Securities: Money Market Funds 346,145 262,690 2,713 - - - Marketable Securities Issued (Net) ------Funds ------1 Defaulted loans and debt securities at end of the previous reporting period 93,407 Financial Liabilities At Fair Value Through P/L ------2 Loans and debt securities defaulted since the last reporting period 131,185

Derivative Financial Liabilities 1,122 - - - - - 3 Receivables back to non-defaulted status - Factoring Liabilities ------4 Amounts written off 35,422 Lease Liabilities (Net) ------Provisions 62,468 - - - - - 5 Other changes (21,116) Current Tax Liability 38,591 - - - - - 6 Defaulted loans and debt securities at end of the reporting period (1+2-3-4±5) 168,054 Deferred Tax Liability ------Liabilities For Property And Equipment Held For Sale ------And Related To Discontinued Operations (Net) Subordinated Debt Instruments 1,579,084 - - - - - Other Liabilities 553,719 - - - - - Equity 1,166,569 - - - - - Total Liabilities 15,852,490 262,690 2,713 - - -

184 185 c) Credit riskmitigationtechniques–overview: ofcredit3. Explanations risk(Continued): (CONTINUED) MANAGEMENT CONSOLIDATED ON RISK EXPLANATIONS IX. (Amounts expressed inthousandsofTurkish Lira(“TL”)unlessotherwisestated) Notes toConsolidatedFinancialStatementsfortheYear Ended31December2019 ICBC TURKEYBANKANONİMŞİRKETİ Total Equity share investments Other receivables funds Undertakings forcollectiveinvestmentsinmutual institutions banks andintermediary corporateclaimson claimsandshort-term Short-term Secured bymortgages Higher riskcategoriesdecidedbytheBoard Overdue loans Claims secured bycommercial property Claims secured byresidential property Claims includedintheregulatory retail portfolios Claims oncorporates institutions Claims onbanksandintermediary organizationsClaims oninternational Claims onmultilateraldevelopmentbanks commercial undertakings Claims onadministrativebodiesandothernon- Claims onregional orlocalauthorities governments andCentralBanks Claims oncentralgovernments Risk Classifications d) Standard Approach -Exposure tocredit riskandcredit riskmitigationrisks 3 4 2 1 Of whichdefaulted Total Debt Instruments Loans unsecured of: of: unsecured (according to to (according 13,511,045 Exposures Exposures 4,684,712 8,826,333 168,054 TAS) On-balance 19,374,898 5,524,930 6,950,136 5,559,486 amount 217,923 491,127 478,217 54,388 98,691 sheet ------Exposures Exposures before secured by by secured Exposures Exposures CCF and CRM and CCF collateral 119,657 119,657 - - Off-balance 7,116,258 3,880,168 2,903,692 amount 107,311 223,868 sheet 1,219 which secured secured which ------collateral, of of collateral, secured by by secured Exposures Exposures 186 119,657 amount 119,657 - - On-balance 19,374,898 5,524,930 6,950,136 5,559,486 amount 217,923 491,127 478,217 54,388 98,691 sheet ------post-CCF and CRM and post-CCF guarantees secured by by secured Exposures Exposures financial Exposures 18,385 18,385 - - Off-balance 5,829,085 3,136,501 2,557,715 amount 111,864 22,761 sheet 244 guarantees, of of guarantees, which secured secured which ------Financial amount 18,385 18,385 - - 16,025,376 8,238,188 5,693,362 1,264,194 165,563 362,069 167,388 55,156 79,456 RWA RWA and RWA density RWA and RWA ------derivatives secured by secured Exposures Exposures credit - - - - density secured by credit credit by secured %100 RWA %51 %36 %0 %1 %0 %0 %0 %0 %0 %2 %1 %1 %0 %0 %0 %0 %8 derivatives, of of derivatives, which secured secured which Exposures Exposures amount - - - -

ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED)

3. Explanation of credit risk (Continued):

e) Standard Approach - Receivables by risk classes and risk weights

Total Risk Risk Classifications 0% 10% 20% 50%(1) 75% 100% 150% Others Amount(2)

Claims on central governments and Central Banks 3,295,181 - - 2,264,305 - - - - 5,559,486 Claims on regional governments or local authorities ------Claims on administrative bodies and other non------commercial undertakings Claims on multilateral development banks ------Claims on international organizations ------Claims on banks and intermediary institutions 160 - 150,208 6,782,841 - 2,574,642 - - 9,507,851 Claims on corporates - - 155,414 279,784 - 8,226,233 - - 8,661,431 Claims included in the regulatory retail portfolios - - - 3 121,449 - - - 121,452 Claims secured by residential property ------478,461 478,461 Receivables secured by commercial real estate - - - 481,760 - 121,231 - - 602,991 mortgage Overdue receivables - - - 190 - 52,473 1,725 - 54,388 Overdue loans ------Higher risk categories decided by the Board ------Secured by mortgages ------Securitization positions ------Short-term claims and short-term corporate claims ------on Bank and intermediary institutions ------

Undertakings for collective investments in mutual ------funds Other receivables 52,360 - - - - 165,563 - - 217,923 Equity share investments ------

Total 3,347,701 - 305,622 9,808,883 121,449 11,140,142 1,725 478,461 25,203,983

(1) Guaranteed with real estate mortgage. (2) Amount after Credit Conversion Rate (“CCR”) and Credit Risk Reduction (“CRR”) 187 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED) IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED)

4. Analysis of counterparty credit risk (CCR) exposure by approach 4. Analysis of counterparty credit risk (CCR) exposure by approach (Continued): a) Evaluation of counterparty credit risk according to measurement methods: c) Standardized approach – CCR exposures by regulatory portfolio and risk weights:

Alpha used Total Credit for computing Exposure at Risk Weight 0% 10% 20% 50% 75% 100% 150% Other (1) Replacement Potential future Risk Current Period – 31 December 2019 EEPE regulatory Default RWA cost exposure Exposure at post-CRM Risk Classifications Default

Claims from central governments and central banks ------Standard Approach-CCR (for derivatives) 660 10,885 - 1.4 11,545 11,616 Claims from regional and local governments ------Internal Model Method (Internal Model Method (for derivative financial instruments, repo transactions, securities or commodity lending or borrowing ------Claims from administration and non-commercial ------transactions, long settlement transactions and securities financing transactions) Claims from multilateral development banks ------

Simple Approach for credit risk mitigation (for repo Claims from international organizations ------transactions, securities or commodity lending or ------borrowing transactions, long settlement transactions and Claims from banks and intermediary institutions - - - 831 - 11,200 - - 11,616 securities financing transactions) Corporates ------Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or Retail portfolios ------borrowing transactions, long settlement transactions and securities financing transactions) Claims on landed real estate ------

Value-at-Risk (VaR) for repo transactions, securities Past-due loans ------or commodity lending or borrowing transactions, Claims which are determined as high risk by the - - - - 679,534 132,284 ------long settlement transactions and securities financing board of BRSA transactions Mortgage securities ------Total 660 10,885 - - 691,079 143,900 Securitization positions ------

Claims from corporates, banks and financial ------b) Credit valuation adjustment (CVA) capital charge: intermediaries which have short term credit rating

Undertakings for collective investments in mutual ------funds Current Period – 31 December 2019 EAD (post-CRM) RWA Stock investment ------Total portfolios subject to the Advanced CVA capital charge - - Other claims ------1 (i) VaR component (including the 3×multiplier) - - Other assets ------2 (ii) Stressed VaR component (including the 3×multiplier) - - Total - - - 831 - 11,200 - - 11,616 3 All portfolios subject to the Standardized CVA capital charge 11,616 55 (1) Total credit risk: The amount related to the capital adequacy calculation after the counterparty credit risk measurement techniques are applied. 4 Total subject to the CVA capital charge 11,616 55 d) Collaterals for counterparty credit risk: None.

e) Credit derivatives: None.

f) Exposures to central counterparties (CCP): None.

5. Securitization Explanations: None.

188 189 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IX. EXPLANATIONS ON CONSOLIDATED RISK MANAGEMENT (CONTINUED) X. EXPLANATIONS ON PRESENTATION OF FINANCIAL ASSETS AND LIABILITIES AT THEIR FAIR VALUE (CONTINUED) 6. Market risk disclosures In the table below; fair values and carrying values of some of the financial assets and liabilities are presented. a) Standard approach:

Carrying Value Fair Value RWA 31 December 2019 31 Aralık 2019

Outright products Financial Assets 16,327,979 16,425,599

1 Interest rate risk (general and specific) 50 Interbank money market 662,583 662,583

2 Equity risk (general and specific) 95,600 Banks 1,838,034 1,838,034

3 Foreign exchange risk 263,963 Financial Assets at Fair Value Through Other Comprehensive Income 1,803,706 1,803,706

4 Commodity risk - Financial Assets measured at amortized cost 2,891,227 2,965,212

Options Loans and receivables(1) 9,132,429 9,156,064 5 Simplified approach - Financial Liabilities 16,802,046 17,381,119

6 Delta-plus method - Bank deposits 176,458 176,458

7 Scenario approach - Other deposits 9,790,304 10,372,229

8 Securitization Funds borrowed from other financial institutions 6,020,427 6,017,575

9 Total 359,613 Bonds Issued - -

Other debts 814,857 814,857

(1) Non-performing loans and specific provisions are not included. X. EXPLANATIONS ON PRESENTATION OF FINANCIAL ASSETS AND LIABILITIES AT THEIR FAIR VALUE

Investment securities in current period includes only marketable interest bearing assets. Market/fair/current value of marketable Carrying Value Fair Value assets is defined based on quoted market prices for other securities, which are subject to redemption in the same nature with 31 December 2018 31 December 2018 respect to interest, maturity and other conditions, if the market price or this price cannot be defined. Financial Assets 13,994,618 13,994,747

Estimated fair value of demand deposit states the amount which shall be paid on demand. Fair value of adjustable-rate Interbank Money Market 349,622 349,622 placements and overnight deposit states the book value. Estimated fair value of fixed rate is calculated through determination of Banks 2,000,779 2,000,779 cash flow discounted via using money market interest rates which is applicable to similar credit risk and other debts having with a Financial Assets at Fair Value Through Other Comprehensive Income (Net) 2,479,033 2,479,033 remaining redemption. Fair value of credits is calculated through determination of cash flow discounted via using money market Financial Assets Measured at Amortized Cost (Net) 1,383,999 1,349,154 interest rates which is applicable to similar credit risk and other debts having with a remaining redemption. Fair value states the Loans and Receivables(1) 7,781,185 7,816,159 book value since the other debts are short-termed. Financial Liabilities 14,423,447 14,494,347

Bank deposits 1,322,553 1,322,553

Other deposits 6,885,541 7,090,959

Funds borrowed from other financial institutions 5,661,634 5,660,107

Bonds Issued - -

Other debts 553,719 420,728

(1) Non-performing loans and specific provisions are not included.

