AKSİGORTA A.Ş. — Interim / Quarterly Report 2017

Apr 20, 2017

Aksigorta Anonim Şirketi Interim condensed financial statements for the three months period ended January 1 – March 31, 2017

Aksigorta Anonim Şirketi

Table of contents Interim statement of financial position Interim income statement Interim statement of comprehensive income Interim statement of changes in equity Interim statement of cash flows Selected notes to the interim condensed financial statements	Page 1 2 3 4 5 6-31

Aksigorta A.Ş.

Interim Statement of financial position as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Unaudited Audited
Assets Note March 31, 2017 December 31, 2016
Total current assets 3.114.552.901 2.720.121.494
Cash and cash equivalents 6, 7 879.227.454 451.153.119
Securities pledged under repurchase agreements 7, 8 77.257.178 30.045.425
Financial assets
Debt securities:
- Available for sale at company’s risk 6 537.782.372 863.687.512
- Available for sale at insurees' risk 6 2.530.185 2.530.185
Premium receivables 465.902.782 395.918.459
Due from reinsurers 30.954 24.180.701
Reinsurance share of insurance liabilities 10 1.015.979.897 833.986.834
Deferred acquisition costs 71.091.432 74.244.366
Derivative financial assets - -
Other current assets 64.750.647 44.374.893
Total non-current assets 77.140.960 89.245.109
Tangible assets 27.091.435 28.001.832
Investment properties 80.126 80.126
Intangible assets 39.842.865 41.176.250
Financial assets
Equity securities:
- Available for sale 6 220.889 220.889
Deferred income tax assets 9.899.865 19.558.809
Other non-current assets 5.780 207.203
Total assets 3.191.693.861 2.809.366.603
Unaudited Audited
Liabilities Note March 31, 2017 December 31, 2016
Total current liabilities 2.721.277.232 2.375.893.942
Insurance liabilities 10 2.252.528.166 2.044.598.155
Payables to reinsurers 11 313.643.130 202.020.282
Derivative financial liabilities - -
Obligations under repurchase agreements 8 77.257.178 30.031.438
Provisions for other liabilities and charges 30.904.082 36.839.062
Trade and other payables 11 46.944.676 62.405.005
Current income tax liabilities - -
Total non-current liabilities 6.424.748 6.335.367
Provision for retirement benefit obligation 12 6.424.748 6.335.367
Total equity 463.991.881 427.137.294
Shareholders' equity 9 306.000.000 306.000.000
Legal and other reserves 9 95.403.929 178.468.101
Actuarial loss arising from employee benefit 9 (3.501.170) (3.472.406)
Hedging reserve 9 19.042.448 16.816.074
Available-for-sale investments fund 9 (5.872.466) (7.203.045)
Retained earnings/accumulated deficit 9 52.919.140 (63.471.429)
Total equity and liabilities 3.191.693.861 2.809.366.603
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The accompanying notes form an integral part of these financial statements.

1

Aksigorta A.Ş.

Interim income statement

for the period January 1 – March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Unaudited Unaudited
Income Statement Note March 31, 2017 March 31, 2016
Insurance premium revenue 4, 13 491.812.484 399.461.578
Insurance premium ceded to reinsurers 4, 13 (205.463.593) (154.186.316)
Net insurance premium revenue 4, 13 286.348.891 245.275.262
Investment income 33.075.035 26.534.055
Commission income 52.685.770 43.101.236
Other operating income 1.091.187 794.906
Net income 373.200.883 315.705.459
Insurance claims 15 (305.192.835) (214.410.148)
Insurance claims recovered from reinsurers 15 112.693.738 53.414.831
Net insurance claims 4, 15 (192.499.097) (160.995.317)
Commission expense (98.345.745) (93.209.290)
Expenses for marketing and administration 14 (35.590.743) (34.204.030)
Other operating expenses (8.693.872) (6.352.901)
Insurance claims and expenses (335.129.457) (294.761.539)
Results of operating activities 38.071.426 20.943.920
Foreign exchange gain / (loss), net 4.031.868 (3.880.103)
Profit before tax 42.103.294 17.063.817
Income tax expense (8.776.897) (3.053.772)
Profit for the period 33.326.397 14.010.045
Earnings per share 0,0011 0,0005
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The accompanying notes form an integral part of these financial statements.

2

Aksigorta A.Ş.

Interim statement of comprehensive income for the period January 1 – March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Unaudited Unaudited
Statement of comprehensive income Note March 31, 2017 March 31, 2016
Profit for the period 33.326.397 14.010.045
Other comprehensive income to be reclassified to profit or loss in
subsequent periods:
Change in available-for-sale financial assets fund, net off deferred tax 9 1.330.581 1.724.465
Cash flow hedging, net off deferred tax 9 2.226.375 (1.266.891)
Net other comprehensive income to be reclassified to profit or loss in
3.556.956 457.574
subsequent periods
Other comprehensive income not being reclassified to profit or loss
in subsequent periods:
Actuarial loss, net off deferred tax 9 (28.764) (28.302)
Net other comprehensive income not being reclassified to profit or
(28.764) (28.302)
loss in subsequent periods
Other comprehensive income, net of tax 3.528.192 429.272
Total comprehensive income for the year, net of tax 36.854.589 14.439.317
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The accompanying notes form an integral part of these financial statements.

3

Aksigorta A.Ş.

Interim statement of changes in equity for the period January 1 - March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

March 31, 2017

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March 31, 2017 Unaudited
Available-for-sale investment Revaluation Actuarial loss arising from Cash flow Retained
Note Share capital funds fund Legal reserves employee benefit hedging earnings Total
Balances at December 31, 2016 9 306.000.000 (7.203.047) - 178.468.101 (3.472.406) 16.816.075 (63.471.429) 350.550.209
Profit for the year - - - - - - 33.326.397 33.326.397
Transfer - - - (83.064.172) - - 83.064.172 -
Other comprehensive income - 1.330.581 - - (28.764) 2.226.375 - 3.528.192
Total comprehensive income 9 - 1.330.581 - (83.064.172) (28.764) 2.226.375 116.390.569 36.854.589
Dividend payment - - - - - - - -
Balances at March 31, 2017 9 306.000.000 (5.872.466) - 95.403.929 (3.501.170) 19.042.450 52.919.140 463.991.883
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March 31, 2016									Unaudited
			Available-for-sale investment	Revaluation		Actuarial loss arising from	Cash flow	Retained
	Note	Share capital	funds	fund Legal reserves		employee benefit	hedging	earnings	Total
Balances at December 31, 2015	9	306.000.000	(5.945.992)	-	178.468.101	**(3.744.443) **	9.794.452	**(134.021.909) **	350.550.209
Profit for the year		-	-	-	-	-	-	70.550.480	70.550.480
Transfer		-	-	-	-	-	-	-	-
Other comprehensive income		-	(1.257.055)	-	-	272.037	7.021.623	-	6.036.605
Total comprehensive income	9	-	(1.257.055)	-	-	272.037	7.021.623	70.550.480	76.587.085
Dividend payment		-	-	-	-	-	-	-	-
Balances at December 31, 2016	9	306.000.000	(7.203.047)	-	178.468.101	**(3.472.406) **	16.816.075	**(63.471.429) **	427.137.294

The accompanying notes form an integral part of these financial statements.

