Subject

Participation Bank

Basic Principles of Participation

Banking

Participants

Deposits

Profit

Resources

• Current Accounts• Participation Accounts• Equity• Islamic Syndication Loans

Deposit Collection Process

Pool

FinanceResource

UsageProcess

Individualsand

Institutions

Fund Usage Methods• Murabaha (Mark up Trading)• Mudarabah (Trust Financing)• Musharakah (P.ship Financing)• Selem (Future Sale)• Istisna (Procurement)• Ijarah (Forward Lease)• Sukuk

Regulatory and Supervisory Authorities (BRSA, CMC, CB, SDIF)

Profit is genereted from Islamic Finance Products

Deposits are being utilized through the methodsbased on tradership and partnership

Application of Participation Banking System

Islamic and Conventional Banks Partnership

Islamic and Conventional Banks Partnership

• Kuveyt Türk Participation Bank began operations in 1989.

• Rated BB- by Fitch

• A network of 407 branches spread across strategic

locations, with over 5,689 employees

• Kuveyt Türk provides services to its international clients

through a network of:

– A wholesale banking branch in the Kingdom of Bahrain

– A full fledged banking subsidiary in Germany

• As of end of June 2018, We are the largest participation

bank in Turkey with 36.2% market share

Financial Snapshot

TRY mm Dec 2015 Dec 2016 Dec 2017 Jun 2018

Asset size 41,760 48,407 57,123 68,130

Shareholder’s Equity 3,448 4,003 4,591 5,086

Net Income 425 579 673 527

NPL 1.66% 2.43% 1.98% 1.81%

ROAE 13.08% 15.49% 15.85% 21.62%

Capital Adequacy Ratio 14.20% 18.51% 17.66% 16.09%

Ownership Structure: Kuveyt Türk

Source: Kuveyt Türk website

62,2%18,7%

9,0%

9,0%Kuwait Finance House

Republic of Turkey General Directorate of Foundations

Islamic Development Bank

Kuwait Public Institution for Social Security

Other real and legal shareholders

Source: Fitch and Bloomberg

Kuwait Turk Overview

Source: S&P Database, KT Consolidated Figures

Strong Shareholders

Kuwait Finance House, Kuwait(“KFH”)

General Directorate for Foundations, Turkey (“GDF”)

Public Institution for Social Security, Kuwait (“PIFSS”)

Islamic Development Bank (“IDB”)

• KFH is the second largest Islamic Bank in the World, It was established in Kuwait in 1977

• KFH is currently rated A1/A-/A+ by Moody’s, S&P and Fitch respectively

• KFH has consistently demonstrated tangible support for Kuveyt Türk including participating in all the share capital increases conducted so far

• The GDF was established in 1924 as a state entity to administer, manage and regulate existing and future Turkish charitable foundations and reports directly to the Turkish Prime Minister

• PIFSS was founded in 1976, to implement the Kuwaiti social security

• PIFSS is a major investor on the Kuwait Stock Exchange and in other Arab and Islamic countries

• The IDB is a multinational development bank established in 1973

• The IDB currently has 57 member states, Turkey is a founding member and owns 6.45% the shares of IDB

• Rated by S&P (AAA), Moody’s (Aaa), and Fitch (AAA)

How Can We Support You?

Int. Presence&Knowlegde

Diverse Loan book

Leader Islamic Lender

• KTPB has a wholesale Banking branch in Bahrain and a subsidiary in Germany.

• We have more than 1500 correspondent banks all over the World.

• KFH is a prominent player in Gulf Region.

• We offer different solutions for each segments.

• Individuals, SMEs and Commercial Clients

• KTPB has TRY 47 bn (USD 10.2 bn) loan book in 2018 Q2.

• USD 759 mm in Project Financing alone

Strong Financials • KTPB’s slogan has always been ‘SOUND BANKING’

• We differentiate ourselves with sound financials .

