Whenever you need AvivaSA is by your side · PDF fileGross Profit Before Taxes 17 32 39 53 41 26% ... 2009 2011 2012 2013 112 % ... P G R O T H W N E S H I, D I V E R S I F I C A T

Annual Report

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Introduction 1

I. Introduction

02 Shareholding Structure03 Financial and Operational Indicators06 Mission, Vision07 Values08 Milestones10 Sabancı Group and Aviva11 AvivaSA at a Glance12 2013 Briefly...

II. Overview

16 Message from Chairman Haluk Dinçer20 Message from CEO Meral Eredenk Kurdaş 24 Macroeconomic Outlook and Sector Overview

III. 2013 Operations

28 Private Pension29 Life Insurance30 Private Pension and Life Insurance on Channel Basis 30 Bancassurance 31 Corporate Projects 32 Direct Sales and Agencies 34 Other Channels35 Customer Relations37 Brand and Communication Activities39 Human Resources Practices40 Research and Development Activities42 Support Activities43 Corporate Social Responsibility

IV. Information on Management and Corporate Governance Activities

47 Organization Chart 48 Board of Directors52 Senior Management54 Corporate Governance Principles57 Information Disclosure Policy57 Dividend Distribution Policy58 Legal Explanations59 Explanations on Ad Hoc and Public Audits During the Accounting Period60 Summarized Annual Report presented to the General Assembly62 Remuneration of Board Members and Senior Managers62 Annual Report Compliance Statement 63 Independent Auditors’ Compliance Opinion on Annual Report64 AvivaSA Emeklilik ve Hayat A.Ş. 2013 Affiliation Report

V. Audit, Financial Information and Risk Management

68 Internal Audit 68 Internal Auditors 70 Assessment of the Financial Situation, Profitability and Claims Payment Solvency72 Information on Risk Management Policies by Risk Type

VI. Financial Statements and Independent Audit Report

80 Financial Statements and Independent Auditor’s Report

Contents

69 Internal Audit Activities

2 AvivaSA Annual Report 2013

Shareholding Structure

* Neither the Chairman nor any member of the Board of Directors, CEO, Senior Managers do not hold Company shares.

Continuing to operate under the joint umbrella of Aviva, the biggest insurance company of the UK, and Sabancı, Turkey's leading group, AvivaSA is a company making all its stakeholders proud of being part of it, for its strong financial structure.

AvivaEurope SE

49,83%

Individual Shareholders0,34%

Hacı Ömer SabancıHolding A.Ş.

49,83%

Introduction 3

Financial and Operational Indicators

* The Net Profit before Taxes / Shareholders’ Equity ratio has been calculated as the growth between 2009 and 2013.

AvivaSA maintained its consistent progress in financial management, premium production and profitability in the year 2013 as well, and has achieved in increasing its premium production by more than double in the last five-year period.

Financial Indicators, TL million 2009 2010 2011 2012 2013

Average Annual Growth

Rate(2009-2013)

Total Premium and Contribution 756 847 971 1,294 1,619 21%

Total Assets 2,782 3,391 3,845 4,958 5,887 21%

Paid-In Capital 36 36 36 36 36 -

Shareholders’ Equity 94 123 151 169 157 14%

Net Financial Income 13 11 29 20 40 33%

Gross Profit Before Taxes 17 32 39 53 41 26%

Net Profit After Tax 17 30 32 39 31 17%

Net Profit After Tax/Shareholders’ Equity

17.8 24.1 21.2 23.0 19.5 1.7%*


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.

And having expanded the

number of its corporate

customers by 125% over

the past five years, AvivaSA

successfully maintains its

leadership of this segment.

443companies

495companies

543companies

612companies

997companies

2009 2010 2011 2012 2013

125%rise in the number of Corporate PPS customers in the last 5 years

148.4TL million

154.9TL million

155.3TL million

197.5TL million

232.9TL million

2009 2010 2011 2012 2013

50% rise in Premium Productionin Life and Accident Branches in the last 5 years

Financial and Operational Indicators

Introduction 5

307.918350.698

420.980

491.683

617.377

2009 2010 2011 2012 2013

100% rise in the number of PPS Participants inthe last 5 years

2.8TL billion

3.4TL billion

3.8TL billion

5.0TL billion

5.9TL billion

2009 2010 2011 2012 2013

112% rise in total assets in the last 5 years

94TL million

123TL million

151TL million

169TL million

2009 2010 2011 2012 2013

157TL million

67%

equity in the last 5 years

rise in shareholders’

2.0TL billion

2.6TL billion

3.0TL billion

4.1TL billion

5.0TL billion

2009 2010 2011 2012 2013

152% rise in PPS Fund Sizein the last 5 years


To be a reliable, innovative and

sustainable company generating

changing and developing needs of

saving and protection

Misyonumuz

Building a popular and

preferred safety net

WHERE THE WORLD IS GOING

OUR ROLE WITHIN IT

OUR PLAN OF ACTION

WHAT MATTERS HERE

(OUR PURPOSE)

(OUR HORIZON)

(OUR STRATEGY)

(OUR STRATEGY)CARE MORE • NEVER REST •

WE FREE PEOPLE FROM FEAR OF UNCERTAINTY

SIMPLICITY YOUR WAY CASHFLOW

PLUS GROTH

OWNERSHIP, DIVERSIFICATION, DIGITAL

ACHIEVEMENT, POTENTIAL, C

OLLABO

RATION

DISTRIBUTION PEOPLE

CUSTOMER INVESTOR

THE AGE OF DISRUPTION I SHIFTING HEALTH

THE POWER OF COMMUNITIES I WINNING THROUGH DATA I MY LIFE, M

Y WAY I

OLDER

, HEALTHIE

R, WEALTHIER I

• CREATE LEGACY • KILL COMPLEXITY

Our Mission

Our Vision

WHAT MATTERS HERE

OUR PLAN OF ACTION

Our role within it

Where the world is going

( our culture )

( our strategy )

( our purpose )

( the horizon )

THE POWER OF COMMUNITIES

THE AGE OF DISRUPTION

SHIFTING WEALTH

OLDER, HEA

LTHI

ER, W

EALT

HIER

MY LIFE, MY WAYWINNING THROUGH DATA

We free people from fear of UNCERTAINTY

CUSTOMER

Investor

PEOPLE

DISTRIBUTION

SIMPLICITY YOUR WAY

CASHFLOW PLUS GROW

TH

Achievement, POTENTIAL, COLLABORATION

OWNERSHIP, DIVERsification, digital

• Create Legacy • K ill C o m plexity •

Care More • Never Rest

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|

|

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Introduction 7

Our business perspective is guided by high ethical

standards and values:

Değerlerimiz

• Let fear stand in the way of what’s right.• Use numbers as an excuse.• Mindlessly apply process.

I will I won’t

Care more

• Stand in my customers’ and colleagues’shoes first.• Actively seek out and address what is wrong.• Treat the company’s money like my own.

At AvivaSA we are obsessed with making things simpler for our customers and each other - we manage complexity so our customers don’t have to.

I will I won’t• Make things easy for anyone to understand.• Be plain dealing.• Start and finish with the customer outcome front of mind.

• Create new process unless it is critical toour success.• Involve people just to cover myself. • Re-invent the wheel.Kill

Complexity

At AvivaSA we are driven every single day to be edgy, think bigger and do better for our customersand each other.

I will I won’t• Think creatively to achieve the desired result no matter the obstacles.• Make bold decisions.• Learn from my mistakes and celebrate our successes.

• Be Satisfied with the status quo. • Make the same mistake twice.• Try and do it all on my own.Never

rest

At AvivaSA we strive to create a future for ourcustomers and each other, which is every bit as bright and sustainable as others created before us.

I will I won’t• Leave behind something so much better than what I found.• Make decisions I will be as proud of in 20 years’ time as I am today.• Invest in the community I operate in.

• Drive purely for short-term gain.• Change path unless it delivers more.• Damage our heritage.

Create Legacy

At AvivaSA we care like crazy about our customers, each other, and the communities we operate in.

Values


KilometreTaşları

Dec. 06, 1941 AK Emeklilik A.S. was founded as Doğan Sigorta A.Ş. in Istanbul. 1991

Commercial Union Hayat was founded through a partnership between Commercial Union Plc. and Finansbank.

1997Commercial Union’s share in this partnership rose from 65% to 90%.

Oct. 03, 1995The company changed its name to Akhayat Sigorta A.Ş.

Dec. 03, 2002The company received authorization from the Undersecretariat of the Treasury to become a pension company.

Jan. 31, 2003The company determined its name as AK Emeklilik A.Ş.

Jul. 07, 2003The company obtained a license from the Undersecretariat of the Treasury to operate in the private pension segment.

AK Emeklilik Aviva Hayat ve Emeklilik

2001CGNU (currently known as Aviva) aquired the remaining shares.

2003Commercial Union Hayat was transformed into a private pension and life insurance company, and started to operate under thename of Commercial Union Hayat ve Emeklilik A.Ş.

2004The company name was converted to Aviva Hayat ve Emeklilik A.Ş.

Oct. 31, 2007Aviva Hayat ve Emeklilik A.Ş. was transferred to AK Emeklilik A.Ş.The company title was convertedto AvivaSA Emeklilik ve Hayat A.Ş.

Jan. 01, 2013The new period started in the Private Pension System.

Sept. 26, 2003The private pension investment funds were registered by the Capital Markets Board.

Oct. 27, 2003The sale of pension products commenced.AvivaSA is the leader

of its own sector with

it sustainability

activities since its

establishment.

Milestones

Introduction 9

KilometreTaşları

Dec. 06, 1941 AK Emeklilik A.S. was founded as Doğan Sigorta A.Ş. in Istanbul. 1991

Commercial Union Hayat was founded through a partnership between Commercial Union Plc. and Finansbank.

1997Commercial Union’s share in this partnership rose from 65% to 90%.

Oct. 03, 1995The company changed its name to Akhayat Sigorta A.Ş.

Dec. 03, 2002The company received authorization from the Undersecretariat of the Treasury to become a pension company.

Jan. 31, 2003The company determined its name as AK Emeklilik A.Ş.

Jul. 07, 2003The company obtained a license from the Undersecretariat of the Treasury to operate in the private pension segment.

AK Emeklilik Aviva Hayat ve Emeklilik

2001CGNU (currently known as Aviva) aquired the remaining shares.

2003Commercial Union Hayat was transformed into a private pension and life insurance company, and started to operate under thename of Commercial Union Hayat ve Emeklilik A.Ş.

2004The company name was converted to Aviva Hayat ve Emeklilik A.Ş.

Oct. 31, 2007Aviva Hayat ve Emeklilik A.Ş. was transferred to AK Emeklilik A.Ş.The company title was convertedto AvivaSA Emeklilik ve Hayat A.Ş.

Jan. 01, 2013The new period started in the Private Pension System.

Sept. 26, 2003The private pension investment funds were registered by the Capital Markets Board.

Oct. 27, 2003The sale of pension products commenced.AvivaSA is the leader

of its own sector with

it sustainability

activities since its

establishment.


Sabancı Group and Aviva

Hacı 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 Borsa Istanbul (BIST) and has controlling interests in 10 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.

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

With a deep-rooted history of 318 years, the Aviva Group currently provides portfolio management services as well as general, life and health insurance businesses. By assuring its customers' daily life risks

successfully, Aviva ensures that they can live a peaceful life and a secure and comfortable retirement period. The biggest insurance services provider in the UK, Aviva operates vigorously in China, Indonesia, France, India,

Hong Kong, the UK, Ireland, Spain, Italy, Canada, Lithuania, Poland, Singapore, Turkey, and Vietnam by providing services to 31.4 million customers across the globe.

Sabancı Group at a Glance

Aviva at a Glance

Introduction 11

AvivaSA at a Glance

One of Turkey's leading private pension and life insurance companies, AvivaSA Emeklilik ve Hayat was established on October 31, 2007 through the merger of AK Emeklilik and Aviva Hayat ve Emeklilik. 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 private pension funds of AvivaSA, one of the companies setting the rules and standards of the market since its inception, are managed by AK Portföy from the Sabancı Group, one of the leading companies in the portfolio management sector.

The multi-channel distribution structure, which boosts access to customers, is a factor that gives AvivaSA an immense competitive edge. The multi-channel distribution structure at AvivaSA covers Direct Sales, Agencies, Bancassurance, Telemarketing, and Corporate Projects, which is one of the company’s key strengths.

Through its multi-channel distribution structure, the company serves its over 1.9 million customers.

Customer service modelAvivaSA 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 company has adopted providing its customers with healthy and satisfactory services as a basic business principle. To that end, process maps for customer-oriented activities are created, efficiency projects are devised, and surveys at customer contact points, mystery customer research, and satisfaction surveys are conducted.

Savings awarenessIn support of its strategy of establishing the concept of saving as a main pillar of private pension and life insurance, AvivaSA conducts intensive activities to raise savings awareness. AvivaSA has an active and integrated approach in numerous areas from money-box design to advertisement activities, from savings-oriented research to social media contests. These activities have 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.

The Private Pension System has entered a new period as of January 1, 2013. Together with the start of this process, the issues underlined by AvivaSA have been verified in the eyes of the public, and the importance of the Private Pension System as a savings instrument has increased.

Since its services are directly associated with savings, and thanks to its communication investments made to promote this association, AvivaSA is one of the first brands recalled in the surveys today.

Year 2013 at first glanceAs of end-2013, AvivaSA has 1,504 employees. According to data released by the Pension Monitoring Center as of 03 January 2014, it holds a 19.08% share of the private pension market with almost TL 5 billion funds under management. It also holds a 6.6% share in direct premium production for pension and/or life insurance companies with total life and accident premium generation of TL 233 million, according to data of the Insurance Association of Turkey (TSB) and Haymer.


Two grand prizes to AvivaSA!In the year 2013, AvivaSA was deemed worthy of grand prize in two different categories in consequence of the evaluation made by yenibiris.com among its corporate members for the year 2012.

AvivaSA won the prizes in the following categories: the “Model Employer” by establishing an effective communication with the candidates and responding to their applications, and the “Fastest Growing Company of the Sector” in the area of employment in the retirement sector.

2013 Briefly...

Turkish private pension funds lead OECD in returnsAccording to the private retirement funds research carried out by the Organization for Economic Cooperation and Development (OECD), the highest nominal return was provided by Turkey-based funds in the economic uncertainty period between 2008 and 2012.

In the average of the last five years, Turkish private pension funds have ranked first with an annual average return of 11.6 percent. In the ranking based on the real return (net of inflation), Turkey has ranked the third among 34 countries with 3.4 percent annual return.

Considering the instruments in which the private pension funds are utilized, Turkey is one of the countries preferring mostly the bonds. In Turkey, 16 percent of the funds have been invested in stocks.

AvivaSA and TÜSAF bring the sector together!One of the leading private pension and life insurance companies, AvivaSA continues to undersign numerous projects through various cooperations in the sector. One of these projects making contributions to the fast-growing private pension sector was the seminars prepared in cooperation with the Federation of Insurance Agencies of Turkey (TÜSAF).

The first one of the seminars was held in Ankara in April, and the second one in Konya in June. Later on, the seminars were also held in Osmaniye, Antalya and Izmir, thus bringing the representatives of the sector together. The agencies have shown great interest in the seminars during which the situation of the sector was evaluated by experts.

AvivaSA announces results of “Consumers’ Saving Tendencies” SurveyAvivaSA shared the results of its traditionalized “Consumers’ Saving Tendencies” survey for the year 2013 by organizing a press meeting on the day before the “World Savings Day”.

Customer satisfaction has top priority in AvivaSAAvivaSA’s customer strategy is to “achieve the best customer experience and increase the customer value by meeting the customers' real needs with simpler and more flexible solutions compared with anybody else”. In the year 2013, AvivaSA took steps to perfect the customer experience and boost the customer satisfaction through numerous process improvement works such as Customer Contact Points Control Process, VIP Customer Visit Process, Complaint Management Improvement Process.

Introduction 13

Consultancy Service Package from AvivaSA to SMEsThe SMEs that shift to private pension through the SME PPS Scheme offered by AvivaSA via Akbank branches use the human resources consultancy services and exhibition information line as well as the financial and legal consultancy services offered by the Inter Partner Assistance (IPA) free of charge for 1 year.

Biriktiren Gelecek (Saving Future) PlanThanks to the broad fund range of Biriktiren Gelecek Plan, the AvivaSA customers are able to utilize their savings as they please in line with their own expectations. The plan offers numerous advantages in addition to flexible payment periods such as one month, 3 months, 6 months, or 12 months.

AvivaSA supports dismissed people through “Bill Payment Guarantee”AvivaSA has prepared a brand-new product for its customers paying their bills through Akbank. The “Bill Payment Guarantee” insurance secures the insured person's bill payments in the event of losing his/her job, and also provides its users with a unique assurance through accidental death or accidental permanent disability coverages.

AvivaSA and Burgan Bank cooperate in PPSBurgan Bank, Turkish affiliate of the Burgan Bank Group that is the leading banking organization in the Middle East and North Africa, has signed an agency agreement with AvivaSA.

With this cooperation, AvivaSA has added also the Burgan Bank Group to the bank channel that is the biggest distribution channel of the company, while Burgan Bank has made a strong entrance to the private pension sector. With the said agreement, Burgan Bank has started to sell “Plan Nar” of AvivaSA to its retail customers through its 60 branches in 20 cities. The Burgan Bank customers who have bought Plan Nar can also benefit the unique advantages of Geleceğini Biriktirenler Kulübü (Save the Future Club) offered by AvivaSA to its participants. AvivaSA also targets the corporations and corporate employees by offering special group pension scheme alternatives to corporate customers of Burgan Bank. The private pension funds in the “Plan Nar” product are managed by Ak Portföy.

ABank and AvivaSA cooperate in PPS for “Mutlu Birikimler” (Happy Savings)Combining AvivaSA’s current market share and high customer satisfaction with its own power in banking, ABank has offered the “Mutlu Birikimler” scheme, a private pension product prepared especially for ABank customers.

In the “Mutlu Birikimler” scheme, where the private pension funds will be managed by Ak Portföy, ABank will acquire the advantage of stable returns and professional management through the expert portfolio management by Ak Portföy while utilizing the savings.


Overview 15

II. OverviewDespite the negative developments in the global economy, thanks to the state support started in 2013, the PPS had the most successful period in its 10-year history. AvivaSA was the pioneer and leader of this success with the transactions it has carried out.


Message from Chairman Haluk Dinçer

26% 24%

617 thousand Total PPS fundsunder management

From the global economy's viewpoint, we witnessed great changes in the expectations and the risk map in the year 2013. The political and economic instability in the European Union, regarded as the biggest risk at the beginning of 2013, changed direction in the midyear upon the signals that the FED may end quantitive easing. Indeed, the FED has made a US$ 20 billion cut in

the monthly bond purchasing program in the years 2013 and 2014. The FED’s said decision has led to a serious atmosphere of uncertainty in the developing countries that are dependent especially on the capital inflow.

There are signals indicating Japan's tendency of coming out of its long-running stagnation. And the trend is positive for the EU as well, though there are no remarkable

growth figures yet. Maintaining its successful performance in the year 2013, China grew by 7.7 percent. On the other hand, we see that the developing countries that are the powerhouse of the global economy are not as lively as they used to be.

In addition to the growth problems in the world, the ineffectiveness of the solution scenarios suggested against the financial imbalances

Distinguished from the competition thanks to its unique business model supported by Sabancı Holding's power and Aviva’s international experience, AvivaSA has left another successful year behind with 617 thousand participants, TL 5 billion fund size, and TL 31 million net profit, in the 10th year of the PPS.

Overview 17

fuel the discussions arguing that a new economic balance environment has begun to emerge.

Turkey has survived the winds of crisis successfullyThe midyear developments in the US have had impacts on our country's economy as well. The size of Turkey’s need for external financing and the net exchange position of the real sector led to

the emergence of an atmosphere of uncertainty in the second half of the year. Yet, Turkey is one of the countries that has survived the global economic uncertainty of the recent years with relatively less damage.

The growth outlook was more positive as of the first three quarters of the year, and we consider it possible to grow by 4 percent approximately as

of the year-end. Although this figure is low to meet Turkey’s development and socioeconomic needs, it can be regarded as successful considering the global downturn and 2.2 percent growth achieved in the year 2012. That the growth arises especially from the domestic demand and private sector investments is pleasing as it indicates that the effect of the public sector on


the growth is decreasing and the investments are increasing. However, it is difficult to say that the growth is based on sound dynamics. Actually, the growth takes its source from import-based consumption instead of production, and thus, creates current deficit. The current account deficit and inflation keeps occupying our agenda as two main problems. In spite of the measures taken by the Banking Regulation and Supervision Agency (BDDK) to decelerate the economy for the purpose of decreasing the current account deficit, the our current account deficit-national income ratio is still high. The inflation is on a band that is stable in recent years but still high compared with the targets, and the expectations for a fall in the inflation in the medium term are weak. The most positive one of the economic indicators is the budgetary equilibrium. In recent years, there is continuous success in managing the budget.

We are cautious but hopeful for 2014Yet, a moderate recovery throughout the year 2013 plus more positive outlook compared with the year 2012 give hope for a continued recovery across the globe in the 2014 as well. However, we also think we'd better keep on the safe side. The future performance of the

US economy, the FED's decisions, the investors' and consumers' trust, and the forthcoming general elections are important factors to affect the year 2014. We expect that the growth continues increasingly, the exchange rates become more stable, the budgetary performance continues, the structural reforms required to solve the problems such as the current account deficit, inflation and unemployment are carried out, and that the necessary measures are taken to decrease the fragility to ensure that the impacts of the global economic fluctuations on us become minimal.

State support for PPS has enlivened the sectorSimultaneously with commencement of the state support for the PPS and enlargement of its scope in the year 2013, the sector brisked greatly up. The total fund size has reached TL 26 billion while one new company has participated in the sector. The 29 percent growth achieved by the sector despite the regulations lowering the revenues of the pension companies is the biggest success of the PPS in its 10-year history.

Alongside with 4 millions of participants, we also observe that withdrawals have been decreasing.

At AvivaSA, we have left another successful year behindAvivaSA catches the attention of the sector for its multi-channel distribution structure, large direct sales team, and the strong cooperation it has with banks, mainly Akbank. It is a company shown as a model and followed for its strong business model, broad range of products, and sales and after-sales services. With the power it has obtained from Sabancı and Aviva and its experienced team, it continues to be an organization that is highly recognized, trusted, and setting the trends in the sector.

AvivaSA had a successful year in 2013 using its strengths in the best way. Thanks to both our nationwide campaigns and intensive promotional and informational activities, AvivaSA has become a company

We have reinforced our position in the sector by reaching 617 thousand participants and TL 5 billion funs under management.

AvivaSA has become a company mentioned rather frequently and accomplishing successful results in the new period started in the PPS with the state support.

Message from Chairman Haluk Dinçer

Overview 19

mentioned rather frequently and accomplishing successful results in the new period started in the PPS with the state support. We have continued to make contributions to improve two big structural problems of our economy such as unemployment and current account deficit. In an environment where we can employ only half of the newly emerging workforce in our country, we have made a remarkable contribution through our human resources of 1,504 employees in total, the new employment we have created, and the programs such as the 4Colors Development Program and the Young Entrepreneurs Program.

New targets and initiatives in 2014 We would like to carry out our successful and well respected position in 2014, as well as medium and long term as we achieved significant successes through bancassurance, foundations, retirement funds and corporate projects within 2013. We aim to reinforce our strength by increasing our market share in the life branch as well while taking firm steps towards leadership in the PPS.

We will continue to offer

uncompromising on the customer satisfaction and to add value to our shareholders, customers, employees, and our national economy by making the most of the synergy created by our operational excellence and multi-channel structure. We will continue to invest in technology and human capital without pausing. As long as economic conjuncture and circumstances permit, we will share the solutions, cooperation and opportunities that will carry AvivaSA into the future with you. I would like to thank mainly to the Sabancı Group and Aviva as well as our employees, solution partners, customers, and all our stakeholders who have their own shares in our successes and turned AvivaSA into Turkey's leading company.

Yours faithfully,

Haluk DİNÇERChairman


Message from CEO Meral Eredenk Kurdaş

Given the economic development performance in the last decade, we can say that 2013 was relatively a recessive year. The economic recession in the west and the political instabilities in the neighboring countries have had negative effects on the growth dynamics. Decreasing trade volume and consumption demand have reflected partially on our country as well.

New era in PPSDespite the negative events affecting the entire world and our country, 2013 was a productive year for the private pension sector. The anticipations for the year 2013 were cautious due to the slow growth in the year 2012. Simultaneously with rising interest rates and declining stock exchange in 2013, the financial performance of the private pension funds were also under negative effects. However,

together with 25 percent government contribution that has mitigated such effects and also functioned as a catalyst, the sector has grown faster than ever before. The positive reflections have been observed in three criteria as increase in entries, decrease in exits, and improvement in collections.

According to Pension Monitoring Center’s data of January 03, 2014, PPS has reached 4.2

In the year 2013, while we made the best of the opportunities in the PPS and reinforced our market position, we reached 19 percent in return on equity while exceeding even our own targets with a profit of TL 31 million.

%25%19

Return on Equity

Net Profit of TL 31 million

Average rate of production increase in the life and personal

accident insurances for the last three years

Overview 21

million participants and a fund size of TL 26.3 billion. Thus, it has reached a peak in 10-year history of PPS with 33 percent and 29 percent growths in terms of the number of participants and the fund size respectively. Although there is a little deviation from the targets in the fund size, the number of the participants has exceeded the anticipations greatly. We expect and aim that the uptrend in the PPS goes on unless it encounters

a very negative cyclical picture, and work to attain this goal.

AvivaSA reinforced its strong position in sectorAs AvivaSA, we undersigned one of the most remarkable growth trends in the sector in the year 2013 by examining this picture correctly, analyzing the dynamics accurately, and by taking the correct position.

We have preserved our market position by taking the correct

measures and applying the correct action plans against the aggressive and instable picture of competition in the beginning of the year. We have launched numerous promotional and sales–boosting campaigns intended for various customer segments through various channels, and supported them with an advertisement campaign.

We have reinforced our place in the market by TL 5 billion in total


fund size and 19 percent market share. We have increased our total participant number to 617 thousand with 15 percent market share, and preserved our strong position in the sector. Thus, we have increased our fund size by 24 percent and participant number by 26 percent. We have enhanced our customer portfolio with the participation of the groups like housewives, farmers, youths, and the self-employed who have kept relatively away PPS in past years. Besides, we renewed our product portfolio in 2013 in line with our customers' needs. In 2013, we achieved the first union transaction in our sector with Lastik-Iş. We have used the government contribution as a very powerful instrument for all our channels in the new participant entries as well as the improvement of exits and collections. In addition to a portfolio including a representative from each income and age group, the customer profile who has higher education and income level, thus potential to pay higher contributions has continued to head for AvivaSA.

Effective performance and ambitious targets in live and accident insurancesIn the year 2013, we experienced important developments in the life insurance as well as the private pension. We have launched new life insurance products to the market within the scope of our projects with Akbank in the area of bancassurance that is one of our largest distribution channel. As an outcome of this and similar projects, we have acquired 6 percent of the market through 21 percent rise in the life

insurance premiums and a total premium production of TL 201 million. In the personal accident insurance, our market share has become 18 percent through a total premium production of TL 32 million. Although we have been increasing our life and personal accident insurances production by 25 percent on average for the last two years, we can say that we have a long way to go. In order to reach our related targets, we are going to take new actions in 2014.

Successful target managementFollowing the legislative restrictions on income imposed in 2013, we had set our target as “to grow to the extent required to offset the shrinkage”, and we have achieved that target. We closed the year with a result exceeding even the return on equity target set for the year 2013. We are among the top three in terms of the return on equity among the Sabancı companies and the markets where Aviva operates. We will keep the same targets for the year 2014 as well.

Leading and different AvivaSAWe use successfully the superiority brought by the confidence and experience provided by the matchless cooperation of the Sabancı Group and Aviva and the power of being a company using multi-channel distribution system. In addition to the powerful bancassurance channel that incorporates numerous banks, we create the difference through the channels such as direct sales team, agencies, telesales, and corporate projects. AvivaSA is

the most prevalent company that has demonstrated its leadership, the first company that has established the corporate projects team, which is the market leader by far. As a company who has trained and helped over twelve thousand people get licensed, and provided almost all companies in the sector with sales teams and managers, we can say that we are the school of this sector. The difference created by AvivaSA by achieving many firsts in the fund size, customer portfolio, and product composition leaves a mark in the eyes of everyone, and raises AvivaSA to upper ranks in terms of the brand value.

AvivaSA distinguishes from the competition in the fund performance as well, which is the issue considered as most important point after trust by the participants. Our target is to provide the optimum return against a stable, sustainable and controlled risk. To that end, we work with Turkey's biggest portfolio management company Ak Portföy that has created a difference with its recently awarded performance in world standards, risk management understanding and governance skills.

We invest a lot in understanding and listening to the customer. Through the customer satisfaction surveys we conduct regularly, we improve our customer satisfaction level every year.

We are more ready for future with our valuesThe world is changing now. And our role is also changing

Message from CEO Meral Eredenk Kurdaş

Overview 23

in this changing world. The people's expectations from the insurance and private pension companies are increasing. We are rewriting our strategy and action plan in line with these expectations. Accordingly, we have also reviewed and renewed our values. We have turned our face towards understanding the customer and investing in the customer. In AvivaSA, we care about our customers, each other and our business partners more. We simplify the works for our customers. For our customers and for each other, we are striving to create a brighter and more sustainable future than what we have come into in every area. In short, we adopt freeing the people from the fear of uncertainty as our raison d'etre.

We continue to invest in the human capital and the infrastructure for a continuous successWe are of the opinion that what creates the difference in the private pension sector is the employees approaching to their jobs professionally, seeing this job as a long-term profession, investing in themselves,

and working for a company investing in them. The satisfied employee leads to the satisfied customer. Therefore, just like the satisfaction survey we conduct for the customers, we conduct regular satisfaction survey for our employees every year. We obtain results exceeding the European standards in the employee satisfaction.

In our Metamorphosis project that will improve the quality of our service better by raising our information technologies infrastructure above the sector average, we made a considerable progress in the year 2013. We are strengthening our infrastructure; thus, we will be able to coordinate and report all our processes and projects. This will facilitate for us to reply the changing conditions of the day and the customers' increasing expectations more rapidly and efficiently.

Plans for 2014In 2014, we will continue to pioneer the growth in the PPS. We will keep growing in the corporate customers channel, AvivaSA’s number one strength area. The unions will be discussed

more in the future, and we will be active in the unions, too. The digital world, the mobilization of the sales team, the CRM projects, and the other social media works will be the items of our agenda.

We will continue to share the fruits of our successful works with all our partners. If the conjuncture and all conditions internal and external to the company are suitable in 2014, we hope to carry this sharing to higher levels, and reach a broader platform for sharing.

I would like to thank to all our employees for their marvelous performances that ensured success in 2013, to our investors whose support we have always felt, and our participants who have never denied their trust to us.

Yours faithfully,

Meral Eredenk KurdaşCEO


Macroeconomic Outlook and Sector Overview

The year 2013 was a year that began with positive expectations all over the world. In the first four months of the year, the developing countries have accelerated their growth while the impacts of the economic crisis on the developed ones were continuing in general. The quantitative easing policy applied by the US as a way out of the crisis has shown positive signs, and the unemployment figures have dropped in addition to a positive growth figure. The recession tendency continuing for long in the EU region started to be broken. Japan, one of the most important economies of the world, also started to display the signs of economic recovery.

This generally positive outlook of the global economy has changed in consequence of the decisions taken by the FED (Federal Bank of the USA) in May 2013. The anticipations for a decrease in the fund flows have led to fluctuations in the economies and a slowdown especially in the capital inflows to developing countries. The currencies of the developing countries have been devalued against the US Dollar and EURO. The interest rates in such countries have risen steeply, and the stock exchange markets have lost value. While it has been observed that the most severe effects of a decrease in the FED's bond purchases were

on the developing countries, Turkey has also been affected by the process.

According to the IMF global growth forecast, it is considered that the 3.2 percent growth rate in the 2012 cannot be reached, and the global growth rate is anticipated to be 2.9 percent in the year 2013. While the US growth forecast is 1.6% for the year 2013, the Eurozone is anticipated to shrink by 0.4 percent in the year 2013. On the other hand, the global growth rate for the year 2014 is anticipated to be 3.6%. The US is foreseen to grow by 2.6% and the Eurozone by 1% in the year 2014.

IMF's estimation for Turkey's growth in the year 2013 that was unsteady all around the world is 3.8 percent. Although the said rate is below Turkey's averages for the previous periods, it is one of the biggest growth rates to occur in the world.

With 3 percent, 4.5 percent and 4.4 percent in the first, second and third quarters of the year 2013 respectively, the growth rate in the first nine months was 4 percent. Since the industrial production index that is the precursor of the growth-related expectations continues strongly and points out 4.1% growth on annual basis in the final quarter of the year, it is possible for the year 2013 that the annual GNP growth rate occurs in line with the IMF estimation. A growth uptrend arising especially

from the domestic demand and special investments and a decreasing public sector effect on the growth attract notice as remarkable developments.

It is observed that the growth dynamics arise from import-based consumption instead of production. In the year 2013, exportation grew by 0.1% to reach USD 163 billion, while importation increased by 6.4% to reach USD 243 billion. In that period, the foreign trade balance has had a deficit of USD 79.8 billion. USD 11.7 billion of this amount has been caused by net gold importation. In the year 2013, the balance of payments deficit rose rapidly to USD 65 billion from USD 48 billion in 2012. In terms of the macroeconomic equilibriums, the foreign trade and balance of payment deficits can be regarded as the most important

problems. Given the fact that Turkey exports mostly to the developed countries, mainly the EU, the improvements in the growth rates of the said countries can be regarded as positive developments. Another advantage is the increased diversification of the export destination countries. The rapid rise in the exchange rate in the year 2013 will be another support to competitiveness of the country in foreign trade.

The inflation rates in the year 2013 were disadvantageous compared with the year 2012. In the year 2013, the consumer prices increased by 1.24 point y-o-y to 7.4 percent. The producer prices, on the other hand, increased to 6.97% in 2013 from 4.52% in the year 2012.

Global Economic Outlook

Turkish Economic Outlook

Overview 25

The most remarkable economic development of the year 2013 took place in the budget. Thanks to a successful budget management, the budget deficit was decreased through a considerable increase in the revenues, and the revenue-expenditure coverage ratio has been improved.

The economic developments throughout the year 2013 affected the financing and banking sectors as well. In the first nine months of the year 2013, the asset size of the banking sector has grown by 25 percent on annual basis to reach an asset size of TL 1.558 billion. The total-assets-to-GNP ratio has reached 103%.

In the same period, the total credit of the banking sector rose by 31% on annual basis according to the September 2013 data. In the sector, the capital adequacy is 15.7%.

In the coming period, the overseas developments and the results of the decisions to be taken by FED will be the issues that must be monitored carefully for our country. The significant need for external financing, the rising rates of exchange, the local elections, and the structural problems lead to a fragile economy. That the steps required to be taken to protect the economy from the external impacts and solve the structural problems cannot be on the agenda sufficiently due to the local elections is another issue to support this fragility. At such points, the public authorities and regulatory bodies are expected to take the necessary steps in cooperation and consultancy with the sector's representatives.

Outlook for Private Pension System and Life Insurance

In the first nine months of the year 2013, the asset size of the banking sector has grown by 25% y-o-y. The total-assets-to-GNP ratio has reached 103%.

In 2011, the total domestic savings rate was the lowest in the history of Turkey with 12.2 percent. The precondition of reaching the target of making the Republic of Turkey one of the top ten economies of the world in its 100th anniversary is to be able to control the current account deficit for a high level and steady growth. The most important issue in combating the current account deficit, on the other hand, is to increase the household savings. We regard the PPS that maintains its organic growth in our country even in crisis periods as a cure to the current account deficit for it provides a regular saving discipline in the long run.

The public administration have negotiated with the sector representatives and pointed out the PPS to increase the domestic savings ratio, and at the beginning of the year 2013, the “state contribution” application has been started in addition to a series of regulations.

Within the scope of the state contribution that has made the PPS one of Turkey's most important investment instruments, for each TL 100 invested, an additional amount that is 25% of the contribution amount is deposited into a separate account opened on behalf of the participant. Although 65 percent of the participants were unable to benefit from the tax advantage in the former system, the state contribution has turned into an advantage used by all participants.

In the new system, the PPS has become advantageous also for the segment such as the self-employed, the farmers, the craftsmen, and the housewives, who cannot benefit from the tax advantage as they do not work a payroll job. Together with the new law, the private pension funds have started to provide very attractive opportunities such as making investment in the instruments such as gold, real estate investment fund, capital-

protected fund, clearing the way for remote sales, and raising the rate of deducting the PPS contributions the employers pay on behalf of their employees from the corporate tax base to 15 percent.