190 191 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

X. EXPLANATIONS ON PRESENTATION OF FINANCIAL ASSETS AND LIABILITIES AT THEIR FAIR VALUE XI. EXPLANATION AND FOOTNOTES ON CONSOLIDATED SEGMENT REPORTING (CONTINUED) The Group performs activities in areas of retail banking, corporate banking and investment banking including treasury transactions. “TFRS 7: Financial Instruments – Disclosures” describes classifications of valuation techniques based on observability of data used Corporate banking offers TL and foreign currency loans, corporate deposit operations, cash management, foreign currency in valuation techniques which are basis for fair value measurements. Classification of fair values is defined as follows. purchases and sales, non-cash transactions (letters of credit, letters of guarantee, prefinancing, bills of exchange) and custody services. a) Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities; Treasury department is consisted of Balance Sheet Management and Sales units. The Balance Sheet Management unit follows up the Parent Bank’s cash flows, liquidity management, marketable securities portfolio and transfer pricing activities. Sales unit is b) Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); responsible for marketing all types of bills and bonds, foreign exchange transactions and derivative products including forwards and options to its customers. ICBC Yatırım, subsidiary of Parent Bank, intermediates for capital markets products and provides investment fund and portfolio management services. c) Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs). Servicing the middle-upper segment of retail customers who require sophisticated banking and investment services falls within the The table below presents the classification of fair values of financial instruments carried at fair value: scope of retail banking. Credit card services are also within the activities of retail banking.

31 December 2019 Level 1 Level 2 Level 3 Total Information related to the segments of the Group: Financial Assets 1,330,322 490,666 - 1,820,988 Segment reporting is prepared according to the 28th article of the BRSA’s “Communiqué on the Financial Statements to be Financial Assets At Fair Value Through Profit/Loss 39 16,574 - 16,613 announced to public by Banks as well as Explanations and Footnotes Thereof”, which is published in the Official Gazette no. Equity Instruments 39 - - 39 Other Financial Assets - 16,574 - 16,574 26333 dated 1 November 2006. Derivative Financial Assets at Fair Value Through - 669 - 669 Profit or Loss Treasury, Group’s Total Financial Assets at Fair Value Through Other 31 December 2019 Retail Banking Corporate Banking Investment Banking 1,330,283 473,423 - 1,803,706 Operations Comprehensive Income and Others Equity Instruments 10,057 - - 10,057 Operating Income 29,803 282,038 312,967 624,808 Government Debt Securities 1,320,226 - - 1,320,226 Net profit of segment (25,619) 147,586 (417) 121,550 Other Financial Assets - 473,423 - 473,423 Undistributed costs - - - - Financial Liabilities - 3,930 - 3,930 Operating Profit / (Loss) (25,619) 147,586 (417) 121,550 Derivative financial liabilities - 3,930 - 3,930 Income from subsidiaries - - - -

31 December 2018 Level 1 Level 2 Level 3 Total Profit / (Loss) before tax (25,619) 147,586 (417) 121,550 Financial Assets 1,604,400 887,512 - 2,491,912 Tax provision (-) - - 50,040 50,040 Financial Assets At Fair Value Through Profit/Loss 46 12,833 - 12,879 Equity Instruments 46 - - 46 Profit / (Loss) after tax (25,619) 147,586 (50,457) 71,510 Government Debt Securities - - - - Minority Shares - - - - Derivative Financial Assets at Fair Value - 30,101 - 30,101 Through Profit or Loss Current Period Net Profit/ (Loss) (25,619) 147,586 (50,457) 71,510 Other Financial Assets - 12,833 - 12,833 Segment assets(1) 633,963 7,802,912 9,954,631 18,391,481 Financial Assets at Fair Value Through Other 1,604,354 874,679 - 2,479,033 Associate and subsidiaries - - - - Comprehensive Income Equity Instruments 6,255 - - 6,255 Total Assets 633,938 7,802,912 9,954,631 18,391,481 Government Debt Securities 1,598,099 - - 1,598,099 Segment liabilities(1) 4,369,281 5,614,530 7,078,358 17,062,169 Other Financial Assets - 874,679 - 874,679 Equity - - 1,329,312 1,329,312 - Financial Liabilities 1,122 - 1,122 Total Liabilities 4,369,281 5,614,530 8,407,670 18,391,481 Derivative financial liabilities - 1,122 - 1,122 Other Segment Items 1,795 87,946 68,326 158,067

Capital investment - - 28,415 28,415 Explanations On Presentation Of Non-Financial Assets And Liabilities At Their Fair Value Amortization 1,022 931 31,339 33,292

Impairment(2) 773 87,015 8,572 96,360 The Parent Bank shows the buildings, included in tangible assets, over their fair values. The aforementioned fair value valuations (1) Assets in others column contain tangible assets, intangible assets, assets held for sale, deferred tax assets and assets not distributed. Liabilities in others column contain general provisions, reserve for employee benefits, are classified as level 3. Fair value of buildings is determined by an independent valuation company authorized by Capital Markets current tax liabilities and liabilities not distributed. (2) Includes loss in value of marketable securities, fixed assets, assets to be disposed of and associates and special loan loss amount. Board of Turkey and Banking Regulation and Supervision Agency. Based on information that is presented in the table above as at 31 December 2019, segments of the Group are distributed based on their asset sizes as percentages in current period as; 42% for corporate banking, 4% for retail banking, 54% for treasury, investment banking and others segment. Gross income (operational income) of the Group is distributed between corporate banking, treasury, investment banking and others segment and retail banking as 45%, 50%, and 5%, respectively.

192 193 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

XI. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED SEGMENT REPORTING (CONTINUED) SECTION FIVE

Information related to the segments of the Group (Continued): EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED FINANCIAL STATEMENTS

Treasury, Investment I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS Retail Corporate Group’s Total 31 December 2018 Banking Banking Banking Operations and Others Operating Income 89,174 255,284 90,408 434,866 1. Information related to cash and the account of the Central Bank of Republic of Turkey (the CBRT):

Net profit of segment 51,968 167,029 (96,084) 122,913 a) Cash and balances with the CBRT: Operating Profit / (Loss) - - - -

Profit / (Loss) before tax 51,968 167,029 (96,084) 122,913 31 December 2019 31 December 2018 Tax provision (-) - - 39,364 39,364 TL FC TL FC Profit / (Loss) after tax 51,968 167,029 (135,448) 83,549 Cash 15,274 37,085 12,783 36,187 Minority Shares - - - - Central Bank of the Republic of Turkey (CBRT)(1) 120,143 1,900,953 517,015 1,240,914 Current Period Net Profit/ (Loss) 51,968 167,029 (135,448) 83,549 Segment assets(1) 803,381 7,093,472 7,955,637 15,852,490 Others - - - -

Associate and subsidiaries - - - - Total 135,417 1,938,038 529,798 1,277,101

(1) Total Assets 803,381 7,093,472 7,955,637 15,852,490 As at 31 December 2019 and 31 December 2018, the Parent Bank does not keep precious metals as reserve deposits at CBRT. Segment liabilities(1) 3,485,400 4,096,472 7,104,049 14,685,921

Equity - - 1,166,569 1,166,569 b) Information related to the account of the CBRT:

Total Liabilities 3,485,400 4,096,472 8,270,618 15,852,490

Other Segment Items 1,873 31,119 205,465 238,457 31 December 2019 31 December 2018

Capital investment - - 53,041 53,041 TL FC TL FC

Amortization 766 675 8,562 10,003 Unrestricted Demand Deposits(1) 120,143 959,988 517,015 953,182

Impairment(2) 1,107 30,444 143,862 175,413 Unrestricted Time Deposits - - - -

(1) Assets in others column contain tangible assets, intangible assets, assets held for sale, deferred tax assets and assets not distributed. Liabilities in others column contain general provisions, reserve for employee benefits, Restricted Time Deposits - 940,965 - 287,732 current tax liabilities and liabilities not distributed. (2) Includes loss in value of marketable securities, fixed assets, assets to be disposed of and associates and special loan loss amount. Total 120,143 1,900,953 517,015 1,240,914

Based on information that is presented in the table above as at 31 December 2018, segments of the Group are distributed (1) As at 31 December 2019 and 31 December 2018, the Parent Bank does not keep precious metals as reserve deposits at CBRT based on their asset sizes as percentages in current period as; 45% for corporate banking, 5% for retail banking, 50% for treasury, investment banking and others segment. Gross income (operational income) of the Group is distributed between corporate c) Explanation on reserve deposits: banking, treasury, investment banking and others segment and retail banking as 59%, 21%, and 20%, respectively. In accordance with the “Communiqué Regarding the Reserve Requirements no. 2005/1”, the Parent Bank is required to maintain reserves in CBRT for TL and foreign currency liabilities. The reserve requirements can be maintained as TL, USD, EUR and/or standard gold. Interest payments are made to required reserves held as TL as at November 2014 and required reserves held as USD as at May 2015, reserve options and free/open accounts.

The reserve rates for TL liabilities vary between 1% and 7% due their maturity profile as at 31 December 2019 (31 December 2018 – between 1.5% and 8%); the reserve rates for foreign currency liabilities vary between 5% and 21% (31 December 2018 – 4% and 20%).

2. Financial assets at fair value through profit or loss (net):

a) Financial assets at fair value through profit or loss given as collateral/blocked and subject to repurchase agreements:

As at 31 December 2019 and 31 December 2018, the financial assets at fair value through profit or loss are kept under unrestricted account.