4

Aksigorta A.Ş.

Interim statement of cash flows

for the year period January 1 – March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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January 1 – January 1 –
Cash Flow Statement Note March 31, 2017 March 31, 2016
Cash inflows from insurance operations 448.720.449 388.748.853
Cash outflows from insurance operations (305.976.325) -291.802.708
Income tax payment (13.478.172) -8.048.351
Cash inflows/(outflows )from operational expenses 18.342.420 (18.057.238)
Net cash flows from operating activities 147.608.372 70.840.556
Tangible and intangible asset acquisitions (283.766) (2.882.195)
Financial asset acquisitions / disposals 6 325.905.140 350.476.871
Interest received 23.005.394 26.255.757
Other cash inflows/(outflows) (21.437.448) (25.127.183)
Net cash flows from investing activities 327.189.320 348.723.250
Dividends paid - -
Net cash flows from financing operations - -
Net increase/(decrease) in cash and cash equivalents 474.797.692 419.563.806
Cash and cash equivalents at the beginning of the period 480.940.578 546.650.423
Cash and cash equivalents at the end of the period 6, 7 955.738.270 966.214.229
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The accompanying notes form an integral part of these financial statements.

5

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

1. General Information

Aksigorta Anonim Şirketi (“the Company”) is a subsidiary of Hacı Ömer Sabancı Holding A.Ş. and Ageas Insurance International N.V. as of March 31, 2017. 38.02% (December 31, 2016: 38.02%) of the Company is issued in Borsa İstanbul (“BİST”) (Note 2.3).

Agreement about the sale of %50 of 18.965.880.200 units of Aksigorta A.Ş. shares with TL 189.658.802 nominal value that belong to H.Ö. Sabancı Holding (“Holding”) portfolio was signed with Ageas Insurance International N.V. at 18 February 2011. At the date of 29 July 2011, 9.482.940.100 units of Aksigorta A.Ş. shares that correspond to %50 of the Holding’ s portfolio have been transferred to Ageas Insurance International N.V. with the sale price (excluding the corrections) of USD 220.029.000. According to the joint administration agreement that signed with Ageas Insurance International N.V. at 18 February 2011, Holding’s previous administrative controls over Aksigorta A.Ş. are going to remain equally with Ageas Insurance International N.V.

The Company is a corporation, which was established in accordance with the requirements of Turkish Commercial Code and registered in Turkey as at 25 April 1960. The Company is located at Poligon Cad. Buyaka 2 Sitesi No:8 Kule:1 Kat:0-6 Ümraniye 34771, İstanbul.

The Company’s main operations include insurance activities based on non-life insurance branches, including primarily fire, marine, accident, personal accident, engineering, agriculture and health.

Average numbers of employees during the period by category are as follows:

	March 31, 2017	December 31, 2016
Top and middle management	100	111
Otherpersonel	513	493
Total	613	604

Remuneration and fringe benefits provided to top management such as; chairman and members of the board of directors, managing director and assistant managing directors amount to 1.441.185 TL in total for January 1 - March 31, 2017 (January 1 - March 31, 2016: TL 1.364.710).

Financial statements include only one company (Aksigorta A.Ş.) and the Company does not have any subsidiaries or affiliates as of March 31, 2017 (December 31, 2016: None).

2. Summary of significant accounting policies

2.1 Basis of preparation

The interim condensed financial statements at March 31, 2017 have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (“IAS 34”). The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual financial statements as at December 31, 2016.

The Company maintains its books of account and prepares its statutory financial statements in Turkish Lira (“TL”) in accordance with the Insurance Law numbered 5684 and the regulations issued for insurance and reinsurance companies by the Undersecretariat of Treasury which is also the functional currency of the Company. These financial statements are based on the statutory records, with adjustments and reclassifications, for the purpose of fair presentation in accordance with IFRS.

6

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise its judgements in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to financial statements are disclosed Note 3.

Comparative information and restatement of prior period financial statements

The Company’s statement of financial position as of March 31, 2017 is presented in comparison with its statement of financial position as of December 31, 2016; statement of comprehensive income, statement of changes in equity and statement of cash flows for the period between January 1 – March 31, 2017 are presented in comparison with its statement of comprehensive income, statement of changes in equity and statement cash flows for the period between January 1 – March 31, 2016.

2.2 Adoption of New and Revised Standards

The new standards, amendments and interpretations

The accounting policies adopted in preparation of the financial statements as at March 31, 2017 are consistent with those of the previous financial year, except for the adoption of new and amended IFRS and IFRIC interpretations effective as of January 1, 2016. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs.

• i) The new standards, amendments and interpretations which are effective as at January 1, 2016 are as follows:

IFRS 11 Acquisition of an Interest in a Joint Operation (Amendment)

IFRS 11 is amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. This amendment clarifies that the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in IFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in IFRS 3 and other IFRSs except for those principles that conflict with the guidance in this IFRS. In addition, the acquirer shall disclose the information required by IFRS 3 and other IFRSs for business combinations. The amendments did not have an impact on the financial position or performance of the Company.

7

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

The amendments to IAS 16 and IAS 38, have prohibited the use of revenue-based depreciation for property, plant and equipment and significantly limiting the use of revenue-based amortisation for intangible assets. The amendments did not have an impact on the financial position or performance of the Company.

IAS 16 Property, Plant and Equipment and IAS 41 Agriculture (Amendment) – Bearer Plants

IAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oil palms should be accounted for in the same way as property, plant and equipment in IAS 16. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. Because their operation is similar to that of manufacturing, either the cost model or revaluation model should be applied. The produce growing on bearer plants will remain within the scope of IAS 41, measured at fair value less costs to sell. The amendment is not applicable for the Company and did not have an impact on the financial position or performance of the Company.

IAS 27 Equity Method in Separate Financial Statements (Amendments to IAS 27)

IASB issued an amendment to IAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either:

• At cost

• In accordance with IFRS 9,

Or

• Using the equity method defined in IAS 28

IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and IAS 28)

Amendments issued to IFRS 10, IFRS 12 and IAS 28, to address the issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated Financial Statements. The amendment is not applicable for the Company and did not have an impact on the financial position or performance of the Company.

IAS 1: Disclosure Initiative (Amendments to IAS 1)

Amendments issued to IAS 1. Those amendments include narrow-focus improvements in the following five areas: Materiality, Disaggregation and subtotals, Notes structure, Disclosure of accounting policies, Presentation of items of other comprehensive income (OCI) arising from equity accounted investments. These amendments did not have significant impact on the notes to the consolidated financial statements of the Company.