Kuveyt Türk StrategyDiverse Loan Book & Key Achievements

Key Achievements Results

Retail Banking

• First mover among Participation Banks in the retail sector

• Innovative product development - Gold

• First participation bank to segment its client base

• Focus on building long-term client relationships

• Strong brand name and strong retail base

• 38,1% market share in retail loans among participation banks

• Offers one of the widest range of products amongst participation banks

SME Banking • Increased focus on SMEs

• High customer service levels

• Higher margin business and reduced risk profile via collateralized loan portfolio

• Increased quantity and quality of clients and improved profit per client

Corporate & Commercial Banking

• Development of portfolio management system

• Increased focus on letters of guarantee

• Strong presence in trade financing

• Higher margin business and reduced risk profile

• Increased quantity and quality of clients and improved profit per client

• Enhanced quality control delivering better returns

• Larger proportion of non-cash loans

International Banking

• First and most advanced international banking propositions

• Dynamic participation bank funding structure

• Development of international network (branches &

correspondent banks)

• The first international Murabaha syndication among participation banks (USD 200 mm) in 2006

• Issued the first Bank Sukuk in Turkey and Europe with amount of USD 100 mm in 2010

• Issued the largest Tier-2 Sukuk out of Turkey with amount of USD 350 mm at February 2016

• Total 9.5 billion TL domestic issuances so far.

Strong Financials

Between 2017&2018 Q2Unconlolidated Figures

KTPB's Comp. With 15 Largest TR Banks*

2017-2018 Q2 KTPB Largest 15 Banks

Assets Growth 17.8% 12%

Profit Growth 37.5% 10.6%

NPL 1.84% 3.75%

ROAE 18.96% 15.49%

• While growing stedialy , we do not compromise our asset quality and profitability.• KTPB’s total asset growth CAGR is 19.26% in the last 4 yearss.• KTPB’s Net Income grew 37.5% compared to 2017 year end.• We have the second least NPL ratio in Turkish Market. • Our NPL Coverage ratio is also 129% and well above market average 72%.

International Presence & Knowledge

• KFH Group has $58 bn total assets and $6.5 bn total equity and s $31.5 bn loan book• Above some samples of KFH’s successful Corporation in Project Financing with Conventional Banks• As KTPB we have a wholesale branch in Bahrain and a Subsidiary in Germany , KT AG.• We also have more than 1500 correspondents all over the world

Sample Project Finance Transactions Concluded by KFH

Project Name Year Purpose Project Size($000) Debt ($000) Islamic Trance($000)

Equate Petrochemical 1996/2001/2004 Perto.Extraction 2.000.000 1.200.000 200.00

Shuweihat W&P 2002 Water and Power 1.600.000 1.285.000 250.00

Umm Al-Nar Power 2004 Water and Power 2.100.000 1.777.000 250.00

Qatar Gas II 2004 Natural Gas Extraction 7.300.000 5.000.000 530.00

Kuwait Paraxelene 2007 Paralexece&Benzene 2.000.000 1.400.000 347.00

Leader Islamic Lender-Kuveyt Turk

Project Finance 2017 Q4 2018 Q2

Cash Exposure (USD) 633,221,032 700,560,914

Non-Cash Exposure (USD) 306,154,821 45,739,364

NPL % 0.00 0.00

Project Type Installed Power as of 2018 Q2 (MW)

Solar Power 495,04

Hydroelectric 299,14

Wind Power 79,40

Bio-Gas 9,01

Total 882,64

• As a whole, our total Loan book corresponds to 35.5% of the total Participation Banking Sector

• Our exposure in Project Finance is USD 746 MM as of 2018 Q2

• We are the leading participation lender in the Project Financing.