In addition to this, together with the regulations made in the fund operating and management expenses, the way has been cleared for the participants to get higher rates of return.

Besides, with the new tax regulations, the withholding taxation over the capital has been abandoned.

According to the HAYMER data, the total production of the direct life and accident insurance premiums has risen by TL 728 million to reach TL 3.5 billion. While it was a dynamic year due to entries and exits of different companies into the sector, the total rate of growth became 26 percent.


2013 Operations 27

III. 2013 OperationsAvivaSA continued to position innovative products with a customer-oriented approach, cooperate with new banks, increase the fund diversification, and offer the groups special plans in the year 2013 as well.


Innovative productsIn the year 2013, we analyzed and started to restructure our products on the basis of our customers' needs by creating a joint work platform within the scope of our cooperation with banks for the purposes of providing the customers with the best service in the most rapid, timely, and beneficial manner, increase the product diversification, and rise to the upper levels in the market against the competition through numerous innovative approaches; and this restructuring process is ongoing.

In relation to the remote sales that is a different sales model that has come into our lives

through the new regulation, the "Fast Retirement" plan has been positioned in Akbank call center.

Diversity of fundsIn the year 2013, the Biriktiren Gelecek Plan and the Emekliliğe Yatırım Plan enhanced with fund diversification, and the Biriktiren VIP and Prestijli Emekliliğe Yatırım plans made more advantageous with the initial additional contribution were positioned as the new private pension products. The Golden Retirement Investment Fund has been founded to increase the investment alternatives for the customers. As of 01,05,2013, “AvivaSA Emeklilik ve Hayat A.Ş. Standard Retirement Investment Fund” and “AvivaSA Emeklilik

ve Hayat A.Ş. Contribution Retirement Investment Fund” have been offered to the public. We continue to found new funds special to different risk groups to increase the diversity of funds.

New co-operationsIn order to improve the multi-channel distribution structure and serve more customers, we have started to sell the PPS products through Odeabank, Burganbank, and ABank.

In the year 2013, we continued to design special group retirement schemes meeting the needs of the institutions, foundations, and trust funds.

Private Pension

Within the scope of the high-quality service it offers to its customers, AvivaSA has positioned new products, undersigned new cooperations, increased the fund diversification, and in parallel to such developments, it has achieved increased customer loyalty and satisfaction.

2013 Operations 29

AvivaSA has grown considerably in the life insurance in the last three years. In the year 2013, AvivaSA produced TL 178 million life risk premiums with a growth rate of 31 percent compared with the year 2010 when the company produced TL 79 million premiums. In the year 2013, AvisaSA ranked 8th in the market with a 6 percent market share in the risk premium thanks to a 33 percent y-o-y increase. The Bancassurance channel has been active in the life insurance production. With the new banks with which AvivaSA established strategic partnerships in the Bancassurance in the year 2013, AvivaSA's strategic target is to become one of the top three in the sector.

New products In the year 2013, under the slogan of "Enjoy the security of insurance and get your premiums back!”, AvivaSA launched its "Return of Premium Life Insurance" product in which the insured person gets all of the premiums s/he paid back when his/her insurance period expires, and if the risk occurs before expiry of the insurance period, the survivors are secured. This product offers death, life and accidental death coverages.In the branches and call center of Akbank, numerous new products

meeting different needs have been positioned and continue to be positioned.

Within this scope, the products such as the “Bill Payment Guarantee” through which AvivaSA pays the bills of the persons who pay their bills through Akbank if they lose their jobs, the "Continuing Education Insurance" that guarantees the children's education in case of their parent's accidental death or invalidity, and the "PPS Saving" that secures the PPS savings against the risks of life.

Targets for the year 2014AvivaSA's target is to become one of the top three companies in the life insurance permanently and race to the top within the next three years by increasing its share of the life insurance market every year progressively. The action plans for the year 2014 are being prepared in parallel to this target.

It is planned to maintain the high growth rate achieved in the life insurances in the last two years and attain a growth of 25 percent on average (Risk+Personal Accident Insurance) in the year 2014. It is targeted to achieve the growth with the loan-related products called Free Life Products, particularly both the loan-related

and non-loan-related products for the SME segment.

Large product portfolioAvivaSA’s large life and personal accident insurance product portfolio includes the following products:

Life Insurances• Plus Money Insurance• Plan B Yearly Life Insurance• Life Insurance Protecting PPS• Check Life Insurance• Refund of Premium Life Insurance• My Life Support Insurance• Life Insurance with SME Loan• Easy Life Insurance• Credit Life Insurance• Custom-Made Life Insurance• Continuous Education Insurance• Long Term Life Insurance• VIP Life Insurance• Life Support Insurance

Personal Accident Insurances• ATM Personal Accident Insurance• Personal Accident Insurance with Benefits• My Child’s Education Insurance• Express Personal Accident Insurance• Personal Accident Insurance• Individual Protection Shield• Teller PAX

Life Insurance

With its growth rate for the last three years, AvivaSA has outperformed the sector that has grown by 21.6 percent in the protection life insurance market.


Private Pension and Life Insurance on Channel Basis

AvivaSA’s biggest distribution channel, Bancassurance produced almost TL 700 million PPS premium in 2013, thus accounting for 50 percent of AvivaSA’s total premium production.

The contract production, on the other hand, has grown by 70 percent. We have reinforced our strong position in the bancassurance channel by establishing business partnerships with new banks. The consistent performance continuing for the last 2 years in the Life and Personal Accident production and corresponding to 105 percent growth continued in the year 2013 as well. Especially in the life products, we have grown by 40 percent y-o-y with a development exceeding the market by 10 points approximately.

Cooperation with new banksIn addition to our long-lived cooperation with Akbank, Odea and ABank as well as Burganbank have joined the AvivaSA family within the year. The experience acquired from our long-lived cooperation with Akbank and the project NEXT developed in the light of such experience are expected to play an important role in our cooperation with the abovementioned banks.

Thanks to the projects carried out with the business partner Akbank within the scope of the Bancassurance Transformation Program started to serve the customers better, simplify the sales processes, strengthen the technological integration, create a product portfolio suitable for the bancassurance channel, and increase the strategic harmony and coordination in the bancassurance channel expected to have a high potential for growth, all of the 8 planned products were launched in the year 2013. Additionally;

• The Call Center (CC) product catalog has been enhanced.• Within the scope of improvement of the operational processes, the renewal and collection projects have been completed.• Akbank CC has started to sell the PPS products.• Within the scope of Customer and Analytics, the projects for enhancing the customer information, customer campaigns, and customer profiling have been completed.• Within the scope of the Performance Management/Infrastructure, the CRM integration, infrastructural improvements, and the Target Performance Management and Reporting projects have been completed.• The committees have been enhanced for an effective management of bancassurance.• The projects for making product sales and creating sales opportunities through alternative distribution channels have been completed.• The sale organization has been restructured. Thus, the number of the Branch Insurance Managers serving in

the bancassurance channel has increased by 75 percent to reach 324 in total.

In this process, the team composed of the Branch Insurance Managers who are expert on private pension and life insurance and have been working in this area for 8 years has been enlarged by 75 percent, thus supporting the business partners intensively and creating a considerable amount of value-added in achieving the goals.

Important steps have been taken in the infrastructureThe year 2013 was an active and efficient year for bancassurance. Using NEXT, the operation-related processes have been accelerated, the period of completing the applications and channeling to collection has been shortened, thus achieving important improvements.

Plans for 2014In the year 2014, the assertive growth target in the Private Pension and Life markets will be continued. We will continue to expand the sales organization to achieve this goal and to create value for the business partners while achieving it.

We are making efforts for establishment of a structure to bring together and integrate the institutions to transform the bancassurance into a channel that is more efficient, more effective and suiting a leading company. The following developments such as

• Policy printing after central renewal,• Policy services,• Complaint management,• Cancellation/persuasion,

Bancassurance

In order to achieve the operational excellence, we launched the project NEXT with the cooperation of Akbank.

2013 Operations 31

Widespread service, strong position in corporate projectsWhile 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. The Corporate Projects team is located at the Head Office in Istanbul, as well as at the regional offices in Ankara, Adana and Izmir.

A successful yearThe year of 2013 was a productive one, during which the Corporate Projects team

expanded its customer portfolio with a “turn-key project approach”. Corporate Projects maintained its leadership in the employer-sponsored group retirement market in the year 2013 as well. Thus, the number of the corporate customers has increased by 21.9 percent.

According to data issued by the Pension Monitoring Center on 3 January 2014, AvivaSA ranks fourth with TL 788,329,743 and 14.4 market share in the amount channeled to investment in the Group Private Pension Contracts and Employer-Sponsored Group Pension Certificates, and first with TL 246,541,006 and 29.7 percent market share in the amount channeled to investment in the Employer-Sponsored Group Pension Certificates only.

In the year 2013, AvivaSA won the Central Bank - Mervak tender, and become one of four companies selected to work with Mervak.

In the year 2013, a new unit was established within the Corporate Projects Department, composed of experts on the transfer of foundations, funds, etc. to the private pension system. Thanks to its expert and experienced staff and the experience gained in the processes carried out, the Corporate Projects team has become a team that guides, forms the sector, and gets involved actively in any tasks supporting the development of this market.

Focused on the customer satisfaction and differentiating in the current corporate customer management in parallel to growth, the Corporate Projects team has established its own ‘Corporate Portfolio Management’ team within the Corporate Projects team, and started to serve its corporate customers more effectively and rapidly.

Customized solutions for associations, foundations and unionsThe Corporate Projects team that is in contact with the unions in parallel to transfer of foundations and trusts to the private pension system plays an active role in the shift of the trade union member companies to the private pension system.

AvivaSA Bancassurance team has started and is continuing

Corporate Projects

It provides almost 1,000 corporations and over 60 thousand corporate employees with private consultancy and service with its team of 30 experts.

• Product sales through Akbank retail internet branch and• Product,

which continue within the scope of the Bancassurance Transformation Program and will raise the current target of

growth, will be continued.Keeping and improving the penetration ratio in the loan-related products and will be one of our most important focal points. We will keep the aggressive growth rate particularly in the SME segment,

and continue to concentrate on the free products, and support the growth target through the newly positioned products, effective use of the alternative distribution channels, and campaigns.

The number of the corporate customers served has reached 60 thousand with 9 thousands new participations.


Direct Sales and Agencies

to sell group pension to the corporate segment customers of the banks with which it has agency agreements. The target is to reach a market share of 30 percent in the transfers to be made by 31/12/2015 that is the deadline for transfer of foundations, funds, etc. to the private pension system.

Serving SMEs efficientlyThe Commercial Branches Management unit within the Corporate Projects department has taken a more active role in selling group private pension plans to SMEs, making it a channel in which 400 percent growth has been achieved compared to the year 2012.

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.

Effective promotional activitiesThe year 2013 was a year in which the broker channel and the Corporate Projects increased the production volume especially in the segment of multinational and large-scale firms. It is expected that the share of the production to be made in the broker channel in the total production volume is to increase in the year 2014, and with this strategy, the broker channel has been positioned as a separate sub-channel within the Corporate Projects channel.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 stand presentations in approximately 400 corporations, increasing the customer satisfaction.

The company continues 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 2014 is also to make efforts towards increasing the satisfaction of existing customers, and to achieve profitable and sustainable growth by managing the project processes of the large and multinational firms, associations, foundations and trusts that can create a competition acceleration in the sector.

Development-oriented Direct Sales Channel continues to growOne 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.The PPS premium production carried out with an ever-increasing acceleration for years by the Direct Sales Channel composed of totally 699 Managers and Financial Advisers rose by 29 percent y-o-y in the year 2013. When we look at the new business production data, we see that there is 63 percent y-o-y increase.

Given the rising production and high productivity per employee in previous years, the Direct Sales

Channel continued to perform very well throughout the year 2013 thanks to the positive sectoral developments caused by the state contribution. In the year 2013, the sales dynamics in the Direct Sales Channel were supported through 7 campaigns to encourage new business productions, additional contribution, and lump sum payments.

In the year 2013, the development of our Channel and Advisors was one of our focal points. All the year round, numerous trainings have been given enabling the Direct Sales Channel's new and existing Managers and Advisors to upgrade their financial competencies as well as their

Having the largest and most well-established team of Turkey with 699 Managers and Financial Consultants, the Direct Sales Channel has grown by 68 percent in new business production.


2013 Operations 33

communicative and sales skills. Trainings in five different categories were given during the year 2013, which can be listed as follows:

• Private Pension Brokers License Training, • Customer Relations and Sales Training “iLikeSales”• Financial Advisor Development Program • Impacts of Macroeconomic Developments on Pension Funds, • First Step to Management (Manager Training Program)

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 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. Thanks to this, almost 20 percent of our Direct Sales Channel customers are composed of our customers paying contributions in the upper segment. In 2013 as in previous years, Direct Sales far

outperformed the sector in terms of contribution production per employee.

The Direct Sales Channel targeting to increase the production of life insurance premiums in the year 2013 has achieved 22 percent increase in the premium production compared with the year 2012.

The goal of the Direct Sales channel in 2014 will be to ensure the continuity of its customer portfolio by maximizing customer satisfaction, bring the prospective customers in the channel, and to increase the production volume by enhancing the current productivity per employee.

The fast-growing Agencies channelThe Agencies channel was reinforced in 2010 with a new management team. It continued its growth momentum in 2013 and grew by 100 percent compared with the last year. The total new business grew by 151 percent y-o-y in the year 2013.

In 2013, the “4Colors Development Program” and the “Young Entrepreneur Program” in support of development and productivity growth in the channel were continued successfully as they were in the previous years. 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. In the year 2013, business partnerships were established with 88 4Colors agencies in total, 45 of which are newcomers.

Furthermore, AvivaSA helps financial advisors keen on establishing their own agency to enter the insurance sector with various kinds of support through the Young Entrepreneur Program. When the financial advisors with entrepreneurial spirit want to establish their own agencies, AvivaSA provides such advisors with numerous financial supports from office furniture to rental, from employees to vehicles and fuel, and to financial consultancy services in their first transitional year. The privileges such as training and recruitment supports, customer loyalty program, Winners Club, etc. provide the agencies with solid ground for healthy growth. Our competitive product commissions, segment-based bonus payments, cash support and various gifts constitute important components of our business partnership with our agencies.

AvivaSA that brought 29 productive Young Entrepreneurs throughout the year 2013 has had 128 productive agencies as of the year-end. It is targeted to increase this figure in the next year.


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 10 percent y-o-y. Throughout 2013, AvivaSA continued to offer its clients well-suited life insurance products through this channel.

Gaining new customers via social mediaMaintaining 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.

Continuous reference to sales channelsAvivaSA 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.

Other Channels


2013 Operations 35

Customer Relations

Customer-oriented strategy AvivaSA continues its customer-oriented transformation 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 2013, it continued to develop loyalty programs, which not only protect the future of its clients, but also add richness to their lives today.

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 2013. The club adds richness to its clients’ lives today by offering various exclusive advantages in areas such as insurance, health, holidays and hobbies. In 2013, the club’s recognition and popularity among customers increased significantly over 2012, and is set to do so further in 2014 on the back of various communication activities and campaigns.

Customer Surveys continuously measure satisfaction and expectations Organized annually to identify factors affecting customer satisfaction, measure customer satisfaction levels, gauge their expectations, the “Customer Satisfaction and Expectation Survey” was repeated in 2013. AvivaSA continued to increase the customer satisfaction. The scope

of the survey organized annually since 2008 was expanded in the 2013 so as to reflect the opinions of the customers who have qualified for pension as well as the active customers. In addition to the customer satisfaction measurement, a Customer Touch Point Survey measured the service quality at after-sales contact points (call center, Internet branch, and complaint management).

The Mystery Shopper Survey conducted annually to measure the quality of the service provided by the sales teams in the sales process was repeated in the year 2013. Besides, in the year 2013, AvivaSA started to carry out in Turkey the Retirement Survey conducted by Aviva regularly in the UK for the last several years and analyzing the investment and spending habits of the retired / near-to-retirement consumers.

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 the ways of benefiting from the PPS most effectively, and established contact with customers through direct communication channels such as e-mail, SMS and regular mail four times a month on average. In the year 2013, and with the exception of the operational communications, AvivaSA sent its customers 14 million e-mails on 89 subjects and 4 million SMS on 4 million subjects within the scope of marketing communication.

Enhancing customer valueThrough 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. In the year 2013 when the state contribution practice was started, AvivaSA carried out an intensive communication activity and campaigns to channel its customers to make the best of this contribution. In consequence of the customer-oriented campaigns and communication activities carried out, we have received record level additional contribution payments from our customers.

Difference created in the sector with Investment IdeasIn the year 2013, AvivaSA launched the Investment Ideas Service to provide both its customers and sales teams with more information on the funds, funds returns, and the sector, and offered a way to monitor the market developments and alternative investment instruments more closely. Thus, it has increased the expertise of its sales teams, and enabled them to meet the customer needs more effectively and proactively. AvivaSA has sent its customers the Market Ideas bulletin on monthly basis, measured their risk perceptions and conducted outgoing calls to provide guidance to update the fund distribution, and shared the experts' opinions on the Private Pension System, investor profiles, fund types, etc. through the BES TV in the website and Facebook/Twitter pages. As an expert on the sector, AvivaSA will continue to provide the Investment Ideas in the year 2014 as well.


The Customer Satisfaction Center established customer contact through nearly 1.6 million calls with 950 thousand incoming and 640 thousand outgoing calls in 2013.Incoming customer calls were served by the Call Center (444 11 11), Corporate Services Center, and Premium Services Center, whereas Sales Channels and the Claims Support Center served all of the company’s sales channels. Approximately 3.5 million transactions were executed through this channel.

The Written Communication and Complaint Management Center executed the customer requests and solved the complaints delivered to us in verbal or written form. As a result of the 1st Interim Audit of ISO 10002 Complaint Management Quality Certification carried out in November 2013, 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.

Our interactive voice response system has been revised to add new steps, thus meeting the customer requests more effectively and rapidly.

Our interactive voice response system has been enhanced, and the informative announcements have been updated continuously on the basis of the new PPS legislation, state contribution information, and systemic developments, and various improvements have been made to enable our customers to get in contact directly with the relevant customer representative with regard to their search.

It has been ensured that 85 percent of the requests can be met via the internet by enabling the customers to acquire the withholding informative form for requesting the past withholding deductions from the tax office under the new legislation.

The customer retention activities have been continued by working in a customer-oriented manner and by maintaining the customer loyalty. Our customers who wanted to leave the Private Pension System or transfer their pension contracts to another company have been persuaded, thus decreasing the transfer ratios.

During the collection works we have carried out within the scope of the customer satisfaction activities; we have contacted

almost 70 thousand customers, and collected almost TL 6 million. We have continued to make persuasion interviews with our customers who called to stop collections. We have informed our customers on regular payment and the state contribution to be acquired through regular payment, thus increasing the continued collection.

In order to increase the customer satisfaction and the productivity in the area of Business Development and Process Management, we have organized in-house and external trainings for our customer consultants, and analyzed and tested our system developments. In the year 2013, we have given 25 different trainings, and 59 test and project works, thus improving the processes and increasing the customer satisfaction.

Within the scope of the “Büyüteç (Magnifying Glass) In-House Trainer Program”, we have trained in-house trainers, and thus, we have started the give the Communication Trainings within MMM as well. Within the scope of the program, the newly employed personnel have been given communication training.

Customer Relations

Customer Satisfaction Center (MMM)

2013 Operations 37

With the campaigns organized, the customers have been offered additional benefits; campaigns have been organized together with Akbank, chip money has been offered, and the customers who have paid contributions above a certain amount within the scope of the campaign have been presented with Iphone, Ipad and Samsung Tablets.

Since 2012, various communication activities have been carried out through radio, and this communication channel has been used consistently. The internet advertisement campaigns have been carried out visibly.

Company 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. The company emphasizes regularly that the most important driving force for Turkey's economic development is the increased domestic long-term savings.

AvivaSA highlighted the importance of saving with the advertisement campaign

launched in April 2008 before the global economic crisis had even affected Turkey. 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 in 2013 as well. The campaign called “Saç Saç Saç II” underlining the state contribution in the PPS said that the savers can realize their retirement in AvivaSA. In 2013, 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 throughout the year. 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.

Through supportive communication activities, AvivaSA has made efforts so that the “saving” notion can turn into a habit in the Turkish society. In this sense, the most important work is publication of the Consumer Attitudes to Saving Survey conducted in 12 countries including Turkey. According to the survey repeated in 2013 and the results of which were disclosed through a press meeting held by AvivaSA CEO Meral Eredenk Kurdaş in October 2013, the Turkish people is more optimistic than the EU countries and the US in financial issues, the biggest impediment to saving is the “current debts”, Turkey ranks 2nd in the list of the countries troubled with debts, the Turkish people live with a mentality like “Nothing would happen to me” and save very less for retirement years, when it comes to pension income; the PPS is more comprehensible than public pension, and the saving methods in Turkey are selected according to friends' suggestions. AvivaSA has delivered this survey to the public authorities and academic circles, thus accelerating its works so that the saving notion can be handled at a higher level by.

The continuous mutual information flow and the increased financial literacy through continuous contact with the customer constitute the foundation of the brand and communication activities. In the year 2013, the company provided the customers with more information on the fund returns, while starting a more intensive communication on the economic situation and the condition of the market.

Brand and Communication Activities


Brand ActivitiesAvivaSA’s most important communication activity within the year is the advertisement campaign held in the last quarter. Pursuant to its mission of transforming the saving issue into a general notion, AvivaSA repeated its “Don’t spend your money, save your future” approach in its advertisement campaign in the year 2013 too, and expressed that it is advantageous to shift to the PPS with AvivaSA.

With the meetings it has organized together with the Federation of Insurance Agencies of Turkey at various city centers, AvivaSA has handled the private pension and life insurance sector and the latest developments in the sector, explained the current situation to numerous segments from the public to the business circles, and underlined the importance of the knowledge accumulation in selection of the private pension and life insurance company.

Internet ActivitiesAvivaSA updated its website with a younger-looking, simpler

and more functional design in the last month of the year due to changing internet and communication environments.

Besides, AvivaSA website has been recoded in line with the changing requirements of the search motors, and made capable of adapting to any displays in case that the website is accessed through different computers or mobile devices.

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 “Smile to the Future Competition”,“April 23 Competition”,“May 19 Competition” on Facebook, and the project “Nostalgia Happens” organized simultaneously on Twitter and Facebook conveyed positive messages emphasizing the importance of insurances throughout the Insurance Week and the importance of savings throughout the year. Besides, AvivaSA has created a communication form to be used by its customers or prospective customers to submit their questions, problems or requests, thus enabling them to communicate with AvivaSA via the social media as well. AvivaSA made a great leap by increasing the number of its social media followers to almost 90 thousand, and started to put into practice various communication modules to ensure faster contact with its customers and followers.

In the year 2013, AvivaSA’s corporate web site was deemed worthy of the Best Web Site Award at the Golden Spider award, one of the reputable awards of the digital world.

Brand and Communication Activities

2013 Operations 39

Human Resources Practices

The Human Resources Department’s 2013 activities can be analyzed under 8 main categories.

Human Resources Promotional ActivitiesThe company continued to use the Facebook HR page entitled AvivaSAİKariyer actively, and the job postings in the career portals have been redesigned.

RecruitmentTotally 792 persons were recruited: 116 for the Head Office and 676 for the sales teams. As of the end of 2013, the number of the AvivaSA employees is 1,504, 94 percent of whom are university graduates. Of the employees, 66 percent are females, while 34 percent are males.

For its recruitment practices, AvivaSA was awarded by yenibiris.com with the prizes of Model Employer and Fastest Growing Company of the Sector.

Within the scope of the candidate resource creating projects, we have visited 17 universities in total. Besides, we have visited 5 universities and carried out interactive activities with students within the scope of the Sabanci Spring organization.

We have started to use in-house evaluation center practices for the management positions and case studies for the sales expert roles in the sales channels. We have created the Sales Trainee program to employ young talents in the Bancassurance channel.

Living Talent and Career ManagementWe have applied performance assessment, target setting, and development planning processes in connection with the “Living Talent” system regarding each employee as a talent.

The second phase of the “AvivaSA Talent Development Program” launched in the year

2012 was implemented in 2013. All such employees were assessed by an independent firm utilizing various instruments. In light of the feedback, employees were included in longterm development programs to support them in their present roles, and to prepare them for future managerial positions in line with personal career planning.

Twenty-eight employees from the Direct Sales channel and 15 employees from the Bancassurance channel have been included into the candidate managers pool. Of the candidates in the pool, 36% in the Direct Sales channel and 40% in the Bancassurance channel have been promoted to higher positions. Totally 32 Regional Managers from both sales channels have been included in the “Evaluation Center” process.

In the Direct Sales channel, 154 Financial Advisors have been appointed to the Bancassurance channel. In the sales channels, 18 managers and 397 sales experts have been promoted.

Training and Development ActivitiesDirect Sales Training and Development Activities• Managers received 7.01 days of training per person, whereas financial advisors received 16.36 days of training per person. The measured rate of satisfaction is 4.53 out of 5.• In the CFC (Candidate Financial Advisor) licensing trainings, the rate of success in the first try of the e-BEAS exam was 75.2%. • The trainings planned within the scope of the iLikeSales project have been carried out in 24 different locations and attended by all channel employees.• For selection and development of the candidate managers, the “First Step to Management” program has been implemented.• The trainings held for the agencies have been participated by 418 persons. Organized with cooperation of Yıldız Technical

University, the “Business Administration Certificate Program for Agencies” has been implemented for the first time, and participated by 26 agencies of ours.

Bancassurance Training and Development Activities• The training duration per person is 7.56 days across the channel, and the satisfaction rate is 4.61.• For selection and development of the candidate managers, the “First Step to Management” program has been implemented.• 1,163 Akbank employees participated in product sales and licensing seminars especially organized for them. The total training duration is 9.101 hours.• The ABank employees were given training of 152 hours in total.

Managerial Staff Training and Development Activities• 90 percent of the managerial staff were given 199 different trainings.• The total training duration is 912 days, and the measured satisfaction rate is 4.69 out of 5.

With the Büyüteç In-House Instructor Program aiming at reproduction of AvivaSA’s corporate knowledge among its employees through sharing, 21 employees have been trained as in-house instructors, and 207 employees in total have been given 23 trainings.

Compensation and Reward ManagementIn the “KUM-PARA” system that is a long-term incentive implemented for the sales teams, the employees who requested were paid their first gains.The flexible side benefit scheme “Butik”, the first of its kind both in the industry and the Sabancı Group, has been developed further. The commission and bonus systems in all channels have been analyzed within the scope of the Metamorphosis project. The Performance Assessment System has been revised.


Research and Development ActivitiesIn line with its innovative stance, competitive understanding, and high quality standards, AvivaSA improves its internal processes and customer-oriented activities continuously and launches new products and campaigns in line with the market conditions and customer expectations.

Metamorphosis The Metamorphosis Project launched in the year 2012 and to provide the basic support in the future operations of the company continues rapidly. The Metamorphosis will be shifted to the new IT platform and create a consolidated structure. With

the Metamorphosis that has higher throughput in commercial sense, much more efficient data warehouse, allows the CRM applications, increases the in-house processes and employee productivity, decreases the infrastructure cost, it is targeted to enable AvivaSA to move ahead of the competition in the sector.

NEXTIn the Bancassurance channel, the transformation project NEXT, which covers the technological integration started to increase the strategic harmony and coordination between AvivaSA and Akbank, has been implemented. Within

this scope, we have designed fast, reliable and effective processes to increase customer acquisition and satisfaction using the potential of the branches, the call center and the alternative distribution channels.

Innovative productsHaving found out its customers' needs accurately and onsite, AvivaSA has continued to commission new products and services to meet such needs. In the year 2013, 11 new products were launched. Besides, the Gold Fund has also been added to the investment alternatives and offered to our customers.

The appreciation and recognition rewards of the sales channels have been continued. We have organized the Stars Summits bringing the most successful sales personnel together with the upper management, and the Winners Club overseas trips in 4 different categories.

Industrial RelationsWithin the scope of the Occupational Health and Safety practices, trainings and health conversations have been organized. Medical examinations have been organized, and the onsite physicians have started periodic controls. In order to raise our employees' awareness and encourage them to lead a healthy life, various works have been started under the slogan of “Health in Each Step!”

“Voice of Employee” Survey and Employee Satisfaction Focus GroupThe “Voice of Employee” Survey measuring the employee loyalty and

satisfaction was participated by 93 percent. The loyalty score was above the Aviva norms. The Employee Satisfaction Focus Group came up with 28 propositions in 2013, out of which 25 were accepted by the upper management.

Face-to-face interviews were made with all sub-executive personnel in the Head Office to check the pulse. Through the “How's it going?” practice implemented to increase the employee loyalty and productivity, pinpointed actions were planned for specific departments of the organization with the intention of increasing the employee satisfaction and loyalty.

Internal Communication and Corporate CultureIn 2013, the company succeeded in living up to its corporate culture and values.

Accordingly,• 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.• Aviva Group CEO Mark Wilson and Aviva Europe Human Resources Director David Hope paid a visit to our company, and our employees found an opportunity to ask them questions about the developments in the group.• Works have been carried out to spread the mission and new corporate values determined in line with the changing world and customer needs throughout the company. • The Human Resources management paid 21 visits to field teams. The information obtained during these visits was shared with units and departments, and action plans monitored.

Human Resources Practices

2013 Operations 41

Şimdi, Akbank kredi kartlarıyla 200 TL’lik ilk bireysel emeklilik katkı payı ödemenizi yapın, 100 TL chip-para kazanın! Emeklilik hayallerinizi kolayca gerçekleştirmek için, siz de hemen Akbank şubelerine gelin,

AvivaSA ile bireysel emekliliğe adım atın. Yarınlara bugünden hazır olmanın farkını yaşayın.

KAZANMAK İÇİN EMEKLİLİĞİ BEKLEMEYİN

AKBANK VE AVIVASA İLE

Kampanyadan 1 Eylül-31 Ekim 2013 tarihleri arasında Akbank aracılığıyla AvivaSA Bireysel Emeklilik Sözleşmesi alan ve en az bir yıl boyunca aylık asgari 200 TL düzenli katkı payı ödemesini Akbank kredi kartlarıyla yapanlar yararlanabilir. Kampanyadan en fazla bir defa yararlanılabilir. Chip para ödülü toplam 100 TL ile sınırlıdır. Kampanya şartlarının yerine getirilmemesi durumunda, verilen ödül geri alınır. Toplu ödemeler kapsam dışıdır. Kampanya ile ilgili detaylı bilgi www.akbank.com/beskampanyasi, 444 25 25 ve Akbank şubelerinde.


Support Activities

Metamorphosis Project The year 2013 was a year of numerous activities carried out to comply with both the new PPS regulations and external standards within the scope of the Information Processing works. We have achieved numerous renovations in the risk, compliance and security issues, thus making the Company compliant with the international standards in terms of information security, and we have conveyed the Company to a further point with regard to compliance with the rules introduced by the legislation and with the accepted standards of the information technologies.

Through the reorganization made in the year 2013, we have created three new basic functions: Risk and Compliance, Security, and corporate architecture. With the Corporate Architecture, the information technologies to be needed by the Company for the next five years have been planned, and a unit integrated with the business units has been created. A structure has been created, which not only meets the needs of the business units reactively but also brings the new technologies and developments to the company considering proactively the direction the business units should go.

Strategic Information Technologies OutsourcingThe needed medium- and long-term services were analyzed, processes for selection of the firms to provide such services were started, and the technical details of the relevant contracts were

prepared. Through the external support to be acquired newly, the service scale will be expanded very much, and we will shift to a structure enabling us to provide our technological services in an integrated manner.

Information Management Road Map (Digitalization)Digitalization is to implement projects to increase AvivaSA's service quality and revenues with new methods through various and new channels by making the best of AvivaSA’s information processing technologies. Within this scope, the life insurance policy renewals have been automated, and the relevant process has been revised. We have begun to record the prospective customers for private pension sales through the internet. We have created the infrastructure for PPS telemarketing.

We have improved the data warehouse, and organized the data flows. We have launched new campaigns, and enhanced the customer information files.

Plans for 2014In the year 2014, we are going to prepare the digitalization road map to determine what we can construct on the infrastructure created through Metamorphosis and Strategic Information Technologies Outsourcing, and how we will carry AvivaSA forward in competition. Our plan in the digitalization strategy is to provide the optimum sales channel supports through automation of the sales force and services.

Project & Application management The year 2013 was a very busy year for the Project & Application management. We started many projects in the year 2013, and made significant progresses in the ongoing ones. Within the scope of the new PPS legislation, we have integrated the requirements, mainly the ones related to state contribution, imposed by the legislation with the system in the most accurate way.

The policy renewal, collection and product development projects have been implemented within the framework of the NEXT program carried out in cooperation with Akbank. We have carried out processes to renew and singularize all our applications within the scope of the Metamorphosis program. The entire program includes eight application development projects, one data transfer project, and one technical infrastructure project. We completed the preliminary trainings, difference analyses, and detail planning works as of the end of 2013, and are continuing to perform the detail analysis and development works at the moment. The program includes 26 stakeholders except the units/departments and agencies of AvivaSA, and it is foreseen that a project team of 128 persons will spend 30,500 man-days in total. It is planned to commence the first phase of the project not later than the end of 2014, and it is also anticipated that the works will continue by the year 2015 in stages.

With its expert staff, high-quality and effective risk management, the Technical Operations department introduced innovative solutions and continued its efforts to outperform the sector in its contribution to customer satisfaction and profitability in the year 2013.The number of transactions carried out within the year reached 1.2 million

with 26 percent y-o-y increase.The department performs operational transactions to meet the customers' expectations at the highest level.

Within the scope of the legislation, upon publication of the new regulations regarding the Private Pension System and state

contribution, the system, process and application improvements have been completed, and the full compliance with the legislation has been ensured by establishing a powerful internal control unit and system. The total number of control points has been increased from 472 to 702.

Information Technologies

Technical Operations

2013 Operations 43

Sponsorship Activities

Corporate Social Responsibility

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, AvivaSA channels its CSR activities towards raising public awareness on this issue. The company cooperates with Juniour Achivement (JA), the only foundation in Turkey that is active in the field of entrepreneurship and financial literacy, sponsoring its activities. As part of the foundation's activities, the AvivaSA employees have been trained to become volunteer consultant in the “Company Program” activity of

JA carried out in pilot schools in Istanbul, Izmir, Bursa and Kocaeli.

With the competition called “Designing the Saving”, AvivaSA has reawaken the money-box, one of the fading notions. Through communication activities on saving awareness and culture on every October 31, which is the foundation anniversary of the company and the World Savings Day, AvivaSA ensures that the saving remains on the agenda. The year 2013 data of the Consumers’ Attitude to Saving survey were shared with the public, and it has been ensured that the subject is handled in a broad perspective.

AvivaSA continued its savings-focused social media activities in the year 2013 as well. Having organized a work called “Nostalgia Happens” (#NostaljiOlur) in the Facebook and Twitter, AvivaSA has ensured with this application that the icons of the present day, which can turn into nostalgia in the future, are accumulated from this day on.

In the year 2013, our company paid TL 0.1 million in total through donations and aids within the scope of the social responsibility projects.

In 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. In the years 2011 and 2012, the tournament organized at the Kemer Golf & Country Club drew significant participation. Repeated in 2013, the

tournament drew even more participants; the highest ranking golf team in Turkey was selected to participate in the tournament organized in Lisbon, and made Turkey proud by ranking third.

AvivaSA continued to promote its brand in different environments with sponsorship activities carried out in the year 2013. Sponsoring the Sabancı Spring together with

numerous Sabancı organizations and participating the activities in the first half of the year, AvivaSA found an opportunity to promote its products and services at Turkey's leading universities.

AvivaSA was the main sponsor of the Marketing Summit organized in Lütfi Kırdar Congress and Exhibition Center in December 2013.


