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avivaSa emeklilik ve Hayat a.Ş. Trade registry number: 27158Head Office Address: Saray Mah. Dr. adnan Büyükdeniz Cad. no: 12 34768 Ümraniye - IstanbulTel: +90 216 633 33 33 • Web Site: www.avivasa.com.tr • E-mail: [email protected]

Contents

I. Introduction06 Vision, Mission and Values08 Corporate Strategy 09 Shareholding Structure10 Financial and Operational Indicators 16 Sabancı Group and Aviva 18 AvivaSA at a Glance19 History20 2012 in Brief...

II. Assessments24 Message from the Chairman 28 Board of Directors30 Message from the CEO 34 Senior Management

III. Activities in 2012 38 Macroeconomic Outlook and Sector Overview44 Private Pension 45 Life Insurance46 Bancassurance48 Corporate Projects 50 Sales and Customer Relations 54 Brand and Communication Activities 56 Support Services

IV. Corporate Social Responsibility

V. Information on Management and Corporate Governance Practices61 Human Resources Practices63 Research and Development Activities64 Organizational Chart66 Corporate Governance Principles71 Information Disclosure Policy72 Legal Explanations74 Statutory Auditors75 Explanations on Special and Public Audits Performed During the Accounting Period76 Internal Audit77 Remuneration of Board Members and Senior Management

VI. Financial Information and Risk Management 80 Internal Audit Activities 82 Assessment on Financial Situation, Profitability and Indemnity Capacity86 Information on Risk Management Policies by Risk Types 89 Independent Audit Report

IntroductIon 1

Turkey’s Private Pension System (PPS) has grown very rapidly to become one of the leading sectors of the national economy.

A number of incentives, in particular the introduction of a monetary contribution by the state, have come into effect to provide significant advantages to the participants of the PPS. In consequence, the sector’s potential has still further increased.

One company is ideally placed to make the best of this potential: AvivaSA

Blending Aviva’s experience in international insurance that can be traced back more than 300 years, with the local power of Sabancı Holding, AvivaSA is set to create increasing added value for its stakeholders, in particular its insurance holders, through its multi-channel service network spread across Turkey!

The essence of AvivaSA’s business is economy, that is to say, savings.

As a company striving to raise awareness of the importance of savings, we have economized in the preparation of our annual report. By slashing costs we have decreased paper consumption by around 25%, which will contribute to our achievements in 2013.

By the end of 2012, there are more than 3 million PPS participants. The number is expected to reach 9 million within ten years along with the new regulations and promotion of government. AvivaSA is one of the leading players and a pioneer in the sector with its 493 thousand participants.

20122011201020092008

493thousand

421thousand

351thousand

307thousand

279thousand 17%

over the past 5 years

The number of PPS participants has increased annually by an average of

Hundreds of thousands more individuals are willing to entrust

their future to AvivaSA!

Hundreds of thousands more individuals are willing to entrust

their future to AvivaSA!

493,430 PPS participants

place their confidence in AvivaSA!

AVIVASA 2012 ANNUl REPoRT6

Our Vision

Our Mission

Building a popular and preferred safety net.

To be a reliable, innovative and sustainable company generating effective financial solutions to your changing and developing needs of saving and protection.

INTRodUcTIoN 7

Our Values

Success• To aim at perfection in all our activities

and to live up to our ambitions • To achieve longevity and sustainability• To achieve individual and team success• To lead, and to raise leaders• To raise the bar of success• To take initiative and own our business• To place perfectionism at the heart of

what we do

Development• To be open to learning and

development in order to achieve better results; to develop extraordinary and innovative approaches by breaking out of the mould

• To be open to new ideas and diversity• To keep knowledge and talent up-to-

date at all times, and to share these with the team

• To keep abreast of change and to be visionary

• To be a pioneer of global standards and to set an example

• To develop “value generating” innovations in business processes, products and services

Our business perspective is guided by firm ethical standards and values:

People• To nurture a sense of togetherness, with

the awareness of being a family, a team and part of a large and harmonized whole

• To listen to internal and external customers and to provide products and services responsive to their needs

• To become a company preferred by employees, who are pleased to work in a team spirit; to become an organization that maintains balance between work and private life

• To demonstrate an approach that attaches value to people and the environment and that embraces social responsibilities

• To prioritize the generation of value for all stakeholders in all business processes

Trust• To trust ourselves, our team and our

company• To be consistent in what we think, say

and do• To keep our promises• To protect privacy• To demonstrate an open-minded,

transparent and fair approach in communication and settlement of disputes

AVIVASA 2012 ANNUl REpoRT8

Corporate Strategy

in the private pension system. Indeed, expectations of corporate participation have grown since the legal developments on the transfer and vesting of foundations and trust funds to the PPS. Backed by a capable corporate projects team AvivaSA constantly advances its achievements in this area. The company registered a groundbreaking achievement by completing one of Turkey’s first transfers of funds from foundations. In a similar vein, the Corporate Projects team successfully integrated the special pension scheme of a corporation to the PPS, and established itself as the leading force in the sector with its turn-key approach to private pensions. AvivaSA’s Corporate Projects team stands out as a key sector player in terms of the transfers of foundations and trusts to the PPS.

Savings awareness In support of its strategy of establishing the concept of saving as a main pillar of private pension and life insurance, AvivaSA has conducted a number of activities to raise savings awareness. These activities highlighted the risks involved in unplanned expenditures and profligacy, and reemphasized thrift through a discourse in accordance with the private pension concept. These efforts formed the first step of our strategy.

Customer service modelAvivaSA works diligently to develop projects to facilitate all customer transactions, and to deliver top-notch services in an efficient manner. With a view to offering customers healthy and satisfactory services, AvivaSA has created process maps for customer-oriented activities, devised efficiency projects and conducted surveys at customer contact points. Furthermore, AvivaSA has realized a number of projects primarily aimed at strengthening customer relations at all points of contact.

Multi-channel distribution structureAvivaSA carries out intensive operations and offers customers tailored projects in order to simplify all financial transactions and increase customer satisfaction, which is at the heart of the company’s activities, and integrates these activities into its existing service model. The multi-channel distribution structure at AvivaSA, one of the company’s key strengths, covers Bancassurance, Direct Sales, Agencies, Telemarketing, ATM Sales, and the Internet Branch, as well as Corporate Projects.

Corporate participationAn important item on AvivaSA’s agenda is increasing corporate participation

Viewing customer satisfaction as its top priority, AvivaSA has developed a unique corporate strategy to provide high quality services to its participants.

IntroductIon 9

Corporate Strategy

ShareholdingStructure*

AvivaSA customers are confident about their future thanks to the robust shareholding structure of the company.

Aviva Europe SE

49.83%Hacı Ömer Sabancı Holding A.Ş.

49.83%

Real Person Shareholders

0.34%

* The Chairman, Board Members, CEO and Executive Vice Presidents do not hold company shares.


Financial and Operational Indicators

As one of the key players of the private pension and life insurance market, AvivaSA continued to carry out successful projects in 2012 with a special focus on leadership. The company further increased its premium production and contributions, and posted net underwriting profit of TL 33 million in 2012.

Financial Indicators, TL Million 2008 2009 2010 2011 2012 ChangeTotal Premium and Contribution 709 756 847 971 1,294 33%Technical Profit -30 4 21 10 33 231%Total Assets 2,161 2,782 3,391 3,845 4,958 29%Paid-in Capital 36 36 36 36 36 0%Shareholders' Equity 72 94 123 151 169 12%Net Financial Income 19 13 11 29 20 -32%Gross Profit Before Taxes -11 17 32 39 53 36%Net Profit After Tax 0 17 30 32 39 21%

Key Ratios (%) 2008 2009 2010 2011 2012 ChangeTechnical Profit/Total Premium and Contribution -4.3 0.5 2.5 1.0 2.6 1.5Profit Before Taxes/Total Assets -0.5 0.6 0.9 1.0 1.1 0.1Profit Before Taxes/Shareholders' Equity

-15.6 17.8 26.1 25.8 31.4 5.6

Total Premium and Contribution / Total Assets

32.8 27.2 25.0 25.3 26.1 0.8

Shareholders' Equity/ Total Premium and Contribution

3.3 3.3 3.6 3.9 3.4

IntroductIon 11

Financial and Operational Indicators

20122011201020092008

5.0 TL billion

3.8 TL billion

3.4 TL billion

2.8 TL billion

2.2 TL billion

134% over the past

five years

Shareholders’ equity has risen by

169 TL million

151 TL million

123 TL million

94 TL million

72 TL million

129% in the last five years

Total assets grew by

With the innovations introduced by the new private pension law, especially the 25% state contribution, the private Pension System is expected to reach a total fund volume of Tl 300 billion within a decade. corporate sales are particularly important for the growth of the PPS. And having expanded the number of its corporate customers by 49% over the past five years AvivaSA successfully maintains its leadership of this segment.

20122011201020092008

612

543

495

443

41149% over the past

five years

The number of corporate customers

has expanded by

Tens of thousands more corporate employees will enjoy a comfortable

retirement with AvivaSA!

Tens of thousands more corporate employees will enjoy a comfortable

retirement with AvivaSA!

612 corporations

place their trust in

AvivaSA!


Sabancı Group and Aviva

Sabancı Holding’s international partners include prominent global brands such as Ageas, Aviva, Bridgestone, Carrefour, Citi, Dia, Heidelberg Cement, Philip Morris and Verbund.

Sabancı Holding is a management centre responsible for setting the Group’s vision and strategies and increasing shareholder value by ensuring Group-wide synergy, as well as for the coordination of the finance, strategy, business development and human resources functions.

Aviva Plc at a GlanceWith a global history of more than 300 years, the Aviva Group currently provides services to more than 43 million people in China, Indonesia, France, South Korea, India, Hong Kong, the UK, Ireland, Spain, Italy, Canada, Malaysia, Poland, Singapore and Turkey. The biggest insurance services provider in the UK, Aviva is the world’s sixth largest insurance group, and the third largest British company with operations in Turkey.

Sabancı Group at a GlanceHacı Ömer Sabancı Holding A.Ş. is the holding company of firms affiliated to the Sabancı Group, one of the largest business groups in Turkey. The key areas of interest for the Sabancı Group include such fast-growing Turkish sectors as financial services, energy, cement, retail and industry, with Group companies leading their respective sectors. Sabancı Holding is listed on the Istanbul Stock Exchange (ISE) and has controlling interests in 11 other listed companies.

Companies under the Sabancı Group umbrella are currently active in 18 countries and market their products to various regions of Europe, the Middle East, Asia, and Northern Africa, as well as North and South America. Thanks to its pedigree and brand image, as well as its established partnerships, knowledge and expertise in the Turkish markets, Sabancı Group has achieved growth in its core business fields to become a driving force of the Turkish economy.

The know-how of Sabancı Holding and Aviva is the main factor underlying AvivaSA’s prominent position in the industry.

IntroductIon 17

Sabancı Group and Aviva


AvivaSA at a Glance

AvivaSA is among the key players of the private pension and life insurance sectors.

AvivaSA Emeklilik ve Hayat was founded on October 31, 2007 as an equal-parts joint venture. Founded on the vast experience and financial power of Hacı Ömer Sabancı Holding, one of Turkey’s largest groups, and British insurance giant Aviva, the company immediately established itself as a reliable brand and leading figure in the industry.

With its skilled workforce, robust technological infrastructure, unique multi-channel distribution structure and vast client base, AvivaSA is among the key players of the private pension and life insurance industries.

The multi-channel distribution structure, which boosts access to customers, is a factor that gives AvivaSA an immense competitive edge. The company delivers services to over 1.7 million clients through its bancassurance channel, the widest direct sales organization in the industry, as well as the telesales channel, agencies, brokers and its corporate sales team.

As of end-2012, AvivaSA has 1,460 employees. According to data released by the Pension Monitoring Center as of 4 January 2013, it holds a 20% share of the private pension market with funds exceeding TL 4 billion. It also holds a 7% share in direct premium production for pension and/or life insurance companies with total life and accident premium generation of TL 197.5 million, according to data of the Association of the Insurance and Reinsurance Companies of Turkey (TSRŞB) and Haymer.

IntroductIon 19

History

AvivaSA is a leader in its business line owing to the sustainable growth strategy it has pursued since its inception.

AvivaSA Emeklilik ve Hayat was founded through the merger of AK Emeklilik and Aviva Hayat ve Emeklilik companies.

AK Emeklilik A.S. was initially founded as Doğan Sigorta A. Ş. in Istanbul on December 6, 1941, and renamed Akhayat Sigorta A.Ş. on 3 October 1995. On 3 December 2002, the company received authorization from the Undersecretariat of the Treasury to become a pension company, and on 31 January 2003, its name was changed to AK Emeklilik A.S. On 7 July 2003 AK Emeklilik A.S. obtained a license from the Undersecretariat of the Treasury to operate in the private pension segment. Private pension investment funds were registered by the Capital Markets Board (CMB) on 26 September 2003 and the sale of pension products commenced on 27 October 2003.

Commercial Union Hayat was founded in 1991 through a partnership between Commercial Union Plc. and Finansbank. While Commercial Union’s

share in this partnership rose from 65% to 90% in 1997, CGNU (currently known as Aviva) bought the remaining shares in 2001. In 2003, Commercial Union Hayat was turned into a private pension and life insurance company, and renamed Commercial Union Hayat ve Emeklilik A.S. In 2004 the company became Aviva Hayat ve Emeklilik A.Ş.

Upon the transfer of Aviva Hayat ve Emeklilik A.Ş. to AK Emeklilik A.Ş. on 31 October 2007, the company was renamed AvivaSA Emeklilik ve Hayat A.Ş.

As per its resolution number 39 dated 28 September 2011, the Board of Directors recognized the sale of company shares worth TL 17,830,354.5 by Aviva International Holdings Limited to Aviva Europe SE, and decided to register this acquisition to the shareholding ledger. Aviva International Holdings Limited thus transferred its stake in AvivaSA Emeklilik ve Hayat A.Ş. to Aviva Europe SE on 28 October 2011.


2012in Brief...

AvivaSA initiated the active fund management system.AvivaSA lives up to its promise of “expertise”, with a recently launched practice. AvivaSA established a special team to institute one-to-one contact with private pension system participants, and to evaluate their fund portfolio according to their risk profile. While AvivaSA teams place direct telephone calls to private pension system participants; the latter can also dial 444 1111 to contact AvivaSA for support on risk assessment and fund management.

The robust distribution network of Akbank branches allows the company to reach out to a vast audience.Bancassurance, the company’s biggest distribution channel, generates PPS contributions, which constitute an important share of overall contribution production. Our life and personal accident insurance premium production has also grown by 60% over the previous year, owing to proactive campaigns organized throughout the year. This impressive performance translated into a two percentage point increase

We achieved a breakthrough in terms of customer satisfaction.

in our market share of this segment. The Bancassurance Transformation Program, which consists of 13 projects initiated jointly with Akbank in 2012, is among the projects on which we expend the most effort.

Sales channels in direct customer contactBoasting the industry’s largest and most experienced sales team, the AvivaSA Direct Sales Channel capped the year of 2012 both with practices setting a precedent in the sector and successful performance results. The PPS contribution production of the Direct Sales channel grew by 14% over the prior year. In order to reach out to an increasing number of customers, the company expanded its Direct Sales workforce, bringing its number of financial consultants up to 725.

Alternative distribution channels continue to create new opportunitiesMaking efficient use of alternative distribution channels, AvivaSA continues to offer fresh opportunities and propositions to its customers via the telesales channel. In 2012, premium production via this channel increased by 28% over the previous year.

IntroductIon 21


Strengthening our agenciesAvivaSA initiated its 4Colors Development Program with a view to bolstering its nationwide agency network. Constituting yet another groundbreaking innovation by the company in the insurance industry, this program supports agencies in their career and performance progress. Another prominent feature of 4Colors is its vast appeal to all actors in the insurance sector, from entrepreneurs just planning to step into the sector, right up to agencies with the highest premium production. As such, AvivaSA not only manages to expand its agency network in a consistent fashion, but also takes pleasure in helping agencies boost their turnover through human resources practices and various incentives.

2012 in Brief...

AvivaSA draws its strength from a workforce that has fully embraced its corporate culture.

Corporate Projects Team leads its segmentOur Corporate Projects team had a very efficient year, during which it won many of the tenders it participated in. As the clearest indications of this success, the AvivaSA corporate sales channel increased its market share of funds invested through employer-sponsored group pension contracts from 30% in 2011 to 33% in 2012, and thus singlehandedly expanded total market size by 5%. The AvivaSA Corporate Projects team also ranked among the top four participants of the largest foundation and trust transfer tender of 2012.

IntroductIon 23

AvivaSA constantly enhances its technological base with ambitious investments.Viewing customer-orientation as a key principle in all its processes, AvivaSA tirelessly endeavors to establish a reliable, accessible and fully integrated technological infrastructure in order to enhance its service quality and competitive edge. In the year 2012, the company continued to prioritize bancassurance activities in its IT operations. By joining forces with Akbank, its largest distribution network, it initiated a comprehensive bancassurance transformation program to review the entire IT infrastructure and related processes. Furthermore, the company also successfully completed its bancassurance operations with Burgan Bank.

With its human resources policy, AvivaSA is among the most preferred employers of the sector.The most important force underlying AvivaSA’s success is a well-experienced and creative workforce that fully embraces corporate culture and team spirit. This fact motivates us to develop cutting edge career and training opportunities for our employees. In fact in 2012, AvivaSA introduced its Financial Consultant Trainer Specialization Program to create a human resources database, which will help the company realize its growth vision in the long-term. The program managed to expand the pool of candidates, and increased the number of applications by 24%.

24 AVIVASA 2012 ANNUl REpoRT

Message from Chairman Haluk Dinçer

By successfully blending Aviva’s international experience with Sabancı Holding’s deep-seated corporate governance philosophy, AvivaSA counts approximately 500 thousand participants and controls a total fund volume of TL 4.1 billion as of 4 January 2013. AvivaSA closed the year 2012 with a strong performance in terms of profitability, increasing its net profit by 21% over the prior year to TL 38.8 million and bringing its return on equity to 24.2%.

AvivaSA’s corporate sales channel increased its market share from 30% in 2011 to 33% in 2012.

33%

Assessments 25




A period of ongoing uncertainty in the global economyAn analysis of key developments in the year 2012 reveals that the global economy has yet to dissipate the clouds of uncertainty. Doubts over US fiscal policy, Europe’s failure to find permanent solutions to its problems, despite the increased coordination of recovery efforts, and finally, lower-than-expected growth rates posted by developing economies suggest that the recovery will take longer than anticipated.

The growth figures of the emerging markets such as Brazil, India and Turkey point to the fact that these nations were very much affected by the lackluster performance of developed economies. The Turkish economy, which showed 8.5% growth in 2011, surpassed only by China, seems to have made a soft landing in 2012 on a 3% growth rate.

Turkey succeeds in its struggle against the current account deficit.Although Turkey’s growth momentum lost some steam in 2012, its exports reached an all-time high. And even as global trade remains sluggish, Turkey managed to diversify its foreign markets to achieve success in foreign trade.

In our opinion, the most favorable development of the year 2012 was the positive results yielded by measures taken against the current account deficit, which is widely viewed as the soft underbelly of the Turkish economy. Therefore, it did not come as a surprise to anyone when Turkey finally received an investment grade credit rating, given

improvements in public finance, various growth opportunities in the medium term, and the diverse and sophisticated nature of the economy.

In the year 2013, too, Turkey needs to continue implementing structural reforms to minimize any adverse risks due to factors such as the lackluster performance of developed markets and political turmoil in its region. All parties seem to agree that, in particular, the decisive continuation of the struggle to control the current account deficit, and the reinforcement of savings-oriented policies are the key to robust economic growth.

Significant state support for the private pension sector The state’s contribution to PPS retirement plans, which came into effect in January 2013, is considered to be a crucial step in this direction. Meanwhile, ongoing promotion campaigns continue to raise public awareness of the issue. It is expected that both the number of participants and the volume of contributions will expand considerably as a result. As the biggest ever reform in the Turkish Private Pension System, this measure will decrease the number of individuals exiting the system, increase the average duration of participation, and boost the funds of savers.

The track record of the Private Pension System, which completes its ninth year, can be said to be more successful than its peers across the world in many aspects, as the number of participants has already exceeded the three million mark. We

Assessments 27

AvivaSA continued to boost customer satisfaction by enhancing business process efficiency.

believe that new legislation is required to slash the operational costs of the system, extend the maturity of savings, increase the diversity of funds, and create an efficient structure easily accessible by all participants, thus fully realizing Turkey’s savings potential.

AvivaSA’s progress is confirmed by the figures.As of 4 January 2013, AvivaSA counts approximately 500 thousand participants and controls a total fund volume of TL 4.1 billion. The company capped the year 2012 with robust profit figures. AvivaSA increased its net profit by 21% over the prior year to TL 38.8 million and brought its return on equity to 24.2%. Striving to offer the most rapid and sophisticated service to its clients via Akbank branches, the corporate channel, the vast direct sales and agency channel, as well as alternative distribution channels, AvivaSA continued to boost customer satisfaction by enhancing business process efficiency.

In the period ahead, we at AvivaSA aim to maximize our market share in the PPS and life insurance segments, as a robust and reliable player of the sector. Capitalizing on our operational excellence, multi-channel distribution structure and top quality services, we shall continue to create value for our clients thanks to our high service quality. In the year 2013, which is set to see competition intensify even further, we are keen on further strengthening our position in this growing market, through investments in human resources and technology. The vast know-how and unique synergy of Sabancı Group and Aviva strongly encourage us to make progress towards our goals.

I would like to take this occasion to extend my gratitude to our business partners, clients, social stakeholders and diligent employees for their unfaltering support underlying AvivaSA’s achievements.

Best regards,

Haluk DinçerChairman


Board of Directors

Bülent Bozdoğan Board MemberBülent Bozdoğan graduated from the Faculty of Administrative Sciences at the Middle East Technical University and began his career at PricewaterhouseCoopers. He went on to work at Unilever, where between 1982 and 1991 he was employed in the finance and human resources departments. In 1991 Mr. Bozdoğan joined Brisa, where he worked as Executive Vice President responsible for finance, planning and procurement. In 2011 he transferred to Kordsa’s subsidiary in the USA, where he established the required financial systems and standards. Since 2009 he has been the President of the Auditing Department at Sabancı Holding.

Adam Jacek Uszpolewicz Board MemberAdam Uszpolewicz is a qualified chartered accountant and has a degree in English and economics from Copenhagen University. From 1999 to 2005, Mr. Uszpolewicz played a leading role in developing the Polish arm of Nationwide, an American life insurance company, taking it from start-up to one of the top five life insurance businesses in the Polish market. From April 2007 until January 2009, he served as the CEO of CU Aviva Poland group – Poland’s largest pension provider with a 27% market share, and the second-largest life insurer. CU Aviva Poland has six business units with 1,400 staff and 3,500 DSF members servicing over 3.2 million customers.

Haluk Dinçer ChairmanHaluk Dinçer was born in Istanbul in 1962. He graduated with a BSc in Mechanical Engineering and an MBA from the University of Michigan. In 1995 he joined Temsa, a Sabancı Group company, and in 2004 was appointed President of the Retail Group. Since March 2011 Haluk Dinçer has been serving as the President of Retail and Insurance Group of Sabancı Holding.

David Angulo Rubio Deputy ChairmanDavid Angulo Rubio graduated from the Department of Economics and Business Administration at Pontificia Comillas University in 1992. In 2001 he received his MBA at the Instituto de Empresa. Having started his professional life at Gescapital in 1992, Mr. Angulo Rubio later served as a director at Bankinter, and until 2005 held managerial positions at Aegon companies. In 2005 he joined the Abbey National Bank, where he worked as an Insurance Management Director. In 2007 he was appointed CEO of Aviva Spain. Since 2008 he has been serving as the Bancassurance Director for Europe at Aviva Europe.

Assessments 29

Meral Eredenk Board Member - CEOMeral Eredenk graduated from the Department of Business Administration of the Faculty of Administrative Sciences at the Boğaziçi University. She later completed the Executive MBA program at the University of Wales, Manchester Business School, and the Executive MIS program at the Boğaziçi University. Having begun her career at Interbank in 1985, Ms. Eredenk then served as Executive Vice President at Garanti Investment Bank. In 1997 she joined Yapı ve Kredi Bank as President of Corporate Marketing Department. Then in 2002 she transferred to the Sabancı Group as CEO of AK Emeklilik. Ms. Eredenk has been the CEO of the company since AK Emeklilik and Aviva Hayat ve Emeklilik were merged into AvivaSA Emeklilik ve Hayat A.Ş. on 31 October 2007. Meral Eredenk is also a member of TÜSİAD and a Board Member of the GYIAD and Classical Automobile Club. Playing active roles in many trade associations, Ms. Eredenk is also a lecturer in Sales-Marketing, Private Pension and Life Insurance at the School of Banking and Insurance at Marmara University.

Before joining CU Aviva, he was an executive director at PricewaterhouseCoopers in Warsaw and held senior positions in a number of leading international financial services companies, such as GE Capital and Cigna, including work in London and Luxembourg. Since January 2009, Mr. Uszpolewicz has been the Aviva Europe Retail Director.

Hayri Çulhacı Board MemberHayri Çulhacı serves as the Vice Chairman of the Board and Executive Director at Akbank. Having joined Akbank in 1990 as an Executive Vice President, he served as Executive Vice President in charge of Corporate Communications and Strategy; as Advisor to the Chairman; and as Executive Board Member in charge of Corporate Social Responsibility, Corporate Communications and Investor Relations throughout his tenure at Akbank. Prior to joining Akbank, he worked as a tax inspector and department head at the Ministry of Finance. Holding a degree in political sciences from Ankara University, he received his MBA from Northeastern University in the USA. Hayri Çulhacı is also a member of the Board of Trustees of Sabancı Foundation and the Board of Trustees of Sabancı University, Chairman of Ak Securities A.Ş. and Ak Portfolio Management A.Ş., a Board Member of Aksigorta A.Ş., Teknosa A.Ş. and Carrefoursa A.Ş., an Executive Board Member of the Turkish-American Business Council (TAIK) and a member of TÜSİAD (the Turkish Industrialists’ and Businessmen’s Association).


Message from CEO Meral Eredenk

According to Pension Monitoring Center data of 4 January 2013, the Private Pension System, which was launched in October 2003 and has now ended its ninth year, is among Turkey’s young, yet important industries, with a total fund volume of TL 20.5 billion, 3,135,708 participants and 5,418 pensioners.

AvivaSA sustained its position in the sector with a market share of 19.9% in total fund volume.

19.9%

Assessments 31




Since its inception, AvivaSA has endeavored to mobilize its means to understand customer needs accurately and ensure customer satisfaction. The company figured among the sector’s pioneering companies in 2012 with its competitive practices and innovations. Its service philosophy, channel-oriented strategy and competences helped the company close the year of 2012 as an industry leader with a high success level.

We obtained robust results in all our fields of activity.The second largest company in the PPS in terms of total fund volume, AvivaSA Emeklilik ve Hayat further strengthened its robust financial structure by increasing its fund volume by 37.8% to TL 4,075 million as of 4 January 2013. Our participant number grew by 17.2% to reach 493,430. AvivaSA remained the second largest firm in the sector in terms of total fund volume with a 19.9% market share, and the third largest in terms of the number of participants, with a market share of 15.7%.

We continued our rapid growth in the life and personal insurance markets, and expanded our total premium production by 33%. The company ranks sixth with TL 197.5 million in total premium production and has a 7% market share in the life and accident insurance direct premium market consisting of pension and/or life insurance companies.

AvivaSA closed the year 2012 with a return on equity of 24.2%, and became one of the most profitable companies under the umbrella of its parent companies Sabancı Group and Aviva Plc.

New period in PPS According to Pension Monitoring Center data of 4 January 2013, the Private Pension System, which was launched in October 2003 and has now ended its ninth year, is among Turkey’s young, yet important industries, with a total fund volume of TL 20.5 billion, 3,135,708 participants and 5,418 pensioners.

The new PPS law heralded a number of innovations that will potentially have a favorable impact on the system. While the previous system had provided tax advantages only to the permanent employees on a company’s payroll, the new law extended this incentive to the self-employed, farmers, shopkeepers and housewives, thus rendering PPS a lucrative investment instrument for a significantly wider group of people. Factors such as the state’s contribution, diversification of fund types, plans for setting up funds based on precious metals, and remote sales opportunities are set to have a very positive impact on participations. Furthermore, the additional fund volume to be created by the state’s contribution, as well as the limitation of the withholding tax on returns, and the rise of the upper limit of the vesting period in corporate retirement plans from five to seven years, are additional factors that will encourage individuals to join the system, thereby boosting total savings.

Assessments 33

AvivaSA is keen on spreading PPS to a wider customer base through its communication activities, multi-channel distribution structure and campaigns.

In the PPS sector, a new period commenced when the state began making a contribution of 25% to participants’ savings. Accordingly, total fund volume is expected to jump by 30% in 2013 to reach TL 26 billion, with the number of participants growing by 14% to 3.5 million.

AvivaSA continuously endeavors to position itself optimally in this new market. In fact, according to the first relevant data of end-January 2013, the company had posted the largest growth in new participants; this in turn, is a clear indication that our efforts have borne fruit. AvivaSA is keen on spreading PPS to a wider client base through its communication activities, multi-channel distribution structure and efficient campaigns. We shall continue to shape the sector in the year 2013.

In 2013 we will keep on steering the sector As one of the key players in the PPS and life insurance sectors, AvivaSA keeps a watchful eye on opportunities and risks, and takes action to obtain a maximum

share from all developments. Cognizant of the fact that the potential of the new PPS system will result in intensifying competition, the company is intent on forging ahead decisively toward sector leadership by creating added value for its customers through its operational excellence, multi-channel structure, high brand recognition and service quality. We are utterly confident that AvivaSA will become the most popular brand in all of its fields of activity, in the period ahead.

The backing of our esteemed shareholders and the diligent efforts of our workforce will remain our key driving force in the year 2013. I would like to extend my gratitude to our shareholders, employees and participants for their unfaltering support on the path to success.

Meral Eredenk CEO


Senior Management

Meral Eredenk CEOMs. Eredenk’s curriculum vitae can be found on page 33.

Mustafa Fırat Kuruca Executive Vice President - FinanceFırat Kuruca graduated from the Department of Business Administration of the Faculty of Administrative Sciences at Boğaziçi University. Before joining AvivaSA, Mr. Kuruca respectively worked at Unilever-Turkey, Unilever-Belgium, Unilever-Germany, Setur Divan Enterprises and Aviva Hayat ve Emeklilik. He has 26 years of professional experience.

Selim Avşar Executive Vice President - Direct Sales and AgenciesSelim Avşar graduated from Department of Econometrics at the Istanbul University and received his Master’s degree in the same department. He started his business career at Commercial Union as a Financial Advisor and served in various positions in sales management within the same company, where he became Executive Vice President responsible for sales, and subsequently a Board Member. Mr. Avşar has 14 years of professional experience.

Ali Önder Lülü Executive Vice President - Bancassurance and Corporate ProjectsAfter receiving his Bachelor’s degree in international relations from Istanbul University, Ali Önder Lülü received his Master’s degree in strategic marketing and brand management. Before joining AvivaSA, Mr. Lülü worked for Brisa and AK Emeklilik, and has 13 years of professional experience.

Berkant Dişcigil Executive Vice President – OperationsBerkant Dişcigil graduated from the Ankara High School of Science, and then the Department of Management Engineering at Istanbul Technical University. He completed an Executive MBA at Sabancı University and began his career at Strateji-Mori as a research specialist before joining the insurance sector at Axa Oyak Hayat Sigorta, where he assumed positions in the Operations, Training, Actuary and Technical departments. He later joined AK Emeklilik, as Underwriting Manager. Also having served as the manager of the Underwriting Operations department, and then as the manager of the Customer Continuity department at AvivaSA, Berkant Dişcigil has 14 years of professional experience.

Assessments 35

Emre Günerman Executive Vice President - Marketing & Sales DevelopmentEmre Günerman graduated from the Department of Industrial Engineering at Bilkent University in 1993. He began his career as a systems analyst at Procter & Gamble, and received his MBA at The Wharton School in Pennsylvania, USA. He then took office as the Total Quality and Corporate Strategy Manager at Tenneco in the USA between 1996 and 2000, before returning to Turkey, where he served at Turkcell in areas such as business development, product management, loyalty campaigns, project development and implementation. In 2004, he joined Borusan Telekom, where he worked as the marketing director for two years. Mr. Günerman worked as the Director of Segment Management at the Marketing Department of Avea between 2006 and 2010. In October 2010, he was appointed Executive Vice President responsible for marketing at AvivaSA Emeklilik ve Hayat.

Murat Bayburtluoğlu Executive Vice President - Human ResourcesA graduate of Saint Joseph French High School for Boys, Bayburtluoğlu graduated in 1985 from the Middle East Technical University, in the Faculty of Administrative and Economic Sciences, in the Department of Business Administration. He started his career in 1985 at İnterbank, and went on to work at Garanti Bank as Deputy

Director of Training and Human Resources, the bank’s representative in Germany, and as Director and Executive Vice President in the Netherlands. He later took office at Finansbank Netherlands as Executive Vice president in charge of IT, Operations, Human Resources and Project Management. After a 14-year stint overseas, he became Executive Vice President in charge of Human Resources at Finansbank. Mr. Bayburtluoğlu then went on to establish his own consultancy firm before joining AvivaSA Emeklilik ve Hayat in 2012 as Executive Vice President in charge of Human Resources.

Nihat Ünalacak Executive Vice President - Information TechnologiesA graduate of Kayseri TED College and Bosphorus University, Department of Computer Engineering, Nihat Ünalacak received his MBA from İstanbul University, Faculty of Business Administration. In 1988 he started his business career at Koç Holding as a planning specialist, and went on to work as IT, logistics and project management director at Ciba Geigy and Inchcape Retrans. In 1998 he joined Aviva Hayat ve Emeklilik, then known as Commercial Union, and served as Executive Vice President until 2007, when he was appointed Aviva Europe’s IT Director, holding the position for five years. Ünalacak was appointed AvivaSA’s Executive Vice President – Information Technologies in 2012.


Activities in 2012

In the year 2012, the number of AvivaSA participants grew by 17% to 493 thousand people.

17

Continuing its efforts to raise savings awareness, AvivaSA largely met its targets in all fields of activity during the year. Furthermore, the company made significant investments to enhance customer satisfaction and channel and technology infrastructure to prepare for the new period of the PPS starting in 2013.

%

Activities in 2012 37

Activities in 2012 With its robust financial structure, AvivaSA is the

second largest firm in the PPS market. As of 4 January 2013, the company’s fund volume has risen by 41% over the previous year to Tl 4,075 million.

The total fund volume managed by the company has expanded by 192% over the past five years.

20122011201020092008

192% aggregate increase

4.1 TL million

2.9 TL million

2.5 TL million

1.9 TL million

1.4 TL million


Global Economic OutlookGlobal economic uncertainty continued in the year 2012, despite the quantitative easing policies of developed economies. The financial and political crisis in European Union member states continued, and indeed, the exit of certain countries seemed a distinct possibility. However, these worries were not long lived, and in time expectations for the general economic performance of European Union countries improved.

In general, G-20 nations displayed sluggish growth in the year 2012. As of the third quarter of the year, an uptick in the growth rate was only observed in the USA, the UK and Brazil, whereas China, Indonesia, India and Russia lost some of their growth momentum. Another remarkable development was the signs of contraction in Japan.

A key development in 2012 occurred in the very last days of the year, when the US House of Representatives approved legislation to increase the tax burden of high income individuals and postponed cuts in public expenditure. This helped avoid the “fiscal cliff ”, which threatened to push the US economy into a severe recession, by triggering drastic fiscal austerity.

