Corporate Credit Rating

Sovereign* National International TURKEY Corporate Credit Rating Factoring Long Term Short Term Foreign Currency BB B Local Currency BB B FC Stable Stable Outlook LC Positive Stable Local Rating A (Trk) A-1 (Trk) Outlook Positive Stable Sponsor Support 2 - Stand-Alone BC - Foreign Currency BB B PRİME FAKTORİNG HİZMETLERİ ANONİM ŞİRKETİ F i n a n c i a l D a t a 2012* 2011* 2010* 2009* 2008* Total Assets (000 USD) 39,249 2,803 3,271 3,723 4,072 Total Assets (000 TRY) 69,769 5,294 5,029 5,537 6,197 Equity (000 TRY) 13,072 5,285 4,999 5,161 6,103 Net Profit (000 TRY) 5,287 290-166 -942 455 Market Share (%) 0.38 0.03 0.03 0.05 0.08 ROAA (%) 17.68 6.30 5.07-20.82 8.86 ROAE (% ) 72.29 6.32 5.28-21.68 9.02 Equity/Assets (%) 18.74 99.82 99.41 93.20 98.49 NPL (%) 0.00 n.a. 100.00 41.83 13.48 Growth Rate (%) 1,217.85 5.27-9.18-10.65 8.38 *End of year Local Currency BB B Outlook FC Stable Stable LC Positive Stable * Assigned by Japan Credit Rating Agency, JCR on June 28, 2012 Analyst: Gökhan İYİGÜN/+90 212 352 56 74 gokhani@jcrer.com.tr 2012 Main Profitability Indicators % T. Income/Equity (avg.) 98.81 T. Income/T. Assets (avg.) 24.16 Equity Margin (avg.) 57.60 Assets Margin (avg.) 14.09 Net Profit Margin 58.30 Gross Profit Margin 73.16 T. Income/T. Expenses 372.56 Interest Coverage 295.23 2012 Main Asset Quality Indicators % NPL Ratio 0.00 Collaterals/T. Receivables 118.17 Net FX Position/T. Assets 0.00 Guarantees and Commitments/T. Assets 0.00 Company Overview Prime Faktoring Hizmeleri A.Ş. (hereinafter referred to as Prime Faktoring, or the Company), founded in 1997, operates in the Turkish Factoring Sector and offers cash-financing to sellers in return for their receivables, based on invoices or other certifying documents representing the domestic sales of goods and services, by undertaking their collection. The activities of the Company are regulated and supervised by the Banking Regulation and Supervision Agency (BRSA). The Company did not provide factoring services during the last two years before the completed fiscal year and refocused on its principal business activities following the change of majority shareholder in April 2012. The Company s utmost qualified shareholder was ANT Holding A.Ş. as of 1Q2013. Mr. Ahmet TAÇYILDIZ held a majority share of the holding company as of the reporting date. Ant Holding incorporates eight companies excluding Prime Faktoring operating in the fields of mining, energy, foreign trade, fleet car and business jet rental. The Company had a work force of 16 as of FYE2012, with no branch network. Strengths Remarkably above sector average profitability ratios No NPL amount and strong collateral level contributing to asset quality Absence of FX position and off balance sheet commitments and contingencies contributing to risk level High income generation capacity Low level of sector penetration along with recent sector legislation promising further room for future growth Constraints Relatively high sector concentration derived from qualified and corporate customers weighted portfolio preference Fierce competition throughout the sector Country-wide issue of remarkable increases in the number and volume of dishonored checks in the completed fiscal year Improvement needs in compliance with corporate governance principles Absence of a branch network Short-term funding inherit in the sector Publication Date: May 07, 2013 Global Knowledge supported by Local Experience Copyright 2011 by JCR Eurasia Rating. Nispetiye Cad.Firuze Sok. Ceylan Apt. No:1-D:8 Akatlar/İSTANBUL Telephone: +90.212.352.56.73 Fax: +90 (212) 352.56.75 Reproduction is prohibited except by permission. All rights reserved. All of the information has been obtained from sources JCR Eurasia Rating believes are reliable. However, JCR Eurasia Rating does not guaranty the truth, accuracy, adequacy of this information. A JCR Eurasia Rating is an objective and independent opinion as to the creditworthiness of a security and issuer, not a recommendation to buy, hold, sell any security and to issue a loan. This rating report has been composed within the frameworks of SPK (Capital Markets Board of Turkey) regulations and internationally accepted rating principles and guidelines but is not covered by the NRSRO regulations. http://www.jcrer.com.tr