194 195 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

2. Financial assets at fair value through profit or loss (net) (Continued): 4. Information on financial assets at fair value through other comprehensive income: b) Table of positive differences related to trading derivative financial assets at fair value through profit or loss: a) Investment securities available-for-sale given as collateral or blocked with net values and comparatively:

Table of positive differences related to derivative financial assets at fair value through other comprehensive income Financial assets measured at amortized cost:

31 December 2019 31 December 2018 31 December 2019 31 December 2018

TL FC TL FC TL FC TL FC

Forward transactions 324 116 725 - Given as collateral or blocked 704,702 191,784 150,244 231,262

Swap transactions 171 35 29,177 199 Subject to repurchase agreements - - 255,363 -

Future transactions - - - - Total 704,702 191,784 405,607 231,262 Options 23 - - -

Other - - - - As of 31 December 2019, financial assets at fair value through other comprehensive income other than those given as collateral or Total 518 151 29,902 199 subject to repurchase agreements amounting to TL 907,220 are unrestricted (31 December 2018 – TL 1,842,164).

3. Information on banks: b) Information on financial assets fair value through other comprehensive income: a) Information on banks: 31 December 2019 31 December 2018

Debt instruments 1,848,637 2,584,771 31 December 2019 31 December 2018 Listed 1,373,848 1,674,523

TL FC TL FC Unlisted 474,789 910,248 Equity instruments 10,057 6,414 Banks Listed - - Domestic 1,115 1,691,394 339 1,660,524 Unlisted 10,057 6,414 Foreign - 145,525 - 339,916 Impairment provision (-) / charge (+) 54,988 111,993 Foreign Offices and Branches - - - - Total 1,803,706 2,479,192 Total 1,115 1,836,919 339 2,000,440 b) Information on foreign bank accounts: 5. Information on loans:

a) Information on all types of loans and advances given to shareholders and employees of the Parent Bank: Unrestricted Amount Restricted Amount

31 December 2019 31 December 2018 31 December 2019 31 December 2018 31 December 2019 31 December 2018 EU Countries 16,816 14,554 - - Cash Non-Cash Cash Non-Cash USA, Canada 110,618 314,168 - - Direct loans granted to shareholders - 567,918 - 259,363 OECD Countries(1) 8,037 1,079 - - Corporate shareholders - 567,918 - 259,363 Off shore banking regions - - - - Individual shareholders - - - - Other 10,054 10,115 - - Indirect loans granted to shareholders - - - - Total 145,525 339,916 - - Loans granted to employees 2,782 - 2,692 - (1) OECD countries except for the EU countries, the USA and Canada. Total 2,782 567,918 2,692 259,363

196 197 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

5. Information on loans (Continued): 5. Information on loans (Continued):

b) Information on the standard and under close monitoring loans with restructured loans under close monitoring: b) Information on the standard and under close monitoring loans with restructured loans under close monitoring (Continued):

Loans Under Close Monitoring Loans and The Time Extended via Standard Loans and Other Receivables the Amendment on Payment Plan Other Receivables Restructured Loans Under Close Monitoring

Loans Loans with Revised Up to 6 Months 150 162,907 Cash Loans Standard Loans Not Subject to Refinance Contract Terms Restructuring 6 Months – 1 Year 2,053 - Non-specialized loans 8,718,478 53,237 177,476 15,184

Enterprise loans - - 177,452 14,681 1-2 Years 461 16,645

Export loans 2,856 33,886 - - 2-5 Years 1,069 11,075 Import loans - - - - 5 Years and Over 597 - Loans given to financial sector 3,984,225 - - -

Consumer loans 599,997 5,055 24 503 c) Distribution of cash loans by maturity: Credit cards 17,998 85 - -

Other 4,113,402 14,211 - - Standard Loans and Other Loans and Other Receivables Specialized loans - - - - Receivables Under Close Monitoring Other receivables - - - - Changes to Changes to Loans and Other Loans and Other Cash Loans the Extension of the Extension of Receivables Receivables Total 8,718,478 53,237 177,476 15,184 the Payment Plan the Payment Plan

Short Term Loans and Other Receivables 4,354,650 - 34,542 -

31 December 2019 31 December 2018 Midterm and Long Term Loans and Other Receivables 4,363,828 - 18,695 192,660

Allowances for Expected Credit Losses on Loans under close Loans under Standard Loans Standard Loans Total 8,718,478 - 53,237 192,660 Stage 1 and 2 monitoring close monitoring

12 Months Expected Loss Provision 43,362 - 46,509 -

Significant Increase in Credit Risk - 48,823 - 83,254

Total 43,362 48,823 46,509 83,254

Information on changes in the payment schedule and payment terms of standard loans and other receivables and loans and other receivables under close monitoring:

Loans and Other Standard Loans and Number of Amendments Related to the Extension of the Payment Plan Receivables Under Other Receivables Close Monitoring

Extended by 1 or 2 Times 4,330 190,627 Extended by 3,4 or 5 Times - - Extended by More than 5 Times - -

198 199 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

5. Information on loans (Continued): 5. Information on loans (Continued): d) Information on consumer loans, consumer credit cards, personnel loans and personnel credit cards: d) Information on consumer loans, consumer credit cards, personnel loans and personnel credit cards (Continued) :

Current Period Short Term Medium and Long Term Total Prior Period Short Term Medium and Long Term Total

Consumer Loans – TL 4,052 596,837 600,889 Consumer Loans – TL 5,731 762,122 767,853 Mortgage Loans 17 489,157 489,174 Mortgage Loans 109 618,602 618,711 Automotive Loans 29 3,600 3,629 Automotive Loans - 3,442 3,442 Consumer Loans 4,006 104,080 108,086 Consumer Loans 5,622 140,078 145,700 Other - - - Other - - -

Consumer Loans – Indexed to FC - - - Consumer Loans – Indexed to FC - - - Mortgage Loans - - - Mortgage Loans - - - Automotive Loans - - - Automotive Loans - - - Consumer Loans - - - Consumer Loans - - - Other - - - Other - - -

Consumer Loans – FC - - - Consumer Loans – FC - - - Mortgage Loans - - - Mortgage Loans - - - Automotive Loans - - - Automotive Loans - - - Consumer Loans - - - Consumer Loans - - - Other - - - Other - - -

Consumer Credit Cards – TL 15,166 - 15,166 Consumer Credit Cards – TL 16,231 - 16,231 With Installment 3,385 - 3,385 With Installment 3,870 - 3,870 Without Installment 11,781 - 11,781 Without Installment 12,361 - 12,361

Consumer Credit Cards – FC 552 - 552 Consumer Credit Cards – FC 469 - 469 With Installment - - - With Installment - - - Without Installment 552 - 552 Without Installment 469 - 469

Personnel Loans – TL 215 1,272 1,487 Personnel Loans – TL 80 1,222 1,302 Mortgage Loans - 242 242 Mortgage Loans - 289 289 Automotive Loans - - - Automotive Loans - - - Consumer Loans 215 1,030 1,245 Consumer Loans 80 933 1,013 Other - - - Other - - -

Personnel Loans – Indexed to FC - - - Personnel Loans – Indexed to FC - - - Mortgage Loans - - - Mortgage Loans - - - Automotive Loans - - - Automotive Loans - - - Consumer Loans - - - Consumer Loans - - - Other - - - Other - - -

Personnel Loans – FC - - - Personnel Loans – FC - - - Mortgage Loans - - - Mortgage Loans - - - Automotive Loans - - - Automotive Loans - - - Consumer Loans - - - Consumer Loans - - - Other - - - Other - - -

Personnel Credit Cards – TL 1,277 - 1,277 Personnel Credit Cards – TL 1,381 - 1,381 With Installment 423 - 423 With Installment 452 - 452 Without Installment 854 - 854 Without Installment 929 - 929

Personnel Credit Cards – FC 43 - 43 Personnel Credit Cards – FC 33 - 33 With Installment - - - With Installment - - - Without Installment 43 - 43 Without Installment 33 - 33

Credit Deposit Account – TL (Real Person) 3,204 - 3,204 Credit Deposit Account – TL (Real Person) 5,198 - 5,198 Credit Deposit Account – FC (Real Person) - - - Credit Deposit Account – FC (Real Person) - - - Total 24,509 598,109 622,618 Total 29,123 763,344 792,467

200 201 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

5. Information on loans (Continued): 5. Information on loans (Continued): e) Information on commercial installment loans and corporate credit cards: f) Loan concentration based on counterparties:

Current Period Short Term Medium and Long Term Total 31 December 2019 31 December 2018 Commercial Installment Loans – TL 85 226,618 226,703 Public 447,710 702,964 Business Residential Loans - - - Automotive Loans - 2,238 2,238 Private 8,684,719 7,078,221

Consumer Loans 85 188,500 188,585 Total 9,132,429 7,781,185 Other - 35,880 35,880 Commercial Installment Loans – Indexed to FC - 11,023 11,023 g) Distribution of domestic and foreign loans: Business Residential Loans - - - Automotive Loans - - - Consumer Loans - 11,023 11,023 31 December 2019 31 December 2018 Other - - - Domestic loans 8,438,533 7,278,648 Commercial Installment Loans – FC 8,197 647,423 655,620 Business Residential Loans - - - Foreign loans 693,896 595,944

Automotive Loans - - - Total 9,132,429 7,874,592 Consumer Loans 8,197 647,423 655,620 Other - - - h) Loans granted to subsidiaries and associates: TL 25 (31 December 2018 – TL 24). Corporate Credit Cards – TL 963 - 963 With Installment 101 - 101 Without Installment 862 - 862 i) Information on loans related reserves for specific provisions or credit impaired (Stage 3): Corporate Credit Cards – FC 82 - 82 With Installment - - - 31 December 2019 31 December 2018 Without Installment 82 - 82 Credit Deposit Account – TL (Legal Entity) - - - Loans and Receivables with Limited Collectibility 142 928 Credit Deposit Account – FC (Legal Entity) - - - Loans and Receivables with Doubtful Collectibility 86,827 28,759 Total 9,327 885,064 894,391 Uncollectible Loans and Receivables 26,697 48,900

Total 113,666 78,587 Prior Period Short Term Medium and Long Term Total Commercial Installment Loans – TL 305 343,234 343,539 j) Information on non-performing loans (net): Business Residential Loans - - - Automotive Loans - 9,093 9,093 j.1) Information on non-performing loans and other receivables those are restructured or rescheduled: Consumer Loans 305 334,141 334,446 Other - - - Group III Group IV Commercial Installment Loans – Indexed to FC - 40,861 40,861 Group V Loans with limited Loans with doubtful Business Residential Loans - - - Uncollectible loans collectibility collectibility Automotive Loans - 11,573 11,573 Current period Consumer Loans - 29,288 29,288 Gross amounts before the specific reserves - - 998 Other - - - Restructured Loans and other receivables - - 998 Commercial Installment Loans – FC - - - Business Residential Loans - - - Automotive Loans - - - Group III Group IV Consumer Loans - - - Group V Loans with limited Loans with doubtful Uncollectible loans Other - - - collectibility collectibility Corporate Credit Cards – TL 1,617 - 1,617 Prior period With Installment 282 - 282 Gross amounts before the specific reserves - - 483 Without Installment 1,335 - 1,335 Restructured Loans and other receivables - - 483 Corporate Credit Cards – FC 66 - 66 With Installment - - - Without Installment 66 - 66 Credit Deposit Account – TL (Legal Entity) - - - Credit Deposit Account – FC (Legal Entity) - - - Total 1,988 384,095 386,083