In its “Global Economic Outlook” dated January 2013, the IMF revised downwards its forecasts for world economic growth. In comparison with the previous report published in October 2012, this latest report cut the forecast for global economic growth in 2013 by 0.1 percentage points to 3.5%, and the forecast for 2014 by 0.1 percentage points to 4.1%.

Macroeconomic Outlook and Sector Overview

Activities in 2012


Turkish Economic OutlookAlthough the main indicators of the Turkish economy are healthy, the growth rate started to falter following two years of sound growth. After growing by 8.5% in 2011, the Turkish economy expanded by 3.4%, 3.0% and 1.6% in the first three quarters of 2012, bringing the aggregate growth rate for the first nine months to 2.6%. In its medium term plan, the Ministry of Development announced estimated growth of 3.2% for the full year of 2012.

Inflation displayed a downward trend, thanks to improvements in core inflation. As measured in consumer prices (TÜFE index), the inflation rate fell from 10.45% as of year-end 2011 to 6.16% in 2012. This downtrend is even stronger in producer prices (ÜFE), where the annual rate of increase declined from 13.33% as of December 2011 to 2.45% as of year-end 2012.

The current account improved remarkably in the year 2012, as the net trade deficit contracted due to falling imports, and the net service income from abroad rose. The key factors underlying this favorable development were the tight monetary policy of the Central Bank of Turkey, and the increase in tourism revenues and net gold exports. According to January - December 2012 balance of payments data issued by the CBT, in the year 2012, the current account deficit contracted by USD 28,352 million to bottom out at USD 48,867 million.

In 2012, this rebalancing of domestic and foreign demand brought favorable results for the Turkish economy. According to provisional trade data released by the Turkish Statistical Institute and the Ministry of Customs and Trade, exports rose by 13.1% over 2011 to USD 152,561 million in 2012, whereas imports fell by 1.8% to USD 236,537 million.

Improvements in public finance and a strong banking industry were key factors behind Turkey’s attaining an investment grade rating.


In 2012, we made a breakthrough in life insur-ance protection instruments. We continued to market personal accident insurance policies at Akbank branches, ATMs and tellers, as well as on the AvivaSA web site.

We increased our market share in the life insurance branch.

20122011

197.5TL million

148.4TL million

** Total life insurance and accident premium production according to TSRŞB and Haymer data.

33%over the

prior year

Premium production grew by


Since the increase in tax revenues started to decelerate in parallel with the slowdown in economic activity, while primary expenditures grew more rapidly, a relative weakening in budget performance was observed. This weaker performance vis-à-vis the year 2011 is largely due to increases in primary expenditure, such as personnel income and current transfers, and a negative base effect stemming from a fall in public revenues due to the new Law on Restructuring of Public Receivables.

Coming to the banking industry, statistics show that the industry has largely preserved its healthy structure. Basel II came into effect at the beginning of July 2012. The banks’ capital adequacy ratios remain high, and the sector continues to post robust profits. Scenario analyses testing the banking industry’s resilience to credit and market shocks indicate that aggregate shareholders’ equity is indeed strong enough to absorb such shocks.

In 2012 as in 2011, the CBT focused its monetary policy on preventing excessive fluctuations in loan growth and real interest rates, so as to support macroeconomic and financial stability. The main objectives of this approach are to bring domestic demand under control and to increase the contribution of foreign demand to growth, and thus to render growth healthier.

Both the improvement of public finance and the strong banking industry were crucial factors behind Fitch’s decision to upgrade Turkey’s credit rating to investment grade. This relative improvement in risk perception concerning Turkey, and an increase in global risk appetite triggered capital inflows into the country, forcing the Turkish lira to appreciate.

The Istanbul Stock Exchange thus left behind a bullish year, posting the second largest increase among all bourses worldwide.


The ISE-100 Index rose by 61% in US dollar terms in 2012, closing the year at 78,579. And although woes concerning the European and US economies are likely to cast a shadow on global markets in 2013, the outlook for Turkey is much more sanguine, as the nation has made significant progress in terms of overcoming its problems through sound savings policies and economic reforms.

Outlook for Private Pension System and Life Insurance SegmentSince deposits account for a very large portion of financial assets in Turkey, the fund volume of the PPS has yet to live up to its true potential.

According to Pension Monitoring Center data released on 4 January 2013 the total fund volume of the PPS market stood at TL 20,463,943,227 and the total participant number at 3,135,708. The same data shows a growth rate of 42.8% in terms of fund size and 18.7% in terms of participant number. The total volume of contributions generated by the PPS market stands at TL 16,261,080,733.

An important revision was made to the PPS incentive system in early 2013 with a view to encouraging participation and increasing domestic savings. Accordingly, the tax reduction for private contributions was annulled, although the state started to make a 25% contribution to these. The state’s contribution is channeled to a separate

Macroeconomic Outlook and Sector Overview

Activities in 2012


account and directed to investment instruments designated by the Undersecretariat of the Treasury. The maximum contribution payable to a participant is limited to 25% of the gross annual minimum wage.

As one of the most comprehensive public measures to tackle the problem of savings to date, this measure is crucial in that it encourages not only taxpayers, but everyone above 18 years of age to join the system, imposing tax not on the principal, but on the return, and reducing the taxation rate.

Another factor in the growth of the Private Pension System aside from state incentives is the operational cost of investment funds. The cost to participants mainly comprises management expenditure and fund operation costs. In the new period, the maximum deduction level was lowered to render the system more appealing to clients.

It is also believed that, upon the completion of draft legislation on life insurance, the life insurance sector will become more appealing to consumers.

According to data of the Association of the Insurance and Reinsurance Companies of Turkey (TSRŞB), the total life insurance and accident direct premium production in the pension and/or life insurance companies had reached TL 2,816 million as of year-end 2012 (2011: TL 2,746 million). Accordingly, premium production rose by 2.6% between 2011 and 2012. And although certain players and segments in the sector underwent contraction, the growth rate in the basic instruments of cover reached 25%.

Sources:

Turkish Statistical Institute

Central Bank of Turkey

MSCI World Index

Undersecretariat of Treasury

ISE

Pension Monitoring Center

January 4, 2013 data

Association of the Insurance and Reinsurance Companies of Turkey (TSRŞB), December 31, 2012 data

IMF World Economic Outlook, January 2013-02-15

Ministry of Development, General Directorate of

Economic Modeling and Strategic Research

As one of the most comprehensive measures ever taken by the state to tackle the savings problem, the new incentive scheme encourages everyone to join the PPS.


PrivatePension

AvivaSA continuously increases its PPS fund and channel diversity.

Special Group Retirement Plans In 2012, in order to increase corporate participation in the PPS, AvivaSA continued to design special group retirement plans customized for corporations and foundation trusts, which can bolster corporate human resources strategies as an additional private pension benefit.

AvivaSA launched its group retirement plan products by introducing a special group retirement plan customized for the needs of the Turkish Notary Association Foundation. As a result, AvivaSA now delivers services to numerous notaries across Turkey and enjoys a competitive edge in this segment.

Fund DiversityIn 2012, AvivaSA set up special pension investment funds for groups to increase the investment alternatives of its customers.

New Bank PartnershipsWith a view to enhancing its multi-channel distribution structure and reaching out to a more customers, AvivaSA started marketing PPS products via Burgan Bank branches.

Efforts towards Compliance with the new PPS RegulationSo as to ensure the compliance of all PPS products with the new legislation that came into effect on 1 January 2013, AvivaSA revised its products with an innovative vision in line with participants’ needs. In this regard, work continued on additional products for the new period.

Activities in 2012


LifeInsurance

AvivaSA developed “Custom-made Life Insurance” reflecting its customer-oriented approach.

Customers Decide, We DeliverIn 2012, AvivaSA launched “Custom-made Life Insurance”, a flexible product which allows individuals to personalize their life insurance policies according to their needs and preferences. This product under a single umbrella offers various types of assurance against risks such as death, dangerous disease, accidental death, and accident related disability, as well as accident treatment expenditure, death by as a result of public transportation accident, and unemployment, and allows the customer to decide on which types of assurance to purchase.

Multi-Channel Solutions for Diverse Customer NeedsAvivaSA continued to market personal accident insurance policies via Akbank branches, ATMs and tellers, as well as the AvivaSA website and the agency channel.

Special Products for Alternative Distribution Channels In order to create cross-sales opportunities through the telesales channel, AvivaSA rolled out its Life Insurance for Income Protection scheme.

AvivaSA’s rich product portfolio:AvivaSA’s comprehensive portfolio of life and personal accident insurance includes the following products as of year-end 2012:

Life Insurance• Long Term Life Insurance• Continuous Education Insurance• Plan B Yearly Renewable Life

Insurance • Easy Life Insurance• Credit Life Insurance• Check Life Insurance • Life Insurance with SME Loan • Custom-Made Life Insurance• Life Insurance Protecting PPS• My Life Support Insurance• VIP Life Insurance• Life Support Insurance• Plus Money Insurance

Personal Accident Insurance• Personal Accident Insurance• ATM Personal Accident Insurance• Personal Accident Insurance with

Benefits• My Child’s Education Insurance • Express Personal Accident Insurance• Individual Protection Aegis • Teller Personal Accident Insurance


In the life insurance and personal accident insurance market in 2012, AvivaSA’s bancassurance channel not only achieved high penetration in loan-related products, but also prioritized independent products. Overall, the channel registered 60% growth through new sales campaigns, which resulted in a two percentage point increase in market share. The channel will maintain the high penetration in loan-related products, and continue to prioritize stand-alone products in 2013, while bolstering growth with newly positioned products, the efficient use of alternative distribution channels and new campaigns.

AvivaSA perceives a strong growth potential in the bancassurance channel. Therefore, in early 2012 the company joined forces with Akbank to initiate the Bancassurance Transformation Program, comprising 13 projects with the following key objectives:

• Enhancing strategic harmonization and coordination between AvivaSA and its business partner Akbank,

Bancassurance

• Creating a product portfolio in tune with the bank channel,

• Improving sales performance,

• Ensuring technological integration between AvivaSA and Akbank.

This transformation was observed to be positively reflected to the results. During this period, a strong team of 185 branch insurance managers specialized in private pension and life insurance, and with an average experience of almost a decade, provided intensive support to the business partners, generating significant added value in pursuit of set targets.

In 2012, the number of Akbank -our main business partner- employees holding a PPS license increased, and more than 930 Akbank branches are now capable of selling the full range of private pension and insurance products through their own customer representatives.

Activities in 2012


As of 2012, more than 930 Akbank branches are capable of selling the full range of private pension and insurance products through their own customer representatives.

As part of the Transformation Program, eleven new products set to be launched in 2013 were designed to increase product portfolio diversity. In addition, the Channel Diversity project was designed for the efficient use of branches and alternative distribution channels in marketing current and future products, and informing customers.

In parallel, the company achieved system integration in PPS and life insurance to boost performance, and designed further improvements to make efficient use of the information required to monitor and enhance performance.

As part of the Transformation Program, new campaigns were designed to utilize CRM efficiently in order to improve new business performance and continuity levels.

Project activities to enhance bancassurance will continue in 2013. The main focal points will be product packages, efficient use of alternative distribution channels, and the service model. In parallel with these activities, and jointly with business partners, the company will take concrete steps to bolster the bank’s sales channel with efficient campaign management and products tailored for customer segments, thereby gaining new customers.


Strong position in Corporate ProjectsThe year of 2012 was a productive one, during which the Corporate Projects team expanded its customer portfolio with a “turn-key project approach”. Corporate Projects won numerous tenders organized during the year and strengthened leadership in the employer-sponsored group retirement market.

According to data issued by the Pension Monitoring Center on 4 January 2013, total employer-sponsored group pension contributions channeled to investment expanded by 26%, whereas AvivaSA Emeklilik ve Hayat’s corporate sales business grew by 43%. In parallel with this growth, AvivaSA’s corporate sales channel increased its market share from 30% in 2011 to 33% in 2012.

While working with companies’ human resources departments, the Corporate Projects team focused on minimizing their workload, maximizing productivity, and inspiring trust through uninterrupted services. AvivaSA offers its corporate customers a boutique service designed to meet their needs, thanks to its enhanced technological infrastructure, after-sales services customized for corporations, and the innovative approach in its operational processes.

Corporate Projects

The team provides special consultancy and other services to over 600 corporations and 60,000 corporate employees through its team of specialists, whose number has risen from 20 to 26. The Corporate Projects team is located at the Head Office in Istanbul, as well as at the regional offices in Ankara, Adana and Izmir.

AvivaSA’s customized PPS solutions for associations and foundationsAs per the Communiqué on the Transfer of Savings from Associations, Foundations, Trusts and Other Institutions to the Individual Pension System and Annuity enacted in 2008, foundations, associations and trusts that provide retirement services, as well as multinational companies with defined benefit plans have started to transfer their funds to the PPS.

As one of the most experienced teams in the industry in terms of the transfer of foundations, associations and trusts, AvivaSA’s Corporate Projects team was among the four main participants in the largest foundation and trust transfer tender of 2012. The team’s accumulated know-how and competitive product packages have enabled it to lead and shape the market, and actively bolster its development.

Activities in 2012


The Corporate Projects team provides special consultancy and services to over 600 corporations and 60,000 corporate employees.

AvivaSA Emeklilik ve Hayat broke new ground in its industry in 2012, by reaching an agreement with a multinational company on the transfer of a defined benefit plan to the Private Pension System. The said transfer is planned to be completed in 2013.

Aside from these projects concerning the transfer of associations, foundations, trusts and similar institutions to the Private Pension System, the AvivaSA Corporate Projects team also launched talks with Turkish trade unions. The team participated in a collective agreement signed by a trade union in 2012, to become the service provider for employer-sponsored private pension contracts that three companies will present to union members.

Serving SMEs more efficientlyIn 2012, the company designed business models to take a more active role in marketing private pension plans to SMEs. AvivaSA thus launched various projects meant to expand its short- and medium-term market share profitably among medium-scale companies, especially the commercial clients of its biggest distribution channel, Akbank. Acknowledging the growth potential of the SME segment, the Corporate Projects team restructured in 2012 in order to provide more efficient services to the SME segment, and began to

operate in a more coordinated fashion with Akbank’s commercial branches, in tandem with the business plan.

AvivaSA expanded its team in 2012 to maximize its after-sales service quality. The company provided solutions to its current customers through a consistent fund performance management system and continuous information flow. Its after-sales services work principles have provided assistance to our customers, and helped them enjoy the continuous support of AvivaSA. During the year, the team made presentations in approximately 400 corporations, increasing customer satisfaction.

In order to uphold this principle and to raise the company’s enhanced technological infrastructure to a level of excellence, various new projects were designed. The company began to develop new projects aimed at further simplification and enhancement of corporate solutions and services offered to the human resources managers of the company’s existing corporate customers.

AvivaSA’s primary target in 2013 is to expand efforts towards increasing the satisfaction of existing customers, and to achieve profitable and sustainable growth by managing the association, foundation and trust transfers of large and multinational companies.


A stronger and more extensive Direct Sales channel One of AvivaSA’s most important distribution channels, the Direct Sales channel, boasts the largest and most well-established direct sales team in the Turkish private pension and life insurance sector. In 2012, the Direct Sales channel succeeded in expanding its PPS contribution volume, as it has done in a consistent fashion for many years.

In line with its rising production and high productivity per employee, the Direct Sales organization was extended to a total of 725 financial consultants. And in order to help new financial consultants to reach a level of competence on a par with the standards of the Direct Sales channel; they underwent further intense and rigorous initial and follow-up training. The main target of all these measures is to reach out to a larger number of customers, while preserving the high customer service standards of the company.

The Direct Sales channel draws its strength from the fact that it functions as a team that sets its own precedents. The Channel has a well-experienced and competent team of managers and financial consultants trained in-house, who provide top quality services to

Sales and Customer Services

customers and continuously raise the production volume on the back of references earned through customer satisfaction. Another significant trait of the Direct Sales channel is its ability to offer customers the most appropriate product options combined with the most suitable budget, and based on efficient need analysis. In 2012 as in previous years, Direct Sales far outperformed the sector in terms of contribution production per employee.

In 2012, the channel focused particularly on the production of life insurance premiums, and increased their production per employee by 80%, exceeding the set target.

The goal of the Direct Sales channel in 2013 will be to ensure the continuity of its customer portfolio by maximizing customer satisfaction, and to achieve further growth in production figures by enhancing productivity per employee.

The fast-growing Agencies channelOperating under the Direct Sales Department, the Agencies channel continues its developmental process. The Agencies channel was reinforced in 2010 with a new management team. It continued its growth momentum in 2012 and met its growth target of 57% expansion.

Activities in 2012


Continuing its customer-oriented strategy with full resolve, AvivaSA shapes all its processes according to this vision.

In 2012, the most important initiative in support of development and productivity growth in the channel was the “4Colors Development Program”, in addition to the “Young Entrepreneur Program” launched previously. The former Program supports agencies in their career and performance progress, whereas the latter enables financial consultants to establish their own agencies.

AvivaSA initiated the 4Colors Development Program, a first for the industry, with a view to bolstering its nationwide agency network. This program supports agencies in their career and performance progress, and also encourages them to increase their turnover with various incentives. As a result of this project launched in 2012, 4Colors agencies accounted for 76% of total production in the Agencies channel.

Furthermore, AvivaSA helps financial consultants keen on establishing their own agency to enter the insurance sector with various kinds of support through the Young Entrepreneur Program. Having already helped 35 young entrepreneurs to join the industry within a short time span, AvivaSA is intent on increasing this number further in the years to come.

Success story in alternative channelsConstantly presenting new offers and opportunities to its customers by positioning its products in the telesales channel, AvivaSA increased its production in this channel by 28%. Throughout 2012, the company continued to offer its clients well-suited life insurance products through this channel.

Digital and social media AvivaSA develops new products and applications to transform digital media, including social media, into a channel that will complement its multi-channel distribution strategy. The company reached out to 3 million people through digital media campaigns and applications in 2012, thereby creating awareness of its products and services, and matching potential clients demanding products with the right sales channels.

Gaining new customers via social media Maintaining a close watch on changing customer needs and behavior, AvivaSA makes use of social media, the importance and application of which increases daily, to inform its customers, strengthen relations, and offer its products. Accordingly, the company reaches out to potential customers through this route, directing them to the right products marketed online,


or to the appropriate sales channel, in line with their needs and demands. It is set to roll out further social media campaigns in 2013 to promote new products and applications.

Continuous reference to sales channels AvivaSA joined forces with other Sabancı Holding companies, as well as companies that possess permission marketing data on customers to organize campaigns designed to increase its references. Such projects carried out in 2012 helped generate references that utilized by all sales channels, particularly the telesales channel. The company plans to continue developing new reference projects in 2013 with a view to enhancing the efficiency and productivity of all sales channels.

Customer-oriented strategyAvivaSA continues its customer-oriented strategy with full resolve, and shapes all its business processes according to this vision.

The company offers its customers products and services best suited to their needs, by means of effective customer communications via its multi-channel distribution structure. In 2012, it continued to develop loyalty programs, which not only protect the future of its clients, but also add richness to their lives today.

Sales and Customer Services

Happy customers at Geleceğini Biriktirenler Kulübü (Save the Future Club)Launched by AvivaSA in 2010 under its Customer Loyalty Program, and with a view to boosting customer satisfaction and ensuring loyalty, Geleceğini Biriktirenler Kulübü continued to color the lives of its clients in 2012. The club adds richness to its clients’ lives today by offering various exclusive advantages in areas such as insurance, health, holidays and hobbies. In 2012, the club’s recognition and popularity among customers increased significantly over 2011, and is set to do so further in 2013 on the back of various communication activities and campaigns.

Customer Surveys continuously measure satisfaction and expectationsOrganized annually since 2008 in order to identify factors affecting customer satisfaction, measure customer satisfaction levels, gauge their expectations and create necessary development plans, the “Customer Satisfaction and Expectation Survey” was repeated in 2012 with an even wider scope. In the private pension segment, the satisfaction level of not only individual, but also corporate customers was measured; furthermore, the satisfaction level of Life Savings Insurance customers was measured separately. And aside from customer satisfaction measurement, a Secret Customer Survey was conducted to

Activities in 2012


In 2012, the AvivaSA Customer Satisfaction Centre’s strong workforce established customer contact through nearly 1.6 million calls.

measure service quality in the sales process, while a Customer Contact Point Survey measured service quality at after-sales contact points (call center, Internet branch, and complaint management). As a result of these efforts, AvivaSA managed to increase its customer satisfaction score by nine points over the prior year.

Meeting the right need at the right time through integrated customer communicationIn 2012, AvivaSA informed its customers in a systematic and integrated fashion on its products, services, fund returns and side benefits, as well as the loyalty program, and changes in PPS, continuously maintaining contact with customers through direct communication channels such as e-mail, SMS and regular mail.

Enhancing customer supportThrough its cross-selling activities, AvivaSA not only increases product per customer, but also meets customers’ investment needs and rapidly changing protection requirements. What’s more, its upstream sales activities increase current customers’ contribution to the Private Pension System and help them attain their future savings target in an easier and swifter fashion.

Customer Satisfaction CenterLaunched to help customers receive information and carry out transactions, the AvivaSA Customer Satisfaction Centre’s strong workforce established customer contact through nearly 1.6 million calls, with 785,000 incoming and 850,000 outgoing calls in 2012. This represents a 9% increase in customer contacts over the previous year.

Incoming customer calls were served by the AvivaSA Call Centre (444 11 11), Corporate Services Centre, and Premium Services Centre, whereas Sales Channels and the Claims Support Centre served all of the company’s sales channels. Approximately 3.5 million transactions were executed through this channel.


Highlighting the importance of savingsEver since its inception, AvivaSA Emeklilik ve Hayat has underscored the importance of increased savings as a key factor for Turkey’s future economic growth. Indeed a company advertising campaign launched in April 2008, before the global economic crisis had even affected Turkey, highlighted the importance of savings. By conveying the message “Don’t spend your money, save your future”, the campaign was one of the first commercial advertising campaigns to emphasize putting something aside for tomorrow.

The campaign also contributed to the widespread recognition of the AvivaSA name, and the economic crisis which hit Turkey soon thereafter once again confirmed how right AvivaSA was in terms of discourse and timing.

AvivaSA conveyed the same message through a different method in 2009. The “Dreams” advertising campaign this time relied on humor to remind people that to realize their future dreams, they needed to start saving today.

The image advertising campaign AvivaSA launched in 2010 focused on the concept of retirement, the key deliverable of the private pension system. Starring some of AvivaSA’s real-life pensioners, the commercial campaign underlined that the savings invested in the PPS eventually bear fruit in retirement.

Brand and Communication Activities

In 2011, AvivaSA conducted yet another advertising campaign focused on the concept of savings. Based on the theme of its first advertising campaign launched in 2008, this campaign aimed to inform savers that they could retire at AvivaSA. Inspired by the jingle of the first advertisement, the commercial used another upbeat musical piece to bring the concept of savings back on the public agenda.

In 2012, and in parallel with the new period in BES, AvivaSA followed a communication strategy that emphasized the importance of savings, and encouraged the public to participate in the system. By highlighting the advantages of the new BES system, the campaign focused on the concept of “Easy PPS”, proposing a product that facilitates participation in the system. Embracing a different tactical approach than the previous image campaigns, the campaign was directly aimed at bolstering sales.

In 2012, AvivaSA continued to emphasize the concept of savings, by highlighting its importance through a wide range of media, and at every suitable occasion. AvivaSA’s views enjoyed significant local and national media coverage underpinned by various public speeches and informative articles.

Activities in 2012


In 2012, AvivaSA launched a communication campaign to encourage savings, in parallel with the new period in the PPS system.

As part of this move, the company started making efficient use of social media websites, and sought to strengthen its bond with the consumer by keeping this issue alive on the public agenda.

In July 2012, AvivaSA CEO Ms. Meral Eredenk organized a press conference to inform the public about the results of the “Consumers’ Saving Tendencies” survey, organized jointly by Aviva and Ipsos among 13 thousand people in 12 countries. The survey revealed that Turkish consumers were currently obliged to continue working after retirement to maintain their living standards, did not attach importance to saving for their retirement, did not seek help in financial issues, and had a sanguine outlook on the future in comparison with consumers in other countries.

In the final quarter of 2012, as part of efforts to comply with the new PPS legislation, the company revised its informative materials, and followed a communications strategy that emphasized the advantages of the new period, segment by segment. In parallel, the company offered consumers informative and explanatory documents through all its sales channels, while raising the competency of its sales points.

AvivaSA has thus become the private pension company enjoying the highest media coverage thanks to its extensive communication efforts.

Web ActivitiesAvivaSA’s corporate web site was deemed worthy of the Best Web Site Award at the Golden Spider awards, a reputable organization of the Turkish Internet scene. The company prioritized the use of social media, which is an efficient current channel, created a strategy and formulated messages to access the target audience through various campaigns. The “Crazy Savings Project Competition” on Facebook, “Thrifty Proverbs Competition” on Twitter, and the special “Savings Money-festo” released on October 31st, World Savings Day, conveyed positive messages emphasizing the importance of savings. AvivaSA made a great leap by quintupling its social media followers, and started to put into practice various communication modules to ensure faster contact with its customers and followers.

Sponsorship ActivitiesIn order to establish warmer relations with its bancassurance customers, AvivaSA joins forces with Akbank to organize a golf tournament, which constitutes the Turkish leg of the Aviva Cup designed by Aviva Europe. The first edition of the tournament was organized at the Kemer Golf & Country Club in 2011, drawing significant participation. In 2012, the number of participants rose further, and the highest ranking golf team in the tournament was selected to represent Turkey in the Aviva Europe Cup. The team achieved notable success by winning the event held in Stockholm on September 30, 2012.


Information Technologies

In 2012, the company launched a number of projects in parallel with its business targets and priorities.

In 2011, AvivaSA had started the preliminary company selection and acquisition process for the Private Pension and Life Insurance Applications infrastructure transformation program, which was fully launched in 2012. The program is planned to be completed by 2014. Upon its completion, the insurance applications currently utilized across AvivaSA will be transferred to the recently purchased core private pension and life insurance application; peripheral systems such as the present sales automation scheme, customer service applications and data storage applications will be revamped and eventually integrated with the new application.

The IT applications utilized by the sales channels will be revised and developed so as to be in tune with market dynamics and company targets.

Support Activities

AvivaSA established “correct and high quality sales” standards and shared these with all sales teams to ensure full implementation.

A number of changes and projects were implemented to ensure productivity and fully automated operations, and to reinforce the IT infrastructure. The capacity of the system infrastructure was further increased to support the expansion in customer numbers and transaction volume.

The company also continued its efforts in 2012 to adapt IT processes to international standards, and to the standards of Aviva and Sabancı Group.

Group Operational Activities The Technical Operations department continued its efforts to outperform the sector in its contribution to customer satisfaction and profitability, in line with its core values of reliability, expertise, innovation, quality and efficient risk management.

The number of transactions rose 22% over the prior year to one million in 2012, while productivity per employee in terms of operational transactions rose by 8% to meet customer expectations at the highest level.

Activities in 2012


In 2012, AvivaSA focused on IT infrastructure and application changes to comply with the new legislation on PPS.

Quality Compliance ActivitiesIn 2012, Complaint and Quality Management Processes were restructured so as to increase the level of efficiency, productivity and service quality in business processes. The company launched more efficient in-house reporting, customer complaint management and action follow-up processes.

As a result of the audit carried out in November, the company’s ISO10002 Complaint Management Quality Certification was renewed. Accordingly, it was once again confirmed that AvivaSA’s customer complaint management systems functioned in line with international standards, and in an efficient and productive fashion.

In 2012, Sales Quality Compliance activities were enhanced by taking into account present industrial conditions and risks, with a view to minimizing risks that might arise during sales and increasing the quality of sales activities.

The company also conducted regular control activities to ensure compliance with these standards.


AvivaSA is fully aware that it must manage the direct and indirect impact of its activities on the community. As such, CSR is at the core of each activity performed by AvivaSA, and in its interactions with stakeholders.

Corporate Social Responsibility

59coRPoRATE SocIAl RESPoNSIBIlITy

The CSR PerspectiveWe at AvivaSA believe that all institutions and corporations are responsible for their own social circles and environs, and that each must act as a citizen in this sense. To this end, we interact with our employees and the environment within the framework of a responsible approach by placing corporate social responsibility (CSR) at the heart of our business. In this respect, AvivaSA shapes its activities with a long-term sense of responsibility.

AvivaSA is fully aware that it must manage the direct and indirect impacts of its activities on the community. As such, CSR is at the core of each activity performed by AvivaSA and in its interactions with stakeholders.

The CSR strategy, policy and principles are established within such a framework, and CSR projects prioritize activities in the following fields:

• Savings • The Environment• Education and Financial Literacy

Corporate Social Responsibility Activities in 2012 As a company that highlights the importance of savings and organizes campaigns to promote this concept, AvivaSA is fully aware that financial literacy is the key to savings awareness. Accordingly, the company channels its CSR activities towards raising public awareness on this issue. The

company cooperates with GBEV, the only foundation in Turkey that is active in the field of entrepreneurship and financial literacy, sponsoring its activities. Established in 1919 in the USA, Junior Achievement/GBEV delivers entrepreneurship, economics and business administration education to children and youngsters in primary schools, high schools and universities, and organizes applied programs. Its mission is to prepare youth for the global economy. AvivaSA encourages its employees to become volunteers of the foundation so as to enable the expansion of its activities.

As in previous years, AvivaSA continues to organize CSR activities through its regional organization. For instance, AvivaSA’s employees in the Ankara 2 Region have provided assistance to the Kızıldere village of the province of Kırıkkale. Regional employees organized a campaign to meet various educational and non-educational needs of 33 students of Kızıldere Primary School, where an AvivaSA customer also participated in the campaign. In another example, AvivaSA’s employees at the Gaziantep branch provided financial aid to the Fatih Sultan Mehmet Primary School located in the Uludere district of Şırnak province under CSR efforts.

The CSR donations and aid given by AvivaSA in 2012 amounted to TL 34,500.


Information on Management and Corporate Governance Activities

In 2012, the AvivaSA Talent Development Program was launched for administrative personnel. In light of the feedback resulting from assessments, employees were included in long-term development programs to prepare them for future managerial roles.

Managers received 9.69 hours of training per person, whereas financial consultants received 7.1 days per person.

7.1 days

InformatIon on management and Corporate governanCe praCtICes 61

The Human Resources Department’s 2012 activities can be analyzed under 10 main categories:

Human Resources Promotional Activities • The company launched a Facebook HR page

entitled AvivaSAİKariyer.• The AvivaSA Financial Consultant Training

Expertise Program was launched to create an alternative pool of candidates, whereby the number of applications grew by 24%.

• The company published advertisements in 10 national and eight local newspapers.

• Company officials gave interviews to the HR supplements of daily newspapers and HR publications.

Recruitment• A total of 96 individuals were recruited for

the Head Office. • As for the Direct Sales channel, 592 people

were recruited as financial consultants, the total number of which reached 736.

• In the Bancassurance channel, 31 branch insurance managers were hired and the year-end target reached.

Living Talent and Career ManagementIn 2012, AvivaSA Talent Development Program was launched among its administrative personnel. All such employees were assessed by an independent firm utilizing various instruments. In light of the feedback, employees were included in long-term development programs to support them in their present roles, and to prepare them for future managerial positions in line with personal career planning.

In the Direct Sales channel, 257 employees were promoted to the position of sales expert, and 27 to managerial posts. Twelve individuals joined the Young Entrepreneur program.

In the Bancassurance channel, 19 employees were promoted to branch insurance manager and regional manager, while a further six managers received various other promotions.

Training and Development ActivitiesDirect Sales Training and Development Activities • Managers received 9.69 hours of training

per person, whereas financial consultants received 7.1 days of training per person.

• The financial consultant licensing training adopted the face-to-face format, and the period of technical training prior to e-BEAS was increased to nine days. The exam success rate in the new model reached 80%.

• 206 agencies participated in training seminars held in Istanbul, Bursa and Izmir.

Bancassurance Training and Development Activities • The number of days of training per person

stood at 2.81.• 1,856 Akbank employees participated

in product sales and licensing seminars specially organized for them. The total duration of training reached 12,835 hours.

• 406 Akbank employees succeeded in obtaining the private pension broker license.

• Citibank employees received 330 hours and Burgan Bank employees 595 hours of training.

Human Resources Practices


Head Office Training and Development Activities The year 2012 was an intense period in terms of training and development activities.

• 349 participants attended 88 different training programs.

• Total training time reached 783 days, and 1.91 days per employee.

The e-training portal was revised and re-launched as “AkademİK” to serve employees. The in-house instructor project named Büyüteç [Magnifying Glass] was also launched, where in-house instructors prepared 10 training programs for submission to employees.

Compensation and Reward Management The company rolled out the flexible side benefit scheme, the first of its kind both in the industry and the Sabancı Group.

The company reorganized its commission operations processes and set up a new business unit called Compensation Management. The commission system of all four sales channels was revamped according to the company’s strategies and requirements.

Human Resources IT Infrastructure UpgradesAvivaSA created a demand module on its web-based HR application KLİK, and started receiving employee’s HR-related demands over this system.

Industrial RelationsIn accordance with applicable legislation, the company saved TL 2,754,036.86 in 2102 in incentives for employers.

In order to help employees strike a balance between their professional and private lives, various measures were taken to encourage

them to take business leave in the first half of the year. Consequently, in 2012, the business leave backlog decreased by 12% over year-end 2011.

“Word of the Employee” Survey and Employee Satisfaction Focus GroupThe company’s loyalty score in the “Word of the Employee” Survey was far above that of its peers in the financial sector. Meanwhile, the Employee Satisfaction Focus Group came up with 57 propositions in 2012, out of which 52 were accepted by upper management.

Internal Communication and Corporate CultureIn 2012, the company succeeded in living up to its corporate culture and values.

The company continued to release Communication Bulletins and hold Communication Meetings to inform employees of upper management decisions, and developments concerning the company, shareholders and sector.

The Human Resources management paid 46 visits to field teams. The information obtained during these visits was shared with units and departments, and action plans monitored.

Social Clubs The number of social clubs reached 11. These clubs include the Dance, Diving, Music, Photography, Book, Sailing, Travel and Gourmet, Fun, Healthy Living and Sports, Theater and Pet Clubs.

By focusing on “development” as a core value, AvivaSA made significant investment in the career development of its employees.

Human ResourcesPractices



In all the products, processes, systems and applications that it offers its clients, AvivaSA strives to raise the current standards and formulate creative solutions. To this end, the company embraces innovative approaches, and carries out projects and activities meant to enhance product quality standards and improve its customer service channels.

In order to enhance process productivity and customer and employee satisfaction in 2012, AvivaSA experts reviewed all corporate processes and redesigned the ideal processes. AvivaSA aims to leapfrog its rivals in the

industry with a brand new infrastructure and customer-oriented ideal processes, upon the completion of its infrastructure transformation program.

In the bancassurance channel, AvivaSA and Akbank jointly launched a transformation project aimed to increase strategic harmony and coordination through technological integration. In this vein, swift, reliable and efficient processes were designed to boost customer acquisition and satisfaction by capitalizing on the potential of branches, call centers and alternative distribution channels.

