TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. The Summary Project Financial Statements of “Innovative Access to Finance Project” (the EUR Tranche) With Independent Auditors’ Report As at 31 December 2018 TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. INNOVATIVE ACCESS TO FINANCE LOAN NO: 8409-TR SUMMARY PROJECT BALANCE SHEET AS OF 31 DECEMBER 2018 (Amounts expressed in EUR unless otherwise stated.) SUMMARY PROJECT BALANCE SHEET Designated Account - Total Extended To PFIs 43.989.750 Participation Banks 19.889.750 Factoring Companies 24.100.000 TOTAL ASSETS 43.989.750 Amount due to World Bank 44.100.000 Credit Line 43.989.750 Up-front fee 110.250 Other (*) (110.250) TOTAL LIABILITIES 43.989.750 (*) “Other” comprises up-front fee (EUR 110.250). (3) TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. INNOVATIVE ACCESS TO FINANCE LOAN NO: 8409-TR DESIGNATED ACCOUNT (“DA”) STATEMENT AS OF 31 DECEMBER 2018 (Amounts expressed in EUR unless otherwise stated.) DESIGNATED ACCOUNT (“DA”) STATEMENT Opening balance as of 1 January 2018 4.927.250 IBRD advances used during the period - 4.927.250 Less: Refund to IBRD from DA during the period - Finance advanced/expenses paid in period 4.927.250 Closing balance per DA Statement - (4) TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. INNOVATIVE ACCESS TO FINANCE LOAN NO: 8409-TR NOTES TO THE SUMMARY PROJECT FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Amounts expressed in EUR unless otherwise stated.) NOTES TO THE SUMMARY PROJECT FINANCIAL STATEMENTS 1- OBJECTIVES AND NATURE OF THE PROJECT Türkiye Sınai Kalkınma Bankası (“TSKB”) received a loan of USD 190.000.000 (the USD Tranche); and EUR 44.100.000 (the EUR Tranche) for financing of Innovative Access to Finance Project from the International Bank for Reconstruction and Development (IBRD). The objectives of the Project is to improve access to longer term Islamic finance and to factoring for small and medium enterprises and export oriented enterprises. The project consists of the establishment and operation of a financing facility within TSKB for the provision of financing (through Subsidiary Financing) to PFIs (“Participating Financial Institution”) for said PFIs to provide financing (through Sub-financing) to SMEs (“Small and Medium Enterprises”) and EOEs (“Export Oriented Enterprises”) to carry out Sub-projects. The lending instrument for the IA2F project is the World Bank's Variable Spread Loan (FSL) in two currencies (US Dollar and EUR) with a maturity till 2041 with a grace period that ends in 2021. The instrument will have a variable spread over the Reference Rate for the loan currency, and is planned as a loan with a long maturity both for the Bank loan to the Borrower (TSKB), and for the subsidiary loans from the Borrower to participating financial intermediaries. Under the Guarantee of Republic of Turkey, as the Lender of Innovative Access to Finance Loan Project, IBRD is on-lending the loan to TSKB. The on-lending is being carried out by means of subsidiary finance agreements between TSKB and Participating Financial Institutions (PFI). The PFI is in turn engaging in sub-loans to Beneficiary Enterprises satisfying a set of eligibility criteria, according to agreed sub-loan terms and conditions and safeguard review procedures and procurement guidelines. 2- OPERATIONS OF THE PROJECT IMPLEMENTING AGENCY Headquartered in İstanbul and established in 1950 with the support of World Bank and the Central Bank of Turkey and shareholding of private commercial banks, Türkiye Sınai Kalkınma Bankası (TSKB) is Turkey’s first privately-owned development and investment bank. Since the day it was founded, TSKB has been supporting Turkey’s sustainable growth with its deep knowledge and experience as well as the broad array of corporate banking, investment banking, and consultancy services that it provides its customers. Through financial subsidiaries offering real estate and sustainability solutions, TSKB also adds value to its customers’ investments. The bank conducts its business through its head office in İstanbul and through its Ankara and İzmir branches. Ever since its inception, TSKB has been engaging in business partnerships with supranational financial institutions, international development agencies, and banks and financial institutions all over the world through which it brings qualified and themed global funds together with investments undertaken by the Turkish business world. With a wide range of credit options that include corporate lending, project finance, and much more, TSKB provides financing support to sustainable investment projects in many different sectors. At the same time and in its capacity as an effective investment bank, TSKB also gives its customers the benefit of its international-class investment banking experience with products and services that have been carefully crafted to meet their specific needs. As a bank that recognizes and internalizes the economic, environmental, and social aspects of sustainability, TSKB has undertaken many initiatives and it commands respect on that front not just in Turkey but abroad as well. TSKB is one of the pioneers in sustainable banking in Europe. (5) TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. INNOVATIVE ACCESS TO FINANCE LOAN NO: 8409-TR NOTES TO THE SUMMARY PROJECT FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Amounts expressed in EUR unless otherwise stated.) NOTES TO THE PROJECT FINANCIAL STATEMENTS (Continued) 3- MAIN ACCOUNTING POLICIES The Bank prepares its summary project financial statements on cash basis. Accordingly, the Bank does not calculate any interest income and expense accrual for the related period. Uses of Funds by Participating Financial Institutions and names of participation banks and factoring companies in Project Balance Sheet are not presented as of 31 December 2018. Expenditure list from beneficiary enterprises are recorded in local or foreign currency and converted to USD or EUR according to the type of the Tranche by using the prevailing exchange rates as of the date of the procurement realized by those enterprises. Disbursements to the PFIs are recorded in USD or EUR according to the type of the Tranche, they would like to draw down. The collections from the PFIs are also made in the corresponding currency. 4- RESTRICTED USE OF FUNDS AND OTHER ASSETS In accordance with the loan agreement between the Bank and IBRD, funds available in the Designated Account are restricted to project purposes only. 5- INNOVATIVE ACCESS TO FINANCE LOAN IBRD agreed to lend to TSKB a total amount of USD 190.000.000 and EUR 44.100.000 as Innovative Access to Finance Project. The front-end fee equals to 0,25% of the Loan amount. The amounts allocated to be extended as participation bank and factoring company PFIs (“Participating Financial Institutions”) equal to USD 189.525.000 and EUR 43.989.750. The loan has a maturity till 2041 and repayments will start in the year 2021. In order to draw down funds under the Innovative Access to Finance Project, TSKB is entering into subsidiary loan agreements with the Participating Financial Institutions. The PFIs enter into sub-loan with beneficiary enterprises. The sub-loans are in accordance with the Innovative Access to Finance sub-loan terms and conditions and prudent banking practices. Sub-loans are being provided for financing of raw material, spare parts, plant and equipment, and works both for working capital as well as investment purposes. TSKB is obliged to pay a front-end fee to IBRD in an amount of USD 475.000 for the Dollar Tranche and EUR 110.250 for the Euro Tranche. As of 31 December 2018, the total usage of the loan portfolio is given as; Total Support Total Usage Collections Source (EUR) (EUR) (EUR) World Bank /Treasury 43.989.750 43.989.750 - (6)