Information on Management and Corporate Governance Practices 45

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

IV. Information on Management and Corporate Governance Activities


Chart

BOARD OF DIRECTORS

Okan GÜNDirector

Internal Audit

Ali Önder LÜLÜExecutive Vice President

Bancassurance and Corporate Projects

Osman ATICIGroup Manager

(Turkey, 1)

Duygu YENERGroup Manager

(Turkey, 2)

Aslı CANÖZGroup Manager

Group 3

Dinçer GÜLEYİNDivision Manager

Bancassurance Development

Ufuk ÇANAKÇIOĞLUDivision Manager Corporate Projects

M. Ali MesruoğluUnit Manager

Sales Support&Operations

Aslı İSMAİLOĞLUDivision ManagerDirect Sales and

Agencies Development

Mirey DERGÜZELYANUnit Manager Sales Support

Ebru Canlı ÖZKANDivision Manager

Logistics and Procurement

Kurtuluş ÇALTEKİNDivision Manager

Law

Sena GÜNGÖRDivision Manager

Project & Application Management

Mehmet ERİŞENDivision Manager

IT Architecture

Ateş SÜNBÜLDivision Manager

IT Security

Kürşad UYGUNLARGroup Manager

Group 2

Burçin ARKUTDivision Manager

Actuarial & Business Risk

Ebru GÖRÇEDivision Manager

Customer Satisfaction Center

Division Manager Corporate

Communications

Fırat DİNÇERGroup Manager

Group 1

Zeliha ALTINOKDivision Manager

Accounting & Finance

İdil NAMYETERDivision Manager

Technical OperationsDivision Manager

Marketing

Selim AVŞARExecutive Vice President Direct Sales and Agencies

Fırat KURUCAExecutive Vice President

Finance

Berkant DİŞCİGİLExecutive Vice President

Operations

Division ManagerInternal Audit

Fisun KOÇGroup Manager

Strategy & Change Management

Sibel ÖZTEPGroup Manager

Risk and Internal Control

O. İlhan ONURKANDivision ManagerRisk Management

Levent ÇAĞLAYANDivision Manager

Quality Compliance

Salim DURSUNOĞLUUnit Manager

Internal Control

Emre GÜNERMANExecutive Vice President

Marketing & Development

Murat BAYBURTLUOĞLUExecutive Vice President

Human Resources

Nihat ÜNALACAKExecutive Vice President


Division ManagerHuman Resources

Organizational Development & Compensation, Benefits

Burak YÜZGÜL

Group Manager Software & Support

Altan EVNİ

Berna BELKISDivision Manager

Human Resources, Sales

Tevfik ÖZELDivision Manager

PensionLife Core Applications



Organization Chart

BOARD OF DIRECTORS

Okan GÜNDirector

Internal Audit

Ali Önder LÜLÜExecutive Vice President

Bancassurance and Corporate Projects

Osman ATICIGroup Manager

(Turkey, 1)

Duygu YENERGroup Manager

(Turkey, 2)

Aslı CANÖZGroup Manager

Group 3

Dinçer GÜLEYİNDivision Manager

Bancassurance Development

Ufuk ÇANAKÇIOĞLUDivision Manager Corporate Projects

M. Ali MesruoğluUnit Manager

Sales Support&Operations

Aslı İSMAİLOĞLUDivision ManagerDirect Sales and

Agencies Development

Mirey DERGÜZELYANUnit Manager Sales Support

Ebru Canlı ÖZKANDivision Manager

Logistics and Procurement

Kurtuluş ÇALTEKİNDivision Manager

Law

Sena GÜNGÖRDivision Manager

Project & Application Management

Mehmet ERİŞENDivision Manager

IT Architecture

Ateş SÜNBÜLDivision Manager

IT Security

Kürşad UYGUNLARGroup Manager

Group 2

Burçin ARKUTDivision Manager

Actuarial & Business Risk

Ebru GÖRÇEDivision Manager

Customer Satisfaction Center

Division Manager Corporate

Communications

Fırat DİNÇERGroup Manager

Group 1

Zeliha ALTINOKDivision Manager

Accounting & Finance

İdil NAMYETERDivision Manager

Technical OperationsDivision Manager

Marketing

Selim AVŞARExecutive Vice President Direct Sales and Agencies

Fırat KURUCAExecutive Vice President

Finance

Berkant DİŞCİGİLExecutive Vice President

Operations

Division ManagerInternal Audit

Fisun KOÇGroup Manager

Strategy & Change Management

Sibel ÖZTEPGroup Manager

Risk and Internal Control

O. İlhan ONURKANDivision ManagerRisk Management

Levent ÇAĞLAYANDivision Manager

Quality Compliance

Salim DURSUNOĞLUUnit Manager

Internal Control

Emre GÜNERMANExecutive Vice President

Marketing & Development

Murat BAYBURTLUOĞLUExecutive Vice President

Human Resources

Nihat ÜNALACAKExecutive Vice President


Division ManagerHuman Resources

Organizational Development & Compensation, Benefits

Burak YÜZGÜL

Group Manager Software & Support

Altan EVNİ

Berna BELKISDivision Manager

Human Resources, Sales

Tevfik ÖZELDivision Manager

PensionLife Core Applications



Haluk Dinçer ChairmanDinçer 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, Dinçer has been serving as the President of Retail and Insurance Group of Sabancı Holding.Click here for Message from Chairman.

David McMillanDeputy ChairmanMcMillan graduated from the Herlot-Watt University with a BSc in Business Administration in 1986. He had his MBA at the University of Chicago in 1996 – 1997. McMillan who started his career at Hewlett-Packard in 1986 has joined Aviva after working for Pricewaterhouse Coopers from 1996 to 2002. By the year 2013, he worked in various positions in Aviva UK including also the CEO position. Since July 2012, McMillan has been serving as the Group Transformation Director in Aviva plc.

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 2001 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 5 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 percent market share, and the second-largest life insurer. CU Aviva Poland has 6 business units with 1,400 staff and 3,500 DSF members servicing over 3.2 million customers. 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.

Board of Directors


Hayri Çulhacı Board MemberHolding a degree in political sciences from Ankara University, Çulhacı received his MBA from Northeastern University in the USA. 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. 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 and a member of the Turkish Industrialists’ and Businessmen’s Association.

David Angulo RubioBoard MemberDavid 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.

Meral Eredenk Kurdaş 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.Click here for Message from CEO


Murat Bayburtluoğlu Ali Önder Lülü Berkant Dişcigil Fırat Kuruca


Selim Avşar Emre Günerman Nihat ÜnalacakMeral Eredenk Kurdaş


CEOMs. Eredenk’s curriculum vitae can be found on page 49.

Fırat Kuruca Executive Vice President - FinanceFırat Kuruca graduated from the Department of Business Administration of the Faculty of Administrative Sciences at Boğaziçi University. Having started his professional life at Unilever-Turkey in 1989, Kuruca has served in various positions. Mr. Kuruca respectively worked at Unilever-Turkey (Management Accountant), Unilever Europe-Belgium (Commercial Officer), Unilever-Turkey (Purchasing Manager), Unilever-Germany (Audit Director), and Unilever Europe-Belgium (CEE Finance Director). In 2004, he resigned from Unilever and returned to Turkey, and served as Financing and Administrative Affairs Director in Koç Holding Setur Divan Enterprises. In 2005, he joined AvivaSA as Executive Vice President in charge of Finance. Kuruca has 25 years of professional experience.

Selim Avşar Executive Vice President - Direct 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 in 1996 as a Financial Advisor and served in various positions in sales management within the same company. He became Executive Vice President responsible for sales in 2003, and subsequently a Board Member. Avşar has 18 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 17 years of professional experience. He has served as manager in after-sales services, product management, and marketing in the sector.

Senior Management


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. Dişcigil joined the insurance sector Axa Oyak Hayat Sigorta, where he assumed positions in the Operations, Training, Actuary and Technical departments. He later joined AK Emeklilik, as Underwriting Manager. He also have served as the manager of the Underwriting Operations department, and then as the manager of the Customer Retention department at AvivaSA. Currently the chairman of Insurance Association of Turkey, Life

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 various areas. 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. As of 6 October 2010, he was appointed Executive Vice President responsible for Marketing at AvivaSA Emeklilik ve Hayat. Günerman has 18 years of professional experience.

Murat Bayburtluoğlu Executive Vice President - Human Resources A 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 representative and later Deputy Director in the bank’s domestic and overseas operations. 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. Bayburtluoğlu has 29 years of professional experience.

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 VicePresident – Information Technologies in 2012. Ünalacak has 26 years of professional experience.


Corporate Governance Principles

The 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.

The corporate governance 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 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.All shareholders are treated equally in 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. This policy 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

AvivaSA 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 Principles Compliance Statement

Corporate Governance Committee

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


annual report, and also shared with the public via the information disclosure policy.

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),

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 are included in the company's website.

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 of 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.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.

AvivaSA conducts its business and transactions transparently.

At AvivaSA, the rights of stakeholders are protected independently of one another.


Corporate Governance Principles

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

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 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 must be clearly and comprehensibly defined in the annual report.

• Board Members fulfill their duties with competence and goodwill, which means that they

always display the minimum care and attention required of them in similar situations and under similar conditions. 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. • 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.

• The managers must 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 companyThe 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 ethical values, internal equilibrium and strategic targets are taken into consideration in formulating remuneration policy.


Objective and ScopeThe 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 RulesThe 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 DisclosureThe 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.

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 Insurance Association 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 GazetteThe 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 StatementsThe Chairman, Board Members, CEO and Executive Vice Presidents are authorized to make public statements via the media.

Supervision of the Information Disclosure PolicyThe 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 is the responsibility of company management.

Information Disclosure Policy

The profit distribution offers presented by the Board of Directors to the General Assembly for approval are

prepared considering the shareholders' expectations and the growth needs and profitability of our company.

All shareholders, including the minority shareholders, are treated equally.

Dividend Distribution Policy


2013 was an active year in terms of the legal regulations concerning the sector. It was a year of heavy schedule to ensure that the Company's operations comply with the legislation due to the secondary regulations related to the Private Pension System as well as the Turkish Commercial Code no. 6102 regulating the insurance contracts.

In the year 2013, the critical duty of the Legal Department

performing AvivaSA’s legal functions was to follow the legal regulations regulating the Company’s activity, review the amendments made to such regulations, and inform the Company on time and sufficiently about the liabilities arising from such amendments.

In 2013, regulatory authorities conducted audits of the company. The company received no significant sanctions in

the year 2013, which could negatively impact its financial structure resulting from the contravening of legislation. In 2013, the company paid TL 24,784.15 in administrative fines for 28 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 2013 is as follows:

Information on parent companies and their subsidiaries In the Affiliation Report issued by AvivaSA Emeklilik ve Hayat A.Ş. Board of Directors on 21 February 2014, it was concluded that in 2013, in all transactions

with its parent companies and their subsidiaries, AvivaSA Emeklilik ve Hayat A.Ş. took the necessary 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.

Legal Explanations

In 2013, the company paid TL 260,857.62 due to unfavorable legal settlements in 13 cases due to business law.

Lawsuits related to business law:

Lawsuits transferred to

2013 from 2012

Lawsuits filed in2013

Lawsuits settled in

2013

86 17 28

Lawsuits related to insurance activities:

In 2013, the company paid TL 859,606 due to unfavorable legal settlements in 19 cases due to insurance activity.

Lawsuits transferred to

2013 from 2012

Lawsuits filed in2013

Lawsuits settled in

2013

191 63 8

Lawsuits settled in

favor of the company in

2013

Lawsuits settled in mutual

compromise in 2013

Lawsuits settled to the detriment of the company

in 2013

6 1 2

Lawsuits settled in

favor of the company in

2013

Lawsuits settled in mutual

compromise in 2013

Lawsuits settled to the detriment of the company

in 2013

17 0 11

In 2013, the company paid TL 1,300 due to unfavorable legal settlements in 1 cases due to private pension activity.

Lawsuits related to private pension activities:

Lawsuits transferred to 2013 from 2012

Lawsuits filed in 2013 Lawsuits settled in 2013

24 11 1


The Capital Markets Board’s routine audit of the listed pension funds established by the company began in February 2013 and ended in May 2013. As part of the audit, all 2012 operations related to the pension funds as well as the internal control activities, processes and

practices were scrutinized.In the year 2013, the Insurance Audit Board audited the Company in terms of Private Pension System State Contribution Transaction Processes and the Life Group Operations and Transactions, and the legality of the private

pension, state contribution and life group transaction processes, and our Company's practices concerning the participants' rights and liabilities arising from the contract and policy were scrutinized.

Explanations on Ad Hoc and Public Audits During the Accounting Period


Summary of Annual Report of the Board of Directors presented to the General Assembly of ShareholdersAt the end of the operating year of 2013, AvivaSA Emeklilik ve Hayat A.Ş. that we established on 31 October 2007 through the merger of AK Emeklilik and Aviva Hayat ve Emeklilik shown that it is one of the determinant companies in Turkish private pension and life insurances sector according to the first period targets and expectations.

For our company, the year 2013 was a year in which we attained successful financial results.

The most important areas AvivaSA will display its difference in 2013 and thereafter will be its international and local knowledge accumulation, strong and effective capital structure, its power stemming from its roots, and its unique multi-channel distribution structure. A natural born leader, AvivaSA will add value to its said features with its innovative services and products; and it will continue to be an important institution for its customers, partners and employees.

At the end of the operating year of 2013, the paid-up capital of the company is TL 35,779,197, and the size of its equity is TL 157,492,156. The company has sufficient equity to meet its current liabilities and any losses likely to be caused by its potential risks.

The size of our company's assets is TL 5,887,066,036 at the end of the year 2013.

Our company's total current assets is TL 701,266,865, total short-term liabilities is TL 233,810,083, and the total insurance business technical provisions is TL 550,201,629. The size of the fund related to pension activities is TL 5,019,219,444.

Our company's investment income (net) is TL 31,104,361, and the other extraordinary revenues and profits/expenses and losses are TL 9,150,921.

In consequence of its all operations, our company closed

year 2013 with a net profit of TL 30,744,794.

According to the Pension Monitoring Center data of 3 January 2014, our company ranks 2nd in the sector with 19% market share in terms of private pension fund size. As of the same date, the number of the private pension system participants is 617,377 corresponding to 15% market share.

Our company has produced TL 232.9 million premiums in the life and personal accident branches, and ranks 7th in the sector with 6.6% market share.

We extend our thanks to our esteemed partners for their attendance to the General Assembly with the intention of reviewing and settling the operations in the year 2013.

Yours sincerely,



Remuneration of Board Members and Senior Managers

Annual Report Compliance Statement

In 2013, the salaries, premiums, bonuses and other benefits offered to the company’s upper management totaled TL 4.6 million, up from TL 4.2 million in 2012.

In 2013, the travel, accommodation and representation fees, and allowances paid to the upper management stood at TL 0.9 million, compared to TL 0.4

million in 2012. The total indemnity of the life insurance held by the company’s upper management was at USD 1.8 million in 2013 and USD 1.8 million in 2012.

We hereby state that our annual report for the year 2013 and the financial statements of 31 December 2013 attached therewith and the related explanations and footnotes have been prepared in compliance with the provisions of the

Decree on “Financial Reporting of Insurance and Reinsurance Companies and Pension Funds” issued by the Turkish Republic Prime Ministry Undersecretariat of Treasury, and of the Decree on “Determining the Minimum Contents of the Annual Reports

of the Companies” issued by the Ministry of Customs and Trade, the related legislation, and the related circulars and regulations, and that the same match our Company's accounting records.


Independent Auditors’ Compliance Opinion on Annual Report


February 21, 2014

1. Object and Scope of Report:AvivaSA Emeklilik ve Hayat A.Ş. residing at Saray Mah. Dr. Adnan Büyükdeniz Cad. No:12 Ümraniye/ Istanbul and registered with Large-Size Taxpayers Tax Office under the taxpayer ID no. 306 005 0656 is engaged in two main branches of insurance as retirement and life insurances.

The object of this report is to explain the relations of AvivaSA Emeklilik ve Hayat A.Ş. with the affiliates and inform the shareholders on whether or not the company is liable for equalization as provided by article 202 of the Turkish Commercial Code (TCC).

Therefore, this report explains the transactions between AvivaSA Emeklilik ve Hayat A.Ş. and affiliates as per the relevant articles of TCC.

2. Information on Transactions with Parent Company's SubsidiariesThe transactions made by AvivaSA Emeklilik ve Hayat A.Ş. with H.Ö. Sabancı Holding A.Ş. and Aviva plc and their subsidiaries within the period from 1 January 2013 to 31 December 2013 are as follows:

2.1. Akbank T.A.Ş.In the year 2008, AvivaSA Emeklilik ve Hayat A.Ş. rented the 5th floor of the Bakırköy Branch service building of Akbank T.A.Ş. (Akbank) as liaison office, and the rental for the said office was paid in the year 2013 as well.

As per the insurance agency contract signed between AvivaSA and Akbank on 8 June 2007, commissions were paid in accordance with the provisions of the contract for the PPS and life insurance portfolios sold by Akbank in the year 2013. Besides, within the scope of the above mentioned agency contract, payments have been made for the

purchases of licenses required to sell PPS products.

The transactions in the financial services we receive from Akbank such as letter of guarantee, etc. as well as deposits, repurchase, etc. carried out by the bank to utilize the assets of our company have been charged on the interest rates and service fees applied in the market. Within the scope of financial operations, AvivaSA opened a time deposit account in Akbank in the year 2013, and acquired interest revenue from this account. Again in the year 2013, we performed repurchase, bought government bonds, investment funds and eurobonds in the said bank, and earned incomes from sales, repayment, and coupon payments of the said securities.

We signed a Support Service Framework Contract with Akbank on 10 March 2008, and this agreement is in force unless it is terminated mutually. In the year 2013, too, AvivaSA received the following services from Akbank: utilization of the fund portfolio in compliance with the legislation and calculation of the unit share value accurately; fulfillment of all the necessary operational and legal liaisons and reconciliations that must be fulfilled within the scope of the fund activities and the contracted service such as all government agencies responsible of regulation and supervision, other banks and intermediary firms, founders, managers; fund accounting and tax procedures; preparation of financial statements; calculation and distribution of the fund management remunerations; and ensuring reconciliation on the share numbers.

In addition to the insurance agency contract signed between AvivaSA and Akbank on 8 June 2007, an supplementary protocol was issued on 10 June 2013 with regard to the “pilot sales model”. With this

protocol, it is targeted to increase the private pension sales. The pilot sales model is the name of the work performed for cooperation to increase the "agency sales" through the support to be given by the AvivaSA personnel to the PPS sales processes carried out by the Akbank personnel under the insurance agency contract. Akbank has been charged for the amount corresponding to AvivaSA's natural cost for the said pilot application in return for the contributions made by the involved AvivaSA personnel to the PPS sales.

2.2. Ak Portföy Yönetimi A.Ş.a) Company Portfolio ManagementBetween Ak Portföy Yönetimi A.Ş. and AvivaSA, the portfolio management framework contract for management of the portfolios composed of AvivaSA’s financial assets by Ak Portföy Yönetimi as proxy on behalf of AvivaSA was signed on 12 November 2008 for an indefinite period. In the year 2013, AvivaSA continued to receive the contracted service from Ak Portföy Yönetimi A.Ş.

b) Pension Investment Funds ManagementBetween Ak Portföy Yönetimi A.Ş. and AvivaSA, a contract was signed on 8 July 2007 for bona fide and careful daily management of the pension investment funds, converting the fund portfolio investment into money and reinvest it, and the AvivaSA continued to receive the same services in the year 2013 as well.

2.3. Aksigorta A.Ş.Aksigorta and AvivaSA signed group health insurance contract on 4 May 2012 to be valid from 31 December 2011 to 31 December 2012, and a supplementary protocol to be valid from 1 April 2012 to 1 April 2013 due to the shift to the flexible plan on 1 April 2012. Within the scope of the said contract and the supplementary protocol, the amounts of the

AvivaSA Emeklilik ve Hayat A.Ş. Year 2013 Affiliation Report


policies/supplementary policies issued by Aksigorta have been paid.

Between AkSigorta A.Ş. and AvivaSA, a rental contract was signed on 1 January 2008 for the liaison office at Gazi Mustafa Kemal Bulvarı No:137 Kat:3 Tandoğan-Ankara. On 9 January 2012, the said contract was signed for 3 years, Aksigorta A.Ş. was paid monthly rentals in 2013 as well.

In order to meet the damage likely to be caused by occurrence of the potential risks, AvivaSA has bought workplace package, machine breakage, electronic device, employer's liability, third party liability, and monetary assurance package insurance policies for the calendar year of 2013 from Aksigorta A.Ş., and the amounts of the policies/supplementary policies issued by Aksigorta have been paid.

2.4. Aviva Sigorta A.Ş.AvivaSA provided Aviva Sigorta A.Ş. with regular risk and audit services in 2013. Aviva Sigorta A.Ş. has been charged for the payroll costs and expenditures made corresponding to the working time spent for the said services.

2.5. BİMSA Uluslararası İş Bilgi ve Yönetim A.Ş.In order to complete the missing licenses for the software used in the company, AvivaSA purchased services for installation and one-year support of the MCAfee Web Protection Suite1:1 GL and Web Reporter Premium P:1 GL licenses that are valid for one year for 1500 users for the purpose of acquiring licenses, wireless network antenna, web filtering, and proxy solution paying also one-year support fee.

2.6. Teknosa İç ve Dış Ticaret A.Ş.The gifts specified in the campaigns organized by AvivaSA in 2013 to award the entitled personnel and air-conditioners for AvivaSA head

office and liaison offices have been purchased, and a contract has been signed to acquire repair service in case of a failure.

On 13 August 2010, the office Çınarlı Mah. Atatürk Caddesi No:1 Sabancı İş Merkezi Kat1 Seyhan Adana was rented to be used as liaison office with a starting date of 7 May 2010, and the annual rental fee was paid in the year 2013.

2.7. Hacı Ömer Sabancı Holding A.Ş.AvivaSA sponsored the Sabancı Spring cultural activity carried out by the Sabancı Foundation and totally designed, promoted and organized by the youths, and made contributions for the organizational expenditures.

In the year 2013, AvivaSA rented meeting rooms in Sabancı Holding A.Ş. building for various trainings, and the rental plus the service fee was invoiced by the holding. AvivaSA has rented a meeting room in Sabancı Holding A.Ş. for a long-term project starting from 1 April 2012. The rental contract was renewed in 2013, and the monthly rentals were paid.

2.8. EnerjiSA Elektrik Enerjisi Toptan Satış A.Ş.In the year 2013, EnerjiSA was paid for electricity consumption and the related services.

2.9. Aviva Europe S.E.In the year 2013, AvivaSA Internal Audit Director and Department Manager provided several Aviva plc group companies with short-term services. The expenditures of the said services were invoiced directly to Aviva plc without adding the cost.

3. AvivaSA Emeklilik ve Hayat A.Ş. In this report issued by the Board of Directors on 21 February 2014, it was concluded that in 2013, in all transactions with its parent companies and their subsidiaries,

AvivaSA Emeklilik ve Hayat A.Ş. took the necessary 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.


Audit, Financial Information and Risk Management 67

In the year 2013, AvivaSA followed the right strategies to grow profitably, outperforming its own targets.

V. Audit, FinancialInformation and Risk Management


Internal Audit

Internal Auditors

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 2010 Okan Gün has been serving as Internal Audit Director at AvivaSA.

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. A Certified Public Accountant, İlkin Esra Yeral has been serving as Senior Auditor at AvivaSA since February 2009.

Adem YoratAuditorAdem Yorat graduated from the Department of Business Administration at the Galatasaray University. Having started his professional life as Internal Auditor in Axa Sigorta, then he worked as Internal Audit Expert in Aviva Sigorta. Adem Yorat has been serving as Internal Audit Expert in AvivaSA Internal Audit Department since July 2009.


Internal Audit Activities

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.

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; and

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.

In the year 2013, the internal audit department conducted a total of eight audits, namely, Effectiveness of the Second Line of Defense, Purchasing and Outsourcing, Pension and Life Operations and Damage Processes, Agency Supervision, Corporate Sales, Investment

Management, Financial Crimes and Payments, Attorney Fees, and COSO Internal Control Framework, 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 1 Audit Director, 1 Senior Audit Manager and 1 Senior Manager, 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.


Assessment of the Financial Situation, Profitability and Claims Payment SolvencyThe year 2013 was a year of intensifying competition in the private pension and life insurance segments of the insurance sector, and when the companies adapted to the legislative amendments in the Private Pension system.

In 2013, 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 30% in 2013, the company achieved 33% growth, thereby increasing its market share by 0.1 percentage points and preserving its 8th position in the said market.

At the end of 2013, AvivaSA produced a total of TL 232.9 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 6.6% (2012 – TL 197.5 million).

• Considering Haymer and TSRŞB data as of 31 December 2013;

In 2013, too, AvivaSA preserved its leadership position in the PPS market. The company’s PPS fund volume grew by 24% to TL 5.013 million and its participant number by 26% to 617 thousand individuals. AvivaSA ranks 2nd in the sector with a 19.1% market share in terms of PPS fund volume (based on the Pension Monitoring Center’s data of January 03, 2014).

• Considering the Pension Monitoring Center’s data of

January 03, 2014;AvivaSA closed the year of 2013 with a return on equity of 18.9%, thus becoming one of the most profitable among all Sabancı Group and Aviva Plc. Companies. The company’s gross profit was TL 41.3 million and its net SFRS profit was TL 30.7 million for the year 2013. In 2013, it distributed its entire 2012 distributable profit of TL 33.6 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 2013 was at 237%, the clearest indication of robust capital management. The minimally required shareholders’ equity stood at TL 70 million and shareholders’ equity at TL 166.3 million (excepting provisions for equalization).

In the life and accident insurance branches, AvivaSA paid a total of TL 172.8 million in indemnity for surrender, maturity, death and invalidity in the year 2013.

The company initiated an investment drive in 2012 to render its IT infrastructure more flexible, whereby it invested TL 9.7 million in material and immaterial assets, representing an increase of 127% over the prior year. The growth continued with the investments in distribution channels as well. The workforce of sales channels was 1,108 individuals as of end-2013.

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 2014.

Progress in Assets and Liabilities The company’s total asset volume for 2013 grew by 19% over the prior year to TL 5.887 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 24% over the prior year to TL 5.019 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 5.9 percent of the total. This item is TL 345.9 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 260 million), which accounts for 4.4% 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., 87% of


the total corresponds to liabilities from pension activities, and 9.3% to technical provisions. On the other hand, the mathematical provision for life, which corresponds to our liabilities towards policy holders, fell by 14.8% over the previous year to TL 466.7 million.

Indemnity Payment CapacityThe total gross indemnity paid by AvivaSA in 2013 stands at

TL 175.8 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 2013, the company’s death and invalidity indemnity coverage -with the exception of surrender

and maturity payments- stood at TL 24.3 million. Taking into consideration the company’s current liquidity and the maturity structure of its investments, it has a strong indemnity payment capacity.


Information on Risk Management Policies by Risk Type

The Risk and Internal Control Group Management activities are carried out as per “Communiqué on the Internal Systems of Insurance, Reassurance and Pension Companies”.

The targets of these risk management and internal control 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.

The risk management activities are carried out under the supervision of the Risk and Internal Control Group Management. The Risk and Internal Control Group Management heads the Legal Regulations Committee, thus monitoring and guiding the Company's legislation-related activities. The Committee composed of the representatives from the relevant functions of the Company reports to AvivaSA Executive Council.

The Operational Risk and Reputation Committee composed of the AvivaSA Executive Council members monitors the operational risk events to ensure that effective actions against the circumstances beyond risk appetite and tolerance are taken on time.

The Risk and Internal Control Group Management submits its findings and evaluations related to the Company's risk management and internal control activities to the Board of Directors Risk Committee every three months.

AvivaSA Internal Control Unit functioning under the Risk and Internal Control Group Management targets to make contributions under the following categories through its operations:

• Raising the awareness on a strong and effective internal control in AvivaSA,• Improving the internal control processes and applications continuously to ensure their optimum and cost-efficient functioning,• Creating the best internal control and supervision practice in AvivaSA.

The Internal Control Unit functions in compliance with

its own governance manual and practice methodology to ensure effective internal control environment in the company, and reports to the CEO and the Board Members in charge of the Internal Systems.

The internal control activities are among the basic responsibilities of the Company functions. The functions constituting the first line of defense are responsible for determining the the internal control points to ensure that the Company assets related to their own processes are protected, its activities are carried out effectively, efficiently and in compliance with laws and the other relevant legislations, in-house policies and rules of the

company, insurance business customs, the reliability and integrity of the accounting and financial reporting systems, and timely retrievability of the information, and that the said controls operate effectively.

The primary scope of the Internal Control Unit operations is to evaluate and report to the upper management the efficiency and effectiveness of the internal control measures and processes carried out in AvivaSA's first line of defense. The functions carry out the internal control regularly and take the necessary improving actions; and such activities are monitored and directed by the Risk Management and Internal Control.

Risk and Internal Control Group Management

Internal Control Framework


AvivaSA risk management framework includes the strategies, policies models, processes, and reporting procedures required to identify, measure, manage, monitor and report the risks to which the Company is or may be exposed.

The risks faced by the company are identified and assessed by the upper management within the scope of the AvivaSA risk management framework. 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.

The Risk Management Department's functions are to identify, measure and monitor the risks to which AvivaSA exposed, to ensure that actions are taken to keep the risks within the limits determined as per the risk appetite, and report such actions. Besides, as the Compliance Unit, it is also responsible for application of the Law No. 5549 on Prevention of Laundering Proceeds of Crime

and the relevant regulations. 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:

AvivaSA Risk Management Framework

Echelon Responsible

Authorities and Duties

1st Line of Defense

Company ManagementTotal

Identifying and assessing risks, managing and reporting these efficiently and so as to remain within the risk appetite limits, ensuring compliance with company policies. Establishing and executing the effective internal control system.

2nd Line of Defense

Risk Management and Internal Control, Legal

Supporting the company management in identifying, assessing, managing and reporting risks, overseeing compliance with company policies and identifying any violation; in short, assisting in the functioning of AvivaSA’s Risk Management Model. Providing an acceptable assurance that the Company assets are protected, its activities are carried out effectively, efficiently and in compliance with laws and the other relevant legislations, in-house policies and rules of the company, insurance business customs, the accounting and financial reporting systems are functioning reliably, their integrity, and timely retrievability of the information.

3rd Line of Defense

Internal AuditAssuring the Board of Directors about the efficiency of the company’s risk management and internal control mechanism from an impartial and independent viewpoint


Risk policy frameworkAvivaSA’s risk policy framework indicates rules for providing a consistent approach to identification, measurement, management, monitoring and reporting of the risks. The company's risk management framework policy defined the risk management roles and responsibilities of the Board of Directors and the Risk Committee under the Board of Directors, the CEO, and the committees (Assets-Liabilities Committee and Operational Risk and Reputation Committee). The said policy also explains the role of each level in the triple line of defense model and functioning of the delegation of authority in AvivaSA.

The governance of AvivaSA’s risk management framework is composed of the defined processes allowing to changes and exceptions in the governance requirements within the framework of the risk policies, business standards, authorities, delegated authorities, and special responsibilities as well as escalating the issue to upper levels and monitor the violations.

The ultimate responsibility for defining the risk management principles and standards to be applied across the Company, updating the risk policies according to the changes in the operating conditions, establishing and executing effective risk management system and processes, monitoring the Company’s riskiness level, establishing the risk limits, checking the current situation against such limits, and taking the necessary actions belongs to the Board of Directors.

The Risk Management Policies set the basic principles and standards for the risk management system and processes. The policies are approved by the Board of Directors, and the amendments made to the same require the Board of Directors approval.

The tools required to determine, measure, manage, monitor and report the risk vary by the risk type. Therefore, the risk policy framework includes six risk policies, including the Risk Management Framework Policy, special to each

risk type to which AvivaSA is exposed: life insurance and private pension, credit, market, liquidity and operational risk policies. Since the risks the company faces cannot be categorized in a single category all the time, it is necessary to utilize multiple risk policies simultaneously in the risk definition, measurement, management, monitoring and reporting processes.

AvivaSA is also exposed to the business risk in relation to its operations in the life insurance and private pension sector. Likewise, the company also faces financial risks related to its operations, such as loan, market, and liquidity risks. The operational risk that is the final risk component is caused by the faults of human, process and technology used in management of the assumed risks: The concentration risk, on the other hand, is not a separate type of risk; but it occurs in cases where there is insufficient distribution in or between certain type(s) of risk. The rising risk or volatility arising from concentration is assessed in each one of the risk types.

Risk Policies


RISK MANAGEMENT FRAMEWORK

OPERATIONAL RISK

RISK APPETITE FRAMEWORK

BUSINESS RISK

PRIVATE

PENSION

LIFE

INSURANCE

LIQUIDITY

RISK

CREDIT

RISK

MARKET

RISK

FINANCIAL RISK

AvivaSA’s Risk Policy Framework


Business standards AvivaSA is aware of the importance of the consistent and controlled business processes in the risk management process. Therefore, each policy is supported with business standards intended for providing the top effectiveness in the relevant business processes. The work commenced in the year 2013 will be scheduled so as to be implemented 40 business standards as of the end of the year 2014. The great part of the business standards are the responsibility of the first line of defense. In the company, each standard has a responsible person; the business standards are reviewed at least once a year in the light of the latest developments, and revised if necessary.

The currently applied risk model shows the structural risks of the Company operating in the life and pension sector, the measurable data of such risks, the risk factors, the limits for the Company to accept such risks, and how such risks will be managed. The Risk Management Policies are practical guides explaining the most effective way to manage the Company's financial, operational and reputation loss risks. The basic issues considered while determining the risk limits arr the risk measurement results and the Company's risk appetite. Apart from the risk limits, the risk indicators of the developments and occurrences that will affect the risk level negatively are identified and monitored by the basic business functions as early warning signals.

Risk Management Framework PolicyThe said policy is fundamentally important for supporting and improving the companies corporate management structure. The basic objectives of this policy are determining the basic principles and standards of the risk management systems and processes, implementing such systems and processes, and complying with the determined risk limits.

The activities covered by the Risk Management Policy are carried out within the framework defined by the insurance and private pension legislation and the other relevant legislations to which the Company is subject.

Life Insurance and Pension Branch Risk PolicyLife Insurance and pension branch risk means the risk likely to arise from wrong and ineffective application of the insurance business technique in the assurance process for the life insurance branch, while it includes the risk of loss likely to arise from inadequacy of the cash flows acquired in the long-run to cover the costs in the private pension branch.In management of the insurance risk, it is essential to create a risk profile based on the Company’s risk appetite in the portfolio. To the that end, the insuree portfolio is monitored effectively. It is monitored regularly whether the said portfolio remains within the defined risk limits of the Company or not.

Credit Risk PolicyThe credit risk means the negative financial impacts that may be caused by the

fluctuations in the credit quality, such as the third party default, rating changes, and movements in the credit spreads.

The company’s total credit risk arises from the insurance business transactions such as the investment activities carried out in the banks and financial institutions, its purchases made for its operations, and its receivables from the reinsurer companies, insurees and agencies.

The credit risk is managed with the limit framework defined for the companies and organizations involved in the transactions made. The credit limit framework is supported with an escalation framework to report larger and/or riskier transactions to the upper management. The Assets-Liabilities Committee is responsible for creating, monitoring and reporting the policies, risk appetite and limits related to the credit risk.

Liquidity Risk Policy The liquidity risk means the risk arising from failure to meet the Company’s liabilities at maturity and cost-effectively. The purpose of this policy is to create a Company-wide framework for management of the liquidity risk. The target of the liquidity risk management is to optimize AvivaSA’s long-term risk-based rate of return while keeping the liquidity risk within the risk appetite parameters. Before taking any strategic decision such as new product launch, investments in new types of assets, it is necessary to consider the impact of such decision on the Company’s liquidity risk profile.



The risk appetite limits are determined with the Liquidity Coverage Ratio (LCR) defined in the Risk Management Framework Policy. Any change to be made in the LCR limits is approved by the Board of Directors upon the suggestion of the AvivaSA Assets-Liabilities Committee.

In our Company’s field of operation, risk definition requires continuous review of the operation environment, and make investments by taking the trends and fluctuations into consideration. This means that the any evaluation of the current liquidity profile o the assets and liabilities on the basis of the past experiences only will be insufficient. While analyzing the encountered liquidity risks, the social, political, legal, legislative, geographical, and environmental changes as well as the financial market are taken into consideration, and this analysis is supported with the process intended for identifying the newly emerging risks. • Our investment strategy is created by considering the investable assets and the bandwidths (lower and upper limits) allowing to move in the asset management process, the Company’s liquidity conditions, and especially the potential liquidity profile of the liabilities.

• The management of the liquidity risk includes an approved limit structure and a series of triggering regulations

to ensure that the management is informed of the potential problems. The Assets-Liabilities Committee is responsible for creating, monitoring and reporting the policies, risk appetite and limits related to the liquidity risk.

Market Risk Policy The market risk arises from the structure and attributes of both the asset investments made to obtain the returns required to fulfill the liabilities to the insurees and the liabilities – in relation to the insuree behaviors. The objective of the market risk management is to keep the Company’s market risk within the risk appetite parameters, thus maximizing AvivaSA’s long-term risk-adjusted rate of return.

Within the investment management activities, the asset investment policy, the liquidity and credit risk management framework, and the relevant control processes have been created. The Assets-Liabilities Committee is responsible for creating, monitoring and reporting the policies, risk appetite and limits related to the market risk. The market risk components such interest risk and exchange risk faced by our Company are measured periodically through stress and scenario tests, and then reported .