1. Rating Rationale The Turkish Factoring Sector has been regulated and supervised by the Banking Regulation and Supervision Agency (BRSA) since 2006. The Financial Leasing, Factoring and Financing Companies Law No. 6361, the factoring sector s first, came into effect on December 13, 2012. Moreover, the Regulation regarding organization and operating principals of financial leasing, factoring and financing companies entered into force on April 24, 2013. According to BRSA statistics updated March 1, 2013, the total asset size of the Turkish Factoring Sector was TRY 18.17bn and involved 83 factoring companies, two of which are listed on the Borsa Istanbul (BIST) as of FYE2012. The Company s consolidated independent audit report prepared in conformity with BRSA regulations, statistical data on the sector produced by BRSA and updated on March 1, 2013, JCR Eurasia Rating s own studies and records, information and clarifications provided by the Company and non-financial figures constitute the major basis of Prime Faktoring s ratings. Mostly the static analyze modalities were applied in the Company s credit rating process due to about two years of inactivity period before the completed fiscal year. On the other hand, the stated period before the change of majority shareholder incorporated in the rating process. The rating notes assigned by JCR Eurasia Rating for Prime Faktoring are a reflection of the Company s on and offbalance sheet financial state, shareholder structure, general market conditions in their fields of activity, diversity of potential activities and interaction with other group companies. In addition to the Company s profitability figures, asset quality, equity structure, market shares and expected support, the main shareholders financial and non-financial positions were also taken into consideration while determining the risk assessment of the long-term international local currency and foreign currency grades as well as national grades. Moreover, Company related issues of internal equity generation capacity, equity adequacy and liquidity level, as well as sector related issues of positive outlook derived from recent legislation, highly competitive market conditions, supervision and regulation of the Company s business sectors by the BRSA and low level of legal risks due to the high compliance with the legal obligations are other positive factors contributing to the formation of the grades. On the other hand, the concentration level in customers and sector, the lack of branch network and short term weighted dispersion of liabilities inherit in the sector are the factors suppressing the ratings of the Company. Moreover, with respect to the above mentioned factors, JCR Eurasia Rating affirms the long term international foreign currency and local currency ratings as BB, the same as that of the sovereign ratings of the Republic of Turkey, and the long term national local rating as A (Trk) in JCR Eurasia Rating s notation system, which denotes an investment grade. 2. Outlook A Positive outlook has been assigned for the Company s long term national grade due to the expectation of an improvement in activity diversity and market efficiency in line with the increase in the diversity of funding sources, actualization of first-quarter profit figure approximating the 2012 year-end total figure, the probable paid capital increase in the last quarter of the year and the positive outlook of the sector derived from low level of sector penetration and recently changed sector legislation promising further growth. Moreover, a Stable outlook has been assigned for the Company s short term national grade with the expectation of minimal changes in existing conditions, state of affairs and development trends due to probable positive future effects of the realized and potential bond issuances on cost of funding and liquidity management as well as recently refocusing on principal business activities in a highly competitive sector, above sector average sector and customer concentrations and improvement needs in compliance level with corporate governance principles. Additionally, JCR Eurasia Rating has assigned Positive and Stable outlooks on the international long and short term local currency rating perspectives of Prime Faktoring, respectively, those of the sovereign rating s outlooks of the Republic of Turkey. The main driving forces that can call forth a revision in the current outlook status include the Company related issues affecting asset quality and liability profile, along with the sovereign rating of Turkey which is highly responsive to domestic and foreign political and economic uncertainties, tensions and developments. 3. Sponsor Support and Stand Alone Sponsor Support notes and risk assessments reflect the financial and non-financial positions of the major controlling shareholder of Prime Faktoring, Ant Holding A.