Research and Development Activities


Organizational Chart


AVIVASA EMEKLİLİK VE HAYAT A.Ş.GENERAL

Board of Directors

Meral Eredenk CEO

Ali Önder Lülü Assistant General Manager, Bancassurance

Osman Atıcı Group Manager, Turkey 1

Necip Tekneci Group Manager, Turkey 2

Dinçer Güleyin Division Manager, Bancassurance Development

Ufuk ÇanakçıoğluDivision Manager, Corporate Projects

M. Ali MesruoğluUnit Manager, Sales Support & Operations

Selim Avşar Assistant General Manager, Direct Sales

Fırat Dinçer Group Manager, Region 1

Kürşad Uygunlar Group Manager, Region 2

Tarık Keleş Group Manager, Region 3

Aslı İsmailoğlu Division Manager, Direct Sales and Agencies Development

Mirey Dergüzelyan Unit Manager, Sales Support

Fırat Kuruca Assistant General Manager, Finance

A. Sibel Öztep Division Manager, Accounting & Finance

Burçin Arkut Division Manager, Actuarial & Business Risk

Ebru Canlı ÖzkanDivision Manager, Logistics and Procurement

Fisun Koç Group ManagerStrategy & Change Management

Okan GünDirector Internal Audit

Şafak ÖzenDivision ManagerInternal Audit


Berkant Dişçigil Assistant General Manager, Operation

İdil Namyeter Division Manager, Technical Operations

Ebru Görçe Division Manager, Customer Satisfaction Center

Kurtuluş ÇaltekinDivision Manager, Legal

Levent Çağlayan Divison Manager, Quality Compliance

Nihat Ünalacak Assistant General Manager, Information Technologies

Altan Evni Group Manager, Information Technologies

Soner ŞahinDivision Manager, Technology Management

Sena GüngörDivision Manager, Project & Application Management

Tevfik ÖzelDivision Manager, Pension & Life Core Applications

O. İlhan Onurkan Division ManagerOperational Risk & Compliance Management

Emre GünermanAssistant General Manager, Marketing & Development

Ersegün Koçoğlu Division Manager, Marketing

Burcu CörütUnit Manager, Corporate Communications

Murat BayburtluoğluAssistant General Manager, Human Resources

Burak Yüzgül Division Manager, Human Resources Organizational Development & Compensation, Benefits

Berna Belkıs Division Manager, Human Resources, Sales


Corporate Governance Principles Compliance StatementAvivaSA Emeklilik ve Hayat A.Ş. abides by the Corporate Governance Principles issued by the Undersecretariat of the Treasury. The company takes utmost care to assure compliance with said principles. AvivaSA Emeklilik ve Hayat A.Ş. constantly updates its annual report and website in accordance with Corporate Governance Principles to provide accurate and up to date information to its stakeholders.

Corporate Governance CommitteeThe Corporate Governance Committee is in charge of laying out the structure of relations between AvivaSA managers, shareholders and other stakeholders, diligently ensuring compliance with Corporate Governance Principles, and making suggestions to the Board of Directors to this end.

Every March, the Corporate Governance Committee presents its report on compliance with Corporate Governance Principles to the Board of Directors, and sends one copy to the Undersecretariat of the Treasury.

AvivaSA forms its Corporate Governance Principles in accordance with the principles of equality, transparency, accountability and responsibility.

These principles are defined as follows:

a. Equality: In all of its activities, the company management treats shareholders and stakeholders as equals and prevents possible conflicts of interest.

b. Transparency: With the exception of commercial secrets, and information not yet shared with the public, the company

Corporate Governance Principles

discloses its financial and non-financial data in a timely, accurate, complete, comprehensible, analyzable, low-cost and easily accessible manner.

c. Accountability: Essentially, Board Members are accountable to the legal representative of the company and its shareholders.

d. Responsibility: The company management must comply with legislation, the Articles of Association and in-house regulations in all of its activities on behalf of the Joint-Stock Company, and this compliance must regularly be audited.

To ensure the exercising of shareholders’ rights, AvivaSA takes all measures required by legislation, the Articles of Association and other in-house regulations.

All shareholders are treated equally on principle.

The company makes no discrimination among shareholders in the exercising of their right to information and analysis. All types of information that may influence the exercising of their rights are presented to them in an up-to-date fashion via electronic media.

The company takes all steps to ensure the participation of shareholders in the General Assembly in a timely manner, prior to the meeting. It provides complete and unequivocal information on the agenda of the General Assembly so as to allow shareholders adequate preparation time. At the General Assembly meeting, the agenda items are presented in an impartial and detailed manner, and in an open and comprehensible fashion. The shareholders are given the right to explain their opinions and pose questions under equal conditions, enabling healthy debate to ensue.



The company refrains from any practice that might jeopardize the exercising of shareholders’ rights. All shareholders are given the opportunity to utilize their voting rights in the simplest and most straightforward manner.

The voting procedure is announced to shareholders beforehand, and again at the start of the meeting.

AvivaSA does its utmost to ensure the exercising of minority voting rights.

The company refrains from practices that might jeopardize the shareholders’ right to transfer their shares freely.

The company abides by a definite and consistent dividend distribution policy, which strikes an optimal balance between the interest of shareholders and those of the company. At the General Assembly meeting, shareholders are informed of various aspects of the dividend distribution policy. Information about dividend distribution is featured in the annual report, and also shared with the public via the information disclosure policy.

AvivaSA conducts its business and transactions transparently.All information that can be disclosed, and that might affect AvivaSA’s financial position and operational results is presented to the public in a timely, accurate, complete, comprehensible, analyzable, low-cost and easily accessible manner.

The public is immediately informed of any significant development concerning the company’s financial position and activities, such as filing for bankruptcy or concordatum, the initiation of a liquidation process, or a court decision to declare the company bankrupt.

The company’s website is used effectively to inform the public.

AvivaSA has an easily accessible website. In addition to the information required by the Communiqué on the Provision of Information in Insurance Contracts issued in the Official Gazette dated 28 October 2007 and numbered 26684, Article 13 on the “Obligation to Create a Website”, paragraph three, clause (a); the company’s web site includes the following:

a. Corporate information about the company in Turkish and English,

b. Trade registry data,c. Articles of Association, d. Information on Board Members,e. Annual reports,f. Financial statements concerning the current

year and the past five years, including independent audit reports and footnotes,

g. The company’s mission and vision. The Board of Directors presents to the General Assembly the principles governing the company’s information disclosure policy, and shares these with the public.

Information disclosure policy indicates what information, in addition to that required by legislation is to be disclosed to the public, and in what form, as well as how frequently and through which means this information will be disclosed, etc.

The company oversees the balance between transparency and the protection its interests, while defining which information is to be classified as a commercial secret.

The Code of Ethics is shared with the public within the framework of the information disclosure policy.

The dividend distribution policy is presented in the annual report, and shared with the public through the information disclosure policy.

The annual report provides sufficient detail to ensure that the public can access all types of information on company activities.


At AvivaSA, the rights of stakeholders are protected independently of one another. In case of a conflict of interest between stakeholders, or on the occasion when a stakeholder is a member of more than one interest group, the company seeks to strike the right balance to protect all rights involved.

AvivaSA takes all the necessary precautions to ensure customer satisfaction in the presentation of its products and services. With regards to commercial secrets, the company takes care to ensure the protection of customer and supplier data. The company takes all necessary measures to establish sound relations free of any fraudulent act between the company and its customers, and to ensure compliance with agreements made between respective parties.

While establishing its recruitment policies and planning careers, the company abides by the principle of providing equal opportunities for individuals under equitable conditions.

With a view to establishing a participative management atmosphere, the company holds employee meetings to inform them on financial benefits, remuneration, careers, training and health, etc., thus fostering healthy debate.

The job definitions of and the division of labor among company employees are determined by managers and announced to employees.

The company provides a safe work environment for employees, and continuously improves these conditions. Measures are taken to protect employees against physical, spiritual and emotional abuse within the organization. Employees, or their representatives, are notified of all decisions and developments that concern them.

The company is well aware of its social responsibilities; it abides by legislation and ethical rules concerning the environment, consumers and public health, and discloses relevant policies to the public.

The General Assembly meetings are announced to shareholders, and measures taken to ensure that they can analyze the annual report and make preparations ahead of the General Assembly. At the General Assembly, shareholders’ right to ask questions is protected and their questions are duly answered. Shareholders can conveniently access the meeting minutes of the General Assembly.

The Board of Directors and managers conduct their activities in a fair, transparent, accountable and responsible fashion.

The Board of Directors sets the company’s policies and strategies, the methods to implement these policies and strategies, developments concerning these policies and strategies, and the processes of monitoring and assessment. The Board of Directors continuously and effectively measures the degree to which the company attains targets, as well as its activities and past performance. Whenever deemed necessary, it takes necessary preemptive precautions before a problem arises.




The Board of Directors oversees the compliance of company activities with legislation, the Articles of Association, in-house regulations and policies.

The Board of Directors plays a key role in settling any disputes between the company and its shareholders.

The duties and authorities of the Board Members and other executives are clearly and comprehensibly defined in the annual report.

Board Members fulfill their duties with competence and goodwill, which means that they always display the care and attention required of them. It is essential for the Board Member to dedicate sufficient time to company activities. The Board of Directors’ meetings are planned and organized in an efficient and productive manner.

In order to ensure that the Board Members can completely fulfill their duties, mechanisms are established to help them access all information they may require.

The Board of Directors is responsible for the preparation, presentation and accuracy of periodical financial statements in accordance with current legislation and international accounting standards. The Board of Directors takes a separate decision to approve the periodical financial statements and the annual report.

All the rights, benefits and salaries enjoyed by the Members and upper management, and the criteria and remuneration principles governing these are published online in the annual report. All such explanations concern the entire body of senior managers, and not merely individual executives.

The company has not borrowed money, extended a loan, extended a personal loan via a third party, or given a collateral or guarantee to any Board Member or senior manager.

Managers ensure that company activities are carried out in line with the mission, vision, targets, strategies and policies, and act in accordance with the annual financial and operational plans approved by the Board of Directors. In fulfilling their duties, managers comply with legislation, the Articles of Association and in-house regulations and policies.

It is ensured that managers possess the requisite professional qualities to fulfill their duties.

Managers cannot use secret or undisclosed information about the company to their benefit, or to the benefit of third parties. They cannot disseminate erroneous, misleading or unfounded information, news or opinions about the company.

The Board Members have conducted no activities or transactions that might breach the ban on doing business or competing with the company, which would necessitate General Assembly approval.

The company’s vision, mission and strategic targets are set, approved and implemented.

AvivaSA’s vision, mission and strategic targets, as defined in the annual report, are expressed in an open and comprehensible manner.

Strategic priorities and targets are determined by the Strategy and Change Management Department with the participation of all company executives. Conditions of competition, macroeconomic circumstances, and current expectations in the national and international finance industries are taken into account in the setting of strategic targets. The ensuing strategic targets are submitted for Board of Directors approval and extensively debated. In line with the strategic priorities and targets, short-, medium- and long-term business plans are created and then monitored periodically.

The Executive Committee, Audit Committee and Risk Committee report to the Board of Directors. Since there are no ultimate controlling real persons at the company, all the Board Members sitting on these committees are independent and act impartially in decision making.

The critical performance criteria approved at Board of Directors meetings are revised whenever deemed necessary by periodical reviews of the company’s performance, according to the degree to which budget and targets are attained, and with measures and decisions being taken regarding areas of potential risk.


The company’s ethical values, internal equilibrium and strategic targets are taken into consideration in formulating remuneration policy.

The general policy governing the salaries of Board Members, senior managers and other personnel is determined by the Board of Directors.

The salary of each Board Member depends on the amount of time they will dedicate to the company during meetings, in preparation before and after meetings, and in special projects.

The salaries and benefits of managers and employees are determined according to their individual qualities, and contribution to the company’s achievements.

The company’s Ordinary General Assembly Meeting for 2012 was held on 29 March 2012. Shareholders representing 99.68% (TL 35,663,611.50) of the company’s total capital of TL 35,779,197 were present at the meeting.

Advertisements indicating the place, date, hour and agenda of the meeting, and examples of letters of attorney were published in the Turkish Trade Registry and in the Vatan and Milliyet newspapers approximately three weeks prior to the meeting.

Information about the meeting was also sent to the holders of registered shares via registered letter, in the same period.

The annual report, financial statements and reports, dividend distribution proposal, agenda items of the General Assembly, the latest version of the Articles of Association, and the full texts of any amendments to the Articles of Association are submitted for the scrutiny of shareholders at the Head Office, once the invitation to the General Assembly is issued.

The draft agenda for the Board of Directors meeting is prepared by the CEO, and is finalized according to the suggestions of the Chairman and Board Members.

The Board of Directors convened four times in 2012.

The meeting date is chosen so as to allow the participation of all Board Members, and all are present at the meetings except under extraordinary circumstances.

It is ensured that the dates of Board of Directors meetings are set at the end of the previous year, and duly announced to the Board Members. To this end, the Board of Directors Secretariat has been set up. During 2012, no Board Member voted against any decision made by the Board of Directors.

Board Members do their utmost to be physically present at all important meetings covering such issues as the company’s field of activity, business plans, completion of the annual report, appointment or election of members, organizational changes, appointments and dismissals, formation of committees, and determination of dividends, mergers and restructuring.




Objective and Scope The company’s information disclosure policy, designed to provide reliable information to shareholders and stakeholders including the general public, has come into effect upon the approval of the Board of Directors, pursuant to the Communiqué on Corporate Governance Principles at Insurance and Reassurance Companies and Pension Companies issued by the Undersecretariat of the Treasury, and the public disclosure principles outlined in the Communiqué on the Establishment and Activities of Pension Funds.

General Rules The information disclosure policy is in full accord with the Turkish Commercial Code, and Law on Private Pension Savings and Investment System, as well as the company’s Corporate Governance Principles.

Its objective is to provide timely, accurate, equitable and complete information to shareholders, customers, stakeholders and public agencies.

It ensures that the information to be disclosed to the public is comprehensible, analyzable, accessible and low-cost so as to better allow said individuals and agencies to make decisions.

The information disclosure policy does not disseminate commercial secrets, customer secrets or information the disclosure of which is legally problematic.

The information disclosure policy is presented by the Board of Directors to the General Assembly and disclosed to the pubic via the website.

Means of Disclosure The annual and interim financial statements and their footnotes, as well as independent audit reports are sent to the Undersecretariat of the Treasury within the legal timeframe, and published on the company’s website.

Information Disclosure Policy

The annual financial reports are announced via two national newspapers in the month following their approval by the General Assembly.

Financial statements are sent to the Undersecretariat of the Treasury on a monthly basis and to the Association of the Insurance and Reinsurance Companies of Turkey on a three-monthly basis.

Annual activity reports published at the end of the accounting period are sent to the Undersecretariat of the Treasury, upon approval of the Board of Directors and their presentation to the General Assembly, and published on the website.

The Company Web Site (www.avivasa.com.tr)The website of AvivaSA Emeklilik ve Hayat A.Ş. is designed to provide comprehensive information to the public and all stakeholders. All information on the website is updated regularly. The internal charters, prospectuses, introduction forms, prices and returns of the pension funds created by the company are published. Independently audited financial statements are also available for perusal.

Advertisements in the Turkish Trade Registry Gazette (The Company’s Trade Registry No.: 27158)The decisions of Ordinary and Extraordinary General Assembly meetings, capital increases and all amendments to the Articles of Association are disclosed to the public via the Turkish Trade Registry Gazette.

Authority to Make Public Statements The Chairman, Board Members, CEO and Executive Vice Presidents are authorized to make public statements via the media.

Supervision of the Information Disclosure Policy The Board of Directors is responsible for overseeing the information disclosure policy. The Board monitors and audits the efficient and reliable implementation of this policy. The implementation of the information disclosure policy meanwhile, is the responsibility of company management.


In the year 2012, legislation governing the company’s business line underwent radical change. The new Turkish Commercial Code No. 6102, which also governs insurance policy law, came into effect on 1 July 2012. Additionally, Law No. 6327 on the Private Pension Savings and Investment System, and the Law on the Amendment of Certain Laws and Statutory Decrees overhauled the private pension system as of 1 January 2013 by revising Law No. 4632 on the Private Pension Savings and Investment System.

Legal Explanations

In 2012, regulatory authorities conducted audits of the company.

The company received no significant sanctions that could negatively impact its financial structure resulting from the contravening of legislation. In 2012, the company paid TL 60 thousand in administrative fines for 29 transactions to the legal authorities.

The Legal Department is in charge of following up any lawsuits by, or against the company. Information on the lawsuits followed up in 2012 is as follows:

Lawsuits related to insurance activities:

Lawsuits transferred to 2012 from 2011

Lawsuits filed in 2012 Lawsuits settled in 2012

128 38 7

Lawsuits settled in favor of the company in 2012

Lawsuits settled in mutual compromise in 2012

Lawsuits settled to the detriment of the company in 2012

3 1 3

In 2012, the company paid TL 38,359 due to unfavorable legal settlements in three cases.



Lawsuits related to private pension activities:

Lawsuits transferred to 2012 from 2011

Lawsuits filed in 2012 Lawsuits settled in 2012

20 3 0

In 2012, no payments were made for any settled lawsuits related to private pension activities.

action or counter action, according to the conditions and circumstances known to the company at the time at which the transaction or measure was taken or avoided, that no measure taken or avoided was potentially detrimental to the company, and that, accordingly, no transaction or measure necessitates equalization.

Information on parent companies and their subsidiaries: In the Affiliation Report issued by AvivaSA Emeklilik ve Hayat A.Ş. Board of Directors on 28 February 2013, it was concluded that in 2012, in all transactions with its parent companies and their subsidiaries, AvivaSA Emeklilik ve Hayat A.Ş. took the necessary


StatutoryAuditors


Şerafettin KarakışAuditorŞerafettin Karakış graduated from the Department of Finance at the Faculty of Political Sciences in Istanbul University and completed a postgraduate degree on fiscal policy at the same university. Having begun his career in the Board of Public Accountants at the Ministry of Finance as a public accountant, Mr. Karakış transferred to the Financial Affairs and Financing Division of Sabancı Holding. He completed the executive MBA program at the Sabancı University, Faculty of Administrative Sciences. Since 2006 he has been working at Sabancı Holding.

Selmin ÇağatayAuditorSelmin Çağatay graduated from the Department of Finance of the Faculty of Business Administration at Bosphorus University. Having begun her career as an Auditor at Arthur Andersen, Ms. Selmin Çağatay was active in the audit processes of more than 15 companies from various industries. In 1987, she joined CPC International Turkey as the Accounting Manager, a position she held for a year and a half, before joining Commercial Union Insurance (now Aviva Sigorta) in December 1988 as Accounting Manager. In 1989 she was appointed Group Manager, Executive Vice President in charge of Financial Affairs, Data Processing and Organization in 1991 and Board Member of in 2001, a position she still holds.


Explanations on Special and Public Audits During the Accounting Period

The Capital Markets Board’s routine audit of the listed pension funds established by the company began in July 2012 and ended in November 2012. As part of the audit, all 2011 operations related to the pension funds as well as the internal control activities, processes and practices were scrutinized.

The company’s activities falling within the scope of Internal Systems Regulation were audited by the Undersecretariat of the Treasury’s Insurance Audit Board from April until May 2012, whereby the activities of the Board of Directors, as well as the risk management structure, internal control system and internal audit structure were analyzed.

The Insurance Audit Board also conducted a PPS audit in May and June, following up the results of its previous audit, verifying the compliance of private pension operations with legislation, checking the company’s notifications on participants’ rights and obligations arising from the contract, and analyzing private pension brokerage practices.


Okan GünInternal Audit DirectorOkan Gün received his degree in management engineering from Istanbul Technical University. Before joining AvivaSA, he worked at the Istanbul and London offices of PricewaterhouseCoopers. A Certified Public Accountant, he lectured on audit and insurance at a number of universities including Bahçeşehir University, Sabancı University and Marmara University. Since June 2009 Okan Gün has been serving as Internal Audit Director at AvivaSA.

Şafak ÖzenInternal Audit ManagerŞafak Özen graduated from the Faculty of Business Administration at Bilkent University and received education on business administration at UC Berkeley. Before joining AvivaSA, he held various finance and audit positions at KPMG, MedNet Turkey, Aksigorta and AK Emeklilik. Since November 2007, Mr. Özen has been serving as Internal Audit Manager at AvivaSA.

Internal Audit

Salim DursunoğluSenior AuditorSalim Dursunoğlu graduated from the Department of Management Engineering at the Istanbul Technical University. Before joining AvivaSA, he worked at the audit firm PricewaterhouseCoopers (PwC). Holder of a Certified Public Accountant license and a CIA certificate, Salim Dursunoğlu has been serving as Senior Auditor at AvivaSA since September 2008.

İlkin Esra YeralSenior Auditorİlkin Esra Yeral graduated from the Department of Business Administration (English) at the Istanbul University. Before working at AvivaSA, she worked at the audit firm Ernst & Young. Since February 2009 İlkin Esra Yeral has been serving as Senior Auditor at AvivaSA.



In 2012, the salaries, premiums, bonuses and other benefits offered to the company’s upper management totaled TL 4.2 million, up from TL 3.6 million in 2011. In 2012, the travel, accommodation and representation fees, and allowances paid to the upper management stood at TL 0.4 million, compared to TL 0.4 million in 2011. The total indemnity of the life insurance held by the company’s upper management was at USD 1.8 million in 2012 and USD 1.6 million in 2011.

Remuneration of Board Members and Senior Managers


AVIVASA EMEKLİLİK VE HAYAT A.Ş.

ANNUAL REPORT FOR THE PERIOD 1 JANUARY 2012 – 31 DECEMBER 2012, PREPARED IN ACCORDANCE WITH THE COMMUNIQUÉ ON THE FINANCIAL STRUCTURE

OF INSURANCE, REASSURANCE AND PENSION COMPANIES AND TURKISH COMMERCIAL CODE, ARTICLE 516

The company’s Annual Report for the accounting period ending on 31 December 2012, and prepared in accordance with the principles and procedures outlined in the Communiqué on the Financial Structure of Insurance, Reassurance and Pension Companies and Turkish Commercial Code, Article 516, is hereby submitted for your scrutiny and approval.

Best regards, 28 February 2013

Haluk Dinçer Chairman

Meral Eredenk Board Member

CEO

M. Fırat Kuruca Finance Executive

Vice President

A. Sibel Öztep Accounting & Finance Department Manager



Financial Information and Risk Management

AvivaSA’s audit methodology is risk-based and in harmony with International Internal Audit Standards; furthermore, it is connected with COSO (Committee of Sponsoring Organizations of the Treadway Commission) and ERM (Enterprise Risk Management), and in compliance with their provisions.

AvivaSA capped the year of 2012 with a return on equity of 24.2%, thus becoming one of the most profitable among all Sabancı Group and Aviva Plc. companies.

24.2%


AvivaSA Emeklilik ve Hayat’s internal audit system was structured in accordance with the Communiqué on the Internal Systems of Insurance, Reassurance and Pension Companies issued in the Official Gazette dated 21 June 2008 and numbered 26913. An Audit Committee was set up to help protect the interests of the company’s stakeholders and to help implement Corporate Governance Principles in accordance with applicable laws, regulations and practices. According to the organizational chart, the Internal Audit Department operates under the Board of Directors.

AvivaSA’s audit methodology is risk-based and in harmony with International Internal Audit Standards; furthermore, it is connected with COSO (Committee of Sponsoring Organizations of the Treadway Commission) and ERM (Enterprise Risk Management), and in compliance with their provisions.

Internal Audit Activities

The company aims to manage its internal control system so as to keep all risk factors that might jeopardize strategic and operational targets within defined maximum limits. Accordingly, it was decided to establish risk management and internal audit departments within the organization. This was designed to ensure operational productivity and efficiency, and to issue financial and managerial results in a timely, accurate and reliable manner, as well as to comply with applicable legislation, protect shareholder investments and company assets, and manage risks effectively and productively.

The scope of internal audit activities consists of the analysis and assessment of the efficiency and competence of internal control, risk management and administrative processes in order to yield reliable, independent and impartial opinions on these processes, and to present proposals for improvement and development. In addition, the prosecution of financial crime is also among the responsibilities of the internal audit department.


Financial inFormation and risk management 81

In 2012, the internal audit department conducted a total of eight audits, namely, Life Insurance Risk Assessment and Reassurance, Human Resources Governance, Financial Reporting and Taxation, Fund Management, MASAK (Financial Crimes Investigation Board), Capital Management, Process Management Prior to IT Systems Infrastructure Transformation, and Legal Audit, sharing its reports with the Audit Committee and Upper Management. The findings of the audits and actions agreed upon together with the AvivaSA upper management were presented to the Board of Directors, with the findings and actions submitted for Board Member approval. Additionally, the internal audit department delivered a consultancy service to bring process designs on a par with Internal Audit Standards, prior to the in-house process improvements and IT infrastructure transformation.

The Internal Audit Department consists of one Audit Director, one Senior Audit Manager and two Senior Managers, who possess the qualifications outlined by the Communiqué on the Internal Systems of Insurance, Reassurance and Pension Companies. Department personnel have no responsibility, authority or influence on the audited departments of the company, and their full independence is ensured.


Financial SituationThe year 2012 saw competition intensify in the private pension and life insurance segments of the insurance sector, as a fresh period began in private pensions with the introduction of new legislation.

In 2012, and in the face of such intense competition, the company followed the right strategies to grow profitably, outperforming its own targets.

And whereas the overall direct protection premium production of all private pension an life insurance companies grew by 6% in 2012, the company achieved 51% growth, thereby increasing its market share by two percentage points and rising from 9th to 6th position in the said market.

In 2012, AvivaSA produced a total of TL 197.5 million in life insurance and personal accident insurance premiums, and brought its market share among private pension and/or life insurance companies in terms of direct premium production up to 7% (an increase of 1.6 percentage points). (2011: TL 148.4 million)

Assessment of the Financial Situation, Profitability and Indemnity Capacity

* Based on Haymer and TSRŞB data as of 31 December 2012.

20122011

166.5TL million

110.0TL million

The company achieved 51% growth in a market that expanded by just 6% overall.

51% Total Protection

Premium

increase6th position in 2012 9th position in 2011



In 2012, too, AvivaSA preserved its leadership position in the PPS market. The company’s PPS fund volume grew by 38% to TL 4,075 million and its participant number by 17% to 493 thousand individuals.

AvivaSA ranks 2nd in the sector with a 19.9% market share in terms of PPS fund volume.

* Based on Pension Monitoring Center data as of January 4, 2013.

2012 20122011 2011

4,075.0TL million

493,430

2,957.9 TL million

420,987

In 2012, the company ranks second in the market with a 19.9% share.

In 2012, the company was an industry leader in terms of PPS participants.

38% increase

17% increase

PPS fund volume

PPS participant number

AvivaSA closed the year of 2012 with a return on equity of 24.2%, thus becoming one of the most profitable among all Sabancı Group and Aviva Plc. Companies. The company’s net profit grew by 36% to TL 53.0 million and its net SFRS profit by 21% to TL 38.8 million for the year. In 2012, for the first time, it distributed its entire 2011 distributable profit of TL 22.9 million to its shareholders.

Calculated according to the principles set by the Undersecretariat of the Treasury, the company’s capital adequacy ratio as of 31 December 2012 was at 291%, the clearest indication of robust capital management. The minimally required shareholders’ equity stood at TL 60 million and shareholders’ equity at TL 174.8 million (excepting provisions for equalization).


In the life and accident insurance branches, AvivaSA paid a total of TL 134.6 million in indemnity for surrender, maturity, death and invalidity.

The company initiated an investment drive in 2012 to render its IT infrastructure more flexible, whereby it invested TL 7.7 million in material and immaterial assets, representing an increase of 161% over the prior year. Investments in distribution channels also continued to grow. The workforce of sales channels had expanded by 15% to 1,146 individuals as of end-2012.

The company plans to expand its market share in 2013 without compromising on profitability; to position itself optimally in the growing PPS market with its multi-channel distribution structure, robust shareholding structure and shareholders equity and specialized staff; and to increase its share of the risk market.

AvivaSA is an industry leader in terms of its PPS fund volume. The company plans to preserve its robust shareholders equity level in the future. It will continue to invest in infrastructure, sales and Head Office staff to achieve sustainable growth and profitability in 2013.

2012 20122011 2011

53.0TL million

38.8

39.0 TL million

32.0

In 2012, the company increased its gross profit by 36% over the previous year to Tl 53 million.

AvivaSA capped the year of 2012 with a return on equity of 24.2%, thus becoming one of the most profitable among all Sabancı Group and Aviva Plc. companies.

36% increase

21% increase

Pre-tax Profit

After-tax Profit

Assessment of the Financial Situation, Profitability and Indemnity Capacity



Progress in Assets and Liabilities The company’s total asset volume grew by 28% over the prior year to TL 4,958 million.

The largest figure among all asset items is liabilities from pension activities. This item corresponds to the total fund volume invested by PPS participants in the company’s pension funds, and has grown by 38% over the prior year to TL 4,051 million.

Another component of the company’s asset volume is financial assets and financial investments, the risk of which is assumed by the policy holders, and accounts for 8.3% of the total. This item is TL 409.5 million in size and corresponds to total financial assets where the funds of depositors and policy holders managed by the company are invested.

Another asset category is foreign currency assets (TL 271 million), which accounts for 5.5% of the total. These assets are held in parallel with the company’s foreign currency liabilities and function as a hedge against foreign currency risk.

As for the liabilities side of the balance sheet of AvivaSA Emeklilik ve Hayat A.Ş., 83.2% of the total corresponds to liabilities from pension activities, and 12.5% to technical provisions. On the other hand, the mathematical provision for life, which corresponds to our liabilities towards policy holders, fell by 5.9% over the previous year to TL 544.6 million.

Indemnity Payment Capacity The total gross indemnity paid by AvivaSA in 2012 stands at TL 134.6 million. Indemnity payments correspond to surrender, maturity, and death indemnity coverage associated with life insurance policies, cumulative products, and combined products that serve both functions.

In 2012, the company’s death and invalidity indemnity coverage -with the exception of surrender and maturity payments- stood at TL 20.8 million. Taking into consideration the company’s current liquidity and the maturity structure of its investments, it has a strong indemnity payment capacity.


Risk Management StructureAvivaSA’s robust risk management structure is the factor underlying the company’s capability to determine and assess threats and opportunities in decision making processes through a risk-based approach. AvivaSA manages risks through the Risk Management Model established according to national and international legislation. The company’s Internal Audit Department reporting to the Board of Directors provides impartial and independent assurance for the strength of AvivaSA’s risk management. AvivaSA’s internal audit structure is established in line with legislation, and is in tune with international internal audit standards.

Risk and Business Monitoring Management AvivaSA’s Risk Management Policies reflect the risk management practices of the company during the activity period.

Risk management activities are conducted by all departments of the organization.

Information on Risk Management Policies by Risk Type

The targets of these risk management activities are as follows.

• Ensuring compliance with legal obligations and the company’s Risk Management Policies,

• Identifying all structural risks the company is exposed to and defining risk acceptance criteria,

• Designing and applying internal control mechanisms and actions in line with these risks, and assuring the Board of Directors about the transparent reporting of the said risks.

Risk management is the company’s main means of avoiding undesirable outcomes in the pursuit of its targets. The management approach interacts with decision making processes through a risk-based approach, which in turn allows the company to use its resources efficiently, and thus meet the expectations of all business partners including customers and shareholders to the highest level. In this approach, dubbed the triple defense line, the division of authority and responsibility is as follows:

Echelon Responsible

Authorities and Duties

1. Line of Defense

Company Management

Identifying and assessing risks, managing and reporting these efficiently, ensuring compliance with company policies, establishing the internal control system

2. Line of Defense

Risk and Business Monitoring Management

Supporting the company management in identifying, assessing, managing and reporting risks, overseeing compliance with company policies and identifying any violation, and overseeing the continuity of the internal control system; in short, assisting in the functioning of AvivaSA’s Risk Management Model

3. Line of Defense

Internal Audit Assuring the Board of Directors about the efficiency of the company’s risk management and internal control mechanism prior to legal audits, from an impartial and independent viewpoint



AvivaSA’s Risk Management Model consists of six primary and 36 secondary risk classes. This model is concretized in 30 Risk Management Policies, which lay out the structural risks of the company active in the life insurance and private pension industry, as well as measurable data concerning these risks, risk factors, acceptable risk limits for the company and their management.

Risk Management ActivitiesThe risks faced by the company are identified by the company management within the scope of the AvivaSA Risk Model, and assessed by upper management. In this assessment, the probability of these risks and their possible effects are taken into consideration. Risks and associated risk management actions (internal controls and actions) are monitored closely and methodically.

Quarterly risk reports covering the company’s entire activities to be submitted to the Board of Directors are prepared and discussed at the Risk Committee under the Board of Directors. These reports cover strategic, operational, financial and insurance risks, and include internal controls and action plans for the optimal management of risks. As such, they provide support to the company management in risk management and monitoring. The company has successfully managed all risks to which it was exposed in 2012, especial those related to legal changes concerning the industry, and has set its 2013 strategies and risk/return equilibrium in due consideration of these risks.

Convenience translation of independent auditors’ report and financial statements originally issued in Turkish)

AvivaSA Emeklilik ve Hayat A.Ş. Financial statements together with independent auditors' report as of December 31, 2012

AvIvASA 2012 AnnuAl report92

(Convenience translation of independent auditors’ report originally issued in Turkish) AvivaSA Emeklilik ve Hayat Anonim Şirketi Table of contents

Pages

Independent auditor's report 1 - 2

Balance sheet 3 - 7

Statement of income 8 - 9

Statement of cash flow 10

Statement of changes in shareholders’ equity 11

Notes to the financial statements 12 – 88

93-94

PAGES

95-99

100-101102103

104-179

fınancıal ınformatıon 93

(Convenience translation of independent auditors’ report originally issued in Turkish) AvivaSA Emeklilik ve Hayat A.Ş.’nin Independent auditors’ report as of December 31, 2012 To the Board of Directors of AvivaSA Emeklilik ve Hayat A.Ş. 1. We have audited the accompanying balance sheet of AvivaSA Emeklilik ve Hayat Anonim

Şirketi (“the Company”) as of December 31, 2012 and the related statement of income, statement of changes in equity, cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes.

Company Management’s responsibility for the financial statements 2. The Company management is responsible for the preparation and fair presentation of these

financial statements in accordance with the prevailing accounting principles and standards set out as per the insurance legislation. This responsibility includes designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility 3. Our responsibility is to express an opinion on the financial statements based on our audit. We

conducted our audit in accordance with the regulations regarding auditing principles set by insurance legislation. Those standards require that the ethical principles are complied with and that the audit is planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatement

Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The independent audit procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the internal systems relevant to the entity are considered. However our purpose is not expressing an opinion on the effectiveness of the entity's internal control, but to consider the relation of the financial statements prepared by the Company management and the internal systems in order to design audit procedures that are appropriate in the circumstances. Our audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

4. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Avivasa Emeklilik ve Hahat Anonim Şirketi as of December 31, 2012 and its financial performance and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards (see financial statement Note 2) set out as per the insurance legislation.

Additional paragraph for convenience translation to English:

5. As of December 31, 2012, the accounting principles described in Note 2 to the accompanying financial statements differ from International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. The effects of differences between accounting principles and standards described in Note 2 and IFRS have not been quantified in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations of the Company in accordance with IFRS.

Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst&Young Global Limited Seda Hacıoğlu, SMMM Partner February 8, 2013 Istanbul, Turkey


AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the balance sheet at December 31, 2012 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Assets Audited Audited

Notes December 31, 2012

December 31, 2011

I- Current Assets A- Cash and Cash Equivalents 2.12, 14 299,185,453 268,144,617 1- Cash 2.12, 14 1,844 830 2- Cheques Received - - 3- Banks 2.12, 14 235,212,090 214,427,517 4- Cheques Given and Payment Orders (-) - - 5 Bank Guaranteed Credit Card Recaivables less than three months - - 6- Other Cash and Cash Equivalents 2.12, 14 63,971,519 53,716,270 B- Financial Assets and Financial Investment at Insured’s Risk 11.4 409,546,878 423,394,806 1- Available-for-Sale Investments 11.4 30,929,539 14,438,065 2 Held to Maturity Investments - - 3- Trading Investments 11.4 16,389,210 14,528,617 4- Loans - - 5- Provision for Loans (-) - - 6- Financial Assets at Insured’s Risk 11.4 362,228,129 394,428,124 7- Company's Shares - - 8- Provision for diminution in value (-) - - C- Receivables from Main Operations 20,798,841 16,948,496 1- Due from Insurance Operations 12.1 9,848,772 8,007,009 2- Provision for Due from Insurance Operations (-) - - 3- Due from Reinsurance Operations - - 4- Provision for Due from Reinsurance Operations (-) - - 5- Premium Reserves - - 6- Loans to Insured 12.1 404,067 588,178 7- Provision for Loans to Insured (-) - - 8- Due from Private Pension Fund Operations 12.1 10,546,002 8,353,309 9- Doubtful Receivables from Main Operations - - 10- Provision for Doubtful Receivables from Main Operations (-) - - D- Due from Related Parties 12.1 170,148 49,682 1- Due from Shareholders 12.2 150,812 29,120 2- Due from Subsidiaries - - 3- Due from Equity Investments - - 4- Due from Joint-Ventures - - 5- Due from Personnel 3,391 1,657 6- Due from Other Related Parties 45 15,945 18,905 7- Rediscount on Due from Related Parties (-) - - 8- Doubtful Receivables from Related Parties - - 9- Provision for Doubtful Receivables from Related Parties (-) - - E- Other Receivables 122,353 172,507 1- Leasing Receivables - - 2- Unearned Leasing Interest Income (-) - - 3- Deposits and Guarantees Given 19,616 19,617 4- Other Receivables 100,387 99,971 5- Rediscount on Other Receivables (-) - - 6- Other Doubtful Receivables 2,350 52,919 7- Provision for Other Doubtful Receivables (-) - - F- Deferred Expenses and Income Accruals 47.1 15,876,940 10,563,611 1- Deferred Acquisition Expenses 14,606,922 10,115,341 2- Accrued Interest and Rent Income - - 3- Deferred Income 47.1 110,196 - 4- Other Deferred Expense Accruals 1,159,822 448,270 G Other Current Assets 67,578 400,077 1- Prepaid Office Supplies - - 2- Prepaid Taxes and Funds 35 - 371,585 3 Deferred Tax Assets - - 4- Job Advances 67,578 28,492 5- Advances to Personnel - - 6- Count Shortages - - 7- Other Current Assets - - 8- Provision for Other Current Assets (-) - - I- Total Current Assets 745,768,191 719,673,796



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Assets Audited Audited Notes December 31, 2012 December 31, 2011 II- Non-Current Assets A- Receivables from Operations 4,195,622,493 3,114,802,463 1- Due from Insurance Operations - - 2- Provision for Due from Insurance Operations (-) - - 3- Due from Reinsurance Operations - - 4- Provision for Due from Reinsurance Operations - - 5- Premium Reserves - - 6- Loans to Insured 12.1 144,089,197 156,736,660 7- Provision for Loans to Insured (-) - - 8- Due from Private Pension Fund Operations 17.6 4,051,533,296 2,958,065,803 9- Doubtful Receivables from Main Operations 12.1 570,351 570,351 10- Provision for Doubtful Receivables from Main Operations (-) 12.1 (570,351) (570,351) B- Due from Related Parties - - 1- Due from Shareholders - - 2- Due from Subsidiaries - - 3- Due from Equity Investments - - 4- Due from Joint-Ventures - - 5- Due from Personnel - - 6- Due from Other Related Parties - - 7- Rediscount on Due from Related Parties (-) - - 8- Doubtful Receivables from Related Parties - - 9- Provision for Doubtful Receivables from Related Parties (-) - - C- Other Receivables 20,861 23,061 1- Leasing Receivables - - 2- Unearned Leasing Interest Income (-) - - 3- Deposits and Guarantees Given 20,861 23,061 4- Other Receivables - - 5- Rediscount on Other Receivables (-) - - 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables (-) - - D- Financial Assets 45.2 849,457 857,459 1- Investment Securities - - 2- Subsidiaries - - 3- Subsidiaries Capital Commitments (-) - - 4- Equity Investments - - 5- Equity Investments Capital Commitments (-) - - 6- Joint-Ventures - - 7- Joint-Ventures Capital Commitments (-) - - 8- Financial Assets and Financial Investments at Insured’s Risk - - 9- Other Financial Assets 45.2 910,051 919,465 10- Provision for diminution in value (-) 45.2 (60,594) (62,006) E- Tangible Assets 6 5,800,125 4,029,006 1- Investment Property - - 2- Provision for Diminution in Value of Investment Property (-) - - 3- Property for Operational Usage - - 4- Machinery and Equipment 6 6,203,529 5,733,771 5- Furniture and Fixtures 6 9,093,613 8,950,834 6- Motor Vehicles 6 - - 7- Other Tangible Assets (including leasehold improvements) 6 9,483,000 8,148,966 8- Leased Assets 6 1,175,521 1,184,279 9- Accumulated Depreciation (-) 6 (20,155,538) (19,988,844) 10- Advances Given for Tangible Assets (including construction in progress) - - F- Intangible Assets 8 4,831,598 1,814,772 1- Rights - - 2- Goodwill - - 3- Start-up Costs - - 4- Research and Development Expenses - - 5- Other Intangible Assets 8 26,745,795 22,658,116 6- Accumulated Amortization (-) 8 (22,840,417) (21,534,985) 7- Advances Given for Intangible Assets 6 926,220 691,641 G- Deferred Expenses and Income Accruals 972,619 - 1- Deferred Acquisition Expenses - - 2- Accrued Interest and Rent Income - - 3- Other Deferred Income and Expense Accruals 47.1 972,619 - H- Other Non-Current Assets 4,104,724 3,583,500 1- Effective Foreign Currency Accounts - - 2- Foreign currency Accounts - - 3- Prepaid Office Supplies - - 4- Prepaid Taxes and Funds - - 5- Deferred Tax Assets 21,35 4,104,724 3,583,500 6- Other Non-Current Assets - - 7- Other Non-Current Assets Depreciation (-) - - 8- Provision for Diminution in Value of Other Non-Current Assets - - II- Total Non-Current Assets 4,212,201,877 3,125,110,261 TOTAL ASSETS (I+II) 4,957,970,068 3,844,784,057



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Liabilities Audited Audited Notes

December 31, 2012 December 31,

2011 III- Current Liabilities A- Financial Liabilities 1,189,478 2,279,999 1- Due to Credit Institutions 2.17 1,189,477 2,280,000 2- Leasing Payables 1 (1) 3- Deferred Leasing Costs (-) - - 4- Short-Term Installments of Long-Term Borrowings - - 5- Issued Debt Securities - - 6- Other Issued Debt Securities - - 7- Value Differences of Other Issued Debt Securities (-) - - 8- Other Financial Payables (Liabilities) - - B- Payables from Main Operations 19 77,637,044 58,467,488 1- Payables from Insurance Operations 19 5,106,963 4,802,190 2- Payables from Reinsurance Operations - - 3- Premium Reserves - - 4- Payables from Private Pension Operations 19 72,461,918 53,615,139 5- Payables from Other Operations 19 68,163 50,159 6- Rediscount on Payables from Other Operations (-) - - C- Due to Related Parties 19 3,414,468 3,630,630 1- Due to Shareholders 12.2, 19 42,590 1,022 2- Due to Subsidiaries - - 3 Due to Equity Investments - - 4- Due to Joint-Ventures - - 5- Due to Personnel 19 647,861 431,424 6- Due to Other Related Parties 19 ,45 2,724,017 3,198,184 D- Other Payables 19 7,130,879 9,303,850 1- Deposits and Guarantees Received - - 2- SGK Payables for Treatments - 3- Other Payables 47.1 7,130,879 9,303,850 4- Rediscount on Other Payables (-) - - E- Insurance Technical Provisions 109,377,169 68,670,186 1- Unearned Premium Reserve-Net 17.15 39,841,313 29,670,205 2- Unexpired Risks Reserve-Net - - 3- Life Mathematical Reserve-Net 17.15 42,568,631 18,189,488 4- Outstanding Claim Provision-Net 17.15 26,967,225 20,810,493 5- Bonus and Rebate Provision-Net - - 6- Provision for Life Policies at Insured's Risk-Net - - 7- Other Technical Reserves-Net - - F- Taxes and Other Fiscal Liabilities 5,317,765 7,633,317 1- Taxes and Funds Payable 3,090,455 5,631,647 2- Social Security Withholdings Payable 1,185,201 2,000,329 3- Overdue, Deferred or Restructured Taxes and Other Fiscal Liabilities - - 4- Other Taxes and Fiscal Liabilities - - 5- Corporate Tax Provision and Other Fiscal Liabilities 35 1,041,040 - 6- Prepaid Corporate Tax and Other Fiscal Liabilities (-) - - 7- Other Taxes and Fiscal Liabilities Provision 47.1 1,069 1,341 G- Provisions for Other Risks 14,008,318 10,208,077 1- Provision for Employment Termination Benefits - - 2- Provision for Social Aid Fund Asset Shortage - - 3- Provision for Expense Accruals 23.2 14,008,318 10,208,077 H- Deferred Income and Expense Accruals 47.1 2,013,028 1,867,876 1- Deferred Acquisition Income 978,810 631,339 2- Provisions for Expenses 1,034,218 1,236,537 3- Other Deferred Income and Expense Accruals - - I- Other Current Liabilities 2,587,221 2,970,688 1- Deferred Tax Liabilities - - 2- Count Overages - - 3- Other Current Liabilities 23.2 2,587,221 2,970,688 III - Total Current Liabilities 222,675,370 165,032,111



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Liabilities Audited Audited Notes December 31,

2012 December 31,

2011 IV- Non-Current Liabilities A- Financial Liabilities - 1 1- Due to Credit Institutions - - 2- Leasing Payables - 473 3- Deferred Leasing Costs (-) - (472) 4- Issued Debt Securities - - 5- Other Issued Debt Securities - - 6- Value Differences of Other Issued Debt Securities (-) - - 7- Other Financial Payables (Liabilities) - - B- Payables from Operations 17.5, 17.6 4,051,425,340 2,957,868,522 1- Payables from Insurance Operations - - 2- Payables from Reinsurance Operations - - 3- Premium Reserves - - 4- Payables from Private Pension Operations 17.5, 17.6 4,051,425,340 2,957,868,522 5- Payables from Other Operations - - 6- Rediscount on Payables from Other Operations (-) - - C- Due to Related Parties - - 1- Due to Shareholders - - 2- Due to Subsidiaries - - 3- Due to Equity Investments - - 4- Due to Joint-Ventures - - 5- Due to Personnel - - 6- Due to Other Related Parties - - D- Other Payables - - 1- Deposits and Guarantees Received - - 2- SGK Payables for Treatments 3- Other Payables - - 4- Rediscount on Other Payables - - E- Insurance Technical Provisions 508,214,858 564,330,947 1- Unearned Premium Reserve - Net - - 2- Unexpired Risks Reserve – Net - - 3- Mathematical Reserve – Net 502,070,369 560,294,125 4- Outstanding Claim Provision - Net - - 5- Bonus and Rebate Provision - Net - - 6- Provision for Life Policies at Insured's Risk - Net - - 7- Other Technical Reserves – Net 17.15 6,144,489 4,036,822 F- Other Liabilities and Related Provisions 42, 47.1 5,153,850 5,090,947 1- Other Payables - - 2- Overdue, Deferred or Restructured Taxes and Other Fiscal Liabilities - - 3- Other Taxes and Fiscal Liabilities Provision 42, 47.1 5,153,850 5,090,947 G- Provisions for Other Risks 22 1,810,014 1,272,987 1- Provision for Employment Termination Benefits 1,810,014 1,272,987 2- Provision for Social Aid Fund Asset Shortage - - H- Deferred Income and Expense Accruals - - 1- Deferred Acquisition Income - - 2- Provisions for Expenses - - 3- Other Deferred Income and Expense Accruals - - I- Other Non-Current Liabilities - 1- Deferred Tax Liabilities - - 2- Other Non-Current Liabilities - - IV- Total Non-Current Liabilities 4,566,604,062 3,528,563,404



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Shareholders’ equity Audited Audited

Notes December 31,

2012 December 31,

2011 V- Shareholders’ Equity A- Share Capital 2.13 51,971,980 51,971,980 1- Nominal Capital 2.13 35,779,197 35,779,197 2- Unpaid Capital (-) - - 3- Adjustments to Share Capital 2.13 16,192,783 16,192,783 4- Adjustments to Share Capital (-) - - 5- Capital waiting for Registering - - B- Capital Reserves 15.2 66,865,115 66,865,115 1- Share Premium - - 2- Profit from Stock Abrogation - - 3- Sales Profit Addition to the Capital - - 4- Foreign Currency Translation Differences - - 5- Other Capital Reserves 15.2, 47.1 66,865,115 66,865,115 C- Profit Reserves 11,081,037 5,995,724 1- Legal Reserves 15.2 1,606,831 289,045 2- Statutory Reserves 15.2 2,122,467 11,494 3- Extraordinary Reserves 15.2 5,439,061 5,410,782 4- Special Reserves - - 5- Valuation of Financial Assets 15.2 1,912,678 284,403 6- Other Profit Reserves - - D- Retained Earnings - 46,351,825 1- Retained Earnings - 46,351,825 E- Accumulated Deficit (-) - (51,985,876) 1- Previous Years' Losses - (51,985,876) F- Net Profit for the Period 38,772,504 31,989,774 1- Net Profit for the Period 38,772,504 31,989,774 2- Net Loss for the Period (-) - - 3- Profit for the period-not subject to distribution - - Total Shareholders’ Equity 168,690,636 151,188,542 Total Liabilities and Shareholders’ Equity (III+IV+V) 4,957,970,068 3,844,784,057


AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the statement of income as of December 31, 2012 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

(8)

Audited Audited

Notes January 1 -

December 31, 2012 January 1 -

December 31, 2011 I- Technical Income A- Non-Life Technical Income 29,550,903 29,074,505 1- Earned Premiums - (Net of Reinsurer's Share) 29,550,903 29,074,505 1.1- Written Premiums - (Net of Reinsurer's Share) 24 32,284,665 26,736,794 1.1.1- Gross Written Premium (+) 24 32,341,198 26,784,037 1.1.2 - Reinsurer’s Share of Gross Written Premium (-) 24 (56,533) (47,243) 1.1.3- Premiums transferred to SGK - 1.2- Change in Unearned Premiums Reserve (Net of Reinsurer's Share and Reserves Carried Forward) (+/-) 47.4 (2,733,762) 2,337,711 1.2.1- Unearned Premiums Reserve (-) (2,738,176) 2,330,935 1.2.2- Reinsurer’s Share of Unearned Premiums Reserve (+) 4,414 6,776 1.3- Change in Unexpired Risks Reserve (Net of Reinsurer's Share and Reserves Carried Forward) (+/-) - - 1.3.1- Unexpired Risks Reserve (-) - - 1.3.2- Reinsurer’s Share of Unexpired Risks Reserve (+) - - 2- Investment Income Transferred from Non-Technical Part - - 3- Other Technical Income - (Net of Reinsurer's Share) - - 3.1- Other Gross Technical Income (+) - - 3.2- Reinsurer’s Share of Other Gross Technical Income (-) - - 4- Subrogation and Salvage Accrued Income (+) - - B- Non-Life Technical Expense (-) (24,461,436) (30,875,237) 1- Incurred Losses - (Net of Reinsurer's Share) (4,913,444) (4,988,750) 1.1- Paid Claims – (Net of Reinsurer's Share) (3,914,495) (3,857,640) 1.1.1- Gross Paid Claims (-) (3,914,495) (3,857,640) 1.1.2- Reinsurer’s Share of Gross Paid Claims (+) - - 1.2- Change in Outstanding Claims (Net of Reinsurer's Share and Returned Reserve) (+/-) 47.4 (998,949) (1,131,110) 1.2.1- Outstanding Claims Provision (-) (1,019,314) (1,131,110) 1.2.2- Reinsurer’s Share of Outstanding Claims Provision (+) 20,365 - 2- Change in Bonus and Rebate Provision (Net of Reinsurer's Share and Reserves Carried Forward) (+/-) - - 2.1- Bonus and Rebate Provision (-) - - 2.2- Reinsurer’s Share of Bonus and Rebate Provisions (+) - - 3- Change in Other Technical Reserves (Net of Reinsurer's Share and Reserves Carried Forward) (+/-) (427,529) (391,466) 4- Operating Expenses (-) 31 (19,109,003) (25,484,247) 5- Change in Mathematical Reserve (Net of Reinsurer's Share and Returned Reserve)(+/-) - - 5.1- Mathematic Reserve (-) - - 5.2- Reinsurer’s Share of Mathematical Reserve (+) - - 6- Other Technical Expense (11,460) (10,774) 6.1- Gross Other Technical Expenses(-) (11,460) (10,774) 6.2- Reinsurer’s Share of Other Technical Expense(+) - - C- Net Technical Income- Non-Life (A - B) 5,089,467 (1,800,732) D- Life Technical Income 199,876,969 222,122,361 1- Earned Premiums - (Net of Reinsurer's Share) 148,556,583 113,246,279 1.1- Written Premiums -(Net of Reinsurer's Share) 24 155,993,929 114,727,463 1.1.1- Gross Written Premiums (+) 24 165,202,464 121,631,827 1.1.2- Reinsurer’s Share of Gross Written Premium (-) 24 (9,208,535) (6,904,364) 1.2- Change in Unearned Premiums Reserve (Net of Reinsurer's Share and Returned Reserve) (+/-) 47.4 (7,437,346) (1,481,184) 1.2.1- Unearned Premiums Reserve (-) (8,660,842) (1,999,844) 1.2.2- Reinsurer’s Share of Unearned Premiums Reserve (+) 1,223,496 518,660 1.3- Change in Unexpired Risks Reserve (Net of Reinsurer's Share and Returned Reserve) (+/-) - - 1.3.1- Unexpired Risks Reserve (-) - - 1.3.2- Reinsurer’s Share of Unexpired Risks Reserve (+) - - 2- Life Investment Income 44,852,671 85,124,954 3- Unrealized Investment Income - - 4- Other Technical Income - (Net of Reinsurer's Share) 47.1 7,049,001 23,149,844 4.1- Gross Other Technical Income (+/-) 7,049,001 23,149,844 4.2- Reinsurer’s Share of Gross Other Technical Income (+/-) - - 5- Salvage Accrued Income (581,286) 601,284 E- Life Technical Expense (191,725,149) (214,782,016) 1- Incurred Losses - (Net of Reinsurer's Share) (134,009,698) (118,165,468) 1.1- Paid Claims (Net of Reinsurer's Share) (128,851,915) (117,571,330) 1.1.1- Gross Paid Claims (-) (130,685,431) (119,686,644) 1.1.2- Reinsurer’s Share of Gross Paid Claims (+) 1,833,516 2,115,314 1.2- Change in Outstanding Claims (Net of Reinsurer's Share and Returned Reserve) (+/-) 47.4 (5,157,783) (594,138) 1.2.1- Outstanding Claim Provisions (-) (6,363,221) (1,209,466) 1.2.2- Reinsurer’s Share of Outstanding Claim Provisions (+) 1,205,438 615,328 2- Change in Bonus and Rebate Provision (Net of Reinsurer's Share and Returned Reserve) (+/-) - - 2.1- Bonus and Rebate Provisions (-) - - 2.2- Reinsurer’s Share of Bonus and Rebate Provisions (+) - - 3- Change in Life Mathematical Reserves (Net of Reinsurer's Share and Returned Reserve) (+/-) 47.4 47,394,464 (21,588,198) 3.1- Life Mathematical Reserves (-) 47,394,464 (21,588,198) 3.1.1- Actuarial Mathematical Reserves (+/-) 45,722,785 (21,580,906) 3.1.2- Profit Sharing Provision (Provision for Policies at Life Insured’s Risk) 1,671,679 (7,292) 3.2- Reinsurer’s Share of Life Mathematical Reserves (+) - - 3.2.1- Reinsurer’s Share of Actuarial Mathematical Reserves (+) - - 3.2.2- Reinsurer’s Share of Profit Sharing Provision (Provision for Policies at Life Insured’s Risk) (+) - - 4- Change in Provision for Policies at Life Insured’s Risk (Net of Reinsurer's Share and Returned Reserve) (+/-) (1,680,139) (1,201,156) 5- Operating Expenses (-) 31 (75,307,522) (53,578,223) 6- Investment Expenses (-) (26,703,583) (19,527,567) 7- Unrealized Investment Expense (-) - - 8- Investment Income Transferred to Non-Life Technical Part (-) (1,418,671) (721,404) F- Net Technical Income- Non-Life (D -E) 8,151,820 7,340,345 G- Pension Funds Technical Income 25 135,711,254 111,054,884 1- Fund Management Income 25 83,548,762 66,874,393 2- Management Expense Charge 25 32,023,292 28,292,088 3- Entrance Fee Income 25 20,023,033 15,842,101 4- Management Expense Charge in case of Suspension 25 - - 5- Special Service Expense Charge - - 6- Capital Allowance Value Increase Income 13,275 3,113 7- Other Technical Income 25 102,892 43,189 H- Pension Funds Technical Expense (115,523,398) (106,488,276) 1- Fund Management Expense (-) (8,943,434) (9,380,903) 2- Capital Allowance Value Decrease Expense (-) (62) (3,047) 3- Operating Expenses (-) 31 (100,811,574) (92,600,624) 4- Other Technical Expenses (-) 47.1 (5,768,328) (4,503,702) I- Net Technical Income - Pension Funds (G - H) 20,187,856 4,566,608


AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the statement of income as of December 31, 2012 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

(9)

Audited Audited Notes January 1 - December

31, 2012 January 1 - December

31, 2011 I-Non-Technical Part C- Net Technical Income-Non-Life (A-B) 5,089,467 (1,800,732) F- Net Technical Income-Life (D-E) 8,151,820 7,340,345 I - Net Technical Income-Pension Funds (G-H) 20,187,856 4,566,608 J- Total Net Technical Income (C+F+I) 33,429,143 10,106,221 K- Investment Income 29,459,852 33,304,505 1- Income from Financial Investments 26 23,366,209 17,589,396 2- Income from Liquidation of Financial Investments 26 553,440 10,848,603 3- Valuation of Financial Investments 27 959,644 (2,271,231) 4- Foreign Exchange Gains 36 2,601,117 6,362,424 5- Income from Subsidiaries 26, 45 21,162 53,909 6- Income from Equity Investments and Joint-Ventures - - 7- Income from Property, Plant and Equipment - - 8- Income from Derivatives 13 539,608 - 9- Other Investments - - 10- Investment Income Transferred from Life Technical Part 1,418,672 721,404 L- Investment Expense (-) (7,924,824) (5,835,963) 1- Investment Management Expenses (Interest incl.) (-) (279,647) (101,498) 2- Diminution in Value of Investments (-) 1,408 (430) 3- Loss from Realization of Financial Investments (-) (696,314) (564,755) 4- Investment Income Transferred to Non-Life Technical Part (-) - - 5- Loss from Derivatives (-) - - 6- Foreign Exchange Losses (-) 36 (4,093,816) (2,674,158) 7- Depreciation Expenses (-) 6.1 (2,856,455) (2,495,122) 8- Other Investment Expenses (-) - - M- Income and Expenses from Other Operations and Extraordinary Operations (+/-) (1,976,616) 1,386,573 1- Provisions (+/-) (216,462) (799,287) 2- Rediscounts (+/-) - - 3- Special Insurance Account (+/-) - - 4- Inflation Adjustment (+/-) - - 5- Deferred Tax Assets (+/-) 21, 35 473,668 581,314 6- Deferred Tax Liabilities Expenses (-) - - 7- Other Income 47.1 4,932,512 11,430,920 8- Other Expenses (-) 47.1 (8,073,744) (9,640,499) 9- Prior Year's Income 47.3 962,673 34,900 10- Prior Year's Expenses (-) 47.3 (55,263) (220,775) N- Net Profit/ (Loss) for the Period 38,772,504 31,989,774 1- Profit/ (Loss) for the Period 52,987,555 38,961,336 2- Corporate Tax Provision and Other Fiscal Liabilities (-) 35 (14,215,051) (6,971,562) 3- Net Profit/ (Loss) for the Period 38,772,504 31,989,774 4-Inflation Adjustment - -


AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the statements of cash flows as of December 31, 2012 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

(10)

Audited Audited Notes December 31,

2012 December 31,

2011

A. Cash Generated from Main Operations 1. Cash flows from insurance operations 197,938,752 151,152,183 2. Cash flows from reinsurance operations - - 3 Cash flows from private pension funds operations 1,820,021,359 1,323,874,885 4. Cash outflows from insurance operations (-) (161,378,360) (144,321,053) 5 Cash outflows from reinsurance operations (-) - - 6. Cash outflows from private pension funds operations (-) (1,681,615,687) (1,214,810,294) 7. Net Cash from main operations (A1+A2+A3-A4-A5-A6) 174,966,064 115,895,721 8. Interest payment (-) - - 9. Income tax payment (-) (50,450,107) (47,806,122) 10. Other cash inflows 1,931,479 389,567 11. Other cash outflows (-) (131,644,427) (103,919,384) 12. Net cash provided by main operations (5,196,991) (35,440,218) B. Cash Flows from Investing Operations 1. Sale of tangible assets 2,735 10,156 2. Tangible assets acquisition (-) 6 (7,667,126) (2,942,638) 3. Financial assets acquisition (-) 11.4 (424,762,744) (134,254,777) 4. Sales of financial assets 439,016,157 217,017,396 5. Interest received 50,972,758 56,195,052 6. Dividends received 45 4,377 53,909 7. Other cash inflows - - 8. Other cash outflows (-) - - 9. Net Cash from investing activities 57,566,156 136,079,098 C. Cash Flow from Financing Operations 1. Issue of shares - - 2. Cash inflows due to the borrowings - - 3. Leasing payments (-) - 4. Dividends paid (-) 15.1 (21,154,166) - 5. Other cash inflows 110,403,178 13,000,000 6. Other cash outflows (-) (24,373,499) (110,403,179) 7. Net cash used in financing activities 64,875,513 (97,403,179) D. Effect of Exchange Differences on Cash and Cash Equivalents (259,230) 2,202,361 E. Net increase in cash and cash equivalents 116,985,447 5,438,062 F. Cash and cash equivalents at the beginning of the period 157,229,173 151,791,111 G. Cash and cash equivalents at the end of the period (E+F) 2.12 274,214,620 157,229,173


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AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the notes to the financial statements as of December 31, 2012 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

(12)

1. General Information 1.1 Name of the parent Company and ultimate parent of the Group:

Aviva Europe SE and Haci Ömer Sabanci Hoding A.Ş are the parents of AvivaSA Emeklilik and Hayat A.Ş (“the Company”), with equal shareholding percantage; which is 49.83%. The ultimate parents of the Company are Aviva Plc. and Hacı Ömer Sabancı Holding A.Ş. The Company maintain its activity with joint management. 1.2 Legal residence of the Company, its legal structure, the country of incorporation and the

address of it’s registered office: The registered address of the Company is Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No:12 34768 Ümraniye - İstanbul Contact information of the Company is listed below: Phone: (216) 633 33 33 Fax: (216) 634 35 69 Web: www.avivasa.com.tr The Company is established by the merge of Ak Emeklilik Anonim Şirketi (Ak Emeklilik) and Aviva Hayat ve Emeklilik Anonim Şirketi’nin (Aviva Emeklilik) at October 31, 2007. Ak Emeklilik is founded as Doğan Sigorta A.Ş. at December 6,1941 in İstanbul and renamed their title as Akhayat Sigorta Anonim Şirketi and declared in commercial registry gazette at October 3, 1995. The Company is allowed to change as pension company under T.C Prime Ministry Undersecretariat of Treasury’s permission No:77941 at December 3, 2002. Alteration of the master agreement is decided because of the change of the Company’s title and operation extent and adding an article numbered 40 is related with Emeklilik Yatırım Fon Portfolio and Portfolio Administer in accordance with Board of Directors’ decision no:26 at December 11, 2002 and Extraordinary General Meeting at January 23, 2003. The commercial title of the Company was decided to be changed as Ak Emeklilik Anonim Şirketi at January 31, 2003 and declared on commercial registry gazette numbered 5730. Ak Emeklilik took over Aviva Emeklilik completely with all of its assets and liabilities on October 31, 2007 by dissolution without liquidation within the framework of the successive articles of the Merger Agreement made on July 7, 2007, in accordance with Articles 19 and 20 of the Corporate Tax Law no. 451 of the Turkish Commercial Code. Ak Emeklilik became the complete successor of Aviva Emeklilik. The merger was made based on the valuations made in accordance with the expert’s opinion dated July 16, 2007 of the commission of experts assigned upon the decree of Kadıköy 3. Commercial Court of First Instance dated July 11, 2007 and numbered 2007/875 D. based on the issued balance sheets of Ak Emeklilik and Aviva Emeklilik along with other data. This merger was registered on the Turkish Trade Registry Gazette dated November 6, 2007 and numbered 6930 and the new name of the company became AvivaSA Emeklilik ve Hayat Anonim Şirketi. The associates of the Company after the merger are Aviva International Holdings Limited (Aviva International) (at %49.83) and Aksigorta Anonim Şirketi (Aksigorta) (at %49.83). Aksigorta Anonim Şirketi transferred its Avivasa Emeklilik ve Hayat AŞ shares to Hacı Ömer Sabancı Holding A.Ş. within the scope of the provisions of the Corporate Tax Law no. 5520, Article 19, paragraph 3, subparagraph “b” and the “Communique Regarding the Regulation of the Partial Allotment Principles of Incorporated Joint Stock and Limited Companies” which was published in the Official Gazette dated September 16, 2003 and numbered 25230, This operation was registered and announced on January 12, 2010 and published in the Turkish Trade Registry Gazette dated January 18, 2010 and numbered 7481. Aviva International Holdings Limited transferred its Avivasa Emeklilik ve Hayat A.Ş. shares to Aviva Europe SE on October 28, 2011.


AvivaSA Emeklilik ve Hayat Anonim Şirketi Convenience translation of the notes to the financial statements as of December 31, 2012 (continued) (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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1. General Information

1.3 Nature of operations: AvivaSA Emeklilik ve Hayat Anonim Şirketi (the Company) is a pension company dealing with insurance operations in two branches; pension and life insurance. The Company also issues insurance policy for personal accidents. On July 7, 2003, Ak Emeklilik acquired a pension operating license from the Undersecretariat of Treasury of the Turkish Republic (Undersecretariat of Treasury) to operate in the pension branch. The individual retirement investment funds were registered by the Capital Market Board (CMB) on September 26, 2003 and the sale of pension products started as of October 27, 2003. On August 26, 2003, Aviva Emeklilik acquired a pension operating license from the Undersecretariat of Treasury to operate also in the pension branch. The individual retirement investment funds were registered by the Capital Market Board (CMB) on October 27, 2003, the individual retirement plans were approved on December 12, 2003 and the sale of pension products started as of December 15, 2003. In accordance with the decree of the Board of Directors dated October 8, 2007 and numbered 15, it was decided that the retirement investment funds of Aviva Emeklilik shall be transferred to Ak Emeklilik as of October 31, 2007. The retirement funds of the Company have been managed by Ak Portföy as of November 1, 2007. AvivaSA Emeklilik ve Hayat A.Ş. Growth Oriented Performance Flexible Retirement Investment Fund, established as of December 20, 2011, started to be managed by Ata Portföy. In accordance with the permission acquired from CMB dated November 20, 2008 and numbered 15-1098, the names of Pension Investment Funds have been changed. The amendments were put into practice as of December 5, 2008. As of the balance sheet date, the Company has sold 19 individual retirement investment funds (December 31, 2011 – 19). The Retirement Investment Funds of the Company are as follows: Name of Pension fund

Date of Establishment

Preliminary Unit Cost

(TL) AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Likit Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Borçlanma Araçları Emeklilik Yatırım Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 08.11.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Emeklilik Yatırım Fonu 28.12.2006 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasası Likit Kamu Emeklilik Yatırım Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Emeklilik Yatırım Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Karma Emeklilik Yatırım Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatırım Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu - Grup 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Esnek Emeklilik Yatırım Fonu 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Grup Emeklilik Yatırım Fonu 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Grup Emeklilik Yatırım Fonu 17.08.2010 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fonu (*) 20.12.2011 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Alternatif Esnek Emeklilik Yatırım Fonu (*) 20.12.2011 0.010000 (*) The establishment of AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Alternatif Esnek Emeklilik Yatırım Fund and AvivaSA Emeklilik ve Hayat A.Ş.

Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fund was approved by the Capital Market Board’s decree numbered 32/928 and this permission for establishment was registered at Istanbul Trade Registry Office on December 2, 2011 and announced in the Turkish Trade Registry Gazette. The physical establishment of both funds was realized in December 20, 2011 by sending fund advance and AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fund started to be managed by Ata Portföy A.Ş. as of this date. The public offering of AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fund was made as of July 16, 2012.

With the decree of the Board of Directors dated As of December 20, 2012, it was decided that AvivaSA Emeklilik ve Hayat A.Ş. Atılgan Esnek Emeklilik ve Yatırım Fund, AvivaSA Emeklilik ve Hayat A.Ş. Aktif Esnek Emeklilik Yatırım Fund, AvivaSA Emeklilik ve Hayat A.Ş Özel Sektör Borçlanma Araçları Emeklilik Yatırım Fund, AvivaSA Emeklilik ve Hayat A.Ş Devlet Katkısı Emeklilik Yatırım Fund, AvivaSA Emeklilik ve Hayat A.Ş. Altın Emeklilik Yatırım Fund, , AvivaSA Emeklilik ve Hayat A.Ş. Katılım Hisse Senedi Emeklilik Yatırım Fund, AvivaSA Emeklilik ve Hayat A.Ş. Küçük ve Orta Ölçekli İşletmeler Hisse Senedi Emeklilik shall be established.



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1. General Information (continued)

a. Explanation of the activities and characteristics of main operations of the corporation: Disclosed in Notes 1.2 and 1.3.

b. Average number of employees during the period by category: December

31,2012 December31,

2011

Top and middle management 129 111 Other personnel 1,179 1,168 1,308 1,279

1.6 Total salaries and benefits paid to the members of the Board of Directors, General

Manager, General Coordinator, Assistant General Managers and other executive management during the current period: January 1 – December 31, 2012: 4,190,445 TL, (January 1 – December 31, 2011: 3,556,135 TL).

1.7 Criteria set for the allocation of investment income and operating expenses (personnel,

management, research and development, marketing and sales, outsourcing utilities and services and other operating expenses) in the financial statements: All investment income that is generated by investments backing life technical provisions, is transferred from non-technical to technical part of the income statement. Other investment income is classified under nontechnical part. Principals and procedures of the distribution key used in financial statements has been updated by the Undersecretariat of Treasury with the communiqué number 2010/9 which is in force starting from January 1, 2011. According to the update, operating expenses transferred to technical part are distributed to pension and insurance sections according to arithmetic average of in force policies and pension contracts ratio at the end of each period in last 3 years and produced contributions and earned premiums in last 3 years. The expenses allocated to insurance part are distributed to life and non-life parts by considering the average of ratio of policies produced in last 3 years with total number of policies produced, ratio of gross written premium in last 3 years with total gross written premium and ratio of amount of number of notified claims in last 3 years with total number of notified claims calculated for each part.

1.8 Whether financial statements include only one firm or group of firms: The financial

statements comprise of only one company (AvivaSA Emeklilik ve Hayat A.Ş.). 1.9 Name and other identification information of the reporting firm and changes at this

information from the previous balance sheet date: The name and other identification information of the Company are disclosed in notes 1.1, 1.2 and 1.3 and no change has been made in this information since the previous balance sheet date.

1.10 Events after the balance sheet date: Financial statements for the period ended December 31,

2012 are authorized by Board of Directors on February 8, 2013.



