MILLI REASURANS ANNUAL REPORT 2018

Millî Reasürans Türk Anonim Şirketi NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2018 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) The movements of legal reserves are as follows: December 31, 2018 December 31, 2017 Legal reserves at the beginning of the period 104.684.320 90.368.834 Transfer from profit 18.357.166 14.315.486 Legal reserves at the end of the period 123.041.486 104.684.320 As of December 31, 2018 and 2017, “Other Reserves and Retained Earnings” includes extraordinary reserves, sales profits to be capitalized and buidings for own use revaluation differences. As at December 31, 2018 and 2017, “Other Reserves and Retained Earnings” are detailed as below: December 31, 2018 December 31, 2017 Other profit reserves 27.445.366 27.624.672 Extraordinary reserves 284.629.618 179.927.446 Other capital reserves 163.749.852 133.901.195 Sales profits to be capitalized 24.245.511 23.723.323 Other earnings and losses (5.037.416) (3.241.062) Subsidiary capital correction (71.060.049) (71.060.049) Total 423.972.882 290.875.525 Other capital reserves According to TAS 16 - “Property Plant and Equipment”, property, plant and equipment are initially recorded at cost and can be subsequently measured at their fair values. The Company has started to show based on the revaluation model by measuring over fair value as of the third quarter of 2015 by making changes in the use of the property which is measuring the cost model in the financial statements before. In accordance with tax legislation, 75% of profits from sales of participation shares and 50% of profits from sales real estates included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years. Anadolu Sigorta, as of December 31, 2018, the tax exempt gain from sale of participation shares and real estate in 2010, 2011, 2013, 2014, 2015, 2016 and 2017 years respectively, amounting to TL 8.081.516, TL 80.025, TL 647.763, TL 920.272, TL 2.541.500 and TL 15.094 and in 2018 real estate revaluation funds are classified as other capital reserves. Milli Reasürans, according to expertise reports, fair value of property for use is calculated as TL 179.340.000 and revaluation differences amounting to TL 162.300.435 is recognized in ‘Other Capital Reserves’ account under equity as TL 146.070.394 with net tax effect in financial statements as of December 31, 2018 (December 31, 2017: TL 117.058.884). Extraordinary reserves The movement of extraordinary reserves is as follows: December 31, 2018 December 31, 2017 Extraordinary reserves at the beginning of the period 179.927.446 81.426.632 Transfer from profit 104.702.172 98.500.814 Extraordinary reserves at the end of the period 284.629.618 179.927.446 Millî Reasürans Annual Report 2018 228 / Consolidated Financial Statements and Independent Auditors’ Report