8

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

Annual Improvements to IFRSs - 2012-2014 Cycle

IASB issued, Annual Improvements to IFRSs 2012-2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – clarifies that changes in methods of disposal (through sale or distribution to owners) would not be considered a new plan of disposal, rather it is a continuation of the original plan

• IFRS 7 Financial Instruments: Disclosures – clarifies that i) the assessment of servicing contracts that includes a fee for the continuing involvement of financial assets in accordance with IFRS 7; ii) the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report

• IAS 19 Employee Benefits – clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located

• IAS 34 Interim Financial Reporting – clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report

These amendments did not have any impact on the financial position or performance of the Company.

ii) Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the financial statements are as follows. The Company will make the necessary changes if not indicated otherwise, which will be affecting the financial statements and disclosures, when the new standards and interpretations become effective.

IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)

Amendments issued to IFRS 10 and IAS 28, to address the acknowledged inconsistency between the requirements in IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognised only to the extent of unrelated investors’ interests in that former subsidiary. In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted. An entity shall apply those amendments prospectively. The amendment is not applicable for the Company and will not have an impact on the financial position or performance of the Company.

9

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

IFRS 15 Revenue from Contracts with Customers

The IASB issued IFRS 15 Revenue from Contracts with Customers. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). IFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Company does not expect that the standard will have significant impact on the financial position or performance of the Company.

Clarifications to IFRS 15 'Revenue from Contracts with Customers' (Amendment)

IASB has published final clarifications to IFRS 15 in April 2016. The amendments address three of the five topics identified (identifying performance obligations, principal versus agent considerations, and licensing) and provide some transition relief for modified contracts and completed contracts. The amendments are effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted. The amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments. The final version of IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted by applying all requirements of the standard. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as FVTPL without applying the other requirements in the standard.

IFRS 16 Leases

The IASB has published a new standard, IFRS 16 'Leases'. The new standard brings most leases onbalance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 'Leases' and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 'Revenue from Contracts with Customers' has also been applied. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.

10

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments)

The IASB issued amendments to IAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Company/Group applies this relief, it shall disclose that fact. The amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

IAS 7 Statement of Cash Flows (Amendments)

The IASB issued amendments to IAS 7 'Statement of Cash Flows'. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity's financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Company/Group first applies those amendments, it is not required to provide comparative information for preceding periods. The amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

IFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments)

The IASB issued amendments to IFRS 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments, provide requirements on the accounting for:

a. the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;

b. share-based payment transactions with a net settlement feature for withholding tax obligations; and c. a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

These amendments are to be applied for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

11

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

IFRS 4 Insurance Contracts (Amendments)

In September 2016, the IASB issued amendments to IFRS 4 Insurance Contracts. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard will:

a. give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 Financial instruments is applied before the new insurance contracts Standard is issued; and

b. give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 Financial instruments until 2021. The entities that defer the application of IFRS 9 Financial instruments will continue to apply the existing financial instruments Standard—IAS 39.

These amendments are to be applied for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.

IAS 40 Investment Property: Transfers of Investment Property (Amendments)

The IASB issued amendments to IAS 40 'Investment Property '. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. These amendments are to be applied for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

The interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.

The Interpretation states that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity is not required to apply this Interpretation to income taxes; or insurance contracts (including reinsurance contracts) it issues or reinsurance contracts that it holds.

The interpretation is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted. The interpretation is not applicable for the Company and will not have an impact on the financial position or performance of the Company.

12

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

2. Summary of significant accounting policies (Continued)

2.2 Adoption of New and Revised Standards (Continued)

Annual Improvements to IFRSs - 2014-2016 Cycle

The IASB issued Annual Improvements to IFRS Standards 2014–2016 Cycle, amending the following standards:

• IFRS 1 First-time Adoption of International Financial Reporting Standards: This amendment deletes the short-term exemptions about some IFRS 7 disclosures, IAS 19 transition provisions and IFRS 10 Investment Entities. These amendments are to be applied for annual periods beginning on or after January 1, 2018.

• IFRS 12 Disclosure of Interests in Other Entities: This amendment clarifies that an entity is not required to disclose summarised financial information for interests in subsidiaries, associates or joint ventures that is classified, or included in a disposal group that is classified, as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. These amendments are to be applied for annual periods beginning on or after January 1, 2017.

IAS 28 Investments in Associates and Joint Ventures: This amendment clarifies that the election to measure an investment in an associate or a joint venture held by, or indirectly through, a venture capital organisation or other qualifying entity at fair value through profit or loss applying IFRS 9 Financial Instruments is available for each associate or joint venture, at the initial recognition of the associate or joint venture. These amendments are to be applied for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company.

2.3 Share capital

As of March 31, 2017, the Company’s nominal capital is TL 306.000.000 (December 31, 2016: TL 306.000.000). Share capital is represented by 30.600.000.000 of equity shares having a nominal amount of TL 0,01 each.

The share capital structure of the Company is as follows:

	**March **	31, 2017	December 31, 2016	December 31, 2016
Name of shareholders	Share	Share amount	Share	Share amount
H. Ömer Sabancı Holding A.Ş.	36.00	110.160.000	36.00	110.160.000
Ageas Insurance International NV	36.00	110.160.000	36.00	110.160.000
Publicly quoted shares	28.00	85.680.000	28.00	85.680.000
Total	100.00	306.000.000	100.00	306.000.000

Agreement about the sale of 50% of 18.965.880.200 units of Aksigorta A.Ş. shares with nominal value of TL 189.658.802 that belong to H.Ö. Sabancı Holding (“Holding”) portfolio, was signed with Ageas Insurance International N.V. at 18 February 2011. 9.482.940.100 units of Aksigorta A.Ş. shares that correspond to 50% of the Holding’ s portfolio has been trasferred to Ageas Insurance International N.V. on 29 July 2011 with a sale price of USD 220.029.000 except for adjustments to sale price.

The Company has accepted the registered capital system set out in accordance with the provisions of Law No: 2499 and applied the system as of June 15, 2000 upon the permission no: 67/1039 granted by the Capital Markets Board. As of March 31, 2017, the Company’s registered share capital is TL 500.000.000 (December 31, 2016: TL 500.000.000).

Other information about Company’s share capital is explained in Note 9.

13

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

3. Critical accounting estimates and judgements

Preparation of financial statements requires the use of estimations and assumptions which may affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the statement of financial position date and reported amounts of income and expenses during the financial period. Accounting estimates and assumptions are continuously evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under current circumstances. Although the estimations and assumptions are based on the best knowledge of the management for existing events and operations, they may differ from the actual results.