Ş., and the other Group companies. It is considered that the controlling shareholder has the capability to ensure the long term liquidity and equity for Prime Faktoring depending on its financial strength and that the other Group companies have the willingness and experience to provide efficient operational support when required. Within this scope, the Company's Sponsor Support grade has been assigned as (2). The Stand Alone grade is constituted especially regarding Prime Faktoring s asset quality, equity structure, risk management practices, market shares, track records and the development of existing risks in the markets and its business environment. We, as JCR Eurasia Rating, are of the opinion that Prime Faktoring will not have difficulties in meeting its current financial risks and has reached the level 1

of adequate entrepreneurial ability, experience and facilities to manage the incurred risks in its balance sheet without any assistance by the shareholders provided that it improves its current customer base and effectiveness in the market. Within this context, the Stand Alone grade of Prime Faktoring is determined as (BC) in JCR Eurasia Rating notation system. 4. Company Profile Prime Factoring was founded in 1995 and provides factoring services, advance payments to sellers against their receivables by taking possession and assuming their collection based on invoices or other certifying documents emanating from domestic sales of goods and services. With no factoring receivables in 2010 and 2011, the Company refocused on its principal business activities following a change in the majority shareholder in April 2012. The following table provides the Company s 1Q2013 shareholder structure and realized changes over time. Shareholders Structure % March, 2013 (*) ANT Holding A.Ş. 99.90 Ahmet TAÇYILDIZ 0.02 99.92 8.92 - Hande TAÇYILDIZ 0.02 0.02 0.02 - Emine KARAMAN 0.02 0.02 0.02 - Serkan BARAN 0.02 0.02 0.02 - Banu DEMİR 0.02 0.02 0.02 - Mehmet TATAR - 60.00 60.00 Hülya TATAR - 20.00 20.00 Haldun Mehmet ÖZBAK - 11.00 15.00 Mert Muhittin TATAR - - 2.50 Gülşah TATAR - - 2.50 Total 100.00 100.00 100.00 100.00 Paid Capital (TRY/000) 7,500 7,500 5,000 5,000 (*): BRSA's decision No. 5237 dated March 14, 2013 2012 2011 2010 The Company s year-end controlling shareholder, Mr. Ahmet TAÇYILDIZ, also holds the majority share of Ant Holding A.Ş. and transferred his shares to the Holding Company on March14, 2013 at which time the Company became a subsidiary of the Holding. Ant Holding incorporates eight companies excluding Prime Faktoring and operates in the fields of mining, energy, foreign trade, fleet car and business jet rental in addition to finance. The shareholding structures and paid-up capitals of the Holding and other group companies are shown in the table below. ANT Paid The Group Companies' Ahmet Holding Diğer Capital Shareholding Structure % TAÇYILDIZ A.Ş. (TRY 000) ANT Holding A.Ş. - 99.99 0.01 10,000 Ant Karlıova Enerji Üretim Ltd.Şti. 50.00-50.00 1,940 Antaç Elektrik Üretim ve Ticaret A.Ş. 51.00-49.00 1,961 Ant Madencilik Ltd. Şti. 99.98 0.02-100 Antaç Enerji Üretim ve Ticaret Ltd. Şti. 99.98 0.02-100 Ant Havacılık Ltd. Şti. 51.00-49.00 11,000 Ant Emlak Geliştirme ve Gayrimenkul Yatırım A.Ş. 99.99-0.01 3,000 Anatech Dış Ticaret A.Ş. 99.99-0.01 1,000 Ant Filo Hizmetleri A.Ş. 100.00 - - 50 Milenyum Oto Kiralama ve Otomotiv Turizm Tic. Ltd. Şti. - 50.00 50.00 250 Ant Enerji San. ve Tic.Ltd.Şti. - 50.00 50.00 1,500 The organizational chart of the Company consists of three directorates structured under a general management representing the chairman of the Company, operations, marketing and financial and administrative affairs. Intelligence, reporting and accounting units are structured under the directorates. Moreover, the organizational chart shows an internal audit unit reporting directly to the Company s Board. The Company had no branch network as of FYE2012. Prime Faktoring s Board consists of 3 members who are shareholders of the Company. The chairman also fulfills the general management tasks. As of FYE2012, the actual labor force of the Company was 16. 