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2013 Annual Report

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Contents

General Information and Activities2 Anadolu Hayat Emeklilik in Brief3 Our Vision, Our Mission, Our Corporate

Strategy 12 Milestones15 Directory16 Chairman’s Assessment of 201318 Message from the CEO20 An Overview of the World and Turkish

Economies in 2013 and 2014 Outlook22 Anadolu Hayat Emeklilik by Numbers24 Organization Chart26 Board Directors 28 Declarations of Independence by Independent

Members of the Board of Directors30 Executive Board 31 Managers Responsible for Internal Systems32 Outside Positions Held by the Board Directors

and Executives33 Goals and Policies of Anadolu Hayat Emeklilik34 An Overview of Anadolu Hayat Emeklilik’s

Position in the Industry and its Activities in 2013

40 Research and Development for New Services and Activities

41 İşbank42 Human Resources Policy44 Modifications to the Articles of Incorporation

During the Fiscal Year58 Changes in the Legislation during the Fiscal

Year60 Other Material Disclosures Concerning the

Reporting Period61 Transactions Executed with the Risk Group

in Which the Company is Included63 An Assessment of Independent Audit, Internal

Control System and Internal Audit Activities by the Board of Directors

64 Independent Auditor’s Compliance Opinion on the Annual Report

Financial Position66 Summary Report of the Board of Directors for

the General Assembly of Shareholders68 Information on Financial Structure70 Assessment of Financial Standing, Profitability

and Claims Payment Ability72 5-Year Summary Financial Information

Including the Reporting Period74 Dividend Payment Policy

Risks and an Assessment by the Board of Directors76 Active Committees and an Assessment by the

Board of Directors79 Risk Management Policies and an Assessment

by the Board of Directors

Information on General Meeting82 Ordinary General Meeting Agenda84 2012 Profit Distribution Table85 2013 Profit Distribution Proposal

Corporate Governance Principles Compliance Report87 Corporate Governance Principles Compliance

Report

Corporate Governance Principles Compliance Report104 Unconsolidated Financial Statements Together

with Independent Auditors’ Report Thereon182 Anadolu Hayat Emeklilik 2013 Annual Report

Information on Consolidated Associate183 Consolidated Financial Statements Together

with Independent Auditors’ Report Thereon263 Information for Investors

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“Shots from Life as Seen by Women” photography competition aims to contribute to the social and cultural development of the

Turkish women, and offers them a platform where they can freely express themselves.

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Anadolu Hayat Emeklilik in Brief

Generator of the Highest Amount of FundsAnadolu Hayat Emeklilik preserves and further builds on its identity as the generator of the highest amount of funds in the aggregate of life insurance and private pension branches.

Anadolu Hayat Emeklilik started operations in 1990 as Turkey’s first life insurance company.

Upon establishment of the Private Pension System in Turkey in 2003, the Company is reorganized into a private pension company and began offering services under the company name Anadolu Hayat Emeklilik A.Ş.

Anadolu Hayat Emeklilik boasts an extensive and correctly structured service network.Anadolu Hayat Emeklilik provides service via regional offices in İstanbul (2), Ankara, İzmir, Adana, Bursa and Antalya, a branch in the Turkish Republic of Northern Cyprus, besides its head office in İstanbul. The extensive service delivery capability of Anadolu Hayat Emeklilik is defined by its strong bancassurance network, direct sales force and nearly 300 agencies, which are instrumental in bringing high value-added products and services to its customers.

A subsidiary of Türkiye İş Bankası A.Ş. (İşbank), Anadolu Hayat Emeklilik is the first and only publicly traded pension company in Turkey.

The Company’s shares are quoted on the Borsa İstanbul (BIST) National Market under the symbol ANHYT.

A guide for the sector with its pioneering identity, experience and vision, Anadolu Hayat Emeklilik is the generator of the highest amount of funds in the sector on the basis of life insurance and private pension system aggregate.

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Our Vision, Our Mission, Our Corporate Strategy

Our VisionTo be the leading company in Turkey in all aspects of financial planning that are of concern to the future of Turkey and the Turkish people.

Our Mission To develop and to nurture in people an awareness of the need to safeguard their own futures and the futures of their loved ones; to offer financial solutions that ease people’s doubts about the future and enhance the quality of their lives; and to contribute to the development of the national economy by creating long-term financial resources.

Our Corporate Strategy •Contribute to the stable

growth of the industry by developing and maintaining a diverse range of products capable of satisfying customers’ needs and demands in terms of life insurance and private pensions.

•Increase our market share by combining our success in offering innovative products and creating value through an extensive service network.

•Provide our customers with financial security and enable them to save up for their retirement by taking advantage of the Company’s experience and effectiveness in the industry to achieve superior performance in the management of pension funds.

•Maintain a sustainable level of profitability that is above the market average.

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Sector’sLeader

The Sector’s leader with Life and Pension

Funds

7,114 ( ̈million)

1 Pension Monitoring Center (PMC) 3 January 2014 (including State Contributions.) 2 Life Insurance Information and Monitoring Center (HAYMER) (31 December 2013)3 “Turkey’s Most Admired Companies 2013” survey conducted by Capital Magazine

Turkey’s Most Admired Private Pension

Company3

MostAdmired

Life and Private Pension Funds 1,2

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Fishing Time Ayşe TemizelShots from Life as Seen by Women ‘13

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6 * Pension Monitoring Center (PMC) 3 January 2014 (including State Contributions.)

Sector’sLeader

Private PensionFunds

5,233 ( ̈million)

Private PensionParticipants *

734(thousand)

Private PensionFunds *

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LimitlessSeyhan BabalShots from Life as Seen by Women ‘13

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1,881 ( ̈million)

Life InsurancePolicyholders *

1.6 (million)

Life InsuranceFunds *

Sector’sLeaderLife Insurance

Assets

* Life Insurance Information and Monitoring Center (HAYMER) 31 December 2013

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The LoopCemile Çiğdem KendirShots From Life As Seen by Women ‘13

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10 * As of 31 December 2013

7,902 ( ̈million)

Total Assets *

534 ( ̈million)

Net Profit *

83.2 ( ̈million)

Shareholders’ Equity *

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Lake InhabitantsŞadan GençShots From Life As Seen by Women ‘13

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Milestones

Pioneering the firsts in the sector…In 2013, Anadolu Hayat Emeklilik became the first pension company to reach five billion in total funds in the private pension system.

1990Anadolu Hayat Sigorta A.Ş. was founded as Turkey’s first life insurance company taking over the life insurance activities carried out by Anadolu Anonim Türk Sigorta Şirketi.

1991Regional branches were opened in Ankara, Bursa, Adana and İzmir.

1992 Comprehensive Health Insurance policies were started to be issued.

1995 First payouts on maturity were made in the “Insurance of the Future”.

1998Ankara Branch Office was renamed to Central Anatolia Regional Office.

1999 Lefkoşa Branch was set up in the Turkish Republic of Northern Cyprus to conduct life insurance activities. Sirkeci and Kadıköy branches were opened.

2000 Anadolu Hayat Sigorta A.Ş. became the first and only life insurance company whose shares are publicly traded. The Company was relocated to İş Towers which also houses İşbank subsidiaries.

2001 “Life for everyone” policy, Turkey’s first-ever insurance coverage without any age limitation and without requiring any health conditions was introduced.Bursa, Adana, İzmir and İstanbul branches were reorganized as Marmara, South Anatolia, Aegean, İstanbul 1st and İstanbul 2nd regional offices.

2002 Upon publication of the “Private Pension Savings and Investment System Law”, an application was filed to be transformed into a private pension company in order to operate in this field.

2003 Upon the transformation permission from the Republic of Turkey Prime Ministry Undersecretariat of Treasury, the Company received its license.

The first private pension contract was issued on October 27.

2004Undersigning yet another first, the Company introduced the “Pension Plan for Housewives” that provides income for housewives without social security and supplementary income in older ages.According to legislation, the Company’s health insurance portfolio and activities were transferred to Anadolu Anonim Türk Sigorta Şirketi.

Online payment of private pension contributions and life insurance premiums via the internet was enabled.

2005 Bancassurance activities carried out with the parent company İşbank were expanded by agency agreements with Türk Ekonomi Bankası A.Ş. (TEB) and HSBC Bank A.Ş. (HSBC).

2006With the support of the Ministry of National Education, the Company initiated the social responsibility project “Girls: The Insurance of our Future” in cooperation with the Association for Supporting Contemporary Living (ÇYDD).

Bancassurance activities were expanded through agency agreements with Anadolubank A.Ş. and TSKB A.Ş.

2007First pensioners of the private pension system were entitled to pension benefits.The Company website was renovated enabling online transactions for private pension accounts.

An agency agreement was signed with Bank Pozitif A.Ş.

A photography contest titled “Shots from Life as Seen by Women” was organized.

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2008Anadolu Hayat Emeklilik became the first pension company to hit the 300,000 participants mark under the private pension system.

The Company exceeded ¨1 billion in total funds.

PPS+ packages were started to be sold covering either one of “Life Insurance with Serious Illness Cover”, “Annual Life Insurance” or “Life for Everyone Insurance” products in addition to the Private Pension Plan.

“Mobile Signature” implementation was put into life, making Anadolu Hayat Emeklilik the first and only insurance and pension company enabling customers to get a private pension plan using the internet or their cell phones.

A new variant was added to life insurance policies issued in connection with loans, and Loan Support Insurance incorporating unemployment cover was added to its product range.

The competition “Young Ideas by Owner” was launched, thereby enabling university students’ idea conception related to the industry.

“Shots from Life as Seen by Women” photography contest has been held for the second time.

2009 The Company became the first pension company to reach 400,000 participants in the private pension system (PPS).

The Company became a member of the Insurance Arbitration System.

Targeting credit card customers, Credit Card Support Insurance policy was launched.

“PPS+Support” package was started to be sold covering private pension plan contributions.

“PPS+Critical+Support” package was put on sale, which provides cover for contribution payments of private pension customers in the event of serious illness and disablement. It also provides death cover.

Private Pension Plans portfolio was further expanded with “Master’s Pension Plan”, which incorporates the special features of “Life-Cycle Fund Exchange Model” and “Auto Re-Balancing System”, a first in Turkey.

“Customer Services Center” started operating in İçerenköy, İstanbul.

“Shots from Life as Seen by Women” photography contest has been held for the third time.

2010The Company became the first pension company to reach 500,000 participants in the private pension system.

Volume of the participants’ private pension funds topped ¨2 billion.

“Shots from Life as Seen by Women” photography contest has been held for the fourth time.

“PPS+Protection” package was started to be sold to private pension customers.

“Life for Everyone” policy was renamed in Turkish.

An agency agreement was signed with Albaraka Türk Katılım Bankası A.Ş. (Albaraka Türk).

Anadolu Hayat Emeklilik was named the “Most Admired Private Pension Company” at the “Turkey’s Most Admired Companies 2010” survey conducted by Capital magazine.

The Company set up “Emerging Markets Flexible Pension Growth Fund” (BRIC Plus Fund) and “Alternative Flexible Pension Income Fund” (Alternative Income Fund) and started their sales.

“Pension Income Plan” targeting private pension system participants was put on sale.

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Milestones

2011 Anadolu Hayat Emeklilik became the first company to reach ¨3 billion in funds in the private pension system.

Number of participants topped 577,000 people.

“Shots from Life as Seen by Women” photography contest has been held for the fifth time.

“Personal Accident Insurance” providing cover for potential risks resulting from accidents was put on sale for retail customers.

Agency and cooperation agreements with Türk Ekonomi Bankası (TEB) expired.

Anadolu Hayat Emeklilik took place among the companies selected by the Association of Turkish Notaries for transfer of savings to the private pension system.

Number of health risks covered by the “Life Insurance with Serious Illness Cover” sold in combination with the Private Pension Plan rose from 9 to 21.

An implementation was introduced enabling participants holding İşbank credit cards incorporating Maximum card features to transfer the MaxiPoints earned to their private pension accounts as additional contribution.

2012Anadolu Hayat Emeklilik became the first pension company to reach ¨4 billion in total funds and 600,000 participants in the private pension system.

Anadolu Hayat Emeklilik was named the “Most Admired Private Pension Company” in the “Turkey’s Most Admired Companies 2012” survey conducted by Capital magazine.

Antalya Regional Office was established and started operations.

With the aim of owning the word “future”, the Company began using the slogan “A Good Future for Everyone” and further strengthened the emphasis on the word “everyone” in line with the Company’s vision.

“Shots from Life as Seen by Women” photography contest has been held for the sixth time.

The Company set up and began selling the “Dynamic Balanced Pension Fund” (Dynamic Balanced Fund) and the “Income Oriented Mixed Debt Instruments Pension Fund” (Mixed Fund).

AHE-Sales section was created to enable online sales from the Company’s website.

2013Anadolu Hayat Emeklilik became the first pension company to reach ¨5 billion in total funds in the private pension system.

Anadolu Hayat Emeklilik was named the “Most Admired Private Pension Company” in the “Turkey’s Most Admired Companies 2013” survey conducted by Capital magazine.

“Shots from Life as Seen by Women” photography contest has been held for the seventh time.

Based on a global decision, HSBC Bank A.Ş., which acted as an agency of Anadolu Hayat Emeklilik, signed a contract with another pension company and began handling most of its new productions through that company.

“AHE Gold Fund” was introduced.

“Contribution Pension Fund” (Contribution Fund) and “Alternative Contribution Pension Fund” (Alternative Contribution Fund) were set up, whereby state contributions will be placed in investments.

Anadolu Hayat Emeklilik participants received the highest amount of state contribution in 2013.

The Company began selling four annuity insurance policies: Insurance for Child, Planned Future Insurance, Collateralized Saving Insurance and Standard Saving Insurance.

The Company introduced the Optional Annual Life Insurance that also provides coverage for full and permanent disability as well as for death and accidental death.

Annuity products were restructured under the names “Annuity” and “Retirement Annuity” targeting different age groups.

Compass and Basic Pension Plans were introduced, which are directed towards different customer needs.

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Directory

Anadolu Hayat Emeklilik A.Ş.

Trade Registration Number:265737

Website: anadoluhayat.com.tr

For correspondence:hizmet@anadoluhayat.com.tr

Head OfficeMeltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 16 Levent 34330 Beşiktaş-İstanbul

Customer RelationsTel: 444 55 00Fax: (+90 212) 317 70 77

Customer Relations CenterDeğirmenyolu Caddesi No: 6 C Blok Kat: 6 34752 İçerenköy-Kadıköy-İstanbulTel: 444 55 00Fax: (+90 212) 317 70 77

İstanbul District Office 1Sinanpaşa Mahallesi Dolmabahçe Caddesi No: 7/A Kat: 6 34353 Beşiktaş-İstanbulTel: (+90 212) 244 76 00 pbxFax: (+90 212) 243 84 40

İstanbul District Office 2Caferağa Mahallesi Albay Faik Sözdener Caddesi Güran İş Merkezi No: 11/13 Kat: 1 34710 Kadıköy-İstanbulTel: (+90 216) 330 94 84 pbxFax: (+90 216) 330 92 54

Central Anatolian District OfficeCumhuriyet MahallesiAtatürk Bulvarı No: 75-77 Kat: 606442 Çankaya-AnkaraTel: (+90 312) 468 62 82 pbxFax: (+90 312) 468 30 67

Southern Anatolian District OfficeKurtuluş Mahallesi Ziyapaşa Bulvarı Tevfik Bey Apartmanı No: 37/A 01120 Seyhan-AdanaTel: (+90 322) 458 30 70 pbxFax: (+90 322) 458 70 43

Marmara District OfficeOdunluk Mahallesi Akademi Caddesi No: 10/BZeno İş Merkezi A Blok Kat: 1 No: 4-5 16130 Nilüfer-BursaTel: (+90 224) 223 71 35 / 223 73 57Fax: (+90 224) 223 75 08

Aegean District Office Atatürk Caddesi No: 92 Kat: 3 35210 Konak-İzmirTel: (+90 232) 441 23 43 pbxFax: (+90 232) 441 82 92

Mediterranean District OfficeŞirinyalı Mahallesi İsmet Gökşen Caddesi No: 64 Kat: 1 07160 Muratpaşa-Antalya Tel: (+90 242) 316 22 82Fax: (+90 242) 316 14 42

TRNC Branch Office Şerif Arzık Sokak No: 25 Köşklüçiftlik Lefkoşa-TRNCTel: (+90 392) 227 01 27 / 227 04 08-09Fax: (+90 392) 227 01 26

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Chairman’s Assessment of 2013

Stepping into 2014…Although it has been five years into the global financial crisis of 2008, the world economy is yet to achieve a new and sustainable growth balance.

The decision of the US Federal Reserve (Fed) to gradually cut back on its bond buying program that was introduced to support the US economy in the aftermath of the crisis brought the post-crisis process to a new threshold in 2013. Once it was firm, US Fed’s decision to pursue a change in its policies triggered a period of uncertainty in global monetary policies and capital flows, and resulted in capital outflows from developing countries and depreciation of their currencies.

While the euro zone gives signals of improvement and exit from stagnation, actions to be taken by the European Central Bank (ECB) at the end of 2014 will be the decisive factor in permanently overcoming the chronic issues.

It is anticipated that global economic growth will pick up relatively in 2014 and developed economies will progressively step up their contribution to global economy. In return, structural reform efforts will need to be increased for restimulating the growth momentum in emerging markets in a sustainable manner.

The inflation, which declined as a result of the downfall in global energy prices, is anticipated to show a rise, even if limited, in the US and euro zone. While the development of the US economy is expected to gain speed, a more cautious growth is anticipated in Europe. The International Monetary Fund (IMF)

revised its forecasts downwards due to the injured growth rates of emerging markets. The IMF forecasts a growth rate of 3.6% in the world, 2.6% in the US and 1% in the euro zone in 2014.

The Turkish economy is estimated to have grown 4% in 2013. Despite negative factors that included international volatilities, elevated interest and exchange rates, limited contribution of exports to growth, and the continued upward trend in the current deficit, the expansion in industrial production and the positive course of the manufacturing confidence index indicate that the recovery in economy persists, as does Turkey’s growth performance.

Central Bank of the Republic of Turkey (CBRT) continues with its monetary tightening policies. On the other hand, it is anticipated that inflation indicators will continue to float above

A good future…During 2013, Anadolu Hayat Emeklilik kept building on its achievements and working towards constructing a good future.

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the targets for some more time in conjunction with the volatility in exchange rates. The CBRT has begun implementing policies seeking to restrict the effects of this trend on pricing.

The world economy is in pursuit of a new balance depending on the policies to be followed by the Fed. In this scope, the Turkish economy is expected to maintain its growth model erected on domestic market dynamics, keep in place its cautious control mechanism in current deficit, and continue growing.

Increased interest in the Private Pension System (PPS) helps us hold an optimistic outlook for the future.The PPS strengthened its growth performance in 2013, and the rise in the number of participants gained significant momentum with the effect of the state contribution practice introduced at the start of the year. Surveys conducted also show that awareness of PPS has increased. Having succeeded in furthering its development, importance and weight in the financial system in as short a period of time as ten years, the PPS began to be associated with the concept of future protection.

The level reached is a product of the close collaboration of the public and private pension sectors.

Legislative arrangements aimed at improving the legal infrastructure represent another topic that needs to be noted with respect to the sector’s future and ensuring sustainable performance. Strict coordination between the companies engaged in the sector and the public authority with respect to changes in legislation is vital to allow all stakeholders and particularly investors to be able to solidly plan their activities in the medium and long term, and to obtain efficient results.

At the point we stand today, we envisage that the PPS will reach much broader audiences, and 10-11 million participants, the number targeted for the overall sector by 2023, will be easily achieved.

We keep working for a good future…During 2013, Anadolu Hayat Emeklilik kept building on its achievements and working towards constructing a good future. We have further cemented our leadership in PPS funds by becoming the first company to top 5 billion. Turkey’s first life insurance company, Anadolu Hayat Emeklilik sustained its success in premium production and life insurance assets also last year, and remained the leader in the sector.

The growth trend captured in life insurance, and sustained growth dynamics of the PPS so as to become a key instrument of saving will remain the primary factors that will back the strong growth strategies of Anadolu Hayat Emeklilik in the period ahead.

Just as in the past, so too in the future, Anadolu Hayat Emeklilik is committed to authoring new achievements. I would like to extend my thanks, first and foremost, to our policyholders and participants, and to our shareholders, business partners and employees who accompany us in this journey.

Mahmut MagemizoğluChairman of the Board of Directors

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Message from the CEO

Marking the inception of state contribution, 2013 is a milestone for us all. 2013 has been a special year for the Private Pension System (PPS) with the state contribution implementation that commenced as of 1 January 2013. Within this scope, the tax incentive, which was made available to salaried participants, has been converted into a new practice encompassing all participants.

The introduction of the state contribution practice has made 2013 the most successful year in the 10-year history of PPS. Effective publicity activities quickly paid out and the productions and total number of participants of all sector players, led by our Company, grew significantly. Annual increase in the number of participants that reached no more than 400-450 thousand people in the earlier years more than doubled and arrived at 1 million in 2013. While a similar expansion occurred also in the funds collected, state contribution transferred to participants’ accounts were worth ¨1.2 billion as at the end of the year.

While the 10th anniversary of the PPS has been a year of transformation both for us, the service providers, and the participants, confidence in the system

significantly increased, and awareness in the society got stronger more than ever before.

In 2013 that marked our 10th year in PPS… Anadolu Hayat Emeklilik has completed a decade in the Private Pension System. During these ten years, our Company strongly communicated the shared goals of achieving enhanced awareness of private pension and of bringing the sector to its deserved position as quickly as possible, and made it to the top with its pioneering activities that guide the sector.

Anadolu Hayat Emeklilik remained the sector’s leader in terms of total funds in 2013, while the number of participants choosing our Company reached 734 thousand. Contributions amounted to ¨4.3 billion, as the amount of participant funds topped ¨5 billion. The figures translated into 17% expansion in the number of participants and in total funds. Anadolu Hayat Emeklilik commanded 20% market share in total funds as at year-end 2013. On the other hand, with ¨231 million added to participants’ accounts, our Company has been the private pension company whose customers received the highest amount of state contributions.

Sustainable performance in life insurance Anadolu Hayat Emeklilik undersigned a successful performance also in life branch in 2013. With a premium production of ¨394 million and a market share of 12%, our Company continues to be one of the leading companies in life branch in our country. Preserving its number one spot in life branch with life insurance assets worth ¨1.9 billion at the end of 2013, Anadolu Hayat Emeklilik’s customer base reached 1.6 million people. Total coverage provided during the same period registered in the order of ¨41 billion.

The progress in credit guarantee insurance products offering risk coverage continued also in 2013, resulting in increased profitability generated on this product by our Company. On the other hand, the anticipated premium production could not be achieved in annuities and pension revenues due to the amendments made to the legislation during the reporting period.

Making effective use of the bancassurance channel, Anadolu Hayat Emeklilik secured 7.4% growth in premium production on life insurance in 2013.

We are sustaining our successful performance. Remaining the sector’s leader in terms of the total funds accumulated in the Private Pension System in 2013, Anadolu Hayat Emeklilik also preserved its top ranking on the basis of life insurance assets in life branch.

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Anadolu Hayat Emeklilik is focused on high quality production.Anadolu Hayat Emeklilik is focused on high quality production, and kept managing and developing its portfolio with this perspective also in 2013.

Being the company responsible for the highest amount of state contributions secured for its participants in 2013 is a result of our high quality production policy. The key drivers behind this result were our proactive approach that requires an accurate and productive match between our customers’ investments and state contributions, and active communication with customers on this topic.

Attaching importance to enhancing the quality of customer communication, Anadolu Hayat Emeklilik will increase customer retention efforts in this vein. We believe that these activities bear importance with respect to both good quality production and productivity and profitability, and we keep making the necessary investments.

Further reinforcing its image as Turkey’s most admired private pension company in 2013, Anadolu Hayat Emeklilik continued with its quest for quality service.In 2013, Anadolu Hayat Emeklilik was named Turkey’s most admired private pension company, in a repeat of 2010 and 2012 results. This ranking is based on the outcomes of a questionnaire administered with business executives within the scope of a survey co-conducted by Capital magazine and GFK. Being designated as the “most admired company” by the Turkish business circle is a distinct source of pride for us.

Adverse market conditions have been restrictive on the expansion of PPS funds in 2013.Among the factors that affected our sector in 2013 was the volatility observed both in global economy and in domestic markets. The events that took place have been restrictive on the expansion of funds available to the sector. While BIST did not perform well, exchange rates displayed unexpected movements. In this process, international mixed funds and Eurobond funds

generated positive yields, whereas PPS funds investing more heavily in stocks showed a weak performance. This caused the PPS to underperform in terms of fund growth as compared with the forecasts in 2013.

We hold a positive outlook for 2014, because;The reservations regarding the operation of the state contribution in PPS have been totally eliminated. The high level of awareness attained will attract an increased number of participants to the system. Up-to-date surveys carried out reveal that 90% of participants are familiar with all the details relating to state contribution. On the other hand, an allowance of ¨7.7 billion has been allocated in the government budget for the 2014-2016 period. All these factors boost the interest and confidence in PPS.• Our sector continues with its stable

growth. We are forecasting a repeat of the successful 2013 performance in 2014. During the reporting period, one new company joined the sector while 2014 is expected to see yet another actor’s entry. These developments will support the growth of production.

• The hesitations related to legislation have been eliminated in remote sales. From 2014, alternative distribution channels such as the Internet, mobile channels and the call center will present growing importance with respect to the performance of the PPS.

• 2014 is expected to witness an increase in corporate participations as well. Reservations in relation to certain regulations have been eliminated regarding transfers from funds and foundations. As a result of this, we are expecting some major foundations and funds to join the PPS in 2014.

• While the CPI was 7.4% in 2013, the PPS generated a return of 25% through the state contribution. This is indicative of a significant return in real terms. Based on the assumption that inflation will decrease in the medium term and interest rates will follow a controlled course, the PPS will differentiate as a highly productive saving instrument.

In brief, 2014 will be a year in which PPS will transcend its success in 2013.

We are improving our operational processes and infrastructure to achieve our future targets.Anadolu Hayat Emeklilik started 2014 with sure-footed steps. We are constantly improving our structuring in the light of amendments made to the legislation, in an effort to offer better service, to access more customers, and to secure more efficient growth. Our alternative distribution channels make up our capabilities that we invest in, as we target these channels to get higher share of our production in the future.

By mid-2014, we are anticipating some regulatory amendments, which will reflect upon the sector’s performance. Our Company is making the necessary preparations in this regard.

On the part of our private pension business line, we are intending to enhance our efficiency in the Pension Plan for Housewives, the Compass plan addressing the upper segment, and the Master’s Pension Plan. We will keep effectively using and improving our private agency channel in 2014. On the life insurance side, we are forecasting the banking system to grow in parallel with credit expansion, and anticipating significant increase in production in this business line which we lead.

In brief, we are saying “The future is our business in 2014”. We will keep moving ahead with this thought, and we will further strengthen our solid financial performance to the satisfaction of our investors, in particular, and all our stakeholders in general.

I would like to thank everyone who has contributed to our 2013 performance.

Mete UğurluCEO and Member of the Board of Directors

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An Overview of the World and Turkish Economies in 2013 and2014 Outlook

The economic recovery in developed economies - mainly in the US - and probable revisions in the countries’ monetary policies to follow will be influential on the global economic activity in 2014.

The World EconomyDuring 2013, decoupling in the growth performances displayed by developed and emerging economies began fading away, which resulted in slowdown in global economic activity. The IMF kept revising its growth forecasts downwards in the light of these developments and most recently, decreased its global growth estimate in October 2013.

It is observed that the weak outlook of the economic activity in China, as well as the improvement in the US and Japanese economies, have an important share in the performance of the world economy. On the other hand, with the US Federal Reserve’s (Fed) intention to cut back its bond buying program, the capital flows directed towards emerging markets showed increased volatility from the second half of 2013. While bearing a negative impact on the economic activity of emerging countries, this predicament also led to significant losses in currencies.

The temporary nature of the solution for the debt ceiling in the US, where labor and housing markets pursued a positive course, is indicative of potentially similar issues that might occur in the US in the first quarter of 2014. Yet, continued recovery in economic data makes the 2014 inception of tapering by the US Fed a highly probable item on the agenda. Likewise, the US Fed announced that it has cut back its monthly bond buying to USD 65 billion in the committee meeting held in January 2014.

Economic activity in euro zone countries picked up throughout 2013 as compared with the previous years. After shrinking for six consecutive quarters, the euro zone economy got out of stagnation in the second quarter of 2013.

The expansionary monetary policy implemented in Japan seemingly has a positive effect on economic activity. The Bank of Japan is expected to sustain its quantitative easing practices until 2015. However, it is believed that the tightening expected in the cost policy in 2014 may exert pressure on growth.

The inflationist pressure created by the local currencies that depreciated particularly from the second half of the year across emerging countries resulted in a tightening trend adopted by the monetary policies. Continued loss of momentum by the Chinese economy in 2013 is expected to pose as a risk element with respect to global economic activity in the period ahead.

The Turkish EconomyDuring 2013, the growth composition of the Turkish economy began changing as compared with that of 2012. During this process, growth seemingly restarted to support consumption and investment outlays. The Turkish economy registered 4% growth year-on-year in the first three quarters of 2013. The moderate recovery trend in economic activity continued also in the last quarter of the year. However, the CBRT’s current monetary tightening policy practices and the BRSA’s precautions adopted in the last quarter of the year in relation to consumer loans are believed to have a somewhat restricting effect on growth. When considered in this framework, the Turkish economy is estimated to achieve a 4% growth in the overall year in 2013.

CPI Inflation(%)

12 13

7.40

6.16

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In 2013, foreign trade deficit expanded by 18.7% year-on and amounted to ¨99.8 billion in 2013. On the other hand, it was observed that the central government budget continued with its positive performance throughout 2013. In the first 11 months of 2013, budget revenues and expenditures went up by 17.3% and 12.7%, respectively. In this framework, the budget balance, which produced a deficit of ¨13.3 billion in the first half of 2012, registered a gap of ¨1.3 billion during the same period of 2013. The course of domestic demand conditions reflected positively on budget revenues.

Having displayed an upward trend in the first half of the year in keeping with the elevated unprocessed food prices and exchange rates, the annual rise in CPI declined from July in conjunction with the base effect. Annual inflation was 7.40% for CPI and 6.97% for PPI.

An Overview of the Life Insurance and Private Pension System in 2013 and 2014 OutlookDuring 2013, 24 life insurance and pension companies realized production in life insurance in Turkey, with 18 of them also operating in the private pension sector.

Based on the December 2013 data released by the Insurance Association of Turkey (IAT), premium production on life insurance grew 26% year-on-year to ¨3,395 million.

Life insurance premium production accounts for 14% of the total production by the overall insurance sector, where the top 10 companies are responsible for 85% of this production figure.

According to December 2013 data of the Insurance Information and Monitoring Center (IIMC), based on the distribution of premium production on life branch by distribution channels, the bancassurance channel increased its share from 75% at year-end 2012 to 79%. The expansion in protection insurance is expected to continue despite implementations targeting shrank credits, while bancassurance channel is anticipated to preserve its weight in this branch.

The Private Pension System has become the best individual investment instrument owing to the unique state contribution advantage and the performance of pension funds in terms of generating returns.

Introduced in 2003, the Private Pension System gained a high momentum with the launch of the state contribution practice, and the number of participants in the system grew by one million to approximately 4.2 million as of 3 January 2014.

Participants’ funds managed under the system amounted to ¨25,128 million, while total contributions reached ¨21,958 million, within which state contributions were worth ¨1,149 million.

Based on 3 January 2014 data, total funds under management by the sector’s top six companies corresponded to 83% of the total funds available to the sector.

When the PMC data of 3 January 2014 are reviewed, the PPS grew by 24% in total funds (¨4,782 million) and by 33% in the number of participants (1,031,905) year-on-year. The PPS is projected to almost triple the number of participants over the next ten years, provided that economic developments and the state contribution model persist with their current course.

Total Funds - Private Pension System(̈ billion)

12 13

25.1

*

20.5

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2.7

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Total Contributions - Private Pension System (̈ billion)

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22.0

16.3

Total Premium Production - Life Insurance(̈ billion)

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3.4

Imports(USD billion)

12 13

228.

5

237

Exports (USD billion)

12 13

138.

7 153

*Excluding state contribution

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Anadolu Hayat Emeklilik by Numbers

At the Board of Directors meeting of Anadolu Hayat Emeklilik held on 26 April 2013, it has been decided to raise the Company’s issued capital of ¨300,000,000 by ¨50,000,000 to ¨350,000,000; of the incremental amount, ¨31,000,000 will be covered from extraordinary reserves, and ¨19,000,000 from statutory reserves. Along the line, it has been deemed fit by the Capital Markets Board of Turkey (CMB) decision dated 21.06.2013 and numbered 22/730 that shares with a nominal value of ¨50,000,000, which will be issued by reason of the capital increase, be registered with the CMB; the registration procedure has been finalized as of 04 July 2013.

Holders of Class A shares are not granted any privileges save for the nomination of the Board Directors. Seven members of the Board Directors are elected by the General Assembly from amongst candidates nominated by Class A shareholders, and four from amongst those nominated by Class B shareholders. The Company’s articles of incorporation do not allow creation of new Class A shares in capital increases.

The Company did not repurchase any of its own shares in the reporting period. The Company has only one associate, İş Portföy Yönetimi A.Ş., in which it holds 20% share in capital. İş Portföy Yönetimi A.Ş. does not own any share in our Company. Shares held in the Company by the members of the Board of Directors and the Executive Committee are negligible.

Shareholder Structure Shareholder Share Amount (¨) Share (%)Türkiye İş Bankası A.Ş. 217,000,000 62Anadolu Anonim Türk Sigorta Şti. 70,000,000 20Millî Reasürans T.A.Ş. 3,500,000 1Publicly Held 59,500,000 17Total 350,000,000 100

Türkiye İş Bankası A.Ş.

62%Anadolu Anonim Türk Sigorta Şti..

20%

Millî Reasürans T.A.Ş.

1%

Publicly-held

17%

Stock Performance

ANHYT Market Capitalization (¨ million)BIST 100 Index (¨)

BIST 100 Index and Anadolu Hayat Emeklilik Market Capitalization (2000-2013, ¨)

90,000

75,000

60,000

45,000

15,000250

500

1,000

1,250

1,500

1,750

2,000

0 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

60,000

50,000

40,000

30,000

20,000

10,000

0

200

400

600

800

1,000

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

BIST 100 Index and Anadolu Hayat Emeklilik Market Capitalization (2000-2013, USD)

ANHYT Market Capitalization (USD million)BIST 100 Index (USD)

BIST 100 Index (USD)

ANHYT Market Capitalization(USD million)

ANHYT Market Capitalization (¨ million)

BIST 100 Index (¨)

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Summary Financial InformationFinancial Highlights (¨ thousand) 2012 2013 Change (%)Total Premium and Contribution Production(*) 1,080,701 1,391,454(**) 29Mathematical Provisions and Profit Sharing Provisions 2,205,674 1,871,476 -15Pension Funds 4,277,830 5,231,179(***) 22General Technical Profit 52,929 52,293 -1Total Assets 7,222,090 7,902,405 9Paid-in Capital 300,000 350,000 17Shareholders’ Equity 524,680 533,869 2Financial Income 63,514 65,436 3Pretax Profit 105,675 98,477 -7Net Profit 79,575 83,167 5

Key Ratios (%) (%)Pretax Profit/Shareholders’ Equity 20 18Premium and Contribution Production/Total Assets 15 18Shareholders’ Equity/Total Assets 7 7

29% increase in total premium and contribution production...Total premium and contribution production by Anadolu Hayat Emeklilik was up 29% to ¨1,391 million in 2013.

(*) Total premium figures include premiums from personal accident branch. (**) Based on the data released by the Pension Monitoring Center (PMC) as of 3 January 2014. (***) Including state contributed funds.

13

52,

293

Total Premium and Contribution Production(̈ thousand)

12 13

1,39

1,45

4

1,08

0,70

1

Pension Funds(̈ thousand)

12 13

5,23

1,17

9

4,27

7,83

0

Total Assets(̈ thousand)

12 13

7,9

02,4

05

7,22

2,09

0

Paid-in Capital(̈ thousand)

12 13

350

,000

300,

000

General Technical Profit(̈ thousand)

12

52,9

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Organization Chart

Early Detection of Risk CommitteeAssoc. Prof. Atakan Yalçın

Recai Semih Nabioğlu

Corporate Governance CommitteeProf. Mehmet Baha Karan

Recai Semih Nabioğlu

CEOMete Uğurlu

Board of Directors

Audit Committee Prof. Dr. Mehmet Baha Karan

Assoc. Prof. Atakan Yalçın

Deputy Chief Executive OfficerM. Uğur Erkan

Deputy Chief Executive OfficerO. Haluk Solak

Funds Management Department

Legal Department

Accounting Department

Individual Sales Department

Communications Department

Human Resources and Training Department

Corporate Sales Department

Marketing Department

Deputy Chief Executive OfficerOrhan Bozkurt

Agencies Department

Support Services and Procurement Department

Life Insurance Department

Health Department

Branches and District Offices

Aegean District Office

Central Anatolian District Office

İstanbul District Office 1

İstanbul District Office 2

Marmara District Office

Mediterranean District Office

Southeastern Anatolian District Office

TRNC Branch

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Secretariat to the Board of Directors

Board of Internal AuditM. Selahattin Bayraktaroğlu

Risk Management & Internal Control Department

Alternative Distribution Channels Department

IT Department

Change and Project Management Department

Software Development Department

Deputy Chief Executive OfficerHaldun Aydoğdu

Coordinatorİ. Hakkı Altay

Customer Relations Department

Customer Operations Department

CoordinatorF. Demet Işıksaçan

Maturity Payments Department

Reinsurance Department

Actuarial Department

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Board Directors

MAHMUT MAGEMİZOĞLUChairman of the Board of Directors1959, Antakya. He holds a degree in Business Administration from the Middle East Technical University and a master’s degree in Investment Analysis from the University of Stirling (UK). Mr. Magemizoğlu has begun his career at İşbank in 1982 as an Assistant Inspector, where he held various positions until 1999 and worked as the Head of the Equity Participations Department from 1999 until 2005. Serving as Deputy Chief Executive of İşbank since 2005, Mr. Magemizoğlu has also been holding the position of the Chairman of the Board of Directors at Anadolu Hayat Emeklilik since 19 June 2009.

SALİH KURTULUŞVice Chairman of the Board of Directors1947, Kalkandelen. He graduated from İstanbul Private School of Journalism. He started his professional career at İşbank in 1974 as an officer. After working as a branch manager of various branches, Mr. Kurtuluş represented İşbank as a director on the Boards of Directors of Anadolu Hayat Emeklilik, Anadolu Sigorta, Paşabahçe Cam Sanayi, as well as some other equity participations of İşbank. After serving as a Board Director at İşbank from 2005 until 2008, he retired from İşbank in 2009. Salih Kurtuluş was reelected as a Board Director at Anadolu Hayat Emeklilik on 24 October 2008.

METE UĞURLUDirector and CEO1955, Ankara. He received his degree in Business Administration from the Middle East Technical University, Faculty of Administrative Sciences. He has begun his career at İşbank in 1978 as an Assistant Specialist where he worked as a manager in various divisions. After serving as a Section Head in the Organization Department from 1996 until 2002, Mr. Uğurlu was appointed as a Deputy Chief Executive Officer in 2002. He represented İşbank as a Board Director at Anadolu Sigorta (1991-2002), as the Chairman of the Board at İş Kültür Yayınları (2002-2003) and at İş Girişim Sermayesi (2003-2006). Serving as the CEO of Anadolu Hayat Emeklilik since 31 January 2006, Mr. Uğurlu currently functions in two industrial associations; he is the Vice Chairman of the Board of Directors and the Head of the Life and Pension Management Committee at the Insurance Association of Turkey, and Member of the Board of Directors at the Pension Monitoring Center.

DR. A. YAVUZ EGEDirector1947, Gemlik. He graduated from the Department of Finance and Economics from Ankara University, Faculty of Political Sciences. He received his master’s and Ph.D. degrees from the Department of Economics at the University of Kent in the UK. He worked for a long time at the T.R. Ministry of Development as a specialist, advisor, Head of Annual Programs and Finance Department, Head of Economical Planning and Deputy Undersecretary. Having served as a member of the Turkish Competition Board in 1997 and as the Undersecretary of Foreign Trade between 1997-1999, he functioned as the Chairman of the Boards of Türk Eximbank, Export Promotion Center and Güven Sigorta (Insurance) at different times. Between 2000-2001, he administrated GAP (Southeast Anatolia Project) Development Plan as Project Director. He taught “Economic Policy and Planning” and “Monetary Theory and Policy” at the Faculty of Political Sciences at Ankara University from 1993 until 2002. After serving as a Board Director of İşbank between 2003-2008, Dr. Ege has been elected a Board Director at Anadolu Hayat Emeklilik on 30 April 2008.

TUNCAY ERCENKDirector1950, Siverek/Şanlıurfa. He holds a degree in law from İstanbul University. Mr. Ercenk worked as a self-employed lawyer registered with the Bar Association of Antalya from 1978 until 2002 and also served two terms of office as a Board member at the Bar Association of Antalya between 1984 and 1990. He also served as a member of the Parliament during the term of the 22nd government from 2002 until 2007, during which time he was a member of the Grand National Assembly of Turkey Committee on Constitution. Having been a Board Director at İşbank from 2008 to 2011, Mr. Ercenk has been elected a Board Director of Anadolu Hayat Emeklilik on 24 May 2011.

PROF. DR. MEHMET BAHA KARAN Director (Independent)He got his degree in Business Administration from the Middle East Technical University in 1978, and his Ph.D. in Business Administration from Gazi University in 1984. Having worked as an associate professor at Hacettepe University, Business Administration Department from 1996 through 2002, he has been a Professor with the same university since 2003. After functioning as the founding director of the Hacettepe University Financial Research Center (1998-2004) and a vice dean of the Faculty of Economics and Administrative Sciences at Hacettepe University (2007-2009), Prof. Karan has become the chair of Hacettepe University Department of Business Administration in 2009, a position he still holds. He also had the positions of chair, member of the board of directors and manager in various international professional organizations including, among others, the Multinational Finance Society and Professional Risk Managers’ International Association (PRMIA).

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EBRU ÖZŞUCA Director1971, Ankara. After getting her degree in economics from the Middle East Technical University, Faculty of Economic and Administrative Sciences in 1992, Ms. Özşuca received a master’s degree from METU Graduate School of Social Sciences, Department of Economics in 1996. She graduated from the University of Southampton, International Banking and Financial Studies in 1998. She joined İşbank in 1993 as an assistant specialist in the Asset Management Department, where she served as Department Head in Corporate Banking Product Department from 2007 until 2011. Ms. Özşuca has been functioning as the Department Manager in Treasury Department since 2011. She was a member on the boards of directors of İş Portföy Yönetimi (2006-2009), İş Yatırım Menkul Değerler A.Ş. (2009-2012), and İşbank AG (2011-2012). Serving as a Board Director at CJSC İşbank (Russia) since 2013, Ms. Ebru Özşuca has been elected a Board Director of Anadolu Hayat Emeklilik on 26 March 2013.

RECEP HAKİ Director1963, Ankara. Recep Haki graduated from the Department of Public Administration at the Middle East Technical University in 1988. The same year, he joined İşbank as an assistant training specialist trainee in the Training Department, where he rose to the position of Assistant Manager in the same department in 1997. Mr. Haki worked as Assistant Branch Manager in İşbank Başkent branch from 2000 until 2002 and in Yenişehir branch from 2002 until 2004. In 2004, he worked in the Corporate Marketing Department where he was involved in the Customer-Centric Transformation Program launched by İşbank. He was a Group Manager in the Change Management Division in 2006. Recep Haki became the Retail Banking Sales Manager in 2008, and was appointed as the Retail Loans Manager on 28 June 2012, a position he currently holds. He functioned as an auditor at Camtaş Düzcam Pazarlama A.Ş. (1998-2002), Beğendik Mağaza İşletmeleri A.Ş. (2001-2002), Gözlük Sanayi A.Ş. (2003), and Tuba-Sim İnş. Konsorsiyumu A.Ş. (2005-2006), and as a Board director at Camiş Elektrik Üretim A.Ş. (2011-2013). Mr. Haki has been elected a Board Director of Anadolu Hayat Emeklilik on 26 March 2013.

Assoc. Prof. ATAKAN YALÇINDirector (Independent)He received his degree in Electrical and Electronics Engineering from Boğaziçi University in 1994. He got his MBA from the Southern Methodist University in 1996 and his Ph.D. in Finance from the Boston College in 2002. He taught at Brandeis University (2000), Boston College (2003-2004), and Koç University (2004-2012). He is currently a faculty member with Özyeğin University Faculty of Economics and Administrative Sciences. Teaching courses on financial management, portfolio management, and derivative securities, Assoc. Prof. Yalçın’s research in the field of economics has appeared in leading journals such as the Journal of Empirical Finance, Journal of Banking and Finance, Journal of Financial Research and Journal of Marketing. He is also a member of the CFA Institute, as well as various academic councils.

R. SEMİH NABİOĞLUDirector1967, Isparta. After getting his degree in Business Administration from the Faculty of Economics and Administrative Sciences at Gazi University, Mr. Nabioğlu received his master’s degree in Accounting and Finance from the same university. He started his career in 1990 as Assistant Specialist at İşbank, where he still works as Unit Manager at the Equity Participations Department. He currently holds seats on the boards of directors of Anadolu Anonim Türk Sigorta Şirketi, Milli Reasürans T.A.Ş., representing İşbank. Mr. Nabioğlu has been elected a Board Director of Anadolu Hayat Emeklilik on 24 August 2012.

MURAT ATALAYDirector1973, Ankara. He graduated from the Department of Statistics, Faculty of Science at Hacettepe University. He joined İşbank in 1996 as an Assistant Specialist and functioned as a Specialist and Manager in various Head Office divisions. In 2011, Mr. Atalay has been appointed as the Director of Retail Banking Marketing Section, a position he still holds. Mr. Atalay has been elected a Board Director of Anadolu Hayat Emeklilik on 24 May 2011.

Board Directors who Resigned during the Reporting PeriodNone.

Information on Board of Directors Meetings During 2013, Anadolu Hayat Emeklilik Board of Directors held 12 meetings, 10 of which were convened with full participation of the members. In two other meetings, full participation could not be achieved due to justified excuses of the Board Directors. These two meetings that was held without full participation was convened in the absence of one Director.

Other InformationDuring 2013, there were no transactions performed by our Board Directors under the authorization received from the General Assembly so that they can perform the transactions specified under Articles 395 and 396 of the Turkish Commercial Code.

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Declarations of Independence by Independent Members of the Board of Directors

Ankara, 25 February 2013

To: Anadolu Hayat Emeklilik A.Ş.Corporate Governance Committee

I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors for your consideration at the General Assembly to be convened in March 2013.

Yours sincerely,

Prof. Dr. Mehmet Baha Karan

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İstanbul, 25 February 2013

To: Anadolu Hayat Emeklilik A.Ş.Corporate Governance Committee

I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors for your consideration at the General Assembly to be convened in March 2013.

Yours sincerely,

Assoc. Prof. Atakan Yalçın

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Executive Board *

FATMA DEMET IŞIKSAÇANCoordinator1973, Ankara. She got her graduate degree in business administration from the Faculty of Economic and Administrative Sciences at the Middle East Technical University and her master’s degree in actuary from Hacettepe University. She has been appointed as assistant specialist at Anadolu Hayat Emeklilik on 09 August 1999, as actuary on 15 July 2003, and as manager on 01 March 2010. Ms. Işıksaçan was appointed as Coordinator on 09 October 2013, a position she still holds.

METE UĞURLUDirector and CEOPlease refer to page 26 for the resumé of Mete Uğurlu.

MEHMET UĞUR ERKANDeputy Chief Executive Officer1964, Ankara. He holds a degree in Economics from the Middle East Technical University, Faculty of Economic and Administrative Sciences. He started his business life as an Assistant Inspector on the Board of Inspectors of İşbank in 1986. Mr. Erkan has been serving as a Deputy Chief Executive Officer at Anadolu Hayat Emeklilik since 14 July 2003.

OĞUZ HALUK SOLAKDeputy Chief Executive Officer1963, Balıkesir. He holds a degree in Business Administration from the Middle East Technical University, Faculty of Economic and Administrative Sciences. He started his career as an Assistant Inspector on the Board of Inspectors of İşbank in 1986. Mr. Solak has been serving as a Deputy Chief Executive Officer at Anadolu Hayat Emeklilik since 15 November 2006.

ORHAN BOZKURTDeputy Chief Executive Officer1956, Rize. He is a graduate of Galatasaray School of Economics and Business Administration of İstanbul Academy of Economic and Commercial Sciences. He started working as an Assistant Inspector at Anadolu Sigorta in 1982. Mr. Bozkurt has been serving as a Deputy Chief Executive Officer at Anadolu Hayat Emeklilik since 12 June 2007.

HALDUN AYDOĞDUDeputy Chief Executive Officer1973, Ankara. He holds a degree in electrical and electronics engineering from the Middle East Technical University. He started working as a Software Specialist at İşbank in 1995, where he functioned as the Software Team Leader (1999-2003), Project Leader (2003-2006), assistant manager in the Operational Solutions Division (2007-2010), and Head of the Operational Solutions Division (2010-2011). He joined Anadolu Hayat Emeklilik as Coordinator on 1 July 2011. Mr. Aydoğdu has been serving as a Deputy Chief Executive Officer since 1 February 2013.

İSMAİL HAKKI ALTAYCoordinator1970, Trabzon. He got his degree in economics from the Economic and Administrative Sciences Department at Hacettepe University. He began his career as an assistant inspector at Anadolu Hayat Emelilik on 04 August 1997. He was appointed as grade 2 inspector at Marmara Regional Branch on 05 April 2004 and as Assistant Manager at the same branch on 01 April 2006. Having been assigned to the Customer Relations and Operations Department on 01 May 2007 and as Manager on 01 April 2009, Mr. Altay has been serving as Coordinator since 09 October 2013.

(*) Mr. Engin Murat Yüksel, Deputy Chief Executive Officer, retired as of 31 January 2013, and Mr. Ayhan Sincek, Deputy Chief Executive Officer resigned from his position in our Company as of 31 July 2013.

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Managers Responsible for Internal Systems

MEHMET SELAHATTİN BAYRAKTAROĞLUHead of the Board of Internal Audit1969, Artvin. He holds a degree in Public Administration from the Middle East Technical University, Faculty of Economic and Administrative Sciences. He started working as an Assistant Internal Auditor at Anadolu Hayat Sigorta in 1994. At the İstanbul 2nd Regional Directorate, he functioned as an Assistant Manager between 2001-2006 and then as a Manager from 2006 onwards. Mr. Bayraktaroğlu has been appointed as the Head of the Board of Internal Audit on 12 June 2007, a position he still holds.

NİLGÜN KILIÇUZARRisk Management and Internal Control Department1968, Eskişehir. She holds a degree in Business Administration from the Middle East Technical University, Faculty of Economic and Administrative Sciences. She started her career at Anadolu Hayat Sigorta as an Assistant Specialist in 1990. After functioning as a Specialist and a Manager in various divisions, Ms. Kılıçuzar has been serving as a Manager at the Risk Management and Internal Control Department since 2011.

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Outside Positions Held by the Board Directors and Executives

Name Position in the Company

Outside Positions Held

Mahmut Magemizoğlu Chairman of the Board of Directors

Deputy Chief Executive at İşbankChairman at Milli Re

Mete Uğurlu Board Director and CEO

Vice Chairman of the Board of Directors at the Insurance Association of Turkey Head of the Life and Pension Management Committee at the Insurance Association of TurkeyMember of the Board of Directors at the Pension Monitoring Center

Murat Atalay Board Director Section Director at İşbank

Recai Semih Nabioğlu Board DirectorUnit Manager at İşbankBoard Director at Anadolu SigortaBoard Director at Milli Re

Prof. Dr. Mehmet Baha Karan Board Director Chair of Business Administration Department at Hacettepe University, Faculty of Economic and Administrative Sciences

Assoc. Prof. Atakan Yalçın Board Director Faculty Member in the Business Administration Department at Özyeğin University, Faculty of Economics and Administrative Sciences

Ebru Özşuca Board Director Section Director at İşbank Member of the Board of Directors at CJSC İşbank (Russia)

Recep Haki Board Director Section Director at İşbank

Oğuz Haluk Solak Deputy Chief Executive Officer President at the Association of İşbank Employees

F. Demet Işıksaçan Coordinator

Member of the Actuarial Society of TurkeyMember of Haymer Data Glossary Committee Member of the Insurance Association of Turkey Life Technical Committee

Information is presented below on the positions held outside of the Company by the members of the Board Directors and Executive Board

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Goals and Policies of Anadolu Hayat Emeklilik

The primary goal of Anadolu Hayat Emeklilik is to be the sector’s leading company in life insurance and private pension branches. The Company’s approach to service focused on customer satisfaction, in-depth know-how and deep-rooted corporate culture, combined with the financial strength of its parent İşbank Group are the key strengths of Anadolu Hayat Emeklilik.

As one of the strong and reliable companies in the Turkish insurance industry, Anadolu Hayat Emeklilik sets its goals and policies based on its commitment to further leverage its sustainable success. Anadolu Hayat Emeklilik targets to improve its performance in productivity, profitability, and growth by making optimum use of its know-how, experience and capital accumulation.

Anadolu Hayat Emeklilik remains loyal to its mission to develop and nurture in people an awareness of the need to safeguard their futures, offer financial solutions that satisfy their needs, and contribute to the development of the national economy by creating long-term, stable funds.

The Company’s vision is to be Turkey’s top and most preferred life insurance and pension company in all aspects and to take place among the world’s leading companies in terms of quantity and quality, as the degree of globalization and integration, particularly in economy, constantly increases.

Along these lines, Anadolu Hayat Emeklilik formulated its primary goals as follows:•ItwillremainapriorityforAnadolu

Hayat Emeklilik to effectively capitalize on the country’s potential and opportunities presented by economic developments, extend the reach of service delivery, and achieve constant improvement in the added value created. The trust held in the Company, investors, its business partners, and products are the key drivers behind the sustainable success of Anadolu Hayat Emeklilik.

•Maintainingthelong-goingsectoralleadership in the private pension system captured in all of the sector’s rankings including total funds, contributions, and number of contracts will remain among the Company’s priorities.

•AnadoluHayatEmekliliktargetstomaintain its long-going title as the sector’s top company in terms of the financial assets of its life policyholders, and to achieve growth in insurance linked to individual loans, in particular.

•Inviewoftheexpectedincreasedattraction of the system owing to the 25% state contribution subsidy that replaced the tax advantage in the private pension system, the Company aims at making optimum use of marketing and sales strategies in an effort to claim the maximum share out of the anticipated surge in total funds.

•TheCompanyaimstoimprovethecapacity and synergy in bancassurance created by the cooperation predominantly with İşbank and other banks in the network.

•Withnearly300agenciesasatyear-end 2013, Anadolu Hayat Emeklilik controls a powerful and active private agency network. The Company will keep effectively and efficiently increasing the synergy created with the agency network, which has been contributing value to the Company.

•BasedonthefactthatTurkeyoffersa high potential for the insurance and pension sectors owing to her young and dynamic population, combined with the low percentage of insurance ownership, the Company intends to create new sales opportunities to tap this potential, employing alternative distribution channels (ADC) such as the Internet, call center and mobile applications, in addition to bank and agency channels.

•TheCompanywillcontinuetosustainits pioneering position in the sector on the back of innovative products and practices, and to steer the products and practices through efficient positioning, constant differentiation and improvement in keeping with the needs of customer segments and sales channels. In recognition of customer satisfaction, Anadolu Hayat Emeklilik set delivering the best in service to its existing customer portfolio and constantly upgrading the capacity and service quality of the call center that serves as a vital channel with respect to customer relations among its key priorities.

•Namedthe“MostAdmiredCompanyinthe Private Pension Sector” in “Turkey’s Most Admired Companies 2013” survey conducted by Capital magazine, Anadolu Hayat Emeklilik will continue to give importance to maintaining its status as the most trusted and respected PPS company in the business field.

•Continuitywillbeachievedinkeepingthe employees and distributions channels informed about new practices and needs and trained about the rapidly changing regulatory requirements, in an attempt to perpetuate and further build the interest and trust in the Company and the sector.

A company identified with trust...The key driver behind the sustainable success of Anadolu Hayat Emeklilik is the trust held in the Company, investors, its business partners, and products.

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An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2013

Differentiated product and service delivery, high quality in service and enhanced customer satisfaction...

During 2013, Anadolu Hayat Emeklilik continued to enhance its service delivery in life insurance and private pension on the axes of:- differentiated product

and service delivery,- high quality in service, and- enhanced customer satisfaction.

Having completed 23 years in operation, Anadolu Hayat Emeklilik strengthened its leadership in total funds in the Private Pension System with the results obtained in life insurance and private pension branches, and ranked second in premium production among life insurance service providers.

2013 highlights:•Controlling12%marketsharewith

¨394 million in premium production in life insurance branch, Anadolu Hayat Emeklilik remained the leader by a large margin also with total mathematical provisions that topped ¨1,881 million.

•BasedonthePensionMonitoringCenter (PMC) data released on 3 January 2014, Anadolu Hayat Emeklilik achieved 17% growth in the number of participants and in total funds in 2013. The Company reached ¨5,233 million in total funds under management (including state contributions) and 734,015 people in the number of participants. Anadolu Hayat Emeklilik is the sector’s leader in total funds with a market share of 20%.

•Byyear-end2013,totalassetsofAnadolu Hayat Emeklilik increased 9% compared to last year and reached ¨7,902 million.

•With¨83.2 million posted in net profit, the Company once again exhibited its capability in producing sustainable and permanent value.

•Addressingchannelmanagementin bancassurance implementations targeting high efficiency and effectiveness, Anadolu Hayat

Emeklilik continued to make optimum use of distribution channels.

•AnadoluHayatEmeklilikisuncompromising on achieving full compliance with corporate governance principles and applicable legislation that governs its operations, and continued to prudently exercise the principles of transparency.

The first company exceeding ¨5 billion in total funds in the Private Pension SystemAccording to PMC data released on 3 January 2014, Anadolu Hayat Emeklilik exceeded ¨5 billion in total funds, strengthened its performance in the amount of funds and sustained its leadership in the sector.

Customized products and services based on high customer perceptionAnadolu Hayat Emeklilik takes a proactive approach in the development of its private pension products and services so as to satisfy the expectations of customers from different segments.During 2013, the Company offered service with a rich portfolio covering 27 individual, 191 group pension plans and 24 pension funds with different content and fees and encompassing various alternatives that respond to the investment and risk expectations of individual and corporate participants.

In the management of its pension funds, Anadolu Hayat Emeklilik works in synergic cooperation predominantly with İş Portföy Yönetimi, as well as other leading asset management companies in the sector.

Extensive customer reach through solid channel managementAnadolu Hayat Emeklilik carries out solid channel management based on its efficiency- and effectiveness-oriented strategy for its comprehensive distribution network. The Company ensures an extensive customer reach via:•regionalofficesinİstanbul(2),

Ankara, İzmir, Adana, Bursa and Antalya, and a branch in the Turkish Republic of Northern Cyprus,

•directsalesforce,•bankbranchesthatserveas

the Company’s agencies,•privateagenciesnetwork,and•alternativedistributionchannels

(call center and the internet).

An efficient and exemplary company in the implementation of bancassuranceOne of the most efficient users of the bancassurance channel in Turkey, Anadolu Hayat Emeklilik also possesses the most extensive delivery channel in this respect.

In this field, Anadolu Hayat Emeklilik continued its cooperation with İşbank, HSBC Bank, Anadolubank, and Albaraka Türk in 2013, thereby capturing the ability to more easily present the products and services designed for its policyholders.

İşbank, the Company’s principal shareholder, presents Anadolu Hayat Emeklilik with a unique competitive advantage in channel diversity with its 1,289 branches, superior technology and alternative distribution channels.

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Through the bancassurance channel covering a network of more than 1,800 branches, Anadolu Hayat Emeklilik delivers its private pension and life insurance products to a wide-range customer base.

The Company actively used the bancassurance channel, which was produced 86% of the Company’s new contracts acquired for private pension and 57% of its premium production on life insurance in 2013.

Direct Sales Team: direct sales team of 353 people in 55 cities Preserving its top spot in total funds in the Private Pension System, Anadolu Hayat Emeklilik’s direct sales team consisted of 353 people as of 31 December 2013.

The direct sales team establishes a mutual relation between the customers and the Company. Maintaining one-to-one contact with the customers, the team is the best expression of the Company’s resource capability and undertakes the marketing of private pension and life insurance products. Offering service to the customers in İşbank’s branches in 55 provinces, the team produced 65% of the private pension products sold in 2013.

300 agencies across the countryAnadolu Hayat Emeklilik’s strong network of nearly 300 agencies displayed a successful sales performance also in 2013. The agency network got 25% share in total contributions and premium collections in endowment policies and private pension contracts inclusive of contributions on contracts sold jointly with banks.

Higher sales, more customers by means of campaignsMaintaining a high level of success on the axis of “responding to customer needs/customer satisfaction”, Anadolu Hayat Emeklilik considers campaigns as an important tool for strengthening the cooperation among marketing channels and for achieving sales targets.

During 2013, the Company continued to carry out an increased number of campaigns in private pension and life insurance branches via agency, bank and direct sales team distribution channels.

Constantly growing importance of digital channels…Anadolu Hayat Emeklilik, in 2013, kept a close eye on the advancements in the digital world and expanded its services and activities in digital media, in keeping with its mission of leading the sector.

Due to the fast-paced increase of digital interaction and intensive use of digital channels by individuals independent from place and time, it has become essential to position products and services also on these media.

Putting this awareness into life with a proactive strategy, Anadolu Hayat Emeklilik set up the Alternative Distribution Channels Department in 2011 in an effort to create a dedicated expertise and capability for the management of digital channels. Also in 2013, the unit attached utmost importance to activities aimed at increasing the efficiency of digital channels and customer interaction thereon in line with the corporate goals.

Sales opportunities6,647 sales leads received via digital channels and referred to the direct sales team resulted in the sales of 498 products as of 31 December 2013. The conversion ratio of leads to sales stood at 7%. It is targeted to bring this figure up to the order of 10% in 2014.

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Powerful interaction in customer relationsWithin the scope of Customer Relations Department activities carried out in 2013, approximately 821 thousand inbound calls and 76 thousand e-mails have been responded to, while 573 thousand outbound calls were placed.

The Internet BranchAnadolu Hayat Emeklilik has initiated work to develop a new Internet branch that will provide an environment of easier and faster access, querying and transaction to its policyholders. The project is slated for completion and introduction during 2014.

Sales management and optimization through search engineEfforts continued in 2013 to create sales leads from Google Search Network and Google Display Network. As a result of search engine optimization efforts, Anadolu Hayat Emeklilik corporate website remained the most visited address among the websites of companies operating in private pension and life insurance sectors, thus fortifying its leadership in this respect.

The Company preserves its goal of being the company with the corporate website that receives the highest number of visitors in the sector also in 2014.

AHEPad©

AHEPad©, a mobile application, has been put into service so as to enable the direct sales team to perform their promotion and sales activities more efficiently. Efforts are ongoing to equip the application with new functions such as sales leads management. The content of AHEPad© application will be further enriched in line with the needs in the years coming.

Social media campaignsThe Company carried out activities directed towards increasing the rate of interaction and the number of followers on social media and organized campaigns during 2013.Projects and activities will continue at a growing extent in line with the primary goals relating to digital channels in 2014.

Other projects planned for 2014Key initiatives intended to be launched in 2014 include mobile applications, applications that support the IVR system, projects aimed at using “mega data”, projects for creation and utilization of authorized database, development of microsites for remote sales, use of the new social media and customized messaging service.

An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2013

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Contribution to the improvement of the system through activities addressing corporate customersBelieving that corporate participants will play a major role in the development of the Private Pension System, Anadolu Hayat Emeklilik actively and uninterruptedly continues with its activities targeting this segment.

Also in 2013, the Company realized campaigns aimed at the intermediaries, in an effort to increase the sales of group pension plans, especially employer-sponsored ones.

Private Pension Intermediaries ExamAgencies and sales representatives offering service as intermediaries in the Private Pension System are required to pass the e-BEAS (Electronic Private Pension Intermediaries) exam.

Anadolu Hayat Emeklilik made sure that all of its new private pension intermediaries across all distribution channels took the e-BEAS exam during the reporting period. Consequently, the number of Anadolu Hayat Emeklilik private pension intermediaries with permanent licenses reached 2,848 people by the end of the year.

The greatest asset of Anadolu Hayat Emeklilik: Human ResourceThe key driver behind the successful performance of Anadolu Hayat Emeklilik is its experienced, creative and dynamic human resource espousing the corporate culture and guided by common sense in their actions.

In 2013, total number of Anadolu Hayat Emeklilik employees including the direct sales team reached 851. Boasting a young team, 71% of the Company’s human resource consists of employees in the 18-34 age interval.

One of the most preferred employers in the sector for its corporate qualities, brand equity and HR implementations, Anadolu Hayat Emeklilik is differentiated with value attached to its employees, and the contemporary training and career opportunities offered.

Aiming to provide its employees with the opportunity to keep abreast of new practices and achieve self-development, and seeking to further raise the bar in its services to policyholders, Anadolu Hayat Emeklilik provided a total of 2,452 hours of training to its employees in 2013. While the programs focused mostly on the private pension system, and professional and personal development, average training time per person was 19,28 hours in the reporting period.

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Social responsibility projectsAnadolu Hayat Emeklilik believes that women play a significant role in the economic and social development of our country. Accordingly, the Company designs its long-lived social responsibility projects based on this notion so as to support their improvement.

“Girls: The Insurance of our Future” ProjectThe project “Girls: The Insurance of our Future” which was conducted with the support of the Ministry of National Education and in cooperation with The Association to Support Contemporary Living and dedicated to support girls who are financially unable to continue their education began its ninth year in 2013. The project initially started with 500 girls in 2005 and had many graduates during the

past eight years. Furthermore, 100 new high school students became part of the project in 2010-2011 academic year.

Students that are part of the project study in the insurance departments that were opened by the Ministry of National Education at Trade Vocational High Schools on scholarship from Anadolu Hayat Emeklilik. For further studies, they attend the Vocation School of Banking and Insurance.

Since 2008, female employees of Anadolu Hayat Emeklilik offer mentoring to “Girls: The Insurance of our Future”, under the name of “Life Volunteers”. Through mentoring, Life Volunteers help the students to have a better understanding about their future professions, and additionally, support them any time they need.

“Shots from Life as Seen by Women” photography competition“Shots from Life as Seen by Women” photography competition aims to contribute to the social and cultural development of the Turkish women, and offers them a platform where they can freely express themselves.

Initiated in 2007 and held for the seventh time in 2013, Competition was once again themed “About Life”. In this context, the jury assessed 5,143 photographs submitted by 1,134 participants, upon which top 44 photos elected were exhibited in various cities. Photographs that won a prize and deemed worthy of being exhibited were collected in a special catalogue.

An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2013

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Communication activitiesDuring 2013, Anadolu Hayat Emeklilik carried out advertising and public relations activities aimed at upkeeping its powerful image before the stakeholders, and publicizing the Private Pension System based on its responsibility coming from its sector’s leader position.

• Designed to highlight the benefits made available to housewives under the revisions made to the Private Pension System, the advertising campaign themed “Housewives also Have a Right to Retirement” aired on TV channels, radio stations, and published in newspapers, magazines, digital and mobile media, as well as in movie theaters. • Various below-the-line activities were carried out which were

aimed at publicizing the state contribution implementation that went into force and at winning new customers for the system. • The campaign “Provinces Reaching out to the Future” took place in local media (TV channels, radio stations, newspapers, magazines). • The campaign “Sweet Life for Cyprus”, which is intended to increase the awareness and prevalence of life insurance products in the Turkish Republic of Northern Cyprus, took place in local TV channels, radio stations, newspapers, magazines and on outdoor advertising media. • Sponsored the TV show “Sunay Akın ile Hayat Deyince” (About Life with Sunay Akın) aired on SKY Türk 360 Channel.

• Commercials aired at Cinemaximum movie theaters and displays which promoted the Private Pension System were set up in foyers. • Various internal communication activities took place and aimed to promote internal communication and corporate awareness. • Giving the Company employees the chance to express the way they see life and seeking to promote intracompany communication, “Shots from Life As Seen by Employees” photography competition was held for the sixth time.

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Radical changes in services and activities...During 2013, Anadolu Hayat Emeklilik undertook radical changes in its services and activities for achieving compliance with new regulations.

During 2013, Anadolu Hayat Emeklilik kept a close eye on the regulations governing life insurance and the private pension system and took on radical changes in its services and activities for achieving compliance with the new requirements.

Efforts for achieving compliance with new regulations were regarded also as an opportunity for new product development or for radical revisions to product features, as well as for improvements to points of service and adapting new technologies. Hence, a series of programs and projects was launched to materialize these opportunities.

Within the frame of the project-based transformation and management concept espoused by Anadolu Hayat Emeklilik, effective improvements were made to project and requirements management, and revisions were introduced to resource, capacity, priority setting and monitoring activities on the back of the infrastructures designed.

In 2013, Anadolu Hayat Emeklilik allocated significant project resources for achieving compliance with the legislation, and also carried out projects with the following objectives:• Modificationofthemainsoftware,

which will result in a radical change in the management and operation of life insurance and private pension processes,

• Efficiencyinbancassuranceoperation,• Improvingfinancialworkflows

and IT software and data infrastructure supporting them,

• Designingandintroducingproductsincorporating new features,

• Determiningandimplementingcustomer retention actions,

• Definingworkflowsatinternational standards,

• Enhancingdataanalysisandreporting capabilities,

• Upgradingthequalityofcustomer service,

• Achievingefficiencyincertain basic operations,

• Increasingtheefficiencyofalternative distribution channels,

• Ensuringprocess-basedoperationthat support COBIT (Control Objectives for Information and Related Technology) framework in IT management.

Anadolu Hayat Emeklilik recognizes the importance of flexibility and agility for quickly responding to requirements resulting from macroeconomic developments, and competitive competitions, as well as for anticipating and proactively taking position for opportunities and risks. The Company is convinced that such agility can only be enabled through efficient workflows and reliable, easily accessible, manageable and integrated technological infrastructure. In this frame, the Company finalized its search for a basic insurance application in 2013, and thus laid the foundations of a major transformation program in its IT infrastructure. Analyses and implementation work are planned to be commenced in the first quarter of 2014 following the conclusion of an agreement with the contractor.

Through ground-breaking implementations to be introduced and new projects to be launched in 2014, innovations will be introduced in the fields of online/tele-marketing, mobile applications, smartpen applications, process automations and information technology service quality.

The projects that will be conducted in 2014 in line with the strategic needs identified will play an important part in sustaining Anadolu Hayat Emeklilik’s leadership in the sector.

Research and Development for New Services and Activities

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İşbank

İşbank, the first national bank of Turkish Republic, was founded on 26 August 1924 at the initiative of Atatürk, consequent to the decisions made in the First Economy Congress in İzmir. İşbank, which has taken a leading stance at every stage of economic and commercial life, assumed various roles in a number of fields, mainly in industry and trade, and made significant contributions through 89 years since its foundation.

As the largest bank of Turkey in terms of total assets, total loans and shareholders’ equity, İşbank provides its customers quick access to financial services through its extensive branch network and alternative distribution channels.

İşbank’s superior scale and its competence of service delivery are defined by its excellent and extensive network that consists of:•24,129employees•1,289domesticand20

international branches•5,673ATMs

Having pioneered the establishment and growth of many new industries in the country with its corporate identity championing innovation in every aspect, İşbank controls a portfolio of equity stakes in leading companies that are active in a wide range of endeavors.

The financial participations operating in a variety of business lines from investment banking to portfolio management and from leasing to private pension make İşbank unique.

Having crowned its trusted company image with its achievements, İşbank continued to build on product and service diversity offered through alternative distribution channels, and to consistently augment its transaction volumes.

As of 2013 year-end, 31.75% of İşbank’s shares are on free float and they are publicly traded on Borsa İstanbul.

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Human Resources Policy

Our Company defines and conducts its human resources policy in light of our country’s social, cultural, and economic conditions and the following principles:

1. In recruitment, the Company espoused the principle that individuals are to be given equal opportunity under identical conditions. Hiring criteria are set forth in writing for each job position and are strictly complied with in practice.

2. Job descriptions and assignments and performance criteria are determined by the Company management and announced to employees.

3. When making training, assignment, and promotion decisions, particular care is taken to making use of objective data and to observing the Company’s best interests, to the maximum extent possible.

4. Training plans are developed and training policies are formulated in an effort to help our employees improve their knowledge and skills.

5. Our Company’s employees are members of the Bank and Insurance Employees’ Union. Any decisions or developments concerning them are communicated to the employees or their representatives, and the opinion of the said union is sought in such decisions.

6. The Company provides a working environment and working conditions that are safe and efforts are undertaken to improve these conditions depending on social and technological requirements.

7. Our employees are kept informed on decisions made or developments that occur concerning them.

8. Measures are taken to prevent discrimination among employees based on race, religion, language, or sex; create a working environment that is respectful of human rights; and prevent all physical, mental, and emotional abuse within the Company.

9. It is not deemed appropriate to appoint a representative to handle relations with our employees.

HIRING PRACTICES

The general principles and criteria adhered to by Anadolu Hayat Emeklilik in all its hiring practices are summarized below. To be hired by the Company, a person must:•BeacitizenofTurkey.•Beatleast18andnotmorethan30

years of age.•Havecompletedanyactivemilitary

service obligations if applicable or have obtained a deferment.

•Nothavebeendeprivedoftheircivilrights.

•Neverhavebeenconvictedofanyofthe offenses specified in insurance and private pension system law, whether or not officially pardoned.

•Behealthyenoughtoworkandtravelanywhere in Turkey.

•Forjanitorialpositions,holdatleastahigh-school diploma. For white-collar positions, be a graduate of at least a two-year vocational school as defined in the applicable legislation, or of four-year faculties.

•Beundernoserviceobligationtoanygovernment agency or private concern.

•Successfullypassthequalifyingexamination and/or interview for the position being hired into.

JOB APPLICATIONS

Whenever vacant positions are available, they are announced on the Company’s internet website and in newspapers. Applications for such positions may be submitted by mail, by fax, in person, and from the website. All applications that are received are placed in a single pool. The Company’s Human Resources and Training Department is responsible for receiving all job applications, conducting written and/or oral exams, announcing exam results, and all other recruitment-related matters.

PROGRESSION

Advancement to positions in our Company’s organizational structure (manager, assistant manager, 2nd manager, service chief, assistant service chief, clerk, specialist, assistant specialist, internal audit, and assistant internal audit) is governed by the Company’s related bylaws. The following general principles apply to all advancements.To be promoted to a higher position:•theemployeemusthaveservedforthe

minimum periods of time specified by headquarters in his current position;

•theemployeemusthaveearnedagoodperformance score substantiating his promotion;

•theremustbeavacancytowhichtheemployee can be promoted.

•theemployeemusthavesuccessfullycompleted whatever course, examination, thesis, project, or similar qualifying requirements that the Company requires for the position.

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PERFORMANCE MANAGEMENT

Performance appraisal system is in place at the Company in order to measure the individual contribution of each employee in supporting the Company towards achievement of its corporate objectives. In this frame, all company employees are evaluated once a year.

The performance appraisal system aims to establish objective criteria for the employees’ career progressions and to determine their training needs.

JOB SECURITY

Job security for our employees is provided under a collective bargaining agreement arrangement between the Company and BASİSEN (Banking and Insurance Employees’ Union).

COMPENSATION POLICY

Employees’ salaries are adjusted annually in accordance with current conditions and as specified in a collective bargaining agreement that is renewed every other year. Salaries are paid on the last day of each month. In addition to their regular monthly salaries, employees receive an annual bonus equal to five monthly salaries. In addition to salary and bonuses, personnel are entitled to a broad range of fringe benefits such as health insurance coverage, healthcare assistance, employer’s contributions to the Private Pension System on the employee’s behalf, personal life insurance, and company-provided transportation and lunchtime meals.

TRAINING

AHE AcademyThe Company set up the AHE Academy in order to systematize the training and development activities directed towards our employees, by incorporating the cultural aspect as well.

Through the AHE Academy, the Company invests in its human capital and aims to make the customer-focused culture permanent.

Anadolu Hayat Emeklilik supports its employees’ professional and personal development, offers various activities that are aligned with their career paths and aim to equip its employees so as to enable them to look from different perspectives.

Training ProgramsCompany employees are provided with in-house and extramural training opportunities to foster their professional and personal development. National and international resources are made use of for these training programs.

As a company that fills management position vacancies from within its own ranks, special attention and importance are given to employee training.

When personnel are first hired, they are put through an orientation program and given training in basic insurance and Private Pension System issues. After this and for the rest of their careers, training is provided so that they have all the knowledge and skills they may need for whatever position they may be filling.

When preparing the annual training programs, the Human Resources and Training Department’s primary goal is to develop employees’ competencies in their current positions while also readying them for higher positions in the future.

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Modifications to the Articles of Incorporation During the Fiscal Year

Under the Communiqué Serial: IV No: 56 on the Determination and Implementation of Corporate Governance Principles that went into force upon its publication in the Official Gazette issue 28158 dated 30 December 2011 and other applicable Capital Markets Board of Turkey (CMB) legislation, the Turkish Commercial Code no. 6102 that was published in the Official Gazette issue 27846 dated 14 February 2011 and came into force on 1 July 2012, and the Law no. 6327 Amending the Private Pension Savings and Investment Law and Certain Other Laws and Statutory Decrees, the Ordinary General Assembly decision for amending the below mentioned articles of the Company’s Articles of Incorporation has been registered on 16 April 2013.

ARTICLE 1 – FORMER VERSION

IncorporationArticle 1 - A joint stock company is herewith incorporated by and among the founders whose names and domiciles are given below, in accordance with the provisions of the Turkish Commercial Code and the Insurance Supervision Law.

1- Anadolu Anonim Türk Sigorta Şirketi Rıhtım Caddesi Anadolu Sigorta Han No.57 Karaköy / İSTANBUL Citizen of Turkey

2- Türkiye İş Bankası Anonim Şirketi Atatürk Bulvarı No.191 Kavaklıdere / ANKARA Citizen of Turkey

3- Destek Reasürans Türk Anonim Şirketi Abdi İpekçi Caddesi No.75 Maçka / ISTANBUL Citizen of Turkey

4- Türkiye Şişe ve Cam Fabrikaları Anonim Şirketi Barbaros Bulvarı No.125 Camhan Beşiktaş / İSTANBUL Citizen of Turkey

5- Mensa Mensucat Sanayi ve Ticaret Anonim Şirketi Mersin Asfaltı 14. Km. / ADANA Citizen of Turkey

6- Türk Dış Ticaret Bankası Anonim Şirketi Yıldız Posta Caddesi No.54 Gayrettepe / İSTANBULCitizen of Turkey

The joint stock company incorporated by the founders whose com-pany names and head offices at the time are written hereinabove was, through amendments subsequently made to its articles of association, transformed into a “company whose shares are publicly offered” in the sense of the Capital Market Law, and into a “Private Pension Company” in the sense of the Private Pension Savings and Investment System Law.

ARTICLE 1 - NEW VERSION

IncorporationArticle 1 - A joint stock company is herewith incorporated by and among the founders whose company names, nationalities and domiciles are given below, in accordance with the provisions of the Turkish Commercial Code and the Insurance Supervision Law.

1- Anadolu Anonim Türk Sigorta Şirketi Rıhtım Caddesi Anadolu Sigorta Han No.57 Karaköy / İSTANBUL Citizen of Turkey

2- Türkiye İş Bankası Anonim Şirketi Atatürk Bulvarı No.191 Kavaklıdere / ANKARA Citizen of Turkey3- Destek Reasürans Türk Anonim Şirketi

Abdi İpekçi Caddesi No.75 Maçka / ISTANBUL Citizen of Turkey

4- Türkiye Şişe ve Cam Fabrikaları Anonim Şirketi Barbaros Bulvarı No.125 Camhan Beşiktaş / İSTANBUL Citizen of Turkey

5- Mensa Mensucat Sanayi ve Ticaret Anonim Şirketi Mersin Asfaltı 14. Km. / ADANA Citizen of Turkey

6- Türk Dış Ticaret Bankası Anonim Şirketi Yıldız Posta Caddesi No.54 Gayrettepe / İSTANBUL Citizen of Turkey

The joint stock company incorporated by the founders whose com-pany names and domiciles at the time are written hereinabove was, through amendments subsequently made to its articles of incor-poration, transformed into a “company whose shares are publicly offered” in the sense of the Capital Market Law, and into a “Pension Company” in the sense of the Private Pension Savings and Invest-ment System Law.

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ARTICLE 3 – FORMER VERSION

Purpose and Scope of the Company

Article 3 - Purpose and scope of the company:

a) Engage in individual or group private pension activities; set up pension funds in this framework; create fund bylaws for the funds to be set up; execute pension contracts, annuity contracts, portfolio management contracts, custody agreements with the custodian for safekeeping of fund assets; execute other agreements in relation to its fields of activity;

When performing the activities subject to the Private Pension Law, the Company acts in compliance with the principles and guidelines set forth therein, and specifically:

- May obtain service for the pension contract from the bank and its branches and private pension intermediaries,

- Invests the contributions collected from participants in funds within the period of time stipulated by the Law,

- Constantly updates private pension accounts and other records related thereto, and takes necessary action for the safekeeping of these records and fund assets,

- Enables access of participants to daily information on their private pension accounts,

- Regularly informs participants on the assets contained in their fund portfolios, fund performances and financial statements,

- Ensures management of funds in accordance with the general strategies and decisions adopted by the company,

- Timely provides the custodian with required information for their incorporation in the custody accounts as necessary,

- Appraises the funds portfolio and ensures accurate calculation of the unit share price,

- Gets the pension plan changed upon request by participants, - Facilitates transfer of contributions to another fund or pension

company, upon request by the participant, subject to the provisions of applicable legislation.

b) Provide individual or group life or whole life insurance, accident insurance in connection therewith, as well as individual or group illness insurance and all sorts of life insurance limited to the period of time allowed by the private pension legislation, and carry out reinsurance transactions related to all kinds of insurance mentioned above;

c) Assume agency, lead insurer and representation services for other national or international insurance and reinsurance companies engaged in the life branch and for pension companies;

d) Carry out all kinds of acts and actions in relation to the Company’s scope; establish companies to be engaged in the same scope or participate in existing or future enterprises active in the same scope;

e) Participate in healthcare institutions;

f) Purchase and sell movables or immovables, construct buildings, create and lift mortgage and all sorts of real rights for the purpose of achieving the Company’s purpose and investing its capital and reserves in interest-bearing instruments, trade in all kinds of domestic and overseas money, financial and capital market instruments allowed by the legislation for the same purpose, provided that such activities shall not be in the nature of brokerage and portfolio management activities;

g) Set up, manage and participate in pension funds and real estate investment trusts, investment participations and all kinds of funds allowed to be set up for advancing life and health insurance; merge/transfer Pension Funds set up by the Company under the Private Pension Savings and Investment System Law.

h) The Company may grant donations within the scope of social responsibility and in accordance with the procedures and principles set by the Capital Markets Board.

Other business activities to be deemed necessary or useful for the Company in the future other than those listed above may also be incorporated in the Company’s scope through amendment of these articles of association.

ARTICLE 3 – NEW VERSION

Purpose and Scope of the Company

Article 3 - Purpose and scope of the company:

Carry out any and all insurance and reinsurance operations such as types of life insurance, accident insurance, illness insurance permitted by the legislation, engage in private pension activities and obtain intermediary services in relation thereto, provided that compliance is achieved in these acts and activities with the principles and guidelines set out in the Private Pension Savings and Investment System Law, the Turkish Commercial Code, the Capital Market Law and other applicable legislation.

The Company may also;Be engaged in such matters as setting up, managing, merging, transferring and participating in pension funds, provided that the obligations specified in the legislation governing pension funds are fulfilled;

Assume agency, lead insurer and representation services for other national or international insurance and reinsurance companies engaged in the life branch and for pension companies;

Purchase and sell movables or immovables, construct buildings, create and lift mortgage and all sorts of real rights for the purpose of achieving the Company’s purpose and investing its capital and reserves in interest-bearing instruments, trade in all kinds of domestic and overseas money, financial and capital market instruments allowed by the legislation for the same purpose, provided that such activities shall not be in the nature of brokerage and portfolio management activities;

The Company may carry out all kinds of acts and actions in relation to the Company’s scope; establish companies to be engaged in the same scope or participate in existing or future enterprises active in the same scope, and may conduct acts, actions and transactions deemed necessary, provided that the legislation is not contradicted with.

The Company may grant donations within the scope of social responsibility and in accordance with the procedures and principles set by the Capital Markets Board.

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Modifications to the Articles of Incorporation During the Fiscal Year

ARTICLE 4 - NEW VERSION

The Company’s Headquarters and Branches

Article 4- The Company is headquartered in Beşiktaş, İstanbul. The Company’s address is Meltem Sokak No:10 İş Kuleleri Kule:2 Kat:16 Levent 34330 Beşiktaş/İSTANBUL.

In the event of a change of address, the new address must be registered with the trade registry, and announced in the Turkish Trade Registry, and posted on the Company website. Such new address shall also be notified to the Ministry of Customs and Trade, Undersecretariat of Treasury and Capital Markets Board. If the new address remains in the same registration precinct, then it shall not be mandatory to amend the articles of incorporation solely by reason of change of address.