The estimation of the ultimate liability for technical expenses that can be incurred for the existing insurance contracts is one of the most critical accounting estimates. Estimation of the insurance liabilities, by nature, includes the evaluation of several uncertainties.

4. Segment information

Information related to the operational reporting made by the Company to the chief operating decisionmaker in accordance with the “IFRS 8 - Operating Segments” is disclosed in this part.

Numerical limits in “IFRS 8 - Operating Segments” is also considered as the reporting to the chief operating decision-maker in the determination of segments and the premium production and net technical income of the segments are considered while determining a separate operating segment.

The Company has been operating in Turkey. Since the effect of the foreign operations on financial statements is extremely low, geographic segment information is not given.

14

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

4. Segment information (continued)

Segment results for period January 1 - March 31, 2017 is as follows:

January 1 - March 31, 2017	Fire	Marine	Motor Own Damage (MOD)	Motor Third Party Liability General Losses	Health	Other	Undistributed	Total
TECHNICAL INCOME	33.317.351	4.897.783	137.413.091	58.929.032 16.895.262	15.032.758	19.863.614		286.348.891
Earned Premiums (Net of Reinsurer Share)	33.317.351	4.897.783	137.413.091	58.929.032 16.895.262	15.032.758	19.863.614		286.348.891
Premiums (Net of Reinsurer Share)	39.668.660	7.186.088	114.291.712	62.098.944 21.507.232	19.568.867	20.196.095		284.517.598
Change in Unearned Premiums Reserve
(Net of Reinsurers Shares and
Reserves Carried Forward) (+/-)	(6.351.309)	(2.288.305)	23.121.380	(3.169.913) (4.611.970)	(4.536.110)	(332.481)		1.831.293
TECHNICAL EXPENSES	**(35.670.913) **	**(1.841.697) **	**(146.517.411) **	**(56.312.756) (15.598.664) **	**(10.947.410) **	(14.463.649)		(281.352.500)
Total Claims (Net of Reinsurer Share)	(21.895.738)	(756.350)	(107.450.624)	(48.342.757) (5.481.232)	(662.834)	(7.909.562)		(192.499.097)
Claims Paid (Net of Reinsurer Share)	(15.516.027)	(1.035.118)	(105.959.480)	(36.204.897) (4.030.182)	(1.943.240)	(3.618.118)		(168.307.062)
Changes in Outstanding Claims Reserve								-
(Net of Reinsurer Share and Reserves
Carried Forward) (+/-)	(6.379.712)	278.768	(1.491.144)	(12.137.860) (1.451.050)	1.280.406	(4.291.445)		(24.192.035)
Commissions (Net)	(5.764.067)	(494.721)	(24.389.608)	(730.025) (5.816.422)	(5.528.454)	(2.936.678)		(45.659.975)
Operating Expenses	(7.076.329)	(453.210)	(11.463.661)	(5.586.614) (3.326.479)	(4.624.351)	(3.060.100)		(35.590.743)
Other OperatingIncome / Expenses	(934.778)	(137.416)	(3.213.518)	(1.653.360) (974.532)	(131.771)	(557.310)		(7.602.685)
	**(2.353.561) **	3.056.085	**(9.104.320) **	2.616.276 1.296.599	4.085.348	5.399.965		4.996.391
Investment income	-	-	-	- -	-	-	33.075.035	33.075.035
Foreign exchange income	-	-	-	- -	-	-	4.031.868	4.031.868
Tax expense	-	-	-	- -	-	-	(8.776.897)	(8.776.897)
Net Profit /(Loss)	**(2.353.561) **	3.056.085	**(9.104.320) **	2.616.276 1.296.599	4.085.348	5.399.965	28.330.006	33.326.397

15

Aksigorta A.Ş.

Notes to the interim condensed financial statements

as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

4. Segment information (continued)

Segment results for period January 1 - March 31, 2016 is as follows:

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----- Start of picture text -----

Motor Own Damage Motor Third Party General
(MOD) Liability Losses
January 1 - March 31, 2016 Fire Marine Health Other Undistributed Total
TECHNICAL INCOME 32.774.895 5.656.638 113.238.718 26.028.161 17.125.444 33.424.566 17.024.220 - 245.272.642
Earned Premiums (Net of Reinsurer Share) 32.774.895 5.656.638 113.238.718 26.028.161 17.125.444 33.424.566 17.024.220 - 245.272.642
Premiums (Net of Reinsurer Share) 36.682.249 7.393.114 105.265.825 33.348.686 17.811.703 12.467.823 16.862.500 - 229.831.899
Change in Unearned Premiums Reserve
(Net of Reinsurers Shares and
Reserves Carried Forward) (+/-) (3.907.354) (1.736.476) 7.972.893 (7.320.525) (686.259) 20.956.744 161.720 - 15.440.742
TECHNICAL EXPENSES (25.054.386) (3.303.585) (120.719.305) (34.722.904) (15.414.884) (37.774.989) (12.799.978) - (249.790.030)
Total Claims (Net of Reinsurer Share) (11.820.029) (2.056.855) (89.115.131) (28.747.285) (6.613.142) (23.285.385) (7.274.698) - (168.912.525)
Claims Paid (Net of Reinsurer Share) (13.535.099) (1.065.927) (87.264.252) (30.313.125) (5.384.295) (26.263.639) (4.303.188) - (168.129.525)
Changes in Outstanding Claims Reserve
(Net of Reinsurer Share and Reserves
Carried Forward) (+/-) 1.715.070 (990.928) (1.850.879) 1.565.839 (1.228.847) 2.978.254 (2.971.510) - (783.000)
Commissions (Net) (5.709.377) (848.946) (21.545.953) (3.462.695) (5.235.078) (8.286.438) (2.105.357) - (47.193.844)
Operating Expenses (6.321.347) (286.081) (9.062.389) (2.193.190) (3.146.197) (5.568.740) (2.672.179) - (29.250.123)
Other Operating Income / Expenses (1.203.633) (111.704) (995.831) (319.733) (420.468) (634.426) (747.743) - (4.433.538)
7.720.509 2.353.053 (7.480.587) (8.694.743) 1.710.560 (4.350.423) 4.224.242 - (4.517.389)
Investment income - - - - - - - 25.460.899 25.460.899
Foreign exchange income - - - - - - - (3.877.463) (3.877.463)
Tax expense - - - - - - - (3.056.001) (3.056.001)
Net Profit / (Loss) 7.720.509 2.353.053 (7.480.587) (8.694.743) 1.710.560 (4.350.423) 4.224.242 18.527.435 14.010.047
----- End of picture text -----

16

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

5. Management of insurance and financial risk

Foreign currency risk

The Company is exposed to foreign exchange risk through the impact of rate changes at the translation of Turkish Lira pertaining to foreign currency denominated assets and liabilities. These risks are monitored by the analysis of exchange rate position. The details of the Company’s foreign currency denominated assets and liabilities as of March 31, 2017 and December 31, 2016 are disclosed below:

March 31, 2017

==> picture [411 x 517] intentionally omitted <==

----- Start of picture text -----

Amount in Foreign
Banks (Foreign Currency) Exchange Rate Amount (TL)
Currency
USD 10.038.491 3,6386 36.526.053
EUR 2.427.129 3,9083 9.485.948
GBP 31.344 4,5169 141.578
CHF 53.153 3,6437 193.674
Other 31
Total 46.347.284
Amount in Foreign
Receivables from Insurance Operations Exchange Rate Amount (TL)
Currency
USD 32.837.667 3,6386 119.483.135
EUR 7.794.192 3,9083 30.462.041
GBP 88.824 4,5169 401.209
CHF 188.341 3,6437 686.258
Other 10.060
Total 151.042.703
Amount in Foreign
Marketable Securities Exchange Rate Amount (TL)
Currency
USD 24.239.687 3,6386 88.198.526
Total 88.198.526
Amount in Foreign
Outstanding Claims Reserve Exchange Rate Amount (TL)
Currency
USD (6.820.978) 3,6386 (24.818.812)
EUR (1.171.297) 3,9083 (4.577.781)
Other (5.541)
Total (29.402.133)
Amount in Foreign
Payables from Insurance Operations Exchange Rate Amount (TL)
Currency
USD (29.950.545) 3,6386 (108.978.053)
EUR (7.873.793) 3,9083 (30.773.145)
Other (1.281.144)
Total (141.032.342)
Amount in Foreign
Off-balance sheet liabilities Exchange Rate Amount (TL)
Currency
USD (28.706.320) 3,6386 (104.450.816)
Total (104.450.816)
Net Foreign Currency Position 10.703.221
----- End of picture text -----

17

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

5. Management of insurance and financial risk (continued)

December 31,2016
Banks (Foreign Currency)	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	7.685.137	3,5192	27.045.534
EUR	1.146.085	3,7099	4.251.861
GBP	109.075	4,3189	471.084
CHF	55.429	3,4454	190.975
Other			2.832
Total			31.962.286
Receivables from Insurance Operations	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	24.560.886	3,5192	86.434.670
EUR	4.765.794	3,7099	17.680.619
GBP	61.864	4,3189	267.184
CHF	8.328	3,4454	28.693
Other			9.663
Total			104.420.830
Marketable Securities	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	23.881.989	3,5192	84.045.496
Total			84.045.496
Outstanding Claims Reserve	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	(6.397.972)	3,5192	(22.515.743)
EUR	(1.327.179)	3,7099	(4.923.701)
Other			(17.841)
Total			(27.457.285)
Payables from Insurance Operations	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	(24.072.894)	3,5192	(84.717.329)
EUR	(4.457.973)	3,7099	(16.538.634)
Other			(779.160)
Total			(102.035.123)
Off-balance sheet liabilities	Amount in Foreign Currency	Exchange Rate	Amount (TL)
USD	(16.358.049)	3,5192	(57.567.247)
Total			(57.567.247)
Net Foreign Currency Position			33.368.955

18

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

5. Management of insurance and financial risk (continued)

Liquidity risk

Liquidity risk is the possibility of non-performance of the Company’s due liabilities. Events that give rise to funding shortages, such as; market deteriorations and decrease in credit ratings, are the main reasons of liquidity risk. The Company manages its liquidity risk through having adequate cash and cash equivalents in order to fulfill its current and possible liabilities by allocating its funds.

Table of liquidity risk as of March 31, 2017 is as follows:

March 31, 2017	Up to 1 month	1 – 3 months	3 months to 1year	1 – 5years 5years and over	1 – 5years 5years and over	No maturity	Total
Cash and cash equivalents	405.299.392	463.401.149	-	-	-	10.531.687	879.232.228
Securities pledged under repurchase agreements		77.252.404					77.252.404
Financial assets available for sale	11.305.537	7.065.463	37.986.404	195.080.442	74.408.406	211.936.120	537.782.372
Investments on policyholders’ risk	-	-	-	2.530.185	-	-	2.530.185
Receivables from main operations	126.721.981	162.582.121	176.598.680	-	-	-	465.902.782
Due from reinsurance companies	-	-	30.954	-	-	-	30.954
Reinsurers’ share of insurance liabilities	166.201.954	216.613.893	633.164.050	-	-	-	1.015.979.897
Equity securities	-	-	-	-	-	220.889	220.889
Other assets	-	135.842.079	-	-	-	-	135.842.079
Total Assets	709.528.864	1.062.757.109	847.780.088	197.610.627	74.408.406	222.688.696	3.114.773.790
Derivative financial liabilities							-
Obligations under repurchase agreements	77.257.178						77.257.178
Insurance liabilities	327.788.478	546.237.676	1.378.502.012	-	-	-	2.252.528.166
Due to reinsurers	-	-	313.643.130	-	-	-	313.643.130
Trade and other payables	-	-	155.105.936	-	-	-	155.105.936
Total liabilities and shareholders' equity	405.045.656	546.237.676	1.847.251.078	-	-	-	2.798.534.410

19

Aksigorta A.Ş.

Notes to the interim condensed financial statements

as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Liquidity surplus/(deficit) 304.483.208 516.519.433 (999.470.990) 197.610.627 74.408.406 222.688.696 316.239.380

5. Management of insurance and financial risk (continued)

Table of liquidity risk as of December 31, 2016 is as follows: ,

December 31, 2016	Up to 1 month	1 – 3 months	3 months to 1year	1 – 5years	5years and over	No maturity	Total
Cash and cash equivalents	141.435.488	291.689.248	-	-	-	18.028.383	451.153.119
Securities pledged under repurchase agreements	-	30.045.425	-	-	-	-	30.045.425
Financial assets available for sale	378.786.360	11.068.599	46.032.680	142.741.726	74.677.041	210.381.106	863.687.512
Investments on policyholders’ risk	-	-	-	2.530.185	-	-	2.530.185
Receivables from main operations	115.408.195	152.956.844	127.553.420	-	-	-	395.918.459
Due from reinsurance companies	-	-	24.180.701	-	-	-	24.180.701
Reinsurers’ share of insurance liabilities	136.430.102	177.811.722	519.745.010	-	-	-	833.986.834
Equity securities	-	-	-	-	-	220.889	220.889
Other assets	-	118.619.259	-	-	-	-	118.619.259
Total Assets	772.060.145	782.191.097	717.511.811	145.271.911	74.677.041	228.630.378	2.720.342.384
Obligations under repurchase agreements		30.031.438					30.031.438
Insurance liabilities	297.530.449	495.814.686	1.251.253.020	-	-	-	2.044.598.155
Due to reinsurers	-	-	202.020.282	-	-	-	202.020.282
Trade and other payables	-	-	99.244.067	-	-	-	99.244.067
Total liabilities and shareholders' equity	297.530.449	525.846.124	1.552.517.369	-	-	-	2.375.893.942
Liquidity surplus/(deficit)	474.529.696	256.344.974	(835.005.559)	145.271.911	74.677.041	228.630.378	344.448.442