Operational Risk PolicyThe operational risk is the risk of loss likely to arise from inefficient business processes,

personnel, systems or external factors. It is essential to evaluate the probability of the operational risks and the level of impact they will create, and take the necessary measures accordingly.

The 1st Line of Defense can provide protection against operational risk through effective follow-up and monitoring of the processes.

The Risk and Internal Control Management monitors and report the effectiveness, efficiency of the controls and the process of implementing the action plans.

AvivaSA’s target is to keep the operational risk at the lowest level that is commercially reasonable. With the operational risk management, AvivaSA targets to decrease faults, repeated works and unfulfilled commitments, thus improving the processes and achieving the following results:

• Decrease the operational losses• Fulfill the commitment and improve the employee satisfaction • Maintain the customer’s trust• Positive legal reputation• Decrease the operational risk In order to support identification, measurement, management, monitoring and reporting of the operational risks, a framework special to the operational risk and reputation management has been created:


Measurement

Identification

RISK MANAGEMENT FRAMEWORK/RISK APPETITE FRAMEWORK

OPOPERATIONAL RISK POLICY

RISK CULTURE FRAMEWORK

ECONOMICCAPITAL

LIQUIDITYCOMPANYCOMPANY

Control Environment Control Activities Risk EventsRisk Analysis & Assessment

Business Standards

External Rules

Management

Basic IndicatorsFunctional

RCSA

Basic Risks & Approaching

Risks

Stress & Scenario Tests

Budget/PlanRisk Analysis

Escalation to Senior Management

Record and Root Cause Analysis

Decision MakingProcess

Project RiskAnalysis

Tests

Risk Mitigating Actions

Closing theAudit Findings

Man

agem

ent

Monitoring

Reporting


Independent Auditor’s Report 79

Financial statements as of 31 december 2013 and independent auditor’s report

AvivaSA Emeklilik ve Hayat Anonim Şirketi

VI.





AvivaSA Emeklilik ve Hayat Anonim Şirketi BALANCE SHEET AS OF 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).

The accompanying notes form an integral part of these financial statements (4)

Assets

Audited

Current Period Audited

Previous Period Note 31 December 2013 31 December 2012 I- CURRENT ASSETS A- Cash and Cash Equivalents 2.12, 14 314,537,220 299,185,453 1- Cash 14 401 1,844 2- Cheques Received - - 3- Banks 14 226,279,431 235,212,090 4- Cheques Given and Payment Orders (-) - - 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months - - 6- Other Cash and Cash Equivalents 14, 47.1 88,257,388 63,971,519 B- Financial Assets and Investments with Risks on Policyholders 11 345,957,494 409,546,878 1- Financial Assets Available for Sale 11 22,066,114 30,929,539 2- Financial Assets Held to Maturity - - 3- Financial Assets Held for Trading 11 57,828,778 16,389,210 4- Loans - - 5- Provision for Loans (-) - - 6- Investments with Risks on Policyholders 11 266,062,602 362,228,129 7- Equity Shares - - 8- Impairment on Financial Assets (-) - - C- Receivables From Main Operations 22,189,292 20,798,841 1- Receivables From Insurance Operations 12.1 14,914,669 9,848,772 2- Provision for Receivables From Insurance Operations (-) - - 3- Receivables From Reinsurance Operations - - 4- Provision for Receivables From Reinsurance Operations (-) - - 5- Cash Deposited With Insurance & Reinsurance Companies - - 6- Loans to Policyholders 12.1 134,537 404,067 7- Provision for Loans to Policyholders (-) - - 8- Receivables from Pension Operation 12.1 7,140,086 10,546,002 9- Doubtful Receivables From Main Operations - - 10- Provisions for Doubtful Receivables From Main Operations (-) - - D- Due from Related Parties 12.1 1,782,259 170,148 1- Due from Shareholders 12.2 241,117 150,812 2- Due from Affiliates - - 3- Due from Subsidiaries - - 4- Due from Entities Under Common Control - - 5- Due from Personnel 3,056 3,391 6- Due from Other Related Parties 45 1,538,086 15,945 7- Discount on Receivables Due from Related Parties (-) - - 8- Doubtful Receivables Due from Related Parties - - 9- Provisions for Doubtful Receivables Due from Related Parties (-) - - E- Other Receivables 12.1 251,844 122,353 1- Leasing Receivables - - 2- Unearned Leasing Interest Income (-) - - 3- Deposits and Guarantees Given 19,617 19,616 4- Other Receivables 47.1 229,877 100,387 5- Discount on Other Receivables (-) - - 6- Other Doubtful Receivables 2,350 2,350 7- Provisions for Other Doubtful Receivables (-) - - F- Prepaid Expenses and Income Accruals 16,468,755 15,876,940 1- Deferred Expenses 47.1 15,089,269 14,606,922 2- Accrued Interest and Rent Income - - 3- Income Accruals 47.1 - 110,196 4-Other Prepaid Expenses 47.1 1,379,486 1,159,822 G- Other Current Assets 80,001 67,578 1- Inventories - - 2- Prepaid Taxes and Funds - - 3- Deferred Tax Assets - - 4- Business Advances 80,001 67,578 5- Advances Given to Personnel - - 6- Stock Count Differences - - 7- Other Current Assets - - 8- Provision for Other Current Assets (-) - - I- Total Current Assets 701,266,865 745,768,191

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİBALANCE SHEET AS OF 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).



The accompanying notes form an integral part of these financial statements. (5)

Assets

Audited


Previous Period Note 31 December 2013 31 December 2012 II- NON CURRENT ASSETS A- Receivables From Main Operations 5,157,603,420 4,195,622,493 1- Receivables From Insurance Operations - - 2- Provision for Receivables From Insurance Operations (-) - - 3- Receivables From Reinsurance Operations - - 4- Provision for Receivables From Reinsurance Operations (-) - - 5- Cash Deposited with Insurance & Reinsurance Companies - - 6- Loans to Policyholders 12.1 137,057,150 144,089,197 7- Provision for Loans to Policyholders (-) - - 8- Receivables From Pension Operations 17.5 5,020,546,270 4,051,533,296 9- Doubtful Receivables from Main Operations 12.1 - 570,351 10-Provision for Doubtful Receivables from Main Operations 12.1 - (570,351) B- Due from Related Parties - - 1- Due from Shareholders - - 2- Due from Affiliates - - 3- Due from Subsidiaries - 4- Due from Entities Under Common Control - - 5- Due from Personnel - - 6- Due from Other Related Parties - - 7- Discount on Receivables Due from Related Parties (-) - - 8- Doubtful Receivables Due from Related Parties - - 9- Provisions for Doubtful Receivables Due from Related Parties (-) - - C- Other Receivables 12.1 21,931 20,861 1- Leasing Receivables - - 2- Unearned Leasing Interest Income (-) - - 3- Deposits and Guarantees Given 21,931 20,861 4- Other Receivables - - 5- Discount on Other Receivables (-) - - 6- Other Doubtful Receivables - - 7- Provisions for Other Doubtful Receivables (-) - - D- Financial Assets 45.2 838,932 849,457 1- Long-term Investments - - 2- Affiliates - - 3- Capital Commitments to Affiliates (-) - - 4- Subsidiaries - - 5- Capital Commitments to Subsidiaries (-) - - 6- Entities Under Common Control - - 7- Capital Commitments to Entities Under Common Control (-) - - 8- Financial Assets and Investments with Risks on Policyholders - - 9- Other Financial Assets 45.2 838,932 910,051 10- Impairment on Financial Assets (-) 45.2 - (60,594) E- Tangible Assets 6.3.4 6,016,157 5,800,125 1- Investment Properties - - 2- Impairment on Investment Properties (-) - - 3- Owner Occupied Property - - 4- Machinery and Equipments 6.3.4 7,006,784 6,203,529 5- Furnitures and Fixtures 6 9,718,549 9,093,613 6- Vehicles 6 - - 7- Other Tangible Assets (Including Leasehold Improvements) 6.3.2, 47.1 10,178,130 9,483,000 8- Leased Tangible Fixed Assets 6.3.4 1,175,521 1,175,521 9- Accumulated Depreciation (-) 6.3.4 (22,062,827) (20,155,538) 10- Advances Paid for Tangible Fixed Assets (Including Construction In Progresses) - - F- Intangible Assets 8 10,517,606 4,831,598 1- Rights - - 2- Goodwill - - 3- Establishment Costs - - 4- Research and Development Expenses - - 5- Other Intangible Assets 8, 47.1 28,440,212 26,745,795 6- Accumulated Amortizations (-) 8 (24,739,635) (22,840,417) 7- Advances Regarding Intangible Assets 8 6,817,029 926,220 G- Prepaid Expenses and Income Accruals 2,618,476 972,619 1- Deferred Expenses - - 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals 2,618,476 972,619 H- Other Non-current Assets 21,35 8,182,649 4,104,724 1- Cash Foreign Currency Accounts - - 2- Foreign Currency Accounts - - 3- Inventories - - 4- Prepaid Taxes and Funds - - 5- Deferred Tax Assets 21, 35 8,182,649 4,104,724 6- Other Non-current Assets - - 7- Other Non-current Assets Amortization (-) - - 8- Provision for Other Non-current Assets (-) - - - II- Total Non-current Assets 5,185,799,171 4,212,201,877 Total Assets (I+II) 5,887,066,036 4,957,970,068





Liabilities

Audited


Previous Period Note 31 December 2013 31 December 2012 III- SHORT TERM LIABILITIES A- Borrowings 1 1,189,478 1- Borrowings from Financial Institutions 2.17 - 1,189,477 2- Finance Lease Payables 1 1 3- Deferred Finance Lease Costs (-) - - 4- Current Portion of Long Term Borrowings - - 5- Principal, Installments and Interests on Issued Bills (Bonds) - - 6- Other Financial Instruments Issued - - 7- In Excess of Par of Financial Instruments (-) - - 8- Other Financial Borrowings (Liabilities) - - B- Payables From Main Operations 19 109,639,447 77,637,044 1- Payables From Insurance Operations 5,918,543 5,106,963 2- Payables From Reinsurance Operations - - 3- Cash Deposited by Insurance & Reinsurance Companies - - 4- Payables From Pension Operations 103,631,681 72,461,918 5- Payables From Other Operations 89,223 68,163 6- Discount on Other Payables From Main Operations, Notes Payable (-) - - C- Due to Related Parties 19 4,435,880 3,414,468 1- Due to Shareholders 12.2 84,213 42,590 2- Due to Affiliates - - 3- Due to Subsidiaries - - 4- Due to Entities Under Common Control - - 5- Due to Personnel 485,021 647,861 6- Due to Other Related Parties 45 3,866,646 2,724,017 D- Other Payables 19 10,473,673 7,130,879 1- Guarantees and Deposits Received - - 2- Medical Treatment Payables to Social Security Institution - - 3- Other Payables 47.1 10,473,673 7,130,879 4- Discount on Other Payables (-) - - E- Insurance Technical Reserves 82,694,659 109,377,169 1- Unearned Premiums Reserve - Net 17.15 41,611,410 39,841,313 2- Unexpired Risk Reserves - Net - - 3- Life Mathematical Reserves - Net 17.15 7,973,447 42,568,631 4- Outstanding Claims Reserve - Net 17.15 33,109,802 26,967,225 5- Provision for Bonus and Discounts - Net - - 6- Other Technical Reserves - Net - - F- Taxes and Other Liabilities and Provisions 4,464,683 5,317,765 1- Taxes and Dues Payable 3,025,184 3,090,455 2- Social Security Premiums Payable 1,455,299 1,185,201 3- Overdue, Deferred or By Installment Taxes and Other Liabilities - - 4- Other Taxes and Liabilities - - 5- Corporate Tax Provision on Period Profit 35 6,762,489 14,215,051 6- Advance Taxes and Other Liabilities on Period Profit (-) (6,778,702) (13,174,011) 7- Provisions for Other Taxes and Liabilities 47.1 413 1,069 G- Provisions for Other Risks 18,015,841 14,008,318 1- Provision for Employee Termination Benefits - - 2- Pension Fund Deficit Provision - - 3- Provisions for Costs 23.2 18,015,841 14,008,318 H- Deferred Income and Expense Accruals 47.1 1,369,607 2,013,028 1- Deferred Income 631,937 978,810 2- Expense Accruals 737,670 1,034,218 3- Other Deferred Income and Expense Accruals - - I- Other Short Term Liabilities 2,716,292 2,587,221 1- Deferred Tax Liability - - 2- Inventory Count Differences - - 3- Other Short Term Liabilities 23.2 2,716,292 2,587,221 III - Total Short Term Liabilities 233,810,083 222,675,370





Liabilities

Audited


Previous Period Note 31 December 2013 31 December 2012 IV- LONG TERM LIABILITIES A- Borrowings - - 1- Borrowings From Financial Institutions - - 2- Finance Lease Payables - - 3- Deferred Finance Lease Costs (-) - - 4- Bonds Issued - - 5- Other Financial Instruments Issued - - 6- In Excess of Par of Financial Instruments (-) - - 7- Other Borrowings (Financial Liabilities) - - B- Payables From Main Operations 5,019,219,444 4,051,425,340 1- Payables From Insurance Operations - - 2- Payables From Reinsurance Operations - - 3- Cash Deposited by Insurance & Reinsurance Companies - - 4- Payables From Pension Operations 17.5, 17.6 5,019,219,444 4,051,425,340 5- Payables From Other Operations - - 6- Discount on Other Payables From Main Operations (-) - - C- Due to Related Parties - - 1- Due to Shareholders - - 2- Due to Affiliates - - 3- Due to Subsidiaries - - 4- Due to Entities Under Common Control - - 5- Due to Personnel - - 6- Due to Other Related Parties - - D- Other Payables - - 1- Guarantees and Deposits Received - - 2- Medical Treatment Payables to Social Security Institution - - 3- Other Payables - - 4- Discount on Other Payables (-) - - E- Insurance Technical Reserves 467,506,970 508,214,858 1- Unearned Premiums Reserve - Net - - 2- Unexpired Risk Reserves - Net - - 3- Life Mathematical Reserves - Net 17.15 458,684,847 502,070,369 4- Outstanding Claims Reserve - Net - - 5- Provision for Bonus and Discounts - Net - - 6- Other Technical Reserves - Net 17.15 8,822,123 6,144,489 F- Other Liabilities and Provisions 47.1 6,466,255 5,153,850 1- Other Liabilities - - 2- Overdue, Deferred or By Installment Other Liabilities - - 3- Other Liabilities and Expense Accruals 47.1, 42 6,466,255 5,153,850 G- Provisions for Other Risks 22 2,571,128 1,810,014 1- Provision for Employee Termination Benefits 2,571,128 1,810,014 2- Provisions for Employee Pension Fund Deficits - - H- Deferred Income and Expense Accruals - - 1- Deferred Income - - 2- Expense Accruals - - 3- Other Deferred Income and Expense Accruals - - I- Other Long Term Liabilities - - 1- Deferred Tax Liability - - 2- Other Long Term Liabilities - - - - IV- Total Long Term Liabilities 5,495,763,797 4,566,604,062





Shareholders’ Equity

Audited


Previous Period Note 31 December 2013 31 December 2012 V- SHAREHOLDERS' EQUITY A- Paid in Capital 2.13 51,971,980 51,971,980 1- (Nominal) Capital 2.13 35,779,197 35,779,197 2- Unpaid Capital (-) - - 3- Positive Inflation Adjustment on Capital 2.13 16,192,783 16,192,783 4- Negative Inflation Adjustment on Capital (-) - - 5-Capital to be registered - - B- Capital Reserves 66,865,115 66,865,115 1- Equity Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Gain on Sale of Assets to be Transferred to Capital - - 4- Translation Reserves - - 5- Other Capital Reserves 15, 47.1 66,865,115 66,865,115 C- Profit Reserves 8,395,144 11,081,037 1- Legal Reserves 15 3,545,456 1,606,831 2- Statutory Reserves 15 5,306,815 2,122,467 3- Extraordinary Reserves 15 5,456,146 5,439,061 4- Special Funds (Reserves) - - 5- Valuation of Financial Assets 15 (5,913,273) 1,912,678 6- Other Profit Reserves - - D- Retained Earning - - 1- Retained Earnings - E- Previous Years' Losses (-) (484,878) - 1- Previous Years' Losses (484,878) - F- Net Profit of the Period 30,744,794 38,772,504 1- Net Profit of the Period 30,744,794 38,772,504 2- Net Loss of the Period - - 3- Net Profit of the Period not Subject to Distribution - - Total Shareholders' Equity 157,492,156 168,690,636 Total Liabilities and Shareholders' Equity (III+IV+V) 5,887,066,036 4,957,970,068



AvivaSA Emeklilik ve Hayat Anonim Şirketi INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).


Audited


Previous Period I- TECHNICAL DIVISION

Note 1 January–

31 December 2013 1 January–

31 December 2012 A- Non-Life Technical Income 32,078,100 29,550,903 1- Earned Premiums (Net of Reinsurer Share) 32,078,100 29,550,903 1.1 - Premiums (Net of Reinsurer Share) 24 32,328,162 32,284,665 1.1.1 - Gross Premiums (+) 24 32,382,317 32,341,198 1.1.2 - Ceded Premiums to Reinsurers (-) 24 (54,155) (56,533) 1.1.3- Premiums Transferred to SSI(-) - 1.2- Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) (250,062) (2,733,762) 1.2.1 - Unearned Premiums Reserve (-) (248,652) (2,738,176) 1.2.2 - Reinsurance Share of Unearned Premiums Reserve (+) (1,410) 4,414 1.3- Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward)(+/-) - - 1.3.1 - Unexpired Risks Reserve (-) - - 1.3.2 - Reinsurance Share of Unexpired Risks Reserve (+) - - 2- Investment Income Transferred from Non-Technical Division - - 3- Other Technical Income (Net of Reinsurer Share) - - 3.1 - Gross Other Technical Income (+) - - 3.2 - Reinsurance Share of Other Technical Income (-) - - 4. Accrued Subrogation and Sovtage Income (+) - - B- Non-Life Technical Expenses (-) (33,289,879) (24,461,436) 1- Total Claims (Net of Reinsurer Share) (3,209,200) (4,913,444) 1.1- Claims Paid (Net of Reinsurer Share) (3,075,421) (3,914,495) 1.1.1 - Gross Claims Paid (-) (3,078,121) (3,914,495) 1.1.2 - Reinsurance Share of Claims Paid (+) 2,700 - 1.2- Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 47.4 (133,779) (998,949) 1.2.1 - Outstanding Claims Reserve (-) (298,708) (1,019,314) 1.2.2 - Reinsurance Share of Outstanding Claims Reserve (+) 164,929 20,365 2- Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) - - 2.1 - Bonus and Discount Reserve (-) - - 2.2 - Reinsurance Share of Bonus and Discount Reserve (+) - - 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) (425,723) (427,529) 4- Operating Expenses (-) 31 (29,497,715) (19,109,003) 5- Changes in Mathematical Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) - - 5.1- Mathematical Reserves (-) - - 5.2- Reinsurer Share of Mathematical Reserves (+) - - 6- Other Technical Expenses (-) (157,241) (11,460) 6.1- Other Gross Technical Expenses (-) (157,241) (11,460) 6.2- Reinsurer Share of Other Gross Technical Expenses (+) - - C- Non Life Technical Profit/(Loss) (A-B) (1,211,779) 5,089,467 D- Life Technical Income 293,799,634 199,876,969 1- Earned Premiums (Net of Reinsurer Share) 190,150,508 148,556,583 1.1 - Premiums (Net of Reinsurer Share) 24 191,670,543 155,993,929 1.1.1 - Gross Premiums (+) 24 200,505,353 165,202,464 1.1.2 - Ceded Premiums to Reinsurers (-) 24 (8,834,810) (9,208,535) 1.2- Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) (1,520,035) (7,437,346) 1.2.1 - Unearned Premiums Reserve (-) (1,476,410) (8,660,842) 1.2.2 - Reinsurance Share of Unearned Premiums Reserve (+) (43,625) 1,223,496 1.3- Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward)(+/-) - - 1.3.1 - Unexpired Risks Reserve (-) - - 1.3.2 - Reinsurance Share of Unexpired Risks Reserve (+) - - 2- Life Branch Investment Income 84,369,468 44,852,671 3- Accrued (Unrealized) Income from Investments - - 4-Other Technical Income (Net of Reinsurer Share) 47.1 19,299,655 7,049,001 4.1- Other Gross Technical Income (+/-) 19,299,655 7,049,001 4.2- Ceded Other Technical Income (+/-) - - 5. Accrued Subrogation Income (+) (19,997) (581,286) E- Life Technical Expense (261,742,287) (191,725,149) 1- Total Claims (Net of Reinsurer Share) (173,135,464) (134,009,698) 1.1- Claims Paid (Net of Reinsurer Share) (167,126,666) (128,851,915) 1.1.1 - Gross Claims Paid (-) (169,710,964) (130,685,431) 1.1.2 - Reinsurance Share of Claims Paid (+) 2,584,298 1,833,516 1.2- Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 47.4 (6,008,798) (5,157,783) 1.2.1 - Outstanding Claims Reserve (-) (6,849,620) (6,363,221) 1.2.2 - Reinsurance Share of Outstanding Claims Reserve (+) 840,822 1,205,438 2- Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) - - 2.1 - Bonus and Discount Reserve (-) - - 2.2 - Reinsurance Share of Bonus and Discount Reserve (+) - - 3- Changes in Life Mathematical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 47.4 37,849,518 47,394,464 3.1 - Life Mathematical Reserves 37,849,518 47,394,464 3.1.1- Actuarial Mathematics provision(+/-) 32,527,743 45,722,785 3.1.2- Dividend Equivalent (Provision Provision for Policyholders Investment Risk.) 5,321,775 1,671,679 3.2- Reinsurance Share of Life Mathematical Reserves - - 3.2.1- Provision of Reinsurance Actuarial Mathematics (+) - - 3.2.2- Reinsurer's Share of Profit Share (Provision Provision for Policyholders Investment Risk.) (+) - - 4- Changes in Technical Reserves for Investments with Risks on Policyholders (Net of Reinsurer Share and Reserves Carried Forward) (+/-)

(2,251,911) (1,680,139)

5- Operating Expenses (-) 31 (83,655,468) (75,307,522) 6- Investment Expenses (-) 36 (38,644,436) (26,703,583) 7- Unrealized Losses from Investments (-) - - 8- Investment Income Transferred to Non-Technical Divisions (-) (1,904,526) (1,418,671) F- Life Technical Profit/(Loss) (D-E) 32,057,347 8,151,820 G- Private Pension Technical Income 25 130,185,735 135,711,254 1- Fund Management Fee 25 81,552,634 83,548,762 2- Management Fee Deduction 25 17,143,326 32,023,292 3- Entrance Fee Income 25 30,366,067 20,023,033 4- Management Fee In Case Of Temporary Suspension 717,614 - 5- Income from Individual Service Charges - - 6- Increase in Market Value of Capital Commitment Advances 25 246,759 13,275 7-Other Technical Income 25 159,335 102,892 H- Private Pension Technical Expenses (160,012,198) (115,523,398) 1- Fund Management Expenses (-) (12,574,088) (8,943,434) 2- Decrease in Market Value of Capital Commitment Advances (-) (117,676) (62) 3- Operating Expenses (-) 31 (141,098,632) (100,811,574) 4- Other Technical Expenses (-) 47.1 (6,221,802) (5,768,328) I- Private Pension Technical Profit/(Loss) (G-H) (29,826,463) 20,187,856

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİINCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).


AvivaSA Emeklilik ve Hayat Anonim Şirketi INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).


II- NON TECHNICAL DIVISION

Audited Current Period

Audited Previous Period

Note

1 January– 31 December 2013

1 January– 31 December 2012

C- Non Life Technical Profit/(Loss) (A-B) (1,211,779) 5,089,467 F- Life Technical Profit /(Loss) (D-E) 32,057,347 8,151,820 I- Private Pension Technical Profit/(Loss) (G-H) (29,826,463) 20,187,856 J- Total Technical Profit/(Loss) (C+F+I) 1,019,105 33,429,143 K- Investment Income 41,623,543 29,459,852 1- Income From Financial Investment 26 20,603,501 23,366,209 2- Income from Sales of Financial Investments 26 2,118,404 553,440 3- Revaluation of Financial Investments 27 10,898,587 959,644 4- Foreign Exchange Gains 36 6,092,274 2,601,117 5- Dividend Income from Affiliates 26 6,251 21,162 6- Income form Subsidiaries and Entities Under Common Control - - 7- Income Received from Land and Building - - 8- Income from Derivatives - 539,608 9- Other Investments - - 10- Investment Income transferred from Life Technical Division 1,904,526 1,418,672 L- Investment Expenses (-) (10,519,182) (7,924,824) 1- Investment Management Expenses (Including Interest) (-) (415,065) (279,647) 2- Valuation Allowance of Investments (-) - 1,408 3- Losses On Sales of Investments (-) (5,649,643) (696,314) 4- Investment Income Transferred to Non-Life Technical Division (-) - - 5- Losses from Derivatives (-) - - 6- Foreign Exchange Losses (-) 36 (632,038) (4,093,816) 7- Depreciation Charges (-) 6.1 (3,822,436) (2,856,455) 8- Other Investment Expenses (-) - - M- Other Income and Expenses (+/-) 9,150,921 (1,976,616) 1- Provisions (+/-) (1,106,142) (216,462) 2- Discounts (+/-) - - 3- Specialty Insurances (+/-) - - 4- Inflation Adjustment (+/-) - - 5- Deferred Tax Asset (+/-) 21, 35 2,782,134 473,668 6- Deferred Tax Liability Accounts (+/-) - - 7- Other Income and Revenues 47.1 15,242,974 4,932,512 8- Other Expenses and Losses (-) 47.1 (9,528,954) (8,073,744) 9- Prior Period Income 47.3 2,450,982 962,673 10- Prior Period Losses (-) 47.3 (690,073) (55,263) N- Net Profit / (Loss) 30,744,794 38,772,504 1- Profit /(Loss) Before Tax 41,274,386 52,987,555 2- Corporate Tax Charge and Other Fiscal Liabilities (-) 35 (10,529,592) (14,215,051) 3- Net Profit (Loss) 30,744,794 38,772,504 4- Inflation Adjustment Account (+/-) - -

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİINCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).


AvivaSA Emeklilik ve Hayat Anonim Şirketi CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).


Audited


Previous Period Note 31 December 2013 31 December 2012 A. Cash Flows from the Operating Activities 1. Cash inflows from the insurance operations 436,718,833 197,938,752 2. Cash inflows from the reinsurance operations - - 3. Cash inflows from the pension operations 2,204,367,038 1,820,021,359 4. Cash outflows due to the insurance operations (-) (186,302,990) (161,378,360) 5. Cash outflows due to the reinsurance operations (-) - - 6. Cash outflows due to the pension operations (-) (2,315,463,738) (1,681,615,687) 7. Cash generated from the operating activities (A1+A2+A3-A4-A5-A6) 139,926,808 174,966,064 8. Interest payments (-) - - 9. Income tax payments (-) (30,933,460) (50,450,107) 10. Other cash inflows 2,795,726 1,931,479 11. Other cash outflows (-) (145,315,504) (131,644,427) 12. Net cash generated from/(used in) operating activities (34,134,096) (5,196,991) B. Cash flows from the investing activities - 1. Sale of tangible assets - 2,735 2. Purchase of tangible assets (-) 6 (9,724,475) (7,667,126) 3. Acquisition of financial assets (-) 11.4 (2,343,898,587) (424,762,744) 4. Sale of financial assets 2,394,460,455 439,016,157 5. Interest received 36,729,545 50,972,758 6. Dividends received 6,251 4,377 7. Other cash inflows - - 8. Other cash outflows (-) - - 9. Net cash generated from/(used in) the investing activities 77,573,189 57,566,156 C. Cash flows from the financing activities - 1. Issue of equity shares - - 2. Cash inflows from borrowings - - 3. Payments of financial leases (-) - - 4. Dividends paid (-) (31,075,782) (21,154,166) 5. Other cash inflows 24,373,499 110,403,178 6. Other cash outflows (-) (1,745,160) (24,373,499) 7. Cash generated from/(used in) the financing activities (8,447,443) 64,875,513 D. Effects of Exchange Rate Differences on Cash and Cash Equivalents 3,106,979 (259,230) E. Net increase/(decrease) in cash and cash equivalents (A12+B9+C7+D) 38,098,629 116,985,447 F. Cash and cash equivalents at the beginning of the period 274,214,620 157,229,173 G. Cash and cash equivalents at the end of period (E+F) 2.12 312,313,249 274,214,620

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİCASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).


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AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİNOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).AvivaSA Emeklilik ve Hayat Anonim Şirketi NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).

13

1. General Information 1.1 Parent Company and the ultimate owner

Partners of AvivaSA Emeklilik ve Hayat Anonim Şirketi (Company), each with its 49.83% share in partnership, are Aviva Europe SE and Hac Ömer Sabanc Holding. Aviva Plc. and Hac Ömer Sabanc Holding Anonim Şirketi are the ultimate controller of the Company. The company operates as a joint venture. 1.2 The Company’s address and legal structure, address of its registered country and registered Office Company is located at Saray Mahallesi Dr. Adnan Büyükdeniz Cad. No:12 34768 Ümraniye – İstanbul.

Other contact information of the Company are as follows: Phone : (216) 633 33 33 Fax : (216) 634 35 69 Web : www.avivasa.com.tr E-mail address : [email protected] AvivaSA Emeklilik ve Hayat Anonim Şirketi (“the Company”) was established on 31 October 2007 by the merger of Ak Emeklilik Anonim Şirketi (“Ak Emeklilik”) with Aviva Hayat ve Emeklilik Anonim Şirketi (Aviva Emeklilik).

Ak Emeklilik was established in Istanbul on 6 December 1941 with the title of Doğan Sigorta A.Ş. On 3 October 1995, title of the Company has been converted to “Akhayat Sigorta Anonim Şirketi” and declared on the Trade Registry Gazette. The Company has been transformed into a pension company with the official letter of the Republic of Turkey Prime Ministry Undersecretariat of Treasury (the “Turkish Treasury”) dated 3 December 2002 numbered 77941.Based on the decision of the Company's Board of Directors dated 11 December 2002 numbered 26 and the Extraordinary General Meeting held on 23 January 2003, it has been decided to amend the main agreement for change in company title and scope of the operations and to add Article 40 related to Pension Investment Fund Portfolio and Portfolio Managers. The title of Company has been converted to “Ak Emeklilik Anonim Şirketi” and declared on Trade Registry Gazette dated 31 January 2003 numbered 5730.

Following the frame agreed upon the merger contract dated 27 July 2007 and pursuant to Turkish Commercial Code Article 451 and Corporate Tax Law Article 19-20, Ak Emeklilik has acquired Aviva Emeklilik together with all assets and liabilities as a whole through dissolution without liquidation. Ak Emeklilik has become the successor of Aviva Emeklilik. Merger transaction has been realized pursuant to valuations of expert committee assigned by Decision No. 2007/876 D. of Kadköy Commercial Court of First Instance No. 3 dated 11 July 2007 based on expert report dated 16 July 2007 based on balance sheets of Ak Emeklilik and Aviva Emeklilik as of 31 May 2007 together with other information. This merger has been published on Trade Registry Gazette No. 6930 dated on 6 November 2007 and new title has become “AvivaSA Emeklilik ve Hayat Anonim Şirketi”.

After the merger, shareholders of the company are Aviva International Holdings Limited (“Aviva International”) (49.83% share ratio) and Aksigorta Anonim Şirketi (“Aksigorta”) (share ratio of 49.83%).

Aksigorta Anonim Şirketi has transferred its shares of AvivaSA Emeklilik ve Hayat A.Ş. to Hac Ömer Sabanc Holding A.Ş. within the scope of clause “b” of Paragraph 3 of Article 3 of Corporate Tax Law numbered 5520 and under the provisions of "Partial Division of Corporations and Limited Liability Companies Procedures and Operations Joint Communiqué on Principles of Editing" published in the Official Gazette No. 25230 dated 16.09.2003. This process has been registered and declared on 12 January 2010 and published Turkey Trade Registry Gazette numbered 7481 at 18 January 2010.

Aviva International Holdings Limited has transferred its shares of AvivaSA Emeklilik ve Hayat A.Ş. to Aviva Europe SE on 28 October 2011.


AvivaSA Emeklilik ve Hayat Anonim Şirketi NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).

14

1. General Information (continued) 1.3. Main operations of the Company AvivaSA Emeklilik ve Hayat Anonim Şirketi (Company) is a pension company which is engaged in two main categories as pension and life insurance operations. In addition, Company writes personal accident insurance policies. Ak Emeklilik received operating license from Prime Ministry Undersecretariat of Treasury to operate in the pension branch on 7 July 2003. Private pension funds was recorded by Capital Markets Board (CMB) on 26 September 2003. As of 27 October 2003 also started to sell pension products. Aviva Emeklilik received operating license from Prime Ministry Undersecretariat of Treasury to operate in the pension branch on 26 August 2003. Private pension funds was recorded by Capital Markets Board (CMB) on 27 October 2003.Company’s private pension plans have been approved on 12 December 2003 and pension products started to sell on 15 December 2003.Based on the 15th decision of Board of Directors on 8 October 2007 Aviva Emeklilik pension funds transferred to Ak Emeklilik on 31 October 2007. From 1 November 2007 the Company's pension investment funds managed by Ak Portfoy. As of 20 December 2011, AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Performans Esnek Emeklilik Yatrm Fonu managed by Ata Portföy Yönetimi A.Ş. The names of Pension Investment funds were changed on 20 November 2008 in accordance with CBM permit. The changes were put into effect as of 5 December 2008. . As of the balance sheet date, the Company has twenty four pension investment funds in total (As at 31 December 2012: Nineteen pension investment funds in total). Pension Funds of the Company are as follows:

Pension Investment Fund Name Establishment

date

Starting unit share value

(TL) AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatrm Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatrm Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Karma Likit Emeklilik Yatrm Fonu (*) 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Borçlanma Araçlar Emeklilik Yatrm Fonu (*) 21.10.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 08.11.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Emeklilik Yatrm Fonu 28.12.2006 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasas Likit Karma Emeklilik Yatrm Fonu (*) 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Emeklilik Yatrm Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Karma Emeklilik Yatrm Fonu (*) 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatrm Fonu 20.08.2003 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu – Grup 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Esnek Emeklilik Yatrm Fonu 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Grup Emeklilik Yatrm Fonu 05.01.2005 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Grup Emeklilik Yatrm Fonu 17.08.2010 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Performans Esnek Emeklilik Yatrm Fonu 20.12.2011 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Alternatif Esnek Emeklilik Yatrm Fonu 20.12.2011 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Katk Emeklilik Yatrm Fonu 02.05.2013 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Standart Emeklilik Yatrm Fonu (*) 02.05.2013 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Altn Emeklilik Yatrm Fonu 20.06.2013 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. BRIC Ülkeleri Esnek Emeklilik Yatrm Fonu 10.05.2013 0.010000 AvivaSA Emeklilik ve Hayat A.Ş. Özel Sektör Borçlanma Araçlar Emeklilik Yatrm Fon 25.10.2013 0.010000 (*) Company decided to apply to CMB for changing the name of AvivaSA Emeklilik ve Hayat A.S. Gelir Amaçl Alternatif Esnek Emeklilik

Yatrm Fonu” as “AvivaSA Emeklilik ve Hayat A.Ş Gelir Amaçl Kira Sertifikalar Emeklilik Yatrm Fonu” according to the 11 October 2013 dated approval of the decision of the Board of Directors.

Company decided to apply to CMB for foundation of “Avivasa Emeklilik ve Hayat A.Ş. Alternatif Standart Emeklilik Yatrm Fonu” according to the 11 October 2013 dated approval of the decision of the Board of Directors. Company decided to apply to CMB for changing the name of “Avivasa Emeklilik Ve Hayat A.Ş. Gelir Amaçl Uluslararas Karma Emeklilik Yatrm Fonu” as “Avivasa Emeklilik Ve Hayat A.Ş. Birinci Esnek Emeklilik Yatrm Fonu”, “, Avivasa Emeklilik Ve Hayat A.Ş. Gelir Amaçl Uluslararas Borçlanma Araçlar Emeklilik Yatrm Fonu” as “Avivasa Emeklilik Ve Hayat A.Ş. İkinci Esnek Emeklilik Yat rm Fonu”, “Avivasa Emeklilik Ve Hayat A. Ş. Para Piyasas Likit Karma Emeklilik Yatrm Fonu” as “Avivasa Emeklilik Ve Hayat A.Ş. Para Piyasas Birinci Likit Esnek Emeklilik Yatrm Fonu”, “Avivasa Emeklilik Ve Hayat A.Ş. Karma Likit Emeklilik Yatrm Fonu” as” Avivasa Emeklilik Ve Hayat A.Ş. Para Piyasas İkinci Likit Esnek Emeklilik Yatrm Fonu” according to the 31 December 2013 dated approval of the decision of the Board of Directors

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİNOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).