The company may open branches and establish agencies, representation offices, and correspondent offices in Turkey, upon fulfillment of the required legal procedures, and abroad, subject to the permission of the Undersecretariat of Treasury.

ARTICLE 6 - NEW VERSION

Capital and Shares

Article 6 - The Company has adopted the registered capital system in accordance with the provisions of the Capital Market Law, and switched to the aforementioned system based on the Capital Markets Board of Turkey (CMB) permission dated 15.06.2000 and numbered 67/1039. The Company’s registered capital is TL 450,000,000 (four hundred and fifty million), divided into 45,000,000,000 (forty-five billion) shares each with a nominal value of TL 0.01.

The Company’s issued capital is TL 300,000,000.-(three hundred million). Of this amount, which is fully paid-up, TL 1,000,000 (one million) is represented by 100,000,000 (one hundred million) Class A shares each with a nominal value of TL 0.01, and TL 299,000,000 (two hundred ninety-nine million) is represented by 29,900,000,000 (twenty-nine billion nine hundred million) Class B shares each with a nominal value of TL 0.01, issued on various dates.

New Class A shares may not be issued in capital increases.

Permission granted by the CMB for authorized capital is valid from 2011 through 2015 (5 years). Even if the authorized capital so permitted is not reached by the end of 2015, in order for the Board of Directors to pass a capital increase decision after 2015, it is mandatory to get authorization from the General Assembly of Shareholders for a new period of time upon getting permission from the CMB for the previously permitted or a new maximum capital amount. The Company will be deemed to have exited the registered capital system in case of failure to obtain the said authorization.

From 2011 through 2015, the Board of Directors is authorized to increase the issued capital up to the authorized capital through issuing registered shares in accordance with the provisions of the Capital Market Law, as and when it deems necessary.

While the nominal value of each share was TL 1,000.-, the same was first changed to 1 New Kuruş pursuant to the Law Amending the Turkish Commercial Code no. 5274, and then to 1 Kuruş due to the elimination of the word “New” from the phrases “New Turkish Lira” and “New Turkish Kuruş” effective from 01 January 2009, based on the Council of Ministers Decision numbered 2007/11963 dated 04 April 2007. Due to this change, total number of shares decreased; accordingly, 10 shares with a value of TL 1,000 have been exchanged with one share with a nominal value of 1 (New) Kuruş. The shareholders’ rights arising from the shares they hold in relation to the said exchange are reserved.

The phrases “Turkish Lira” herein are phrases that have been inserted pursuant to the Council of Ministers Decision mentioned above.

Shares representing the capital are followed-up in dematerialized form within the frame of dematerialization principles.

Decisions for increasing the capital are publicly disclosed within the frame of public disclosure of material events.

The capital may not be increased unless cash values of the shares are fully paid, save for increases made from internal funds.

ARTICLE 4 - FORMER VERSION

The Company’s Headquarters and Branches

Article 4 - The Company is headquartered in Şişli, İstanbul. The Company’s address is İş Kuleleri Kule 2 Kat 17-20 34330 4. Levent - İstanbul.

In the event of a change of address, the new address must be registered with the trade registry, announced in the Turkish Trade Registry Gazette, and also notified to the Ministry of Industry and Commerce and Capital Markets Board. Failure to have a new address registered and announced in due time after having departed from an existing registered and announced address shall be deemed cause for dissolution of the company.

The company may open branches and establish agencies, representation offices, and correspondent offices in Turkey, and abroad subject to the permission of the Undersecretariat of Treasury.

ARTICLE 6 - FORMER VERSION

Capital and Shares

Article 6 - The Company has adopted the registered capital system in accordance with the provisions of the Law no. 2499, and switched to the aforementioned system based on the Capital Markets Board of Turkey (CMB) permission dated 15.06.2000 and numbered 67/1039. The Company’s registered capital is TL 450,000,000 (four hundred and fifty million), divided into 45,000,000,000 (forty-five billion) shares each with a nominal value of TL 0.01.

The Company’s issued capital is TL 300,000,000.- (three hundred million). Of this amount, which is fully paid-up, TL 1,000,000 (one million) is represented by 100,000,000 (one hundred million) Class A shares each with a nominal value of TL 0.01, and TL 299,000,000 (two hundred ninety-nine million) is represented by 29,900,000,000 (twenty-nine billion nine hundred million) Class B shares each with a nominal value of TL 0.01, issued on various dates. All shares are registered shares.

New Class A shares may not be issued in capital increases.

Permission granted by the CMB for authorized capital is valid from 2011 through 2015 (5 years). Even if the authorized capital so permitted is not reached by the end of 2015, in order for the Board of Directors to pass a capital increase decision after 2015, it is mandatory to get authorization from the General Assembly of Shareholders for a new period of time upon getting permission from the CMB for the previously permitted or a new maximum capital amount. The Company will be deemed to have exited the registered capital system in case of failure to obtain the said authorization.

From 2011 through 2015, the Board of Directors is authorized to increase the issued capital up to the authorized capital through issuing registered shares in accordance with the provisions of the Capital Market Law, as and when it deems necessary.

While the nominal value of each share was TL 1,000.-, the same was first changed to 1 New Kuruş pursuant to the Law Amending the Turkish Commercial Code no. 5274, and then to 1 Kuruş due to the elimination of the word “New” from the phrases “New Turkish Lira” and “New Turkish Kuruş” effective from 01 January 2009, based on the Council of Ministers Decision numbered 2007/11963 dated 04 April 2007. Due to this change, total number of shares decreased; accordingly, 10 shares with a value of TL 1,000 have been exchanged with one share with a nominal value of 1 (New) Kuruş. The shareholders’ rights arising from the shares they hold in relation to the said exchange are reserved.

The phrases “Turkish Lira” herein are phrases that have been inserted pursuant to the Council of Ministers Decision mentioned above.

Shares representing the capital are followed-up in dematerialized form within the frame of dematerialization principles.

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ARTICLE 7 - FORMER VERSION

Share Certificates

Article 7- Rescinded.

ARTICLE 8 – FORMER VERSION

Issuing Bonds, Debt Instruments and Profit/Loss Sharing Certificates.

Article 8 - The Company may issue bonds, debt instruments and profit/loss sharing certificates subject to the provisions of the Turkish Commercial Code, the Capital Market Law, Private Pension Savings and Investment System Law, insurance legislation and other applicable legislation.

The General Assembly is authorized with respect to bonds issue.

The General Assembly may set out the details concerning the issue of bonds, debt instruments and profit/loss sharing certificates and it may also authorize the Board of Directors in this matter, if it so wishes.

ARTICLE 9 – FORMER VERSION

Board of Directors

Article 9 - The Company is managed by a Board of Directors consisting of nine members possessing the qualifications as described in the Private Pension, Capital Market and Insurance legislation.

Members of the Board of Directors shall be elected by the General Assembly, six of them from among nominations made by Class A shareholders, and three from among nominations made by Class B shareholders.

In the absence of the Company’s CEO, his deputy with highest seniority shall serve as the natural member of the Board of Directors.

ARTICLE 7 - NEW VERSION

Shares and Transfer of Shares

Article 7- All of the shares are registered shares.

Transfer of shares is governed by the provisions of the Turkish Commercial Code and of the CMB legislation. Provisions of the Insurance Law and Private Pension Savings and Investment System Law and other applicable legislation are reserved. Over-the-counter acquisition concept shall be determined in accordance with ISE (Istanbul Stock Exchange) regulations.

The provisions of Article 379 and subsequent articles of the Turkish Commercial Code governing the Company’s repurchase of its own shares are reserved.

ARTICLE 8 – NEW VERSION

Issuing Debt Instruments and Convertibles.

Article 8 - The Company may issue bonds, debt instruments and convertibles subject to the provisions of the Turkish Commercial Code, the Capital Market Law, Private Pension Savings and Investment System Law, insurance legislation and other applicable legislation.

The General Assembly is authorized with respect to issuing bonds, debt instruments and convertibles.

The provisions of the Capital Market Law and applicable legislation will be abided by with respect to the limit of the bonds, debt instruments and convertibles.

The values of debt instruments must be cash and must be paid in full upon delivery.

New bonds and other debt instruments in the nature of capital market instruments and convertibles may not be issued, unless the bonds and other debt instruments in the nature of capital market instruments and convertibles that have been issued are fully sold or until the unsold ones have been rescinded.

ARTICLE 9 – NEW VERSION

Board of Directors

Article 9- The Company is represented and managed by a Board of Directors consisting of 11 members possessing the qualifications as described in the Private Pension, Capital Market and Insurance legislation, who will be elected by the General Assembly pursuant to the provisions of the Turkish Commercial Code.

Members of the Board of Directors shall be elected by the General Assembly, seven of them from among nominations made by Class A shareholders, and four from among nominations made by Class B shareholders. A candidate nominated by certain share classes must be elected as a member by the General Assembly, unless there is justified reason to do otherwise.

In the absence of the Company’s CEO, the deputy CEO with highest seniority shall serve as the natural member of the Board of Directors.

Legal entities can be elected to the seats on the Board of Directors. In such a case, a real person designated by such legal entity and materializing the legal entity in his person shall be registered and promulgated along with the legal entity member of the Board. Any proposals submitted and votes cast by such real person before the Board of Directors shall be deemed submitted/cast by the legal entity. The responsibility rests with the legal entity only. Such real person can be substituted at any time at the unilateral will of the legal entity. Discharge from the office shall not be necessary in such a case. The legal entity’s representative may not be elected in lieu of the legal entity as Board member.

The provisions of the applicable legislation of the Capital Markets Board are reserved regarding independent Board Directors.

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ARTICLE 10 – NEW VERSION

Duration of the Board of Directors

Article 10- Members of the Board of Directors shall be elected for a maximum term of office of three years. Any member whose term of office expires may be re-elected.

The General Assembly may replace the Board members at any time, if the agenda covers an item concerning the discharge of the Board members or in the absence of such an item, in the event there is a justified reason therefor.

If a seat on the Board of Directors is vacated by reason of resignation, death or any other cause, then the Board of Directors shall temporarily elect an individual possessing the required qualifications from amongst nominations made by the Class entitled to nominate for such vacated membership, and lay it down for approval by the General Assembly in the immediately following meeting. The individual elected as a Board member as such shall serve until the first General Assembly meeting. If his election is approved by the General Assembly, he shall serve until the expiration of the term of office of the member he is succeeding. The applicable provision of the Turkish Commercial Code is reserved..

ARTICLE 11- NEW VERSION

Board of Directors Meeting and Decision Quorum

Article 11 - The Board of Directors shall convene upon invitation by the chairman, and in his absence, by the vice chairman, as the Company’s affairs dictate, but at least once a month. In addition, every Board Director may request in writing from the Chairman, and in his absence from the Vice Chairman, to convene the Board for a meeting. The Chairman or the Vice Chairman shall take care to fulfill the meeting request by a Board Director depending on the need and to the extent possible.

The invitation letter shall incorporate the agenda and the meeting date and hour.Board of Directors meeting shall be held at the Company headquarters. Meetings may also be held elsewhere by a majority decision of the Board.

Those who are entitled to attend the Company’s Board of Directors meetings may do so electronically, pursuant to Article 1527 of the Turkish Commercial Code. Pursuant to the provisions of the Communiqué on Electronic General Assembly Meetings of Business Corporations Save for Joint Stock General Assembly Meetings, the Company may either set up the Electronic Meeting System that will allow eligible individuals to attend and cast votes in these meetings on electronic medium, or may purchase service from systems created for this purpose. In the meetings to be held, it will be provided that eligible individuals exercise their rights specified in the applicable legislation subject to the provisions of the said Communiqué using the system set up pursuant to this provision of the Company’s charter or using the system from which support service will be obtained.

The Board shall convene with a simple majority of its full membership. Decisions shall be passed by a simple majority of Board Directors who are present. In the event that votes are tied, the issue shall be held over to the next meeting. If votes are again tied at that meeting, the motion shall be considered to have been declined. Board of Directors decisions on a particular issue proposed by one of the Board Directors to all of the Directors may also be passed with the written approval of at least the majority of full membership, unless a Board Director requests that a meeting be held and the matter be discussed.

Board decisions shall only be valid if they have been put into writing and signed. However, decisions may also be passed and stored electronically within the frame of the procedures and principles set out in the applicable legislation.

ARTICLE 10 – FORMER VERSION

Duration of the Board of Directors

Article 10- Members of the Board of Directors shall be elected for a maximum term of office of three years. Any member whose term of office expires may be re-elected.

The General Assembly may replace the Board membership body, in full or in part, at any time, if it so deems necessary.

If a seat on the Board of Directors is vacated by reason of resignation, death or any other cause, then the Board of Directors shall temporarily elect an individual possessing the required qualifications from amongst nominations made by the Class entitled to nominate for such vacated membership, and lay it down for approval by the General Assembly in the immediately following meeting. The individual elected as a Board member as such shall serve until the first General Assembly meeting. If his election is approved by the General Assembly, he shall serve until the expiration of the term of office of the member he is succeeding.

ARTICLE 11 - FORMER VERSION

Board of Directors Meeting and Decision Quorum

Article 11 - The Board of Directors shall convene upon invitation by the chairman as the Company’s affairs dictate, but at least once a month.

The invitation letter shall incorporate the agenda and the meeting date and hour.Board of Directors meeting shall be held at the Company headquarters.

Meetings may also be held elsewhere by a majority decision of the Board.

The Board shall convene with a simple majority of its membership. Decisions shall be passed by a simple majority of Board Directors who are present in the meeting.

Board of Directors decisions on a particular issue proposed by one of the Board Directors may also be passed with the written approval of the other members unless a Board Director requests that a meeting be held and the matter be discussed. Board decisions shall only be valid if they have been put into writing and signed.

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ARTICLE 12 – FORMER VERSION

Division of Authority

Article 12 - At the first session following an ordinary or an extraordinary general meeting which also includes renewal of elections, the Board of Directors shall each year elect from among its members a chairman and, to stand in for him in his absence, a vice chairman. The Board of Directors may set up committees and commissions from among its membership as circumstances dictate and may also elect a managing director.

ARTICLE 13 – FORMER VERSION

Members’ Non-participation in Meetings

Article 13 – Any member of the Board of Directors who fails to participate in three consecutive meetings without a just cause shall be deemed to have resigned.

ARTICLE 14 – FORMER VERSION

Duties and Authorities of the Board of Directors

Article 14 – The Company is managed and represented by the Board of Directors. This authority is absolute and the Board has full power to pass decisions in any matter that is not prohibited by these articles of association and do not require a prior General Assembly resolution, as well as to dispose of the Company’s properties, and to undertake any transaction related to the Company’s scope. Accordingly, the Board is authorized, among others, to:a) Establish and revoke agencies, branches, and representation offices and determine the conditions thereof; assume agency, lead insurer and representation services for other insurance and reinsurance companies; set out the terms of collaboration with private pension intermediaries;b) Appoint and remove from the office the Funds Committee and Funds Supervisor within the frame of Private Pension legislation, as well as the Company’s CEO and other senior executives;c) Set the dates of inception and termination of operations in private pension and other insurance branches the Company will be engaged in;d) Determine the basic elements of pension contracts, annuity contracts, portfolio management contracts, custody agreements; fund bylaws, and insurance and reinsurance agreements;e) Execute and terminate all sorts of reinsurance agreements;f) Establish companies to be engaged in private pension and insurance business; participate in existing or future companies active in the same scope;g) Buy stocks, bonds, T-bills, profit sharing certificates and similar securities, and sell the same provided that such activities shall not be in the nature of brokerage and portfolio management activities for the purpose of achieving the Company’s purpose and investing its capital and reserves in interest-bearing instruments;h) purchase and sell movables or immovables, construct buildings, borrow money by creating mortgage over the Company’s immovables, creating and lifting all sorts of real rights for the purpose of achieving the Company’s purpose and investing its capital and reserves in interest-bearing instruments;i) Enter into amicable settlement, resort to acquittal or arbitration;i) Set up private pension funds.

ARTICLE 12 – NEW VERSION

Division of Authority

Article 12 - At the first session following an ordinary or an extraordinary general meeting which also includes renewal of elections, the Board of Directors shall each year elect from among its members a Chairman and, to stand in for him in his absence, at least one vice chairman. A secretary may be chosen from among the members or non-members. The Board of Directors may set up committees and commissions from among its membership as circumstances dictate and may also elect a managing director.

The duties, rights and powers assigned to the independent Board Directors in the Capital Market Law and relevant regulations of the Capital Markets Board are reserved. In addition to the ones stipulated by the Capital Markets Board regulations, the Board of Directors may set up other commissions and committees charged with the execution or supervision of the implementation of the Company affairs and relevant decisions and policies. The requirements of the Capital Markets Board are observed when setting up these committees.

In addition to its powers specified in the Turkish Commercial Code, capital market legislation and other applicable legislation, the Board of Directors is obliged to set up, drive and develop a specialist committee for early detection and management of risk pursuant to Article 378 of the Turkish Commercial Code. The said committee shall fulfill the goals and duties set out under Article 378. Members of the Board of Directors may take on duties in this committee to be set up.

ARTICLE 13 – NEW VERSION

Members’ Non-participation in Meetings

Article 13- Rescinded.

ARTICLE 14 – NEW VERSION

Duties and Authorities of the Board of Directors

Article 14 – The Board of Directors is authorized to decide on any matter and transaction necessary for achieving the Company’s scope, apart from those in which the General Assembly is authorized to decide pursuant to the law and the articles of association.

Moreover, the Board of Directors may delegate part or all of its powers and management duties to one or more managing directors from among its members or non-member managing directors, pursuant to Article 370(2) and Article 367 of the Turkish Commercial Code, respectively, save for nonassignable duties and powers specified in Article 375 of the TCC.

The Board of Directors may delegate management in part or in whole with an internal directive pursuant to Article 367 of the TCC, save for the nonassignable duties and powers specified in Article 375 of the TCC.

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Modifications to the Articles of Incorporation During the Fiscal Year

ARTICLE 15 – NEW VERSION

Remuneration of the Board Directors

Article 15 – The monthly salary to be paid to the chairman and members of the Board of Directors shall be determined every year by the General Assembly in accordance with the provisions of the Turkish Commercial Code, Capital Market Law and other applicable legislation.

ARTICLE 16 – NEW VERSION

CEO and Other Senior Officers

Article 16 – The Board of Directors shall appoint a CEO from amongst its members equipped with the powers the Board deems appropriate for the execution of the decisions passed and for the conduct of the Company’s business.

For the purpose of ensuring supervision of the transactions concerning the private pension funds to be set up by the Company, the Board of Directors shall appoint a Funds Committee of at least three members who possess the qualifications set out in the Private Pension legislation.

Furthermore, the Board of Directors shall appoint at least one fund supervisor for each fund.

Senior officers authorized to represent the Company and have signing authority shall be appointed, promoted, transferred and dismissed by the Board of Directors upon proposal by the CEO.

Terms of office and signing authorities of the CEO and managers and other officers with signing authority are not restricted to the terms of office of the Board Directors. The signing authorities of these individuals shall remain in force until they are revoked by the Board of Directors.

The CEO, Deputy CEO and Executives who are in equivalent position to the Deputy CEO with respect to their powers and duties must possess the qualifications stipulated by the private pension, capital market and insurance legislation.

ARTICLE 15 – FORMER VERSION

Remuneration of the Board Directors

Article 15 – The monthly salary to be paid to the chairman and members of the Board of Directors shall be determined every year by the General Assembly.

ARTICLE 16 – FORMER VERSION

CEO and Other Senior Officers

Article 16 – The Board of Directors shall appoint a CEO from amongst its members equipped with the powers the Board deems appropriate for the execution of the decisions passed and for the conduct of the Company’s business.

For the purpose of ensuring supervision of the transactions concerning the private pension funds to be set up by the Company, the Board of Directors shall appoint a Funds Committee of at least three members who possess the qualifications set out in the Private Pension legislation.

Furthermore, the Board of Directors shall appoint at least one fund supervisor for each fund.

Senior officers authorized to represent the Company and have signing authority shall be appointed, promoted, transferred and dismissed by the Board of Directors upon proposal by the CEO.

The CEO, Deputy CEO and Executives who are in equivalent position to the Deputy CEO with respect to their powers and duties must possess the qualifications stipulated by the private pension, capital market and insurance legislation.

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ARTICLE 18 – FORMER VERSION

Individuals Authorized to Sign on behalf of the Company and Signing Requirements

Article 18 – The Company will be represented and documents and agreements to be issued in the name of the Company will be binding upon the Company, if they are signed by at least two officers, at least one of whom must have first degree power of signature, and if the signatures are exercised beneath the Company title. Individuals having signing authority and the degree of their power shall be determined by a Board of Directors decision, and then registered and promulgated.

ARTICLE 19 – FORMER VERSION

Audit Principles for the Company; Selection and Dismissal of Statutory Auditors

Article 19 – The Company is internally audited within the frame of the Company’s internal audit guidelines and in accordance with the principles and procedures to be set by the Undersecretariat of Treasury.

Funds are internally audited within the frame of the Capital Market legislation and in accordance with the principles and procedures to be set by the Capital Markets Board.

The Funds Committee monitors and reports on the transactions involving the funds set up by the Company.

The Company sets up a suitable internal control system to ensure that:funds operate in compliance with the legislation, pension agreements, fund bylaws and the prospectus;funds are lucrative;data pertaining to funds are reliable and timely accessible;accounting records are accurate and complete.

The Fund Supervisor is responsible for ensuring that the fund operations are executed in compliance with internal control principles and procedures.The Company shall duly draw up the data, documents, and charts to be required by the Undersecretariat of Treasury and the Capital Markets Board, and the private pension recording system.

The General Assembly shall each year elect at most three statutory auditors from among shareholders or non-shareholders.

Statutory auditors must possess the qualifications set out in the Private Pension, Capital Market and Insurance legislation, as well as in the Turkish Commercial Code. Statutory auditors whose terms of office expire may be re-elected.

For statutory auditor positions vacated for any reason whatsoever, action will be taken in accordance with the legislation in force.

ARTICLE 20 - FORMER VERSION

Duties and Authorities of Statutory Auditors

Article 20 - Statutory Auditors are obliged to perform the duties specified in the TCC, Private Pension, Capital Market and Insurance legislation.

ARTICLE 21 – FORMER VERSION

Compensation of Statutory Auditors

Article 21 - The remuneration of statutory auditors is determined each year by the General Assembly of Shareholders.

ARTICLE 18 – NEW VERSION

Individuals Authorized to Sign on behalf of the Company and Signing Requirements

Article 18 – Individuals with signing power so that the Company can be represented and documents and agreements to be issued in the name of the Company can be binding upon the Company and signing requirements shall be determined by a Board of Directors decision, and then registered and promulgated.

Individuals authorized to represent the Company may not undertake actions that are outside the Company’s purpose and scope specified under Article 3 and that are contradictory to the law. Otherwise, the Company shall have recourse to these individuals if the Company is held liable for such actions. The Company shall not be bound by an action when any third party knows, or is in a position to know, that such action is outside the Company’s objective and scope. Any third party who constantly deals with the Company and receives the Company’s explanatory, cautionary and other letters and decisions and who is aware of the same may not claim good faith.

ARTICLE 19 – NEW VERSION

Audit Principles for the Company

Article 19 – The Company’s General Assembly shall each year designate an independent audit firm as auditor. After selection, the Board of Directors shall have the auditor registered before the Trade Registry and promulgate the same in the Turkish Trade Registry Gazette and on the website. An audit firm that has been named as auditor for the same company for a total of seven years in a ten-year period may not be designated as auditor in earlier than three years. The auditor is dismissed as per the provisions of the Turkish Commercial Code. Article 399(2) of the Turkish Commercial Code is reserved.

Funds are internally audited within the frame of the Capital Market legislation and in accordance with the principles and procedures to be set by the Capital Markets Board.

The above shall be without prejudice to the CMB arrangements governing the Company’s audit.

ARTICLE 20 - NEW VERSION

Duties and Authorities of Statutory AuditorsArticle 20- Rescinded.

ARTICLE 21 – NEW VERSION

Compensation of Statutory Auditors

Article 21- Rescinded.

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ARTICLE 22 – NEW VERSION

General Assembly Meetings

Article 22- The General Assembly Meetings are held ordinarily and extraordinarily pursuant to the provisions of the Turkish Commercial Code and other applicable legislation. The annual meeting is held every year within 3 months following the fiscal year. Extraordinary General Assembly Meetings are held as and when imposed by the Company’s affairs or in case of the emergence of the reasons specified under Article 410 and subsequent articles of the Turkish Commercial Code.

ARTICLE 23 – NEW VERSION

Invitation and Agenda

Article 23 – The General Assembly shall be summoned for meeting by way of the announcement that includes the meeting date, place, time and agenda posted on the Company’s website and published in the Turkish Trade Registry Gazette. Such announcement must be made at least three weeks in advance of the General Assembly meeting date, excluding the dates of announcement and meeting.

Announcements summoning the General Assembly of Shareholders for ordinary and extraordinary meetings must be made in accordance with the provisions of the Communiqué on the Determination and Implementation of Corporate Governance Principles issued by the Capital Markets Board and the Corporate Governance Principles attached thereto, as well as the procedures stipulated by the Turkish Commercial Code, the Capital Market Law and applicable legislation.

The announcement will also be posted on the Company’s website in a manner to draw attention to the elements regulated by the Capital Markets Board Corporate Governance Principles, as well as the general assembly meeting announcement, and the disclosures and explanations the Company is required to make pursuant to the legislation.

At the Annual General Assembly meetings, matters covered in the agenda, which are prepared in view of Article 409 of the Turkish Commercial Code and regulatory arrangements of the Capital Markets Board, shall be discussed and decided on. Dismissal of Board Directors and election of new Directors shall be deemed linked to the discussion of year-end financial statements. Matters not contained in the agenda shall not be brought up for discussion, without prejudice to Article 438 of the Turkish Commercial Code.

ARTICLE 22 – FORMER VERSION

General Assembly Meetings

Article 22- The General Assembly Meetings are held ordinarily and extraordinarily. The annual meeting is held every year within 3 months following the fiscal year. General Assembly is summoned for extraordinary meeting, when necessary.

Shareholders exercise their rights in relation to the Company affairs such as appointment of bodies, approval of accounts and distribution of earnings in the General Assembly meeting pursuant to the TCC.

ARTICLE 23 - FORMER VERSION

Invitation and Agenda

Article 23 - Announcements summoning the General Assembly of Shareholders for ordinary and extraordinary meetings must be made in accordance with the provisions of the Communiqué on the Determination and Implementation of Corporate Governance Principles issued by the Capital Markets Board and the Corporate Governance Principles attached thereto, as well as the procedures stipulated by the Turkish Commercial Code, the Capital Market Law and applicable legislation.

The announcement will also be posted on the Company’s website in a manner to draw attention to the elements regulated by the Capital Markets Board Corporate Governance Principles, as well as the general assembly meeting announcement, and the disclosures and explanations the Company is required to make pursuant to the legislation.

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ARTICLE 24 – FORMER VERSION

Meeting Place

Article 24 - The General Assembly meets in the city where the Company’s headquarters is located or in Ankara.

ARTICLE 25 – FORMER VERSION

Notification of Meetings to Related Authorities

Article 25 – Both annual and extraordinary General Assembly meetings are notified to the Ministry of Industry and Trade at least 20 days prior to the meeting date and a copy of the meeting agenda and related documents are sent to the Ministry.

In all meetings, the presence of the Ministry of Industry and Trade commissioner is mandatory. General Assembly meetings to be held in the absence of the commissioner shall be invalid.

The Undersecretariat of Treasury may have a representative present in the General Assembly meeting.

Three copies of each of the Board of Directors’ and statutory auditors’ reports, balance sheet, minutes of the General Assembly meeting and the list of attendants shall be sent to the Ministry of Industry and Trade within one month from the meeting date or delivered to the attending commissioner.

Financial statements and reports required to be drawn up by the Capital Markets Board, and independent audit report, if the Company is subject to independent auditing, shall be sent to the Capital Markets Board and publicly disclosed subject to the principles and procedures set out by the Capital Markets Board.

ARTICLE 26 – FORMER VERSION

Meeting and Decision Quora

Article 26 – Unless otherwise stipulated in the Turkish Commercial Code, the General Assembly shall convene with the participation of shareholders that represent at least one fourth of the Company’s capital.

If the said quorum cannot be achieved in the first meeting, shareholder shall be summoned for meeting for a second time. In the second meeting, shareholders present in the meeting shall be authorized to discuss and decide on matters, irrespective of the amount of capital they represent.

Decisions are passed by the majority of votes present, unless otherwise stipulated in the Turkish Commercial Code.

ARTICLE 24 – NEW VERSION

Meeting Place

Article 24 - The General Assembly meets in the city where the Company’s headquarters is located.

Those who are entitled to attend the Company’s Board of Directors meetings may do so electronically, pursuant to Article 1527 of the Turkish Commercial Code. Pursuant to the provisions of the Communiqué on Electronic General Assembly Meetings of Business Corporations Save for Joint Stock General Assembly Meetings, the Company may either set up the Electronic Meeting System that will allow eligible individuals to attend these meetings, voice their opinions, submit proposals and cast votes therein on electronic medium, or may purchase service from systems created for this purpose. In all General Assembly meetings to be held, it will be provided that eligible individuals exercise their rights specified in the provisions of the said Communiqué using the system set up pursuant to this provision hereof.

ARTICLE 25 – NEW VERSION

Notification of Meetings to Related Authorities

Article 25 – Both annual and extraordinary General Assembly meetings are notified to the Ministry of Customs and Trade within the period of time set out in the legislation and a copy of the meeting agenda and related documents are sent to the Ministry.

In all meetings, the presence of the Ministry of Customs and Trade representative is mandatory. General Assembly meetings to be held in the absence of the Ministry representative shall be invalid.

Financial statements, consolidated financial statements, annual activity report by the Board of Directors, audit reports and the dividend distribution proposal by the Board of Directors shall be made available for review by the shareholders at the Company’s headquarters and branches at least three weeks prior to the General Assembly meeting. From amongst these documents, financial statements and consolidated statements are kept available for the information of shareholders for a period of one year at the headquarters and branches. Provisions of Article 437 of the Turkish Commercial Code are reserved.

ARTICLE 26 – NEW VERSION

Meeting and Decision Quora

Article 26 – Unless otherwise stipulated in the Turkish Commercial Code, the General Assembly shall convene with the participation of shareholders that represent at least one fourth of the Company’s capital. The said quorum must be maintained during the course of the meeting. Managing directors, if any, and at least one Board Directors and independent auditor must attend the general assembly meeting.

If the said quorum cannot be achieved in the first meeting, shareholder shall be summoned for meeting for a second time. In the second meeting, shareholders present in the meeting shall be authorized to discuss and decide on matters, irrespective of the amount of capital they represent.

Decisions are passed by the majority of votes present, unless otherwise stipulated in the Turkish Commercial Code.

Article 421 (5) of the Turkish Commercial Code is reserved.

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Modifications to the Articles of Incorporation During the Fiscal Year

ARTICLE 27 – NEW VERSION

Voting Right

Article 27- Each nominal value of TL 0.01 entitles its holder to one vote and at General Assembly meetings, shareholders vote pro rata the total nominal value of the shares they hold, pursuant to Article 434 of the Turkish Commercial Code. Shareholders may have themselves represented at the General Assembly meetings pursuant to the provisions of the relevant article in the Turkish Commercial Code. The Capital Market Board requirements concerning voting by proxy are complied with in proxy voting.

ARTICLE 28 – NEW VERSION

Voting Manner

Article 28 – With respect to voting in the General Assembly meetings, Capital Markets Board and Turkish Commercial Code requirements are complied with.

ARTICLE 29 – NEW VERSION

Chair

Article 29 – General Assembly meetings are chaired by the Chairman of the Board of Directors, and in his absence, by the Vice Chairman of the Board. In the absence of the latter, the Chair is elected by the General Assembly.

The General Assembly shall also elect two people from amongst shareholders to count and sort the votes, and one person to serve as minutes secretary from amongst shareholders or non-shareholders.

The Chair shall chair the General Assembly in accordance with the provisions of the “General Assembly Guidelines”.

ARTICLE 30 – NEW VERSION

Written Record of the General Assembly Meeting

Article 30 - Discussions held and decisions passed at the General Assembly shall be documented in the minutes. These minutes shall be signed by the presiding board, and the Ministry representative.

ARTICLE 31 – NEW VERSION

Fiscal Year

Article 31 – The Company’s fiscal year is the calendar year. Accounting standards are observed when drawing up the Company’s financial statements and reports, and the requirements of the Capital Markets Board with respect to independent audit.

Within the first three months of the fiscal year that follows the date of the balance sheet, the Board of Directors shall draw up the financial statements set out in the Turkish Accounting Standards, appendices thereof, and the annual activity report of the Board of Directors, and present them to the General Assembly.

Provisions of Private Pension and Insurance legislation are reserved.

ARTICLE 27 – FORMER VERSION

Voting Right

Article 27- Each share entitles its holder to one vote.

If one share is held by several owners, the same can cast their vote only via a joint representative.

Shareholders may be represented at the General Assembly meetings via a proxy to be appointed from amongst shareholders or non-shareholders. Proxies who are shareholders in the company shall be authorized to cast votes for the shareholders they represent, in addition to their own votes. The format of the proxy form shall be determined by the Board of Directors subject to the requirements of the Capital Markets Board. The proxy form must be in writing. The proxy shall be obliged to cast the vote in line with the assignor’s wish, provided that the shareholder assigning the authority has specified the same in the proxy form.

ARTICLE 28 – FORMER VERSION

Voting Manner

Article 28 – Open voting is implemented at General Assembly meetings. However, secret voting can be implemented upon request by those representing one tenth of those who are present at the meeting.

With respect to voting in the General Assembly meetings, Capital Markets Board requirements are complied with.

ARTICLE 29 – FORMER VERSION

Chair

Article 29 – General Assembly meetings are chaired by the Chairman of the Board of Directors, and in his absence, by the Vice Chairman of the Board. In the absence of the latter, the Chair is elected by the General Assembly.

The General Assembly shall also elect two people from amongst shareholders to count and sort the votes, and one person to serve as secretary from amongst shareholders or non-shareholders.

ARTICLE 30 – FORMER VERSION

Written Record of the General Assembly Meeting

Article 30 - Discussions held and decisions passed at the General Assembly shall be documented in a written record. This written record shall be signed by the chair, vote collectors, secretary and the shareholders present in the meeting, as well as the Ministry of Industry and Trade commissioner.

ARTICLE 31 – FORMER VERSION

Fiscal Year

Article 31 – The Company’s fiscal year is the calendar year. At the end of each fiscal year, a balance sheet and profit/loss statement are drawn up that show the Company’s financial standing. Accounting standards are observed when drawing up the Company’s financial statements and reports, and the requirements of the Capital Markets Board with respect to independent audit.

Provisions of Private Pension and Insurance legislation are reserved.

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ARTICLE 32 – FORMER VERSION

Assistance Reserves for the Benefit of Employees

Article 32 – The Company may set up a pension and assistance fund to provide social security for its employees, pursuant to Article 468 of the Turkish Commercial Code. The General Assembly may set aside assistance reserves to set up or maintain such funds.

ARTICLE 33 – FORMER VERSION

Distribution of Profit

Article 33 – Net profit of the Company is revenues generated during a balance sheet period less overhead expenses, depreciation costs, provisions, corporate tax and similar taxes and financial obligations, and prior period losses, if applicable.

Net profit shall be distributed as follows:

a) 5% legal reserves shall be set aside.

b) Out of the distributable profit calculated as such, first dividends in the ratio and amount set by the Capital Markets Board shall be set aside.

c) The Company may distribute dividends to its clerks, janitors and workers, limited maximum to 3% of the remaining amount, and limited to three times of their respective salaries.

d) 10% of the balance shall be set aside as extraordinary reserves.The remaining amount shall be utilized as determined by the General Assembly. (Provision of Article 466/3 of the Turkish Commercial Code is reserved.)

Unless the reserves that are mandatory to be set aside as per the provisions of the TCC and Capital Market Law and first dividends in the percentage set for the shareholders in the articles of association have been set aside, it may not be decided to set aside other reserves, to carry over profit to the following year, and also it may not be decided to distribute share from profit to the Board Directors and to clerks, janitors and workers, unless first dividends have been distributed.

In calculating second reserves, the basis shall be one tenth of the amount decided to be distributed to shareholders and other people participating in the share after deduction of shareholders’ dividends equal to 5% of the paid-in capital.

ARTICLE 32 – NEW VERSION

Assistance Reserves for the Benefit of Employees

Article 32 – Rescinded.

ARTICLE 33 – NEW VERSION

Distribution of Profit

Article 33 – Distribution of the profit at the Company shall be decided by the General Assembly in line with the proposal of the Board of Directors and in view of the provisions of the Turkish Commercial Code, Capital Market Law and other legislation governing the Company.

Advances on dividends may be distributed provided that the principles and procedures set out in the Capital Market legislation are complied with.

Net profit of the Company is revenues generated during a balance sheet period less overhead expenses, depreciation costs, provisions, corporate tax and similar taxes and financial obligations, and prior period losses, if applicable. The resulting net profit shall be set aside and distributed in the manner, percentages and order set out hereinbelow:

a) 5% of the annual net profit shall be set aside as legal reserves until the same reaches 20% of the issued capital; once the legal limit is reached, the amounts stipulated as per Article 519(2) subparagraphs a and b shall be added to general legal reserves.

b) From the remaining amount, first dividends shall be distributed, which will be in the ratio to be set by the General Assembly in line with the requirements of the Capital Markets Board.

c) The Company shall set aside up to 3% of the remaining amount for its officers, clerks, caretakers and workers limited to 3 times of their respective salaries.

d) 10% of the amount remaining after the distribution mentioned under subparagraph (d) shall be set aside as statutory reserves.

e) The General Assembly may decide to distribute the remaining profit in part or in whole to shareholders as second dividends, to allocate the same as additional dividends for the Company’s officers, clerks, caretakers and workers as per subparagraph (d) above, or set the same aside as extraordinary legal reserves.

Pursuant to Article m.519/2(c) of the Turkish Commercial Code, 10% of the total amount to be distributed to people who will get share from profit shall be added to general legal reserves.

Provisions of Article 519 (3) of the Turkish Commercial Code are reserved.

Provisions of the Capital Market legislation are reserved in relation to dividend distribution.

Unless the reserves that are mandatory to be set aside as per the provisions of the TCC and Capital Market Law and first dividends have been set aside, it may not be decided to set aside other reserves, to carry over profit to the following year, and to distribute share from profit to the members of the Board of Directors and to employees and workers.

The date and manner of distribution of annual profit to shareholders shall be decided by the General Assembly upon proposal of the Board of Directors, and in accordance with the requirements of the Capital Markets Board. Profit distributed in accordance with the provisions of these articles of incorporation may not be reclaimed. Provisions of the Turkish Commercial Code concerning the right to reclaim are reserved.

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Modifications to the Articles of Incorporation During the Fiscal Year

PART TWO HEADING NEW VERSION

SECTION EIGHTREVISING THE ARTICLES OF ASSOCIATION

ARTICLE 34 – NEW VERSION

Revising the Articles of Incorporation

Article 34 – The Company’s articles of incorporation may be revised based on a General Assembly decision, under the provisions of the Turkish Commercial Code, and Private Pension, Capital Market and Insurance legislation. However, no revisions shall be valid unless permission shall have been obtained from the Ministry of Customs and Trade, the Capital Markets Board, and the Undersecretariat of Treasury therefor, and they have been registered with the trade registry and duly promulgated.

ARTICLE 35 – NEW VERSION

Announcements in relation to the Company

Article 35 – Announcements in relation to the Company, which are mandatory to be made as per the laws, regulations and these articles of incorporation, shall be made in the Turkish Trade Registry Gazette; moreover, announcements required to be made by the Company pursuant to Article 1524 of the Turkish Commercial Code shall be made on the Company’s website.

The foregoing is without prejudice to the provisions arising from the Insurance and Private Pension legislation and the provision of Article 198 of the Turkish Commercial Code.

Provisions of Articles 474 and 532 of the Turkish Commercial Code shall be applied to announcements concerning capital decrease and dissolution.

The foregoing is without prejudice to announcement and information provision obligations to be performed as per the Capital Market Law and announcement and information provision obligations to be made to the Undersecretariat of Treasury.

ARTICLE 36 – NEW VERSION

Printing the Articles of Association and Submitting to Relevant Authorities

Article 36 - Rescinded.

ARTICLE 38 – NEW VERSION

Implementation of Legal Provisions

Article 38 - In matters where these articles of incorporation remain silent, Turkish Commercial Code, Private Pension legislation, Insurance legislation, Capital Market Law, and the provisions of the current communiqués and regulations and other relevant decisions of the Capital Markets Board shall apply.

PROVISIONAL ARTICLE 1 – NEW VERSION

Initial Board of Directors

Provisional Article 1 - Rescinded.

PART TWO HEADING FORMER VERSION

SECTION EIGHTREVISING THE ARTICLES OF ASSOCIATION

ARTICLE 34 – FORMER VERSION

Revising the Articles of Association

Article 34 – The Company’s articles of association may be revised based on a General Assembly decision, under the provisions of the Turkish Commercial Code, and Private Pension, Capital Market and Insurance legislation. However, no revisions shall be valid unless permission shall have been obtained from the Ministry of Trade, the Capital Markets Board, and the Undersecretariat of Treasury therefor, and they have been registered with the trade registry and duly promulgated.

ARTICLE 35 – FORMER VERSION

Announcements in relation to the Company

Article 35 – Announcements in relation to the Company, which are mandatory to be made as per the laws, regulations and these articles of association, shall be made in the Turkish Trade Registry Gazette and a daily newspaper published in the city where the Company is headquartered at least 7 days in advance. Longer periods of time stipulated by the law and these articles of association are reserved.

The foregoing is without prejudice to announcement and information provision obligations to be performed as per the Capital Market Law and announcement and information provision obligations to be made to the Undersecretariat of Treasury.

ARTICLE 36 – FORMER VERSION

Printing the Articles of Association and Submitting to Relevant Authorities

Article 36 - These articles of association shall be printed and distributed to shareholders. 10 copies shall be sent to the Ministry of Industry and Trade, sufficient number of copies to the Undersecretariat of Treasury, and one copy to the Capital Markets Board.

ARTICLE 38 – FORMER VERSION

Implementation of Legal Provisions

Article 38 - In matters where these articles of association remain silent, Turkish Commercial Code, Private Pension legislation, Insurance legislation, Capital Market Law, and the provisions of the current communiqués and regulations and other relevant decisions of the Capital Markets Board shall apply.

PROVISIONAL ARTICLE 1 – FORMER VERSION

Initial Board of Directors

Provisional Article 1 – The individuals named below have been elected to serve as members on the initial Board of Directors until the first Annual General Assembly meeting.

Bedii Tümer (representing Anadolu Anonim Türk Sigorta Şirketi) Onur Özbilen (Representing T. İş Bankası Anonim Şirketi) Oktay Bekişoğlu (Representing Destek Reasürans T.A.Ş.) Yaşar İğdirsel (representing Mensa Mensucat San. ve Tic. A.Ş.) Tuğrul Erden (representing T. Dış Ticaret Bankası A.Ş.)

Initial Statutory AuditorsProvisional Article 2 – The individuals named below have been elected as statutory auditors to serve until the first Annual General Assembly meeting.Cüneyt Demren T. İş Bankası A.Ş. - Zincirlikuyu Branch Manager (Turkish citizen)Neşe DemirT. İş Bankası A.Ş. – Assistant Manager at Equity Participations Department(Turkish citizen)

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The new version of “Article 6 – Capital and Shares” of the Company’s Articles of Incorporation, which has been revised in conjunction with raising the Company’s issued capital from ¨300,000,000.- to ¨350,000,000.- within the authorized capital and which has been approved by the CMB, has been registered on 04 July 2013 and promulgated on 10 July 2013. The relevant amendment is given below.

ARTICLE 6 - FORMER VERSION

Capital and Shares

Article 6- The Company has adopted the registered capital system in accordance with the provisions of the Capital Market Law, and switched to the aforementioned system based on the Capital Markets Board of Turkey (CMB) permission dated 15.06.2000 and numbered 67/1039. The Company’s registered capital is TL 450,000,000 (four hundred and fifty million), divided into 45,000,000,000 (forty-five billion) shares each with a nominal value of TL 0.01.

The Company’s issued capital is TL 300,000,000.-(three hundred million). Of this amount, which is fully paid-up, TL 1,000,000 (one million) is represented by 100,000,000 (one hundred million) Class A shares each with a nominal value of TL 0.01, and TRY 299,000,000 (two hundred and ninety-nine million) is represented by 29,900,000,000 (twenty-nine billion and nine hundred million) Class B shares each with a nominal value of TL 0.01, issued on various dates.

New Class A shares may not be issued in capital increases.

Permission granted by the CMB for authorized capital is valid from 2011 through 2015 (5 years). Even if the authorized capital so permitted is not reached by the end of 2015, in order for the Board of Directors to pass a capital increase decision after 2015, it is mandatory to get authorization from the General Assembly of Shareholders for a new period of time upon getting permission from the CMB for the previously permitted or a new maximum capital amount. The Company will be deemed to have exited the registered capital system in case of failure to obtain the said authorization.

From 2011 through 2015, the Board of Directors is authorized to increase the issued capital up to the authorized capital through issuing registered shares in accordance with the provisions of the Capital Market Law, as and when it deems necessary.

While the nominal value of each share was TL 1,000.-, the same was first changed to 1 New Kuruş pursuant to the Law Amending the Turkish Commercial Code no. 5274, and then to 1 Kuruş due to the elimination of the word “New” from the phrases “New Turkish Lira” and “New Turkish Kuruş” effective from 1 January 2009, based on the Council of Ministers Decision numbered 2007/11963 dated 4 April 2007. Due to this change, total number of shares decreased; accordingly, 10 shares with a value of TL 1,000.- have been exchanged with one share with a nominal value of 1 (New) Kuruş. The shareholders’ rights arising from the shares they hold in relation to the said exchange are reserved.

The phrases “Turkish Lira” herein are phrases that have been inserted pursuant to the Council of Ministers Decision mentioned above.

Shares representing the capital are followed-up in dematerialized form within the frame of dematerialization principles.

Decisions about capital increases are publicly disclosed by way of material event disclosures.

Save for capital increases covered from internal sources, the capital may not be increased unless cash prices of shares are paid in full.

ARTICLE 6 - NEW VERSION

Capital and Shares

Article 6- The Company has adopted the registered capital system in accordance with the provisions of the Capital Market Law, and switched to the aforementioned system based on the Capital Markets Board of Turkey (CMB) permission dated 15.06.2000 and numbered 67/1039. The Company’s registered capital is TL 450,000,000 (four hundred and fifty million), divided into 45,000,000,000 (forty-five billion) shares each with a nominal value of TL 0.01.

The Company’s issued capital is TL 350,000,000.- (three hundred and fifty million). Of this amount, which is fully paid-up, TL 1,000,000 (one million) is represented by 100,000,000 (one hundred million) Class A shares each with a nominal value of TL 0.01, and TRY 349,000,000 (three hundred and forty-nine million) is represented by 34,900,000,000 (thirty-four billion and nine hundred million) Class B shares each with a nominal value of TL 0.01, issued on various dates.

New Class A shares may not be issued in capital increases.

Permission granted by the CMB for authorized capital is valid from 2011 through 2015 (5 years). Even if the authorized capital so permitted is not reached by the end of 2015, in order for the Board of Directors to pass a capital increase decision after 2015, it is mandatory to get authorization from the General Assembly of Shareholders for a new period of time upon getting permission from the CMB for the previously permitted or a new maximum capital amount. The Company will be deemed to have exited the registered capital system in case of failure to obtain the said authorization.

From 2011 through 2015, the Board of Directors is authorized to increase the issued capital up to the authorized capital through issuing registered shares in accordance with the provisions of the Capital Market Law, as and when it deems necessary.

While the nominal value of each share was TL 1,000.-, the same was first changed to 1 New Kuruş pursuant to the Law Amending the Turkish Commercial Code no. 5274, and then to 1 Kuruş due to the elimination of the word “New” from the phrases “New Turkish Lira” and “New Turkish Kuruş” effective from 1 January 2009, based on the Council of Ministers Decision numbered 2007/11963 dated 4 April 2007. Due to this change, total number of shares decreased; accordingly, 10 shares with a value of TL 1,000.- have been exchanged with one share with a nominal value of 1 (New) Kuruş. The shareholders’ rights arising from the shares they hold in relation to the said exchange are reserved.

The phrases “Turkish Lira” herein are phrases that have been inserted pursuant to the Council of Ministers Decision mentioned above.

Shares representing the capital are followed-up in dematerialized form within the frame of dematerialization principles.

Decisions about capital increases are publicly disclosed by way of material event disclosures.

Save for capital increases covered from internal sources, the capital may not be increased unless cash prices of shares are paid in full.

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Laws• The Law no. 6327 Amending

the Private Pension Savings and Investment System Law and Certain Other Laws and Statutory Decrees introduced significant changes to the private pension and insurance system through its provisions that went into force on 1 January 2013.

A key change introduced by the Law no. 6327 is the termination of the practice whereby contributions were deducted from the tax base, and revision of the incentive model in the Private Pension System by way of the newly defined State Contribution.Within the scope of the State Contribution practice that went into force on 1 January 2013, a State Contribution began to be paid, which corresponds to 25% of the contributions paid into the private pension account on behalf of the participant, excluding the contributions paid by the employer. Participants are not required to be taxpayers or to be generating income in order to be eligible for State Contribution. All participants are entitled to State Contribution up to 25% of the annual gross minimum wage during one calendar year.

• Law no. 6456 Amending the Law on the Regulation of Public Financing and Debt Management and Certain Laws and Decree-Laws was published in the Official Gazette dated 18.04.2013 and all articles of the law concerning the Private Pension System went into force on the date of its publication.

A change introduced by the Law no.6456 relates to the amounts transferred from provident funds/foundations/trusts to the Private Pension System. Accordingly, 3.75% tax will be levied on the entire amount transferred to the system by participants who drop out of the system within three years following the date of transfer, save for those who drop put due to obligatory reasons.

• Based on the revised Law no. 4632 on Private Pension Savings and Investment System, upon establishing that undeserved State Contribution payments were made to companies, the same will not be deducted from the following payment, but instead, will be deposited in cash with the tax offices in line with the principles to be established by the PMC, which is a major change.

• The Law no. 6502 on Consumer Protection was published in the Official Gazette issue 28835, dated 28 November 2013. The law will come into force six months after its date of publication.

The purpose of the law is to take measures that are aimed at protecting the consumers’ health and safety and economic interests, indemnifying their losses, ensuring protection against environmental hazards, informing and raising awareness of the consumers in line with the public interest, to promote self-protective actions among consumers, and to encourage voluntary organizations regarding the creation of relevant policies.

Regulations• Regulation on the Establishment and

Working Principles of Pension Funds was published in the Official Gazette issue 28586 dated 13 March 2013.

The assets that can be incorporated in the pension funds portfolios were diversified, and accordingly, the possibility was introduced for setting up pension funds in new portfolio structures such as gold funds, sukuk funds and fund baskets, and also to allow existing funds to invest in these products.

• The Regulation on Internet Sites to be Launched by Equity Companies was published in the Official Gazette issue 28663 dated 31 May 2013 and went into force on 01 July 2013. The purpose of the Regulation is to set out the principles and procedures concerning the opening of internet sites as per Article 1524 (1) of the Turkish Commercial Code no. 6102 and allocation of a specific section of this website for posting the announcements legally required to be made by the Company and for information society services.

• The Regulation on Unclaimed Monies by Right Holders under Insurance Policies Governed by the Provisions of Private Law was published in the Official Gazette issue 28789 dated 08 October 2013. The regulation contained provisions setting out that if amounts unclaimed by right holders prescribe, then such prescribed monies and identification and address information for right holders will be transferred to the Assurance Account by insurance and pension companies, whereas amounts before entities engaged in insurance activity under the provisions of private law, which are not claimed by right holders, will be entered as income by the said entities.

Changes in the Legislation during the Fiscal Year

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Communiqués• Public Disclosure Platform

Communiqué no. VII-128.6 was published in the Official Gazette issue 28864 dated 27 December 2013. The objective of the Communiqué is to set out the principles and procedures for:

a) electronic signing of the disclosures by trusts, investment trusts, fund founders and other entities and organizations determined by the CMB and their electronic submission to the Public Disclosure Platform,

b) preparation and signing of the independent audit reports issued by independent auditors in electronic environment and their electronic delivery to the independently audited trusts and entities, which are obligated to make disclosures.

• General Communiqué no. 433 on the Tax Procedural Law was published in the Official Gazette (repeated) issue 28867 dated 30 December 2013. The General Communiqué covers detailed descriptions about the transition to E-Archive, E-Book and E-Invoice implementations and principles.

Circulars• The Tax Income circular dated

26 November 2013 and numbered GVK-92/2013-7 covers tax implementation requirements, which will be taken as the basis for transfers from foundations/provident funds/trusts to the Private Pension System.

• The Circular no. 2013/2 on the Principles and Procedures for the Information, Documents and Forms Submitted by Pension Companies was enforced upon its publication by the Undersecretariat of Treasury on 25 January 2013. The Circular is intended to describe the principles and procedures concerning the information, documents and forms to be submitted to the participants and sponsoring entities pursuant to the Private Pension System Regulation.

• The Circular no. 2013/3 on Pension Plans was enforced upon its publication by the Undersecretariat of Treasury on 26 February 2013. The Circular is intended to describe the implementation principles and procedures concerning pension plans pursuant to the Private Pension System Regulation published in the Official Gazette 28462 dated 09 November 2012.

Technical principles were determined for pension plans and the funds offered thereunder, the standard fund definition was made into which savings of individuals who do not make a fund preference at the time of participation in the system will be channeled, and Companies were asked to set up a standard fund with the specified properties.

• Principles for the State Contribution transactions were described, which are performed pursuant to the Circular no. 2013/10 dated 02 July 2013 on the State Contribution Transactions in the Private Pension System, supplementary article 1 of the Law no. 4632 on the Private Pension Savings and Investment System, and the Regulation on the State Contribution in the Private Pension System published in the Official Gazette issue 28512 dated 29 December 2012. Within this scope, the Circular covers matters relating to the refundment of unearned amounts of participants wanting to drop out of the system accumulated in the State Contributions account, excess payments made to the Undersecretariat of Treasury, and the undeserved State Contribution amounts paid to participants.

• Under the Circular no. 2013/14 dated 29 July 2013 on the Implementation Principles for Pension Annuity Products, and the Life Insurance Regulation published in the Official Gazette issue 28437 dated 10 October 2012, and in view of the retirement age criterion implemented by the Private Pension System, it has been stipulated to offer life insurance products paying only the so-called “Pension Annuity”, excluding the transfers to be made from foundations and provident funds, to individuals aged 56 and older. The Circular on the Implementation Principles for Pension Annuity Products describes the technical principles for tariffs and dividends in relation to pension annuity products, and the guidelines to be followed when making revisions to these principles.

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Disclosures on the Special Audit and Public Audit Conducted During the Reporting PeriodThe audits conducted at the Company during the reporting period are presented below:

Major Lawsuits Brought against the CompanyThere are no major lawsuits brought against the Company during 2013, which might have a potential impact on the Company’s financial standing and activities.

Penalties and Sanctions against the Company and Board Directors on account of Practices Contradicting with the Provisions of LegislationThere were no penalties and sanctions of material nature imposed on account of practices contradicting with the provisions of legislation in 2013.

Grants and Donations, Expenses Incurred within the Frame of Social Responsibility during the Reporting PeriodIn 2013, the Company’s grants and donations totaled ¨36,595, out of which ¨33,385 was incurred in relation to the social responsibility project.

Information on General AssemblyAll of the resolutions adopted at the Ordinary General Assembly meeting held on 26 March 2013 have been realized.

Rights Provided to Board Directors and Senior ExecutivesFinancial rights and other benefits provided to the Board Directors and senior executives during 2013 are presented below.

Financial RightsIn the fiscal year ended 31 December 2013, wages and similar benefits provided to the chairman and the members of the Board of Directors amounted to ¨984,300, and to senior executives such as the CEO and Deputy Chief Executive Officers amounted to ¨2,974,078.

Other MeansUnder other means including, among others, business trip expenses, entertainment expenses and insurance premium payments, the Company provided means in kind and in cash worth ¨22,046 to the Board Directors, and ¨761,474 to senior executives such as the CEO and Deputy Chief Executive Officers.

In addition, an insurance coverage of ¨3,501,900 in total has been defined for senior executives within the frame of whole life insurance.

Other Material Disclosures Concerning the Reporting Period

Agency Conducting the Audit Subject of Audit Audit Dates

T.R. Prime Ministry Capital Markets Board CMB Audit on Pension Funds 2011 Activities 20.09.2012-03.01.2013

T.R. Prime Ministry Capital Markets Board CMB Audit on Pension Funds 2012 Activities 07.02.2013-23.05.2013

T.R. Prime Ministry Undersecretariat of Treasury Insurance Supervision Board Audit on Life Insurance Affairs and Transactions 11.03.2013-24.05.2013

T.R. Prime Ministry Undersecretariat of Treasury Insurance Supervision Board Process Audit on PPS State Contribution Transactions 06.06.2013-28.06.2013

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Transactions Executed with the Risk Group in Which the Company is Included

During the reporting period, the Company collected ¨15,486,007 (31 December 2012: ¨14,316,736) employer contribution for private pension plans from related parties, and accrued ¨506,769 employer premium for life insurance (31 December 2012: ¨302,422). Other material transactions executed with related parties in the fiscal years that ended on 31 December 2013 and 31 December 2012 are presented below:

¨ 31 December 2013 31 December 2012

Milli Reasürans TAŞ - premiums written, ceded 702,590 917,985Premiums written, ceded 702,590 917,985 Milli Reasürans TAŞ - commission income from reinsurers 294,309 246,831Commission income from reinsurers 294,309 246,831 Türkiye İş Bankası AŞ – interest income from deposits 663,404 652,012Investment income 663,404 652,012 İş Portföy Yönetimi AŞ – investment consultancy fee 195,552 187,488İş Portföy Yönetimi AŞ – portfolio management fee - 20,256İş Yatırım Menkul Değerler AŞ – MKK service commission 15,750 13,125İş Yatırım Menkul Değerler AŞ – portfolio management fee 8,080İş Portföy Yönetimi AŞ – secondary market operations of marketable securities - 13,278İş Yatırım Menkul Değerler AŞ – secondary market operations of marketable securities - 10,674

Investment expense 211,302 252,901 Türkiye İş Bankası AŞ – commission of production 51,918,079 45,144,459İş Portföy Yönetimi AŞ – portfolio management fee of pension funds 12,984,035 12,191,098İş Merkezleri Yönetim ve İşletim A.Ş. – building administrative expense 4,178,552 3,961,869İş Gayrimenkul Yatırım Ortaklığı A.Ş. – rent expense 3,131,677 2,917,306İş-Net Elektronik Bilgi Üretim Dağ. Tic. ve İletişim A.Ş. - communication expense 825,064 1,253,519Anadolu Anonim Türk Sigorta Şirketi – premium paid 1,649,623 1,020,191Türkiye İş Bankası AŞ – commission of premium collection and banking services 764,575 839,031Türkiye İş Bankası A.Ş. – fund operation service expense 664,311 503,624Türkiye Iş Bankası AŞ – rent expense 588,558 424,717Anadolu Anonim Türk Sigorta Şirketi – rent expense 157,199 152,082Other expenses 76,861,673 68,407,896

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The related party balances as at 31 December 2013 and 2012 are as follows:

¨ 31 December 2013 31 December 2012

Türkiye İş Bankası AŞ – receivables from credit card collections 102,192,002 76,031,154Cash and cash equivalents 102,192,002 76,031,154

Türkiye İş Bankası AŞ – bank deposits 9,813,038 5,534,597Cash at banks 9,813,038 5,534,597

Anadolu Anonim Türk Sigorta Şirketi – premium receivables - -Receivables from main operations - -

Türkiye İş Bankası AŞ – commission payables 5,081,480 4,374,762Milli Reasürans TAŞ – premium payables 99,454 162,086Payable from main operations 5,180,934 4,536,848

Anadolu Anonim Türk Sigorta Şirketi – premium payables 5,014 8,172Payables to shareholders 5,014 8,172

İş Portföy Yönetimi AŞ 4,115,797 3,738,711İş Merkezleri Yönetim ve İşletim AŞ 353,476 198,734İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim AŞ 96,614 77,092Other payables 4,565,887 4,014,537

The conclusion of the Associated Company Report 2013, which is prepared pursuant to Article 199 of the Turkish Commercial Code no 6102, is copied below:

“Between our Company and our controlling shareholder İşbank or other Group Companies affiliated to İşbank, there is:•Notransferofreceivables,payablesorassets,•Nolegaltransactioncreatingliabilitysuchasprovidingsuretyship,guaranteeorendorsement,•Nolegaltransactionthatmightresultintransferofprofit.

All legal transactions with the controlling company and group companies affiliated thereto during the 2013 operating year have been carried out on an arm’s length basis, according to the terms and conditions known to us, and necessary counter-performances have been provided, and the Company did not register loss.”

Transactions Executed with the Risk Group in Which the Company is Included

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An Assessment of Independent Audit, Internal Control System and Internal Audit Activities by the Board of Directors

Independent AuditorPeriodic financial reports are prepared within the framework of current laws and regulations and insurance accounting standards in such a way as to show the Company’s true financial standing. Such reports are independently audited and publicly disclosed as prescribed by law.

The Company’s independent auditor is rotated at regular intervals. In this respect, the Company abides by the provisions of the “Regulation on Independent Auditing in Insurance, Reinsurance and Pension Companies” dated 12 July 2008 and numbered 26934.

External audits at our Company are performed on an entirely independent basis and its external auditors operate completely within the framework of truthfulness, professional honesty, and candor and without any involvement in a conflict of interest whatsoever. No payments are made to any independent auditor in our employ other than such fees as are reasonable in light of existing market conditions.

The factors that strengthen the independence of firms from which we obtain independent auditing services are: the existence of an Audit Committee, the possession of an effective accounting and internal audit system, and adherence to rules of ethics that give importance to truthful public disclosure of company-related matters.

The Board of Internal AuditThe Board of Internal Audit carries out its activities within the frame of the Regulation on the Internal Systems of Insurance, Reinsurance and Pension Companies that was published in the Official Gazette issue 26913 dated 21 June 2008. The Board reports directly to the Board of Directors and is organized independently in administrative terms.

Within the frame of the Regulation on the Internal Systems of Insurance, Reinsurance and Pension Companies, the Board of Internal Audit reports on all Headquarters units, regional offices and branches at least once a year, and on all agencies at least once in every three years. The reports are based on International Internal Audit Standards within the scope of the audit plan and

program approved by the Company’s Board of Directors, and they adopt a risk-focused approach. In addition to these inspection activities, investigations and reviews are also conducted.

In 2013, 22 headquarters units, 7 regional offices and 1 branch adding up to 30 units in total were inspected. In addition, 1 investigation report was issued. Inspection of agencies continued during 2013, and 176 agencies were inspected in this frame. Reports resulting from inspections, interrogations and investigations have been submitted to the Board of Directors.

In 2013, the Board of Internal Audit was staffed by 13 inspectors and assistant inspectors. To support their professional development and to expand their professional knowledge, participation in various training programs was facilitated for the members of the Board of Inspectors. Attention is paid to ensure alignment of the inspection activities and the resulting inspection reports with the “International Internal Audit Standards” and current conditions, and arrangements, revisions and updates are made as necessary.

The Board of Internal Audit has made it a mission to contribute value to the Company’s activities, while increasing efficiency and productivity, as well as to provide independent and objective assurance to the Company’s Senior Management that the Company’s activities are carried out in accordance with the Law, other applicable legislation, internal strategies and policies. In addition, the Board carries on with its activities in keeping with its mission of training and gearing up the managers for the Company in the long run through investments made into the human resource.

Risk Management and Internal Control DepartmentRisk Management and Internal Control Department conducts its activities within the frame of the “Regulation on the Internal Systems of Insurance, Reinsurance and Pension Companies” published in the Official Gazette issue 26913 dated 21 June 2008. The Department reports directly to the CEO.

It is intended to have a control system which enables due and effective

management, mitigation and control of the risks involved in the Company’s activities and which is structured to cover all operations of the Company. The system is designed to encompass the principles, standards, legislation, methods, procedures and guidelines that all employees at any level are responsible for fully, accurately and efficiently abiding by and implementing, as well as risk mitigating systems, facilities, mechanisms and all similar elements. In this framework, operational activities and risk elements at the Company are evaluated and priority is given to compliance efforts. New products and new implementations put on the market are reviewed, and subjected to risk assessments and compliance checks.

Efforts are spent to make sure that the internal control system that make up the control functions of the Company and encompasses all the units is kept in compliance with the legislation and standards, and efficient with respect to its structure and operation. The basic strategy turned towards these goals is to conduct internal control activities independently, productively and effectively based on a risk-focused approach and within the frame of applicable legislation and internationally accepted principles and standards.

The control system aimed at the activities carried out by the Company units basically consists of the following: compliance and conformity controls, tangible asset controls, review of adherence to limits set by the Company and tracking limit overruns, controls pertaining to the approval and authorization system, inquiry and reconciliation controls, controls for information and communication systems, controls for the financial reporting systems, and controls for communication channels.

Reports covering internal control activities and risk monitoring, assessment and management activities is submitted to the Board of Directors at regular intervals.

The Department had 6 members during 2013. The employees were provided with training opportunities to enhance their professional development and expand their knowledge.

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Independent Auditor’s Compliance Opinion on the Annual Report

To the Shareholders of Anadolu Hayat Emeklilik Anonim Şirketi,

We have audited the accuracy and the consistency of the financial information in the annual report of Anadolu Hayat Emeklilik Anonim Şirketi (“the Company”) with the audited financial statements as of 31 December 2013. The annual report is the responsibility of the Company’s management. Our responsibility, as independent auditors, is to express an opinion on the annual report based on the compliance of financial information provided in the annual report with the audited financial statements and explanatory notes.

Our audit was conducted in accordance with the regulations on preparation and issuance of annual report in “Communiqué on Individual Retirement Saving and Investment System” (“Communiqué”) issued on 7 August 2007 dated and 26606 numbered. Those regulations require that we plan and perform the audit to obtain reasonable assurance regarding whether the consistency of financial information represented in the annual report with the audited financial statements and explanatory notes is free of material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the financial information provided in the accompanying annual report prepared in accordance with the Communiqué is in compliance with the audited financial statements and explanatory notes of Anadolu Hayat Emeklilik Anonim Şirketi, in all material respects, as at 31 December 2013.

Istanbul,

27 February 2014

Akis Bağımsız Denetim ve

Serbest Muhasebeci Mali Müşavirlik

Anonim Şirketi

Alper Güvenç,

Certified Public Accountant

Partner

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Contents

Financial Position

• SummaryReportoftheBoardofDirectorsfortheGeneralAssemblyofShareholders• InformationonFinancialStructure• AssessmentofFinancialStanding,ProfitabilityandClaimsPaymentAbility• 5-YearSummaryFinancialInformationIncludingtheReportingPeriod• DividendPaymentPolicy

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Summary Report of the Board of Directors for the General Assembly of Shareholders

DearShareholders,

ItisespousedasthebasicphilosophyofourCompanytooffercustomer-focusedserviceachievingexcellenceineveryaspectbeforeitsshareholders,investorsandcustomersdrawingonitsstructureencompassingthebestpracticesofmodernprivatepensionandlifeinsurancebusinesses;onitshistory,capitalization,transparentorganization,anditscorporatevaluesgivingtheforegroundtocustomersatisfaction,innovationandcreativity;theabilitytoputitsresourcesandnewtechnologiestousetowardsincreasingproductivity;maximuminvolvementinsocialactivitiesbyastrictcommitmenttoitssocialresponsibilitiesinitsactivitiesandactions,andbeliefinandsupporttoentrepreneurialteamspirit.

Inlinewiththecorporatecultureandobjectivesoftheİşbankgroup,AnadoluHayatEmekliliksucceededincarryingitsleadershipinlifeinsurancetotheprivatepensionsegmentregardedasacrucialpartofthesocialsecuritysystem,capitalizingontheknow-howandcapitalaccumulationgainedinthelifeinsuranceandprivatepensionsegments.ItisalsodefinedasakeyobjectiveoftheCompanytomaintainitsleadershipinlifeinsuranceintheyearstocomeandtorendermarketleadershipintheprivatepensionsegmentpermanentbyfortifyingitspositionamongtheleadingfinancialservicescompaniesofthecapitalmarketastheonlypublicly-floatedprivatepensioncompanyinthesystem.

During2013,globaleconomicactivitydisplayedaweaker-than-expectedrecoverytrend.ThegrowthcompositionoftheTurkisheconomybegantochangeascomparedwith2012andseeminglyre-startedtosupportconsumptionandinvestmentoutlays.RegulatoryarrangementsofsignificancewereintroducedconcerningtheLifeInsurancesectorandthePrivatePensionsector,inparticular.TheCompany’spracticesandinfrastructurewerebroughttoconformitywiththeseregulatorychangesafterintenseworkinthisrespect.Activitiestargetedatnewproductdevelopmentcateringtocustomerneeds,diversificationofdistributionchannelsandenhancementofservicequalityremainedamongtheCompany’stoppriorities,inconjunctionwiththecontinuedcompetitiveenvironment.

Totaldividendspaidincashtoourshareholdersin2013amountedto¨40million,andalloftheresolutionsadoptedattheAnnualGeneralAssemblyMeetingheldon26 March2013havebeenrealized.

CarryingouttheiractivitiesinalignmentwiththeregulatoryarrangementsandtargetingtoensurethatourCompany’soveralloperationandpracticesareconductedinamannerthatisstructured,efficientandtransparent,theBoardofDirectorsCommitteescontinuedwiththeireffortsandworkduringthereportingperiod.TheRiskManagementandInternalControlDepartmentissuesquarterly“RiskAssessmentReports”,biannualInternalControlReportandMarketRiskMonitoringReport,andperforms“ValueatRisk”computationsonadailybasis.Inaddition,annualandquarterlyreportsarebeingproducedinaccordancewiththeFinancialCrimesInvestigationBoard(inTurkish:MASAK)legislation.Thedataderivedfromthesaidreports,whichareapprovedbytheCompany’sBoardofDirectors,areusedtoensurethatpotentialriskexposureisregularlyassessedandmonitored.

Basedonthesectoraldatafor2013:

• Year-to-year,premiumproductiongrewby25%onlifeinsuranceand22%onnon-lifeinsurance.Totalpremiumproductionamountedto ¨3,395million.Ofthisproductionfigure,whichcorrespondedtoapproximately14%ofthetotalpremiumproductionintheoverallinsurancesector,85%hasbeengeneratedbythetop10companiesinthesector.

• Asof3 January2014,thenumberofparticipantsinthePrivatePensionSystemhadwentupbyonemillionto4.2millionpeople,whiletotalfundsofparticipants,includingstatecontributions,amountedto¨26,278million.Thetotalcontributionsinthesectorasatthesaiddateareannouncedas¨21,958million.

• In2013,statecontributionsdepositedinparticipants’accountsamountedto¨1.2billion.

• InviewoftheCompany’scurrentmission,vision,corporatestrategiesandprimarygoals,2013hasbeenaperiodduringwhichwepreservedourpioneeringpositioninthesectorsweareengagedinandattainedsuccessfulfinancialresults.

• Havingconcludeditsactivitiesin2013successfully,ourCompanyincreaseditsnetprofitby5%to¨83.2millionanditstotalassetsby9%to¨7,902million.

• TheCompany’sexistingequitycapitalwasworthapproximately¨534millionasatyear-end2013,theamountofrequiredequitycapitalcomputedaccordingtoregulatoryrequirementsgoverningcapitaladequacyis¨124.1million.

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• OurCompanyderived¨52.3millionintotaltechnicalprofitin2013.

• In2013,ourCompany’spremiumproductioninlife/non-lifeinsuranceamountedto¨395million.

• Inarepeatof2010and2012results,ourCompanywasnamedthemostadmiredcompanyintheprivatepensionsectorinthe“Turkey’sMostAdmiredCompanies2013”surveyconductedbyCapitalmagazine.

• 822,920privatepensioncontractswereissuedfor734,015participantsand¨4,337millionwerecollectedincontributionsaccordingtothePensionMonitoringCenter(PMC)datadated03 January2014.In2013,ourCompanyhasbeenthefirstpensioncompanytoreachthe¨5billionmarkintotalfundsinthePrivatePensionSystem.

• AnadoluHayatEmeklilikhasbeenthecompanywhoseparticipantswerepaidthehighestamountofstatecontributionsin2013.

• Remainingtheoneandonlypublicly-floatedprivatepensioncompany,AnadoluHayatEmeklilikretaineditstitleasthehighestfundsgeneratorinlifeinsuranceandPrivatePensionSystemalsoin2014.

• TheCompanyofferedtothepubliconepensionfundwithaviewtodiversifyingfundchoicesandtwopensionfundsinordertoputtheStateContributionsintolucrativeuseduring2013.

• Wekeepsteeringourproductsandpracticesthatcreatedemandthroughefficientpositioning,inlinewiththeneedsofcustomersegmentsandsaleschannels.

• ThroughAlternativeDeliveryChannels,ourCompanyconcentratesonsalesoutletssuchasonlineandmobileapplications,andcontinuesandfurtherincreasesitseffortstotapthehighpotentialourcountry’syounganddynamicpopulationpossesses.

• Inordertoupgradethelevelofserviceofferedtopolicyholdersandsharpenourcompetitiveedge,planningandimplementationprocessesarecarriedoutonthebasisofgenerallyacceptedprojectmanagementprincipleswithaviewtorespondingtoallarisingbusinessneedsthroughthemostcompatibletechnologies.

• OureffortswillcontinueuninterruptedlytoconstantlyupgradethequalityofserviceofferedtotheparticipantsinthePrivatePensionSystem,whichhasbecomethebestindividualinvestmentinstrumentowingtoitsuniqueStateContributionadvantageandthereturngenerationperformanceofpensionfunds,andtoachievecompliancewiththeregulatoryrequirements.

• Drawingonitssolidshareholdingstructure,itssuccessfulfinancialperformance,itscorporatecultureandthecustomer-focusedapproachtoserviceithasespoused,ourCompanywillcontinuetocreateaddedvalueforthesectorandthenationaleconomy,beingTurkey’soneandonlypublicly-floatedpensioncompany.

• Conductedsince2005andofferinggirlstudentstheopportunitytopursuetheireducationwhoarefinanciallyunabletoattendschool,oursocialresponsibilityproject“Girls:TheInsuranceofourFuture”wenton.

• OurCorporateGovernancePrinciplesComplianceReportandthefinancialstatementsfor2013arepresentedonthefollowingpagesforyourinformationandapproval.

Wewouldliketotakethisopportunitytoexpressourgratitudetoourfounderİşbankandourothershareholders,ourpolicyholdersandparticipants,whoplacetheirtrustinourCompany,andouragents,allourdistributionchannelsandallouremployeesfortheircontributionsthatmadetheresultsachievedpossible.

Sincerely,BoardofDirectors

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Information on Financial Structure

Withitscapitalbackedbyitsstrongshareholdingstructuresinceitsfoundationanditsbusinessphilosophyfocusedonsustainableprofitabilityinthebranchesinwhichitisactive,AnadoluHayatEmeklilikalwayssucceededintakingplaceamongtheindustry’sstrongestcompanieswithrespecttofinancialstructure.

Akeyindicatorofastrongfinancialstructure,theCapitalAdequacyStatementisreportedatregularintervalsinlinewiththelegalrequirements,andassuch,itisregisteredbeforethepublicauthoritythatourCompanypossessesacapitalinexcessofthecapitalamountnecessarytocoveritsliabilities.

CapitalAdequacyStatementsforthelastthreeyearspresentedhereinbelowshowthattheCompany’sshareholders’equitywithrespecttotherelevantfiscalyearsareabovetherequiredshareholders’equityamounts.

31 December 2013 (¨) 31 December 2012 (¨) 31 December 2011 (¨)RequiredCapitalforNon-LifeBranches 115,435 196,369 186,997RequiredCapitalforLifeBranches 109,078,343 108,496,682 106,373,431RequiredCapitalforPensionBranch 14,952,948 12,569,576 9,450,175TOTAL REQUIRED CAPITAL 124,146,726 121,262,627 116,010,603CURRENT CAPITAL 539,790,655(*) 524,679,792 430,162,083EXCESSIVE CAPITAL 415,643,929 403,417,165 314,151,480

(*)Asperthelegislation,equalizationprovisionwasincludedintheequitycapital.

AN ASSESSMENT OF THE OPERATIONS OF THE COMPANY’S SEGMENTS

AnadoluHayatEmeklilikclosed2013postingatechnicalprofitof¨52millioninlifeinsurance,personalaccidentinsuranceandprivatepensionbranchesinwhichitisactive.

Thedistributionofbalancesheetandincomestatementitemsaccordingtobrancheswasbasedonthedistributionkeythatwassetoutinthe“CircularonthePrinciplesandProceduresforKeysUsedinFinancialStatementsDrawnUpwithintheFrameofUniformChartofAccountsinInsurance”dated04 January2008publishedbytheUndersecretariatofTreasury.

ThetablebelowshowsthecontributionsofthebranchesinwhichtheCompanyisactivetoourfinancialstructurewithrespecttoassetsizes.

31 December 2013 (¨) Life Private Pension Personal Accident TotalSegmentassets 2,245,556,871 5,640,484,413 16,363,369 7,902,404,653Total segment assets 2,245,556,871 5,640,484,413 16,363,369 7,902,404,653Segmentliabilities (2,251,440,771) (5,634,566,447) (16,397,435) (7,902,404,653)Total segment liabilities (2,251,440,771) (5,634,566,447) (16,397,435) (7,902,404,653)OthersegmentinformationDepreciationandamortization (2,471,797) (2,445,646) (18,012) (4,935,455)

31 December 2013 Life Private Pension Non-Life Total

Continuing operations:Technicalincome 598,513,416 132,002,445 675,114 731,190,975Technicalexpense (535,102,109) (143,137,394) (658,719) (678,898,222)Totalofotherincomeandexpense 23,130,004 22,885,286 168,548 46,183,838Income before tax 86,541,311 11,750,337 184,943 98,476,591Incometaxexpense - - - (15,310,000)Net profit for the period 86,541,311 11,750,337 184,943 83,166,591

FINANCIALASSETS

LifeinsuranceandprivatepensionfundscreatedbeforeourCompanyareinvestedwithintheframeofprocesses,whicharedefinedbytheprovisionsofapplicablelegislation,andareconstantlymonitoredbythepublicauthorities.TheseinvestedfundsarerecognizedinthebalancesheetassetsinlinewiththeprovisionsoftheInternationalAccountingStandards,whichweareobligedtocomplywith.

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OurprimarygoalistoensuremaximizationofbenefitsforourCompanyandforallourshareholders.

TheCompanymanagesfinancialassetsintowhichthefundsthatbelongtoourCompanyandthoseintowhichlifebranchfundsareinvested.TheCompany’sfundmanagementprinciplesareformulatedincompliancewiththerequirementsofeffectivecashandassetmanagement.Theseassetsarepresentedhereinbelowinorder.

Financial Assets (¨) Cost Value Fair Value Book ValueFinancialAssetsHeldforTradingPurpose 27,545,521 36,388,883 36,388,883Loans(receivablesfromreverserepotransactions) 11,400,000 11,401,986 11,401,986Available-for-SaleFinancialAssets 557,079,500 571,445,937 571,445,937TOTAL 596,025,021 619,236,806 619,236,806 FinancialInvestmentswithRisksonSavingLifePolicyholders 1,748,096,167 1,787,655,851 1,787,655,851TOTAL 2,344,121,188 2,406,892,657 2,406,892,657

PrivatePensionfunds,ontheotherhand,aremanagedbyİşPortföyYönetimiandHSBCPortföyYönetimi,companiesinlinewiththedecisionspassedbytherelevantFundCommittees.

Private Pension Funds Number Amount (¨)AH1BondFund 38,294,022,156.01 1,620,028,607.31AH2LiquidFund 4,585,072,946.63 138,551,734.30AH3EurobondDollarFund 4,560,450,091.56 128,942,165.89AH4EurobondEuroFund 4,119,971,344.87 116,479,829.86AH5EquityFund 3,488,537,052.92 226,395,589.12AH6InternationalMixedFund 2,276,433,080.72 60,646,453.70AH8ConservativeFund 4,468,009,325.79 157,559,880.86AH9BalancedFund 24,428,037,174.32 1,065,721,977.80AH0AggressiveFund 8,961,780,267.35 560,756,514.89AGEAlternativeGainFund 6,639,861,442.46 78,781,956.01ABEBRICPlusFund 2,922,204,366.22 34,753,776.53AHLDynamicFlexibleFund 2,018,248,514.43 23,306,733.84AHCMixedFund(¨) 3,133,028,631.87 36,656,434.99AG1GroupBondFund 5,561,805,321.32 215,742,428.41AG2GroupEurobondFund 436,337,123.02 9,646,541.12AG3GroupEquityFund 773,259,624.18 32,401,898.03AG4GroupConservativeFund 2,539,158,903.61 86,224,758.05HS1Bond-BillFund 11,277,987,267.19 299,960,627.35AHBWhiteEquityFund 2,100,959,453.72 52,171,025.15ATKStandardFund(*) 1,089,957,724.29 22,763,767.07ATEOrangeBalancedFund 532,193,862.27 11,136,688.76AETContributionFund(**) 23,587,324,029.54 225,942,976.88AERAlternativeContributionFund(**) 489,145,045.72 4,852,808.00AEAGoldFund(**) 2,301,993,477.32 21,753,838.36Total 160,585,778,227.33 5,231,179,012.28

(*)Basedonamodificationtoitsbylawsandprospectus,theATKOrangeBond-BillFundwasrenamedATKStandardFundeffective25 April2013.(**)TheinitialpricemakingdateoftheAETContributionFundandAERAlternativeContributionFundis30 April2013,whichistheIPOdate.TheinitialpricemakingdayforAEAGoldFund,ontheotherhand,is15 April2013,whichistheportfolioformationdate.

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Assessment of Financial Standing, Profitability and Claims Payment Ability

2013wasearmarkedbyweaker-than-expectedrecoveryinglobaleconomicactivity.Preservingitspioneeringpositioninthesectorinitsrelevantbranchesdespiteincreasedcompetition,AnadoluHayatEmeklilikcompleted2013withsuccessfulresultsandmaintaineditsstableandprofitablegrowth.TheCompanykeptcreatingaddedvalueforthesectorandforthenationaleconomyowingtoitsstrongshareholdingstructure,soundfinancialstructure,andcorporateculture.

Alongtheselines,theCompanyposted¨52.3millionintechnicalprofitatyear-end2013,andincreaseditsnetprofitby4.5%year-onto¨83.2million.TheCompany’sgrossprofitwasworth¨98.5million.

ASSET PERFORMANCE

TheCompanyincreaseditstotalassetsby9%andreachedanassetsizeof¨7,902million.

Withinassetitems,“ReceivablesfromMainOperations”and“FinancialAssetsandInvestmentswithRisksonPolicyholders”itemstakethetopplacesintermsofsize.Financialinvestmentswithrisksonpolicyholders,whichmakeup74%ofthelatter,refertotheamountoffinancialassetsintowhichthepolicyholders’fundsundertheCompany’smanagementareinvested.In2013,theCompanyposted¨395millioninpremiumproduction;translatingintoayear-onriseby7%,thisperformanceisexpectedtocontinueinthecomingperiod.

Receivablesfrompensionoperations,whichmostlyrefertothetotalamountofaccumulationinPrivatePensionFundsreachedbythecontributionsdepositedbyourparticipantswiththeCompanyunderthePrivatePensionSystem,grew22%year-onandrosefrom¨4,286millionto¨5,239million.

In2013,privatepensionfundsmadeup74%ofthetotalfundsmanagedbyourCompanythatwereworth¨7,114million.

Takingplaceamongourassetitems,FXassetsamountingto¨351millioncover100%ofourexistingFXliabilities.

LIABILITY PERFORMANCE

InAnadoluHayatEmeklilik’sbalancesheet,liabilitiesconsistofpayablesduetopensionoperationsby68%,technicalprovisionsby25%,andshareholders’equityandotherliabilityitemsby7%.

Runninginreciprocationwiththereceivablesfrompensionoperationsunderassetswithrespecttotheprivatepensionportfolio,thepayablesduetopensionoperationsitemregistered23%year-ongrowth,drivenbytheperformancedisplayedinthevalorizationofsavingsofexistingparticipantsaswellasinnewproductions.

Expressingourliabilitiestowardsourpolicyholders,lifemathematicalprovisionsdecreased15%year-onandwentdownfrom¨2.2billionto¨1.9billion.

Asof31 December2013,theminimumamountofshareholders’equitynecessaryfortheCompanyascalculatedontheprinciplessetbytheTurkishTreasurywas¨124million;theCompany’sequitycapitalasofthesaiddatestoodat¨540million,includingtheequalizationprovision.Carryingonitsactivitiesinlifeinsuranceandprivatepensionbranchesasthesectoralleader,ourCompanyhasmaintaineditsstrongshareholders’equityeversinceitsfoundation.

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CLAIMS PAYMENT ABILITY

ClaimspaidinlifeinsurancebranchbytheCompanyin2013totaled¨290million.Therewas52%increaseinthisamountwhencomparedwith2012.

Ourclaimpaymentsconsistofpolicymaturityanddeathbenefitpaymentsinrelationtoourlifeinsuranceandaccumulation-basedproductsfromthepriorperiods,andourproductioncoveringbothaspects.

TheamountpaidbytheCompanyonaccumulatingproductsattheexpirationoftheinsuranceperiodwas¨258million,up53%year-on.