20

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

6. Financial assets

Available for sale debt securities:

		March 31, 2017
	Cost Value	Fair Value	Book Value
Government bonds	53.340.001	47.330.622	47.330.622
Private bonds	185.812.561	190.700.106	190.700.106
Investment Funds	186.172.994	211.936.444	211.936.444
Eurobonds	91.649.582	87.815.201	87.815.201
Total	516.975.138	537.782.373	537.782.373

		December 31, 2016
	Cost Value	Fair Value	Book Value
Government bonds	414.615.001	409.346.640	409.346.640
Private bonds	157.224.003	159.914.268	159.914.268
Investment Funds	189.073.620	210.381.106	210.381.106
Eurobonds	88.642.117	84.045.498	84.045.498
Total	849.554.741	863.687.512	863.687.512

Financial assets at insurees’ risk:

		March 31, 2017
	Cost Value	Fair Value	Book Value
Government bonds	2.530.185	2.530.185	2.530.185
Total	2.530.185	2.530.185	2.530.185
		December 31, 2016
	Cost Value	Fair Value	Book Value
Government bonds	2.530.185	2.530.185	2.530.185
Total	2.530.185	2.530.185	2.530.185

Equity shares under available-for-sale investments:

As of March 31, 2017, the Company has an investment in Merter BV with a 25% participation rate (December 31, 2016: 25%). Merter BV is a real estate company which has an investment in a shopping mall and office building with 50% participation rate. The Company has a final participation rate of 12,5% in the real estates. Since the Company does not have any influence in the financial and operating policy decisions of the investee, this investment is classified as available for sale financial asset and carried at its fair value. The Company has booked impairment provision for Merter BV amounting to TL 30.116.653 in its financial statements as of March 31, 2017 in accordance with the appraisal report obtained from an independent appraisal firm (December 31, 2016: TL 30.116.653).

21

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

6. Financial assets (continued)

List of the investments and fair values is as below:

		March 31, 2017
	Cost Value	Fair Value	Book Value
Equity investments
Merter BV	30.116.653	0	0
Tarsim	220.889	0	220.889
Total	30.337.542	0	220.889
		December 31, 2016
	Cost Value	Fair Value	Book Value
Equity investments
Merter BV	30.116.653	0	0
Tarsim	220.889	0	220.889
Total	30.337.542	0	220.889

Fair Value Hierarchy

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidencedby a quoted market price, if one exists. Fair value measurments are performed in accordance with the followingfair value measurment hierarchy.

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other thanqouted pricesincluded within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indircetly (that is, derived from prices).

• Level 3: Inputs for the asset or liability that is not based on observable market data (that is, unobservable inputs).

	March 31,	Level 1	Level2	Level 3
	2017
Available for sale at company’s risk	537.782.372	537.782.372	-	-
Available for sale at insurees' risk	2.530.185	2.530.185	-	-
Total	540.312.557	540.312.557	-	-
	December 31, 2016	Level 1	Level2	Level 3
Available for sale at company’s risk	863.687.512	863.687.512	-	-
Available for sale at insurees' risk	2.530.185	2.530.185	-	-
Total	866.217.697	866.217.697	-	-

(*) Unlisted equity shares amounting to TL 220.889 (December 31, 2016: TL 220.889) has been accounted at its cost value as of March 31, 2017

• (**) The Company has written off Merter BV, one of the affiliates, amounting to TL 30.116.652 in its financial statements as of March 31, 2017 (December 31, 2016: TL 30.116.652).

22

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

7. Cash and cash equivalents

The details of cash and cash equivalents of the Company are as follows:

	March 31, 2017	December 31, 2016
Cash at banks	619.408.174	240.333.856
-time deposits	608.876.487	222.305.473
-demand deposits	10.531.687	18.028.383
Bank guaranteed credit card receivables
with maturity less than 3 months	259.819.280	210.819.263
	879.227.454	451.153.119
Securities pledge under repurchase agreements	77.257.178	30.045.425
Total cash and cash equivalents	956.484.632	481.198.544

(*) The Company has reflected TL 77.257.178 of time deposits as securities pledged under repurchase agreements in the financial statements as of March 31, 2017 (2016: 30.045.425).

The maturities of the Company’s time deposits as of March 31, 2017 are less than six months (December 31, 2016: Less than six months).

Cash and cash equivalents that are included in the statements of cash flows for the periods January 1 – March 31, 2017 and January 1 – December 31, 2016 are as follows:

	March 31, 2017	December 31, 2016
Total cash and cash equivalents	956.484.632	481.198.544
Interest accrual on cash at banks (-)	(746.360)	(257.966)
Cash and cash equivalents per statement of cash flow	955.738.272	480.940.578

Weighted average interest rates of time deposits:

	March 31, 2017	December 31, 2016
TL	7,75 – 13,05	4,50 – 13,95
USD	0,10 – 3,70	0,10 – 3,40
EUR	0,10 – 0,90	0,10 – 1,85

23

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

8. Repurchase agreements

Securities pledged under repurchase agreements:

The details of reverse repo receivables in the balance sheet as of March 31, 2017 are as follows:

March 31, 2017 Cost Interest rate	Maturity Book value
Time deposits 77.000.000 13,94%	23.03.2017 - 15.05.2017 77.252.404
77.000.000	77.252.404

The details of reverse repo receivables in the balance sheet as of December 31, 2016 are as follows:

December 31, 2016		Interest rate	Maturity	Book value
Time deposits	25.000.000	11,45%	28.12.2016 - 30.01.2017	25.031.370
Time deposits	5.000.000	11,40%	23.12.2016 - 17.03.2017	5.014.055
	30.000.000			30.045.425

Obligations under repurchase agreements:

The details of funds received from reverse repo aggrements accounted for under short term other financial liabilities in the balance sheet as of March 31, 2017 and December 31, 2016 are as follows:

March 31, 2017	Cost	Interest rate		Book value
Government bond	(77.000.000)	12,19%	22.03.2017 - 16.05.2017	(77.257.178)
	(77.000.000)			(77.257.178)
December 31, 2016	Cost	Interest rate	Maturity	Book value
Government bond	10.000.000	10,90%	29.12.2016 - 04.01.2017	10.008.959
Government bond	15.000.000	10,90%	29.12.2016 - 04.01.2017	15.013.438
Government bond	5.000.000	11,00%	26.12.2016 - 02.01.2017	5.009.041
	30.000.000			30.031.438

24

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

9. Equity

As of March 31, 2017, the Company’s total amount of nominal shares is 30.600.000.000 (December 31, 2016: 30.600.000.000) which has all been paid. The face value of the Company’s common stocks is TL 0,01 each and the total nominal amount is TL 306.000.000 (December 31, 2016: TL 306.000.000).

