Garanti Faktoring 2013 Activity Report

Transcription

1 Garanti Faktoring 2013 Activity Report 1

2 INDEX SECTION I OVERVIEW... 5 Corporate Profile... 5 Capital of the Company and Shareholding Structure... 6 General Information on Shareholders... 7 Türkiye Garanti Bankası A.Ş Türkiye İhracat Kredi Bankası A.Ş Garanti Faktoring At a Glance... 8 Our Vision... 9 Our Mission... 9 Our Strategies... 9 Our Prerequisites... 9 Competitive Superiorities of Garanti Faktoring Organizational Structure and Organizational Structure Changes Branch and Personnel Information Side Benefits Granted to Personnel Education Background Board of Directors Backgrounds and Duties of the Board Members Committees and Attendance to Committee Meetings Senior Management Senior Management Background Details Turkish and Global Economy Overview Factoring Sector Overview Factoring in Turkey Factoring on a Global Scale SECTION II. FINANCIAL RIGHTS GRANTED TO MANAGING BODY MEMBERS AND SENIOR MANAGERS Rights Granted to the Board Members and Senior Managers Real and Cash Allowances Granted to Senior Managers and Representation Expenses SECTION III. RESEARCH AND DEVELOPMENT ACTIVITIES SECTION IV 2013 ACTIVITIES AND SIGNIFICANT PROGRESS IN THE ACTIVITIES Investments Assessment of the Operation of Internal Control, Internal Audit and Risk Management Systems by the Audit Committee Information on Direct and Indirect Subsidiaries and Respective Share Ratios Information on Acquired Shares Information on Private Audit and Public Audit Lawsuits Filed Against Garanti Faktoring Hizmetleri A.Ş Administrative or Civil Sanctions Imposed on Garanti Faktoring Hizmetleri A.Ş. and Management Body Members Previous Period Budget and Performance Assessment General Assembly Meetings Donation and Aid Granted in Social Responsibility Projects Donation and Aid Policy Information on Companies Group Amendments of the Articles of Association Corporate Governance Principles Compliance Rating Garanti Faktoring 2013 Activity Report 2

3 Rating Awards Our Units, 2013 Activities and Projects of the Next Period Sales Marketing and Coordination Product Management and Business Development Client and Correspondent Relations Treasury Treasury Marketing Operations/Legislations Human Resources and Training Our Sponsorships and 2013 Social Responsibility Projects SECTION V. FINANCIAL STATUS The View of the Chairman of the Board of Directors about the Period The View of General Manager about the Period Major Financial Indicators and Ratios Garanti Faktoring Eliminated Essential Balance Sheet Sizes Transaction Volume Evaluation of the Financial Status and 2013 Performance Information on GARFA Shares Finance Sources Findings About Capital Reserves and Evaluation of Management Body Information on Garanti Faktoring Hizmetleri A.Ş. Dividend Policy and Profit Distribution Transactions with Related Parties SECTION VI. RISKS AND EVALUATION OF THE MANAGEMENT BODY Financial Risk Management Objectives and Policies SECTION VII OTHER ISSUES Regulations on Factoring Legislation Important Events That Occurred After the End of the Activity Year SECTION VII. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Social responsibility projects that are realized in 2013 are shared in "Our Sponsorships and 2013 Social Responsibility Projects" section of the report SECTION IX. GARANTİ FAKTORİNG HİZMETLERİ A.Ş. - FINANCIAL STATEMENTS AS OF DECEMBER 31, Garanti Faktoring 2013 Activity Report 3

4 DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza Bilim Sok. No:5 Maslak, Şişli İstanbul, Turkey Tel :+90 (212) Fax:+90 (212) INDEPENDENT AUDIT REPORT ON THE ANNUAL ACTIVITY REPORT TO BE SUBMITTED TO THE GENERAL ASSEMBLY To the information of Garanti Faktoring Hizmetleri A.Ş. Board of Directors, 1. As part of our independent audit assignment, we made an assessment to see if the financial information stated in the annual activity report of Garanti Faktoring Hizmetleri A.Ş. ("Company") to be submitted to the General Assembly as of December 31, 2013 as well as the opinion and evaluations of the Board of Directors thereof are in compliance with the figures written in the financial tables with the same date which were subject to independent audit. 2. Company is responsible to prepare the annual activity report which is the subject of the report according to the Regulation on Determination of the Minimum Content of the Annual Activity Report of the Companies. 3. As an independent audit company, our responsibility is to provide our opinion on the consistency of financial information stated in the annual activity report with the financial tables audited by an independent audit company and referenced in the independent audit report dated January 29, We performed our assessment in compliance with principles and practices regulating preparation and announcement of annual activity reports imposed by the Turkish Commercial Code No ("TTK"). Purpose of these principles and practices is to ensure a reasonable assurance on the non existence of a significant error in relation with the consistency of financial information stated in the annual activity report and financial tables that were subject to independent audit and findings of the auditor as a result of its assignment. We believe that our assessments are reasonable and sufficient to support our opinion. 4. Our opinion is that the financial information stated in attached annual activity report, as well as the opinion and evaluations of the Board of Directors thereof are in compliance with the figures written in the financial tables of Garanti Faktoring Hizmetleri A.Ş. dated December 31, 2013 which were subject to independent audit. DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç, Independent Account and Financial Advisor Associate Chief Auditor İstanbul, February 27, 2014 Member of Deloitte Touche Tohmatsu Limited Garanti Faktoring 2013 Activity Report 4

5 SECTION I OVERVIEW Corporate Profile Garanti Faktoring was established with the title Aktif Finans Faktoring Hizmetleri A.Ş. on September 4, 1990 to provide factoring services to industry and trade companies and started to operate within the "Garanti" group upon the resolution taken in the Ordinary General Assembly Meeting of 2001 held on March 27, 2002 where its trade title was amended to Garanti Faktoring Hizmetleri A.Ş. ("Company"). The Company received its license from the Capital Markets Board ("CMK") to offer its shares to the public and was listed on the Borsa İstanbul ("BİST") in Company activities are regulated according to the Capital Markets Law, "the Code of Leasing, Factoring and Finance Companies" published on the Official Gazette No , dated 12/13/2012 and the "Regulation of Establishment and Operation Principles of Financial Leasing, Factoring and Finance Companies" of the Banking Regulation and Supervision Agency ("BRSA") and published in the Official Gazette No , dated 04/24/2013. Garanti Faktoring provides finance, guarantee and collection instruments required for both domestic and foreign trade through trade finance and receivable based finance concentration and 8.4% of its free floating shares are traded on the BİST National Market under the GARFA name. Garanti Faktoring's domestic and foreign factoring transactions are performed focusing on the customer's needs over a wide ranging network with the synergy of the Doğuş Group. Garanti Faktoring serves a huge customer base including especially SME, companies that make intensive import and export operations as well as organizations with a widespread supplier and dealer network by introducing factoring products and services throughout the country. Garanti Faktoring Hizmetleri A.Ş. is registered in the İstanbul Chamber of Commerce with registry No and operates at: Eski Büyükdere C. Ayazağa Köy Yolu No. 23 K: 2 Maslak Şişli İstanbul Telephone: +90 (212) Fax: +90 (212) You can access the Company's bilingual web site in Turkish and English at Garanti Faktoring 2013 Activity Report 5

6 Capital of the Company and Shareholding Structure The paid-up capital of Garanti Faktoring as of December 31, 2013 is TL 79,500,000. Shareholding structure; The registered shares of Türkiye Garanti Bankası A.Ş. is 55.4% and it received the remaining 26.4% out of the shares offered to the public through the BİST. Share of Garanti Faktoring which is 8.4% is traded on the BİST National Market. Garanti Faktoring 2013 Activity Report 6

7 General Information on Shareholders Türkiye Garanti Bankası A.Ş. Garanti Bankası, founded in 1946 in Ankara, is the second largest private bank of Turkey with a consolidated asset size of US$ billion as of December 31, Operating in almost all branches of the banking sector including corporate, commercial, SME, payment systems, private, personal and investment banking, Garanti is an integrated financial services group working together with its international subsidiaries in the Netherlands, Russia and Romania as well as other financial subsidiaries each being a leader in life insurance, individual pension, financial leasing, factoring and portfolio management services. As of December 31, 2013, Garanti brings solutions to the financial needs of more than 12.4 million customers with its approximately 19,000 employees via 990 domestic branches, 8 foreign branches; 6 in Cyprus, 1 in Luxembourg and 1 in Malta, one representative office in London, Düsseldorf and Shanghai, more than 4,000 ATMs equipped with cutting edge technology, award winning Call Center, multi-channel mobile distribution network, the Internet and social banking platforms. Garanti is a leader in all areas where it has been operating since its foundation due to its profitable and sustainable growth strategy. Its competent and dynamic human resources; unique technology infrastructure; customer oriented service policy; innovative products and services offered without compromising on quality take Garanti on the top of Turkish banking sector. Garanti has adopted best practices in its corporate governance, and two strong organizations in the management of Garanti, which are Doğuş Holding and Banco Bilbao Vizcaya Argentaria S.A. (BBVA), act according to the equal partnership principles. The Free floating rate of Garanti in Borsa İstanbul is 49.88% as of December 31, 2013 while its shares are traded in Turkey and depository receipts are in UK and USA. Türkiye İhracat Kredi Bankası A.Ş. Türkiye İhracat Kredi Bankası A.Ş. (Türk Eximbank) was founded as per the Cabinet Decision No. 87/11914 published in the Official Gazette dated August 21, 1987 pursuant to the Law No published in the Official Gazette dated March 31, The main objectives of Türk Eximbank are the improvement of exports, diversification of goods and services exported, introducing new markets for export goods, helping exporters to increase their share in international commerce and provide them with the support they need for their operations, ensure exporters as well as contractors operating abroad enjoy competitive power and security, support and promote foreign investments as well as production and sale of investment goods to be exported. Türk Eximbank, being the sole corporate incentive source of export in Turkey, provides short, medium and long term cash and non-cash loans, insurance and guarantee programs to support the exporters having the same objective, and producers that are producing for export purposes as well as contractors and entrepreneurs operating abroad. Since Türk Eximbank brings all guarantee and insurance insurances under the same roof, this allows integrity of services provided to export companies which is different from export credit organizations supported officially in many developed countries. In 2013, Türk Eximbank provided US$ 28.1 billion support in total to exports made up of cash loans amounting to US$ 19.7 billion and insurance/guarantee amounting to US$ 8.4 billion which was 27% more comparing to the previous year. Thus, the Bank provided cash and non-cash finance support to 19% of exports made in Turkey. Assets size of the Bank by the end of 2013 was TL 24.8 billion, and paid-up capital was TL 2.2 billion. Garanti Faktoring 2013 Activity Report 7

8 Garanti Faktoring At a Glance Asset size amounting to TL 2,060 million Factoring Receivables Balance Sheet Size amounting to TL 1,987 million Trading volume amounting to TL 9,786 million Net Profit amounting to TL 15.3 million, Shareholders' equity amounting to TL 120 million Corporate Management Rating 8,76 in BİST Corporate Management Index 6,003 customers, 37,027 factoring transactions in total 195 Employees and 21 Branches. Garanti Faktoring 2013 Activity Report 8

9 Our Vision We aim to be the leader company of the sector by making a difference with the Garanti name. Our Mission Our mission is to create continuous added value to our customers, employees and shareholders, leading to the improvement of the sector where we are operating thanks to our investments in human resources and technology. Our Strategies To use technology effectively and increase efficiency by making non-stop investments in technology infrastructure, To offer services tailored to the needs of customers via innovative products and customized corporate solutions, To ensure that our strategies are based on profitable growth, service quality, employee satisfaction principles as well as ma rket data, and that customer requirements are effectively maintained, monitored, improved and an interactive communication is guaranteed among employees. Our Prerequisites Our Customers... We are an Ethical Factoring Company and its Employees... "Our most important value is human" Team work Continuous improvement Our social responsibilities Garanti Faktoring 2013 Activity Report 9

10 Competitive Superiorities of Garanti Faktoring Pioneer in advanced technology Strong brand and reputation Human resource capable of making a difference Customer oriented innovative products and services Superior data warehouse and management reporting Centralized operations Integrated financial service presentation Best customer relations management solutions Garanti Faktoring 2013 Activity Report 10

11 Organizational Structure and Organizational Structure Changes The "Project Office Unit" reporting to the Executive Vice President was established in 2013 to monitor and conduct system development and efficiency projects. Garanti Faktoring Organizational Structure: Garanti Faktoring 2013 Activity Report 11

12 Branch and Personnel Information In the first half of the year, Garanti Faktoring completed the process of transforming its eleven representation offices into branches in order to comply with the Code of Leasing, Factoring and Finance Companies, opened and started operation of ten new branches in the third quarter and reached twenty one branches in total. Now we are closer to our customers at the strategic locations we were aiming with our new openings. The address and telephone details of our branches are available on page 135 of the report. The number of personnel employed by Garanti Faktoring is 195 as of December 31, Side Benefits Granted to Personnel Garanti Faktoring provides health insurance, life insurance, and food and transportation allowances to all its personnel. In addition to these, senior executives of the company are provided with an official car and mobile phone as per the limits. Education Background 13% of employees have post graduate degree, 72% of them graduate degrees, 9% of them have associate degrees and 6% are high school graduates. Board of Directors Nine members are assigned in the Board of Directors. The Company's Chairman of the Board of Directors is Sait Ergun Özen, and the General Manager is Hasan Hulki Kara. The executive members of the Board of Directors are Turgay Gönensin, and Hasan Hulki Kara; nonexecutive members are Sait Ergun Özen, Muammer Cüneyt Sezgin, Aydın Şenel, Manuel Pedro Galatas Sanchez Harguindey, and Luis Vicente Gasco Tamarit, and independent members are Ali Çoşkun and Serhat Yanık. Board Members and Their Office Terms; Garanti Faktoring 2013 Activity Report 12

