JCR Eurasia Rating has reviewed and affirmed the credit ratings of Vakıf Finansal Kiralama A.Ş. and its subsidiary’s consolidated structure as ‘BBB+(Trk)’ on the Long Term National Scale and as ‘BBB-‘ on the Long Term International Scale, and assigned a

JCR Eurasia Rating has reviewed and affirmed the investment grade credit ratings of “Vakıf Finansal Kiralama A.Ş. and its subsidiary’s consolidated structure” as ‘BBB+ (Trk) on the Long Term National Scale and as “A-2 (Trk)” on the Short Term National Scale, and assigned a ‘Stable’ outlook for all grades. On the other hand, the Long Term International Foreign and Local Currency Ratings have been affirmed at the country ceiling level of ‘BBB-’. Other notes and details of the ratings are given in the table below:

Long Term International Foreign Currency : BBB- / (Stable Outlook) Long Term International Local Currency : BBB- / (Stable Outlook) Long Term National Local Rating : BBB+ (Trk) / (Stable Outlook) Short Term International Foreign Currency : A-3 / (Stable Outlook) Short Term International Local Currency : A-3 / (Stable Outlook) Short Term National Local Rating : A-2 (Trk) / (Stable Outlook) Sponsor Support : 2 Stand Alone : AB

The Turkish Leasing Sector, dominated by the bank shared companies and with more associative activities with the banking sector compared to other countries, maintained its contribution to the development of the national economy through supporting the capital investments of small and medium size enterprises (SMEs) with high growth potential operating in an increasingly competitive market in the globalization era and having difficulties in the processes of credit access with relatively limited equity and renewal of technological infrastructure to increase competitiveness. The performance of the sector, which is directly correlated with investor risk appetite, has continued its positive development regarding asset size through supportive regulations on tax rates and ongoing contributions of increased product diversity despite the highly volatile market conditions caused by pressure of global and domestic uncertainties. As such, the significant decline in sector growth, exercised after 2007 due to the abolition of provided tax advantages and global crisis, again turned into a growth trend through the contribution of restored tax advantages for certain product classes and the product range increasingly diversified through the introduction of instruments such as ‘operational leasing’ and ‘sell and lease back’. The sector carries the potential to grow its asset size in the future through the increasing preference of funding through leasing by companies in all scales, the increasing share of leasing in the procurement of machinery and equipment of major public infrastructure projects, the possible contributions of ‘credit guarantee fund’ practices and the comparatively low penetration level.

Vakıf Finansal Kiralama A.Ş., having a high compliance level with corporate governance practices within the scope of its publicly listed shareholding structure, carries out its operations mainly focused on SMEs and investors in the commercial segment through its headquarters, five branches, over 900 branches of its parent company, Vakıfbank, representing the qualified shareholder and its consolidated subsidiary, Vakıf Sigorta Aracılık Hizmetleri Limited Şirketi (Vakıf Sigorta). The Company which has a short-term weighted borrowing structure despite displaying a better composition than the sector average, managed to balance the risk level associated with liquidity position through its broad funding sources utilizing the advantages of being a bank related company, aimed to contribute to liquidity management and risk position and created opportunity for future growth through the envisaged debt instrument issuance in the short-term which is compatible with its current balance sheet composition. Although the Company exhibited a decreasing market share trend over the last five years, it improved its customer base and lowered the credit risk on its activities through the rising number of contracts and the decreased average contract value.

The comparatively low equity levels derived from robust shareholding structure and ease of access to funding sources, representing the inherent features of bank-related companies, also hold true for Vakıf Leasing. On the other hand, the Company improved its equity level against the deteriorating sector figure thanks to satisfactory internal equity generation capacity achieved over the last two years and the management strategy envisaging to support the equity level through the retention of generated internal resources. Although the continuously above sector NPL ratio and the cumulative effect of doubtful receivables positioned above equity suppressed the asset quality, the Company managed to relieve the stated pressure through its high collateral and collectability levels and generated a positive contribution potential on future profitability ratios through realized and envisaged collections in the current period. Within these considerations, the sustainability of internal resource generation capacity together with its contribution to equity level, probable effects of collection potential from doubtful receivables on profitability and the possible pressure of challenging and competitive market conditions on asset quality emerged as the issues to be monitored closely.

The Company's Sponsor Support Grade has been affirmed as (2) based on JCR Eurasia Rating’s notation scale taking into consideration the willingness of the shareholders to supply long term liquidity and equity should the need arise along with the experience to provide effective operational support. On the other hand, taking into account the Company’s organizational structure, asset size, market efficiency, corporate governance practices and past track record, we, as JCR Eurasia Rating, are of the opinion that Vakıf Finansal Kiralama A.Ş. has reached the level of adequate experience and facilities to manage the incurred risks on its balance sheet regardless of any assistance from the shareholders, provided that it maintains the efficiency in the market. Within this context, the Stand Alone Grade of the Company has been determined as (AB) in the JCR Eurasia Rating notation system.

For more information regarding the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr.Gokhan IYIGUN.

JCR EURASIA RATING

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