5. Sector Analysis According to BRSA s 2012 year-end data, the total assets size of the Factoring Sector reached TRY 18.18bn from TRY 15.62 with a growth rate of 16.36% as of FYE2012. Moreover, the total net profit of the sector increased 21.19% to TRY 597.08mn and profitability ratios of the sector improved accordingly. Factoring transactions began in Turkey in 1983 under the regulation and inspection of the Undersecretariat of the Treasury. The first factoring company was established in 1990. Subsequent to the Banking Law enacted towards the end of 2005, factoring transactions fell under the supervision and regulation of the Banking Regulation and Supervision Agency (BRSA). Recently, the Leasing, Factoring and Financing Companies draft law passed into law with acceptance of the Turkish Parliament General Assembly dated November 21, 2012 and entered into force on the date of publication, December 13, 2012. Moreover, the Regulation regarding organization and operating principals of financial leasing, factoring and financing companies entered into force on April 24, 2013. The key provisions of the stated law and regulation related to the Turkish Factoring Sector are as follows; The capital base of the companies advanced to TRY 20mn from TRY 7.5mn along with a 3-year of adaptation period, Companies are required to reserve to meet realized or potential losses derived from factoring receivables within the framework of the principles and procedures set by the BRSA, The associations of three sectors (leasing, factoring and financing companies) will unite under one roof within six months from the date of entry into force of the law. The companies will be a member of the established association within one month, The related companies are required to obtain permission to set up domestic and international branches. Moreover, an organizational structure that covers only the branches is permitted, Factoring companies and banks will assemble the information, including billing information, about their assigned receivables at a Risk Center or in a way deemed appropriate by the association, 2

Lending firms, operating with the permission of the Turkish Undersecretariat of Treasury, need to apply to BRSA to form into a factoring, leasing or financing company within six months from the date of entry into force of the Law. Within this period, the related firms cannot offer a new lending. Moreover, the operating permission of the lending firms which are not apply to BRSA on time or with unaccepted applications will be canceled. Companies are required to meet and sustain the minimum standard ratio (equity to total assets) of 3% along with an adaptation period until the end of 2013. Although the act does not involve provisions about certain points desired by the sector, such as recognizing provisions as an expense, not being liable to the Banking Insurance Transaction Tax (BITT) and to benefit from address information sharing system, it is expected that it will contribute to more effective execution of sector activities. Moreover, the Credit Bureau of Turkey (KKB) made the Check Report available for the use of factoring and leasing companies in August 2012, partially due to a significant increase in the number of dishonored checks in 2012. It is expected that the use of the Check Report will provide more effective credit risk management through information sharing and more robust decision making through accurate measurement of customers commercial risks. As of FYE2012, there were 78 factoring companies operating in the sector through 62 branches, 185 agents and 4,082 employees. According to BRSA s 2012 year-end statistics, the number of customers stood at 67k. Turkish Factoring Sector Some Operational Indicators Number of 2008 2009 2010 2011 2012 Companies 81 78 76 75 78 Branches 20 26 28 34 62 Representation 128 116 175 209 185 Employees 3,009 2,959 3,557 3,819 4,186 Customers 50,228 40,997 57,094 67,582 67.054 Contracts 146,558 65,952 89,516 91,029 84,769 Source: BDDK, The Turkish factoring sector held a small 0.76% share of the general financial system as of September 30, 2012. Excluding banks, the Central Bank of Turkey (CBT) and Borsa Istanbul (BIST), the factoring sector comprised an 11.32% share in the same period. Market Share of Factoring Sector (%) 2008 2009 2010 2011 2012* In the Financial System 0.69 0.74 0.83 0.82 0.76 In the Non-Bank and Non-ISE Financial System (*)September 30, 2012 7.61 8.81 9.67 9.37 11.32 Inhibiting an increase in the number of publicly traded companies in the factoring sector has been the confiscation of shares for various reasons, uncertainty regarding the financial institutions public shares and its negative repercussions for small investors. Of the 78 companies in the sector, only Creditwest Faktoring and Garanti Faktoring are publicly listed companies. Keeping in mind that a large portion of the funds provided by factoring companies come from bank affiliates or companies within a banking group, sector and non-affiliate factoring companies intermediary functions remain superficial but improving. The combined asset size of the factoring companies stood at TRY 18.17bn with an equity size of TRY 3.87bn at the end of 2012. With the exception of decreases of 10.31% in 1994 and 40.23% in 2001, the factoring sector has experienced continuous growth over its history. The sector showed a cumulative growth of 140.69% between the years 2008 and 2012. Moreover, in comparison with previous years, the sector posted a higher growth of 16.36% in 2012. 