ThesedisbursementsarebasicallycoveredthroughdisposalofmarketablesecuritiesthatbelongtoourpolicyholdersandregisteredundertheCompany’sassets.

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5-Year Summary Financial Information Including the Reporting Period

Financial Highlights and Key RatiosFinancial Highlights (¨ thousand) 2009 2010 2011 2012 2013TotalPremiumandContributionProduction* 844,155 888,384 1,004,546 1,080,701 1,391,454**

TotalTechnicalProfit 18,820 26,839 34,445 52,929 52,293TotalAssets 4,480,463 5,298,991 5,647,734 7,222,090 7,902,405NominalCapital 250,000 250,000 300,000 300,000 350,000Shareholders’Equity 429,892 450,646 430,162 524,680 533,869FinancialIncome 87,869 70,034 57,222 63,514 65,436PretaxProfit 97,993 86,832 78,085 105,675 98,477

Key Ratios (%) (%) (%) (%) (%)PretaxProfit/Shareholders’Equity 23 19 18 20 18PremiumandContributionProduction/TotalAssets 19 17 18 15 18Shareholders’Equity/TotalAssets 10 9 8 7 7

*Totalpremiumfiguresincludepremiumsfromnon-lifebranch.**AsperthedatareleasedbythePensionMonitoringCenterasof3 January2014.

Premium and Private Pension Contribution Production (¨ thousand)Private Pension Contribution Production

2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)344,107 530,774 54 667,103 26 712,733 7 996,445 40

Life /Non-Life Premium Production2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

500,048 357,610 -28 348,436 -3 367,968 6 395,009 7

Premium and Private Pension Contribution Production2009 2010   2011   2012   2013  

844,155 888,384 5 1,015,539 14 1,080,701 6 1,391,454 29

Mathematical Reserves and Profit Share Reserves2009 2010   2011   2012   2013  

1,976,486 2,090,760 6 2,027,283 -3 2,205,674 9 1,871,476 -15

Pension Funds2009 2010   2011   2012   2013  

1,952,892 2,619,960 34 3,030,070 16 4,277,830 41 5,231,179 22

Policy Maturity and Death Benefit Payments (¨ thousand)

Policy Maturity2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

132,531 117,124 -12 147,320 26 168,239 14 257,875 53

Death Benefit Payments2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

12,067 12,548 4 15,445 23 23,111 50 32,154 39Total

2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)144,598 129,672 -10 162,765 26 191,350 18 290,029 52

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Technical Results (¨ thousand)Life Insurance

2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)7,250 13,945 92 34,447 147 33,416 -3 63,412 90

Non-Life Insurance2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

56 -226 - -7 + 18 - 16 -11

Private Pension2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)11,514 13,120 14 5 - 19,496 + -11,135 -

Total2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

18,820 26,839 43 34,445 28 52,929 54 52,293 -1

Financial Income(¨ thousand)2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

87,868 70,034 -20 57,222 -18 63,514 11 65,436 3

Financial Expenses and Other Expenses2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

-8,695 -10,041 15 -13,582 35 -10,768 -21 -19,252 79

Pretax Profit2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

97,993 86,832 -11 78,085 -10 105,675 35 98,477 -7

Shareholders’ Equity2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

429,892 450,646 5 430,162 -5 524,680 22 533,869 2

Total Assets2009 2010 Change (%) 2011 Change (%) 2012 Change (%) 2013 Change (%)

4,480,463 5,298,991 18 5,647,734 7 7,222,090 28 7,902,405 9

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Dividend Payment Policy

AccordingtoourArticlesofIncorporation,aportionoftheCompany’sdistributableprofitispaidoutasafirstdividendatratesandinamountswhicharenolessthanthosedeterminedbytheCapitalMarketsBoard.

ThedividendpaymentproposalsthattheBoardofDirectorssubmitstotheGeneralAssemblyofShareholdersarepreparedaccordingtoapolicythat;

a)avoidsdisturbingthedelicatebalancebetweenshareholders’expectationsandtheCompany’sneedtogrow,and

b)takestheCompany’sprofitabilityintoaccount.

TheBoardofDirectorshasadoptedadividendpaymentpolicythatisbasedonproposingtotheGeneralAssemblyofShareholdersthatatleast30%ofnetincomesubjecttoprofitbepaidoutasfreesharesofstockorincash.

TherearenopreferredstocksintheCompany’sprofitdistribution.

Therearenofounder’ssharesnorisitaCompanypracticetogivesharesofprofitstomembersoftheBoardofDirectors.

AsrequiredbyourArticlesofIncorporation,amaximumof3%ofthetotalamountremainingafterthefirstdividendhasbeensetasideispaidouttoouremployeesastheirshareoftheprofits,subjecttoacapofthreemonthlysalaries.

TheCompany’sdividendsarepaidwithinthelegallyprescribedperiodsoftime.

TheArticlesofIncorporationcontainnoprovisionsgoverningthepaymentofadvancesondividends.

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Risks and an Assessment by the Board of Directors

• ActiveCommitteesandanAssessmentbytheBoardofDirectors• RiskManagementPoliciesandanAssessmentbytheBoardofDirectors

Contents

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Active Committees and an Assessment by the Board of Directors

CorporateGovernanceCommittee,AuditCommitteeandEarlyDetectionofRiskCommitteehavebeensetuptofacilitateeffectiveandtransparentexecutionoftheBoardofDirectors’dutiesandresponsibilities,inalignmentwiththeobligationsimposedbyapplicablelegislation.

PursuanttoArticle4.5.1oftheCommuniquéSerial:IVNo:56onDeterminationandImplementationofCorporateGovernancePrinciplesenforceduponitspublicationintheOfficialGazetteissue28158dated30 December2011,theCorporateGovernanceCommittee,whichhasbeensetupbasedontheBoardofDirectorsdecisionno353/1dated14 March2005,alsofunctionsastheNominationCommitteeandtheRemunerationCommittee.

Ourcommitteescarryouttheiractivitiesinlinewithregulatoryrequirements,targettoensurethattheCompany’soverallconductandpracticesareexecutedinafashionthatisstructured,efficientandtransparent,keeptheBoardofDirectorsinformedonmaterialdevelopmentsinatimelymannerandasnecessary,andobservestrictharmonyandcoordinationwiththeexecutiveofficersoftheCompanyintheiractivities.Informationontheobjectives,members,structuresandactivitiesofthecommitteesispresentedbelow.

CORPORATE GOVERNANCE COMMITTEE

Objectives

TomonitortheCompany’scompliancewithcorporategovernanceprinciplesandtoengageinactivitiesandmakerecommendationstotheBoardofDirectorstoimprovesuchcompliance.

Members

Prof.MehmetBahaKaran,IndependentDirector(CommitteeHead)

RecaiSemihNabioğlu,Director(CommitteeMember)

Structure

TheCorporateGovernanceCommitteeisformedbytheBoardofDirectorswithintheframeworkofcorporategovernanceprinciples,withprioritygiventomembersselectedfromwithinitsownbody.Whendeemedtobenecessary,individualswhoarenotcompanydirectorsbutwhohaveexpertiseinparticularmattersmaybegivendutiesonthecommittee.NoCEOmaybeamemberofthiscommittee.

TheCorporateGovernanceCommitteemustconsistofatleasttwomembers.Committeemembersmustbenon-executivedirectors.HeadofthecommitteeiselectedfromamongstindependentBoardDirectors.

Inprincipal,thetermofofficeoftheCorporateGovernanceCommitteeiscoevalwiththatoftheBoardofDirectorsexceptthatifanychangestakeplaceinthelatter,thecommitteeremainsconstituteduntilthecompletionofitsexistingterm.

Insofarasispossible,thecommitteeconvenesinparallelwiththeBoardofDirectors.Committeedecisionsaretakenbyamajorityvote.Theheadofthecommitteekeepstheboardofdirectorsinformedaboutthecommittee’sactivities.

Activities

• EstablisheswhetherthecorporategovernanceprinciplesareimplementedintheCompany,aswellasthegroundsfornon-implementation,ifapplicable,andtheconflictsofinterest,ifany,arisingfromfailuretofullycomplywiththeseprinciples,andpresentsproposalstotheBoardofDirectorsfortheimprovementofcorporategovernancepractices;

• OverseestheactivitiesoftheShareholderRelationsUnit;

• Workstocreateatransparentsystemregardingidentification,assessment,andtrainingofnomineeseligiblefortheBoardofDirectors,andtoestablishrelatedpoliciesandstrategies;

• RegularlyassessestheformationandefficiencyoftheBoardofDirectors,andsubmitsrelevantrecommendedalterationstotheBoardofDirectors;

• Setsandoverseestheapproaches,principlesandpracticesregardingperformanceevaluationandcareerplanningofBoardDirectorsandseniorexecutives;

• PreparesitsrecommendationsregardingtheremunerationprinciplesforBoardDirectorsandseniorexecutivesinviewoftheCompany’slong-termgoals;

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• SetsthemeasuresthatcanbeusedinremunerationwhichwillbelinkedtotheCompany’sandtheDirector’sperformance;

• PresentsitssuggestionstotheBoardofDirectorsregardingtheremunerationstobepaidtoBoardDirectorsandseniorexecutives,whichsuggestionswillpayregardtotheextentatwhichthecriteriahavebeenfulfilled.

EARLY DETECTION OF RISK COMMITTEE

Objectives

Toearlydetecttherisksthatmightendangertheexistence,progressandsurvivaloftheCompany,implementnecessarymeasuresandremediesinrelationtotheidentifiedrisks,andmanagetherisk.TheCommitteepresentsanassessmentofthesituationinitsbimonthlyreporttotheBoardofDirectors,pointingattheperils,ifany,andindicatingtheremedies.Thereportisalsosenttothestatutoryauditor.TheCommitteewillalsoreviewtheriskmanagementsystemsatleastonanannualbasis.

Members

Assoc.Prof.AtakanYalçın,IndependentDirector(CommitteeHead)

RecaiSemihNabioğlu,Director(CommitteeMember)

Structure

TheCommitteeisformedbytheCorporateGovernanceCommitteegivingprioritytomembersselectedfromwithinitsownbody,withintheframeworkofCorporateGovernancePrinciples.Whendeemednecessary,individualswhoarenotBoardDirectorsbutwhohaveexpertiseinparticularmattersmaybeassignedtothecommittee.TheCEOmaynotbeamemberonthiscommittee.

TheCommitteemustconsistofatleasttwomembers.Committeemembersmustbenon-executiveDirectors.HeadofthecommitteeiselectedfromamongstindependentBoardDirectors.

Inprincipal,thetermofofficeoftheEarlyDetectionofRiskCommitteeiscoevalwiththatoftheBoardofDirectorsexceptthatifanychangestakeplaceinthelatter,thecommitteeremainsinofficeuntilthecompletionofthepredeterminedadjustmentperiod.

Committeedecisionsaretakenbyamajorityvote.TheHeadoftheCommitteekeepstheBoardofDirectorsinformedabouttheCommittee’sactivities.

Activities

PursuanttoArticle4.5.1oftheCommuniquéSerial:IVNo:56onDeterminationandImplementationofCorporateGovernancePrinciplesenforceduponitspublicationintheOfficialGazetteissue28158dated30 December2011,theEarlyDetectionofRiskCommitteecarriesoutthefollowingactivitiesinordertofunctionwithintheprinciplesmentionedhereinbelow:

• Workstoearlydetecttherisksthatmightendangertheexistence,progressandsurvivaloftheCompany,toimplementnecessarymeasuresandremediesinrelationtotheidentifiedrisks,andtomanagetherisk;

• PresentsanassessmentofthesituationinitsbimonthlyreporttotheBoardofDirectors,pointingattheperils,ifany,andindicatingtheremedies.Thereportisalsosenttothestatutoryauditor.

• Reviewstheriskmanagementsystemsatleastonanannualbasis.

AUDIT COMMITTEE

Objectives

TomonitortheoperationandeffectivenessoftheCompany’saccountingsystem,publicdisclosureoffinancialinformation,andindependentauditing.

Members

Prof.MehmetBahaKaran,IndependentDirector(CommitteeHead)

Assoc.Prof.AtakanYalçın,IndependentDirector(CommitteeMember)

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Structure

TheAuditCommitteeisformedbytheBoardofDirectorswithintheframeworkofcorporategovernanceprinciplesfromamongmembersofitsownbody.

TheAuditCommitteemustconsistofatleasttwonon-executivedirectors.TwocompanyofficersdesignatedbytheBoardofDirectorsareresponsibleforcoordinatingactivitiesbetweenthecommitteeandtheCompany.

ThetermofofficeoftheCorporateGovernanceCommitteeiscoevalwiththatoftheBoardofDirectors.Thecommitteemeetsatleastonceeverythreemonths.Committeedecisionsaretakenbyamajorityvote.

TheBoardofDirectorsiskeptregularlyinformedaboutthecommittee’sactivities

Activities

TheprincipalactivitiesoftheAuditCommitteeconsistofthefollowing:

• ChecksperiodicfinancialreportsthataretobepubliclydisclosedfortheircompliancewiththerequirementsofapplicablelawsandregulationsandwithinternationalaccountingstandardsandreportsitsfindingstotheBoardofDirectorsalongwiththeopinionsoftheindependentauditor.

• Takesmeasuresasnecessarytoensurethatallinternalandexternalauditingisconductedadequatelyandtransparently.

• MonitorsthefunctioningandeffectivenessoftheCompany’saccountingsystem,ofthepublicdisclosureoffinancialinformation,ofindependentauditing,andoftheCompany’sinternalcontrolsystem;monitorstheselectionofanindependentauditor,thepreparationofindependentauditingagreements,theinitiationoftheindependentauditingprocess,andallaspectsoftheactivitiesoftheindependentauditor.

• Afterhavingdeterminedthatthereisnoissueimpairingtheindependenceofapotentialindependentauditorandsostatedinareport,givesitspreliminaryapprovalfortheselectionofindependentauditorsandfortheservicestobeobtainedbytheCompanyfromthemandsubmitsthisrecommendationandreporttotheBoardofDirectors.

• ExaminesandfinalizesanycomplaintsmadetotheCompanyconcerningitsaccounts,itsinternalcontrolsystem,oritsindependentauditing;ensuresthatcompanyemployeesexaminesuchcomplaintswithintheframeworkoftheprincipleofconfidentiality.

Active Committees and an Assessment by the Board of Directors ...continued

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Riskmanagementpoliciesdescribe the keyprinciples andnorms related to the riskmanagement systemandprocesses.TherequirementsunderthepolicyaresetbytheBoardofDirectors,theapprovalofwhichisrequiredforanyrevisions.Ataminimum,theriskmanagementsystemandprocessesmustbeintroducedandtherisklimitssetmustbeadheredto.

TheBoardofDirectorsisresponsibleforsettingtheriskmanagementprinciplesandnormsthatwillbeimplementedacrosstheCompany; updating the risk policies in connectionwith the changes in the circumstances governing operations; establishingandoperatingeffectiveriskmanagementsystemandprocesses;monitoringtheCompany’srisklevel;establishingrisklimitsandcheckingactualizationsversustheselimits,andintroducingnecessarymeasures.

Risklimitsthataresetforthepurposeofmeasuring,evaluatingandmonitoringtherisklevelsareenforcedbasedonaBoardofDirectorsdecisionasandwhendeemednecessaryandimportant.

ThekeyconsiderationsinsettingtherisklimitsaretheriskmeasurementresultsandtheCompany’sriskappetite.

Separatefromrisklimits,indicatorsofdevelopmentsandoccurrencesthatwillnegativelyimpacttherisklevelaredetectedandmonitoredasearlywarningsignals.

Risk Management Policies Implemented on the Basis of Types of Risks

TheRiskManagementPolicyispivotalforsupportinganddevelopingtheCompany’scorporatestructure.Thepolicyis,inessence,intended to set the key principles and norms related to the risk management system and processes; to introduce the riskmanagementsystemandprocessesspecifiedinthepolicy,andtoachieveconformitywiththerisklimitsset.

TheactivitiesfallingundertheRiskManagementPolicyarecarriedoutwithintheframeworksetbytheinsuranceandprivatepensionlegislation,andotherlegislationgoverningtheCompany.TheCompany’sriskexposureisindividuallymonitored,assessedandcontrolledunderthefollowingcategories:insuranceunderwritingandpensionbranchrisk,creditrisk,marketrisk,operationalrisk, assets and liabilities management risk, structural interest rate risk, liquidity risk, property investment risk and capitalinvestmentrisk.

RiskManagementandInternalControlDepartmentisresponsiblefordescribing,measuring,analyzing,monitoringandreportingrisks.Otherresponsibilitiesofthedepartmentincludefollowingupthedevelopmentsinriskmanagement,improvingthemethodsemployed,andsubmittingreportstotheBoardofDirectorsonrequired legalreporting,notificationandfollow-upactivities. Inaddition,thedepartmentalsoactsastheComplianceUnitwithregardtotheenforcementoftheLawno5549onPreventionofLaunderingProceedsfromCrimeandrelatedregulations.

Insurance Underwriting and Pension Branch Risk Policy

Insuranceunderwritingandpensionbranchriskrefers,withrespecttothe insurancebranch,totheriskthatmightarisefromfailuretocorrectlyandeffectivelyemploytheunderwritingtechniquewhileprovidingcoverageforprobableincidents;andwithrespecttotheprivatepensionbranch,totheriskofsustaininglossduetothegeneratedrevenuesthatfallshortofthecostsincurred.

In insuranceandpensionbranchproducts,thebasicprinciple istoestablishtheactuarialstructurein linewithtechnicalprofitforecastswithintheframeofprecautionaryprinciple.Alongthisline,technicalincomeandexpensesforinsuranceandpensionbranchesaresetwithintheframeoftheprinciplesdefinedininsuranceandprivatepensionlegislation,takingintoconsiderationtheCompany’sriskappetite.Themanagementofinsuranceunderwritingriskisbasedontheprincipleofcomposingalow-riskportfolioofpolicyholders.Tothisend, thepolicyholderportfolio iseffectivelymonitored.TheCompany’s incomeandrisk limitsareregularlyfollowed-uptodeterminewhethertheyareattheleveltocovertheriskunderwrittenbytheCompany.

Assets and Liabilities Risk PolicyUndertheassetsandliabilitiesriskthatexpressesallfinancialrisksapartfromthecreditriskwhichstemfromtheCompany’sassetsandliabilities,structuralinterestraterisk,liquidityrisk,capitalinvestmentriskandrealestateinvestmentriskareconsidered.In the composition of the Company’s assets and liabilities, return on asset items and cost of liability items, cashing-in andreinvestmenttimesaretakenintoaccount.TheCompany’sneeds,alternativeborrowingsources,profitabilityofthelendingandlendingfacilitiesaretakenintoaccountwhenidentifyingandutilizingthesourcesforfundingassets.

Thebasicprincipleistoensurethatthetransactionscarriedoutinthemoneyandcapitalmarketsare“welldiversified”soastoavoidanyconcentrationinanyinvestmentinstrument,maturity,currency,interesttypeandothersimilarparametersandinviewoftherisklevelcreatedthereby.

Whenmanaging the liquidity risk, theCompanycomposes itsportfolio ina structure that is compatiblewith the functionsofderivingprofitontheportfolioandofmarketriskmanagement.Hence,keyconsiderationsincludethematuritydistributionoftheportfoliocomposedassuch,itshavingaprofit-focuswhileuncompromisingfromliquidityrequirements,andtheriskversusreturnbalance.

Risk Management Policies and an Assessment by the Board of Directors

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MarketrisklimitsaresetbytheBoardofDirectorsinaccordancewiththeCompany’sriskappetite.AdherencetolimitsisconstantlymonitoredbytheRiskManagementandInternalControlDepartmentandrelatedexecutiveunits.Intheeventoflimitoverruns,theviolationandthereasonsthereforarereportedtotheBoardofDirectors,accompaniedbytheexecutiveunits’comments.ActiontobetakenintheeventofalimitoverrunisdecidedbytheBoardofDirectors.

Carefulconsiderationisgiventothecreditworthinessofthoseissuingfinancialinstrumentsthatposeamarketrisk.Basically,theissuerofthefinancialinstrumentshouldhavebeenassignedan“investmentgrade”intermsofcreditriskrating.

Withintheframeofstructuralinterestraterisk,theexposurestemmingfromtheinterestsensitivityofalloftheCompany’sassets,liabilities,incomeandexpensesarefollowedupseparatelyfromtheinterestriskthatisaddressedunderthemarketrisk.

Decisionsoncapitalinvestments(newinvestments,increasing/decreasingtheinvestmentlevelorwithdrawalfromaninvestment)aremadebytheCompany’sBoardofDirectors.Capital investmentsaremanagedbasedonaportfolioapproach,observingthebalancebetweentheriskundertakenandthereturngenerated.

Credit Risk Policy

CreditRiskreferstotheprobabilityoflosstheCompanymightsustainduetothefailureofindebtedparties(agencies,reinsurers,etc.)totheCompanytofulfillthecontractualrequirementsandtheirfailuretosatisfytheirobligationsinpartorinwhole.

Thebasicprincipleistomanagecounterpartytransactions,whichareofanaturetogiverisetocreditrisk,soasnottocreateconcentration,andinawell-diversifiedmannerbykeepinganeyeontherisklevelcreated.Tothisend,thecreditriskexposureismonitoredbywayofvariouscriteriaincludingcounterparty,collateral,sector,maturityandcurrency.

UndertheCreditRiskevaluationprocess,thefollowingaremonitoredataminimumandarereported:

• Risklevelofinsurancebrokers,

• Risklevelofreinsurers,

• Risklevelofcompaniesinwhichshareholdingstakesareacquired,

• Risklevelofbanks/financialinstitutionsfromwhichfinancialservicesareobtained.

Earlydetectionanddefinitionoftheissuesareessentialforeffectivecreditriskmanagement.

Operational Risk Policy

Operationalriskistheriskoflossthatmightresultfrominadequateorinoperationalinternalprocesses,people,systemsorexternalfactors.Thebasicprincipleistoconsideroperationalriskswithrespecttotheirlikelihoodandtheimpacttheywouldcreateintheeventtheyoccurred,andtotakenecessarycountermeasures.

Whenmanagingoperationalrisk,controlsaredesignedtoeliminateormitigatetheriskofsustaininglossduetotheriskexposureoftheactivities.RiskManagementandInternalControlDepartmentmonitors,andreportson,theefficiencyandadequacyofthecontrols,aswellastheenforcementoftheactionplansadopted.

Auditing of Risk Management System and Processes

The risk management system and processes are audited by the Company’s Board of Internal Audit. The Board of Directorsdeterminestheprinciplesrelatingtoexecutionofactionplansfortheconductoftheaudit,thereportingofauditresults,andremedyoferrorsandirregularitiesidentifiedintheaudits.

TheCompany’sriskmanagementandassessmentprocessconsistsofprovidinginformationtotheBoardofDirectorsontopicssuchas:

• AdequacyoftheCompany’sriskmanagementsystemandprocesses,

• Compliancewithlimits,

• Accuracyandqualityofthedatausedintheriskmanagementprocess,

• Accuracyandqualityoflimitviolationreports,

• Compliancewiththepolicyandimplementationprocedures.

Theprocessalsoincludeslayingdownproposalsregardingthepossiblemeasuresthatcanbeadopted,aswellasreportingstages.

Risk Management Policies and an Assessment by the Board of Directors ...continued

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Information on General Meeting

• OrdinaryGeneralMeetingAgenda• 2012ProfitDistributionTable• 2013ProfitDistributionProposal

Contents

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Ordinary General Meeting Agenda

2013 ORDINARY GENERAL MEETING OF SHAREHOLDERS

24 MARCH 2014, MONDAY, İŞ KULELERİ KULE 1 KAT: 41 LEVENT 34330 BEŞİKTAŞ/İSTANBUL, 10:00 HOURS

AGENDA:

1. Opening,electingaPresidingBoard,andauthorizingthePresidingBoardtosigntheminutesoftheOrdinaryGeneralMeeting

2. PresentationanddiscussionontheBoardofDirectors’2013ActivityReport,andpresentationoftheStatutoryAuditors’reportfor2013

3. Presentation,discussionandapprovalofthefinancialstatementsfor2013

4. IndividualacquittaloftheCompany’sDirectors

5. ApprovaloftheamendedDividendPaymentPolicy

6. Decisionondistributionofprofits

7. ElectionofthemembersoftheBoardofDirectorsanddeterminationoftheirtermsofoffice

8. AuthorizingtheBoardDirectorstocarryoutthetransactionssetoutinArticles395and396oftheTurkishCommercialCode

9. DeterminationoftheremunerationofBoardDirectors

10. Designationoftheindependentauditfirm

11. Presentationofinformationongrantsanddonationsmadeduringthereportingperiod

12. Approvalofthelimitforthedonationsandgrantsintendedtobemadeduring2014.

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Anadolu Hayat Emeklilik Anonim ŞirketiDraft Amendment to the Dividend Payment Policy

Former Version of the Dividend Payment Policy New Version of the Dividend Payment PolicyIntheCompany’sArticlesofAssociation,ithasbeenespousedasaprincipletodistributefirstdividendsintheratioandamountdeterminedbytheCapitalMarketsBoardoutofthedistributableprofit.

DividenddistributionproposalslaiddownbyourBoardofDirectorsfortheapprovaloftheGeneralAssemblyarepreparedbasedonadividendpaymentpolicywhich;

a)avoidsdisturbingthedelicatebalancebetweentheshareholders’expectationsandtheCompany’sneedtogrow,

b)takestheCompany’sprofitabilityintoaccount.

TheBoardofDirectorshasadoptedadividendpaymentpolicythatisbasedonproposingtotheGeneralAssemblyofShareholdersthatatleast30%ofnetdistributableprofitbepaidoutinbonussharesorincash.

Nosharesenjoyanyprivilegesintermsofgettingasharefromprofit.

Therearenofounder’ssharesnorisitaCompanypracticetopaydividendstothemembersoftheBoardofDirectors.

PursuanttoourArticlesofAssociation,employeesarepaiddividendsuptothreetimesoftheirmonthlysalariesfromnomorethan3%oftheamountthatremainsafterfirstdividendsaresetaside.

Dividendpayoutsaremadewithinthelegallyprescribedperiodsoftime.

TheArticlesofAssociationcontainnoprovisionsstipulatingpayingadvancesondividends.

DividenddistributionprinciplesapplicabletotheCompany’sshareholdersandotherpersonsparticipatingintheprofitaregovernedbytheprovisionscontainedintheTurkishCommercialCode,theCapitalMarketlegislation,andotherlegislationtheCompanyissubjectto,aswellastherelevantarrangementsintheCompany’sArticlesofIncorporation.

ThedividenddistributionproposalssubmittedbytheCompany’sBoardofDirectorsforapprovalbytheGeneralAssemblyarepreparedsoastomaintainthedelicatebalancebetweentheshareholders’expectationsandtheCompany’sneedtogrow,takingintoaccounttheCompany’sforecastsaboutoperations,capitaladequacytargets,andtheconditionsprevailinginthecapitalmarkets,aswellastheCompany’sprofitability.

ThedividenddistributionpolicyespousedbytheBoardofDirectorsisbasedontheprincipleofproposingattheGeneralAssemblytodistributeatleast30%ofthenetdistributableprofitfortheperiodcalculatedaccordingtothelegalaccounts,inbonussharesand/orincash.

Nosharesenjoyanyprivilegesintermsofgettingasharefromprofit.

Therearenofounder’ssharesnorisitaCompanypracticetopaydividendstothemembersoftheBoardofDirectors.

PursuanttoourArticlesofIncorporation,employeesarepaiddividendsuptothreetimesoftheirmonthlysalariesfromnomorethan3%oftheamountthatremainsafterfirstdividendsaresetaside.

CashdividendpayoutismadebynolaterthantheendofthesecondmonthfollowingthedateoftheGeneralAssemblymeetinginwhichtheprofitdistributiondecisionispassed.Dividendpayoutintheformofdematerializedsharesisrealizedfollowinglegalpermissions.

AdvancesondividendsmaybedistributedprovidedthattheprinciplesandproceduressetoutintheCapitalMarketlegislationareadheredto.

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2012 Profit Distribution Table

1-2- 

Paid-in/IssuedCapitalTotalLegalReserves(accordingtolegalrecords)IfthereareprivilegesfordistributionofprofitsaccordingtotheArticlesofIncorporation,informationonsuchprivileges

  

 

300,000,00065,516,677

THEREARENOPRIVILEGESFORDISTRIBUTIONOFPROFITS

    Based on CMB(Consolidated)

Based on Legal Records (Unconsolidated)

3- ProfitforthePeriod(*) 109,052,075 107,675,4864- TaxesPayable(-) -26,100,000 -26,100,0005- NetProfitforthePeriod(=) 82,952,075 81,575,4866- LossesinPriorYears(-) - -7- FirstLegalReserves(-) 4,078,774 4,078,7748- NETDISTRIBUTABLEPROFITFORTHEPERIOD(=) 78,873,301 77,496,7129- DonationsduringtheYear(+) 72,603  10- NetDistributableProfitforthePeriodIncludingDonations,

BasedonWhichFirstDividendwillbeComputed 78,945,904  11- FirstDividendtoShareholders 78,945,904    -Cash 15,789,181    -BonusShares -    -Total 15,789,181  12- DividendsDistributedtoOwnersofPrivilegedShares -  13- DividendsDistributedtoBoardMembers,Employees,etc. 1,892,524  14- DividendsDistributedtoOwnersofRedeemedShares -  15- SecondDividendtoShareholders 24,210,819  16- SecondLegalReserves 2,689,252  17- StatutoryReserves 6,119,160 6,119,16018- SpecialReserves - -19- EXTRAORDINARYRESERVES(**) 28,172,365 26,795,77620- OtherResourcestobeDistributed      -PreviousYearProfit      -ExtraordinaryReserves      -OtherDistributableReservesaspertheLawandArticles

ofIncorporation    

INFORMATION ON DIVIDEND RATIOINFORMATION ON EARNINGS PER SHARE 

GROUP TOTAL DIVIDENDS (¨)DIVIDENDS PER SHARES WITH NOMINAL VALUE OF ¨1 EACH

AMOUNT (¨) RATE (%)GROSS A 133,333.33 0.133333 13.3333

B 39,866,666.67 0.133333 13.3333TOTAL 40,000,000.00

   NET(***) A 113,333.33 0.113333 11.3333

B 33,886,666.67 0.113333 11.3333TOTAL 34,000,000.00

RATIO OF DIVIDENDS DISTRIBUTED TO NET DISTRIBUTABLE PERIOD PROFIT INCLUDING DONATIONS

CASH DIVIDENDS DISTRIBUTED TO SHAREHOLDERS (¨)RATIO OF DIVIDENDS DISTRIBUTED TO SHAREHOLDERS TO NET

DISTRIBUTABLE PERIOD PROFIT INCLUDING DONATIONS (%)40,000,000 50.67

(*)PursuanttotherequirementsetoutintheWeeklyBulletin2010/4oftheCapitalMarketsBoard,profitdistributionhasbeenbasedontheconsolidatedprofitfigure.Provisionfordividendstobepaidtothepersonnelintheamountof ¨2,000,000setasideaspertheTurkishAccountingStandardshasbeenaddedtotheprofitfortheperiodended31 December2012.(**)Asaresultofprofitdistribution,¨26,795,776willbetakenintoaccountasextraordinaryreserves,whichamountiscalculatedbasedonlegalrecords.(***)15%incometaxdeduction,whichisapplicableforfull-fledgedtaxpayerenterprisesforcashdividendpayouts,willnotbeapplied.

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2013 Profit Distribution Proposal

ANADOLU HAYAT EMEKLİLİK A.Ş. 2013 PROFIT DISTRIBUTION PROPOSAL TABLE (¨)1-2-

Paid-in/IssuedCapitalTotalLegalReserves(accordingtolegalrecords)If there are privileges for distribution of profits according to the Articles of Incorporation, information on such privileges

350,000,00072,284,703

THERE ARE NO PRIVILEGES FOR DISTRIBUTION OF

PROFITS 

 Based on CMB

(Consolidated)Based on Legal Records

(Unconsolidated)3- ProfitforthePeriod(*) 102,015,935 100,476,5914- TaxesPayable(-) -15,310,000 -15,310,0005- NetProfitforthePeriod(=) 86,705,935 85,166,5916- LossesinPriorYears(-) - -7- GeneralLegalReserves(-) 4,258,330 4,258,3308- NETDISTRIBUTABLEPROFITFORTHEPERIOD(=) 82,447,605 80,908,2619- DonationsduringtheYear(+) 36,595 10- NetDistributableProfitforthePeriodIncludingDonations 82,484,200 11- FirstDividendtoShareholders   -Cash 16,496,840   -BonusShares -   -Total 16,496,840 12- DividendsDistributedtoOwnersofPrivilegedShares - 13- OtherDistributedDividends 1,978,523

-ToBoardMembers -ToEmployees 1,978,523 -ToPeopleOtpherthanShareholders -

14- DividendsDistributedtoOwnersofRedeemedShares - 15- SecondDividendtoShareholders 33,503,160 16- GeneralLegalReserves 3,447,852 17- StatutoryReserves 6,397,224 6,397,22418- SpecialReserves - -19- EXTRAORDINARYRESERVES(**) 20,624,006 19,084,66220- OtherResourcestobeDistributed - -

INFORMATION ON DIVIDEND RATIODIVIDEND RATIOS TABLE  

GROUPTOTAL DIVIDENDS

DISTRIBUTED

TOTAL DIVIDENDS DISTRIBUTED /

NET DISTRIBUTABLE PROFIT FOR THE PERIOD

DIVIDENDS PER SHARES WITH NOMINAL VALUE OF ¨1 EACH

CASH (¨) BONUS (¨) RATE (%) AMOUNT (¨) RATE (%)NET(***) A 121,428.57 - 0.15 0.1214286 12.14286

B 42,378,571.43 - 51.40 0.1214286 12.14286TOTAL 42,500,000.00 - 51.55 - -

(*)PursuanttotheDividendGuideissuedbytheCapitalMarketsBoardin January2014,dividenddistributionhasbeenbasedontheconsolidatedprofitfigure.Provisionfordividendstopersonnelintheamountof¨2,000,000,whichhasbeensetasideasperTAS19,wasaddedtotheprofitfortheperiodasat31 December2013.(**)Asaresultofprofitdistribution,¨19,084,662willbetakenintoaccountasextraordinaryreserves,whichamountiscalculatedaccordingtolegalrecords.(***)15%incometaxdeduction,whichisapplicableforfull-fledgedtaxpayerenterprisesforcashdividendpayouts,willnotbeapplied.

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Corporate Governance Principles Compliance Report

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Corporate Governance Principles Compliance Report

1. STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

OurCompanybelievesthatcompliancewithcorporategovernanceprinciplesisatleastasimportantasitsfinancialperformanceandthatsuchcomplianceisofgreatbenefitfromthestandpointsbothofthedevelopmentofnationalandinternationalcapitalmarketsandoftheadvancementofourowncompany’sinterests.

OurCompanyimplementsthecompulsoryprinciplesasspecifiedintheCommuniquéSerial:IVNo.56ontheDeterminationandImplementationofCorporateGovernancePrinciples.

Ourarticlesofincorporationdonotcontainanyprovisionsstipulating:

• Exerciseoftherequestforappointmentofaspecialauditorasanindividualright,

• Distributionofadvancesondividends,

• ParticipationofstakeholdersinthemanagementoftheCompany,

• Expansionofthescopeofminorityrightsbeyondtheprovisionsofapplicablelegislation

• AdoptionofresolutionsconcerningdemergerorshareexchangethatwouldresultinachangeintheCompany’scapital,managementstructureanditsassets,buying/selling,lettingorrentingtangible/intangibleassetsormakingdonationsorgrantsinsubstantialamounts,andprovidingguaranteesuchassuretyshipormortgageinfavorofthirdparties.

Furthermore,minorityrightsarenotrepresentedonourBoardofDirectors.

Therehaveneverbeenanyconflictsofinterestamongstakeholdersoverthelimitednumberofprinciplesthathavesofarnotbeenimplemented.

AttheOrdinaryGeneralAssemblymeetingheldon26 March2013,theCompany’sArticlesofIncorporationhavebeenamended;thesemodificationsarecontainedintheCompany’sAnnualReportunderaseparateheading,“ChangesintheArticlesofIncorporationduringtheReportingPeriod”,aspertheCorporateGovernanceCommuniquéandapplicablelegislation.ModificationstothesaidarticleswereregisteredintheTurkishTradeRegistryGazetteissue8305dated22 April2013.

AdeterminationandassessmentofthelevelofourCompany’scompliancewithCorporateGovernancePrinciplesandopinionsconcerningthefurtheranceofthelevelofcomplianceintermsofscopeandnaturearepresentedbelow.

PART I - SHAREHOLDERS

2. SHAREHOLDER RELATIONS UNIT

AllshareholdersaretreatedequallyattheCompany.TheShareholderRelationsUnithasbeensetupin2004.

Theemployeesassignedtothisunitandtheircontactinformationarepresentedbelow:Name Telephone E-mailOğuzHalukSolak +902123177006 investorrelations@anadoluhayat.com.trN.CemÖzcan +902123177104 investorrelations@anadoluhayat.com.trAlperEşsizoğlu* +902123177106 investorrelations@anadoluhayat.com.tr

*Mr. AlperEşsizoğlunolongerservesintheInvestorRelationsUnitasof09 October2013duetoareorganizationintheCompany.

TheheadoftheunitisOğuzHalukSolak,whoreportsdirectlytotheheadoftheCorporateGovernanceCommittee.

Thisunitplaysanactivepartintheprotectionofshareholdingrightsandfacilitatestheirexercise,mainlyregardingtherighttoobtainandreviewinformation,andestablishesthecommunicationbetweentheBoardofDirectorsandshareholders.

Effortsareunderwaytofacilitatethereportingoftheunit’sactivitiestotheBoardofDirectors.

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Inessence,theShareholderRelationsUnitworkstofulfillthefollowingfunctions:

• Ensurethatrecordspertainingtoshareholdersaremaintainedinareliable,secure,andup-to-datemanner.

• Respondtoshareholders’andpotentialinvestors’writtenrequestsforCompany-relatedinformationapartfromthosethatarenotpubliclydisclosed,areofaconfidentialand/ortradesecretnature.

• MakeavailabletotheshareholderssuchinformationanddisclosuresthatmayhaveaneffectontheexerciseofshareholdingrightsontheCompanywebsiteinanup-to-datemanner.

• EnsurethatGeneralAssembliesofShareholdersareconductedinaccordancewiththerequirementsofcurrentlegislation,theCompany’sarticlesofincorporationandotherinternalregulations.

• PreparedocumentsfortheuseofshareholdersatGeneralAssemblymeetings.

• MakesurethattheresultsofvotingatGeneralAssembliesarerecordedandthatreportsontheseresultsaresenttoshareholders.

• OverseeandmonitoranymatterrelatedtopublicdisclosuresasrequiredbythelegislationandtheCompany’sPublicDisclosurePolicy.

• EnsurerepresentationofourCompanyininvestorrelationsmeetingsorganizedinTurkeyorabroadbyinternationalestablishments.

In2013,allverbalinformationrequestsreceivedfromresearchersandourinvestorsinrelationtoourCompanyand/orpubliclydisclosedfinancialstatementresultswereanswered.Requestsformeetingsreceivedduringthereportingperiodfromnationalandinternationalinvestmentcompanieswereacceptedandnecessaryinformationwasprovided.Intotal,162investormeetingsandfourteleconferenceswereheldin2013.Inthesemeetings,presentationsweremadeonoursectorandourCompany,andtheinvestors’questionswereanswered.

3. SHAREHOLDERS’ EXERCISE OF THEIR RIGHT TO OBTAIN INFORMATION

Allinformationrequestedbyshareholdersisprovidedexceptthatwhichisinthenatureofatradesecretorhasnotbeenpubliclydisclosed.

Shareholders’requestsforinformationarehandledbytheShareholderRelationsUnitemployeesandrespondedtowithintheframeworkofthedisclosurepolicy.

RequestsinrelationtokeepingtheshareholdersinformedareattimespersonallyfulfilledbytheCompany’sBoardofDirectorsandstatutoryauditors.

InformationonthetopicsourshareholdersfrequentlyneedanddevelopmentsthatmightaffecttheexerciseoftheirrightsaimedatexpandingtheirrighttoinformationarepostedontheCompanywebsiteaccessibleatwww.anadoluhayat.com.tr.

Itisbelievedthatallinformationnecessaryforhealthyexerciseofshareholders’rightsismadeavailabletoourshareholdersonourwebsite,inourannualreportandmaterialeventdisclosuresatagenerallevel,andthroughindividualqueries,atanindividuallevel.

GiventhattheGeneralAssemblymusthonortherequestforappointmentofaspecialauditorpursuanttoapplicablelegislationandthatsuchrequestconstitutesoneoftheexceptionstotheprincipleofadherencetoagenda,therequestfortheappointmentofaspecialauditorhasbeenstipulatedunderthearticlesofincorporation,basedontheconcernthatproblemsmightariseinpracticewithregardtoprotectionoftheconfidentialityoftradesecretsorundisclosedinformation.PursuanttoArticle438oftheTurkishCommercialCode,therighttorequestappointmentofaspecialauditorisreservedforeveryshareholder,providedthatsuchshareholdermeetsthecriteriaspecifiedunderthelaw.

In2013,ourShareholdersdidnotrequestappointmentofaspecialauditorfromtheGeneralAssemblyofShareholders.

Shareholders’requestsforinformationaboutthelegaland/orcommercialrelationshipsbetweentheCompanyandrealpersonsand/orlegalentitieswithwhichtheCompanyisdirectlyorindirectlyrelatedintermsofmanagementorcontrolarerespondedto,totheextentallowedbythelegislation.

Corporate Governance Principles Compliance Report ...continued

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4. GENERAL ASSEMBLY MEETINGS

OurCompany’sOrdinaryGeneralAssemblyMeetingfor2012washeldon26 March2013attheCompanyheadquarters.Shareholderscontrolling¨275millionworthofsharescorrespondingto92%ofourCompany’s¨300millionpaid-incapitaltookpartinthisassembly.

WhiletheCompany’sBoardDirectors,statutoryauditors,otherrelevantindividuals,officialsresponsiblefordrawingupthefinancialstatements,twoofficialsfromtheIndependentAuditFirmauditingthefinancialstatementsoftheCompanyandsomeCompanyemployeesparticipatedinthemeeting,otherstakeholdersormediarepresentativesdidnotattendthemeeting.

Announcementsummoningthemeeting,whichcoveredtheinformationbelow,waspublishedthreeweeksbeforethemeetingdateintheTurkishTradeRegistryGazette,thenewspapersDünyaandAkşam,andwaspostedonthewebsiteattheaddresswww.anadoluhayat.com.tr,ontheElectronicGeneralMeetingSystem(e-GEM)undertheCentralRegistryAgencyandonthePublicDisclosurePlatform(inTurkish:KAP)underBorsaİstanbul(BIST).

CareistakenthatGeneralAssemblyannouncementscover:

• Themeetingdateandhour,

• Themeetingplace,

• Agenda,

• Necessaryinformationabouttheagendaitems,

• Specimenproxystatements,

• Formerandcurrentversionsoftheamendedarticle(s)asapprovedbytherelatedauthorities,iftheagendacoversanyamendmentstothearticlesofincorporation,

• Thebodysummoningtheassembly,

• IfanotherGeneralAssemblyofshareholdersisbeingreconvenedbecauseapreviousonewaspostponedforanyreason,thereasonforthepostponementandthequorumthatwillberequiredatthenewassembly,

• Inordinarymeetingannouncements,theaddressatwhichtheannualreport,financialstatements,andotherdocumentspertinenttotheGeneralAssemblycanbeexamined.

Asofthedateonwhichtheannouncementoftheinvitationtoageneralassemblyofshareholdersismade,copiesoftheannualreport,financialstatementsandreports,theagenda,otherdocumentspertainingtotheitemsontheagenda,thecurrenttextofthearticlesofincorporation,andifthearticlesofincorporationaretobeamended,thetextsandjustificationsoftheamendmentsareallmadeavailablefortheinspectionofshareholdersattheCompany’sheadquartersandbranches.

AttheOrdinaryGeneralAssemblyMeetingheldon26 March2013,shareholdersagreedbymajorityofvotesto:

• formthepresidingboard,

• foregoreadingouttheannualreportonthegroundsthatithadpreviouslybeenmadeavailableforshareholders’review,

• readouttheCompany’sStatutoryAuditors’Reportandthe“opinion”sectionoftheIndependentAuditor’sReport,

• readoutanddiscussthefinancialstatementsinoutline,

• individuallyacquittheCompany’sBoarddirectorsandstatutoryauditorsinrelationtotheCompany’sactivitiesandoperationsin2011,

• accepttheBoardofDirectors’proposalconcerningthedistributionofprofitsascoveredintheAnnualReport,

• approvethechangesintheseatsoftheBoardofDirectorsthatoccurredduringthereportingperiod,

• ratifytheamendmentstoarticles1,3,4,6,7,8,9,10,11,12,13,14,15,16,18,19,20,21,22,23,24,25,26,27,28,29,30,31,32,33,34,35,36,38andprovisionalarticle1oftheCompany’sArticlesofIncorporation,

• electionoftheBoardDirectors,

• designationoftheindependentauditfirm,• approvethemotionssubmittedfordeterminationoftheremunerationstobepaidtotheCompany’sDirectors,

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• allowtheBoardDirectorstoperformthetransactionssetoutinArticles395and396oftheTurkishCommercialCode,

• approvetheInternalGuidelinesfortheOperatingPrinciplesandProceduresoftheGeneralAssemblyofShareholderspreparedbytheBoardofDirectors,

• ratifythelimitforthedonationsintendedtobemadeduring2013.

Informationhasbeenprovidedaboutthechangesinthestatutoryauditorduringthereportingperiod.

DuringtheGeneralAssembly,noneofourshareholdersexercisedtheirrighttoposequestions.

Noagendaitemshavebeenproposedbyourshareholdersduringthemeeting.

Underaseparateagendaitem,ourshareholdershavebeeninformedthattheCompany’sdonationsin2012totaled¨72,603.TheCompany’sdonationsandgrantsinaidarehandledundertheDonationsGuidelinesapprovedbytheBoardofDirectorsin2006.IfanyrevisionsaremadetotheDonationsGuidelinescurrentlyinforce,thesameshallbelaiddownattheGeneralAssemblyforapproval.

Pursuanttolegislation,electronicgeneralmeetingsystemhasbeenintroducedstartingwiththeGeneralAssemblymeetingfor2012.TheCompany’sarticlesofincorporationcontainnoprovisionsstipulatingthatourGeneralAssemblyMeetingsmustbeheldopentothepublic,includingstakeholdersandthemedia.

MinutesoftheGeneralAssemblymeetingsinwrittenformaremadeavailableforelectronicaccessatourwebsiteatwww.anadoluhayat.com.tr.

Maximumattentionispaidtoachievefullcompliancewiththerequirementsoflawsoastofacilitateparticipationingeneralassemblymeetings.ItisbelievedthatCompanyshareholdersencounternodifficultiesinparticipatinginGeneralAssembliesandtodate,nocomplaintonthisissuehaseverbeenreceivedfromashareholder.

AllinformationanddocumentspertinenttotheGeneralAssemblyarealsoaccessibleontheCompanywebsiteattheaddresswww.anadoluhayat.com.tr.ThewebsitecoverstotalnumberofsharesreflectingtheCompany’sshareholdingstructureandrelevantvotingrights,numberofsharesrepresentingthepreferentialclassofsharesandrelevantvotingrights,groundsfordismissalandsubstitutionofBoardDirectorsiftheGeneralAssemblymeetingagendaincludessuchdismissal,substitutionorelectionasanitem,informationonindividualsthatwillbenominatedtotheBoardofDirectors,requestsbyshareholders,CapitalMarketsBoard(CMB)and/oranypublicauthorityoragencythatgovernstheCompanyfortheinclusionofitemsontheagenda,therelevantBoardofDirectorsdecisioniftheagendacoversrevisionstothearticlesofincorporation,aswellastheformerandrevisedversionsthereof.

During2013,theshareholderspossessingmanagementcontrol,BoardDirectors,seniorexecutives,andtheirspousesandrelativesbybloodormarriageuptotheseconddegreedidnotengageinanytransactionwhichmightleadtoaconflictofinterestwiththeCompanyoritssubsidiaries.

During2013,notransactionofmaterialnatureasperthelegislationtookplacesuchastheCompany’sassignmentof,orcreationofrealrightson,orlettingallorsubstantialpartofitsassets;takingoverorrentingamaterialasset,stipulationofprivilegesorchangingthescopeorsubjectmatterofexistingprivileges;ordelisting.UnlessaGeneralAssemblydecisionisrequiredforsuchtransactions,approvalofthemajorityofindependentBoardDirectorsissoughtfortheexecutionofBoardofDirectorsdecisionspertainingtosuchtransactions.IntheabsenceoftheapprovalofthemajorityofindependentBoardDirectorsinmaterialtransactionsandifitisdesiredtoexecutethesaidtransactionsdespiteoppositionbymajorityofindependentBoardDirectors,thetransactionshallbelaiddownattheGeneralAssemblymeetingforapproval.Insuchacase,essentiallythegroundsfortheoppositionofindependentBoardDirectorsshouldbepubliclydisclosed,notifiedtotheCMBandreadoutintheGeneralAssemblymeetingtobeheld.Ifpartiestothetransactionofmaterialnaturearerelatedparties,thenrelatedpartiesmaynotvoteinGeneralAssemblymeetings.WhentheGeneralAssemblyadoptsresolutionsontransactionsofmaterialnature,provisionsofArticle29/6oftheCapitalMarketLawwillapply.

Accordingtolegislation,theBoardofDirectorsisauthorizedtopassdecisionsofmaterialnaturesaveforthoseforwhichtheGeneralAssemblyisauthorized.

MinutesoftheGeneralAssemblymeetingaredeliveredtotheshareholdersuponconclusionofthemeeting,andaremadeavailableforelectronicaccessatourwebsiteatwww.anadoluhayat.com.tr,inordertokeepnon-participatingshareholdersinformed.

Corporate Governance Principles Compliance Report ...continued

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Changesinmanagementororganizationalactivitiesthattookplaceinthepriorfiscalyearorareplannedinthefuture,ifany,arepresentedfortheinformationofshareholderstogetherwiththegroundsforsuchchanges,beforetheGeneralAssemblyMeeting.

Inthisframework,thefollowingaremadeavailablefortheexaminationofshareholdersattheGeneralAssemblyMeetings:

• ExplanationsconcerningchangesintheCompany’sorganizationalstructureandtheirjustifications

• Therelevantreportonthematterbytheconsultantcompany,ifoneishired;otherwiseinformationanddocumentsonthesubjectpreparedbytheCompany

• Ifthereareorganizationalchangesinsubsidiariesoraffiliates,theannualreports,andfull-yearfinancialreportsforthemostrecenttwofiscalyearsofallthecompaniesaffectedbytheorganizationalchanges.

Whenpreparingagendasforgeneralmeeting,careistakentopresentingeachitemtobevotedonunderaseparateheading;tomaketheheadingsasclearandexplicitaspossiblesoasnottobeinterpretedinanyotherway;torefrainfromincludingsuchlegallyprohibiteditemsas“Other”or“Miscellaneous”.

Specimenproxystatementsforshareholdersthatwishtohavethemselvesrepresentedatmeetingsarepublishedalongwithassemblyannouncementsandarealsomadeavailablefortheuseofshareholdersinelectronicformat.

TheprinciplesandproceduresthatgovernvotingattheCompany’sGeneralAssembliesofshareholdersarepresentedbelowinmainoutline.

• Eachshareofstockisentitledtoonevote.

• Ifashareofstockhasmorethanoneowner,suchvotesmaybecastonlybyaproxyrepresentingthemall.

• ShareholdersmayberepresentedattheGeneralAssembliesbyaproxytobenominatedfromamongstshareholdersornon-shareholders

• ProxieswhoareshareholdersintheCompanyareauthorizedtocastvotesfortheshareholderstheyrepresent,inadditiontotheirownvotes.

• TheformatoftheproxyformshallbedeterminedbytheBoardofDirectorssubjecttotherequirementsoftheCapitalMarketsBoard.Theproxyformmustbeinwriting.Theproxyshallbeobligedtocastthevoteinlinewiththeassignor’swish,providedthattheshareholderassigningtheauthorityhasspecifiedthesameintheauthorizationcertificate.

• VotingatGeneralAssemblymeetingsisbyanopenshowofhands.However,upondemandbyparticipatingShareholdersrepresentingonetenthofthecapital,secretvotingwillbecarriedout.

ComplianceisachievedwiththeCapitalMarketsBoardrequirementswithrespecttovotingatGeneralAssemblymeetings.

Theprinciplesandproceduresthatgovernvotingatgeneralassembliesofshareholdersarealsoreadoutatthebeginningoftheassembly.

IssuesthatshareholdershavetoldtheShareholderRelationsUnittheywishtohaveincludedonassemblyagendasaregivenconsiderationbytheBoardofDirectorswhenitpreparesanassembly’sagenda.

Pursuanttotheapplicablelegislationandtothearticlesofincorporation,ordinaryGeneralAssemblymeetingsmustbeheldwithinthreemonthsfollowingtheendofeachfiscalyear.

Inlinewithourarticlesofincorporation,GeneralAssembliesareheldintheplacewhereourCompanyheadquartersislocatedandatavenuethatwillenableparticipationbyallourShareholders.

NewsandanalysespertainingtodisputedissuesappearinginthemediaconcerningtheCompanyarepresentedfortheinformationofshareholdersatgeneralassemblies.

QuestionsthatshareholdersaskoftheBoardofDirectorsarerespondedtoprovidedthattheanswersarepertinenttotheexerciseofshareholderrightsanddonotfallwithinthescopeoftradesecrets.

ThepresidentofaGeneralAssemblyofShareholdersconductstheassemblyeffectivelyinsuchawayastoensurethatshareholdersareabletoexercisetheirrights.

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CareistakentoanswereveryquestionraisedduringtheGeneralAssemblybytheshareholdersduringthesamemeeting,andtoprovidewrittenanswersfromtheShareholderRelationsUnitwithinnomorethanthirtybusinessdays,incasethequestionraisedisnotrelevanttotheagendaoristoocomprehensivetobeansweredpromptly.

Directors,authorizedemployeesresponsibleforthepreparationoffinancialstatements,andofficialsfromtheIndependentAuditFirmandotherrelevantpeopletoofferexplanationsontheagendatopicsthatareofspecialtypaysattentiontobepresentinthemeetingtotheextentpossible.

EachitemontheagendaofaGeneralAssemblyofShareholdersisvotedonindividually.Toforestallanydoubtsabouttheresultsofvoting,votesarecountedandtheresultsofthevotingareannouncedtoallshareholdersbeforetheassemblyisadjourned.

5. VOTING RIGHTS AND MINORITY RIGHTS

Accordingtoourarticlesofincorporation,eachshareofstockisentitledtoonevote.

OurCompany’scapitalisdividedintoClassAandClassBshares.

Asof31 December2013,ourCompany’sissuedcapitalamountsto¨350millionconsistingof100,000,000ClassAsharesworthatotalof¨1millionand34,900,000,000ClassBregisteredsharesworthatotalof¨349million.

Asrequiredbyourarticlesofincorporation,sevenofthemembersoftheBoardofDirectorsareelectedfromamongnomineesdesignatedbyClassAshareholdersandfourfromamongnomineesdesignatedbyClassBshareholders.

ClassAshareshavenoprivilegesotherthanthenominationprivilegementionedabove.NewClassAsharesarenotissuedwhensharecapitalincreasestakeplace.

Noshareholderisinvolvedinacross-shareholdingrelationshipwiththeCompany.

TheCompanypaysmaximumattentiontoensureexerciseofminorityrightsgrantedundertheTurkishCommercialCodeandtheCapitalMarketLaw,andnostipulationswereincorporatedinourarticlesofincorporationduetothefactthatthelegalprovisionsgoverningthismatterhavebeenexpanded.

MinorityshareholdinginterestsarenotrepresentedontheBoardofDirectors,whichisformedatthediscretionofourGeneralAssembly.

Thearticlesofincorporationcontainnoprovisionsgoverningthecumulativevotingmethod.

ThereisnoupperlimitonthenumberofvotesashareholdermaycastataGeneralAssembly.

Votingrightsareacquiredthemomentthesharesonwhichtheyarecontingentareacquired.Therearenorulesstipulatingthatvotingrightsmaybeexercisedonlyafteraspecificperiodoftimehaspassedaftersharesareacquired.

Ourarticlesofincorporationcontainnoprovisionspreventingnon-shareholdersfromvotinginproxy.

ShareholdersmayexercisetheirvotingrightspersonallyatGeneralAssembliesandmaydosothroughanyotherpartyirrespectiveoftheshareholderstatusofthatparty.

Anon-corporateshareholdermayonlyberepresentedbyasingleproxyataGeneralAssembly.Ifacorporateshareholderisrepresentedbymorethanoneindividualatanassembly,onlyoneofthemmaycastvotes.Theproxystatementmustidentifytheindividualwhoisauthorizedtocastvotes.

6. ENTITLEMENT TO DIVIDENDS

AdoptedbytheBoardofDirectorson10 March2006andannouncedontheİstanbulStockExchangeonthesamedate,theCompany’sDividendDistributionPolicywasincorporatedintheagendaofthe2005AnnualGeneralAssemblyMeetingheldon27 March2006.Publishedinannualreportsandonthecorporatewebsite,thedividenddistributionpolicyispresentedbelow.

AnadoluHayatEmeklilikA.Ş.DividendDistributionPolicy

TheCompany’sarticlesofincorporationsetsforthitasaprincipletodistributefirstdividendsoutofthedistributableprofitintheratioandamountdeterminedbytheCapitalMarketsBoard.

ThedividendpaymentproposalsthattheBoardofDirectorssubmitstothegeneralassemblyofshareholdersarepreparedaccordingtoapolicythat;

a)avoidsdisturbingthedelicatebalancebetweenshareholders’expectationsandtheCompany’sneedtogrow,and

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b)takestheCompany’sprofitabilityintoaccount.

TheBoardofDirectorshasadoptedadividendpaymentpolicythatisbasedonproposingtothegeneralassemblyofshareholdersthatatleast30%ofnetincomesubjecttoprofitbepaidoutasfreesharesofstockorincash.

TherearenopreferredstocksintheCompany’sprofitdistribution.

Therearenofounder’ssharesnorisitacompanypracticetogivesharesofprofitstoMembersoftheBoardofDirectors.

Asrequiredbyourarticlesofincorporation,amaximumof3%ofthetotalamountremainingafterthefirstdividendhasbeensetasideispaidouttoouremployeesastheirshareoftheprofits,subjecttoacapofthreemonthlysalaries.

TheCompany’sdividendsarepaidwithinthelegallyprescribedperiodsoftime.

AdvancesondividendscanbepaidoutprovidedthattheprinciplesandproceduressetoutintheCapitalMarketlegislationareadheredto.

TherearenosignificantdonationsorgrantsinaidthattheCompanymadeduringtheyearorhadplannedtomakeasofyear-end.

TotalcashdividendsdistributedbytheCompanyin2013amountedto¨40million.

7. TRANSFER OF SHARES

Inourarticlesofincorporationtherearenoclausesthatrestricttransferofshares.

Allshareholders,includingminorityshareholdinginterestsandforeignnationalsaretreatedequally.

PART II – PUBLIC DISCLOSURE AND TRANSPARENCY

8. DISCLOSURE POLICY

TheCompanydisclosurepolicy,whichisapprovedbytheBoardofDirectors,ispostedonthecorporatewebsite.Incaseofanychangesinthedisclosurepolicy,thepointssubjecttochangeandthereasonsthereforarepubliclydisclosedviathePublicDisclosurePlatformuponapprovaloftheBoardofDirectors.Themainheadingsofthedisclosurepolicyarepresentedbelow:

• Generalframework

• Authorityandresponsibility

• Publicdisclosureworkandthemethodsandtoolsused

• Otherannouncementsmade

• Designationofindividualswithadministrativeresponsibility

• Corporatewebsite

InourCompany,theBoardofDirectorsisauthorizedandresponsibleformonitoring,overseeingandimprovingthepublicdisclosurepolicy.

ThedisclosurefunctioniscoordinatedbytheemployeesinthesaidunitinclosecooperationwiththeBoardofDirectorsandthemanagersresponsibleforfinancialmanagementandreporting.

Thedisclosurepolicycoversprinciplesregardingpublicdisclosureofforward-lookinginformation.

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9. COMPANY INTERNET SITE AND ITS CONTENT

TheCompanyhasaninternetsitepreparedinTurkishandEnglishlanguages,accessibleattheaddresswww.anadoluhayat.com.tr.TheCompanywebsiteisactivelyusedinprovidinginformationandpublicdisclosure.

TheCompanywebsitefeaturestheinformationanddatastipulatedbytheCorporateGovernancePrinciplesandregulatoryauthorities.Inadditiontotheinformationthataremandatorytobedisclosedasperthelegislation,thewebsitecoverstraderegistrydata,mostrecentshareholdingandmanagementstructure,detailedinformationonpreferentialshares,themostrecentversionofarticlesofincorporationandthedatesandnumbersofTradeRegistryGazettesinwhichthechangesarepromulgated,materialeventdisclosures,financialreports,annualreports,prospectusesandpublicofferingcirculars,agendas,listsofattendantsandminutesofGeneralAssemblies,proxyvotingform,dividenddistributionpolicy,disclosurepolicy,informationontransactionswithrelatedparties,rulesofethicsformulatedbytheCompany,andinformationrequests,queriesandnotificationsreceivedbytheCompanyandtheresponsesprovidedtheretoundertheheading“FrequentlyAskedQuestions”.Inthisframework,thewebsitecontainsCompany-relatedinformationcoveringthepastfiveyearsataminimum.AbigpartoftheinformationisalsotranslatedintoandmadeavailableinEnglishsoastoenableinternationalinvestorstomakeuseofthem.

TheinformationtobedisclosedtothepublicaremadeavailableforpublicuseonthePublicDisclosurePlatform(www.kap.gov.tr)andtheCompany’swebsitesoastohelptheindividualsandestablishmentsthatwillmakeuseofthedisclosurewiththeirdecision-making,inamannerthatistimely,accurate,complete,intelligible,interpretableandeasilyaccessibleatlowcost.

Importanceisattachedtoopinionsandsuggestionsreceivedthroughthecorporatewebsiteandtheyaretakenintoconsideration.Careistakentokeeptheinternetsiteup-to-dateatalltimes.

TheaddressoftheinternetsitetakesplaceontheCompany’sletterhead.

10. ANNUAL REPORT

TheCompany’sannualreportsarepreparedbytheBoardofDirectorssoastopresentacompleteviewoftheCompany’sfinancialstatus,inaccordancewiththelegislation,andinsufficientdetailtocovertheinformationlistedinCorporateGovernancePrinciples.

PART III - STAKEHOLDERS

11. KEEPING STAKEHOLDERS INFORMED

Careistakentokeepingstakeholders–thosewhohaveaninterestinourCompanyandincludeshareholders,employees,creditors,customers,suppliers,non-governmentalorganizations,thegovernment,andpotentialinvestorsinourCompany–informedonissuesconcerningourCompanythatareofinteresttotheminwriting,totheextentpossible.TheCompany’srelationshipswithstakeholdersaregovernedbywrittenagreementsasfaraspossible.

Insituationswheretherightsofstakeholdersarenotgovernedbylaworcontract,theCompanysafeguardsthemwithintheframeworkoftherulesofgoodfaith,tothedegreepossible,andmindfuloftheCompany’sownreputation.

ThecorporategovernancestructureprovidesthemeanstoallstakeholdersincludingemployeesandtheirrepresentativebodiestocommunicatetheirconcernsaboutanyillegalorunethicalpracticestotheCorporateGovernanceCommitteeandtheAuditCommittee,andsafeguardstheirrighttodoso.

TheCompany’squalitypolicypledgestoofferandmaintainqualityproductsandservicesonthebackoftheteamsenjoyingexpertiseandexperience,strongtechnologicalandfinancialinfrastructure,constantdevelopmentandimprovementconcept,combinedwithitsexperiencedandextensiveagencynetwork.

TheCompanypaysregardtoensuringcontinuedqualityandstandardsinserviceacrossallphasesofitslifeinsuranceandprivatepensionservices.Customerdemandsarerespondedtoquicklyandpolicyholdersareinformedincaseofanydelays.

Attentionispaidtoconfidentialityofcustomers’andsuppliers’informationthatisoftradesecretnature.

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12. STAKEHOLDER PARTICIPATION IN MANAGEMENT

WhilethearticlesofincorporationcontainnoprovisionsonstakeholderparticipationintheCompany’smanagement,theCompany’sinternalregulationscoverpracticestothisend.

TheSuggestionSystemRegulationtargetingthecompanyemployeeshasbeenintroducedasof01 May2006.SuggestionsforinnovationsandimprovementsareevaluatedwithintheframeworkofthisregulationandputintoeffectintheCompany.

TheCompanymeetswithitssalesorganizationtwiceayearatwhichtimetheyareinformedabouttheCompany’sactivities,theirsuggestionsareheard,andsuccessfulintermediariesarerewarded.

13. HUMAN RESOURCES POLICY

TheprinciplesofthehumanresourcespolicyadoptedbyourCompanyaresetoutbelow.

Jobdescriptionsandassignmentsandperformancecriteriaweredeterminedbymanagementandannouncedtoemployees.

Whenhiring,itisaprinciplethatindividualsaretobegivenequalopportunityunderidenticalconditions.Hiringcriteriaaresetforthinwritingforeachjobpositionandarestrictlycompliedwithinpractice.

SuccessionplanningismadetoidentifythenewmanagerstobeappointedincaseswhereitispredictedthatchangesinamanagerialpositionwillcausehitchesinthemanagementoftheCompany.

Whenmakingtraining,assignment,andpromotiondecisions,particularcareistakentomakinguseofobjectivecriteriaandtoprotectingtheCompany’sbestinterests.

Trainingplansaredevelopedandimplementedsoastoenableouremployeestoimprovetheirknowledgeandskills.

OurCompany’semployeesaremembersoftheUnionofBankandInsuranceWorkers.OurCompanysupportsactiveacknowledgmentofthefreedomofassociationandtherighttocollectivelybargain.

Tohandletherelationswithemployees,thereareunionrepresentativeswhoaredesignatedbytheUnionofBankingandInsuranceWorkersorganizedatourCompanyfromamongstourheadquartersandregionalbranchemployees.

Safeworkingenvironmentandconditionsareprovidedforouremployees;workisundertakentoimprovetheseconditionsdependingonsocialandtechnologicalnecessities.

Ouremployeesarekeptinformedaboutanycompanydecisionsthataremadeandaboutdevelopmentsthatmaybeofconcerntothem.

Measuresareadoptedtopreventdiscriminationonthebasisofrace,religion,languageandsexamongouremployees,toensurehumanrightsarerespectedandtoprotecttheemployeesagainstinternalphysical,mentalandemotionalabuse.

NocomplaintshavebeenreceivedonaccountofdiscriminationamongCompanyemployees.

TheprovisionsofthesuggestionsystemregulationareappliedtopromoteCompanyemployees’creativeideasaboutthecompanyactivitiesandpractices,collectandevaluateindividualideas,andtoappreciateandrewardthosedeemedsuccessful.

14. CODE OF ETHICS AND SOCIAL RESPONSIBILITY

Operatingasapubliclytradedcompanyintheprivatepensionandlifeinsurancebranches,AnadoluHayatEmeklilikA.Ş.(theCompany)strivestoachieveitsproductivity,profitabilityandcontinuousgrowthtargetsonthebackofitsparentgroups’corporateculture,businessethics,andthecorporateawarenesscreatedunderthe“CodesofEthics”presentedbelow,aswellastheapplicablelegislationandpertinentrequirements.Everycompanyemployeeateverylevelisliabletoabidebytheserulesofethicsandtoensurecompliancetherewithinwhatevernewworkflowsandorganizationalstructuresmaybedeveloped.IngeneraltheCompany’sactivitiesaretobeconductedinamannerthatisincompliancewiththelaw,honest,impartial,trustworthy,transparentandsociallyresponsible.

Companyemployeesareobligedtoabidebytheserulesofethicswithoutexception,tocauseotherstocomplywiththem,andtoarrangeworkflowsaccordingly.NeithertheCompanynortheemployeesmaywaivetheserulesinanydecisionsorarrangements.

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CodesofethicssettingouttheprofessionalethicsthattheCompanyanditsemployeesarerequiredtoabidebywhenperformingtheiractivitieswithintheexistinglawsandregulationsarepostedonthecorporatewebsite.

Inaddition,theCompany,initsactivities,actsincompliancewiththeregulationsgoverningtheenvironment,consumersandpublichealth.

NochargeswerefiledornosanctionswereimposedagainstourCompanyonaccountofanyenvironmentalprotectioninfringementtodate.

Withintheframeofthesocialresponsibilityprinciplethatisregardedaspartofourrulesofethics,AnadoluHayatEmeklilikupheldthenation’sinterestssinceitsinception,andhasbeenstrivingtopropagateLifeInsuranceandPrivatePensionSysteminTurkeybasedonitscommitmenttosocialresponsibility.

AnadoluHayatEmeklilikbelievesthatwomenposegreatsignificanceforourcountry’sprogress.Accordingly,theCompanydesignsitssocialresponsibilityprojectssoastosupporttheirimprovement.

Theprojectthatisdedicatedtosupportgirlswhoarefinanciallyunabletocontinuetheireducation,“Girls:TheInsuranceofourFuture”beganitsninthyearin2013.

Annuallyorganizedsince2007,“ShotsfromLifeasSeenbyWomen”photographycompetitionaimstocontributetothesocialandculturaldevelopmentoftheTurkishwomen,andofferthemaplatformwheretheycanfreelyexpressthemselvesthroughphotographs.

PART IV – BOARD OF DIRECTORS

15. STRUCTURE AND FORMATION OF THE BOARD OF DIRECTORS AND INDEPENDENT MEMBERS

TheCompany’sBoardofDirectorsiscomposedofelevenmemberssoastoenableourBoardDirectorstoworkefficientlyandconstructively,makedecisionsswiftlyandrationally,andorganizetheformationandactivitiesofthecommitteesefficiently.

InasmuchasourCompanyhasnoultimatenon-corporatecontrollingshareholders,alloftheBoardDirectorsareassumedtobenaturallyabletoactwithindependenceandtherefore,havetheadvantageofbeingabletoactimpartiallyintheirdecisionsbyholdingtheinterestsoftheCompanyandofitsstakeholdersaboveeverythingelse.

TherearetwoindependentmembersontheBoardofDirectors.TheindependentBoardDirectorshavenotservedasmembersformorethansixyearsinthepasttenyears.WhilethetermofofficeforanindependentBoardDirectorisoneyear,theycanbereelecteduponbeingnominated.

TwocandidatesforindependentBoardDirectorstatushavebeennominatedtotheCorporateGovernanceCommitteeservinginlieuoftheNominationCommittee,andthereportonwhetherthecandidatesfulfillthecriteriaofindependencehasbeenpresentedtotheBoardofDirectorson27 February2013.

IndependentBoardDirectorsfulfilltheindependencecriteriapublishedintherelevantlegislation,andtheirdeclarationsofindependencehavebeendulyreceived.Noinstancestookplaceduringthereportingperiod,whichwouldcompromiseindependence.Ifaninstancecompromisingindependencearises,thentheindependentBoardDirectorshallpresentsuchchangeimmediatelytotheBoardofDirectorstobedisclosedtothepublic.Insuchacase,theBoardDirectorwholoseshisindependenceshallresignasamatterofprinciple.

ApartfromtheCEO,theBoardofDirectorsconsistsofnon-executivemembers.ChairmanoftheBoardandCEOfunctionsarecarriedoutbydifferentindividuals.

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InformationaboutourBoardDirectorsispresentedbelow.

Name Position

Educational Background/ University/Faculty/Department Company Position

Professional Experience

(Years)

Tenure of Office with our

CompanyMahmutMagemizoğlu Chairman MiddleEastTechnical

University/FacultyofAdministrativeSciences/BusinessAdministration

TürkiyeİşBankasıA.Ş./In-Group

DeputyCEO 31 4years6months

SalihKurtuluş ViceChairman İstanbulPrivateSchoolofJournalism

- - 40 5years2months

MeteUğurlu Director&CEO MiddleEastTechnicalUniversity/FacultyofAdministrativeSciences/BusinessAdministration

AnadoluHayatEmeklilikA.Ş.

CEO 34.5 7years11months

A.YavuzEge,Ph.D. Director AnkaraUniversity/FacultyofPoliticalSciences/Economics&PublicFinance

- - 43 5years8months

TuncayErcenk Director İstanbulUniversity/FacultyofLaw

- - 36 2years7months

Prof.MehmetBahaKaran

IndependentDirector

MiddleEastTechnicalUniversity/FacultyofAdministrativeSciences/BusinessAdministration

HacettepeUniversity/Non-Group

ChairoftheBusinessAdministrationDepartment

33 1year9months

AtakanYalçın,Assoc.Prof.

IndependentDirector

BoğaziçiUniversity/FacultyofEngineering/ElectricalandElectronicEngineering

ÖzyeğinUniversity/Non-Group

FacultyMember

18 1year9months

R.SemihNabioğlu Director GaziUniversity/FacultyofEconomicsandAdministrativeSciences/BusinessAdministration

TürkiyeİşBankasıA.Ş./In-Group

UnitManager 23 1year4months

MuratAtalay Director HacettepeUniversity/FacultyofLettersandScience/StatisticsDepartment

TürkiyeİşBankasıA.Ş./In-Group

DivisionManager

17 2years7months

EbruÖzşuca Director MiddleEastTechnicalUniversity/FacultyofAdministrativeSciences/BusinessAdministration

TürkiyeİşBankasıA.Ş./In-Group

DivisionManager

20 9months

RecepHaki Director MiddleEastTechnicalUniversity/PublicAdministration

TürkiyeİşBankasıA.Ş./In-Group

DivisionManager

25 9months

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Althoughtherearenosetrulesonnon-independentDirectors’undertakingotherdutiesoutsidetheCompany,theDirectorsdonothaveanyotherdutiesapartfromtheirnaturaldutiesintheentitiestheyrepresentandfromthoseintheestablishmentsownedbytheentitiestheyrepresent.Yet,BoardDirectorsdevotesufficientamountoftimeforCompanyaffairs,andexercisetheirpowersprudentlyandwithintheframeofgoodfaith,possessingallnecessaryknowledgetoensurefullperformanceoftheduty.

Pastexperiences,andoutsidepositionsheld,ifany,oftheindependentBoardDirectorsaredisclosedintheirrésumésandpresentedonourwebsiteandinourannualreport.

Inthefulfillmentofitsdecision-makingfunctions,theBoardofDirectors’fundamentalconcernsareto:

• MaximizetheCompany’smarketvalue

• EnsurethattheCompany’sactivitiesareconductedinsuchawayastosecurelong-term,stablegainsforitsshareholders

• Maintainthedelicatebalancebetweenshareholders’expectationsandtheCompany’sneedtogrow.

TheBoardofDirectorsdefinethestrategicgoalsoftheCompany,determinesthehumanresourcesandfinancialresourcestheCompanywillneed,andauditsthemanagementperformance.

Atthesametime,theBoardofDirectorsalsooverseesthecomplianceoftheCompanyactivitieswiththelegislation,articlesofincorporation,internalregulations,andthepoliciesformulated.

WhenchoosingnewmemberstofillvacanciesontheBoardattentionisgiventothefollowingmatters:

• CandidatesarerequiredtobepresentatgeneralassembliesofshareholdersatwhichBoardelectionsaretobeheld.

• Shareholdersareprovidedwithcompleteinformationaboutcandidates.

• Shareholdershavetherighttoputquestionstocandidates.

• Candidatesarerequiredtoinformshareholdersaboutwhat,ifany,seatstheyholdontheboardsofothercompaniesandstatewhetherornottheywillcomplywithCompanyregulationsaboutsuchmatters.

AttentionisgiventotheconductofregularBoardmeetings,whichareheldatleastonceamonth.

ApprovalofthemajorityofindependentBoardDirectorsissoughtfortheBoardofDirectorsdecisionspertainingtotheCompany’stransactionsofamaterialnaturewithrelatedpartiesandtofurnishingguarantee,pledgeandmortgageinfavorofthirdparties.IfmajorityoftheindependentBoardDirectorsdonotapprovethetransaction,thisispubliclydisclosed,providingadequateinformationonthetransactionwithintheframeofpublicdisclosurerequirements,andthetransactionislaiddownfortheapprovaloftheGeneralAssembly.ThematterisdecidedinthesaidGeneralAssemblymeetingthroughvotingwherethepartiestothetransactionandtheirrespectiverelatedpartiesmaynotcastvotes,thusinvolvingothershareholdersinsuchdecisionsattheGeneralAssembly.MeetingquorumshallnotbesoughtforGeneralAssemblymeetingsthatwillbeheldforcircumstancesspecifiedinthisarticle.Decisionsaremadewiththesimplemajorityofthoseeligibletovote.BoardofDirectorsandGeneralAssemblydecisionspassedinviolationoftheprincipleshereinshallbenullandvoid.Thearticlesofincorporationcoverprovisionsgoverningtheseaspects.

TherearenoadministrativeorjudicialsanctionsimposedagainsttheCompanyortheBoardDirectors.

ThereisawomanmemberonourBoardofDirectors.

16. OPERATING PRINCIPLES OF THE BOARD OF DIRECTORS

AdraftoftheagendaforaBoardmeetingispreparedbytheCEOandfinalizedinlinewiththerecommendationsoftheChairmanandotherdirectors.

SpecialcareistakentosettingmeetingdatesthatwillallowallBoardDirectorstoattendandtoholdthemeetingswithalldirectorsinattendanceexceptinunforeseenexceptionalcases.

Asarule,ateachregularmeetingoftheBoard,thedateofthenextscheduledmeetingissetandMembersaresubsequentlyremindedofthisinwriting.

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UtmostcareispaidtoensurethattheinformationanddocumentspertainingtoitemsontheBoard’sagendaarenormallysentouttoMembersforthemtoexamineatleastsevendaysbeforethemeetingdate.Insituationswherethisisnotpossible,everyeffortismadetoensurethatallmembersareequallyinformedaboutthemattersinvolved.

AsecretariathasbeensetupthatisresponsibleforexecutingtheactivitiesoftheBoardofDirectors,keepingtheCompany’sDirectorsinformed,andforcommunicatingwiththem.

ABoard’sfirstmeetingispreferablyheldonthesamedaythatitiselectedintooffice.

Atthisfirstmeeting,theChairmanandDeputyChairmanareelected,dutiesareassigned,andcommitteesareformed.

TheBoardmeetsregularlyatleastonceamonthaspreviouslyscheduledandoccasionallyascircumstanceswarrant.

Inprinciple,BoardDirectorstakepartinallmeetings.

EachBoardDirectorisentitledtoasinglevote.Alldirectors’votescarryequalweightandnoDirectorhasapositiveornegativevetopower.

Asstipulatedinourarticlesofincorporation,theBoardconveneswithasimplemajorityofitsmembershipanddecisionsarepassedbyasimplemajorityofthosepresent.

TheBoardconvened12timesduring2013.

NoCompanyDirectorcastadissentingvoteagainstanyBoarddecisionpassedduring2013.

TherewerenorelatedpartytransactionsortransactionsofmaterialnaturethathavebeenlaiddownfortheapprovalofourIndependentDirectors.

TheBoardofDirectorsestablishestheinternalcontrolsystemsoftheCompany,afterobtainingtheopinionsoftherelatedBoardofDirectorscommittees,andannuallyreviewstheefficiencyofriskmanagementandinternalcontrolsystems.

17. NUMBER, STRUCTURE, AND INDEPENDENCE OF COMMITTEES ESTABLISHED BY THE BOARD OF DIRECTORS

ThereisanAuditCommittee,aCorporateGovernanceCommitteeandEarlyDetectionofRiskCommitteeinourCompany.

DuetothestructureoftheBoardofDirectors,theCorporateGovernanceCommitteealsofunctionsastheNominationCommitteeandtheRemunerationCommittee.

Therearetwonon-executiveBoardDirectorsineachoneoftheCommittees.

Asamatterofprinciple,BoardDirectorsdonotundertakerolesinseveralcommittees.However,sinceallmembersoftheAuditCommittee,theheadoftheCorporateGovernanceCommitteeandtheheadoftheEarlyDetectionofRiskCommitteemustbeelectedfromamongstIndependentBoardDirectors,ourIndependentBoardDirectorsserveontwodifferentcommittees.

Furthermore,astherearenoultimatenon-corporatecontrollingshareholdersinourCompany,itisassumedthatalloftheBoardDirectorsservingincommitteesarenaturallyabletoactwithindependenceandtherefore,havetheadvantageofactingimpartiallyintheirdecisions.

TheCorporateGovernanceCommitteeisformedbytheBoardofDirectorswithinthescopeofcorporategovernanceprinciplesandfirstlyfromamongstitsownmembers.Whennecessary,specialistindividualswhoarenotmembersoftheBoardofDirectorsmaybeassignedtothecommittee.TheChiefExecutiveOfficerdoesnottakeplaceinthiscommittee.TheCommitteeconsistsofaminimumoftwomembers.ThemajorityoftheCommitteemembersconsistofnon-executiveBoardDirectors.TheheadoftheCommitteeiselectedfromamongstindependentDirectors.WhilethetermofofficefortheCorporateGovernanceCommitteeis,inessence,coevalwiththatoftheBoardofDirectors;theCommitteewillremaininofficeuntilthecompletionofthepredeterminedadjustmentprocess,whentheBoardofDirectorsissucceeded.Totheextentpossible,theCommitteemeetsconsistentlywiththeBoardofDirectorsmeetings.Committeedecisionsareadoptedonthebasisofthemajorityofvotescast.

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Prof.MehmetBahaKaranandRecaiSemihNabioğluserveontheCorporateGovernanceCommitteeattheCompany.TheCommitteeheadisProf.MehmetBahaKaran.

TheAuditCommitteeisformedbytheBoardofDirectors,fromamongstitsownmembers.TheCommitteeconsistsofaminimumoftwomembers.ThemajorityoftheCommitteemembersconsistofnon-executiveBoardDirectors.ThemembersoftheCommitteeareelectedfromamongstindependentDirectors.ThetermofofficefortheAuditCommitteeis,inessence,coevalwiththatoftheBoardofDirectors;theCommitteeholdsatleastquarterlymeetings.Committeedecisionsareadoptedonthebasisofthemajorityofvotescast.

OntheAuditCommittee,Prof.MehmetBahaKaranservesastheCommitteeheadandAssoc.Prof.AtakanYalçınasmember.

ThetermofofficeoftheEarlyDetectionofRiskCommitteeiscoevalwiththatoftheBoardofDirectors.TheCommitteespendseffortstoearlydetecttherisksthatmightendangertheexistence,progressandsurvivaloftheCompany,toensureimplementationofnecessarymeasuresandremediesinrelationtotheidentifiedrisks,andtomanagetherisk.TheCommitteeundertakesareviewoftheriskmanagementsystemsatleastonanannualbasis.TheCommitteepresentsanassessmentofthesituationinitsbimonthlyreporttotheBoardofDirectors,pointingattheperils,ifany,andindicatingtheremedies.

OntheEarlyDetectionofRiskCommittee,Assoc.Prof.AtakanYalçınservesastheCommitteeHeadandRecaiSemihNabioğluasmember.TheCommitteepresentsanassessmentofthesituationinitsbimonthlyreporttotheBoardofDirectors,pointingattheperils,ifany,andindicatingtheremedies.

AllofthemembersoftheAuditCommitteeandtheheadsofothercommitteesareelectedfromamongstindependentDirectors.

OurexecutiveDirectorsandCEOdonotserveonanycommittee.

Theobjectives,members,structuresandactivitiesofcommitteestakeplaceintheannualreport.

18. RISK MANAGEMENT AND INTERNAL CONTROL MECHANISM

BoardofInternalAuditcarriesoutitsactivitieswithintheframeoftheRegulationontheInternalSystemsofInsurance,ReinsuranceandPensionCompaniespublishedintheOfficialGazetteissue26913dated21 June2008.Inthiscontext,theBoardofInternalAuditreportsdirectlytotheBoardofDirectorsandisorganizedindependentlyinadministrativeterms.

TheBoardofInternalAuditreportsonallunitsattheheadquarters,regionaloffices,andbranchesatleastonceayear,andonallagentsatleastonceinthreeyears,inaccordancewiththeRegulationontheInternalSystemsofInsurance,ReinsuranceandPensionCompanies.ThereportingisperformedinlinewiththeauditplanandprogramapprovedbytheBoardofDirectors,onthebasisofInternationalInternalAuditStandards,employingarisk-focusedapproach.Inadditiontotheseinternalauditactivities,investigationsandexaminationsarealsoconducted.

RiskManagementandInternalControlDepartmentconductsitsactivitieswithintheframeoftheRegulationontheInternalSystemsofInsurance,ReinsuranceandPensionCompaniespublishedintheOfficialGazetteissue26913dated21 June2008.TheDepartmentreportsdirectlytotheCEO.

Itisintendedtohaveasystemthatenablesdueandeffectivemanagement,mitigationandcontroloftherisksinvolvedintheCompany’sactivities.Inthisframework,operationalactivitiesandriskelementsattheCompanyareevaluatedandpriorityisgiventocomplianceefforts.Newproductsandnewimplementationsputonthemarketarereviewed,andsubjectedtoriskassessmentsandcompliancechecks.

TheinternalcontrolsystemmakesupthecontrolfunctionsoftheCompanyandencompassesallunits;hence,constanteffortsarespenttokeepthesystemefficientandalignedwiththelegislationandstandardswithrespecttostructureandoperation.Thebasicstrategydirectedtowardsthisgoalistoconductinternalcontrolactivitiesindependently,productivelyandeffectively,basedonarisk-focusedapproachandwithintheframeofapplicablelegislationandinternationallyacceptedprinciplesandstandards.