202 203 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

5. Information on loans (Continued): 5. Information on loans (Continued):

j) Information on non-performing loans (net) (Continued): j) Information on non-performing loans (net) (Continued):

j.2) Information on total movements of non-performing loans: j.4) Information on net and gross amounts of non-performing loans according to beneficiary group:

Group III Group IV Group V Group III Group IV Group V Loans with limited Loans with doubtful Uncollectible Loans with limited Loans with doubtful Uncollectible collectibility collectibility loans collectibility collectibility loans Prior Period End Balance 2,817 39,676 50,914 Current Period (Net) 306 46,350 7,731 Additions (+) 135,087 2,889 3,858 Loans Allowed to Real Persons and Corporate Entities (Gross) 448 133,177 34,428 Transfers from Other Categories of Non- Performing Loans (+) - 135,814 43,584 Specific provision (-) 142 86,827 26,697 Transfers to Other Categories of Non-Performing Loans (-) 135,814 43,584 - Loans Allowed to Real Persons and Corporate Entities (Net) 306 46,350 7,731 Collections (-) 1,623 1,583 14,102 Banks (Gross) - - - Write-offs (-) 16 2 35,404 Specific provision (-) - - - Sales (-) 3 33 14,422 Banks (Net) - - - Corporate and Commercial Loans - - 10,810 Other Loan and Receivables (Gross) - - - Retail Loans - - 3,539 Specific provision (-) - - - Credit Cards 3 33 73 Other Loan and Receivables (Net) - - - Other - - - Prior Period (Net) 1,889 10,917 2,014 Balances at End of the Current Period 448 133,177 34,428 Loans Allowed to Real Persons and Corporate Entities (Gross) 2,817 39,676 50,914 Specific Provisions (-) 142 86,827 26,697 Specific provision (-) 928 28,759 48,900 Net Balance on Balance Sheet 306 46,350 7,731 Loans Allowed to Real Persons and Corporate Entities (Net) 1,889 10,917 2,014 Banks (Gross) - - - Specific provision (-) - - - j.3) Information on non-performing loans in foreign currencies: Banks (Net) - - - Other Loan and Receivables (Gross) - - - Group III Group IV Group V Loans with limited Loans with doubtful Uncollectible Specific provision (-) - - - collectibility collectibility Loans Other Loan and Receivables (Net) - - - Current Period Balances at the end of the period - 100,596 119 j.5) Information on interest accruals, rediscounts, valuation differences and their provisions calculated for non-performing loans which are Provision Amount (-) - 72,337 72 Net Balance on Balance Sheet - 28,259 47 expected to be used in accordance with TFRS 9:

Prior Period Balances at the end of the period - - 657 Group III Group IV Group V Loans with Limited Loans with Doubtful Uncollectible Provision Amount (-) - - 626 Collectibility Collectibility Loans Net Balance on Balance Sheet - - - Current period (Net) - (77,078) (3,713) Interest accruals and rediscounts with valuation differences - 9,563 5,956 Provision amount (-) - 86,641 9,669

Prior period (Net) (386) (23,160) - Interest accruals and rediscounts with valuation differences 420 5,231 - Provision amount (-) 806 (28,391) -

k) Liquidation policy for counting as loss loans and other receivables:

Uncollectible loans and other receivables are collected through legal follow-up and liquidation of collaterals.

l) Information on write-off from assets policy:

The Parent Bank’s general policy for write-off of loans and receivables under follow-up is to write off such loans and receivables that are proven to be uncollectible by obtaining required documentation, also considering Tax Procedural Law’s verdicts.

204 205 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

6. Financial assets at amortized cost: 7. Information on associates (net): a) Information on subject to repurchase agreement and given as collateral or blocked: None.

Securities subject to held to maturity are kept under unrestricted account. 8. Information on subsidiaries (net): b) Information on public sector debt securities at amortized cost: As at 31 December 2019, the Parent Bank has subsidiary as ICBC Turkey Yatırım Menkul Değerler A.Ş.. The Parent Bank does not have any capital needs due to its subsidiary which is included in the calculation of its consolidated capital adequacy standard ratio. The current equity amount of the subsidiary fulfils the minimum capital requirement entailed in accordance with the Capital 31 December 2019 31 December 2018 Markets Board’s regulations. Government bonds 1,946,244 993,472 Treasury bills - - Information related to subsidiaries: Other public sector debt securities - -

Total 1,946,244 993,472 a) Information on unconsolidated subsidiaries: c) Information on financial assets at amortized cost: None.

31 December 2019 31 December 2018 b) Information on unconsolidated subsidiaries according to information above:

Debt instruments 2,791,719 1,324,326 Listed - - None. Unlisted 2,791,719 1,324,326 Impairment provision(1) 99,508 59,673 c) Movement of unconsolidated subsidiaries: Total 2,891,227 1,383,999 (1) Consists of change in interest accruals. None. d) Movements of investment securities held-to-maturity during the year: d) Industrial distribution of unconsolidated subsidiaries:

31 December 2019 31 December 2018 As at 31 December 2019, the Parent Bank has no unconsolidated subsidiary.

Beginning balance 1,380,504 493,413 Foreign currency differences on monetary assets - - e) Information on consolidated subsidiaries: Purchases during year 1,748,151 830,913 Disposals through sales and redemptions (336,936) - Bank’s share percentage- Banks Risk Address Description If different from Group Impairment provision(1) 99,508 59,673 (City/Country) voting percentage (%) Share Percentage (%) Total 2,891,227 1,383,999 ICBC Turkey Yatırım Menkul Değerler A.Ş. (ICBC Yatırım) İstanbul/Turkey 99.998 100 (1) Consists of change in interest accruals. f) Information on subsidiaries included in the scope of consolidation in the order listed above:

Income from Current period Prior period Total assets Shareholders’ equity Total fixed assets Interest Income marketable Fair Value profit/(loss) profit /(loss) securities portfolio 923,623 145,537 1,558 16,675 374 30,641 925 -

ICBC Yatırım participated in ICBC Turkey Portföy Yönetimi A.Ş (ICBC Portföy) with 100% share in April 2015. The financial information above shows amounts the result of consolidation of ICBC Yatırım and ICBC Portföy.

206 207 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

8. Information on subsidiaries (net) (Continued): 8. Investments in subsidiaries (net) (Continued): f) Information on subsidiaries included in the scope of consolidation in the order listed above (Continued): i) Listed subsidiaries: None.

The solo financial information of ICBC Portföy company, which is consolidated to ICBC Yatırım, is also listed below: j) Subsidiaries disposed of during the current period: None.

Income from k) Subsidiaries purchased in the current period: None Current period Prior period Total assets Shareholders’ equity Total fixed assets Interest Income marketable Fair Value profit/(loss) profit/(loss) securities portfolio 5,132 4,431 70 772 - 799 82 - 9. Information on joint ventures (net): g) Movement of consolidated subsidiaries: None.

10. Information on financial lease receivables (net): 31 December 2019 31 December 2018

Balance at the Beginning of the Period 75,998 75,998 None. Movements During the Period - - Purchases - - 11. Information on hedging purpose derivatives (net): Bonus Shares Received - - Dividends from Current Year Profit - - None. Sales - - Revaluation Increase - - Impairment Provision - - 12. Information on tangible assets (net):

Balance at the End of the Period 75,998 75,998 Tangible assets Other 31 December 2019 Buildings(1) Vehicles Right of use Total from finance lease tangible assets h) Sectoral distribution of consolidated subsidiaries: Prior Period End: 31/12/2018 Cost 23,590 3,160 36 - 54,986 81,772

31 December 2019 31 December 2018 Accumulated Depreciation (-) 4,010 3,160 36 - 38,237 45,533 Net Book Value 19,580 - - - 16,659 36,329 Banks - - Current Period End: 31/12/2019 Insurance Companies - - Net Book Value at the Beginning of the 19,580 - - 16,659 36,239 Factoring Companies - - Period Leasing Companies - - TFRS 16 Opening Balance - - - 80,333 - 80,333 Finance Companies - - Additions - - - 15,835 12,294 28,129 Other Financial Subsidiaries 75,998 75,998 Disposals, net (-) 2,390 - - - 46 2,436 Revaluation / (Impairment) (1) 1,846 - - - - 1,846 Total 75,998 75,998 Depreciation (-) 178 - - 17,648 7,310 25,136 Cost at period end 23,046 2,269 - 95,313 67,280 187,908 Accumulated Depreciation at period end (-) 3,795 2,269 - 17,648 45,637 69,349

Closing Net Book Value 19,251 - - 77,665 21,643 118,559

(1) There is a capital gain amounting to TL 14,390 as of 31 December 2019 as a result of change in fair value of buildings, which is determined by licensed immovable property valuation companies.