13 Backgrounds and Duties of the Board Members Ergun Özen Ergun Özen received his bachelor's degree from New York State University School of Economics and then completed the Harvard Business School Senior Management Program before joining Garanti in Özen has been Garanti Bankası General Manager and Board Member since April 1, 2000 while he is also acting as a Board Member in Garanti Yatırım Menkul Kıymetler A.Ş., Garanti Portföy Yönetimi A.Ş., Garanti Emeklilik ve Hayat A.Ş., Garanti Faktoring Hizmetleri A.Ş., Garanti Finansal Kiralama A.Ş., Garanti Ödeme Sistemleri A.Ş., Garanti Bilişim Teknolojisi ve Tic. T.A.Ş., Garanti Bank SA (Romania) and Garanti Bank Moscow. In addition to these responsibilities, Ergun Özen is also the Chairman of the Board of Directors of the Teachers Academy Foundations, and a Board Member of The Banks Association of Turkey, Turkish Industry and Business Association (TÜSİAD), İstanbul Foundation for Culture and Arts (İKSV) and Turkish Education Association. Turgay Gönensin Turgay Gönensin graduated from the Boğaziçi University School of Business Administration. He started working in Garanti in 1987 where he has been assigned to various departments. He acted as the General Manager of Garanti Bank International N.V. between and of Osmanlı Bankası between In 2002, Gönensin assumed the role of Executive Vice President responsible for Commercial Banking and was assigned to his current duty on January 1, Gönensin is the Chairman of the Board of Directors in Garanti Filo Yönetimi Hizmetleri A.Ş., Vice Chairman of the Board of Directors in Garanti Finansal Kiralama A.Ş. and Garanti Faktoring Hizmetleri A.Ş., Board Member in Garanti Bilişim Teknolojisi ve Tic. T.A.Ş., Garanti Bank SA (Romania) and Garanti Portföy Yönetimi A.Ş., and Credit Committee Member in Garanti Bank International N.V. Hulki Kara Received his bachelor's degree from the Dokuz Eylül University School of Economics, Hulki Kara joined Garanti Bankası in 1989, assuming the roles of 1st Degree Supervisor, Branch Manager and Area Manager in the Internal Audit Department, and has been Garanti Faktoring General Manager since October 18, Garanti Faktoring 2013 Activity Report 13

14 Aydın Şenel Aydın Şenel graduated from the Marmara University, School of Business Science and acted as Inspector, Human Resources Group Manager, Credit Cards Manager, Financial Analyze Coordination Manager and Financial Monitoring Manager between Şenel was General Accounting Manager in 1999 and was assigned as Executive Vice President in charge of General Accounting and Financial Reporting. He assumed his current role in June 6, Şenel is also acting as the Vice Chairman of the Board of Directors of T. Garanti Bankası A.Ş. Officials and Employees Retirement Fund Association and Board of Trustees Member of the Teachers Academy Foundations, Board Member of Garanti Faktoring Hizmetleri A.Ş. and Audit Committee Member of Garanti Leasing A.Ş. Manuel Galatas Sanchez-Harguindey Manuel Galatas Sanchez-Harguindey received his bachelor's degree from Georgetown University School of Business Administration and International Finance. Following his assignment as an executive in different private entities, he started his current duty in Argentaria (currently BBVA) in He acted as General Manager of BBVA Hong Kong in charge of all Asia/Pacific Branches and Representation Offices of BBVA before the partnership with Garanti. In addition to his duties as the Board Member and Audit Committee Member of Garanti Bankası, he acts as General Manager of the Representation Office of BBVA Turkey located in Garanti Bankası's Head Office Building. He also serves as Board Member of Garanti Bank SA (Romania), Garanti Bank Moscow, Garanti Bank International N.V., Garanti Yatırım Menkul Kıymetler A.Ş., Garanti Portföy Yönetimi A.Ş., Garanti Emeklilik ve Hayat A.Ş., Garanti Faktoring Hizmetleri A.Ş., Garanti Finansal Kiralama A.Ş., Garanti Ödeme Sistemleri A.Ş. and Garanti Filo Yönetimi Hizmetleri A.Ş. Acting as the Board Member of Garanti Bankası since May 5, 2011, Manuel Galatas Sanchez-Harguindey has been an Independent Member of the Board of Garanti Bankası since April 30, 2013 according to relevant regulations of Capital Markets Board. Luis Vicente Gasco Tamarit Luis Vicente Gasco received his bachelor's degree from TamaritICADE University School of Business Administration and Law and his Master's degree in Wholesale Banking from BBVA School of Finance. He started his career in BBVA in 1998, assumed executive positions in Commercial Banking and is currently the BBVA Commercial Banking Global Business Development Director. Garanti Faktoring 2013 Activity Report 14

15 Dr. M. Cüneyt Sezgin M. Cüneyt Sezgin received his bachelor's degree from Middle East Technical University, School of Business Administration, his Master's degree from Western Michigan University Business Management (MBA) and his PhD from İstanbul University School of Economics (doctoral program) and is assigned as executive in various private sector banks. Dr. Sezgin joined Garanti Bankası in 2001 and in addition to his assignments as a Member of the Board of Directors and Audit Committee of the Bank, he is the Board Member in Garanti Bank SA (Romania), Garanti Emeklilik ve Hayat A.Ş., Garanti Faktoring Hizmetleri A.Ş., Garanti Finansal Kiralama A.Ş., Garanti Filo Yönetimi Hizmetleri A.Ş., Garanti Portföy Yönetimi A.Ş., Garanti Yatırım Menkul Kıymetler A.Ş. and Private Sector Volunteers Association (ÖSGD). Acting as the Board Member of Garanti Bankası since June 30, 2004, Cüneyt Sezgin has been an Independent Member of the Board of Garanti Bankası since April 30, 2013 according to relevant regulations of the Capital Markets Board. Ali Çoşkun Ali Çoşkun received his bachelor's degree from İstanbul Technical University, School of Industry Engineering, his Master's degree from Boğaziçi University Finance department and his PhD from the University of Texas Accounting and Information Management. He is currently pursuing his career as an academic in Boğaziçi University. Serhat Yanık Serhat Yanık received his bachelor's degree from İstanbul University, Public Administration and his Master's degree and PhD in Business administration. He is currently acting as the President of Direct Procurement and Tender Commission of İstanbul University, President of Accounting and Finance Department in Faculty of Political Sciences, School of Business Administration of İstanbul University, Vice Manager of İstanbul University Circulating Capital Management, Finance Director of İstanbul University Hospitals General Directorate and Member of the Tender Commission, Board Member of Expert Accountants Association of Turkey and Editorial Board Member of Internal Audit Bulletin of the Institute of Internal Audits. Garanti Faktoring 2013 Activity Report 15

16 Declaration of Independence of Independent Members of the Board Garanti Faktoring 2013 Activity Report 16

17 Garanti Faktoring 2013 Activity Report 17

18 Committees and Attendance to Committee Meetings Audit Committee, It is formed to assist the Board of Directors in its supervision responsibility related with the operation and effectiveness of the Company's internal control system. The Committee reviews and assesses the Company's systems, processes and activities regarding the accounting system, financial reporting, public disclosure, internal and external audit systems, independent external audit, as well as compliance with laws, regulations and ethical principles and provides suggestions to the Board of Directors if necessary. Serhat YANIK and Ali ÇOŞKUN are the Independent members of the Audit Committee Board of Directors. Committee activities; Internal Control System The Committee reviews the Company management to ensure it is informing the Company employees of the significance of the internal control process and maintaining the correct "control culture" within the Company. The Committee receives the results of regular and process based audits performed by the Internal Audit Unit on the failed oversights and deficiencies of practices. The Committee monitors the deficiencies defined at the end of audit works performed by Internal Audit Unit, T. Garanti Bankası A.Ş. Internal Audit Board and other entities and informs the Company's Board of Directors on the findings that are not eliminated. Internal Audit The Committee supervises if the Internal Audit Unit is fulfilling its responsibilities defined in the Internal Audit Regulation. The Committee reviews the annual audit plan prepared by the Internal Audit Unit as well as any revisions made on the annual audit plan prior to the approval of the Board of Directors. It approves Internal Audit Unit employee appointments. It reviews the Internal Audit Unit Regulation before it is approved by the Board of Directors. It conducts performance assessments of the Internal Audit Manager. It may seek opinion of the Company General Manager on this issue when necessary. The Committee complies with the decisions taken by senior management and units reporting the same on the findings introduced by internal audit reports. The Committee reviews the report of the Internal Audit Unit on the audit activities prepared pursuant to Article 13/4 of the Regulation of Establishment and Operation Principles of Financial Leasing, Factoring and Finance Companies as well as the report submitted by the Internal Audit Unit which shows the results and assessments of supervision activities. The Committee monitors the qualification of the personnel structure of the Internal Audit Unit as well as training, competence and expertise levels of actual personnel and takes the necessary measures to ensure that audit unit personnel are instructed in the best manner in theory and in practice. Financial Reporting and External Audit It monitors if the Company's financial reports include all correct and required information, whether the reports are prepared in compliance with the Law and other applicable regulations and ensures that deficiencies and irregularities determined are corrected. The election of the external audit entity, preparation of audit contracts to start external audit process as well as the activities of external audit entity in all phases are conducted under the supervision of the Committee. Garanti Faktoring 2013 Activity Report 18

19 Compliance with Law, Regulations and Ethical Principles The Committee supervises the operation of internal systems as well as accounting and reporting systems pursuant to the law and applicable regulations and observes the integrity of the presented information. The Committee, through its units, reviews the Company activities in relation to their compliance with the law and applicable regulations. It monitors whether the Company's internal policies and implementing procedures that are approved by the Board of Directors are maintained or not, provides suggestions to the Board of Directors on the necessary measures. The Audit Committee convened 8 times in During these meetings, significant findings and the results of periodic control activities introduced as a result of Internal Audit Unit works were discussed. Besides this, external audit entity Deloitte briefed the Audit Committee on the results of its audit works it performed in relation to the Company's financial data concerning the dates 12/31/2012, 03/31/2013, 06/30/2013 and 09/30/2013, as well as the letter of recommendation presented to the management. Corporate Governance Committee The Corporate Governance Committee is formed in line with the Articles of Association, Legislation and Corporate Governance Principles of the Capital Markets Board; to find out whether the corporate governance principles are respected and to determine possible conflict of interest issues within the Company. The Corporate Governance Committee is presided over by an independent member of the board Serhat YANIK and attended by Muammer Cüneyt Sezgin and Aydın Şenel. Committee activities; As per the structure of the Board of Directors, the Corporate Governance Committee is formed with the purpose of acting as the Nomination Committee and Compensation Committee and therefore assumes the duties of these Committees. Duties of the Committee; With the title of Corporate Governance Committee; Monitors the compliance of the Company to corporate governance principles, Performs improvement studies and provides suggestions to the Board of Directors regarding the issue, Determines conflicts of interest caused by non-compliance to corporate governance principles, Supervises the activities of the unit in charge of relations with shareholders. With the Title of Nomination Committee; Establishes relevant policies and a transparent process for the definition, evaluation and training of nominees to the Board of Directors, Assesses the efficiency of the Board of Directors structure, Designs and monitors the approaches, principles and implementations to be considered in the performance evaluation and career planning of Board Members and senior executives, Provides its suggestions to the Board of Directors on the changes that might be introduced regarding the Board of Directors structure and efficiency. With the Title of Early Detection of Risk Committee; Identifies the risks in advance that may endanger the Company's existence, growth and survival, Works on the implementation and management of the measures required for the risks identified and reviews the risk management systems at least once in a year. Garanti Faktoring 2013 Activity Report 19

20 With the Title of Compensation Committee; Prepares suggestions on the compensation principles related with Board Members and senior executives, Identifies benchmarks to be used in relation with the performance of the Company and members, Provides its suggestions to the Board of Directors on the compensations of Board Members and senior executives. Credit Committee; The Board of Directors of Garanti Faktoring passed on a portion of its credits allocation authorities to the Credit Committee. Credit offers submitted by Regions to the General Directorate which are above the credit authority of the General Directorate are presented to the Credit Committee convening every week. The Credit Committee reviews credit offers and finalizes the ones that fall within the scope of its authorities. The Committee submits the credit offers above its authorities to the Board of Directors for final decision. Credit Committee Members Although they are not the members of the Credit Committee, Turgay Gönensin (Vice Chairman of the Board of Directors), Erhan Adalı (Member of Credit Committee), Hulki Kara (Board Member and General Manager) İlkay Şahin Hamurcu (Executive Vice President) and Erkan Coplugil (Executive Vice President) are authorized to attend the meetings to provide their opinions on credit offers. Garanti Faktoring 2013 Activity Report 20

21 Senior Management Senior Management Background Details Mert Ercan He was born in İzmir in Graduated from Dokuz Eylül University, School of Business Administration. He joined Garanti Bankası in 1999 and acted as an inspector in the Internal Audit Department before holding the office of Vice President of Internal Audit Department. He has been the Executive Vice President of Garanti Faktoring since March 15, Erkan Coplugil He was born in İstanbul in He received his bachelor's degree from İstanbul Technical University, School of Management Engineering. He joined Garanti Bankası in 1998 where he was assigned in the Organization and Planning, Commercial Banking Units and acted as Branch Manager. He has been the Executive Vice President of Garanti Faktoring since December 12, İlkay Şahin Hamurcu He was born in Bilecik in He graduated from İstanbul University, School of Business Administration. He started his career in July 1992 in Pamukbank and was assigned to İktisat Bankası Corporate Credits, Koçbank Credits Allocation and Marketing Units chronologically. He continued his career in Körfez Bank Credits Allocation Unit starting from 1998 before he assumed his duties in Osmanlı Bankası, Garanti Bankası and Garanti Leasing. In 2005, he took the office of Credits Manager in Garanti Faktoring and has acted as the Executive Vice President of Garanti Faktoring since March 1, Garanti Faktoring 2013 Activity Report 21

22 Turkish and Global Economy Overview The financial crisis that initially started in USA before spreading internationally is now in its sixth year, including a year of recovery both in USA and Europe. Although high indebtedness prevails as a significant issue in Europe, the Area left the recession behind by the third quarter of The most important agenda which affected global markets in the first instance was the messages of USA Central Bank to start lesser asset acquisition. That strengthened the belief that financial tightening had been realize earlier than expected so developing economies had to deal with more limited foreign capital. As a conclusion, the year 2013 can be seen as the year when the recovery of developed economies started but the downside risks on the growth in developing countries increased. Concerns posed on the growth in Europe weakened due to the ease down of constriction in peripheral countries such as Spain and Italy in Despite this, the labor market is still waiting for its share of the recovery. That is because financial measures are still effective although a certain flexibility was ensured in addition to the fact that the credit transfer system is not running effectively yet. On the other hand, recovery in the British economy was very strong; while the annual consumer inflation in Japan exceeded 1% as a result of monetary expansion. Another factor affecting the global economy system was the messages given by the USA Central Bank especially in the second half of the year to start lesser asset acquisitions. In fact the decision to acquire less assets by the January 2014 was taken on December Under these circumstances, capital outflows and monetary depreciations in developing countries were observed. Besides this, although the unemployment rate of 6.5% which was set as the threshold for the interest rate increase in USA was close by the year end; low labor force participation rate and inflation rate conditions might force USA Central Bank be more cautious for its exit strategy. Meanwhile USA decreased its foreign-source dependency by aiming at new energy sources and introduced significant change helping to decrease its foreign trade deficit. The trade volume of China, being the second biggest economy of the world, outreached USA in 2013; however measures to ensure sustainable growth adapted in China are stalling off the growth. The growth rate of China's economy was 7.7% in 2013 which was close to the previous year; and according to the International Monetary Fund (IMF) estimations it will fall back to 7.5% in While this might pose a downside risk on the growth of developing economies; such risks might be limited if recovery in developed countries especially in USA and UK continue in 2014 as well. If a nuclear agreement with Iran takes place, this might be a positive factor on the economic dynamics of energy importing countries as a result of a substantial decrease in energy prices. Based on these circumstances; the IMF projects that global growth will gain speed in 2014 compared to the previous year. IMF Growth Estimations (2012 is real, other years are only estimated figures) Garanti Faktoring 2013 Activity Report 22