Corporate Governance Principles Compliance Report ...continued

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DirectedtowardstheactivitiescarriedoutbytheCompanyunits,thecontrolsystembasicallyconsistsofthefollowing:complianceandconformitycontrols,tangibleassetcontrols,reviewofadherencetolimitssetbytheCompanyandtrackinglimitoverruns,controlspertainingtotheapprovalandauthorizationsystem,inquiryandreconciliationcontrols,controlsforinformationandcommunicationsystems,controlsforthefinancialreportingsystems,andcontrolsforcommunicationchannels.

Reportscoveringriskmonitoring,assessmentandmanagementactivities,alongwiththeinternalcontrolactivitiesaresubmittedtotheBoardofDirectorsregularly.

TheactivitiesoftheDepartmentareadministereddirectlybytheCEO.TheBoardDirectorresponsibleforInternalSystemsisalsoresponsibletowardtheBoardofDirectorsfortheformationoftheDepartmentandensuring,monitoringandcoordinatingitsoperability,adequacyandeffectiveness.

AllfindingsobtainedbyexaminingtherisksindependentlyfromexecutivefunctionsareregularlyreportedbytheDepartmenttotheBoardDirectorresponsibleforInternalSystems,totheCEOandtheBoardofDirectors.

19. STRATEGIC GOALS OF THE COMPANY

TheCompany’svisionis:

“TobetheleadingcompanyinTurkeyinallaspectsoffinancialplanningthatareofconcerntothefutureofTurkeyandtheTurkishpeople.”

Itsmissionis:

“Toinculcateandfurtherinpeopleanawarenessoftheneedtosafeguardtheirownfuturesandthefuturesoftheirlovedones;toofferfinancialsolutionsthateliminatepeople’sdoubtsaboutthefutureandenhancethequalityoftheirlives;andtocontributetothedevelopmentofthenationaleconomybycreatinglong-termfinancialresources.

Ourcorporatestrategyisformulatedasfollows:

• MaintaintheproductdiversitythatcaterstothecustomerneedsanddemandsinlifeinsurancesectorandPrivatePensionSystem,andcontributetothestablegrowthofthesector,

• Combineoursuccessinintroducinginnovativeproductsandcreatingvaluewithourextensiveservicenetwork,andthussecureincreasedmarketshare,

• DisplayhighperformanceinthemanagementofpensionfundsandprovidefinancialprotectionandsavingstoourcustomersinthePrivatePensionSystem,

• Keepourprofitabilitysustainableabovethemarketaverage.

TheCompany’svision,missionandcorporatestrategyhavebeenpubliclydisclosedonourwebsiteattheaddresswww.anadoluhayat.com.tr.

Ourannualbusinessprogramsthatalsoincludeourstrategicgoalsaredeterminedbythemanagementinviewofthecompetitiveconditions,theoveralleconomicconjuncture,generalexpectationsinnationalandinternationalfinancialmarkets,andtheCompany’smedium-andlong-termobjectives,andpresentedtotheBoardofDirectorsforitsapproval.

TheproposedstrategiesandgoalsareapprovedbytheBoarduponthoroughandcomprehensivedebatesthereon.

PerformancewithrespecttoapprovedstrategiesandgoalsisregularlyreviewedatmonthlyBoardmeetingsatwhichtheCompany’sactivities,financialstructure,andrelatedissuesareassessedandevaluated.

Inordertoeffectivelyandcontinuouslycarryoutitssupervisionandcontrolfunctions,theBoardofDirectorsinprinciplemeetseverymonth.

Atsuchmeetings,considerationisgivenbasicallytotheCompany’sactivities,thedegreeofachievementofthegoalssetintheapprovedannualbusinessprogram,theCompany’spositioninthesector,itsfinancialperformance,andthedegreeofcompliancewithinternationalstandardsachievedinitsreportingandactivities.

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20. FINANCIAL RIGHTS

AggregateofthesalariesandsimilarbenefitsprovidedtotheCompany’sBoardDirectorsandseniorexecutivesaredisclosedinthenotestothefinancialstatements,whicharepubliclydisclosedandarealsoaccessibleonourcorporatewebsite,andthereby,incorporatedinourannualreport.

Companydirectorsreceivenofinancialbenefitsotherthanthehonorariumthatispaidtothem.

Theamounttobepaidasanhonorariumisdeterminedbyshareholdersatageneralassembly.

TheremunerationpolicydevelopedfortheCompany’smanagersandemployeesatanylevelisputintowriting,presentedtotheshareholdersfortheirinformationasaseparateagendaitematthe2011GeneralAssembly.ThesaidremunerationpolicyispublishedontheCompanywebsite.

StockoptionsorpaymentplansbasedontheCompany’sperformancearenotusedintheremunerationofourBoardDirectors,includingtheindependentBoardDirectors.Nonetheless,itisbelievedthattheremunerationofindependentBoardDirectorsisatalevelthatwillnotprejudicetheirindependence.

TheBoardDirectorsandSeniorExecutiveshaveneverutilized,directlyorindirectly,cashornon-cashloansfromtheCompany,nordidtheCompanylentmoneyorgavesuretyshiporprovidedanysimilarguaranteetoanyBoardDirectororSeniorExecutive.

Corporate Governance Principles Compliance Report ...continued

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Financial Reports and Other Matters

• UnconsolidatedFinancialStatementsTogetherwithIndependentAuditors’ReportThereon• InformationonConsolidatedAssociate• ConsolidatedFinancialStatementsTogetherwithIndependentAuditors’ReportThereon• InformationforInvestors

Contents

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Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

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Anadolu Hayat Emeklilik Anonim ŞirketiIndependent Auditors’ Report

To the Board of Directors of Anadolu Hayat Emeklilik Anonim Şirketi

Introduction

WehaveauditedtheaccompanyingunconsolidatedbalancesheetofAnadoluHayatEmeklilikAnonimŞirketi(“theCompany”)asat31 December2013andtherelatedunconsolidatedstatementofincome,unconsolidatedstatementofchangesinequityandunconsolidatedstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Management’s Responsibility for the Financial Statements

Managementisresponsibleforthepreparationandfairpresentationoftheseunconsolidatedfinancialstatementsinaccordancewiththeaccountingprinciplesandstandardsinforceaspertheinsurancelegislation.Thisresponsibilityincludes:designing,implementingandmaintaininginternalsystemsrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatements,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Independent Auditors’ Responsibility

Ourresponsibilityistoexpressanopinionontheseunconsolidatedfinancialstatementsbasedonouraudit.Weconductedourauditinaccordancewithauditstandardsinforceaspertheinsurancelegislation.Thosestandardsrequirethatwecomplywithrelevantethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreeofmaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalsystemsrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalsystem. Anauditalsoincludesevaluatingtheappropriatenessofaccountingprinciplesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

Independent Auditors’ Opinion

Inouropinion,theaccompanyingunconsolidatedfinancialstatementsgiveatrueandfairviewofthefinancialpositionofAnadoluHayatEmeklilikAnonimŞirketiasat31 December2013,andofitsunconsolidatedfinancialperformanceanditsunconsolidatedcashflowsfortheyearthenendedinaccordancewiththeaccountingprinciplesandstandards(seeNote 2)inforceaspertheinsurancelegislation.

Istanbul,4 February2014AkisBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikAŞ

AlperGüvenç,CertifiedPublicAccountantPartner

Additional paragraph for convenience translation to English:AsexplainedinNote 2.1.1,theaccompanyingunconsolidatedfinancialstatementsarenotintendedtopresentthefinancialpositionandresultsofoperationsoftheCompanyinaccordancewiththeaccountingprinciplesandpracticesgenerallyacceptedincountriesandjurisdictionsotherthanTurkey.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.KavacıkRüzgarlıBahçeMah.KavakSok.No:3Beykoz34805İstanbul

Telephone +90(216)6819000Fax +90(216)6819090İnternet www.kpmg.com.tr

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Weconfirmthattheunconsolidatedfinancialstatementsandrelateddisclosuresandfootnotesasat31 December2013whichwerepreparedinaccordancewiththeaccountingprinciplesandstandardsinforceaspertheregulationsofT.C.BaşbakanlıkHazineMüsteşarlığıareincompliancewiththe“CodeRelatedtotheFinancialReportingofInsurance,ReinsuranceandPrivatePensionCompanies”andthefinancialrecordsofourCompany.

Istanbul,4 February2014

MeteUğurlu OğuzHalukSolak N.CemÖzcan F.DemetIşıksaçanMemberofBoardofDirectors,

ChiefExecutiveOfficerViceChiefExecutiveOfficer AccountingManager Actuary

(RegistrationNumber:37)

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Financial Statements as at and For the Year Ended 31 December 2013

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CONTENTS PAGEBALANCE SHEET 108-112STATEMENT OF INCOME 113-115STATEMENT OF CHANGES IN EQUITY 116-117STATEMENT OF CASH FLOWS 118STATEMENT OF PROFIT DISTRIBUTION 119NOTES TO THE FINANCIAL STATEMENTS 120-181NOTE1 Generalinformation 120NOTE2 Summaryofsignificantaccountingpolicies 122NOTE3 Criticalaccountingestimatesandjudgmentsinapplyingaccountingpolicies 136NOTE4 Managementofinsuranceandfinancialrisk 136NOTE5 Segmentreporting 152NOTE6 Tangibleassets 153NOTE7 Investmentproperties 154NOTE8 Intangibleassets 154NOTE9 Investmentsinassociates 155NOTE10 Reinsuranceassetsandliabilities 155NOTE11 Financialassets 156NOTE12 Loansandreceivables 161NOTE13 Derivativefinancialinstruments 161NOTE14 Cashandcashequivalents 162NOTE15 Equity 162NOTE16 OtherreservesandequitycomponentofDPF 164NOTE17 Insurancecontractliabilitiesandreinsuranceassets 165NOTE18 Investmentcontracts 172NOTE19 Tradeandotherpayablesanddeferredincome 172NOTE20 Financialliabilities 173NOTE21 Deferredtax 173NOTE22 Retirementbenefitobligations 174NOTE23 Otherliabilitiesandprovisions 174NOTE24 Netinsurancepremiumrevenue 175NOTE25 Feerevenues 175NOTE26 Investmentincome 175NOTE27 Netincomeaccrualonfinancialassets 175NOTE28 Assetsheldatfairvaluethroughprofitorloss 176NOTE29 Insurancerightsandclaims 176NOTE30 Investmentcontractbenefits 176NOTE31 Otherexpenses 176NOTE32 Operatingexpenses 176NOTE33 Employeebenefitexpenses 176NOTE34 Financialcosts 176NOTE35 Incometaxexpense 176NOTE36 Netforeignexchangegains 177NOTE37 Earningspershare 177NOTE38 Dividendspershare 177NOTE39 Cashgeneratedfromoperations 178NOTE40 Convertiblebonds 178NOTE41 Redeemablepreferenceshares 178NOTE42 Risks 178NOTE43 Commitments 178NOTE44 Businesscombinations 178NOTE45 Relatedpartytransactions 178NOTE46 Eventsafterthereportingperiod 181NOTE47 Others 181

Anadolu Hayat Emeklilik Anonim Şirketi

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ASSETS

I- Current Assets Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Cash and Cash Equivalents 14 138,765,629 142,342,4261- Cash 14 20,961 14,1552- Cheques Received - -3- Banks 14 29,864,319 59,951,4614- Cheques Given and Payment Orders 14 (174,771) (163,210)5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 109,055,120 82,540,0206- Other Cash and Cash Equivalents - -B- Financial Assets and Financial Investments with Risks on Policyholders 11 2,406,892,657 2,682,557,4931- Available-for-Sale Financial Assets 11 581,745,719 518,741,9652- Held to Maturity Investments -3- Financial Assets Held for Trading 11 36,388,883 42,316,4994- Loans and Receivables 11 11,401,986 14,091,3455- Provision for Loans and Receivables - -6- Financial Investments with Risks on Saving Life Policyholders 11 1,787,655,851 2,117,707,4667- Company’s Own Equity Shares - -8- Diminution in Value of Financial Investments 11 (10,299,782) (10,299,782)C- Receivables from Main Operations 12 5,296,014,578 4,347,148,1601- Receivables from Insurance Operations 12 12,788,669 8,959,6682- Provision for Receivables from Insurance Operations 12 (2,574) (2,574)3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited to Insurance and Reinsurance Companies - -6- Loans to the Policyholders 12 43,748,889 51,779,5597- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Operations 12 5,239,479,594 4,286,411,5079- Doubtful Receivables from Main Operations 12 117,996 117,99610- Provision for Doubtful Receivables from Main Operations 12 (117,996) (117,996)D- Due from Related Parties 12 334,634 1,096,3501- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel 12 334,634 1,096,3506- Due from Other Related Parties - -7- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -E- Other Receivables 12 12,165,677 1,891,7041- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given 41,395 36,6034- Other Miscellaneous Receivables 47 12,124,282 1,855,1015- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -F- Prepaid Expenses and Income Accruals 4.2 10,690,180 12,601,3721- Deferred Commission Expense 9,474,281 11,756,4542- Accrued Interest and Rent Income 147,038 194,5493- Income Accruals 4 164- Other Prepaid Expenses 1,068,857 650,353G- Other Current Assets 4.2 17,887 23,2301- Stocks to be Used in the Following Months 4,760 13,1762- Prepaid Taxes and Funds 7,624 6,7513- Deferred Tax Assets - -4- Job Advances - -5- Advances Given to Personnel 5,400 3,2006- Inventory Count Differences 103 1037- Other Miscellaneous Current Assets - -8- Provision for Other Current Assets - -I- Total Current Assets   7,864,881,242 7,187,660,735

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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ASSETS

II- Non-Current Assets Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Receivables from Main Operations - -1- Receivables from Insurance Operations - -2- Provision for Receivables from Insurance Operations - -3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited for Insurance and Reinsurance Companies - -6- Loans to the Policyholders - -7- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Business - -9- Doubtful Receivables from Main Operations - -10- Provision for Doubtful Receivables from Main Operations - -B- Due from Related Parties - -1- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel - -6- Due from Other Related Parties - -7- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -C- Other Receivables - -1- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given - -4- Other Miscellaneous Receivables - -5- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -D- Financial Assets 9, 45.d 8,762,193 8,762,1931- Investments in Equity Shares - -2- Investments in Associates 9,45.d 8,762,193 8,762,1933- Capital Commitments to Associates - -4- Investments in Subsidiaries - -5- Capital Commitments to Subsidiaries - -6- Investments in Joint Ventures - -7- Capital Commitments to Joint Ventures - -8- Financial Assets and Financial Investments with Risks on Policyholders - -9- Other Financial Assets - -10- Impairment in Value of Financial Assets - -E- Tangible Assets 6 21,701,481 21,311,4441- Investment Properties 6,7 25,497,361 25,873,0872- Impairment for Investment Properties - -3- Owner Occupied Property 6 1,338,902 1,338,9024- Machinery and Equipments 6 7,955,505 5,722,9425- Furniture and Fixtures 6 2,999,195 2,852,9406- Motor Vehicles 6 529,723 573,4757- Other Tangible Assets (Including Leasehold Improvements) 6 2,953,267 2,685,3828- Tangible Assets Acquired Through Finance Leases 6 1,071,729 1,071,7299- Accumulated Depreciation 6 (20,644,201) (18,807,013)10- Advances Paid for Tangible Assets (Including Construction in Progress) - -F- Intangible Assets 8 4,982,250 4,297,9531- Rights 8 15,235,745 11,845,6442- Goodwill - -3- Pre-operating Expenses - -4- Research and Development Costs - -5- Other Intangible Assets - -6- Accumulated Amortization (Depreciation) 8 (10,253,495) (7,547,691)7- Advances Paid for Intangible Assets - -G- Prepaid Expenses and Income Accruals 8,905 58,1421- Deferred Commission Expense 8,905 58,1422- Income Accruals - -3- Other Prepaid Expenses and Income Accruals - -H- Other Non-Current Assets 21 2,068,582 -1- Effective Foreign Currency Accounts - -2- Foreign Currency Accounts - -3- Stocks to be Used in the Following Years - -4- Prepaid Taxes and Funds - -5- Deferred Tax Assets 21 2,068,582 -6- Other Miscellaneous Non-Current Assets - -7- Amortization on Other Non-Current Assets - -8- Provision for Other Non-Current Assets - -II- Total Non-Current Assets 37,523,411 34,429,732TOTAL ASSETS 7,902,404,653 7,222,090,467

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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LIABILITIES

III- Short-Term Liabilities Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012A- Financial Liabilities - -1- Borrowings from Financial Institutions - -2- Finance Lease Liabilities - -3- Deferred Leasing Costs - -4- Current Portion of Long Term Debts - -5- Principal Installments and Interests on Bonds Issued - -6- Other Financial Assets Issued - -7- Valuation Differences of Other Financial Assets Issued - -8- Other Financial Liabilities - -B- Payables Arising from Main Operations 19 5,361,512,193 4,371,184,2351- Payables Arising from Insurance Operations 19 5,868,305 4,090,5662- Payables Arising from Reinsurance Operations - -3- Cash Deposited by Insurance and Reinsurance Companies 19,10 881,759 636,8224- Payables Arising from Individual Pension Business 19 5,354,762,129 4,366,456,8475- Payables Arising from Other Main Operations - -6- Discount on Payables from Other Main Operations - -C- Due to Related Parties 19 5,014 10,4321- Due to Shareholders 19,45 5,014 8,1722- Due to Associates - -3- Due to Subsidiaries - -4- Due to Joint Ventures - -5- Due to Personnel - -6- Due to Other Related Parties 19 - 2,260D- Other Payables 19 8,882,417 6,469,3841- Deposits and Guarantees Received 19 320,984 244,6082- Medical Treatment Payables to Social Security Institution - -3- Other Miscellaneous Payables 19,47 8,561,433 6,224,7764- Discount on Other Miscellaneous Payables - -E- Insurance Technical Provisions 17 1,972,924,325 2,288,110,8801- Reserve for Unearned Premiums - Net 17 20,847,997 22,532,7652- Reserve for Unexpired Risks - Net - -3- Mathematical Provisions - Net 17 1,871,476,210 2,205,674,3734- Provision for Outstanding Claims - Net 17 74,550,204 55,731,6195- Provision for Bonus and Discounts - Net 128,485 256,6136- Other Technical Provisions - Net 17 5,921,429 3,915,510F- Provisions for Taxes and Other Similar Obligations 8,648,030 11,313,3001- Taxes and Funds Payable 3,755,158 3,361,0512- Social Security Premiums Payable 1,092,876 778,2843- Overdue, Deferred or By Installment Taxes and Other Liabilities - -4- Other Taxes and Similar Payables 2,250 -5- Corporate Tax Payable 35 15,310,000 26,100,0006- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (11,512,254) (18,926,035)7- Provisions for Other Taxes and Similar Liabilities - -G- Provisions for Other Risks 23 5,705,359 6,359,7581- Provision for Employee Termination Benefits - -2- Provision for Pension Fund Deficits - -3- Provisions for Costs 23 5,705,359 6,359,758H- Deferred Income and Expense Accruals 19 2,588,141 1,793,5411- Deferred Commission Income 19 515,595 415,8722- Expense Accruals 19 829,103 335,9713- Other Deferred Income and Expense Accruals 19 1,243,443 1,041,698I- Other Short-Term Liabilities 62 611- Deferred Tax Liabilities - -2- Inventory Count Differences 62 613- Other Various Short-Term Liabilities - -III - Total Short-Term Liabilities   7,360,265,541 6,685,241,591

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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LIABILITIES

IV- Long-Term Liabilities Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Financial Liabilities   - -1- Borrowings from Financial Institutions   - -2- Finance Lease Liabilities   - -3- Deferred Leasing Costs   - -4- Bonds Issued   - -5- Other Financial Assets Issued   - -6- Valuation Differences of Other Financial Assets Issued   - -7- Other Financial Liabilities   - -B- Payables Arising from Main Operations   - -1- Payables Arising from Insurance Operations   - -2- Payables Arising from Reinsurance Operations   - -3- Cash Deposited by Insurance and Reinsurance Companies   - -4- Payables Arising from Individual Pension Business   - -5- Payables Arising from Other Operations   - -6- Discount on Payables from Other Operations   - -C- Due to Related Parties   - -1- Due to Shareholders   - -2- Due to Associates   - -3- Due to Subsidiaries   - -4- Due to Joint Ventures   - -5- Due to Personnel   - -6- Due to Other Related Parties   - -D- Other Payables   - -1- Deposits and Guarantees Received   - -2- Medical Treatment Payables to Social Security Institution - -3- Other Miscellaneous Payables   - -4- Discount on Other Miscellaneous Payables   - -E-Insurance Technical Provisions - -1- Reserve for Unearned Premiums - Net - -2- Reserve for Unexpired Risks - Net - -3- Mathematical Provisions - Net - -4- Provision for Outstanding Claims - Net - -5- Provision for Bonus and Discounts - Net - -6- Other Technical Provisions - Net - -F-Other Liabilities and Relevant Accruals - -1- Other Liabilities - -2- Overdue, Deferred or By Installment Taxes and Other Liabilities - -3- Other Liabilities and Expense Accruals - -G- Provisions for Other Risks 22,23 8,269,886 7,408,4141- Provision for Employee Termination Benefits 22,23 8,269,886 7,408,4142- Provision for Pension Fund Deficits - -H-Deferred Income and Expense Accruals - -1- Deferred Commission Income - -2- Expense Accruals - -3- Other Deferred Income and Expense Accruals - -I- Other Long-Term Liabilities 21 - 4,760,6701- Deferred Tax Liabilities 21 - 4,760,6702- Other Long-Term Liabilities - -IV- Total Long-Term Liabilities   8,269,886 12,169,084

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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EQUITY

V- Equity Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Paid in Capital 2.13,15  350,000,000 300,000,0001- (Nominal) Capital 2.13,15 350,000,000 300,000,0002- Unpaid Capital - -3- Positive Capital Restatement Differences - -4- Negative Capital Restatement Differences - -5- Register in Progress Capital - -B- Capital Reserves - -1- Share Premiums - -2- Cancellation Profits of Equity Shares - -3- Profit on Assets Sale That Will Be Transferred to Capital - -4- Currency Translation Adjustments - -5- Other Capital Reserves - -C- Profit Reserves 93,815,061 138,216,7321- Legal Reserves 15 72,284,703 65,516,6772- Statutory Reserves 15 841,874 13,722,7143- Extraordinary Reserves 15 8,001,112 12,205,3364- Special Funds - -5- Revaluation of Financial Assets 15,16 12,978,741 46,772,0056- Other Profit Reserves 15 (291,369) -D- Retained Earnings 6,887,574 6,887,5741- Retained Earnings 6,887,574 6,887,574E- Accumulated Losses - -1- Accumulated Losses - -F-Net Profit for the Period 83,166,591 79,575,4861- Net Profit for the Period 83,166,591 79,575,4862- Net Loss for the Period - -3- Profit not Available for Distribution - -V- Total Equity 533,869,226 524,679,792TOTAL EQUITY AND LIABILITIES 7,902,404,653 7,222,090,467

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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I-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012A- Non-Life Technical Income 5 675,114 681,2761- Earned Premiums (Net of Reinsurer Share)   675,114 681,2761.1- Written Premiums (Net of Reinsurer Share) 24 648,587 588,7721.1.1- Written Premiums, gross 789,193 910,9351.1.2- Written Premiums, ceded 10 (140,606) (322,163)1.1.3- Premiums Transferred to Social Security Institutions - -1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 26,527 92,5041.2.1- Reserve for Unearned Premiums, gross 47,444 119,0061.2.2- Reserve for Unearned Premiums, ceded 10 (20,917) (26,502)1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share - -1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.3.1- Reserve for Unexpired Risks, gross - -1.3.2- Reserve for Unexpired Risks, ceded - -2- Investment Income - Transferred from Non-Technical Section - -3- Other Technical Income (Net of Reinsurer Share) - -3.1- Other Technical Income, gross - -3.2- Other Technical Income, ceded - -4- Accrued Salvage and Subrogation Income - -B- Non-Life Technical Expense 5 (658,719) (663,540)1- Incurred Losses (Net of Reinsurer Share) (260,633) (338,489)1.1- Claims Paid (Net of Reinsurer Share) (272,814) (317,078)1.1.1- Claims Paid, gross (407,892) (362,397)1.1.2- Claims Paid, ceded 10 135,078 45,3191.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 12,181 (21,411)1.2.1- Change in Provisions for Outstanding Claims, gross (14,572) 9,2661.2.2- Change in Provisions for Outstanding Claims, ceded 10 26,753 (30,677)2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) - -2.1- Provision for Bonus and Discounts, gross (2,690) -2.2- Provision for Bonus and Discounts, ceded 2,690 -3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (8,698) (11,704)4- Operating Expenses 32 (389,388) (313,347)5- Change in Mathematical Provision (Net of Reinsurer Share and Less the Amounts Carried Forward) - -5.1.- Change in Mathematical Provision, gross - -5.2 - Change in Mathematical Provision, ceded - -6- Change in Other Technical Provision (Net of Reinsurer Share and Less the Amounts Carried Forward) - -6.1- Change in Other Technical Provision, gross - -6.2.- Change in Other Technical Provision, ceded - -C- Net Technical Income-Non-Life (A - B) 16,395 17,736D- Life Technical Income 5 598,513,416 502,677,8291- Earned Premiums (Net of Reinsurer Share) 382,876,620 346,805,2511.1- Written Premiums (Net of Reinsurer Share) 24 381,218,379 355,597,3101.1.1- Written Premiums, gross 394,219,745 367,057,4391.1.2- Written Premiums, ceded 10 (13,001,366) (11,460,129)1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 1,658,241 (8,792,059)1.2.1- Reserve for Unearned Premiums, gross 1,106,340 (8,923,900)1.2.2- Reserve for Unearned Premiums, ceded 10 551,901 131,8411.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.3.1- Reserve for Unexpired Risks, gross - -1.3.2- Reserve for Unexpired Risks, ceded - -2- Investment Income 26 206,895,965 149,640,1013- Unrealized Gains on Investments - -4- Other Technical Income (Net of Reinsurer Share) 8,740,831 6,232,4774.1- Other Technical Income, gross 8,740,831 6,232,4774.2- Other Technical Income, ceded - -5- Accrued Salvage and Subrogation Income - -

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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I-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012E- Life Technical Expense 5 (535,102,109) (469,262,040)1- Incurred Losses (Net of Reinsurer Share) (527,633,079) (454,748,419)1.1- Claims Paid (Net of Reinsurer Share) (506,847,643) (442,038,966)1.1.1- Claims Paid, gross (513,541,690) (445,432,538)1.1.2- Claims Paid, ceded 10 6,694,047 3,393,5721.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (20,785,436) (12,709,453)1.2.1- Change in Provisions for Outstanding Claims, gross (23,287,695) (12,355,824)1.2.2- Change in Provisions for Outstanding Claims, ceded 10 2,502,259 (353,629)2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 128,128 (256,613)2.1- Provision for Bonus and Discounts, gross 49,648 (528,684)2.2- Provision for Bonus and Discounts, ceded 78,480 272,0713- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) 83,433,502 59,536,6813.1- Change in Life Mathematical Provisions, gross 84,903,898 59,323,7573.1.1- Change in Actuarial Mathematical Provisions, gross 40,633,870 46,422,5703.1.2- Change in Profit Share Provision (Provision for Financial Investments with Risks on Saving Life Policyholders), gross 44,270,028 12,901,1873.2- Change in Life Mathematical Provisions, ceded 10 (1,470,396) 212,9243.2.1- Change in Actuarial Mathematical Provisions, ceded (1,470,396) 212,9243.2.2- Change in Profit Share Provision (Provision for Financial Investments with Risks on Saving Life Policyholders), ceded - -4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (1,997,221) (1,709,090)5- Operating Expenses 32 (89,033,439) (72,084,599)6- Investment Expenses - -7- Unrealized Losses on Investments - -8- Investment Income Transferred to the Non-Life Technical Section - -F- Net Technical Income- Life (D - E) 63,411,307 33,415,789G- Pension Business Technical Income 5, 25 132,002,445 139,026,0571- Fund Management Income 25 90,764,418 88,470,9732- Management Fee 25 17,771,761 33,953,3273- Entrance Fee Income 25 20,236,910 16,121,3434- Management Expense Charge in case of Suspension 25 3,120,756 367,2615- Income from Individual Service Charges - -6- Increase in Value of Capital Allowances Given as Advance 25 - -7- Other Technical Income 25 108,600 113,153H- Pension Business Technical Expense 5 (143,137,394) (119,530,396)1- Total Fund Expenses (16,300,221) (15,070,322)2- Decrease in Value of Capital Allowances Given as Advance - (2,400)3- Operating Expenses 32 (125,961,568) (102,992,329)4- Other Technical Expenses (873,988) (1,465,345)5- Fine Payments (1,617) -I- Net Technical Income - Pension Business (G - H) (11,134,949) 19,495,661

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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II-NON-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012C- Net Technical Income - Non-Life (A-B) 16,395 17,736F- Net Technical Income - Life (D-E) 63,411,307 33,415,789I - Net Technical Income - Pension Business (G-H) (11,134,949) 19,495,661J- Total Net Technical Income (C+F+I) 52,292,753 52,929,186K- Investment Income 26 65,435,963 63,514,1171- Income from Financial Assets 33,906,018 21,023,9552- Income from Disposal of Financial Assets 21,336,148 7,511,1803- Valuation of Financial Assets (832,007) 23,349,8794- Foreign Exchange Gains 36 4,480,459 513,7175- Income from Associates 26 554,972 539,0386- Income from Subsidiaries and Joint Ventures - -7- Income from Property, Plant and Equipment 7,26 3,280,321 3,059,3258- Income from Derivative Transactions - 421,2389- Other Investments 26 2,710,052 7,095,78510- Income Transferred from Life Section - -L- Investment Expense (-) (17,054,753) (7,186,728)1- Investment Management Expenses (inc. interest) (1,116,227) (1,228,879)2- Diminution in Value of Investments - -3- Loss from Disposal of Financial Assets (66) (1,207,110)4- Investment Income Transferred to Non-Life Technical Section - -5- Loss from Derivative Transactions - -6- Foreign Exchange Losses 36 (11,003,005) (945,869)7- Depreciation and Amortization Expenses 6,8 (4,935,455) (3,804,870)8- Other Investment Expenses - -M- Income and Expenses From Other and Extraordinary Operation(+/-) (2,197,372) (3,581,089)1- Provisions 47 (800,039) (2,301,040)2- Rediscounts - -3- Specified Insurance Accounts - -4- Monetary Gains and Losses - -5- Deferred Taxation (Deferred Tax Income) 21 - -6- Deferred Taxation (Deferred Tax Expense) 21 (148,052) (447,909)7- Other Income 13 68- Other Expenses and Losses (1,249,294) (832,146)9- Prior Year’s Income - -10- Prior Year’s Expenses and Losses - -N- Net Profit for the Year 37 83,166,591 79,575,4861- Profit for the Year 98,476,591 105,675,4862- Corporate Tax Provision and Other Fiscal Liabilities 35 (15,310,000) (26,100,000)3- Net Profit for the Year 37 83,166,591 79,575,4864- Monetary Gains and Losses - -

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Audited Changes in Equity - 31 December 2012

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit (or Loss)

for the Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2011 300,000,000 - (9,601,394) - - 59,640,083 9,095,243 1,219,776 64,669,510 5,138,865 430,162,083II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2012 300,000,000 - (9,601,394) - - 59,640,083 9,095,243 1,219,776 64,669,510 5,138,865 430,162,083A- Capital increase (A1+A2) - - - - - - - - - - -1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - - - - -D- Change in the value of financial assets 15 - - 56,373,399 - - - - - - - 56,373,399E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the year - - - - - - - - 79,575,486 - 79,575,486I - Dividends paid 38 - - - - - - - - (41,431,176) - (41,431,176)J - Transfers from retained earnings 15 - - - - - 5,876,594 4,627,471 10,985,560 (23,238,334) 1,748,709 -IV - Balance at the end of the year - 31 December 2012 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792

Audited Changes in Equity - 31 December 2013 

Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit for the

Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2012 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2013 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792A- Capital increase (A1+A2) 50,000,000 - - - - - (19,000,000) (31,000,000) - - -1- In cash - - - - - - - - - - -2- From reserves 50,000,000 - - - - - (19,000,000) (31,000,000) - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (291,369) - - (291,369)D- Change in the value of financial assets 15 - - (33,793,264) - - - - - - - (33,793,264)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses 15 - - - - - - - - 2,000,000 - 2,000,000G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the period - - - - - - - - 83,166,591 - 83,166,591I - Dividends paid 38 - - - - - - - - (41,892,524) - (41,892,524)J - Transfers from retained earnings 15 - - - - - 6,768,026 6,119,160 26,795,776 (39,682,962) - -IV - Balance at the end of the period - 31 December 2013 350,000,000 - 12,978,741 - - 72,284,703 841,874 7,709,743 83,166,591 6,887,574 533,869,226

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Changes in Equity For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Audited Changes in Equity - 31 December 2012

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit (or Loss)

for the Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2011 300,000,000 - (9,601,394) - - 59,640,083 9,095,243 1,219,776 64,669,510 5,138,865 430,162,083II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2012 300,000,000 - (9,601,394) - - 59,640,083 9,095,243 1,219,776 64,669,510 5,138,865 430,162,083A- Capital increase (A1+A2) - - - - - - - - - - -1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - - - - -D- Change in the value of financial assets 15 - - 56,373,399 - - - - - - - 56,373,399E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the year - - - - - - - - 79,575,486 - 79,575,486I - Dividends paid 38 - - - - - - - - (41,431,176) - (41,431,176)J - Transfers from retained earnings 15 - - - - - 5,876,594 4,627,471 10,985,560 (23,238,334) 1,748,709 -IV - Balance at the end of the year - 31 December 2012 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792

Audited Changes in Equity - 31 December 2013 

Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit for the

Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2012 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2013 300,000,000 - 46,772,005 - - 65,516,677 13,722,714 12,205,336 79,575,486 6,887,574 524,679,792A- Capital increase (A1+A2) 50,000,000 - - - - - (19,000,000) (31,000,000) - - -1- In cash - - - - - - - - - - -2- From reserves 50,000,000 - - - - - (19,000,000) (31,000,000) - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (291,369) - - (291,369)D- Change in the value of financial assets 15 - - (33,793,264) - - - - - - - (33,793,264)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses 15 - - - - - - - - 2,000,000 - 2,000,000G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the period - - - - - - - - 83,166,591 - 83,166,591I - Dividends paid 38 - - - - - - - - (41,892,524) - (41,892,524)J - Transfers from retained earnings 15 - - - - - 6,768,026 6,119,160 26,795,776 (39,682,962) - -IV - Balance at the end of the period - 31 December 2013 350,000,000 - 12,978,741 - - 72,284,703 841,874 7,709,743 83,166,591 6,887,574 533,869,226

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  Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012A. Cash flows from operating activities

1. Cash provided from insurance activities 905,029,055 438,572,7552. Cash provided from reinsurance activities 244,937 -3. Cash provided from individual pension business 171,441,309 154,825,9584. Cash used in insurance activities (932,211,577) (514,400,927)5. Cash used in reinsurance activities - (49,747)6. Cash used in individual pension business (147,339,063) (116,165,455)7. Cash provided by operating activities (2,835,339) (37,217,416)8. Interest paid - -9. Income taxes paid (26,100,000) (13,415,000)10. Other cash inflows 20,579,783 25,303,73511. Other cash outflows (13,583,826) (28,434,068)12. Net cash provided by operating activities (21,939,382) (53,762,749)

B. Cash flows from investing activities1. Proceeds from disposal of tangible assets 352,381 2,346,7092. Acquisition of tangible assets 6,8 (6,227,963) (8,018,006)3. Acquisition of financial assets (305,408,122) (309,005,855)4. Proceeds from disposal of financial assets 239,925,820 335,767,7695. Interests received 124,550,559 90,347,8726. Dividends received 3,815,541 3,314,2177. Other cash inflows 3,441,720 66,130,1678. Other cash outflows - (63,093,995)9. Net cash used in investing activities 60,449,936 117,788,878

C. Cash flows from financing activities1. Equity shares issued - -2. Cash provided from loans and borrowings - -3. Finance lease payments - -4. Dividends paid (41,892,524) (41,431,176)5. Other cash inflows - -6. Other cash outflows - -7. Net cash provided by financing activities (41,892,524) (41,431,176)

D. Effect of exchange rate fluctuations on cash and cash equivalentsE. Net increase in cash and cash equivalents (3,381,970) 22,594,953F. Cash and cash equivalents at the beginning of the year 14 142,060,223 119,465,270G. Cash and cash equivalents at the end of the year 14 138,678,253 142,060,223

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Cash Flows For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Note

AuditedCurrent Period

31 December 2013 (**)

AuditedPrior Period

31 December 2012I. DISTRIBUTION OF THE PERIOD PROFIT1.1. PERIOD PROFIT (*) 102,015,935 109,052,0751.2 TAXES AND DUTIES PAYABLE (15,310,000) (26,100,000)

1.2.1. Corporate Tax (Income Tax) (15,310,000) (26,100,000)1.2.2. Income Tax Deductions - -1.2.3. Other Taxes and Legal Duties - -

A. CURRENT PERIOD PROFIT (1.1 - 1.2) 86,705,935 82,952,0751.3. ACCUMULATED LOSSES (-) - -1.4 FIRST LEGAL RESERVES (-) 4,158,330 4,078,7741.5 OTHER STATUTORY RESERVES (-) - -B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1.4 + 1.5))] 82,547,605 78,873,3011.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (15,789,181)

1.6.1. To owners of ordinary shares - (15,789,181)1.6.2. To owners of privileged shares - -1.6.3 To owners of redeemed shares - -1.6.4 To holders profit sharing bonds - -1.6.5 To holders of profit and loss sharing certificates - -

1.7. DIVIDENDS TO PERSONNEL (-) - (1,892,524)1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - -1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) - (24,210,819)

1.9.1. To owners of ordinary shares - (24,210,819)1.9.2. To owners of privileged shares - -1.9.3. To owners of redeemed shares - -1.9.4. To holders profit sharing bonds - -1.9.5. To holders of profit and loss sharing certificates - -

1.10. LEGAL RESERVES (-) - (2,689,252)1.11. STATUTORY RESERVES(-) - (6,119,160)1.12. EXTRAORDINARY RESERVES - (28,172,365)1.13. OTHER RESERVES - -1.14. SPECIAL FUNDS - -II. DISTRIBUTION OF RESERVES - -2.1. APPROPRIATED RESERVES - -2.2. SECOND LEGAL RESERVES (-) - -2.3. DIVIDENDS TO SHAREHOLDERS (-) - -

2.3.1. To owners of ordinary shares - -2.3.2. To owners of privileged shares - -2.3.3. To owners of redeemed shares - -2.3.4. To holders of profit sharing bonds - -2.3.5. To holders of profit and loss sharing certificates - -

2.4. DIVIDENDS TO PERSONNEL (-) - -2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) - -III. EARNINGS PER SHARE - -3.1. TO OWNERS OF ORDINARY SHARES 0.24773 0.237013.2. TO OWNERS OF ORDINARY SHARES (%) 24.773 23.7013.3. TO OWNERS OF PRIVILEGED SHARES 0.24773 0.237013.4. TO OWNERS OF PRIVILEGED SHARES (%) 24.773 23.701IV. DIVIDEND PER SHARE4.1. TO OWNERS OF ORDINARY SHARES 38 - -4.2. TO OWNERS OF ORDINARY SHARES (%) - -4.3. TO OWNERS OF PRIVILEGED SHARES - -4.4. TO OWNERS OF PRIVILEGED SHARES (%) - -

(*)Consolidatedcurrentyearprofitisusedforprofitdistributionasperthe“ProfitShareGuidebook”issuedbytheCapitalMarketBoardon2013/10dated.Provisionfordividendexpenseamountingto¨2,000,000isaddedtotheprofitfortheyearended31 December2013.(**)Asofthereportingdate,theGeneralAssemblyMeetinghasnotbeenheld;therefore,onlydistributablenetprofitispresentedintheprofitdistributiontableabove.

Anadolu Hayat Emeklilik Anonim ŞirketiUnconsolidated Statement of Profit Distribution For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Anadolu Hayat Emeklilik Anonim ŞirketiNotes to the Unconsolidated Financial Statements As at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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1 General information

1.1 Name of the Company and the ultimate owner of the group

AnadoluHayatEmeklilikAnonimŞirketi(“theCompany”)hasbeenoperatingsince31 May1990andtheshareholdingstructureoftheCompanyispresentedbelow.Asat31 December2013,theshareholderhavingdirectorindirectcontroloverthesharesoftheCompanyisTürkiyeİşBankasıAŞ(“İşBankası”)by83.0%oftheoutstandingsharesoftheCompany.

31 December 2013 31 December 2012

NameShareholding

amount (¨)Shareholding

rate (%)Shareholding

amount (¨)Shareholding

rate (%)

TürkiyeİşBankasıAŞ 217,000,000 62.0 186,000,000 62.0AnadoluAnonimTürkSigortaŞirketi 70,000,000 20.0 60,000,000 20.0MilliReasüransTAŞ 3,500,000 1.0 3,000,000 1.0Publiclytraded 59,500,000 17.0 51,000,000 17.0Paid in capital 350,000,000 100.0 300,000,000 100.0

1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating center if it is different from the registered office)

TheCompanywasregisteredinTurkeyandhasthestatusof‘IncorporatedCompany’inaccordancewiththeregulationsofTurkishCommercialCode(“TTK”).TheaddressoftheCompany’sregisteredofficeisMeltemSokakNo:10İşKuleleriKule:2Kat:16,Levent34330Beşiktaş/İstanbul.

1.3 Business of the Company

TheactivitiesoftheCompanyinvolveprovidingindividualandgroupinsuranceandreinsuranceservicesrelatingtogrouplife,individuallife,retirementandrelatedpersonalaccidentbranches,establishingretirementfunds,developinginternalrulesandregulationsrelatedtothesefunds,carryingoutretirement,annualincomeinsurance,portfoliomanagementandcustodycontractsfortheassetsofthefundsheldincustody.

Asat31 December2013,theCompanyhas24individualpensioninvestmentfunds(31 December2012:21)

1.4 Description of the main operations of the Company

TheCompanyissuespoliciesininsurancebranchesspecifiedintheabovenote1.3-Business of the CompanyandcontractsinindividualpensionbusinessbyconductingitoperationsinaccordancewiththeInsuranceLawNo.5684(the“InsuranceLaw”)issuedon14 June2007datedand26552numberedOfficialGazetteandIndividualPensionSavingsandInvestmentSystemLawNo.4632(the“IndividualPensionLaw”)andothercommuniquésandregulationsinforceissuedbythePrimeMinistryUndersecretariatoftheTreasuryoftheTurkishRepublic(the“TurkishTreasury”)basedontheInsuranceLawandtheIndividualPensionLaw.

TheCompany’sshareshavebeenlistedontheBorsaIstanbul(“BIST”).InaccordancewithArticle136(1)inSectionVIIIoftheCapitalMarketsLaw,insurancecompanieshavetocomplywiththeirownspecificlawsandregulationsinmattersofestablishment,auditing,supervision/oversight,accountingandfinancialreporting;therefore,theCompanyperformsitsoperationsaccordingly.

1.5 The average number of the personnel during the period in consideration of their categories

The average number of the personnel during the period in consideration of their categories is as follows:31 December 2013 31 December 2012

Seniorlevelmanagers 7 7Directors 94 86Officers 331 298Contractedpersonnel 5 6Marketingandsalespersonnel 352 315Other 12 13Total 801 725

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1.6 Wages and similar benefits provided to the senior management

Fortheyearended31 December2013,wagesandsimilarbenefitsprovidedtotheseniormanagementincludingchairman,membersoftheboardofthedirectors,generalmanager,anddeputygeneralmanagersamountedto¨3,958,378(31 December2012:¨3,616,722).

1.7 Explanation about the distribution of investment income and operating expenses (personnel expenses, administrative expenses, research and development expenses, marketing and selling expenses, and expenses for the services bought from third parties) in the financial statements

Proceduresandprinciplesrelatedtokeysusedinthefinancialstatementsofthecompaniesaredeterminedinaccordancewiththe4 January2008datedand2008/1numbered“CommuniquéRelatedtotheProceduresandPrinciplesfortheKeysUsedintheFinancialStatementsBeingPreparedInAccordanceWithInsuranceAccountingPlan”issuedbytheTurkishTreasury.InaccordancewiththeabovementionedCommuniqué,knownandexactlydistinguishableoperatingexpensesaredirectlyrecordedunderlife,non-lifeorindividualpensionsegments.Othernon-distinguishableexpenses,whicharenotexactlydistinguished,aredistributedbetweeninsurancesegmentsandindividualpensionsegmentinaccordancewiththenumberofpoliciesandcontractsattheendoflast3yearsandarithmeticaverageofcontributionpremiumandearnedpremiumwithinthelast3yearsinaccordancewiththe9 August2010datedand2010/9numbered“AmendmentsCommuniquéRelatedtotheProceduresandPrinciplesfortheKeysUsedintheFinancialStatementsBeingPreparedInAccordanceWithInsuranceAccountingPlan”issuedbytheTurkishTreasury.Amendmentiseffectivefrom1 January2011.Theportionofinsurancesegmentscalculatedasdescribedaboveisdistributedbetweenlifeandnon-lifebranchesinaccordancewiththeaverageof3ratioscalculatedbydividing“numberofthepoliciesproducedwithinthelastthreeyears”,“grosspremiumswrittenwithinthelastthreeyears”,and“numberoftheclaimsreportedwithinthelastthreeyears”tothe“totalnumberofthepolicies”,“totalgrosswrittenpremiums”,andthe“totalnumberoftheclaimsreported”,respectively.

Incomefromtheassetsinvestedagainstnon-lifetechnicalprovisionsistransferredtotechnicalsectionfromnon-technicalsection.

Incomefromtheassetsinvestedagainstmathematicalandprofitsharingprovisionsisrecordedundertechnicalsection,remainingincomeistransferredtothenon-technicalsection.

Asatthereportingperiod,distributionoftheoperatingexpensebetweenlife,non-lifeandpensionbranchesispresentedinnote5-Segment distribution.

1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies

TheaccompanyingfinancialstatementscompriseonlytheunconsolidatedfinancialinformationoftheCompany.Asfurtherdetailedinnote2.2- Consolidation,theCompanyhaspreparedconsolidatedfinancialstatementsasat31 December2013,separately.

1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting periodTradenameoftheCompany :AnadoluHayatEmeklilikAŞRegisteredaddressoftheheadoffice :İşKuleleri,Kule2Kat2034330,Levent/İstanbulThewebpageoftheCompany :www.anadoluhayat.com.trE-mailaddressoftheCompany :hizmet@anadoluhayat.com.trPhone :02123177070Fax :02123177077

Therehasbeennochangeintheaforementionedinformationsubsequenttothepreviousreportingperiod.

1.10 Events after the reporting period

None.

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2 Summary of significant accounting policies

2.1 Basis of preparation

2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements

InaccordancewithArticle136(1)inSectionVIIoftheCapitalMarketsLaw,insurancecompanieshavetocomplywiththeirownspecificlawsandregulationsinmattersofestablishment,auditing,supervision/oversight,accountingandfinancialreporting.Therefore,theCompanymaintainsitsbooksofaccountandpreparesitsfinancialstatementsinaccordancewiththeTurkishAccountingStandards(“TAS”),TurkishFinancialReportingStandards(“TFRS”),andotheraccountingandfinancialreportingprinciples,statementsandguidance(collectively“theReportingStandards”)inaccordancewiththe“CommuniquéRelatedtotheFinancialReportingofInsurance,Reinsurance,andIndividualPensionCompanies”aspromulgatedbytheTurkishTreasurybasedonArticle18oftheInsuranceLawandArticle11oftheIndividualPensionLaw.

Althoughthe4thstandardoftheTurkishAccountingStandardsBoard(“TASB”)forthe‘Insurance contracts’becameeffectiveon25 March2006fortheaccountingperiodsthatbeginonorafter31 December2005,itisstatedthatTFRS4willnotbeimplementedatthisstagesincethesecondphaseoftheInternationalAccountingStandardsBoardprojectabouttheinsurancecontractshasnotbeencompletedyet.Inthiscontext,“CommuniquéonTechnicalReservesforInsurance,ReinsuranceandIndividualPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”(“CommuniquéonTechnicalReserves”)ispublishedintheOfficialGazettedated7 August2007,numbered26606andbecameeffectiveon1 January2008.SubsequenttothepublicationoftheCommuniquéonTechnicalReserves,someothercircularsandsectorannouncementswhichcontainexplanationsandregulationsrelatedtoapplicationoftheCommuniquéonTechnicalReservesarepublished.Accountingpoliciesappliedfortheinsurancecontractsbasedonthesecommuniqué,circularsandothersectorannouncementsaresummarizedontheirowncaptionsinthefollowingsections.

Accountingforsubsidiaries,associatesandjointventuresisregulatedwith28 December2007datedand2007/26numbered“CircularRelatedtotheAccountingofSubsidiaries,AssociatesandJointVentures”,issuedbytheTurkishTreasury.Itisstatedthat,thecompanieswillcontinuetoapplytheprinciplesoftherelatedstandardsofTFRSsfortheaccountingofsubsidiaries,associatesandjointventureuntilthepublicationofanotherregulationonthisissuebytheTurkishTreasury.“CircularRelatedtothePreparationoftheConsolidatedFinancialStatementsofInsurance,Reinsurance,andIndividualPensionCompanies”issuedbytheTurkishTreasuryinthe31 December2008datedand27097numbered(4threpeat)OfficialGazette,constitutedthebasisofconsolidationtobeeffectiveonthedatesthatcircularspecifies.

Additional paragraph for convenience translation to EnglishThedifferencesbetweenaccountingprinciples,asdescribedintheprecedingparagraphs,andtheaccountingprinciplesgenerallyacceptedincountries,inwhichtheaccompanyingunconsolidatedfinancialstatementsaretobedistributed,andInternationalFinancialReportingStandards(“IFRS”),mayhavesignificantinfluenceontheaccompanyingunconsolidatedfinancialstatements.Accordingly,theaccompanyingunconsolidatedfinancialstatementsarenotintendedtopresentthefinancialpositionandresultsofoperationsinaccordancewiththeaccountingprinciplesgenerallyacceptedinsuchcountriesotherthanTurkey.

2.1.2 Other accounting policies appropriate for the understanding of the financial statements

Accounting in hyperinflationary countriesFinancialstatementsoftheTurkishentitieshavebeenrestatedforthechangesinthegeneralpurchasingpoweroftheTurkishLirabasedonTAS29-Financial Reporting in Hyperinflationary Economiesasat31 December2004.TAS 29requiresthatfinancialstatementspreparedinthecurrencyofahyperinflationaryeconomybestatedintermsofthemeasuringunitcurrentatthereportingperiod,andthatcorrespondingfiguresforpreviousyearsberestatedinthesameterms.

Withrespecttothe4 April2005datedand19387numbereddeclarationoftheTurkishTreasury,theCompanyrestateditsfinancialstatementsasat31 December2004andpreparedopeningfinancialstatementsof2005inaccordancewiththe“RestatementofFinancialStatementsinHyperinflationaryPeriods”oftheCapitalMarketsBoard(“CMB”)CommuniquéNo:25ofSeriesXI,“CommuniquéonAccountingStandardsinCapitalMarket”publishedintheOfficialGazettedated15 January2003andnumbered25290.Inflationaccountingisnolongerappliedstartingfrom1 January2005,inaccordancewiththesamedeclarationoftheTurkishTreasury.Accordingly,asat31 December2013,non-monetaryassetsandliabilitiesanditemsincludedinshareholders’equityincludingpaid-incapitalrecognizedorrecordedbefore1 January2005aremeasuredasrestatedto31 December2004inordertoreflectinflationadjustments.Non-monetaryassetsandliabilitiesanditemsincludedinshareholders’equityincludingpaid-incapitalrecognizedorrecordedafter1 January2005aremeasuredattheirnominalcostsorvalues.

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Other accounting policies

Informationregardingtootheraccountingpolicesisexplainedaboveinthesectionofnote2.1.1 - Information about the principles and the special accounting policies used in the preparation of the financial statements andeachonitsowncaptioninfollowingsectionsofthisreport.

2.1.3 Functional and presentation currency

TheCompany’sfinancialstatementsarepresentedinthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(itsfunctionalcurrency).TheresultsandfinancialpositionoftheCompanyareexpressedin¨,whichisthefunctionalandpresentationcurrencyoftheCompany.

2.1.4 Rounding level of the amounts presented in the financial statements

Financialinformationpresentedin¨,hasbeenroundedtothenearest¨ values.

2.1.5 Basis of measurement used in the preparation of the financial statements

Theaccompanyingfinancialstatementsarepreparedonthehistoricalcostbasisasadjustedfortheeffectsofinflationthatlasteduntil31 December2004,exceptforthefinancialassetsatfairvaluethroughprofitorloss,available-for-salefinancialassetsandfinancialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailable-for-salefinancialassetsandderivativefinancialinstrumentswhicharemeasuredattheirfairvaluesunlessreliablemeasuresareavailable.

2.1.6 Accounting policies, changes in accounting estimates and errors

Therehavebeennochangesintheaccountingpoliciesorerrorsinthecurrentperiod.

CriticalaccountingjudgmentsmadeinapplyingtheCompany’saccountingpoliciesareexplainedinnote3-Critical accounting estimates and judgments in applying accountingpolicies.

2.2 Consolidation

“CircularRelatedtothePreparationoftheConsolidatedFinancialStatementsofInsurance,Reinsurance,andIndividualPensionCompanies”issuedbytheTurkishTreasuryinthe31 December2008datedand27097numberedOfficialGazette,hasbeeninforcesince31 March2009.Accordingly,consolidatedfinancialstatementsarepreparedusingtheequitymethodofaccountingtoconsolidatetheCompany’sassociate;İşPortföyYönetimiAŞ.

Inthe12 August2008datedand2008/36numbered“SectorAnnouncementRelatedtotheAccountingofSubsidiaries,AssociatesandJointVenturesintheStandAloneFinancialStatementsofInsurance,ReinsuranceandIndividualPensionCompanies”oftheTurkishTreasury,itisstatedthatalthoughinsurance,reinsuranceandindividualpensioncompaniesareexemptedfromTAS 27-Consolidated and Separate Financial Statements, subsidiaries,associatesandjoint-venturescouldbeaccountedinaccordancewithTAS39-Financial Instruments: Recognition and Measurementoratcostinaccordancewiththe37thparagraphofTAS27-Consolidated and Separate Financial Statements.Paralleltotherelatedsectorannouncementsmentionedabove,asatthereportingperiodtheCompanyhasaccountedforitsassociateatcostlessimpairmentlosses,ifany.

2.3 Segment reporting

AnoperatingsegmentisacomponentoftheCompanythatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheCompany’sothercomponents,whoseoperatingresultsarereviewedregularlybytheBoardofDirectors(beingchiefoperatingdecisionmaker)tomakedecisionsaboutresourcesallocatedtoeachsegmentandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.

2.4 Foreign currency transactions

Transactionsarerecordedin¨,whichistheCompany’sfunctionalcurrency.Transactionsinforeigncurrenciesarerecordedattheratesrulingatthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedatexchangeratesrulingatthereportingperiodandforeigncurrencyexchangedifferencesareoffsetandallexchangedifferencesarerecognizedinthestatementofincome.

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Foreigncurrencyexchangedifferencesofunrecognizedgainsorlossesarisingfromthedifferencebetweentheirfairvalueandthediscountedvaluescalculatedpereffectiveinterestratemethodofforeigncurrencyavailable-for-salefinancialassetsarerecordedin“Revaluationoffinancialassets”underequityandtherealizedgainorlossesarerecognizeddirectlyinthestatementofincome.Foreigncurrencyexchangedifferencesofunrecognizedgainsorlossesarisingfromfinancialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailable-for-salefinancialassets,5%ofthedifferenceisrecordedunderequityandtheremaining95%belongingtopolicyholdersisrecordedas‘insurancetechnicalprovisions-lifemathematicalprovisions’.

2.5 Tangible assets

Tangibleassetsarerecordedattheirhistoricalcoststhathavebeenadjustedaccordingtotheinflationratesuntiltheendof31 December2004.Therehavebeennootherinflationaryadjustmentsforthesetangibleassetsforthefollowingyearsandthereforetheyhavebeenrecordedattheircostsindexedtotheinflationratesfor31 December2004.Tangibleassetsthathavebeenpurchasedafter1 January2005havebeenrecordedattheircostsexcludingtheirexchangeratedifferencesandfinanceexpenseslessimpairmentlossesifany.

Gains/lossesarisingfromthedisposalofthetangibleassetsarecalculatedasthedifferencebetweenthenetcarryingvalueandtheproceedsfromthedisposalofrelatedtangibleassetsandreflectedtothestatementofincomeoftherelatedperiod.

Maintenanceandrepaircostsincurredintheordinarycourseofthebusinessarerecordedasexpense.

Therearenopledges,mortgagesandotherencumbrancesontangiblefixedassets.

Therearenochangesinaccountingestimatesthathavesignificanteffectonthecurrentperiodorthatareexpectedtohavesignificanteffectonthefollowingperiods.

Depreciationisrecognizedinprofitorlossonastraight-linebasisovertheestimatedusefullivesofeachpartofanitemoftangibleassetssincethismostcloselyreflectstheexpectedpatternofconsumptionofthefutureeconomicbenefitsembodiedintheasset.

Depreciationratesandestimatedusefullivesareasfollows:

Tangible assetsEstimated useful

lives (years)Depreciation

rates (%)Buildings 50years 2.00Machineryandequipment 3-16years 6.25-33.33Fixturesandfurniture 4-13years 7.69-25.00Vehicles 5years 20.00Othertangibleassets(includesleaseholdimprovements) 5years 20.00Leasedassets 4-15years 6.66-25.00

2.6 Investment properties

Investmentpropertiesareheldeithertoearnrentalsand/orforcapitalappreciationorforboth.

Investmentpropertiesaremeasuredinitiallyatcostincludingtransactioncosts.

Subsequenttoinitialrecognition,theCompanymeasuredallinvestmentpropertybasedonthecostmodelinaccordancewiththecostmodelforpropertyandequipment(i.e.atcostlessaccumulateddepreciationandlessimpairmentlossesifany).

Depreciationisprovidedoninvestmentpropertiesonastraightlinebasis.Depreciationperiodforinvestmentpropertiesis50yearsforbuildingsandlandisnotdepreciated.

Investmentpropertiesarederecognizedwheneithertheyhavebeendisposedoforwhentheinvestmentpropertyispermanentlywithdrawnfromuseandnofutureeconomicbenefitisexpectedfromitsdisposal.Anygainsorlossesontheretirementordisposalofaninvestmentpropertyarerecognizedinprofitorlossintheperiodofretirementordisposal.

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2.7 Intangible assets

TheCompany’sintangibleassetsconsistofcomputersoftware.

Intangibleassetsarerecordedatcostincompliancewiththe“TAS38-Accountingforintangibleassets”.Thecostoftheintangibleassetspurchasedbefore31 December2004arerestatedfromthepurchasingdatesto31 December2004,thedatethehyperinflationaryperiodisconsideredtobeended.Theintangibleassetspurchasedafterthisdatearerecordedattheirhistoricalcosts.Acquiredcomputersoftwarelicensesarecapitalizedonthebasisofthecostsincurredtoacquireandbringtousethespecificsoftware.

Amortizationischargedonastraight-linebasisovertheirestimatedusefullives(3years)overthecostoftheasset.

Costsassociatedwithdevelopingormaintainingcomputersoftwareprogramsarerecognizedasexpensewhenincurred.CoststhataredirectlyassociatedwiththedevelopmentofidentifiableanduniquesoftwareproductsthatarecontrolledbytheCompanyandwillprobablyprovidemoreeconomicbenefitsthancostsinoneyeararerecognizedasintangibleassets.Costsincludesoftwaredevelopmentemployeecostsandanappropriateportionofrelevantoverheads.Computersoftwaredevelopmentcostsrecognizedasassetsareamortizedovertheirestimatedusefullives(notexceedingthreeyears).

2.8 Financial assets

Afinancialassetisanyassetthatiscash,anequityinstrumentofanotherentity,acontractualrighttoreceivecashoranotherfinancialassetfromanotherentity;ortoexchangefinancialassetsorfinancialliabilitieswithanotherentityunderconditionsthatarepotentiallyfavorabletotheentity.

Securitiesarerecognizedandderecognizedatthedateofsettlement.

Financialassetsareclassifiedinfourcategories;asfinancialassetsheldfortrading,available-for-salefinancialassets,heldtomaturityfinancialassets,andloansandreceivables.

Financial assets at fair value through profit or lossarepresentedasfinancialassetsheldfortradingintheaccompanyingfinancialstatementsandtradingsecuritiesandderivativesareincludedinthiscategory.Financialassetsatfairvaluethroughprofitorlossmeasuredattheirfairvaluesandgain/lossarisingduetochangesinthefairvaluesofrelatedfinancialassetsarerecordedinthestatementofincome.Interestincomeearnedontradingpurposefinancialassetsandthedifferencebetweentheirfairvaluesandacquisitioncostsarerecordedasinterestincomeinthestatementofincome.Incaseofdisposalofsuchfinancialassetsbeforetheirmaturities,thegains/lossesonsuchdisposalarerecordedundertradingincome/losses.Accountingpoliciesofderivativesaredetailedinnote2.10-Derivative financial instruments.

Loans and receivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.TheyarisewhentheCompanyprovidesmoney,goodsorservicesdirectlytoadebtorwithnointentionoftradingthereceivable.Loansandreceivablesthosearenotinterestearningaremeasuredbydiscountingoffuturecashflowslessimpairmentlosses,andinterestearningloansandreceivablesaremeasuredatamortizedcostlessimpairmentlosses.

Held to maturity financial assetsarethefinancialassetswithfixedmaturitiesandfixedorpre-determinedpaymentschedulesthattheCompanyhastheintentandabilitytoholduntilmaturity,excludingloansandreceivables.Subsequenttoinitialrecognition,heldtomaturityfinancialassetsandloansandreceivablesaremeasuredatamortizedcostusingeffectiveinterestratemethodlessimpairmentlosses,ifany.

Available-for-sale financial assetsarethefinancialassetsotherthanassetsheldfortradingpurposes,held-to-maturityfinancialassetsandloansandreceivables.

Available-for-salefinancialassetsareinitiallyrecordedatcostandsubsequentlymeasuredattheirfairvalues.Assetsthatarenottradedinanactivemarketaremeasuredbyvaluationtechniques,includingrecentmarkettransactionsinsimilarfinancialinstruments,adjustedforfactorsuniquetotheinstrumentbeingvalued;ordiscountedcashflowtechniquesfortheassetswhichdonothaveafixedmaturity.Unrecognizedgainsorlossesderivedfromthedifferencebetweentheirfairvalueandthediscountedvaluescalculatedpereffectiveinterestratemethodarerecordedin“Revaluationoffinancialassets”undershareholders’equity.Upondisposal,therealizedgainorlossesarerecognizeddirectlyinthestatementofincome.

Thedeterminationoffairvaluesoffinancialinstrumentsnottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Observablemarketpricesofthequotedfinancialinstrumentswhicharesimilarintermsofinterest,maturityandotherconditionsareusedindeterminingthefairvalue.

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Associatesareclassifiedasfinancialassetsinthefinancialstatements.Associates,tradedinanactivemarketorwhosefairvaluecanbereliablymeasured,arerecordedattheirfairvalues.Associatesthatarenottradedinanactivemarketandwhosefairvaluecannotbereliablysetarereflectedinfinancialstatementsattheircostsafterdeductingimpairmentlosses,ifany.

Specific instruments

Financial investments with risks on saving life policyholdersarethefinancialassetsinvestedagainstthesavingsofthelifepolicyholders.Financialinvestmentswithrisksonsavinglifepolicyholderscouldbeclassifiedasfinancialassetsheldfortradingpurpose,availableforsalefinancialassetsorheldtomaturityinvestmentsbyconsideringthebenefitsofthepolicyholdersandmeasuredinaccordancewiththeprinciplesasexplainedabove.

Whensuchinvestmentsareclassifiedasavailable-for-salefinancialassets,5%ofthedifferencebetweenthefairvaluesandamortizedcosts,calculatedbyusingeffectiveinterestmethod,ofthefinancialassetsisrecordedunderequityandtheremaining95%belongingtopolicyholdersisrecordedas‘insurancetechnicalprovisions-lifemathematicalprovisions’.Asat31 December2013,95%ofthedifferencebetweenfairvaluesandamortizedcostsofthoseassetsbackingliabilitiesamountingto¨(5,711,673)(31 December2012:¨245,052,988)isrecordedinlifemathematicalprovisions.

Receivables from individual pension operations consistof‘capitaladvancesgiventopensioninvestmentfunds’,‘receivablefrompensioninvestmentfundsforfundmanagementfees’,‘entrancefeereceivablefromparticipants’and‘receivablesfromclearinghouseonbehalfoftheparticipants’.

‘Receivablefrompensioninvestmentfundsforfundmanagementfee’arethefeeschargedtothepensioninvestmentfundsagainstfortheadministrationofrelatedpensioninvestmentfundswhichconsistoffeeswhicharenotcollectedinthesameday.

Capitaladvancesgiventopensioninvestmentsfundsduringtheirestablishmentarerecordedunder‘capitaladvancesgiventopensioninvestmentfunds’.

‘Receivablesfromtheclearinghouseonbehalfoftheparticipants’isthereceivablefromclearinghouseonfundbasisagainstthecollectionsoftheparticipants.Sameamountisalsorecordedaspayablestoparticipantsforthefundssoldagainsttheircollectionsunderthe‘payablesarisingfromindividualpensionbusinesses.

Loanstothepolicyholdersareloansthatareprovidedtothepolicyholdersfromsavingcomponentofthelifeinsurancepoliciesbasedonthefundamountsandfundunitprices.Valuationoftheloanstothepolicyholdersbasedonthefundamountsandfundunitpricesasatthereportingdate.

Derecognition

Afinancialassetisderecognizedwhenthecontroloverthecontractualrightsthatcomprisethatassetislost.Thisoccurswhentherightsarerealized,expireoraresurrendered.

2.9 Impairment on assets

Impairment on financial assets

Financialassetsorgroupoffinancialassetsarereviewedateachreportingperiodtodeterminewhetherthereisobjectiveevidenceofimpairment.Ifanysuchindicationexists,theCompanyestimatestheamountofimpairment.Impairmentlossincursif,andonlyif,thereisobjectiveevidencethattheexpectedfuturecashflowsoffinancialassetorgroupoffinancialassetsareadverselyaffectedbyanevent(s)(“lossevent(s)”)incurredsubsequenttorecognition.Thelossesexpectedtoincurduetofutureeventsarenotrecognizedeveniftheprobabilityoflossishigh.

Loansandreceivablesarepresentednetofspecificallowancesforuncollectibility.Specificallowancesaremadeagainstthecarryingamountsofloansandreceivablesthatareidentifiedasbeingimpairedbasedonregularreviewsofoutstandingbalancestoreducetheseloansandreceivabletotheirrecoverableamounts.

Therecoverableamountofanequityinstrumentisitsfairvalue.Therecoverableamountofdebtinstrumentsandpurchasedloansmeasuredtofairvalueiscalculatedasthepresentvalueoftheexpectedfuturecashflowsdiscountedatthecurrentmarketrateofinterest.

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Animpairmentlossisreversedifthereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognized.Forfinancialassetsmeasuredatamortizedcostandavailable-for-salefinancialassetsthataredebtsecurities,thereversalisrecognizedinthestatementofoperations.Foravailable-for-salefinancialassetsthatareequitysecurities,thereversalisrecognizeddirectlyinequity.

Impairment on tangible and intangible assets

Oneachreportingperiod,theCompanyevaluateswhetherthereisanindicationofimpairmentoffixedassets.Ifthereisanobjectiveevidenceofimpairment,theasset’srecoverableamountisestimatedinaccordancewiththe“TAS 36 - ImpairmentofAssets”andiftherecoverableamountislessthanthecarryingvalueoftherelatedasset,aprovisionforimpairmentlossismade.

RediscountandprovisionexpensesoftheperiodaredetailedinNote 47.

2.10 Derivative financial instruments

Asatthereportingperiod,derivativefinancialinstrumentsoftheCompanyconsistofTurkDEX-ISE30Indexfuturecontracts.ThesederivativeinstrumentsaretreatedasheldfortradingfinancialassetsincompliancewiththestandardTAS39-Financial Instruments.

Derivativefinancialinstrumentsareinitiallyrecognizedattheirfairvalue.

Thereceivablesandliabilitiesarisingfromthederivativetransactionsarerecognizedundertheoff-balancesheetaccountsthroughthecontractamounts.

Derivativefinancialinstrumentsaresubsequentlyre-measuredatfairvalueandpositivefairvaluedifferencesarepresentedeitheras“financialassetsheldfortrading”andnegativefairvaluedifferencesarepresentedas“otherfinancialliabilities”intheaccompanyingfinancialstatements.Allunrealizedgainsandlossesontheseinstrumentsareincludedinthestatementofincome.

2.11 Offsetting of financial assets

Financialassetsandliabilitiesareoff-setandthenetamountispresentedinthebalancesheetwhen,andonlywhen,theCompanyhasalegalrighttosetofftheamountsandintendseithertosettleonanetbasisortorealizetheassetandsettletheliabilitysimultaneously.

IncomeandexpensesarepresentedonanetbasisonlywhenpermittedbytheReportingStandards,orforgainsandlossesarisingfromagroupoftransactionsresultingfromtheCompany’ssimilaractivitiesliketradingtransactions.

2.12 Cash and cash equivalents

Cashandcashequivalents,whichisabaseforthepreparationofthestatementofcashflowsincludescashonhand,othercashandcashequivalents,demanddepositsandtimedepositsatbankshavingoriginalmaturitylessthan3monthswhicharereadytobeusedbytheCompanyornotblockedforanyotherpurpose.

2.13 Capital

TheshareholdingstructureoftheCompanyispresentedinnote1.1-Name of the Company and the ultimate owner of the group.Asof31 December2013,theCompany’sissuedcapitalis¨350,000,000(31 December2012:¨300,000,000).

Sources of the capital increases during the period

TheCompany’sissuedcapitalincreasedfrom¨300,000,000to¨350,000,000by¨50,000,000throughthetransfertoextraordinaryreservesby¨31,000,000,statutoryreservesby¨19,000,000.

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Privileges on common shares representing share capital

Asat31 December2013,thesharecapitaloftheCompanywasamounted¨350,000,000(31 December2012:¨300,000,000),dividedinto35,000,000,000shares(31 December2012:30,000,000,000shares)witheachhasanominalvalueof¨0.01.TheCompany’ssharecapitalwasdividedintogroupscomprisedof100,000,000.AmongelevenmembersoftheBoardofDirectors,sevenareelectedamongcandidatesnominatedbyGroupAshareholderswhilefourareelectedamongcandidatesnominatedbyGroupBshareholders.

Registered capital system in the Company

TheCompanyhasacceptedtheregisteredcapitalsystemsetoutinaccordancewiththeLawNo:2499andappliedthesystemasof15 June2000uponthepermissionno:67/1039grantedbytheCapitalMarketsBoard.Asat31 December2013theregisteredcapitaloftheCompanyis¨450,000,000(31 December2012:¨450,000,000).

Repurchased own shares by the Company

None.

2.14 Insurance and investment contracts - classification

AninsurancecontractisacontractunderwhichtheCompanyacceptssignificantinsuranceriskfromanotherparty(thepolicyholder)byagreeingtocompensatethepolicyholderifaspecifieduncertainfutureevent(theinsuredevent)adverselyaffectsthepolicyholder.Insuranceriskcoversallriskexceptforfinancialrisks.Allpremiumshavebeenreceivedwithinthecoverageofinsurancecontractsrecognizedasrevenueundertheaccountcaption“writtenpremiums”.

Investmentcontractsarethosecontractswhichtransferfinancialriskwithnosignificantinsurancerisk.Financialriskistheriskofapossiblefuturechangeinaspecifiedinterestrate,financialinstrumentprice,commodityprice,foreignexchangerate,indexofpricesorrates,creditratingorcreditindexorothervariable,provided,thatitisnotspecifictoapartytothecontract,inthecaseofanon-financialvariable.

TheCompanymainlyissuespoliciesunderpersonalaccident,riskandsavinglifeinsurancebranchesandindividualpensioncontracts.

SavingcomponentofthelifeproductscanbemeasuredseparatelybytheCompany.However,insuranceandsavingcomponentsarenotseparatedduetoaccountingpolicyrequirementsspecifiedtoaccountallrisksandrewardswithoutconsideringthebasisofmeasurement.

2.15 Insurance contracts and investment contracts with discretionary participation feature

Discretionaryparticipationfeature(“DPF”)withininsurancecontractsandinvestmentcontractsistherighttohavefollowingbenefitsinadditiontotheguaranteedbenefits.

(i)thatarelikelytocompriseasignificantportionofthetotalcontractualbenefits,

(ii)whoseamountortimingiscontractuallyatthediscretionoftheIssuer;and

(iii)thatarecontractuallybasedon:

(1)theperformanceofaspecifiedpoolofcontractsoraspecifiedtypeofcontract;

(2)realizedand/orunrealizedinvestmentsreturnsonaspecifiedpoolofassetsheldbytheIssuer;or

(3)theprofitorlossoftheCompany,Fundorotherentitythatissuesthecontract.

Asatthereportingperiod,theCompanydoesnothaveanyinsuranceorinvestmentcontractsthatcontainaDPF.

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2.16 Investment contracts without DPF

Inthecontextofthesavinglifeproducts,iftheinvestmentreturn,obtainedfromthesavingsofthepolicyholderswhichisinvestedbytheCompanyresultsaloweryieldratethanthetechnicalinterestrate,theCompanycompensatesthedifference;ifinvestmentreturnresultshigheryieldthantheguaranteedtechnicalinterestrate,thedifferenceisdistributedtothepolicyholdersasprofitsharingbonus.Duetocontractualandcompetitiveconstraintsinpractice,theCompanyhasclassifiedthesecontractsasinvestmentcontractswithoutDPF.

Forsuchproducts,investmentincomeobtainedfromassetsbackingliabilitiesisrecordedwithinincomestatementorequityinaccordancewiththeaccountingpoliciesmentionedabove;andwholecontractispresentedasaliabilityunderlifemathematicalprovisions.

2.17 Liabilities

Financial liabilityisanyliabilitythatisacontractualobligationtodelivercashoranotherfinancialassettoanotherentity.FinancialliabilitiesoftheCompanyaremeasuredattheirdiscountedvalues.Afinancialliabilityisderecognizedwhenitisextinguished.

Payables from individual pension businessconsistofpayablestoparticipants,participants’temporaryaccounts,andpayablestoindividualpensionagencies.Thepayablestoparticipantsaretheaccountinwhichthecontributionofparticipantsthattransferredtoinvestmentsonbehalfofindividualpensioncontractownersandincomefromtheseinvestmentsarerecorded.Thetemporaryaccountofparticipantsincludesthecontributionsofparticipantsthathavenotyetbeentransferredtotheinvestment.Thisaccountalsoincludestheentrancefeedeductedportionoftheparticipants’fundamounts,obtainedfromthefundsharesalesoccurinthecaseofsystemleaves.Thisaccountconsistsoftheamountsofparticipantsthatwillbetransferredtootherindividualpensioncompaniesorparticipants’ownaccounts.PayablestoindividualpensionagenciesareCompany’sliabilitiestoindividualpensionagenciesinreturnoftheirservices.

2.18 Income taxes

Corporate tax

Statutoryincomeissubjecttocorporatetaxat20%.Thisrateisappliedtoaccountingincomemodifiedforcertainexemptions(likedividendincome)anddeductions(likeinvestmentincentives),andadditionsforcertainnon-taxdeductibleexpensesandallowancesfortaxpurposes.Ifthereisnodividenddistributionplanned,nofurthertaxchargesaremade.

Dividendspaidtotheresidentinstitutionsandtheinstitutionsworkingthroughlocalofficesorrepresentativesarenotsubjecttowithholdingtax.Thewithholdingtaxrateonthedividendpaymentsotherthantheonespaidtothenon-residentinstitutionsgeneratingincomeinTurkeythroughtheiroperationsorpermanentrepresentativesandtheresidentinstitutionsis15%.Inapplyingthewithholdingtaxratesondividendpaymentstothenon-residentinstitutionsandtheindividuals,thewithholdingtaxratescoveredintherelatedDoubleTaxTreatyAgreementsaretakenintoaccount.Appropriationoftheretainedearningstocapitalisnotconsideredasprofitdistributionandthereforeisnotsubjecttowithholdingtax.

Theprepaidtaxesarecalculatedandpaidattheratesvalidfortheearningsoftherelatedyears.Thepaymentscanbedeductedfromtheannualcorporatetaxcalculatedforthewholeyearearnings.

Inaccordancewiththetaxlegislation,taxlossescanbecarriedforwardtooffsetagainstfuturetaxableincomeforuptofiveyears.Taxlossescannotbecarriedbacktooffsetprofitsfrompreviousperiods.Asat31 December2013and2012,theCompanydoesnothaveanydeductibletaxlosses.

InTurkey,thereisnoprocedureforafinalanddefiniteagreementontaxassessments.Companiesfiletheirtaxreturnswiththeirtaxofficesbytheendof25thofthefourthmonthfollowingthecloseoftheaccountingperiodtowhichtheyrelate.Taxreturnsareopenforfiveyearsfromthebeginningoftheyearthatfollowsthedateoffilingduringwhichtimethetaxauthoritieshavetherighttoaudittaxreturns,andtherelatedaccountingrecordsonwhichtheyarebased,andmayissuere-assessmentsbasedontheirfindings.

Accordingtothe“GeneralCommuniqueonCorporateTax”promulgatedinOfficialGazetteno28178dated19 January2012,fairvalueofderivativetransactionsandoptionpremiumsareacceptedasincomeorexpenseinthecorporatetaxstatementifthosetransactionsareperformedatDerivativeExchangeMarketandnotifthosetransactionsareperformedwithentitiesaspreviously.

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Deferred tax

InaccordancewithTAS12-Income taxes,deferredtaxassetsandliabilitiesarerecognizedonalltaxabletemporarydifferencesarisingbetweenthecarryingvaluesofassetsandliabilitiesinthefinancialstatementsandtheircorrespondingbalancesconsideredinthecalculationofthetaxbase,exceptforthedifferencesnotdeductiblefortaxpurposesandinitialrecognitionofassetsandliabilitieswhichaffectneitheraccountingnortaxableprofit.

Thedeferredtaxassetsandliabilitiesarereportedasnetinthefinancialstatementsif,andonlyif,theCompanyhasalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxassetsanddeferredtaxliabilitiesrelatetoincometaxesleviedbythesametaxationauthorityoneitherthesametaxableentity.

Incasewheregains/lossesresultingfromthesubsequentmeasurementoftheassetsarerecognizedinthestatementofincome,thentherelatedcurrentand/ordeferredtaxeffectsarealsorecognizedinthestatementofincome.Ontheotherhand,ifsuchgains/lossesarerecognizedasanitemunderequity,thentherelatedcurrentand/ordeferredtaxeffectsarealsorecognizeddirectlyintheequity.

Transfer pricing

InTurkey,thetransferpricingprovisionshavebeenstatedundertheArticle13ofCorporateTaxLawwiththeheadingof“disguisedprofitdistributionviatransferpricing”.TheGeneralCommuniquéondisguisedprofitdistributionviaTransferPricing,dated18 November2007setsdetailsaboutimplementation.

Ifataxpayerentersintotransactionsregardingsaleorpurchaseofgoodsandserviceswithrelatedparties,wherethepricesarenotsetinaccordancewitharm’slengthprinciple,thenrelatedprofitsareconsideredtobedistributedinadisguisedmannerthroughtransferpricing.Suchdisguisedprofitdistributionsthroughtransferpricingarenotacceptedastaxdeductibleforcorporateincometaxpurposes.

2.19 Employee benefits

Employee termination benefits

InaccordancewithexistingTurkishLaborLaw,theCompanyisrequiredtomakelump-sumterminationindemnitiestoeachemployeewhohascompletedoneyearofservicewiththeCompanyandwhoseemploymentisterminatedduetoretirementorforreasonsotherthanresignationormisconduct.ThecomputationoftheliabilityisbasedupontheretirementpayceilingannouncedbytheGovernment.Theapplicableceilingamountasat31 December2013is¨3,254.44(31 December2012:¨3,033.98).

TheCompanyaccountedforemployeeseveranceindemnitiesusingactuarialmethodincompliancewiththeTAS19-Employee Benefits.AftertherevisionofTAS19,astheamountofactuarialgainandlossarepresentedundertheotherprofitreserves,whichwerepreviouslyshownundertheincomestatement.Themajoractuarialassumptionsusedinthecalculationofthetotalliabilityasat31 December2013and2012areasfollows:

31 December 2013 31 December 2012Discountrate 3.77% 1.00%-4.57%Expectedrateofsalary/limitincrease 6.00% 6.00%

Other benefits

TheCompanyhasprovidedforundiscountedshort-termemployeebenefitsearnedduringtheperiodasperservicesrenderedincompliancewithTAS19intheaccompanyingfinancialstatements.

2.20 Provisions

Aprovisionismadeforanexistingobligationresultingfrompasteventsifitisprobablethatthecommitmentwillbesettledandareliableestimatecanbemadeoftheamountoftheobligation.Provisionsarecalculatedbasedonthebestestimatesofmanagementontheexpensestoincurasofthereportingperiodand,ifmaterial,suchexpensesarediscountedtotheirpresentvalues.IftheamountisnotreliablyestimatedandthereisnoprobabilityofcashoutflowfromtheCompanytosettletheliability,therelatedliabilityisconsideredas“contingent”anddisclosedinthefootnotestothefinancialstatements.

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Acontingentassetisapossibleassetthatarisesfrompasteventsandwhoseexistencewillbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheCompany.Contingentassetsarenotrecognizedinfinancialstatementssincethismayresultintherecognitionofincomethatmayneverberealized.Contingentassetsareassessedcontinuallytoensurethatdevelopmentsareappropriatelyreflectedinthefinancialstatements.Ifithasbecomevirtuallycertainthataninflowofeconomicbenefitswillarise,theassetandtherelatedincomearerecognizedinthefinancialstatementsoftheperiodinwhichthechangeoccurs.Ifaninflowofeconomicbenefitshasbecomeprobable,theCompanydisclosesthecontingentasset.

2.21 Revenue recognition

Written premiumsand claims paid

Writtenpremiumsrepresentpremiumsonpolicieswrittenduringtheperiodnetoftaxes,premiumsofthecancelledpolicieswhichwereproducedinpriorperiodsandpremiumcededtoreinsurancecompanies.Premiumscededtoreinsurancecompaniesareaccountedas“writtenpremiums,ceded”intheprofitorlossstatement.

Claimsarerecognizedasexpenseastheyarepaid.Outstandingclaimsprovisionisprovidedforbothreportedunpaidclaimsatthereportingperiodandincurredbutnotreportedclaims.Reinsurer’ssharesofclaimspaidandoutstandingclaimsprovisionsareoff-setagainstthesereserves.

Commission income and expense

AsfurtherdisclosedinNote 2.24,commissionspaidtotheagenciesrelatedtotheproductionoftheinsurancepoliciesandthecommissionsreceivedfromthereinsurancefirmsrelatedtothepremiumscededarerecognizedoverthelifeofthecontractbydeferringcommissionincomeandexpenseswithinthecalculationofreserveforunearnedpremiumsforthepoliciesproducedbefore1 January2008andrecognizingdeferredcommissionincomeanddeferredcommissionexpenseinthefinancialstatementsforthepoliciesproducedafter1 January2008.

Inordertonet-offthereceivableaccountsincompliancewiththematchingprinciple,theCompanyreservesaprovisionofcommissionstointermediariesovertheaccruedbutuncollectedreceivablesfrompolicyholdersbalanceasatthereportingperiod.Whilethecommissionstointermediariesfornon-lifebranchesarenotaccrued,thecommissionamountthathastobepaidincaseofthecollectionofreceivablesiscalculatedonthebasisofpolicyforlifebranch.

Reinsurancecommissionsareaccountedforbasedonreinsureragreements.AccordingtotheCircularno:2007/25issuedbytheTurkishTreasuryon28 December2007,startingfrom10 January2008,deferredreinsurancecommissionsarepresentedin“DeferredIncome”accountinthebalancesheet.

Interest income and expense

Interestincomeandexpensearerecognizedinthestatementofincomeusingtheeffectiveinterestmethod.Theeffectiveinterestrateistheratethatexactlydiscountstheestimatedfuturecashpaymentsandreceiptsthroughtheexpectedlifeofthefinancialassetorliability(or,whereappropriate,ashorterperiod)tothecarryingamountofthefinancialassetorliability.Theeffectiveinterestrateisestablishedoninitialrecognitionofthefinancialassetandliabilityandisnotrevisedsubsequently.

Thecalculationoftheeffectiveinterestrateincludesallfeesandpointspaidorreceivedtransactioncosts,anddiscountsorpremiumsthatareanintegralpartoftheeffectiveinterestrate.Transactioncostsareincrementalcoststhataredirectlyattributabletotheacquisition,issueordisposalofafinancialassetorliability.

Trading income/expense

Tradingincome/expenseincludesgainsandlossesarisingfromdisposalsoffinancialassetsheldfortradingpurposeandavailable-for-salefinancialassets.Tradingincomeandtradingexpensesarerecognizedas“Incomefromdisposaloffinancialassets”and“Lossfromdisposaloffinancialassets”intheaccompanyingunconsolidatedfinancialstatements.