15

1. General Information (continued)

1.4. Details of the Company’s operations and nature of field of activities: Disclosed in Note 1.3 1.5 Average number of the Company’s personnel based on their categories

31 December 2013 31 December 2012 Key management personel 120 129 Other personnel 1,298 1,179 1,418 1,308

1.6 As of 31 December 2013, remuneration and fringe benefits provided to top management such as; chairman and members of the board of directors, managing director and assistant managing director in total amount to TL 4,629,811 ( 1 January – 31 December 2012: TL 4,190,445)

1.7 Distribution keys used in the distribution of investment income and operating expenses in the financial statements (personnel expenses, administration expenses, research and development expenses, marketing and selling expenses , outsourced benefits and services and other operating expenses) All the revenues arised from direction of the assets providing for the life technical provisions to investment by the Company are recognized under the technical section investment revenues account. Other investment revenues are classified under non-technical section. Based on the circular no 2010/9 published by the Undersecretariat of Treasury to be valid as of January 01, 2011, changes were applied in the methods and principles related to the keys to be used in the financial statements. Accordingly, the operating expenses transferred to the technical section were apportioned to the retirement and insurance sections according to the ratio of the number of the policies and retirement agreements in force as of the end of each year for the last 3 years and the arithmetical average of the premium rate of the contribution shares produced and earned premiums in the last 3 years. With respect to the life and non-life parts of the expenses apportioned to the insurance section; it is distributed according to the average of 3 rates which are reached by proportioning the number of policies produced in the last 3 years, for each section, gross written premium amount and damage notification number to the total number of policies produced, gross written premium amount and the number of damage notification.

1.8 Stand-alone or consolidated financial statements: The accompanying financial statements comprise only the AvivaSA Emeklilik ve Hayat A.Ş. financial informations.

1.9 Name and other information of the reporting company and subsequent changes to the prior balance sheet date: Company name and other identification information are given in 1.1, 1.2 and 1.3 notes. There is no change in the aforementioned information subsequent to the balance sheet date. 1.10 Subsequent events: The financial statements of the Company as at 31 December 2013, approved by the Board of Directors on 21 February, 2014 Explanations related to subsequent events are disclosed in Note 46 – Subsequent events.



16

2. Summary of Significant Accounting Policies 2.1 Basis of Preparation

2.1.1 Basis of Preparation of Financial Statements and Specific Accounting Policies Used

The Company prepares its financial statements in Turkish Lira (TL) according to the Insurance Chart of Accounts within the scope of "Communiqué on Insurance Chart of Accounts and Prospectus" (Communiqué on Chart of Accounts) of the Undersecretariat of Treasury published in the Official Gazette no 25686 dated 30 December 2004 and entered into force on 1 January 2005. As based on the announcement of Undersecretariat of Treasury no 2008/20 dated May 02, 2008, the Company prepares its financial statements in compliance with the principles of the Undersecretariat of Treasury related to the insurance and reinsurance companies, and the accounting principles and standards set forth in the applicable regulations in compliance with the Insurance Law no 5684 (Insurance Law) published in the Official Gazette no 26552 dated June 14, 2007 and Individual Retirement Savings and Investment System Law (Individual Retirement Law) no 4632 dated March 28, 2001 and the relevant regulations. Although the 4th standard of the Turkish Accounting Standards Board (“TASB”) for the ‘Insurance contracts’ became effective on 25 March 2006 for the accounting periods that begin on or after 31 December 2005, it is stated that TFRS 4 will not be implemented at this stage since the second phase of the International Accounting Standards Board project about the insurance contracts has not been completed yet. In this context, “Communiqué on Technical Reserves for Insurance, Reinsurance and Private Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) is published in the 7 August 2007 dated Official Gazette, numbered 26606 and became effective on 1 January 2008. Subsequent to the publication of the Communiqué on Technical Reserves, some other circulars and sector announcements which contain explanations and regulations related to application of the Communiqué on Technical Reserves are published. Accounting policies applied for the insurance contracts based on these communiqué, circulars and other sector announcements are summarized on its own caption in the following sections. The Company presents its financial statements in compliance with the "Communiqué on the Presentation of the Financial Statements" published in the Official Gazette no 26851 dated April 18, 2008 by Undersecretariat of Treasury, arranged within the scope of the Insurance Law of and "Regulation on Financial Reporting of the Insurance and Reinsurance Companies and Individual Retirement Companies" (Regulation on Financial Reporting) published in the Official Gazette no 26582 dated July 14, 2007 and entered into force on January 01, 2008. Statutory Decree No: 660, which has been become effective and published in the Official Gazette on 2 November 2011, and the Additional Clause 1 of the Law No: 2499 were nullified and accordingly, Public Oversight, Accounting and Audit Standards Institution (the “Institution”) was established. Except the situations mentioned above, Turkey Accounting Standarts/ Turkey Financial Reporting Standarts and additional amendments (TAS/TFRS) regulated by Public Oversight, Accounting and Audit Standards Institutions (the “Institution”) are taken into account.

2.1.2 Other accounting policies appropriate for the understanding of the financial statements Preparation of Financial Statements in Hyperinflationary Periods With respect to the 4 April 2005 dated and 19387 numbered declaration of the Turkish Treasury, the Company restated its financial statements as at 31 December 2004 and prepared opening balances of the financial statements of 2005 in accordance with the “Restatement of Financial Statements in Hyperinflationary Periods” of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Market” published in the Official Gazette dated 15 November 2003 and numbered 25290. Inflation accounting is no longer applied starting from 1 January 2005, in accordance with the same declaration of the Turkish Treasury .2.1.3 Functional and presentation currency

The accompanying financial statements are presented in TL, which is the Company’s functional currency




17

2. Summary of Significant Accounting Policies (continued)

2.1.4 Rounding level of the amounts presented in the financial statements

Financial information presented in TL, has been rounded to the nearest TL values. 2.1.5 Basis of measurement used in the preparation of the financial statements

As indicated in detail in note 2.1.2, non-monetary assets and liabilities in the balance sheet and the equities items including capital as of December 31, 2013 and 2012 are calculated by indexing the entries until December 31, 2004 up to December 31, 2004, and by carrying over the entries after this date from their nominal values. The financial statements are prepared as based on the historical cost principle except for the mentioned inflation adjustments and the current financial assets which are recognized by their fair values. . 2.1.6 Accounting policies, changes in accounting estimates and errors The Company prepares its financial statements in accordance with accounting policies set out in Note 2.1.1. Adoption of new and revised standards Details of other standards and interpretations adopted in these financial statements but that have had no impact on the financial statements are set out below.

The Company's new and revised standards affecting presentation and disclosure TAS 19 Employee Benefits The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the “corridor approach” permitted under the previous version of TAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognized immediately through other comprehensive income in order for the net pension asset or liability recognized in the statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of TAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. The amendments to TAS 19 require retrospective application. The company has considered the effects of the retrospective application and concluded that the effect is not material and therefore has not restated the prior period financial statements.



18

2. Summary of Significant Accounting Policies (continued) 2.1.6 Accounting policies, changes in accounting estimates and errors (continued) Adoption of new and revised standards (continued) Standards and interpretations those are effective in 2013 with no impact on the 2013 financial statements Amendments to TAS 1 Presentation of Items of Other Comprehensive Income Amendments to TAS 1 Clarification of the Requirements for Comparative Information

TFRS 10 Consolidated Financial Statements TFRS 11 Joint Arrangements TFRS 12 Disclosure of Interests in Other Entities TFRS 13 Fair Value Measurement Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities Amendments to IFRS 10, IFRS 11 Consolidated Financial Statements, Joint Arrangements and and IFRS 12 Disclosures of Interests in Other Entities: Transition Guide IAS 27 (as revised in 2011) Separate Financial Statements IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures

New and revised TFRSs in issue but not yet effective The Company has not applied the following new and revised TFRSs that have been issued but are not yet effective: IFRS 9 Financial Instruments2 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures2 Amendments to IFRS 10, 11, IAS 27 Investment Entities1 Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities1 Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets1 Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting1 IFRIC 21 Levies1

1 Effective for annual periods beginning on or after 1 January 2014. 2 Effective for annual periods beginning on or after 1 January 2015. 2.2 Consolidation

The Company has no subsidiaries and affiliates as of balance sheet date.

2.3 Segment Reporting Segment reporting is related to main operations of Company. Since Turkey is the main geographical area that Company operates, segment reporting has not been presented. The decision of not subjecting the balance sheet items to segment reporting but the income statement items is taken based on the sub items affecting the Company’s management.




19


2.4 Foreign currency transactions

Transactions are recorded in TL, which represents the Company’s functional currency. Transactions denominated in foreign currencies are recorded at the exchange rates ruling at the dates of the transactions. Foreign currency denominated monetary assets and liabilities are converted into TL at the exchange rates ruling at the reporting date with the resulting exchange differences recognized in the statement of comprehensive income as foreign exchange gains or losses. As of the balance sheet date, foreign currency denominated receivables and payables are stated with the Central Bank foreign currency rates. If a rate of exchange is determined on the agreement in valuation of the liabilities, then the rates of exchange written in the agreement are taken into consideration at first. Unit-based policies are valued over TCMB foreign exchange purchase rate while profit share policies are valued over TCMB effective sales rate.

Foreign currency exchange rates used by the Company as at respective dates are as follows 31 December 2013 US Dollar / TL Euro / TL GBP / TL Currency exchange rate 2.1343 2.9365 3.5114 Effective sales exchange 2.1413 2.9462 3.5350 31 December 2012 US Dollar / TL Euro / TL GBP / TL Currency exchange rate 1.7826 2.3517 2.8708 Effective sales exchange 1.7939 2.3665 2.8901 2.5 Tangible assets

Property, plant and equipment regulated according to TAS 16 "Property, Plant and Equipment" section.

Tangible assets are recorded at their historical costs that have been adjusted according to the inflation rates until the end of 31 December 2004. There have been no other inflationary adjustments for these tangible assets for the following years and therefore they have been recorded at their costs indexed to the inflation rates for 31 December 2004. Tangible assets that have been purchased after 1 January 2005 have been recorded at their costs excluding their exchange rate differences and finance expenses less impairment losses if any.

Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net carrying value and the proceeds from the disposal of related tangible assets and reflected to the statement of income of the related period. Maintenance and repair cost incurred in the ordinary course of the business are recorded as expense. There are no pledges, mortgages and other encumbrances on tangible fixed assets.

As of 31 December 2013 and 2012, depreciation for the tangible assets is calculated in accordance with straight-line and prorata depreciation method at their historical costs.

Depreciation rates and estimated useful lives are as follows: Furniture and fixture 2-15 years Machinery and equipment 4 years Vehicles 5 years Other tangible assets (includes leasehold improvements) 5 years As of the each reporting date, it is evaluated whether there is any indication showing that the assets had a decrease in value. In case there is such an indication, then the recoverable amount of the relevant asset is estimated. When the value of the assets exceeds the recoverable sum, then the impairment provision expense is recognized in the income statement. Recoverable sum is the higher of the net sales price of the asset and the usage value.



20


2.6 Investment Properties

As at balance sheet date, the Company does not have any investment property. 2.7 Intangible Assets Intangible assets are recorded at cost in compliance with the “TAS 38 – Accounting for intangible assets”. Intangible fixed assets are recognized over their cost values initially and are carried over the rearranged cost values by multiplying the adjustment coefficient convenient for the purchase year until December 31, 2004 and are carried over the purchase cost for those purchased after the year 2005. The economic benefit to be provided to the corporation by the relevant asset for the capitalization of the non-tangible fixed assets should be determinable and the cost of the asset should be reliably measurable. Purchased intangible assets are accounted for at cost, less accumulated amortization and accumulated impairment losses. If there is a change in circumstances, cost of intangible assets are revised in order to observe whether there is an impairment or not. Intangible assets are composed of software programmes and development costs, there are amortised with straight line amortisation method and the useful life is 3 years. 2.8 Financial assets A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is:

cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments from another enterprise under conditions that are

potentially favorable, or, an equity instrument of another enterprise

A financial asset or liability is calculated over the transaction costs which is the fair value given first (for a financial asset) and acquired (for a financial liability), and if any, by addition of the transaction expenses. Following the first entry, financial assets are valued without deduction of the transaction costs to occur in case of a sale over fair value. Fair value describes the price for the purchase-sale of a financial instrument between the applicant parties in a current transaction, except for the obligatory sale and liquidation. Quoted market price, if any, is the value which best reflects the fair value of a financial instrument. Estimated fair values of the financial instruments are determined by the Company by using the available market information and appropriate valuation methods. The Company recognizes a financial asset or financial liability in its balance sheet when and only when it becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset. The Company derecognizes a financial liability when liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expired. All the usual financial asset purchase and sales are recognized on the date of transaction, in other words, on the date on which the Company undertakes to purchase or sell the financial asset. The mentioned purchases or sales are generally the purchases sales that require the delivery of the financial asset within the period of time determined by the practices and arrangements in the market.




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2. Summary of Significant Accounting Policies (continued) 2.8 Financial assets (continued) Current financial assets Company classifies it’s current financial assets as available for sale financial assets, financial assets designated as at fair value through profit or loss, financial assets with risks on saving life policyholders, and receivables from main operations.

a) Available-for-sale financial assets

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.

(a) Financial investments at the Company’s risk i) Public securities:

A part of the government bonds and treasury bills at the Company's risk, is classified as marketable financial assets. Marketable financial assets are valued over their fair values. In determination of the fair values of the Government bonds, treasury bills, asset-backed securities and private sector bonds, the best purchase order prices waiting among the current orders published on the balance sheet date by İstanbul Stock Exchange Market (Borsa İstanbul) as based on the letter of the Undersecretariat of Treasury no 12741 dated March 03, 2005, are used. The differences between the fair value of the mentioned securities and the value calculated by the relevant interest rates according to the internal efficiency method are followed up in the financial assets valuation account under equities The interest income acquired is followed up in the investment income in the income statement.

ii) Foreign currency Eurobonds: Foreign currency Eurobonds at the Company's own risk are classified as marketable financial assets and are valued over their fair values. The Company subjects the foreign currency Eurobonds to valuation over the rates of exchange announced by Central Bank of Turkish Republic (TCMB) as of the date of the balance sheet. Eurobonds are valued by the purchase quotation of the over the counter market at 15:15 - 15:30 on the Reuters screen on the balance sheet dates. The differences between the fair value of the mentioned securities and the value calculated by the relevant interest rates according to the internal efficiency method are followed up in the financial assets valuation account under equities. The interest income acquired is followed up in the investment income in the income statement. The Company recognized the rate of exchange income and expense due to the foreign exchange Eurobonds under the investment income and expense accounts in the attached income statement. b) Financial investments with risks on policyholders classified as available for sale: Financial investments with risks on policyholders consist of public securities, foreign currency Eurobonds and time deposits.



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2. Summary of Significant Accounting Policies (continued) 2.8 Financial assets (continued) Current financial assets (continued) b) Financial investments with risks on policyholders classified as available for sale (continued)

i) Public securities:

Government bonds and treasury bills at the insureds’ own risk, are classified as marketable financial assets within the financial assets at the life policy holders' own risk. Marketable financial assets are valued over their fair values. In determination of the fair values of the government bonds, treasury bills, the best purchase order prices waiting among the current orders published on the balance sheet date by Borsa İstanbul, are used. The portion of the differences between the fair value of the mentioned securities and the value calculated by the relevant interest rates according to the internal efficiency method, belonging to the insured, is recognized under Insurance Technical Provisions - Life Mathematical Provisions account, as indicated by the Undersecretariat of Treasury. The portion of the differences between the fair value of the mentioned securities and the value calculated by the relevant interest rates according to the internal efficiency method, belonging to the Company is followed up in the financial assets valuation account under shareholders equity.

ii) Foreign currency Eurobonds: Foreign currency Eurobonds at the insureds' own risk are classified as marketable financial assets at the life policy holders' own risk and are valued over their fair values. The Company subjects the foreign currency Eurobonds to valuation over the rates of exchange announced by TCMB as of the date of the balance sheet. Eurobonds are valued by the purchase quotation of the over the counter market at 15:15 - 15:30 on the Reuters screen on the balance sheet dates. The portion of the differences between the fair value of the mentioned foreign currency Eurobonds and the value calculated by the relevant interest rates according to the internal efficiency method, belonging to the insured, is recognized under Insurance Technical Provisions - Life Mathematical Provisions account, as indicated by the Undersecretariat of Treasury in the letter no 12741 dated March 03, 2005. The portion of the differences between the fair value of the mentioned foreign currency Eurobonds and the value calculated by the relevant interest rates according to the internal efficiency method, belonging to the Company is followed up in the financial assets valuation account under shareholders equity.

The Company recognized the rate of exchange income and expense due to the foreign currency Eurobonds at the insureds' own risk under the technical income and expense accounts in the attached income statement. c) Financial assets held for trading Financial assets held for trading are the assets that are acquired in order to provide profit from the fluctuations in the prices and similar issues in the short term in the market or, apart from the reason of acquisition, these are the assets that are a part of the portfolio that is for providing profit in the short term.

i) Public securities: A part of the government bonds and treasury bills at the Company's risk, is classified as financial assets held for trading. Following the first date of recognition, securities held for trading are followed up over the fair value by taking into account the best purchase order among the current orders in the stock market with respect to the concerned securities. All the realized and unrealized profit and losses related to the financial investments for trading purposes are included in the income statement in the relevant period.




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2. Summary of Significant Accounting Policies (continued) 2.8 Financial assets (continued) Current financial assets (continued) c) Financial assets held for trading (continued)

ii) Other securities:

The private sector bonds and asset-backed securities at the Company's risk, are classified as financial assets held for trading. Following the first date of recognition, the private sector bonds are followed up over the fair value by taking into account the best purchase order among the current orders in the stock market with respect to the concerned securities. All the realized and unrealized profit and losses related to the financial investments for trading purposes are included in the income statement in the relevant period. Other non-current financial assets As of the balance sheet date, other non-current financial assets of the Company are the investments defined as marketable financial assets, but which are invested in the financial instruments without any registered market price in an active market and based on equities for which fair value cannot be measured reliably (Note 45.2). The mentioned investments are reflected from the acquisition costs corrected according to the inflation until December 31, 2004, if any, with the value found as a result of deduction of the free shares taken as a result of addition of the revaluation fund onto the capital. By the end of the period, the investment acquisition cost is compared with the net realizable value and in case the net realizable value is lower than the acquisition cost, then the value loss provision is allocated. Loans and receivables The loans and receivables created by the receivables from the main operations are the financial assets which have fixed or determinable payments and are not traded in an active market and which the Company did not classify as marketable or held for trading. The receivables arising of insurance activities are classified under this group. These assets are entered into the balance sheet over their book values. If there is any solid indication that the matured receivables from insurance activities cannot be collected, then provision is allocated for the receivable. In case receivables which are not possible to be collected are detected, these are completely deleted. Loans to policyholders Following the expiry of the period of three years in life policies, the insured can demand a part of the accumulated sum as a loan. The Company provides loans for the policy holders who completed their 3rd years up to the specific ratio of the accumulated sum with profit share on that date on the surrender table of the relevant tariff. The Company does not apply loan interest to the policies with unit basis, and realizes debt repayment transaction over the unit price on the loan repayment date. The Company applies loan interest for the accumulated life policies other than these policies. The loan interest rate applied is determined at a rate over the annual profit share rate. The surrender payments for the policy for which a loan is used are entered as expense and the relevant policy is closed. The technical provisions allocated related to the closed policy are entered as revenue and closed.



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2. Summary of Significant Accounting Policies (continued) 2.8 Financial assets (continued) Pension System Accounts Receivables from pension operations Pension business receivables consist of ‘receivable from pension investment funds for fund management fees’, ‘entry fee receivable from participants’ and ‘receivables from clearing house on behalf of the participants’. "Receivables from Pension Operations" classified within non-current assets are composed of the receivables from the custodian company and shows the receivables on fund-basis from the custodian company on behalf of the participants and it operates together with the payables to the participants account under the debts from the retirement activities where the fund-basis obligations belonging to the participants are kept in the liabilities Individual Retirement government participation share is the sum paid to the individual retirement account of the participant by the government in compliance with the additional 1st article of the Law no 4632. Twenty five percent of the contribution share paid on the basis of participants on behalf of the citizens of Turkish Republic and those who are Turkish Republic citizens and lost Turkish citizenship by taking permission for ceasing to be a citizen according to the 28th article of Turkish Citizenship Law no 5901 dated 29.5.2009 and their descendants and transferred as cash to the company accounts, is paid by the government as the government share to the participant's individual retirement account in compliance with the additional 1st article of the Law no 4632, on condition not to exceed the annual total gross minimum wage determined for the relevant calendar year. Payables from pension operations "Payables from Pension Operations" classified within the current liabilities are composed of the participants temporary account, payables to the individual retirement intermediaries, payables to the custodian company, portfolio management company and pension monitoring center. The Participants Temporary Account, is the account item which enables the follow up of the money not directed to an investment yet on behalf of the participants and the sums to be paid to the participants or to be transferred to another company, in case the participant leaves the system or transfers his accumulation to another company, following the sale of the fund shares of the participant and after deduction of the entrance fees and similar deductions, if any, arising of the mentioned sales transaction. This account is credited if collection is made from the participants or in case the money from the sale of the fund shares of the participants are transferred to the Company account. The account is debited and closed after the money is directed to the fund or the person leaves, or it is transferred to another company. "Payables from Pension Operations" classified within the non-current liabilities are composed of the debts to the participants. It shows the liabilities of the Company on fund-basis on behalf of the participant (the sums deposited by the participants for the funds which shall be paid to the participant when due). If the retirement agreement is not rejected by the company, following the completion of the blocking period, if any, it enters into force on the date of entry of the first payment made as contribution share, into the company accounts as cash. If the proposal is rejected by the company, then the payment instructions given are cancelled and if any, all the payments effected are returned to the payer within five business days without any deduction. The participant has the right to withdraw within sixty days following the signing of the proposal form or approval of the proposal. The payment instructions given are cancelled following the delivery of the notification of withdrawal to the company and all the payments effected are returned to the payer within fifteen business days, if any, together with the investment income, without any deduction, except the fund total expense deduction.




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2. Summary of Significant Accounting Policies (continued) 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. 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 subject to impairment are reviewed for possible reversal of the impairment at each reporting date. Impairment of financial assets The impartial indicators related to the impairment of a financial asset or financial asset group include the following: a) Issuer or undertaker being under a considerable financial trouble, b) Violation of the agreement, c) Due to economic or legal reasons related to the financial trouble of the debtor, the creditor grants a

privilege to the debtor, which would not be granted under any other condition, d) High probability of the debtor for bankruptcy or any other financial restructuring, e) Elimination of the active market related to the mentioned financial asset due to the financial difficulties. The Company assesses its financial assets at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. According to TAS 39, financial asset or portfolio of financial assets is impaired and an impairment loss incurred if there is objective evidence that an event or events since initial recognition of the asset have adversely affected the amount or timing of future cash flows from the asset. Moreover, in case there is an impartial indication with respect to the decrease of value, accumulated impairment sum arising of the difference between the cost value and the current value, which is created under the equities, is anticipated to be removed from the equities and recognized as loss in the income statement. In case there is an impartial indication that there is a decrease of value loss in the loans and receivables, then the relevant loss is recognized in the income statement. Moreover, the Company reserves a provision for doubtful receivables arising of the main activities for the doubtful receivables related to its agencies and insureds, which are under administrative and legal follow up and for uncollectible sums or the sums which do not have the possibility of collection anymore. Total mortgages or guarantees on assets amounts disclosed in Note 17.1, doubtful receivables for overdue and not overdue balances disclosed in Note 12, accruals and expenses for the period are presented in Note 47.5 2.10 Derivative financial instruments As at balance sheet date, the Company does not hold any derivative financial instruments. According to TAS 39, derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period.



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2. Summary of Significant Accounting Policies (continued) 2.11 Offsetting of financial assets Financial assets and liabilities are off-set and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to set off the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously 2.12 Cash and cash equivalents Cash and cash equivalent, which is a base for the preparation of the statement of cash flows includes cash on hand, cheques received, other cash and cash equivalents, demand deposits and time deposits at banks having original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose. Cash and cash equivalent are presented at their acquisition costs. The basis of cash flow statement, cash and cash equivalents are as follows:

31 December 2013 31 December 2012

Cash 401 1,844 Banks 226,279,431 235,212,090 Other cash and cash equivalents 88,257,388 63,971,519 Total cash and cash equivalents 314,537,220 299,185,453

Accrued interest (478,812) (597,334) Term deposits with maturities of 3 months or more (1,745,159) (24,373,499)

Total 312,313,249 274,214,620 The other cash and cash-equivalent assets are composed of the receivables for which the provision is obtained as of the balance sheet date but not yet transferred to the current accounts since the blockage term did not expire yet. 2.13 Share capital As at 31 December 2013 and 31 December 2012, the share capital and ownership structure of the Company are as follows:

31 December 2013 31 December 2012 Name of shareholder Pay rate Pay amount Pay rate Pay amount Hac Ömer Sabanc Holding A.Ş. (Sabanc 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 0.33 118,489 0.34 118,489 Nominal capital 100.00 35,779,197 100.00 35,779,197

Positive Inflation Adjustment to share capital

16,192,783 16,192,783

Paid-in capital 51,971,980 51,971,980 As of 31 December 2013 and 31 December 2012, Company’s nominal capital consists of 3,577,919,700 equity shares having nominal par value of TL 0,01 each. There is no privileges on common shares representing share capital and registered capital system in the Company




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2.14 Insurance and investment contracts – classification

Insurance contract: It is defined as a contract in which the Company accepts a considerable insurance risk by agreeing to compensate the loss of the policy holder in case of realization of a predefined future uncertain event causing the policy holder to be influenced negatively (the event covered by the insurance). Insurance risk includes all the risks, except the financial risk. All the premiums collected within the frame of insurance contracts are recognized as income under written premiums account. The contracts in which the variable is not specific to any one of the parties of the contract, which takes into account a non-financial variable, which anticipates payment as based on only the changes in a certain interest rate, financial instrument price, product price, foreign exchange rate, interest or price indexes, credit score or credit index or one or more other variables, are classified as investment contracts. Articles of associations produced by the company; are the life policies including the personal accident, risk and accumulated policies and individual retirement contracts. In accumulated life insurance products of the Company, in case the rate of return to be obtained as a result of direction of the accumulations of the insured to investment is below the "technical interest", then the difference in between is provided by the Company and if it is above this rate, then it is distributed to the insureds as profit share in addition to the guarantee factor. In these products, all the premiums collected from the policy holders and all the income as a result of direction of the accumulations to investment are recognized in the income statement in compliance with the accounting policies, and the part directed to accumulation on behalf of the policy holder as liability under the life mathematical provisions account in the financial statements The company issues individual retirement contracts within the individual retirement system that is structured in order to provide a reliable saving for the individuals, to direct, regulate and encourage these savings,. The contribution shares collected in the individual retirement contracts are recognized as liabilities under payables to the participants account and the same sum is shown as receivables under the receivables from custodian company account. Reinsurance contracts Reinsurance provides the transfer of a part or all of the responsibility undertaken by the insurance company, to the reinsurer company. This is as a guarantee or a protection measure for the insurance companies. It accommodates functions such as spreading the risk, increase, support of the work acceptance capacities and flexibilities of the insurance companies, control of the catastrophic damages to be caused by the surplus of the accumulations. Reinsurers transfer their knowledge and experience, which they acquired in time as a result of working with different insurance companies and markets, to the insurance companies as technical information. Since it is required that all the details of the transactions and processes should be included in the reinsurance contracts, it is required to clearly indicate the scope, identification, technical details of the work to be transferred to the reinsurer, work acceptance and compensation evaluation method, general and special conditions, the legal aspects of the contract, and the parties explicitly as the cedent and reinsurer




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2. Summary of Significant Accounting Policies (continued) 2.15 Insurance contracts and investment contracts with discretionary participation feature The feature of voluntary participation in the insurance and investment contracts, is a right that is based on the contract with respect to the additional benefits listed below as well as the guaranteed benefits:

(i) A candidate to constitute a significant part of the total benefits as based on the contract; (ii) In which the sum and timing is in discretion of the issuer as based on the contract; and (iii) It is based on the following as a requirement of the contract:

(1) The performance of a certain pool of contracts or a type of certain contract type; (2) Realized and/or unrealized investment income of a certain asset pool held by the issuer; or (3) Profit or loss of the company, fund or any other entity issuing the contract.

As of the balance sheet date, the Company does not have insurance contracts and investment contracts with discretionary participation feature. 2.16 Investment contracts without DPF None. 2.17 Liabilities

Financial liabilities mean the liabilities which are created as a result of the transactions that shall require giving cash or any other financial assets to another entity. The financial liabilities are shown in the financial statements of the company over the costs amortized according to effective interest method. This financial liability is deleted when it is paid.

As of 31 December 2013, there is no loan used. (As of 31 December 2012 short-term TL interest free loans consist of tax spot loans and carried at amortized cost.)

2.18 Income Tax Corporate Tax

Statutory income is subject to corporate tax at 20%. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made. Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.

The prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings.

In accordance with the tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be carried back to offset profits from previous periods. As at of balance sheet date, the Company does not have any deductible tax losses.

In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.




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2. Summary of Significant Accounting Policies (continued) 2.18 Corporate Tax (continued) Deferred taxes In accordance with TAS 12 – Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit

The deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity. In case where gains/losses resulting from the subsequent measurement of the assets are recognized in the statement of income, then the related current and/or deferred tax effects are also recognized in the statement of income. On the other hand, if such gains/losses are recognized as an item under equity, then the related current and/or deferred tax effects are also recognized directly in the equity.

Transfer pricing In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation.

If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm's length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes

2.19 Employee benefits

Employee termination benefits

In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at 31 December 2013 is TL 3,254.44 (31 December 2012: TL 3,125.01).

The Company reserved for employee severance indemnities using actuarial method in compliance with the TAS 19 – Employee Benefits. The major actuarial assumptions used in the calculation of the total liability as at 31 December 2013 and 31 December 2012 are as follows:

31 December 2013 31 December 2012 Expected Rate of Salary/Limit Increase %4.5 %4.5 Discount Rate %8 %8

Other employee benefits The company pay compulsory social insurance Premium to Social Insurance Institution. The Company has no liability as long as the premiums are paid. These premiums are recognized as personnel expenses. This provision calculated for deserved but for the unused vacation and accounted in short term liabilities




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2.20 Provisions Provisions, contingent liabilities and contingent assets Provision is made for an existing obligation resulted from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the balance sheet date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the footnotes to the financial statements.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset. Technical Provisions The technical reserves within the technical insurance accounts in the financial statements and the reinsurer share of such reserves are recognized in compliance with the following principles and in compliance with the "Regulation on the Technical Reserves of the Insurance and Reinsurance and Retirement Companies and Assets in which such Reserves shall be invested" ("Technical Reserves Regulations")" published by the Undersecretariat of Treasury in the Official Gazette no 26606 dated August 7, 2007 prepared as based on the 16th article of the Insurance Law no 5684 dated June 14, 2007 and 8th article of the Individual Retirement Savings and Investment System Law no 4632 dated March 28, 2001, with "Regulation on the Amendment of the Regulation on the Technical Reserves of the Insurance and Reinsurance and Retirement Companies and the Assets in which such Provisions shall be Invested" (Technical Reserves Amendment Regulation) published in the Official Gazette no: 27655 dated June 28, 2010 and entered into force as of September 30, 2010 and with "Sector Declaration on Regulation on the Amendment of the Regulation on the Technical Reserves of the Insurance and Reinsurance and Retirement Companies and the Assets in which such Provisions shall be Invested " no 2012/13 dated June 18, 2012 and with the other declarations and announcements made related to this issue. Reserve for unearned premiums revenue In accordance with the 9th article of the “Communiqué Related to Changes in the Communiqué on Technical Reserves for Insurance, Reinsurance and Private Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued on 28 July 2010 dated 27655 numbered Official Gazette and entered into force on 30 September 2010, unearned premiums represents the proportions of the gross premiums written without deductions of commission or any other allowance, in a period that relate to the period of risk subsequent to the balance sheet date for all short- term insurance policies. In the case of annual life insurance and life insurance which of the renewal date exceeds one year, reserve for unearned premiums is calculated for the portion of the remaining part which is left after deducting savings from gross premium written for the period. Unearned premium reserves; The commencement date and expiry date of insurance is considered as a half day in the calculation of unearned Premium reserves under the Undersecretariat of Treasury’s Communiqué




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2. Summary of Significant Accounting Policies (continued) 2.20 Provisions (continued)

Reserve for unearned premiums revenue In Technical Provisions Regulation, it is stated that the part corresponding to the future period or periods, of the commissions paid to the intermediaries on condition that accrual is made as based on the production, the commissions taken due to the premiums transferred to the reinsurer, production expense shares and the sums paid for non-proportional reinsurance contracts and the variable production expenses for the preparation and sale of the tariffs and insurance contracts and the payments for support services, shall be recognized under deferred income and deferred expenses accounts and other relevant accounts. As of 31 December, the gross amount of unearned premiums reserve is 44,231,754 TL (31 December 2012: 42,506,691 TL). As of 31 December 2013, deferred commission income is 631,937 TL (31 December 2012: 978,810 TL) and deferred commission expense amount is 15,089,269 TL (31 December 2012: 14,606,922 TL). Reserve for unexpired risks

In accordance with the Communiqué on Technical Reserves, in each accounting period, the companies while providing reserve for unearned premiums should perform adequacy test covering the preceding 12 months in regard with the probability of future claims and compensations of the outstanding policies will arise in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (reserve for outstanding claims, net + claims paid, net – reserve for outstanding claims carried forward, net) to earned premiums (written premiums, net + reserve for unearned premiums carried forward, net net – reserve for unearned premiums, net) In the calculation of earned premiums; deferred commission expenses paid to the agencies and deferred commission income received from the reinsurance firms which were netted off from reserve for unearned premiums both at the beginning of the period and at the end of the period are not taken into consideration In compliance with the "Regulation on the Amendment of the Regulation on the Technical Provisions of the Insurance and Reinsurance and Retirement Companies and the Assets in which such Provisions shall be Invested" published in the Official Gazette no 28356 dated July 17, 2012, the Undersecretariat of Treasury, if the estimated claim premium ratio exceeds 95% in future periods for the estimated claim premium ratio of insurance branches, the amount calculated multiplying ratio exceeding 95% by net unearned premiums reserve is called net provision for unexpired risk reserve, and the amount calculated multiplying ratio exceeding 95% by gross unearned premiums reserve is called gross provision for unexpired risk reserve. The Undersecretariat of Treasury can change this test method as of the branches, can have qualification tests with different test methods and can request the allocation of provisions for the continuing risks within the frame of this test method. As at 31 December 2013 and 31 December 2012, related test have not resulted any deficiency in the premiums of the Company.




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2. Summary of Significant Accounting Policies (continued) 2.20 Provisions (continued) Outstanding claims reserve Outstanding claims reserve is provided for outstanding claims incurred and calculated but not actually paid in prior or current period, or outstanding claims for which the related amount is not calculated, carried at estimated value incurred but not reported.

In compliance with the insurance legislation and technical reserves regulation of the Undersecretariat of Treasury, the Company accounts for outstanding claim reserve for the damage and compensations incurred, but not reported yet. Outstanding claims reserve for the damages and compensations realized but not reported yet are calculated separately for the life and personal accident branches as based on the methods determined in the regulation for the damages and compensations realized in the previous period but not reported yet.

In Life Insurance branch, the calculation of the incurred but not reported compensations, are made by taking into account on the basis of the main coverage and additional coverage so that the compensations as of the end of the period cover the last 12 months in compliance with the “Circular on the Calculation principles of Outstanding Compensations Reserve incurred but not reported at Life Insurance Branch” no 2010/14. The compensations realized before these dates but notified after these dates are accepted to be incurred but not reported compensations. During the calculation of the incurred but not reported compensations, the weighted average of the insurance and reinsurance companies related to these sums for the last 5 or more years, found by dividing the compensations incurred before these dates but reported afterwards into the annual average coverages of the previous year are taken into consideration. For finding the annual average coverage on the basis of coverage as of the years; within the frame of IBNR circular, "average coverage" in the interim period calculations is calculated by going back 1 year (4 quarters) and dividing the total of the period end and period start coverage sums into two. Incurred but not reported compensations for the current accounting period is found by multiplying the weighted average which is calculated as explained above with the annual average coverage sum as of the current year. In these calculations the income items such as recourse, salvage and the like are taken into account as deducted. The outstanding files which are notified during the current accounting period or the previous accounting periods but which are not in the outstanding claims of the current period for any reason whatsoever and which are reprocessed in the next year are also included in the incurred but not reported compensations of the relevant branch.