23 After the year 2012 during which the growth was due to foreign demand despite restricted domestic demand; In 2013 the growth was mostly based on public participation and private consumption despite the negative effect of weak private sector investments and foreign demand. Domestic Demand Components of the Growth in Turkey Turkey was a gold exporting country in 2012 and its changing position to gold importer in 2013 and higher importation due to the increase in domestic demand caused a higher foreign trade deficit in respect of the previous year. The current deficit widened due to this, and the Government announced dealing with the current deficit as its primary target in its Medium Term Program (OVP). In this regard, BRSA introduced measures aimed at reducing private consumption while a Special Consumption Tax and fixed tax rates on certain items were increased. Considering the sharp falls on consumer confidence indexes, prepared to show consumption tendencies of recent periods, such policies might have an impact to reduce consumption. On the inflation side, food price increases which were quite low in 2012 caused an increasing effect on general inflation in 2013 while the decrease in energy inflation imposed a limit on this. However, with the reflection of exchange rate transitivity on prices, the inflation rate exceeded the uncertainty band and realized as 7.4% by the year end. On the other hand, Turkey has the advantage of financial discipline. It appears that this advantage will be maintained in coming years. In fact, Turkey will continue to have less public debt compared to some European countries and certain developed countries in the year 2014 according to IMF estimations. Moreover, despite the debt stock ratio to GDP increase from 43.1% by the end of 2012 to 45.3% as of the third quarter, the public portion in this was still low as 14.3%. Financial institutions were decisive in the acceleration of foreign indebtedness while it should be underlined that it does not pose a risk on the financial stability thanks to the strong balance sheet structure of the banking sector. Garanti Faktoring 2013 Activity Report 23

24 Public Debt Stock/GDP (%, 2014 IMF Estimation) Regarding monetary policy, 2013 was a year when new concepts were at center stage for communication simplicity and verbal guidance means. The Central Bank took an effective position in the monetary policy to limit the effects of foreign shocks. Therefore, strong capital inflows were seen and average funding costs were set close to one week repo rates in the first half of During this period Moody's increased Turkey's credit rating from Ba1 to Baa3 which is the investable level. Following Moody s, Japan's credit rating agency JCR has also increased Turkey's rating as investable. However, as a result of the messages announced by USA Central Bank, the Turkish Lira lost its value due to the reverse of capital flows and a tightening in monetary policy was preferred in the second half of On July 23, the Central Bank increased the overnight lending rate from 6.5% to 7.25%; and the interest rate of borrowing facilities provided for primary dealers via repo transactions from 6% to 6.75%. On August 20, the interest rate corridor upper band was increased to 7.75% one more time after the increase made on July 23. In this regard, while the Central Bank aimed to limit exchange rate volatility by foreign currency selling tenders, it caused the funding cost to approach the "Marginal Funding Rate (7.75%)" which is the interest rate corridor upper band by tightening Turkish Lira liquidity during the last months of the year. Thus, the funding cost reached 7.10% by the year end. The 2-year benchmark bond interest started to increase and reached 10.03% by the year end after its record low average of 5.9% had decreased in the first half of In 2013 when the Turkish Lira lost 7.9% of its value against the Euro/Dollar basket as an annual average, the annual credit growth rate was 25% without the currency impact due to a strong domestic demand. The year 2014 might be volatile due to the impacts of less bond acquisitions by USA Central Bank and the election process in Turkey. According to the estimations of World Bank updated in January 2014, the expected growth rate for Turkey for 2014 is 3.5% which was 4.3% in Garanti Faktoring 2013 Activity Report 24

25 Factoring Sector Overview Factoring in Turkey The factoring sector developed quickly in Turkey especially during the second half of the 2000s regarding transaction volumes and customer numbers. In recent years it became an essential instrument in financial markets due to the increased popularity of factoring products as well as more access channels to customers. A significant part of domestic trade is forward transactions. Factoring is needed more and more every day due to the facts such as the high inflation rate in Turkey leads to operation capital problems in companies, dependency of the Turkish economy on exports, forward (credit) accounts are being preferred in foreign trade and payments with letter of credit are a less preferred option. The corporate background of factoring companies in Turkey is less than 20 years. Asset size of the sector was TL 8.4 billion in 2009 and reached TL 20.1 billion by the end of The factoring sector closed the third quarter of 2013 with TL 63.2 billion turnover and will continue to grow in 2014 as well. Momentum in 2014 is expected to be in the SME and export segments. Source: BRSA The total assets of the factoring sector increased 20% in 2013 compared to the previous year. Return on assets, return on equity and NPL ratio of the sector in the last five years are given below. Source: BRSA Garanti Faktoring 2013 Activity Report 25

26 By the end of 2013, the number of factoring companies was 76 operating through 298 branches with 4,383 personnel employed according to the data provided by the Association of Financial Institutions. The factoring sector closed the third quarter of 2013 with a total transaction volume of US$ 33.9 billion. Transaction volume increased by 22.7% when compared to the third quarter of While export and import finance is developing rapidly in Turkey, the need for credit based finance methods in addition to the common banking products are increasing day by day. We are offering operation capital, credit guarantee and collection management services to our exporter customers who are the steam engine of growth in Turkey, to enable them make their export operations in security and to provide fast and effective solutions to their needs. The importance of the "guarantee" offered by correspondents is increasing more and more for Turkish exporters. Regarding the export factoring with guarantee, since the non-payment risk of buyers due to financial factors is taken by the corresponding factoring company located in the country of the buyer, exporting companies may continue their sale activities without concerns about collecting their receivables and also benefit from a finance opportunity to a defined extent before the relevant due date set for the export operation they performed. Besides, collection of receivables are made by the expert factoring corresponding companies located in the country of the buyer and a factoring guarantee is provided against the risk of non-payments due to financial reasons. Export factoring which enables exporters to penetrate new markets, to grow and focus on their sales has a very big potential in Turkey. Factoring on a Global Scale Factoring started to help the wool trade between USA and UK a hundred years ago. Most factoring organizations, that have been providing the advanced services that we see today since the 50s, were founded with the participation of big banks and finance institutions. Unable to develop till the 70s, factoring became a reliable finance practice following the oil shock in 1973 for many companies that wanted to go abroad under more challenging global trade conditions. Global factoring practices advanced rapidly during the 60s in Continental Europe, notably in Italy. Today, Europe is on the top in terms of turnover followed by Asia, America, Australia and Africa respectively. The factoring sector share in national income is between 10-12% in the developed countries of the world. Garanti Faktoring 2013 Activity Report 26

27 SECTION II. FINANCIAL RIGHTS GRANTED TO MANAGING BODY MEMBERS AND SENIOR MANAGERS Rights Granted to the Board Members and Senior Managers Annual gross compensation paid to each Independent Board Member as an attendance fee is TL 110,000-. Garanti Faktoring does not provide any guarantees, including debt, credit, personal loan and favorable collateral to any board member or managers. Real and Cash Allowances Granted to Senior Managers and Representation Expenses Garanti Faktoring provided cash and similar benefits amounting TL 3,158 thousand to its senior managers in the year ending December 31, SECTION III. RESEARCH AND DEVELOPMENT ACTIVITIES Garanti Faktoring aims that its internal organizational structures and work processes operate better to increase customer satisfaction and overall efficiency in line with its objectives. Considering such targets, necessary systematic improvements were introduced in 2013 pursuant to legal requirements and regulation amendments. The HFL (Ready Factoring Limit) product was launched which enable limit allocations based on the analysis of regular morality controls made on available data and systematic inquiry results. Thanks to this product customer satisfaction is maintained not only by offering a fast and quality service during the credit process but also operational efficiency within the Company. Systematic integration works were completed to comply with the e-invoice practices as per the legal requirements and the Company switched to e-invoice practices. Upon this transition, the issuing, sending and approval of invoices on the system were ensured together with the parties that started to use e-invoices. An "IT Committee" was formed in 2013 with the participation of the General Manager, Executive Vice Presidents, Sales Marketing and Coordination Department Manager, Project Management Office Manager and Organization and Process Development Manager to define and prioritize the projects as well as to monitor the master plan within the framework of efficiency programs. The Committee will proceed with efficiency based works in 2014 as well. The aim is to address domestic operation processes again for compliance with the legal requirements and ensure faster extension processes. It is expected that a noticeable increase will be seen in the service quality as a result of ongoing systematic improvements in credit processes. Garanti Faktoring 2013 Activity Report 27

28 SECTION IV 2013 ACTIVITIES AND SIGNIFICANT PROGRESS IN THE ACTIVITIES Investments In the 2013 accounting period, Garanti Faktoring; Realized TL 474,200 thousand, EURO 334,170 thousand and US$ 1,733,750 thousand time deposit transactions in banks and gained TL 4,293 thousand interest income. It purchased Tangible assets amounting to TL 149 thousand and Intangible assets (software) amounting to TL 1,987 thousand. Assessment of the Operation of Internal Control, Internal Audit and Risk Management Systems by the Audit Committee The Company's fundamental and essential principles include the formation and supervision of appropriate Company policies, risk oriented audit, active monitoring of the Board of Directors and senior managers, timely, fair and proper measurement, evaluation and reporting of risks as well as the establishment of a sufficient and effective internal control system. In this regard, the internal audit unit performed audit and control works on the performance and efficiency of the Company's internal control and risk management systems within the scope of the 2013 audit plan and it realized consultancy activities on necessary issues. The purposes of internal audit activities include assessment of the risks that threaten the Company's governance processes, activities and information systems, considering at the same time the realization of corporate strategic targets, reliability and correctness of financial and operational information, efficiency of activities and programs, protection of assets as well as compliance with laws and internal regulations. In 2013, the Audit Committee and Board of Directors supervised sufficiency and efficiency of internal control, risk management and internal audit systems as well as operation of these systems together with accounting and reporting systems in line with applicable regulations. Sufficiency and efficiency of risk management and internal audit systems will be supervised in 2014 as well through the Audit Committee and Board of Directors considering the Company strategy and activities. Ali ÇOŞKUN Board Member Audit Committee Member Serhat YANIK Board Member Audit Committee Member Garanti Faktoring 2013 Activity Report 28

29 Information on Direct and Indirect Subsidiaries and Respective Share Ratios Garanti Faktoring Hizmetleri A.Ş. has no direct or indirect subsidiaries nor any respective share ratios as of December 31, Information on Acquired Shares Garanti Faktoring Hizmetleri A.Ş. has no own shares it acquired as of December 31, Information on Private Audit and Public Audit Banking Regulation and Supervision Agency audit personnel performed their annual ordinary audit of 2013 in the Company. Our Company did not undergo any private audit during the 2013 operational period. Lawsuits Filed Against Garanti Faktoring Hizmetleri A.Ş. In the 2013 operational period, no lawsuit was filed against Garanti Faktoring Hizmetleri A.Ş. which might have an impact on the financial status and activities of Garanti Faktoring. Administrative or Civil Sanctions Imposed on Garanti Faktoring Hizmetleri A.Ş. and Management Body Members No administrative or civil sanction was imposed on the Company and the Members of its Management Body in the operational period of Garanti Faktoring 2013 Activity Report 29

30 Previous Period Budget and Performance Assessment Same as in 2012, Garanti Faktoring increased its factoring receivables by 8.7% and realized TL million in It maintained its top position in the sector by raising TL 105 million in total assets, the same as in its factoring receivables. The tightened net interest margin had a negative impact on profitability due to the increased interest costs in Garanti Faktoring 2013 Activity Report 30

31 General Assembly Meetings In 2013 operation period, Ordinary and Extraordinary General Assembly Meetings for the year 2012 were held in the Company Head Office and also via the Electronic General Assembly System (EGKS). Agenda of 2012 Extraordinary General Assembly Meeting held on January 14, 2013: 1- Opening and election of the General Assembly Presidency Council, 2- Authorization of Presidency Council for the signature of the General Assembly Meeting minutes, 3- Reading, discussing and approval of the issues regarding the Articles of Association of the Company for which necessary permits were obtained from the Banking Regulation and Supervision Agency, Capital Markets Board and Ministry of Customs and Trade that is related with the amendment of Article 6 "Registered Capital" pursuant to Turkish Commercial Code No and Capital Markets Regulation; amendment of Article 10 Meetings of the Board of Directors pursuant to Turkish Commercial Code No and, Article 6 of the Communique on General Assembly Meetings of Turkish Joint-Stock Companies to be held On-line as published in the Official Gazette No , dated August 29, 2012; amendment of Article 18 General Assembly Meetings pursuant to Turkish Commercial Code No and, Article 5 of the Communique on General Assembly Meetings of Turkish Joint-Stock Companies to be held On-line as published in the Official Gazette No , dated August 28, 2012; and Provisional Articles 1, 2, 3 and 4 of the Articles of Association are removed from the Articles of Association so that the Articles of Association are amended, 4- Approval of the appointments of Board Members who resigned pursuant to Article 25/1 of the Law on the operation and implementation of Turkish Commercial Code No and then appointed again as Real Entity Board Members, 5- Within the framework of Articles 395 and 396 of Turkish Commercial Code No. 6102, permitting shareholders holding the management majority, Board Members, senior manager and their spouses as well as their second degree relatives; to conduct transactions which may lead to conflict of interest with the Company and subsidiaries, and compete with them, 6- To conduct in person or on behalf of others the works within the scope of the Company, to become a partner in Companies that are engaged with similar businesses, 7- Reading, discussing and approval of GARANTİ FAKTORİNG HİZMETLERİ A.Ş. Profit Distribution Policy and Policies related with Donations and Aids pursuant to the Turkish Commercial Code and Corporate Governance Principles of Capital Markets Board, 8- Wishes and closing. Agenda of 2012 Ordinary General Assembly Meeting held on March 29, 2013: 1- Opening and election of General Assembly Presidency Council, 2- Authorization of Presidency Council for the signature of General Assembly Meeting minutes, 3- Reading, discussing and approval of Annual Activity Report of the Board of Directors regarding 2012 activities, 2012 Audit Report and 2012 External Audit Report, 4- Reading, discussing and approval of the Company's 2012 Balance Sheet and Profit-Loss Statements prepared according to the Turkish Commercial Code and Capital Markets Law, 5- Discussion, acceptance and approval of the discharge of the Board Members and the Members of the Audit Committee for their activities in 2012, by the shareholders attending the General Assembly meeting without the vote of the respective members in relation with their discharge as per Article 436 of the Turkish Commercial Code, Garanti Faktoring 2013 Activity Report 31