3.23 3.23 2008 ANNUAL 38.90 34.55 2009 91.50 37.87 2010 CUMULATIVE Turkish Factoring Sector Asset Growth Rates % 106.85 16.33 Factoring receivables constitute the largest portion (89.84%) of sector total assets and borrowings and others the largest portion (75.84%) of resources. The most significant portion (70.46%) of total resources is met through short-term bank loans. On the other hand, some companies have been able to provide funds through bond issuances since 2008. Funding through bond and commercial bill issuance gained acceleration in 2011 and continued to increase in 2012, reaching TRY 978.37mn as of FYE2012, with a share of 5.38% of total resources. Accordingly, 24 debt instrument issuance applications were made by 19 factoring companies and 18 realized in 2012, partially overcoming the sector problem of inability to create a diversity of resources. The recent regulation of BRSA covers the provision related to equity ratio that the ratio of the company s equity to total assets should be at least 3%. The stated sector average ration was 21.28% FYE2012. The sector s non-performing receivables to total receivables ratio (NPL) increased to 4.68% FYE2012 from 3.82% FYE2011, which was remarkably over that of the banking sector (2.86% FYE2012). Moreover, the share of nonperforming receivables in equity rose to 20.74% from 16.52% in 2012, which increases the factoring sector s risk perception and weakens asset quality. The remarkable increase (41.86%) in impaired loans in 2012 mainly 8.02 2011 140.63 2012 160 140 120 100 80 60 40 20 0 3

derived from loans in 2009-2010 during which the highest loan acceleration occurred. On the other hand, the factoring sector s 2012 profit indicators improved and stood generally above those of the banking sector. The banking sector s average ROAA and ROAE ratios stood at 2.33% and 18.49%, respectively, and showed a slight improvement, while the same ratios of the factoring sector stood at 4.32% and 20.18%, respectively. Taking the ratio of equity to total assets into account, the factoring sector possessed a higher equity. The factoring sector s Equity/Total Asset ratio was 21.28% for 2012 and that of the banking sector was 13.27%. The Turkish factoring market provided more financing for the manufacturing industry. As of FYE2011, the total receivables concentration ratio was 63.15%. Sub-sectors of the manufacturing sector include, listed in terms of concentration, nuclear fuel, oil and coal products, textile and textile products and transportation vehicles. Following the manufacturing sector in terms of factoring company financing, the wholesale and retail trade motor vehicle servicing facilities took a 12.84% share and the construction sector a 9.11% share. Additionally, financing is provided for firms operating in the area of agriculture, education, health, real estate, hotels and transportation. 36.87% of the sector s factoring receivables were discounted and the remaining 63.13% non-discounted as of FYE2012. Moreover, almost all discounted receivables were domestic (99.49%), as were 87.63% of the total factoring receivables. Additionally, 56.87% of total receivables were revocable as of FYE2012. Factoring transactions in Turkey were established according to the principles of the full service factoring model. In full service factoring the factoring companies undertake financing along with services and collateral functions. Furthermore, Turkey is of international importance in the field of export factoring. According to data from FCI-Factors Chain International, Turkey follows only China as the country with the highest volume of export factoring. Although deficiencies in the legislation and supervision of the sector have been corrected by a period of improvement since 2006 under the auspices of the BRSA and the sector s first law came into effect on December 13, 2012, the following continue to be the sector s important issues and threat risks: Lack of cooperation between the factoring sector and Eximbank, Lack of regulations and implementations in Credit Insurance and its role in restraining growth in the size of sector transactions, Concentration of factoring companies in Istanbul and certain large cities and the lack of sufficient and accurate recognition in Anatolia, Absence of usufruct from specialty money markets (interbank, repurchase markets, etc.) that can provide resources for short-term liquidity needs and heavy reliance on bank sources, The lack of rights to use special provisions for receivables transferred to non-performing loans as a tax deduction item, High level of competition due to the large number of firms in the sector, Lack of infrastructure compatible with international operations, The carrying-out of a risk tracking and management procedures based on expert opinions and the lack of a systematic structure Low level of compliance with corporate governance principles. 