Movement of common stocks at opening balance and closing balance is as follows:

Paid Total Paid Total	January 1, 2017 Unit Nominal TL 30.600.000.000 306.000.000 30.600.000.000 306.000.000 January 1, 2016 Unit Nominal TL 30.600.000.000 306.000.000 30.600.000.000 306.000.000	Issued Capital UnitNominal TL - - - - Issued Capital UnitNominal TL - - - -	Amortised Unit Nominal TL - - - - Amortised Unit Nominal TL - - - -	March 31, 2017
				Unit Nominal TL
				30.600.000.000 306.000.000 30.600.000.000 306.000.000 December 31, 2016
				Unit Nominal TL
				30.600.000.000 306.000.000 30.600.000.000 306.000.000

Movement of legal reserves is as follows:

Legal Reserves	2017	2016
Opening balance, January 1	178.468.101	178.468.101
Transfers from retained earnings	(83.064.172)	-
Closing balance, March 31	95.403.929	178.468.101

Actuarial gain / (loss)

In accordance with changes regarding “IAS 19 – Employee Benefits” effective as of January 1, 2013, net-off deferred tax actuarial loss amounting to TL 4.376.462 (net off deferred tax: TL (3.501.170) resulting from retirement pay liability calculation has been accounted to extraordinary reserves under equity.

Movement of actuarial loss arising from employee benefit is as follows:

Actuarial Loss	2017	2016
Opening balance, January 1	4.340.507	4.680.554

25

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

Change for the period	35.955	(340.047)
Closing balance, March 31	4.376.462	4.340.507

9. Equity (continued)

Available for sale investments fund:

The unrealized gains and losses that result from the changes in the fair values of available for sale financial assets are directly recognized in the shareholders’ equity as “Available for sale investments fund”. Movement of available for sale investments fund is below:

Available for sale investments fund	2017	2016
Opening balance, January 1	(7.203.045)	(5.945.992)
Increase/decrease in value recognized under the shareholders’ equity in the current period	1.330.579	(1.257.053)
Closing balance, March 31	(5.872.466)	(7.203.045)

Hedge Accounting

The Company recognizes the changes in value of hedged asset by the foreign currency differences under equity. As of March 31, 2017, TL 23.803.060 (net: TL 19.042.448) is recognized under equity resulting from hedge accounting (December 31, 2016: TL 21.020.093, net: TL 16.816.074).

March 31, 2017
		Exchange rate at	Exchange rate at	Exchange
Amount of deposit	Currency	the beginning	the end	difference
15.856.440	USD	2,23	3,64	(22.268.784)
12.849.880	USD	3,52	3,64	(1.534.276)
28.706.320				(23.803.060)
December 31, 2016
		Exchange rate at	Exchange rate at	Exchange
Amount of deposit	Currency	the beginning	the end	difference
16.358.049	USD	2,23	3,52	(21.020.093)

Type risk and principle of the cash flow hedge

The Company aims to prevent the future foreign exchange risk resulting from the operational leases by hedging with the eurobond amounting to USD 24.329.687 .

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Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

10. Insurance liabilities

Gross	March 31, 2017	December 31, 2016
Reserve for unearned premiums	1.118.964.517	995.397.648
Outstanding claims provision	1.130.306.330	1.045.955.010
Life actuarial mathematical reserves	1.379.670	1.373.929
Life profit share provision	153.297	152.659
Bonus and rebates provision	1.724.352	1.718.909
Total	2.252.528.166	2.044.598.155
Reinsurance Share	March 31, 2017	December 31, 2016
Reinsurers’ share of outstanding claims	503.138.875	446.542.113
Reinsurers’ share of unerned premiums	511.127.431	385.729.269
Bonus and rebates provision	1.713.591	1.715.452
Total	1.015.979.897	833.986.834
Net	March 31, 2017	December 31, 2016
Reinsurers’ share of outstanding claims	627.167.455	599.412.897
Reinsurers’ share of unearned premiums	607.837.086	609.668.379
Life actuarial mathematical reserves	1.379.670	1.373.929
Life profit share provision	153.297	152.659
Bonus and rebates provision	10.761	3.457
Total	1.236.548.269	1.210.611.321

11. Payables to reinsurers, trade and other payables

	March 31,	December 31,
	2017	2016
Payables to reinsurers	313.643.130	202.020.282
Payables due to main operations	313.643.130	202.020.282
Payables to SSI regarding medical expenses (*)	5.446.765	4.268.447
Taxes payable	14.609.894	17.872.576
Payables to Turkish Catastrophe Insurance Pool	15.389.523	21.395.892
Payables to contracted institutions	5.085.307	6.010.520
Payables to suppliers	2.721.333	10.538.496
Other	3.691.854	2.319.074
Total other short termpayables	46.944.676	62.405.005
Total financial liabilities trade and other payables, deferredd income	360.587.806	264.425.287

27

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

12. Retirement social security liabilities

12. Retirement social security liabilities
	March 31, 2017	December 31, 2016
Provision for employment termination benefits	6.424.748	6.335.367
Total	6.424.748	6.474.170

Under the terms of Turkish Labor Law, the Company is required to pay employment termination benefits to each employee who has qualified for such payment. Also, employees are entitled to retirement pay provisions subsequent to the completion of their retirement period by gaining a right to receive retirement payments in accordance with the amended Article 60 of the applicable Social Insurance Law No: 506 and the related Decrees No: 2422 and 4447 issued on 6 March 1981 and August 25, 1999, respectively. Some transitional provisions related to pre-retirement service term was excluded from the law since the related law was amended as of May 23, 2002.

Employee termination benefits provisions are legally not a subject of funding. The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. TAS 19 (“Employee Benefits”) requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at March 31, 2017 and December 31, 2016, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. As of March 31, 2017, the provisions at the respective balance sheet dates have been calculated assuming an annual inflation rate of 8,53% (December 31, 2016: 8,81%) and a discount rate of 10,91% (December 31, 2016: 10,71%), resulting in a real interest rate of approximately 2% (December 31, 2016: 2%). The anticipated rate of forfeitures is considered and estimated rate of the Company’s retirement pay is also taken into account.

However, during this estimation, the employee termination benefits mentioned in subparagraph 5 of paragraph 1 of article 14 of the Labor Law numbered 1475 to be made in accordance with other conditions excluding the ages stipulated in clauses (a) and (b) of subparagraph A of paragraph one of article 60 of the Law numbered 506 or due to termination of employees on their own will after having completed the insurance period required for retirement pension (15 years) and the number of premium payment days (3600 days) have been excluded from the payments to be incurred by the Company.