32 6- Pursuant to the principle related with "the determination and distribution of profit" as defined in the Articles of Association, and in line with communique Series No. XI, No. 29 of the Capital Markets Board, discussion and approval of the proposal of the Board of Directors indicating that the net profit of the period amounting TL 20,460, after reserving tax provisions from the 2012 annual profit amounting TL 25,583, calculated as per the financial statements prepared according to International Reporting Standards is transferred to the legal and extraordinary reserves accounts so they are held within the Company considering the deferred tax benefit amounting TL 2,125,000.- which is calculated based on the 2012 period profit, 7- Election, appointment and approval of Board Members namely Serhat YANIK (Id No ) and Ali ÇOŞKUN (Id No ) as Independent Board Members, Sait Ergun ÖZEN (Id No ), Turgay GÖNENSİN (Id No ), Muammer Cüneyt SEZGİN (Id No ), Aydın ŞENEL (Id No ), Manuel Pedro GALATAS SANCHEZ HARGUINDEY (Tax Id No ), Luis Vicente GASCO TAMARIT (Tax Id No ), and Hasan Hulki KARA (Id No ) as Real Entity Board Members for 3 years, 8- Discussion and approval of compensations to be paid to Board Members and Independent Members of the Board, 9- Discussion and approval of the Board of Directors proposal to assign DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. as the Company's external audit firm for the year 2013 to perform external audit of the Company for the year 2013, 10- Discussion and approval of the issue related with permitting shareholders holding the management majority, Board Members, senior manager and their spouses as well as their second degree relatives; to conduct transactions which may lead to conflict of interest with the Company and subsidiaries, compete with them, to conduct in person or on behalf of others the works within the scope of the Company, to become a partner in the Companies that are engaged with similar businesses within the framework of Articles 395 and 396 of the Turkish Commercial Code and Corporate Governance Principles of Capital Markets Board, 11- Reading, discussing and approval of the amendments made on the Articles of Association as in the amendment text indicating previous forms of the articles and their final form after the amendment upon the necessary permits obtained from the Banking Regulation and Supervision Agency, Capital Markets Board, Ministry of Customs and Trade in order to conform to the Turkish Commercial Code No. 6102, Capital Markets Board Law and relevant communiques, 12- Briefing the General Assembly on the "report of transactions made with related parties" prepared for the asset, service and liability transfer transactions of partnerships listed in the stock exchange which are made commonly and in a continuing manner with related parties pursuant to the Capital Markets Board communique Series IV, No. 41, 13- Reading, discussing and approval of Internal Directive on the Operation Principles and Practices of Garanti Faktoring Hizmetleri A.Ş. General Assembly prepared according to the communiques of the Ministry of Customs and Trade, 14- Briefing the General Assembly on the donations and aid granted by the Company in 2012 to various organizations, 15- Wishes and closing. Garanti Faktoring 2013 Activity Report 32

33 Donation and Aid Granted in Social Responsibility Projects The Company's donation and aid policy is approved in the Ordinary General Assembly Meeting held on January 14, 2013 and announced in the websitewww.garantifactoring.com under the section Yatırımcı İlişkileri>Kurumsal Yönetim. The Company donated TL 3,889 in total in 2013 which was TL 2,389 to Ayhan Şahenk Foundation and TL 1,500 to the Turkish Educational Foundation. Donation and Aid Policy Garanti Faktoring Hizmetleri A.Ş. may grant donations and aid to foundations, associations, schools, universities and similar organizations with social purposes according to the rules set by the Capital Markets Board. The Company prepares its donation and aid policy and submits it for the approval of the General Assembly. Shareholders are briefed during the General Assembly Meeting under a separate agenda on the size of all donations and aid granted during the period pursuant to the policy approved by the General Assembly as well as respective beneficiaries and policy changes if any. The Company keeps the size of donations and aid at a minimum level since its fundamental purpose is to ensure high income received by its investors and shareholders. Information on Companies Group Transactions realized with holding companies and associates that are among the group companies only have commercial purposes and there is no transaction or decision taken or any measure that is avoided with the direction of a holding company or without its direction in favor of the holding company or any associate company. No counter action or measures became necessary or avoided since there is no legal proceeding started thereof and thus no damage occurred regarding this issue. Garanti Faktoring 2013 Activity Report 33

34 Amendments of the Articles of Association The Articles of Association amendments were approved and became effective with the Extraordinary General Assembly Meeting held on January 14, 2013; GARANTİ FAKTORİNG HİZMETLERİ A.Ş. ARTICLES OF ASSOCIATION PREVIOUS TEXT AUTHORIZED CAPITAL Article 6 The Company agreed the authorized capital system pursuant to the provisions of the Capital Markets Board Law No amended with the Law No and started using this system upon the Capital Markets Board permit No. 709, issued on October 8, The authorized capital of the Company is TL 25,000,000 which is divided into 2,500,000,000 shares with nominal value of Kr. 1.- each. The Board of Directors has the power to increase the issued capital by issuing registered share within the limits of the authorized capital ceiling pursuant to the provisions of the Capital Markets Board Law when it finds necessary. The Company's issued capital is TL 15,000,000.- (Fifteen Million Turkish Lira) which is divided into 1,500,000,000 shares in total including 755,517,672 registered shares for group (A) and 744,482,328 registered shares for group (B) with nominal value of Kr. 1.- each (One Kurus). The nominal value of the shares was TL 1,000- before this is changed to YKr. 1.- according to the provisions of the Law that introduced an amendment on the Turkish Commercial Code No The total number of shares decreased following this amendment and 1 share having the value of 1 New Kurus will be distributed for 10 shares having the value of YTL 1,000.- each. Shareholders reserve their respective rights on their shares in relation to the amendment in question. Shares that represent the capital are monitored according to the dematerialization principles. Nominal value of the shares was amended as 1 New Kuruş as per the Law on the Amendment of Turkish Commercial Code No and then the New Turkish Lira and New Kuruş terms were amended as Turkish Lira and Kuruş according to the Cabinet Decree No. 2007/11963, dated April 4, 2007 on the Removal of the Term "New" in New Turkish Lira and New Kuruş and Principles of the Implementation Thereof. Issued capital is paid in full. The Board of Directors may take restrictive decisions such as issuing the shares above preferred or nominal value for different groups, limiting shareholders to obtain new shares or on the rights of the holders of preferred shares according to the capital markets board regulation and provision of applicable legislation. NEW TEXT AUTHORIZED CAPITAL Article 6 The Company agreed the authorized capital system pursuant to the provisions of Capital Markets Board Law No amended with the Law No and started using this system upon the Capital Markets Board permit No. 709, issued on October 8, The authorized capital of the Company is TL 175,000,000 which is divided into 17,500,000,000 shares with nominal value of Kr. 1.- each. The Authorized Capital Ceiling permit granted by the Capital Markets Board is valid for the period of (5 years). Even if the authorized capital ceiling for which the permit was granted is not reached by the end of 2016, the Board of Directors, if it intends to take a decision to increase the capital, has to receive approval of the General Assembly for a new term to obtain the permit of Capital Markets Board for the previous ceiling or a new ceiling. The Company is considered out of the authorized capital system if such approval is not given. The Board of Directors may increase the capital by issuing registered shares within the authorized capital ceiling regardless of the provision of the Turkish Commercial Code related with the capital increase but in accordance with the provisions of the Capital Markets Board Law when it deems necessary, during the period of The Company's issued capital is TL 21,000,000.- (Twenty One Million Turkish Lira) which is divided into 2,100,000,000 shares in total including 1,057,724,557 registered shares for group (A) and 1,042,275,443 registered shares for group (B) with nominal value of Kr. 1.- each (One Kurus). The nominal value of the shares was TL 1,000- before this is changed to YKr. 1.- according to the provisions of the Law that introduced an amendment on the Turkish Commercial Code No The total number of shares decreased following this amendment and 1 share having the value of 1 New Kurus will be distributed for 10 shares having the value of YTL 1,000.- each. Shareholders reserve their respective rights on their shares in relation to the amendment in question. Shares that represent the capital are monitored according to the dematerialization principles. The nominal value of the shares was amended as 1 New Kuruş as per the Law on the Amendment of Turkish Commercial Code No and then the New Turkish Lira and New Kuruş terms were amended as Turkish Lira and Kuruş according to the Cabinet Decree No. 2007/11963, dated April 4, 2007 on the Removal of the Term "New" in New Turkish Lira and New Kuruş and the Principles of the Implementation thereof. Issued capital is paid in full. The Board of Directors may take restrictive decisions such as issuing the shares above preferred or nominal value for different groups, limiting shareholders to obtain new shares or on the rights of the holders of preferred shares according to the capital markets board regulation and provision of applicable legislation. Garanti Faktoring 2013 Activity Report 34

35 BOARD OF DIRECTORS MEETINGS: Article 10 The Board of Directors convenes when required as per the Company businesses. However, a meeting has to be held monthly. The Board of Directors is considered as duly convened if more than half of its total members are present in the meeting and takes its decisions based on the majority of the votes. Votes are either affirmative or dissentive. Abstention votes are not valid. A Member who used a dissentive vote indicates his/her reason and signs his/her statement. Obligatory rules defined in the Corporate Governance Principles of the Capital Markets Board are observed for the transactions that are considered important within the meaning of Corporate Governance Principles as well as other transactions such as the issue of guarantee, security and pledges in favor of related parties of third parties. BOARD OF DIRECTORS MEETINGS: Article 10 The Board of Directors convenes when required as per the Company businesses. However, a meeting has to be held monthly. The Board of Directors is considered as duly convened if more than half of its total members are present in the meeting and takes its decisions based on the majority of the votes. Votes are either affirmative or dissentive. Abstention votes are not valid. A Member who used a dissentive vote indicates his/her reason and signs his/her statement. Obligatory rules defined in the Corporate Governance Principles of the Capital Markets Board are observed for the transactions that are considered important within the meaning of Corporate Governance Principles as well as other transactions such as the issue of guarantee, security and pledges in favor of related parties of third parties. Those who are entitled to participate in the meeting of the Board of Directors of the Company may also participate in such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce and any secondary legislation. The Company may either establish the electronic meeting system to allow the Directors to attend the Board meetings and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on Meetings other than the General Assembly Meetings of Joint Stock Companies in an Electronic Means. In the meetings to be held, it is ensured that the right owners exercise such rights specified in the relevant legislation on the system established as per this provisions of the Articles of Association of the Company or on the system from which support services will be procured, within the frameworks set forth in the provisions of the Communiqué. Garanti Faktoring 2013 Activity Report 35

36 GENERAL ASSEMBLY MEETINGS: Article 18 The General Assembly convenes ordinarily and extraordinarily. The Ordinary General Assembly convenes at least once a year within three months following the end of Company's account period to discuss and resolve on the agenda defined by the Board of Directors considering the provisions set in Article 369 of the Turkish Commercial Code. An Extraordinary General Assembly convenes when required by the Company businesses to take necessary decisions. General Assembly meeting announcements are made using all kinds of communication means including electronic mediums with the aim of reaching the highest number of shareholders possible in addition to the methods defined in the relevant regulations at least three weeks prior to the date of the meeting meanwhile other declarations and explanations that shareholders should know are placed on the website. Transactions of shareholders holding the management majority, board members, senior managers and their spouses as well as their second degree relatives which may lead to a conflict of interest with the Company and subsidiaries are subject to the Turkish Commercial Code and obligatory regulations related with Corporate Governance Principles of the Capital Markets Board and relevant information on these kind of transactions are presented in the General Assembly. STAMP DUTY: PROVISIONAL ARTICLE Stamp duty connected with these Articles of Association will be deposited to the relevant tax office within three months following the definite incorporation of the Company. GENERAL ASSEMBLY MEETINGS: Article 18 The General Assembly convenes ordinarily and extraordinarily. The Ordinary General Assembly convenes at least once a year within three months following the end of Company's account period to discuss and resolve on the agenda defined by the Board of Directors considering the provisions set in Article 409 of Turkish Commercial Code. An Extraordinary General Assembly convenes when required by the Company businesses to take necessary decisions. General Assembly meeting announcements are made using all kinds of communication means including electronic mediums with the aim of reaching the highest number of shareholders possible in addition to the methods defined in the relevant regulations at least three weeks prior to the date of the meeting meanwhile other declarations and explanations that shareholders should know are placed on the website. The right holders entitled to participate in the meetings of the General Assembly of the Company may also attend such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce. The Company may either establish the Electronic General Assembly System to allow the shareholders to attend the General Assembly meetings, express their opinion, make suggestions and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on General Assembly Meetings of Joint Stock Companies in an Electronic Means. The shareholders or their proxies are ensured to exercise the rights stipulated in the said Regulations via the said system in all General Assembly meetings in accordance with this provision of the Articles of Association. Transactions of shareholders holding the management majority, board members, senior managers and their spouses as well as their second degree relatives which may lead to a conflict of interest with the Company and subsidiaries are subject to the Turkish Commercial Code and obligatory regulations related with Corporate Governance Principles of the Capital Markets Board and relevant information on these kind of transactions are presented in the General Assembly. Provisional Article term is removed from the Articles of Association. Garanti Faktoring 2013 Activity Report 36

37 MEMBERS OF THE FIRST BOARD OF DIRECTORS PROVISIONAL ARTICLE 2 The following individuals are elected as members of the first Board of Directors; Name of the Board Member: İsmet Alver Representing: Türkiye Vakıflar Bankası T.A.O. Name of the Board Member: Adam Arda Representing: Türkiye Vakıflar Bankası T.A.O. Name of the Board Member: Naci Aslankalp Representing: Türkiye Vakıflar Bankası T.A.O. Name of the Board Member: Suphi Kabadayı Representing: Türkiye Vakıflar Bankası T.A.O. Name of the Board Member: Mehmet Aydoğdu Representing: Güneş Sigorta A.Ş. Name of the Board Member: Bülent Taşar Representing: Vakıf Finansal Kiralama Name of the Board Member: Ferruh Tanay Representing: Türkiye Vakıflar Bankası T.A.O. They are appointed until the first Ordinary General Assembly. MEMBERS OF THE FIRST AUDIT BOARD PROVISIONAL ARTICLE 3 Gonca PAŞAMEHMETOĞLU, Turkish citizen, residing at 60 Sokak 16/7 Emek/ANKARA and Mustafa ATİK, Turkish citizen, residing at Bağlar Caddesi Suna Sokak 4/5 Büyükesat/ANKARA are elected as the First Auditors. Provisional Article 2 is removed from the Articles of Association. Provisional Article 3 is removed from the Articles of Association. Garanti Faktoring 2013 Activity Report 37