6. Financial Analysis 6.1. Profitability & Performance The Company refocused on its principal business activities following a two year period of inactivity between 2010 and 2011 and the change of majority shareholder in April 2012. A net profit of TRY 5.29mn was achieved as of FYE2012. The stated net profit amount as well as average total assets and equity led to profitability ratios that were remarkably above the sector average. The Company realized ROAA and ROAE ratios of 17.68% and 72.29% against sector figures of 4.32% and 20.18%, respectively. The Company s ratio of total income/avg. equity reached a year end value of 98.81%, more than two times the sector average (47.43%), reflecting its high income generation capacity. The year-end profitability ratios of the Company are listed in the table below. PRİME FAKTORİNG HİZMETLERİ A.Ş. FINANCIAL RATIO % I. PROFITABILITY & PERFORMANCE 2012 1. ROA - Pretax Profit / Total Assets (avg.) 17.68 2. ROE - Pretax Profit / Equity (avg.) 72.29 3. Total Income / Equity (avg.) 98.81 4. Total income / Total Assets (avg.) 24.16 5. Provisions / Total Income 0.00 6. Total Expense / Total Resources (avg.) 8.59 7. Net Profit for the Period / Total Assets (avg.) 14.09 8. Total Income / Total Expenses 372.56 9. Non Cost Bearing Liabilities + Equity- Non Earning Assets/Assets 15.90 10. Non Cost Bearing Liabilities - Non Earning Assets/Assets -2.84 11. Total Operating Expenses/Total Income 26.84 12. Interest Margin 22.68 13. Operating ROAA (avg.) 26.73 14. Operating ROAE (avg.) 109.32 15. Interest Coverage EBIT / Interest Expenses 295.23 16. Net Profit Margin 58.30 17. Gross Profit Margin 73.16 18. Market Share 0.38 19. Growth Rate 1,217.85 4

Moreover, the Company actualized a 1Q2013 net profit figure of TRY 4.6mn, approximating the year-end figure. 6.2. Capital Adequacy The recent regulation of BRSA covers the provision related to the equity ratio (standard ratio) that the ratio of the company s equity to total assets should be at least 3%. The Company s stated ratio stood at 18.74% FYE2012, a value below the sector average of 21.28%. Within the scope of the recent legislation, the Company s paid-up capital of TRY 7.5 mn needs to be raised to TRY 20mn by December 13, 2015. A paid capital increase to TRY 20mn is on the Company s 4Q2013 of 1Q2014 agenda. 6.3. Liquidity The Company s liquidity related ratios stayed below the sector averages as of FYE2012, reflecting the need for funding for further growth. Moreover, short-term borrowings hold 79.23% of total liabilities and equity, which was above the sector average (72.08%). PRİME FAKTORİNG HİZMETLERİ A.Ş. FINANCIAL RATIO % 2012 III. LIQUIDITY (year end) 1. Liquid Assets + Marketable Securities / Total Assets 2.58 2. Liquid Assets + Marketable Securities / Total Liabilities 3.17 3. Short Term Borrowings / Total Assets 79.23 4. Net Interest and Commission / Total Assets 12.95 5. Liquid Assets + Marketable Securities / Equity 13.77 On the other hand, the Company realized a TRY 29mn bond issuance recently and made an application to CMB for approval of another bond issuance amounting to TRY 49mn. 6.4. Asset Quality The Company, which returned its focus to its core business activities in April 2012, had no non-performing loans and provisions as of FYE2012 contributing to asset quality. Moreover, the strong collateral level ensuring full coverage, zero on and off-balance sheet FX positions and absence of off balance sheet commitments and contingencies are the other factors contributing to the Company s asset quality. 