The effect of estimation changes in the calculation of employee termination benefits is amounting to TL 4.376.462 (Deferred tax effect: TL 875.292) and has been accounted to actuarial loss arising from employee benefit under equity.

As the maximum liability is updated semi annually, as of March 31, 2017, the maximum amount of TL 4.426,16 effective from January 1, 2017 has been taken into consideration in calculation of provision from employment termination benefits (December 31, 2016 : TL 4.092,53).

Movement of employee termination benefits provisions are presented in the statement below:

	2017	2016
Opening balance, January 1	6.335.367	6.474.170
Charge for the period	281.016	1.569.790
Actuarial gain/loss	35.955	(340.047)
Retirementpayments	(227.590)	(1.368.546)
Closing balance, March 31	6.424.748	6.335.367

28

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

13. Net insurance premium income

The distribution of premium income is as follows:

==> picture [454 x 180] intentionally omitted <==

----- Start of picture text -----

January 1 – March 31, 2017 January 1 – March 31, 2016
Gross Reinsurers’ share Net Gross Reinsurers’ share Net
Written premium 615.379.353 (330.857.168) 284.522.185 499.175.841 (269.341.461) 229.834.379
Change in unearned premium reserve () (123.566.869) 125.393.575 1.826.706 (99.714.263) 115.155.146 15.440.883
Total premium revenue 491.812.484 (205.463.593) 286.348.891 399.461.578 (154.186.315) 245.275.263
Fire 159.757.389 (120.088.728) 39.668.660 135.517.383 (98.835.135) 36.682.249
Marine 19.319.721 (12.133.634) 7.186.088 12.576.733 (5.183.620) 7.393.114
Motor Own Damage 121.973.553 (7.677.255) 114.296.299 112.120.958 (6.855.133) 105.265.825
Motor Third Party Liability 66.404.055 (4.305.111) 62.098.944 35.998.869 (2.650.183) 33.348.686
Other 60.939.398 (40.744.803) 20.194.595 47.340.580 (30.478.081) 16.862.500
General Losses 91.008.140 (69.500.907) 21.507.232 71.430.257 (53.618.554) 17.811.703
Health 95.975.597 (76.406.730) 19.568.867 84.188.579 (71.720.756) 12.467.823
Life 1.500 - 1.500 2.480 2.480
Total 615.379.353 (330.857.168) 284.522.185 499.175.841 (269.341.461) 229.834.379
----- End of picture text -----*

14. Expenses by nature

==> picture [454 x 215] intentionally omitted <==

----- Start of picture text -----

January 1 - January 1 -
March 31, 2017 March 31, 2016
Personnel expenses (18.370.088) (17.842.891)
Information technology expenses (2.646.382) (3.074.654)
Depreciation expenses (3.999.395) (2.956.914)
Rent expenses (2.236.780) (1.949.216)
Social relief expenses (931.546) (1.157.092)
Transportation expenses (1.156.572) (957.375)
Meeting and training expenses (1.323.063) (1.058.530)
Advertisement expenses (1.102.139) (1.035.087)
Repair and maintanence (714.006) (739.414)
Communication expenses (374.985) (399.440)
Outsourcing service expenses (474.832) (158.241)
Other (2.260.954) (2.875.176)
Total (35.590.743) (34.204.030)
----- End of picture text -----

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Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

15. Insurance claims and claims recovered from reinsurers

March 31, 2017

Paid Claims	Gross 223.455.962	Reinsurers' Share (55.148.900)	Net 168.307.062
Change in outstanding claims	81.725.054	(57.546.698)	24.178.356
Change in mathematical reserves	6.380	-	6.380
Bonus and rebatesprovison	5.439	1.860	7.299
Total	305.192.835	(112.693.738)	192.499.097

March 31, 2016

March 31, 2016
Paid Claims	Gross 200.117.133	Reinsurers' Share (25.426.115)	Net 174.691.018
Change in outstanding claims	14.336.218	(27.892.666)	(13.556.448)
Change in mathematical reserves	(142.672)	211	(142.461)
Bonus and rebatesprovison	99.469	(96.261)	3.208
Total	214.410.148	(53.414.831)	160.995.317

16. Related parties

The details of transactions between the Company and other related parties are disclosed below: Due from /to related parties

	March 31, 2017	December 31, 2016
Shareholders	760.103	19.958
Shareholder’s subsidiaries	49.183.352	12.456.988
Total	49.943.455	12.476.946

Banks

	March 31, 2017	December 31, 2016
Shareholder’s subsidiaries	204.953.359	574.281.361
Total	204.953.359	574.281.361

Marketable securities

	March 31, 2017	December 31, 2016
Shareholder’s subsidiaries	42.899.179	15.294.313
Total	42.899.179	15.294.313

Investment funds

	March 31, 2017	December 31, 2016
Shareholder’s subsidiaries	211.936.444	158.252.836
Total	211.936.444	158.252.836

30

Aksigorta A.Ş.

Notes to the interim condensed financial statements as at March 31, 2017

(Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

16. Related parties (continued)

Written Premium

	March 31, 2017	March 31, 2016
Shareholders	783.414	646.165
Shareholder’s subsidiaries	39.300.860	32.134.596
Total	40.084.274	32.780.761

Claims Paid

	March	31, 2017	March 31, 2016
Shareholders		154	1.000
Shareholder’s subsidiaries		745.325	2.823.341
Total		745.479	2.824.341

Investment Income

	March 31, 2017	March 31, 2016
Shareholder’s subsidiaries	15.831.664	12.151.268
Total	15.831.664	12.151.268

17. Contingencies

As of June 24, 2015, Tax Inspection Board of T.C. Ministry of Finance has launched a limited tax investigation related to the Banking and Insurance Transactio n Tax for the years 2009, 2010, 2011 and 2012 and as a consequence of the tax inspection, tax of TL 1,8 million and tax penalty of TL 2,8 million for the year 2009 , tax of TL 2 million and tax penalty of TL 3 million for the year 2010 , tax of TL 3 million and tax penalty of TL 4,6 million for the year 2011 and tax of TL 4,3 million and tax penalty of TL 6,4 million for the year 2012 and in total tax and tax penalty of 27,9 million related to Banking Insurance Transaction Tax were imposed to the Company. The Company has not booked any provision in the financial statements since it believes that its practice is in compliance with the regulations. On January 16, 2015 and on February 20, 2015, the Company filed a reconciliation request to the Large Taxpayers Office Commission of Reconciliation for the tax and tax penalty for the year 2009 and for the years 2010, 2011 and 2012, respectively.

18. Subsequent events

On 10.04.2017, Treasury issued a circular numbered 2017/1 with regards to the premiums in Motor Third Party Liability branch.

The maximum premiums (caps) for each city, vehicle type and NCD level has been announced in the circular. The circular will be valid between the period 12.04.2017- 31.12.2017.

31