38 COMPENSATIONS OF BOARD OF DIRECTORS AND AUDIT BOARD: PROVISIONAL ARTICLE 4 Board Members who are elected will receive a monthly compensation of TL 500,000.- (Net) and Auditors will receive monthly compensation of TL 300,000.-(Net) for their duty in the first year. FOUNDERS: TÜRKİYE VAKIFLAR BANKASI T.A.O. SIGNATURE THE PROXY ACTING ON BEHALF OF VAKIF FİNANSAL KİRALAMA A.Ş. Mustafa ATİK İMZA THE PROXY ACTING ON BEHALF OF GÜNEŞ SİGORTA A.Ş. Mustafa ATİK İMZA T. VAKIFLAR BANKASI OFFICIALS AND EMPLOYEES PENSION AND HEALTH FUND FOUNDATION T. VAKIFLAR BANKASI MEMBERS SOCIAL COOPERATION FUND SIGNATURE File No.: (0112.3/47300) Aktif Finans Factoring Hizmetleri A.Ş. The Articles of Association of this company have been examined and its establishment was allowed by virtue of Article 273 of the Turkish Commercial Code. On behalf of President: Bülent Özesen Signature Domestic Trade General Manager Signature and Seal Name of the Bank Blocked: Vakıflar Bankası T.A.O Branch: Mecidiyeköy Branch Blocking Amount: 2,500,000,000.- Date and No. of Blocking Letter: May 28, Provisional Article 4 is removed from the Articles of Association. Garanti Faktoring 2013 Activity Report 38

39 Articles of Association amendments approved and became effective with the Ordinary General Assembly Meeting held on March 29, 2013; PREVIOUS TEXT Articles of Association of Aktif Finans Factoring Hizmetleri Anonim Şirketi TRADE TITLE: Article 2 The Company's trade title is "GARANTİ FAKTORİNG HİZMETLERİ ANONİM ŞİRKETİ". PURPOSE AND SUBJECT: Article 3 The Company is established to provide factoring services connected with all kinds of domestic and foreign trade transactions. The Company may engage in the following activities to realize its purpose and the works that fall in its scope provided that these are related with its main activities and in conformity with factoring regulations. 1. The Company may, considering international factoring rules and practices, buy, sell, appropriate or assign to others all kinds of receivables related with domestic commercial transactions, import and export transactions; buy, sell, appropriate or assign to others long-term receivables related with international factoring transactions, and realize international factoring transactions in line with Foreign Trade and Exchange Regulations. 2. The Company may perform accounting works of other companies that assigned their respective receivables to the Company and establish units required for this purpose. 3. The Company takes the necessary steps to collect the receivables assigned to it. 4. The Company provides consultancy services and intelligence about domestic and foreign creditors of its customers. 5. The Company maintains correspondence relations with foreign organizations operating in the same field as the Company, acts as the intermediary for them both in Turkey or abroad, subscribes to domestic and international associations and foundations having similar purposes. 6. The Company trains personnel in Turkey and abroad to be employed in the organizations and units to be established to realize its purposes, organizes courses, training programs and seminars. 7. The Company buys all kinds of movable and immovable properties in Turkey or abroad related with its purpose, sells, rents, rents out the same in part or fully, performs import and export with the same purposes. 8. The Company participates in and becomes partner with local and foreign companies already established or to be established, or forms consortiums. 9. The Company executes all kinds of agreements connected with its scope and purpose, contacts with private and public organizations for this purpose, and makes required agreements and contracts. 10. The Company establishes rights in kind on all kinds of movable and immovable properties (including ships), receives, gives and releases pledge and mortgage, provides advances, guarantees and accepts the same offered, provides guarantee to NEW TEXT Articles of Association of Garanti Faktoring Hizmetleri Anonim Şirketi (Previous title: Aktif Finans Factoring Hizmetleri Anonim Şirketi) TRADE TITLE OF THE COMPANY: Article 2 The Company's trade title is "GARANTİ FAKTORİNG HİZMETLERİ ANONİM ŞİRKETİ". FIELD OF OPERATION Article 3 The Company is established to provide factoring services connected with all kinds of domestic and foreign trade transactions. The Company engages in the following activities to realize the works that are within its field of operation provided that it respects the factoring regulations. 1. The Company may buy, sell, take over (appropriate) all kinds of receivables related with domestic trade and import and export operations, transfer (assign) these receivables to others according to international factoring practices and rules; to buy, sell, take over or assign to other long-term receivables related with international factoring transactions; realize international factoring transactions in line with the Foreign Trade and Exchange Regulations. 2. The Company may perform accounting works of other companies that assigned their respective receivables to the Company and establish units required for this purpose. 3. The Company takes the necessary steps to collect the receivables assigned to it. 4. The Company provides consultancy services and intelligence about domestic and foreign creditors of its customers. 5. The Company maintains correspondence relations with foreign organizations operating in the same field as the Company, acts as the intermediary for them both in Turkey or abroad, subscribes to domestic and international associations and foundations having similar purposes. 6. The Company trains personnel in Turkey and abroad to be employed in the organizations and units to be established to realize its purposes within the scope of its field of operation, organizes courses, training programs and seminars. 7. The Company buys all kinds of movable and immovable properties in Turkey or abroad related with its field of operation, sells, rents, rents out the same in part or fully, performs import and export with the same purposes. 8. The Company participates in local and foreign companies already established and becomes partner with companies to be established, forms consortiums notwithstanding the provisions of Article 21/1 of the Capital Markets Law. 9. The Company executes all kinds of agreements connected with its field of activity, contacts with private and public organizations for this purpose, makes required agreements and contracts. 10. The Company establishes rights in kind on all kinds of movable and immovable properties (including ships), receives, gives and releases pledge and mortgage, provides advances, guarantees and accepts the same offered, provides guarantee to Garanti Faktoring 2013 Activity Report 39

40 secure debts of third parties, executes guarantee agreements, grants all kinds of pledge and mortgage, realizes all kinds of obligation and saving transactions. 11. The Company buys and sells shares however, it cannot perform intermediary and securities portfolio management transactions. 12. The Company acquires marks, models, drawings, licenses, concessions, patents, private production methods, operating rights, intangible rights and uses the same rights at its discretion. 13. The Company takes all kinds of short, medium and long term credits from local and foreign banks and other credit institutions in order to realize its activities and purposes. 14. The Company makes market research, prepares and implements feasibility reports about other companies, provides all kinds of consultancy services and engages in publicity activities. If in future the Company needs to engage in activities not stated above which are found essential and necessary, that issue will be presented by the Board of Directors in the General Assembly and the General Assembly should take a decision about the issue. These kinds of activities require amendment of the Articles of Association and the permission of the Ministry of Industry and Trade as well as the permits of Banking Regulation and Supervision Agency and Capital Markets Board must be obtained if required. HEAD OFFICE AND BRANCHES OF THE COMPANY: Article 4 The Company's Head Office is at İstanbul İli, Şişli İlçesi, Eski Büyükdere Cad. Ayazağa Köy Yolu No. 23 Maslak Şişli/İstanbul. In case of a change of address, the new address is registered in the Trade Registry and announced in the Turkish Trade Registry Gazette and also Capital Markets Board, Banking Regulation and Supervision Agency and the Ministry of Industry and Commerce are notified. Any notice made to the address so registered and published shall be deemed to have been duly served to the Company. The Company s not having registered its new address in due time in case of leaving its registered and announced address shall be considered as a reason of termination. The Company may open branches in Turkey in accordance with Turkish Commercial Code and Capital Markets Board regulation provided that it obtained prior permission of the Capital Markets Board and Banking Regulation and Supervision Agency and notified the Ministry of Industry and Commerce. The Company may open representation offices, agencies and liaison offices in Turkey in accordance with the Turkish Commercial Code and may open the same in foreign countries according to the provisions of the Foreign Exchange Law provided that it notifies the Banking Regulation and Supervision Agency. Rules set by the Banking Regulation and Supervision Agency are applied when branches and representation offices are opened. AUTHORIZED CAPITAL: Article 6 The Company agreed the authorized capital system pursuant to the provisions of the Capital Markets Board Law No amended with the Law No and started using this system upon the Capital Markets Board permit No. 709, issued on October 8, The authorized capital of the Company is TL 175,000,000.- which is divided into 17,500,000,000 shares with nominal value of Kr. 1.- each. The Authorized Capital Ceiling permit granted by the Capital Markets Board is valid for the period of (5 years). secure debts of third parties, executes guarantee agreements, grants all kinds of pledge and mortgage, realizes all kinds of obligation and saving transactions. 11. The Company buys and sells shares unless related with investment services or activities. 12. The Company acquires marks, models, drawings, licenses, concessions, patents, private production methods, operating rights, intangible rights and uses the same rights at its discretion. 13. The Company takes all kinds of short, medium and long term credits from local and foreign banks and other credit institutions in order to realize its activities and purposes within its field of activity. 14. The Company makes market research, prepares and implements feasibility reports about other companies, provides all kinds of consultancy services and engages in publicity activities. If in future the Company needs to engage in activities not stated above which are found essential and necessary, permission of Capital Markets Board should be obtained to make respective amendments on the Articles of Association and following the implementation of the provisions of the Law No and applicable regulations related with the amendments on the Articles of Association, and permission of Ministry of Customs and Trade should be obtained. HEAD OFFICE AND BRANCHES OF THE COMPANY: Article 4 The Company's Head Office is at İstanbul İli, Şişli İlçesi, Eski Büyükdere Cad. Ayazağa Köy Yolu No. 23 Maslak Şişli/İstanbul. In case of a change of address, the new address is registered in the Trade Registry and announced in the Turkish Trade Registry Gazette and also Capital Markets Board, Banking Regulation and Supervision Agency and the Ministry of Customs and Trade are notified. Any notice made to the address so registered and published shall be deemed to have been duly served to the Company. The Company s not having registered its new address in due time in case of leaving its registered and published domicile shall be considered as a reason of termination. The Company may open branches in Turkey and in foreign countries after obtaining necessary permits stated in the Turkish Commercial Code, Capital Markets Board regulation, provisions of Foreign Exchange Law and notifying the respective Authorities. Rules set by the Banking Regulation and Supervision Agency are applied when a branch is opened. AUTHORIZED CAPITAL: Article 6 The Company agreed the authorized capital system and started using this system upon the Capital Markets Board permit No. 709, issued on October 8, The authorized capital of the Company is TL 175,000,000.- which is divided into 17,500,000,000 shares with nominal value of Kr. 1.- each. The Authorized Capital Ceiling permit granted by the Capital Markets Board is valid for the period of (5 years). Even if the authorized capital ceiling for which the permit was granted is not reached by the end of 2016, the Board of Garanti Faktoring 2013 Activity Report 40

41 Even if the authorized capital ceiling for which the permit was granted is not reached by the end of 2016, the Board of Directors, if it intends to take a decision to increase the capital, has to receive approval of the General Assembly for a new term to obtain the permit of Capital Markets Board for the previous ceiling or a new ceiling. The Company is considered out of the authorized capital system if such approval is not given. The Board of Directors may increase the capital by issuing registered shares within the authorized capital ceiling regardless of the provision of the Turkish Commercial Code related with the capital increase but in accordance with the provisions of the Capital Markets Board Law when it deems necessary, during the period of The Company's issued capital is TL 21,000,000.- (Twenty One Million Turkish Lira) which is divided into 2,100,000,000 shares in total including 1,057,724,557 registered shares for group (A) and 1,042,275,443 registered shares for group (B) with nominal value of Kr. 1.- each (One Kurus). The nominal value of the shares was TL 1,000- before this is changed to YKr. 1.- according to the provisions of the Law that introduced an amendment on the Turkish Commercial Code No The total number of shares decreased following this amendment and 1 share having the value of 1 New Kurus will be distributed for 10 shares having the value of YTL 1,000.- each. Shareholders reserve their respective rights on their shares in relation to the amendment in question. Shares that represent the capital are monitored according to the dematerialization principles. The nominal value of the shares was amended as 1 New Kuruş as per the Law on the Amendment of Turkish Commercial Code No and then the New Turkish Lira and New Kuruş terms were amended as Turkish Lira and Kuruş according to the Cabinet Decree No. 2007/11963, dated April 4, 2007 on the Removal of the Term "New" in New Turkish Lira and New Kuruş and the Principles of the Implementation thereof. Issued capital is paid in full. The Board of Directors may take restrictive decisions such as issuing the shares above preferred or nominal value for different groups, limiting shareholders to obtain new shares or on the rights of the holders of preferred shares according to the capital markets board regulation and provision of applicable legislation. SHARES AND ASSIGNMENT Article 7 Group A and B shares are registered shares. Since the shares in other groups that are not group B registered shares are not offered to the public, in case there is a shareholder who wants to assign his/her group A registered shares, other shareholders who hold registered shares in these groups have preferential right to buy the shares to be assigned as per their own share ratios in consideration of respective market value. A Shareholder who wants to assign his/her shares has to notify other registered shareholders through a notary. Shares can be assigned to third parties upon the permission of the Board of Directors unless no shareholder wants to acquire the shares within one month following this notice. Registered shares that are traded at the exchange. Shares can be issued as clippings bearing different values in line Directors, if it intends to take a decision to increase the capital, has to receive approval of the General Assembly for a new term to obtain the permit of Capital Markets Board for the previous ceiling or a new ceiling. The Company is considered out of the authorized capital system if such approval is not given. The Board of Directors may increase the issued capital by issuing new shares up to the authorized capital ceiling pursuant to the provision of the Turkish Commercial Code, take decisions on the limitation of rights of preferred shareholders and limitation on new share acquisitions by shareholders and on the issue of premium shares or shares that are under the nominal value when it deems necessary, during the period of Power to limit new share acquisitions cannot be used in a way leading to inequality among shareholders. The Board of Directors has the power to increase the issued capital by issuing registered share within the limits of the authorized capital ceiling regardless of the provisions of the Turkish Commercial Code related with the increase of authorized capital. The Company's issued capital is TL 21,000,000.- (Twenty One Million Turkish Liras) which is divided into 2,100,000,000 shares in total including 1,057,724,557 registered shares for group (A) and 1,042,275,443 registered shares for group (B) with nominal value of Kr. 1.- each (One Kurus). The nominal value of the shares was TL 1,000- before this is changed to YKr. 1.- according to the provisions of the Law that introduced an amendment on the Turkish Commercial Code No The total number of shares decreased following this amendment and 1 share having the value of 1 New Kurus will be distributed for 10 shares having the value of YTL 1,000.- each. Shareholders reserve their respective rights on their shares in relation with the amendment in question. Shares that represent the capital are monitored according to the dematerialization principles. The nominal value of the shares was amended as 1 New Kuruş as per the Law on the Amendment of Turkish Commercial Code No and then the New Turkish Lira and New Kuruş terms were amended as Turkish Lira and Kuruş according to the Cabinet Decree No. 2007/11963, dated April 4, 2007 on the Removal of the Term "New" in New Turkish Lira and New Kuruş and Principles of the Implementation thereof. Issued capital is paid in full. The Board of Directors may take restrictive decisions such as issuing the shares above preferred or nominal value for different groups, limiting shareholders to obtain new shares or on the rights of the holders of preferred shares. SHARES AND ASSIGNMENT Article 7 Group A and B shares are registered shares. Since the shares in other groups that are not group B registered shares are not offered to the public, in case there is a shareholder who wants to assign his/her group A registered shares, other shareholders who hold registered shares in these groups have preferential right to buy the shares to be assigned as per their own share ratios in consideration of respective market value. A Shareholder who wants to assign his/her shares has to notify other registered shareholders through a notary. Shares can be assigned to third parties upon the permission of the Board of Directors unless no shareholder wants to acquire the shares within one month following this notice. Registered shares that are traded at the exchange. The Company capital cannot be less than the amount defined in Garanti Faktoring 2013 Activity Report 41