6.5. Risk Management The Company s main financial instruments consist of cash, sortterm deposits, factoring receivables and borrowings. The most significant risks arising from the Company s financial instruments are interest rate, liquidity and credit risk. The installation and oversight of the Company s risk management framework is the responsibility of the Board. The Company s Board determines and ensures the implementation of policies reducing the financial risk exposure, building credibility, ensuring continuity and increasing the growth and profitability of the Company. Credit risk is the risk of unexpected changes in the ability of borrowers to pay back their principal and interest amounts. The Company is exposed to credit risk due to its factoring transactions and seeks to manage its credit risk by limiting transactions with certain parties and continuously keeping track of collections. Moreover, the Company undergoes a credit review stage for all credit customers in accordance with its procedures and obtains sufficient collateral where appropriate. Additionally, Company loans are consistently monitored and doubtful receivables are minimized. Credit risk concentration occurs depending on the number of companies operating in similar business areas, taking part in the same geographical region or which are similarly affected by changes in economics, politics or other conditions. Credit risk concentration shows the sensitivity of the Company to developments affecting a particular industry or geographical area. All Company assets and liabilities derive from institutions in Turkey. The gross factoring receivables of the Company had a sectoral distribution of 88.53% machinery and equipment and 11.47% textile as of FYE2012. Moreover, all Company factoring transactions derived from the receivables of a textile firm and distributors of a well-known marketing company with 67 distributors. Accordingly, both the customer and sector concentrations of the Company s receivables are higher than sector averages and accepted international reference indices. On the other hand, the Company had a zero impaired receivables as of FYE2012. Market risk is the risk of adverse effects of the Company s ability to pursue its goals with its existing capital and earnings due to fluctuations in interest rates, foreign currency exchange rates, inflation rates and market prices. The Company monitors its market risk under the headings of interest rate and currency risks. The Company was not exposed to currency risk due to the absence of foreign currency denominated assets and liabilities as of FYE2012. The Company s major interest bearing assets and liabilities are factoring receivables and bank loans. Interest rates of the Company s receivables and payables are usually changed at the end of their term and accordingly the Company tries to minimize the interest rate risk through due date matching efforts of its receivables and payables. As of FYE2012, the Company had no financial instruments with floating interest rates. Moreover, weighted average affective interest rates of Company assets and liabilities were 16.50% and 12.21%, respectively, as of FYE2012, eliminating the interest rate risk. Liquidity risk arises in the funding of Company activities and involves the risks of failure to fund assets at optimum maturity and interest rates and the inability to make an asset liquid asset at a reasonable price and in an appropriate time frame. In short, it is the risk of possibility that the company cannot meet its net funding requirements. The Company has organized an appropriate liquidity risk management process for its short, medium and long term 5

funding requirements. The Company manages its liquidity risk through regular following of forecast and actual cash flow, maturities matching efforts of assets and liabilities and continuance of debt reserves. The Company uses its Holding Company s credit lines. 6.6. Budget and Bond Issue The Company projects two series of bond issuances amounting to TRY 78,430k in 2013 and a TRY 97.17mn bond issuance in 2014, with terms to be determined depending on the market conditions, to finance its funding needs and implement its growth strategies. The CMB authorized the Company for the first series of bond issuance of TRY 29mn. The estimated budget projection submitted by the Company is shown in the table below. The budget projection covers bond issuance related issues. Budget TRY (000) Actual Budgeted 2012 2013 2014 Current Assets 66,369 106,400 225,282 Cash & Cash Equiv alents 1,800 4,550 3,073 Factoring Receiv ables 64,569 101,850 222,209 Non-Current Assets 3,400 3,541 3,625 Total Assets 69,769 109,941 228,907 Short Term Liabilities 56,697 2,244 6,457 Financial Liabilities 55,277 1,785 6,147 Long Term Liabilities - 78,430 175,604 Issued Bond - 78,430 175,604 Equity 13,072 29,267 46,846 Paid Capital 7,500 7,500 20,000 Profit & Loss 5,287 16,196 17,578 Total Liability 69,769 109,941 228,907 Annual Asset Growth % 1,217.85 57.58 108.21 Equity/Total Asset % 18.74 26.62 20.47 ROAA % 17.68 6.94 6.38 ROAE % 72.29 28.60 30.52 Prime Faktoring projected a 2014 year-end asset size of TRY 228.91mn through a 228.09% cumulative growth rate during the following two years. Moreover, the projection envisages a 258.38% equity growth covering a paid capital increase to TRY 20mn, the minimum legal requirement, in 2014. Additionally, the Company projection underlines that the 79.03% of factoring receivables would be financed with long term sources as of FYE2014, contrary to the existing sector wide characteristic of short-term weighted funding. The stated projected growth is compatible with the balance of the Company s current financial statements, cash flow tables and income and expense predictions. 