Dividends

DividendincomeisrecognizedwhentheCompany’srighttoreceivepaymentisascertained.

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Income from individual pension operations

Fundmanagementfeeisrecognizedasincome,chargedtothepensioninvestmentfundsagainstthehardware,software,personnelandaccountingservicesprovided,andfeeissharedbetweentheCompanyandtheportfoliomanagersinaccordancewiththeagreementsignedbetweenparties.Totaloffundmanagementfeechargedtothepensioninvestmentfundsisrecognizedas“Fundmanagementincome”undertechnicalincomeandportionoftheportfoliomanagerisrecognizedas“Fundmanagementexpense”undertechnicalexpenses.

Managementfeeisleviedoncontributionsoftheparticipantsupto2%andrecognizedas“Managementfee”undertechnicalincome.Ifnopaymentismadeinthreemonthsafterthepaymentdateofoverduecontribution,caseofsuspensionoccursandmanagementexpenseischarged.Theaforementionedexpensesarerecognizedas“Managementexpensechargeincaseofsuspension”.

EntrancefeesarereceivedbytheCompanyfromparticipantsduringtheentranceintothesystemandfortheopeningofanewindividualpensionaccount.Entrancefeeschargedtotheparticipantscouldnotbehigherthanminimumwagethatisvalidonthedateofthecontract.IntheoutstandingindividualpensioncontractsoftheCompany,significantportionoftheentrancefeesisdeferredtotheendofthecontract.Thedeferredandcontingententrancefeesarenotrecordedintoincomestatement.Entrancefee,whichiscollectedinadvanceandequalto10%ofminimumwagethatisvalidonthedateofthecontract,isrecognizedas“Entrancefeeincome”undertechnicalincome.

Thedifferenceinvalueofthepensioninvestmentfundshares,obtainedduetocapitaladvanceonthedateofestablishment,tothedateofsellingofthosesharestotheparticipantsisrecordedintheincomestatementas“increaseinvalueofcapitalallowancesgivenasadvances”.

2.22 Leasing transactions

Tangibleassetsacquiredbywayoffinanceleasingarerecognizedintangibleassetsandtheobligationsunderfinanceleasesarisingfromtheleasecontractsarepresentedunderfinanceleasepayablesaccountinthefinancialstatements.Inthedeterminationoftherelatedassetsandliabilities,thelowerofthefairvalueoftheleasedassetandthepresentvalueofleasingpaymentsisconsidered.Financialcostsofleasingagreementsareexpandedinleaseperiodsatafixedinterestrate.

Ifthereisimpairmentinthevalueoftheassetsobtainedthroughfinancialleaseandintheexpectedfuturebenefits,theleasedassetsarevaluedwithnetrealizablevalue.Depreciationforassetsobtainedthroughfinancialleaseiscalculatedinthesamemannerastangibleassets.

Paymentsmadeunderoperatingleasesarerecognizedinthestatementofincomeonastraight-linebasisoverthetermofthelease.

2.23 Dividend distribution

InaccordancewiththeArticlesofAssociationoftheCompany,firstdividenddistributionismadefromdistributableprofitbasedontheratesandamountssetoutbytheCapitalMarketsBoard.InregardstotheprofitsharedistributionpolicyoftheCompany,twooptionsarepresentedtotheGeneralAssembly;30%ofdistributableprofitataminimumasbonussharesorincash.Basedonitsarticlesofassociation,theCompanymakesatamaximumof3%ofprofitsharepaymentstoitsemployeesfollowingtheappropriationoffirstprofitshare,limitedtoamaximumofthree-monthsalary.Fortheyearendedperiod31 December2013,dividendstothepersonnelhavebeenaccountedforinthestatementofincomethroughaccountinginthecurrentyear’sprofits/lossesinaccordancewithTAS19-EmployeeBenefits.

Dividendpayablesarerecordedasliabilityinthefinancialstatementswhentheyareannounced.

2.24 Reserve for unearned premiums

Inaccordancewiththe“CommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”(“CommuniquéonTechnicalReserves”)whichwasissuedin26606numberedand7 August2007datedOfficialGazetteandputintoeffectstartingfrom1 January2008,thereserveforunearnedpremiumsrepresentstheproportionsofthegrosspremiumswrittenwithoutdeductionsofcommissionoranyotherallowance,inaperiodthatrelatetotheperiodofrisksubsequenttothereportingperiodforallshort-terminsurancepolicies.

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Inthecaseofpersonalaccidentinsurance,annuallifeinsuranceandlifeinsurancewhichoftherenewaldateexceedsoneyear,reserveforunearnedpremiumsiscalculatedfortheportionoftheremainingpartwhichisleftafterdeductingsavingsfromgrosspremiumwrittenfortheyear.Inaccordancewiththe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”issuedin28356numberedand17 July2012datedOfficialGazetteandeffectivefrom30 June2012,reserveforunearnedpremiumsiscalculatedfromremainingamountofgrosswrittenpremiumsbydeductingsavingcomponentandexpensesrelatedwithsavingcomponentforlifeinsuranceandlifeinsurancewithsavingcomponentshavinglongerthanoneyearmaturity.Insurancepoliciescoveringpossibilitiesoflifeanddeathorbothandpersonalaccident,disabilitybyillnessandseriousillnessinsurancepoliciesareconsideredaslifeinsurancepoliciesandtheirpremiumsareclassifiedaslifeinsurancepremiums.

Accordingtothe2009/9NumberedCircularRelatedtoApplicationofTechnicalReservesissuedon27 March2009reserveforunearnedpremiumsiscalculatedbytakingintoaccountthatallpolicesbecomeactiveat12:00atnoonandendat12:00atnoon.

2.25 Reserve for unexpired risks

InaccordancewiththeCommuniquéonTechnicalReserves,ineachaccountingperiod,thecompanieswhileprovidingreserveforunearnedpremiumsshouldperformadequacytestcoveringthepreceding12monthsinregardwiththeprobabilityoffutureclaimsandcompensationsoftheoutstandingpolicieswillariseinexcessofthereserveforunearnedpremiumsalreadyprovided.Inperformingthistest,itisrequiredtomultiplythereserveforunearnedpremiums,netwiththeexpectedclaim/premiumratio.

Expectedclaim/premiumratioiscalculatedbydividingincurredlosses(provisionforoutstandingclaims,netattheendoftheperiod+claimspaid,net-provisionforoutstandingclaims,netatthebeginningoftheperiod)toearnedpremiums(writtenpremiums,net+reserveforunearnedpremiums,netatthebeginningoftheperiod-reserveforunearnedpremiums,netattheendoftheperiod).Inthecalculationofearnedpremiums;deferredcommissionexpensespaidtotheagenciesanddeferredcommissionincomereceivedfromthereinsurancefirmswhichwerenettedofffromreserveforunearnedpremiumsbothatthebeginningoftheperiodandattheendoftheperiodarenottakenintoconsideration.

Inaccordancewiththe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”issuedin28356numberedand17 July2012datedOfficialGazetteandeffectivefrom31 December2013,thetestisperformedonbranchbasisandincasewheretheexpectedclaim/premiumratioishigherthan95%,reservecalculatedbymultiplyingtheexceedingportionoftheexpectedclaim/premiumratiowiththereserveforunearnedpremiumsofthatspecificbranchisaddedtothereservesofthatbranch.Thedifferencebetweenthegrossamountandthenetamountisconsideredasthereinsurer’sshare.TurkishTreasuryisauthorizedtochangetestmethodsandrequireadditionalreserveforunexpiredrisksonbranchbasis.

Asat31 December2013and2012,relatedtesthavenotresultedinanydeficiencyregardingreserveforunexpiredrisks.

2.26 Provision for outstanding claims

Claimsarerecordedintheyearinwhichtheyoccur,basedonreportedclaimsoronthebasisofestimateswhennotreported.Provisionforoutstandingclaimsrepresentstheestimateofthetotalreportedcostsofnotifiedclaimsonanindividualcasebasisatthereportingperiodaswellasthecorrespondinghandlingcosts.

Changeinmeasurementoftechnicalreservesbecameeffectiveasat30 September2010accordingtotheTurkishTreasuryCircularwhichwerepublishedas“CommuniquéonAmendmentstoCommuniquéonTechnicalReserves”inOfficialGazettedated28 July2010andnumbered27655.

CommuniquéontechnicalreservesandcircularsissuedbyTurkishTreasurybringsessentialchangesintoeffectonmeasurementoftechnicalreservesandaccountingofincomefromsalvageandsubrogation.Insummary,itisaimedtoalignCommuniquéonTechnicalReserveswithmethodologicalchangesonActuarialChainladdermethod,toincludematterswhichweredeclaredbeforethroughcircularsandsectorannouncementstothecommuniqué.TheTurkishTreasuryissuedtheCircularsnumbered2010/12,2010/13,2010/14andthesectorannouncementnumbered2010/29whichbecameeffectiveasat31 December2010inordertoclarifyuncertaintiesonmeasurementoftechnicalreservesandaccountingofincomefromsalvageandsubrogation.

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Additionalamendmentseffectivefrom30 June2012areissuedinthe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”in28356numberedand17 July2012datedOfficialGazette.TestIBNRmethodceasedinthecalculationofprovisionforoutstandingclaims.Inaccordancewiththepreviouscommuniquésandsectorannouncementscompaniesshouldperformactuarialchainladdermethodforthenon-lifeinsurancebranchesengagedmorethanfiveyearsandhadsufficientdata.

Claimsincurredbeforetheaccountingperiodsbutreportedsubsequenttothosedatesareacceptedasincurredbutnotreported(“IBNR”)claims.Accordingtothe“CommuniquéonProvisionforIBNRClaimsinLifeBranch”numbered2010/14,IBNRcalculationischanged.Inaccordancewiththerelatedregulations,lastfiveormorethanfiveyears’weightedaveragecalculatedbydividingtotalgrossamountofincurredbutnotreportedclaimstoaverageannualguaranteeoftherelatedyears.Asofthecurrentreportingperiod,IBNRiscalculatedbymultiplyingweightedaverageIBNRratiobytheaverageguaranteeamountoflasttwelvemonthsbeforereportingperiod.Accordingly,asatthereportingperiod,theCompanyhasprovidedforIBNR,netoffcededamountingto¨4,003,978(31 December2012:¨3,832,540).

Accordingtothe7tharticle6thsubclauseofthe“CircularonChangeinTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”;provisionfortheoutstandingclaimsoftheperiodcannotbelessthantheresultoftheactuarialchainladdermethoddeterminedbyTurkishTreasury.TheCompanyhasselected“Standardchainladdermethod”forpersonalaccidentbranchasstatedinthe“CommuniquéonTechnicalReservesandCircularonActuarialChainLadderMethod”dated20 September2010andnumbered2010/12.Accordingly,asatthereportingperiod,theCompanyhasprovidedforIBNR,netoffcededamountingto¨32,878(31 December2012:¨38,228).

IntheSectorAnnouncementdated18 July2012andnumbered2012/13publishedbytheTurkishTreasury,insurance,reinsuranceandindividualpensioncompaniesarerequiredtoperformadequacytesttoassesstheadequacyofprovisionforoutstandingclaimsattheendoftheeachreportingperiod.Companiesperformedactuarialchainladdermethodsarenotobligedtorecordadditionalprovisionforoutstandingclaims.Asat31 December2013,thisadequacytesthasnotresultedinadditionalprovisionforoutstandingclaims.

2.27 Mathematical provisions

InaccordancewiththeCommuniquéonTechnicalReserves,companiesoperatinginlifeandnon-lifeinsurancebranchesareobligedtoallocateadequatemathematicalreservesbasedonactuarialbasistomeetliabilitiesagainstpolicyholdersandbeneficiariesforlong-termlife,healthandpersonalaccidentinsurancecontracts.Mathematicalprovisionsarecomposedofactuarialmathematicalprovisionsandprofitsharingprovisions.Actuarialmathematicalprovisions,accordingtoformulasandbasisinapprovedtechnicalbasisoftariffsforoveroneyear-lengthlifeinsurance,arecalculatedbydeterminingthedifferencebetweenpresentvalueofliabilitiesthattheCompanymeetsinfutureandcurrentvalueofpremiumspaidbypolicyholderinfuture(prospectivemethod).Inlifeinsurancewheresavingplanpremiumsarealsogenerated,actuarialmathematicalprovisionsconsistoftotalsavingplanportionsofpremiums.Provisionforprofitsharingconsistofprofitsharingcalculatedinpreviousyearsandacertainpercentageofcurrentyear’sincome,determinedintheapprovedprofitsharingtariffs,obtainedfromthefinancialassetsbackingliabilitiesoftheCompanyagainstthepolicyholdersandotherbeneficiariesforthecontractswhichtheCompanyisliabletogiveprofitsharing.ThevaluationmethodusedincalculationoftheprofittobesharedforsavinglifecontractsisthesamewiththevaluationbasisofportfolioonwhichassetsonwhichtheCompanyinveststheprovisionsallocatedduetoliabilitiesagainstthebeneficiariesareincludedintheframeworkofbasisdefinedinthenote2.8-Financial assetsabove.

2.28 Equalization provision

Accordingto“CommuniquéonTechnicalReserves”,companiesshouldbookequalizationprovisionforguaranteesofloanandearthquakesinordertooffsetfluctuationsintherateofindemnificationandtomeetcatastrophicrisksintheaccountingperiod.

InaccordancewiththeCommuniquéonTechnicalReservesissuedbytheTurkishTreasuryon27 March2009numbered2009/9,theinsurancecompaniesshouldrecognizeequalizationprovisionfordisabilityanddeathoccurredbecauseofanearthquakeandtariffsthatincludeadditionalguaranteeinlifeandcasualtybranches.Withthecircularreleasedon28 July2010andnumbered27655“CircularonChangeinTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”,thecalculationofequalizationprovisionisrevised.InaccordancewiththeCommuniquéonTechnicalReserves,thecompanieswhichgiveadditionalguaranteeinlifeusetheirownstatisticaldataforequalizationprovisioncalculation.Thecompaniesnothavingsufficientdataforcalculationwillaccept11%ofdeathnetpremium(includingdamagepayments)asearthquakepremiumand12%ofthatamountiscalculatedasequalizationprovision.

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InaccordancewiththeCommuniquéonTechnicalReserves,bookingprovisionsshouldcontinueuntilreaching150%ofthehighestnetpremiumamountofthelastfivefinancialyears.Equalizationprovisionsamountingto¨5,921,429arepresentedunder“othertechnicalreserves”withinshort-termliabilitiesintheaccompanyingfinancialstatements(31 December2012:¨3,915,510).

InaccordancewithRegulationonTechnicalReserves,insurancecompaniesarerequiredtoaccountforthebonusordiscountsprovidedtopolicyholdersandbeneficiariesinaccordancewiththecurrentyeartechnicalincome.Asof31 December2013,theCompanyaccountedforbonusprovisionamountingto¨128,485(31 December2012:¨256,613).

2.29 Related parties

PartiesareconsideredrelatedtotheCompanyif;

(a)directly,orindirectlythroughoneormoreintermediaries,theparty:

• controls,iscontrolledby,orisundercommoncontrolwiththeCompany(thisincludesparent,subsidiariesandfellowsubsidiaries);

• hasaninterestintheCompanythatgivesitsignificantinfluenceovertheCompany;or

• hasjointcontrolovertheCompany;

(b)thepartyisanassociateoftheCompany;

(c)thepartyisajointventureinwhichtheCompanyisaventurer;

(d)thepartyismemberofthekeymanagementpersonneloftheCompanyanditsparent;

(e)thepartyisaclosememberofthefamilyofanyindividualreferredtoin(a)or(d);

(f)thepartyisanentitythatiscontrolled,jointlycontrolledorsignificantlyinfluencedby,oranyindividualreferredtoin(d)or(e)whichsignificantvotingpowerinsuchentityresideswithdirectlyorindirectly,or

(g)thepartyisapost-employmentbenefitplanforthebenefitofemployeesoftheCompany,orofanyentitythatisarelatedpartyoftheCompany.

Arelatedpartytransactionisatransferofresources,servicesorobligationsbetweenrelatedparties,regardlessofwhetherapriceischarged.

Anumberoftransactionsareenteredintowithrelatedpartiesinthenormalcourseofbusiness.

2.30 Earnings per share

Earningspersharepresentedintheincomestatementiscalculatedbydividingthenetprofitintotheweightedaveragenumberoftheoutstandingsharesthroughoutthefinancialyear.CompaniesinTurkeycanincreasetheircapitalbydistributing“bonusshares”toshareholdersfromtheprioryears’profit.Such“bonusshare”distributionsareconsideredasissuedsharesintheearningspersharecalculations.Accordingly,weightedaveragenumberofequitysharesusedinthecalculationsiscalculatedbyconsideringtheretrospectiveeffectsofsharedistributions.

2.31 Events after the reporting period

“EventsAftertheReportingPeriod”;post-reportingdateeventsthatprovideadditionalinformationabouttheCompany’spositionatthereportingperiods(adjustingevents)arereflectedintheunconsolidatedfinancialstatements.Post-reportingdateeventsthatarenotadjustingeventsaredisclosedinthenoteswhenmaterial.

2.32 New standards and interpretations not yet adopted

Thereareanumberofnewstandards,updatesrelatedtotheexistingstandardsandinterpretationswhicharenotadoptedinthepreparationoftheaccompanyingfinancialstatementsandhavenotyetenteredintoforcefortheaccountingperiod31 December2013.ThesenewstandardsarenotexpectedtohaveanyimpactonthefinancialstatementsoftheCompany,withtheexceptionofTFRS9-Financial instruments,whichispublishedbytheTurkishAccountingStandardsBoardonOfficialGazettedated27 April2010andnumbered27564.

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IFRS9-Financial instruments,ispublishedbyInternationalAccountingStandardsBoardinNovember2009asapartofawiderprojectthataimstobringnewregulationstoreplaceTAS39-Financial Instruments: Recognition and Measurement.

Developinganewstandardforthefinancialreportingoffinancialassetsthatisprinciple-basedandlesscomplexisaimedbythisproject.TheobjectiveofTFRS9,beingthefirstphaseoftheproject,istoestablishprinciplesforthefinancialreportingoffinancialassetsthatwillpresentrelevantandusefulinformationtousersoffinancialstatementsfortheirassessmentofamounts,timinganduncertaintyoftheentity’sfuturecashflows.WithTFRS9anentityshallclassifyfinancialassetsassubsequentlymeasuredateitheramortizedcostorfairvalueonthebasisofboththeentity’sbusinessmodelformanagingthefinancialassetsandthecontractualcashflowcharacteristicofthefinancialassets.TheguidanceinTAS39onimpairmentoffinancialassetsandhedgeaccountingcontinuestoapply.

AnentityshallapplyTFRS9forannuallyyearsbeginningonorafter1 January2015.Anearlierapplicationispermitted.IfanentityadoptsthisTFRSinitsfinancialstatementsforaperiodbeginningbefore1 January2012,thenpriorperiodsarenotneededtoberestated.

New standards and interpretations not yet adopted and have no effect on the Company’s financials

• TAS32- FinancialInstruments:Presentation-TheamendmentontheClarificationofFinancialAssetsandDebtsaimstoclarifythestatement“existenceofanavailableandlegalrightforclarificationoftherecognizedamounts”.AdditionallyTAS32clarifiesapplicationareasofsettlementsystems(suchasExchangebureaus)wheregrosspaymentismadeandwhereclarificationprincipleisnotimplementedsimultaneously.Amendmentswillbeappliedfortheaccountingperiodsstartingasfrom1 January2014retrospectively.

3 Critical accounting estimates and judgments in applying accounting policies

Thenotesgiveninthissectionareprovidedtoaddition/supplementthecommentaryonthemanagementofinsurancerisknote4.1 - Management of insurance riskandnote4.2-Financial risk management.

Thepreparationoffinancialstatementsrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Inparticular,informationaboutsignificantareasatestimationuncertaintyandcriticaljudgmentinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountrecognizedinthefinancialstatementsaredescribedinthefollowingnotes:

Note 2.26 - Provisionforoutstandingclaims

Note 2.27 - Mathematicalprovisions

Note 4.1 -Managementofinsurancerisk

Note 4.2-Financialriskmanagement

Note 7-Investmentproperties

Note 11-Financialassets

Note 12-Loansandreceivables

Note 21-Deferredtax

4 Management of insurance and financial risk

4.1 Management of insurance risk

Objective of managing risks arising from insurance contracts and policies used to minimize such risks:

Insuranceriskisdefinedascoverageforexposuresthatexhibitapossibilityoffinanciallossduetoapplyinginappropriateandinsufficientinsurancetechniques.Inlinewiththenatureofaninsurancecontract,astheriskiscoincidental,theriskamountcannotbepredictable.

Insuranceriskrepresentsthepossibilityofthenoncoverageoftheclaimspaidbythepremiumscollected.

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Asof31 December2013,theCompany’slifeinsuranceclaims/premiumsratiostandsat19%.Lowclaims/premiumsratio,whichiscalculatedbytheproportionofclaimstoriskpremiumscollected,indicatesthattheCompanymakessignificantprofit.TheCompanyadoptscentralriskassessmentpolicy.TheCompanyappliesthispolicytotheallmarketingchannelsproduced.Initslifepolicyproduction,theCompanyhasnosaleschannelwithcontinuousriskexposure.TheCompanyanalyzesitsclaims/premiumsratioperiodicallyinordertoidentifyitsinsurancerisks.

Asof31 December2013,theCompany’spersonalaccidentinsuranceclaims/premiumsratiois62%.SincepersonalaccidentinsuranceportfoliohasaninsignificantshareintheCompany’sgeneralportfolio,thisratiowouldbelowwhennocompensationispaidandthisratiowouldbehighwhencompensationispaid.

Claims/premiumratiooftheCompanyasofthefinancialstatementperiodsispresentedbelow:  31 December 2013 31 December 2012

Lifeinsurance 19% 17%Personalaccident 62% 39%

TheCompanysharesitssignificantrisksassociatedwithnaturaldisasters,suchas;earthquake,terrorismorlarge-scaleaccidents,withreinsurersbyenteringintocatastrophicexcessoflossagreements.

Asat31 December2013and2012,riskportiontransferredtoreinsurersintermsofriskguaranteeispresentedasbelow:  31 December 2013 31 December 2012

Deathbynaturalcause 12% 7%Deathbyaccident 64% 51%Disabilitybyaccident 64% 49%Disabilitybyillness 65% 42%

Sensitivity to insurance risk

TheCompany’spolicyproductionstrategyfollowsaneffectiveriskmanagementinthepolicyproductionprocessconsideringthenature,extent,andaccuratedistributionoftheriskincurred.

Reinsureragreementsincludeclaimssurplus,excessoflossandquotareinsurances.Asaresultoftheseagreements,iftheCompany’s“deathbynaturalcause”riskaccountexceedsamountsinagreements“deathbyaccident”,theCompanytransferstheexceedingclaimpaymentstoreinsurers.TheCompanyalsotransferstheexceedingclaimpaymentstoreinsurersiftheCompany’s“deathbynaturalcause”or“deathbyaccident”riskaccountsexceedamountsinagreementsforallpolicies.

Determination of insurance risk concentrations by management and the common characteristics of insurance risk concentrations (nature, location and currency)

TheCompanyproduceslifeandpersonalaccidentbranchpolicies.TheCompany’sgrossandnetinsuranceriskconcentrations(afterreinsurance)intermsofinsurancebranchesaresummarizedasbelow:

31 December 2013

BranchesTotal gross

risk liability (*)Reinsurer’s share

of risk liabilityThe company’s net

claims liability

Lifeinsurance 40,714,955,430 11,217,790,955 29,497,164,475Personalaccident 3,488,091,959 1,787,721,812 1,700,370,147Total 44,203,047,389 13,005,512,767 31,197,534,622

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31 December 2012

BranchesTotal gross

risk liability (*)Reinsurer’s share

of risk liabilityThe company’s net

claims liability

Lifeinsurance 34,238,444,953 5,935,647,619 28,302,797,334Personalaccident 2,802,704,014 1,534,836,503 1,267,867,512Total 37,041,148,967 7,470,484,122 29,570,664,846

(*)Representsthemaximuminsuranceamountbasedondeathbynaturalcause,deathbyaccident,disabilitybyaccidentanddisabilitybyillness.

TheCompanyissuesinsurancecontractsmainlyinTurkey.Grossandnetinsuranceriskconcentrationsoftheinsurancecontracts(afterreinsurance)basedongeographicalregionsaresummarizedasbelow:

31 December 2013

Claims liability (*) Total gross claims liabilityReinsurer’s share of

claims liability Total net claims liability

MarmaraRegion 30,345,519 941,482 29,404,037CentralAnatolianRegion 11,660,915 225,796 11,435,119AegeanRegion 10,790,830 191,640 10,599,190MediterraneanRegion 7,716,232 370,586 7,345,646BlackSeaRegion 4,541,838 103,126 4,438,712SouthEastAnatolianRegion 2,507,785 49,291 2,458,494EastAnatolianRegion 1,842,388 46,356 1,796,032Foreigncountries(other) 3,036,119 - 3,036,119Total 72,441,626 1,928,277 70,513,349

31 December 2012

Claims liability (*) Total gross claims liabilityReinsurer’s share of

claims liability Total net claims liability

MarmaraRegion 21,480,725 68,937 21,411,788CentralAnatolianRegion 8,709,904 48,056 8,661,848AegeanRegion 7,173,066 5,775 7,167,291MediterraneanRegion 4,462,034 14,598 4,447,436BlackSeaRegion 3,713,142 - 3,713,142SouthEastAnatolianRegion 1,715,237 1,051 1,714,186EastAnatolianRegion 2,025,848 1,318 2,024,530Foreigncountries(other) 2,722,129 1,500 2,720,629Total 52,002,085 141,235 51,860,850

(*)Totalclaimsliabilityincludestheactualestimatedcompensationamounts.IBNRprovisionandoutstandingclaimsadequacyprovisionarenotincludedinthecalculation.

Comparison of incurred claims with past estimations

Asat31 December2013,thereisnotanydeficiencyintheoutstandingclaimsreserveoftheCompany.

Incurredclaimdevelopmenttableisdisclosedinnote17 - Insurance liabilities and reinsurance assets.

Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements

Inthecurrentperiod,therearenomaterialchangesintheassumptionsofmeasurementofinsuranceassetsandliabilities.

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4.2 Financial risk management

ThisnotepresentsinformationabouttheCompany’sexposuretoeachofthebelowrisks,theCompany’sobjectives,policiesandprocessesformeasuringandmanagingrisk,andtheCompany’smanagementofcapital.TheCompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments:

• creditrisk

• liquidityrisk

• marketrisk

TheCompany’sriskmanagementprogramfocusesonminimizingthenegativeeffectsoftheambiguitiesinfinancialmarketsontheCompany’sfinancialstatements.TheCompanyismostlyexposedtointerestriskandpriceriskinrelationwithfinancialinvestments,tocreditriskinrelationwithinsurancereceivablesandexchangerateriskduetopoliciesandassetsinforeigncurrencies.

TheriskismanagedbyaspecificdepartmentwhichisinlinewiththeapprovedpoliciesbytheBoardofDirectors.SeveralriskpolicieshavebeenpreparedbytheBoardofDirectorsinordertomanagetheexchangerisk,interestrisk,creditrisk,usingthederivativeandnon-derivativefinancialinstrumentsrisks.

Credit risk

Creditriskisbasicallydefinedasthepossibilitythatcounterpartywillfailtomeetitsobligationsinaccordanceunderagreedtermsofacontract.WhentheCompany’sfieldofactivityandthirdpartyrelationsisconsidered,itscreditriskisdeemedtoberelativelyatminimum.ThebalancesheetitemsthattheCompanyisexposedtocreditriskareasfollows:

• Cashatbanks

• Othercashandcashequivalents

• Availableforsalefinancialassets

• Financialassetsheldfortrading

• Held-to-maturityfinancialassets

• Premiumreceivablesfrompolicyholders

• Receivablesfromintermediaries(agencies)

• Receivablesfromreinsurancecompaniesrelatedtoclaimspaidandcommissionsaccrued

• Reinsurancesharesofinsuranceliabilities

• Duefromrelatedparties

• Otherreceivables

ThereviewoftheCompany’sthirdpartyrelationsarepresentedbelow.

Reinsurers: Reinsurancecontractsarethemostcommonmethodtomanageinsurancerisk.Thisdoesnot,however,dischargetheCompany’sliabilityastheprimaryinsurer.Ifareinsurerfailstopayaclaimforanyreason,theCompanyremainsliableforthepaymenttothepolicyholder.TheCompanyworkswithinternationalreinsurancecompanieswithstrongfinancialstatus.Inthisperspective,thelevelofriskexposureisalsoconsideredtobeatminimum.

Agencies: AgenciesworkingwiththeCompanyexposeittoalimitedlevelofcreditrisk.SincetheCompany’sproductsareissuedwithlong-termuse,commissionsgiventoagenciesarealsolongterminnature;therefore,theCompanyhasconsistentpayablestoagencies.

Policyholders: OverduepremiumreceivablesarenotconsideredasasignificantriskexposuretotheCompanybecauseiftheCompanyhasunpaidpremiums,allguaranteesrelatedtotheinsurancewillbeinvalid.

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Asat31 December2013and2012,theCompany’screditriskexposurebytypesoffinancialinstrumentsisasfollows.Banksandothercashandcashequivalentsarealsoincludedinthecreditrisk.

31 December 2013

Receivables (*)

Financial assets

Banks and other cash and cash

equivalent assets

Receivables from insurance activities

Other receivables

Related party Third party Related party Third party

Maximum credit risk exposure as at the reporting period (A+B+C) - 56,534,984 334,634 12,165,677 2,290,684,583 138,919,439-Securedportionofmaximumriskbyguarantees,provisions,etc. - - - - - -A.Netbookvalueofneitherpastduenorimpairedfinancialassets - 47,679,360 334,634 12,165,677 2,290,684,583 138,919,439B.Netbookvalueofpastduebutnotimpairedassets - 8,855,624 - - - -C.Netbookvalueofimpairedassets - - - - - -

-Grossbookvalue - 120,570 - - - --Impairment - (120,570) - - - --Securedportionofnetbookvaluebyguarantees,provisions,etc. - - - - - -

31 December 2012

Receivables (*)

Financial assets

Banks and other cash and cash

equivalent assets

Receivables from insurance activities

Receivables from insurance activities

Related party Third party Related party Third party

Maximum credit risk exposure as at the reporting period (A+B+C) - 60,736,653 1,096,350 1,891,704 2,562,713,429 142,491,481-Securedportionofmaximumriskbyguarantees,provisions,etc. - - - - - -A.Netbookvalueofneitherpastduenorimpairedfinancialassets - 54,917,279 1,096,350 1,891,704 2,562,713,429 142,491,481B.Netbookvalueofpastduebutnotimpairedassets - 5,819,374 - - - -C.Netbookvalueofimpairedassets - - - - - -

-Grossbookvalue - 120,570 - - - --Impairment - (120,570) - - - --Securedportionofnetbookvaluebyguarantees,provisions,etc. - - - - - -

(*)ReceivablesfromindividualpensionactivitiesarenotincludedinthecreditrisktablesincethosereceivablesarefollowedbothsideofthebalancesheetasassetandliabilityandtheyareheldonbehalfofparticipantsbyIMKBTakasveSaklamaBankasıAŞ(the“ISESettlementandCustodyBank”).

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Liquidity risk

LiquidityriskistheriskthattheCompanywillencounterdifficultyinmeetingthenetfundingobligations.Liquidityriskarisesfromtheeventstriggerdecreasingfundssuchasdeteriorationinthemarketconditionsordowngradingofcreditratings.Asat31 December2013,maturityanalysesoftheCompany’sassetsandliabilitiesarepresentedinthetablebelow:

31 December 2013Without

maturityUp to

1 month1 to 3

months3 to 12

months 1 to 5 years 5 years and over Unallocated TotalCashandcashequivalents 11,127,176 127,638,453 - - - - - 138,765,629Financialassetsandinvestmentswithrisksonpolicyholders - 31,035,028 73,707,554 318,395,419 414,066,604 1,362,044,106 207,643,946 2,406,892,657Receivablesfrommainoperations - 685,599 1,206,495 2,040,950 - - 5,292,081,534 5,296,014,578Duefromrelatedparties - - 334,634 - - - - 334,634Otherreceivables - 11,261,706 903,971 12,165,677Prepaidexpensesandincomeaccruals,shortterm - - - - - - 10,690,180 10,690,180Othercurrentassets - - - - - - 17,887 17,887Financialassets(Associates) - - - - - - 8,762,193 8,762,193Tangibleassets - - - - - - 21,701,481 21,701,481Intangibleassets - - - - - - 4,982,250 4,982,250Prepaidexpensesandincomeaccruals,longterm - - - - - - 8,905 8,905Deferredtaxassets - - - - - - 2,068,582 2,068,582Total assets 11,127,176 170,620,786 75,248,683 320,436,369 414,066,604 1,362,044,106 5,548,860,929 7,902,404,653

Payablesarisingfrommainoperations - 8,949,788 - 881,759 - - 5,351,680,646 5,361,512,193Duetorelatedparties - - - 5,014 - - - 5,014Otherpayables - 5,702,261 - - - - 3,180,156 8,882,417Insurancetechnicalprovisions - - - - - - 1,972,924,325 1,972,924,325Provisionsfortaxesandothersimilarobligations - 4,848,034 - - - - 3,799,996 8,648,03Deferredincomeandexpenseaccruals - - - - - - 2,588,141 2,588,141Othershorttermliabilities - - - - - - 62 62Provisionsforotherrisks - 650,000 - 2,000,000 - 8,269,886 3,055,359 13,975,245Deferredtaxliabilities - - - - - - - -Shareholders’equity - - - - - - 533,869,226 533,869,226Total liabilities - 20,150,083 - 2,886,773 - 8,269,886 7,871,097,911 7,902,404,653Net liquidity surplus/(deficit) 11,127,176 150,470,703 75,248,683 317,549,596 414,066,604 1,353,774,220 (2,322,236,982)

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31 December 2012Without

maturityUp to 1 month 1 to 3 months

3 to 12 months 1 to 5 years 5 years and over Unallocated Total

Cashandcashequivalents 5,724,356 136,618,070 - - - - - 142,342,426Financialassetsandinvestmentswithrisksonpolicyholders - 19,083,944 16,543,014 242,201,381 754,493,001 1,423,754,509 226,481,644 2,682,557,493Receivablesfrommainoperations - 436,074 1,003,583 1,700,637 - - 4,344,007,866 4,347,148,160Duefromrelatedparties - - 1,096,350 - - - - 1,096,350Otherreceivables - 1,166,746 724,958 1,891,704Prepaidexpensesandincomeaccruals,shortterm - - - - - - 12,601,372 12,601,372Othercurrentassets - - - - - - 23,230 23,230Financialassets(Associates) - - - - - - 8,762,193 8,762,193Tangibleassets - - - - - - 21,311,444 21,311,444Intangibleassets - - - - - - 4,297,953 4,297,953Prepaidexpensesandincomeaccruals,longterm - - - - - - 58,142 58,142Deferredtaxassets - - - - - - - -Total assets 5,724,356 157,304,834 18,642,947 243,902,018 754,493,001 1,423,754,509 4,618,268,802 7,222,090,467

Payablesarisingfrommainoperations - 9,105,720 - 636,822 - - 4,361,441,693 4,371,184,235Duetorelatedparties - - - 8,172 - - 2,260 10,432Otherpayables - 3,850,309 - - - - 2,619,075 6,469,384Insurancetechnicalprovisions - - - - - - 2,288,110,880 2,288,110,880Provisionsfortaxesandothersimilarobligations - 4,139,335 - - - - 7,173,965 11,313,300Deferredincomeandexpenseaccruals - - - - - - 1,793,541 1,793,541Othershorttermliabilities - - - - - - 61 61Provisionsforotherrisks - 500,000 - - - 7,408,414 5,859,758 13,768,172Deferredtaxliabilities - - - - - - 4,760,670 4,760,670Shareholders’equity - - - - - - 524,679,792 524,679,792Total liabilities - 17,595,364 - 644,994 - 7,408,414 7,196,441,695 7,222,090,467Net liquidity surplus/(deficit) 5,724,356 139,709,470 18,642,947 243,257,024 754,493,001 1,416,346,095 (2,578,172,893)

Market risk

Marketriskistheriskthatchangesinmarketprices,suchasinterestrate,foreignexchangeratesandcreditspreadswillaffecttheCompany’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimizingthereturnonrisk.

Foreign currency risk

TheCompanyisexposedtoforeigncurrencyriskthroughinsuranceandreinsurancetransactionsinforeigncurrencies.

Foreignexchangegainsandlossesarisingfromforeigncurrencytransactionsarerecordedattransactiondates.Attheendoftheperiods,foreigncurrencyassetsandliabilitiesevaluatedbytheCentralBankoftheRepublicofTurkey’sspotpurchaseratesandthedifferencesarisingfromforeigncurrencyratesarerecordedasforeignexchangegainorlossinthestatementofoperations.

ParalleltothegeneralcharacteristicofTurkishinsurancesector,theCompanyholdslongpositionintermsofUSDollarandEuro.

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TheCompany’sexposuretoforeigncurrencyriskisasfollows:Foreign currency position table - 31 December 2013

 Total ¨ (Functional

currency) US Dollar Euro GBP CHF JPY1.Cashatbanks 1,013,036 235,728 651,781 112,476 13,051 -2.Financialassetsandfinancialinvestmentswithrisksonpolicyholders 349,939,881 229,425,236 108,350,930 12,163,715 - -3.Receivablesfrommainoperations 297,044 168,988 122,673 5,383 - -4.Reinsurancereceivables 128,461 - 128,461 - - -5.Rentreceivables - - - - - -6.Depositsgiven 23,477 23,477 - - - -Foreign currency assets, current 351,401,899 229,853,429 109,253,845 12,281,574 13,051 -

7. Total assets 351,401,899 229,853,429 109,253,845 12,281,574 13,051 -

8.Financeleaseliabilities - - - - - -9.Payablestoreinsurers 22,163 21,613 - 381 - 16910.Agencyguarantees 237,595 225,078 12,517 - - -11.Technicalprovisions 339,075,966 236,612,886 91,029,132 11,384,517 13,079 36,352Foreign currency liabilities, short term 339,335,724 236,859,577 91,041,649 11,384,898 13,079 36,521

12. Total liabilities 339,335,724 236,859,577 91,041,649 11,384,898 13,079 36,521

Net financial position 12,066,175 (7,006,148) 18,212,196 896,676 (28) (36,521)Net long/(short) position on monetary items 12,042,698 (7,029,625) 18,212,196 896,676 (28) (36,521)

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Foreign currency position table - 31 December 2012

 Total ¨ (Functional

currency) US Dollar Euro GBP CHF JPY1.Cashatbanks 2,543,732 2,138,498 137,416 113,413 154,405 -2.Financialassetsandfinancialinvestmentswithrisksonpolicyholders 418,853,062 297,272,130 107,842,355 13,738,577 - -3.Receivablesfrommainoperations 374,618 303,753 66,438 4,427 - -4.Reinsurancereceivables 23,942 10,655 13,287 - - -5.Rentreceivables - - - - - -6.Depositsgiven 19,609 19,609 - - - -Foreign currency assets, current 421,814,963 299,744,645 108,059,496 13,856,417 154,405 -7. Total assets 421,814,963 299,744,645 108,059,496 13,856,417 154,405 -

8.Financeleaseliabilities - - - - - -9.Payablestoreinsurers 963 - - 700 - 26310.Agencyguarantees 181,307 170,648 10,659 - - -11.Technicalprovisions 313,232,568 218,974,074 84,117,708 10,068,544 15,750 56,492Foreign currency liabilities, short term 313,414,838 219,144,722 84,128,367 10,069,244 15,750 56,75512. Total liabilities 313,414,838 219,144,722 84,128,367 10,069,244 15,750 56,755

Net financial position 108,400,125 80,599,923 23,931,129 3,787,173 138,655 (56,755)Net long/(short) position on monetary items 108,380,516 80,580,314 23,931,129 3,787,173 138,655 (56,755)

ForeigncurrencytransactionsarerecordedatexchangeratesatthetransactiondatesandforeigncurrencydenominatedmonetaryitemsareevaluatedbytheCentralBankoftheRepublicofTurkey’sspotpurchaseratesasat31 December2013.

Foreigncurrencyratesusedforthetranslationofforeigncurrencydenominatedmonetaryassetsandliabilitiesasatreportingperiodsareasfollows:31 December 2013 US Dollar Euro GBP CHF JPY

Foreigncurrencyrateusedintranslationofbalancesheetitems 2.1343 2.9365 3.5114 2.3899 0.0202

31 December 2012 US Dollar Euro GBP CHF JPY

Foreigncurrencyrateusedintranslationofbalancesheetitems 1.7826 2.3517 2.8708 1.9430 0.0207

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Exposure to foreign currency risk

A10percentdepreciationofthe¨againstthefollowingcurrenciesasat31 December2013and2012wouldhaveincreasedordecreasedequityandprofitorloss(excludingtaxeffects)bytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestrates,remainconstant.Incaseofa10percentappreciationofthe¨againstthefollowingcurrencies,theeffectwillbeinoppositedirection.Exchange rate sensitivity analysis table - 31 December 2013  Profit/loss   Equity (*)

 

Appreciation of foreign

currency

Depreciation of foreign

currency

Appreciation of foreign

currency

Depreciation of foreign

currency

If USD value changes by 10% against ¨:        1-NetUSDollarassets/liabilities (714,269) 714,269 (700,615) 700,6152-HedgedportionfromUSDollarrisk(-) - - - -3- Net effect of US Dollar (1+2) (714,269) 714,269 (700,615) 700,615

If EUR value changes by 10% against ¨:4-NetEuroassets/liabilities 1,785,809 (1,785,809) 1,821,220 (1,821,220)5-HedgedportionfromEurorisk(-) - - - -6- Net effect of Euro (4+5) 1,785,809 (1,785,809) 1,821,220 (1,821,220)

If GBP value changes by 10% against ¨:7-NetGBPassets/liabilities 89,884 (89,884) 89,668 (89,668)8-HedgedportionfromGBPrisk(-)  - - - -9- Net effect of GBP (7+8)  89,884 (89,884) 89,668 (89,668)

If CHF value changes by 10% against ¨:10-NetCHFassets/liabilities (3) 3 (3) 311-HedgedportionfromCHFrisk(-) - - - -12- Net effect of CHF (10+11) (3) 3 (3) 3

If JPY value changes by 10% against ¨:13-NetJPYassets/liabilities (3,652) 3,652 (3,652) 3,65214-HedgedportionfromJPYrisk(-) - - - -15- Net effect of JPY (13+14) (3,652) 3,652 (3,652) 3,652 Total (3+6+9+12+15) 1,157,769 (1,157,769) 1,206,618 (1,206,618)

(*)Includesprofit/losseffect.

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Exchange rate sensitivity analysis table - 31 December 2012  Profit/loss   Equity (*)

 Appreciation of

foreign currencyDepreciation of

foreign currencyAppreciation of

foreign currencyDepreciation of

foreign currency

If USD value changes by 10% against ¨:        1-NetUSDollarassets/liabilities 7,654,585 (7,654,585) 8,059,992 (8,059,992)2-HedgedportionfromUSDollarrisk(-) - - - -3- Net effect of US Dollar (1+2) 7,654,585 (7,654,585) 8,059,992 (8,059,992)

If EUR value changes by 10% against ¨:4-NetEuroassets/liabilities 2,332,055 (2,332,055) 2,393,113 (2,393,113)5-HedgedportionfromEurorisk(-) - - - -6- Net effect of Euro (4+5) 2,332,055 (2,332,055) 2,393,113 (2,393,113)

If GBP value changes by 10% against ¨:7-NetGBPassets/liabilities 361,013 (361,013) 378,717 (378,717)8-HedgedportionfromGBPrisk(-)  - - - -9- Net effect of GBP (7+8)  361,013 (361,013) 378,717 (378,717)

If CHF value changes by 10% against ¨:10-NetCHFassets/liabilities 13,866 (13,866) 13,866 (13,866)11-HedgedportionfromCHFrisk(-) - - - -12- Net effect of CHF (10+11) 13,866 (13,866) 13,866 (13,866)

If JPY value changes by 10% against ¨:13-NetJPYassets/liabilities (5,676) 5,676 (5,676) 5,67614-HedgedportionfromJPYrisk(-) - - - -15- Net effect of JPY (13+14) (5,676) 5,676 (5,676) 5,676 Total (3+6+9+12+15) 10,355,843 (10,355,843) 10,840,012 (10,840,012)

(*)Includesprofit/losseffect.

Interest risk

Exposure to interest risk

Thechangesininterestratethatarisefluctuationsinpricesoffinancialinstrumentsleadtothenecessityofovercominginterestraterisk.TheCompany’ssensitivityforinterestrateriskisrelatedtotheinconsistencyofmaturityofassetandliabilityitems.Theinterestriskismanagedbycompensatingtheassetsexposedtotheinterestfluctuationswiththeidenticalliabilities.

Financialinstrumentswhicharesensitivetothechangesininterestratesaregiveninthetablebelow:  31 December 2013 31 December 2012

Fixed rate financial instrumentsFinancialassets 1,635,110,730 1,875,486,885

Financial assets at fair value through profit or loss - -Available-for-sale financial assets 1,623,708,744 1,861,395,540Loans and receivables 11,401,986 14,091,345

Banks 18,737,143 54,078,050

Variable rate financial instrumentsFinancialassets 564,137,981 580,588,964

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Interest rate sensitivity of financial instruments

Asat31 December2013and2012,interestrateriskanalysisoffinancialassetsandfinancialliabilitiesaresummarizedinthetablebelow:

31 December 2013Up to 1 month 1 to 3 months

3 to 12 months 1 to 5 years

5 years and over

Non-interest bearing Total

Assets:              Cashandcashequivalents 127,638,453 - - - - 11,127,176 138,765,629Financialassetsandinvestmentswithrisksonpolicyholders 521,465,455 73,707,554 165,404,467 76,627,129 1,362,044,106 207,643,946 2,406,892,657Receivablesfrommainoperations 685,599 1,206,495 2,040,950 - - 5,292,081,534 5,296,014,578Duefromrelatedparties - 334,634 - - - - 334,634Otherreceivables 11,261,706 - - - - 903,971 12,165,677Prepaidexpensesandincomeaccruals,shortterm - - - - - 10,690,180 10,690,180Othercurrentassets - - - - - 17,887 17,887Financialassets(Associates) - - - - - 8,762,193 8,762,193Tangibleassets - - - - - 21,701,481 21,701,481Intangibleassets - - - - - 4,982,250 4,982,250Prepaidexpensesandincomeaccruals,longterm - - - - - 8,905 8,905Deferredtaxassets - - - - - 2,068,582 2,068,582Total assets 661,051,213 75,248,683 167,445,417 76,627,129 1,362,044,106 5,559,988,105 7,902,404,653

Liabilities:Payablesarisingfrommainoperations 8,949,788 - 881,759 - - 5,351,680,646 5,361,512,193Duetorelatedparties - - 5,014 - - - 5,014Otherliabilities 5,702,261 - - - - 3,180,156 8,882,417Insurancetechnicalprovisions - - - - - 1,972,924,325 1,972,924,325Provisionsfortaxesandothersimilarobligations 4,848,034 - - - - 3,799,996 8,648,030Deferredincomeandexpenseaccruals - - - - - 2,588,141 2,588,141Othershorttermliabilities - - - - - 62 62Provisionsforotherrisks 650,000 - 2,000,000 - 8,269,886 3,055,359 13,975,245Deferredtaxliabilities - - - - - - -Shareholders’equity - - - - - 533,869,226 533,869,226Total liabilities and equity 20,150,083 - 2,886,773 - 8,269,886 7,871,097,911 7,902,404,653

Net position 640,901,130 75,248,683 164,558,644 76,627,129 1,353,774,220 (2,311,109,806) -

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31 December 2012Up to 1 month 1 to 3 months

3 to 12 months 1 to 5 years

5 years and over

Non-interest bearing Total

Assets:              Cashandcashequivalents 54,078,050 - - - - 88,264,376 142,342,426Financialassetsandinvestmentswithrisksonpolicyholders 513,609,225 102,606,697 242,201,381 173,904,037 1,423,754,509 226,481,644 2,682,557,493Receivablesfrommainoperations 436,074 1,003,583 1,700,637 - - 4,344,007,866 4,347,148,160Duefromrelatedparties - 1,096,350 - - - - 1,096,350Otherreceivables 1,166,746 - - - - 724,958 1,891,704Prepaidexpensesandincomeaccruals,shortterm - - - - - 12,601,372 12,601,372Othercurrentassets - - - - - 23,230 23,230Financialassets(Associates) - - - - - 8,762,193 8,762,193Tangibleassets - - - - - 21,311,444 21,311,444Intangibleassets - - - - - 4,297,953 4,297,953Prepaidexpensesandincomeaccruals,longterm - - - - - 58,142 58,142Deferredtaxassets - - - - - - -Total assets 569,290,095 104,706,630 243,902,018 173,904,037 1,423,754,509 4,706,533,178 7,222,090,467

Liabilities:Payablesarisingfrommainoperations 9,105,720 - 636,822 - - 4,361,441,693 4,371,184,235Duetorelatedparties - - 8,172 - - 2,260 10,432Otherliabilities 3,850,309 - - - - 2,619,075 6,469,384Insurancetechnicalprovisions - - - - - 2,288,110,880 2,288,110,880Provisionsfortaxesandothersimilarobligations 4,139,335 - - - - 7,173,965 11,313,300Deferredincomeandexpenseaccruals - - - - - 1,793,541 1,793,541Othershorttermliabilities - - - - - 61 61Provisionsforotherrisks 500,000 - - - 7,408,414 5,859,758 13,768,172Deferredtaxliabilities - - - - - 4,760,670 4,760,670Shareholders’equity - - - - - 524,679,792 524,679,792Total liabilities and equity 17,595,364 - 644,994 - 7,408,414 7,196,441,695 7,222,090,467

Net position 551,694,731 104,706,630 243,257,024 173,904,037 1,416,346,095 (2,489,908,517) -

Interestratesensitivityofthestatementofincomeistheeffectoftheassumedchangesininterestratesonthefairvaluesoffinancialassetsatfairvaluethroughprofitorlossandonthenetinterestincomeasatandfor31 December2013and2012ofthefloatingratenon-tradingfinancialassetsandfinancialliabilitiesheldat31 December2013and2012.Interestratesensitivityofequityiscalculatedbyrevaluingavailable-for-salefinancialassetsat31 December2013and2012fortheeffectsoftheassumedchangesininterestrates.Thisanalysisassumesthatallothervariables,inparticularforeigncurrencyrates,remainconstant.Thetablebelowdemonstratingtheeffectofchangesininterestratesonstatementofincomeandequityexcludestaxeffectsonrelatedlossorincome.

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31 December 2013100 bp

increase100 bp

decrease500 bp

increase500 bp

decrease

Company’sownportfolio (4,775,898) 4,893,034 (22,025,376) 26,775,962Total, net (4,775,898) 4,893,034 (22,025,376) 26,775,962

31 December 2012100 bp

increase100 bp

decrease500 bp

increase500 bp

decrease

Company’sownportfolio (6,165,010) 6,477,278 (28,088,476) 35,978,405Total, net (6,165,010) 6,477,278 (28,088,476) 35,978,405

Fair value information

Theestimatedfairvaluesoffinancialinstrumentshavebeendeterminedusingavailablemarketinformation,andwhereitexists,appropriatevaluationmethodologies.

TheCompanyhasclassifieditsfinancialassetsaswhetherheldfortradingpurposeoravailableforsale.Asatreportingperiod,availableforsalefinancialassetsandfinancialassetsheldfortradingaremeasuredattheirfairvaluesintheaccompanyingfinancialstatements.

Managementestimatesthatthefairvalueofotherfinancialassetsandliabilitiesarenotmateriallydifferentthantheircarryingvalues.

Classification relevant to fair value information

IFRS7-Financial instruments: Disclosuresrequirestheclassificationoffairvaluemeasurementsintoafairvaluehierarchybyreferencetotheobservabilityandsignificanceoftheinputsusedinmeasuringfairvalueoffinancialinstrumentsmeasuredatfairvaluetobedisclosed.Thisclassificationbasicallyreliesonwhethertherelevantinputsareobservableornot.Observableinputsrefertotheuseofmarketdataobtainedfromindependentsources,whereasunobservableinputsrefertotheuseofpredictionsandassumptionsaboutthemarketmadebytheCompany.Thisdistinctionbringsaboutafairvaluemeasurementclassificationgenerallyasfollows:

Level1:Fairvaluemeasurementsusingquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities;

Level2:FairvaluemeasurementsusinginputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(asprices)orindirectly(derivedfromprices).

Level3:Fairvaluemeasurementsusinginputsfortheassetsorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

Ifclassificationisavailableforusage,itnecessitatestheutilizationofobservablemarketdata.

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Theclassificationoffairvaluemeasurementsoffinancialassetsandliabilitiesmeasuredatfairvalueisasfollows:31 December 2013

Level 1 Level 2 Level 3 Total

Financial assets:Financialassetsheldfortrading 36,388,883 - - 36,388,883Availableforsalefinancialassets(*) 532,884,056 13,929,093 - 546,813,149Loansandreceivables 11,401,986 - - 11,401,986Financialinvestmentswithrisksonpolicyholdersclassifiedasavailableforsale 1,787,655,851 - - 1,787,655,851Receivablesfromindividualpensionbusiness 5,231,179,012 - - 5,231,179,012Total financial assets 7,599,509,788 13,929,093 - 7,613,438,881

Financial liabilities:Investmentcontractliabilities-lifemathematicalprovisionforsavinglifepolicies 1,871,476,210 - - 1,871,476,210Payablesarisingfromindividualpensionbusiness(**) 5,231,179,012 - - 5,231,179,012Total financial liabilities 7,102,655,222 - - 7,102,655,222

(*)Asat31 December2013,securitiesthatarenotpubliclytradedamountingto¨34,932,570havebeenmeasuredatcostandareexcludedfromthetable.(**)Includesinvestmentsdirectedindividualpensionfunds.

31 December 2012Level 1 Level 2 Level 3 Total

Financial assets:Financialassetsheldfortrading 42,316,499 - - 42,316,499Availableforsalefinancialassets(*) 475,524,095 8,335,117 - 483,859,212Loansandreceivables 14,091,345 - - 14,091,345Financialinvestmentswithrisksonpolicyholdersclassifiedasavailableforsale 2,117,707,466 - - 2,117,707,466Receivablesfromindividualpensionbusiness 4,277,830,443 - - 4,277,830,443Total financial assets 6,927,469,848 8,335,117 - 6,935,804,965

Financial liabilities:Investmentcontractliabilities-lifemathematicalprovisionforsavinglifepolicies 2,205,674,373 - - 2,205,674,373Payablesarisingfromindividualpensionbusiness(**) 4,277,830,443 - - 4,277,830,443Total financial liabilities 6,483,504,816 - - 6,483,504,816

(*)Asat31 December2012,securitiesthatarenotpubliclytradedamountingto¨34,882,753havebeenmeasuredatcostandareexcludedfromthetable.(**)Includesinvestmentsdirectedindividualpensionfunds.

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Equity share price risk

Equitysharepriceriskisdefinedastheriskofdecreasingthemarketpriceofequitysharesasaresultofadeclineinindex.

Theeffectofchangesinfairvaluesoftheavailable-for-salefinancialassetsonequitythatisresultedfromthefluctuationsonindex(alloftheothervariablesareassumedtobefixed)areasfollowsasat31 December2013and2012.

Change in index 31 December 2013 31 December 2012

Marketpriceofequity 10% 8,920,298 9,320,633

Theeffectofchangesinfairvaluesofthefinancialassetsheldfortradingonequitythatisresultedfromthefluctuationsonindex(alloftheothervariablesareassumedtobefixed)areasfollowsasat31 December2013and2012.

Change in index 31 December 2013 31 December 2012

Marketpriceofequity 10% 237,230 205,477

Capital management

TheaimoftheCompany’scapitalmanagementisdefinedastoprovidethecontinuityofprofit-makingcompany,toprotectthebenefitsoftheshareholdersandinstitutionalpartnersandalsotoconductthemostefficientcapitalstructureinordertoreducethecostofcapital.

ThecapitaladequacyoftheCompanyiscalculatedinaccordancewiththeDecree“MeasurementandAssessmentofCapitalAdequacyofInsuranceandReinsuranceCompaniesandPensionFunds”inallreportingperiods.TheCapitalAdequacycalculatedaccordingtotwomethodsareinlinewiththeminimumrequirements.TheCompany’srecentcapitaladequacytablepreparedasatthereportdatefor31 December2013issummarizedbelow.Asat31 December2013,thecapitaladequacyoftheCompanyis¨124,146,726and¨90,436,913;basedonfirstandsecondmethodrespectively.Bythetablebelow,itisobservedthatcapitaladequacybalancescalculatedbyusingfirstandsecondmethodsarelessthantheCompany’scapitalasat31 December2013.TheCompany’scapitalcalculatedbasedontheregulationasat31 December2013¨539,790,655.Consequently,theCompany’scapitalisadequate.

Capital Adequacy Table  31 December 2013 31 December 2012

Requiredcapitalfornon-lifebranches 115,435 196,369Requiredcapitalforlifebranch 109,078,343 108,496,682Requiredcapitalforpensionbranch 14,952,948 12,569,576Required capital based on the first method 124,146,726 121,262,627

Requiredcapitalforassetrisk 66,013,754 59,220,929Requiredcapitalforreinsurancerisk 2,561,093 2,638,414Requiredcapitalforexcessivepremiumincrease - 2,848,020Requiredcapitalforoutstandingclaimsrisk 1,863,755 1,393,290Requiredcapitalforunderwritingrisk 19,093,348 17,809,304Requiredcapitalforinterestrateandcurrencyrisk 904,963 8,130,010Required capital based on the second method 90,436,913 92,039,967

Required capital 124,146,726 121,262,627Current capital 539,790,655 524,679,792Excessive capital 415,643,929(*) 403,417,165

(*)Asaresultoflegalregulation,theequalizationprovisionamounted¨5,921,429isincludedinthecurrentcapital.

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5 Segment reporting

SegmentingofbalancesheetandincomestatementitemsisbasedonthedistributionkeydescribedinCircular“PrinciplesandProceduresofDistributionKeysUsedinFinancialStatementsundertheInsuranceUniformedChartofAccounts”issuedbytheUndersecretariatofTreasuryon4 January2008andCircular“AmendmentstoPrinciplesandProceduresofDistributionKeysUsedinFinancialStatementsundertheInsuranceUniformedChartofAccounts”issuedbytheUndersecretariatofTreasuryon9 August2010.31 December 2013 Life Individual Pension Personal Accident Total

Continuing operations:Technicalincome 598,513,416 132,002,445 675,114 731,190,975Technicalexpense (535,102,109) (143,137,394) (658,719) (678,898,222)Totalofotherincomeandexpense 23,130,004 22,885,286 168,548 46,183,838Income before tax 86,541,311 11,750,337 184,943 98,476,591Incometaxexpense - - - (15,310,000)Net profit for the period 86,541,311 11,750,337 184,943 83,166,591

31 December 2013 Life Individual Pension Personal Accident Total

Segmentassets 2,245,556,871 5,640,484,413 16,363,369 7,902,404,653Total assets 2,245,556,871 5,640,484,413 16,363,369 7,902,404,653

Segmentliabilities (2,251,440,771) (5,634,566,447) (16,397,435) (7,902,404,653)Total liabilities (2,251,440,771) (5,634,566,447) (16,397,435) (7,902,404,653)

Other segment informationDepreciationandamortization (2,471,797) (2,445,646) (18,012) (4,935,455)

31 December 2012 Life Individual Pension Personal Accident Total

Continuing operations:Technicalincome 502,677,829 139,026,057 681,276 642,385,162Technicalexpense (469,262,040) (119,530,396) (663,540) (589,455,976)Totalofotherincomeandexpense 26,468,063 26,092,017 186,220 52,746,300Income before tax 59,883,852 45,587,678 203,956 105,675,486Incometaxexpense - - - (26,100,000)Net profit for the period 59,883,852 45,587,678 203,956 79,575,486

31 December 2012 Life Individual Pension Personal Accident Total

Segmentassets 2,555,929,807 4,648,178,044 17,982,616 7,222,090,467Total assets 2,555,929,807 4,648,178,044 17,982,616 7,222,090,467

Segmentliabilities (2,560,541,778) (4,643,538,704) (18,009,985) (7,222,090,467)Total liabilities (2,560,541,778) (4,643,538,704) (18,009,985) (7,222,090,467)

Other segment informationDepreciationandamortization (1,909,282) (1,882,155) (13,433) (3,804,870)

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6 Tangible assets

Movementintangibleassetsintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Land(*) 1,832,831 - - 1,832,831Buildings(*) 25,379,158 - (375,726) 25,003,432Machineryandequipment 5,722,942 2,239,866 (7,303) 7,955,505Vehicles 573,475 183,856 (227,608) 529,723Furnitureandfixtures(includesleasedassets) 3,924,669 146,255 - 4,070,924Leaseholdimprovements 2,685,382 267,885 - 2,953,267

40,118,457 2,837,862 (610,637) 42,345,682Accumulated depreciation:Buildings (10,430,872) (503,679) 167,824 (10,766,727)Machineryandequipment (3,326,955) (1,072,558) 6,481 (4,393,032)Vehicles (442,475) (105,377) 218,158 (329,694)Furnitureandfixtures(includesleasedassets) (2,953,316) (287,209) - (3,240,525)Leaseholdimprovements (1,653,395) (260,828) - (1,914,223)

(18,807,013) (2,229,651) 392,463 (20,644,201)Carrying amounts 21,311,444 21,701,481

(*)Landwithacarryingamountof¨1,411,831andbuildingswithacarryingamountof¨13,568,863areinvestmentpropertiesandgiveninNote7-Investment propertiesindetail.Totalimpairmentlossesonownuselandamountedto¨417,070.

Movementintangibleassetsintheperiodfrom1 Januaryto31 December2012ispresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Land(*) 1,832,831 - - 1,832,831Buildings(*) 25,379,158 - - 25,379,158Machineryandequipment 4,212,702 1,528,873 (18,633) 5,722,942Vehicles 797,979 - (224,504) 573,475Furnitureandfixtures(includesleasedassets) 3,723,903 297,573 (96,807) 3,924,669Leaseholdimprovements 2,229,627 455,755 - 2,685,382

38,176,200 2,282,201 (339,944) 40,118,457Accumulated depreciation:Buildings(*) (9,922,184) (508,688) - (10,430,872)Machineryandequipment (2,642,412) (696,092) 11,549 (3,326,955)Vehicles (546,574) (87,506) 191,605 (442,475)Furnitureandfixtures(includesleasedassets) (2,759,383) (280,979) 87,046 (2,953,316)Leaseholdimprovements (1,402,711) (250,684) - (1,653,395)

(17,273,264) (1,823,949) 290,200 (18,807,013)Carrying amounts 20,902,936 21,311,444

(*)Landwithacarryingamountof¨1,411,831andbuildingswithacarryingamountof¨14,260,981areinvestmentpropertiesandgiveninNote7-Investment propertiesindetail.Totalimpairmentlossesonownuselandamountedto¨417,070.

Therearenopledgesontangibleassets.

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7 Investment properties

Movementininvestmentpropertiesintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Land 1,411,831 - - 1,411,831Buildings 24,461,256 - (375,726) 24,085,530

25,873,087 - (375,726) 25,497,361Accumulated depreciation:Buildings (10,200,275) (484,216) 167,824 (10,516,667)

(10,200,275) (484,216) 167,824 (10,516,667)       

Carrying amounts 15,672,812     14,980,694

Fortheyearended31 December2013,theCompanyhasrentalincomefrominvestmentpropertiesamounting¨3,280,321(31 December2012:¨3,059,325).

Movementininvestmentpropertiesintheperiodfrom1 Januaryto31 December2012ispresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Land 1,411,831 - - 1,411,831Buildings 24,461,256 - - 24,461,256

25,873,087 - - 25,873,087Accumulated depreciation:Buildings (9,711,050) (489,225) - (10,200,275)

(9,711,050) (489,225) - (10,200,275)       

Carrying amounts 16,162,037     15,672,812

Asat31 December2012,totalfairvalueoftheCompany’sinvestmentpropertiesamountingto¨53,523,000.Expertreportsonthesepropertieshavebeenpreparedbytheauthorizedrealestatevaluationcompaniesat Januaryand Februaryof2010.Therearenopledgesontheseproperties.

8 Intangible assets

Movementinintangibleassetsintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Rights 11,845,644 3,390,101 - 15,235,745

11,845,644 3,390,101 - 15,235,745Accumulated amortization:Rights (7,547,691) (2,705,804) - (10,253,495)

(7,547,691) (2,705,804) - (10,253,495)

Carrying amounts 4,297,953 4,982,250

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Movementsinintangibleassetsintheperiodfrom1 Januaryto31 December2012arepresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Rights 8,299,662 3,545,982 - 11,845,644

8,299,662 3,545,982 - 11,845,644Accumulated amortization:Rights (5,566,770) (1,980,921) - (7,547,691)

(5,566,770) (1,980,921) - (7,547,691)

Carrying amounts 2,732,892 4,297,953

9 Investments in associates31 December 2013 31 December 2012

Carrying value Participation rate % Carrying value Participation rate %

İşPortföyYönetimiAŞ 8,762,193 20.0% 8,762,193 20.0%Investments in associates, net 8,762,193 8,762,193

Associate Total assetsShareholders’

equityRetained earnings

Profit for the period

Audited or not Period

İşPortföyYönetimiAŞ 80,906,115 75,181,480 14,958,829 10,471,581 Audited 31 December2013

TheCompanyhas¨554,972ofdividendincomefromassociates.

10 Reinsurance assets and liabilities

OutstandingreinsuranceassetsandliabilitiesoftheCompany,asacedingcompanyinaccordancewiththeexistingreinsurancecontractsareasfollows:Reinsurance assets 31 December 2013 31 December 2012

Reserveforunearnedpremiums,ceded(Note 17.15) 2,193,599 1,662,615Provisionforoutstandingclaims,ceded(Note 17.15) 3,134,362 605,350Lifemathematicalreserve,ceded(Note 17.15) 3,998,021 5,468,417Provisionforbonusanddiscount,ceded(Not17.15) 353,241 272,071Othertechnicalprovision,ceded 268,623 180,789Duefromreinsurers 113,350 242,024Total 10,061,196 8,431,266

Thereisnotanyimpairmentlossesrecognizedforreinsuranceassets.Reinsurance liabilities 31 December 2013 31 December 2012

Cashdepositedbyinsuranceandreinsurancecompanies(Note 19) 881,759 636,822Total 881,759 636,822

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Gainsandlossesrecognizedinthestatementofincomeinaccordancewithexistingreinsurancecontractsareasfollows:31 December 2013 31 December 2012

Lifebranch:Premiumscededduringtheperiod (13,001,366) (11,460,129)Changeinunearnedpremiumsreserve,ceded 551,901 131,841Commissionsreceivedfromreinsurers(*) 2,613,736 2,760,812Reinsurersshareofclaimspaid 6,694,047 3,393,572Changeinoutstandingclaims,ceded 2,502,259 (353,629)Changeinbonusanddiscountprovision,ceded 78,480 272,071Changeinlifemathematicalreserve,ceded (1,470,396) 212,924

(2,031,339) (5,042,538)

Non-life branch:Premiumscededduringtheperiod (140,606) (322,163)Changeinunearnedpremiumsreserve,ceded (20,917) (26,502)Commissionsreceivedfromreinsurers(*) 48,490 60,894Reinsurersshareofclaimspaid 135,078 45,319Changeinoutstandingclaims,ceded 26,753 (30,677)Changeinprovisionforbonusanddiscount,ceded 2,690 -

51,488 (273,129)

Total, net (1,979,851) (5,315,667)(*)Deferredcommissionsareexcludedfromcommissionsreceivedfromreinsurers.

11 Financial assets

Asat31 December2013and2012,theCompany’sfinancialassetsaredetailedasfollows:Financial assets and financial investments with risk on policyholders 31 December 2013 31 December 2012

Availableforsalefinancialassets,Company’sownportfolio 581,745,719 518,741,965Financialassetsheldfortradingpurpose 36,388,883 42,316,499Loansandreceivables 11,401,986 14,091,345Financialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailableforsale 1,787,655,851 2,117,707,466Impairmentlossonfinancialassets (10,299,782) (10,299,782)Total 2,406,892,657 2,682,557,493

Asat31 December2013and2012,theCompany’sfinancialassetsheldfortradingaredetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Equity shares and other non-fixed income financial assets:Equityshares 1,265,614 2,372,303 2,372,303InvestmentfundsandTurkishderivativesexchangecontracts 26,279,907 34,016,580 34,016,580Total financial assets held for trading purpose - other 27,545,521 36,388,883 36,388,883

Total financial assets held for trading purpose 27,545,521 36,388,883 36,388,883

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31 December 2012Face value Cost Fair value Carrying value

Equity shares and other non-fixed income financial assets:Equityshares 1,265,614 2,054,767 2,054,767InvestmentfundsandTurkishderivativesexchangecontracts 30,259,023 40,261,732 40,261,732Total financial assets held for trading purpose - other 31,524,637 42,316,499 42,316,499

Total financial assets held for trading purpose 31,524,637 42,316,499 42,316,499

TheCompany’sfinancialassetsheldfortradingissuedbytheCompany’srelatedparties,aredetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Investmentfunds 557,536,556 26,279,907 34,016,580 34,016,580Total 557,536,556 26,279,907 34,016,580 34,016,580

31 December 2012Face value Cost Fair value Carrying value

Investmentfunds 501,187,090 30,259,023 40,261,732 40,261,732Total 501,187,090 30,259,023 40,261,732 40,261,732

Asat31 December2013and2012,theCompany’sloansandreceivablesaredetailedasfollows:31 December 2013

Cost Fair value Carrying value

Reverserepo 11,400,000 11,401,986 11,401,986Receivables from reverse repo 11,400,000 11,401,986 11,401,986

31 December 2012Cost Fair value Carrying value

Reverserepo 14,089,404 14,091,345 14,091,345Receivables from reverse repo 14,089,404 14,091,345 14,091,345

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Asat31 December2013and2012,theCompany’savailableforsalefinancialassetsinitsownportfolioaredetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Debt instruments:Privatesectorbonds 63,159,000 56,048,139 58,211,104 58,211,104Governmentbonds 392,952,232 406,881,935 399,399,063 399,399,063Total available for sale financial assets - debt instruments 462,930,074 457,610,167 457,610,167

Equity shares and other non-fixed income financial assets:Equityshares(*) 104,449,208 124,135,552 124,135,552Total available for sale financial assets - other 104,449,208 124,135,552 124,135,552

Total available for sale financial assets 567,379,282 581,745,719 581,745,719

Impairment loss on available for sale equity shares (10,299,782) (10,299,782) (10,299,782)

Net available for sale financial assets 557,079,500 571,445,937 571,445,937(*)Financialassetsofwhichthefairvaluesaremeasuredreliablyarepresentedattheirfairvalues,ifnot,presentedattheircosts.

31 December 2012Face value Cost Fair value Carrying value

Debt instruments:Privatesectorbonds 29,492,970 25,758,616 26,512,627 26,512,627Governmentbonds 349,474,472 333,670,209 364,140,259 364,140,259Total available for sale financial assets - debt instruments 359,428,825 390,652,886 390,652,886

Equity shares and other non-fixed income financial assets:Equityshares(*) 100,871,811 128,089,079 128,089,079Total available for sale financial assets - other 100,871,811 128,089,079 128,089,079

Total available for sale financial assets 460,300,636 518,741,965 518,741,965

Impairment loss on available for sale equity shares (10,299,782) (10,299,782) (10,299,782)

Net available for sale financial assets 450,000,854 508,442,183 508,442,183(*)Financialassetsofwhichthefairvaluesaremeasuredreliablyarepresentedattheirfairvalues,ifnot,presentedattheircosts.

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TheCompanyhasequitysharesandbondsissuedbytheCompany’srelatedpartiesandclassifiedasavailableforsalefinancialassetsinitsownportfoliowithacostamountof¨103,220,742and¨18,291,112acarryingvalueof¨120,795,738and¨18,312,084asat31 December2013(31 December2012:Equityshareswithacostamountof¨99,643,344andacarryingamountof¨125,103,318;BondsissuedbytheCompany’srelatedpartieswithacostamount¨4,799,350andacarryingamountof¨4,992,600).

Financialinvestmentswithrisksonsavinglifepolicyholders(“FIRSLP”)asat31 December2013and2012aredetailedasfollows:  31 December 2013

Face value Cost Fair value Carrying value

Debt Instruments:Governmentbonds-¨ 1,359,428,127 1,372,517,064 1,387,177,831 1,387,177,831EurobondsissuedbytheTurkishGovernment 137,578,000 318,932,698 337,737,532 337,737,532Privatesectorbonds 5,500,000 5,146,240 5,321,195 5,321,195Investmentfunds 55,151,200 51,500,165 57,419,293 57,419,293Total available for sale financial assets - debt instruments 1,557,657,327 1,748,096,167 1,787,655,851 1,787,655,851Financial investments with risks on saving life policyholders 1,748,096,167 1,787,655,851 1,787,655,851

31 December 2012Face value Cost Fair value Carrying value

Debt Instruments:Governmentbonds-¨ 1,413,003,589 1,464,050,779 1,646,165,027 1,646,165,027EurobondsissuedbytheTurkishGovernment 154,991,000 300,765,080 405,166,591 405,166,591InvestmentFunds 55,151,200 51,500,165 66,375,848 66,375,848Total available for sale financial assets - debt instruments 1,623,145,789 1,816,316,024 2,117,707,466 2,117,707,466Financial investments with risks on saving life policyholders 1,816,316,024 2,117,707,466 2,117,707,466

ThefinancialassetsissuedbytheCompany’srelatedpartiesandclassifiedasFIRSLParedetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Investmentfunds 55,151,200 51,500,165 57,419,293 57,419,293Privatesectorbonds 5,500,000 5,146,240 5,321,195 5,321,195Total 60,651,200 56,646,405 62,740,488 62,740,488

31 December 2012Face value Cost Fair value Carrying value

Investmentfunds 55,151,200 51,500,165 66,375,848 66,375,848Total 55,151,200 51,500,165 66,375,848 66,375,848

TheCompanyhasnosecurities,otherthanissuedsharesinthecurrentperiod,oranymatureddebtsecurities.

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Valueincreasesinfinancialassetsforthelastthreeperiods:31 December 2013 31 December 2012 31 December 2011

Current financial assets:Availableforsalefinancialassets,Company’sownportfolio 14,366,437 58,441,329 774,599Financialassetsheldfortradingpurpose 8,843,362 10,791,862 2,410,277Loansandreceivables 1,986 1,941 162Financialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailableforsale 39,559,684 301,391,442 141,798,468Total 62,771,469 370,626,574 144,983,506

Valueincreasesreflectthedifferencebetweenthecarryingvalueandcostofthefinancialassets.

TheCompanyhas¨10,299,782ofimpairmentlossarisingfromitsavailableforsaleinvestmentsinequityparticipationsnothavingaquotedmarketpriceinanactivemarket.

TheCompanydoesnotapplyhedgeaccounting.

Exchangeratedifferencesarisingfromthepaymentsofmonetaryitemsordifferentconversionratesusedinthecurrentperiodoratinitialrecognitionarerecognizedinprofitorloss.

FinancialassetsblockedinfavoroftheTurkishTreasuryasaguaranteefortheinsuranceactivitiesareasfollows:31 December 2013

Face value Cost Fair value Carrying value

Financialinvestmentswithrisksonsavinglifepolicyholders-debtsecurities 1,557,657,327 1,748,096,167 1,787,655,851 1,787,655,851Availableforsalefinancialassets 133,995,798 138,191,971 135,211,744 135,211,744Total 1,886,288,138 1,922,867,595 1,922,867,595

31 December 2012Face value Cost Fair value Carrying value

Financialinvestmentswithrisksonsavinglifepolicyholders-debtsecurities 1,623,145,789 1,816,316,024 2,117,707,466 2,117,707,466Availableforsalefinancialassets 135,522,223 137,669,477 150,802,627 150,802,627Total 1,953,985,501 2,268,510,093 2,268,510,093

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12 Loans and receivables 31 December 2013 31 December 2012

Receivablesfrominsuranceoperations 12,788,669 8,959,668Provisionsforreceivablesfrominsuranceoperations (2,574) (2,574)Loanstothepolicyholders 43,748,889 51,779,559Doubtfulreceivablesfrommainoperationsandinsuranceoperations 117,996 117,996Provisionsfordoubtfulreceivablesfrommainoperationsandinsuranceoperations (117,996) (117,996)Receivablesfrompensionactivities 5,239,479,594 4,286,411,507

Net fund value of participants 5,231,179,012 4,277,830,443Other 8,300,582 8,581,064

Total receivables from main operations 5,296,014,578 4,347,148,160Receivablesfrompersonnel 334,634 1,096,350Otherreceivables 12,165,677 1,891,704Total 5,308,514,889 4,350,136,214

ThedetailsofguaranteesfortheCompany’sreceivablesarepresentedbelow:31 December 2013 31 December 2012

Guaranteesandcommitments 4,112,320 4,075,128Lettersofguarantees 1,655,469 1,140,697Realestatepledges 1,026,400 1,016,400Total 6,794,189 6,232,225

31 December 2013 31 December 2012

Provisionsfordoubtfulreceivablesfrommainoperationsandinsuranceoperationsatthebeginningoftheperiod 117,996 117,996Collections - -Chargefortheperiod - -Provisions for doubtful receivables from main operations and insurance operations at the end of the period 117,996 117,996

Provision for both overdue receivables and receivables not due yet

a)Receivablesunderlegaloradministrativefollowup(due):¨117,996(31 December2012:¨117,996).

b)Provisionforpremiumreceivables(due):¨2,574(31 December2012:¨2,574).

TheCompanyprovidesprovisionforitsdoubtfulreceivablesinthelegalfollow-upbyconsideringthevalueandnatureofthereceivable.

TheCompanyreflectsitsreceivablesfromandpayablestoreinsuranceandinsurancecompaniesbynettingoffontheentitybasis.

TheCompany’sreceivablesfromandpayablestoshareholders,associatesandsubsidiariesaredetailedinnote45-Related party transactions.

13 Derivative financial instruments

Asat31 December2013,thedetailedinformationabouttheCompany’scurrentderivativefinancialinstrumentsispresentedin11-Financial assets. Atthereportingperiod,Companyhasnoderivativefinancialinstruments.

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14 Cash and cash equivalents

Asat31 December2013and2012,cashandcashequivalentsareasfollows:31 December 2013 31 December 2012

At the end of the period

At the beginning of the period

At the end of the period

At the beginning of the period

Cashonhand 20,961 14,155 14,155 12,206Bankdeposits 29,864,319 59,951,461 59,951,461 52,803,532BankGuaranteedCreditCardReceivableswithMaturitiesLessThanThreeMonths(*) 109,055,120 82,540,020 82,540,020 67,036,981Chequesgivenandpaymentorders (174,771) (163,210) (163,210) (63,794)Cash and cash equivalents in the balance sheet 138,765,629 142,342,426 142,342,426 119,788,925

Interestaccrualsonbankdeposits (87,376) (282,203) (282,203) (323,655)Timedepositswithmaturitieslongerthan3months - - - -Cash and cash equivalents presented in the statement of cash flow 138,678,253 142,060,223 142,060,223 119,465,270

(*)BankGuaranteedCreditCardReceivableswithMaturitiesLessThanThreeMonthsincludecreditcardreceivablesfrombanksinrelationtopremiumpaymentsofpolicyholders.

Asat31 December2013and2012,bankdepositsarefurtheranalyzedasfollows:31 December 2013 31 December 2012

Foreigncurrencydenominatedbankdeposits-timedeposits - --demanddeposits 1,013,036 2,543,732

BankdepositsinTurkishLira-timedeposits 18,737,143 54,078,050-demanddeposits 10,114,140 3,329,679

Cash at banks 29,864,319 59,951,461

Asat31 December2013,¨timedepositshaveamaximummaturityof1monthandtheirsimpleinterestratesvarybetween7.00%and9.00%.TheCompanyhasnoforeigncurrencydenominatedbankdeposits.

Asat31 December2012,¨timedepositshaveamaximummaturityof1monthandtheirsimpleinterestratesvarybetween6.84%and8.00%.TheCompanyhasnoforeigncurrencydenominatedbankdeposits.

15 Equity

Paid in capital

Asat31 December2013,theauthorizednominalsharecapitaloftheCompanyis¨350,000,000andthesharecapitaloftheCompanyconsistsof35,000,000,000issuedshareswith¨0.01nominalvalueeach.

TheCompany’ssharecapitalisdividedintogroupAandgroupBshares.GroupAshareisrepresentedby100,000,000ofequityshareshavinganominalamountof¨0.01each.GroupBshareisrepresentedby34,900,000,000shareshavinganominalamountof¨0.01eachandallsharesareownedbyTürkiyeİşBankasıAŞ.GroupAshareholdershavenoprivilegesexceptfortheelectionofBoardmembers.InaccordancewiththeArticlesofAssociation,newgroupAsharescannotbeissuedincapitalincreases.

TheCompanyhasacceptedtheregisteredcapitalsystemsetoutinaccordancewiththeLawNo:2499andappliedthesystemasof15 June2000uponthepermissionno:67/1039grantedbytheCapitalMarketsBoard.Asat31 December2013,theCompany’sregisteredcapitalis¨450,000,000.

Asat31 December2013,therearenotanytreasurysharesheldbytheCompany’sassociate;namelyİşPortföyYönetimiAŞ.TherearenotanytreasurysharesheldbytheCompanyitself.

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Profit on assets sale that will be transferred to capital

Inaccordancewithtaxlegislation,75%ofprofitsfromsalesofparticipationsharesandrealstatesincludedintheassetsofcompaniesisexemptfromcorporatetaxprovidedthatitisclassifiedunderaspecialfundforfullfiveyears.Theexemptgainscannotbetransferredtoanotheraccountotherthanacapitalincreaseorcannotbewithdrawnfromtheentityforfiveyears.

Legal reserves

ThelegalreservesconsistoffirstandsecondlegalreservesinaccordancewiththeTurkishCommercialCode.Thefirstlegalreserveisappropriatedoutofthestatutoryprofitsattherateof5%,untilthetotalreservereachesamaximumof20%oftheentity’ssharecapital.Thesecondlegalreserveisappropriatedattherateof10%ofalldistributionsinexcessof5%oftheentity’ssharecapital.Thefirstandsecondlegalreservesarenotavailablefordistributionunlesstheyexceed50%ofthesharecapital,butmaybeusedtoabsorblossesintheeventthatthegeneralreserveisexhausted.

Themovementoflegalreservesisasfollows:31 December 2013 31 December 2012

Legal reserves at the beginning of the period 65,516,677 59,640,083Transferfromprofit 6,768,026 5,876,594Legal reserves at the end of the period 72,284,703 65,516,677

Extraordinary reserves

Themovementofextraordinaryreservesispresentedbelow:31 December 2013 31 December 2012

Extraordinary reserves at the beginning of the period 12,205,336 1,219,776Transferfromprofit 26,795,776 10,985,560Capitalincrease (31,000,000) -Extraordinary reserves at the end of the period 8,001,112 12,205,336

Statutory reserves

Themovementofstatutoryreservesispresentedbelow:31 December 2013 31 December 2012

Statutory reserves at the beginning of the period 13,722,714 9,095,243Transferfromprofit 6,119,160 4,627,471Capitalincrease (19,000,000) -Statutory reserves at the end of the period 841,874 13,722,714

Other Profit Reserves

Asof31 December2013,inaccordancewiththerevisionofTAS19,astheamountofactuarialgainsandlosses(¨(291,369),arepresentedundertheotherprofitreserves,whicharepreviouslyshownundertheincomestatement.

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Valuation of financial assets

Movementoffairvaluereservesofavailableforsalefinancialassetsispresentedbelow:31 December 2013 31 December 2012

Fair value reserves at the beginning of the period 46,772,005 (9,601,394)

Changes during the period:Theeffectofchangesinforeignexchangeratesonunrealizedgainsandlosses,recognizedduetochangeinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders 829,468 (69,361)Changeinunrealizedgainsandlossesduetochangesinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders (251,823,405) 230,582,919Changeinunrealizedgainsandlossesduetochangesinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders,policyholders’portion 239,232,235 (219,053,773)Changeinunrealizedgainsandlossesfromavailableforsalefinancialassets,company’sownportfolio (19,698,771) 54,407,569Deferredandcorporatetaxeffect 4,517,072 (7,550,933)

Disposals during the period:Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders (19,772,207) (368,680)Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders,policyholders’portion 18,783,597 350,246Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassets,company’sownportfolio (2,568,256) 4,276,718Deferredandcorporatetaxeffect 711,373 (851,657)

Amounts transferred to income statement due to bonus shares: (4,004,370) (5,349,649)

Fair value reserves at the end of the period 12,978,741 46,772,005

16 Other reserves and equity component of DPF

Incomeandexpenseitemsthataredirectlyaccruedinequityasofthereportingperiodareasfollows:31 December 2013 31 December 2012

Temporarydifferencesarisingfromrevaluationoffinancialassets (2,254,978) 32,267,327Permanentdifferencesarisingfromrevaluationoffinancialassets 14,782,723 20,958,144Deferredtaxeffect 450,996 (6,453,466)Total 12,978,741 46,772,005

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17 Insurance contract liabilities and reinsurance assets

17.1 Total amount of guarantee that should be placed by the Company for life and non-life branches and guarantees placed for the life and non-life branches in respect of related assets:

31 December 2013 31 December 2012Should be placed (**) Placed (*)

Should be placed (**) Placed (*)

Life:Financialassets(*) 1,942,439,296 1,931,004,910 1,917,972,126 2,214,166,541

Total 1,942,439,296 1,931,004,910 1,917,972,126 2,214,166,541

Non-life:Financialassets (*) 768,354 1,988,009 591,383 1,718,017

Total 768,354 1,988,009 591,383 1,718,017

Total 1,943,207,650 1,932,992,919 1,918,563,509 2,215,884,558(*)Asat31 December2013and2012,governmentbondsandtreasurybillsaremeasuredatdailyofficialpricesannouncedbytheCentralBankofTurkey;ifthesepricesarenotavailable,theyaremeasuredwithstockexchangevalues;investmentfundparticipationcertificatesaremeasuredusingthedailypricesinaccordancewiththe6thArticleof“CircularRelatedtotheFinancialStructureofInsurance,Reinsurance,andIndividualPensionCompanies”.(**)Accordingto7tharticleof“CircularRelatedtotheFinancialStructureofInsurance,Reinsurance,andIndividualPensionCompanies”whichregulatesnecessaryguaranteeamount,minimumguaranteefundforcapitaladequacycalculationperiodwillbeestablishedasaguaranteeintwomonthsfollowingthecalculationperiod.Accordingto“RegulationsRegardingtoCapitalAdequacyMeasurementandAssessmentofInsurance,Reinsurance,andIndividualPensionCompanies”,companiesmustpreparetheircapitaladequacytablestwiceinafinancialyearatJuneandDecemberperiodsandmustsentcapitaladequacytablestotheTurkishTreasuryDepartmentwithintwomonths.Asat31 December2013(31 December2012),minimumguaranteeamountof30 June2013isshownasnecessaryguaranteeamount;since,minimumguaranteeamountasat30 June2013(30 June2012)isbasedon30 Junecalculations.

