Dear Stakeholders,

In 2016, the global markets started the year on a moderate note, moving into a more positive trend in the first half, due to the effects of a strong recovery in oil prices, signals from the US Federal Reserve Bank towards less aggressive interest rate hikes, and new steps taken by the European Central Bank towards enlargement, as well as an increase in global risk appetite. However, in the second half of the year, global markets were affected by sharp price movements, a consequence of unanticipated adverse developments.

As PASHA Bank, we exceeded our targets, closing a robust 2016 with a profit of TL 14 million by closely following market movements and taking necessary action in a timely manner. Our assets reached TL 510 million at the end of the year, increasing over 50% compared to the end of the previous year, and our cash and non-cash credits increased by 61% to TL 600 million.

This year, we successfully completed our first bond issue, selling to qualified investors bonds amounting to TL 37.5 million. Our bonds started to be traded in the relevant market in the Istanbul Stock Exchange. Following the issuance of bonds realized in October, the international credit rating agency Fitch Ratings confirmed our long-term credit rating as A (tur). In addition, the announcement of an upward revision in our Corporate Governance Rating to 92.64 demonstrated the importance that we, as PASHA Bank, give to corporate governance principles, as well as our belief in sustainable success.

In terms of our Bank, we realized another first in the field of investment banking: to act as a broker for business mergers and acquisitions. With this transaction, we ensured the creation of financial resources with the contribution of 13 individuals and an international institutional investor for a company operating in the field of orthodontics. In this sense and in line with our targets, we will continue to be involved in the upcoming period as well with the M&A processes of innovative, value-creating companies.

Utilizing the synergy that our Bank has created between PASHA Bank Azerbaijan and PASHA Bank Georgia, and our foreign trade activities carried out in this region, we continue to provide solutions to our customers and to be a guide for entrepreneurs who are investing in the region. With the advantage provided by our main shareholder PASHA Bank Azerbaijan as the largest privately-owned banking group in the country, we consistently contribute to expanding sales for our customers exporting in the region, and to increasing the volume of foreign trade between Turkey, Azerbaijan, and Georgia.

Aiming to promote the development of regional trade between Turkey, Azerbaijan, and Georgia, we elected to present the close historical relations and artistic links between these three countries in the City Stories Photography Exhibition. Depicting the story of the love, peace and comradeship between Baku, Tbilisi, and Istanbul through the lens of photographer Mustafa Seven, this Exhibition illustrates the important roles played by each city in the historical, cultural, economic, and social development of the region. We wanted to share these stories with you, as well, in our annual report.

Our close watch on the market indicates that last year’s volatility is continuing in 2017, signaled by actions the new US President’s actions, the Fed’s interest rate hike process, and uncertainty around the consequences of the general elections and referendums being held throughout Europe. As well, there are ongoing concerns regarding China's growth and domestic geopolitical developments. However, we believe that the Turkish economy and the banking sector will continue an upward growth trend; and, although we anticipate loan growth in the range of 10-12% for the industry in general, our aim as PASHA Bank is to reach 25% in loan growth. We aim to increase the diversity of our Bank’s external resources in 2017 as well; we plan to continue to issue bonds and bills in varying maturities in 2017, along with expanding resources to be created from international banks.

I offer great thanks to my colleagues and our Board Members who have contributed to the steady growth and profitability of our Bank with their dedicated work; to our customers, who preferred to work with us; and to our shareholders, who consistently provided their open support. I hope that 2017 continues to be successful year, both in terms of the banking industry and with respect to our Bank.

Respectfully yours,

General Manager and Board Member