Incurred but not reported compensations in the personal accident branch are calculated over the claims (outstanding and paid claims total) realized in compliance with the "Circular on Actuarial Chain Ladder Method" no 2010/12. The company does not have any substantial damages which shall be subject to substantial damage elimination method. As a result of the calculation made for the personal accident branch, Loss-Premium method is selected and as indicated in the circular no 2011/10, 100% of the sum calculated at the end of 2013 are reflected onto the financial statements. The Company did not apply deduction in the outstanding compensation provision for the files in the process of a lawsuit in compliance with the circular no 2011/23.

As of 31 December 2013, the Company has provided TL 8,041,728 (31 December 2012: TL 7,391,250) of net outstanding claims provision in relation to incurred but not reported claims in its financial statements in total including TL 5,397,418 for life branch ( 31 December 2012: TL 4,576,068) and TL 2,644,310 for non-life branch (31 December 2012: TL 2,815,182).

Mathematical provisions and provision for profit share

In accordance with the Communiqué on Technical Reserves, companies performing in life and non-life insurance branches are obliged to allocate adequate mathematical reserves based on actuarial basis to meet liabilities against policyholders and beneficiaries for long-term life, health and personal accident insurance contracts. If the mathematical provisions are undertaken with the actuarial mathematical provision calculated separately as based on the technical principles in the tariff for each policy in force, then it is composed of the total of the profit share provisions allocated for the insureds from the income obtained from direction of such provisions to investment.




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2. Summary of Significant Accounting Policies (continued) 2.20 Provisions (continued) Mathematical provisions and provision for profit share (continued) Actuarial mathematical provisions are the difference between the cash values of the premiums taken for the risk undertaken by the companies and the liabilities to the insureds and beneficiaries. Actuarial mathematical provisions are allocated as based on the formulas and principles given in the technical principles of the tariffs for the life insurances with a term longer than one year. Actuarial mathematical provisions, according to formulas and basis in approved technical basis of tariffs for over one year-length life insurance, are calculated by determining the difference between present value of liabilities that the Company meets in future and current value of premiums paid by policyholder in future (prospective method). Provision for profit sharing consist of profit sharing calculated in previous years and a certain percentage of current period’s income, determined in the approved profit sharing tariffs, obtained from the financial assets backing liabilities of the Company against the policyholders and other beneficiaries for the contracts which the Company is liable to give profit sharing. As of 31 December 2013 and 2012, total amount of actuarial mathematical provisions and profit sharing have been approved by Actuary. Total mathematical reserves are TL 350,404,777 as of 31 December 2013 (31 December 2012: TL 381,222,270). The mathematical and profit share provisions of the policies written in the unit price based funds of the company's are evaluated daily according to TL, US Dollar and Euro profit share technical principles approved by TR Undersecretariat of Treasury and Foreign Trade on January 14, 1993 and September 12, 1996. The income from the investments belonging to the insured is distributed as the income of the investment instrument related to the interest method accrued daily. Daily Profit Share System according to Profit Share Technical Principles and Life Insurances Regulation of TR Prime Ministry Undersecretariat of Treasury Insurance General Directorate approved on November 01, 1999 is applied for the life, mathematical and profit share of the accumulated policies written in the other funds of the company (profit share based). Profit share values calculated according to the profit share ratios calculated as based on the daily proceeds of TL, US Dollar and Euro investment instruments are reflected onto the insureds' accounts daily.




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2. Summary of Significant Accounting Policies (continued) 2.20 Provisions (continued) Equalization reserves As a requirement of the Technical Provisions Regulation, the companies are required to allocate equalization reserves at the rate of 12% of the net premiums corresponding to each year, for the credit and earthquake coverage in order to balance the fluctuations in the compensation rates to occur in the following accounting periods and cover the catastrophic risks. Allocation of reserves is continued until 150% of the highest sum of the net premiums written in the last financial years is reached. In "Sector Declaration Related to the Application of Relevant Legislation Concerning Technical Provisions" no 2009/9 published by Undersecretariat of Treasury on March 27, 2009, it is indicated that the insurance companies are required to allocate equalization reserves for the tariffs in which they provide additional earthquake coverage for death and disabilities due to earthquake, and in life and accident branches, and the method of calculation of the equalization reserves is re-determined under " Regulation on the Amendment of the Regulation on the Technical Provisions of the Insurance and Reinsurance and Retirement Companies and the Assets in which such Provisions shall be Invested" no 27655 published by the Undersecretariat on June 28, 2010. In the 5th paragraph of the 9th article "Equalization Reserve" of the mentioned Regulation, it is stated that the companies shall use their own statistical data during the calculation of the equalization reserves in the life insurances in which death coverage is provided, and that the companies which do not have the data set required for the calculation shall assume 11% of the death net premium (expense share included) as the earthquake premium and shall allocated reserves at the rate of 12% of this sum. Within this scope, the company calculated equalization reserve at the rate of 12% of the sum which is obtained by assuming 11% of the death net premium as the earthquake premium, including the expense share As of 31 December 2013, the gross amount of equalization reserve of the Company is TL 9,321,483 (31 December 2012 – TL 6,522,503) and net amount of TL 8,822,123 (31 December 2012 – TL 6,144,489). 2.21 Revenue Recognition Written premiums Written premiums represent premiums on policies written during the year net of taxes, premiums. Annual policies are accounted according to the accrual basis, long term policies are accounted according to the cash basis. Company’s long term policies written under other funds are also accounted according to accrual basis. The commissions taken and paid The commissions taken and paid are composed of the commissions paid in relation to the written premiums and the commissions taken in relation to the premiums transferred to the reinsurance companies. The company recognizes the commissions taken and paid in compliance with the accrual principle. The commission expenses paid to the intermediaries with respect to the production of the insurance policies and the commission income taken from the reinsurers are explained under unearned premiums provision note. The company evaluated the expenses that can be subject to deferment with respect to the Individual Retirement System as outside the scope of TFRS 4 and handled these within the scope of TAS 39 and TAS 18. The commissions paid with respect to the Individual Retirement System are not subjected to deferment as of the reporting period.




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2.21 Revenue Recognition (continued)

Interest Income

Interest income is recognized periodically basis by using effective interest rate method.

Dividend Income

Dividend is recognized as income when the collection is realized.

Income from Pension Operations

Total fund expense deduction

Fund operation income which is in consideration of the management and representation of the funds and the equipment, personnel and accounting services allocated to the funds are entered as income in the Company accounts and are shared between the Company and the company managing the retirement funds (Manager) within the frame of the ratios set forth in the agreement. The whole fees mentioned are entered as fund operation income within the technical income of the Company and the part belonging to the Manager is entered as the sum paid in consideration of fund operation within the technical expenses of the Company. In this context, the ratio related to the total of the expenses to be incurred from the fund are determined in the fund's internal regulations in a way not exceed the maximum rates indicted on the fund group basis, including the deduction related to the fund operation expenses. The mentioned accounts are shown in the retirement technical income/expense accounts of the income statements attached.

Management fee deduction

In compliance with the 22nd article of "Regulation on Individual Retirement System" published in the Official Gazette dated 9 November 2012, administrative expense deduction is applied at the rate of maximum two percent over the contribution shares paid to the Individual Retirement account. Moreover, in case of interruption of the payment in compliance with the 14th article of the same regulation, additional administrative expense deduction as two Turkish Liras for each whole month interrupted is taken from the accumulation of the participant during the interruption period.

Entrance fee income

In compliance with the 20th article of "Regulation on Individual Retirement System" published in the Official Gazette dated November 09, 2012, this is the sum which is required to be paid to the Company during the initial entrance into the individual retirement system or during the signing of a retirement contract in a different company for the first time. Entrance fee is collected from the participant or the sponsor entity within the frame of the principles indicated in this article, by taking into account the monthly gross minimum wage applicable on the date on which the proposal is signed or the proposal is approved in distant sale.

Entrance fee is collected as advance or as deferred to the transfer date or the date of exit from the system. The part of the entrance fee that is collected as advance cannot exceed ten percent of the monthly gross minimum wage applicable on the date on which the proposal is signed or approved. The total of the entrance fees collected as advance or deferred cannot exceed;

a) Seventy five percent of the monthly gross minimum wage applicable on the date on which the proposal is signed or approved for those leaving the company within three years as of the effective date of the contract,

b) Fifty percent of the monthly gross minimum wage applicable on the date on which the proposal is signed or approved for those leaving the company before six years upon completion of the three years as of the effective date of the contract

c) Twenty five percent of the monthly gross minimum wage applicable on the date on which the proposal is signed or approved for those leaving the company before ten years upon completion of the six years as of the effective date of the contract.

Deferred entrance fees are collected at the moment of exit or transfer within the frame of the conditions defined in the contract as of the effective date of the contract and are recognized as income. Entrance fees collected as advance or in installments are accrued on the date when the contract is executed and the participant enters the system and are reflected in the income accounts.

Entrance fee is not collected in case the participant leaves the individual retirement system due to death or continuous disability or retirement. The mentioned account is shown retirement technical income-entrance fee income in the attached income statement




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2. Summary of Significant Accounting Policies (continued) 2.22 Leasing transactions

Tangible assets acquired by way of finance leasing are recognized in tangible assets and the obligations under finance leases arising from the lease contracts are presented under finance lease payables account in the financial statements. In the determination of the related assets and liabilities, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs of leasing agreements are expanded in lease periods at a fixed interest rate. If there is impairment in the value of the assets obtained through financial lease and in the expected future benefits, the leased assets are valued with net realizable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.

2.23 Dividend distribution The Company distributes the profit share within the frame of the profit distribution policies to be determined by the general assemblies and in compliance with the relevant provisions of the legislation and as based on the decision of the general assembly. The Company pays the profit share as determined in its articles of association or the profit distribution policies. 2.24 Related parties Related party of the Company that are associated with a person or entity that prepares financial statements.

(a) A person or a close member of the family of that person considered related to Company if;

( i ) controls, is controlled by, or is under common control with the Company (ii) has an interest in the Company that gives it significant influence over the Company, (iii) the party is member of the key management personnel of the Company and its parent

(b) Parties are considered related to the Company if;

(i) The Company and the reporting Company are the members of the same group (in other words, each main partnership, subsidiary and other subsidiaries are related to the others).

(ii) The Company is the participation or business partnership of the other entity (or the member of the group in which the other entity is a member).

(iii) Both Companies are the business partnership of the same third party.

(iv) One of the Companies is the business partnership of a third Company and the other Company is the participation of the mentioned third Company.

(v) The Company has benefit plans provided for the employees of the reporting Company or a Company related to the reporting Company, when they leave work. If the reporting Company has such a plan, then the sponsoring employees are also related to the reporting Company.

(vi) The Company is controlled or is under common control by a person defined in article (a).

(vii) A person defined in paragraph (i) of the article (a) has a significant effect on the Company or is a member of the key executive personnel of the mentioned Company (or the main partner of this Company). The transaction with the related party is the transfer of the sources, services or liabilities between the reporting Company and the related party regardless of whether there is a consideration for such transfer or not. In the financial statements dated December 31, 2013 and December 31, 2012 and the relevant explanatory footnotes, the companies included in Aviva Group and Sabanc Holding, other than the partners and the Company Management are defined as the other related parties. 2.25 Earning per share

Earning per share is calculated by dividing the net profit for the period distributable to the shareholders into the weighted average number of the shares within the year.




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2. Summary of Significant Accounting Policies (continued) 2.26 Other monetary balance sheet items Reflected in the balance sheet at their book values. 2.27 Subsequent events Post-balance sheet events that provide additional information about the Company’s position at the balance sheet dates (adjusting events) are reflected in the financial statements. Post-balance sheet events that are not adjusting events are disclosed in the Notes when material. 3. Significant accounting estimates and judgments Preparation of financial statements requires the Company make use of estimations and assumptions which may affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of income and expenses during the financial period. Realized results can be different from the estimations. Estimations are regularly reviewed and the required corrections are carried out and are reflected onto the income statements in the period in which they are realized. The estimations used are mainly related to insurance outstanding claims and compensation reserves, life mathematical reserves, calculation of the fair values of the financial assets, provision for severance pay, impairment provision for the assets, other provisions for expenses and deferred tax assets and the significant assumptions and evaluations by consideration of the main sources of the interpretations that can have significant effect on the sums reflected onto the financial statements and the estimations available on the balance sheet date or to occur in future, are as follows:

a) The severance pay liability is determined using actuarial calculations which are based on making assumptions about discount rates, future salary increases and employee turnover. Due to the long-term nature of these plans, such assumptions are subject to significant uncertainty. The details for the provisions for employee benefits are given in Note 2.19 and Note 22.

b) Provisions for doubtful receivables reflect the sums which the Company management believes shall compensate the future losses related to the receivables which are available as of the balance sheet date but which has a risk of non-collection within the frame of the current economic conditions. When evaluating whether the receivables are impaired or not, the past performances of the debtors, other than the related entity, their credibility in the market and their performances from the balance sheet date until the approval date of the financial statements and renegotiated conditions are also taken into consideration. The provisions for doubtful receivables as of the relevant balance sheet date are given in Note 12.1.

c) Deferred tax assets are recognized to the extent that it is strongly probable to benefit from the temporary differences and accumulated loss by obtaining profit which is subject to future taxation. When determining the amount of the deferred tax assets to be recognized, it is required to make significant estimations and judgments related to the future taxable profits (Note 21).

d) While allocating provisions for lawsuits, the probability of losing such lawsuits and the results to be borne if lost are evaluated within the direction of the opinions of the legal advisors of the Company and the Company Management makes their best forecasts by use of the available data and allocates the required provisions accordingly (Note 42). With respect to the technical and other provisions, other estimations and assumptions of the Company are explained in detail in the relevant footnotes.




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4. Insurance and financial risk management Risk and internal control management and risk factors Risk and Internal Control Company Management handles its operations within the framework of “Regulation on Internal Systems of Insurance and Reinsurance Companies as well as of Pension Companies”. Risk Management and Internal Control operations aim to provide Board of Directors with assurance with respect to: Adherence to legal liabilities and to corporate Risk Management Policies and Standards, Identification of all incurred structural risks and establishment of risk acceptance criteria, Designing and implementation of internal control mechanisms and actions compatible with such risks,

and reporting of such risks in a transparent way. . Risk management is a fundamental approach which ensures protection against situations which might give birth to inconvenient consequences in the process of achievement of the Company’s objectives. Interaction of management concept with decision-making processes pursuing a risk-based approach ensures that available resources are utilized in an efficient way and, thus, enables us to meet expectations of all stakeholders, including our customers and shareholders, at an optimal level. In this approach called triple-defense, the sharing of responsibility and empowerment is reflected in the table below: Responsibilities Powers and Duties

1st Line of Defense Company Management Identification, evaluation, effective management and reporting of risks, and achievement of strict observance of Corporate Policies. Setting-up and continued implementation of an effective internal control system.

2nd Line of Defense Risk Management and Internal Control, Legal Affairs

Provision of support to Company management with respect to identification, evaluation, management and reporting of risks, surveillence for adherence to, as well as for any diversions from, Corporate Policies, and, in sum, provision of support for good functionality of AvivaSA Risk Management Model. Giving assurance that Company assets are well protected through Internal Control structure and that its operations are handled in an efficient and effective way and in strict compliance with the governing Laws and other applicable legislative acts, Company’s internal policies and rules, as well as with insurance business practices and that accounting and safe functioning and integrity of financial reporting system is achieved and that information are acquired in a timely manner.

3rd Line of Defense Internal Audit Providing Board of Directors with assurance as to effectiveness of Company’s risk management and internal control platform through audits conducted in an impartial and independent way under applicable legislation.

Risks facing the Company are identified and evaluated by upper (senior/top) management within the framework of AvivaSA Risk Model. Due consideration is given to likelihood of occurrence of risks, as well as to likely impacts thereof, as part of such evaluation. Risks and relevant risk management activities (internal controls and actions) are kept under close monitoring. Risk Management Department is in charge of identifying, measuring and monitoring of risks facing AvivaSA and of taking actions set up to keep risks at such limits as defined within the framework of risk appetite, and of reporting thereof. Moreover, it is also responsible, as a unit in charge of harmonization, for implementation of the Law 5549 on Prevension of Laundering Proceeds of Crime, as well as of other applicable legislative acts. Risk and Internal Control Group Management chairs Regulatory Committee and thus monitors and guides regulatory actions within the Company. This committee is composed of relevant persons from every function of the Company. This Committee reports to Executive Committee.




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4. Insurance and financial risk management (continued)

Risk management activities are carried out by Executive Committee, a body set up within Board of Directors to handle executive operations of the Company, in coordination with Risk and Internal Control Company Directorate. Executive Committee evaluates risk activities on a monthly basis through Operational Risk Committee, an internal body represented by its own members, and ensures that results thereof are reported.

Risk and Internal Control Company Management reports to Board of Directors, Board of Auditors and Board of Directors’ Risk Committee in accordance with the data generated from Operational Risk Committee.

AvivaSA Internal Control Unit, a body set up within Risk and Internal Control Company Management, aims to contribute under the following headings while carrying out its functions: - Creation of a strong and effective internal control awareness within AvivaSA, - Continuous improvement of internal control processes and practices with optimal effectiveness and cost

efficiency, - Sharing of best practices relating to internal control and surveillence within AvivaSA.

Internal Control Unit works in compliance with its own governance manual and implementation methodology for achievement of an effective internal control platform, and reports to General Manager.

Internal control activities are among fundamental responsibilities of corporate functions. Company Management, which forms the first line of defense, is responsible for protection of Company assets within the Company in relation to its own processes and for conduct of operations in an effective and efficient way and strict compliance with the Laws and other applicable legislative acts and Company’s internal policies and rules, as well as with insurance business practices, and for identifying internal control points which would ensure reliability and integrity of accounting and financial reporting system and timely acquisition of information, as well as for getting such controls work in an effective way. Primary scope of Internal Control Unit operations is to scrutinize and evaluate adequacy and effectiveness of internal control measures and processes put in action in the first line of defense of AvivaSA and to report results thereof to upper management. It is individual functions that carry out controls in a regular way and that take necessary corrective actions; these are monitored by Risk Management and Internal Control; are audited by Internal Audit. Reports containing aspects of risk monitoring, evaluation and management activities, as well as internal control activities, are presented to Board of Directors’ Risk and Audit Committees at regular intervals. And fundamental purpose of risk management and internal control audit activities done by Internal Audit is to ascertain whether risk and internal control management performs its duties undertaken by itself as the second line of defense or not and to ensure that necessary corrections are made accordingly.

Risk Management Policies Fundamental principles and standards in relation to risk management system and processes are identified in Risk Management Policies. Policies are approved by Board of Directors and, as such, any amendments thereto are subject to prior approval of Board of Directors.

Board of Directors is ultimately responsible for identifying risk management principles and standards applicable Company-wide and for updating risk policies depending on changes in operating conditions and for establishing effective risk management system and processes and for getting them work properly and for monitoring Company’s riskiness level and for establishing relevant risk limits, as well as for controlling the situation visa-a-vis such limits and for implementing necessary precautions with respect thereto. AvivaSA Risk Management Model is composed of six policies as well as twenty business standards built upon such policies. AvivaSA is aware of importance of coherent and controlled business processes in risk management process. For this reason, each policy is supported by business standards designed to provide maximal effectiveness in relevant business processes. Majority of business standards is under responsibility of the first line of defense. Within the Company, someone is in charge of each standard, and business standards are revised at least once a year. .




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4. Insurance and financial risk management (continued) Risk Management Policies (continued) Risk model put in implementation is indicative of structural risks of the company doing business in life and pension sector and of data specific to such risks, of risk factors and of up to which limits such risks might be accepted by the company, as well as of how they would be managed. Risk Management Policies are practical guidances which describe how the Company could manage its financial, operational and nominal loss risks with highest effectiveness. Risk measurement results and Company’s risk appetite are taken as fundamental components in identification of risk limits. Apart from risk limits, indicators of developments and incidents likely to have negative impact on riskiness level are identified as early signal and are, as such, monitored. Primary risks facing the Company are Insurance Risk, Market Risk and Credit Risk. Insuring Risk This denotes the likelihood of premiums collected by the Company turning out to be insufficient to cover its indemnity liabilities and profit share payouts, as well as a situation where the payouts for incurred losses and indemnities turn out to be higher than expected. Primary analyses regarding Insuring Risk management and monitoring processes are as follows: o Analysis of profitability on product basis o Claims ratios (Claim-premium ratio) o Cancellation, negotiation, death amounts and rates o NBC (New Business Contributions), PVNBP (Present value of new business premiums), EEV

(European Embedded Value) The Company makes such analyses in order to manage claims/premium balance well, to identify its liabilities in an accurate way and to make sure whether provisions enough to cover all such liabilities are available or not. Insuring risk facing the Company on branch basis is as follows: a) Life Branch Short Term Life Insurance (TL, USD, EURO), Protection Insurance (USD), Major Health Risk Insurance (USD), In mentioned types of insurance, both individual and group contracts are executed Long Term Protection Insurances (TL, USD), Credit Life (TL, USD), Cumulative (long term) Life Insurances (TL, USD, EURO), In mentioned types of insurance, both individual and group contracts are executed.




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4. Insurance and financial risk management (continued) b) Personal Accident (Non-Life) Branch Accidental death insurances are offered as individual or group contracts. Risks for life and accident insurances can be summed up as mortality rates, sickness rates, continuity risk and investment risk. The most important components in managing all these risks are reinsurance agreements and underwriting. Reserves set apart for covering minimum interest guaranteed in certain life insurance contracts are invested in risk-free treasury bills and government bonds for further gains. Interest rate guaranteed for cumulative policies is 6% for TL policies, while 2% for USD policies. Interest rate guaranteed for other policies is 9% for TL policies, while 2.5% for foreign currency policies. And rates of profit shares distributed for 2013 and 2012 are given in the table below:

31 December 2013

Profit Shares 31 December 2012

Profit Shares TL (unit-based) 7.42% 8.33% USD (unit-based) 4.54% 6.33% TL (other) 9.29% 9.51% USD (other) 6.66% 6.48% EURO (other) 4.80% 4.79% c) Pension (Retirement) Branch Individual retirement savings plans are available. Investment risk on pension contracts is borne by participants themselves. Participants are able to invest their funds for further gains according to their own investment preferences. And the risk facing the Company in this branch is the continuity risk. Management of Insurance Risk Purpose in managing risks arising from insurance contracts and policies designed to reduce such risks: Insurance risk is defined as a risk transferred by insured to insurer, apart from financial risk. Transferred risk is about an uncertain future incident. Uncertainty arises from lack of information about whether the incident is going to happen or not or about its size or timing. The ratio of premiums collected by insurer to indemnities paid out to insured denotes a company’s capacity to cover insurance risk. As at 31 December 2013 and 31 December 2012, Company’s claims/premium ratios in relevant branches are given below. It is observed that premiums collected provide a capacity to cover any incurred claims: Expected net claims ratio 31 December 2013 31 December 2012 Life 15% 12% Personal Accident (Casualty) 10% 13%




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4. Insurance and financial risk management (continued) As at 31 December 2013 and 31 December 2012, that part of total risk which is ceded to reinsurers is given below on a risk coverage basis.

31 December 2013 Life Death by Natural Cause

Accidental Death

Accidental Disability Sickness Disability

Dangerous Diseases

Public Transport

Unemployment

2.76% 0.52% 1.42% 1.03% 2.57% 0.08% 0.02%

Personal Accident Death by Natural Cause

Accidental Death

Accidental Disability

Accident-Caused Treatment Costs

- 0.15% 0.21% -

31 December 2012 Life Death by Natural Cause

Accidental Death

Accidental Disability Sickness Disability

Dangerous Diseases

Public Transport

2.81% 0.52% 1.75% 1.32% 2.94% 0.07%

Personal Accident Death by Natural Cause

Accidental Death

Accidental Disability

Accident-Caused Treatment Costs

- 0.15% 0.21% -

Susceptibility to Insurance Risk Company’s policy production strategy is based on optimal distribution of risk to reinsurance companies according to policy type, as well as to kind and size of risk taken. At 31 December 2013 ve 31 December 2012 Company has both proportional and non-proportional reinsurance treaties. Outstanding claims are reviewed and updated periodically by claims department of the Company.




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4. Insurance and financial risk management (continued) The Company executes insurance contracts in life insurance and personal accident branches. Accordingly, in such insurance contracts, insurance risk concentration according to nature of the subject-matter of insurance are summed up below in gross and net figures (post-reinsurance):

31 December 2013 Total gross risk

liability Share of reinsurer

in total risk liability Net risk liability Life 31,167,780,632 1,378,101,830 29,789,678,802 Personal accident 26,809,810,623 98,140,953 26,711,669,670 Total 57,977,591,255 1,476,242,783 56,501,348,472

31 December 2012 Total gross risk

liability Share of reinsurer

in total risk liability Net risk liability 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

Company’s gross outstanding claims at 31 December 2013 and 31 December 2012 are given in the table below. Outstanding Claims 31 December 2013 31 December 2012 Life 30,264,942 23,415,322 Personal accident 6,297,445 5,998,737 Total 36,562,387 29,414,059

Under Regulation on Technical Reserves, being part of insurance legislative acts, reserves set apart and effects of such reserves on balance sheets of 31 December 2013 and 31 December 2012 are given below: Unexpired Risk Reserve:

This is the reserve set apart for covering the last 12 months, as of each accounting period, against the likelihood that indemnities which might be suffered on account of still-in-effect insurance contracts might be higher than unearned premium reserve set apart for relevant contracts. Effect on Balance Sheet of 31 December 2013: No reserve has been set apart as the net claims ratio (claims-premium ratio) expected in life and personal accident branch did not go over 95%, being the statutory rate specified in the Regulation (31 December 2012 – not set apart as it did not go beyond 95%). Unearned Premium Reserve

Unearned Premium Reserve is computed at gross premiums. In cumulative life insurances, cumulative premium is deducted from gross premium.




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4. Insurance and financial risk management (continued) Amount of gross unearned Premium reserves computed at 31 December 2013 has been computed as TL 27,708,548 for life branch (31 December 2012 – TL 26,232,138), for personal accident branch TL 16,523,206 (31 December 2012 – TL 16,274,554) Equalization reserve

In order to equalize the fluctuation in compensation rates and to meet the catastrophic risk that may occur in subsequent period, for all branches including guarantees and credits given an additional provision should be made. Balance sheet effect as at 31 December 2013: For Life Insurance, gross TL 7,262,896 (31 December 2012 – TL 4,891,363), for personal accident insurance, the gross TL 2,058,587 (31 December 2012 – TL 1,631,140) .Total gross amount is TL 9,321,483 (31 December 2012 – TL 6,522,503) Incurred but not reported claims (IBNR)

The Company makes its IBNR computation according to such branchial distinction as defined in the Communique 2007/1 concerning insurance branches. Accordingly, for life branch, computation is made according to the Circular 2010/14 Concerning Computational Principles as to Reserves for Incurred But Not Reported Outstanding Claims in Life Branch and to the Circular 2010/12 Concerning Actuarial Chain Ladder Method for Personal Accident Branch. Reinsurers’ shares computed according to still-in-effect reinsurance agreements are deducted, such that net IBNR and ACLM set apart as reinsurer’s share. Effect on Balance Sheet of 31 December 2013: Totally a net amount of TL 8,041,728 (31 December 2012 – TL 7,391,250) has been set apart as IBNR reserve, of which TL 5,397,418 TL (31 December 2012 – TL 4,576,068) is for Life branch and TL 2,644,310 (31 December 2012 – TL 2,815,182) is for Personal Accident branch Financial Risk Management Primary financial instruments used by the Company are cash, time bank deposits, government bonds, treasury bills, private sector bonds and Eurobonds. As at 31 December 2013 and 31 December 2012, all of financial assets booked at their fair values are 1st level financial assets. The Company faces various financial risks in connection with financial instruments it is using as well as with its insurance contract liabilities. Risks arising from instruments so used are market risk, liquidity risk and credit risk. Such risks are managed by Company management as follows a) Market Risk This denotes the risk of loss which might occur in value of financial assets held by the Company owing to fluctuations in interest risk, share prices and currency risk. The purpose of the market risk management is to optimize the risk profitability and to control the market risk amount within the direction of the accepted parameters. Company’s Independent/Free and Insured’s funds are managed within the framework of investment strategy set by Board of Directors. i) Currency Risk Currency risk primarily arises from assets and liabilities carried by the Company in US Dollars and Euros and from variations in exchange rates applied while converting them into TL from relevant foreign currencies.




45

4. Insurance and financial risk management (continued) a) Market Risk (continued) i ) Currency risk (continued) As at 31 December 2013, on condition that all variables remain constant, effect of a 10% appreciation/ devaluation of Eurobonds against TL on owners’ equity is TL (467,827). As at 31 December 2013: Liabilities and assets in foreign currency Income/expense effect Exchange rate variation (*) USD EUR USD %10 3,788,057 508,053 (2,549) -%10 (3,788,057) (508,053) 2,549 As at 31 December 2012, on condition that all variables remain constant, effect of a 10% appreciation/ devaluation of Eurobonds against TL on owners’ equity is TL 152,189. As at 31 December 2012: Liabilities and assets in foreign currency Income/expense effect Exchange rate variation (*) USD EUR USD %10 1,810,134 151,252 (79,945) -%10 (1,810,134) (151,252) 79,945 (*) Relevant amounts denote TL converted value of currencies. ii) Interest Rate Risk Interest risk denote variations in fair values of financial assets or in future (prospective) cash flows which arise from fluctuations in market interests. The table below indicates, on condition that all other variables remain constant, the effect on profit and revenue reserves of a 5- point increase/decrease in market interest rates for TL securities, as well as of a 0,5-point increase/decrease for USD and EURO securities. The underlying logic in this projection is that a discount interest rate applicable for each year with effect of the stresses set in different rates by respective years is found using the upward-downward variation which might occur in average market interest rates and that market value of securities are then discounted at such rate in connection with their respective maturity period.




46

4. Insurance and financial risk management (continued) ii) Interest Rate Risk (continued) As at 31 December 2013:

Effect on Profit/Profit Reserve Market interest increase / (decrease) (**) TL USD (*) EUR (*) %5 (12,900,940) (5,327,681) (47,905) -%5 11,722,774 4,597,596 37,776

Trading financial assets (company) Effect on Income/Expense Market interest increase / (decrease) (**) TL USD (*) EUR (*) %5 (1,787,742) - - -%5 1,954,840 - -

Available for sale financial assets Effect on Profit/Profit Reserve Market interest increase / (decrease) (**) TL USD (*) EUR (*) 5% Investments with Risks on Policyholders (10,214,212) (4,716,479) (47,455) 5% Available for sale financial assets (company) (898,986) (611,202) - -5% Investments with Risks on Policyholders 8,989,327 4,093,542 37,422 -5% Available for sale financial assets (company) 778,607 504,054 - (*) Interest risk computed according to a 0.5% point variation for USD and EUR portfolio. (**) Amounts are shown in relevant currency. As at 31 December 2012 :

Effect on Profit/Profit Reserve Market interest increase / (decrease) (**) TL USD (*) EUR (*) %5 (11,211,892) (2,678,728) (61,718) -%5 10,324,779 2,224,698 47,804

Trading financial assets (company) Effect on Income/Expense Market interest increase / (decrease) (**) TL USD (*) EUR (*) %5 (700,467) - - -%5 765,939 - - Available for sale financial assets Effect on Profit/Profit Reserve Market interest increase / (decrease) (**) TL USD (*) EUR (*) 5% Investments with Risks on Policyholders (6,763,875) (2,603,073) (61,718) 5% Available for sale financial assets (company) (3,747,550) (75,654) - -5% Investments with Risks on Policyholders 6,260,996 2,158,396 47,804 -5% Available for sale financial assets (company) 3,297,844 66,302 - (*) Interest risk computed according to a 1% point variation for USD and EUR portfolio. (**) Amounts are shown in relevant currency.




47


ii) Interest Rate Risk (continued)

Fair value information

The estimated fair values of financial instruments have been determined using available market information, and where it exists, appropriate valuation methodologies. The Company has classified its financial assets as whether held for trading purpose or available for sale and measured its financial assets at their fair values at the end of the period.

Management estimates that the fair value of other financial assets and liabilities are not materially different than their carrying values.

Classification relevant to fair value information

TFRS 7 – Financial instruments: Disclosures requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows:

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Classification requires using observable market data if possible. Fair value of financial assets and liabilities shown in the financial statements at fair value are presented below:

31 December 2013

1. Level 2. Level 3. Level Total

Financial assets: Available for sale financial assets (Note 11) 22,066,114 - - 22,066,114 Financial assets held for trading (Note 11) 57,828,778 - - 57,828,778 Financial investments with risks on policyholders classified as available

for sale (Note 11) 266,062,602 - - 266,062,602

Total financial assets 345,957,494 - - 345,957,494

31 December 2012

1. Level 2. Level 3. Level Total

Financial assets: Available for sale financial assets (Note 11) 30,929,539 - - 30,929,539 Financial assets held for trading (Note 11) 16,389,210 - - 16,389,210 Financial investments with risks on policyholders classified as available

for sale (Note 11) 362,228,129 - - 362,228,129

Total financial assets 409,546,878 - - 409,546,878




48


b) Credit Risk This denotes the inconvenience faced by the Company owing to failure of third parties, with which the Company has established business relation, to fulfill all or part of their obligations in a timely manner, acting in breach of their contract. Information on doubtful receivables is described in Note 12. Company’s credit risk management action is primarily addressed while tracking down the proper reinsurance companies. Reinsurance placements are covered by reinsurers whose credibility is checked and agreements made in this regard are approved by Board of Directors. Financial assets, being part of the Company’s financial investments, are primarily composed of government borrowing instruments as well as of deposits placed with Turkey-resident banks, and these investments are not considered to be of high credit risk. Information as to Company’s financial investments is given in Note 11. c) Liquidity risk The Company uses cash assets available at its hand in order to meet its liabilities arising from insurance contracts. Liquidity risk is the risk of failure to get a sufficient amount of cash for paying up debts within a reasonable cost structure. Management sets limits for availability of funds enough to pay up and settle such debts. The table below indicates the distribution of the Company’s contractual financial and insurance liabilities, or by their respective expected time-to-maturity, as of balance sheet date: As at 31 December 2013, maturity distribution of trading payables and financial payables of the Company not discounted by their respective maturity dates is as follows:

6 month - 1 year More than Demand 0 – 3 month 3 - 6 month 1 year 3 year 3 year Total

Financial liabilities - 1 - - - - 1 Payables from insurance operations 55,535 5,863,008 - - - - 5,918,543 Payables from pension operations 85,784,656 17,847,025 - - - - 103,631,681 Payables from other operations - 89,223 - - - - 89,223 Due to related parties 569,234 3,866,646 - - - - 4,435,880 Other payables 335,914 10,137,759 - - - - 10,473,673 Total 86,745,339 37,803,662 - - - - 124,549,001

As at 31 December 2012, maturity distribution of trading payables and financial payables of the Company not discounted by their respective maturity dates is as follows: 6 month - 1 year More than Demand 0 - 3 month 3 - 6 month 1 year 3 year 3 year 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 Payables from other operations - 68,163 - - - - 68,163 Due to related parties 690,451 2,724,017 - - - - 3,414,468 Other payables 941,402 6,189,477 - - - - 7,130,879

Total 66,992,711 22,159,433 102,577 117,148 - - 89,371,869




49

4. Insurance and financial risk management (continued) d) Operational risks Risks other than insuring risk, credit risk and market risk likely to cause a monetary or reputation loss on the part of the Company are defined as operational risks. The Company has classified basic risks which it might face in its Risk catalogue. Risk catalogue is updated according to undefined risks which might be incurred owing to changes operating environment or business processes. Capital Management Capital adequacy is computed within the framework of “Regulation on Measurement and Evaluation of Capital Adequacy of Insurance, Reinsurance and Pension Companies” of Undersecretariat of Treasury promulgated on Official Gazette of 19 January 2009, Nr.26761, at semi-annual periods. Primary purpose set for the Company’s capital management is to build up a strong capital structure for handling and keeping up operations of the Company, as well as to maximize the contribution made to its shareholders. Moreover, third paragraph of article 8 of said Capital Adequacy Regulation, regarding reinsurance risk measurement, has been amended by the Regulation promulgated in Official Gazette of 1 March 2009, Nr.27156. As at 31 December 2013 and 31 December 2012, the Company has an adequate amount of owners’ equity against losses which might arise on account of its current liabilities as well as of potential risks. As at 31 December 2013 and 31 December 2012, the required owners’ equity (as computed under the above-mentioned Regulation) and of current capital adequacy analysis is as follows: 31 December 2013 31 December 2012 Total owners’ equity (*) 166,314,279 174,835,125 Required minimum capital reserves 70,267,142 59,979,303 Capital surplus 96,047,137 114,855,822 (*) Compensation reserve excluded in the calculation of regulatory capital adequacy



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51

6. Tangible assets 6.1 Depreciation and amortization for the period: 1 January -31 December 2013: TL 3,822,437, (1 January-31 December 2012: TL 2,856,455). 6.1.1 Depreciation expense 1 January-31 December 2013: TL 1,923,219 TL, (1 January-31 December 2012: TL 1,551,023). 6.1.2 Amortization and depletion expenses 1 January-31 December 2013: TL 1,899,218, (1 January -31 December 2012: TL 1,305,432). 6.2 Changes in the method of calculation of depreciation and amortization expense for the period,

caused the increase (+) or decrease (-): Disclosed in Note 2.5. There is no changes. 6.3 Fixed asset in the current Period 6.3.1 Purchased, produced or constructed cost of tangible and intangible fixed assets: TL 9,724,477 (31

December 2012- TL 7,667,126) 6.3.2 Cost of sold or scrapped tangible and intangible fixed assets: None. (31 December 2012- TL 1,407,055) 6.3.3 Revaluation increases during the period: None.