208 209 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED)

12. Information on tangible assets (net) (Continued): 13. Intangible assets (net) (Continued):

Tangible assets Other 31 December 2018 Buildings(1) Vehicles Total from finance lease tangible assets b) Movement table contains below mentioned information at the beginning and the end of the period:

Prior Period End: 31/12/2017 Cost 21,882 3,160 36 50,102 75,180 31 December 2019 31 December 2018 Accumulated Depreciation (-) 3,812 3,160 36 31,407 38,415 Beginning of the period 8,171 5,194 Net Book Value 18,070 - - 18,695 36,765 Additions Resulting from Mergers, Acquisitions and Purchases 1,736 5,526 Current Period End: 31/12/2018 Disposals (-) - - Net Book Value at the Beginning of the Period 18,070 - - 18,695 36,765 Accumulated Amortization (-) 1,713 2,549 Additions - - - 4,884 4,884 Period End 8,194 8,171 Disposals, net (-) - - - - - Revaluation / (Impairment) (1) 1,708 - - - 1,708 Depreciation (-) 198 - - 6,937 7,135 14. Information on investment properties: Cost at period end 23,590 3,160 36 54,986 81,772 Accumulated Depreciation at period end (-) 4,010 3,160 36 38,327 45,533 None. Closing Net Book Value 19,580 - - 16,659 36,239

(1) There is a capital gain amounting to TL 13,967 as of 31 December 2018 as a result of change in fair value of buildings, which is determined by licensed immovable property valuation companies. 15. Information on deferred tax assets: a) The cost and accumulated depreciation of assets disposed is as follows: a) Amount of deferred tax asset recognized in the balance sheet in respect of each type of deductible temporary differences, unused tax credits: Tangible assets from Other 31 December 2019 Buildings Vehicles Total finance lease tangible assets

Cost 2,784 886 - 773 1,917 (1 January – 31 December 2019) (1 January – 31 December 2018) Accumulated Depreciation (-) 394 886 - 727 1,917 Balance at the beginning of the previous period 44,596 10,619 Net disposal amount 577 - - 46 - TFRS 9 effect - 9,239

Balance at the beginning of the current period 44,596 19,858 Tangible assets Other 31 December 2018 Buildings Vehicles Total from finance lease tangible assets Deferred tax income / (expense) (net) 8,811 7,254

Cost - 886 - 1,031 1,917 Deferred tax recognized in other comprehensive income (22,489) 17,484 Accumulated Depreciation (-) - 886 - 1,031 1,917 Balance at the end of the period 30,918 44,596 Net disposal amount - - - - -

13. Intangible assets (net): Net deferred tax asset / (liability) movements in the current and previous periods are as follows.

a) The gross book value and accumulated amortization amounts at the beginning and at the end of the period: Timing differences from a basis Current period Prior period for deferred tax

Accumulated Deferred Accumulated Deferred 31 December 2019 31 December 2018 temporary differences tax asset/(debt) temporary differences tax asset/(debt) Gross Book Value 35,553 30,407 Provisions(*) 29,555 5,952 27,523 5,568 Accumulated Amortization (-) 27,359 22,236 Financial assets and liabilities valuation differences 10,968 2,194 40,227 8,045 Total 8,194 8,171 Derivative valuation differences 3,275 655 (28,975) (5,795)

Loan provisions on stage 1 and 2 151,620 33,357 151,266 33,278

Other (66,131) (11,240) 7,638 3,500

Total net deferred tax asset/(liability) 129,287 30,918 197,679 44,596

(*) Consists of employee rights provisions, credit score provisions and other provisions.

210 211 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

I. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED ASSETS (CONTINUED) II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES

15. Information on deferred tax assets (Continued): 1. Information on deposits:

As at 31 December 2019, the Group’s deferred tax asset arising from the deductible temporary differences except for general loan a) Information on maturity profile of deposits: provisions is amounting to TL 30,918 (31 December 2018 – TL 44,596). As at 31 December 2019, there is no deferred tax asset arising from financial losses (31 December 2018 – None). The Parent Bank does not have any deposits callable in 7 days.

In case of book value and taxable value differences of assets are subject of deferred tax relating to equities accounts, deferred tax a.1) 31 December 2019: asset or liability net off with accounts in this group.

Up to 1-3 3-6 6 Months- 1 Year and Cumulative Demand Total b) Amount and expiry date of deductible temporary differences, unused tax losses, unused tax credits for which no deferred tax 1 Month Months Months 1 Year Over Deposits asset is recognized in the balance sheet: . Saving Deposits 40,686 298,425 1,538,667 1,465 11,311 252 - 1,890,806 Foreign Currency Deposits 442,887 1,089,028 5,198,971 74,701 75,445 12,185 - 6,893,217

None Residents in Turkey 411,215 1,088,931 4,921,801 71,822 22,046 4,188 - 6,520,003

Residents Abroad 31,672 97 277,170 2,879 53,399 7,997 - 373,214

16. Information on assets held for sale and discontinued operations: Public Sector Deposits 6,810 ------6,810

Commercial Deposits 79,829 102,275 788,894 5,403 54 - - 976,455

The Parent Bank has no asset held for sale and discontinued operation as at 31 December 2019 and 31 December 2018. Other Ins. Deposits 4,687 744 17,531 12 42 - - 23,016 Precious Metal Deposits ------17. Information on other assets: Interbank Deposits 117,050 59,408 - - - - - 176,458 CBRT ------Commodities and immovable properties of the Group obtained with respect to non-performing loans are recognized under Domestic Banks 4,154 59,408 - - - - - 63,562 movable and immovable assets to be sold off and shown under other assets in the balance sheet. Net total carrying value of the Foreign Banks 112,896 ------112,896 aforementioned assets is TL 4,176 as at 31 December 2019 (31 December 2018 – TL 2,058). Participation Banks ------Other ------

Sum of other assets amounting to TL 34,657 (31 December 2018 – TL 41,869), which are out of movable and immovable Total 691,949 1,549,880 7,544,063 81,581 86,852 12,437 - 9,966,762 properties to be sold off, do not exceed 10% of the balance sheet total.

a.2) 31 December 2018:

Up to 1-3 3-6 6 Months- 1 Year and Cumulative Demand Total 1 Month Months Months 1 Year Over Deposits Saving Deposits 24,938 36,896 1,635,517 108,563 6,507 1,967 - 1,814,388 Foreign Currency Deposits 315,403 287,300 3,946,995 68,698 16,337 4,487 - 4,639,220

Residents in Turkey 302,244 284,863 3,837,081 63,256 4,637 515 - 4,492,596

Residents Abroad 13,159 2,437 109,914 5,442 11,700 3,972 - 146,624

Public Sector Deposits 7,544 ------7,544

Commercial Deposits 33,478 26,058 125,273 37,862 - - - 222,671

Other Ins. Deposits 4,036 42 11,716 30 41 1 - 15,866 Precious Metal Deposits ------Interbank Deposits 52,774 1,269,779 - - - - - 1,322,553 CBRT ------Domestic Banks 1,775 1,269,779 - - - - - 1,271,554 Foreign Banks 50,999 ------50,999 Participation Banks ------Other ------

Total 438,173 1,620,075 5,719,501 215,153 22,885 6,455 - 8,022,242

212 213 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED) II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED)

1. Information on deposits (Continued): 2. Information on derivative financial liabilities held for trading: b) Information on Deposit Insurance: Derivative Financial Liabilities:

b.1) Information on savings deposits insured by Saving Deposit Insurance Fund and the total amount of the deposits exceeding the 31 December 2019 31 December 2018 insurance coverage limit: TL FC TL FC

Forward Transactions 51 104 4 - Covered by Deposit Exceeding the Deposit Saving Deposits Swap Transactions - 3,760 745 373 Insurance Fund Insurance Limit Future Transactions - - - - 31 December 2019 31 December 2019 Options 15 - - - Saving Deposits 983,721 907,130 Other - - - - Foreign Currency Savings Deposits 528,032 1,956,518 Total 66 3,864 749 373 Other Saving Deposits - - Foreign branches’ Deposits Under Foreign Insurance Coverage - - Off-Shore Deposits Under Foreign Insurance Coverage - - 3. Information on funds borrowed: Total 1,511,753 2,863,648 a) Information on banks and other financial institutions:

Covered by Deposit Exceeding the Deposit Saving Deposits 31 December 2019 31 December 2018 Insurance Fund Insurance Limit TL FC TL FC 31 December 2018 31 December 2018 Central Bank of the Republic of Turkey - - - - Saving Deposits 807,156 1,005,237 Domestic Banks and Institutions 2,052 801 1,527 - Foreign Currency Savings Deposits 272,089 1,283,059 Foreign Banks, Institutions and Funds - 4,235,154 1,161,228 2,919,795 Other Saving Deposits - - Foreign branches’ Deposits Under Foreign Insurance Coverage - - Total 2,052 4,235,955 1,162,755 2,919,795 Off-Shore Deposits Under Foreign Insurance Coverage - - Total 1,079,245 2,288,296 b) Contractual maturities of funds borrowed:

b.2) Savings deposits in Turkey are not covered under insurance in another country since the Headquarter of the Bank is not located 31 December 2019 31 December 2018 abroad: None. TL FC TL FC Short-Term 2,052 603,593 1,162,755 792,471 b.3) Saving deposits not covered by deposit insurance: The group has saving deposits not covered by deposit insurance amounting to TL Medium and Long-Term - 3,632,362 - 2,127,324

7,710 (31 December 2018 – TL 5,588). Total 2,052 4,235,955 1,162,755 2,919,795

Saving deposits of real persons that are not covered under the guarantee of saving deposit insurance fund: c) Additional information on concentrations of the Parent Bank’s liabilities:

The Parent Bank diversifies its funding resources with customer deposits and funds borrowed from foreign banks. The Parent 31 December 2019 31 December 2018 Bank makes concentration analysis for the customers providing funds in branch basis and takes long and short term actions to Deposits and Other Accounts at Foreign Branches - - generalize the customers in these branches. Funds borrowed consist of funds with different characteristics and maturity-interest

Deposits and Other Accounts belong to Major Shareholders with Their Parents, Spouse and structures like export financing, money market, post-finance funding and are provided from different institutions. - - Children under Their Care

Deposits and Other Accounts belong to Members of Board of Directors, CEO and Deputy CEOs 7,710 5,588 4. Information on other liabilities: with Their Parents, Spouse and Children under Their Care

Deposits and Other Accounts linked to Crimes Mentioned in 282nd Article of 5237 Numbered - - Other liabilities are amounting to TL 814,857 (31 December 2018 – TL 553,719) and do not exceed 10% of total liabilities Turkish Crime Legislation dated on 26/09/2004 excluding the off-balance sheet items. Deposits belong to Off-Shore Banks which are established to be engaged in off-shore banking in - - Turkey

214 215 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED) II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED)

5. Information on lease payables (net): 7. Information on provisions (Continued):

31 December 2019 31 December 2018 As at 31 December 2019, the Group has vacation pay liability amounting TL 6,861 (31 December 2018 – TL 5,734).