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2. Summary of significant accounting policies 2.1 Basis of preparation 2.1.1 Information about the basis and special accounting policies used in the preparation of

the financial statements: The Company prepares its financial statements as Turkish Lira (TL) in accordance with the Insurance Chart of Accounts included in the communiqué issued by Undersecretariat of Treasury (“The Treasury”) regarding the Insurance Chart of Accounts and Prospects, published in the Official Gazette (No:25686) dated 30 December 2004 and become effective on January 1, 2005. Based on the communiqué of the Treasury dated May 2, 2008 and numbered 2008/20, The Company prepares its financial statements in accordance with the accounting principles and standards and related codes identified in effective regulations in conformity with the principles set out by the Treasury for Insurance and Reinsurance Companies and the Insurance Law No. 5684 with Individual Pension Savings and Investment System Law No. 4632 published in the Official Gazette (No: 26552) on June 14, 2007. The Company, presents its financial statements in conformity with the “Communiqué on Presentation of Financial Statements” published in Official Gazette (No:26851) dated April 18, 2008 and issued within the scope of the regulation on Financial Reporting of Insurance and Reinsurance Companies and Pension Companies published on July 14, 2007 in the Official Gazette (No:26852) and has enacted as of January 1, 2008. Within the scope of Regulation on Financial Reporting, accounting of the operations of insurance and reinsuance companies and pension companies in the framework of Turkish Accounting Standards (TAS) and Turkish Financial Reporting Standards (TFRS) declared by Accounting Standards Board of Turkey is essential and regulating by the Treasury of procedures and principles regarding accounting of insurance agreements, subsidiaries, joint ventures and associates and consolidated financial statements, financial statements to be disclosed to the public and related explanations and notes are adjudicated. Consequently, the Company accounts its operations in the framework of TAS and TFRS and, other explanations, regulations and circular issued by the Treasury within this scope. The sector communiqué of the Treasury dated February 18, 2008 has left TFRS 4- “Insurance Contracts”, TAS 27- “Consolidated and Non-consolidated Financial Statements, and TAS 1- “Financial Statements and Presentation” out of scope. In accordance with Communiqué on Preparation of the Consolidated Financial Statement of Insurance and Reinsurance companies and, Pension companies published in Official Gazette (No:27097) dated December 31, 2008, preparing consolidated financial statement has been required in 2009 however the Company has not any subsidiary or associate under the scope of consolidation.



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2. Summary of significant accounting policies (continued) 2.1.2 Other related accounting policies relevant for the financial statements: Financial reporting in hyperinflationary economies With respect to the declaration of the Treasury numbered 19387 and dated April 4, 2005, the Company’s financial statements as of December 31, 2004 are adjusted for the opening balances of 2005 in accordance with the inflation accounting section of the Capital Markets Board (“CMB”) Communiqué XI No. 25 (which came into force as published in the Official Gazette numbered 25290 and dated November 15, 2003). Moreover, in the same decree of the Treasury also announced that insurance companies are not required to apply inflation accounting effective from January 1, 2005. Therefore non monetary assets, liabilities and shareholders’ equity including share capital reported in the balance sheet as of December 31, 2012 and 2011 are derived by indexing the additions that occurred until December 31, 2004 and carrying the additions after this date with their nominal amounts. 2.1.3 Functional currency

Financial statements are expressed in Turkish Lira (TL) as functional currency and presentation currency for the financial statements 2.1.4 Rounding degree used in the financial statements:

All the balances presented in the financial statements are expressed in full Turkish Lira (TL). 2.1.5 Measurement method (or methods) used in the presentation of the financial statements: As stated in note 2.1.2, As of December 31, 2012 and 2011, non-monetary assets and liabilities and shareholders' equity including capital contained in balance sheet, are derived by indexing the additions that occurred until December 31, 2004 and carrying the additions after this date with their nominal amounts. The financial statements, except mentioned inflation adjustments and current financial assets presented at fair value, have been prepared on the historical cost basis. 2.1.6 Changes in accounting policies and estimates and errors: The Company prepares its financial statements in accordance with accounting policies stated in note 2.1.1 The accounting policies adopted in preparation of the financial statements as at December 31, 2012 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS interpretations effective as of January 1, 2012. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs.



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2. Summary of significant accounting policies (continued) Changes in Turkish Financial Reporting Standards, Accounting Policies and explanations: The new standards, amendments and interpretations which are effective as at January 1, 2012 are as follows: TAS 12 Income Taxes: Recovery of Underlying Assets (Amendment): TAS 12 has been updated to include i) a rebuttable presumption that deferred tax on investment property measured using the fair value model in TAS 40 should be determined on the basis that its carrying amount will be recovered through sale and ii) a requirement that deferred tax on non-depreciable assets, measured using the revaluation model in TAS 16, should always be measured on a sale basis. These amendments will be applied retrospectively. This standard has not yet been endorsed by the EU. Adoption of this amendment did not have any impact on the financial position or performance of the Company TFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements: (Amended) The purpose of this amendment is to allow users of financial statements to improve their understanding of transfer transactions of financial assets (e.g. securitizations), including understanding the possible effects of any risks that may remain with the entity which transferred the assets. The amendment also requires additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. Comparative disclosures are not required. The amendment affects disclosures only and did not have any impact on the financial position or performance of the Company. Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the financial statements are as follows. The Company will make the necessary changes if not indicated otherwise, which will be affecting the financial statements and disclosures, after the new standards and interpretations become in effect. TAS 1 Presentation of Financial Statements (Amended) – Presentation of Items of Other Comprehensive Income

The amendments are effective for annual periods beginning on or after July 1, 2012, but earlier application is permitted. The amendments to TAS 1 change only the grouping of items presented in other comprehensive income. Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time would be presented separately from items which will never be reclassified. The amendments will be applied retrospectively. The amendment affects presentation only and will have no impact on the financial position or performance of the Company.



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2. Summary of significant accounting policies (continued) TAS 19 Employee Benefits (Amended) Amended standard is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. With very few exceptions retrospective application is required. Numerous changes or clarifications are made under the amended standard. Among these numerous amendments, the most important changes are removing the corridor mechanism and making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. The Company is in the process of assessing the impact of the amended standard on the financial position or performance of the Company. TAS 27 Separate Financial Statements (Amended) As a consequential amendment to TFRS 10 and TFRS 12, the TASB also amended TAS 27, which is now limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. Transitional requirement of this amendment is similar to TFRS 10. This standard has not yet been endorsed by the EU. This amendment will not have any impact on the financial position or performance of the Company. TAS 28 Investments in Associates and Joint Ventures (Amended) As a consequential amendment to TFRS 11 and TFRS 12, the TASB also amended TAS 28, which has been renamed TAS 28 Investments in Associates and Joint Ventures, to describe the application of the equity method to investments in joint ventures in addition to associates. Transitional requirement of this amendment is similar to TFRS 11. This standard has not yet been endorsed by the EU. The Company does not expect that this amendment will have any impact on the financial position or performance of the Company. TAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended) The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the TAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. This standard has not yet been endorsed by the EU. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2014. The Company does not expect that these amendments will have significant impact on the financial position or performance of the Company. TFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amended) New disclosures would provide users of financial statements with information that is useful in (a) evaluating the effect or potential effect of netting arrangements on an entity’s financial position and (b) analyzing and comparing financial statements prepared in accordance with TFRSs and other generally accepted accounting standards. This standard has not yet been endorsed by the EU. The amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The amendment affects disclosures only and will have no impact on the financial position or performance of the Company.



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2. Summary of significant accounting policies (continued)

TFRS 9 Financial Instruments – Classification and measurement As amended in December 2011, the new standard is effective for annual periods beginning on or after January 1, 2015. Phase 1 of this new TFRS introduces new requirements for classifying and measuring financial instruments. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. This standard has not yet been endorsed by the EU. The Company is in the process of assessing the impact of the new standard on the financial position or performance of the Company. TFRS 10 Consolidated Financial Statements The standard is effective for annual periods beginning on or after January 1, 2013 and is applied on a modified retrospective basis. This new Standard may be adopted early, but TFRS 11 Joint Arrangements and TFRS 12 Disclosure of Interests in Other Entities should be also adopted early. TFRS 10 replaces the portion of TAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. A new definition of control is introduced, which is used to determine which entities are consolidated. This is a principle based standard and require preparers of financial statements to exercise significant judgment. This standard has not yet been endorsed by the EU. The amendment will have no impact on the financial position or performance of the Company. TFRS 11 Joint Arrangements The standard is effective for annual periods beginning on or after January 1, 2013 and is applied on a modified retrospective basis. This new Standard may be adopted early, but TFRS 10 Consolidated Financial Statements and TFRS 12 Disclosure of Interests in Other Entities should be also adopted early. The standard describes the accounting for joint ventures and joint operations with joint control. Among other changes introduced, under the new standard, proportionate consolidation is not permitted for joint ventures. This standard has not yet been endorsed by the EU. The Company does not expect that this standard will have a significant impact on the financial position or performance of the Company. TFRS 12 Disclosure of Interests in Other Entities The standard is effective for annual periods beginning on or after January 1, 2013 and is applied on a modified retrospective basis. This new Standard may be adopted early, but TFRS 10 Consolidated Financial Statements and TFRS 11 Joint Arrangements should be also adopted early. TFRS 12 includes all of the disclosures that were previously in TAS 27 Consolidated and Separate Financial Statements related to financial statements, as well as all of the disclosures that were previously included in TAS 31 Interests in Joint Ventures and TAS 28 Investment in Associates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. This standard has not yet been endorsed by the EU. Under the new standard the Company will provide more comprehensive disclosures for interests in other entities.



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2. Summary of significant accounting policies (continued) TFRS 13 Fair Value Measurement The new Standard provides guidance on how to measure fair value under TFRS but does not change when an entity is required to use fair value. It is a single source of guidance under TFRS for all fair value measurements. The new standard also brings new disclosure requirements for fair value measurements. TFRS 13 is effective for annual periods beginning on or after January 1, 2013 and will be adopted prospectively. Early application is permitted. The new disclosures are only required for periods beginning after TFRS 13 is adopted — that is, comparative disclosures for prior periods are not required. This standard has not yet been endorsed by the EU. The Company is in the process of assessing the impact of the new standard on the financial position or performance of the Company. Transition Guidance (Amendments to TFRS 10, TFRS 11 and TFRS 12) The guidance is effective for annual periods beginning on or after January 1, 2013. The amendments change the transition guidance to provide further relief from full retrospective application. The date of initial application is defined as ‘the beginning of the annual reporting period in which TFRS 10 is applied for the first time’. The assessment of whether control exists is made at ‘the date of initial application’ rather than at the beginning of the comparative period. If the control assessment is different between TFRS 10 and TAS 27/SIC-12, retrospective adjustments should be determined. However, if the control assessment is the same, no retrospective application is required. If more than one comparative period is presented, additional relief is given to require only one period to be restated. For the same reasons TASB has also amended TFRS 11 Joint Arrangements and TFRS 12 Disclosure of Interests in Other Entities to provide transition relief. This guidance has not yet been endorsed by the EU. The amendment will have no impact on the financial position or performance of the Company. Improvements to TFRSs The TASB has issued the Annual Improvements to TFRSs – 2009 – 2011 Cycle, which contains amendments to its standards. The annual improvements project provides a mechanism for making necessary, but non-urgent, amendments to TFRS. The effective date for the amendments is for annual periods beginning on or after January 1, 2013. Earlier application is permitted in all cases, provided that fact is disclosed. This project has not yet been endorsed by the EU. The Company does not expect that this standard will have a significant impact on the financial position or performance of the Company. TAS 1 Financial Statement Presentation: Clarifies the difference between voluntary additional comparative information and the minimum required comparative information. TAS 16 Property, Plant and Equipment: Clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. TAS 32 Financial Instruments: Presentation: Clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with TAS 12 Income Taxes. The amendment removes existing income tax requirements from TAS 32 and requires entities to apply the requirements in TAS 12 to any income tax arising from distributions to equity holders.



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2. Summary of significant accounting policies (continued) TAS 34 Interim Financial Reporting: Clarifies the requirements in TAS 34 relating to segment information for total assets and liabilities for each reportable segment. Total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total amount disclosed in the entity’s previous annual financial statements for that reportable segment. 2.1.7 Comparative Information In accordance with the Sector Communiqué No:2012/27 issued in May 31, 2012 regarding to “New Account Numbers and Presentation of Financial Statements”, expenses amounting to TL 448.270, except for deferred commission expenses, under the account of prepaid expenses for the following months in the financial statements dated December 31, 2011, have been classified to other prepaid expenses, to be comparable with financial statements dated December 31, 2012. In the financial statements as of December 31, 2011, commission income amounting to TL 631.339 in the short term deferred income has been classified to deferred commission income. Other technical expenses amounting to TL (10.774) in the financial statements as of December 31, 2011, has been disclosed separately. Provision for profit sharing amounting to TL (7.292) in life technical expense in the financial statements as of December 31, 2011, has been disclosed separately. In the financial statements as of December 31, 2011, amount of TL 601.284 in the life other technical income has been disclosed separately as accrued subrogation income in the life technical income. 2.2 Consolidation The Company does not have any subsidiary that requires consolidation in accordance with “TAS 27- Consolidated or Non-Consolidated Financial Statements”.

2.3 Segment reporting As of December 31, 2012 and December 31, 2011, the Company operates mainly in Turkey and in life and personal accident insurance, and private pension business segments and the Company does not perform segment reporting since the Company is not a public company. 2.4 Foreign currency translation Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. As of balance sheet dates, receivables and payables in foreign currency are translated using Central Bank buying currencies. In liabilities translation, exchange rate on the contract is taken into account if the rates determined primarily written in the contract. Profit sharing policies are evaluated using effective selling rate of the Central Bank and unit-based policies are evaluated using foreign currency buying rate of the Central Bank.



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2. Summary of significant accounting policies (continued) Exchange rates used at the end of period, as: December 31, 2012 TL / USD TL / Euro TL / GBP Buying rate of exchange 1.7826 2.3517 2.8708 Selling rate of exchange 1.7939 2.3665 2.8901 December 31, 2011 TL / USD TL / Euro TL / GBP Buying rate of exchange 1.8889 2.4438 2.9170 Selling rate of exchange 1.9008 2.4593 2.9366 2.5 Property and equipment Property and equipments are disclosed in accordance with clauses in the related parts of the TAS 16 “Property and Equipment”. Property and equipments are initially booked at cost of purchase and until December 31, 2004, are carried at restated cost by multiplying by the correction factor appropriate to the year of acquisition. However additions have purchased since the beginning of 2005 are carried at cost of purchase. As of December 31, 2012 and 2011, amortization on property and equipment is charged on straight-line basis and per diem deduction over their estimated useful lives. Useful lives of property and equipment stated below: Furniture and fixtures 2-15 years Machinery and equipment 4 years Motor vehicles 5 years Other tangible assets (including leasehold improvements) 5 years, term of the lease If there are indicators of impairment on tangible assets, a review is made in order to determine possible impairment and as a result of the review, if an asset’s carrying amount is greater than its estimated recoverable amount, the asset’s carrying amount is written down immediately to its recoverable amount by accounting for a provision for impairment. 2.6 Investment property The Company does not have any investment property as at balance sheet date. 2.7 Intangible assets Intangible assets are disclosed in accordance with clauses in the related parts of the TAS 38 “Intangible Assets”. Property and equipments are initially booked at cost of purchase and until December 31, 2004, are carried at restated cost by multiplying by the correction factor appropriate to the year of acquisition. However additions have purchased since the beginning of 2005 are carried at cost of purchase. For capitalization, the future economic benefits of intangible assets must be detectable and cost of the asset must be measured reliably



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2. Summary of significant accounting policies (continued) Intangible assets are disclosed at cost less accumulated amortization and accumulated impairment losses. The carrying values of intangible assets are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets consist of the acquired software and depreciation is calculated using the straight-line method based on the useful live (3 years) of properties. 2.8 Financial assets Financial instruments are any contracts that increase an entity's financial assets and another entity’s financial liabilities or equity instruments. Financial assets: cash, contractual right that proposes receiving cash or another financial assets from another entity, contractual right that proposes exchanging financial instruments with another entity, in favor of

the entity, or an equity instruments of the another business firm. A financial asset or liability is calculated over the cost of operation which is the fair value initially given (for an asset) or acquired (for a liability) by adding the cost of operation, if any. Following the first registration, financial assets are valued over their fair value without deducting the cost of operation which may occur in case of sale. The fair value stands for the price of a financial instrument subject to purchase and sale between the bidding parties in a current transaction, except for circumstances such as forced sale and liquidation. The quoted market price, if any, is the value which best reflects the fair value of a financial instrument. The estimated fair values of financial instruments are determined by the Company using the current market information and appropriate valuation methods. As of 31 December 2012 and 2011, all of the financial assets reflected on the financial statements in their fair values, are 1. level financial assets. The Company reflects its financial assets and liabilities on its balance sheet in case it is a party to the subject financial instrument contracts. The Company only deregisters all or a part of a financial asset when it loses its control over the rights arising from the contract the subject assets is related to. The Company only deregisters a financial liability when the liability defined in the contract is removed or cancelled or when it expires. All normal financial asset purchase and sales are recorded on the transaction date, which is the date the Company commits to buy or sell the asset. These purchases and sales generally require the delivery of the financial asset within the time frame determined through general practices and arrangements in the market.



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2. Summary of significant accounting policies (continued) Current financial assets The Company classifies its current financial assets as available-for-sale financial assets, financial assets at fair value through profit or loss (Held-for-trading financial assets) and credits and receivables consists of receivables from main operations and financial investments at life policyholders’ risk a) Available-for-sale financial assets: Available-for-sale financial assets are financial assets other than (a) credit and receivable, (b) held-to-maturity financial assets (c) financial assets at fair value through profit or loss and derivative.

i) Government securities:

A part of government bonds and treasury bills, the risk of which is on the government, are classified as financial assets ready for sale. Financial assets ready for sale are valued at their fair values. In determining the fair value of government bonds, treasury bills, asset-backed securities and private sector bonds, the best purchase order price among current orders on the balance sheet date published by Istanbul Stock Exchange with regard to the note of the Undersecretariat of Treasury dated March 3, 2005 and numbered 12741 is used. The difference between the fair value of these securities and the value calculated with the related interest rates according to the internal efficiency method is monitored under the account of valuation of financial assets under equity.

The acquired interest income is monitored under the investment income account in the income statement. ii) Foreign exchange Eurobonds Foreign exchange Eurobonds, the risk of which is on the government, are classified as financial assets ready for sale and valued at their fair values. The Company subjects the foreign exchange Eurobonds to valuation at the exchange rate announced by the Central Bank of the Turkish Republic as of the balance sheet dates. Eurobonds are valued at the purchase quotation in the over-the-counter market which flew on the Reuters screen at 3:15 pm – 3:30 pm on the balance sheet date. The difference between the fair value of these securities and the value calculated with the related interest rated according to the internal efficiency method is monitored under the account of valuation of financial assets under equity.

The acquired interest income is monitored under the investment income account in the income statement. The company recognizes the income and expense currency difference arising from foreign exchange Eurobonds under the investment income and expense accounts in the accompanying income statement. b) Financial assets held for purchase and sale Financial assets held for purchase and sale are assets which are acquired for the purpose of making profit from the fluctuations in prices or similar elements in the market in the short term or which are part of a portfolio aimed at making profit in the short term independent from the reason of their acquisition. i) Government Securities A part of government bonds and treasury bills, the risk of which is on the government, are classified as financial assets held for purchase and sale. After the date of initial registration, the securities held for purchase and sale are monitored over the fair value, taking into account the best purchase order of the related security among the current orders in the market.



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2. Summary of significant accounting policies (continued)

ii) Other securities:

A part of government bonds and asset-backed securities, the risk of which is on the government, are classified as financial assets held for purchase and sale. After the date of initial registration, the private sector bonds are monitored over the fair value, taking into account the best purchase order of the related security among the current orders in the market. Asset-backed securities are monitored over the fair value taking into account the internal efficiency rate of the related security, since asset-backed securities are not traded at the exchange. All realized and unrealized profit and loss regarding the purchase and sale oriented financial investment is included in the income statement for the related period. c) Financial investments at Insured’s Risk: Financial investments the risk of which is on the holder of the policy consist of government securities, foreign exchange Eurobonds and time deposits.

i) Government securities

Government bonds and treasury bills, the risk of which is on the holder of the policy, are classified as financial assets available for sale. Financial assets available for sale are valued at their fair values. In determining the fair value of government bonds and treasury bills, the best purchase order price among current orders on the balance sheet date published by Istanbul Stock Exchange is used. Of the difference between the fair value of these securities and the value calculated with the related interest rates according to the internal rate of return, the part belonging to the insured is recognized under the account of “Insurance Technical Provisions – Life Mathematics Provisions. Of the difference between the fair value of these securities and the value calculated with the related interest rates according to the internal efficiency method, the part belonging to the Company is recognized under the account of valuation of financial assets under equity.

ii) Foreign exchange Eurobonds

Foreign exchange Eurobonds, the risk of which is on the holder of life insurance, are classified as financial assets ready for sale and valued at their fair values. The Company subjects the foreign exchange Eurobonds to valuation at the exchange rate announced by the Central Bank of the Turkish Republic as of the balance sheet dates. Eurobonds are valued at the purchase quotation in the over-the-counter market which flew on the Reuters screen at 3:15 pm – 3:30 pm on the balance sheet date. Of the difference between the fair value of these securities and the value calculated with the related interest rates according to the internal efficiency method, the part belonging to the insured is recognized under the account of “Insurance Technical Provisions – Life Mathematics Provisions as stated in note of the Undersecretariat of Treasury dated March 3, 2005 and numbered 12741. Of the difference between the fair value of these foreign exchange Eurobonds and the reduced value, the part belonging to the Company is monitored under the account of valuation of financial assets under equity.

The company recognizes the income and expense currency difference arising from the Eurobonds, the risk of which is on the insured, under the technical income and expense accounts in the accompanying income statement. Derivative financial instruments

The Company uses foreign currency forward contacts and as of December 31, 2012 the Company has carried these instruments at market value in the financial statements. The Company uses end of period market exchange rates and interest rates to calculate market value of foreign exchange forward contracts. According to TAS 39 (Financial Instruments: Recognition and Measurement), changes in fair value, defining as held for trading, are reflected to income statement.



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2. Summary of significant accounting policies (continued) Other non-current financial assets The Company’s other non-current financial assets as of the balance sheet date are investments made in equity-based financial instruments which are defined as financial assets ready for sale but which have no registered price in an active market, the fair value of which cannot be measured reliably (Note 45.2). These investments are reflected at the value obtained as a result of deducting the bonus chares acquired as a result of adding the revaluation fund to share capital from the acquisition costs adjusted according to inflation as of December 31, 2004. At the end of the period, the investment acquiring cost is compared with the net realizable value and in the event that the net realizable value is lower than the acquiring value, impairment provision is made. Loans and receivables Loans and receivables that consist of receivables from main operations are financial assets which have fixed and determinable payments and are not quoted in an active market and not classified as held for trading by the Company. Receivables from insurance operations have been classified in this group. These assets have been reflected to balance sheet at the carrying value, essentially. When the due receivables from insurance operations have any concrete indication concerning not to be collected, receivable provision is recorded. Bad debts are written off as they are detected. Loans to Insured Loans to insured are the loan provided to the insured for the time interval (the time interval for loans to insured is minimum three years related to the General Conditions of Life Insurance) determined by the technical principal cause related to the tariffs of life insurance. The Company does not apply loans to insured interest for unit-based policies, carries out debt repayment process on unit cost in the repayment date. The Company applies loans to insured interest for the saving life policies. The interest ratio is determined as above annual profit share ratio. Exit payments for the policy that had loans to insured are recorded as expense and policy is closed. Technical reserves regarding closed policy is recorded as income and closed.



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2. Summary of significant accounting policies (continued) Accounts of Individual Pension System Receivables from Pension Operations “Receivables from Pension Operations” classified under current assets generally consist of receivables from participant (entrance fee receivables), capital advances to pension investment funds and receivable of fund management expenses deduction. “Receivables from Pension Operations” classified under non-current asset generally consist of clearing house receivables and present fund-based receivables from clearing house on behalf of participants and in the liability side works reciprocal with payables to participants under the payables from pension operation fund-based liability belong to participants. Payables from Pension Operations “Payables from Pension Operations” classified under current liabilities consist of temporary account of participants, payables to private pension intermediaries, and payables to clearing house, portfolio management companies and pension monitoring center. Temporary account of participants is used for recording the money that is not yet directed to investment on behalf of the contract holders. It is also used for recording the sales amount of the funds of the contract holders, net of entrance fee and other deductions, which will be paid to contract holders or transferred to other firms, in case of leaving the system or transferring their funds to another firm. When a collection is made from the contract holders, or if the sale of fund shares is realized, this account is credited. Account is closed after directing money to investment or exit of participant and directing money to other company. “Payables from Pension Operations” classified under non-current liabilities consist of payables to participants. Account presents fund-based liabilities of the Company on behalf of participant (amounts of participant investments to funds and to be paid when due). Unless the pension contract is rejected by the Company, private pension contracts are effective after 30 days after the proposal form is signed by the participant or any sponsor. Effective date is not affected even if thirtieth day of contract falls on a holiday. Participant or sponsor has the right of withdrawal before the pension contract become effective (30 days). In case of withdrawal or rejection of the proposal by company, all payments and fund income, if any should be returned without any deduction in seven business days. In this context, during withdrawal period saving is following under payables from pension operation and when the withdrawal period has expired, related amounts are transferred to funds. 2.9 Impairment of assets Impairment of non-financial assets: Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that are subject to impairment are reviewed for possible reversal of the impairment at each reporting date.



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2. Summary of significant accounting policies (continued) Impairment of financial assets: Evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events: a) significant financial difficulty of the issuer or obligor, b) a breach of contract, c) the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to

the borrower a concession that the lender would not otherwise consider, d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization, e) the disappearance of an active market for that financial asset because of financial difficulties, The Company evaluates any evidence related to the balance sheet dates and reflects provision for impairment its financials, if any. According to TAS 39, a long-term and significant decrease in the fair value of financial assets qualifying as capital instrument ready for sale, occurring below the cost value are is an objective indicator of impairment. Moreover, in the event that there is an objective indicator that impairment loss has occurred, it is envisaged that the accumulated impairment amount created under equity, which comprises of the difference between the cost value and fair value shall be deducted from equity and reflected on the income statement as loss. In the event that an objective indicator that impairment has occurred in borrowings and receivables is present, the amount regarding the related loss is recognized in the income statement. Besides, the Company holds uncertain receivable provision arising from main operations for uncertain receivables related to agencies and insurance holders, which are in an administrative and legal process, and for amounts which could not be collected or the collection of which is no longer probable. Mortgages or guarantees on assets are explained in Note 17.1, provisions for overdue receivables and provisions for receivables which are not overdue are explained in Note 12, and provision and rediscount expense for the period are explained in Note 47.5. 2.10 Derivative financial instruments

None (December 31, 2011: None). 2.11 Offsetting financial instruments Financial assets and liabilities are offset only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or when the acquisition of the asset and the settlement of the liability take place simultaneously.



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2. Summary of significant accounting policies (continued) 2.12 Cash and cash equivalents In terms of presentation of cash flow statement, cash and cash equivalents, cash at hand, demand deposits and other short-term highly liquid investments which their original maturities are three months or less, that are readily convertible to cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents is represented with acquisition costs. Cash and cash equivalents included in the statements of cash flows are as follows:

December 31,

2012 December 31,

2011

Cash 1,844 830 Banks 235,212,090 214,427,517 Other cash and cash equivalents 63,971,519 53,716,270 Total cash and cash equivalents 299,185,453 268,144,617 Interest accrual (597,334) (512,265) Time deposit excess of 3 months (24,373,499) (110,403,179) Total 274,214,620 157,229,173 Other cash and cash equivalents consist of credit card receivables blocked by bank for 1 to 31 days approved as of balance sheet dates. 2.13 Share capital The composition of the Company’s share capital at December 31, 2012 and December 31, 2011 is as follows: December 31, 2012 December 31, 2011 Capitalist Name Share rate Share amount Share rate Share amount Hacı Ömer Sabancı Holding A.Ş. (Sabancı Holding) 49.83 17,830,354 49.83 17,830,354 Aviva Europe SE 49.83 17,830,354 49.83 17,830,354 Other 0.34 118,489 0.34 118,489 Nominal capital 100.00 35,779,197 100.00 35,779,197 Positive distinction from share capital adjustment 16,192,783 16,192,783 Paid in capital 51,971,980 51,971,980 (*) Regarding Board of Directors numbered 39 and dated September 28, 2011, the Company informed BOD

about selling shares with nominal value of TL 17.830.354,50 to Aviva Europe SE by Aviva International Holdings Limited and decided to record selling into the share register. Aviva International Holdings Limited has transferred its shares to Aviva Europe SE on October 28, 2011.

As of December 31, 2012 and 2011, capital of the Company consists of 3.577.919.700 shares with nominal value of 1 kuruş (kr) (TL 0.01) The Company is not subject to the registered share capital system and has not preference shares representing the share capital.



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2. Summary of significant accounting policies (continued) 2.14 Insurance and investment contracts – classification Insurance contract Insurance contracts are contracts that provide protection to the insured against adverse economic consequences of an event of loss as covered under the terms and conditions stipulated in the insurance policy according to TFRS 4. Financial Guarantee Contract is a contract which requires that the issuer make specific payments to reimburse the holder for the loss incurred by the debtor when a specific breach of its obligation to pay, in accordance with the conditions, original or amended, of a debt instrument. According to TFRS 4, financial risk is the risk posed by a possible future change in one or more of the following variables: an interest rate specified the price of a financial instrument, the price of a commodity trading, an exchange rate, a price index or interest, A credit rating or an index or other variable. If this is a nonfinancial variable, it is necessary that the same is not specific to one of the parties to the contract. According to this, insurance contracts include changes in market prices, as well as insurance risk. Some policies (Saving Life Policies) of the Company include financial return in addition to insurance risk and carry financial risk, accordingly. However these contracts are defined as insurance contracts also and accounted in this context. Because there are no contracts with a stand-alone financial risk in the Company’s portfolio and contracts do not carry significant insurance risk, mentioned policies are within the context of insurance contracts. Investment contracts All policies in the Company portfolio are treated as insurance contracts. Reinsurance agreements: Reinsurance is the transfer of partial or all of the risk of the insurance company to the reinsurance company. It is a kind of guarantee or hedge for the insurance company. The purpose of reinsurance is risk proliferation, increasing and supporting the insurance company’s capacity and flexibility to accept policies, controlling the catastrophic claims amongst others. Reinsurers can also share their technical knowledge and experience which they have gathered as a result of working with many companies in various markets with other insurance companies. As all details related to the transactions and processes has to be included in the reinsurance agreements, scope, description and technical details of ceded business, evaluation of business acceptance and claims, general and specific conditions and legal framework of the agreement are maintained to be disclosed explicitly in the agreement. 2.15 Insurance contracts and investment contracts with discretionary participation features None.



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2. Summary of significant accounting policies (continued) 2.16 Investment contracts without discretionary participation features None. 2.17 Borrowings Contractual financial liabilities are liabilities which foresee the Company: to give another entity cash or other financial assets, or to exchange financial assets on a contractual basis with another entity in favor of the other party. As of December 31, 2012, 2011, short term borrowings consist of spot loan and carried at acquisition cost. 2.18 Taxes on income Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax assets and liabilities are determined using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled Deferred tax assets is calculated on all deductable temporary differences and unused tax losses, if it is possible to appear taxable profit in future to be able to deduct of deductible temporary differences and unused tax losses. At each balance sheet date, the Company reviews deferred tax income and accounted by considering the possibility of future reduction. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities is eliminated in the event that the Company has intention of paying its current tax assets and liabilities by offsetting or there is a legal right related to offsetting of current tax assets and current tax liabilities or associating the assets and liabilities with income tax collected by the same tax authority. Current and deferred tax of the Period Current and deferred tax are recognized as an expense or income in profit or loss, except when they are associated with or arises from the initial business combination credited or debited directly to equity, in which case the tax is also recognized directly in equity.

2.19 Employee termination benefits (a) Defined benefit plans: In accordance with existing social legislation in Turkey, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. In the financial statements, the Company has recognized a liability using the “Projected Unit Credit Method” based upon factors derived using the Company’s experience of personnel terminating and being eligible to receive benefits, discounted by using the current market yield at the balance sheet date on government bonds. All gains and losses are recognized in the income statement.



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2. Summary of significant accounting policies (continued) b) Defined contribution plans: The Company pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. (c) Vacation pay liability Mentioned provision, as of balance sheet dates, is calculated for earned but not used vacations and classified under short term liabilities account. 2.20 Provisions Provisions, contingent assets and liabilities Provisions in accordance with TAS 37 are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Contingent liabilities are disclosed and not reflected to the consolidated financial statements, if the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are disclosed and not reflected to the consolidated financial statements, where an inflow of economic benefits is probable. Technical provisions Technical reserves classified in technical insurance reserves in the financial statements and reinsurance shares of this reserves are accounted in conformity with “Regulation Regarding the Technical Reserves of Insurance, Reinsurance and Pension Companies and the Assets to which These Reserves Are Invested” published in Official Gazette (No:26606) dated August 7, 2007 by the Treasury based on section 8 of Private Pension, Saving and Investment System Law No. 4632 dated March 28, 2011 and section 16 of Insurance Law No.5684 dated June 14, 2007, Regulation about Amending “Regulation Regarding the Technical Reserves of Insurance, Reinsurance and Pension Companies and the Assets to which These Reserves Are Invested” published in Official Gazette (No: 27655) dated July 28, 2010 and has become effective as of September 30, 2010, and Sector Communiqué No.2012/13 dated July 18, 2012 about Regulation on Amending “Regulation Regarding the Technical Reserves of Insurance, Reinsurance and Pension Companies and the Assets to which These Reserves Are Invested” and other related communiqués and announcements, concerning principles specified below.



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2. Summary of significant accounting policies (continued) Unearned premium reserve In accordance with Regulation about Amending “Regulation Regarding the Technical Reserves of Insurance, Reinsurance and Pension Companies and the Assets to which These Reserves Are Invested” published in Official Gazette (No: 27655) dated July 28, 2010 and has become effective as of September 30, 2010, unearned premium reserve consists of parts passed to subsequent accounting period according to daily gross basis without commission or any deduction of the accrued premiums for insurance contracts in force. In addition, it consists of parts passed to subsequent accounting period of life insurance contracts accumulated of saving premium its duration more than one year and annual life insurance in force, after deducting of allocated to saving from gross written premiums, if any. In accordance with Regulation of Technical Reserves, during calculating unearned premium reserve, it is considered that end date and start date of insurance contract are half a day, and calculated regarding this assumption. In the Regulation of Technical Reserves, commissions to intermediaries, commission income due to the ceded premiums, amounts paid for non-proportional reinsurance contracts and production expense shares, variable production overheads for preparation of tariffs and insurance contracts and portion that corresponds to future periods of support services payments are accounted under deferred income and deferred expenses and other related accounts, on condition recording accrual depending on production. As of December 31, 2012, gross unearned premium reserve is amounting to TL 42,506,691 (December 31, 2011 – TL 31,107,673) As of December 31, 2012, deferred commission income is amounting to TL 978,810 (December 31, 2011 – TL 631,339) and is accounted under account of deferred commission income. As of December 31, 2012 calculated deferred commission expenses is amounting to TL 14,606,922 (December 31, 2011 – TL 10,115,341) Unexpired risks reserve Pursuant to the Technical Provisions Regulation, in insurance branches where the level of risk undertaken during the period of the insurance agreement and the time-based distribution of acquired premiums are considered to be incompliant, unexpired risk reserve is booked in the event that unearned premium provisions fall behind the risk held by the Company and the expected level of expense. As of each accounting period, companies in allocation of unexpired risk reserve, are obliged to apply adequacy test mentioned in Regulation of Technical Reserves in case of the fact that claim compensations may arise due to insurance contracts in force and allocated unearned premium reserve are more than unearned premium reserve provided for related contracts, by covering the last 12 months. As a result of adequacy test, as of December 31, 2012 and 2011, the Company does not need to allocate unexpired risk reserve.