42 with the communiques of the Capital Markets Board and regulations of the Banking Regulation and Supervision Agency. The Company capital cannot be less than the amount defined in the respective regulations of Banking Regulation and Supervision Agency. BOARD OF DIRECTORS MEETINGS: Article 10 The Board of Directors convenes when required as per the Company businesses. However, a meeting has to be held monthly. The Board of Directors is considered as duly convened if more than half of its total members are present in the meeting and takes its decisions based on the majority of the votes. Votes are either affirmative or dissentive. Abstention votes are not valid. A Member who used a dissentive vote indicates his/her reason and signs his/her statement. Obligatory rules defined in the Corporate Governance Principles of the Capital Markets Board are observed for the transactions that are considered important within the meaning of Corporate Governance Principles as well as other transactions such as the issue of guarantee, security and pledges in favor of related parties of third parties. Those who are entitled to participate in the meeting of the Board of Directors of the Company may also participate in such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce and any secondary legislation. The Company may either establish the electronic meeting system to allow the Directors to attend the Board meetings and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on Meetings other than the General Assembly Meetings of Joint Stock Companies in an Electronic Means. In the meetings to be held, it is ensured that the right owners exercise such rights specified in the relevant legislation on the system established as per this provisions of the Articles of Association of the Company or on the system from which support services will be procured, within the frameworks set forth in the provisions of the Communiqué. REPRESENTATION AND BINDING OF THE COMPANY: Article 12 The Board of Directors prudentially performs all duties entrusted by the General Assembly and imposed by the Turkish Commercial Code and other applicable legislation. All the documents to be submitted and the agreements to be executed by the Company shall bear the signatures of at least two individuals authorized to bind the Company under the Company Title to be valid. Those authorized to represent and bind the Company shall be determined by the Board of Directors. the Board of Directors has the power to appoint a Managing Member or Managing Director. the respective regulations of the Banking Regulation and Supervision Agency. BOARD OF DIRECTORS MEETINGS: Article 10 The Board of Directors convenes when required as per the Company businesses. The Board of Directors is considered as duly convened if more than half of its total members are present in the meeting and takes its decisions based on majority of the votes cast by the members who are present in the meeting. This rule is also valid for on-line meetings of the Board of Directors. Votes are either affirmative or dissentive. Abstention votes are not valid. Member who used dissentive vote indicates his/her reason and signs his/her statement. Obligatory rules defined in the Corporate Governance Principles of the Capital Markets Board are observed for the transactions that are considered important within the meaning of the Corporate Governance Principles as well as other transactions made with related parties. Those who are entitled to participate in the meeting of the Board of Directors of the Company may also participate in such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce and any secondary legislation. The Company may either establish the electronic meeting system to allow the Directors to attend the Board meetings and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on Meetings other than the General Assembly Meetings of Joint Stock Companies in an Electronic Means. In the meetings to be held, it is ensured that the right owners exercise such rights specified in the relevant legislation on the system established as per this provisions of the Articles of Association of the Company or on the system from which support services will be procured, within the frameworks set forth in the provisions of the Communiqué. REPRESENTATION AND BINDING OF THE COMPANY: Article 12 The Board of Directors has the responsibility to perform the duties entrusted by the General Assembly and imposed by the Turkish Commercial Code and other applicable legislation acting as a prudent manager aiming to protect the Company's interests in line with codes of ethics. The Board of Directors may entrust one or more Board Member(s) or a third party with the full or partial management of the Company by introducing an internal directive without prejudice to the non-assignable duties and powers stated in Article 375 of Turkish Commerce Code. Representation of the Company with a sole signature may be entrusted to any one of the Board Members or one or more Managing Member(s) or other third parties acting as manager upon the decision of the Board of Directors. At least one Board Member has to have representation authority. The assignment of representation authorization is not valid unless the notarized copy of the resolution showing the individuals authorized to represent and the representation manner is registered by the Trade Registry and announced accordingly. The limitation of representation authority does not have any validity on third parties acting in good faith; however, registered and announced limitations that are associated with the activities of the head office or a single branch or its joint use are valid. Articles 371, 374 and 375 of the Turkish Commerce Code are reserved. Garanti Faktoring 2013 Activity Report 42

43 All the documents to be submitted and the agreements to be executed by the Company shall bear signatures of at least two individuals authorized to bind the Company under the Company Title to be valid. The Board of Directors may assign the representation authority to one of more managing member(s) or third parties acting as a manager. In such case, the Board of Directors issues a directive pursuant to Article 367/1 of the Turkish Commercial Code. The Board of Directors decides who are authorized to bind the Company. GENERAL MANAGER AND MANAGERS: Article 15 The Board of Directors appoints the General Manager and Executive Vice Presidents. The General Manager, Executive Vice Presidents and other 1 st degree authorized signatories should have the qualifications defined as per the principles set by the Banking Regulation and Supervision Agency. The General Manager is a Board Member and a shareholder. The General Manager is responsible for managing the Company prudently and in good faith respecting the Board of Directors resolutions as well as the Turkish Commercial Code, Capital Markets Board and the provisions of respective regulations issued by the Banking Regulation and Supervision Agency and other applicable legislation. AUDITORS AND TERM OF OFFICE: Article 16 The General Assembly elects three auditors among the shareholders and outside of the Company for one year. Auditors are obliged to perform their duties stipulated in Articles of the Turkish Commercial Code. Audit Report should be in the format defined by the Capital Markets Board. COMPENSATION OF AUDITORS: Article 17 The General Assembly decides the level of compensation to be paid to the Auditors. GENERAL ASSEMBLY MEETINGS: Article 18 The General Assembly convenes ordinarily and extraordinarily. The Ordinary General Assembly convenes at least once a year within three months following the end of Company's account period to discuss and resolve on the agenda defined by the Board of Directors considering the provisions set in Article 409 of Turkish Commercial Code. An Extraordinary General Assembly convenes when required by the Company businesses to take necessary decisions. General Assembly meeting announcements are made using all kinds of communication means including electronic mediums with the aim of reaching the highest number of shareholders possible in addition to the methods defined in the relevant regulations at least three weeks prior to the date of the meeting meanwhile other declarations and explanations that shareholders should know are placed on the website. The right holders entitled to participate in the meetings of the General Assembly of the Company may also attend such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce. The Company may either establish the Electronic General Assembly System to allow the shareholders to attend the General Assembly meetings, express GENERAL MANAGER AND MANAGERS: Article 15 The Board of Directors appoints the General Manager, Executive Vice Presidents and Manager according to the provisions of applicable regulations. The General Manager, Executive Vice Presidents and other 1 st degree authorized signatories should have the qualifications defined as per the principles set by the Banking Regulation and Supervision Agency. The General Manager and his/her proxy is the inherent member of the Board of Directors. The General Manager is responsible for managing the Company prudently and in good faith respecting the Board of Directors resolutions as well as the Turkish Commercial Code, Capital Markets Board and the provisions of respective regulations issued by the Banking Regulation and Supervision Agency and other applicable legislation. AUDITORS: Article 16 The Company is audited according to Turkish Commercial Code and other applicable legislation. Shareholders' reserve their rights to appoint private auditor as per the provisions of applicable legislation. Removed from the Articles of Association. GENERAL ASSEMBLY MEETINGS: Article 17 The General Assembly convenes ordinarily and extraordinarily. The Ordinary General Assembly convenes at least once a year within three months following the end of Company's account period to discuss and resolve the agenda defined by the Board of Directors considering the provisions set in Article 409 of the Turkish Commercial Code. An Extraordinary General Assembly convenes when required by Company businesses to take necessary decisions. General Assembly meeting announcements are made using all kinds of communication means including electronic mediums with the aim of reaching the highest number of shareholders possible in addition to the methods defined in the relevant regulations at least three weeks prior to the date of the meeting meanwhile other declarations and explanations that shareholders should know are placed on the website. The right holders entitled to participate in the meetings of the General Assembly of the Company may also attend such meetings in an electronic environment as per Article 1527 of the Turkish Code of Commerce. The Company may either establish the Electronic General Assembly System to allow the shareholders to attend the General Assembly meetings, express Garanti Faktoring 2013 Activity Report 43

44 their opinion, make suggestions and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on General Assembly Meetings of Joint Stock Companies in an Electronic Means. The shareholders or their proxies are ensured to exercise the rights stipulated in the said Regulations via the said system in all General Assembly meetings in accordance with this provision of the Articles of Association. their opinion, make suggestions and vote in an electronic means or purchase such services from appropriate providers pursuant to the provisions of the Regulations on General Assembly Meetings of Joint Stock Companies in an Electronic Means. The shareholders or their proxies are ensured to exercise the rights stipulated in the said Regulations via the said system in all General Assembly meetings in accordance with this provision of the Articles of Association. Transactions of shareholders holding the management majority, board members, senior managers and their spouses as well as their second degree relatives which may lead to a conflict of interest with the Company and subsidiaries are subject to the Turkish Commercial Code and obligatory regulations related with Corporate Governance Principles of the Capital Markets Board and relevant information on these kind of transactions are presented in the General Assembly. MEETING AND RESOLUTION QUORUM: Article 19 Quorums related with General Assembly meetings are subject to the Turkish Commercial Code and obligatory regulations related with Corporate Governance Principles of Capital Markets Board. ANNOUNCEMENT OF MEETING PLACE, BALANCE SHEET, PROFIT-LOSS TABLE AND AUDIT REPORT Article 20 General Assembly meetings are held at the Company head office or other places elected by the Board of Directors. The Company's balance sheet and profit-loss table which become final after the approval of the Board of Directors as well as the audit report are announced in line with the manner decided by the Capital Markets Board. PRESENCE OF A COMMISSIONER AT THE MEETING: Article 21 A Commissioner of the Ministry of Industry and Trade must be present in Ordinary and Extraordinary General Assembly Meetings. Resolutions taken during the General Assembly Meetings without the presence of commissioner are not valid. APPOINTMENT OF REPRESENTATIVE: Article 22 Shareholders can appoint a representative among other shareholders or from outside the Company to represent themselves in the General Assembly meetings. A representative who is also a shareholder has the power to exercise the voting rights of the shareholder he/she represents in addition to his/her own voting rights. A letter of authorization has to be drafted according the form stated in the directives of the Capital Markets Board. VOTING: Article 23 In General Assembly meetings, voting is made by raising hands. However, a secret ballot can be held upon the request of those holding a tenth of the capital represented by the shareholders attending the meeting. Transactions of shareholders holding the management majority, board members, senior managers and their spouses as well as their second degree relatives which may lead to a conflict of interest with the Company and subsidiaries and/or the commercial transactions which fall into the scope of the Company or its subsidiaries realized by the same on their behalf or on behalf of others or their participation as an unlimited partner in a company engaged in similar commercial activities are subject to the Turkish Commercial Code and obligatory regulations related with the Corporate Governance Principles of the Capital Markets Board and relevant information on these kind of transactions are presented in the General Assembly. MEETING AND RESOLUTION QUORUM: Article 18 Quorums related with General Assembly meetings are subject to the Turkish Commercial Code and Capital Markets Board regulations. ANNOUNCEMENT OF MEETING PLACE, BALANCE SHEET, PROFIT-LOSS TABLE AND AUDIT REPORT Article 19 General Assembly meetings are held at the Company head office or other places elected by the Board of Directors. The Company's balance sheet and profit-loss table which become final after the approval of the Board of Directors as well as the audit report are announced in line with the manner decided by the Capital Markets Board. ATTENDANCE OF MINISTRY REPRESENTATIVE: Article 20 A Ministry Representative must be present in Ordinary and Extraordinary General Assembly Meetings. Resolutions taken during the General Assembly Meetings without the presence of Ministry Representative are not valid. APPOINTMENT OF REPRESENTATIVE: Article 21 Shareholders can appoint a representative among other shareholders or from outside the Company to represent themselves in the General Assembly meetings. A representative who is also a shareholder has the power to exercise the voting rights of the shareholder he/she represents in addition to his/her own voting rights. A letter of authorization has to be drafted according the form stated in the directives of the Capital Markets Board. VOTING: Article 22 In General Assembly meetings, voting is open and made by raising hands. However, a secret ballot can be held upon the request of those holding a tenth of the capital represented by the shareholders attending the meeting. Garanti Faktoring 2013 Activity Report 44