6.3.3.1 Cost of fixed asset (+): None. 6.3.3.2 Accumulated depreciation (-): None

6.3.4 Construction in progress nature, amount, start and end date, completion rate : The company started works in 2012 in order to unify the basic insurance applications that are used within the structure of the company and to use such applications by integration to all the surrounding systems. Amounting to TL 6,817,029 of expenditures on construction in progress consists Information System Technologies.

Movement in tangible assets in the period from 1 January 2013 to 31 December 2013 is presented below:

Cost 1 January

2013 Additions Disposals 31 December

2013 Machinery and equipment 6,203,529 803,255 - 7,006,784 Furniture and fixtures 9,093,613 640,866 (15,930) 9,718,549 Other tangible assets 9,483,000 695,130 - 10,178,130 Leased assets 1,175,521 - - 1,175,521 Total 25,955,663 2,139,251 (15,930) 28,078,984

Accumulated depreciation(-) 1 January

2013 Additions Disposals 31 December

2013 Machinery and equipment 5,556,375 335,861 - 5,892,236 Furniture and fixtures 6,923,606 560,625 (15,930) 7,468,301 Other tangible assets 6,500,451 1,026,733 - 7,527,184 Leased assets 1,175,106 - - 1,175,106 Total 20,155,538 1,923,219 (15,930) 22,062,827 Book Value 5,800,125 6,016,157




52

6. Tangible assets (continued) Movement in tangible assets in the period from 1 January 2012 to 31 December 2012 is presented below:

Cost 1 January

2012 Additions Disposals

Transfers 31 December

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 assets 1,184,279 - - (8,758) 1,175,521 Total 24,017,850 3,344,868 (1,407,055) - 25,955,663

Accumulated depreciation(-) 1 January

2012 Additions Disposals

Transfers 31 December

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 assets 1,183,682 182 - (8,758) 1,175,106 Total 19,988,844 1,551,023 (1,384,329) - 20,155,538 Book Value 4,029,006 5,800,125 7. Investment properties

None 8. Intangible assets

Movement in intangible assets in the period from 1 January to 31 December 2013 is presented below:

Cost 1 January 2013 Additions Disposals 31 December 2013 Software 26,745,795 1,694,417 - 28,440,212 Construction in progress 926,220 5,890,809 - 6,817,029 Total 27,672,015 7,585,226 - 35,257,241 Accumulated depriciation (-) 1 January 2013 Additions Disposals 31 December 2013 Software 22,840,417 1,899,218 - 24,739,635 Total 22,840,417 1,899,218 - 24,739,635 Book value 4,831,598 10,517,606




53

8. Intangible assets (continued) Movement in intangible assets in the period from 1 January to 31 December 2012 is presented below: Cost 1 January 2012 Additions Disposals Transfers 31 December 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 depreciation (-) 1 January 2012 Additions Disposals Transfers 31 December 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 9. Investments in associates

None.

10. Reinsurance assets Outstanding reinsurance balances of the Company presented on balance sheet and income statement, arising from existing reinsurance contracts as of 31 December 2013 and 31 December 2012 are as follows: 31 December 2013 31 December 2012 Reinsurance share of unearned premiums reserve (Note 17.15) 2,620,344 2,665,378 Reinsurance share of outstanding claim reserve (Note 17.15) 3,452,585 2,446,834 Reinsurers' share of provision equalization (Note 17.15) 499,360 378,014 Reinsurance companies' current account (net) 493,603 (455,271) Total reinsurance assets / (liabilities) 7,065,892 5,034,955 Gains and losses recognized in the statement of income in accordance with existing reinsurance contracts are as follows: 1 January–


31 December 2012 Ceded premiums to reinsurers (Note 24) (8,888,965) (9,265,068) Commissions received from reinsurers (Note 32) 2,903,680 2,039,795 Reinsurance share of claims paid 2,586,998 1,833,516 Reinsurance share of outstanding claim reserve 1,005,747 1,225,803 Reinsurance shares of unearned premium reserve (Note 17) (45,034) 1,227,910 Reinsurers' share of provision equalization (Note 17) 121,346 128,775 Total reinsurance income / (expense) (2,316,228) (2,809,269)




54

11. Financial asset 11.1 Line with operations, sub-classifications of presented items:

31 December 2013 With risk on policyholders Company portfolio

Blocked Non-

blocked

Total

Blocked Non-

blocked

Total Financial Assets Available-for-sale Government bonds and Treasury bills 78,513,796 - 78,513,796 6,301,220 - 6,301,220 Eurobond 154,248,459 - 154,248,459 15,764,894 - 15,764,894 Time deposit 33,300,347 - 33,300,347 - - - Financial assets held for trading Asset-Backed Securities - - - - 5,019,829 5,019,829 Private Sector Bonds - - - - 36,808,947 36,808,947 İnvestment Fund - - - - 16,000,002 16,000,002 Total 266,062,602 - 266,062,602 22,066,114 57,828,778 79,894,892 31 December 2012 With risk on policyholders Company portfolio Blocked Non-

blocked Total Blocked Non-

blocked Total

Financial Assets Available-for-sale Government bonds and Treasury bills 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 - - - Financial assets held for trading 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




55

11. Financial asset (continued) 11.2 Marketable securities except stock issued during the year: None 11.3 Debt securities issued during the year: None. 11.4 Securities are carried at cost on the balance sheet and stock market values of financial assets, the

valuation of marketable securities exchange and cost value that ranges from financial fixed assets information:

Securities 31 December 2013 31 December 2012 Cost Book Value Fair Value Cost Book Value Fair Value Financial Assets Available-for-

sale Government bonds and Treasury

bills (TL) 7,698,000 6,301,220 6,301,220 30,641,141 30,929,539 30,929,539

Eurobond (USD) 18,862,187 15,764,894 15,764,894 - - - 26,560,187 22,066,114 22,066,114 30,641,141 30,929,539 30,929,539 Financial assets held for trading Asset-Backed Securities 4,722,088 5,019,829 5,019,829 5,120,760 5,856,240 5,856,240 Private Sector Bonds 36,535,082 36,808,947 36,808,947 10,500,000 10,532,970 10,532,970 Investment Fund 16,000,002 16,000,002 16,000,002 - - - 57,257,172 57,828,778 57,828,778 15,620,760 16,389,210 16,389,210 Financial investments with risks

on policy holders

Government bonds and Treasury(TL) 91,169,921 78,513,796 78,513,796 67,257,935 70,240,904 70,240,904 Eurobond (USD) 158,662,496 147,118,584 147,118,584 175,735,083 185,908,997 185,908,997 Eurobond (EUR) 6,598,684 7,129,875 7,129,875 5,284,565 6,048,593 6,048,593 Time Deposit(TL) 32,700,000 33,300,347 33,300,347 87,861,825 91,232,084 91,232,084 Time Deposit (USD) - - - 8,743,653 8,797,551 8,797,551 289,131,101 266,062,602 266,062,602 344,883,061 362,228,129 362,228,129 Total 372,948,460 345,957,494 345,957,494 391,144,962 409,546,878 409,546,878

The Company's non-current financial assets shown with their cost value (Note 45.2).




56

11. Financial Assets (continued) As of 31 December 2013 and 31 December 2012, available for sale financial assets and financial assets at risk of policyholders movement are as follows: 31 December 2013 31 December 2012 1 January 409,546,878 423,394,806 Charge for the year 2,343,898,587 424,762,744 Disposal (2,355,946,888) (411,235,693) Valuation (decrease) / increase 6,637,471 (2,401,222) Disposals through redemption during the period (6,048,330) (26,055,361) Unrealized foreign exchange income (expense) (99,869) (14,048,968) The amount recognized in shareholders' equity (7,391,591) 2,147,004 Amount recognized in mathematical reserves (23,164,226) 19,327,533 The amount recognized under the income statement and technical provisions (21,474,537) (6,343,965) Total 345,957,494 409,546,878 The maturity analysis of financial assets: 31 December 2013 6 month- 1-3 More than Demand 0 - 3 month 3 - 6 month 1 year year 3 years Total Government bonds and

Treasury(TL) - - - - 11,791,947 73,023,069 84,815,016 Eurobond - - - - 34,239,170 135,774,183 170,013,353 Private sector bonds - 36,808,947 - - - - 36,808,947 Asset-Backed Securities - - - 5,019,829 - - 5,019,829 Time deposit - 33,300,347 - - - - 33,300,347 Investment Fund 16,000,002 - - - - - 16,000,002 Total 16,000,002 70,109,294 - 5,019,829 46,031,117 208,797,252 345,957,494 31 December 2012 6 month- 1-3 More than Demand 0 - 3 month 3 - 6 month 1 year Year 3 years Total Government bonds and

Treasury(TL) - 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




57

11. Financial Assets (continued) Analysis of the financial assets in foreign currency:

31 December 2013 Currency

Type Currency Amount Rate Amount TL

Financial Assets Available-for-sale USD 7,386,447 2.1343 15,764,894 TL 6,301,220 Total 22,066,114 Financial assets held for trading TL 57,828,778 Total 57,828,778 Financial investments with risks on policy holders USD 68,930,602 2.1343 147,118,584 EUR 2,428,018 2.9365 7,129,874 TL 111,814,144 Total 266,062,602 345,957,494

31 December 2012 Currency

Type Currency Amount Rate Amount TL

Financial Assets Available-for-sale TL 30,929,539 Total 30,929,539 Financial assets held for trading TL 16,389,210 Total 16,389,210 Financial investments with risks on policy holders USD 109,226,157 1.7826 194,706,548 EUR 2,572,009 2.3517 6,048,593 TL 161,472,988 Total 362,228,129 409,546,878

11.5 The sums of the securities included within the securities and long term securities group, which are

issued by the partners, affiliates and subsidiaries of the corporation and the partnerships issuing these: None

11.6 Value increases financial assets in the last three years: None.




58

12. Payables and Receivables 12.1 Classifications of receivables as trade receivables from customers, receivables from related parties,

advance payments (short term and long-term payments) and others: 31 December 2013 31 December 2012 Receivables from insurance operations 14,914,669 9,848,772 Loans to the policyholders 137,191,687 144,493,264 Receivables from pension operations 7,140,086 10,546,002 Receivables from related parties 1,782,259 170,148 Other receivables 273,775 143,214

Total 161,302,476 165,201,400 Doubtful receivables from main operations - 570,351 Provision for doubtful receivables from operating activities - (570,351) Total 161,302,476 165,201,400 Prepaid expenses details are given in note 47. Aging details of due receivables from insurance operations are presented below: 31 December 2013 31 December 2012 Receivables from policyholders 0-3 months 5,032,751 3,944,074 3 -6 months 3,166,866 2,267,734 6- 9 months 1,987,304 1,354,012 9 - 12 months 706,821 483,181 Total 10,893,742 8,049,001 Overdue receivables from insurance operations are as follows: 31 December 2013 31 December 2012 0-3 months 2,959,727 941,042 3 - 6 months 230,695 363,610 6 - 9 months 189,494 194,955 9 -12 months 36,367 78,157 More than 1 year 15,265 - Total 3,431,548 1,577,764 Total 14,325,290 9,626,765

As of 31 December 2013, total of receivables from reinsurance companies and subrogation receivables is TL 589,379 (31 December 2012 – TL 222,007)




59

12. Payables and Receivables (continued) Distribution of current loans debt

31 December 2013 31 December 2012 Up to 3 months - 224,072 3-6 months - 66,829 6-9 months 18,926 88,602 9-12 months 115,611 24,564 Total 134,537 404,067

Other (demand) 137,057,150 144,089,197 Total 137,191,687 144,493,264

Movement of provision for receivables from insurance operations is as follows: 31 December 2013 31 December 2012 1 January 570,351 570,351 Charge for the year - - Provisions written-off - - Write-off receivables (570,351) - 31 December - 570,351

12.2 The Company’s receivables from and payables to its shareholders, affiliates and subsidiaries: 31 December 2013 31 December 2012 Receivables Payables Receivables Payables

Commercial Non-

Commercial Commercial Non-



Commercial Affiliates Hac Ömer Sabanc A.Ş. - - 7,629 - - - 21,167 Aviva International 241,117 - - 26,328 150,812 - - - Other - - - 50,256 - - - 21,423 Total 241,117 - - 84,213 150,812 - - 42,590

12.3 Total amount of mortgages and other guarantees obtained for receivables


USD EUR TL Total (TL) USD EUR TL

Total (TL)

Guarantees and contingencies: Letters of guarantee 140,864 58,730 4,906,135 5,105,729 83,782 - 2,246,350 2,330,132 Mortgage securities - - 241,200 241,200 - - 241,200 241,200 Other guarantees and

contingencies: 229,844 8,113 151,800 389,757 155,503 6,498 86,800 248,801

Total 370,708 66,843 5,299,135 5,736,686 239,285 6,498 2,574,350 2,820,133




60

12. Payables and Receivables (continued) 12.4 Denominated foreign currency and not guaranteed rates of exchange receivables and payables and

foreign currency amount separately and TL conversion dates : Assets 31 December 2013 31 December 2012 Cash and cash equivalents Rate TL Amount Rate TL Amount EUR 3,074 2.9365 9,026 1,456 2.3517 3,424 GBP 1,677 3.5114 5,888 356 2.8708 1,023 USD 9,006,088 2.1343 19,221,694 3,914,321 1.7826 6,977,668 Total 19,236,608 6,982,115

Financial assets and financial investments at risk policyholders Rate TL Amount Rate TL Amount USD 76,317,048 2.1343 162,883,477 109,226,157 1.7826 194,706,548 EUR 2,428,019 2.9365 7,129,877 2,572,009 2.3517 6,048,593 Total 170,013,354 200,755,141

Receivables from main operations Rate TL Amount Rate TL Amount EUR 51 2.9365 149 9,882 2.3517 23,238 USD 32,845,312 2.1343 70,101,750 35,522,772 1.7826 63,322,894 Total 70,101,899 63,346,132 Receivables from related parties Rate TL Amount Rate TL Amount GBP 68,667 3.5114 241,117 52,533 2,8708 150,812 USD - - - 15 1,7826 27 EUR 360 2.9365 1,057 Total 242,174 150,839 Other current asset Rate TL Amount Rate TL Amount EUR - 2.9365 - - - - GBP - 3.5114 - - - - USD - 2.1343 - 375 1.7826 668 Total - 668 Other Receivables Rate TL Amount Rate TL Amount EUR 1,000 2.9365 2,937 1,000 2.3517 2,352 USD 200 2.1343 427 200 1.7826 357 Total 3,364 2,709




61

12. Payables and Receivables (continued) Liabilities 31 December 2013 31 December 2012 Receivables from main operations Rate TL Amount Rate TL Amount EUR 161 2.9365 474 42 2.3517 100 USD 57,875 2.1343 123,523 - - - Total 123,997 100 Receivables from related parties Rate TL Amount Rate TL Amount EUR - 2.9365 - 121,168 2.3517 284,950 GBP 8,020 3.5114 28,162 - - - USD 200,166 2.1343 427,214 538,709 1.7826 960,303 Total 455,376 1,245,253

Other liabilities Rate TL Amount Rate TL Amount EUR 74,028 2.9365 217,384 4,915 2.3517 11,559 GBP 6,528 3.5114 22,923 - - - USD 247,096 2.1343 527,377 210,629 1.7826 375,467 Total 767,684 387,026

Provision for outstanding claims Rate TL Amount Rate TL Amount EUR 125,151 2.9462 368,720 85,625 2.3665 202,632 USD– (effective sales rate) 1,197,941 2.1413 2,565,151 895,072 1.7939 1,605,670 USD 286,584 2.1343 611,656 257,506 1.7826 459,301 Total 3,545,527 2,267,333

Deferred income and accrued expenses Rate TL Amount Rate TL Amount GBP 63,055 3.5114 221,411 331,365 2.8708 951,282 USD 13,277 2.1343 28,337 24,393 1.7826 42,482 Total 249,748 993,764

Life mathematical reserves Rate TL Amount Rate TL Amount EUR– (effective sales rate) 401,852 2.9462 1,183,938 1,488,170 2.3665 3,521,755 EUR 99,439 2.9365 292,003 231,363 2.3517 544,096 USD– (effective sales rate) 2,735,768 2.1413 5,858,101 7,009,339 1.7939 12,574,054 USD 95,668,567 2.1343 204,185,424 129,565,063 1.7826 230,962,682 Total 211,519,466 247,602,587

13. Derivative financial instruments The Company does not have any derivative financial instruments as of 31 December 2013. (31 December 2012: None)




62

14. Cash and cash equivalents

As at 31 December 2013 and 31 December 2012, cash and cash equivalents are as follows:

31 December 2013 31 December 2012 Cash on hand 401 1,844 Bank deposits and checks issued 226,279,431 235,212,090 Other cash and cash equivalents 88,257,388 63,971,519 Total 314,537,220 299,185,453 31 December 2013 31 December 2012 Foreign currency cash and cash equivalents 19,236,608 6,982,115 - demand deposits 153,505 142,983 - time deposits 19,030,814 6,791,229 - credit card collections 52,143 46,635 - cash 146 1,268 TL cash and cash equivalents 295,300,612 292,203,338 - demand deposits 3,623,988 4,612,426 - time deposits / participation accounts 203,471,123 223,665,451 - credit card collections 88,205,246 63,924,885 - cash 255 576 Total 314,537,220 299,185,453 The weighted average interest rates of term deposits: 31 December

2013 31 December

2012 Annual interest

rate (%) Annual interest

rate (%) USD 1.81 0.29 TL 9.12 8.44

As of 31 December 2013, TL deposit maturity changes between 2 January 2014 and 25 April 2014, foreign currency deposits maturity between 2 January 2014 and 6 January 2014 As of 31 December 2012, TL deposit maturity changes between 2 January 2013and 19 April 2013, foreign currency deposits maturity between 7 January 2013 and 5 September 2013 Demand and time deposits in foreign currency: 31 December 2013 31 December 2012 Foreign currency TL amount Foreign currency TL amount Time Demand Time Demand Time Demand Time Demand USD 8,916,654 66,673 19,030,814 142,300 3,809,732 80,079 6,791,229 142,748 EUR - 1,825 - 5,359 - 100 - 235 GBP - 1,665 - 5,846 - - - - Total 19,030,814 153,505 6,791,229 142,983




63

15. Share Capital 15.1 Distributions to the partners, the sums of the transactions concluded by the entity with the

partners, under the own wills of the partners: In the Ordinary General Assembly of the Company convened on 28 March 2013, it was unanimously decided with respect to the distribution of profit, to allocate TL 1.938.625 of first legal reserves from the after tax net profit of TL 38,772,504 accrued according to the balance sheet of 2012 financial year, to pay the partners total TL 33,632,446 of I. and II. Dividend as TL 0,0094 per share in consideration of their shares, to allocate TL 3,184,348 of second legal reserves and to transfer TL 17,085 to the extraordinary reserves account, and to distribute the dividend to be distributed to the partners as of April 01, 2013. As of December 31, 2013 the dividend payment to the legal entity partners is completed. 15.2 Capital and profit reserves: Profit reserves: As of 31 December 2013, the Company’s profit reserves are comprised of legal reserves of TL 3,545,456 TL, statutory reserves of 5,306,815 extraordinary reserves of TL 5,456,146 and valuation of financial assets of TL (5,913,273) (31 December 2012 ;1,912,678 TL). The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5%, 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% of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, 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 reserves: As of 31 December 2013 and 31 December 2012, Company’s capital reserve about TL 66,865,115 occurs the difference between Aviva Emeklilik nominal capital before merger about TL 82,320,000 and Ak Emeklilik capital increase amount about TL 15,779,197; inflation adjustment affiliates about TL 324,236 amount and associate free capital shares increase about TL 76 amount. Valuation of financial assets: Unrealized gains and losses arising from changes in the fair value of available-for-sale financial assets accounted under ‘’Valuation of Financial Assets" Valuation of financial assets during the period are as follows: 2013 2012 1 January 1,912,678 284,403 Fair value gain / (loss), net (7,825,951) 1,628,275 31 December (5,913,273) 1,912,678




64

15. Share Capital (continued) 15.3 Share capital movement As of 31 December 2013 and 31 December 2012, there are no capital increase. The share capital of the Company consists of 3,577,919,700 issued shares with TL 0.01 nominal value each.

More detailed information regarding the Company's share capital are disclosed in Note 2.13 16. Other Provisions and Capital Component of Discretionary Participation (“DPF”) Details of other reserves in shareholders' equity is disclosed in Note 15.

17. Insurance contract liabilities and reinsurance assets 17.1 Guarantees to be provided for life and non-life branches and guarantees provided for life and non-life branches based on assets is presented below: 31 December 2013 31 December 2012 Branch

Required Establishment

(*) Current Blockage

(nominal)

Current Blockage (official journal

price)

Required Establishment

(*) Current Blockage

(nominal)

Current Blockage (official journal

price) Life 386,456,814 389,836,181 408,537,089 407,913,612 405,385,354 417,277,952 Non-life 3,189,964 4,224,290 4,224,290 3,273,205 3,938,453 3,938,453 Total 389,646,778 394,060,471 412,761,379 411,186,817 409,323,807 421,216,405 (*) As of 31 December 2013 and 31 December 2012, the amounts should be established. Total mortgages or guarantees on assets:

31 December 2013

31 December 2012

Securities portfolio (nominal values) TL 236,903,908 232,402,624 Foreign currency 157,156,563 176,921,183 Total 394,060,471 409,323,807 Mentioned above asset values have been blocked on behalf of the Treasury.




65

17. Insurance contract liabilities and reinsurance assets (continued)

17.2 Number of life insurance policies, additions, disposals in the current period, and current life policy holders and their mathematical reserves are presented below: 31 December 2013 31 December 2012

Units Mathematical reserves TL

Units Mathematical reserves TL

Opening 1,612,962 381,222,270 1,204,978 415,969,273

Additions 1,223,919 74,786,693 1,007,490 61,771,034 Disposal 1,012,633 105,604,165 599,506 96,518,036 End of period 1,824,248 350,404,798 1,612,962 381,222,270 (1) Mathematical provisions are calculated in accordance with its own technical for each product. (2) As of 31 December 2013, there are no provision for canceled policies (31 December 2012: None)

a) Active at the beginning of the period and canceled during the period of the contractual provisions of mathematics are illustrated in outputs, canceled during the period of the unit-based policies, and their mathematical provisions, the input and output are not included in the figures.

b) As of 31 December 2013, for the amount of the loan allocated TL 137,057,150 (31 December 2012 – TL 144,089,197 TL) the amount of mathematical reserves and TL (20,803,654) (31 December 2012 – TL 19,327,533) the amount of the insured risk on financial assets at fair value shown in entries mathematical reserves

17.3 Insurance coverage given to non-life insurance branches: TL 57,977,591,255 (31 December 2012 –

TL 51,469,163,540). 17.4 Pension investment funds established by the Company and their unit prices: As of 31 December 2013,there are 24 (31 December – 19 ) pension fund established by the company. Fund Name

Unit price 31 December 2013

(TL)

Unit price 31 December 2012

(TL

AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 0,027049 0.024112 AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatrm Fonu 0.034230 0.036183 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatrm Fonu 0.036832 0.038188 AvivaSA Emeklilik ve Hayat A.Ş.Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 0.024309 0.021449 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 0.037740 0.037500 AvivaSA Emeklilik ve Hayat A.Ş. Karma Likit Emeklilik Yatrm Fonu 0.028684 0.027110 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Borçlanma Araçlar Emeklilik Yatrm Fonu 0.016905 0.014573 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Emeklilik Yatrm Fonu 0.019486 0.022084 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasas Likit Karma Emeklilik Yatrm Fonu 0.030506 0.028833 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 0.038420 0.038131 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Emeklilik Yatrm Fonu 0.037048 0.038279 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Karma Emeklilik Yatrm Fonu 0.017892 0.013699 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatrm Fonu 0.038525 0.044066 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu-Grup 0.029904 0.029400 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Esnek Emeklilik Yatrm Fonu 0.029859 0.028101 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Grup Emeklilik Yatrm Fonu 0.030080 0.033827 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Grup Emeklilik Yatrm Fonu 0.012499 0.012716 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Performans Esnek Emeklilik Yatrm Fonu 0.011011 0.011294 AvivaSA Emeklilik ve Hayat A.Ş Standart Emeklilik Yatrm Fonu 0.009384 - AvivaSA Emeklilik ve Hayat A.Ş. Katk Emeklilik Yatrm Fonu 0.009492 - AvivaSA Emeklilik ve Hayat A.Ş. Altn Emeklilik Yatrm Fonu 0.009684 -




66

17. Insurance contract liabilities and reinsurance assets (continued) 17.5 Total units and amount of participation certificates in portfolio and circulation: 31 December 2013 31 December2012 Participation Certificates in Circulation Unit Amount Unit Amount AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 4,166,571,893 112,701,603 3,336,793,261 80,456,759 AvivaSA Emeklilik ve Hayat A.Ş. Dengeli Emeklilik Yatrm Fonu 2,576,645,315 88,198,569 2,545,281,828 92,095,932 AvivaSA Emeklilik ve Hayat A.Ş. Esnek Emeklilik Yatrm Fonu 4,707,359,544 173,381,467 4,151,504,962 158,537,672 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Dş Borçlanma Araçlar Emeklilik Yatrm Fonu 2,693,566,546 65,477,909 2,451,698,406 52,586,479 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 8,822,267,347 332,952,370 9,138,937,065 342,710,140 AvivaSA Emeklilik ve Hayat A.Ş. Karma Likit Emeklilik Yatrm Fonu 1,378,511,434 39,541,222 1,518,001,307 41,153,015 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Borçlanma Araçlar Emeklilik Yatrm Fonu 1,325,639,857 22,409,942 1,068,689,723 15,574,015 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Emeklilik Yatrm Fonu 3,578,204,859 69,724,900 2,418,058,625 53,400,407 AvivaSA Emeklilik ve Hayat A.Ş. Para Piyasas Likit Karma Emeklilik Yatrm Fonu 11,392,862,165 347,550,653 9,877,401,900 284,795,129 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu 44,453,493,463 1,707,903,219 38,352,243,634 1,462,409,402 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Emeklilik Yatrm Fonu 27,342,332,449 1,012,978,733 20,719,039,114 793,104,098 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Uluslararas Karma Emeklilik Yatrm Fonu 1,996,844,859 35,727,548 700,199,574 9,592,034 AvivaSA Emeklilik ve Hayat A.Ş. Hisse Senedi Emeklilik Yatrm Fonu 7,655,532,979 294,929,408 4,911,509,677 216,430,586 AvivaSA Emeklilik ve Hayat A.Ş. Kamu Borçlanma Araçlar Emeklilik Yatrm Fonu-Grup 10,518,768,569 314,553,255 9,867,634,743 290,108,461 AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Esnek Emeklilik Yatrm Fonu 3,661,364,818 109,324,692 3,487,897,003 98,013,394 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Hisse Senedi Grup Emeklilik Yatrm Fonu 1,615,560,816 48,596,070 1,244,601,436 42,101,133 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Esnek Grup Emeklilik Yatrm Fonu 2,097,318,545 26,214,384 1,347,089,858 17,129,595 AvivaSA Emeklilik ve Hayat A.Ş. Büyüme Amaçl Performans Esnek Emeklilik Yatrm Fonu 124,032,871 1,365,726 108,649,657 1,227,089 AvivaSA Emeklilik ve Hayat A.Ş Standart Emeklilik Yatrm Fonu 677,211,876 6,354,956 - - AvivaSA Emeklilik ve Hayat A.Ş Katk Emeklilik Yatrm Fonu 21,034,337,322 199,657,930 - - AvivaSA Emeklilik ve Hayat A.Ş Altn Emeklilik Yatrm Fonu 999,059,073 9,674,888 - - 162,817,486,600 5,019,219,444 117,245,231,773 4,051,425,340 31 December 2013 31 December 2012 Constructor Participation Certificates Unit Amount Unit Amount AvivaSA Emeklilik ve Hayat A.Ş. Gelir Amaçl Alternatif Esnek Emeklilik Yatrm Fonu 10,000,000 109,670 10,000,000 107,956 AvivaSA Emeklilik ve Hayat A.Ş. Özel Sektör Borçlanma Araçlar Emeklilik Yatrm Fonu 10,000,000 101,026 - - AvivaSA Emeklilik ve Hayat A.Ş. BRIC Ülkeleri Esnek Emeklilik Yatrm Fonu 100,000,000 1,116,130 - - 120,000,000 1,326,826 10,000,000 107,956 17.6 Total units and portfolio amounts of additions, disposals, reversals and current individual and group private pension participants: 31 December 2013 31 December 2012

Unit Amount

TL Unit Amount

TL Individual Additions 191,011 314,021,732 121,318 277,148,695 Disposal 53,019 445,390,338 55,642 1,457,174,987 Current 643,894 4,038,304,788 497,848 3,217,780,421 Group Additions 16,924 25,092,804 15,862 99,449,925 Disposal 7,283 80,716,601 6,143 131,639,905 Current 82,986 980,914,656 70,875 833,644,919 Total 726,880 5,019,219,444 568,723 4,051,425,340




67

17. Insurance contract liabilities and reinsurance assets (continued)

17.7 Valuation methods used in profit share calculation of life insurances with profit shares:

The life mathematical reserves for the accumulated policies written from the Company's accumulated funds are valuated daily in compliance with TL and USD profit share technical principles approved by TR Undersecretariat of Treasury Foreign Trade on January 14, 1993 and September 12, 1996. The revenues of the mentioned investments are distributed as the revenues of the relevant investment instruments with the daily accrued interest method. Daily Profit Share System is applied to the life mathematical reserves for the accumulated life policies written from the Company's other funds in compliance with Profit Share Technical Principles and Life Insurance Regulation approved on November 1, 1999 by TR Prime Ministry, Undersecretariat of Treasury General Directorate of Insurance. Profit share values calculated according to the profit share rates calculated according to the daily yields of TL, USA Dollar and Euro investment instruments are reflected onto the accounts of the insured daily. 17.8 Total units of additions and their group or individual gross and net share participations in the

current period: 1 January– 31 December 2013 1January – 31 December 2012

Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Individual 191,011 309,542,438 306,205,219 121,318 151,092,323 147,787,291 Corporate 16,924 21,646,850 21,641,749 15,862 21,760,983 21,747,097 Total 207,935 331,189,288 327,846,968 137,180 172,853,306 169,534,388 In the table above; the contracts become effective in the 2013 and 2012, the total contracts become effective and ceased in the same period, contributions collected regarding these contracts and the contributions transferred to investment in the current period have been specified. Transfer amounts are not included in the current period numbers and balances. 17.9 Total units of additions from the other companies and their group or individual gross and net share participations in the current period:

1 January– 31 December 2013 1January – 31 December 2012

Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Individual 4,681 88,738,430 88,661,671 2,135 48,874,936 48,788,946 Corporate 1,213 11,908,740 11,908,633 8,132 47,418,981 47,418,658 Total 5,894 100,647,170 100,570,304 10,267 96,293,917 96,207,604

Transferred contribution from another company participant and charged contribution during this period have been explained in report. Contribution from another company combined with an established agreement and new contributions from the amount of the transfer is topic the above table 17.10 Total units of transfers from the Company’s life portfolio to private pension portfolio and their

group or individual gross and net share participations: None.




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17. Insurance contract liabilities and reinsurance assets (continued) 17.11 Total units of transfers from the Company’s private pension portfolio to other company or not, and together their personal and corporate allocation and gross and net share participations: 1 January– 31 December 2013 1 January– 31 December 2012

Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Unit

Participation Share

(Gross) TL

Participation Share

(Net) TL Individual 53,019 376,834,214 364,750,161 55,642 400,817,797 386,222,504 Corporate 7,283 63,066,574 62,921,743 6,143 43,109,766 42,991,221 Total 60,302 439,900,788 427,671,904 61,785 443,927,563 429,213,725 Unit: Shows the number of participants left the Company. Participation Share (Gross): Represents the sum of contributions as a result of separation. Participation Share (Net): Represent the remaining amount after the deduction of gross contribution share.

17.12 Total units of additions of life insurances and their group or individual allocation and gross and net premiums:

1 January - 31 December 2013 1 April- 31 December 2013

Unit(*) Net Premium

Amount TL (**)

Unit(*)

Net Premium Amount TL (**)

Individual 890,889 133,214,158 688,534 73,706,277 Group 333,029 17,310,986 318,954 40,825,231 Total 1,223,918 150,525,145 1,007,488 114,531,508

(*) Premium amount for the period does not include the renewals for 1 policy on 2013 and 1 policy on 2012 (**) Only new post life insurance details are shown in table above; re-enacted and renewal life insurance policies are not taken

into consideration.

17.13 Total units of disposals of life insurances and their group or individual allocation and gross net

premiums and net mathematical reserves:

1 January- 31 December 2013 1 January - 31 December 2012

Unit Mathematical

Reserve TL

Unit Mathematical

Reserve TL Individual 667,726 104,983,642 344,656 87,628,742 Group 344,907 620,523 254,850 510,660 Total 1,012,633 105,604,165 599,506 88,139,402

There is no mathematical provision calculated for annual life policies. For TL and USD unit based in policies, policy transaction for entering and exiting in the same period are not shown.




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17. Insurance contract liabilities and reinsurance assets (continued) 17.14 Profit share distribution rate of life insurances

Profit share distribution rate (%)

December 2013

Profit share distribution rate (%)

December 2012 TL (unit-based) %7.42 %8.33 USD (unit-based) %4.54 %6.33 TL (other) %9.29 %9.51 USD(other) %6.66 %6.48 EUR(other) %4.80 %4.79 17.15 Amounts from insurance contracts in the financial statements: 31 December

2013 31 December

2012 Gross insurance liabilities Provision for unearned premiums 44,231,754 42,506,691 Provision for outstanding claims 36,562,387 29,414,059 Equalization provision 9,321,483 6,522,503 Mathematical provisions(*) 466,658,294 544,639,000 Total 556,773,917 623,082,253 Reinsurance assets Provision for unearned premiums 2,620,344 2,665,378 Provision for outstanding claims 3,452,585 2,446,834 Equalization provision 499,360 378,014 Total 6,572,289 5,490,226 Net insurance liabilities Provision for unearned premiums 41,611,410 39,841,313 Provision for outstanding claims 33,109,802 26,967,225 Equalization provision 8,822,123 6,144,489 Mathematical provisions 466,658,294 544,639,000 Total 550,201,629 617,592,027 (*) Movements of mathematical provisions are disclosed in Note 17.2. Provisions are calculated on a net basis as described in Note 2.20.