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2. Summary of significant accounting policies (continued) Outstanding claim reserve Outstanding claim reserve is the provision that is allocated for all liabilities related to unpaid claims under appraisal stage and reported to the Company as of end of period. Outstanding claims are presented in change in Outstanding Claims, as net of reinsurer's share and ceded reserve, under the account of life and non-life technical expenses in the income statement. In addition, the Company provides outstanding claim reserve for incurred but not reported claim amounts in accordance with regulation of the Treasury on insurance legislation and technical reserves. Outstanding claim reserves for the amounts of incurred but not reported claims are calculated separately for the life and individual accidents branches dependent to methods specified in the regulation of incurred but not reported claims amounts in previous periods. In accordance with the “Regulation on Calculation Principles of Incurred But Not Reported Outstanding Claim Reserve Regarding Life Branches” numbered 2010/14, the calculation of claim amounts regarding incurred but not reported outstanding claim reserve regarding life branches are taken into account differentially on the basis of primary claim and additional claims in a manner that the end of financial year claim cover the last 12 months. Claims occurred before these dates but reported after these dates are considered as incurred but not reported claims. During the calculation of incurred but not reported claims, the weighted average found by dividing the claims of insurance and reinsurance companies within the last 5 or more years which incurred before this date but were reported after this date by the annual weighted average claims of the previous year, is taken into consideration. By years, on assurance basis, in the calculation of annual assurance, within the framework of the IBNR regulation, the average assurance is calculated by going back one year (4 quarters) and dividing the end of period and beginning of period assurance amounts by two. For the current financial year, the incurred but not reported claim is found by multiplying the weighted average calculated as mentioned above and the annual average assurance cost as of the current year. In these calculations, subrogation, salvage and similar income items are excluded. Files subject to outstanding claim which were not included in the outstanding claim in the current financial year for any reason, though reported in the current or previous financial years, but put into process in the following year are included in the account of incurred but not reported claims of the related branch. Incurred but not reported claim reserves regarding individual accident branches are calculated over the occurred damages (sum of outstanding claim and paid damages) in accordance with the Regulation Regarding Actuarial Chain Ladder Method for Individual Accident Branches numbered 2010/12. The Company has no significant damage which may be subject to significant damage elimination method. In consequence of calculations made for Individual Accident branches, the Damage-Premium method was selected and as mentioned in the regulation numbered 2010/12, 100% of it for the second quarter of 2011 was reflected on the financial statements. Pursuant to the regulation numbered 2011/13, the Company has not performed discount in outstanding claim provisions for the files in the process of a lawsuit. As of December 2012, net amount of outstanding claim reserve provided for incurred but not reported claims is TL 7,391,250 (December 31, 2011 – TL 5,610,180), and for the life branches net amount is TL 4,576,068 (December 31, 2011 – TL 3,499,179) and for individual accident branch the net amount is TL 2,815,182 (December 31, 2011 – TL 2,111,001).



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2. Summary of significant accounting policies (continued) Life mathematical and profit share reserves In accordance with Regulation of Technical Reserves, companies operated in Life and non-life branches allocate mathematical reserve, adequately according to actuarial principles, for health and personal accident policies and long-term life policies in order to meet its obligations to beneficiaries and insureds. Mathematical reserves consist of actuarial mathematical reserves and profit share reserves, share of policyholders, determined from the income generated from mathematical reserves directed towards investment, that are calculated separately for each effective policy, in accordance with the technical principles in the tariffs. Actuarial mathematical reserve is the difference between the premiums received for the risks assumed and cash value of liabilities to policyholders and beneficiaries. Actuarial mathematical reserves are provided for life insurance having more than one year of maturity, based on the formulas and elements of technical principles. Actuarial mathematical reserves are calculated on a prospective method by determining the difference between the cash value of the insurer’s future liabilities and the present value of future premiums to be paid by the policyholder. Profit share reserves consist of the income obtained from assets in relation to reserves provided for the obligations for the policyholders and beneficiaries in contracts for which the Company has committed to distribute profit shares; the guaranteed portion, not to exceed the technical interest income calculated based on the profit share distribution system prescribed in the approved technical principles of profit share and prior years’ accumulated profit share reserves. As of December 31, 2012 and 2011, actuarial mathematical reserve and profit sharing reserves are approved by actuary. Total mathematical reserves on December 31, 2012 is amounting to TL 381.222.270 (December 31, 2011 – TL 415.969.273). Profit sharing reserves and life mathematical reserves related to written policies in fund based on unit price are valuating daily according to TL, USD and EURO profit sharing technical principals approved by the Undersecretariat of Foreign Trade on January 14, 1993 and September 12, 1996. Investment income of insured is distributed as income of the investment instrument related to interest method accrued daily. For the profit sharing reserves and life mathematical reserves related to saving policies written in the other funds (based on profit sharing) of the Company, daily based profit sharing system is applied in conformity with “Regulation on Life Insurance and Technical Principles of Profit Sharing” certification dated November 1, 1999 of the Treasury General Directorate of Insurance. Values of profit sharing calculated using profit sharing ratios determined according to daily return of investment instruments of TL, USD and EURO are reflected to insured accounts daily.



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2. Summary of significant accounting policies (continued) Equalization reserve According to the Regulation on Technical Reserves, insurance companies are required to provide equalization reserve of 12% of net premiums in their financial statements for earthquake and credit coverage in order to balance the fluctuations in the claim ratios and to meet the catastrophic risks in the subsequent periods. Provisioning is continued until reaching 150% of maximum amount of net premiums written in last five years. Based on the explanation numbered 2009/9 regarding “Application of Regulation on the Technical Reserves”, starting from January 1, 2009, the life and pension companies are required to record an equalization reserve for the insurance contracts including earthquake and credit coverage in life and accident branches. In addition, the calculation technique of the equalization reserves determined by the Undersecretariat of Treasury by Regulation numbered “Regulation for the Amendment on Regulations about Technical Reserves and Assets for Investing Reserves of Insurance, Reinsurance and Pension Funds Companies” 27655 and dated July 28, 2010. In the life insurances obtaining death indemnity, by accepting 11% of death premium as earthquake premiums, provision is allocated of 12% of these amounts. As of December 31, 2012, the Company has provide provided gross equalization reserve amounting to TL 6,522,503 (December 31, 2011 – TL 4,286,061) and net amount is TL 6,144,489 (December 31, 2011 – TL 4,036,822). 2.21 Revenue recognition Written premiums Written premiums consist of insurance policies written during the year and amounts, remaining after deduction of collections, of installments of policies written in previous years. Annual policies are accounted on accrual basis, while saving policies based on unit on cash basis. Saving life policies written in other funds of the Company are accounted on accrual basis. Received and paid commissions Received and paid commissions consist of received commissions related to ceded premiums to reinsurance companies and paid commissions related to written premiums. The Company is accounted received and paid commissions on accrual basis. The Company has evaluated expenses may be subject to deferral related to Private Pension System beyond the scope of TFRS 4 and has addressed within the context of TAS 39 and TAS 18. As of report date, expenses may be subject to deferral related to PPS has not been subject to deferral due to the lack of uniformity and certainty of application standard by the Treasury, although it is interpreted, throughout the sector, that these expenses shall be correlated directly to commission and sale again. Interest income Interest income is calculated according to the effective interest method and accounted as periodically.



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2. Summary of significant accounting policies (continued) Dividend income Dividend is recognized as income when the right of collection is obtained. Income from Pension Operations Fund management income/expenses and deductions from fund management Fund management charge, which is charged in return for the fund management services, representation and other services provided to pension funds, is recorded as income in the Company’s accounts and is shared between the Company and the funds’ portfolio manager according to the ratios specified in the agreement signed between the parties. The total charge is recorded to the Company’s technical income as fund management revenue and the part of charge which belongs to the funds’ portfolio manager thereof, is recorded in the Company’s technical expense accounts. Accounts mentioned above are disclosed in pension technical income/expense in the attached income statements Income from the entrance (subscription) fee This account is used for recording the entrance fee that is received from the policyholder or the person acting on behalf of the policyholder who is entering the system for the first time or opening a new pension account. Deferred entrance fees are able to be collected and recorded as income in the event of exiting, merging and transferring accounts within the context of conditions defined in the contract as of effective date of contract. Entrance fee is not charged in case of the fact that participant dies or becomes disabled or participant exit from pension system. Accounts mentioned above are disclosed in pension technical income/expense in the attached income statements. 2.22 Financial Leasing Financial leases which transfer all risks and benefits related to ownership of the assets leased to the Company, is disclosed on the basis of booking of the smaller one from the fair value of the asset and present value of payments. Financial leasing payments, remaining debt balance for each period so as to produce a constant periodic interest ratio, are allocated as financial expense and principal. Financial expenses are reflected directly to income statements by the periods. Capitalized leased assets are amortized over the estimate useful life of the asset. 2.23 Profit share distribution Earnings per share Earnings per share are calculated by dividing net profit distributable to shareholders to the weighted average number of shares. In case of capital increase during the period from internal sources, it is accepted that the value while calculating weighted average number of shares shall be effective at the beginning of the earliest period presented



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2. Summary of significant accounting policies (continued) 2.24 Related parties Parties are considered related to the Company if; (a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the

reporting entity. (b) An entity is related to a reporting entity if any of the following conditions applies:

(i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the

third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the

reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the

key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. In the financial statements and related notes dated December 31, 2012 and 2011, the Company management, groups associated to Sabancı Holding and Aviva are defined as other related parties. 2.25 Other monetary balance sheet items It is reflected to balance sheet at book value. 2.26 Subsequent events Post period-end events that provide additional information about the Company’s position at the statement of financial position date (adjusting events), are reflected in the financial statements and footnotes. Post period-end events that are not adjusting events are disclosed in the notes when material. 2.27 Additional paragraph for convenience translation to English: The effects of differences between those accounting principles and standards set out by insurance laws and regulations and accounting principles generally accepted in the countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position, financial performance, changes in equity and cash flows in accordance with the accounting principles generally accepted in such countries and IFRS.



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3. Summary of significant judgments and estimates The preparation of the financial statements require management to make estimates and assumptions that are reflected in the measurement of income and expense in the statement of comprehensive income and in the carrying value of assets and liabilities in the statement of financial position, and in the disclosure of information in the notes to the financial statements. Estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. The key assumptions are mainly related to outstanding claim reserves, life mathematical reserves, the calculation of the fair value of financial assets, retirement pay liability, provision for impairments of assets, provisions for other expenses and calculation of deferred tax asset, and, concerning the future and other key resources of estimation at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and the significant judgments (apart from those involving estimations) with the most significant effect on amounts recognized in the financial statements are as follows: a) In accordance with existing social legislation in Turkey, the Company is required to make lump-

sum termination indemnities to each employee who has completed over one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. In calculating the related liability to be recorded in the financial statements for these defined benefit plans, the Company makes assumptions and estimations relating to the discount rate to be used, turnover of employees, future change in salaries/limits, etc. These estimations which are disclosed in Note 2.19 and Note 22 are reviewed regularly.

b) Doubtful receivables provisions are related to the total amount of receivables assessed by the

Company’s management, to cover the future potential losses arising from the non-collectability of the receivables as of the balance sheet date, upon the current state of the economy. The total amount of the provision is determined according to the valuation results, performances, market credibility, collection performances following balance sheet date, and the restructuring on the receivables. The doubtful receivables provision as of the balance sheet date is disclosed in disclosure 12.1.

c) Deferred tax assets are recorded in the event of the fact that benefit for accumulated losses and

temporary differences, on condition of obtaining taxable profit in future, is highly probable. It is necessary to evaluate and make predictions regarding taxable profits may occur in future while determining amount of deferred tax assets to be recorded.

d) In determining the provision for litigations, the Management considers the probability of legal

cases to be resulted against the Company and in case it is resulted against the Company considers its consequences based on the assessments of legal advisor. The Company management makes its best estimates using the available data provided. (Note 42)

In terms of technical and other provisions, all the other predictions and assumption made by the Company are disclosed in detail in the related notes. 4. Management of Insurance and Financial Risk

Risk management and risk factors The risk management function of the Company is implemented by all departments of the organization and finally aims to assure the Board of Directors in:

Compliance with legal liabilities and the Company’s Risk Management Policies, Determining all structural risks exposed and creation of risk acceptance criteria, Transparent reporting of these risks by designing and implementing internal control

mechanisms and actions addressing these risks.



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4. Management of Insurance and Financial Risk (continued) AvivaSA’s robust risk management structure is the factor underlying the company’s capability to determine and assess threats and opportunities in decision making processes through a risk-based approach. The company’s Internal Audit Department reporting to the Board of Directors provides impartial and independent assurance for the strength of AvivaSA’s risk management. AvivaSA’s internal audit structure is established in line with legislation, and is in line with international internal audit standards. Information Regarding the Implemented Risk Management Policies by Risk Types Risk and Business Oversight Management With the Risk Management Policies of the Company, the risk management practices performed within the financial year are reflected. The risk management function is implemented by all departments of the Company. Through risk management operations;

Ensuring compliance with legal obligations and the company’s Risk Management Policies,

Identifying all structural risks the company is exposed to and defining risk acceptance criteria,

Designing and applying internal control mechanisms and actions in line with these risks, and assuring the Board of Directors about the transparent reporting of the said risks.

Risk management is the company’s main means of avoiding undesirable outcomes in the pursuit of its targets. The management approach interacts with decision making processes through a risk-based approach, which in turn allows the company to use its resources efficiently, and thus meet the expectations of all business partners including customers and shareholders to the highest level. In this approach, dubbed the triple defense line, the division of authority and responsibility is as follows: Responsibles Authorization and duties

1. Defense Line Company management Identifying and assessing risks, managing and reporting these efficiently, ensuring compliance with company policies, establishing the internal control system.

2. Defense Line Risk management and law Supporting the company management in identifying, assessing, managing and reporting risks, overseeing compliance with company policies and identifying any violation, and overseeing the continuity of the internal control system; in short, assisting in the functioning of AvivaSA’s Risk Management Model

3. Defense Line Internal audit Assuring the Board of Directors about the efficiency of the company’s risk management and internal control mechanism prior to legal audits, from an impartial and independent viewpoint



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4. Management of Insurance and Financial Risk (continued) Risk management policies Risk Management Policies are practical guides which explain how the Company can manage the financial, operational and nominal losses in the most appropriate way. AvivaSA’s Risk Management Model consists of 4 primary, 7 secondary risk classes and 20 policy.. This model is concretized in 30 Risk Management Policies, which lay out the structural risks of the company active in the life insurance and private pension industry, as well as measurable data concerning these risks, risk factors, acceptable risk limits for the company and their management. Risk Management Activities The risks faced by the company are identified by the company management within the scope of the AvivaSA Risk Model, and assessed by upper management. In this assessment, the probability of these risks and their possible effects are taken into consideration. Risks and associated risk management actions (internal controls and actions) are monitored closely and methodically. Risk management department follow it and internal audit department audit. Risk management operations are performed by the Management Committee in the coordination of Risk and Compliance department which operates under the roof of the Board of Directors and performs the executions of the Company. The Management Committee evaluates the risk operations in the Operational Risk Committee which is contingent upon itself and which is represented by its own members and provides reporting. The Risk and Compliance department reports to the Board of Directors, the Board of Supervisors and the Board of Directors Risk Committee in the light of the obtained information. The main purpose of the risk and compliance controls carried out by the Internal Control is to investigate whether the risk management carries out its responsibility as a secondary defense line and to make necessary adjustments. Quarterly risk reports covering the company’s entire activities to be submitted to the Board of Directors are prepared and discussed at the Risk Committee under the Board of Directors. These reports cover strategic, operational, financial and insurance risks, and include internal controls and action plans for the optimal management of risks. As such, they provide support to the company management in risk management and monitoring. The company has successfully managed all risks to which it was exposed in 2012, especial those related to legal changes concerning the industry, and has set its 2012 strategies and risk/return equilibrium in due consideration of these risks. The Risk and Compliance department chairs the Legal Regulations Committee and monitors and directs the regulation works in the company. In the committee, relevant persons from each function of the company take part. The Committee reports to the Management Committee. During the year 2012, works were carried out within the scope of Corporate Management Principles, compliance with the regulations was ensured and the internet website was updated. The operations towards compliance with the new risk standards published in 2012 were continued and they are currently still going on. Within the scope of the regulations of Financial Crime Investigation Board (MASAK), reporting, monitoring and control operations are still going on. Regular e-learning trainings are given about financial crimes and trainings are updated every year.



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4. Management of Insurance and Financial Risk (continued) The main risks the Company faces are Insurance Risk, Market Risk and Credit Risk. Insurance Risk States the possibility that the premiums allocated by the Company may not meet the claim liabilities and profit share payments and that the payments related to damages and claims may be over the expectations. The main analyses regarding the Insurance Risk Management and the monitoring process are as follows: o Profitability analyses on product basis o Claim Premium rates o Cancellation, purchase, decease amounts and rates o NBC (New Business Contributions) , PVNBP (Present value of new business premiums), EEV

(European Embedded Value) The Company performs these analyses in order to manage the claim/premium balance, determine the liabilities accurately and to make sure there is enough provision to meet these liabilities. The insurance risk of the Company on branch basis is as follows: a) Life Branch Short Term Life Insurance (TL, USD, EURO), Protection Insurance (USD), Health Risk Insurance (USD), All those insurance type has individual and group agreements. Long Term Protection Insurance (TL, USD), Credit Life (TL, USD), Saving Life Insurance (TL, USD, EURO), All those insurance type has individual and group agreements. b) Personal Accident Branch Insurance for death due to accidents is presented as individual or group contracts. The risks for life and accident insurances can be summarized as mortality rates, illness rates, continuity risk and investment risk. The most important element in managing these risks are reinsurance agreements and underwriting. In order to meet the minimum interest guaranteed in some life insurances, the allocated reserves are evaluated in treasury bills and government bonds. The guaranteed interest rate in saving policies is 6% for TL policies and 2% for USD policies. The guaranteed interest rate in other policies is 9% for TL policies and 4% for USD policies.



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4. Management of Insurance and Financial Risk (continued) As of 2012 and 2011 dividend payout ratio is as follow: 2012 Profit share 2011 Profit share TL (Unit) %8,33 %7,97 USD (Unit) %6,33 %6,56 TL (Other) %9,51 %9,10 USD (Other) %6,48 %6,35 EURO (Other) %4,79 %4,61 c) Pension Branch Individual retirement saving plans are provided. The investment risk on pension agreements is on the insured. The insured evaluate their funds according to their own investment preferences. The risk of this branch on the Company is the risk of continuity of policies. Insurance Risk Management The purpose of management of insurance agreements risks and the policies about decrease it: According to TFRS, the insurance risk is defined as the risk transferred from the insured to the insurer apart from financial risk. The transferred risk is an uncertain incident in the future. The uncertainty arises from not knowing whether the incident will happen, its magnitude or its time. The rate of premiums acquired by the insurer to the claim paid to the insured states the company’s capacity to meet the insurance risk. As December 31, 2012 and 2011 claim/premium rate related branches is as follow. Received premiums compensate the realized claims.

Excepted claim premium rate December 31,

2012 December 31,

2011

Life %12 %19 Personal Accident %13 %17



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4. Management of Insurance and Financial Risk (continued) As of 31 December 2012 and 2011, the part of the total risk transferred to reinsurance is given below: December 31, 2012 Life

Natural death Accidental

death Accidental

disability Sickness disability Dangerous

sickness Public

Transport

%2,81 %0,52 %1,75 %1,32 %2,94 %0,07

Personal Accident


death Accidental

disability Accidental

treatment cost

- %0,15 %0,21 - December 31, 2011 Life


death Accidental

disability Sickness disability Dangerous

sickness Public

Transport

%2,68 %0,58 %1,95 %1,60 %1,64 %0,02 Personal Accident


death Accidental

disability Accidental

treatment cost

- %0,13 %0,18 - Sensitivity to insurance risk The policy creation strategy of the Company is based on the distribution of the risk among reinsurance companies optimally according to the type of policy and the type and magnitude of the risk undertaken. At December 31, 2012 and 2011, there are nine proportional reinsurance agreements. In consequence of these reinsurance agreements, the Company determined the retention amounts of the life insurance policies for decease, accidents and invalidity collateral security to be TL 150,000, USD 100,000 and EUR 75,000 (December 31, 2011 – TL 150,000 TL, USD 100,000 and EUR 75,000). For Dangerous Illness Collateral Security, %50 retention is held up to these limits (December 31, 2011 – 50%) All of Involuntary Unemployment Collateral Security is transferred to the reinsurer. Outstanding claims is updated and reviewed by claim department periodically.



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4. Management of Insurance and Financial Risk (continued) The company enters into insurance agreement of life and personal accident branch. Accordingly intensity of insurance agreement risk’s gross and net table as follow:

December 31, 2012 Total gross risk Total gross risk

reinsurance’s share Total Net risk Life 23,743,593,952 1,187,729,863 22,555,864,089 Personal Accident 27,725,569,588 99,467,067 27,626,102,521 Total 51,469,163,540 1,287,196,930 50,181,966,610

December 31, 2011 Total gross risk Total gross risk

reinsurance’s share Total Net risk Life 16,674,182,631 848,477,987 15,825,704,644 Personal accident 28,451,826,433 89,180,312 28,362,646,121 Total 45,126,009,064 937,658,299 44,188,350,765

As of December 31, 2012 and 2011 gross outstanding claim is as follow:

Outstanding Claim December 31,

2012 December 31,

2011 Life 23,415,322 17,052,101 Personal accident 5,998,737 4,979,423 Total 29,414,059 22,031,524

According to the Decree on the Technical Reserves, provisions and effect on December 31, 2012 and 2012 financial statements as follow: Unexpired Risks Reserve It is the reserve provided for the possibility that the liabilities related to the insurance contracts are greater than the unearned premium reserve. It is calculated for the prior 12 months for each reporting period. Effect on December 31, 2012 financial statements: Both life and personal accident branch net claim premium rate is under 95%. According to that the company has not make provision (December 31, 2011: None) Unearned premiums reserve Unearned premium reserve calculated on gross premiums. For permanent life insurance, permanent premiums deduct in gross premiums.



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4. Management of Insurance and Financial Risk (continued) As of December 31, 2012 calculated unearned premiums reserve for life branch amounting to TL 26,232,138 (December 31, 2011: TL 17,571,295), for personal accident amounting to TL 16,274,554 (December 31, 201: TL 13,536,378). Equalization reserve Equalization reserve is the provision that is provided for earthquake and credit coverage in order to balance the fluctuations in the claim ratios and to meet the catastrophic risks in the subsequent periods. Effect on the balance sheet dated December 31, 2012: For life branch a gross amount of TL 4,891,363 (December 31, 2011 – TL 3,085,093), for individual accident branch a gross amount of TL 1,631,140 (December 31, 2011 – TL 1,200,967), a total amount of gross TL 6,522,503 (December 31, 2011 – TL 4,286,061) balance provision was allocated. Incurred but not reported (IBNR)

The Company calculates IBNR according to the branch division set out in the Communiqué 2007/1 regarding insurance branches. According to this, calculations are made based on the Regulation on Calculation Principles of Incurred But Not Reported Outstanding Claim Reserve Regarding Life Branches numbered 2010/14 for life branches and the Regulation Regarding ACLM for Individual Accident Branches; and provisions are allocated gradually in accordance with the Regulation regarding the gradual implementation of ACLM results in 2010 and 2011 numbered 2011/10. The reinsurer shares calculated according to the conditions of reinsurance agreements in effect are deducted and allocated as net IBNR and ACLM reinsurer share. Effect on the balance sheet dated December 31, 2012: For life branch a net amount of TL 4,576,068 (December 31, 2011 – TL 3,499,179), for individual accident branch a net amount of TL 2,815,182 (December 31, 2011 – TL 2,111,001), a total amount of net TL 7,391,250 (December 31, 2011 – TL 5,610,180) IBNR provision was allocated. Financial Risk Management

The main financial instruments used by the Company are cash, time bank deposits, government bonds, treasury bills, private sector bonds and Eurobonds. As of December 31, 2012 and 2011, all financial assets monitored with their fair value are 1. level financial assets. The Company faces various financial risks due to the financial instruments used and insurance contract liabilities. The risks arising from the used instruments are market risk, liquidity risk and credit risk. The management of the Company manages these risks as explained below. a) Market Risk

States the risk of loss due to interest risk in the values of assets held by the Company, stock prices and foreign currency risk fluctuations The Company’s funds and funds of the policyholders are managed within the framework of the investment strategy set out by the Board of Directors. The market risk is monitored in the weekly meetings of the Executive Committee and investment committee. During the process of monitoring market risk, liquidity risk is monitored through cash flow projection operations prepared. i) Foreign currency risk

The Company is exposed to foreign exchange risk through the impact of rate changes at the translation of Turkish Lira pertaining to foreign currency denominated receivables and payables.



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4. Management of Insurance and Financial Risk (continued) At December 31, 2012, if Eurobond had strengthened/weakened by 10% against TL with all other variables held constant, equity would have been higher/lower by TL 152,073. December 31, 2012: Foreign currency asset and liabilities Effect on income/expense Rate variation (*) USD EUR GBP %10 1,810,134 151,252 79,945 -%10 (1,810,134) (151,252) 79,945 At December 31, 2011, if Eurobond had strengthened/weakened by 10% against TL with all other variables held constant, equity would have been higher/lower by TL 145,189. Foreign currency asset and liabilities Effect on income/expense Rate variation (*) USD EUR GBP %10 2,726,503 132,511 (116,912) -%10 (2,726,503) (132,511) 116,912 (*) All amounts are presented in TL. ii) Interest rate risk The Company’s sensitivity to interest rate risk is related to the change in the fair values or expected cash inflows of the financial assets due to the fluctuations in the interest rates. The Company closely monitors interest rate risk by monitoring market conditions and appropriate valuation methods.

In the following table, ceteris paribus, it is disclosed that effects over the profits and profit reserves of 5% increase/decrease for TL marketable securities, and 1% increase/decrease for USD and EURO marketable securities in the market interest rates. The underlying logic used in the practice; by using up and down changes may occur in average market interest rates, finding a discount rate, through impacts of stresses identified in different proportions according to the years, valid for each year and discounting the market value of marketable securities regarding maturity period.



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4. Management of Insurance and Financial Risk (continued) December 31, 2012: Effect on profit and profit reserve Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 (11,211,892) (2,678,728) (61,718) -%5 10,324,779 2,224,698 47,804

Held for trading financial assets (financier) Effect on income/expense Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 (700,467) - - -%5 765,939 - -

Available for sale financial assets Effect on profit and profit reserve Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 Financial assets at policyholders’ risk (6,763,875) (2,603,073) (61,718) %5 Available for sale financial assets (3,747,550) (75,654) - -%5 Financial assets at policyholders’ risk 6,260,996 2,158,396 47,804 -%5 Available for sale financial assets 3,297,844 66,302 - (*) Interest risk is calculated for 1% change of portfolio of USD and EUR. (**) All amounts is shown in respective currency. December 31, 2011: Effect on profit and profit reserve Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 (12,728,342) (2,773,410) (149,745) -%5 15,218,745 2,411,017 126,330

Held for trading financial assets (financier) Effect on income/expense Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 (1,152,772) - - -%5 1,353,905 - - Available for sale financial assets Effect on profit and profit reserve Market rate increase / (decrease) (**) TL USD (*) EUR (*) %5 Financial assets at policyholders’ risk (11,291,510) (2,628,557) (149,745) %5 Available for sale financial assets (284,060) (144,853) - -%5 Financial assets at policyholders’ risk 13,592,980 2,298,696 126,330 -%5 Available for sale financial assets 271,860 112,322 - (*) Amount is shown in respective currency.



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4. Management of Insurance and Financial Risk (continued) b) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Information about doubtful receivables is disclosed in Note 12. Credit risk management process of the Company is evaluated in the stage of determining of reinsurance companies. Reinsurance placement is compensated by high credibility reinsurance companies and agreements are approved by the Company’s Board of Directors. The Company’s financial assets except for loans and receivables subject to credit risk generally consist of domestic government bonds and time and demand deposits kept in banks and other financial institutions in Turkey and such receivables are not deemed to have high credit risk. Information about financial instruments is disclosed in Note 11. c) Liquidity risk The Company uses its available cash resources to pay claims arising from insurance contracts. Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Management sets limits on the minimum portion of funds available to meet such claims. The table below analyses distribution of the Company’s financial and insurance liabilities into relevant maturity groups based on the expected remaining period at the balance sheet or contractual maturity date. As of December 31, 2012 trade receivables and financial receivables maturity distribution as follow: No stated

maturity 0-3

months 3-6

months 6 months to 1 year

1-3 years

More than 3 years Total

Financial liabilities - 1,189,478 - - - - 1,189,478 Payables from Insurance Operations 34,501 4,852,737 102,577 117,148 - - 5,106,963 Payables from Pension Operations 65,326,357 7,135,561 - - - - 72,461,918 Other operating liabilities - 68,163 - - - - 68,163 Debts to affiliates 690,451 2,724,017 - - - - 3,414,468 Other Liabilities 941,402 6,189,477 - - - - 7,130,879 Total 66,992,711 22,159,433 102,577 117,148 - - 89,371,869 As of December 31, 2011 trade receivables and financial receivables maturity is distribution as follows: No stated

maturity 0-3

months 3-6


1-3 years


Financial liabilities - 2,279,999 - - - - 2,279,999 Payables from Insurance Operations 58,601 4,616,159 58,293 69,137 - - 4,802,190 Payables from Pension Operations 50,199,409 3,415,730 - - - - 53,615,139 Other operating liabilities - 50,159 - - - - 50,159 Debts to affiliates 431,424 3,199,206 - - - - 3,630,630 Other Liabilities 1,014,793 8,289,057 - - - - 9,303,850 Total 51,704,227 21,850,310 58,293 69,137 - - 73,681,967



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4. Management of insurance and financial risk (continued) d) Operational Risks Other risks except insurance risk, credit risk and market risk which may cause financial or loss of reputation to the Company are defined as operational risks. The Company has classified basic risks it may face in the Risk catalogue. The Risk catalogue is updated according to the undefined risks which the Company may be exposed to due to changes in the operation environment and business processes. Capital Management The Company’s capital adequacy which is based on “The Decree Measurement and Assessment of Capital Adequacy of Insurance and Reinsurance Companies and Pension Funds” published in the Official Gazette No: 26761 on January 19, 2008, is calculated 6 month terms. The main purpose of the Company’s capital management is to maximize the value provided by the Company to its associates in order to create and maintain a strong capital share structure to continue the operations of the Company. Besides, with the Regulation published in the official Gazette dated March 1, 2009 and numbered 27156, the capital sufficiency regulation, Article 8, paragraph 3, reinsurance risk calculation has been amended. As of December 31, 2012 and 2011, the Company has a sufficient amount of equity for losses which may arise from current liabilities and potential risks of the Company. As of December 31, 2012 and 2011, the necessary equity (calculated in accordance with the above-mentioned regulation) and current capital share adequacy analysis is as follows: December 31,

2012 December 31,

2011 Total shareholders' equity (*) 174,835,125 155,225,364 Minimal capital reserve 59,979,303 49,449,798 Capital surplus 114,855,822 105,775,566 (*) Except equalization provision. 5. Segment Information Disclosed in Note 2.3. 6. Property, plant and equipment 6.1 Depreciation and amortization expenses for the period: TL 2,856,455 (December 31, 2011

– TL 2,495,122). 6.1.1 Depreciation expenses: TL 1,551,023 (December 31, 2011 – TL 1,566,269) 6.1.2 Amortization expenses: TL 1,305,432 (December 31, 2011 - TL 928,853) 6.2 Changes in depreciation calculation methods and effect of such changes on depreciation

expenses for the year: None.



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6. Property, plant and equipment (continued) 6.3 Movements of property and equipment in the current period: 6.3.1 Cost of property and equipment purchased: TL 7,667,126 (December 31, 2011 – TL 2,942,639) 6.3.2 Cost of property and equipment sold or used as scrap: TL 1,407,055

(December 31, 2011 – TL 1,400,428). 6.3.3 Revaluation increases in the current period: None

6.3.3.1 Cost of fixed assets (+): None (December 31, 2011: TL None). 6.3.3.2 Accumulated depreciation (-): None (December 31, 2011: TL None)

6.3.4 Construction in progress’s property, total amount, start date, end date and degree of completion: Construction in progress which is amounting to TL 926,220 consists of expenses about Information Systems and Technologies. As of December 31, 2012 tangible assets movement table as follow:

Costs: January 1,

2012 Additions Disposals Transfers December 31,

2012 Machinery and equipment 5,733,771 496,886 (35,886) 8,758 6,203,529 Furniture and fixtures 8,950,834 1,513,948 (1,371,169) - 9,093,613 Other tangible assets 8,148,966 1,334,034 - - 9,483,000 Leased tangible assets 1,184,279 - - (8,758) 1,175,521 Total 24,017,850 3,344,868 (1,407,055) - 25,955,663

Accumulated depreciation: (-) January 1,


2012 Machinery and equipment 5,347,317 236,168 (35,868) 8,758 5,556,375 Furniture and fixtures 7,818,232 453,835 (1,348,461) - 6,923,606 Other tangible assets 5,639,613 860,838 - - 6,500,451 Leased tangible assets 1,183,682 182 - (8,758) 1,175,106 Total 19,988,844 1,551,023 (1,384,329) - 20,155,538 Net book value 4,029,006 5,800,125 As of December 31, 2011 tangible assets movement table as follow:

Costs: January 1,


2012 Machinery and equipment 5,394,713 53,424 (13,604) 299,238 5,733,771 Furniture and fixtures 9,344,156 682,350 (1,367,394) 291,722 8,950,834 Other tangible assets 7,181,687 792,131 (8,973) 184,121 8,148,966 Leased tangible assets 1,968,159 - (8,799) (775,081) 1,184,279 Total 23,888,715 1,527,905 (1,398,770) - 24,017,850

Accumulated depreciation: (-) January 1,


2012 Machinery and equipment 4,520,274 539,556 (11,524) 299,011 5,347,317 Furniture and fixtures 8,702,093 280,804 (1,348,938) 184,273 7,818,232 Other tangible assets 4,871,440 684,062 (8,973) 93,084 5,639,613 Leased tangible assets 1,707,002 61,847 (8,799) (576,368) 1,183,682 Total 19,800,809 1,566,269 (1,378,234) - 19,988,844 Net book value 4,087,906 4,029,006



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7. Investment properties None (December 31, 2011: None). 8. Intangible assets

As of December 31, 2012 intangible assets movement and its accumulated depreciation is as follows:

Cost January 1, 2012

Additions

Impairments Transfers December 31,

2012 Software 22,658,116 3,396,038 - 691,641 26,745,795 Construction-in-progress 691,641 926,220 - (691,641) 926,220 Total 23,349,757 4,322,258 - - 27,672,015

Accumulated amortization (-) January 1, 2012

Additions Impairments Transfers December 31,

2012 Software 21,534,985 1,305,432 - - 22,840,417 Total 21,534,985 1,305,432 - - 22,840,417 Net book value 1,814,772 4,831,598 As of December 31, 2011 intangible assets movement and its accumulated depreciation is as follows:

Cost January 1, 2011


2011 Software 21,936,681 723,093 (1,658) - 22,658,116 Construction-in-progress - 691,641 691,641 Total 21,936,681 1,414,734 (1,658) - 23,349,757

Accumulated amortization (-) January 1, 2011


2011 Software 20,607,790 928,853 (1,658) - 21,534,985 Total 20,607,790 928,853 (1,658) - 21,534,985 Net book value 1,328,891 1,814,772 9. Investments in associates None (December 31, 2011: None).