45 Provisions related with the voting procedures to be applied in General Assembly meetings held on-line are reserved. OTHER ANNOUNCEMENTS Article 24 Announcements about the Company are made on a local newspaper published in the same place where the Company head office is located at least 15 days before the respective situation notwithstanding the provisions of Par. 4 of Article 37 of the Turkish Commercial Code, Capital Markets Board Law and communiques issued by the Capital Markets Board. However, the provisions of Article 18 related with the announcement of General Assembly Meetings are reserved. Provisions of Article 397 and 438 of Turkish Commercial Code shall apply to the announcements concerning the decrease of the capital and liquidation. OTHER ANNOUNCEMENTS Article 23 Statutory announcements related with the Company are made in accordance with Par. 4 of Article and Article 1524 of Turkish Commercial Code without prejudice to the provisions of the Capital Markets Board and communiques issued by the Capital Markets Board. However, the provisions of Article 17 related with the announcement of General Assembly Meetings are reserved. Provisions of Article 474 and 532 of Turkish Commercial Code shall apply to the announcements concerning the decrease of the capital and liquidation of the Company. ACCOUNT PERIOD - PREPARATION OF BALANCE SHEET AND PROFIT-LOSS TABLE, DOCUMENTS TO BE SUBMITTED TO CAPITAL MARKETS BOARD Article 25 The accounting period of the Company commences on the first day of January and ends on the last day of December. However, the first fiscal year begins on the date of establishment of the Company and ends on the last day of December of that year. The Company prepares its balance sheet and profit-loss tables in the form and according to the principles defined by the Capital Markets Board. The announced balance sheet, profit-loss table and audit report or their detailed forms requested by the Capital Markets Board as well as the annual activity report are submitted to the Capital Markets Board within 30 days following the General Assembly meeting. DETERMINATION AND DISTRIBUTION OF PROFIT: Article 26 The net profit remaining after the amounts that must be paid and reserved by the Company such as general expenses and various amortization as well as any taxes required to be paid by the Company are deducted from the income determined at the end of the account period and that is recorded in the balance sheet shall be distributed as follows respectively after deduction of any accumulated losses, if any. a. Primary reserve which is 5% of the net profit is set aside. b. First dividend at the rate and amount decided by the Capital Markets Board is set aside from the balance remaining after the allocation of primary reserve. c. 10% of the net profit is distributed to the Board Members and/or Company managers and employees without impairing the first dividend. The time and method of distribution is defined by the Board of Directors according to the regulations of the Capital Markets Board. Provisions of Article 466/3 of Turkish Commercial Code are reserved. d. In case the net profit that can be distributed is less than the amount of the first dividend determined by the Capital Markets Board or the financial year ended with a loss, the General Assembly may decide with a majority for the dividend distribution by using the reserves other than those defined in Articles 466 and 468 of Turkish Commercial Code provided that the amount to be distributed is not above the amount set by the Capital Markets Board. e. The General Assembly decides on the second dividend that can be distributed partially or fully on the balance remaining ACCOUNT PERIOD - PREPARATION, ANNOUNCEMENTS AND SUBMISSION OF ANNUAL FINANCIAL STATEMENTS Article 24 The accounting period of the Company commences on the first day of January and ends on the last day of December. The Company prepares and makes public its balance sheet in the form and according to the principles defined by the Capital Markets Board and Banking Regulation and Supervision Agency. The Company has its annual financial statements published on the Trade Registry Gazette within 30 days following the Ordinary General Assembly meeting every year. In case the General Assembly meeting is not held, annual financial statements are announced within six months at the latest upon the closing of the annual account period. DETERMINATION AND DISTRIBUTION OF PROFIT: Article 25 The net profit remaining after the amounts that must be paid and reserved by the Company such as general expenses and various amortization as well as any taxes required to be paid by the Company are deducted from the income determined at the end of the account period and that is recorded in the balance sheet shall be distributed as follows respectively after deduction of any accumulated losses, if any. a. Primary reserve which is 5% of the net profit is set aside. b. First dividend is set aside on the balance remained and the amount including the grant made during the year pursuant to the profit distribution policy agreed by the General Assembly and applicable regulations. c. 10% of the net profit after the above deductions is distributed to the Board Members and/or Company managers and employees. The time and method of distribution is defined by the General Assembly based on the proposal of the Board of Directors according to the regulations of the Capital Markets Board. Provisions of Article 519/2 of Turkish Commercial Code are reserved. d. In case the financial year ended with a loss, the General Assembly may decide with a majority for dividend distribution on the profit by using the reserves other than those defined in Articles 519 and 522 of Turkish Commercial Code. e. The General Assembly decides on the second dividend that can be distributed partially or fully on the balance remaining after the deduction from the net profit the amounts set in paragraphs a, b, c above, whether it is added to the capital Garanti Faktoring 2013 Activity Report 45

46 after the deduction from the net profit the amounts set in paragraphs a, b, c above, whether it is added to the capital reserves set aside as per the law or Articles of Association or the amount to be set aside as excess reserve or left as previous year profit on the balance sheet. Unless the statutory capital reserve is set aside, the General Assembly cannot decide on the allocation of other reserves, transfer of profit to the next year or profit distribution to Board Members, officials, servants and employees until the payment of primary reserves. TERM OF THE PROFIT DISTRIBUTION: Article 27 The General Assembly decides on the term and method of distribution of the annual profit to the shareholders following the proposal of the Board of Directors in line with the provisions of the Capital Markets Board Law. CAPITAL RESERVES: Article 28 Provisions of Articles 466 and 467 of the Turkish Commercial Code are applied for the capital reserves set aside by the Company. AUTHORIZED COURT: Article 29 Any disputes between Company and shareholders are resolved by the Court located in the same place as the Company head office. DISSOLUTION AND TERMINATION: Article 30 The Company is dissolved as per the reasons defined in the Turkish Commercial Code. The Company can also be dissolved with the resolution of the General Assembly following court orders or other instructions. In case the Company is required to be terminated or dissolved, the Board of Directors calls for a General Assembly Meeting to resolve on the issue. If reason for dissolution is other than bankruptcy, the Board of Directors makes the registration and announcement required by Article 438 of the Turkish Commercial Code. LIQUIDATORS: Article 31 If the reason for dissolution or termination is other than bankruptcy, the Board of Directors appoints liquidators. METHOD OF LIQUIDATION: Article 32 The provisions of the Turkish Commercial Code apply for liquidation works, processes as well as powers and responsibilities of liquidators. AUTHORIZED COURT: Article 33 Courts and execution offices located in the same place as the Company head office are competent for any disputes related with the Company business that may arise between the Company and shareholders and direct shareholders both during the operation of the Company and its liquidation process. DOCUMENTS TO BE SUBMITTED TO THE MINISTRY OF INDUSTRY AND TRADE: reserves set aside as per the law or Articles of Association or the amount to be set aside as excess reserve or left as previous year profit on the balance sheet. No profit distribution is allowed to Board Members, officials, servants, employees, foundations established for various purposes as well as similar entities and/or organizations unless the statutory capital reserve is set aside and dividend distributed to the shareholders as per the Articles of Association. TERM OF THE PROFIT DISTRIBUTION: Article 26 The General Assembly decides on the term and method of distribution of the annual profit to the shareholders following the proposal of the Board of Directors in line with the provisions of the Capital Markets regulation. CAPITAL RESERVES: Article 27 Provisions of the relevant articles of the Turkish Commercial Code are applied for the capital reserves set aside by the Company. Removed from the Articles of Association. EXPIRY AND LIQUIDATION: Article 28 The Company is dissolved as per the reasons set in the Turkish Commercial Code and other applicable regulations. The term of the Company can also be dissolved with the resolution of the General Assembly or court order. In case the Company is required to be terminated or liquidated, the Board of Directors calls for a General Assembly Meeting to resolve on the issue. LIQUIDATORS: Article 29 The Board of Directors conducts liquidation processes unless the General Assembly appoints liquidators. Right of other authorities based on applicable legislation to appoint liquidators is reserved. METHOD OF LIQUIDATION: Article 30 The provisions of the Turkish Commercial Code apply for liquidation works, process as well as powers and responsibilities of liquidators. Liquidation processes of the Company can be inspected by the Banking Regulation and Supervision Agency if necessary. AUTHORIZED COURT: Article 31 Courts and execution offices located in the same place as the Company head office are competent for any disputes that may arise between the Company and shareholders both during the operation of the Company and its liquidation process. Removed from the Articles of Association. Garanti Faktoring 2013 Activity Report 46

47 Article 34 Two copies of Turkish Trade Registry Gazette where the Company's Articles of Association are published are sent to the Ministry of Industry and Trade and one copy is sent to the Capital Markets Board. INTEGRAL PROVISIONS: Article 35 Relevant provisions of the Turkish Commercial Code and Capital Markets Board Law as well as communiques issued by the Capital Markets Board and provisions of regulations approved by the Banking Regulation and Supervision Agency shall apply for the issues not expressed in these Articles of Association. INTEGRAL PROVISIONS: Article 32 Relevant provisions of Turkish Commercial Code and Capital Markets Board Law as well as communiques and regulations issued by the Capital Markets Board and Banking Regulation and Supervision Agency shall apply for the issues not expressed in these Articles of Association. ISSUANCE OF BONDS AND OTHER SECURITIES Article 36 The Company may issue bonds, convertible bonds and other securities used as capital market instruments according to the provisions of the Turkish Commercial Code, Capital Markets Board Law and other applicable laws and communiques. The General Assembly assigns its right to issue bonds, convertible bonds and other debt instruments used as capital market instruments to the Board of Directors pursuant to Articles 13 and 14 of the Capital Markets Board Law. PREPARATIONS OF THE BOARD OF DIRECTORS REPORT Article 37 The Company's annual Board of Directors report is prepared according to the principles and manner set by the Capital Markets Board. ISSUANCE OF BONDS AND OTHER SECURITIES Article 33 The Company may issue bonds, convertible bonds and other securities used as capital market instruments according to the provisions of the Turkish Commercial Code, Capital Markets Board Law and other applicable laws and communiques. The General Assembly assigns its right to issue bonds, convertible bonds and other debt instruments used as capital market instruments to the Board of Directors for an indefinite term pursuant to Articles 31, Paragraph 3 of the Capital Markets Board Law. PREPARATIONS OF THE BOARD OF DIRECTORS REPORT Article 34 The Company's annual Board of Directors report is prepared according to the provisions of applicable legislation. Garanti Faktoring 2013 Activity Report 47

48 Corporate Governance Principles Compliance Rating The 2 nd "Corporate Governance Principles Compliance Rating" works which was made first in last year to certify the Company's commitment to the Corporate Governance Principles Compliance were completed on 08/21/2013. In the report prepared by KOBİRATE Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş. (KOBİRATE A.Ş.) the Company's Corporate Governance Rating for the period 08/21/ /21/2014 is revised and increased from 8.36 to Companies which are rated in the range of "7-8.9" are defined as "highly in compliance with the Corporate Governance Principles, capable of determining and controlling possible risks that may occur, supervise the rights of its shareholders fairly, implementing a high level of transparency in terms of public disclosure, having a Board of Directors structure and operation methods that are considered as in line with corporate governance principles, aspects which are not in line with these principles do not pose significant risks, in case of public offering, they deserve to be in BİST Corporate Governance Index." The report of Kobirate is available at the Company's website ( under the section Yatırımcı İlişkileri with the name SPK Kurumsal Yönetim İlkelerine Uyum Derecelendirme Raporları. Rating As of May 15, 2013, international credit rating organization Fitch Ratings rated Garanti Faktoring Hizmetleri A.Ş. as BBB, Stable Outlook. Credit ratings announced by Fitch Ratings are as following: Foreign Currency Long Term: BBB Short Term: F3 Turkish Lira Long Term BBB Short Term: F3 National Long Term: AAA (tur) Stable Outlook Awards Upon the proposal of the Company leaders from 178 countries, the organization named Business Initiative Directions (BID) granted "International Star for Quality" award to Garanti Faktoring for its commitment to quality management and innovation in its practices and processes. The Company, always seeking customer satisfaction, with a fast and quality service provision as its starting points, will continue its performance even by increasing its level which brought it this award. Garanti Faktoring 2013 Activity Report 48

49 Our Units, 2013 Activities and Projects of the Next Period Sales Marketing and Coordination Domestic Volume Increase Export Volume Increase Import Volume Increase Aiming to offer finance, guarantee and collection services which are among factoring activities to its customers one by one or all together, Garanti Faktoring realizes its domestic and foreign factoring transactions as to the requirements of customers over a broad network supported by the Doğuş Group and BBVA synergies. Garanti Faktoring opened new branches and increased their total number to 21 at the start of 2013 based on its objective to increase its number of customers at every segment and to work more closely with its customers throughout the country. Therefore, Garanti Faktoring serves a huge customer base including especially SME, companies that make intensive import and export operations as well as organizations with a widespread supplier and dealer network by introducing factoring products and services throughout the country thanks to the fact that it has the broadest branch network among the bank subsidiary companies in the sector. The Company completed and adopted the processes that are developed to ensure faster transactions with customers in the SME segment according to their requirements. Transaction size and volume expected to be higher in 2014 When 2013 figures are generally considered, we realized factoring transactions with 6,003 customers corresponding to TL billion throughout the year. Compared to the previous year, the volume of domestic transactions increased 20%, export transactions increased 139% and import factoring transactions increased 59%. In 2013 we worked with more customers compared to the previous years especially in terms of export factoring transactions other than domestic finance transactions. Another objective is to increase the market share above the sector average by dealing with new markets and companies. We will continue to offer innovative products tailored to the customer needs working intensively with a customer oriented manner on a wider map thanks to the twenty one branches. Regarding foreign country transactions; We will assume a more active role in the offering and sale of 2F Export Factoring instrument to export companies and increase our market share in that area. Garanti Faktoring will not compromise its investments in system infrastructure and human resources the same as in 2013 and will surely increase its efficiency while working hard to realize its objectives. Garanti Faktoring 2013 Activity Report 49

50 Product Management and Business Development Organization's activities focus primarily on new product and business partnership improvements as well as development of current products in line with factoring regulations. In this regard, we developed new projects in 2013 which are already in use in developed countries but not introduced in Turkey yet to offer them to our customers. Thanks to the works completed, a new organization is designed similar to the guarantee model we are offering abroad via our correspondents and in August we introduced for the first time the product named Alacağım Garanti de which guarantees timely collection of domestic receivables payable to sellers. In addition to the guarantee offered, a finance option is also available for sellers. Garanti Faktoring plans to again increase the diversity and size of its structured financial products realized with its business partners in 2013 also in the year Also, our new product, which is in the course of development to enhance irrevocable transaction volume, is planned to be offered to our customers in the first quarter of In 2013, the Company aimed to use its linkedin, facebook and twitter accounts more effectively, and consequently increased its social media appearance within the framework of Social Media Platforms. The "Commercial Collection Management" team acting with a professional service vision ensures that customers that choose the "Commercial Collection Management" product enjoy shorter collection periods and less operation costs. Client and Correspondent Relations The Client and Correspondent Relations Department continues to make a difference with its expert team by expanding its correspondent network in new markets and offers tailored solutions to its clients by cooperating with correspondent factoring companies based on a wide product range thanks to its strong relations management, providing top quality services to the clients in their foreign operations due to its innovative and customer oriented approach. As Garanti Faktoring, export factoring transactions are very important for us and we have no doubt that it has a high potential in Turkey. Approximately 18% of factoring turnover in Turkey in 2012 is export factoring. Turkey's share is 14% in correspondent guaranteed export volumes realized globally as Euro 25 billion in Turkey is currently the second biggest country after China in correspondent guaranteed export factoring transactions and i ts global share is increasing every day. With the support of our export sales and marketing teams that we re-organized under the Client and Correspondent Relations Department and renovated system infrastructures in 2012, we offered collection guarantee, collection service and finance options in correspondent guaranteed export transactions and consequently we doubled our market share with a rise of 139% in exports compared to the previous year. Our memberships; Garanti Faktoring is the only factoring company in Turkey having memberships in two giant international factoring chains at the same time namely FCI (Factors Chain International) and IFG (International Factors Group). Garanti Faktoring 2013 Activity Report 50