TL FC TL FC b) Information on provisions related to foreign currency differences of foreign currency indexed loans: Less Than 1 Year 4,417 - - -

Between 1-4 Years 16,062 - - - As at 31 December 2019, there is no foreign exchange differences on foreign currency indexed loans (31 December 2018 –none) More Than 4 Years 61,809 - - - are netted with loans on the asset side. Total 82,288 - - - c) Specific provisions for non-cash loans that are not indemnified and not converted into cash: 6. Information on liabilities arising from hedging purpose derivatives (net): As at 31 December 2019, the Group has provision amounting to TL 3,232 (31 December 2018 – TL 2,964) for non-cash loans and None. irrevocable commitments that are not indemnified and not converted into cash amounting to TL 6,643 (31 December 2018 – TL 6,060). 7. Information on provisions: d) Information on other provisions: a) Information on reserve for employee rights: d.1) Information on provision for possible risks: In accordance with existing legislation in Turkey, the Parent Bank and its subsidiary in Turkey have to make certain lump-sum payments to employees who has completed one year of service with the Parent Bank, who has complete 25 working years (20 None. years for women) and whose employment is terminated due to retirement (retirement age for women and men are 58 and 60, respectively) or reasons other than resignation or misconduct. Provision for employee severance benefits has been accounted for d.2) Information on banking services promotion provisions: using discounting total provision and reflected to the consolidated financial statements. As of 31 December 2019, the Parent Bank has a provision amounting to TL 96 (31 December 2018 – TL 91) that it recognized for The indemnity payable is one month's salary for each year of service and as of 31 December 2019, this amount is restricted with promotional practices regarding credit card services. TL-full 6,379.86 (31 December 2018 – TL-full 5,434.42). The liability is not funded, since there is no funding requirement. d.3) Information on other provisions: The Parent Bank reserved for employee severance indemnities in the accompanying financial statements using actuarial method in accordance with the Turkish Accounting Standard 19 (TAS 19) “Employee Benefits”. The major actuarial assumptions used in the As at 31 December 2019, there is provision for lawsuits filed against the Parent Bank and its subsidiary amounting TL 13,051 calculation of the total liability are as follows. (31 December 2018 – TL 12,515). As at 31 December 2019, there is provision for non-cash loans is amounting to TL 37,408 (31 December 2018 – TL 5,737). As at 31 December 2019, there is provision for personnel bonus amounting TL 56,387 (31 The basic assumption, which is to be paid severance pay for each year of service, or an estimated salary increase cap will increase December 2018 – TL 23,244). in the rate of inflation each year. The discount rate is shows the expected real rate after adjusting for the effects of inflation.

31 December 2019 31 December 2018

Discount Ratio (%) 4.39 4.11

Expected Salary/ETI Liability Ceiling Increase Rate (%) 8.30 9.50

Rate for the Probability of Retirement (%) 93.00 93.00

Movement of ETI liability is as below:

31 December 2019 31 December 2018

Balance at prior period end 12,183 10,735

Current year provisions 6,570 3,706

Paid in current year (4,639) (2,258)

Balance at Current Period End 14,114 12,183

216 217 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED) II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED)

8. Information on tax liabilities: 10. Detailed explanation on subordinated loans including quantity, maturity, interest rate, issuing institution, option to be converted into stock certificate a) Information on current tax liability: As at 31 December 2019, corporate taxes payable of the Group after deductions of prepaid taxes is TL 2,292 (31 December 2018 – TL 18,001). 31 December 2019 31 December 2018 b) Information on taxes payable: TL FC TL FC Debt instruments to be included in the additional capital - - - - borrowing instruments

31 December 2019 31 December 2018 Subordinated Loans - - - -

Corporate Taxes Payable 2,292 18,001 Subordinated Debt Instruments - - - - Debt instruments to be included in the contribution capital Taxation on Securities 6,411 5,391 - 1,782,420 - 1,579,084 calculation Property Tax 325 256 Subordinated Loans(1) - 1,782,420 - 1,579,084 Booking and Insurance Transaction Tax (BITT) 4,909 2,976 Subordinated Debt Instruments - - - - Foreign Exchange Tax - - Value Added Tax Payable 609 744 Total - 1,782,420 - 1,579,084

Other 6,288 8,892 (1) The main shareholder of the Bank, Industrial and Commercial Bank of China Limited (ICBC), provided a subordinated loan amounting to USD 300 million (USD three hundred million), with a maturity of 10 years and repayment option after 5 years. Total 20,834 36,260 11. Information on shareholders’ equity: c) Information on premiums payable: a) Paid in capital:

31 December 2019 31 December 2018

Social security premiums - employee 1,322 1,009 31 December 2019 31 December 2018 Social security premiums - employer 1,478 1,135 Common Stock 860,000 860,000 Bank social aid pension fund premium - employee - - Preferred Stock - - Bank social aid pension fund premium - employer - - Pension fund membership fees and provisions - employee - - Pension fund membership fees and provisions - employer - - The paid-in share capital of the Parent Bank is represented by 8,600,000,000 registered shares of one 0.10 Turkish Liras each. Unemployment insurance - employee 94 62 Unemployment insurance - employer 187 124 b) Paid-in capital amount, explanation as to whether the registered share capital system is applicable at bank; if so the amount of Other - 1 registered share capital: None Total 3,081 2,331 c) Information on share capital increases and their sources; other information on any increase in capital shares during the current d) Information on deferred tax liabilities: period: None.

Deferred tax assets and liabilities of each consolidated entity calculated individually are netted at each individual financial d) Information on share capital increases from revaluation funds: None. statement. Net deferred tax assets and liabilities of the Group’s entities are not netted off with each other during consolidation process. e) Capital commitments for current financial year and following period: None.

9. Information on payables related to assets held for sale and discontinued operations (net): f) Prior period indicators of the Parent Bank’s income, profitability and liquidity; and possible effects of the predictions on equity, considering the ambiguity of the indicators: None. None. g) Information on the privileges given to stocks representing the capital: The 70% of share capital of the Parent Bank consist of Type A shares and the 30% of the remaining consist of Type B shares. Three out of five members of the Board of Directors are appointed by Type A shareholders and the remaining two are appointed by Type B shareholders. There is no other privilege appointed.

218 219 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

II. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED LIABILITIES (CONTINUED) III. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED OFF-BALANCE SHEET ITEMS

11. Information on shareholders’ equity: 1. Disclosures on off - balance sheet items: h) Information on marketable securities value increase fund: a) Type and amount of irrevocable commitments:

31 December 2019 31 December 2018 31 December 2019 31 December 2018

TL FC TL FC Forward purchase and sale commitments 15,160 112,551 Commitment for use guaranteed credit allocation 30,415 29,325 From investment in associates, subsidiaries and joint ventures - - - - Credit cards limit commitments 80,622 73,480 Revaluation difference (2,733) 7,315 (51,945) (31,288) Payment commitments for cheques 6,989 7,720 Foreign exchange difference - - - - Credit card commitments given with applications for promotion 192 199 Total (2,733) 7,315 (51,945) (31,288) Tax and fund obligations arising from export commitments 9 6 Other irrevocable commitments 564 7,105

Information on portion of marketable securities valuation reserve related to foreign currency securities: Total 133,951 230,386

Portion of marketable securities valuation reserve related to foreign marketable securities is presented as difference between b) Type and amount of possible losses and commitments from off-balance sheet items: fair values of the government bonds classified as financial assets at fair value through other comprehensive income and values, discounted according to the effective interest rate (internal rate of return) method. There is no possible loss arising from off-balance sheet items. Guarantees from off-balance sheet commitments are shown in “off- balance sheet items” statements. i) Information on the Parent Bank's 2018 profit distribution 31 December 2019 31 December 2018 At the Ordinary Assembly Meeting of the Parent Bank held on 29 March 2019 it was decided, TL 62,029 of the net income after Letters of guarantee 2,273,364 2,040,443 the net tax for the year 2018 to be used for calculation of legal reserve of 5% of with amount of TL 3,103 in accordance with the Bank acceptance loans - - TCC 519/1 and the remaining TL 58,966 to be transferred to extraordinary reserves. Letters of credit 294,068 217,850 Other guarantees 4,419,976 112,889

Total 6,987,408 2,371,182

c) Total amount of non-cash loans:

31 December 2019 31 December 2018

Non-Cash Loans Given for Cash Loan Risks 93,003 166,824 With Original Maturity of 1 Year or Less 74,324 108,737 With Original Maturity of More Than 1 Year 18,679 58,087 Other Non-Cash Loans 6,894,405 2,204,358

Total 6,987,408 2,371,182

220 221 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

III. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED OFF-BALANCE SHEET ITEMS (CONTINUED) IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT

1. Disclosures on off - balance sheet items (Continued): 1. Information on interest income: d) Information on sectoral risk concentration of non-cash loans a) Information on interest income received from loans:

31 December 2019 31 December 2018 31 December 2019 31 December 2018 TL (%) FC (%) TL (%) FC (%) TL FC TL FC Agriculture 222 0.04 - - 894 0.15 31,782 1.78 Interest Income Received from Loans(1) Farming and Raising Livestock 204 0.04 - - 876 0.15 31,782 1.78 Short Term Loans 62,996 8,775 192,988 6,306 Forestry ------Medium and Long Term Loans 279,594 331,518 309,211 242,075 Fishery 18 - - - 18 - - - Loans Under Follow-Up 17,551 - 7,556 - Manufacturing 97,476 17.02 529,001 8.25 29,925 5.11 533,939 29.91 Premiums Received from Resource Utilization - - Mining and Quarrying 490 0.09 542 0.01 4,578 0.78 480 0.03 Support Fund

Production 19,441 3.39 516,210 8.05 24,911 4.25 522,611 29.27 Total 360,141 340,293 509,755 248,381

Electricity, Gas and Water 77,545 13.54 12,249 0.19 436 0.07 10,848 0.61 (1) Also includes fees and commissions from cash loans.