Asat31 December2013,¨1,547,605,688ofgovernmentbonds(31 December2012:¨1,841,176,020)and¨327,967,938ofEurobonds(31 December2012:¨308,332,690)and¨57,419,293(31 December2012:¨66,375,848)ofinvestmentfundsareplacedasguaranteeforthelifeandnon-lifebranches.

17.2 Number of life insurance policies, additions, disposals in the current period, and current life policy holders and the related mathematical reserves

31 December 2013 (*) 31 December 2012 (*)

Number of policies

Mathematical reserves

Number of policies

Mathematical reserves

Additionsduringtheperiod 1,445,462 217,280,779 1,343,918 298,965,577Disposalsduringtheperiod (1,245,897) (302,184,677) (1,047,267) (358,289,334)Outstanding 1,818,085 1,881,185,904 1,618,520 1,966,089,802

(*)Theabovetableincludes71ofreactivatedlifeinsurancepolicies(31 December2012:95)andtheircorrespondingmathematicalreserves.

AsexplainedinNote2-Financial Assets,availableforsalefinancialassetswithrisksonsavinglifepolicyholdersaremeasuredatfairvalue;95%ofthefairvalueandamortizedcostdifferenceamountingto¨5,711,673(31 December2012:¨245,052,988)isrecognizedunderthelifemathematicalprovisions.Asatthereportingdate,thereisnofuturewithholdingtaxleviedtoincomeobtainedfromfinancialinvestmentswhichareclassifiedundertheCompany’sassetsrecognizedunderthelifemathematicalprovisions(31 December2012:None).Thesebalancesarenotincludedintheabovetable.

¨3,998,021(31 December2012:¨5,468,417)ofreinsurer’sshareoflifemathematicalprovisionsisnotoffsetagainstthemathematicalprovisionsintheabovetable.

17.3 Guarantees given to non-life insurances based on branches:31 December 2013 31 December 2012

Guaranteesgiventodeathbyaccident 1,740,325,537 1,388,855,772Guaranteesgiventodisabilitybyaccident 1,747,766,422 1,390,190,772Total 3,488,091,959 2,779,046,544

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17.4 Pension investment funds established by the Company and their unit prices:

Asat31 December2013and2012,individualpensioninvestmentfundsfoundedbytheCompanyandtheirunitpricesareasfollows:

31 December 2013 Unit price

31 December 2012 Unit price

AH1BondFund  0.042305 0.042710AH2LiquidFund  0.030218 0.028745AH3EurobondDollarFund  0.028274 0.026961AH4EurobondEuroFund  0.028272 0.023889AH5EquityFund  0.064897 0.074480AH6InternationalMixedFund  0.026641 0.019754AH8ConservativeFund  0.035264 0.033813AH9BalancedFund  0.043627 0.045663AH0AggressiveFund  0.062572 0.064976AGEAlternativeGainFund  0.011865 0.011646ABEBRICPlusFund  0.011893 0.010674AHLDynamicFlexibleFund(*)  0.011548 0.011856AHCMixedFund(¨)(*)  0.011700 0.011227AG1GroupBondFund  0.038790 0.038902AG2GroupEurobondFund  0.022108 0.020035AG3GroupEquityFund  0.041903 0.047584AG4GroupConservativeFund  0.033958 0.032217HS1Bond-BillFund 0.026597 0.026523AHBWhiteEquityFund 0.024832 0.028644ATKStandardFund(*)  0.020885 0.020235ATEOrangeBalancedFund  0.020926 0.021922AETContributionFund(**)  0.009579AERAlternativeContributionFund(**)  0.009921AEAGoldFund(***)  0.009450

(*)ATKOrangeBond-BillFund’snamehaschangedasATKStandardFundaccordingtostatuteoffundat25 April2013.(**) InitialpublicofferingofAETContributionFund(¨)andAERAlternativeContributionFundhasbeenexecutedat30 April2013,respectively.(***)InitialpublicofferingofAEAGoldFund(¨)hasbeenexecutedat15 April2013,respectively.

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17.5 Number and amount of participation certificates in portfolio and circulation:

Numberofparticipationdocumentsintheportfolioandincirculationissuchasfollowsasof31 December2013and2012:31 December 2013 31 December 2012

Participation Certificates in Circulation Participation Certificates in CirculationNumber Amount Number Amount

AH1BondFund 38,294,022,156.01 1,620,028,607.31 34,044,230,542.89 1,454,029,086.49AH2LiquidFund 4,585,072,946.63 138,551,734.30 4,028,128,998.44 115,788,568.06AH3EurobondDollarFund 4,560,450,091.56 128,942,165.89 4,156,360,776.66 112,059,642.90AH4EurobondEuroFund 4,119,971,344.87 116,479,829.86 3,434,167,896.02 82,038,836.87AH5EquityFund 3,488,537,052.92 226,395,589.12 2,686,126,576.72 200,062,707.43AH6InternationalMixedFund 2,276,433,080.72 60,646,453.70 573,914,153.51 11,337,100.19AH8ConservativeFund 4,468,009,325.79 157,559,880.86 3,109,262,703.31 105,133,499.79AH9BalancedFund 24,428,037,174.32 1,065,721,977.80 20,479,238,309.32 935,143,458.92AH0AggressiveFund 8,961,780,267.35 560,756,514.89 7,593,578,573.45 493,400,361.39AGEAlternativeGainFund 6,639,861,442.46 78,781,956.01 3,287,291,074.08 38,283,791.85ABEBRICPlusFund 2,922,204,366.22 34,753,776.53 2,819,064,006.50 30,090,689.21AHLDynamicFlexibleFund 2,018,248,514.43 23,306,733.84 836,806,404.80 9,921,176.74AHCMixedFund(¨) 3,133,028,631.87 36,656,434.99 564,956,145.74 6,342,762.65AG1GroupBondFund 5,561,805,321.32 215,742,428.41 5,967,101,621.38 232,132,187.27AG2GroupEurobondFund 436,337,123.02 9,646,541.12 337,897,019.12 6,769,766.78AG3GroupEquityFund 773,259,624.18 32,401,898.03 587,998,732.06 27,979,331.67AG4GroupConservativeFund 2,539,158,903.61 86,224,758.05 2,327,553,802.12 74,986,800.84HS1Bond-BillFund 11,277,987,267.19 299,960,627.35 10,089,694,555.13 267,608,968.69AHBWhiteEquityFund 2,100,959,453.72 52,171,025.15 1,474,177,699.61 42,226,346.03ATK-StandardFund(*) 1,089,957,724.29 22,763,767.07 973,520,735.30 19,699,192.08ATEOrangeBalancedFund 532,193,862.27 11,136,688.76 583,713,510.49 12,796,167.58AETContributionFund(**) 23,587,324,029.54 225,942,976.88 - -AERAlternativeContributionFund(**) 489,145,045.72 4,852,808.00 - -AEAGoldFund(***) 2,301,993,477.32 21,753,838.36 - -Total 5,231,179,012.28 4,277,830,443.43

(*)ATKOrangeBond-BillFund’snamehaschangedasATKStandardFundaccordingtostatuteoffundat25 April2013.(**) InitialpublicofferingofAETContributionFund(¨)andAERAlternativeContributionFundhasbeenexecutedat30 April2013,respectively.(***)InitialpublicofferingofAEAGoldFund(¨)hasbeenexecutedat15 April2013,respectively.

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17.6 Portfolio amounts in terms of number of new participants left or cancelled existing participants for individuals and groups:

31 December 2013Additions during

the periodLeft/cancellations

during the period Outstanding Total amountIndividuals 138,770 57,142 623,983 3,772,234,203Group 57,618 18,264 197,717 1,228,096,224Total 196,388 75,406 821,700 5,000,330,427

31 December 2012Additions during

the periodLeft/cancellations

during the period Outstanding Total amountIndividuals 114,708 64,759 543,632 3,215,797,259Group 29,324 19,244 157,086 1,062,013,086Total 144,032 84,003 700,718 4,277,810,345

Additions:Thesumofthenewcontractsaddedintheperiodandtheirregisteredcumulativevaluesasoftheperiodendinadditionwiththenumberofthecontractsthatbeginandfinishinthesameperiod.Forthedatacalculatedfor31 December2013,portfolioamountandinsurancecontractnumbersrelatedwithcontributionamountscollectedbeforetheexercisedatearenottakenintoconsideration.Inaddition,theamountsrelatedwithcreditcardcollectionswithundueblockagetermsarenotaddedtothecalculation.

Left/cancellations:Thenumberoffinalizedcontractsduringtheperiodandtheirvaluesattheirexpirationdates.

Outstanding:Thenumberofoutstandingcontractsandtheirvaluesasoftheperiodend.

Sinceretirementplantransfersbetweenindividualandgroupretirementplansoccursduringtheperiod,periodicalchangesshouldbefollowedbythetotalnumberandportfolioamountofpolicies.Also,whenthecontractseffectiveatthepriorreportingperiodbecomealiabilitybecauseofcollectionreversalsinthecurrentperiodorwhenthecontractseffectiveatthepriorreportingperiodbecomeanasset,totalnumbersandportfoliovaluesofthesecontractsarenetoffattheperiodend.NumberandportfolioamountofindividualandgrouppoliciespresentedinnotesreflecttheoutstandingpositionoftheCompanyasoftheperiod-end.

Outstandingcontractshavestatecontributionamountingto¨230,795,560inthestatecontributionfundsasoftheperiodend.

17.7 Valuation methods used in profit share calculation for saving life contracts with profit sharing:

Financialinvestmentswithrisksonsavinglifepolicyholdersareclassifiedas“available-for-salefinancialassets”.TheseassetsaremeasuredinaccordancewiththeprinciplesspecifiedinNote2.8Financial Assetsandvaluationdifferencesaretakenintoaccountintheprofitsharecalculation.

17.8 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups:1 January - 31 December 2013 1 January - 31 December 2012

Number of contracts

Gross contributions

Net contributions

Number of contracts

Gross contributions

Net contributions

Individuals 138,770 339,682,488 338,357,397 114,708 227,156,127 222,408,785Group 57,618 63,100,324 63,001,457 29,324 41,292,795 41,024,760Total 196,388 402,782,812 401,358,854 144,032 268,448,922 263,433,545

Contractsbecomeeffectiveinthecurrentperiodandthetotalcontractsbecomeeffectiveandceasedinthesameperiodandcontributionscollectedregardingthesecontractsandtheinvestmentorientedcontributionshavebeenspecified.Thecollectionsmadewithcreditcardswithundueblockagetermsarealsoaddedintogrossandnetcontributions.Transferamountsarenotincludedinthecurrentperiodnumbersandbalances.Inaddition,Companyhascollected¨56,072,348asStateContribution.

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17.9 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from other insurance companies during the period:

31 December 2013 31 December 2012Number of

contractsGross

contributionsNet

contributionsNumber of

contractsGross

contributionsNet

contributionsIndividuals 1,707 27,039,688 27,039,688 1,909 23,460,763 23,460,763Group 585 7,517,259 7,517,259 1,324 5,683,833 5,683,833Total 2,292 34,556,947 34,556,947 3,233 29,144,596 29,144,596

Inaddition,Companyhastransferred¨463,248asStateContributionfromotherpensioncompaniesintherelatedperiod.

17.10 Distribution of individual and group participants and their gross and net contributions which were transferred from life insurance portfolio to private pension portfolio during the period:

Thelegalpermissionofthetransferfromlifeportfoliotoprivatepensionportfolioexpiredon7 October2006andtherefore,thereisnotransferinthecurrentandpriorperiod.

17.11 Distribution of individual and group participants which were transferred to other insurance companies in terms of their numbers and gross and net contributions:

1 January - 31 December 2013 1 January - 31 December 2012Number of

contractsGross

contributionsNet

contributionsNumber of

contractsGross

contributionsNet

contributionsIndividuals 57,142 205,015,835 191,601,159 64,759 409,585,946 370,510,795Group 18,264 57,066,401 54,291,399 19,244 101,825,247 92,434,269Total 75,406 262,082,236 245,892,558 84,003 511,411,193 462,945,064

Numberofcontractsindicatesthenumberofdisposalsintherelatedperiod.

Grosscontributionsindicatethefundsalesamountasaresultofdisposal,i.e.;disposalamount.

Netcontributionsindicatetheremainingamountpaidtoparticipantlessanydeductions(initiationfeeandwithholding)againstthegrossamountasaresultofdisposal.

Inaddition,Company’sfundoutflowis¨6,763,234asStateContribution.

17.12 Distribution of new life insurance participants in terms of their numbers and first premium amounts for individuals and groups during the period:

31 December 2013 31 December 2012Number of

contractsFirst premium

amounts (¨)Number of

contractsFirst premium

amounts (¨)

Individuals 11,742 96,098,428 17,185 81,871,623Group 1,433,649 180,855,996 1,326,638 149,189,900Total (*) 1,445,391 276,954,424 1,343,823 231,061,523

(*)71ofreactivatedcontractsarenotincludedinthecurrentperiodadditions.

17.13 Distribution of left or cancelled life insurance participants in terms of their numbers and mathematical reserves for individuals and groups during the period:

1 January - 31 December 2013 1 January - 31 December 2012Number of

contractsMathematical

reserves (¨)Number of

contractsMathematical

reserves (¨)

Individuals 86,784 266,681,983 140,003 310,416,026Group 1,159,113 35,502,694 907,264 47,873,308Total 1,245,897 302,184,677 1,047,267 358,289,334

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17.14 Profit share distribution rate of life insurances as of 31 December 2013 and 201231 December 2013 % 31 December 2012 %

¨Life insurance 7.43 10.50Income insurance 7.43 10.50USDLife insurance 7.98 7.92Income insurance 7.98 7.92EUROLife insurance 5.57 6.01Income insurance 5.57 6.01GBPLife insurance 7.04 7.75Income insurance 7.04 7.75

17.15 Information on insurance contract balances in the financial statements31 December 2013 31 December 2012

Reserveforunearnedpremiums,gross 23,041,596 24,195,380Reserveforunearnedpremiums,ceded(Note 10) (2,193,599) (1,662,615)Reserves for unearned premiums, net 20,847,997 22,532,765

Provisionforoutstandingclaims,gross 77,684,566 56,336,969Provisionforoutstandingclaims,ceded (Note 10) (3,134,362) (605,350)Provision for outstanding claims, net 74,550,204 55,731,619

Lifemathematicalprovisions,gross 1,875,474,231 2,211,142,790Lifemathematicalprovisions,ceded(Note 10) (3,998,021) (5,468,417)Life mathematical provisions, net 1,871,476,210 2,205,674,373

Provisionforbonusanddiscount,gross 481,726 528,684Provisionforbonusanddiscount,ceded(Not 10) (353,241) (272,071)Provision for bonus and discount, net 128,485 256,613

Equalization provision, net 5,921,429 3,915,510

Total insurance technical provisions, net 1,972,924,325 2,288,110,880

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17.16 Factors resulting from individual insurance policies which provide portfolio

Factorsresultingfromindividualinsurancepolicieswhichprovideportfolioincreasethroughthechangeinmathematicalprovisionsfortheperiods1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Newpoliciesissued 74,528,869 59,033,558Activatedfromreductions 9,277,026 7,754,761Activatedfromcancellations 23,649 228,156Contractswithincreasedcapital 63,975,789 145,046,829Total increase in the portfolio 147,805,333 212,063,304

Factorsresultingfromindividualinsurancepolicieswhichprovideportfoliodecreasethroughthechangeinmathematicalprovisionsfortheperiods1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Terminationsandcancellations(-) (4,482,167) (142,997)Transformedtocontractswithoutcharge(-) 20,553,462 21,987,028Insuranceshadcapitaldecrease(-) (41,138) -Withdrawals(-) (100,308,637) (179,540,126)Ceasedwithriskformed(-) (5,747,889) (4,824,419)Expirations(-) (156,102,151) (125,908,484)Total decrease in the portfolio (246,128,520) (288,428,998)

Factorsresultingfromgroupinsurancepolicieswhichprovideportfolioincreasethroughthechangeinmathematicalreservesfortheperiod1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Newcontracts 39,269,669 31,984,921Activatedfromreductions 28,582 48,534Activatedfromcancellations 137,766 49,487Insuranceshadcapitalincrease 10,653,144 32,110,639Total increase in the portfolio 50,089,161 64,193,581

Factorsresultingfromgroupinsurancepolicieswhichprovideportfoliodecreasethroughthechangeinmathematicalreservesfortheperiods1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Terminationsandcancellations(-) - (874)Transformedtocontractswithoutcharge(-) 303,218 508,740Insuranceshadcapitaldecrease(-) (19,905,213) -Withdrawals(-) (4,003,329) (1,837,164)Ceasedwithriskformed(-) (4,015) (16,456)Expirations(-) (11,590,137) (46,018,814)Total decrease in the portfolio (35,199,476) (47,364,568)

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17.17 Gain/losses resulted from reinsurance contracts and recognized in the income statement

Gainorlossesresultedfromreinsurancecontractsandrecognizedintheincomestatementaredisclosedinnote10-Reinsurance assets, liabilities.

17.18 Incurred claim development table

Incurredclaimdevelopmenttablepresentedbelowprovidedcumulativepaymentsofclaimsaccordingtoclaimyearandfollowingyears:Claim year 2008 2009 2010 2011 2012 2013 TotalClaimyear 7,621,312 6,201,960 10,858,399 8,532,107 15,285,562 19,456,357 67,955,6971yearlater 3,634,320 4,113,823 4,610,880 5,329,728 9,723,183 - 27,411,9342yearslater 273,370 286,233 399,311 304,054 - - 1,262,9683yearslater 14,037 4,938 198,602 - - - 217,5774yearslater 28,668 19,148 - - - - 47,8165yearslater 19,792 - - - - 19,7926yearslater - - - - - - -Cumulativepaymentsuptodate 11,591,499 10,626,102 16,067,192 14,165,889 25,008,745 19,456,357 96,915,784Paymentsfortheyearended31 December2013 (*) 19,792 19,148 198,602 304,054 9,723,183 19,456,357 29,721,136

*)Theclaimspaidincludesdeath-disabilityterminationandpersonalaccidentbranchgrosspayments.

17.19 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately

Effectsofchangesintheassumptionsusedinthemeasurementofinsuranceassetsandliabilitiesaredisclosedinnote4-Management of insurance risks.

18 Investment contracts

None.

19 Trade and other payables and deferred income31 December 2013 31 December 2012

Payablesfrominsuranceoperations 5,868,305 4,090,566Cashdepositedbyinsuranceandreinsurancecompanies 881,759 636,822Payablesfrompensionactivities 5,354,762,129 4,366,456,847

Net fund value of participants 5,231,179,012 4,277,830,443Other 123,583,117 88,626,404

Total payables from main operations 5,361,512,193 4,371,184,235

Duetoshareholders 5,014 8,172Payablestootherrelatedparties - 2,260Total payables to related parties 5,014 10,432

Guaranteesanddepositsreceived 320,984 244,608Otherpayables 8,561,433 6,224,776Total other payables 8,882,417 6,469,384

Deferredcommissionincome 515,595 415,872Expenseaccruals 829,103 335,971OtherDeferredIncomeandExpenseAccruals 1,243,443 1,041,698Total deferred income and expense accruals 2,588,141 1,793,541

Total 5,372,987,765 4,379,457,592

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20 Financial liabilities

TheCompanyhasnofinancialliabilitiesasatthereportingdate(31 December2012:None).

21 Deferred tax

TheCompanyrecognizesdeferredtaxassetsandliabilitiesbasedupontemporarydifferencesarisingbetweenitsfinancialstatementsasreportedforTFRSpurposesanditsstatutorytaxfinancialstatements.ThesedifferencesusuallyresultintherecognitionofrevenueandexpensesindifferentreportingperiodsforTFRSandtaxpurposesandtheyaregivenbelow.

20%taxrateisusedinthecalculationofdeferredtaxassetandliabilities.Deferred tax (assets)/liabilities base: 31 December 2013 31 December 2012

Differenceinvaluationoffinancialassets 11,170,825 43,619,636Provisionforemployeeterminationbenefits (8,269,886) (7,408,414)Equalizationreserves/bonusanddiscountprovision (6,049,914) (4,172,123)Dividendtopersonnelandsalaryprovision (2,000,000) (3,800,000)DifferencesindepreciationmethodsontangibleandintangibleassetsbetweentaxregulationsandtheReportingStandards (2,275,544) (2,469,963)Provisionforunusedvacationpayliability (2,918,389) (1,965,788)Total (10,342,908) 23,803,348

Deferred tax (assets)/liabilities: 31 December 2013 31 December 2012

Differenceinvaluationoffinancialassets 2,234,165 8,723,927Provisionforemployeeterminationbenefits (1,653,977) (1,481,683)Equalizationreserves/bonusanddiscountprovision (1,209,983) (834,424)Dividendtopersonnelandsalaryprovision (400,000) (760,000)DifferencesindepreciationmethodsontangibleandintangibleassetsbetweentaxregulationsandtheReportingStandards (455,109) (493,993)Provisionforunusedvacationpayliability (583,678) (393,157)Total (2,068,582) 4,760,670

Movementofdeferredtaxassets/liabilitiesfortheyearended31 December2013and2012aregivenbelow:Movement of deferred tax (assets)/liabilities: 31 December 2013 31 December 2012

Openingbalanceat1 January 4,760,670 (4,541,053)Recognizedinprofitorloss 148,052 447,909Recognizedinequity (6,977,304) 8,853,814Closing balance at 31 December (2,068,582) 4,760,670

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22 Retirement benefit obligations

UndertheTurkishLaborLaw,theCompanyisrequiredtopayemploymentterminationbenefitstoeachemployeewhohasqualifiedforsuchpayment.Also,employeesareentitledtoretirementpayprovisionssubsequenttothecompletionoftheirretirementperiodbygainingarighttoreceiveretirementpaymentsinaccordancewiththeamendedArticle60oftheapplicableSocialInsuranceLawNo:506andtherelatedDecreesNo:2422and4447issuedon6 March1981and25 August1999,respectively.Sometransitionalprovisionsrelatedtopre-retirementservicetermwasexcludedfromthelawsincetherelatedlawwasamendedasof23 May2002.

Theterminationbenefittobepaidissubjecttoupperlimitof¨3,254.44asat31 December2013(31 December2012:¨3,033.98).

TheprovisionhasbeencalculatedbyestimatingthepresentvalueofthefutureprobableobligationoftheCompanyarisingfromtheretirementofemployees.TAS19(“EmployeeBenefits”)requiresactuarialvaluationmethodstobedevelopedtoestimatetheenterprise’sobligationunderdefinedbenefitplans.Accordingly,thefollowingactuarialassumptionswereusedinthecalculationofthetotalliability:

Theprincipalassumptionisthatthemaximumliabilityforeachyearofservicewillincreaseparallelwithinflation.Thus,thediscountrateappliedrepresentstheexpectedrealrateafteradjustingfortheanticipatedeffectsoffutureinflation.Consequently,intheaccompanyingfinancialstatementsasat31 December2013,theprovisionhasbeencalculatedbyestimatingthepresentvalueofthefutureprobableobligationoftheCompanyarisingfromtheretirementoftheemployees.Theprovisionsattherespectivereportingperiodshavebeencalculatedassuminganannualinflationrateof6.0%andadiscountrate10%resultinginarealdiscountrate3,77%(31 December2012:6.0%,and1.00%-4.57%,respectively).TheanticipatedrateofforfeituresisconsideredandestimatedrateoftheCompany’sretirementpayisalsotakenintoaccount.

AftertherevisionofTAS19,astheamountofactuarialgainandlossarepresentedundertheotherprofitreserves,whichwerepreviouslyshownundertheincomestatement.

Movementofprovisionforemployeeterminationbenefitsduringtheperiodispresentedbelow:31 December 2013 31 December 2012

Provisionasat1 January 7,408,414 4,828,646Interestcost 444,505 289,719Servicecost 734,666 638,792Paymentsmadeduringtheyear (681,910) (1,132,288)Actuarialgainandlosses 364,211 2,783,545Provision as at 31 December 8,269,886 7,408,414

23 Other liabilities and provisions

Asat31 December2013and2012;thedetailsoftheprovisionsforotherrisksareasfollows:31 December 2013 31 December 2012

Dividendtopersonnelandsalaryprovision 2,000,000 3,800,000Provisionforunusedvacationpayliability 2,918,389 1,965,788Provisionforcommissionstosalespersonnel 650,000 500,000Provisionforlitigations 93,970 93,970Provisionforcommissionsandexpenses 43,000 -Provisions for costs 5,705,359 6,359,758Provision for employee termination benefits 8,269,886 7,408,414Total provisions for other risks 13,975,245 13,768,172

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24 Net insurance premium revenue 31 December 2013 31 December 2012

Non-life 648,587 588,772Life 381,218,379 355,597,310Total 381,866,966 356,186,082

25 Fee revenues

Thedetailsoffeerevenuesfortheyearended31 December2013and2012receivedfromindividualpension,lifeandnon-lifebranchesinaccordancewithTAS18areasfollows:

31 December 2013 31 December 2012

Fundmanagementincome 90,764,418 88,470,973Administrativecostdeductions 17,771,761 33,953,327Entrancefee 20,236,910 16,121,343Administrativecostdeductionsintheformofcessation 3,120,756 367,261Othertechnicalincome 108,600 113,153Increaseinvalueofcapitalallowancesgiven - -Total 132,002,445 139,026,057

26 Investment income31 December 2013 31 December 2012

Financial assets held-for-trading:  Valuationgain/(loss) (892,251) 9,585,612Gainonsale - 1,351,553Interestincome 21 182,079Dividendincome - 19,549

Financial assets available- for-sale:Interestincome 125,943,353 135,334,531Valuationgain(internalrateofreturngain) 99,452,715 38,766,493Gainonsale 27,252,894 6,637,140Dividendincome 3,260,568 2,755,630

Income from associates: 554,972 539,038Investment properties:Rentincome 3,280,321 3,059,325Other income: (*) 13,479,335 14,923,268Total (**) 272,331,928 213,154,218

(*)Otherincomeincludesincomefrombonussharesthroughcapitalincreasesinassociatesfromprofitorcapitalreserves,interestincomefromtimedeposits,incomefromderivativetransactions,foreignexchangegainsandinsurers’moneynotrequestedfromtheCompany.(**)¨65,435,963(31 December2012:¨63,514,117)ofinvestmentincomeobtainedfromtheCompany’sownportfolioand¨206,895,965(31 December2012:¨149,640,101)ofinvestmentincomeobtainedfrompolicyholders’portfolio.

27 Net income accrual on financial assets

NetincomeaccrualfromtheCompany’sownportfolioisasfollows:31 December 2013 31 December 2012

Available-for-sale financial assets:  Fairvaluedifferencesrecognizedinequity 12,828,359 40,327,945Fairvaluedifferencesrecognizedinprofit/loss 4,430,562 13,121,631Total 17,258,921 53,449,576

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28 Assets held at fair value through profit or loss

Netlossfromassetsheldatfairvaluethroughprofitorlossrecognizedinincomestatementasat31 December2013is¨(892,230)(31 December2012:¨11,138,793,netgain.).

29 Insurance rights and claims

Detailsofinsurancerightsandclaimsarepresentedinstatementofincome.

30 Investment contract benefits

None.

31 Other expenses

Theallocationoftheexpenseswithrespecttotheirnatureorfunctionispresentedinnote32- Operating expenses below.

32 Operating expenses

Fortheyearended31 December2013and2012,thedetailsofoperatingexpensesareasfollows:31 December 2013 31 December 2012

Productioncommissionexpenses (98,513,424) (80,054,824)Employeebenefitexpenses(*) (64,378,951) (52,595,033)Administrationexpenses (19,427,362) (18,465,127)Marketingandsalesexpenses (20,783,342) (13,520,385)Rentexpenses (6,506,431) (5,906,613)Outsourcedbenefitsandservices (3,561,044) (3,598,516)Bankfees (3,372,117) (2,490,347)Reinsurancecommissionincome 2,559,861 2,808,701Otherexpenses (1,401,585) (1,568,131)Total (215,384,395) (175,390,275)

(*)Asof31 December2013theamountof‘dividendandpersonnelfeeexpenses’arepresentedunder‘personnelexpenses’whicharepreviouslyshownunderprovisionexpenses.

33 Employee benefit expenses31 December 2013 31 December 2012

Wagesandsalaries 64,378,951 52,595,033Dividendtopersonnelandsalaryprovisionexpense 2,000,000 -Employeeterminationbenefits 497,260 2,579,768Provisionforunusedvacation 952,602 302,069Total 67,828,813 55,476,870

34 Financial costs

TheCompany’shasnofinanceexpenseinthecurrentperiod(31 December2012:None).

35 Income tax expense31 December 2013 31 December 2012

Corporate tax liabilities:Corporatetaxprovision 15,310,000 26,100,000Less:Corporationtaxespaidinadvancesduringtheperiod (11,512,254) (18,926,035)Total 3,797,746 7,173,965

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Total tax expense recognized in profit or loss 31 December 2013 31 December 2012

Currenttaxexpense 15,310,000  26,100,000Deferredtaxexpense/(income) 148,052  447,909Total 15,458,052 26,547,909

Total tax expense recognized in equity31 December 2013 31 December 2012

Changeinfairvalueofavailableforsalefinancialassets (450,996) 6,453,466Total deferred tax expense recognized in equity (450,996) 6,453,466

Reconciliation of the Company’s taxation for the year ended 31 December 2013 and 2012 are as follows:31 December 2013 31 December 2012

Profit before tax 98,624,643 Tax rate (%) 106,123,395 Tax rate (%)Taxesonincomeperstatutorytaxrate (19,724,929) (20.00) (21,224,679) (20.00)Disallowableexpenses (1,598,009) (1.62) (6,680,378) (6.29)Effectofallowances 5,864,886 5.95 1,357,148 1.28Total tax expense recognized in profit or loss (15,458,052) (15.67) (26,547,909) (25.01)

36 Net foreign exchange gains31 December 2013 31 December 2012

Foreignexchangegains 4,480,459 513,717Foreignexchangelosses (11,003,005) (945,869)Total (6,522,546) (432,152)

37 Earnings per share

Earningspershareiscalculatedbydividingnetprofitfortheperiodtotheweightedaveragenumberofshares.31 December 2013 31 December 2012

For a share having TRKr (Kuruş) 1 of nominal value:Weightedaveragenumberofshares(*) 35,000,000,000 35,000,000,000Netprofitfortheperiod 83,166,591 79,575,486Earningspershare(for100shares) 0.23762 0.22736

(*)Capitalincreaseismadethroughinternalresourcesandpriorperiod’searningspersharefigureisrevisedbyusingthenumberofsharessubsequenttothecapitalincrease.

38 Dividends per share

TheCompany’sdividenddistributionin2013fromtheprofitof2012ispresentedbelow.

  Group

Total Cash Dividend Amount

(¨)

Cash dividend corresponding to a share having ¨1 of nominal value

Amount (¨) Rate (%)

Gross

A 133,333.33 0.133333 13.3333B 39,866,666.67 0.133333 13.3333Total 40,000,000.00

Net

A 113,333.33 0.113333 11.3333B 33,886,666.67 0.113333 11.3333Total 34,000,000.00

TheCompany’sdividenddistributionin2013fromtheprofitof2012is¨40,000,000.Otherthanthat,adividendof¨1,892,524isdistributedtothepersonneloftheCompany.

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39 Cash generated from operations

Thecashflowsfromoperatingactivitiesarepresentedintheaccompanyingstatementofcashflows.

40 Convertible bonds

None.

41 Redeemable preference shares

None.

42 Risks

Inthenormalcourseofitsoperations,theCompanyisexposedtolegaldisputes,claimsandchallenges,whichmainlystemfromitsinsuranceoperations.Thenecessaryincome/expenseaccrualsfortherevocablecasesagainst/onbehalfoftheCompanyareprovidedeitherunderprovisionforoutstandingclaimsorprovisionsforotherrisksintheaccompanyingfinancialstatements.

Asat31 December2013,thereare105ongoinglawsuitfiledagainsttheCompanyandtotalamountofthesesuitsare¨2,221,291.¨2,376,705(31 December2012:¨3,412,883)ofprovisionincludinginterestexpenseforongoinglawsuitsforwhichcashoutflowisprobableandmeasurablereliablyissetbytheCompanyinthefinancialstatements.Thereare30ongoinglawsuitsprosecutedbytheCompanyagainstthethirdpartiesthathaveamounted¨1,402,896.Subsequenttothereportingperiod,thereisnoexpectedamountoflawsuitstobeprosecutedagainsttheCompany.

43 Commitments

Totalamountofcommitmentsthatarenotincludedinliabilities:31 December 2013 31 December 2012

Guaranteesandcommitments 475,786 863,986Capitalcommitments - -Guarantees and commitments 475,786 863,986

TheCompanydoesnothavefinanceleaseliabilitiesasatthereportingperiod(31 December2012:None).

44 Business combinations

None.

45 Related party transactions

a.Parentcompany’snameandtheultimateownerofthegroup

TheCompany’sparentisTurkeyİşBankasıAŞwitha62%ofshare.

b.InaccordancewiththeCompany’sactivities,itemsofsub-classifications

TheactivitiesoftheCompanyinvolveprovidingindividualandgroupinsuranceandreinsuranceservicesrelatingtogrouplife,individuallife,retirementandrelatedpersonalaccidentbranches,establishingretirementfunds,developinginternalrulesandregulationsrelatedtothesefunds,carryingoutretirement,annualincomeinsurance,portfoliomanagementandcustodycontractsfortheassetsofthefundsheldincustody.

c.Noexpenseisrecognizedintherelatedperiodforbadordoubtfuldebtsinrespectoftheamountsowedbytheshareholders,associatesandsubsidiaries.

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d.DetailsofassociatesandsubsidiarieshavingindirectcapitalandmanagementrelationswiththeCompany;names,amountsandratesofparticipationsintheassociatesandsubsidiaries;profit/lossfortheperiodpresentedintherecentfinancialstatementsofsuchparticipations;netprofit/lossfortheperiodandperiodcoveredbythefinancialstatements;informationaboutwhetherthesefinancialstatementsarepreparedinaccordancewiththeCMBstandards;informationaboutwhetherthesefinancialstatementsareaudited;detailsoftheauditopinion(ifthereportincludesunqualified,adverseorqualifiedopinion):

Carrying amount

Participation rate (%)

Reporting period

Profit before income tax

Net profit of the period

Financial statements

base

Independent auditor’s

opinionİşPortföyYönetimiAŞ 8,762,193 20,00 31 December2013 13,150,735 10,471,581 SPKXI/29 Unqualified

e.Bonussharesobtainedfromassociatesorsubsidiariesthroughinternalresourcecapitalincreases

AtthereportingdateTheCompanyhasobtainednobonussharesthroughcapitalincreasesinassociatesfromprofitorcapitalreserves.

f.Noguarantees,commitments,guaranteeletters,advancesandendorsementsgiveninfavorofshareholders,associatesandsubsidiaries.

g.Relatedpartydisclosures

Therelatedpartybalancesasat31 December2013and2012areasfollows:31 December 2013 31 December 2012

TürkiyeİşBankasıAŞ-receivablesfromcreditcardcollections 102,192,002 76,031,154Cash and cash equivalents 102,192,002 76,031,154

TürkiyeİşBankasıAŞ-bankdeposits 9,813,038 5,534,597Cash at banks 9,813,038 5,534,597

AnadoluAnonimTürkSigortaŞirketi-premiumreceivables - -Receivables from main operations - -

TürkiyeİşBankasıAŞ-commissionpayables 5,081,480 4,374,762MilliReasüransTAŞ-premiumpayables 99,454 162,086Payable from main operations 5,180,934 4,536,848

AnadoluAnonimTürkSigortaŞirketi-otherpayables 5,014 8,172Payables to shareholders 5,014 8,172

İşPortföyYönetimiAŞ 4,115,797 3,738,711İşMerkezleriYönetimveİşletimAŞ 353,476 198,734İş-NetElektronikBilgiÜretimDağıtımTicaretveİletişimAŞ 96,614 77,092Other payables 4,565,887 4,014,537

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Fortheyearended31 December2013,theCompanyobtainedemployercontributionforindividualpensionplansamountingto¨15,486,007(31 December2012:¨14,316,736)andaccruedemployerpremiumforlifeinsuranceamountingto¨506,769(31 December2012:¨302,422)fromrelatedparties.Othertransactionswithrelatedpartiesduringtheyearended31 December2013and2012areasfollows:

  31 December 2013 31 December 2012

MilliReasüransTAŞ-premiumswritten,ceded 702,590 917,985Premiums written, ceded 702,590 917,985

MilliReasüransTAŞ-commissionincomefromreinsurers 294,309 246,831Commission income from reinsurers 294,309 246,831

TürkiyeİşBankasıAŞ-interestincomefromdeposits 663,404 652,012Investment income 663,404 652,012

İşPortföyYönetimiAŞ-investmentconsultancyfee 195,552 187,488İşPortföyYönetimiAŞ-portfoliomanagementfee - 20,256İşYatırımMenkulDeğerlerAŞ-MKKservicecommission 15,750 13,125İşYatırımMenkulDeğerlerAŞ-portfoliomanagementfee - 8,080İşPortföyYönetimiAŞ-secondarymarketoperationsofmarketablesecurities - 13,278İşYatırımMenkulDeğerlerAŞ-secondarymarketoperationsofmarketablesecurities - 10,674Investment expense 211,302 252,901

TürkiyeİşBankasıAŞ-commissionofproduction 51,918,079 45,144,459İşPortföyYönetimiAŞ-portfoliomanagementfeeofpensionfunds 12,984,035 12,191,098İşMerkezleriYönetimveİşletimA.Ş.-buildingadministrativeexpense 4,178,552 3,961,869İşGayrimenkulYatırımOrtaklığıAŞ-rentexpense 3,131,677 2,917,306İş-NetElektronikBilgiÜretimDağ.Tic.veİletişimA.Ş.-communicationexpense 825,064 1,253,519AnadoluAnonimTürkSigortaŞirketi-premiumpaid 1,649,623 1,020,191TürkiyeİşBankasıAŞ-commissionofpremiumcollectionandbankingservices 764,575 839,031TürkiyeİşBankasıA.Ş.-fundoperationserviceexpense 664,311 503,624TürkiyeIşBankasıAŞ-rentexpense 588,558 424,717AnadoluAnonimTürkSigortaŞirketi-rentexpense 157,199 152,082Other expenses 76,861,673 68,407,896

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46 Events after the reporting period

Eventsafterthereportingperiodaredisclosedinnote1.10-events after the reporting period.

47 Others

Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet

Itemsandamountsclassifiedunderthe“other”accountinfinancialstatementseitherexceeding20%ofthetotalamountofthegrouptowhichtheyrelateor5%ofthetotalassetsinthebalancesheetareasfollows:Current Assets (Other Receivables) 31 December 2013 31 December 2012

Securitiesreconciliationaccount 11,261,706 1,166,746Other 862,576 688,355Total 12,124,282 1,855,101

Short-term Liabilities (Other Miscellaneous Payables) 31 December 2013 31 December 2012

Suspenseaccounts 2,778,054 1,990,188Securitiesreconciliationaccount 2,445 92,431Payabletosuppliers 5,699,816 3,757,877Other 81,118 384,280Total 8,561,433 6,224,776

Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets

None.

Subrogation recorded in “Off-Balance Sheet Accounts”

None.

Real rights on immovable and their values

None.

Explanatory note for the amounts and nature of previous years’ income and losses

None.

For the year ended 31 December 2013 and 2012, details of discount and provision expenses are as follows:31 December 2013 31 December 2012

Provisionforemployeeterminationbenefits (497,260) (2,579,768)Unusedvacationpayliability (952,602) (302,069)Provisionsnolongerrequired 840,768 619,356Provisionforimpairmentlossonfinancialassets - -Otherprovisionexpense (190,945) (38,559)Provision expense (800,039) (2,301,040)

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Information on Consolidated Associate

Pursuanttothe“CircularRelatedtothePreparationoftheConsolidatedFinancialStatementsofInsurance,Reinsurance,andPrivatePensionCompanies”(“ConsolidationCircular”)issuedbytheTurkishTreasuryintheOfficialGazetteissue27097dated31 December2008,insurance,reinsuranceandpensioncompaniesareobligedtopublishconsolidatedfinancialstatementsbesidesunconsolidatedfinancialstatements.

Accordingly,ourCompanystarteddrawingupconsolidatedfinancialstatementsasof2010,takingintoconsiderationthefinancialstatementsofİşPortföyYönetimiA.Ş.,whichistheonlyassociateoftheCompany,andusingtheequitymethodofaccounting.

FoundedinOctober2000asanassociateofİşbank,İşPortföyYönetimiA.Ş.offersassetmanagementandinvestmentadvisoryservicestoinstitutionalinvestors.

GeneralinformationonİşPortföyYönetimiA.Ş.ispresentedinthebelow-giventable.

İşPortföyYönetimiA.Ş.doesnotholdanysharesinourCompany.

Carrying Value

Participation Rate (%)

Reporting Period

Profit for the Period before

Tax

Net Profit for the Period

Financial Statements

Base

Independent Auditor’s Opinion

İş Portföy Yönetimi A.Ş. 15,036,296 20,0

31 December 2013 13,150,735 10,471,581 SPK XI/29 Unqualified

Unconsolidated/Consolidated Summary Financial Data (¨ thousand):

Financialstatementitemsthatshowadifferentvalueduetoconsolidationarepresentedbelowwiththeirunconsolidatedandconsolidatedvalues.

Unconsolidated ConsolidatedAssociates 8,762 15,036FinancialIncome 65,436 66,975PretaxProfit 98,477 100,016Shareholders’Equity 533,869 540,143TotalAssets 7,902,405 7,908,679

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Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

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To the Board of Directors of Anadolu Hayat Emeklilik Anonim Şirketi

Introduction

WehaveauditedtheaccompanyingconsolidatedbalancesheetofAnadoluHayatEmeklilikAnonimŞirketi(“theCompany”)asat31 December2013andtherelatedconsolidatedstatementofincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Management’s Responsibility for the Financial Statements

Managementisresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatementsinaccordancewiththeaccountingprinciplesandstandardsinforceaspertheinsurancelegislation.Thisresponsibilityincludes:designing,implementingandmaintaininginternalsystemsrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatements,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Independent Auditors’ Responsibility

Ourresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudit.Weconductedourauditinaccordancewithauditstandardsinforceaspertheinsurancelegislation.Thosestandardsrequirethatwecomplywithrelevantethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreeofmaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalsystemsrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalsystem.Anauditalsoincludesevaluatingtheappropriatenessofaccountingprinciplesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

Anadolu Hayat Emeklilik Anonim ŞirketiIndependent Auditors’ Report

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.KavacıkRüzgarlıBahçeMah.KavakSok.No:3Beykoz34805İstanbul

Telephone +90(216)6819000Fax +90(216)6819090İnternet www.kpmg.com.tr

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Independent Auditors’ Opinion

Inouropinion,theaccompanyingconsolidatedfinancialstatementsgiveatrueandfairviewofthefinancialpositionofAnadoluHayatEmeklilikAnonimŞirketiasat31 December2013,andofitsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyearthenendedinaccordancewiththeaccountingprinciplesandstandards(seeNote 2)inforceaspertheinsurancelegislation.

Istanbul,4 February2014

AkisBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikAŞ

AlperGüvenç,CertifiedPublicAccountantPartner

Additional paragraph for convenience translation to English:AsexplainedinNote 2.1.1,theaccompanyingconsolidatedfinancialstatementsarenotintendedtopresentthefinancialpositionandresultsofoperationsoftheCompanyinaccordancewiththeaccountingprinciplesandpracticesgenerallyacceptedincountriesandjurisdictionsotherthanTurkey.

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Weconfirmthattheconsolidatedfinancialstatementsandrelateddisclosuresandfootnotesasat31 December2013whichwerepreparedinaccordancewiththeaccountingprinciplesandstandardsinforceaspertheregulationsofT.C.BaşbakanlıkHazineMüsteşarlığıareincompliancewiththe“CodeRelatedtotheFinancialReportingofInsurance,ReinsuranceandPrivatePensionCompanies”andthefinancialrecordsofourCompany.

Istanbul,4 February2014

MeteUğurlu OğuzHalukSolak N.CemÖzcan F.DemetIşıksaçanMemberofBoardofDirectors,

ChiefExecutiveOfficerViceChiefExecutiveOfficer AccountingManager Actuary

(RegistrationNumber:37)

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Financial Statements as at and For the Year Ended 31 December 2013

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CONTENTS PAGECONSOLIDATED BALANCE SHEET 188-192CONSOLIDATED STATEMENT OF INCOME 193-195CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 196-197CONSOLIDATED STATEMENT OF CASH FLOWS 198CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 199NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 200-262NOTE1 Generalinformation 200NOTE2 Summaryofsignificantaccountingpolicies 202NOTE3 Criticalaccountingestimatesandjudgmentsinapplyingaccountingpolicies 216NOTE4 Managementofinsuranceandfinancialrisk 216NOTE5 Segmentreporting 232NOTE6 Tangibleassets 233NOTE7 Investmentproperties 234NOTE8 Intangibleassets 234NOTE9 Investmentsinassociates 235NOTE10 Reinsuranceassetsandliabilities 235NOTE11 Financialassets 236NOTE12 Loansandreceivables 241NOTE13 Derivativefinancialinstruments 241NOTE14 Cashandcashequivalents 242NOTE15 Equity 242NOTE16 OtherreservesandequitycomponentofDPF 244NOTE17 Insurancecontractliabilitiesandreinsuranceassets 245NOTE18 Investmentcontracts 252NOTE19 Tradeandotherpayablesanddeferredincome 252NOTE20 Financialliabilities 253NOTE21 Deferredtaxes 253NOTE22 Retirementbenefitobligations 254NOTE23 Otherliabilitiesandprovisions 254NOTE24 Netinsurancepremiumrevenue 255NOTE25 Feerevenues 255NOTE26 Investmentincome 255NOTE27 Netincomeaccrualonfinancialassets 255NOTE28 Assetsheldatfairvaluethroughprofitorloss 256NOTE29 Insurancerightsandclaims 256NOTE30 Investmentcontractbenefits 256NOTE31 Otherexpenses 256NOTE32 Operatingexpenses 256NOTE33 Employeebenefitexpenses 256NOTE34 Financialcosts 256NOTE35 Incometaxexpense 256NOTE36 Netforeignexchangegains 257NOTE37 Earningspershare 257NOTE38 Dividendspershare 257NOTE39 Cashgeneratedfromoperations 258NOTE40 Convertiblebonds 258NOTE41 Redeemablepreferenceshares 258NOTE42 Risks 258NOTE43 Commitments 258NOTE44 Businesscombinations 259NOTE45 Relatedpartytransactions 259NOTE46 Eventsafterthereportingperiod 262NOTE47 Others 262

Anadolu Hayat Emeklilik Anonim Şirketi

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ASSETS

I- Current Assets Note

AuditedCurrent Period

31 December 2013

Audited Prior Period

31 December 2012A- Cash and Cash Equivalents 14 138,765,629 142,342,4261- Cash 14 20,961 14,1552- Cheques Received - -3- Banks 14 29,864,319 59,951,4614- Cheques Given and Payment Orders 14 (174,771) (163,210)5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 109,055,120 82,540,0206- Other Cash and Cash Equivalents - -B- Financial Assets and Financial Investments with Risks on Policyholders 11 2,406,892,657 2,682,557,4931- Available-for-Sale Financial Assets 11 581,745,719 518,741,9652- Held to Maturity Investments -3- Financial Assets Held for Trading 11 36,388,883 42,316,4994- Loans and Receivables 11 11,401,986 14,091,3455- Provision for Loans and Receivables - -6- Financial Investments with Risks on Saving Life Policyholders 11 1,787,655,851 2,117,707,4667- Company’s Own Equity Shares - -8- Diminution in Value of Financial Investments 11 (10,299,782) (10,299,782)C- Receivables from Main Operations 12 5,296,014,578 4,347,148,1601- Receivables from Insurance Operations 12 12,788,669 8,959,6682- Provision for Receivables from Insurance Operations 12 (2,574) (2,574)3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited to Insurance and Reinsurance Companies - -6- Loans to the Policyholders 12 43,748,889 51,779,5597- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Operations 12 5,239,479,594 4,286,411,5079- Doubtful Receivables from Main Operations 12 117,996 117,99610- Provision for Doubtful Receivables from Main Operations 12 (117,996) (117,996)D- Due from Related Parties 12 334,634 1,096,3501- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel 12 334,634 1,096,3506- Due from Other Related Parties - -7- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -E- Other Receivables 12 12,165,677 1,891,7041- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given 41,395 36,6034- Other Miscellaneous Receivables 47 12,124,282 1,855,1015- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -F- Prepaid Expenses and Income Accruals 4.2 10,690,180 12,601,3721- Deferred Commission Expense 9,474,281 11,756,4542- Accrued Interest and Rent Income 147,038 194,5493- Income Accruals 4 164- Other Prepaid Expenses 1,068,857 650,353G- Other Current Assets 4.2 17,887 23,2301- Stocks to be Used in the Following Months 4,760 13,1762- Prepaid Taxes and Funds 7,624 6,7513- Deferred Tax Assets - -4- Job Advances - -5- Advances Given to Personnel 5,400 3,2006- Inventory Count Differences 103 1037- Other Miscellaneous Current Assets - -8- Provision for Other Current Assets - -I- Total Current Assets   7,864,881,242 7,187,660,735

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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ASSETS

II- Non-Current Assets Note

Audited Current Period

31 December 2013

Audited Prior Period

31 December 2012A- Receivables from Main Operations - -1- Receivables from Insurance Operations - -2- Provision for Receivables from Insurance Operations - -3- Receivables from Reinsurance Operations - -4- Provision for Receivables from Reinsurance Operations - -5- Cash Deposited for Insurance and Reinsurance Companies - -6- Loans to the Policyholders - -7- Provision for Loans to the Policyholders - -8- Receivables from Individual Pension Business - -9- Doubtful Receivables from Main Operations - -10- Provision for Doubtful Receivables from Main Operations - -B- Due from Related Parties - -1- Due from Shareholders - -2- Due from Associates - -3- Due from Subsidiaries - -4- Due from Joint Ventures - -5- Due from Personnel - -6- Due from Other Related Parties - -7- Rediscount on Receivables from Related Parties - -8- Doubtful Receivables from Related Parties - -9- Provision for Doubtful Receivables from Related Parties - -C- Other Receivables - -1- Finance Lease Receivables - -2- Unearned Finance Lease Interest Income - -3- Deposits and Guarantees Given - -4- Other Miscellaneous Receivables - -5- Rediscount on Other Miscellaneous Receivables - -6- Other Doubtful Receivables - -7- Provision for Other Doubtful Receivables - -D- Financial Assets 9, 45.d 15,036,296 13,568,0061- Investments in Equity Shares - -2- Investments in Associates 9,45.d 15,036,296 13,568,0063- Capital Commitments to Associates - -4- Investments in Subsidiaries - -5- Capital Commitments to Subsidiaries - -6- Investments in Joint Ventures - -7- Capital Commitments to Joint Ventures - -8- Financial Assets and Financial Investments with Risks on Policyholders - -9- Other Financial Assets - -10- Impairment in Value of Financial Assets - -E- Tangible Assets 6 21,701,481 21,311,4441- Investment Properties 6,7 25,497,361 25,873,0872- Impairment for Investment Properties - -3- Owner Occupied Property 6 1,338,902 1,338,9024- Machinery and Equipments 6 7,955,505 5,722,9425- Furniture and Fixtures 6 2,999,195 2,852,9406- Motor Vehicles 6 529,723 573,4757- Other Tangible Assets (Including Leasehold Improvements) 6 2,953,267 2,685,3828- Tangible Assets Acquired Through Finance Leases 6 1,071,729 1,071,7299- Accumulated Depreciation 6 (20,644,201) (18,807,013)10- Advances Paid for Tangible Assets (Including Construction in Progress) - -F- Intangible Assets 8 4,982,250 4,297,9531- Rights 8 15,235,745 11,845,6442- Goodwill - -3- Pre-operating Expenses - -4- Research and Development Costs - -5- Other Intangible Assets - -6- Accumulated Amortization 8 (10,253,495) (7,547,691)7- Advances Paid for Intangible Assets - -G- Prepaid Expenses and Income Accruals 8,905 58,1421- Deferred Commission Expense 8,905 58,1422- Income Accruals - -3- Other Prepaid Expenses and Income Accruals - -H- Other Non-Current Assets 21 2,068,582 -1- Effective Foreign Currency Accounts - -2- Foreign Currency Accounts - -3- Stocks to be Used in the Following Years - -4- Prepaid Taxes and Funds - -5- Deferred Tax Assets 21 2,068,582 -6- Other Miscellaneous Non-Current Assets - -7- Amortization on Other Non-Current Assets - -8- Provision for Other Non-Current Assets - -II- Total Non-Current Assets 43,797,514 39,235,545TOTAL ASSETS 7,908,678,756 7,226,896,280

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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LIABILITIES

III- Short-Term Liabilities Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Financial Liabilities - -1- Borrowings from Financial Institutions - -2- Finance Lease Liabilities - -3- Deferred Leasing Costs - -4- Current Portion of Long Term Debts - -5- Principal Installments and Interests on Bonds Issued - -6- Other Financial Assets Issued - -7- Valuation Differences of Other Financial Assets Issued - -8- Other Financial Liabilities - -B- Payables Arising from Main Operations 19 5,361,512,193 4,371,184,2351- Payables Arising from Insurance Operations 19 5,868,305 4,090,5662- Payables Arising from Reinsurance Operations - -3- Cash Deposited by Insurance and Reinsurance Companies 19,10 881,759 636,8224- Payables Arising from Individual Pension Business 19 5,354,762,129 4,366,456,8475- Payables Arising from Other Main Operations - -6- Discount on Payables from Other Main Operations - -C- Due to Related Parties 19 5,014 10,4321- Due to Shareholders 19,45 5,014 8,1722- Due to Associates - -3- Due to Subsidiaries - -4- Due to Joint Ventures - -5- Due to Personnel - -6- Due to Other Related Parties 19 - 2,260D- Other Payables 19 8,882,417 6,469,3841- Deposits and Guarantees Received 19 320,984 244,6082- Medical Treatment Payables to Social Security Institution - -3- Other Miscellaneous Payables 19,47 8,561,433 6,224,7764- Discount on Other Miscellaneous Payables - -E- Insurance Technical Provisions 17 1,972,924,325 2,288,110,8801- Reserve for Unearned Premiums - Net 17 20,847,997 22,532,7652- Reserve for Unexpired Risks - Net - -3- Mathematical Provisions - Net 17 1,871,476,210 2,205,674,3734- Provision for Outstanding Claims - Net 17 74,550,204 55,731,6195- Provision for Bonus and Discounts - Net 128,485 256,6136- Other Technical Provisions - Net 17 5,921,429 3,915,510F- Provisions for Taxes and Other Similar Obligations 8,648,030 11,313,3001- Taxes and Funds Payable 3,755,158 3,361,0512- Social Security Premiums Payable 1,092,876 778,2843- Overdue, Deferred or By Installment Taxes and Other Liabilities - -4- Other Taxes and Similar Payables 2,250 -5- Corporate Tax Payable 35 15,310,000 26,100,0006- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (11,512,254) (18,926,035)7- Provisions for Other Taxes and Similar Liabilities - -G- Provisions for Other Risks 23 5,705,359 6,359,7581- Provision for Employee Termination Benefits - -2- Provision for Pension Fund Deficits - -3- Provisions for Costs 23 5,705,359 6,359,758H- Deferred Income and Expense Accruals 19 2,588,141 1,793,5411- Deferred Commission Income 19 515,595 415,8722- Expense Accruals 19 829,103 335,9713- Other Deferred Income and Expense Accruals 19 1,243,443 1,041,698I- Other Short-Term Liabilities 62 611- Deferred Tax Liabilities - -2- Inventory Count Differences 62 613- Other Various Short-Term Liabilities - -III - Total Short-Term Liabilities   7,360,265,541 6,685,241,591

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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LIABILITIES

IV- Long-Term Liabilities Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Financial Liabilities   - -1- Borrowings from Financial Institutions   - -2- Finance Lease Liabilities   - -3- Deferred Leasing Costs   - -4- Bonds Issued   - -5- Other Financial Assets Issued   - -6- Valuation Differences of Other Financial Assets Issued   - -7- Other Financial Liabilities   - -B- Payables Arising from Main Operations   - -1- Payables Arising from Insurance Operations   - -2- Payables Arising from Reinsurance Operations   - -3- Cash Deposited by Insurance and Reinsurance Companies   - -4- Payables Arising from Individual Pension Business   - -5- Payables Arising from Other Operations   - -6- Discount on Payables from Other Operations   - -C- Due to Related Parties   - -1- Due to Shareholders   - -2- Due to Associates   - -3- Due to Subsidiaries   - -4- Due to Joint Ventures   - -5- Due to Personnel   - -6- Due to Other Related Parties   - -D- Other Payables   - -1- Deposits and Guarantees Received   - -2- Medical Treatment Payables to Social Security Institution - -3- Other Miscellaneous Payables   - -4- Discount on Other Miscellaneous Payables   - -E-Insurance Technical Provisions - -1- Reserve for Unearned Premiums - Net - -2- Reserve for Unexpired Risks - Net - -3- Mathematical Provisions - Net - -4- Provision for Outstanding Claims - Net - -5- Provision for Bonus and Discounts - Net - -6- Other Technical Provisions - Net - -F-Other Liabilities and Relevant Accruals - -1- Other Liabilities - -2- Overdue, Deferred or By Installment Taxes and Other Liabilities - -3- Other Liabilities and Expense Accruals - -G- Provisions for Other Risks 22,23 8,269,886 7,408,4141- Provision for Employee Termination Benefits 22,23 8,269,886 7,408,4142- Provision for Pension Fund Deficits - -H-Deferred Income and Expense Accruals - -1- Deferred Commission Income - -2- Expense Accruals - -3- Other Deferred Income and Expense Accruals - -I- Other Long-Term Liabilities 21 - 4,760,6701- Deferred Tax Liabilities 21 - 4,760,6702- Other Long-Term Liabilities - -IV- Total Long-Term Liabilities   8,269,886 12,169,084

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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EQUITY

V- Equity Note

Audited Current Period

31 December 2013

AuditedPrior Period

31 December 2012A- Paid in Capital 2.13,15  350,000,000 300,000,0001- (Nominal) Capital 2.13,15 350,000,000 300,000,0002- Unpaid Capital - -3- Positive Capital Restatement Differences - -4- Negative Capital Restatement Differences - -5- Register in Progress Capital - -B- Capital Reserves - -1- Share Premiums - -2- Cancellation Profits of Equity Shares - -3- Profit on Assets Sale That Will Be Transferred to Capital - -4- Currency Translation Adjustments - -5- Other Capital Reserves - -C- Profit Reserves 94,766,924 139,133,3711- Legal Reserves 15 73,274,700 66,400,3962- Statutory Reserves 15 841,874 13,722,7143- Extraordinary Reserves 15 8,001,112 12,205,3364- Special Funds - -5- Revaluation of Financial Assets 15,16 12,938,958 46,804,9256- Other Profit Reserves 15 (289,720) -D- Retained Earnings 10,670,470 9,400,1591- Retained Earnings 10,670,470 9,400,159E- Accumulated Losses - -1- Accumulated Losses - -F-Net Profit/(Loss) for the Period 84,705,935 80,952,0751- Net Profit for the Period 84,705,935 80,952,0752- Net Loss for the Period - -3- Profit not Available for Distribution - -V- Total Equity 540,143,329 529,485,605TOTAL EQUITY AND LIABILITIES 7,908,678,756 7,226,896,280

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Balance Sheet as at 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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I-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012A- Non-Life Technical Income 5 675,114 681,2761- Earned Premiums (Net of Reinsurer Share)   675,114 681,2761.1- Written Premiums (Net of Reinsurer Share) 24 648,587 588,7721.1.1- Written Premiums, gross 789,193 910,9351.1.2- Written Premiums, ceded 10 (140,606) (322,163)1.1.3- Premiums Transferred to Social Security Institutions - -1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 26,527 92,5041.2.1- Reserve for Unearned Premiums, gross 47,444 119,0061.2.2- Reserve for Unearned Premiums, ceded 10 (20,917) (26,502)1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share - -1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.3.1- Reserve for Unexpired Risks, gross - -1.3.2- Reserve for Unexpired Risks, ceded - -2- Investment Income - Transferred from Non-Technical Section - -3- Other Technical Income (Net of Reinsurer Share) - -3.1- Other Technical Income, gross - -3.2- Other Technical Income, ceded - -4- Accrued Salvage and Subrogation Income - -B- Non-Life Technical Expense 5 (658,719) (663,540)1- Incurred Losses (Net of Reinsurer Share) (260,633) (338,489)1.1- Claims Paid (Net of Reinsurer Share) (272,814) (317,078)1.1.1- Claims Paid, gross (407,892) (362,397)1.1.2- Claims Paid, ceded 10 135,078 45,3191.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 12,181 (21,411)1.2.1- Change in Provisions for Outstanding Claims, gross (14,572) 9,2661.2.2- Change in Provisions for Outstanding Claims, ceded 10 26,753 (30,677)2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) - -2.1- Provision for Bonus and Discounts, gross (2,690) -2.2- Provision for Bonus and Discounts, ceded 2,690 -3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (8,698) (11,704)4- Operating Expenses 32 (389,388) (313,347)5- Change in Mathematical Provision (Net of Reinsurer Share and Less the Amounts Carried Forward) - -5.1.- Change in Mathematical Provision, gross - -5.2 - Change in Mathematical Provision, ceded - -6- Change in Other Technical Provision (Net of Reinsurer Share and Less the Amounts Carried Forward) - -6.1- Change in Other Technical Provision, gross - -6.2.- Change in Other Technical Provision, ceded - -C- Net Technical Income-Non-Life (A - B) 16,395 17,736D- Life Technical Income 5 598,513,416 502,677,8291- Earned Premiums (Net of Reinsurer Share) 382,876,620 346,805,2511.1- Written Premiums (Net of Reinsurer Share) 24 381,218,379 355,597,3101.1.1- Written Premiums, gross 394,219,745 367,057,4391.1.2- Written Premiums, ceded 10 (13,001,366) (11,460,129)1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 1,658,241 (8,792,059)1.2.1- Reserve for Unearned Premiums, gross 1,106,340 (8,923,900)1.2.2- Reserve for Unearned Premiums, ceded 10 551,901 131,8411.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - -1.3.1- Reserve for Unexpired Risks, gross - -1.3.2- Reserve for Unexpired Risks, ceded - -2- Investment Income 26 206,895,965 149,640,1013- Unrealized Gains on Investments - -4- Other Technical Income (Net of Reinsurer Share) 8,740,831 6,232,4774.1- Other Technical Income, gross 8,740,831 6,232,4774.2- Other Technical Income, ceded - -5- Accrued Salvage and Subrogation Income - -

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

Theaccompanyingnotesareanintegralpartoftheseunconsolidatedfinancialstatements.

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I-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012E- Life Technical Expense 5 (535,102,109) (469,262,040)1- Incurred Losses (Net of Reinsurer Share) (527,633,079) (454,748,419)1.1- Claims Paid (Net of Reinsurer Share) (506,847,643) (442,038,966)1.1.1- Claims Paid, gross (513,541,690) (445,432,538)1.1.2- Claims Paid, ceded 10 6,694,047 3,393,5721.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (20,785,436) (12,709,453)1.2.1- Change in Provisions for Outstanding Claims, gross (23,287,695) (12,355,824)1.2.2- Change in Provisions for Outstanding Claims, ceded 10 2,502,259 (353,629)2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 128,128 (256,613)2.1- Provision for Bonus and Discounts, gross 49,648 (528,684)2.2- Provision for Bonus and Discounts, ceded 78,480 272,0713- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) 83,433,502 59,536,6813.1- Change in Life Mathematical Provisions, gross 84,903,898 59,323,7573.1.1- Change in Actuarial Mathematical Provisions, gross 40,633,870 46,422,5703.1.2- Change in Profit Share Provision (Provision for Financial Investments with Risks on Saving Life Policyholders), gross 44,270,028 12,901,1873.2- Change in Life Mathematical Provisions, ceded 10 (1,470,396) 212,9243.2.1- Change in Actuarial Mathematical Provisions, ceded (1,470,396) 212,9243.2.2- Change in Profit Share Provision (Provision for Financial Investments with Risks on Saving Life Policyholders), ceded - -4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (1,997,221) (1,709,090)5- Operating Expenses 32 (89,033,439) (72,084,599)6- Investment Expenses - -7- Unrealized Losses on Investments - -8- Investment Income Transferred to the Non-Life Technical Section - -F- Net Technical Income- Life (D - E) 63,411,307 33,415,789G- Pension Business Technical Income 5, 25 132,002,445 139,026,0571- Fund Management Income 25 90,764,418 88,470,9732- Management Fee 25 17,771,761 33,953,3273- Entrance Fee Income 25 20,236,910 16,121,3434- Management Expense Charge in case of Suspension 25 3,120,756 367,2615- Income from Individual Service Charges - -6- Increase in Value of Capital Allowances Given as Advance 25 - -7- Other Technical Income 25 108,600 113,153H- Pension Business Technical Expense 5 (143,137,394) (119,530,396)1- Total Fund Expenses (16,300,221) (15,070,322)2- Decrease in Value of Capital Allowances Given as Advance - (2,400)3- Operating Expenses 32 (125,961,568) (102,992,329)4- Other Technical Expenses (873,988) (1,465,345)5-Fine Payments (1,617)I- Net Technical Income - Pension Business (G - H) (11,134,949) 19,495,661

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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II-NON-TECHNICAL SECTION Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012C- Net Technical Income - Non-Life (A-B) 16,395 17,736F- Net Technical Income - Life (D-E) 63,411,307 33,415,789I - Net Technical Income - Pension Business (G-H) (11,134,949) 19,495,661J- Total Net Technical Income (C+F+I) 52,292,753 52,929,186K- Investment Income 26 66,975,307 64,890,7061- Income from Financial Assets 33,906,018 21,023,9552- Income from Disposal of Financial Assets 21,336,148 7,511,1803- Valuation of Financial Assets (832,007) 23,349,8794- Foreign Exchange Gains 36 4,480,459 513,7175- Income from Associates 26 2,094,316 1,915,6276- Income from Subsidiaries and Joint Ventures - -7- Income from Property, Plant and Equipment 7,26 3,280,321 3,059,3258- Income from Derivative Transactions - 421,2389- Other Investments 26 2,710,052 7,095,78510- Income Transferred from Life Section - -L- Investment Expense (-) (17,054,753) (7,186,728)1- Investment Management Expenses (inc. interest) (1,116,227) (1,228,879)2- Diminution in Value of Investments - -3- Loss from Disposal of Financial Assets (66) (1,207,110)4- Investment Income Transferred to Non-Life Technical Section - -5- Loss from Derivative Transactions - -6- Foreign Exchange Losses 36 (11,003,005) (945,869)7- Depreciation and Amortization Expenses 6,8 (4,935,455) (3,804,870)8- Other Investment Expenses - -M- Income and Expenses From Other and Extraordinary Operation(+/-) (2,197,372) (3,581,089)1- Provisions 47 (800,039) (2,301,040)2- Rediscounts - -3- Specified Insurance Accounts - -4- Monetary Gains and Losses - -5- Deferred Taxation (Deferred Tax Income) 21 - -6- Deferred Taxation (Deferred Tax Expense) 21 (148,052) (447,909)7- Other Income 13 68- Other Expenses and Losses (1,249,294) (832,146)9- Prior Year’s Income - -10- Prior Year’s Expenses and Losses - -N- Net Profit for the Year 37 84,705,935 80,952,0751- Profit for the Year 100,015,935 107,052,0752- Corporate Tax Provision and Other Fiscal Liabilities 35 (15,310,000) (26,100,000)3- Net Profit for the Year 37 84,705,935 80,952,0754- Monetary Gains and Losses - -

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Income For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Audited Changes in Equity - 31 December 2012

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit (or Loss)

for the Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2011 300,000,000 - (9,822,204) - - 60,430,004 9,095,243 1,219,776 62,920,800 9,493,958 433,337,577II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2012 300,000,000 - (9,822,204) - - 60,430,004 9,095,243 1,219,776 62,920,800 9,493,958 433,337,577A- Capital increase (A1+A2) - - - - - - - - - - -1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - - - - -D- Change in the value of financial assets 15 - - 56,627,129 - - - - - - - 56,627,129E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the year - - - - - - - - 80,952,075 - 80,952,075I - Dividends paid 38 - - - - - - - - (41,431,176) - (41,431,176)J - Transfers from retained earnings 15 - - - - - 5,970,392 4,627,471 10,985,560 (21,489,624) (93,799) -IV - Balance at the end of the year - 31 December 2012 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605

Audited Changes in Equity - 31 December 2013

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit for the

Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2012 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2013 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605A- Capital increase (A1+A2) 50,000,000 - - - - - (19,000,000) (31,000,000) - - -1- In cash - - - - - - - - - - -2- From reserves 50,000,000 - - - - - (19,000,000) (31,000,000) - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (289,720) - - (289,720)D- Change in the value of financial assets 15 - - (33,865,967) - - - - - - - (33,865,967)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses 15 - - - - - - - - 2,000,000 - 2,000,000G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the period - - - - - - - - 84,705,935 - 84,705,935I - Dividends paid 38 - - - - - - - - (41,892,524) - (41,892,524)J - Transfers from retained earnings 15 - - - - - 6,874,304 6,119,160 26,795,776 (41,059,551) 1,270,311 -IV - Balance at the end of the period - 31 December 2013 350,000,000 - 12,938,958 - - 73,274,700 841,874 7,711,392 84,705,935 10,670,470 540,143,329

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Changes in Equity For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Audited Changes in Equity - 31 December 2012

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit (or Loss)

for the Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2011 300,000,000 - (9,822,204) - - 60,430,004 9,095,243 1,219,776 62,920,800 9,493,958 433,337,577II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2012 300,000,000 - (9,822,204) - - 60,430,004 9,095,243 1,219,776 62,920,800 9,493,958 433,337,577A- Capital increase (A1+A2) - - - - - - - - - - -1- In cash - - - - - - - - - - -2- From reserves - - - - - - - - - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - - - - -D- Change in the value of financial assets 15 - - 56,627,129 - - - - - - - 56,627,129E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses - - - - - - - - - - -G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the year - - - - - - - - 80,952,075 - 80,952,075I - Dividends paid 38 - - - - - - - - (41,431,176) - (41,431,176)J - Transfers from retained earnings 15 - - - - - 5,970,392 4,627,471 10,985,560 (21,489,624) (93,799) -IV - Balance at the end of the year - 31 December 2012 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605

Audited Changes in Equity - 31 December 2013

  Note Paid-in CapitalOwn Shares of the

CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal Reserves Statutory ReservesOther Reserves and

Retained EarningsNet Profit for the

Period Retained Earnings TotalI - Balance at the end of the year period - 31 December 2012 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605II - Change in Accounting Standards - - - - - - - - - - -III - Restated balances (I+II) -1 January 2013 300,000,000 - 46,804,925 - - 66,400,396 13,722,714 12,205,336 80,952,075 9,400,159 529,485,605A- Capital increase (A1+A2) 50,000,000 - - - - - (19,000,000) (31,000,000) - - -1- In cash - - - - - - - - - - -2- From reserves 50,000,000 - - - - - (19,000,000) (31,000,000) - - -B- Purchase of own shares - - - - - - - - - - -C- Gains or losses that are not included in the statement of income - - - - - - - (289,720) - - (289,720)D- Change in the value of financial assets 15 - - (33,865,967) - - - - - - - (33,865,967)E- Currency translation adjustments - - - - - - - - - - -F- Other gains or losses 15 - - - - - - - - 2,000,000 - 2,000,000G- Inflation adjustment differences - - - - - - - - - - -H- Net profit for the period - - - - - - - - 84,705,935 - 84,705,935I - Dividends paid 38 - - - - - - - - (41,892,524) - (41,892,524)J - Transfers from retained earnings 15 - - - - - 6,874,304 6,119,160 26,795,776 (41,059,551) 1,270,311 -IV - Balance at the end of the period - 31 December 2013 350,000,000 - 12,938,958 - - 73,274,700 841,874 7,711,392 84,705,935 10,670,470 540,143,329

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  Note

AuditedCurrent Period

31 December 2013

AuditedPrior Period

31 December 2012A. Cash flows from operating activities

1. Cash provided from insurance activities 905,029,055 438,572,7552. Cash provided from reinsurance activities 244,937 -3. Cash provided from individual pension business 171,441,309 154,825,9584. Cash used in insurance activities (932,211,577) (514,400,927)5. Cash used in reinsurance activities - (49,747)6. Cash used in individual pension business (147,339,063) (116,165,455)7. Cash provided by operating activities (2,835,339) (37,217,416)8. Interest paid - -9. Income taxes paid (26,100,000) (13,415,000)10. Other cash inflows 20,579,783 25,303,73511. Other cash outflows (13,583,826) (28,434,068)12. Net cash provided by operating activities (21,939,382) (53,762,749)

B. Cash flows from investing activities1. Proceeds from disposal of tangible assets 352,381 2,346,7092. Acquisition of tangible assets 6,8 (6,227,963) (8,018,006)3. Acquisition of financial assets (305,408,122) (309,005,855)4. Proceeds from disposal of financial assets 239,925,820 335,767,7695. Interests received 124,550,559 90,347,8726. Dividends received 3,815,541 3,314,2177. Other cash inflows 3,441,720 66,130,1678. Other cash outflows - (63,093,995)9. Net cash used in investing activities 60,449,936 117,788,878

C. Cash flows from financing activities1. Equity shares issued - -2. Cash provided from loans and borrowings - -3. Finance lease payments - -4. Dividends paid (41,892,524) (41,431,176)5. Other cash inflows - -6. Other cash outflows - -7. Net cash provided by financing activities (41,892,524) (41,431,176)

D. Effect of exchange rate fluctuations on cash and cash equivalentsE. Net increase in cash and cash equivalents (3,381,970) 22,594,953F. Cash and cash equivalents at the beginning of the year 14 142,060,223 119,465,270G. Cash and cash equivalents at the end of the year 14 138,678,253 142,060,223

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Cash Flows For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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Note

AuditedCurrent Period

31 December 2013(**)

AuditedPrior Period

31 December 2012I. DISTRIBUTION OF THE PERIOD PROFITI. DISTRIBUTION OF THE PERIOD PROFIT 102,015,935 109,052,0751.1. PERIOD PROFIT (*) (15,310,000) (26,100,000)1.2 TAXES AND DUTIES PAYABLE (15,310,000) (26,100,000)

1.2.1. Corporate Tax (Income Tax) - -1.2.2. Income Tax Deductions - -1.2.3. Other Taxes and Legal Duties 86,705,935 82,952,075

A. CURRENT PERIOD PROFIT (1.1 - 1.2) - -1.3. ACCUMULATED LOSSES (-) 4,158,330 4,078,7741.4 FIRST LEGAL RESERVES (-) - -1.5 OTHER STATUTORY RESERVES (-) 82,547,605 78,873,301B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1.4 + 1.5)] - (15,789,181)1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (15,789,181)

1.6.1. To owners of ordinary shares - -1.6.2. To owners of privileged shares - -1.6.3 To owners of redeemed shares - -1.6.4 To holders profit sharing bonds - -1.6.5 To holders of profit and loss sharing certificates - (1,892,524)

1.7. DIVIDENDS TO PERSONNEL (-) - -1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - -1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) - (24,210,819)

1.9.1. To owners of ordinary shares - (24,210,819)1.9.2. To owners of privileged shares - -1.9.3. To owners of redeemed shares - -1.9.4. To holders profit sharing bonds - -1.9.5. To holders of profit and loss sharing certificates - -

1.10. LEGAL RESERVES (-) - (2,689,252)1.11. STATUTORY RESERVES(-) - (6,119,160)1.12. EXTRAORDINARY RESERVES - (28,172,365)1.13. OTHER RESERVES - -1.14. SPECIAL FUNDS - -II. DISTRIBUTION OF RESERVES - -2.1. APPROPRIATED RESERVES - -2.2. SECOND LEGAL RESERVES (-) - -2.3. DIVIDENDS TO SHAREHOLDERS (-) - -

2.3.1. To owners of ordinary shares - -2.3.2. To owners of privileged shares - -2.3.3. To owners of redeemed shares - -2.3.4. To holders of profit sharing bonds - -2.3.5. To holders of profit and loss sharing certificates - -

2.4. DIVIDENDS TO PERSONNEL (-) - -2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) - -III. EARNINGS PER SHARE 0,24773 0,237013.1. TO OWNERS OF ORDINARY SHARES 24,773 23,7013.2. TO OWNERS OF ORDINARY SHARES (%) 0,24773 0,237013.3. TO OWNERS OF PRIVILEGED SHARES 24,773 23,7013.4. TO OWNERS OF PRIVILEGED SHARES (%)IV. DIVIDEND PER SHARE 38 - -4.1. TO OWNERS OF ORDINARY SHARES - -4.2. TO OWNERS OF ORDINARY SHARES (%) - -4.3. TO OWNERS OF PRIVILEGED SHARES - -

(*)Consolidatedcurrentyearprofitisusedforprofitdistributionasperthe“ProfitShareGuidebook”issuedbytheCapitalMarketBoardon2013/10dated.Provisionfordividendexpenseamountingto¨2,000,000isaddedtotheprofitfortheyearended31 December2013.(**)Asofthereportingdate,theGeneralAssemblyMeetinghasnotbeenheld;therefore,onlydistributablenetprofitispresentedintheprofitdistributiontableabove.

Anadolu Hayat Emeklilik Anonim ŞirketiConsolidated Statement of Profit Distribution For the Year Ended 31 December 2013 (Currency: Turkish Lira (¨)) Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1

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1 General information

1.1 Name of the Company and the ultimate owner of the group

AnadoluHayatEmeklilikAnonimŞirketi(“theCompany”)hasbeenoperatingsince31 May1990andtheshareholdingstructureoftheCompanyispresentedbelow.Asat31 December2013,theshareholderhavingdirectorindirectcontroloverthesharesoftheCompanyisTürkiyeİşBankasıAŞ(“İşBankası”)by83.0%oftheoutstandingsharesoftheCompany.

31 December 2013 31 December 2012

NameShareholding

amount (¨)Shareholding rate

(%)Shareholding

amount (¨)Shareholding rate

(%)

TürkiyeİşBankasıAŞ 217,000,000 62.0 186,000,000 62.0AnadoluAnonimTürkSigortaŞirketi 70,000,000 20.0 60,000,000 20.0MilliReasüransTAŞ 3,500,000 1.0 3,000,000 1.0Publiclytraded 59,500,000 17.0 51,000,000 17.0Paid in capital 350,000,000 100.0 300,000,000 100.0

1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating center if it is different from the registered office)

TheCompanywasregisteredinTurkeyandhasthestatusof‘IncorporatedCompany’inaccordancewiththeregulationsofTurkishCommercialCode(“TTK”).TheaddressoftheCompany’sregisteredofficeisMeltemSokakNo:10İşKuleleriKule:2Kat:16,Levent34330Beşiktaş/İstanbul.

1.3 Business of the Company

TheactivitiesoftheCompanyinvolveprovidingindividualandgroupinsuranceandreinsuranceservicesrelatingtogrouplife,individuallife,retirementandrelatedpersonalaccidentbranches,establishingretirementfunds,developinginternalrulesandregulationsrelatedtothesefunds,carryingoutretirement,annualincomeinsurance,portfoliomanagementandcustodycontractsfortheassetsofthefundsheldincustody.

Asat31 December2013,theCompanyhas24individualpensioninvestmentfunds(31 December2012:21).

1.4 Description of the main operations of the Company

TheCompanyissuespoliciesininsurancebranchesspecifiedintheabovenote1.3-Business of the CompanyandcontractsinindividualpensionbusinessbyconductingitoperationsinaccordancewiththeInsuranceLawNo.5684(the“InsuranceLaw”)issuedon14 June2007datedand26552numberedOfficialGazetteandIndividualPensionSavingsandInvestmentSystemLawNo.4632(the“IndividualPensionLaw”)andothercommuniquésandregulationsinforceissuedbythePrimeMinistryUndersecretariatoftheTreasuryoftheTurkishRepublic(the“TurkishTreasury”)basedontheInsuranceLawandtheIndividualPensionLaw.

TheCompany’sshareshavebeenlistedontheBorsaIstanbul(“BIST”).InaccordancewithArticle136(1)inSectionVIIIoftheCapitalMarketsLaw,insurancecompanieshavetocomplywiththeirownspecificlawsandregulationsinmattersofestablishment,auditing,supervision/oversight,accountingandfinancialreporting;therefore,theCompanyperformsitsoperationsaccordingly.

1.5 The average number of the personnel during the period in consideration of their categories

The average number of the personnel during the period in consideration of their categories is as follows:31 December 2013 31 December 2012

Seniorlevelmanagers 7 7Directors 94 86Officers 331 298Contractedpersonnel 5 6Marketingandsalespersonnel 352 315Other 12 13Total 801 725

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1.6 Wages and similar benefits provided to the senior management

Fortheyearended31 December2013,wagesandsimilarbenefitsprovidedtotheseniormanagementincludingchairman,membersoftheboardofthedirectors,generalmanager,anddeputygeneralmanagersamountedto¨3,958,378(31 December2012:¨3,616,722).

1.7 Explanation about the distribution of investment income and operating expenses (personnel expenses, administrative expenses, research and development expenses, marketing and selling expenses, and expenses for the services bought from third parties) in the financial statements

Proceduresandprinciplesrelatedtokeysusedinthefinancialstatementsofthecompaniesaredeterminedinaccordancewiththe4 January2008datedand2008/1numbered“CommuniquéRelatedtotheProceduresandPrinciplesfortheKeysUsedintheFinancialStatementsBeingPreparedInAccordanceWithInsuranceAccountingPlan”issuedbytheTurkishTreasury.InaccordancewiththeabovementionedCommuniqué,knownandexactlydistinguishableoperatingexpensesaredirectlyrecordedunderlife,non-lifeorindividualpensionsegments.Othernon-distinguishableexpenses,whicharenotexactlydistinguished,aredistributedbetweeninsurancesegmentsandindividualpensionsegmentinaccordancewiththenumberofpoliciesandcontractsattheendoflast3yearsandarithmeticaverageofcontributionpremiumandearnedpremiumwithinthelast3yearsinaccordancewiththe9 August2010datedand2010/9numbered“AmendmentsCommuniquéRelatedtotheProceduresandPrinciplesfortheKeysUsedintheFinancialStatementsBeingPreparedInAccordanceWithInsuranceAccountingPlan”issuedbytheTurkishTreasury.Amendmentiseffectivefrom1 January2011.Theportionofinsurancesegmentscalculatedasdescribedaboveisdistributedbetweenlifeandnon-lifebranchesinaccordancewiththeaverageof3ratioscalculatedbydividing“numberofthepoliciesproducedwithinthelastthreeyears”,“grosspremiumswrittenwithinthelastthreeyears”,and“numberoftheclaimsreportedwithinthelastthreeyears”tothe“totalnumberofthepolicies”,“totalgrosswrittenpremiums”,andthe“totalnumberoftheclaimsreported”,respectively.

Incomefromtheassetsinvestedagainstnon-lifetechnicalprovisionsistransferredtotechnicalsectionfromnon-technicalsection.

Incomefromtheassetsinvestedagainstmathematicalandprofitsharingprovisionsisrecordedundertechnicalsection,remainingincomeistransferredtothenon-technicalsection.

Asatthereportingperiod,distributionoftheoperatingexpensebetweenlife,non-lifeandpensionbranchesispresentedinnote5-Segment distribution.

1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies

TheaccompanyingfinancialstatementscomprisetheconsolidatedfinancialinformationoftheCompanyasfurtherdetailedinnote2.2- Consolidation.

TheCompanyowns20%ofİşPortföyYönetimiA.Ş.(“İşPortföy”)andthisassociatehasbeenconsolidatedintheaccompanyingconsolidatedfinancialstatementsbyusingtheequitymethodofaccounting.