51 This advantage takes Garanti Faktoring ahead of its competitors. As Garanti Faktoring, we are able to guarantee faster, easier and more reliable forward cash against goods sales to our clients by benefiting from the wide correspondent network including more than 270 factoring companies located in 75 countries that are members of these two chains and efficiently using these correspondent factoring companies throughout the world. Treasury The Treasury Department meets the funding needs of Garanti Faktoring and manages the cash flow. Also, it manages the liquidity risk and maturity risk by setting interest rates of Garanti Faktoring in order to maximize balance sheet net margins and minimize fluctuations. In this regard, it makes necessary transactions in the spot or derivative markets by closely monitoring market conditions and making required analyses. The Treasury Department also manages relations of Garanti Faktoring with banks. The Department's main objective is to increase the Company's profitability by monitoring the finance markets closely was an important year in terms of both Turkish Lira and foreign currency liquidity risk management. On the Turkish Lira side, when the Central Bank of Turkey introduced tightening liquidity policies, interest rates rapidly increased in mass funding markets and this had an effect on credit and bill interest rates. Under these circumstances, diversification of resources and cost management as well as effective use of limited resources were important in the Turkish Lira Balance Sheet. Short and medium term swaps were actively used in addition to bank credits in Foreign Currency liquidity management. Turkish Lira bill issuance that started in 2013 contributed active and passive management practices of Garanti Faktoring during the year and became one of the prioritized transactions for The Treasury is planning to maintain its current strategy also in 2014 under volatile interest and currency rate conditions. Garanti Faktoring 2013 Activity Report 51

52 Treasury Marketing The Treasury Marketing Unit answers pricing requests on four business lines which are classified as corporate, commercial, medium size enterprises and small size enterprises in line with the customer segmentation of Garanti Faktoring. The Treasury Marketing Unit ensures the coordination and information share with Treasury Department and Sales and Marketing Units in order to ensure that the Company's liquidity is used in the best manner and to develop placement strategies. While doing this it announces market changes and Company policies to distribution channels, evaluates private placement pricing requests received from the Sales, Marketing and Coordination Unit in terms of profitability, efficiency and market conditions and sends proper pricing to relevant Units in the fastest way. Firstly, the corporate and large size commercial customers, making customer visits together with the Sales and Marketing Units to find out their requirements, informing them about market conditions and supporting our relations are among its duties. The 2014 objectives include expanding the product range by evaluating new product needs based on the feedback received from our corporate customers, as well as new product development by working in cooperation with distribution channels in order to increase customer efficiency. Operations/Legislations Number of Transactions Number of Customers The Operations/Legislations Department ensures that all transactions are performed properly and timely in conformity with the laws, regulations, and international factoring rules as well as policies and procedures of Garanti Faktoring, provides effective solution to problems caused by the nature of transactions, and offers legislation consultancy services to sales teams and other units in line with their responsibilities. The Operations/Legislations Department structured some project based transactions, continued to ensure conformity of factoring practices to legislation, and clarified the standards by receiving the opinion of authorities while taking a primary role in the sector for uncertainties during the year. It realized 37,027 transactions with 6,003 customers in 2013 and increased transaction volume. The completion of transactions at the end of a standard term being one of the objectives of the Operations/Legislations Department was also realized during this period and the Department worked hard to rise both domestic and foreign customer satisfaction related with the completion of transactions. Re-organization process within the Company also continued in 2013; our processes were reviewed to ensure that transactions are performed with zero legislation risk and our systematic and organizational processes were re-structured considering the increased transaction volume. Garanti Faktoring Operations/Legislations Department voluntarily contributed in both internal training and sectoral training. Increased awareness on operational efficiency as well as compliance with legislation will also be maintained in 2014 with on-going system developments. In addition to systematic adjustments, both internal training and sectoral training will continue to increase knowledge levels. Garanti Faktoring 2013 Activity Report 52

53 Human Resources and Training Garanti Faktoring is Investing in Efficiency Oriented Human Resources Systems and Processes Quality and dynamic human resource which makes a difference; Garanti Faktoring supports its stable growth by its investments in efficiency oriented human resources systems and processes. Garanti Faktoring continues to invest in its employees and always develops its human resource practices in line with its consistent growth. The basic human resources policy of Garanti Faktoring gives priority to promotion within the Company so the executives are found internally. Based on this principle, Career Maps were created in 2013 to find the appropriate path that employees should pursue pursuant to their abilities, experiences, expectations and objectives. An award program is introduced in 2013 aiming at awarding Company employees who Make Difference in line with the Company's targets and strategies in order to create awareness across the Company. As a continuation of the First Steps in Leadership training, designed for the managers assigned in the Head Office, 6 "Coaching Programs" for 17 individuals were organized in In addition to this training, approximately 78 employees received 8 different in-class trainings in 2013 within the framework of the "Portfolio Management Certification Program" that was created especially for sales teams and first introduced in Also, Follow-Up Workshops within the Strategic Management Program that is organized for the special group of 26 Senior Managers and Executives were completed in Consistent growth of Garanti Faktoring is planned to be supported by giving importance to internal training on Sales and Leadership topics. Within the framework of the Bahçeşehir University CO-OP project held for the 4 th time in 2013, students showed great attention, as in the previous years, to the class named Garanti Faktoring; The World of Receivable Finance included in the Spring Term academic program. Bahçeşehir University students received 27 hours of class in 9 weeks where they were informed about the sector. Garanti Faktoring continued its investments in training and human resources in line with the capabilities and preferences of the employees. In 2013, more than 200 trainings were organized under 54 different in-class on-the-job training topics. Training of two big factoring chains, the IFG and FCI organizations, were included in the training catalog of Garanti Faktoring. 22 different e-trainings were organized in 2013 in order to meet the training needs of employees in a faster manner. Also, employees participated in 7 different events such as conferences, seminars etc. according to their professional expertise. Within the scope of occupational health and safety, 5 employees received first aid training, 11 employees received firefighting training, 110 employees received emergency and ergonomics training and 125 employees received basic occupational health and safety training in Company employees received Factoring Legislation training and all employees of the Company were assigned to "Fighting Against Laundering Proceeds of Crime and Terrorism Finance" e-learning training. Garanti Faktoring provided approximately 8,415 hours in-class and on-the-job training to its employees in Training period per employee is 44 hours. Based on the principle adopted by Garanti Faktoring of rising its own Garanti Faktoring 2013 Activity Report 53

54 executive internally, 95% of the promotions in 2013 were realized among the executives that were trained in the Company. The Company selected the remaining 5% from Garanti Bankası within the Doğuş Group while acting with the group synergy respecting Doğuş Group's principle of rising its own executives who accepted its own values. It is planned to have the action plan required for the Company to work with a stronger synergy with the "Internal Customer Satisfaction Survey" to be made in 2014 projecting the evaluation of different units on other units. Also, another objective is to transfer employee information to modules by systematic adjustments to create a more sound data base both for employees and the Company. Our Sponsorships and 2013 Social Responsibility Projects Within the framework of the Bahçeşehir University CO-OP project that we organized for the 4 th time in 2013, students showed great attention, as in the previous years, to the class named Garanti Faktoring; The World of Receivable Finance included in the Spring Term academic program. During the term, our Executives informed the Bahçeşehir University students about the sector in 27 hours of class received in 9 weeks. TEKSEM (Turkey Non-Disabled Culture Art and Learning Center) staged theater plays it had writing for the projects aiming at changing the image of disabled people and to create a source for education with the support of individuals who are visually and physically impaired as well as with its volunteers, and this year the play "Non-Disabled CANs are in Traffic" draws attention to the mistakes related with seat belts and first aid practices. To support the "Non-Disabled CANs are in Traffic Project", Garanti Faktoring sponsored the play named "Mischievous Cat in Traffic" staged by TEKSEK Non-Disabled Artists Center on Wednesday, December 11. A few scenes from the play: Garanti Faktoring 2013 Activity Report 54

55 Garanti Faktoring, who donates every year for the support of the Everything is for Children Fair organized by the Ayhan Şahenk Foundation, acted together with the Foundation in 2013 in the preparation of agendas and calendars where recycled paper is used for sustainable development. Also, paper, battery, plastic bottle caps and currier packages are still collected for recycling purposes within the Company. Individual Donations: Aid materials (computers, basic necessities etc.) requested by Semiha Şakir Nursery School according to their needs drew the attention of almost all the Company employees and we collected them all together and delivered them to the school. Similarly, the items needed by Kocamustafapaşa Nursery School, where orphan babies at the age of 0-2 stay, were collected thanks to our employees' sensitivity and delivered to the school. Our employees also showed sensitivity and contributed for the aid list of children with leukemia hospitalized in the Çapa and Medical Park Hospitals, some of them are suffering serious financial difficulties. Garanti Faktoring 2013 Activity Report 55

56 SECTION V. FINANCIAL STATUS The View of the Chairman of the Board of Directors about the Period Dear Shareholders, We experienced two different economic environments in Turkey in Especially until the May, interest rates were the lowest ever in the history of Turkey. However, interest rates started to increase in line with the expectations and announcements while FED policies were taking shape. The slowdown in the Turkish economy was already projected for 2014 due to the low domestic demand as a result of measures taken to decrease the high current deficit and take inflation under control. We saw the same scenario also in other developing countries economies with the main reason caused by FED policies in Highly fragile economies were negatively affected and could not draw global capital. When the Turkish finance sector data is checked, the sector's strong look did not change while cost increases posed pressure on profitability especially with the second half of the year and this was reflected clearly on the yearend balance sheets. This also had an impact on the factoring sector, which is the second most important player in the finance sector after banking. Garanti Faktoring raised its asset size to TL million and its factoring receivables to TL million. In addition to the asset size increase, its asset quality is above the sector average thanks to the NPL ratio of 1.92%. Garanti Faktoring, using the advantage of its memberships in IFG and FCI, increased its export transactions volume by 139% and realized US Dollar 605 million turnover in 2013 compared to the previous year, continuing to support export finances of our exporter customers especially the SMEs. I strongly believe that Garanti Faktoring, with its customer oriented work model analyzing customer requirements correctly and providing quality and quick solutions and its processes based on the efficiency approach, will give importance to asset quality and continue its profitable and sustainable growth in the coming years as well. On behalf of the Board of Directors, I would like to use this opportunity to thank you, all our valuable employees, customers and investors who participated in the success of Garanti Faktoring in the year Ergun Özen Chairman of the Board of Directors Garanti Faktoring 2013 Activity Report 56

57 The View of General Manager about the Period Dear Shareholders, Customer and my beloved Co-Workers, We have gone through a year when the conditions of the global economy and local circumstances have changed rapidly, which highly affected both our sector and the real economy. Despite all the difficulties, we are happy to see that our successful performance was sustained again. Firstly the announcements about FED policy changes made last May and then the decreased bond acquisitions during the last months of the previous year were the essential points that directed the economies since these points had an impact on the decisions taken for the target of global capital. While the recovery of basic ratios in the USA economy continued, we saw that recession in EURO zone eased down. On the other hand, emerging economies such as India, Mexico, Russia, and Brazil which also includes Turkey showed an economic slowdown. The Turkish economy naturally is not immune to these changes in the global economy and it is affected directly. Our current deficit problem became a more serious issue to deal with more carefully while global capital was not sure about its target. Due to the measures taken recently to decrease domestic demand, it is expected that growth in the year 2014 will slow down and realize between the range of 2-2.5%. As Garanti Faktoring, our on-site organization now has 21 branches after new openings and transformation of our representation offices into branches in 2013 to comply with the provisions of The Code of Leasing, Factoring and Finance Companies as well as supplementary adjustments. We realized 37 thousand factoring transactions in total with 6,003 customers. Our transaction volume increased by 30% and realized as TL million in line with our projections. The balance sheet assets size by the end of 2013 was TL million, and factoring receivables was TL million. While realizing the above figures we did not compromise our asset quality and kept our non-performing receivables ratio at 1.92% which is above the sector average. Thanks to the increase of essential balance sheet items in 2013, our net profit of the period and shareholders' equity were realized as TL 15.3 million and TL 120 million respectively. Our return on equity level is 13.4%. We continued to give importance to developing Management Programs within the Company in 2013 as well. We appointed Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş., which is authorized by the Capital Markets Board and Banking Regulation and Supervision Agency, to perform a Corporate Governance Compliance Rating study that we first made in 2012 in relation with the Corporate Governance Principles Compliance rating. The Corporate Governance Compliance Rating of the Company which was 8.36 in the first study increased to 8.76 following the audit assignment. As I always say, we will keep our interest alive on this issue and increase our rating in the future. Garanti Faktoring 2013 Activity Report 57

58 Our quality service approach in 2013 bore fruit with the "International Star for Quality" award given in the organization held by the Business Initiative Directions (BID). Being an international corporation, BID gives its International Star for Quality award every year to appreciate and encourage companies that are leading their sector by giving priority to quality, technology and innovation. Nominees to the award are evaluated based on QC100 Total Quality Management Model standards. Representatives of successful companies from all over the world were present in the award ceremony organized by BID in Genevra on September 29, With the suggestions of company leaders from 178 countries, Garanti Factoring was found to deserve the "International Star for Quality award as its successful representation of both Turkey and the "Garanti" group due to its commitment to quality management and innovation in its practices and processes. As Garanti Faktoring we are aiming to lead our sector with our profitable and sustainable growth strategy in 2014 as well. In line with this objective, we are expecting to expand our customer oriented work model giving priority to customer satisfaction and to increase the Company's share in factoring transactions needed by our actual customers by focusing on our efficiency projects and aiming to enhance our service quality. After a successful year, I want to thank all our customers and shareholders for their support and trust in our Company and our employees who are our most important competitive advantage for their efforts and hard work. Sincere regards, Hulki Kara General Manager Garanti Faktoring 2013 Activity Report 58

59 Major Financial Indicators and Ratios According to the sector data announced by the Banking Regulation and Supervision Agency on 12/31/2013 and the Association of Financial Institutions announced on 09/30/2013; The Factoring sector increased by 17.6% in terms of average assets while average assets of Garanti Faktoring rose by 17.8%. Factoring receivables of the sector increased by 19% while average factoring receivables of Garanti Faktoring rose by 13%. The number of customers increased in line with the sector. Garanti Faktoring 2013 Activity Report 59

60 Garanti Faktoring Eliminated Essential Balance Sheet Sizes Comparing to the figures realized by the end of previous year Factoring receivables increased by 8.7% and realized TL thousand. Net non-performing receivables increased by 21.7% and realized TL thousand. Total assets increased by 5.3% and realized TL thousand. Figures of last five years (Thousand TL): Funds borrowed decreased by 12.2% and realized TL thousand. Total bills issued amounts to TL thousand and total borrowings increased by 3.4% and realized TL thousand. Shareholders equity increased by 14.3% and realized TL thousand. Net profit fell by 25.2% and realized TL thousand as a result of tightened margins. Figures of last five years (Thousand TL): 1 Effect of share sale transaction made one time in 2011 is TL Garanti Faktoring 2013 Activity Report 60