Project Details as of 2018 Q2

Project Type Cash Exposure Non-Cash Exposure Project Number(s)

Bio-Gas 5,013,390 249,774 2

Solar Power 381,374,636 2,927,295 129

Hydroelectric Power 236,221,370 2,452,684 7

Wind Power 31,236,374 2,075,771 2

Privatization - 38,033,840 1

Corporate Syndication 22,328,267 - 2

Construction Development 24,386,877 - 2

Total 700,560,914 45,739,364 145

Project Details after 2018 Q2

Project Name Amount (USD)

Bilkent CCN Labs (ISTISNA) 103,857,289

Gallipoli 1915 Bridge (MRBH) 179,577,465

Niğde-Ankara Highway (MRBH) 124,287,398

Total 407,722,152

Leader Islamic Lender II

Reasons for favoring Solar Power:

• More predictable energy production,• Easier to build and operate

Results:

• 10% market share in Un-Licenced SolarPower• 46% market share in Licenced Solar Power

Reuters

Analysis&Findings

Country Name Conventional Volume Islamic Volume Total Volume Share in Total Amount Islamic Share in Country's Volume Islamic Share in Islamic Loans

Saudi Arabia 95,967,485,516 18,659,397,880 114,626,883,396 27.89% 4.54% 59.41%

United Arab Emirates 84,645,559,653 5,107,727,582 89,753,287,236 21.84% 1.24% 16.26%

Turkey 60,435,342,033 350,000,000 60,785,342,033 14.79% 0.09% 1.11%

Qatar 42,255,621,011 2,416,500,005 44,672,121,016 10.87% 0.59% 7.69%

Oman 25,705,261,181 2,400,000,000 28,105,261,181 6.84% 0.58% 7.64%

Egypt 24,837,865,974 674,999,994 25,512,865,967 6.21% 0.16% 2.15%

Kuwait 13,146,744,000 1,053,000,000 14,199,744,000 3.46% 0.26% 3.35%

Bahrain 11,622,176,000 618,000,000 12,240,176,000 2.98% 0.15% 1.97%

Israel 9,456,174,002 - 9,456,174,002 2.30% 0.00% 0.00%

Jordan 6,462,876,373 126,000,000 6,588,876,373 1.60% 0.03% 0.40%

Iran 1,745,000,000 - 1,745,000,000 0.42% 0.00% 0.00%

Yemen 1,680,000,000 - 1,680,000,000 0.41% 0.00% 0.00%

Iraq 784,548,933 - 784,548,933 0.19% 0.00% 0.00%

Syria 721,000,000 - 721,000,000 0.18% 0.00% 0.00%

Palestine 93,000,000 - 93,000,000 0.02% 0.00% 0.00%

Grand Total 379,558,654,676 31,405,625,461 410,964,280,137 100.00% 7.64% 100.00%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

SaudiArabia

UnitedArab

Emirates

Turkey Qatar Oman Egypt Kuwait Bahrain Israel Jordan Iran Yemen Iraq Syria Palestine

27,89%

21,84%

14,79%

10,87%

6,84% 6,21%

3,46% 2,98% 2,30% 1,60%0,42% 0,41% 0,19% 0,18% 0,02%

Project Finance Share in the Middle East

Thank You!

Project Company (as IstisnaAgent)

EPC Consortium

Islamic Facility Agent

Participating Banks

Project Company (as Obligor)

Turkish Treasury/MoF

Stage Payments

Cashflow

Finance DocumentTransfer of Rights / Assets

PPP ConcessionAgreement

Profit Payments / Instalments 2. Istisna Agreement

1. Facility/InvestmentAgency Agreement

Stage Payments / Profit Payments / Instalments

3. EPC Contract4. Transfer of title uponcompletion of construction

4. Constructed Project Assets are Deliveredto Project Companyon behalf of FacilityAgent

Stage Payments

3. Istisna AgnecyAgreement

ISTISNA STRUCTURE

EPC Consortium

Project Company (as Obligor / as a Purchaser)

CommodityBroker B

KFH as an Islamic FacilityAgent / Investment Agent

(as a Seller)

Participating Banks

CommodityBroker A

Stage PaymentsEPC Contract

4. Commodity SaleAgreement

Stage Payments (Netting Arrangementwill apply)

3. Master Murabaha Agreement

Profit Payments/Instalments/DeferredPayment Price

StagePayments/ Profit Payments/ Instalments

1. Facility/ InvestmentAgencyAgreement

2.Commodity PurchaseAgreement

CashflowFinance DocumentTransfer of Rights / Assets

Commodity Murabaha Structure