Construction 101,001 17.64 220,202 3.43 154,178 26.32 149,704 8.38 b) Information on interest income received from banks: Services 370,760 64.75 5,665,600 88.32 399,180 68.16 1,069,862 59.92 Wholesale and Retail Trade 20,596 3.60 21,292 0.33 16,048 2.74 58,941 3.30

Accommodation and Dining Services 2,515 0.44 - - 2,582 0.44 - - 31 December 2019 31 December 2018

Transportation and Telecommunication 205,399 35.87 2,540,527 39.60 322,955 55.14 239,905 13.44 TL FC TL FC

Financial Institutions 141,109 24.64 3,022,201 47.11 54,711 9.34 456,227 25.55 From CBRT - - - - Real Estate and Lending Services 17 - - - 17 - - - From Domestic Banks 1,654 77,075 1,059 5,260 Self Employment Services 1,032 0.18 81,314 1.27 1,615 0.28 314,548 17.62 From Foreign Banks - 10,706 - 2,421 Educational Services 1 - - - 1 0.00 - - From Headquarters and Branches Abroad - - - - Health and Social Services 91 0.02 266 0.01 1,251 0.21 241 0.01 Total 1,654 87,781 1,059 7,681 Other 3,146 0.55 - - 1,498 0.26 220 0.01

Total 572,605 100.00 6,414,803 100.00 585,675 100.00 1,785,507 100.00 c) Information on interest income received from securities portfolio: e) Non-cash loans classified under Group I and II: 31 December 2019 31 December 2018

Group I Group II TL FC TL FC TL FC TL FC Financial Assets at Fair Value Through Profit Or Loss - - - - Letters of Guarantee 566,917 1,573,302 2,037 124,465 Financial Assets at Fair Value Through Other Comprehensive 82,439 59,116 228,831 73,197 Bank Acceptances - - - - Income Letters of Credit - 294,068 - - Financial Assets Measured at Amortized Cost 70,850 94,892 69,305 25,221 Endorsements - - - -

Underwriting Commitments - - - - Total 153,289 154,008 298,136 98,418 Factoring Guarantees - - - -

Other Commitments and Contingencies - 4,419,976 - -

Total 566,917 6,287,346 2,037 124,465 d) Information on interest income received from associates and subsidiaries: None.

The Parent Bank has recorded a provision amounting to TL 3,232 (31 December 2018 –TL 2,964), for the unearned non-cash loans and irrevocable commitments amounting to TL 6,643 (31 December 2018 – TL 6,060).

2. Explanations on the services rendered on behalf and account of other persons:

The Group performs purchase-sale transactions on behalf of its customers and provides custody, management and consultancy services. 222 223 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT (CONTINUED) IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT (CONTINUED)

2. Information on interest expense (Continued): 2. Information on interest expense (Continued):

a) Information on interest expense related to funds borrowed: b) Information on interest expense paid to associates and subsidiaries:

Information on interest expense paid to affiliates and subsidiaries: TL 8,971 (31 December 2018 – TL 2,566). 31 December 2019 31 December 2018

TL FC TL FC c) Information on interest expense paid to securities issued: None. Banks(1) 30,020 200,855 80,913 177,307

Central Bank of the Republic of Turkey - - - - d) Maturity structure of the interest expense on deposits:

Domestic Banks 431 20 216 96

Foreign Banks 29,589 200,835 80,697 177,211 The Parent Bank has no interest expense paid to deposits callable within 7 days.

Foreign Branches and Offices Abroad - - - -

Other Institutions - - - - 31 December 2019 Time Deposits Total 30,020 200,855 80,913 177,307 Demand Up to 1 Up to 3 Up to 6 Up to 1 1 year Cumulative Account Name Total (1) Also includes fees and commission expenses related with funds borrowed. Deposits Month Months Months Year and over Deposits TL Bank Deposits - 7,373 - - - - - 7,373

Saving Deposits - 19,998 289,984 6,056 1,576 375 - 317,989

Public Sector Deposits ------

Commercial Deposits - 27,194 93,854 748 4 - - 121,800

Other Deposits - 278 3,132 4 6 1 - 3,421

Total - 54,843 386,970 6,808 1,586 376 - 450,583 FC - Foreign Currency Deposits - 3,426 157,214 1,894 868 199 - 163,601 Bank Deposits - 13,320 - - - - - 13,320 Precious Metal Deposits ------

Total - 16,746 157,214 1,894 868 199 - 176,921 Grand Total - 71,589 544,184 8,702 2,454 575 - 627,504

31 December 2018 Time Deposits

Demand Up to 1 Up to 3 Up to 6 Up to 1 1 year Cumulative Account Name Total Deposits Month Months Months Year and over Deposits TL Bank Deposits - 847 - - - - - 847

Saving Deposits - 4,478 251,299 6,851 540 44 263,212

Public Sector Deposits ------

Commercial Deposits - 6,986 43,759 916 - 1 - 51,662

Other Deposits - 21 1,868 4 4 - 1,897

Total - 12,332 296,926 7,771 544 45 - 317,618 FC Foreign Currency Deposits - 1,353 133,643 1,690 189 126 - 137,001 Bank Deposits - 4,434 - - - - - 4,434 Precious Metal Deposits ------

Total - 5,787 133,643 1,690 189 126 - 141,435 Grand Total - 18,119 430,569 9,461 733 171 - 459,053

224 225 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT (CONTINUED) IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT (CONTINUED)

3. Explanation on dividend income: 7. Information on other operational expenses:

31 December 2019 31 December 2018 31 December 2019 31 December 2018

Financial Assets at Fair Value Through Profit/Loss 1 152 Reserve for Employee Termination Benefits 3,554 589 Financial Assets at Fair Value Through Other Comperhensive Income - - Reserve for Bank’s Social Aid Fund Deficit - - Other - - Impairment Expenses of Tangible Assets - - Total 1 152 Depreciation Expenses of Tangible Assets 28,129 7,118 Impairment Expenses of Intangible Assets - - 4. Information on trading profit / loss (net): Impairment Expenses of Goodwill - - Depreciation Expenses on Intangible Assets 5,504 2,549 Impairment Expenses of Investments in Associates - - 31 December 2019 31 December 2018 Impairment Expenses of Assets Held for Resale - - Profit 321,480 1,392,785 Depreciation Expenses of Assets Held for Resale 98 336 Capital Market Gains 12,246 10,378 Impairment Expenses of Assets Held for Sale and Discontinued Operations - - Derivative Gains 141,061 715,708 Other Operating Expenses 58,972 70,999 Foreign Exchange Gains 168,173 666,699 Leasing Expenses related to TFRS 16 Exemptions 3,563 28,185 Loss (-) 263,560 1,409,578 Repair and Maintenance Expenses 14,073 9,424 Capital Market Losses - - Advertisement Expenses 1,530 850 Derivative Losses 131,598 487,748 Other Expenses 39,806 32,540 Foreign Exchange Losses 131,962 921,830 Loss on Sale of Assets 27 - Other(1) 98,401 29,385 Net profit related to derivative transactions resulting from foreign currency rate changes is amounting to TL 1,083 TL (31 December 2018 – TL 320,412 net profit). Total 194,685 110,976 (1) Other line mainly includes taxes paid other than corporate income tax, customs and duties paid and SDIF premium expense. 5. Information on other operating income: 8. Explanations on profit / loss before tax of continued and discontinued operations:

31 December 2019 31 December 2018 Profit before taxes for continued operations is TL 121,550 (31 December 2018 – TL 122,913 profit before tax). Profit before taxes Collection of Prior Year Provisions 4,213 - consists of net interest income amounting to TL 399,494 (31 December 2018 – TL 475,571), net fees and commission income Reverse of Prior Year Expenses 8,190 23,014 amounting to TL 124,409 (31 December 2018 – TL 96,576), personnel expenses amounting to TL 212,213 (31 December 2018 – Income on Project Appraisal 3,636 12,862 TL 180,011) and other operating expenses amounting to TL 194,685 (31 December 2018 – TL 110,976). Income from Held for Sales Assets 186 6,542 Other Income 26,759 16,953 9. Explanations on tax provision of continued and discontinued operations: Total 42,984 59,371 a) Information on current tax income or expense and deferred tax income or expense: 6. Impairment on loans and other receivables: Current tax expenses belonging to period ending on 31 December 2019 is TL 58,851 (31 December 2018 – TL 32,110). 31 December 2019 31 December 2018

Allowance for expected credit losses 85,567 149,850 There is a deferred tax expense on 31 December 2019 amounting to TL 17,204 (31 December 2018 – TL 7,619) and there is 12-Month expected credit losses (Stage 1) 38,145 17,863 deferred tax income on 31 December 2019 amounting to TL 26,015 (31 December 2018 – TL 365). Significant increase in credit risk (Stage 2) (37,792) 79,051 Credit-Impaired (Stage 3) 85,214 52,936 b) Information on deferred tax charge arising from origination or reversal of temporary differences: Impairment provisions for financial assets 10,256 22,596 Financial assets at fair value through profit or loss 8 - For the period ended 31 December 2019, the deferred tax expense arising from the origination of temporary differences amounts Financial assets at fair value through other comprehensive income 10,248 22,596 TL 17,204 (31 December 2018 – TL 7,619) and there is deferred tax income on 31 December 2019 amounting to TL 26,015 (31 Impairment provisions related to investments in associates, subsidiaries and joint ventures - - December 2018 – TL 365). Associates - - Subsidiaries - - Additionally, for the period ended 31 December 2019, the current tax effect amounting to TL (16,294) and deferred tax effect Joint Ventures - - amounting to TL (6,349), on an aggregate TL (22,643) tax effect (31 December 2018 – TL 12,982 current and TL 7,662 is deferred Other 537 2,967 tax effect total TL 20,644) which are related to transactions recognized under equity is accounted under equity accounts). Total 96,360 175,413

226 227 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

IV. EXPLANATION AND FOOTNOTES ON CONSOLIDATED PROFIT OR LOSS STATEMENT (CONTINUED) V. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 9. Explanations on tax provision of continued and discontinued operations (Continued): 1. Information on financial assets at fair value through other comprehensive income: c) Information on deferred tax income or expense reflected on the statement of profit or loss resulting from temporary differences, financial losses and tax deductions and exemptions: The decrease amounting to TL 87,815 (31 December 2018 – TL 83,246 increase) resulting from the remeasurement of the Bank's available-for-sale investments is recognized in the statement of changes in equity accumulated gains/(losses) due to revaluation For the period ended 31 December 2019, the deferred tax expense amounting to TL 17,204 (31 December 2018 – TL 7,619) and and/or reclassification of financial assets measured at fair value through other comprehensive income as period movement. deferred tax income amounting to TL 26,015 (31 December 2018 – TL 365) arising from the origination of temporary differences. There is no deferred tax income from financial loss in period ending on 31 December 2019 (31 December 2018 – None). Information on cash flow hedge: None.