İşPortföywasregisteredwiththeİstanbulTradeRegistryon23 September2000anditsfoundationwaspublishedintheTurkishTradeRegistryGazettenumber5168on6 November2000.İşPortföydealswithcapitalmarketactivitiesinaccordancewithitsArticlesofAssociationandCapitalMarketLawnumber2499asmodifiedbyLawnumber3794.İşPortföymanagesportfolios,whicharemadeupofthecapitalmarketinstrumentsaccordingtotherulesoftherelatedregulationsandtheCapitalMarketLawbyenteringintoportfoliomanagementagreementswithitsclients.Additionally,İşPortföymanagesdomesticandforeignfunds,theportfoliosoftheinvestmentpartnerships,theportfoliosofthedomesticandforeignrealorjudicialpersons,theportfoliosoftheinvestmentcompaniesandsimilarentities.Inaddition,theİşPortföyprovidesinvestmentconsultancyservices.

1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting periodTradenameoftheCompany :AnadoluHayatEmeklilikAŞRegisteredaddressoftheheadoffice :İşKuleleri,Kule2Kat2034330,Levent/İstanbulThewebpageoftheCompany :www.anadoluhayat.com.trE-mailaddressoftheCompany :hizmet@anadoluhayat.com.trPhone :02123177070Fax :02123177077

Therehasbeennochangeintheaforementionedinformationsubsequenttothepreviousreportingperiod.

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1.10 Events after the reporting period

None.

2 Summary of significant accounting policies

2.1 Basis of preparation

2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements

InaccordancewithArticle136(1)inSectionVIIIoftheCapitalMarketsLaw,insurancecompanieshavetocomplywiththeirownspecificlawsandregulationsinmattersofestablishment,auditing,supervision/oversight,accountingandfinancialreporting.Therefore,theCompanymaintainsitsbooksofaccountandpreparesitsfinancialstatementsinaccordancewiththeTurkishAccountingStandards(“TAS”),TurkishFinancialReportingStandards(“TFRS”),andotheraccountingandfinancialreportingprinciples,statementsandguidance(collectively“theReportingStandards”)inaccordancewiththe“CommuniquéRelatedtotheFinancialReportingofInsurance,Reinsurance,andIndividualPensionCompanies”aspromulgatedbytheTurkishTreasurybasedonArticle18oftheInsuranceLawandArticle11oftheIndividualPensionLaw.

Althoughthe4thstandardoftheTurkishAccountingStandardsBoard(“TASB”)forthe‘Insurance contracts’becameeffectiveon25 March2006fortheaccountingperiodsthatbeginonorafter31 December2005,itisstatedthatTFRS4willnotbeimplementedatthisstagesincethesecondphaseoftheInternationalAccountingStandardsBoardprojectabouttheinsurancecontractshasnotbeencompletedyet.Inthiscontext,“CommuniquéonTechnicalReservesforInsurance,ReinsuranceandIndividualPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”(“CommuniquéonTechnicalReserves”)ispublishedintheOfficialGazettedated7 August2007,numbered26606andbecameeffectiveon1 January2008.SubsequenttothepublicationoftheCommuniquéonTechnicalReserves,someothercircularsandsectorannouncementswhichcontainexplanationsandregulationsrelatedtoapplicationoftheCommuniquéonTechnicalReservesarepublished.Accountingpoliciesappliedfortheinsurancecontractsbasedonthesecommuniqué,circularsandothersectorannouncementsaresummarizedontheirowncaptionsinthefollowingsections.

Accountingforsubsidiaries,associatesandjointventuresisregulatedwith28 December2007datedand2007/26numbered“CircularRelatedtotheAccountingofSubsidiaries,AssociatesandJointVentures”,issuedbytheTurkishTreasury.Itisstatedthat,thecompanieswillcontinuetoapplytheprinciplesoftherelatedstandardsofTFRSsfortheaccountingofsubsidiaries,associatesandjointventureuntilthepublicationofanotherregulationonthisissuebytheTurkishTreasury.“CircularRelatedtothePreparationoftheConsolidatedFinancialStatementsofInsurance,Reinsurance,andIndividualPensionCompanies”issuedbytheTurkishTreasuryinthe31 December2008datedand27097numbered(4threpeat)OfficialGazette,constitutedthebasisofconsolidationtobeeffectiveonthedatesthatcircularspecifies.

Perdecreeno660publishedontheOfficialGazettedated2 November2011andbecameeffective,additionalarticleno1ofthe2499numberedLawonestablishmentofTASBhasbeenabrogatedandestablishmentofPublicOversight,AccountingandAuditingStandardsAssociation(“Board”)hasbeendecidedbytheCouncilofMinisters.Inaccordancewiththisadditionaltemporaryarticleno1ofthedecree,currentregulationswillprevailuntilrelatedstandardsandregulationswillbeissuedbytheBoard.

Additional paragraph for convenience translation to English

Thedifferencesbetweenaccountingprinciples,asdescribedintheprecedingparagraphs,andtheaccountingprinciplesgenerallyacceptedincountries,inwhichtheaccompanyingconsolidatedfinancialstatementsaretobedistributed,andInternationalFinancialReportingStandards(“IFRS”),mayhavesignificantinfluenceontheaccompanyingconsolidatedfinancialstatements.Accordingly,theaccompanyingconsolidatedfinancialstatementsarenotintendedtopresentthefinancialpositionandresultsofoperationsinaccordancewiththeaccountingprinciplesgenerallyacceptedinsuchcountriesotherthanTurkey.

2.1.2 Other accounting policies appropriate for the understanding of the financial statements

Accounting in hyperinflationary countries

FinancialstatementsoftheTurkishentitieshavebeenrestatedforthechangesinthegeneralpurchasingpoweroftheTurkishLirabasedonTAS29-Financial Reporting in Hyperinflationary Economiesasat31 December2004.TAS 29requiresthatfinancialstatementspreparedinthecurrencyofahyperinflationaryeconomybestatedintermsofthemeasuringunitcurrentatthereportingperiod,andthatcorrespondingfiguresforpreviousyearsberestatedinthesameterms.

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Withrespecttothe4 April2005datedand19387numbereddeclarationoftheTurkishTreasury,theCompanyrestateditsfinancialstatementsasat31 December2004andpreparedopeningfinancialstatementsof2005inaccordancewiththe“RestatementofFinancialStatementsinHyperinflationaryPeriods”oftheCapitalMarketsBoard(“CMB”)CommuniquéNo:25ofSeriesXI,“CommuniquéonAccountingStandardsinCapitalMarket”publishedintheOfficialGazettedated15 January2003andnumbered25290.Inflationaccountingisnolongerappliedstartingfrom1 January2005,inaccordancewiththesamedeclarationoftheTurkishTreasury.Accordingly,asat31 December2010,non-monetaryassetsandliabilitiesanditemsincludedinshareholders’equityincludingpaid-incapitalrecognizedorrecordedbefore1 January2005aremeasuredasrestatedto31 December2004inordertoreflectinflationadjustments.Non-monetaryassetsandliabilitiesanditemsincludedinshareholders’equityincludingpaid-incapitalrecognizedorrecordedafter1 January2005aremeasuredattheirnominalcostsorvalues.

Other accounting policies

Informationregardingtootheraccountingpolicesisexplainedaboveinthesectionofnote2.1.1- Information about the principles and the special accounting policies used in the preparation of the financial statements andeachonitsowncaptioninfollowingsectionsofthisreport.

2.1.3 Functional and presentation currency

TheCompany’sfinancialstatementsarepresentedinthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(itsfunctionalcurrency).TheresultsandfinancialpositionoftheCompanyareexpressedin¨,whichisthefunctionalandpresentationcurrencyoftheCompany.

2.1.4 Rounding level of the amounts presented in the financial statements

Financialinformationpresentedin¨,hasbeenroundedtothenearest¨values.

2.1.5 Basis of measurement used in the preparation of the financial statements

Theaccompanyingfinancialstatementsarepreparedonthehistoricalcostbasisasadjustedfortheeffectsofinflationthatlasteduntil31 December2004,exceptforthefinancialassetsatfairvaluethroughprofitorloss,available-for-salefinancialassets,financialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailable-for-salefinancialassetsandderivativefinancialinstrumentswhicharemeasuredattheirfairvaluesunlessreliablemeasuresareavailable.

2.1.6 Accounting policies, changes in accounting estimates and errors

Therehavebeennochangesintheaccountingpoliciesorerrorsinthecurrentperiod.

CriticalaccountingjudgmentsmadeinapplyingtheCompany’saccountingpoliciesareexplainedinnote3-Critical accounting estimates and judgments in applying accountingpolicies.

2.2 Consolidation

“CircularRelatedtothePreparationoftheConsolidatedFinancialStatementsofInsurance,Reinsurance,andIndividualPensionCompanies”issuedbytheTurkishTreasuryinthe31 December2008datedand27097numberedOfficialGazette,hasbeeninforcesince31 March2009.Accordingly,consolidatedfinancialstatementsarepreparedusingtheequitymethodofaccountingtoconsolidatetheCompany’sassociate;İşPortföyYönetimiAŞ.

2.3 Segment reporting

AnoperatingsegmentisacomponentoftheCompanythatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheCompany’sothercomponents,whoseoperatingresultsarereviewedregularlybytheBoardofDirectors(beingchiefoperatingdecisionmaker)tomakedecisionsaboutresourcesallocatedtoeachsegmentandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.

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2.4 Foreign currency transactions

Transactionsarerecordedin¨,whichistheCompany’sfunctionalcurrency.Transactionsinforeigncurrenciesarerecordedattheratesrulingatthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedatexchangeratesrulingatthereportingperiodandforeigncurrencyexchangedifferencesareoffsetandallexchangedifferencesarerecognizedinthestatementofincome.

Foreigncurrencyexchangedifferencesofunrecognizedgainsorlossesarisingfromthedifferencebetweentheirfairvalueandthediscountedvaluescalculatedpereffectiveinterestratemethodofforeigncurrencyavailable-for-salefinancialassetsarerecordedin“Revaluationoffinancialassets”underequityandtherealizedgainorlossesarerecognizeddirectlyinthestatementofincome.Foreigncurrencyexchangedifferencesofunrecognizedgainsorlossesarisingfromfinancialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailable-for-salefinancialassets,5%ofthedifferenceisrecordedunderequityandtheremaining95%belongingtopolicyholdersisrecordedas‘insurancetechnicalprovisions-lifemathematicalprovisions’.

2.5 Tangible assets

Tangibleassetsarerecordedattheirhistoricalcoststhathavebeenadjustedaccordingtotheinflationratesuntiltheendof31 December2004.Therehavebeennootherinflationaryadjustmentsforthesetangibleassetsforthefollowingyearsandthereforetheyhavebeenrecordedattheircostsindexedtotheinflationratesfor31 December2004.Tangibleassetsthathavebeenpurchasedafter1 January2005havebeenrecordedattheircostsexcludingtheirexchangeratedifferencesandfinanceexpenseslessimpairmentlossesifany.

Gains/lossesarisingfromthedisposalofthetangibleassetsarecalculatedasthedifferencebetweenthenetcarryingvalueandtheproceedsfromthedisposalofrelatedtangibleassetsandreflectedtothestatementofincomeoftherelatedperiod.

Maintenanceandrepaircostsincurredintheordinarycourseofthebusinessarerecordedasexpense.

Therearenopledges,mortgagesandotherencumbrancesontangiblefixedassets.

Therearenochangesinaccountingestimatesthathavesignificanteffectonthecurrentperiodorthatareexpectedtohavesignificanteffectonthefollowingperiods.

Depreciationisrecognizedinprofitorlossonastraight-linebasisovertheestimatedusefullivesofeachpartofanitemoftangibleassetssincethismostcloselyreflectstheexpectedpatternofconsumptionofthefutureeconomicbenefitsembodiedintheasset.

Depreciationratesandestimatedusefullivesareasfollows:

Tangible assetsEstimated useful

lives (years)Depreciation

rates (%)Buildings 50years 2.00Machineryandequipment 3-16years 6.25-33.33Fixturesandfurniture 4-13years 7.69-25.00Vehicles 5years 20.00Othertangibleassets(includesleaseholdimprovements) 5years 20.00Leasedassets 4-15years 6.66-25.00

2.6 Investment properties

Investmentpropertiesareheldeithertoearnrentalsand/orforcapitalappreciationorforboth.

Investmentpropertiesaremeasuredinitiallyatcostincludingtransactioncosts.

Subsequenttoinitialrecognition,theCompanymeasuredallinvestmentpropertybasedonthecostmodelinaccordancewiththecostmodelforpropertyandequipment(i.e.atcostlessaccumulateddepreciationandlessimpairmentlossesifany).

Depreciationisprovidedoninvestmentpropertiesonastraightlinebasis.Depreciationperiodforinvestmentpropertiesis50yearsforbuildingsandlandisnotdepreciated.

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Investmentpropertiesarederecognizedwheneithertheyhavebeendisposedoforwhentheinvestmentpropertyispermanentlywithdrawnfromuseandnofutureeconomicbenefitisexpectedfromitsdisposal.Anygainsorlossesontheretirementordisposalofaninvestmentpropertyarerecognizedinprofitorlossintheperiodofretirementordisposal.

2.7 Intangible assets

TheCompany’sintangibleassetsconsistofcomputersoftware.

Intangibleassetsarerecordedatcostincompliancewiththe“TAS38-Accountingforintangibleassets”.Thecostoftheintangibleassetspurchasedbefore31 December2004arerestatedfromthepurchasingdatesto31 December2004,thedatethehyperinflationaryperiodisconsideredtobeended.Theintangibleassetspurchasedafterthisdatearerecordedattheirhistoricalcosts.Acquiredcomputersoftwarelicensesarecapitalizedonthebasisofthecostsincurredtoacquireandbringtousethespecificsoftware.

Amortizationischargedonastraight-linebasisovertheirestimatedusefullives(3years)overthecostoftheasset.

Costsassociatedwithdevelopingormaintainingcomputersoftwareprogramsarerecognizedasexpensewhenincurred.CoststhataredirectlyassociatedwiththedevelopmentofidentifiableanduniquesoftwareproductsthatarecontrolledbytheCompanyandwillprobablyprovidemoreeconomicbenefitsthancostsinoneyeararerecognizedasintangibleassets.Costsincludesoftwaredevelopmentemployeecostsandanappropriateportionofrelevantoverheads.Computersoftwaredevelopmentcostsrecognizedasassetsareamortizedovertheirestimatedusefullives(notexceedingthreeyears).

2.8 Financial assets

Afinancialassetisanyassetthatiscash,anequityinstrumentofanotherentity,acontractualrighttoreceivecashoranotherfinancialassetfromanotherentity;ortoexchangefinancialassetsorfinancialliabilitieswithanotherentityunderconditionsthatarepotentiallyfavorabletotheentity.

Securitiesarerecognizedandderecognizedatthedateofsettlement.

Financialassetsareclassifiedinfourcategories;asfinancialassetsheldfortrading,available-for-salefinancialassets,heldtomaturityfinancialassets,andloansandreceivables.

Financial assets at fair value through profit or lossarepresentedasfinancialassetsheldfortradingintheaccompanyingfinancialstatementsandtradingsecuritiesandderivativesareincludedinthiscategory.Financialassetsatfairvaluethroughprofitorlossmeasuredattheirfairvaluesandgain/lossarisingduetochangesinthefairvaluesofrelatedfinancialassetsarerecordedinthestatementofincome.Interestincomeearnedontradingpurposefinancialassetsandthedifferencebetweentheirfairvaluesandacquisitioncostsarerecordedasinterestincomeinthestatementofincome.Incaseofdisposalofsuchfinancialassetsbeforetheirmaturities,thegains/lossesonsuchdisposalarerecordedundertradingincome/losses.Accountingpoliciesofderivativesaredetailedinnote2.10-Derivative financial instruments.

Loans and receivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.TheyarisewhentheCompanyprovidesmoney,goodsorservicesdirectlytoadebtorwithnointentionoftradingthereceivable.Loansandreceivablesthosearenotinterestearningaremeasuredbydiscountingoffuturecashflowslessimpairmentlosses,andinterestearningloansandreceivablesaremeasuredatamortizedcostlessimpairmentlosses.

Held to maturity financial assetsarethefinancialassetswithfixedmaturitiesandfixedorpre-determinedpaymentschedulesthattheCompanyhastheintentandabilitytoholduntilmaturity,excludingloansandreceivables.Subsequenttoinitialrecognition,heldtomaturityfinancialassetsandloansandreceivablesaremeasuredatamortizedcostusingeffectiveinterestratemethodlessimpairmentlosses,ifany.

Available-for-sale financial assetsarethefinancialassetsotherthanassetsheldfortradingpurposes,held-to-maturityfinancialassetsandloansandreceivables.

Available-for-salefinancialassetsareinitiallyrecordedatcostandsubsequentlymeasuredattheirfairvalues.Assetsthatarenottradedinanactivemarketaremeasuredbyvaluationtechniques,includingrecentmarkettransactionsinsimilarfinancialinstruments,adjustedforfactorsuniquetotheinstrumentbeingvalued;ordiscountedcashflowtechniquesfortheassetswhichdonothaveafixedmaturity.Unrecognizedgainsorlossesderivedfromthedifferencebetweentheirfairvalueandthediscountedvaluescalculatedpereffectiveinterestratemethodarerecordedin“Revaluationoffinancialassets”undershareholders’equity.Upondisposal,therealizedgainorlossesarerecognizeddirectlyinthestatementofincome.

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Thedeterminationoffairvaluesoffinancialinstrumentsnottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Observablemarketpricesofthequotedfinancialinstrumentswhicharesimilarintermsofinterest,maturityandotherconditionsareusedindeterminingthefairvalue.

Associates;İşPortföyhasbeenconsolidatedintheaccompanyingconsolidatedfinancialstatementsbyusingtheequitymethodofaccounting.

Specific instruments

Financial investments with risks on saving life policyholdersarethefinancialassetsinvestedagainstthesavingsofthelifepolicyholders.Financialinvestmentswithrisksonsavinglifepolicyholderscouldbeclassifiedasfinancialassetsheldfortradingpurpose,availableforsalefinancialassetsorheldtomaturityinvestmentsbyconsideringthebenefitsofthepolicyholdersandmeasuredinaccordancewiththeprinciplesasexplainedabove.

Whensuchinvestmentsareclassifiedasavailable-for-salefinancialassets,5%ofthedifferencebetweenthefairvaluesandamortizedcosts,calculatedbyusingeffectiveinterestmethod,ofthefinancialassetsisrecordedunderequityandtheremaining95%belongingtopolicyholdersisrecordedas‘insurancetechnicalprovisions-lifemathematicalprovisions’.Asat31 December2013,95%ofthedifferencebetweenfairvaluesandamortizedcostsofthoseassetsbackingliabilitiesamountingto¨(5,711,673)(31 December2012:¨245,052,988)isrecordedinlifemathematicalprovisions.

Receivables from individual pension operations consistof‘capitaladvancesgiventopensioninvestmentfunds’,‘receivablefrompensioninvestmentfundsforfundmanagementfees’,‘entrancefeereceivablefromparticipants’and‘receivablesfromclearinghouseonbehalfoftheparticipants’.

‘Receivablefrompensioninvestmentfundsforfundmanagementfee’arethefeeschargedtothepensioninvestmentfundsagainstfortheadministrationofrelatedpensioninvestmentfundswhichconsistoffeeswhicharenotcollectedinthesameday.

Capitaladvancesgiventopensioninvestmentsfundsduringtheirestablishmentarerecordedunder‘capitaladvancesgiventopensioninvestmentfunds’.

‘Receivablesfromtheclearinghouseonbehalfoftheparticipants’isthereceivablefromclearinghouseonfundbasisagainstthecollectionsoftheparticipants.Sameamountisalsorecordedaspayablestoparticipantsforthefundssoldagainsttheircollectionsunderthe‘payablesarisingfromindividualpensionbusinesses.

Loanstothepolicyholdersareloansthatareprovidedtothepolicyholdersfromsavingcomponentofthelifeinsurancepoliciesbasedonthefundamountsandfundunitprices.Valuationoftheloanstothepolicyholdersbasedonthefundamountsandfundunitpricesasatthereportingdate.

Derecognition

Afinancialassetisderecognizedwhenthecontroloverthecontractualrightsthatcomprisethatassetislost.Thisoccurswhentherightsarerealized,expireoraresurrendered.

2.9 Impairment on assets

Impairment on financial assets

Financialassetsorgroupoffinancialassetsarereviewedateachreportingperiodtodeterminewhetherthereisobjectiveevidenceofimpairment.Ifanysuchindicationexists,theCompanyestimatestheamountofimpairment.Impairmentlossincursif,andonlyif,thereisobjectiveevidencethattheexpectedfuturecashflowsoffinancialassetorgroupoffinancialassetsareadverselyaffectedbyanevent(s)(“lossevent(s)”)incurredsubsequenttorecognition.Thelossesexpectedtoincurduetofutureeventsarenotrecognizedeveniftheprobabilityoflossishigh.

Loansandreceivablesarepresentednetofspecificallowancesforuncollectibility.Specificallowancesaremadeagainstthecarryingamountsofloansandreceivablesthatareidentifiedasbeingimpairedbasedonregularreviewsofoutstandingbalancestoreducetheseloansandreceivabletotheirrecoverableamounts.

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Therecoverableamountofanequityinstrumentisitsfairvalue.Therecoverableamountofdebtinstrumentsandpurchasedloansmeasuredtofairvalueiscalculatedasthepresentvalueoftheexpectedfuturecashflowsdiscountedatthecurrentmarketrateofinterest.

Animpairmentlossisreversedifthereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognized.Forfinancialassetsmeasuredatamortizedcostandavailable-for-salefinancialassetsthataredebtsecurities,thereversalisrecognizedinthestatementofoperations.Foravailable-for-salefinancialassetsthatareequitysecurities,thereversalisrecognizeddirectlyinequity.

Impairment on tangible and intangible assets

Oneachreportingperiod,theCompanyevaluateswhetherthereisanindicationofimpairmentoffixedassets.Ifthereisanobjectiveevidenceofimpairment,theasset’srecoverableamountisestimatedinaccordancewiththe“TAS 36 - ImpairmentofAssets”andiftherecoverableamountislessthanthecarryingvalueoftherelatedasset,aprovisionforimpairmentlossismade.

RediscountandprovisionexpensesoftheperiodaredetailedinNote 47.

2.10 Derivative financial instruments

Asatthereportingperiod,derivativefinancialinstrumentsoftheCompanyconsistofTurkDEX-ISE30Indexfuturecontracts.ThesederivativeinstrumentsaretreatedasheldfortradingfinancialassetsincompliancewiththestandardTAS39-Financial Instruments.

Derivativefinancialinstrumentsareinitiallyrecognizedattheirfairvalue.

Thereceivablesandliabilitiesarisingfromthederivativetransactionsarerecognizedundertheoff-balancesheetaccountsthroughthecontractamounts.

Derivativefinancialinstrumentsaresubsequentlyre-measuredatfairvalueandpositivefairvaluedifferencesarepresentedeitheras“financialassetsheldfortrading”andnegativefairvaluedifferencesarepresentedas“otherfinancialliabilities”intheaccompanyingfinancialstatements.Allunrealizedgainsandlossesontheseinstrumentsareincludedinthestatementofincome.

2.11 Offsetting of financial assets

Financialassetsandliabilitiesareoff-setandthenetamountispresentedinthebalancesheetwhen,andonlywhen,theCompanyhasalegalrighttosetofftheamountsandintendseithertosettleonanetbasisortorealizetheassetandsettletheliabilitysimultaneously.

IncomeandexpensesarepresentedonanetbasisonlywhenpermittedbytheReportingStandards,orforgainsandlossesarisingfromagroupoftransactionsresultingfromtheCompany’ssimilaractivitiesliketradingtransactions.

2.12 Cash and cash equivalents

Cashandcashequivalents,whichisabaseforthepreparationofthestatementofcashflowsincludescashonhand,othercashandcashequivalents,demanddepositsandtimedepositsatbankshavingoriginalmaturitylessthan3monthswhicharereadytobeusedbytheCompanyornotblockedforanyotherpurpose.

2.13 Capital

TheshareholdingstructureoftheCompanyispresentedinnote1.1-Name of the Company and the ultimate owner of the group.Asof31 December2013,theCompany’sissuedcapitalis¨350,000,000(31 December2012:¨300,000,000).

Sources of the capital increases during the period

TheCompany’sissuedcapitalincreasedfrom¨300,000,000to¨350,000,000by¨50,000,000throughthetransfertoextraordinaryreservesby¨31,000,000,statutoryreservesby¨19,000,000.

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Privileges on common shares representing share capital

Asat31 December2013,thesharecapitaloftheCompanywasamounted¨350,000,000(31 December2012:¨300,000,000),dividedinto35,000,000,000shares(31 December2012:30,000,000,000shares)witheachhasanominalvalueof¨0.01.TheCompany’ssharecapitalwasdividedintogroupscomprisedof100,000,000GroupAshareshavingnominalvaluesof¨0.01foreach.AmongelevenmembersoftheBoardofDirectors,sevenareelectedamongcandidatesnominatedbyGroupAshareholderswhilefourareelectedamongcandidatesnominatedbyGroupBshareholders.

Registered capital system in the Company

TheCompanyhasacceptedtheregisteredcapitalsystemsetoutinaccordancewiththeLawNo:2499andappliedthesystemasof15 June2000uponthepermissionno:67/1039grantedbytheCapitalMarketsBoard.Asat31 December2013theregisteredcapitaloftheCompanyis¨450,000,000(31 December2012:¨450,000,000).

Repurchased own shares by the Company

None.

2.14 Insurance and investment contracts - classification

AninsurancecontractisacontractunderwhichtheCompanyacceptssignificantinsuranceriskfromanotherparty(thepolicyholder)byagreeingtocompensatethepolicyholderifaspecifieduncertainfutureevent(theinsuredevent)adverselyaffectsthepolicyholder.Insuranceriskcoversallriskexceptforfinancialrisks.Allpremiumshavebeenreceivedwithinthecoverageofinsurancecontractsrecognizedasrevenueundertheaccountcaption“writtenpremiums”.

Investmentcontractsarethosecontractswhichtransferfinancialriskwithnosignificantinsurancerisk.Financialriskistheriskofapossiblefuturechangeinaspecifiedinterestrate,financialinstrumentprice,commodityprice,foreignexchangerate,indexofpricesorrates,creditratingorcreditindexorothervariable,provided,thatitisnotspecifictoapartytothecontract,inthecaseofanon-financialvariable.

TheCompanymainlyissuespoliciesunderpersonalaccident,riskandsavinglifeinsurancebranchesandindividualpensioncontracts.

SavingcomponentofthelifeproductscanbemeasuredseparatelybytheCompany.However,insuranceandsavingcomponentsarenotseparatedduetoaccountingpolicyrequirementsspecifiedtoaccountallrisksandrewardswithoutconsideringthebasisofmeasurement.

2.15 Insurance contracts and investment contracts with discretionary participation feature

Discretionaryparticipationfeature(“DPF”)withininsurancecontractsandinvestmentcontractsistherighttohavefollowingbenefitsinadditiontotheguaranteedbenefits.

(i)thatarelikelytocompriseasignificantportionofthetotalcontractualbenefits,

(ii)whoseamountortimingiscontractuallyatthediscretionoftheIssuer;and

(iii)thatarecontractuallybasedon:

(1)theperformanceofaspecifiedpoolofcontractsoraspecifiedtypeofcontract;

(2)realizedand/orunrealizedinvestmentsreturnsonaspecifiedpoolofassetsheldbytheIssuer;or

(3)theprofitorlossoftheCompany,Fundorotherentitythatissuesthecontract.

Asatthereportingperiod,theCompanydoesnothaveanyinsuranceorinvestmentcontractsthatcontainaDPF.

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2.16 Investment contracts without DPF

Inthecontextofthesavinglifeproducts,iftheinvestmentreturn,obtainedfromthesavingsofthepolicyholderswhichisinvestedbytheCompanyresultsaloweryieldratethanthetechnicalinterestrate,theCompanycompensatesthedifference;ifinvestmentreturnresultshigheryieldthantheguaranteedtechnicalinterestrate,thedifferenceisdistributedtothepolicyholdersasprofitsharingbonus.Duetocontractualandcompetitiveconstraintsinpractice,theCompanyhasclassifiedthesecontractsasinvestmentcontractswithoutDPF.

Forsuchproducts,investmentincomeobtainedfromassetsbackingliabilitiesisrecordedwithinincomestatementorequityinaccordancewiththeaccountingpoliciesmentionedabove;andwholecontractispresentedasaliabilityunderlifemathematicalprovisions.

2.17 Liabilities

Financial liabilityisanyliabilitythatisacontractualobligationtodelivercashoranotherfinancialassettoanotherentity.FinancialliabilitiesoftheCompanyaremeasuredattheirdiscountedvalues.Afinancialliabilityisderecognizedwhenitisextinguished.

Payables from individual pension businessconsistofpayablestoparticipants,participants’temporaryaccounts,andpayablestoindividualpensionagencies.Thepayablestoparticipantsaretheaccountinwhichthecontributionofparticipantsthattransferredtoinvestmentsonbehalfofindividualpensioncontractownersandincomefromtheseinvestmentsarerecorded.Thetemporaryaccountofparticipantsincludesthecontributionsofparticipantsthathavenotyetbeentransferredtotheinvestment.Thisaccountalsoincludestheentrancefeedeductedportionoftheparticipants’fundamounts,obtainedfromthefundsharesalesoccurinthecaseofsystemleaves.Thisaccountconsistsoftheamountsofparticipantsthatwillbetransferredtootherindividualpensioncompaniesorparticipants’ownaccounts.ThisaccountmeansCompany’sliabilitiestoindividualpensionagenciesinreturnoftheirservices.

2.18 Income taxes

Corporate tax

Statutoryincomeissubjecttocorporatetaxat20%.Thisrateisappliedtoaccountingincomemodifiedforcertainexemptions(likedividendincome)anddeductions(likeinvestmentincentives),andadditionsforcertainnon-taxdeductibleexpensesandallowancesfortaxpurposes.Ifthereisnodividenddistributionplanned,nofurthertaxchargesaremade.

Dividendspaidtotheresidentinstitutionsandtheinstitutionsworkingthroughlocalofficesorrepresentativesarenotsubjecttowithholdingtax.Thewithholdingtaxrateonthedividendpaymentsotherthantheonespaidtothenon-residentinstitutionsgeneratingincomeinTurkeythroughtheiroperationsorpermanentrepresentativesandtheresidentinstitutionsis15%.Inapplyingthewithholdingtaxratesondividendpaymentstothenon-residentinstitutionsandtheindividuals,thewithholdingtaxratescoveredintherelatedDoubleTaxTreatyAgreementsaretakenintoaccount.Appropriationoftheretainedearningstocapitalisnotconsideredasprofitdistributionandthereforeisnotsubjecttowithholdingtax.

Theprepaidtaxesarecalculatedandpaidattheratesvalidfortheearningsoftherelatedyears.Thepaymentscanbedeductedfromtheannualcorporatetaxcalculatedforthewholeyearearnings.

Inaccordancewiththetaxlegislation,taxlossescanbecarriedforwardtooffsetagainstfuturetaxableincomeforuptofiveyears.Taxlossescannotbecarriedbacktooffsetprofitsfrompreviousperiods.Asat31 December2013and2012,theCompanydoesnothaveanydeductibletaxlosses.

InTurkey,thereisnoprocedureforafinalanddefiniteagreementontaxassessments.Companiesfiletheirtaxreturnswiththeirtaxofficesbytheendof25thofthefourthmonthfollowingthecloseoftheaccountingperiodtowhichtheyrelate.Taxreturnsareopenforfiveyearsfromthebeginningoftheyearthatfollowsthedateoffilingduringwhichtimethetaxauthoritieshavetherighttoaudittaxreturns,andtherelatedaccountingrecordsonwhichtheyarebased,andmayissuere-assessmentsbasedontheirfindings.

Accordingtothe“GeneralCommuniqueonCorporateTax”promulgatedinOfficialGazetteno28178dated19 January2012,fairvalueofderivativetransactionsandoptionpremiumsareacceptedasincomeorexpenseinthecorporatetaxstatementifthosetransactionsareperformedatDerivativeExchangeMarketandnotifthosetransactionsareperformedwithentitiesaspreviously.

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Deferred tax

InaccordancewithTAS12-Income taxes,deferredtaxassetsandliabilitiesarerecognizedonalltaxabletemporarydifferencesarisingbetweenthecarryingvaluesofassetsandliabilitiesinthefinancialstatementsandtheircorrespondingbalancesconsideredinthecalculationofthetaxbase,exceptforthedifferencesnotdeductiblefortaxpurposesandinitialrecognitionofassetsandliabilitieswhichaffectneitheraccountingnortaxableprofit.

Thedeferredtaxassetsandliabilitiesarereportedasnetinthefinancialstatementsif,andonlyif,theCompanyhasalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxassetsanddeferredtaxliabilitiesrelatetoincometaxesleviedbythesametaxationauthorityoneitherthesametaxableentity.

Incasewheregains/lossesresultingfromthesubsequentmeasurementoftheassetsarerecognizedinthestatementofincome,thentherelatedcurrentand/ordeferredtaxeffectsarealsorecognizedinthestatementofincome.Ontheotherhand,ifsuchgains/lossesarerecognizedasanitemunderequity,thentherelatedcurrentand/ordeferredtaxeffectsarealsorecognizeddirectlyintheequity.

Transfer pricing

InTurkey,thetransferpricingprovisionshavebeenstatedundertheArticle13ofCorporateTaxLawwiththeheadingof“disguisedprofitdistributionviatransferpricing”.TheGeneralCommuniquéondisguisedprofitdistributionviaTransferPricing,dated18 November2007setsdetailsaboutimplementation.

Ifataxpayerentersintotransactionsregardingsaleorpurchaseofgoodsandserviceswithrelatedparties,wherethepricesarenotsetinaccordancewitharm’slengthprinciple,thenrelatedprofitsareconsideredtobedistributedinadisguisedmannerthroughtransferpricing.Suchdisguisedprofitdistributionsthroughtransferpricingarenotacceptedastaxdeductibleforcorporateincometaxpurposes.

2.19 Employee benefits

Employee termination benefits

InaccordancewithexistingTurkishLaborLaw,theCompanyisrequiredtomakelump-sumterminationindemnitiestoeachemployeewhohascompletedoneyearofservicewiththeCompanyandwhoseemploymentisterminatedduetoretirementorforreasonsotherthanresignationormisconduct.ThecomputationoftheliabilityisbasedupontheretirementpayceilingannouncedbytheGovernment.Theapplicableceilingamountasat31 December2013is¨3,254.44(31 December2012:¨3,033.98).

TheCompanyaccountedforemployeeseveranceindemnitiesusingactuarialmethodincompliancewiththeTAS19-Employee Benefits.AftertherevisionofTAS19,astheamountofactuarialgainandlossarepresentedundertheotherprofitreserves,whichwerepreviouslyshownundertheincomestatement.Themajoractuarialassumptionsusedinthecalculationofthetotalliabilityasat31 December2013and2012areasfollows:

31 December 2013 31 December 2012Discountrate 3.77% 1.00%-4.57%Expectedrateofsalary/limitincrease 6.00% 6.00%

Other benefits

TheCompanyhasprovidedforundiscountedshort-termemployeebenefitsearnedduringtheperiodasperservicesrenderedincompliancewithTAS19intheaccompanyingfinancialstatements.

2.20 Provisions

Aprovisionismadeforanexistingobligationresultingfrompasteventsifitisprobablethatthecommitmentwillbesettledandareliableestimatecanbemadeoftheamountoftheobligation.Provisionsarecalculatedbasedonthebestestimatesofmanagementontheexpensestoincurasofthereportingperiodand,ifmaterial,suchexpensesarediscountedtotheirpresentvalues.IftheamountisnotreliablyestimatedandthereisnoprobabilityofcashoutflowfromtheCompanytosettletheliability,therelatedliabilityisconsideredas“contingent”anddisclosedinthefootnotestothefinancialstatements.

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Acontingentassetisapossibleassetthatarisesfrompasteventsandwhoseexistencewillbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheCompany.Contingentassetsarenotrecognizedinfinancialstatementssincethismayresultintherecognitionofincomethatmayneverberealized.Contingentassetsareassessedcontinuallytoensurethatdevelopmentsareappropriatelyreflectedinthefinancialstatements.Ifithasbecomevirtuallycertainthataninflowofeconomicbenefitswillarise,theassetandtherelatedincomearerecognizedinthefinancialstatementsoftheperiodinwhichthechangeoccurs.Ifaninflowofeconomicbenefitshasbecomeprobable,theCompanydisclosesthecontingentasset.

2.21 Revenue recognition

Written premiums and claims paid

Writtenpremiumsrepresentpremiumsonpolicieswrittenduringtheperiodnetoftaxes,premiumsofthecancelledpolicieswhichwereproducedinpriorperiodsandpremiumcededtoreinsurancecompanies.Premiumscededtoreinsurancecompaniesareaccountedas“writtenpremiums,ceded”intheprofitorlossstatement.

Claimsarerecognizedasexpenseastheyarepaid.Outstandingclaimsprovisionisprovidedforbothreportedunpaidclaimsatthereportingperiodandincurredbutnotreportedclaims.Reinsurer’ssharesofclaimspaidandoutstandingclaimsprovisionsareoff-setagainstthesereserves.

Commission income and expense

AsfurtherdisclosedinNote 2.24,commissionspaidtotheagenciesrelatedtotheproductionoftheinsurancepoliciesandthecommissionsreceivedfromthereinsurancefirmsrelatedtothepremiumscededarerecognizedoverthelifeofthecontractbydeferringcommissionincomeandexpenseswithinthecalculationofreserveforunearnedpremiumsforthepoliciesproducedbefore1 January2008andrecognizingdeferredcommissionincomeanddeferredcommissionexpenseinthefinancialstatementsforthepoliciesproducedafter1 January2008.

Inordertonet-offthereceivableaccountsincompliancewiththematchingprinciple,TheCompanyreservesaprovisionofcommissionstointermediariesovertheaccruedbutuncollectedreceivablesfrompolicyholdersbalanceasatthereportingperiod.Whilethecommissionstointermediariesfornon-lifebranchesarenotaccrued,thecommissionamountthathastobepaidincaseofthecollectionofreceivablesiscalculatedonthebasisofpolicyforlifebranch.

Reinsurancecommissionsareaccountedforbasedonreinsureragreements.AccordingtotheCircularno:2007/25issuedbytheTurkishTreasuryon28 December2007,startingfrom10 January2008,deferredreinsurancecommissionsarepresentedin“DeferredIncome”accountinthebalancesheet.

Interest income and expense

Interestincomeandexpensearerecognizedinthestatementofincomeusingtheeffectiveinterestmethod.Theeffectiveinterestrateistheratethatexactlydiscountstheestimatedfuturecashpaymentsandreceiptsthroughtheexpectedlifeofthefinancialassetorliability(or,whereappropriate,ashorterperiod)tothecarryingamountofthefinancialassetorliability.Theeffectiveinterestrateisestablishedoninitialrecognitionofthefinancialassetandliabilityandisnotrevisedsubsequently.

Thecalculationoftheeffectiveinterestrateincludesallfeesandpointspaidorreceivedtransactioncosts,anddiscountsorpremiumsthatareanintegralpartoftheeffectiveinterestrate.Transactioncostsareincrementalcoststhataredirectlyattributabletotheacquisition,issueordisposalofafinancialassetorliability.

Trading income/expense

Tradingincome/expenseincludesgainsandlossesarisingfromdisposalsoffinancialassetsheldfortradingpurposeandavailable-for-salefinancialassets.Tradingincomeandtradingexpensesarerecognizedas“Incomefromdisposaloffinancialassets”and“Lossfromdisposaloffinancialassets”intheaccompanyingfinancialstatements.

Dividends

DividendincomeisrecognizedwhentheCompany’srighttoreceivepaymentisascertained.

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Income from individual pension operations

Fundmanagementfeeisrecognizedasincome,chargedtothepensioninvestmentfundsagainstthehardware,software,personnelandaccountingservicesprovided,andfeeissharedbetweentheCompanyandtheportfoliomanagersinaccordancewiththeagreementsignedbetweenparties.Totaloffundmanagementfeechargedtothepensioninvestmentfundsisrecognizedas“Fundmanagementincome”undertechnicalincomeandportionoftheportfoliomanagerisrecognizedas“Fundmanagementexpense”undertechnicalexpenses.

Managementfeeisleviedoncontributionsoftheparticipantsupto2%andrecognizedas“Managementfee”undertechnicalincome.Ifnopaymentismadeinthreemonthsafterthepaymentdateofoverduecontribution,caseofsuspensionoccursandmanagementexpenseischarged.Theaforementionedexpensesarerecognizedas“Managementexpensechargeincaseofsuspension”.

EntrancefeesarereceivedbytheCompanyfromparticipantsduringtheentranceintothesystemandfortheopeningofanewindividualpensionaccount.Entrancefeeschargedtotheparticipantscouldnotbehigherthanminimumwagethatisvalidonthedateofthecontract.IntheoutstandingindividualpensioncontractsoftheCompany,significantportionoftheentrancefeesisdeferredtotheendofthecontract.ThedeferredandcontingententranceThedifferenceinvalueofthepensioninvestmentfundshares,obtainedduetocapitaladvanceonthedateofestablishment,tothedateofsellingofthosesharestotheparticipantsisrecordedintheincomestatementas“increaseinvalueofcapitalallowancesgivenasadvances”.

2.22 Leasing transactions

Tangibleassetsacquiredbywayoffinanceleasingarerecognizedintangibleassetsandtheobligationsunderfinanceleasesarisingfromtheleasecontractsarepresentedunderfinanceleasepayablesaccountinthefinancialstatements.Inthedeterminationoftherelatedassetsandliabilities,thelowerofthefairvalueoftheleasedassetandthepresentvalueofleasingpaymentsisconsidered.Financialcostsofleasingagreementsareexpandedinleaseperiodsatafixedinterestrate.

Ifthereisimpairmentinthevalueoftheassetsobtainedthroughfinancialleaseandintheexpectedfuturebenefits,theleasedassetsarevaluedwithnetrealizablevalue.Depreciationforassetsobtainedthroughfinancialleaseiscalculatedinthesamemannerastangibleassets.

Paymentsmadeunderoperatingleasesarerecognizedinthestatementofincomeonastraight-linebasisoverthetermofthelease.

2.23 Dividend distribution

InaccordancewiththeArticlesofAssociationoftheCompany,firstdividenddistributionismadefromdistributableprofitbasedontheratesandamountssetoutbytheCapitalMarketsBoard.InregardstotheprofitsharedistributionpolicyoftheCompany,twooptionsarepresentedtotheGeneralAssembly;30%ofdistributableprofitataminimumasbonussharesorincash.

Basedonitsarticlesofassociation,theCompanymakesatamaximumof3%ofprofitsharepaymentstoitsemployeesfollowingtheappropriationoffirstprofitshare,limitedtoamaximumofthree-monthsalary.

Dividendpayablesarerecordedasliabilityinthefinancialstatementswhentheyareannounced.

2.24 Reserve for unearned premiums

Inaccordancewiththe“CommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”(“CommuniquéonTechnicalReserves”)whichwasissuedin26606numberedand7 August2007datedOfficialGazetteandputintoeffectstartingfrom1 January2008,thereserveforunearnedpremiumsrepresentstheproportionsofthegrosspremiumswrittenwithoutdeductionsofcommissionoranyotherallowance,inaperiodthatrelatetotheperiodofrisksubsequenttothereportingperiodforallshort-terminsurancepolicies.

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Inthecaseofpersonalaccidentinsurance,annuallifeinsuranceandlifeinsurancewhichoftherenewaldateexceedsoneyear,reserveforunearnedpremiumsiscalculatedfortheportionoftheremainingpartwhichisleftafterdeductingsavingsfromgrosspremiumwrittenfortheyear.Inaccordancewiththe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”issuedin28356numberedand17 July2012datedOfficialGazetteandeffectivefrom30 June2012,reserveforunearnedpremiumsiscalculatedfromremainingamountofgrosswrittenpremiumsbydeductingsavingcomponentandexpensesrelatedwithsavingcomponentforlifeinsuranceandlifeinsurancewithsavingcomponentshavinglongerthanoneyearmaturity.Insurancepoliciescoveringpossibilitiesoflifeanddeathorbothandpersonalaccident,disabilitybyillnessandseriousillnessinsurancepoliciesareconsideredaslifeinsurancepoliciesandtheirpremiumsareclassifiedaslifeinsurancepremiums.

Accordingtothe2009/9NumberedCircularRelatedtoApplicationofTechnicalReservesissuedon27 March2009reserveforunearnedpremiumsiscalculatedbytakingintoaccountthatallpolicesbecomeactiveat12:00atnoonandendat12:00atnoon.

2.25 Reserve for unexpired risks

InaccordancewiththeCommuniquéonTechnicalReserves,ineachaccountingperiod,thecompanieswhileprovidingreserveforunearnedpremiumsshouldperformadequacytestcoveringthepreceding12monthsinregardwiththeprobabilityoffutureclaimsandcompensationsoftheoutstandingpolicieswillariseinexcessofthereserveforunearnedpremiumsalreadyprovided.Inperformingthistest,itisrequiredtomultiplythereserveforunearnedpremiums,netwiththeexpectedclaim/premiumratio.

Expectedclaim/premiumratioiscalculatedbydividingincurredlosses(provisionforoutstandingclaims,netattheendoftheperiod+claimspaid,net-provisionforoutstandingclaims,netatthebeginningoftheperiod)toearnedpremiums(writtenpremiums,net+reserveforunearnedpremiums,netatthebeginningoftheperiod-reserveforunearnedpremiums,netattheendoftheperiod).Inthecalculationofearnedpremiums;deferredcommissionexpensespaidtotheagenciesanddeferredcommissionincomereceivedfromthereinsurancefirmswhichwerenettedofffromreserveforunearnedpremiumsbothatthebeginningoftheperiodandattheendoftheperiodarenottakenintoconsideration.

Inaccordancewiththe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”issuedin28356numberedand17 July2012datedOfficialGazetteandeffectivefrom31 December2012,thetestisperformedonbranchbasisandincasewheretheexpectedclaim/premiumratioishigherthan95%,reservecalculatedbymultiplyingtheexceedingportionoftheexpectedclaim/premiumratiowiththereserveforunearnedpremiumsofthatspecificbranchisaddedtothereservesofthatbranch.Thedifferencebetweenthegrossamountandthenetamountisconsideredasthereinsurer’sshare.TurkishTreasuryisauthorizedtochangetestmethodsandrequireadditionalreserveforunexpiredrisksonbranchbasis.

Asat31 December2013and2012,relatedtesthavenotresultedinanydeficiencyregardingreserveforunexpiredrisks.

2.26 Provision for outstanding claims

Claimsarerecordedintheyearinwhichtheyoccur,basedonreportedclaimsoronthebasisofestimateswhennotreported.Provisionforoutstandingclaimsrepresentstheestimateofthetotalreportedcostsofnotifiedclaimsonanindividualcasebasisatthereportingperiodaswellasthecorrespondinghandlingcosts.

Changeinmeasurementoftechnicalreservesbecameeffectiveasat30 September2010accordingtotheTurkishTreasuryCircularwhichwerepublishedas“CommuniquéonAmendmentstoCommuniquéonTechnicalReserves”inOfficialGazettedated28 July2010andnumbered27655.

CommuniquéontechnicalreservesandcircularsissuedbyTurkishTreasurybringsessentialchangesintoeffectonmeasurementoftechnicalreservesandaccountingofincomefromsalvageandsubrogation.Insummary,itisaimedtoalignCommuniquéonTechnicalReserveswithmethodologicalchangesonActuarialChainladdermethod,toincludematterswhichweredeclaredbeforethroughcircularsandsectorannouncementstothecommuniqué.TheTurkishTreasuryissuedtheCircularsnumbered2010/12,2010/13,2010/14andthesectorannouncementnumbered2010/29whichbecameeffectiveasat31 December2010inordertoclarifyuncertaintiesonmeasurementoftechnicalreservesandaccountingofincomefromsalvageandsubrogation.

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Additionalamendmentseffectivefrom30 June2013areissuedinthe“CommuniquéonAmendmentstotheCommuniquéonTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”in28356numberedand17 July2012datedOfficialGazette.TestIBNRmethodceasedinthecalculationofprovisionforoutstandingclaims.Inaccordancewiththepreviouscommuniquésandsectorannouncementscompaniesshouldperformactuarialchainladdermethodforthenon-lifeinsurancebranchesengagedmorethanfiveyearsandhadsufficientdata.“

Claimsincurredbeforetheaccountingperiodsbutreportedsubsequenttothosedatesareacceptedasincurredbutnotreported(“IBNR”)claims.Accordingtothe“CommuniquéonProvisionforIBNRClaimsinLifeBranch”numbered2010/14,IBNRcalculationischanged.Inaccordancewiththerelatedregulations,lastfiveormorethanfiveyears’weightedaveragecalculatedbydividingtotalgrossamountofincurredbutnotreportedclaimstoaverageannualguaranteeoftherelatedyears.Asofthecurrentreportingperiod,IBNRiscalculatedbymultiplyingweightedaverageIBNRratiobytheaverageguaranteeamountoflasttwelvemonthsbeforereportingperiod.Accordingly,asatthereportingperiod,theCompanyhasprovidedforIBNR,netoffcededamountingto¨4,003,978(31 December2012:¨3,832,540).

Accordingtothe7tharticle6thsubclauseofthe“CircularonChangeinTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”;provisionfortheoutstandingclaimsoftheperiodcannotbelessthantheresultoftheactuarialchainladdermethoddeterminedbyTurkishTreasury.TheCompanyhasselected“Standardchainladdermethod”forpersonalaccidentbranchasstatedinthe“CommuniquéonTechnicalReservesandCircularonActuarialChainLadderMethod”dated20 September2010andnumbered2010/12.Accordingly,asatthereportingperiod,theCompanyhasprovidedforIBNR,netoffcededamountingto¨32,878(31 December2012:¨38,228).

IntheSectorAnnouncementdated18 July2012andnumbered2012/13publishedbytheTurkishTreasury,insurance,reinsuranceandindividualpensioncompaniesarerequiredtoperformadequacytesttoassesstheadequacyofprovisionforoutstandingclaimsattheendoftheeachreportingperiod.Companiesperformedactuarialchainladdermethodarenotobligedtorecordadditionalprovisionforoutstandingclaims.Asat31 December2013,thisadequacytesthasnotresultedinadditionalprovisionforoutstandingclaims.

2.27 Mathematical provisions

InaccordancewiththeCommuniquéonTechnicalReserves,companiesoperatinginlifeandnon-lifeinsurancebranchesareobligedtoallocateadequatemathematicalreservesbasedonactuarialbasistomeetliabilitiesagainstpolicyholdersandbeneficiariesforlong-termlife,healthandpersonalaccidentinsurancecontracts.Mathematicalprovisionsarecomposedofactuarialmathematicalprovisionsandprofitsharingprovisions.Actuarialmathematicalprovisions,accordingtoformulasandbasisinapprovedtechnicalbasisoftariffsforoveroneyear-lengthlifeinsurance,arecalculatedbydeterminingthedifferencebetweenpresentvalueofliabilitiesthattheCompanymeetsinfutureandcurrentvalueofpremiumspaidbypolicyholderinfuture(prospectivemethod).Inlifeinsurancewheresavingplanpremiumsarealsogenerated,actuarialmathematicalprovisionsconsistoftotalsavingplanportionsofpremiums.Provisionforprofitsharingconsistofprofitsharingcalculatedinpreviousyearsandacertainpercentageofcurrentyear’sincome,determinedintheapprovedprofitsharingtariffs,obtainedfromthefinancialassetsbackingliabilitiesoftheCompanyagainstthepolicyholdersandotherbeneficiariesforthecontractswhichtheCompanyisliabletogiveprofitsharing.ThevaluationmethodusedincalculationoftheprofittobesharedforsavinglifecontractsisthesamewiththevaluationbasisofportfolioonwhichassetsonwhichtheCompanyinveststheprovisionsallocatedduetoliabilitiesagainstthebeneficiariesareincludedintheframeworkofbasisdefinedinthenote2.8-Financial assetsabove.

2.28 Equalization provision

Accordingto“CommuniquéonTechnicalReserves”,companiesshouldbookequalizationprovisionforguaranteesofloanandearthquakesinordertooffsetfluctuationsintherateofindemnificationandtomeetcatastrophicrisksintheaccountingperiod.

InaccordancewiththeCommuniquéonTechnicalReservesissuedbytheTurkishTreasuryon27 March2009numbered2009/9,theinsurancecompaniesshouldrecognizeequalizationprovisionfordisabilityanddeathoccurredbecauseofanearthquakeandtariffsthatincludeadditionalguaranteeinlifeandcasualtybranches.Withthecircularreleasedon28 July2010andnumbered27655“CircularonChangeinTechnicalReservesforInsurance,ReinsuranceandPensionCompaniesandtheRelatedAssetsThatShouldBeInvestedAgainstThoseTechnicalReserves”,thecalculationofequalizationprovisionisrevised.InaccordancewiththeCommuniquéonTechnicalReserves,thecompanieswhichgiveadditionalguaranteeinlifeusetheirownstatisticaldataforequalizationprovisioncalculation.Thecompaniesnothavingsufficientdataforcalculationwillaccept11%ofdeathnetpremium(includingdamagepayments)asearthquakepremiumand12%ofthatamountiscalculatedasequalizationprovision.

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InaccordancewiththeCommuniquéonTechnicalReserves,bookingprovisionsshouldcontinueuntilreaching150%ofthehighestnetpremiumamountofthelastfivefinancialyears.Equalizationprovisionsamountingto¨5,921,429arepresentedunder“othertechnicalreserves”withinshort-termliabilitiesintheaccompanyingfinancialstatements(31 December2012:¨3,915,510).

InaccordancewithRegulationonTechnicalReserves,insurancecompaniesarerequiredtoaccountforthebonusordiscountsprovidedtopolicyholdersandbeneficiariesinaccordancewiththecurrentyeartechnicalincome.Asof31 December2013,theCompanyaccountedforbonusprovisionamountingto¨128,485(31 December2012:¨256,613).

2.29 Related parties

PartiesareconsideredrelatedtotheCompanyif;

(a)directly,orindirectlythroughoneormoreintermediaries,theparty:

• controls,iscontrolledby,orisundercommoncontrolwiththeCompany(thisincludesparent,subsidiariesandfellowsubsidiaries);

• hasaninterestintheCompanythatgivesitsignificantinfluenceovertheCompany;or

• hasjointcontrolovertheCompany;

(b)thepartyisanassociateoftheCompany;

(c)thepartyisajointventureinwhichtheCompanyisaventurer;

(d)thepartyismemberofthekeymanagementpersonneloftheCompanyanditsparent;

(e)thepartyisaclosememberofthefamilyofanyindividualreferredtoin(a)or(d);

(f)thepartyisanentitythatiscontrolledorsignificantlyinfluencedby,orforwhichsignificantvotingpowerinsuchentityresideswithdirectlyorindirectly,anyindividualreferredtoin(d)or

(g)thepartyisapost-employmentbenefitplanforthebenefitofemployeesoftheCompany,orofanyentitythatisarelatedpartyoftheCompany.

Arelatedpartytransactionisatransferofresources,servicesorobligationsbetweenrelatedparties,regardlessofwhetherapriceischarged.

Anumberoftransactionsareenteredintowithrelatedpartiesinthenormalcourseofbusiness.

2.30 Earnings per share

Earningspersharepresentedintheincomestatementiscalculatedbydividingthenetprofitintotheweightedaveragenumberoftheoutstandingsharesthroughoutthefinancialyear.CompaniesinTurkeycanincreasetheircapitalbydistributing“bonusshares”toshareholdersfromtheprioryears’profit.Such“bonusshare”distributionsareconsideredasissuedsharesintheearningspersharecalculations.Accordingly,weightedaveragenumberofequitysharesusedinthecalculationsiscalculatedbyconsideringtheretrospectiveeffectsofsharedistributions.

2.31 Events after the reporting period

“EventsAftertheReportingPeriod”;post-reportingdateeventsthatprovideadditionalinformationabouttheCompany’spositionatthereportingperiods(adjustingevents)arereflectedinthefinancialstatements.Post-reportingdateeventsthatarenotadjustingeventsaredisclosedinthenoteswhenmaterial.

2.32 New standards and interpretations not yet adopted

Thereareanumberofnewstandards,updatesrelatedtotheexistingstandardsandinterpretationswhicharenotadoptedinthepreparationoftheaccompanyingfinancialstatementsandhavenotyetenteredintoforcefortheaccountingperiod31 December2013.ThesenewstandardsarenotexpectedtohaveanyimpactonthefinancialstatementsoftheCompany,withtheexceptionofTFRS9-Financial instruments,whichispublishedbytheTurkishAccountingStandardsBoardonOfficialGazettedated27 April2010andnumbered27564.

TFRS9-Financial instruments,ispublishedbyInternationalAccountingStandardsBoardinNovember2009asapartofawiderprojectthataimstobringnewregulationstoreplaceTAS39-Financial Instruments: Recognition and Measurement.

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Developinganewstandardforthefinancialreportingoffinancialassetsthatisprinciple-basedandlesscomplexisaimedbythisproject.TheobjectiveofTFRS 9,beingthefirstphaseoftheproject,istoestablishprinciplesforthefinancialreportingoffinancialassetsthatwillpresentrelevantandusefulinformationtousersoffinancialstatementsfortheirassessmentofamounts,timinganduncertaintyoftheentity’sfuturecashflows.WithTFRS 9anentityshallclassifyfinancialassetsassubsequentlymeasuredateitheramortizedcostorfairvalueonthebasisofboththeentity’sbusinessmodelformanagingthefinancialassetsandthecontractualcashflowcharacteristicofthefinancialassets.TheguidanceinTAS39onimpairmentoffinancialassetsandhedgeaccountingcontinuestoapply.

AnentityshallapplyTFRS9forannuallyyearsbeginningonorafter1 January2015.Anearlierapplicationispermitted.IfanentityadoptsthisTFRSinitsfinancialstatementsforaperiodbeginningbefore1 January2012,thenpriorperiodsarenotneededtoberestated.

New standards and interpretations not yet adopted and have no effect on the Company’s financials

• TAS32- Financial Instruments: Presentation-TheamendmentontheClarificationofFinancialAssetsandDebtsaimstoclarifythestatement“existenceofanavailableandlegalrightforclarificationoftherecognizedamounts”.AdditionallyTAS32clarifiesapplicationareasofsettlementsystems(suchasExchangebureaus)wheregrosspaymentismadeandwhereclarificationprincipleisnotimplementedsimultaneously.Amendmentswillbeappliedfortheaccountingperiodsstartingasfrom1 January2014retrospectively. 

3 Critical accounting estimates and judgments in applying accounting policies

Thenotesgiveninthissectionareprovidedtoaddition/supplementthecommentaryonthemanagementofinsurancerisknote4.1 - Management of insurance riskandnote4.2-Financial risk management.

Thepreparationoffinancialstatementsrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

Inparticular,informationaboutsignificantareasatestimationuncertaintyandcriticaljudgmentinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountrecognizedinthefinancialstatementsaredescribedinthefollowingnotes:

Note 2.26 - Provisionforoutstandingclaims

Note 2.27 - Mathematicalprovisions

Note 4.1 - Managementofinsurancerisk

Note 4.2-Financialriskmanagement

Note 7-Investmentproperties

Note 11-Financialassets

Note 12-Loansandreceivables

Note 21 -Deferredincometax

4 Management of insurance and financial risk

4.1 Management of insurance risk

Objective of managing risks arising from insurance contracts and policies used to minimize such risks:

Insuranceriskisdefinedascoverageforexposuresthatexhibitapossibilityoffinanciallossduetoapplyinginappropriateandinsufficientinsurancetechniques.Inlinewiththenatureofaninsurancecontract,astheriskiscoincidental,theriskamountcannotbepredictable.

Insuranceriskrepresentsthepossibilityofthenoncoverageoftheclaimspaidbythepremiumscollected.

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Asof31 December2013,theCompany’slifeinsuranceclaims/premiumsratiostandsat19%.Lowclaims/premiumsratio,whichiscalculatedbytheproportionofclaimstoriskpremiumscollected,indicatesthattheCompanymakessignificantprofit.TheCompanyadoptscentralriskassessmentpolicy.TheCompanyappliesthispolicytotheallmarketingchannelsproduced.Initslifepolicyproduction,theCompanyhasnosaleschannelwithcontinuousriskexposure.TheCompanyanalyzesitsclaims/premiumsratioperiodicallyinordertoidentifyitsinsurancerisks.

Asof31 December2013,theCompany’spersonalaccidentinsuranceclaims/premiumsratiois62%SincepersonalaccidentinsuranceportfoliohasaninsignificantshareintheCompany’sgeneralportfolio,thisratiowouldbelowwhennocompensationispaidandthisratiowouldbehighwhencompensationispaid.

Claims/premiumratiooftheCompanyasofthefinancialstatementperiodsispresentedbelow:  31 December 2013 31 December 2012

Lifeinsurance 19% 17%Personalaccident 62% 39%

TheCompanysharesitssignificantrisksassociatedwithnaturaldisasters,suchas;earthquake,terrorismorlarge-scaleaccidents,withreinsurersbyenteringintocatastrophicexcessoflossagreements.

Asat31 December2013and2012,riskportiontransferredtoreinsurersintermsofriskguaranteeispresentedasbelow:  31 December 2013 31 December 2012

Deathbynaturalcause 12% 7%Deathbyaccident 64% 51%Disabilitybyaccident 64% 49%Disabilitybyillness 65% 42%

Sensitivity to insurance risk

TheCompany’spolicyproductionstrategyfollowsaneffectiveriskmanagementinthepolicyproductionprocessconsideringthenature,extent,andaccuratedistributionoftheriskincurred.

Reinsureragreementsincludeclaimssurplus,excessoflossandquotareinsurances.Asaresultoftheseagreements,iftheCompany’s“deathbynaturalcause”riskaccountexceedsamountsinagreements“deathbyaccident”,theCompanytransferstheexceedingclaimpaymentstoreinsurers.TheCompanyalsotransferstheexceedingclaimpaymentstoreinsurersiftheCompany’s“deathbynaturalcause”or“deathbyaccident”riskaccountsexceedsamountsinagreementsforallpolicies.

OutstandingclaimsarereviewedandupdatedperiodicallybytheexpertsoftheCompany’sClaimsDepartment.

Determination of insurance risk concentrations by management and the common characteristics of insurance risk concentrations (nature, location and currency)

TheCompanyproduceslifeandpersonalaccidentbranchpolicies.TheCompany’sgrossandnetinsuranceriskconcentrations(afterreinsurance)intermsofinsurancebranchesaresummarizedasbelow:

31 December 2013

BranchesTotal gross

risk liability (*)Reinsurer’s share of risk

liabilityThe company’s net claims

liability

Lifeinsurance 40,714,955,430 11,217,790,955 29,497,164,475Personalaccident 3,488,091,959 1,787,721,812 1,700,370,147Total 44,203,047,389 13,005,512,767 31,197,534,622

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31 December 2012

BranchesTotal gross

risk liability (*)Reinsurer’s share of risk

liabilityThe company’s net claims

liability

Lifeinsurance 34,238,444,953 5,935,647,619 28,302,797,334Personalaccident 2,802,704,014 1,534,836,503 1,267,867,512Total 37,041,148,967 7,470,484,122 29,570,664,846

(*)Representsthemaximuminsuranceamountbasedondeathbynaturalcause,deathbyaccident,disabilitybyaccidentanddisabilitybyillness.

TheCompanyissuesinsurancecontractsmainlyinTurkey.Grossandnetinsuranceriskconcentrationsoftheinsurancecontracts(afterreinsurance)basedongeographicalregionsaresummarizedasbelow:

31 December 2013

Claims liability total (*)Total gross

claims liabilityReinsurer’s share of claims liability

Total net claims liability

MarmaraRegion 30,345,519 941,482 29,404,037CentralAnatolianRegion 11,660,915 225,796 11,435,119AegeanRegion 10,790,830 191,640 10,599,190MediterraneanRegion 7,716,232 370,586 7,345,646BlackSeaRegion 4,541,838 103,126 4,438,712SouthEastAnatolianRegion 2,507,785 49,291 2,458,494EastAnatolianRegion 1,842,388 46,356 1,796,032Foreigncountries(other) 3,036,119 - 3,036,119Total 72,441,626 1,928,277 70,513,349

31 December 2012

Claims liability total (*)Total gross

claims liabilityReinsurer’s share of claims liability

Total net claims liability

MarmaraRegion 21,480,725 68,937 21,411,788CentralAnatolianRegion 8,709,904 48,056 8,661,848AegeanRegion 7,173,066 5,775 7,167,291MediterraneanRegion 4,462,034 14,598 4,447,436BlackSeaRegion 3,713,142 - 3,713,142SouthEastAnatolianRegion 1,715,237 1,051 1,714,186EastAnatolianRegion 2,025,848 1,318 2,024,530Foreigncountries(other) 2,722,129 1,500 2,720,629Total 52,002,085 141,235 51,860,850

(*)Totalclaimsliabilityincludestheactualestimatedcompensationamounts.IBNRprovisionandoutstandingclaimsadequacyprovisionarenotincludedinthecalculation.

Comparison of incurred claims with past estimations

Asat31 December2013,thereisnotanydeficiencyintheoutstandingclaimsreserveoftheCompany.

Incurredclaimdevelopmenttableisdisclosedinnote17 - Insurance liabilities and reinsurance assets.

Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements

Inthecurrentperiod,therearenomaterialchangesintheassumptionsofmeasurementofinsuranceassetsandliabilities.

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4.2 Financial risk management

ThisnotepresentsinformationabouttheCompany’sexposuretoeachofthebelowrisks,theCompany’sobjectives,policiesandprocessesformeasuringandmanagingrisk,andtheCompany’smanagementofcapital.TheCompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments:

• creditrisk

• liquidityrisk

• marketrisk

TheCompany’sriskmanagementprogramfocusesonminimizingthenegativeeffectsoftheambiguitiesinfinancialmarketsontheCompany’sfinancialstatements.TheCompanyismostlyexposedtointerestriskandpriceriskinrelationwithfinancialinvestments,tocreditriskinrelationwithinsurancereceivablesandexchangerateriskduetopoliciesandassetsinforeigncurrencies.

TheriskismanagedbyaspecificdepartmentwhichisinlinewiththeapprovedpoliciesbytheBoardofDirectors.SeveralriskpolicieshavebeenpreparedbytheBoardofDirectorsinordertomanagetheexchangerisk,interestrisk,creditrisk,usingthederivativeandnon-derivativefinancialinstrumentsrisks.

Credit risk

Creditriskisbasicallydefinedasthepossibilitythatcounterpartywillfailtomeetitsobligationsinaccordanceunderagreedtermsofacontract.WhentheCompany’sfieldofactivityandthirdpartyrelationsisconsidered,itscreditriskisdeemedtoberelativelyatminimum.ThebalancesheetitemsthattheCompanyisexposedtocreditriskareasfollows:

• Cashatbanks

• Othercashandcashequivalents

• Availableforsalefinancialassets

• Financialassetsheldfortrading

• Held-to-maturityfinancialassets

• Premiumreceivablesfrompolicyholders

• Receivablesfromintermediaries(agencies)

• Receivablesfromreinsurancecompaniesrelatedtoclaimspaidandcommissionsaccrued

• Reinsurancesharesofinsuranceliabilities

• Duefromrelatedparties

• Otherreceivables

ThereviewoftheCompany’sthirdpartyrelationsarepresentedbelow.

Reinsurers: Reinsurancecontractsarethemostcommonmethodtomanageinsurancerisk.Thisdoesnot,however,dischargetheCompany’sliabilityastheprimaryinsurer.Ifareinsurerfailstopayaclaimforanyreason,theCompanyremainsliableforthepaymenttothepolicyholder.TheCompanyworkswithinternationalreinsurancecompanieswithstrongfinancialstatus.Inthisperspective,thelevelofriskexposureisalsoconsideredtobeatminimum.

Agencies: AgenciesworkingwiththeCompanyexposeittoalimitedlevelofcreditrisk.SincetheCompany’sproductsareissuedwithlong-termuse,commissionsgiventoagenciesarealsolongterminnature;therefore,theCompanyhasconsistentpayablestoagencies.

Policyholders: OverduepremiumreceivablesarenotconsideredasasignificantriskexposuretotheCompanybecauseiftheCompanyhasunpaidpremiums,allguaranteesrelatedtotheinsurancewillbeinvalid.

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Asat31 December2013and2012,theCompany’screditriskexposurebytypesoffinancialinstrumentsisasfollows.Banksandothercashandcashequivalentsarealsoincludedinthecreditrisk.

31 December 2013

Receivables (*)

Financial assets

Banks and other cash

and cash equivalent

assets

Receivables from insurance activities Other receivablesRelated

party Third partyRelated

party Third party

Maximum credit risk exposure as at the reporting period (A+B+C) - 56,534,984 334,634 12,165,677 2,290,684,583 138,919,439-Securedportionofmaximumriskbyguarantees,provisions,etc. - - - - - -A.Netbookvalueofneitherpastduenorimpairedfinancialassets - 47,679,360 334,634 12,165,677 2,290,684,583 138,919,439B.Netbookvalueofpastduebutnotimpairedassets - 8,855,624 - - - -C.Netbookvalueofimpairedassets - - - - - --Grossbookvalue - 120,570 - - - --Impairment - (120,570) - - - --Securedportionofnetbookvaluebyguarantees,provisions,etc. - - - - - -

31 December 2012

Receivables (*)

Financial assets

Banks and other cash

and cash equivalent

assets

Receivables from insurance activities

Receivables from insurance activities

Related party Third party

Related party Third party

Maximum credit risk exposure as at the reporting period (A+B+C) - 60,736,653 1,096,350 1,891,704 2,562,713,429 142,491,481-Securedportionofmaximumriskbyguarantees,provisions,etc. - - - - - -A.Netbookvalueofneitherpastduenorimpairedfinancialassets - 54,917,279 1,096,350 1,891,704 2,562,713,429 142,491,481B.Netbookvalueofpastduebutnotimpairedassets - 5,819,374 - - - -C.Netbookvalueofimpairedassets - - - - - --Grossbookvalue - 120,570 - - - --Impairment - (120,570) - - - --Securedportionofnetbookvaluebyguarantees,provisions,etc. - - - - - -

(*)ReceivablesfromindividualpensionactivitiesarenotincludedinthecreditrisktablesincethosereceivablesarefollowedbothsideofthebalancesheetasassetandliabilityandtheyareheldonbehalfofparticipantsbyIMKBTakasveSaklamaBankasıAŞ(the“ISESettlementandCustodyBank”).

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Liquidity risk

LiquidityriskistheriskthattheCompanywillencounterdifficultyinmeetingthenetfundingobligations.Liquidityriskarisesfromtheeventstriggerdecreasingfundssuchasdeteriorationinthemarketconditionsordowngradingofcreditratings.Asat31 December2013,maturityanalysesoftheCompany’sassetsandliabilitiesarepresentedinthetablebelow:

31 December 2013Without

maturityUp to

1 month1 to

3 months3 to

12 months1 to 5 years

5 years and over Unallocated Total

Cashandcashequivalents 11,127,176 127,638,453 - - - - - 138,765,629Financialassetsandinvestmentswithrisksonpolicyholders - 31,035,028 73,707,554 318,395,419 414,066,604 1,362,044,106 207,643,946 2,406,892,657Receivablesfrommainoperations - 685,599 1,206,495 2,040,950 - - 5,292,081,534 5,296,014,578Duefromrelatedparties - - 334,634 - - - - 334,634Otherreceivables - 11,261,706 - - - - 903,971 12,165,677Prepaidexpensesandincomeaccruals,shortterm - - - - - - 10,690,180 10,690,180Othercurrentassets - - - - - - 17,887 17,887Financialassets(Associates) - - - - - - 15,036,296 15,036,296Tangibleassets - - - - - - 21,701,481 21,701,481Intangibleassets - - - - - - 4,982,250 4,982,250Prepaidexpensesandincomeaccruals,longterm - - - - - - 8,905 8,905Deferredtaxassets - - - - - - 2,068,582 2,068,582Total assets 11,127,176 170,620,786 75,248,683 320,436,369 414,066,604 1,362,044,106 5,555,135,032 7,908,678,756

Payablesarisingfrommainoperations - 8,949,788 - 881,759 - - 5,351,680,646 5,361,512,193Duetorelatedparties - - - 5,014 - - 5,014Otherpayables - 5,702,261 - - - - 3,180,156 8,882,417Insurancetechnicalprovisions - - - - - - 1,972,924,325 1,972,924,325Provisionsfortaxesandothersimilarobligations - 4,848,034 - - - - 3,799,996 8,648,030Provisionsforotherrisks - - - - - - 2,588,141 2,588,141Deferredincomeandexpenseaccruals - - - - - - 62 62Othershorttermliabilities - 650,000 - 2,000,000 - 8,269,886 3,055,359 13,975,245Deferredtaxliabilities - - - - - - -Shareholders’equity - - - - - - 540,143,329 540,143,329Total liabilities - 20,150,083 - 2,886,773 - 8,269,886 7,877,372,014 7,908,678,756

Net liquidity surplus/(deficit) 11,127,176 150,470,703 75,248,683 317,549,596 414,066,604 1,353,774,220 (2,322,236,982) -

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31 December 2012Without

maturityUp to

1 month1 to

3 months3 to

12 months1 to 5 years

5 years and over Unallocated Total

Cashandcashequivalents 5,724,356 136,618,070 - - - - - 142,342,426Financialassetsandinvestmentswithrisksonpolicyholders - 19,083,944 16,543,014 242,201,381 754,493,001 1,423,754,509 226,481,644 2,682,557,493Receivablesfrommainoperations - 436,074 1,003,583 1,700,637 - - 4,344,007,866 4,347,148,160Duefromrelatedparties - - 1,096,350 - - - - 1,096,350Otherreceivables - 1,166,746 724,958 1,891,704Prepaidexpensesandincomeaccruals,shortterm - - - - - - 12,601,372 12,601,372Othercurrentassets - - - - - - 23,230 23,230Financialassets(Associates) - - - - - - 13,568,006 13,568,006Tangibleassets - - - - - - 21,311,444 21,311,444Intangibleassets - - - - - - 4,297,953 4,297,953Prepaidexpensesandincomeaccruals,longterm - - - - - - 58,142 58,142Deferredtaxassets - - - - - - - -Total assets 5,724,356 157,304,834 18,642,947 243,902,018 754,493,001 1,423,754,509 4,623,074,615 7,226,896,280

Payablesarisingfrommainoperations - 9,105,720 - 636,822 - - 4,361,441,693 4,371,184,235Duetorelatedparties - - - 8,172 - - 2,260 10,432Otherpayables - 3,850,309 - - - - 2,619,075 6,469,384Insurancetechnicalprovisions - - - - - - 2,288,110,880 2,288,110,880Provisionsfortaxesandothersimilarobligations - 4,139,335 - - - - 7,173,965 11,313,300Deferredincomeandexpenseaccruals - - - - - - 1,793,541 1,793,541Othershorttermliabilities - - - - - - 61 61Provisionsforotherrisks - 500,000 - - - 7,408,414 5,859,758 13,768,172Deferredtaxliabilities - - - - - - 4,760,670 4,760,670Shareholders’equity - - - - - - 529,485,605 529,485,605Total liabilities - 17,595,364 - 644,994 - 7,408,414 7,201,247,508 7,226,896,280Net liquidity surplus/(deficit) 5,724,356 139,709,470 18,642,947 243,257,024 754,493,001 1,416,346,095 (2,578,172,893) -

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Market risk

Marketriskistheriskthatchangesinmarketprices,suchasinterestrate,foreignexchangeratesandcreditspreadswillaffecttheCompany’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimizingthereturnonrisk.

Foreign currency risk

TheCompanyisexposedtoforeigncurrencyriskthroughinsuranceandreinsurancetransactionsinforeigncurrencies.

Foreignexchangegainsandlossesarisingfromforeigncurrencytransactionsarerecordedattransactiondates.Attheendoftheperiods,foreigncurrencyassetsandliabilitiesevaluatedbytheCentralBankoftheRepublicofTurkey’sspotpurchaseratesandthedifferencesarisingfromforeigncurrencyratesarerecordedasforeignexchangegainorlossinthestatementofoperations.

ParalleltothegeneralcharacteristicofTurkishinsurancesector,theCompanyholdslongpositionintermsofUSDollarandEuro.

TheCompany’sexposuretoforeigncurrencyriskisasfollows:Foreign currency position table - 31 December 2013

 Total ¨ (Functional

currency) US Dollar Euro GBP CHF JPY1.Cashatbanks 1,013,036 235,728 651,781 112,476 13,051 -2.Financialassetsandfinancialinvestmentswithrisksonpolicyholders 349,939,881 229,425,236 108,350,930 12,163,715 - -3.Receivablesfrommainoperations 297,044 168,988 122,673 5,383 - -4.Reinsurancereceivables 128,461 - 128,461 - - -5.Rentreceivables - - - - - -6.Depositsgiven 23,477 23,477 - - - -Foreign currency assets, current 351,401,899 229,853,429 109,253,845 12,281,574 13,051 -

7. Total assets 351,401,899 229,853,429 109,253,845 12,281,574 13,051 -

8.Financeleaseliabilities - - - - - -9.Payablestoreinsurers 22,163 21,613 - 381 - 16910.Agencyguarantees 237,595 225,078 12,517 - - -11.Technicalprovisions 339,075,966 236,612,886 91,029,132 11,384,517 13,079 36,352Foreign currency liabilities, short term 339,335,724 236,859,577 91,041,649 11,384,898 13,079 36,521

12. Total liabilities 339,335,724 236,859,577 91,041,649 11,384,898 13,079 36,521

Net financial position 12,066,175 (7,006,148) 18,212,196 896,676 (28) (36,521)Net long/(short) position on monetary items 12,042,698 (7,029,625) 18,212,196 896,676 (28) (36,521)

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Foreign currency position table - 31 December 2012

 Total ¨ (Functional

currency) US Dollar Euro GBP CHF JPY1.Cashatbanks 2,543,732 2,138,498 137,416 113,413 154,405 -2.Financialassetsandfinancialinvestmentswithrisksonpolicyholders 418,853,062 297,272,130 107,842,355 13,738,577 - -3.Receivablesfrommainoperations 374,618 303,753 66,438 4,427 - -4.Reinsurancereceivables 23,942 10,655 13,287 - - -5.Rentreceivables - - - - - -6.Depositsgiven 19,609 19,609 - - - -Foreign currency assets, current 421,814,963 299,744,645 108,059,496 13,856,417 154,405 -

7. Total assets 421,814,963 299,744,645 108,059,496 13,856,417 154,405 -

8.Financeleaseliabilities - - - - - -9.Payablestoreinsurers 963 - - 700 - 26310.Agencyguarantees 181,307 170,648 10,659 - - -11.Technicalprovisions 313,232,568 218,974,074 84,117,708 10,068,544 15,750 56,492Foreign currency liabilities, short term 313,414,838 219,144,722 84,128,367 10,069,244 15,750 56,755

12. Total liabilities 313,414,838 219,144,722 84,128,367 10,069,244 15,750 56,755

Net financial position 108,400,125 80,599,923 23,931,129 3,787,173 138,655 (56,755)Net long/(short) position on monetary items 108,380,516 80,580,314 23,931,129 3,787,173 138,655 (56,755)

ForeigncurrencytransactionsarerecordedatexchangeratesatthetransactiondatesandforeigncurrencydenominatedmonetaryitemsareevaluatedbytheCentralBankoftheRepublicofTurkey’sspotpurchaseratesasat31 December2013.

Foreigncurrencyratesusedforthetranslationofforeigncurrencydenominatedmonetaryassetsandliabilitiesasatreportingperiodsareasfollows:31 December 2013 US Dollar Euro GBP CHF JPY

Foreigncurrencyrateusedintranslationofbalancesheetitems 2.1343 2.9365 3.5114 2.3899 0.0202

31 December 2012 US Dollar Euro GBP CHF JPY

Foreigncurrencyrateusedintranslationofbalancesheetitems 1.7826 2.3517 2.8708 1.9430 0.0207

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Exposure to foreign currency risk

A10percentdepreciationofthe¨againstthefollowingcurrenciesasat31 December2013and2012wouldhaveincreasedordecreasedequityandprofitorloss(excludingtaxeffects)bytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestrates,remainconstant.Incaseofa10percentappreciationofthe¨againstthefollowingcurrencies,theeffectwillbeinoppositedirection.

Exchange rate sensitivity analysis table - 31 December 2013

  Profit/loss 

Equity (*)

 Appreciation of

foreign currencyDepreciation of

foreign currencyAppreciation of

foreign currencyDepreciation of

foreign currency

If USD value changes by 10% against ¨:        1-NetUSDollarassets/liabilities (714,269) 714,269 (700,615) 700,6152-HedgedportionfromUSDollarrisk(-) - - - -

3- Net effect of US Dollar (1+2) (714,269) 714,269 (700,615) 700,615

If EUR value changes by 10% against ¨:4-NetEuroassets/liabilities 1,785,809 (1,785,809) 1,821,220 (1,821,220)5-HedgedportionfromEurorisk(-) - - - -

6- Net effect of Euro (4+5) 1,785,809 (1,785,809) 1,821,220 (1,821,220)

If GBP value changes by 10% against ¨:7-NetGBPassets/liabilities 89,884 (89,884) 89,668 (89,668)8-HedgedportionfromGBPrisk(-)  - - - -

9- Net effect of GBP (7+8)  89,884 (89,884) 89,668 (89,668)

If CHF value changes by 10% against ¨:10-NetCHFassets/liabilities (3) 3 (3) 311-HedgedportionfromCHFrisk(-) - - - -

12- Net effect of CHF (10+11) (3) 3 (3) 3

If JPY value changes by 10% against ¨:13-NetJPYassets/liabilities (3,652) 3,652 (3,652) 3,65214-HedgedportionfromJPYrisk(-) - - - -

15- Net effect of JPY (13+14) (3,652) 3,652 (3,652) 3,652 Total (3+6+9+12+15) 1,157,769  (1,157,769) 1,206,618 (1,206,618)

(*)Includesprofit/losseffect.

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Exchange rate sensitivity analysis table - 31 December 2012

  Profit/loss Equity(*)

 Appreciation of

foreign currencyDepreciation of

foreign currencyAppreciation of

foreign currencyDepreciation of

foreign currency

If USD value changes by 10% against ¨:        1-NetUSDollarassets/liabilities 7,654,585 (7,654,585) 8,059,992 (8,059,992)2-HedgedportionfromUSDollarrisk(-) - - - -

3- Net effect of US Dollar (1+2) 7,654,585 (7,654,585) 8,059,992 (8,059,992)

If EUR value changes by 10% against ¨:4-NetEuroassets/liabilities 2,332,055 (2,332,055) 2,393,113 (2,393,113)5-HedgedportionfromEurorisk(-) - - - -

6- Net effect of Euro (4+5) 2,332,055 (2,332,055) 2,393,113 (2,393,113)

If GBP value changes by 10% against ¨:7-NetGBPassets/liabilities 361,013 (361,013) 378,717 (378,717)8-HedgedportionfromGBPrisk(-)  - - - -

9- Net effect of GBP (7+8)  361,013 (361,013) 378,717 (378,717)

If CHF value changes by 10% against ¨:10-NetCHFassets/liabilities 13,866 (13,866) 13,866 (13,866)11-HedgedportionfromCHFrisk(-) - - - -

12- Net effect of CHF (10+11) 13,866 (13,866) 13,866 (13,866)

If JPY value changes by 10% against ¨:13-NetJPYassets/liabilities (5,676) 5,676 (5,676) 5,67614-HedgedportionfromJPYrisk(-) - - - -15- Net effect of JPY (13+14) (5,676) 5,676 (5,676) 5,676 Total (3+6+9+12+15) 10,355,843 (10,355,843) 10,840,012 (10,840,012)

(*)Includesprofit/losseffect.

Interest risk

Exposure to interest risk

Thechangesininterestratethatarisefluctuationsinpricesoffinancialinstrumentsleadtothenecessityofovercominginterestraterisk.TheCompany’ssensitivityforinterestrateriskisrelatedtotheinconsistencyofmaturityofassetandliabilityitems.Theinterestriskismanagedbycompensatingtheassetsexposedtotheinterestfluctuationswiththeidenticalliabilities.