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10. Reinsurance assets As of December 31, 2012 and 2011 reinsurer transactions from insurance agreements amount that take part in financial statements is as follows: December 31,

2012 December 31,

2011 Reinsurers’ share of unearned premiums reserve (Note 17.15) 2,665,378 1,437,468 Reinsurer’s share of outstanding claim (Note 17.15) 2,446,834 1,221,031 Reinsurers’ share of change in equalization provision (Note 17.15) 378,014 249,239 Reinsurers company account current (net) (455,271) (2,005,071) Total reinsurance assets/ (liabilities) 5,034,955 902,667 December 31,

2012 December 31,

2011 Premium ceded to reinsurers (Not 24) (9,265,068) (6,951,607) Commission income from reinsurers (Not 32) 2,039,795 1,295,013 Reinsurer’s share in paid claim 1,833,516 2,115,314 Reinsurers’ share of change in outstanding claims reserve (Not 17) 1,225,803 615,328 Reinsurers’ share of change in unearned premiums reserve (Not 17) 1,227,910 525,435 Reinsurers’ share of change in equalization provision (Not 17) 128,775 82,142 Total reinsurance income/(expense) (2,809,269) (2,318,375) 11. Financial assets 11.1 The Company’s financial assets are summarized below by measurement category in the

table below:

December 31, 2012 Financial assets at policyholders’ risk Company’s portfolio Blocked Free Total Blocked Free Total Available for sale financial assets Government bonds and bills treasury 70,240,904 - 70,240,904 30,929,539 - 30,929,539 Eurobond 191,857,257 100,332 191,957,589 - - - Time deposit 100,029,636 - 100,029,636 - - - Held for trading financial assets Asset backed securities - - - - 5,856,240 5,856,240 Private Sector Bonds - - - - 10,532,970 10,532,970

Total 362,127,797 100,332 362,228,129 30,929,539 16,389,210 47,318,749 December 31, 2011 Financial assets at policyholders’ risk Company’s portfolio Blocked Free Total Blocked Free Total Available for sale financial assets Government bonds and bills treasury 113,853,953 - 113,853,953 2,776,962 2,514,983 5,291,945 Eurobond 198,234,424 108,736 198,343,160 9,146,120 - 9,146,120 Time deposit 82,231,011 - 82,231,011 - - - Held for trading financial assets Government bonds - - - - 14,528,617 14,528,617 Total 394,319,388 108,736 394,428,124 11,923,082 17,043,600 28,966,682



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11. Financial assets (continued) 11.2 Marketable securities issued during the year other than share certificates: None

(December 31, 2011: None). 11.3 Debt securities issued during the year: None (December 31, 2011: None). 11.4 Market value of marketable securities and financial assets carried at cost and carrying

value of marketable securities and financial assets shown at market value: Marketable securities December 31, 2012 December 31, 2011

Cost Value Book Value

Fair Value Cost Value Book Value Fair Value Available for sale financial

assets – Company Portfolio Government bonds and bills treasury (TL) 30,641,141 30,929,539 30,929,539 5,630,750 5,291,945 5,291,945 Eurobond (USD) - - - 8,892,370 9,146,120 9,146,120 30,641,141 30,929,539 30,929,539 14,523,120 14,438,065 14,438,065 Held for trading financial assets Asset backed securities and

bills treasury (TL) 5,120,760 5,856,240 5,856,240 - - - Government bonds and bills - - - 14,638,769 14,528,617 14,528,617 Private Sector Bonds 10,500,000 10,532,970 10,532,970 - - -

15,620,760 16,389,210 16,389,210 14,638,769 14,528,617 14,528,617 Policyholders’ risk invesments Government bonds and bills treasury (TL) 67,257,935 70,240,904 70,240,904 117,222,000 113,853,953 113,853,953 Eurobond (USD) 175,735,083 185,908,997 185,908,997 185,844,471 192,758,726 192,758,726 Eurobond (EURO) 5,284,565 6,048,593 6,048,593 5,491,525 5,584,434 5,584,434 Time deposit (TL) 87,861,825 91,232,084 91,232,084 57,515,000 59,462,481 59,462,481 Time deposit (USD) 8,743,653 8,797,551 8,797,551 22,487,355 22,768,530 22,768,530

344,883,061 362,228,129 362,228,129 388,560,351 394,428,124 394,428,124

Total 391,144,962 409,546,878 409,546,878 417,722,240 423,394,806 423,394,806 Company’s non-current assets are presented with cost value.



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11. Financial assets(continued) As of December 31, 2012 and 2011 policyholders’ risk investments and available for sale financial assets movement table in current year as follow: December 31,

2012 December 31,

2011 January 1 423,394,806 493,710,142 Inflows within the period 424,762,744 134,254,777 Outflows within the period (411,235,693) (202,402,966) Valuation increase/decrease (2,401,222) (5,474,896) Sold financial assets in current year (26,055,361) (5,328,540) Unrealized rate income (expense) (14,048,968) 31,736,027 Accounted under equity 2,147,004 566,284 Amount accounted under mathematical reserves 19,327,533 5,777,681 Amount accounting under technical reserves and income statement (6,343,965) (29,443,703)

Total 409,546,878 423,394,806 The maturity analysis of financial assets is as follows:

December 31, 2012 No stated

maturity 0-3

months 3-6


1-3 years


Government bonds and

treasury bills - 7,929,675 - - 53,458,832 39,781,936 101,170,443 Eurobond - 4,128,584 - - 142,052,386 45,776,620 191,957,590 Private Sector Bonds - 10,532,970 - - - - 10,532,970 Asset backed securities - - 5,856,240 - - - 5,856,240 Time deposit - 65,728,307 - 34,301,328 - - 100,029,635 Total 88,319,536 5,856,240 34,301,328 195,511,218 85,558,556 409,546,878 December 31, 2011 No stated

maturity 0-3

months 3-6


1-3 years


Government bonds and

treasury bills - 7,951,800 - 25,220,364 43,673,929 56,828,423 133,674,516 Eurobond - 2,821,027 - - 129,723,641 74,944,611 207,489,279 Time deposit - 18,739,562 63,491,449 - - 82,231,011 Total - 29,512,389 - 88,711,813 173,397,570 131,773,034 423,394,806



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11. Financial assets(continued) The foreign currency analysis of financial assets is as follows: December 31, 2012

Foreign currency

Foreign currency

amount Rate Amount TL Available for sale financial assets TL 30,929,539 Total 30,929,539 Held for trading financial assets TL 16,389,210 Total 16,389,210 Policyholders’ risk investments USD 109,226,157 1.7826 194,706,548 Euro 2,572,009 2.3517 6,048,593 TL 161,472,988 Total 362,228,129 409,546,878

December 31, 2011

Foreign currency

Foreign currency

amount Rate Amount TL Available for sale financial assets USD 4,842,035 1.8889 9,146,120 TL 5,291,945 Total 14,438,065 Held for trading financial assets TL 14,528,617 Total 14,528,617 Policyholders’ risk investments

USD 114,101,994 1.8889 215,527,256

Euro 2,285,143 2.4438 5,584,434 TL 173,316,434 Total 394,428,124 423,394,806

11.5 Marketable securities under “Marketable Securities and Investment Securities” account

group and issued by the Company’s shareholders, investments or subsidiaries and the issuers: None (December 31, 2011: None).



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11. Financial assets(continued) 11.6 Revaluation of property and equipment in the last three years: None (December 31, 2011:

None). 12. Loans and receivables 12.1 Classification of the receivables as receivables from main customers, receivables from

interested parties, receivables for the advance payment (short-term and long-term prepayment) and the others:

December 31,

2012 December 31,

2011 Due from insurance operations 9,848,772 8,007,009 Loans give to policyholders (Loans to insured) 144,493,264 157,324,837 Due from pension operations 10,546,002 8,353,309 Due from related parties 170,148 49,682 Other receivables 143,214 195,568 Total 165,201,400 173,930,405 Doubtful receivables from main operations 570,351 570,351 Provisions for doubtful receivables from main operations (570,351) (570,351) Total 165,201,400 173,930,405 Detail of prepaid expenses is disclosed in Note 47. Undue insurance operations receivables movement table as follow: December 31,

2012 December 31,

2011 Receivables from policyholders Up to 3 months 3,944,074 3,089,897 3 to 6 months 2,267,734 1,698,231 6 to 9 months 1,354,012 976,461 9 to 12 months 483,181 277,452 Total 8,049,001 6,042,041 Overdue insurance operations receivables movement table as follow: December 31,

2012 December 31,

2011 Overdue 0-3 months 941,042 696,861 Overdue 3-6 months 363,610 273,658 Overdue 6-9 months 194,955 113,531 Overdue 9-12 months 78,157 115,976 Overdue 1 year 79,810 Total 1,577,764 1,279,836 Grand total 9,626,765 7,321,877 As of December 31, 2012 total receivables from reinsurance companies and total recourse receivables amounting to TL 222,007 (December 31, 2011 – TL 83,849).



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12. Loans and receivables (continued) Aging of Loans to insured December 31,

2012 December 31,

2011 Up to 3 months 224,072 299,726 3 to 6 months 66,829 132,248 6 to 9 months 88,602 39,241 9 to 12 months 24,564 116,962 Total 404,067 588,177 Other (unallocated) 144,089,197 156,736,660 Total 144,493,264 157,324,837 Provision for insurance operations receivables movement table as follow: December 31,

2012 December 31,

2011 January 1 570,351 570,351 Inflows within the period - - Write off provisions - - Charge off receivables - - December 31 570,351 570,351 12.2 Due from / due to shareholders, investments and subsidiaries: December 31, 2012 December 31, 2011 Payables Liabilities Payables Liabilities

Commer-cial

Non-commer

cial Commer

cial Non-

commercial Commer-

cial Non-

commercial Commer-

cial Non-

commercial Shareholders Sabancı Holding - - - 21,167 - - - 1,022 Aviva International 150,812 - - - - 29,120 - - Other - - - 21,423 - - - -

Total 150,812 - - 42,590 - 29,120 - 1,022 12.3 Total mortgages and collateral obtained for receivables: Total mortgages and collateral obtained for receivables:

December 31, 2012 December 31, 2011

USD Euro TL Total (TL) USD Euro TL

Total (TL)

Guarantees received Letter of guarantees 83,782 - 2,246,350 2,330,132 252,253 48,876 707,050 1,008,179 Mortgage deed - - 241,200 241,200 - - 243,700 243,700 Other guarantees 155,503 6,498 86,800 248,801 183,665 6,752 202,156 392,573 Total 239,285 6,498 2,574,350 2,820,133 435,918 55,628 1,152,906 1,644,452



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12. Loans and receivables (continued) 12.4 Receivables and payables denominated in foreign currencies having no foreign

exchange rate guarantees, assets in foreign currencies and conversion rates: Debit December 31, 2012 December 31, 2011 Cash and cash equivalents Rate TL Amount Rate TL Amount

EUR 1,456 2.3517 3,424 1,478 2.4438 3,612 GBP 356 2.8708 1,023 207 2.917 605 USD 3,914,321 1.7826 6,977,668 5,804,367 1.8889 10,963,869

Total 6,982,115 10,968,086

Financial assets and policyholders’ risk investments Rate TL Amount Rate TL Amount

EUR 2,572,009 2.3517 6,048,593 2,285,143 2.4438 5,584,433 USD 109,226,157 1.7826 194,706,548 118,944,029 1,8889 224,673,377

Total 200,755,141 230,257,810

Due from main operations Rate TL Amount Rate TL Amount

EUR 9,882 2.3517 23,238 34,727 2.4438 84,867 USD 35,522,772 1.7826 63,322,894 38,717,255 1.8889 73,133,022

Total 63,346,132 73,217,889 Receivables from related parties Rate TL Amount Rate TL Amount

GBP 52,533 2.8708 150,812 9,983 2.917 29,120 USD 15 1.7826 27 15 1.8889 29

Total 150,839 29,149 Other current assets Rate TL Amount Rate TL Amount

EUR - - - 9,559 2.4438 23,361 USD 375 1.7826 668 - - -

Total 668 23,361 Other receivables Rate TL Amount Rate TL Amount

EUR 1,000 2.3517 2,352 1,000 2.4438 2,444 USD 200 1.7826 357 3,200 1.8889 6,044

Total 2,709 8,488



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12. Loans and receivables (continued) Credit December 31, 2012 December 31, 2011 Payables due to main operations Rate TL Amount Rate TL Amount

EUR 42 2.3517 100 1,650 2.4438 4,032 USD - - - 178,919 1.8889 337,961

Total 100 341,993 Due to related parties Rate TL Amount Rate TL Amount

EUR 121,168 2.3517 284,950 235 2.4438 574 GBP - - - 585 2.917 1,706 USD 538,709 1.7826 960,303 1,491 1.8889 2,816

Total 1,245,253 5,096

Other payables Rate TL Amount Rate TL Amount

EUR 4,915 2.3517 11,559 13,818 2.4438 33,768 GBP - - - 7,694 2.917 22,443 USD 210,629 1.7826 375,467 145,898 1.8889 275,587

Total 387,026 331,798

Provision for life mathematical reserves Rate TL Amount Rate TL amount

EUR 85,625 2.3665 202,632 12,451 2.4593 30,621 USD 895,072 1.7939 1,605,670 462,711 1.9008 879,521 USD 257,506 1.7826 459,031 377,361 1.8889 712,797

Total 2,267,333 1,622,939

Prepaid income and expense accural Rate TL Amount Rate TL Amount

GBP 331,365 2.8708 951,282 402,706 2.917 1,174,694 USD 24,393 1.7826 42,482 21,458 1.8889 40,532

Total 993,764 1,215,226

Provision for life mathematical reserves Rate TL Amount Rate TL Amount

EUR 1,488,170 2.3665 3,521,755 1,795,558 2.4593 4,415,815 EUR 231,363 2.3517 544,096 (45,505) 2.4438 (111,206) USD 7,009,339 1.7939 12,574,054 9,580,531 1.9008 18,210,674 USD 129,565,063 1.7826 230,962,682 138,202,883 1.8889 261,051,426

Total 247,602,587 283,566,709 13. Derivative financial instruments The Company has no derivative financial instruments as of December 31, 2012 (December 31, 2011 – none). The Company has short term swap agreements occurred in the financial period and the total income arising from the market valuation of these transactions are recognized as TL 539,608 in the account of income acquired from derivative products (December 31, 2011 – None).



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14. Cash and cash equivalents

Cash and cash equivalents, the period ended December 31, 2012 and December 31, 2011 of the Company are as follows: December 31,

2012 December 31,

2011 Cash 1,844 830 Bank deposits 235,212,090 214,427,517 Other cash and cash equivalents 63,971,519 53,716,270 Total 299,185,453 268,144,617 December 31,

2012 December 31,

2011 Foreign currency cash and cash equivalent 6,982,115 10,968,086 - demand deposits 142,983 145,298 - time deposits 6,791,229 10,777,527 - credit card collection 46,635 45,184 - cash 1,268 77 TL cash and cash equivalent 292,203,338 257,176,531 - demand deposits 4,612,426 7,362,824 - time deposits 223,665,451 196,141,868 - credit card collection 63,924,885 53,671,086 - cash 576 753 Total 299,185,453 268,144,617 Weighted average interest rate of time deposits: December 31,

2012 December 31,

2011 Per-annum rate

(%) Per-annum rate

(%) USD 0.29 0.43 TL 8.44 11.25

As of December 31, 2012 maturity of TL deposits are changed between January 2, 2013 to April 19, 2013, foreign exchange maturity are changed between January 7, 2013 to September 5,2013. (As of December 31, 2011 maturity of TL deposits are changed between January 2, 2012 to December 27, 2013, foreign exchange maturity are changed between January 2, 2012 to February 19, 2013.)



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14. Cash and cash equivalents (continued) Foreign exchange time deposits and demand deposits: December 31, 2012 December 31, 2011 Foreign currency TL Foreign currency TL Dated Undated Dated Undated Dated Undated Dated Undated USD 3,809,732 80,079 6,791,229 142,748 5,705,716 76,472 10,777,527 144,448 Euro - 100 - 235 - 103 - 252 GBP - - - - - 205 - 598 Total 6,791,229 142,983 10,777,527 145,298

15. Share capital 15.1 Transactions between the Company and its shareholders, showing each distribution

made to the shareholders separately In the Ordinary General Assembly held on March 31, 2012, the Company decided by unanimity vote that, in line with the profit distribution offer, TL 46,351,825 of previous year’s losses amounting TL 51,985,876 in the financial year balance sheet of 2011 shall be provided from retained earnings, that previous year’s loss amounting to TL 5,634,052 shall be provided from the profit acquired from the operations in 2011 with deductions, that in return for their shares, first and second dividends shall be paid to the shareholders as TL 0,0064 per share, totally amounting to TL 22,898,685, that TL 2,110,973 shall be allocated in Secondary Statutory Reserves and TL 28,278 shall be transferred to Extraordinary Reserves Account and that the dividend to be distributed shall be distributed to shareholders as of April 2, 2012. As of December 31, 2012, dividend payment to shareholders with a legal entity status has been completed.

15.2 Capital and profit reserves Legal reserves:

As of December 31, 2012 and 2011 profit reserves consist of legal reserves amounting to TL 1,606,831, statuary reserves amounting to TL 2,122,467, extraordinary reserves amounting to TL 5,439,061 and valuation of financial assets amounting to TL 1,912,678 (December 31, 2011: TL 284,403). Retained earnings as per the statutory financial statements, other than legal reserve requirements, are available for distribution subject to the legal reserve requirement referred to below. The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code. The Turkish Commercial Code stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the Company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the Turkish Commercial Code, the legal reserves can only be used to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital. Capital reserve

As of December 31, 2012, 2011, capital reserves of the Company amounting to TL 66,865,115 consist of the amount of TL 66,540,803 that are differences resulted between the amount of TL 82,320,000 that is pre-merger nominal capital of Aviva Emeklilik and TL 15,779,197 that is capital increase amount of Ak Emeklilik; inflation adjustment of affiliates amounting to TL 324,236 and the amount of TL 76 that is bonus share increase of the affiliate.



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15. Share capital (continued) Valuation of financial assets: The Company’s share of the unrealized gains on available-for-sale financial assets is credited to the “Valuation of financial assets” account in the shareholders’ equity. The movement of valuation of financial assets in the year is as follows: December 31,

2012 December 31,

2011 January 1 284,403 4,372,530 Fair value increase/(decrease), net 1,628,275 (4,088,127) December 31 1,912,678 284,403

15.3 Capital movement As of December 31, 2012 and 2011 the Company does not has capital increase. The face value of Kr 1 each and the total nominal amount is TL 3,577,919,700. Information about capital classified in share capital is explained in Note 2.3 16. Other reserves and equity component of discretionary participation feature Information about other reserves classified in share capital is explained in Note 15. 17. Insurance liabilities and reinsurance assets 17.1 Guarantees to be provided and guarantees provided for life and non-life branches: December 31, 2012 December 31, 2011 Branch

To be provided (*)

Blockage (nominal)

Blockage (price of official

gazette) To be provided

(*) Blockage (nominal)

Blockage (price of official

gazette) Life 407,913,612 405,385,354 417,277,952 433,911,473 438,466,953 438,735,755 Non-life 3,273,205 3,938,453 3,938,453 2,974,671 3,663,095 3,621,695 Total 411,186,817 409,323,807 421,216,405 436,886,144 442,088,648 442,357,450 (*) Amount of to be provided, as of December 31, 2012 and 2011. Total collateral on assets:

December 31, 2012

December 31, 2011

Securities portfolio (nominal value) Turkish Lira 232,402,624 226,824,390 Foreign currency 176,921,183 215,264,258 Total 409,323,807 442,088,648 The assets above are blocked by Undersecretariat of the Treasury.



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17. Insurance liabilities and reinsurance assets (continued) 17.2 Number of life policies, the number and mathematical reserve amount of the life policies

that enter and exit during the year and current status:


Unit Mathematical

reserve TL

Unit Mathematical

reserve TL At the beginning 1,204,978 415,969,273 1,034,950 412,763,786 Entry 1,007,490 61,771,034 734,587 92,007,574 Exit 599,506 96,518,037 564,559 88,802,087 At the end of 1,612,962 381,222,270 1,204,978 415,969,273 (1) Mathematical reserves is calculated by its own technical rules for each product. (2) As of December 31, 2012, there is not any provision for cancelled policy (December 31, 2011 : None) a) Mathematical reserves of policies that were active at the beginning of the period and have

cancelled in the reporting period are disclosed in exits, however mathematical reserves and units related to unit based policies written and cancelled in the reporting period are not included to entries and exits

b) As of December 31, 2012 mathematical reserve allocated for loans to insured is amounting to

TL 144,089,197 (December 31, 2011: TL 156,736,660) and the fair value difference of financials investments at insured’s risk amounting to TL 19,327,533 (December 31, 2011: TL 5,777,681) has not disclosed in related mathematical reserves.

17.3 Guarantee amount to be provided for non-life branch: 51,469,163,540 TL (December 31, 2011 - 45,126,009,064 TL).

17.4 Unit prices of pension funds and savings founded by the Company: As of December 31, 2012 the company has 19 pension mutual funds. Pension Investment Funds

Unit amount December 31,

2012 (TL)

Unit amount December 31,

2011 (TL)

AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 0,024112 0,021640 AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatırım Fonu 0,036183 0,028882 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatırım Fonu 0,038188 0,030428 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 0,021449 0,018968 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 0,037500 0,033290 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Likit Emeklilik Yatırım Fonu 0,027110 0,025268 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Borçlanma Araçları Emeklilik Yatırım Fonu 0,014573 0,014849 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Emeklilik Yatırım Fonu 0,022084 0,014352 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasası Likit Kamu Emeklilik Yatırım Fonu 0,028833 0,026954 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 0,038131 0,034102 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Emeklilik Yatırım Fonu 0,038279 0,031262 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Karma Emeklilik Yatırım Fonu 0,013699 0,013062 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatırım Fonu 0,044066 0,028941 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu-Grup 0,029400 0,025902 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Esnek Emeklilik Yatırım Fonu 0,028101 0,025509 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Grup Emeklilik Yatırım Fonu 0,033827 0,022035 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Grup Emeklilik Yatırım Fonu 0,012716 0,009944 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fonu 0,011294 0,010033 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Alternatif Esnek Emeklilik Yatırım Fonu 0,010796 0,009695



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17. Insurance liabilities and reinsurance assets (continued) 17.5 Units and amounts of share certificates in portfolio and in circulation: December 31, 2012 December 31, 2011 Share certificates in circulation Unit Amount Unit Amount AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 3,336,793,261 80,456,759 3,297,997,623 71,368,669 AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatırım Fonu 2,545,281,828 92,095,932 2,962,243,111 85,555,505 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatırım Fonu 4,151,504,962 158,537,672 3,986,118,001 121,289,598 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Dış Borçlanma Araçları Emeklilik Yatırım Fonu 2,451,698,406 52,586,479 2,174,576,564 41,247,368 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 9,138,937,065 342,710,140 8,303,132,139 276,411,269 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Likit Emeklilik Yatırım Fonu 1,518,001,307 41,153,015 1,061,325,754 26,817,579 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Borçlanma Araçları Emeklilik Yatırım Fonu 1,068,689,723 15,574,015 1,358,065,023 20,165,907 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Emeklilik Yatırım Fonu 2,418,058,625 53,400,407 2,347,651,108 33,693,489 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasası Likit Kamu Emeklilik Yatırım Fonu 9,877,401,900 284,795,129 9,070,800,841 244,494,366 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Kamu Borçlanma Araçları Emeklilik Yatırım Fonu 38,352,243,634 1,462,409,402 33,431,785,931 1,140,090,764 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Emeklilik Yatırım Fonu 20,719,039,114 793,104,098 17,589,102,116 549,870,510 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Uluslararası Karma Emeklilik Yatırım Fonu 700,199,574 9,592,034 770,336,899 10,062,141 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatırım Fonu 4,911,509,677 216,430,586 4,409,868,066 127,625,992 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçları Emeklilik Yatırım Fonu-Grup 9,867,634,743 290,108,461 4,618,363,514 119,624,852 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Esnek Emeklilik Yatırım Fonu 3,487,897,003 98,013,394 2,469,054,423 62,983,109 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Hisse Senedi Grup Emeklilik Yatırım Fonu 1,244,601,436 42,101,133 1,059,180,209 23,339,036 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Esnek Grup Emeklilik Yatırım Fonu 1,347,089,858 17,129,595 324,654,866 3,228,368 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek Emeklilik Yatırım Fonu 108,649,657 1,227,089

-

-

117,245,231,773 4,051,425,340 99,234,256,188 2,957,868,522

December 31, 2012 December 31, 2011 Share certicates at founder Unit Amount Unit Amount AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçlı Performans Esnek

Emeklilik Yatırım Fonu - -

10,000,000

100,328 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçlı Alternatif Esnek Emeklilik

Yatırım Fonu 10,000,000 107,956

10,000,000

96,953 10,000,000 107,956 20,000,000 197,281 17.6 Numbers and portfolio amounts of the individual and group pension funds’ participants

(entered, left, cancelled during the period and the current participants):

December 31,

2012 December 31,

2011

Number of contracts

Portfolio amount TL

Number of contracts

Portfolio amount

TL Individual Entrance 121,318 277,148,695 120,582 137,999,128 Exit 55,642 1,457,174,987 44,386 316,892,948 Available 497,848 3,217,780,421 438,395 2,458,444,275 Group Entrance 15,862 99,449,925 10,427 28,131,271 Exit 6,143 131,639,905 4,752 37,315,455 Available 70,875 833,644,919 52,479 499,424,247 Total portfolio 568,723 4,051,425,340 490,874 2,957,868,522



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17. Insurance liabilities and reinsurance assets (continued) 17.7 Valuation methods of profit share calculation for life insurance: The Company’s life mathematics provisions regarding saving policies written from saving funds are evaluated daily according to TL and USD profit share technical principles approved by the Undersecretariat of Treasury and Foreign Trade of the Turkish Republic on January 14, 1993 and September 12, 1996. The income from these investments is distributed using the daily accrued interest method as the income of the related investment instrument. In accordance with the Profit Share Technical Principles approved by the Turkish Republic Prime Ministry Undersecretariat of Treasury General Directorate of Insurance on November 1, 1999 and Life Insurance Regulations, the Daily Profit Share System is applied to the Company’s life mathematics provisions regarding saving life policies written from other funds Profit share values calculated according to profit share rates calculated according to the daily yield of TL; USD and EUR investment instruments are reflected daily on the accounts of the insured. 17.8 Number of units and individual/group allocation of gross/net contribution amounts of the

private pension fund participants at the Company during the period: January 1 – December 31, 2012 January 1 – December 31, 2011

Number of contracts

Gross contribution

amount TL

Contribution amount (net) TL

Number of contracts

Gross contribution

amount TL


Individual 121,318 151,092,323 147,787,291 120,582 162,243,513 159,031,087 Group 15,862 21,760,983 21,747,097 10,427 13,878,650 13,870,616 Total 137,180 172,853,306 169,534,388 131,009 176,122,163 172,901,703 For the years of 2012 and 2011, contracts made in the related years are taken into account. For the year of 2012 and 2011, if there is a contribution entry to contract made in prior to related years from another company due to the merger, related contribution amount and contributions of the reporting period have been evaluated as subsequent amounts and not disclosed in the table above. 17.9 Number of units and individual/group allocation of gross/net contribution amounts of the

private pension fund participants transferred from another company during the period:

January 1 – December 31, 2012 January 1 – December 31, 2011

Number of contracts

Gross contribution

amount TL


Number of contracts

Gross contribution

amount TL


Individual 2,135 48,874,936 48,788,946 1,189 19,772,250 19,731,523 Group 8,132 47,418,981 47,418,658 400 5,079,945 5,079,832 Total 10,267 96,293,917 96,207,604 1,589 24,852,195 24,811,355 The contribution amount of transferred from another company and contribution amounts collected in the reporting period for the related contract have been subject to report. If contribution transferred from another company due to the merger has combined to a contract established in the period, new contribution amounts has been subject to table above. 17.10 Number of units and individual/group allocation of gross/net contribution amounts of the

private pension fund participants transferred from the life insurance portfolio to the private pension fund portfolio during the period:

None (December 31, 2011: None).



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17. Insurance liabilities and reinsurance assets (continued) 17.11 Number of units and individual/group allocation of gross/net contribution amounts of the

private pension fund participants that left the Company and transferred to another company or that left the Company but did not transfer to another company:


Number of contracts

Gross contribution

amount TL

Net contribution

amount TL Number of contracts

Gross contribution

amount TL

Net contribution

amount TL Individual 55,642 400,817,797 386,222,504 44,386 290,374,077 279,317,619 Group 6,143 43,109,766 42,991,221 4,752 31,480,579 31,393,923 Total 61,785 443,927,563 429,213,725 49,138 321,854,656 310,711,542 Number of contracts: It shows that outgoing participant. Gross contribution amount: It shows that total contribution amount after outgoing. Net contribution amount: It shows that contribution amount after outgoing after cutoff piece. 17.12 Number of units, gross/net premiums and individual/group allocation for life

policyholders that joined the portfolio during the period: January 1 – December 31, 2012 January 1 – December 31, 2011

Unit (*)

Net Premium amount TL (**)

Unit (*)

Net Premium amount

TL (**) Individual 688,534 73,706,277 493,221 40,721,803 Group 318,954 40,825,231 241,353 26,994,943 Total 1,007,488 114,531,508 734,574 67,716,746

(*) For 2012, 2 policy, for 2011, 13 policy which is enter into force from cancellation has not been included in

entrances. (**) In the table, life policies written in the reporting period has disclosed only, and re-enacted policies in the

reporting period and renewable annual life policies that renewing in progress has not been taken into consideration. Interim movements of TL and USD unit based policies enter and exit in the same period has not been presented.

17.13 Number of units, gross/net premiums and individual/group allocation of mathematical reserves for life policyholders that left the portfolio during the period:


Unit Mathematical

reserve TL

Unit Mathematical

reserve TL Individual 344,656 87,628,742 283,107 86,601,976 Group 254,850 510,660 281,452 2,200,111 Total 599,506 88,139,402 564,559 88,802,087



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17. Insurance liabilities and reinsurance assets (continued) There is no mathematical reserve about annually life policy accordingly not disclosed. Interim movements of TL and USD unit based policies that enter and exit in the same period has not been presented. 17.14 Profit share allocation rate to the life policyholders:

Dividend distribution rate

(%) December 2012

Dividend distribution rate

(%) December 2011

TL (per) 8.33 7.97 USD (per) 6.33 6.56 TL (other) 9.51 9.10 USD (other) 6.48 6.35 EUR (other) 4.79 4.61 17.15 Amount of liabilities from insurance agreements December 31,

2012 December 31,

2011 Gross insurance liabilities Unearned premiums reserve 42,506,691 31,107,673 Outstanding claim reserve 29,414,059 22,031,524 Equalization reserve 6,522,503 4,286,061 Mathematical reserve (*) 544,639,000 578,483,613 Total 623,082,253 635,908,871 Reinsurance assets Unearned premiums reserve 2,665,378 1,437,468 Outstanding claim reserve 2,446,834 1,221,031 Equalization reserve 378,014 249,239 Total 5,490,226 2,907,738 Net insurance liabilities Unearned premiums reserve 39,841,313 29,670,205 Outstanding claim reserve 26,967,225 20,810,493 Equalization reserve 6,144,489 4,036,822 Life mathematical reserve 544,639,000 578,483,613 Total 617,592,027 633,001,133 (*) Movement of mathematical reserve is disclosed in Note 17.2. According to the Note 2.20. the

reserve is net.



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17. Insurance liabilities and reinsurance assets (continued) Outstanding claim reserve’ movement table in current year: December 31, 2012 December 31, 2011

Life Gross Reinsurers’

share Net Gross Reinsurers’

share Net January 1 17,052,101 (1,221,031) 15,831,070 15,842,636 (605,703) 15,236,933 Paid claim (2,283,184) 250,188 (2,032,996) (2,429,261) 295,952 (2,133,309) Increase/(decrease) - - Outstanding claim in current year 10,073,462 (1,236,303) 8,837,159 11,355,691 (420,640) 10,935,051 - Outstanding claim in previous year (1,427,057) (219,323) (1,646,381) (7,716,965) (490,640) (8,207,605) December 31 23,415,322 (2,426,469) 20,988,852 17,052,101 (1,221,031) 15,831,070 Reported claims 17,995,465 (1,582,679) 16,412,786 13,000,902 (669,011) 12,331,891 Claims incurred but not reported 5,419,857 (843,790) 4,576,067 4,051,199 (552,020) 3,499,179 Total 23,415,322 (2,426,469) 20,988,853 17,052,101 (1,221,031) 15,831,070


Personel accident Gross Reinsurers’

share Net Gross Reinsurer

s’ share Net January 1 4,979,423 - 4,979,423 3,848,313 - 3,848,313 Paid claim (1,138) - (1,138) (1,144,033) - (1,144,033) Increase/(decrease) - Outstanding claim in current year 2,252,655 (20,365) 2,232,290 1,453,388 - 1,453,388 - Outstanding claim in previous year (1,232,203) - (1,232,203) 821,755 - 821,755 December 31 5,998,737 (20,365) 5,978,372 4,979,423 - 4,979,423 Reported claims 3,183,555 (20,365) 3,163,190 2,868,422 - 2,868,422 Claims incurred but not reported 2,815,182 - 2,815,182 2,111,001 - 2,111,001 Total 5,998,737 (20,365) 5,978,372 4,979,423 - 4,979,423 Grand Total 29,414,059 (2,446,834) 26,967,225 22,031,524 (1,221,031) 20,810,493

Equalization reserve’ movement table in current year:


Equalization provision Gross Reinsurers’


share Net January 1 4,286,061 (249,239) 4,036,822 2,611,297 (167,097) 2,444,200 Net change 2,236,442 (128,775) 2,107,667 1,674,764 (82,142) 1,592,622 December 31 6,522,503 (378,014) 6,144,489 4,286,061 (249,239) 4,036,822 Unearned premium reserve’ movement table in current year: December 31, 2012 December 31, 2011

Unearned premiums reserve Gross Reinsurers’


share Net January 1 31,107,673 (1,437,468) 29,670,205 31,438,765 (912,033) 30,526,732 Increase/(decrease)

- Unearned premiums reserve in current yaer 41,375,158 (2,547,199) 38,827,958 29,835,698 (1,318,855) 28,516,843 - Unearned premiums reserve in previous year (29,976,140) 1,319,289 (28,656,850) (30,166,790) 793,420 (29,373,370)

Net change 11,399,018 (1,227,910) 10,171,108 (331,092) (525,435) (856,527) December 31 42,506,691 (2,665,378) 39,841,313 31,107,673 (1,437,468) 29,670,205



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17. Insurance liabilities and reinsurance assets (continued) As of December 31, 2012 and 2011 foreign currency net technical provisions is as follows: December 31, 2012 December 31, 2011

Mathematical reserves

Foreign currency

amount

Foreign currency

rate TL amount

Foreign currency

amount

Foreign currency

rate TL amount TL - - 297,036,413 - - 294,916,904 ABD Doları 7,009,339 1.7939 12,574,054 9,580,531 1.9008 18,210,674 ABD Doları 129,565,063 1.7826 230,962,682 138,202,883 1.8889 261,051,426 Euro 1,488,170 2.3665 3,521,755 1,795,558 2.4593 4,415,815 Euro 231,362 2.3517 544,096 (45,505) 2.4438 (111,206) 544,639,000 578,483,613 Unearned premium reserve TL - - 39,841,313 - - 29,670,205 39,841,313 29,670,205 Outstanding claims reserve TL - - 24,699,892 - - 19,187,554 ABD Doları 895,072 1.7939 1,605,670 462,711 1.9008 879,521 ABD Doları 257,506 1.7826 459,031 377,361 1.8889 712,797 Euro 85,625 2.3665 202,632 12,451 2.4593 30,621 26,967,225 20,810,493 Equalization reserve TL - - 6,144,489 - - 4,036,822 6,144,489 4,036,822 As of December 31, 2012 claim movement is as follows: Accident Year

2005 and previous 2006 2007 2008 2009 2010 2011 2012 Total

Estimated claim cost In accident year 473,849 26,543 581,347 2,058,282 1,512,446 1,802,975 2,108,774 11,081,145 19,645,382

1 year later - 107,366 2,470 24,500 54,984 245,761 550,246 - 985,327 2 year later 1,082 1,663 - 182,101 167,431 87,929 - - 440,205 3 year later - 344 - 66,473 30,180 - - - 96,996 4 year later - - - 6,110 - - - - 6,110 5 year later - - - - - - - - - 6 year later - - - - - - - - - 7 year later 5,000 - - - - - - - 5,000

Total outstanding claim 479,931 135,916 583,817 2,337,466 1,765,041 2,136,665 2,659,020 11,081,144 21,179,020

IBNR claim 5,419,857 Additional outstanding claims with

ACLM. 2,815,182

Total gross provision for outstanding claim 29,414,059



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17. Insurance liabilities and reinsurance assets (continued) As of December 31, 2011 claim movement is as follows: Accident Year

2004 and previous 2005 2006 2007 2008 2009 2010 2011 Total

Estimated claim cost In accident year 7,730 2,146 27,238 19,200 64,867 67,157 1,520,824 12,945,127 14,654,289

1 year later - - 425 2,470 34,452 298,285 397,329 - 732,960 2 year later - - - - 194,978 212,621 - - 407,599 3 year later - - - - 70,470 - - - 70,470 4 year later - - - - - - - - - 5 year later - - - - - - - - - 6 year later - 4,006 - - - - - - 4,006 7 year later - - - - - - - - - 8 year later - - - - - - - - -

Total outstanding claim 7,730 6,152 27,663 21,670 364,767 578,063 1,918,153 12,944,553 15,869,324

IBNR claim 4,051,199 Additional outstanding claims with ACLM. 2,111,001

Total gross provision for outstanding

claim 22,031,524

18. Investment contract liabilities None (December 31, 2011: None). 19. Trade and other payables and deferred income As of December 31, 2012 and 2011 trade and other liabilities are as follows: December 31,

2012 December 31,

2011 Payables due to main operations 77,637,044 58,467,488

Participants’ transitory account (Payables from pension operations)

68,325,519

52,305,017

Due from Insurance Operations 5,106,963 4,802,190 Other (Payables from pension operations) 4,136,399 1,310,122 Payables due to other main operations 68,163 50,159

Payables to related-parties 3,414,468 3,630,630 Payables to shareholders 42,590 1,022 Payables to personnel 647,861 431,424 Payables to other affiliates 2,724,017 3,198,184

Other payables (Not 47.1) 7,130,879 9,303,850 Total 88,182,391 71,401,968

As of December 31, 2012 and 2011 foreign currency trade and other liabilities is disclosed in Note 12.4. As of date of financial statements prepaid expenses and expense accrual is disclosed in Note 47.1 As of date of financial statements provisions for vacation pay liabilities is classified in other miscellaneous short term liabilities.