10. Explanations on continued and discontinued operations net profit/loss: 2. Differences arising on revaluation of tangible fixed assets:

Net profit from continued operations is TL 71,510 (31 December 2018 – TL 83,549 net profit). Surplus amounting to TL 1,826 (31 December 2018 – TL 1,622) that occurs after purged tax effect arise from revaluation of buildings fair value included tangible fixed assets of the Parent Bank is represented as period transaction of “Tangible / Intangible 11. Explanations on net profit and loss: Assets Revaluation Reserves” on statement of changes in equity. a) If it is required that the nature of the income and expense items arising from ordinary banking transactions, size and repetition 3. Information on the foreign exchange differences: None. rate for the understanding of the Parent Bank's performance over the period, the nature and amount of these items: None. 4. Information on profit shares noticed after balance sheet date but previous to announcement of financial statements: b) The profit / loss effect of a change in the estimate made in relation to the financial statement items, if any, is likely to affect subsequent periods: None. As at the report date, there is no decision for the profit distribution of current year profit of the Parent Bank.

12. Explanations on the components of other items in the statement of profit loss exceeding 10% of the group total, or at Net profit per share for the period that has been suggested to be distributed to shareholders after balance sheet date: least 20% of the sub-accounts belonging to this group: As at the report date, there is no decision for the profit distribution of current year profit of the Parent Bank. In the consolidated statement of profit or loss; the “Other” captions presented under “Fees and Commissions Received” and “Fees and Commissions Paid” accounts, which are included in “Net Fee and Commission Income”, consist of mainly income Amounts transferred to the reserves: received and expenses paid to customers and third parties regarding banking activities.

31 December 2019 31 December 2018

Amount transferred to legal reserves from non-distributed profits 3,103 1,958

Extraordinary Reserves from Unallocated Profit and Other Amount transferred to profit reserves 58,966 37,210

5. Information on issue of shares: None.

6. Information on other share capital increase accounts in statements of changes in equity: None.

7. Other explanations:

The Group has presented actuarial difference amounting to TL 1,592 (31 December 2018 – TL (558)) arising from the changes in actuarial assumptions of the employee severance pay liability, Total Comprehensive Income section.

228 229 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VI. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED CASH FLOW STATEMENT VI. EXPLANATIONS AND FOOTNOTES ON CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

1. Information on cash and cash equivalents:: 3. Disclosures for “other” items in the statement of cash flows and effect of changes in foreign currency exchange rates on cash and cash equivalents: The components of cash and cash equivalents and the accounting policies used in the determination of these components: As at 31 December 2019, “Other” item amounting to TL 18,128 (31 December 2018 – TL 374,297) presented under “Operating Cash in vault, foreign currencies, cash in transit, cheques purchased, demand deposits in banks including demand deposit Profit Before Changes in Operating Assets and Liabilities” comprises other operating expenses except personnel expenses, other balances with the Central Bank of Turkey are described as “Cash”; interbank money market placements, time deposits in banks taxes paid, fees and commissions paid. which have original maturities shorter than three months and reverse repo receivables are described as “Cash Equivalents”. The reserve requirement amounts within the Central Bank are not considered as “cash equivalent assets” As at 31 December 2019 “Net Decrease in Other Liabilities” item amounting to TL 247,004 (31 December 2018 – TL 48,904) in the statement of cash flows. presented under “Changes in Operating Assets and Liabilities” is comprised of changes in miscellaneous payables, other external resources and tax liabilities. As at 31 December 2019, “Net Increase/decrease in Other Assets” amounting to TL 7,721 (31 a) Cash and cash equivalents at the beginning of the period: December 2018 – TL 42,825) is comprised of miscellaneous receivables and other assets.

31 December 2019 31 December 2018 The cash outflow of TL (30,824) (31 December 2018 – TL (428,763) is presented in the “net cash flows from investments” as of 31 December 2019 results from the differences arising from cash outflows and actuarial differences of financial assets from fair value Cash 1,846,590 1,493,478 other comprehensive income. Cash in Vault, Foreign Currencies and Other 48,969 36,626

Demand Deposits at Banks 1,797,621 1,456,852 The effect of the change of foreign exchange rates on the cash and cash equivalents is TL 106,011 for the year 2019

Cash Equivalents 2,007,641 474,891 (2018 – TL 70,377).

Interbank Money Market 349,216 9,600

Time Deposits at Banks 1,658,425 465,291

Total Cash and Cash Equivalents 3,854,231 1,968,369 b) Cash and cash equivalents at the end of the period:

31 December 2019 31 December 2018

Cash 1,524,706 1,846,590

Cash in Vault, Foreign Currencies and Other 52,359 48,969

Demand Deposits at Banks 1,472,347 1,797,621

Cash Equivalents 2,341,640 2,007,641

Interbank Money Market 662,376 349,216

Time Deposits at Banks 1,679,264 1,658,425

Total Cash and Cash Equivalents 3,866,346 3,854,231

2. Information on cash and cash equivalent assets of the Group that are not available for free use due to legal restrictions or other reasons:

As mentioned in the first item above, the reserve requirement amounts held under blockage within the Central Bank is not considered as cash equivalent assets in the statement of cash flows.

230 231 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VII. EXPLANATIONS ON THE PARENT BANK’S RISK GROUP VII. EXPLANATIONS ON THE PARENT BANK’S RISK GROUP (CONTINUED)

1. Information on the volume of transactions with the Parent Bank’s risk group, lending and deposits outstanding at period 1. Information on the volume of transactions with the Parent Bank’s risk group, lending and deposits outstanding at period end and income and expenses in the current period: end and income and expenses in the current period (Continued): a) 31 December 2019: The Parent Bank has borrowed loans from the Parent Bank’s Risk Group amounting TL 4,235,154 as at 31 December 2019 (31 December 2018 – TL 3,815,471). The Parent Bank has borrowed subordinated loan from the Parent Bank’s Risk Group amounting TL 1,782,420 (31 December 2018 – TL 1,579,084). Associates, Subsidiaries Bank’s Direct and Indirect Other Components Parent Bank’s Risk Group (1) and Joint Ventures Shareholders in Risk Group d) Information on forward transactions and option agreements and similar other agreements related with the Parent Bank’s risk Cash Non-Cash Cash Non-Cash Cash Non-Cash group as at 31 December 2019 – None (31 December 2018 – None). Loans and Other Receivables

Balance at the Beginning of the Period 1 2 - 259,363 25 - 2. Information on the Parent Bank’s transactions with the risk group: Balance at the End of the Period - - - 567,918 20 -

Interest and Commission Income Received ------Besides nature of the relationship, transaction type, amount and its proportion in total transaction amount, amounts of primary nd (1) As described in the 2 Subclause on Article 49 of Banking Law no.5411. transactions and their proportions in total amount, pricing policy and other matters:

The Parent Bank has TL 20,056 placements at its risk group banks as at 31 December 2019 (31 December 2018 – TL 19,259). Also In the Group’s transactions with its risk group, pricing policy and other matters are determined and applied at market conditions. the Parent Bank has TL 424 irrevocable commitment at its risk group as at 31 December 2019 (31 December 2018 – TL 93). As at 31 December 2019, proportion of cash loans to risk group in total cash loans is 0.0002% (31 December 2018 – 0.0004%) and proportion of deposits from its risk group in total deposits is 0.02% (31 December 2018 – 0.4%). Proportion of subordinated loans b) 31 December 2018: from its risk group in total subordinated loans is 99.9% (31 December 2018 – 93.5%).

Associates, Subsidiaries Bank’s Direct and Indirect Other Components As a result of other activities in the risk group of the Bank, other commission income with amount of TL 7 (31 December 2018 – TL Parent Bank’s Risk Group(1) and Joint Ventures Shareholders in Risk Group 28), other operating income with amount of TL 3,312 (31 December 2018 – TL 2,768), other commission expenses with amount of

Cash Non-Cash Cash Non-Cash Cash Non-Cash TL 2 (31 December 2018 – TL 17) and other operating expenses with amount of TL 260 (31 December 2018 – 102) are recognized

Loans and Other Receivables in the records.

Balance at the Beginning of the Period - - 548,329 168,694 88 -

Balance at the End of the Period 1 2 - 259,363 25 - In the current period, benefits provided to the Group’s key management amount to TL 24,799 (2018 – TL 19,709).

Interest and Commission Income Received - - 2,597 - - -

(1) As described in the 2nd Subclause on Article 49 of Banking Law no.5411. c) Information on deposits held by the Parent Bank’s risk group:

Current Period Associates, Subsidiaries Bank’s Direct and Other Components Parent Bank’s Risk Group(1) and Joint Ventures Indirect Shareholders in Risk Group

Deposits

Balance at the beginning of the Period - 31,221 992

Balance at the End of the Period - 203 2,261

Interest on Deposits - - 67

(1) As described in the 2nd Subclause on Article 49 of Banking Law no.5411.

Prior Period Associates, Subsidiaries Bank’s Direct and Other Components Parent Bank’s Risk Group(1) and Joint Ventures Indirect Shareholders in Risk Group

Deposits

Balance at the beginning of the Period - 70,367 519

Balance at the End of the Period - 31,221 992

Interest on Deposits - - 33

(1) As described in the 2nd Subclause on Article 49 of Banking Law no.5411.

232 233 ICBC TURKEY BANK ANONİM ŞİRKETİ ICBC TURKEY BANK ANONİM ŞİRKETİ Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 Notes to Consolidated Financial Statements for the Year Ended 31 December 2019 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated)

VIII. INFORMATION ON DOMESTIC, FOREIGN, OFF-SHORE BRANCHES AND FOREIGN REPRESENTATIVE SECTION SIX OFFICES OF PARENT BANK EXPLANATIONS ON THE INDEPENDENT AUDIT REPORT

Number of Number of Branches Employees I. EXPLANATIONS ON THE INDEPENDENT AUDIT REPORT

Domestic Branches 43 731 Country The consolidated financial statements of the Parent Bank and its subsidiary as at and for the year ended 31 December 2019 have Foreign Representative Offices - - - Total Assets Legal Capital been audited by KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (the Turkish member of KPMG International Foreign Branches - - - - - Cooperative, a Swiss entity) and the Independent Auditors’ Report dated 27 February 2020 is presented in the introduction of this Off-Shore Branches - - - - - report.

II. EXPLANATIONS AND FOOTNOTES PREPARED BY THE INDEPENDENT AUDITORS IX. EXPLANATIONS AND FOOTNOTES ON SUBSEQUENT EVENTS

Upon resignation of Mr. Mehmet Hilmi Güler, the Board of Directors decided on 24 February 2020 to appoint Mr. Serhat Yanık None. as Independent Board Member representing (A) shares as of 24 February 2020 on the condition that his appointment to be submitted to the general meeting of shareholders for approval and to complete Mr. Mehmet Hilmi Güler’s duty term pursuant to the Turkish Commercial Code, Article 363.

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