Financialinstrumentswhicharesensitivetothechangesininterestratesaregiveninthetablebelow:  31 December 2013 31 December 2012

Fixed rate financial instrumentsFinancialassets 1,635,110,730 1,875,486,885

Financial assets at fair value through profit or loss - -Available-for-sale financial assets 1,623,708,744 1,861,395,540Loans and receivables 11,401,986 14,091,345

Banks 18,737,143 54,078,050

Variable rate financial instrumentsFinancialassets 564,137,981 580,588,964

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Interest rate sensitivity of financial instruments

Asat31 December2013and2012,interestrateriskanalysisoffinancialassetsandfinancialliabilitiesaresummarizedinthetablebelow:

31 December 2013 Up to 1 month 1 to 3 months3 to 12

months 1 to 5 years5 years and

overNon-interest

bearing TotalAssets:              Cashandcashequivalents 127,638,453 - - - - 11,127,176 138,765,629Financialassetsandinvestmentswithrisksonpolicyholders 521,465,455 73,707,554 165,404,467 76,627,129 1,362,044,106 207,643,946 2,406,892,657Receivablesfrommainoperations 685,599 1,206,495 2,040,950 - - 5,292,081,534 5,296,014,578Duefromrelatedparties - 334,634 - - - - 334,634Otherreceivables 11,261,706 - - - - 903,971 12,165,677Prepaidexpensesandincomeaccruals,shortterm - - - - - 10,690,180 10,690,180Othercurrentassets - - - - - 17,887 17,887Financialassets(Associates) - - - - - 15,036,296 15,036,296Tangibleassets - - - - - 21,701,481 21,701,481Intangibleassets - - - - - 4,982,250 4,982,250Prepaidexpensesandincomeaccruals,longterm - - - - - 8,905 8,905Deferredtaxassets - - - - - 2,068,582 2,068,582Total assets 661,051,213 75,248,683 167,445,417 76,627,129 1,362,044,106 5,566,262,208 7,908,678,756Liabilities:Payablesarisingfrommainoperations 8,949,788 - 881,759 - - 5,351,680,646 5,361,512,193Duetorelatedparties - - 5,014 - - - 5,014Otherliabilities 5,702,261 - - - - 3,180,156 8,882,417Insurancetechnicalprovisions - - - - - 1,972,924,325 1,972,924,325Provisionsfortaxesandothersimilarobligations 4,848,034 - - - - 3,799,996 8,648,030Deferredincomeandexpenseaccruals - - - - - 2,588,141 2,588,141Othershorttermliabilities - - - - - 62 62Provisionsforotherrisks 650,000 - 2,000,000 - 8,269,886 3,055,359 13,975,245Deferredtaxliabilities - - - - - - -Shareholders’equity - - - - - 540,143,329 540,143,329Total liabilities and equity 20,150,083 - 2,886,773 - 8,269,886 7,877,372,014 7,908,678,756

Net position 640,901,130 75,248,683 164,558,644 76,627,129 1,353,774,220 (2,311,109,806) -

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 31 December 2012 Up to 1 month 1 to 3 months3 to 12

months 1 to 5 years5 years and

overNon-interest

bearing TotalAssets:              Cashandcashequivalents 54,078,050 - - - - 88,264,376 142,342,426Financialassetsandinvestmentswithrisksonpolicyholders 513,609,225 102,606,697 242,201,381 173,904,037 1,423,754,509 226,481,644 2,682,557,493Receivablesfrommainoperations 436,074 1,003,583 1,700,637 - - 4,344,007,866 4,347,148,160Duefromrelatedparties - 1,096,350 - - - - 1,096,350Otherreceivables 1,166,746 - - - - 724,958 1,891,704Prepaidexpensesandincomeaccruals,shortterm - - - - - 12,601,372 12,601,372Othercurrentassets - - - - - 23,230 23,230Financialassets(Associates) - - - - - 13,568,006 13,568,006Tangibleassets - - - - - 21,311,444 21,311,444Intangibleassets - - - - - 4,297,953 4,297,953Prepaidexpensesandincomeaccruals,longterm - - - - - 58,142 58,142Deferredtaxasset - - - - - - -Total assets 569,290,095 104,706,630 243,902,018 173,904,037 1,423,754,509 4,711,338,991 7,226,896,280Liabilities:Payablesarisingfrommainoperations 9,105,720 - 636,822 - - 4,361,441,693 4,371,184,235Duetorelatedparties - - 8,172 - - 2,260 10,432Otherliabilities 3,850,309 - - - - 2,619,075 6,469,384Insurancetechnicalprovisions - - - - - 2,288,110,880 2,288,110,880Provisionsfortaxesandothersimilarobligations 4,139,335 - - - - 7,173,965 11,313,300Provisionsforotherrisks - - - - - 1,793,541 1,793,541Deferredincomeandexpenseaccruals - - - - - 61 61Othershorttermliabilities 500,000 - - - 7,408,414 5,859,758 13,768,172Deferredtaxliabilities - - - - - 4,760,670 4,760,670Shareholders’equity - - - - - 529,485,605 529,485,605Total liabilities and equity 17,595,364 - 644,994 - 7,408,414 7,201,247,508 7,226,896,280

   Net position 551,694,731 104,706,630 243,257,024 173,904,037 1,416,346,095 (2,489,908,517) -

Interestratesensitivityofthestatementofincomeistheeffectoftheassumedchangesininterestratesonthefairvaluesoffinancialassetsatfairvaluethroughprofitorlossandonthenetinterestincomeasatandfor31 December2013and2012ofthefloatingratenon-tradingfinancialassetsandfinancialliabilitiesheldat31 December2013and2012.Interestratesensitivityofequityiscalculatedbyrevaluingavailable-for-salefinancialassetsat31 December2013and2012fortheeffectsoftheassumedchangesininterestrates.Thisanalysisassumesthatallothervariables,inparticularforeigncurrencyrates,remainconstant.Thetablebelowdemonstratingtheeffectofchangesininterestratesonstatementofincomeandequityexcludestaxeffectsonrelatedlossorincome.

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31 December 2013100 bp

increase100 bp

decrease500 bp

increase500 bp

decrease

Company’sownportfolio (4,775,898) 4,893,034 (22,025,376) 26,775,962Total, net (4,775,898) 4,893,034 (22,025,376) 26,775,962

31 December 2012100 bp

increase100 bp

decrease500 bp

increase500 bp

decrease

Company’sownportfolio (6,165,010) 6,477,278 (28,088,476) 35,978,405Total, net (6,165,010) 6,477,278 (28,088,476) 35,978,405

Fair value information

Theestimatedfairvaluesoffinancialinstrumentshavebeendeterminedusingavailablemarketinformation,andwhereitexists,appropriatevaluationmethodologies.

TheCompanyhasclassifieditsfinancialassetsaswhetherheldfortradingpurposeoravailableforsale.Asatreportingperiod,availableforsalefinancialassetsandfinancialassetsheldfortradingaremeasuredattheirfairvaluesintheaccompanyingfinancialstatements.

Managementestimatesthatthefairvalueofotherfinancialassetsandliabilitiesarenotmateriallydifferentthantheircarryingvalues.

Classification relevant to fair value information

TFRS7-Financial instruments: Disclosuresrequirestheclassificationoffairvaluemeasurementsintoafairvaluehierarchybyreferencetotheobservabilityandsignificanceoftheinputsusedinmeasuringfairvalueoffinancialinstrumentsmeasuredatfairvaluetobedisclosed.Thisclassificationbasicallyreliesonwhethertherelevantinputsareobservableornot.Observableinputsrefertotheuseofmarketdataobtainedfromindependentsources,whereasunobservableinputsrefertotheuseofpredictionsandassumptionsaboutthemarketmadebytheCompany.Thisdistinctionbringsaboutafairvaluemeasurementclassificationgenerallyasfollows:

Level1:Fairvaluemeasurementsusingquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities;

Level2:FairvaluemeasurementsusinginputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(asprices)orindirectly(derivedfromprices).

Level3:Fairvaluemeasurementsusinginputsfortheassetsorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

Ifclassificationisavailableforusage,itnecessitatestheutilizationofobservablemarketdata.

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Theclassificationoffairvaluemeasurementsoffinancialassetsandliabilitiesmeasuredatfairvalueisasfollows:31 December 2013

Level 1 Level 2 Level 3 Total

Financial assets:Financialassetsheldfortrading 36,388,883 - - 36,388,883Availableforsalefinancialassets(*) 532,884,056 13,929,093 - 546,813,149Loansandreceivables 11,401,986 - - 11,401,986Financialinvestmentswithrisksonpolicyholdersclassifiedasavailableforsale 1,787,655,851 - - 1,787,655,851Receivablesfromindividualpensionbusiness 5,231,179,012 - - 5,231,179,012Total financial assets 7,599,509,788 13,929,093 - 7,613,438,881

Financial liabilities:Investmentcontractliabilities-lifemathematicalprovisionforsavinglifepolicies 1,871,476,210 - - 1,871,476,210Payablesarisingfromindividualpensionbusiness(**) 5,231,179,012 - - 5,231,179,012Total financial liabilities 7,102,655,222 - - 7,102,655,222

(*)Asat31 December2013,securitiesthatarenotpubliclytradedamountingto¨34,932,570havebeenmeasuredatcostandareexcludedfromthetable.(**)Includesinvestmentsdirectedindividualpensionfunds.

31 December 2012Level 1 Level 2 Level 3 Total

Financial assets:Financialassetsheldfortrading 42,316,499 - - 42,316,499Availableforsalefinancialassets(*) 475,524,095 8,335,117 - 483,859,212Loansandreceivables 14,091,345 - - 14,091,345Financialinvestmentswithrisksonpolicyholdersclassifiedasavailableforsale 2,117,707,466 - - 2,117,707,466Receivablesfromindividualpensionbusiness 4,277,830,443 - - 4,277,830,443Total financial assets 6,927,469,848 8,335,117 - 6,935,804,965

Financial liabilities:Investmentcontractliabilities-lifemathematicalprovisionforsavinglifepolicies 2,205,674,373 - - 2,205,674,373Payablesarisingfromindividualpensionbusiness(**) 4,277,830,443 - - 4,277,830,443Total financial liabilities 6,483,504,816 - - 6,483,504,816

(*)Asat31 December2012,securitiesthatarenotpubliclytradedamountingto¨34,932,570havebeenmeasuredatcostandareexcludedfromthetable.(**)Includesinvestmentsdirectedindividualpensionfunds.

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Equity share price risk

Equitysharepriceriskisdefinedastheriskofdecreasingthemarketpriceofequitysharesasaresultofadeclineinindex.

Theeffectofchangesinfairvaluesoftheavailable-for-salefinancialassetsonequitythatisresultedfromthefluctuationsonindex(alloftheothervariablesareassumedtobefixed)areasfollowsasat31 December2013and2012.

Change in index 31 December 2013 31 December 2012

Marketpriceofequity 10% 8,920,298 9,320,633

Theeffectofchangesinfairvaluesofthefinancialassetsheldfortradingonequitythatisresultedfromthefluctuationsonindex(alloftheothervariablesareassumedtobefixed)areasfollowsasat31 December2013and2012.

Change in index 31 December 2013 31 December 2012

Marketpriceofequity 10% 237,230 205,477

Capital management

TheaimoftheCompany’scapitalmanagementisdefinedastoprovidethecontinuityofprofit-makingcompany,toprotectthebenefitsoftheshareholdersandinstitutionalpartnersandalsotoconductthemostefficientcapitalstructureinordertoreducethecostofcapital.

ThecapitaladequacyoftheCompanyiscalculatedinaccordancewiththeDecree“MeasurementandAssessmentofCapitalAdequacyofInsuranceandReinsuranceCompaniesandPensionFunds”inallreportingperiods.TheCapitalAdequacycalculatedaccordingtotwomethodsareinlinewiththeminimumrequirements.TheCompany’srecentcapitaladequacytablepreparedasatthereportdatefor31 December2013issummarizedbelow.Asat31 December2013,thecapitaladequacyoftheCompanyis¨124,146,726and¨90,436,913;basedonfirstandsecondmethodrespectively.Bythetablebelow,itisobservedthatcapitaladequacybalancescalculatedbyusingfirstandsecondmethodsarelessthantheCompany’scapitalasat31 December2013.TheCompany’scapitalcalculatedbasedontheregulationasat31 December2013¨539,790,655.Consequently,theCompany’scapitalisadequate.

Capital Adequacy Table  31 December 2013 31 December 2012

Requiredcapitalfornon-lifebranches 115,435 196,369Requiredcapitalforlifebranch 109,078,343 108,496,682Requiredcapitalforpensionbranch 14,952,948 12,569,576Required capital based on the first method 124,146,726 121,262,627

Requiredcapitalforassetrisk 66,013,754 59,220,929Requiredcapitalforreinsurancerisk 2,561,093 2,638,414Requiredcapitalforexcessivepremiumincrease - 2,848,020Requiredcapitalforoutstandingclaimsrisk 1,863,755 1,393,290Requiredcapitalforunderwritingrisk 19,093,348 17,809,304Requiredcapitalforinterestrateandcurrencyrisk 904,963 8,130,010Required capital based on the second method 90,436,913 92,039,967

Required capital 124,146,726 121,262,627Current capital 539,790,655(*) 524,679,792Excessive capital 415,643,929 403,417,165

(*)Asaresultoflegalregulationtheequalizationprovisionamounted¨5,921,429isincludedinthecurrentcapital.

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5 Segment reporting

SegmentingofbalancesheetandincomestatementitemsisbasedonthedistributionkeydescribedinCircular“PrinciplesandProceduresofDistributionKeysUsedinFinancialStatementsundertheInsuranceUniformedChartofAccounts”issuedbytheUndersecretariatofTreasuryon4 January2008andCircular“AmendmentstoPrinciplesandProceduresofDistributionKeysUsedinFinancialStatementsundertheInsuranceUniformedChartofAccounts”issuedbytheUndersecretariatofTreasuryon9 August2010.31 December 2013 Life Individual Pension Personal Accident Total

Continuing operations:Technicalincome 598,513,416 132,002,445 675,114 731,190,975Technicalexpense (535,102,109) (143,137,394) (658,719) (678,898,222)Totalofotherincomeandexpense 23,900,945 23,648,071 174,166 47,723,182Income before tax 87,312,252 12,513,122 190,561 100,015,935Incometaxexpense - - - (15,310,000)Net profit for the period 87,312,252 12,513,122 190,561 84,705,935

31 December 2013 Life Individual Pension Personal Accident Total

Segmentassets 2,248,699,096 5,643,593,393 16,386,267 7,908,678,756Total assets 2,248,699,096 5,643,593,393 16,386,267 7,908,678,756

Segmentliabilities (2,254,582,996) (5,637,675,427) (16,420,333) (7,908,678,756)Total liabilities (2,254,582,996) (5,637,675,427) (16,420,333) (7,908,678,756)

Other segment informationDepreciationandamortization (2,471,797) (2,445,646) (18,012) (4,935,455)

31 December 2012 Life Individual Pension Personal Accident Total

Continuing operations:Technicalincome 502,677,829 139,026,057 681,276 642,385,162Technicalexpense (469,262,040) (119,530,396) (663,540) (589,455,976)Totalofotherincomeandexpense 27,158,835 26,772,974 191,080 54,122,889Income before tax 60,574,624 46,268,635 208,816 107,052,075Incometaxexpense - - - (26,100,000)Net profit for the period 60,574,624 46,268,635 208,816 80,952,075

31 December 2012 Life Individual Pension Personal Accident Total

Segmentassets 2,558,341,361 4,650,555,336 17,999,583 7,226,896,280Total assets 2,558,341,361 4,650,555,336 17,999,583 7,226,896,280

Segmentliabilities (2,562,953,332) (4,645,915,996) (18,026,952) (7,226,896,280)Total liabilities (2,562,953,332) (4,645,915,996) (18,026,952) (7,226,896,280)

Other segment informationDepreciationandamortization (1,909,282) (1,882,155) (13,433) (3,804,870)

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6 Tangible assets

Movementintangibleassetsintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Land(*) 1,832,831 - - 1,832,831Buildings(*) 25,379,158 - (375,726) 25,003,432Machineryandequipment 5,722,942 2,239,866 (7,303) 7,955,505Vehicles 573,475 183,856 (227,608) 529,723Furnitureandfixtures(includesleasedassets) 3,924,669 146,255 - 4,070,924Leaseholdimprovements 2,685,382 267,885 - 2,953,267

40,118,457 2,837,862 (610,637) 42,345,682Accumulated depreciation:Buildings(*) (10,430,872) (503,679) 167,824 (10,766,727)Machineryandequipment (3,326,955) (1,072,558) 6,481 (4,393,032)Vehicles (442,475) (105,377) 218,158 (329,694)Furnitureandfixtures(includesleasedassets) (2,953,316) (287,209) - (3,240,525)Leaseholdimprovements (1,653,395) (260,828) - (1,914,223)

(18,807,013) (2,229,651) 392,463 (20,644,201)

Carrying amounts 21,311,444 21,701,481(*)Landwithacarryingamountof¨1,411,831andbuildingswithacarryingamountof¨13,568,863areinvestmentpropertiesandgiveninNote7-Investment propertiesindetail.Totalimpairmentlossesonownuselandamountedto¨417,070.

Movementintangibleassetsintheperiodfrom1 Januaryto31 December2012ispresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Land(*) 1,832,831 - - 1,832,831Buildings(*) 25,379,158 - - 25,379,158Machineryandequipment 4,212,702 1,528,873 (18,633) 5,722,942Vehicles 797,979 - (224,504) 573,475Furnitureandfixtures(includesleasedassets) 3,723,903 297,573 (96,807) 3,924,669Leaseholdimprovements 2,229,627 455,755 - 2,685,382

38,176,200 2,282,201 (339,944) 40,118,457Accumulated depreciation:Buildings(*) (9,922,184) (508,688) - (10,430,872)Machineryandequipment (2,642,412) (696,092) 11,549 (3,326,955)Vehicles (546,574) (87,506) 191,605 (442,475)Furnitureandfixtures(includesleasedassets) (2,759,383) (280,979) 87,046 (2,953,316)Leaseholdimprovements (1,402,711) (250,684) - (1,653,395)

(17,273,264) (1,823,949) 290,200 (18,807,013)

Carrying amounts 20,902,936 21,311,444(*)Landwithacarryingamountof¨1,411,831andbuildingswithacarryingamountof¨14,260,981areinvestmentpropertiesandgiveninNote7-Investment propertiesindetail.Totalimpairmentlossesonownuselandamountedto¨417,070.

Therearenopledgesontangibleassets.

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7 Investment properties

Movementininvestmentpropertiesintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Land 1,411,831 - - 1,411,831Buildings 24,461,256 - (375,726) 24,085,530

25,873,087 - (375,726) 25,497,361Accumulated depreciation:Buildings (10,200,275) (484,216) 167,824 (10,516,667)

(10,200,275) (484,216) 167,824 (10,516,667)       

Carrying amounts 15,672,812     14,980,694

Fortheyearended31 December2013,theCompanyhasrentalincomefrominvestmentpropertiesamounting¨3,280,321(31 December2012:¨3,059,325).

Movementininvestmentpropertiesintheperiodfrom1 Januaryto31 December2012ispresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Land 1,411,831 - - 1,411,831Buildings 24,461,256 - - 24,461,256

25,873,087 - - 25,873,087Accumulated depreciation:Buildings (9,711,050) (489,225) - (10,200,275)

(9,711,050) (489,225) - (10,200,275)       

Carrying amounts 16,162,037     15,672,812

Asat31 December2013,totalfairvalueoftheCompany’sinvestmentpropertiesamountingto¨53,523,000.Expertreportsonthesepropertieshavebeenpreparedbytheauthorizedrealestatevaluationcompaniesat JanuaryandFebruaryof2010.Therearenopledgesontheseproperties.

8 Intangible assets

Movementinintangibleassetsintheperiodfrom1 Januaryto31 December2013ispresentedbelow:1 January 2013 Additions Disposals 31 December 2013

Cost:Rights 11,845,644 3,390,101 - 15,235,745

11,845,644 3,390,101 - 15,235,745Accumulated amortization:Rights (7,547,691) (2,705,804) - (10,253,495)

(7,547,691) (2,705,804) - (10,253,495)

Carrying amounts 4,297,953 4,982,250

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Movementsinintangibleassetsintheperiodfrom1 Januaryto31 December2012ispresentedbelow:1 January 2012 Additions Disposals 31 December 2012

Cost:Rights 8,299,662 3,545,982 - 11,845,644

8,299,662 3,545,982 - 11,845,644Accumulated amortization:Rights (5,566,770) (1,980,921) - (7,547,691)

(5,566,770) (1,980,921) - (7,547,691)

Carrying amounts 2,732,892 4,297,953

9 Investments in associates31 December 2013 31 December 2012

Carrying valueParticipation

rate % Carrying valueParticipation

rate %

İşPortföyYönetimiAŞ 15,036,296 20.0% 13,568,006 20.0%Investments in associates, net 15,036,296 13,568,006

Associate Total assetsShareholders’

equityRetained earnings

Profit for the period Audited or not Period

İşPortföyYönetimiA.Ş. 80,906,115 75,181,480 14,950,581 10,471,581 Reviewed31 December

2013

¨2,094,316ofincomeisobtainedfromassociatesthroughequityaccountedconsolidationmethod(31 December2012:¨1,915,627).

10 Reinsurance assets and liabilities

OutstandingreinsuranceassetsandliabilitiesoftheCompany,asacedingcompanyinaccordancewiththeexistingreinsurancecontractsareasfollows:Reinsurance assets 31 December 2013 31 December 2012

Reserveforunearnedpremiums,ceded(Note 17.15) 2,193,599 1,662,615Provisionforoutstandingclaims,ceded(Note 17.15) 3,134,362 605,350Lifemathematicalreserve,ceded(Note 17.15) 3,998,021 5,468,417OtherTechnicalprovision,ceeded 268,623 180,789Provisionforbonusanddiscount,ceded(Not 17.15) 353,241 272,071Duefromreinsurers 113,350 242,024Total 10,061,196 8,431,266

Thereisnotanyimpairmentlossesrecognizedforreinsuranceassets.Reinsurance liabilities 31 December 2013 31 December 2012

Cashdepositedbyinsuranceandreinsurancecompanies(Note 19) 881,759 636,822Total 881,759 636,822

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Gainsandlossesrecognizedinthestatementofincomeinaccordancewithexistingreinsurancecontractsareasfollows:31 December 2013 31 December 2012

Life branch:Premiumscededduringtheperiod (13,001,366) (11,460,129)Changeinunearnedpremiumsreserve,ceded 551,901 131,841Commissionsreceivedfromreinsurers(*) 2,613,736 2,760,812Reinsurersshareofclaimspaid 6,694,047 3,393,572Changeinoutstandingclaims,ceded 2,502,259 (353,629)Changeinbonusanddiscountprovision,ceded 78,480 272,071Changeinlifemathematicalreserve,ceded (1,470,396) 212,924

(2,031,339) (5,042,538)

Non-life branch:Premiumscededduringtheperiod (140,606) (322,163)Changeinunearnedpremiumsreserve,ceded (20,917) (26,502)Commissionsreceivedfromreinsurers(*) 48,490 60,894Reinsurersshareofclaimspaid 135,078 45,319Changeinoutstandingclaims,ceded 26,753 (30,677)Changeinbonusanddiscountprovision,ceded 2,690 -

51,488 (273,129)

Total, net (1,979,851) (5,315,667)(*)Deferredcommissionsareexcludedfromcommissionsreceivedfromreinsurers.

11 Financial assets

Asat31 December2013and2012,theCompany’sfinancialassetsaredetailedasfollows:Financial assets and financial investments with risk on policyholders 31 December 2013 31 December 2012

Availableforsalefinancialassets,Company’sownportfolio 581,745,719 518,741,965Financialassetsheldfortradingpurpose 36,388,883 42,316,499Loansandreceivables 11,401,986 14,091,345Financialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailableforsale 1,787,655,851 2,117,707,466Impairmentlossonfinancialassets (10,299,782) (10,299,782)Total 2,406,892,657 2,682,557,493

Asat31 December2013and2012,theCompany’sfinancialassetsheldfortradingaredetailedasfollows:

31 December 2013Face value Cost Fair value Carrying value

Equity shares and other non-fixed income financial assets:Equityshares 1,265,614 2,372,303 2,372,303InvestmentfundsandTurkishderivativesexchangecontracts 26,279,907 34,016,580 34,016,580Total financial assets held for trading purpose - other 27,545,521 36,388,883 36,388,883

Total financial assets held for trading purpose 27,545,521 36,388,883 36,388,883

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31 December 2012Face value Cost Fair value Carrying value

Equity shares and other non-fixed income financial assets:Equityshares 1,265,614 2,054,767 2,054,767InvestmentfundsandTurkishderivativesexchangecontracts 30,259,023 40,261,732 40,261,732Total financial assets held for trading purpose - other 31,524,637 42,316,499 42,316,499

Total financial assets held for trading purpose 31,524,637 42,316,499 42,316,499

Asat31 December2013,theCompany’sfinancialassetsheldfortradingissuedbytheCompany’srelatedparties,aredetailedasfollows:

31 December 2013Face value Cost Fair value Carrying value

Investmentfunds 557,536,556 26,279,907 34,016,580 34,016,580Total 557,536,556 26,279,907 34,016,580 34,016,580

31 December 2012Face value Cost Fair value Carrying value

Investmentfunds 501,187,090 30,259,023 40,261,732 40,261,732Total 501,187,090 30,259,023 40,261,732 40,261,732

Asat31 December2013and2012,theCompany’sloansandreceivablesaredetailedasfollows:31 December 2013

Cost Fair value Carrying value

Reverserepo 11,400,000 11,401,986 11,401,986Receivables from reverse repo 11,400,000 11,401,986 11,401,986

31 December 2012Cost Fair value Carrying value

Reverserepo 14,089,404 14,091,345 14,091,345Receivables from reverse repo 14,089,404 14,091,345 14,091,345

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Asat31 December2013and2012,theCompany’savailableforsalefinancialassetsinitsownportfolioaredetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Debt instruments:Privatesectorbonds 63,159,000 56,048,139 58,211,104 58,211,104Governmentbonds 392,952,232 406,881,935 399,399,063 399,399,063Total available for sale financial assets - debt instruments 462,930,074 457,610,167 457,610,167

Equity shares and other non-fixed income financial assets:Equityshares(*) 104,449,208 124,135,552 124,135,552Total available for sale financial assets - other 104,449,208 124,135,552 124,135,552

Total available for sale financial assets 567,379,282 581,745,719 581,745,719

Impairment loss on available for sale equity shares (10,299,782) (10,299,782) (10,299,782)

Net available for sale financial assets 557,079,500 571,445,937 571,445,937(*)Financialassetsofwhichthefairvaluesaremeasuredreliablyarepresentedattheirfairvalues,ifnot,presentedattheircosts.

31 December 2012Face value Cost Fair value Carrying value

Debt instruments:Privatesectorbonds 29,492,970 25,758,616 26,512,627 26,512,627Governmentbonds 349,474,472 333,670,209 364,140,259 364,140,259Total available for sale financial assets - debt instruments 359,428,825 390,652,886 390,652,886

Equity shares and other non-fixed income financial assets:Equityshares(*) 100,871,811 128,089,079 128,089,079Total available for sale financial assets - other 100,871,811 128,089,079 128,089,079

Total available for sale financial assets 460,300,636 518,741,965 518,741,965

Impairment loss on available for sale equity shares (10,299,782) (10,299,782) (10,299,782)

Net available for sale financial assets 450,000,854 508,442,183 508,442,183(*)Financialassetsofwhichthefairvaluesaremeasuredreliablyarepresentedattheirfairvalues,ifnot,presentedattheircosts.

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TheCompanyhasequitysharesandbondsissuedbytheCompany’srelatedpartiesandclassifiedasavailableforsalefinancialassetsinitsownportfoliowithacostamountof¨103,220,742and¨18,291,112acarryingvalueof¨120,795,738and¨18,312,084asat31 December2013(31 December2012:Equityshareswithacostamountof¨99,643,344andacarryingamountof¨125,103,318;BondsissuedbytheCompany’srelatedpartieswithacostamount¨4,799,350andacarryingamountof¨4,992,600).

Financialinvestmentswithrisksonsavinglifepolicyholders(“FIRSLP”)asat31 December2013and2012aredetailedasfollows:31 December 2013

Face value Cost Fair value Carrying value

Debt Instruments:Governmentbonds-¨ 1,359,428,127 1,372,517,064 1,387,177,831 1,387,177,831EurobondsissuedbytheTurkishGovernment 137,578,000 318,932,698 337,737,532 337,737,532Investmentfunds 5,500,000 5,146,240 5,321,195 5,321,195Privatesectorbonds 55,151,200 51,500,165 57,419,293 57,419,293Total available for sale financial assets - debt instruments 1,557,657,327 1,748,096,167 1,787,655,851 1,787,655,851Financial investments with risks on saving life policyholders 1,748,096,167 1,787,655,851 1,787,655,851

  31 December 2012Face value Cost Fair value Carrying value

Debt Instruments:Governmentbonds-¨ 1,413,003,589 1,464,050,779 1,646,165,027 1,646,165,027EurobondsissuedbytheTurkishGovernment 154,991,000 300,765,080 405,166,591 405,166,591Investmentfunds 55,151,200 51,500,165 66,375,848 66,375,848Total available for sale financial assets - debt instruments 1,623,145,789 1,816,316,024 2,117,707,466 2,117,707,466Financial investments with risks on saving life policyholders 1,816,316,024 2,117,707,466 2,117,707,466

Asat31 December2013,thefinancialassetsissuedbytheCompany’srelatedpartiesandclassifiedasFIRSLParedetailedasfollows(31 December2012:None):

31 December 2013Face value Cost Fair value Carrying value

Investmentfunds 55,151,200 51,500,165 57,419,293 57,419,293Privatesectorbonds 5,500,000 5,146,240 5,321,195 5,321,195Total 60,651,200 56,646,405 62,740,488 62,740,488

31 December 2012Face value Cost Fair value Carrying value

Investmentfunds 55,151,200 51,500,165 66,375,848 66,375,848Total 55,151,200 51,500,165 66,375,848 66,375,848

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TheCompanyhasnosecurities,otherthanissuedsharesinthecurrentperiod,oranymatureddebtsecurities.

Valueincreasesinfinancialassetsforthelastthreeperiods:31 December 2013 31 December 2012 31 December 2011

Current financial assets:Availableforsalefinancialassets,Company’sownportfolio 14,366,437 58,441,329 774,599Financialassetsheldfortradingpurpose 8,843,362 10,791,862 2,410,277Loansandreceivables 1,986 1,941 162Financialinvestmentswithrisksonsavinglifepolicyholdersclassifiedasavailableforsale 39,559,684 301,391,442 141,798,468

 Total 62,771,469 370,626,574 144,983,506

Valueincreasesreflectthedifferencebetweenthecarryingvalueandcostofthefinancialassets.

TheCompanyhas¨10,299,782ofimpairmentlossarisingfromitsavailableforsaleinvestmentsinequityparticipationsnothavingaquotedmarketpriceinanactivemarket.

TheCompanydoesnotapplyhedgeaccounting.

Exchangeratedifferencesarisingfromthepaymentsofmonetaryitemsordifferentconversionratesusedinthecurrentperiodoratinitialrecognitionarerecognizedinprofitorloss.

FinancialassetsblockedinfavoroftheTurkishTreasuryasaguaranteefortheinsuranceactivitiesareasfollows:31 December 2013

Face value Cost Fair value Carrying value

Financialinvestmentswithrisksonsavinglifepolicyholders-debtsecurities 1,557,657,327 1,748,096,167 1,787,655,851 1,787,655,851Availableforsalefinancialassets 133,995,798 138,191,971 135,211,744 135,211,744Total 1,886,288,138 1,922,867,595 1,922,867,595

31 December 2012Face value Cost Fair value Carrying value

Financialinvestmentswithrisksonsavinglifepolicyholders-debtsecurities 1,623,145,789 1,816,316,024 2,117,707,466 2,117,707,466Availableforsalefinancialassets 135,522,223 137,669,477 150,802,627 150,802,627Total 1,953,985,501 2,268,510,093 2,268,510,093

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12 Loans and receivables

ThedetailsoftheCompany’sreceivablesareasfollows:31 December 2013 31 December 2012

Receivablesfrominsuranceoperations 12,788,669 8,959,668Provisionsforreceivablesfrominsuranceoperations (2,574) (2,574)Loanstothepolicyholders 43,748,889 51,779,559Doubtfulreceivablesfrommainoperationsandinsuranceoperations 117,996 117,996Provisionsfordoubtfulreceivablesfrommainoperationsandinsuranceoperations (117,996) (117,996)Receivablesfrompensionactivities 5,239,479,594 4,286,411,507

Net fund value of participants 5,231,179,012 4,277,830,443Other 8,300,582 8,581,064

Total receivables from main operations 5,296,014,578 4,347,148,160Receivablesfrompersonnel 334,634 1,096,350Otherreceivables 12,165,677 1,891,704Total 5,308,514,889 4,350,136,214

ThedetailsofguaranteesfortheCompany’sreceivablesarepresentedbelow:31 December 2013 31 December 2012

Guaranteesandcommitments 4,112,320 4,075,128Lettersofguarantees 1,655,469 1,140,697Realestatepledges 1,026,400 1,016,400Total 6,794,189 6,232,225

31 December 2013 31 December 2012

Provisionsfordoubtfulreceivablesfrommainoperationsandinsuranceoperationsatthebeginningoftheperiod 117,996 117,996Collections - -Chargefortheperiod - -Provisions for doubtful receivables from main operations and insurance operations at the end of the period 117,996 117,996

Provision for both overdue receivables and receivables not due yet

a)Receivablesunderlegaloradministrativefollowup(due):¨117,996(31 December2012:¨117,996).

b)Provisionforpremiumreceivables(due):¨2,574(31 December2012:¨2,574).

TheCompanyprovidesprovisionforitsdoubtfulreceivablesinthelegalfollow-upbyconsideringthevalueandnatureofthereceivable.

TheCompanyreflectsitsreceivablesfromandpayablestoreinsuranceandinsurancecompaniesbynettingoffontheentitybasis.

TheCompany’sreceivablesfromandpayablestoshareholders,associatesandsubsidiariesaredetailedinnote45-Related party transactions.

13 Derivative financial instruments

Asat31 December2013,thedetailedinformationabouttheCompany’scurrentderivativefinancialinstrumentsispresentedin11-Financial assets. Atthereportingperiod,Companyhasnoderivativefinancialinstruments.

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14 Cash and cash equivalents

Asat31 December2013and2012,cashandcashequivalentsareasfollows:31 December 2013 31 December 2012

At the end of the period

At the beginning of the period

At the end of the period

At the beginning of the period

Cashonhand 20,961 14,155 14,155 12,206Bankdeposits 29,864,319 59,951,461 59,951,461 52,803,532BankGuaranteedCreditCardReceivableswithMaturitiesLessThanThreeMonths(*) 109,055,120 82,540,020 82,540,020 67,036,981Chequesgivenandpaymentorders (174,771) (163,210) (163,210) (63,794)Cash and cash equivalents in the balance sheet 138,765,629 142,342,426 142,342,426 119,788,925

Interestaccrualsonbankdeposits (87,376) (282,203) (282,203) (323,655)Timedepositswithmaturitieslongerthan3months - - - -Cash and cash equivalents presented in the statement of cash flow 138,678,253 142,060,223 142,060,223 119,465,270

(*)BankGuaranteedCreditCardReceivableswithMaturitiesLessThanThreeMonthsincludecreditcardreceivablesfrombanksinrelationtopremiumpaymentsofpolicyholders.

Asat31 December2013and2012,bankdepositsarefurtheranalyzedasfollows:31 December 2013 31 December 2012

Foreigncurrencydenominatedbankdeposits-demanddeposits 1,013,036 2,543,732

BankdepositsinTurkishLira-timedeposits 18,737,143 54,078,050-demanddeposits 10,114,140 3,329,679

Cash at banks 29,864,319 59,951,461

Asat31 December2013,¨timedepositshaveamaximummaturityof1monthandtheirsimpleinterestratesvarybetween7.00%and9.00%simpleinterestrate.TheCompanyhasnoforeigncurrencydenominatedbankdeposits.

Asat31 December2012,¨timedepositshaveamaximummaturityof1monthandtheirsimpleinterestratesvarybetween6.84%and8.00%.TheCompanyhasnoforeigncurrencydenominatedbankdeposits.

15 Equity

Paid in Capital

Asat31 December2013,theauthorizednominalsharecapitaloftheCompanyis¨350,000,000andthesharecapitaloftheCompanyconsistsof35,000,000,000issuedshareswith¨0.01nominalvalueeach.

TheCompany’ssharecapitalisdividedintogroupAandgroupBshares.GroupAshareisrepresentedby100,000,000ofequityshareshavinganominalamountof¨0.01each.GroupBshareisrepresentedby34,900,000,000shareshavinganominalamountof¨0.01eachandallsharesareownedbyTürkiyeİşBankasıAŞ.GroupAshareholdershavenoprivilegesexceptfortheelectionofBoardmembers.InaccordancewiththeArticlesofAssociation,newgroupAsharescannotbeissuedincapitalincreases.

TheCompanyhasacceptedtheregisteredcapitalsystemsetoutinaccordancewiththeLawNo:2499andappliedthesystemasof15 June2000uponthepermissionno:67/1039grantedbytheCapitalMarketsBoard.Asat31 December2013,theCompany’sregisteredcapitalis¨450,000,000.

Asat31 December2013,therearenotanytreasurysharesheldbytheCompany’sassociate;namelyİşPortföyYönetimiAŞ.TherearenotanytreasurysharesheldbytheCompanyitself.

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Profit on Assets Sale That will be Transferred to Capital

Inaccordancewithtaxlegislation,75%ofprofitsfromsalesofparticipationsharesandrealstatesincludedintheassetsofcompaniesisexemptfromcorporatetaxprovidedthatitisclassifiedunderaspecialfundforfullfiveyears.Theexemptgainscannotbetransferredtoanotheraccountotherthanacapitalincreaseorcannotbewithdrawnfromtheentityforfiveyears.

Legal reserves

ThelegalreservesconsistoffirstandsecondlegalreservesinaccordancewiththeTurkishCommercialCode.Thefirstlegalreserveisappropriatedoutofthestatutoryprofitsattherateof5%,untilthetotalreservereachesamaximumof20%oftheentity’ssharecapital.Thesecondlegalreserveisappropriatedattherateof10%ofalldistributionsinexcessof5%oftheentity’ssharecapital.Thefirstandsecondlegalreservesarenotavailablefordistributionunlesstheyexceed50%ofthesharecapital,butmaybeusedtoabsorblossesintheeventthatthegeneralreserveisexhausted.

Themovementoflegalreservesisasfollows:31 December 2013 31 December 2012

Legal reserves at the beginning of the year 66,400,396 60,430,004Transferfromprofit 6,874,304 5,970,392Legal reserves at the end of the year 73,274,700 66,400,396

Extraordinary reserves

Themovementofextraordinaryreservesispresentedbelow:31 December 2013 31 December 2012

Extraordinary reserves at the beginning of the year 12,205,336 1,219,776Transferfromprofit 26,795,776 10,985,560Capitalincrease (31,000,000) -Extraordinary reserves at the end of the year 8,001,112 12,205,336

Statutory reserves

Themovementofstatutoryreservesispresentedbelow:31 December 2013 31 December 2012

Statutory reserves at the beginning of the year 13,722,714 9,095,243Transferfromprofit 6,119,160 4,627,471Capitalincrease (19,000,000) -Statutory reserves at the end of the year 841,874 13,722,714

Other Profit Reserves

Asof31 December2013,inaccordancewiththerevisionofTAS19,astheamountofactuarialgainsandlosses¨(289,720),arepresentedundertheotherprofitreserves,whicharepreviouslyshownundertheincomestatement.

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Valuation of financial assets

Movementoffairvaluereservesofavailableforsalefinancialassetsispresentedbelow:31 December 2013 31 December 2012

Fair value reserves at the beginning of the year 46,804,925 (9,822,204)

Changes during the year:Theeffectofchangesinforeignexchangeratesonunrealizedgainsandlosses,recognizedduetochangeinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders 829,468 (69,361)Changeinunrealizedgainsandlossesduetochangesinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders (251,823,405) 230,582,919Changeinunrealizedgainsandlossesduetochangesinthefairvaluesofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders,policyholders’portion 239,232,235 (219,053,773)Changeinunrealizedgainsandlossesfromavailableforsalefinancialassets,company’sownportfolio (19,698,771) 54,407,569Deferredandcorporatetaxeffect 4,517,072 (7,550,933)

Disposals during the year:Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders (19,772,207) (368,680)Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassetswithrisksonsavinglifepolicyholders,policyholders’portion 18,783,597 350,246Unrealizedgainsandlossestransferredfromequitytoincomestatementduetodisposalofavailableforsalefinancialassets,company’sownportfolio (2,568,256) 4,276,718Deferredandcorporatetaxeffect 711,373 (851,657)

Amounts transferred to income statement due to bonus shares: (4,004,370) (5,349,649)

Fair value changes in investments in associates (72,703) 253,730

Fair value reserves at the end of the year 12,938,958 46,804,925

16 Other reserves and equity component of DPF

Incomeandexpenseitemsthataredirectlyaccruedinequityasofthereportingperiodareasfollows:31 December 2013 31 December 2012

Temporarydifferencesarisingfromrevaluationoffinancialassets (2,254,978) 32,267,327Permanentdifferencesarisingfromrevaluationoffinancialassets 14,742,940 20,991,064Deferredtaxeffect 450,996 (6,453,466)Total 12,938,958 46,804,925

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17 Insurance contract liabilities and reinsurance assets

17.1 Total amount of guarantee that should be placed by the Company for life and non-life branches and guarantees placed for the life and non-life branches in respect of related assets:

31 December 2013 31 December 2012Should be placed (**) Placed (*)

Should be placed (**) Placed (*)

Life:Financialassets(*) 1,942,439,296 1,931,004,910 1,917,972,126 2,214,166,541

Total 1,942,439,296 1,931,004,910 1,917,972,126 2,214,166,541

Non-life:Financialassets (*) 768,354 1,988,009 591,383 1,718,017

Total 768,354 1,988,009 591,383 1,718,017

Total 1,943,207,650 1,932,992,919 1,918,563,509 2,215,884,558(*)Asat31 December2013and2012,governmentbondsandtreasurybillsaremeasuredatdailyofficialpricesannouncedbytheCentralBankofTurkey;ifthesepricesarenotavailable,theyaremeasuredwithstockexchangevalues;investmentfundparticipationcertificatesaremeasuredusingthedailypricesinaccordancewiththe6thArticleof“CircularRelatedtotheFinancialStructureofInsurance,Reinsurance,andIndividualPensionCompanies”.(**)Accordingto7tharticleof“CircularRelatedtotheFinancialStructureofInsurance,Reinsurance,andIndividualPensionCompanies”whichregulatesnecessaryguaranteeamount,minimumguaranteefundforcapitaladequacycalculationperiodwillbeestablishedasaguaranteeintwomonthsfollowingthecalculationperiod.Accordingto“RegulationsRegardingtoCapitalAdequacyMeasurementandAssessmentofInsurance,Reinsurance,andIndividualPensionCompanies”,companiesmustpreparetheircapitaladequacytablestwiceinafinancialyearat JuneandDecemberperiodsandmustsentcapitaladequacytablestotheTurkishTreasuryDepartmentwithintwomonths.Asat31 December2013(31 December2012),minimumguaranteeamountof30 June2013isshownasnecessaryguaranteeamount;since,minimumguaranteeamountasat30 June2013(30 June2012)isbasedon30 Junecalculations.

Asat31 December2013,¨1,547,605,688ofgovernmentbonds(31 December2012:¨1,841,176,020)and¨327,967,938ofEurobonds(31 December2012:¨308,332,690)and¨57,419,293(31 December2012:¨66,375,848)ofinvestmentfundsareplacedasguaranteeforthelifeandnon-lifebranches.

17.2 Number of life insurance policies, additions, disposals in the current period, and current life policy holders and the related mathematical reserves

31 December 2013(*) 31 December 2012(*)

Number of policies

Mathematical reserves

Number of policies

Mathematical reserves

Additionsduringtheperiod 1,445,462 217,280,779 1,343,918 298,965,577Disposalsduringtheperiod (1,245,897) (302,184,677) (1,047,267) (358,289,334)Outstanding 1,818,085 1,881,185,904 1,618,520 1,966,089,802

(*)Theabovetableincludes71ofreactivatedlifeinsurancepolicies(31 December2012:95)andtheircorrespondingmathematicalreserves.

AsexplainedinNote2-Financial Assets,availableforsalefinancialassetswithrisksonsavinglifepolicyholdersaremeasuredatfairvalue;95%ofthefairvalueandamortizedcostdifferenceamountingto¨5,711,673(31 December2012:¨245,052,988)isrecognizedunderthelifemathematicalprovisions.

¨3,998,021(31 December2012:¨5,468,417)ofreinsurer’sshareoflifemathematicalprovisionsisnotoffsetagainstthemathematicalprovisionsintheabovetable.

17.3 Guarantees given to non-life insurances based on branches:31 December 2013 31 December 2012

Guaranteesgiventodeathbyaccident 1,740,325,537 1,388,855,772Guaranteesgiventodisabilitybyaccident 1,747,766,422 1,390,190,772Total 3,488,091,959 2,779,046,544

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17.4 Pension investment funds established by the Company and their unit prices:

Asat31 December2013and2012,individualpensioninvestmentfundsfoundedbytheCompanyandtheirunitpricesareasfollows:

31 December 2013Unit price

31 December 2012 Unit price

AH1BondFund  0.042305 0.042710AH2LiquidFund  0.030218 0.028745AH3EurobondDollarFund  0.028274 0.026961AH4EurobondEuroFund  0.028272 0.023889AH5EquityFund  0.064897 0.074480AH6InternationalMixedFund  0.026641 0.019754AH8ConservativeFund  0.035264 0.033813AH9BalancedFund  0.043627 0.045663AH0AggressiveFund  0.062572 0.064976AGEAlternativeGainFund  0.011865 0.011646ABEBRICPlusFund  0.011893 0.010674AHLDynamicFlexibleFund(*)  0.011548 0.011856AHCMixedFund(¨)(*)  0.011700 0.011227AG1GroupBondFund  0.038790 0.038902AG2GroupEurobondFund  0.022108 0.020035AG3GroupEquityFund  0.041903 0.047584AG4GroupConservativeFund  0.033958 0.032217HS1Bond-BillFund 0.026597 0.026523AHBWhiteEquityFund 0.024832 0.028644ATKStandardFund(*)  0.020885 0.020235ATEOrangeBalancedFund  0.020926 0.021922AETContributionFund(**) 0.009579 -AERAlternativeContributionFund(**) 0.009921 -AEAGoldFund(***) 0.009450 -

(*)ATKOrangeBond-BillFund’snamehaschangedasATKStandardFundaccordingtostatuteoffundat25 April2013.(**)InitialpublicofferingofAETContributionFund(¨)andAERAlternativeContributionFundhasbeenexecutedat30 April2013,respectively.(***)InitialpublicofferingofAEAGoldFund(¨)hasbeenexecutedat15 April2013,respectively.

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17.5 Number and amount of participation certificates in portfolio and circulation:

Numberofparticipationdocumentsintheportfolioandincirculationissuchasfollowsasof31 December2013and2012:31 December 2013 31 December 2012

Participation Certificates in Circulation Participation Certificates in CirculationNumber Amount Number Amount

AH1BondFund 38,294,022,156,01 1,620,028,607,31 34,044,230,542,89 1,454,029,086,49AH2LiquidFund 4,585,072,946,63 138,551,734,30 4,028,128,998,44 115,788,568,06AH3EurobondDollarFund 4,560,450,091,56 128,942,165,89 4,156,360,776,66 112,059,642,90AH4EurobondEuroFund 4,119,971,344,87 116,479,829,86 3,434,167,896,02 82,038,836,87AH5EquityFund 3,488,537,052,92 226,395,589,12 2,686,126,576,72 200,062,707,43AH6InternationalMixedFund 2,276,433,080,72 60,646,453,70 573,914,153,51 11,337,100,19AH8ConservativeFund 4,468,009,325,79 157,559,880,86 3,109,262,703,31 105,133,499,79AH9BalancedFund 24,428,037,174,32 1,065,721,977,80 20,479,238,309,32 935,143,458,92AH0AggressiveFund 8,961,780,267,35 560,756,514,89 7,593,578,573,45 493,400,361,39AGEAlternativeGainFund 6,639,861,442,46 78,781,956,01 3,287,291,074,08 38,283,791,85ABEBRICPlusFund 2,922,204,366,22 34,753,776,53 2,819,064,006,50 30,090,689,21AHLDynamicFlexibleFund(*) 2,018,248,514,43 23,306,733,84 836,806,404,80 9,921,176,74AHCMixedFund(¨)(*) 3,133,028,631,87 36,656,434,99 564,956,145,74 6,342,762,65AG1GroupBondFund 5,561,805,321,32 215,742,428,41 5,967,101,621,38 232,132,187,27AG2GroupEurobondFund 436,337,123,02 9,646,541,12 337,897,019,12 6,769,766,78AG3GroupEquityFund 773,259,624,18 32,401,898,03 587,998,732,06 27,979,331,67AG4GroupConservativeFund 2,539,158,903,61 86,224,758,05 2,327,553,802,12 74,986,800,84HS1Bond-BillFund 11,277,987,267,19 299,960,627,35 10,089,694,555,13 267,608,968,69AHBWhiteEquityFund 2,100,959,453,72 52,171,025,15 1,474,177,699,61 42,226,346,03ATKStandardFund(*) 1,089,957,724,29 22,763,767,07 973,520,735,30 19,699,192,08ATEOrangeBalancedFund 532,193,862,27 11,136,688,76 583,713,510,49 12,796,167,58AETContributionFund(**) 23,587,324,029,54 225,942,976,88 - -AERAlternativeContributionFund(**) 489,145,045,72 4,852,808,00 - -AEAGoldFund(***) 2,301,993,477,32 21,753,838,36 - -Total 5,231,179,012,28 4,277,830,443,43

(*)ATKOrangeBond-BillFund’snamehaschangedasATKStandardFundaccordingtostatuteoffundat25 April2013.(**)InitialpublicofferingofAETContributionFund(¨)andAERAlternativeContributionFundhasbeenexecutedat30 April2013,respectively.(***)InitialpublicofferingofAEAGoldFund(¨)hasbeenexecutedat15 April2013,respectively.

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17.6 Portfolio amounts in terms of number of new participants, left or cancelled participants, and existing participants for individuals and groups:

1 January - 31 December 2013Additions during

the periodLeft/cancellations

during the period Outstanding Total amountIndividuals 138,770 57,142 623,983 3,772,234,203Group 57,618 18,264 197,717 1,228,096,224Total 196,388 75,406 821,700 5,000,330,427

1 January - 31 December 2012Additions during

the periodLeft/cancellations

during the period Outstanding Total amountIndividuals 114,708 64,759 543,632 3,215,797,259Group 29,324 19,244 157,086 1,062,013,086Total 144,032 84,003 700,718 4,277,810,345

Additions:Thesumofthenewcontractsaddedintheperiodandtheirregisteredcumulativevaluesasoftheperiodendinadditionwiththenumberofthecontractsthatbeginandfinishinthesameperiod.Forthedatacalculatedfor31 December2013,portfolioamountandinsurancecontractnumbersrelatedwithcontributionamountscollectedbeforetheexercisedatearenottakenintoconsideration.Inaddition,theamountsrelatedwithcreditcardcollectionswithundueblockagetermsarenotaddedtothecalculation.

Left/cancellations:Thenumberoffinalizedcontractsduringtheperiodandtheirvaluesattheirexpirationdates.

Outstanding:Thenumberofoutstandingcontractsandtheirvaluesasoftheperiodend.

Sinceretirementplantransfersbetweenindividualandgroupretirementplansoccursduringtheperiod,periodicalchangesshouldbefollowedbythetotalnumberandportfolioamountofpolicies.Also,whenthecontractseffectiveatthepriorreportingperiodbecomealiabilitybecauseofcollectionreversalsinthecurrentperiodorwhenthecontractseffectiveatthepriorreportingperiodbecomeanasset,totalnumbersandportfoliovaluesofthesecontractsarenetoffattheperiodend.NumberandportfolioamountofindividualandgrouppoliciespresentedinnotesreflecttheoutstandingpositionoftheCompanyasoftheperiod-end.

Outstandingcontractshavestatecontributionamountingto¨230,795,560inthestatecontributionfundsasoftheperiodend.

17.7 Valuation methods used in profit share calculation for saving life contracts with profit sharing:

Financialinvestmentswithrisksonsavinglifepolicyholdersareclassifiedas“available-for-salefinancialassets”.TheseassetsaremeasuredinaccordancewiththeprinciplesspecifiedinNote2.8Financial Assetsandvaluationdifferencesaretakenintoaccountintheprofitsharecalculation.

17.8 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups:1 January - 31 December 2013 1 January - 31 December 2012

Number of contracts

Gross contributions

Net contributions

Number of contracts

Gross contributions

Net contributions

Individuals 138,770 339,682,488 338,357,397 114,708 227,156,127 222,408,785Group 57,618 63,100,324 63,001,457 29,324 41,292,795 41,024,760Total 196,388 402,782,812 401,358,854 144,032 268,448,922 263,433,545

Contractsbecomeeffectiveinthecurrentperiodandthetotalcontractsbecomeeffectiveandceasedinthesameperiodandcontributionscollectedregardingthesecontractsandtheinvestmentorientedcontributionshavebeenspecified.Thecollectionsmadewithcreditcardswithundueblockagetermsarealsoaddedintogrossandnetcontributions.Transferamountsarenotincludedinthecurrentperiodnumbersandbalances.Inaddition,Companyhascollected¨56,072,348asStateContribution.

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17.9 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from other insurance companies during the period:

31 December 2013 31 December 2012Number of

contractsGross

contributionsNet

contributionsNumber of

contractsGross

contributionsNet

contributionsIndividuals 1,707 27,039,688 27,039,688 1,909 23,460,763 23,460,763Group 585 7,517,259 7,517,259 1,324 5,683,833 5,683,833Total 2,292 34,556,947 34,556,947 3,233 29,144,596 29,144,596

Inaddition,Companyhastransferred¨463,248asStateContributionfromotherpensioncompaniesintherelatedperiod.

17.10 Distribution of individual and group participants and their gross and net contributions which were transferred from life insurance portfolio to private pension portfolio during the period:

Thelegalpermissionofthetransferfromlifeportfoliotoprivatepensionportfolioexpiredon7 October2006andtherefore,thereisnotransferinthecurrentandpriorperiod.

17.11 Distribution of individual and group participants which were transferred to other insurance companies in terms of their numbers and gross and net contributions:

1 January - 31 December 2013 1 January - 31 December 2012Number of

contractsGross

contributionsNet

contributionsNumber of

contractsGross

contributionsNet

contributionsIndividuals 57,142 205,015,835 191,601,159 64,759 409,585,946 370,510,795Group 18,264 57,066,401 54,291,399 19,244 101,825,247 92,434,269Total 75,406 262,082,236 245,892,558 84,003 511,411,193 462,945,064

Numberofcontractsindicatesthenumberofdisposalsintherelatedperiod.

Grosscontributionsindicatethefundsalesamountasaresultofdisposal,i.e.;disposalamount.

Netcontributionsindicatetheremainingamountpaidtoparticipantlessanydeductions(initiationfeeandwithholding)againstthegrossamountasaresultofdisposal.

Inaddition,Company’sfundoutflowis¨6,673,234asStateContribution.

17.12 Distribution of new life insurance participants in terms of their numbers and first premium amounts for individuals and groups during the period:

31 December 2013 31 December 2012Number of

contractsFirst premium

amounts (¨)Number of

contractsFirst premium

amounts (¨)

Individuals 11,742 96,098,428 17,185 81,871,623Group 1,433,649 180,855,996 1,326,638 149,189,900Total (*) 1,445,391 276,954,424 1,343,823 231,061,523

(*)71ofreactivatedcontractsarenotincludedinthecurrentyearadditions.

17.13 Distribution of left or cancelled life insurance participants in terms of their numbers and mathematical reserves for individuals and groups during the period:

1 January - 31 December 2013 1 January - 31 December 2012Number of

contractsMathematical

reserves (¨)Number of

contractsMathematical

reserves (¨)

Individuals 86,784 266,681,983 140,003 310,416,026Group 1,159,113 35,502,694 907,264 47,873,308Total 1,245,897 302,184,677 1,047,267 358,289,334

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17.14 Profit share distribution rate of life insurances as of 31 December 2013 and 201231 December 2013 % 31 December 2012 %

¨Life insurance 7.43 10.50Income insurance 7.43 10.50USDLife insurance 7.98 7.92Income insurance 7.98 7.92EUROLife insurance 5.57 6.01Income insurance 5.57 6.01GBPLife insurance 7.04 7.75Income insurance 7.04 7.75

17.15 Information on insurance contract balances in the financial statements31 December 2013 31 December 2012

Reserveforunearnedpremiums,gross 23,041,596 24,195,380Reserveforunearnedpremiums,ceded(Note 10) (2,193,599) (1,662,615)Reserves for unearned premiums, net 20,847,997 22,532,765

Provisionforoutstandingclaims,gross 77,684,566 56,336,969Provisionforoutstandingclaims,ceded (Note 10) (3,134,362) (605,350)Provision for outstanding claims, net 74,550,204 55,731,619

Lifemathematicalprovisions,gross 1,875,474,231 2,211,142,790Lifemathematicalprovisions,ceded(Note 10) (3,998,021) (5,468,417)Life mathematical provisions, net 1,871,476,210 2,205,674,373

Provisionforbonusanddiscount,gross 481,726 528,684Provisionforbonusanddiscount,ceded(Not 10) (353,241) (272,071)Provision for bonus and discount, net 128,485 256,613

Equalization provision, net 5,921,429 3,915,510Total insurance technical provisions, net 1,972,924,325 2,288,110,880

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17.16 Factors resulting from individual insurance policies which provide portfolio

Factorsresultingfromindividualinsurancepolicieswhichprovideportfolioincreasethroughthechangeinmathematicalprovisionsfortheperiods1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Newpoliciesissued 74,528,869 59,033,558Activatedfromreductions 9,277,026 7,754,761Activatedfromcancellations 23,649 228,156Contractswithincreasedcapital 63,975,789 145,046,829Total increase in the portfolio 147,805,333 212,063,304

Factorsresultingfromindividualinsurancepolicieswhichprovideportfoliodecreasethroughthechangeinmathematicalprovisionsfortheperiods1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Terminationsandcancellations(-) (4,482,167) (142,997)Transformedtocontractswithoutcharge(-) 20,553,462 21,987,028Insurancehascapitaldecrease(-) (41,138)Purchases(-) (100,308,637) (179,540,126)Ceasedwithriskformed(-) (5,747,889) (4,824,419)Expirations(-) (156,102,151) (125,908,484)Total decrease in the portfolio (246,128,520) (288,428,998)

Factorsresultingfromgroupinsurancepolicieswhichprovideportfolioincreasethroughthechangeinmathematicalreservesfortheperiod1 January-31 December2013and1 January-31 December2012areasfollows:Mathematical provisions 31 December 2013 31 December 2012

Newcontracts 39,269,669 31,984,921Activatedfromreductions 28,582 48,534Activatedfromcancellations 137,766 49,487Insuranceshadcapitalincrease 10,653,144 32,110,639Total increase in the portfolio 50,089,161 64,193,581

Factorsresultingfromgroupinsurancepolicieswhichprovideportfoliodecreasethroughthechangeinmathematicalreservesforthe1 January-31 December2013and1 January-31 December2012periods:Mathematical provisions 31 December 2013 31 December 2012

Terminationsandcancellations(-) - (874)Transformedtocontractswithoutcharge(-) 303,218 508,740Insuranceshadcapitaldecrease(-) (19,905,213) -Purchases(-) (4,003,329) (1,837,164)Ceasedwithriskformed(-) (4,015) (16,456)Expirations(-) (11,590,137) (46,018,814)Total decrease in the portfolio (35,199,476) (47,364,568)

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17.17 Gain/losses resulted from reinsurance contracts and recognized in the income statement

Gainorlossesresultedfromreinsurancecontractsandrecognizedintheincomestatementaredisclosedinnote10-Reinsurance assets, liabilities.

17.18 Incurred claim development table

Incurredclaimdevelopmenttablepresentedbelowprovidedcumulativepaymentsofclaimsaccordingtoclaimyearandfollowingyears:Claim year 2008 2009 2010 2011 2012 2013 TotalClaimyear 7,621,312 6,201,960 10,858,399 8,532,107 15,285,562 19,456,357 67,955,6971yearlater 3,634,320 4,113,823 4,610,880 5,329,728 9,723,183 - 27,411,9342yearslater 273,370 286,233 399,311 304,054 - - 1,262,9683yearslater 14,037 4,938 198,602 - - - 217,5774yearslater 28,668 19,148 - - - - 47,8165yearslater 19,792 - - - - 19,7926yearslater - - - - - - -Cumulativepaymentsuptodate 11,591,499 10,626,102 16,067,192 14,165,889 25,008,745 19,456,357 96,915,784Paymentsfortheyearended31 December2013 (*) 19,792 19,148 198,602 304,054 9,723,183 19,456,357 29,721,136

(*)Theclaimspaidincludesdeath-disabilityterminationandpersonalaccidentbranchgrosspayments.

17.19 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately

Effectsofchangesintheassumptionsusedinthemeasurementofinsuranceassetsandliabilitiesaredisclosedinnote4-Management of insurance risks.

18 Investment contracts

None.

19 Trade and other payables and deferred income31 December 2013 31 December 2012

Payablesfrominsuranceoperations 5,868,305 4,090,566Cashdepositedbyinsuranceandreinsurancecompanies 881,759 636,822Payablesfrompensionactivities 5,354,762,129 4,366,456,847

Net fund value of participants 5,231,179,012 4,277,830,443Other 123,583,117 88,626,404

Total payables from main operations 5,361,512,193 4,371,184,235

Duetoshareholders 5,014 8,172Payablestootherrelatedparties - 2,260Total payables to related parties 5,014 10,432

Guaranteesanddepositsreceived 320,984 244,608Otherpayables 8,561,433 6,224,776Total other payables 8,882,417 6,469,384

Deferredcommissionincome 515,595 415,872Expenseaccruals 829,103 335,971OtherDeferredIncomeandExpenseAccruals 1,243,443 1,041,698Total deferred income and expense accruals 2,588,141 1,793,541

Total 5,372,987,765 4,379,457,592

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20 Financial liabilities

TheCompanyhasnofinancialliabilitiesasatthereportingdate(31 December2012:None).

21 Deferred taxes

TheCompanyrecognizesdeferredtaxassetsandliabilitiesbasedupontemporarydifferencesarisingbetweenitsfinancialstatementsasreportedforTFRSpurposesanditsstatutorytaxfinancialstatements.ThesedifferencesusuallyresultintherecognitionofrevenueandexpensesindifferentreportingperiodsforTFRSandtaxpurposesandtheyaregivenbelow.

20%taxrateisusedinthecalculationofdeferredtaxassetandliabilities.Deferred tax (assets)/liabilities base: 31 December 2013 31 December 2012

Differenceinvaluationoffinancialassets 11,170,825 43,619,636Provisionforemployeeterminationbenefits (8,269,886) (7,408,414)Equalizationreserves/bonusanddiscountprovision (6,049,914) (4,172,123)Dividendtopersonnelandsalaryprovision (2,000,000) (3,800,000)DifferencesindepreciationmethodsontangibleandintangibleassetsbetweentaxregulationsandtheReportingStandards (2,275,544) (2,469,963)Provisionforunusedvacationpayliability (2,918,389) (1,965,788)Total (10,342,908) 23,803,348

Deferred tax (assets)/liabilities: 31 December 2013 31 December 2012

Differenceinvaluationoffinancialassets 2,234,165 8,723,927Provisionforemployeeterminationbenefits (1,653,977) (1,481,683)Equalizationreserves/bonusanddiscountprovision (1,209,983) (834,424)Dividendtopersonnelandsalaryprovision (400,000) (760,000)DifferencesindepreciationmethodsontangibleandintangibleassetsbetweentaxregulationsandtheReportingStandards (455,109) (493,993)Provisionforunusedvacationpayliability (583,678) (393,157)Total (2,068,582) 4,760,670

Movementofdeferredtaxassets/liabilitiesasat31 December2013and2012aregivenbelow:Movement of deferred tax (assets)/liabilities: 31 December 2013 31 December 2012

Openingbalanceat1 January 4,760,670 (4,541,053)Recognizedinprofitorloss 148,052 447,909Recognizedinequity (6,977,304) 8,853,814Closing balance at 31 December (2,068,582) 4,760,670

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22 Retirement benefit obligations

UndertheTurkishLaborLaw,theCompanyisrequiredtopayemploymentterminationbenefitstoeachemployeewhohasqualifiedforsuchpayment.Also,employeesareentitledtoretirementpayprovisionssubsequenttothecompletionoftheirretirementperiodbygainingarighttoreceiveretirementpaymentsinaccordancewiththeamendedArticle60oftheapplicableSocialInsuranceLawNo:506andtherelatedDecreesNo:2422and4447issuedon6 March1981and25 August1999,respectively.Sometransitionalprovisionsrelatedtopre-retirementservicetermwasexcludedfromthelawsincetherelatedlawwasamendedasof23 May2002.

Theterminationbenefittobepaidissubjecttoupperlimitof¨3,254.44asat31 December2013(31 December2012:¨3,033.98).

TheprovisionhasbeencalculatedbyestimatingthepresentvalueofthefutureprobableobligationoftheCompanyarisingfromtheretirementofemployees.TAS19(“EmployeeBenefits”)requiresactuarialvaluationmethodstobedevelopedtoestimatetheenterprise’sobligationunderdefinedbenefitplans.Accordingly,thefollowingactuarialassumptionswereusedinthecalculationofthetotalliability:

Theprincipalassumptionisthatthemaximumliabilityforeachyearofservicewillincreaseparallelwithinflation.Thus,thediscountrateappliedrepresentstheexpectedrealrateafteradjustingfortheanticipatedeffectsoffutureinflation.Consequently,intheaccompanyingfinancialstatementsasat31 December2013,theprovisionhasbeencalculatedbyestimatingthepresentvalueofthefutureprobableobligationoftheCompanyarisingfromtheretirementoftheemployees.Theprovisionsattherespectivereportingperiodshavebeencalculatedassuminganannualinflationrateof6.0%andadiscountrateof10%,resultinginarealdiscountrateofbetween3.77%(31 December2012:6.0%,1.00%-4.57%,respectively).TheanticipatedrateofforfeituresisconsideredandestimatedrateoftheCompany’sretirementpayisalsotakenintoaccount.

AftertherevisionofTAS19,astheamountofactuarialgainandlossarepresentedundertheotherprofitreserves,whichwerepreviouslyshownundertheincomestatement.

Movementofprovisionforemployeeterminationbenefitsduringtheperiodispresentedbelow:31 December 2013 31 December 2012

Provisionasat1 January 7,408,414 4,828,646Interestcost 444,505 289,719Servicecost 734,666 638,792Paymentsmadeduringtheyear (681,910) (1,132,288)Actuarialgainandlosses 364,211 2,783,545Provision as at 31 December 8,269,886 7,408,414

23 Other liabilities and provisions

Asat31 December2013and2012;thedetailsoftheprovisionsforotherrisksareasfollows:31 December 2013 31 December 2012

Dividendtopersonnelandsalaryprovision 2,000,000 3,800,000Provisionforunusedvacationpayliability 2,918,389 1,965,788Provisionforcommissionstosalespersonnel 650,000 500,000Provisionforlitigations 93,970 93,970Provisionforcommissionsandexpenses 43,000 -Provisions for costs 5,705,359 6,359,758Provision for employee termination benefits 8,269,886 7,408,414Total provisions for other risks 13,975,245 13,768,172

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24 Net insurance premium revenue 31 December 2013 31 December 2012

Non-life 648,587 588,772Life 381,218,379 355,597,310Total 381,866,966 356,186,082

25 Fee revenues

Thedetailsoffeerevenuesfortheyearended31 December2013and2012receivedfromindividualpension,lifeandnon-lifebranchesinaccordancewithTAS18areasfollows:

31 December 2013 31 December 2012

Fundmanagementincome 90,764,418 88,470,973Administrativecostdeductions 17,771,761 33,953,327Entrancefee 20,236,910 16,121,343Administrativecostdeductionsintheformofcessation 3,120,756 367,261Othertechnicalincome 108,600 113,153Total 132,002,445 139,026,057

26 Investment income31 December 2013 31 December 2012

Financial assets held-for-trading:  Valuationgain/(loss) (892,251) 9,585,612Gainonsale - 1,351,553Interestincome 21 182,079Dividendincome - 19,549

Financial assets available- for-sale:Interestincome 125,943,353 135,334,531Valuationgain(internalrateofreturngain) 99,452,715 38,766,493Gainonsale 27,252,894 6,637,140Dividendincome 3,260,568 2,755,630

Income from associates: 2,094,316 1,915,627Investment properties:Rentincome 3,280,321 3,059,325Other income: (*) 13,479,335 14,923,268Total (**) 273,871,272 214,530,807

(*)Otherincomeincludesincomefrombonussharesthroughcapitalincreasesinassociatesfromprofitorcapitalreserves,interestincomefromtimedeposits,incomefromderivativetransactions,foreignexchangegainsandinsurers’moneynotrequestedfromtheCompany.(**)¨66,975,307(31 December2012:¨64,890,706)ofinvestmentincomeobtainedfromtheCompany’sownportfolioand¨206,895,965(31 December2012:¨149,640,101)ofinvestmentincomeobtainedfrompolicyholders’portfolio.

27 Net income accrual on financial assets

NetincomeaccrualfromtheCompany’sownportfolioisasfollows:31 December 2013 31 December 2012

Available-for-sale financial assets:  Fairvaluedifferencesrecognizedinequity 12,828,359 40,327,945Fairvaluedifferencesrecognizedinprofit/loss 4,430,562 13,121,631Total 17,258,921 53,449,576

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28 Assets held at fair value through profit or loss

Netlossfromassetsheldatfairvaluethroughprofitorlossrecognizedinincomestatementasat31 December2013is¨(892,230)(31 December2012:¨11,138,793,netprofit).

29 Insurance rights and claims

Detailsofinsurancerightsandclaimsarepresentedinstatementofincome.

30 Investment contract benefits

None.

31 Other expenses

Theallocationoftheexpenseswithrespecttotheirnatureorfunctionispresentedinnote32- Operating expenses below.

32 Operating expenses

Fortheyearended31 December2013and2012,thedetailsofoperatingexpensesareasfollows:31 December 2013 31 December 2012

Productioncommissionexpenses (98,513,424) (80,054,824)Employeebenefitexpenses(*) (64,378,951) (52,595,033)Administrationexpenses (19,427,362) (18,465,127)Marketingandsalesexpenses (20,783,342) (13,520,385)Rentexpenses (6,506,431) (5,906,613)Outsourcedbenefitsandservices (3,561,044) (3,598,516)Bankfees (3,372,117) (2,490,347)Reinsurancecommissionincome 2,559,861 2,808,701Otherexpenses (1,401,585) (1,568,131)Total (215,384,395) (175,390,275)

(*)Asof31 December2013theamountof‘dividendandpersonnelfeeexpenses’arepresentedunder‘personnelexpenses’whicharepreviouslyshownunderprovisionexpenses

33 Employee benefit expenses31 December 2013 31 December 2012

Wagesandsalaries 64,378,951 52,595,033Dividendtopersonnelandsalaryprovisionexpense 2,000,000 -Employeeterminationbenefits 497,260 2,579,768Provisionforunusedvacation 952,602 302,069Total 67,828,813 55,476,870

34 Financial costs

TheCompany’shasnofinanceexpenseinthecurrentperiod(31 December2012:None).

35 Income tax expense31 December 2013 31 December 2012

Corporate tax liabilities:Corporatetaxprovision 15,310,000 26,100,000Less:Corporationtaxespaidinadvancesduringtheperiod (11,512,254) (18,926,035)Total 3,797,746 7,173,965

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Total tax expense recognized in profit or loss 31 December 2013 31 December 2012

Currenttaxexpense 15,310,000  26,100,000Deferredtaxexpense/(income) 148,052  447,909Total 15,458,052 26,547,909

Total tax expense recognized in equity31 December 2013 31 December 2012

Changeinfairvalueofavailableforsalefinancialassets (450,996) 6,453,466Total deferred tax expense recognized in equity (450,996) 6,453,466

Reconciliation of the Company’s taxation for the year ended 31 December 2013 and 2012 are as follows:31 December 2013 31 December 2012

Profit before tax 100,163,987Tax rate

(%) 107,499,984Tax rate

(%)Taxesonincomeperstatutorytaxrate (20,032,797) (20.00) (21,499,997) (20.00)Disallowableexpenses (1,598,009) (1.60) (6,405,060) (5,96)Effectofallowances 6,172,754 6.16 1,357,148 1.26Total tax expense recognized in profit or loss (15,458,052) (15.44) (26,547,909) (24.70)

36 Net foreign exchange gains31 December 2013 31 December 2012

Foreignexchangegains 4,480,459 513,717Foreignexchangelosses (11,003,005) (945,869)Total (6,522,546) (432,152)

37 Earnings per share

Earningspershareiscalculatedbydividingnetprofitfortheyeartotheweightedaveragenumberofshares.31 December 2013 31 December 2012

For a share having TRKr (Kuruş) 1 of nominal value:Weightedaveragenumberofshares(*) 35,000,000,000 35,000,000,000Netprofitfortheperiod 84,705,935 80,952,075Earningspershare(for100shares) 0.24202 0.23129

38 Dividends per share

TheCompany’sdividenddistributionin2013fromtheprofitof2012ispresentedbelow.

  Group

Total Cash Dividend

Amount (¨)

Cash dividend corresponding to a share having ¨1 of nominal value

Amount (¨) Rate (%)

Gross

A 133,333.33 0.133333 13.3333B 39,866,666.67 0.133333 13.3333Total 40,000,000.00

Net

A 113,333.33 0.113333 11.3333B 33,886,666.67 0.113333 11.3333Total 34,000,000.00

TheCompany’sdividenddistributionin2013fromtheprofitof2012is¨40,000,000.Otherthanthat,adividendof¨1,892,524isdistributedtothepersonneloftheCompany.

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39 Cash generated from operations

Thecashflowsfromoperatingactivitiesispresentedintheaccompanyingstatementofcashflows.

40 Convertible bonds

None.

41 Redeemable preference shares

None.

42 Risks

Inthenormalcourseofitsoperations,theCompanyisexposedtolegaldisputes,claimsandchallenges,whichmainlystemfromitsinsuranceoperations.Thenecessaryincome/expenseaccrualsfortherevocablecasesagainst/onbehalfoftheCompanyareprovidedeitherunderprovisionforoutstandingclaimsorprovisionsforotherrisksintheaccompanyingfinancialstatements.

Asat31 December2013,thereare105ongoinglawsuitfiledagainsttheCompanyandtotalamountofthesesuitsare¨2,221,291.¨2,376,705(31 December2012:¨3,412,883)ofprovisionincludinginterestexpenseforongoinglawsuitsforwhichcashoutflowisprobableandmeasurablereliablyissetbytheCompanyinthefinancialstatements.Thereare30ongoinglawsuitsprosecutedbytheCompanyagainstthethirdpartiesthathaveamounted¨1,402,896.Subsequenttothereportingperiod,thereisnoexpectedamountoflawsuitstobeprosecutedagainsttheCompany.

43 Commitments

Totalamountofcommitmentsthatarenotincludedinliabilities:31 December 2013 31 December 2012

Guaranteesandcommitments 475,786 863,986Capitalcommitments - -Guarantees and commitments 475,786 863,986

TheCompanydoesnothavefinanceleaseliabilitiesasatthereportingperiod(31 December2012:None).

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44 Business combinations

None.

45 Related party transactions

a.Parentcompany’snameandtheultimateownerofthegroup

TheCompany’sparentisTurkeyİşBankasıAŞwitha62%ofshare.

b.InaccordancewiththeCompany’sactivities,itemsofsub-classifications

TheactivitiesoftheCompanyinvolveprovidingindividualandgroupinsuranceandreinsuranceservicesrelatingtogrouplife,individuallife,retirementandrelatedpersonalaccidentbranches,establishingretirementfunds,developinginternalrulesandregulationsrelatedtothesefunds,carryingoutretirement,annualincomeinsurance,portfoliomanagementandcustodycontractsfortheassetsofthefundsheldincustody.

c.Noexpenseisrecognizedintherelatedperiodforbadordoubtfuldebtsinrespectoftheamountsowedbytheshareholders,associatesandsubsidiaries.

d.DetailsofassociatesandsubsidiarieshavingindirectcapitalandmanagementrelationswiththeCompany;names,amountsandratesofparticipationsintheassociatesandsubsidiaries;profit/lossfortheperiodpresentedintherecentfinancialstatementsofsuchparticipations;netprofit/lossfortheperiodandperiodcoveredbythefinancialstatements;informationaboutwhetherthesefinancialstatementsarepreparedinaccordancewiththeCMBstandards;informationaboutwhetherthesefinancialstatementsareaudited;detailsoftheauditopinion(ifthereportincludesunqualified,adverseorqualifiedopinion):

Carrying amount

Participation rate (%)

Reporting period

Profit before income tax

Net profit of the period

Financial statements

base

Independent auditor’s

opinionİşPortföyYönetimiAŞ 15,036,296 20.0

31 December2013 13,150,735 10,471,581 SPKXI/29 Unqualified

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e.Bonussharesobtainedfromassociatesorsubsidiariesthroughinternalresourcecapitalincreases

AtthereportingdateTheCompanyhasobtainednobonussharesthroughcapitalincreasesinassociatesfromprofitorcapitalreserves.

f.Noguarantees,commitments,guaranteeletters,advancesandendorsementsgiveninfavorofshareholders,associatesandsubsidiaries.

g.Relatedpartydisclosures

Therelatedpartybalancesasat31 December2013and2012areasfollows:31 December 2013 31 December 2012

TürkiyeİşBankasıAŞ-receivablesfromcreditcardcollections 102,192,002 76,031,154Cash and cash equivalents 102,192,002 76,031,154

TürkiyeİşBankasıAŞ-bankdeposits 9,813,038 5,534,597Cash at banks 9,813,038 5,534,597

AnadoluAnonimTürkSigortaŞirketi-premiumreceivables - -Receivables from main operations - -

TürkiyeİşBankasıAŞ-commissionpayables 5,081,480 4,374,762MilliReasüransTAŞ-premiumpayables 99,454 162,086Payable from main operations 5,180,934 4,536,848

AnadoluAnonimTürkSigortaŞirketi-premiumpayables 5,014 8,172Payables to shareholders 5,014 8,172

İşPortföyYönetimiAŞ 4,115,797 3,738,711İşMerkezleriYönetimveİşletimAŞ 353,476 198,734İş-NetElektronikBilgiÜretimDağıtımTicaretveİletişimAŞ 96,614 77,092Other payables 4,565,887 4,014,537

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Fortheyearended31 December2013,theCompanyobtainedemployercontributionforindividualpensionplansamountingto¨15,486,007(31 December2012:¨14,316,736)andaccruedemployerpremiumforlifeinsuranceamountingto¨506,769(31 December2012:¨302,422)fromrelatedparties.Othertransactionswithrelatedpartiesduringtheyearended31 December2013and2012areasfollows:

  31 December 2013 31 December 2012

MilliReasüransTAŞ-premiumswritten,ceded 702,590 917,985Premiums written, ceded 702,590 917,985

MilliReasüransTAŞ-commissionincomefromreinsurers 294,309 246,831Commission income from reinsurers 294,309 246,831

TürkiyeİşBankasıAŞ-interestincomefromdeposits 663,404 652,012Investment income 663,404 652,012

İşPortföyYönetimiAŞ-investmentconsultancyfee 195,552 187,488İşPortföyYönetimiAŞ-portfoliomanagementfee - 20,256İşYatırımMenkulDeğerlerAŞ-MKKservicecommission 15,750 13,125İşYatırımMenkulDeğerlerAŞ-portfoliomanagementfee 8,080İşPortföyYönetimiAŞ-secondarymarketoperationsofmarketablesecurities - 13,278İşYatırımMenkulDeğerlerAŞ-secondarymarketoperationsofmarketablesecurities - 10,674Investment expense 211,302 252,901

TürkiyeİşBankasıAŞ-commissionofproduction 51,918,079 45,144,459İşPortföyYönetimiAŞ-portfoliomanagementfeeofpensionfunds 12,984,035 12,191,098İşMerkezleriYönetimveİşletimA.Ş.-buildingadministrativeexpense 4,178,552 3,961,869İşGayrimenkulYatırımOrtaklığıAŞ-rentexpense 3,131,677 2,917,306İş-NetElektronikBilgiÜretimDağ.Tic.veİletişimA.Ş.-communicationexpense 825,064 1,253,519AnadoluAnonimTürkSigortaŞirketi-premiumpaid 1,649,623 1,020,191TürkiyeİşBankasıAŞ-commissionofpremiumcollectionandbankingservices 764,575 839,031TürkiyeİşBankasıA.Ş.-fundoperationserviceexpense 664,311 503,624TürkiyeIşBankasıAŞ-rentexpense 588,558 424,717AnadoluAnonimTürkSigortaŞirketi-rentexpense 157,199 152,082Other expenses 76,861,673 68,407,896

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46 Events after the reporting period

Eventsafterthereportingperiodaredisclosedinnote1.10-events after the reporting period.

47 Others

Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet

Itemsandamountsclassifiedunderthe“other”accountinfinancialstatementseitherexceeding20%ofthetotalamountofthegrouptowhichtheyrelateor5%ofthetotalassetsinthebalancesheetareasfollows:Current Assets (Other Receivables) 31 December 2013 31 December 2012

Securitiesreconciliationaccount 11,261,706 1,166,746Other 862,576 688,355Total 12,124,282 1,855,101

Short-term Liabilities (Other Miscellaneous Payables) 31 December 2013 31 December 2012

Suspenseaccounts 2,778,054 1,990,188Securitiesreconciliationaccount 2,445 92,431Payabletosuppliers 5,699,816 3,757,877Other 81,118 384,280Total 8,561,433 6,224,776

Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets

None.

Subrogation recorded in “Off-Balance Sheet Accounts”

None.

Real rights on immovable and their values

None.

Explanatory note for the amounts and nature of previous years’ income and losses

None.

For the year ended 31 December 2013 and 2012, details of discount and provision expenses are as follows:31 December 2013 31 December 2012

Provisionforemployeeterminationbenefits (497,260) (2,579,768)Unusedvacationpayliability (952,602) (302,069)Provisionsnolongerrequired 840,768 619,356Otherprovisionexpense (190,945) (38,559)Provision expense (800,039) (2,301,040)

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Information for Investors

Stock Exchange

AnadoluHayatEmeklilikA.Ş.stocksaretradedontheİstanbulStockExchange(ISE)inthenationalmarketunderthesymbolANHYT.InformationabouttheCompany’sstocksispublishedontheeconomicspagesofdailynewspapersandontheinternetportalsofbrokeragehouses.

Investor Relations

CopiesofAnadoluHayatEmeklilikA.Ş.’sannualreportsandotherinformationabouttheCompanymaybeobtainedfromthefollowingaddressaswellasfromthecorporatewebsitelocatedatanadoluhayat.com.tr.

Shareholder Relations Unit

AnadoluHayatEmeklilikA.Ş.İşKuleleri,Kule2,Kat:19,Levent34330,Beşiktaş/İstanbul

Annual General Meeting

AnadoluHayatEmeklilikA.Ş.’sAnnualGeneralMeetingwillbeheldon24 March2013at10:00hoursattheaddressofİşKuleleri,Kule1,Kat:41,Levent34330Beşiktaş/İstanbul.

Independent Auditor

AkisBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.RüzgarlıbahçeMah.KavakSokakNo:29Kavacık-Beykoz34805,İstanbul

Tax Certification

DRTYeminliMaliMüşavirlikveBağımsızDenetimA.Ş.MaslakMah.BilimSokakSunPlazaNo:5Kat:23Maslak34398,İstanbul

Anadolu Hayat Emeklilik Share Performance in 2013

Asof31 December2013,theCompany’snominalcapitalamountsto¨350,000,000,consistingoffully-paid35,000,000,000shareseachwithavalueof¨0.01.17%oftheCompany’ssharesarepubliclyheld.

Sharepricequarterlylowsandhighsarepresentedbelow.

¨ ¨ HIGHEST ¨ LOWEST ¨ CLOSING01.01.2013-31.03.2013 5.18 3.64 5.1401.04.2013-30.06.2013 5.37 3.51 4.2601.07.2013-30.09.2013 4.61 3.64 4.5501.10.2013-31.12.2013 5.56 4.58 5.26

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Directory

Anadolu Hayat Emeklilik A.Ş.

Website: anadoluhayat.com.tr

For correspondence:investorrelations@anadoluhayat.com.tr

Head OfficeMeltemSokakNo:10İşKuleleriKule:2Kat:16Levent34330Beşiktaş-İstanbul

Customer RelationsTel:4445500Fax:(+90212)3177077

Customer Relations CenterDeğirmenyoluCaddesiNo:6CBlokKat:634752İçerenköy-Kadıköy-İstanbulTel:4445500Fax:(+90212)3177077

İstanbul District Office 1SinanpaşaMahallesiDolmabahçeCaddesiNo:7/AKat:634353Beşiktaş-İstanbulTel:(+90212)2447600pbxFax:(+90212)2438440

İstanbul District Office 2CaferağaMahallesiAlbayFaikSözdenerCaddesiGüranİşMerkeziNo:11/13Kat:134710Kadıköy-İstanbulTel:(+90216)3309484pbxFax:(+90216)3309254

Central Anatolian District OfficeCumhuriyetMahallesiAtatürkBulvarıNo:75-77Kat:606442Çankaya-AnkaraTel:(+90312)4686282pbxFax:(+90312)4683067

Southern Anatolian District OfficeKurtuluşMahallesiZiyapaşaBulvarıTevfikBeyApartmanıNo:37/A01120Seyhan-AdanaTel:(+90322)4583070pbxFax:(+90322)4587043

Marmara District OfficeOdunlukMahallesiAkademiCaddesiNo:10/BZenoİşMerkeziABlokKat:1No:4-516130Nilüfer-BursaTel:(+90224)2237135/2237357Fax:(+90224)2237508

Aegean District Office AtatürkCaddesiNo:92Kat:335210Konak-İzmirTel:(+90232)4412343pbxFax:(+90232)4418292

Mediterranean District OfficeŞirinyalıMahallesiİsmetGökşenCaddesiNo:64Kat:107160Muratpaşa-AntalyaTel:(+90242)3162282Fax:(+90242)3161442

TRNC Branch OfficeŞerifArzıkSokakNo:25KöşklüçiftlikLefkoşa-TRNCTel:(+90392)2270127/2270408-09Fax:(+90392)2270126

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