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20. Borrowings As of December 31, 2012 and 2011 borrowings is disclosed in Note 2.17. 21. Deferred income tax The Company calculates deferred income tax for the temporary differences in the balance sheet items arising due to measurement in the financial statements and measurement in accordance with Tax Law. The enacted tax rate used for the calculation of deferred income taxes on temporary differences that are expected to be realized in the following periods under the liability method is 20%. As of December 31, 2012 and 2011 the temporary differences giving rise to deferred income tax assets and deferred income tax liabilities with using appropriate tax rates are as follows: Deferred income

tax assets/(liabilities)

Deferred income tax

assets/(liabilities)

Deferred tax (expense)

income

Deferred tax (expense)

income December 31,

2012 December 31,

2011 December

31, 2012 December

31, 2011 Deferred income tax assets Provision for employment

termination benefit 362,003 254,597 107,405 96,104 Personnel vacation pay liability 517,444 594,138 (76,694) (47,468) Provision for legal cases 1,030,769 1,018,189 12,580 111,221 Provision for actuarial ACLM - 220,526 (220,526) 175,752 Provision for loans to insured BSMV 214 266 (54) (87) Portfolio price difference held for

trading - 37,086 (37,086) 33,362 Expense accrual 2,846,600 2,059,859 786,742 172,958 4,757,030 4,184,661 572,367 541,842 Deferred tax liabilities Net difference between the carrying

values and tax base values of tangible assets (329,876)

(181,142) (148,734)

(25,454)

Eurobond valuation difference (88,104) (138,137) 50,035 64,926 (417,980) (319,279) (98,699) 39,472 Deferred tax assets (liabilities)

accounted under equity due to increase value of available for sale financial assets (234,326)

(281,882) - -

Deferred tax, net 4,104,724 3,583,500 473,668 581,314



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21. Deferred income tax (continued) The movement of deferred income tax within the year is as follows: December 31,

2012 December 31,

2011 Opening balance - January 1 3,583,500 2,463,128 Deferred tax assets booked in equity due to increase value of

available for sale financial assets 281,882 820,940 Deferred income tax credited 473,668 581,314 Deferred tax assets booked in equity due to increase value of

available for sale financial assets (234,326) (281,882) Total 4,104,724 3,583,500 As of December 31, 2012 and 2011 there is no transmissible accrued loss. 22. Retirement benefit obligations Under Turkish Labor Law, the Company is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service and achieves the retirement age. The amount payable consists of one month's salary limited to a maximum of TL 3,034 (December 31, 2011: TL 2,732) for each year of service as of December 31, 2012 TAS 19 requires actuarial valuation methods to be developed to estimate the enterprise's obligation, the provision has been calculated by using projection method. The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: December 31,

2012 December 31,

2011 Discount rate (%) 8% 10% Estimated salary increase rate (%) 4,5% 5,1%

The movement in the provision for employment termination benefits in the current period is as follows December 31,

2012 December 31,

2011 Opening balance - January 1 1,272,987 792,468 Paid during the period (1,561,177) (1,153,316) Charge for the period 2,098,204 1,633,835 Total 1,810,014 1,272,987



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23. Provisions for other liabilities and charges 23.1 Provision about personnel social securities and others: None (December 31, 2011: None). 23.2 Provision for other risks: The company’ provision for expense accruals is as fallow: December 31,

2012 December 31,

2011 Personnel bonus provision 8,403,010 6,311,951 Commission provision 920,000 1,565,937 Bonus provision for sales personnel 4,685,308 2,330,189 Total 14,008,318 10,208,077

Other short term liabilities are consist of provision for unused vacations. Other long term liabilities are disclosed in Note 47. 23.3 Contingent liabilities December 31, 2012 December 31, 2011 USD Euro TL Total USD Euro TL Total Guarantees,

commitments

Letter of guarantee 14,439 - 2,518,076 2,532,515 15,300 - 1,656,054 1,671,354 Other 14,439 - 2,518,076 2,532,515 15,300 - 1,656,054 1,671,354 Insurance coverage Life 825,876,946 22,044,750 22,895,672,256 23,743,593,952 1,026,456,278 25,432,272 15,622,294,081 16,674,182,631 Personel accident - - 27,725,569,588 27,725,569,588 - - 28,451,826,433 28,451,826,433 825,876,946 22,044,750 50,621,241,844 51,469,163,540 1,026,456,278 25,432,272 44,074,120,514 45,126,009,064

24. Net Insurance premium revenue The distribution of written premiums is as follows: January 1- December 31, 2012 January 1- December 31, 2011

Gross Reinsurer

share Net Gross Reinsurer

share Net Non-life 32,341,198 (56,533) 32,284,665 26,784,037 (47,243) 26,736,794 Life 165,202,464 (9,208,535) 155,993,929 121,631,827 (6,904,364) 114,727,463 Total premium income 197,543,662 (9,265,068) 188,278,594 148,415,864 (6,951,607) 141,464,257



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25. Fee income As of December 31, 2012 and 2011 private pension income are as follows: January 1-

December 31, 2012

January 1- December 31,

2011 Fund management income 83,548,762 66,874,393 Management fee expense 32,023,292 28,292,088 Entrance fee income 20,023,033 15,842,101 Income from the value increase of capital advances 13,275 3,113 Other technical income 102,892 43,189 Total 135,711,254 111,054,884 26. Invest income

January 1-

December 31, 2012


2011 Dividend income 21,162 53,909 Net earned income/(expense) 23,366,209 17,589,396 Held-for-trading financial assets net earned income/(expense) 1,052,940 1,229,441 Held-for-trading financial assets- deposit interest income 18,765,643 12,746,123 Available-for-sale financial assets net earned income/(expense) 1,701,710 1,936,757 Available-for-sale financial assets- deposit interest income 1,845,916 1,677,075 Net sales income/(expense) 553,440 10,848,603 Held-for-trading financial assets 289,640 998,645 Available-for-sale financial assets 263,800 9,849,958 Other income(*) 539,608 - Total 24,480,419 28,491,908 (*) Swap transactions income are classified in other income. 27. Net realized gains on financial assets January 1-

December 31, 2012


2011 Held-for-trading financial assets 1,017,826 (929,325) Available-for-sale financial assets (58,182) (1,341,906)

Total 959,644 (2,271,231) 28. Net fair value gains on assets at fair value through income The information about net fair value gains on assets at fair value through income is disclosed in Note 26.



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29. Insurance benefits and claims Disclosed in note 17. 30. Investment contract benefits None (December 31, 2011: None). 31. Other expenses by destination January 1-

December 31, 2012


2011 Operating expenses classified under technical part Non-life 19,109,003 25,484,247 Life 75,307,522 53,578,223 Pension 100,811,574 92,600,624 Total 195,228,099 171,663,094 Operating expenses particulars are presented in note 32. 32. Expense by nature January 1-

December 31, 2012


2011 Personnel expenses 77,624,510 73,725,978 Production commissions 66,916,475 55,032,116 Advertising and marketing expenses 7,659,724 6,503,147 Travelling and transporting expenses 7,535,543 6,459,029 Outsourcing 14,229,703 11,247,281 Communication expenses 5,487,821 4,402,956 Operating expense 6,702,248 5,572,646 Presentation and entertainment expenses 4,691,903 4,551,658 Stationery expenses 1,702,802 1,383,370 Other marketing, sales and distribution expenses 1,109,456 1,005,551 Other operating expenses 583,617 401,961 Other expenses 599,876 603,375 Taxes and other legal dues 1,650,024 1,426,608 Reinsurance commissions (2,039,795) (1,295,013) Broker expenses 774,192 642,431 Total 195,228,099 171,663,094



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33. Employee benefit expense January 1-

December 31, 2012


2011 Wages 45,308,139 41,824,781 Commission and promotion expenses 7,859,828 11,413,848 Social security costs 6,981,984 6,904,905 Other personnel expenses 5,551,791 4,835,462 Other wages expenses 9,864,681 7,006,244 Severance pay expense 1,561,177 1,153,316 payment in lieu of notice expense 142,236 202,081 Vacation indemnity expenses 354,674 385,341 Total 77,624,510 73,725,978 The company does not has share based payment. 34. Finance costs 34.1 Total financial expenses for the period: January 1-

December 31, 2012


2011 Financial expenses (classified in direct expenses) 448 1,998 34.2 Financial expenses related to shareholders, subsidiaries and investments (any amount

exceeding 20% of total will be illustrated separately): None. 34.3 Sales to/purchases from shareholders, subsidiaries and investments (any amount

exceeding 20% of total will be illustrated separately):

January 1 - January 1 - December 31,

2012 December 31,

2011 Purchases of services Hacı Ömer Sabancı Holding A.Ş. 205,014 99,311 205,014 99,311 Services offered Hacı Ömer Sabancı Holding A.Ş. 388,330 286,276 388,330 286,276

34.4 Interest, rent or other charges received from or paid to shareholders, subsidiaries and

investments (any amount exceeding 20% of total will be illustrated separately): December 31, 2012 - 29,205 TL (December 31, 2011 – None).



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35. Income taxes The Company is subject to corporate tax legislation applicable in Turkey. Corporation tax for 2012 is payable at a rate of 20%. Corporate tax returns are submitted to the related tax office by the 25th day of the 4th month following the month when the accounting period ends. Corporations are required to pay advance corporation tax quarterly at the rate of 20% on their corporate income. Advance Tax is declared by 14th of the second month following and payable by the 17th of the second month following each calendar quarter end. Advance Tax paid by corporations is credited against the annual Corporation Tax liability. According to Turkish tax legislation, financial losses on the returns can be offset against period income for up to 5 years. In tax reviews authorized bodies can review the accounting records for the past five years and if errors are detected, tax amounts may change due to tax assessment. Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding tax at the rate of 15%. An increase in capital via issuing bonus shares is not considered as a profit distribution thus does not incur withholding tax and no stoppage is applied. Dividend income (except for participation certification of investment funds and profit shares obtained from shares of investment trusts) acquired from shares in the capital of another entity subject to resident taxpaying is exempt from corporate tax. The affiliate shares stocked for minimum 2 years and the 75% of the profit obtained from the property sales are considered as tax exemptions in such condition that the amount is added onto capital as pre-stated in Corporate Tax Law or the amount is kept in equity for 5 years. The reports which are published in the scope of “General Communiqué (No:1) on Transfer Pricing Through Distribution of Concealed” on November 2007 need to be prepared until the deadline of corporate tax return. Tax income and expense recognized in the income statement of the interim periods ended December 31, 2012 and 2011 are summarized as follows: January 1 - January 1 - December 31,

2012 December 31,

2011 Corporate tax for the current period (14,215,051) (6,971,562) Deferred tax income/(expense) 473,668 581,314 Total tax expense (13,741,383) ( 6,390,248) Deferred income tax asset 4,757,030 4,184,661 Deferred income tax liability (652,306) (601,161) Deferred income tax asset, net 4,104,724 3,583,500



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35. Income taxes (continued) The reconciliation between the expected and the actual taxation charge is as follows: January 1 -

December 31, 2012

January 1 - December 31,

2011 Profit before current and deferred income tax 52,513,887 38,380,022 Enacted tax rate 20% 20% Tax calculated by enacted tax rate (10,502,777) (7,676,005) Nontaxable income 2,130,067 4,023,653 Expenses not allowable for tax purposes, net (5,842,341) (3,319,210) Tax expenses before deferred tax (14,215,051) (6,971,562) Deferred tax income/(expense) (Not 21) 473,668 581,314 (13,741,383) (6,390,248) The Company has prepaid tax amount to TL 13,174,011 (December 31, 2011: TL 371,585). January 1 -

December 31, 2012


2011 Tax provision 14,215,051 6,971,562 Prepaid taxes (11,776,205) (6,053,488) Deducted witholding tax (1,397,806) (918,074) Total tax liabilities 1,041,040 - 36. Net foreign exchange gains January 1 -

December 31, 2012


2011 Financial assets at insured’s risk income 16,461,858 57,812,356 Financial assets at insured’s risk expense (26,659,323) (19,486,575) Available-for-sale financial assets income 2,601,117 6,362,424 Available-for-sale financial assets income (4,093,816) (2,674,158) Other exchange income 3,505,422 9,949,771 Other exchange expense (4,831,679) (8,633,227) Total (13,016,421) 43,330,591



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37. Earnings per share 37.1 On the condition that common and preferred stocks are shown separately, common

stock and preferred capital stock earning per share and dividend rates: Shareholder of the company's earnings per share calculation is as follows: December 31,

2012 December 31,

2011 Net current year profit 38,772,504 31,989,774 Per 0,01 TL nominal value number of shares 3,577,919,700 3,577,919,700 Earnings per share (TL) 0.0108 0.0089 38. Dividends per share: The Company’s dividend amounting to TL 0.0064 for distribution to shareholders in accordance with the percentage of their shares regarding to the profit of 2011 is TL 22,898,685 as of April 1, 2012. Distribution of profit for 2012 to shareholders of the Company in accordance with the percentage of their shares and the amount of dividends will be finalized in the General Assembly that will be held on March 28, 2013. 39. Cash generated from operations: Disclosed in the statement of cash flows. 40. Convertible bond: None. 41. Redeemable preference shares: None. 42. Contingencies December 31,

2012 December 31,

2011 Business lawsuit against the company 2,646,245 3,068,215 Insurance lawsuit against the company 2,195,371 1,703,700 Other lawsuit against the company 312,234 319,032 5,153,850 5,090,947 Provision for lawsuit against company is classified in long term provisions for liabilities and charges according to financial statements. 43. Commitments The Company has GİVEN guarantee letter amounting TL 2,532,515 to its supplier and Customs Office (December 31, 2011: TL 1,671,354).



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44. Business combinations None. 45. Related-party transactions Top management benefits As of December 31, 2012 and 2011, the members of the Board of Directors, general manager, general coordinator, assistant general managers, such as salaries and other benefits provided to top executives in the current period are as follow:

December 31,

2012 December 31

2011 Short term employee benefits 4,060,471 3,444,010 Total earnings 4,060,471 3,444,010 Employer's share of social security premium 129,974 112,125 December 31,

2012 December 31

2011 Trade receivables from other related-parties Aksigorta A.Ş.(Aksigorta) - 3,551 Aviva Sigorta A.Ş. (Aviva Sigorta) 15,945 15,354 15,945 18,905 December 31,

2012 December 31,

2011 Trade payables to other related-parties Ak Finansal Kiralama A.Ş. - 2,486 Ak Portföy 869,192 2,794,961 Akbank T. A.Ş. (Akbank) - 294 Aksigorta A.Ş. (Aksigorta) 83,972 - Bimsa 1,035,477 19,357 Emeklilik Gözetim Merkezi A.Ş. 31,125 65,996 TeknoSA İç ve Dış Tic. A.Ş. (TeknoSA) 207,463 2,028 Vista Turizm ve Seyahat A.Ş. (Vista) 458,919 280,666 EnerjiSA A.Ş. 35,490 32,396 Aviva Sigorta A.Ş. 2,379 - 2,724,017 3,198,184



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45. Related-party transactions (continued)

December 31, 2012

December 31, 2011

Purchases of services Akbank 64,033,186 49,995,130

- Paid administrative expenses 47,361 45,763 - Paid commissions 63,985,825 49,949,367

Ak Portföy 9,223,082 9,482,400 Vista (management cost) 2,510,750 2,947,404 Citibank A.Ş. (Paid commission and premium expenses and performance

premiums) 231,071 286,529 BimSA (data processing machine) 158,282 142,983 Aviva Sigorta (hull policy expenses and consultancy services fee about integration

project) 2,379 - Emeklilik Gözetim Merkezi A.Ş. (exam fee, co-operative advertising fee) 1,031,685 1,113,217 Milli Reasürans T.A.Ş. (Transferred premiums) 669,551 497,104 Aksigorta A.Ş. 2,203,710 1,968,363 EnerjiSA A.Ş. 432,770 384,265 Other 539,874 218,159 81,036,340 67,035,554 Financial gain Akbank (interest income) 16,040,509 14,002,749 16,040,509 14,002,749

December 31,

2012 December 31,

2011 Services rendered (premium) Citibank 1,439,268 1,896,214 Kordsa 414,703 370,602 Brisa 284,673 315,474 Temsa 284,357 248,386 Akçansa 158,552 158,310 Enerjisa 226,208 262,257 Çimsa 153,617 148,077 Sabancı Üniversitesi 149,522 152,007 TeknoSA İç ve Dış ticaret A.Ş. 129,191 111,961 Ak Yatırım Menkul Değerler A.Ş. 39,247 32,673 Exsa Satış Araştırma 3,715 9,902 Aksigorta A.Ş 133,771 109,161 Advansa 111,860 115,151 I-Bımsa 47,074 42,627 Olmuksa 127,616 121,529 Yünsa 78,256 68,087 Aviva Sigorta A.Ş. 304,269 433,037 Ak Portföy 43,899 35,551 Milli Reasürans T.A.Ş. 380,496 298,885 Philip Morris Sab. Sat. ve Paz. 414,789 365,159 Philip Morris Sab. Sigara ve Tütün 396,592 350,004 Philip Morris Seyahat Perakende Sat. 20,324 17,483 Akbank (fatura) 52,197 - Other 388,587 245,405 5,782,783 5,907,942 Dividend income Milli Reasürans T.A.Ş. - 50,497 Ak Yatırım Menkul Değerler A.Ş. 3,968 3,026 Tursa 303 305 Ak Portföy 106 81

4,377 53,909



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45. Related-party transactions (continued) As of December 31, 2012 the Company's own portfolio of financial assets classified as held for trading and financial assets issued by related parties of the Company are as follows (December 31, 2011 : None).

December 31, 2012

Nominal Value Cost Value Fair Value Book Value

Private sector bonds Akbank T.A.Ş. 9,000,000 9,000,000 9,020,160 9,020,160 Ak Finansal Kiralama A.Ş 1,500,000 1,500,000 1,512,810 1,512,810

10,500,000 10,500,000 10,532,970 10,532,970 45.1 Doubtful receivables from shareholders, investments, subsidiaries: None. 45.2 Breakdown of investments and subsidiaries having an indirect shareholding and

management relationship with the Company, participation rates and amounts of these investments and subsidiaries; profit/loss, net profit/loss in the latest financials, the period of these financials and the opinion type of the independent audit report if the Company is independently audited: None (December 31, 2011: None). Other financial assets are as below:

December 31, 2012 Financial statements’

Subsidiary

% Subsidiary

amount Net

Profit (loss)

Profit or loss fort he

period Period Compliance of CMB standarts

Audited/ Unaudited

Audit opinion

Within group Tursa A.Ş 0,008 71,119 3,196,296 3,335,186 31/12/2012 - Unaudited - Outside of the group Milli Reasürans A.Ş (**) 0,1494 575,082 - - - - Unaudited - Emeklilik Gözetim Merkezi A.Ş.(**) 8,3326 263,222 - - - - Unaudited - Enternasyonal Turizm Yatırım A.Ş. (**) 0,0001 2 - - - - Unaudited - Endüstri Holding A.Ş (**) 0,0001 626 - - - - Unaudited - 910,051 Provision for losses (*) (60,594) Total 849,457 (*) Provision for losses for Tursa A,Ş. (**) It has not provided as of the date of the report.



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45. Related-party transactions (continued) December 31, 2011 Financial statements’

Subsidiary

% Subsidiary

amount Net

Profit (loss)

Profit or loss fort he period Period

Compliance of CMB standarts

Audited/ Unaudited

Audit opinion

Within group Tursa A.Ş 0,008 71,119 5,323,905 5,215,971 31/12/2011 - Unaudited - Ak Yatırım A.Ş 0,020 9,381 67,920,616 74,413,050 31/12/2011 - Unaudited - Ak Portföy Yönetim A.Ş. 0,001 33 11,616,711 14.521.342 31/12/2011 - Unaudited - Outside of the group Milli Reasürans A.Ş 0,1494 575,082 - - - Unaudited - Emeklilik Gözetim Merkezi A.Ş. 8,3326 263,222 1,243 15,443 31/12/2011 - Unaudited - Enternasyonal Turizm Yatırım A.Ş. 0,0001 2 - - - - Unaudited - Endüstri Holding A.Ş 0,0001 626 - - - - Unaudited - 919,465 Provision for losses (*) (62,006) Total 857,459

(*) Provision for losses for Tursa A,Ş. 45.3 Bonus shares obtained through internally funded capital increases of equity investments

and subsidiaries: None (December 31, 2011 - 134,435 TL). 45.4 Rights on immovable and their value: None. 45.5 Guarantees, commitments and securities given for shareholders, investments and

subsidiaries: None. 46. Events after the balance sheet date: The new “Individual Retirement System Regulation”

became effective as of January 1, 2013 after being published in the official gazette by the Prime Ministry Undersecretariat of Treasury of the Turkish Republic on 9 November 2012.

47. Other

Details of “Other” items in the balance sheet which exceed 20% of its respective account group or 5% of total assets:

Other cash and cash equivalents consist of blocked by bank credit cards receivables. Other short term receivables is consist of witholding tax and receivables other companies. Other tangible assets consist of private cost. Other intangible assets consist of software. Other technical reserves and other reserves movement account consists of equalization provision.



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47. Other (continued)

December 31,

2012 December 31,

2011 Other current deferred income and expense accruals Deferred commission expenses 14,606,922 10,115,341 Income accruals 110,196 - Other expenses 1,159,822 448,270 15,876,940 10,563,611

December 31,

2012 December 31,

2011 Prepaid expenses and income accruals Other prepaid expenses

972,619

-

972,619 - Other miscellaneous payables Payables 6,189,477 8,289,057 Other payables 941,402 1,014,793 7,130,879 9,303,850 Provision for other liabilities and expenses (long term) Provisions for lawsuits 5,153,850 5,090,947 5,153,850 5,090,947 Taxes and other fiscal liabilities and reserves Provision for BSMV on interest for loans to insured 1,069 1,341 1,069 1,341 Short-term deferred income and accrued expenses Deferred commission 978,810 631,339 Return of no claim bonus 43,675 112,482 BES expense accrual - 754,899 Provision for Other administrative expenses 990,543 369,156 2,013,028 1,867,876 Other capital reserves Other capital reserves 66,540,803 66,540,803 Subsidiary inflation adjustment 324,312 324,236 Subsidiary capital increase by bonus issue - 76 66,865,115 66,865,115



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47. Other (continued) January 1 –

December 31, 2012 January 1 –

December 31, 2011 Other technical reserves (Life) Unit price difference of loans to insured 6,976,119 23,003,285 Other technical income 19,429 28,530 Unclaimed money from beneficiary clients 53,453 118,029 7,049,001 23,149,844 Other technical reserves (Non-Life) Other expenses 11,460 10,774 11,460 10,774 Other technical expenses – (Pension) Commissions paid to Takasbank 1,564,429 960,582 Service charged by Emeklilik gözetim merkezi 351,975 421,124 Subscription fee 549,275 410,702 Collective advertising expense 251,847 187,952 Support services charge 706,582 554,538 Other expenses 2,344,220 1,968,804 5,768,328 4,503,702 Other Expenses Foreign currency losses 4,831,679 8,633,227 Non-tax-deductible expenses 1,842,248 435,690 Special communication tax expense 342,917 306,815 Other expenses 1,056,900 264,767 8,073,744 9,640,499 Other income Foreign exchange income 3,505,422 9,949,771 Other income 1,427,090 1,481,149 4,932,512 11,430,920 47.2 Due from and due to personnel classified in “Other receivables” and “Other short-term or

long-term payables” that exceed 1% of total assets: None.



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47. Other (continued) 47.3 Receivables from claim recoveries followed under off-balance sheet items:

Prior year's income and expenses

January 1 – December 31,

2012


2011 Cancelled invoices 14,052 - Other technical expense accrual cancelled 101,120 - Cancellations of tax provision (*) 845,645 28,169 Other 1,856 6,731 Total 962,673 34,900 (*) As of December 31, 2011 tax provision cancelation between corporate tax base and corporate

tax return.

Prior year's income and expenses


2012


2011 Deferred invoice 42,269 36,550 Claim payment - 4,859 Profit commission adjustment - 167,653 Premium adjustment 573 - Other expenses 12,421 11,713 Total 55,263 220,775 47.4 Information that the Treasury requires to be presented Provision and rediscount expenses/(income) for the period: January 1 –

December 31, 2012


2011 Change in unearned premium reserves, net 10,171,108 (856,527) Change in outstanding claims reserves, net 6,156,732 1,725,248 Change in life mathematical reserves, net (47,394,464) 21,588,199 Equalization reserve, net 2,107,667 1,592,622 Provision for employment termination benefit, net 537,027 480,519 Provision for vacation pay, net (383,468) (237,339) Tax provision 14,215,051 6,971,562 Deferred tax provision (473,668) (581,314) Provision for administrative expenses, net 2,152,800 83,431 Provision for commission, net (645,937) 766,693 Provision for staff bonus, net 2,091,059 354,049 Provision for litigation 62,902 556,104 Other tax provisions (272) (436) (11,403,463) 32,442,811



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Current

period Previous

period Note (31/12/2012) (31/12/2011) I. Distribution of profit for the period 1.1.Profit for the period 52,987,555 38,961,336 1.2.Taxes payable and legal liabilities (14,215,051) (6,971,562) 1.2.1. Corporation tax (income tax) (14,215,051) (6,971,562) 1.2.2. Income tax deduction - - 1.2.3. Other taxes and legal liabilities - - A. Net profit for the period (1.1 - 1.2) 38,772,504 31,989,774 1.3.Previous years' losses (-) - (5,634,052) 1.4.First legal reserve - 1,317,786 1.5.Legal reserves kept in the company (-) - - B. Net distributable - 25,037,936 profit for the period [ (a - (1.3 + 1.4 + 1.5) ] - 1,788,960 1.6.First dividend to shareholders (-) - - 1.6.1. To common shareholders - - 1.6.2. To preferred shareholders - - 1.6.3. To owners of participating redeemed shares - - 1.6.4. To owners of profit-sharing securities - - 1.6.5. To owners of profit and loss sharing securities - - 1.7. Dividends to personnel (-) - - 1.8. Dividends to founders (-) - - 1.9. Dividends to board of directors (-) - 21,109,726 1.10. Second dividends to shareholders (-) - 21,109,726 1.10.1. To common shareholders - - 1.10.2. To preferred shareholders - - 1.10.3. To owners of participating redeemed shares - - 1.10.4. To owners of profit-sharing securities - - 1.10.5. To owners of profit and loss sharing securities - 2,110,973 1.11. Second legal reserve (-) - - 1.12. Statutory reserves (-) - 28,278 1.13. Extraordinary reserves - - 1.14. Other reserves - - 1.15. Special funds - - II. Distribution from reserves - - 2.1.Distributed reserves - - 2.2.Second legal reserve (-) - - 2.3.Dividends to shareholders (-) - - 2.3.1. To common shareholders - - 2.3.2. To preferred shareholders - - 2.3.3. To owners of participating redeemed shares - - 2.3.4. To owners of profit-sharing securities - - 2.3.5. To owners of profit and loss sharing securities - - 2.4.Dividends to employees (-) - - 2.5.Dividends to board of directors (-) - - III. Profit per share - 0.894 3.1.To common shareholders - %89 3.2.To common shareholders (%) - - 3.3.To preferred shareholders - - 3.4.To preferred shareholders (%) - 0.640 IV. Dividends per share - %64 4.1.To common shareholders - - 4.2.To common shareholders (%) - - 4.3.To preferred shareholders - -

Distribution of profits for 2012 to shareholders of the Company in accordance with the percentage of their shares and the amount of dividends will be finalized in the General Assembly that will be held on March 28, 2013.


Head Office and Sales Offices

Gaziantep Sales Office 2Gazi Muhtar Paşa Bulvarı Kepkepzade Park İş Merkezi C Blok Kat: 5 D: 18, 27090 GaziantepTel: +90 342 232 27 02Fax: +90 342 232 27 05İskenderun Sales OfficeSavaş Mah 41. Sok. Murathan İş Merkezi No: 3 K: 3 D: 10 İskenderun - HatayTel: +90 326 614 17 67Fax: +90 326 614 09 49İstanbul Avrupa Sales Office 1İstasyon Caddesi, Fahri Korutürk Çıkmazı,No: 9/1, Akhan K: 5, 34720Bakırköy - İstanbulTel: +90 212 543 35 25Fax: +90 212 543 19 90İstanbul Avrupa Sales Office 2Meclis-i Mebusan Cad. No: 63 Fındıklı Han Kat: 6Fındıklı – Karaköy - İstanbulTel: +90 212 245 40 00 / +90 212 292 79 40Fax: +90 212 292 79 45 / +90 212 245 41 25İstanbul Asya Sales OfficeSaray Mah. Dr. Adnan Büyükdeniz Cad. No: 12 34768 Ümraniye – İstanbulTel: +90 216 633 33 33 / +90 216 634 36 30 / +90 216 634 36 50Fax: +90 216 634 35 67 / +90 216 634 36 49 / +90 216 634 36 29İzmir 1 Sales Office1476 Sok. Tibaş İş HanıAlsancak – İzmirTel: +90 232 464 65 42Fax: +90 232 421 04 95İzmir 2 Sales OfficeKültür Mah. Talatpaşa Bulvarı İş Bankası Apt. No: 27 Kat: 6 D: 5 Alsancak – İzmirTel: +90 232 404 00 10Fax: +90 232 465 29 01İzmir 3 and İzmir 4 Sales OfficesCumhuriyet Bulvarı No: 34 Kat: 7 Vakıflar Konak İş Merkezi Konak - İzmirTel: +90 232 446 45 85Fax: +90 232 489 22 97

İzmit Sales OfficeKörfez Mah. Berk Sok Dolphin İş Merk. K: 5 D: 502İzmit - KocaeliTel: +90 262 321 66 11Fax: +90 262 331 65 70Kayseri Sales OfficeFevzi Çakmak Mah. Nato Cad. Mehmet Çavuşoğulları Apt. No: 140/B KayseriTel: +90 352 235 96 32Fax: +90 352 223 65 59Manisa Sales OfficeSakarya Mah. Uzunyol Cad. No: 106/A ManisaTel: +90 236 232 33 07Fax: +90 236 232 09 82Marmaris Sales OfficeÇamdibi Mah. Ulusal Egemenlik Cad. Gökmen İş Merkezi No: 20/B Zemin Kat İşyeri No: 2Marmaris - MuğlaTel: +90 252 413 89 40Fax: +90 252 413 89 59Mersin Sales OfficeÇankaya Mah. 10. Cad. İsmet İnönü Bulvarı Canatan İş Merkezi No: 1/A K: 11 D: 22MersinTel: +90 324 233 17 18Fax: +90 324 233 43 34Samsun Sales OfficeKale Mah. Gazi Cad. Salihbey Sokak Paşa Han. No: 16/4 SamsunTel: +90 362 432 43 93Fax: +90 362 432 92 96Trabzon Sales Office 1Atatürk Alanı Taksim Cad. Taksim İş Merkezi Kat: 4 D: 13/4 TrabzonTel: +90 462 326 54 53Fax: +90 462 326 10 65Trabzon Sales Office 2Kemerkaya Mah. Kahramanmaraş Cad. No: 37/A Kat: 5 61200 TrabzonTel: +90 462 326 34 84Fax: +90 462 326 51 58

Contents

I. Introduction06 Vision, Mission and Values08 Corporate Strategy 09 Shareholding Structure10 Financial and Operational Indicators 16 Sabancı Group and Aviva 18 AvivaSA at a Glance19 History20 2012 in Brief...

II. Assessments24 Message from the Chairman 28 Board of Directors30 Message from the CEO 34 Senior Management

III. Activities in 2012 38 Macroeconomic Outlook and Sector Overview44 Private Pension 45 Life Insurance46 Bancassurance48 Corporate Projects 50 Sales and Customer Relations 54 Brand and Communication Activities 56 Support Services

IV. Corporate Social Responsibility

V. Information on Management and Corporate Governance Practices61 Human Resources Practices63 Research and Development Activities64 Organizational Chart66 Corporate Governance Principles71 Information Disclosure Policy72 Legal Explanations74 Statutory Auditors75 Explanations on Special and Public Audits Performed During the Accounting Period76 Internal Audit77 Remuneration of Board Members and Senior Management

VI. Financial Information and Risk Management 80 Internal Audit Activities 82 Assessment on Financial Situation, Profitability and Indemnity Capacity86 Information on Risk Management Policies by Risk Types 89 Independent Audit Report

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avivaSa emeklilik ve Hayat a.Ş. Trade registry number: 27158Head Office Address: Saray Mah. Dr. adnan Büyükdeniz Cad. no: 12 34768 Ümraniye - IstanbulTel: +90 216 633 33 33 • Web Site: www.avivasa.com.tr • E-mail: [email protected]

Documents

This reporT harbors greaT - AvivaSA · 8 AVIVASA 2012 ANNUl REPoRT Corporate Strategy in the private pension system. Indeed, expectations of corporate participation have grown since