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17. Insurance contract liabilities and reinsurance assets (continued) 17.15 Amounts from insurance contracts in the financial statements (continued): Movements in the provision for outstanding claims during the period: 31 December 2013 31 December 2012

Life Gross Reinsurance

share Net Gross Reinsurance

share Net 1 January 23,415,322 (2,426,469) 20,988,853 17,052,101 (1,221,031) 15,831,070 Paid claims (3,823,405) 741,924 (3,081,481) (2,283,184) 250,188 (2,032,996) Increase/decrease - - - Outstanding claims for the period 13,262,198 (1,466,892) 11,795,306 10,073,462 (1,236,303) 8,837,159 - Past years' outstanding claims (2,589,174) (115,850) (2,705,024) (1,427,057) (219,323) (1,646,381) 31 December 30,264,941 (3,267,287) 26,997,654 23,415,322 (2,426,469) 20,988,852 Reported damage 23,820,096 (2,219,860) 21,600,236 17,995,465 (1,582,679) 16,412,786 Incurred but not reported 6,444,845 (1,047,427) 5,397,418 5,419,857 (843,790) 4,576,067 Total 30,264,941 (3,267,287) 26,997,654 23,415,322 (2,426,469) 20,988,853


Personal accident Gross Reinsurance


share Net 1 January 5,998,737 (20,365) 5,978,372 4,979,423 - 4,979,423 Paid claims (907,655) - (907,655) (1,138) - (1,138) Increase/decrease - Outstanding claims for the period 1,361,083 (4,504) 1,356,579 2,252,655 (20,365) 2,232,290 - Past years' outstanding claims (154,719) (160,429) (315,148) (1,232,203) - (1,232,203) 31 December 6,297,446 (185,298) 6,112,148 5,998,737 (20,365) 5,978,372 Reported damage 3,472,341 (4,504) 3,467,837 3,183,555 (20,365) 3,163,190 Incurred but not reported 2,825,104 (180,794) 2,644,311 2,815,182 - 2,815,182 Total 6,297,445 (185,298) 6,112,148 5,998,737 (20,365) 5,978,372 Total 36,562,387 (3,452,581) 33,109,802 29,414,059 (2,446,834) 26,967,225

Movements in the provision for equalization during the period:


Equalization provision Gross Reinsurance


share Net 1 January 6,522,503 (378,014) 6,144,489 4,286,061 (249,239) 4,036,822 Net change 2,798,980 (121,346) 2,677,634 2,236,442 (128,775) 2,107,667 31 December 9,321,483 (499,360) 8,822,123 6,522,503 (378,014) 6,144,489 Movements in the provision for unearned premiums during the period: 31 December 2013 31 December 2012

Provision for unearned premiums Gross Reinsurance


share Net 1 January 42,506,691 (2,665,378) 39,841,313 31,107,673 (1,437,468) 29,670,205 Increase (decrease)

- Current year provision for unearned premiums 43,104,168 (2,493,183) 40,610,985 41,375,158 (2,547,199) 38,827,958 - Prior years' provision for unearned premiums (41,379,105) 2,538,217 (38,840,888) (29,976,140) 1,319,289 (28,656,850)

Net change 1,725,063 45,034 1,770,097 11,399,018 (1,227,910) 10,171,108 31 December 44,231,754 (2,620,344) 41,611,410 42,506,691 (2,665,378) 39,841,313




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17. Insurance contract liabilities and reinsurance assets (continued) 17.15 Amounts from insurance contracts in the financial statements (continued): As of 31 December 2013 and 31 December 2012, net technical provisions which denominated foreign currency as follows: 31 December 2013 31 December 2012

Mathematical provisions Foreign

Currency Rate TL amount Foreign

Currency Rate TL amount TL - - 255,138,829 - - 297,036,413 USD 2,735,768 2.1413 5,858,101 7,009,339 1.7939 12,574,054 USD 95,668,567 2.1343 204,185,424 129,565,063 1.7826 230,962,682 EUR 401,852.45 2.9462 1,183,938 1,488,170 2.3665 3,521,755 EUR 99,439.04 2.9365 292,002 231,362 2.3517 544,096 466,658,294 544,639,000 Provision for unearned premiums TL - - 41,611,410 - - 39,841,313 41,611,410 39,841,313 Provision for outstanding claims TL - - 29,564,274 - - 24,699,892 USD 1,197,941 2.1413 2,565,151 895,072 1.7939 1,605,670 USD 286,584 2.1343 611,657 257,506 1.7826 459,031 EUR 125,151 2.9462 368,720 85,625 2.3665 202,632 33,109,802 26,967,225 Equalization provision TL - - 8,822,123 - - 6,144,489 8,822,123 6,144,489 As of 31 December 2013, damage development table is as follows: Accident year

2006 and earlier

2007 2008 2009 2010 2011 2012 2013 Total Current estimate of claims Accident year 329,438 846,145 1,597,244 1,221,544 1,525,863 1,851,084 3,616,998 13,768,123 24,756,439 1 year later 87,644 103,489 227,947 232,100 432,994 286,968 525,525 - 1,896,667 2 year later 1,663 - - 131,895 93,555 190,815 - - 417,928 3 year later 344 - 66,650 9,484 85,665 - - - 162,143 4 year later - - 6,110 50,050 - - - - 56,160 5 year later - - 3,100 - - - - - 3,100 6 year later - - - - - - - - - 7 year later - - - - - - - - - 8 year later - - - - - - - - - Total 419,089 949,634 1,901,051 1,645,073 2,138,077 2,328,867 4,142,523 13,768,123 27,292,437 Incurred but not reported claims 6,444,846 Additional claims according to the

actuarial claim development table 2,825,104 Total gross provision for outstanding

claims as at 31 December 2013 36,562,387




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17. Insurance contract liabilities and reinsurance assets (continued) 17.15 Amounts from insurance contracts in the financial statements (continued): As of 31 December 2012, damage development table is as follows: Accident year

2005 and earlier 2006 2007 2008 2009 2010 2011 2012 Total

Current estimate of claims 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 479,931 135,916 583,817 2,337,466 1,765,041 2,136,665 2,659,020 11,081,145 21,179,020 Incurred but not reported 5,419,857 Additional claims according to the actuarial claim

development table 2,815,182 Total gross provision for outstanding claims as at

31 December 2012 29,414,059

18. Investment contract liabilities

None

19. Trade and other payables and deferred income

Payables from main operations of the Company as at 31 December 2013 and 31 December 2012 are detailed below:

31 December 2013

31 December 2012

Payables from main operations 109,639,447 77,637,044

Participants transition accounts (pension payables) 92,166,667 68,325,519 Payables from insurance operations 5,918,543 5,106,963 Other (pension payables) 11,465,014 4,136,399 Other payables from main operations 89,223 68,163

Payables to related parties 4,435,880 3,414,468 Due to shareholder 84,213 42,590 Due to personnel 485,021 647,861 Payables to other related parties 3,866,646 2,724,017

Other payables (Note 47.1) 10,473,673 7,130,879 Total 124,549,000 88,182,391

As of 31 December 2013 and 31 December 2012, trade and other payables which denominated foreign currency are disclosed in Note 12.4 As of the balance sheet date, deferred revenue and expense accruals disclosed in Note 47.1. As of the balance sheet date, other short term liabilities include provision for unused vacation is 2,716,292 TL (31 December 2012: 2,587,221 TL).




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20. Financial liabilities As of 31 December 2013 and 31 December 2012, loans used by the Company are disclosed in Note 2.17 21. Deferred Tax The Company recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for Turkish Procedure Law purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TAS and tax purposes and they are given below. % 20 tax rate is applied in the calculation of deferred tax asset and liabilities As at 31 December 2013 and 31 December 2012, the detailed analysis of the items resulting deferred tax assets and liabilities are as follows: Deferred Tax

Assets / (Liabilities)

Deferred Tax Assets / (Liabilities)

Deferred tax (expense)

income

Deferred tax (expense)

income 31 December

2013 31 December

2012 31 December

2013 31 December

2012 Deferred tax assets Provision for employee termination benefits 514,226 362,003 31,003 107,405 Provision for personnel unused vacation 543,258 517,444 25,814 (76,694) Provisions for lawsuits 1,293,251 1,030,769 262,482 12,580 Provision for the actuarial chain method - - (220,526) Loan BSMV provision 82 214 (132) (54) Trading portfolio price difference 23,700 - 23,700 (37,086) Expense accruals 3,650,474 2,846,600 803,874 786,742 Equalization provision 1,764,425 - 1,764,425 - Deposits internal rate of return-linear interest rate

difference 12,842 - 12,842 - 7,302,258 4,757,030 2,924,008 572,367 Deferred tax liabilities Differences in depreciation methods on tangible and

intangible assets between tax regulations and the Reporting Standards (444,690) (329,876) (114,814) (148,734)

Other revenue reserves - - - - Profit commission - - - - Internal rate of return-linear Eurobond interest rate

difference (115,164) (88,104) (27,060) 50,035 (559,854) (417,980) (141,874) (98,699) Available for sale financial assets are recognized in

shareholders' equity of deferred tax assets (liabilities) 940,245 (234,326) - - Deferred tax, net 8,182,649 4,104,724 2,782,134 473,668




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21. Deferred Tax (continued) Movement of deferred tax assets / liabilities as of 31 December 2013 and 31 December 2012 are given below: 31 December 2013 31 December 2012 1 January 4,104,724 3,583,500 Cancellation available for sale financial assets are recognized in shareholders'

equity of deferred tax assets 234,326 281,882

Deferred tax income/ (expense) 2,782,134 473,668 Deferred tax asset / (liability) recognized in equity due to impairment losses on

available for sale financial assets 940,245 (234,326)

Deferred tax asset of actuarial loss on retirement pay provision 121,220 - Total 8,182,649 4,104,724 As of 31 December 2013 and 31 December 2012, there is no loss of accumulated portable 22. Retirement Benefits Obligations

Under the Turkish Labour Law, the Company is required to pay employee termination benefits to each employee who has qualified for such payment. The termination benefit to be paid is subject to upper limit of TL 3,254 as at 31 December 2013 (31 December 2012: TL 3,034). . According to IAS 19, actuarial calculations are necessary to calculate the liabilities of the Company, The provision has been calculated by using ‘’Projection Method’’ and estimating the present value of the future probable obligation of the Company arising from the retirement of employees. As of 31 December 2013 and 31 December2012, movement of actuarial assumptions used to calculate liabilities is presented below: 31 December

2013 31 December

2012 Discount rate (%) 8% 8% The estimated rate of salary increase (%) 4.5% 4.5%

Movement of provision for employee termination benefits during the period is presented below: 31 December

2013 31 December

2012 1 January 1,810,014 1,272,987 Paid during the period (2,404,128) (1,561,177) Provision in the current period 2,559,145 2,098,204 Actuarial loss (*) 606,097 - Total 2,571,128 1,810,014

(*) In the current year, the assumptions used in the calculation of employee termination benefits have been revised and actuarial loss, net of tax, is accounted for under shareholders equity.




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23. Provisions for other liabilities and charges

23.1 Provisions related to employee benefits, and others: None. 23.2 Provisions for other risks: Cost of the provision of the Company are as follows:

31 December 2013 31 December 2012 Dividend to personnel and salary provision 10,456,135 8,403,010 Provision for commissions 2,493,967 920,000 Provision for commissions to sales personnel 5,065,739 4,685,308 Total 18,015,841 14,008,318

Other short-term liabilities consist of unused vacation provisions amounting to TL 2,716,292 (31 December2012: TL 2,587,221). Detail of the provision of long-term debts and expense are disclosed in Note 47. 23.3 Total commitment amount which is not included liabilities:

31 December 2013 31 December 2012 USD EUR TL Total USD EUR TL Total Guarantees and

collaterals given Letter of guarantee 17,288 - 2,801,859 2,819,147 14,439 - 2,518,076 2,532,515 17,288 - 2,801,859 2,819,147 14,439 - 2,518,076 2,532,515 Insurance guarantee Life 1,137,595,411 21,307,435 30,008,877,786 31,167,780,632 825,876,946 22,044,750 22,895,672,256 23,743,593,952 Indvdual accident - - 26,809,810,623 26,809,810,623 - - 27,725,569,588 27,725,569,588 1,137,595,411 21,307,435 56,818,688,409 57,977,591,255 825,876,946 22,044,750 50,621,241,844 51,469,163,540

24. Net Insurance Premium Income As of 1 January-31 December 2013 and 1 January-31 December 2012 net premiums are as follows: 1 January – 31 December 2013 1 January – 31 December 2013

Gross Reinsurance


share Net Non-life 32,382,317 (54,155) 32,328,162 32,341,198 (56,533) 32,284,665 Life 200,505,353 (8,834,810) 191,670,543 165,202,464 (9,208,535) 155,993,929 Total premium revenue 232,887,670 (8,888,965) 223,998,705 197,543,662 (9,265,068) 188,278,594




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25. Fee revenues Revenue generated from private pension between 1 January -31 December 2013 and 1 January -31 December 2012 are as follows. 1 January- 1 January- 31 December 2013 31 December 2012 Fund management fee income 81,552,634 83,548,762 Management fee deduction 17,143,326 32,023,292 Entrance fee income 30,366,067 20,023,033 Management fee deduction in case of suspension

717,614 -

Market value increase income of capital commitment advances

246,759 13,275

Other technical income 159,335 102,892 Total 130,185,735 135,711,254 26. Investment income

1 January- 1 January- 31 December 2013 31 December 2012 Dividend income 6,251 21,162 Net realized gain/ (loss) 20,603,501 23,366,209 Financial assets held for trading, net realized gain / (loss) 1,607,971 1,052,940 Financial assets held for trading- Interest income on

deposits 12,877,583 18,765,643 Available-for-sale financial assets, net realized gain / (loss 474,571 1,701,710 Available-for-sale financial assets - Interest income on

deposits 5,643,376 1,845,916 Net sales gain/ (loss) 2,118,404 553,440 Financial assets held for trading 982,108 289,640 Available-for-sale financial assets 1,136,296 263,800 Other income - 539,608 Total 22,728,156 24,480,419 27. Net Income Accrual on Financial Assets 1 January- 1 January- 31 December 2013 31 December 2012 Financial Assets Held for Trading 11,374,651 1,017,826 Financial Assets Available-for-Sale (476,064) (58,182) Total 10,898,587 959,644 28. Assets Held at Fair Value through Profit and Loss Disclosed in Note 26.




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29. Insurance Rights and Claims Disclosed in Note 17. 30. Investment Agreement Rights None 31. Other Expenses 1 January - 1 January- 31 December

2013 31 December

2012 Operating expenses classified under technical

section

Non-life 29,497,715 19,109,003 Life 83,655,468 75,307,522 Pension 141,098,632 100,811,574 Total 254,251,815 195,228,099 Details of the operating expense are disclosed in Note 32. 32. Operating Expenses 1 January - 1 January-

31 December

2013 31 December

2012 Production commission expenses 100,781,361 66,916,475 Personnel expenses 92,128,458 77,624,510 Management expenses 31,896,152 28,370,217 Outsourced benefits and services 22,156,282 14,229,703 Marketing and sales expenses 9,212,263 9,543,372 Reinsurance commissions (2,903,680) (2,039,795) Other operating expenses 980,978 583,617

Total 254,251,815 195,228,099 33. Employee Benefit Expenses 1 January - 1 January - 31 December

2013 31 December

2012

Wages and salaries 49,479,892 45,308,139 Commissions and promotions expenses 13,813,418 7,859,828 Other wage expenses 10,922,390 9,864,681 Social security premiums 7,755,175 6,981,984 Other personnel expense 6,951,355 5,551,791 Termination benefits expenses 2,404,128 1,561,177 Notice pay expenses 172,770 142,236 Unused vacation expenses 629,330 354,674

Total 92,128,458 77,624,510 There is no share-based payment transaction.




78

34. Financial costs 34.1 Finance expenses:

1 January- 1 January- 31 December

2013 31 December

2012 Financial expenses (direct expenses include) - 448 34.2 Financial expense relevant part of the shareholders, affiliates and subsidiaries (Exceed 20% of the

total amount will be illustrated separately): None 34.3 Sales and purchases to partners, subsidiaries and investments (Exceed 20% of the total amount

will be illustrated separately):

1 January- 1 January- 31 December 2013 31 December 2012 Purchased services Hac Ömer Sabanc Holding A.Ş. 194,054 205,014 Aviva Europe SE 24,843 - 218,897 205,014 Services provided Hac Ömer Sabanc Holding A.Ş. 373,261 388,330 Aviva Europe SE 48,880 - 422,141 388,330

34.4 Paid interest and rent received from partners, subsidiaries and affiliates (Exceed 20% of the total

amount will be illustrated separately): 31 December 2013– TL 41,414 (31 December 2012 – TL 29,205).




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35. Corporate Tax The Company activities are subject to the tax legislation and applications in force in Turkey. In Turkey, corporate tax rate is 20%. Corporate tax is declared until the evening of the twenty-fifth day of the forth month following the end of the relevant accounting period and is paid as a single installment until the end of the relevant month. In compliance with the tax legislation, advance tax is calculated and paid at the rate of 20% over the earnings as of the quarterly periods and the sums paid this way are set off from the tax calculated over the annual earning. The financial loss shown on the return according to the Corporate Tax Law, can be deducted from the corporate tax base of the period, on condition not to exceed 5 years. The returns and the relevant accounting records can be inspected at the tax administration office within five years and the tax accounts can be revised. The dividend payments effected except to those joint stock companies settled in Turkey which are not liable for the corporate tax and income tax and which are exempted from these, and to those real entities which are settled or not settled in Turkey and to those legal entities which are not settled in Turkey, are subject to 15% income tax. The dividend payments from the joint stock companies settled in Turkey to the joint stock companies settled again in Turkey are not subject to income tax. Moreover, income tax is not calculated again in case the profit is not distributed or if added onto the capital The dividend earnings of the corporations from participation in the capital of another corporation which is subject to full liability (except the profit shares from the participation certificates of the investment funds and share certificates of the investment partnerships) are exempted from the corporate tax. Moreover, 75% of the earnings arising of the sale of the participation shares, real estates, preferential rights, founder shares and dividend shares of the corporations, which are included within their assets at least for a period of two full years, are exempted from the corporate tax, in order to benefit from the exemption, the mentioned earning is required to be kept in a fund account under liabilities and not to be withdrawn for a period of 5 years, and the sales price is required to be collected by the end of the second calendar year following the year in which the sale is made. The Company should prepare the reports which are required within the scope of "General Communiqué on Distribution of Hidden Income through Transfer Pricing" (Series no:1) published in November 2007 until the time for presentation of corporate tax return The tax income and expenses included in the income statements for the periods which ended on December 31, 2013 and 2012 are summarized below: 1 January - 1 January- 31 December 2013 31 December 2012 Current income tax (10,529,592) (14,215,051) Deferred tax income / (expense) 2,782,134 473,668 Total income tax expense (7,747,456) (13,741,383) As the end of 31 December 2013and 31 December 2012, Deferred tax assets / (liabilities) are summarized below: 31 December 2013 31 December2012 Deferred tax assets 8,742,503 4,757,030 Deferred tax liabilities (559,854) (652,306) Deferred tax assets /(liabilities), net 8,182,649 4,104,724




80

35. Corporate Tax (continued) Reconciliation of actual tax expense is as follows: 1 January- 1 January- 31 December 2013 31 December 2012 Income before tax 38,492,252 52,513,887 Tax rate 20% 20% Tax calculated (7,698,450) (10,502,777) Income not subject to tax 2,804,494 2,130,067 Non-deductible expenses, net (5,635,636) (5,842,341) Provision for income tax expense (-) (10,529,592) (14,215,051) Deferred tax income (Note 21) 2,782,134 473,668 (7,747,456) (13,741,383) The Company has prepaid tax amounting to TL 6,788,702 (31 December 2012– TL 13,174,011) 1 January-


31 December 2012 Provision for tax 6,762,489 14,215,051 Prepaid tax (5,810,263) (11,776,205) The amount of withholding tax to be deducted (968,439) (1,397,806) Total tax liabilities / (assets) (16,213) 1,041,040 36. Net Income from the Changes in Foreign Exchange Rates 1 January- 1 January- 31 December

2013 31 December

2012 The risk of financial investment income on policyholders 65,205,058 16,461,858 The risk of financial investment expenses on policyholders (38,464,662) (26,659,323) Available-for-sale financial assets, revenue 6,092,274 2,601,117 Available-for-sale financial assets, expenses (632,038) (4,093,816) Other foreign exchange revenue transactions 11,271,555 3,505,422 Other operations expenses of foreign exchange (7,569,864) (4,831,679) Total 35,902,323 (13,016,421)




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37. Earnings per Share 37.1 With the requirement of shown separately for common shares and preference shares, earnings per

share and dividend rates: Shareholder of the company's earnings per share calculation is as follows. 31 December 2013 31 December 2012 Net profit for the period 30,744,794 38,772,504 Total shares 0.01 per each 3,577,919,700 3,577,919,700 Earnings per Share (TL) 0.0086 0.0108 38. Dividends per Share: Regarding the Company’s profit for the year 2012, in return for their shares

earnings per share is TL 0.0108 for each shareholder. As of 1 April 2013 the total amount of dividend distributed is TL 33,632,445. The company will decide the dividend to be distributed and profit distribution with the shares of shareholders in General Assembly held in 2014.

39. Cash generated from operations: The cash flows from operating activities is presented in the accompanying statement of cash flows.

40. Convertible bond: None.

41. Redeemable preference shares: None

42. Risks The amount of provision required for the lawsuits against the accompanying financial statements of other long-term debts and expenses are taken into account. As of 31 December 2013, total amount including the lawsuits followed under outstanding claim reserves is TL 15,297,413 (31 December 2012: TL 11,762,579). 43. Commitments TL 8,819,147 (31 December 2012: TL 2,532,515) amount letters of guarantee given to suppliers and the Executive Directorate by Company.

44. Business mergers

None.




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45. Related party transactions

Benefits provided to executive management As of 31 December 2013 and 2012, wages and other benefits provided to top management such as; Chairman and members of the Board of Directors, managing director and assistant managing director during the year are shown below: 1 January- 1 January- 31 December 2013 31 December 2012

Benefits provided to executive management

4,473,361 4,060,471

Total 4,473,361 4,060,471 Employer's share of social security 156,450 129,974 31 December 2013 31 December 2012 Akbank T.A.Ş –Credit card receivables 87,747,296 63,732,510 Other cash and cash equivalents 87,747,296 63,732,510 Akbank T.A.Ş – Bank deposit 97,208,869 142,741,572 Banks 97,208,869 142,741,572

As of 31 December 2013 and 31 December 2012, The Company’s portfolio of financial assets classified as held for trading and financial assets issued by related parties of the Company are as follows:

31 December 2013 Nominal Cost Fair Value Book Value Private Sector bonds Akbank T.A.Ş. 6,520,000 6,520,000 6,530,628 6,530,628 Ak Finansal Kiralama A.Ş - - - -

Başkent Elektrik Dağtm A.Ş. 4,500,000 4,500,000 4,549,590 4,549,590

11,020,000 11,020,000 11,080,218 11,080,218

31 December 2012 Nominal Cost 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




83

45. Related party transactions (continued) 31 December 2013 31December 2012 Other receivables from related parties Aviva Sigorta A.Ş. (Aviva Sigorta) 7,010 - Akbank T.A.Ş 1,526,946 - Aviva Sigorta A.Ş. (Aviva Sigorta) 4,130 - Vista Turizm ve Seyahat A.Ş. (Vista) - 15,945 1,538,086 15,945 31 December 2013 31 December 2012 Other payables to related parties Ak Portföy Yönetimi A.Ş. 2,858,071 869,192 AkSigorta A.Ş. (Aksigorta) 31,066 83,972 Bimsa Uluslararas İletişim ve Bilgi Sistemleri A.Ş. 552,196 1,035,477 Emeklilik Gözetim Merkezi A.Ş. 29,387 31,125 TeknoSA İç ve Dş Tic. A.Ş. (TeknoSA) 163,835 207,463 Vista Turizm ve Seyahat A.Ş. (Vista) 188,845 458,919 EnerjiSA A.Ş. 42,983 35,490 Aviva Sigorta A.Ş. 263 2,379 3,866,646 2,724,017 31 December 2013 31 December 2012 Payables from main operations Ak Portföy Yönetimi A.Ş. 723,250 754,156 723,250 754,156 31 December 2013 31 December 2012 Other payables from main operations Akbank T.A.Ş 89,223 68,163 31 December 2013 31 December 2012 Expense accruals from other related parties Aviva PLC Europe 221,411 181,018 221,411 181,018




84

45. Related party transactions (continued) 1 January–


31 December 2012 Purchased services Akbank T.A.Ş. 87,594,909 64,033,186 - Paid administrative expenses 1,145,777 47,361 - Commission paid 86,449,132 63,985,825 Ak Portföy Yönetimi A.Ş. 10,995,832 9,223,082 Vista (administrative expenses) 2,666,246 2,510,750 Citibank A.Ş. (commission and bonus expenses and performance bonuses) 154,981 231,071 BimSA (accounting and computing machinery) 464,959 158,282 Aviva Sigorta (car insurance policy expenses and consultancy services for integration

project) - 2,379 Emeklilik Gözetim Merkezi A.Ş. (examination fee, pension costs, joint promotion

services) 833,420 1,031,685 Milli Reasürans T.A.Ş. (Premiums Transferred) 22,077 669,551 Aksigorta A.Ş. 2,265,517 2,203,710 EnerjiSA Doğal Gaz Toptan Satş A.Ş 499,397 432,770 Other 390,114 539,874 105,887,452 81,036,340 Financial income Akbank (interest income) 10,395,029 16,040,509 10,395,029 16,040,509 Services provided Citibank A.Ş 549,463 1,439,268 Kordsa Global Endüstriyel İplik ve Kord Bezi San. ve Tic. A.Ş 412,797 414,703 Brisa Bridgestone Sabanc Lastik San. Ve Tic. A.Ş 304,043 284,673 Temsa Global San. Ve Tic. A.Ş 288,035 284,357 Akçansa Çimento San. Ve Tic. A.Ş 171,632 158,552 Enerjisa Doğal Gaz Toptan Satş A.Ş 256,147 226,208 Çimsa Çimento San. Ve Tic. A.Ş 166,700 153,617 Sabanc Üniversitesi 212,233 149,522 TeknoSA İç ve Dş ticaret A.Ş. 139,564 129,191 Ak Yatrm Menkul Değerler A.Ş. 49,364 39,247 Advansa Sasa Polyester Sanayi A.Ş 102,578 111,860 Exsa Satş Araştrma 3,261 3,715 I-Bmsa Uluslararas İş, Bilgi ve Yönetim Sistemleri A.Ş 54,317 47,074 Olmuksa Olmuk Mukavva San. ve Tic. A.Ş. 133,952 127,616 Yünsa Yünlü San. Tic. A.Ş 93,790 78,256 Aviva Sigorta A.Ş 113,031 304,269 Ak Portföy Yönetimi A.Ş 51,331 43,899 Milli Reasürans T.A.Ş. 10,878 380,496 Philip Morris Sabanc Satş ve Pazarlama A.Ş. 356,712 414,789 Philip Morris Sabanc Sigara ve Tütün A.Ş. 330,783 396,592 Philip Morris Seyahat Perakende Satş A.Ş. 9,659 20,324 Aksigorta A.Ş 160,057 133,771 Akbank T.A.Ş 2,898,418 52,197 Others 421,881 388,587 7,290,626 5,782,783 Dividend income Ak Yatrm Menkul Değerler A.Ş. - 3,968 Ak Portföy Yönetimi A.Ş. - 106 Tursa Sabanc Turizm ve Yatrm Tic. A.Ş. - 303

- 4,377




85

45. Related party transactions (continued) 45.1 Provision for doubtful receivables is provided for due from shareholders, affiliates and subsidiaries:

None. 45.2 Details of associates and subsidiaries having indirect capital and management relations with the

Company; names, amounts and rates of participations in the associates and subsidiaries; profit/loss for the period presented in the recent financial statements of such participations; net profit/loss for the period and period covered by the financial statements; information about whether these financial statements are prepared in accordance with the CMB standards; information about whether these financial statements are audited; details of the audit opinion (if the report includes unqualified, adverse or qualified opinion): As of 31 December 2013 and 2012, There are no subsidiaries of the Company and its subsidiaries. Information on other financial assets is as follows:

31 December 2013 Financial statements

Participation

rate % Participation

amount

Net period

profit (loss) Period

profit (loss) Current

period

CMB compliance with

standards

independent audit pass /

does not exceed

Independent auditor’s

opinion

Non-group Milli Reasürans A.Ş (**) 0.1494 575,082 - Unaudited - Emeklilik Gözetim Merkezi A.Ş. (**) 8.3326 263,222 - Unaudited - Enternasyonal Turizm Yatrm A.Ş. (**) 0.0001 2 - - - -

Unaudited -

Endüstri Holding A.Ş (**) 0.0001 626 - - - - Unaudited - 838,932 (**) As of the report date is not available. 31December 2012 Financial statement

Participation

rate % Participation

amount

Net period

profit (loss) Period

profit (loss) Current

period

CMB compliance with

standards

independent audit pass /

does not exceed

Independent auditor’s

opinion

Group Tursa A.Ş 0.008 71,119 3,196,296 3,335,186 31/12/2012 - Unaudited - Non-group Milli Reasürans A.Ş (**) 0.1494 575,082 - - - - Unaudited - Emeklilik Gözetim Merkezi A.Ş.(**) 8.3326 263,222 - - - - Unaudited - Enternasyonal Turizm Yatrm A.Ş. (**) 0.0001 2 - - - -

Unaudited -

Endüstri Holding A.Ş (**) 0.0001 626 - - - - Unaudited - 910,051 Provision for impairment (*) (60,594) Total 849,457 (*) Tursa A.Ş. provision impairment (**) As of the report date is not available. 45.3 Bonus shares obtained from associates or subsidiaries through internal resource capital increases:

None(31 December 2012- None). 45.4 On immovable real rights and their values: None 45.5 Guarantees, commitments, guarantee letters, advances and endorsements given in favor of

shareholders, associates and subsidiaries: None 46. Events after the reporting period: None




86

47. Other 47.1 Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet Other cash and cash equivalents consist of credit card receivables that have been blocked for a period of 1 to 31 days by the bank. Short-term other receivables consist of withholding tax and other receivables from various organizations. Other tangible assets consists of special costs. Other intangible assets consist of software. Other technical provisions and other provisions items consist of provision for equalization.

31 December

2013 31 December

2012 Prepaid expenses Deferred acquisition costs 15,089,269 14,606,922 Health Insurance Costs 602,838 110,196 Other expenses 776,648 1,159,822

16,468,755 15,876,940

Prepaid expenses and accrued income Other Prepaid Expenses 2,618,476 972,619

2,618,476 972,619

Other payables Trade payables 10,137,759 6,189,477 Other payables 335,914 941,402

10,473,673 7,130,879

Other payables and accrued expenses (long-term) Provision for lawsuits 6,466,255 5,153,850

6,466,255 5,153,850

Provisions for other taxes and similar obligations Loan interest BITT provision 413 1,069 413 1,069

Deferred income and accrued expenses Deferred commission income 631,937 978,810 No claim refund of premiums 15,115 43,675 Other general and administrative expenses 722,555 990,543

1,369,607 2,013,028

Other capital reserves Other capital reserves 66,540,803 66,540,803 Subsidiaries inflation adjustment 324,312 324,312

66,865,115 66,865,115




87

47. Other (continued) 47.1 Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet (continued) 1 January-

31 December 2013

1 January- 31 December

2012 Other technical income (Life) Loan unit price difference 19,285,837 6,976,119 Other technical income 13,818 19,429 Money not claimed by the owners - 53,453 19,299,655 7,049,001

Other technical expenses (Non-Life) Other Expenses 157,241 11,460 157,241 11,460 Other technical expenses (Pension) ISE Settlement and Custody Bank maintenance fee

2,358,599 1,564,429

Emeklilik gözetim merkezi service fee 388,377 351,975 Recognition charges - 549,275 Co-promotion operating expenses 322,455 251,847 Support service fee 930,522 706,582 Other expenses 2,221,849 2,344,220 6,221,802 5,768,328 Other expenses and losses Foreign exchange losses 7,569,864 4,831,679 Non-deductible expenses 400,794 1,842,248 Special communication tax expense 332,174 342,918 Other expenses 1,226,122 1,056,900 9,528,954 8,073,744 Other income and gains Foreign exchange gains 11,271,555 3,505,422 Other income 3,971,419 1,427,090 15,242,974 4,932,512 47.2 Total amount of each due to/from personnel items classified under “Other Receivables” and “Other

Short and Long Term Payables” exceeding one percent of total assets in the balance sheet: None.




88

47. Other (continued) 47.3 Descriptive disclosure in relation to amounts and resources of prior period income, expenses, and

losses Previous year's income and profits 1 January-

31 December 2013


2012 Tax Provision (*) 1,493,349 845,645 Cancellation of other technical expenses accrual 18,225 101,120 Cancelled invoices 2,247 14,052 Others 937,161 1,856 Total 2,450,982 962,673

Expenses and losses the previous year


2013


2012 Invoices arriving late 328,543 42,269 Premium adjustment 275,109 573 Other expenses - 12,421 Adjustment to profit commission 86,421 - Total 690,073 55,263

(*) This amount consist of the difference between corporate tax base and corporate tax declaration of the

years 2012 and 2011. 47.4 Other notes should be included Discount, provision and other expense

1 January- 1 January- 31 December

2013 31 December

2012 Provision for unearned premiums, net 1,770,097 10,171,108 Outstanding claims provision, net 6,142,577 6,156,732 Life mathematical provision, net (37,849,518) (47,394,464) Equalization provision, net 2,677,634 2,107,667 Provision for employee termination benefits, net 155,017 537,027 Allowance, net 129,071 (383,468) Provision for taxes 10,529,592 14,215,051 Deferred tax provision (2,782,134) (473,668) General and administrative expenses, net 83,882 2,152,800 The Commission, net 1,573,967 (645,937) Staff bonuses, net 2,053,138 2,091,059 Provision for lawsuit 1,392,405 62,902 Other tax provisions (656) (272) (14,124,928) (11,403,463)



AvivaSA Emeklilik ve Hayat Anonim Şirketi THE STATEMENT OF PROFIT DISTRIBUTION AS OF 31 DECEMBER 2013 (Amounts expressed in Turkish Lira ( TL) unless otherwise stated).

89

The Statement of Profit Distribution

Current Period (*) Previous Period Note (31/12/2013) (31/12/2012) I. Distribution of profit for the period 1.1 Profit for the period 41,274,386 52,987,555 1.2 Taxes and surcharges payable (-) (10,529,592) (14,215,051)

1.2.1 Corporate tax (Income tax) (10,529,592) (14,215,051) 1.2.2. Income withholding tax - - 1.2.3 Other taxes and surcharges (deferred tax) - -

A. Net profit for the period (1.1-1.2) 30,744,794 38,772,504 1.3 Prior periods’ loses (-) (484,878) - 1.4 First legal reserve (-) - 1,938,625 1.5. Compulsory legal funds to be retained in the company (-) - - B. Net profit available for distribution [(A-(1.3+1.4+1.5)] - 36,833,879 1.6 First dividend to shareholders (-) - 1,788,960

1.6.1 To Holders of Ordinary Shares - 1,788,960 1.6.2 To Holders of Preferred Shares - - 1.6.3 To Holders of Participating Redeemed Shares - - 1.6.4 To Holders of Bonds Participating to Profit - - 1.6.5 To Holders of Profit and Loss Sharing Certificates - -

1.7 Dividends to personnel (-) - - 1.8 Dividends to founder shareholders (-) - - 1.9 Dividends to board of directors (-) - - 1.10 Second dividend to shareholders (-) - 31,843,486

1.10.1 To Holders of Ordinary Shares - 31,843,486 1.10.2 To Holders of Preferred Shares - - 1.10.3 To Holders of Participating Redeemed Shares - - 1.10.4 To Holders of Bonds Participating to Profit - - 1.10.5 To Holders of Profit and Loss Sharing Certificates - -

1.11 Second legal reserve (-) - 3,184,349 1.12. Statutory reserves (-) - - 1.13. Extraordinary reserves - 17,085 1.14 Other reserves - - 1.15 Special funds - - II. Distribution of reserves - - 2.1 Distributed reserves - - 2.2. Second legal reserves (-) - - 2.3 Dividends to shareholders (-) - -

2.3.1 To Holders of Ordinary Shares - - 2.3.2 To Holders of Preferred Shares - - 2.3.3 To Holders of Participating Redeemed Shares - - 2.3.4 To Holders of Bonds Participating to Profit - - 2.3.5 To Holders of Profit and Loss Sharing Certificates - -

2.4 Dividends to personnel (-) - - 2.5 Dividends to board of directors (-) - - III. Earnings per share - - 3.1 To owners of ordinary shares - 0.0108 3.2 To owners of ordinary shares ( % ) - %108 3.3 To owners of preferred share - - 3.4 To owners of preferred share ( % ) - - IV. Dividend per share - 0.0094 4.1 To owners of ordinary shares - %94 4.2 To owners of ordinary shares ( % ) - - 4.3 To owners of preferred share - - 4.4 To owners of preferred share ( % ) - -

Profit distribution disclosed in Note 15.1 (*) Since profit distribution proposal for the year 2013 has not been prepared by the Board of Directors, the profit distribution table is indicated only in the amount of distributable profit.,

AVIVASA EMEKLİLİK VE HAYAT ANONİM ŞİRKETİTHE STATEMENT OF PROFIT DISTRIBUTION AS OF 31 DECEMBER 2013(Amounts expressed in Turkish Lira (TL) unless otherwise stated).

AvivaSA Emeklilik ve Hayat A.Ş. Trade Registry Number: 27158

Headquarters Address: Saray Mah. Dr. Adnan Büyükdeniz Cad. No:12 34768 Ümraniye – İstanbul

Tel: 0 (216) 633 33 33 Website: www.avivasa.com.tr

E-mail: [email protected]

http://www.avivasa.com.tr

mailto:kurumsaliletisim%40avivasa.com.tr?subject=

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