300 250 200 150 Cumulative Asset Growth Rate % Cumulative Equity Growth Rate % Cumulative Liability Growth Rate % 123.90 100 57.58 50-0.00 42.29-0 2012 2013 2014 7. Corporate Governance 258.38 228.09 221.11 Prime Faktoring is not a publicly traded company; therefore the corporate governance discipline is not a field that is required to be taken into consideration. However, the Turkish Factoring Sector in which the Company operates is one in which the BDDK enforces strict regulation and supervision. These circumstances have provided the Company with a corporate organizational structure, comprehensive internal control system and a risk management system. The company aligns all of its records and reports with international standards and procures an independent audit service. The periodical financial statements are disclosed to the public via its website. The Board of Prime Faktoring consists of 3 members who are shareholders of the Company. It is concluded that the Board Members have the adequate qualifications to administer their duties and that the Board successfully performs its duties of leading, supervising and inspecting. The chairman of the Board also executes the general manager tasks. The Board of the Company contains a credit committee, although the Corporate Governance committees stated in the Corporate Governance Principals have not yet been established. The Company has an internal audit unit which regularly reports to the Board. The Company web site provides information and disclosed documentation such as the audit reports, title information of board members, mission and vision, ethic principles and organizational chart. On the other hand, the shortcomings of the Company s website such as the absence of the shareholder structure, personal backgrounds of board members and executive managers, documents related to the general meetings and articles of association along with absence of the annual report significantly weakens the transparency level of the Company. Moreover, the dividend and disclosure policies, code of conduct, and remuneration policy regarding board members and executive managers should be disclosed to the public via the website to realize the principles of corporate governance. Additionally, the Company does not have a written social responsibility policy or a directly progressed project. 6

(Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) As % of As % of As % of PRİME FAKTORİNG HİZMETLERİ A.Ş. 2012 2012 2012 2011 2011 2010 2010 2009 2012 2011 2010 2012 2011 2010 BALANCE SHEET - ASSET USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth TRY (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate Rate Rate A-TOTAL EARNING ASSETS (I+II+III) 37,335.80 66,368.12 33,184.84 1.55 2,059.80 4,118.05 3,503.49 2,888.92 95.13 0.03 81.89 4,278,953.5 8-99.96 42.55 I- LOANS AND RECEIVABLES (net) 36,323.47 64,568.61 32,284.30 0.00 0.00 0.00 1,442.15 2,884.29 92.55 n.a n.a n.a n.a -100.00 a) Factoring Receivables 36,323.47 64,568.61 32,284.30 0.00 0.00 0.00 1,379.67 2,759.34 92.55 n.a n.a n.a n.a -100.00 b) Financing Loans 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Lease Receivables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a d) Over Due Loans 0.00 0.00 0.00 0.00 860.94 1,721.88 1,853.20 1,984.51 n.a n.a 34.24 n.a -100.00-13.23 e) Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a f) Receivable from Customer due to Brokerage Activities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a g) Allowance for Loan and Receivables Losses (-) 0.00 0.00 0.00 0.00-860.94-1,721.88-1,790.72-1,859.56 n.a n.a -34.24 n.a -100.00-7.40 II-BANKS AND OTHER EARNING ASSETS 1,012.33 1,799.51 900.53 1.55 2,059.80 4,118.05 2,061.34 4.63 2.58 0.03 81.89 115,922.82-99.96 88,842.85 a) Banks 1,012.33 1,799.51 900.53 1.55 2,059.80 4,118.05 2,061.34 4.63 2.58 0.03 81.89 115,922.82-99.96 88,842.85 b) Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Balance With Banks-Current Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a III-SECURITIES AT FAIR VALUE THROUGH P/L 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a a) Treasury Bills and Government Bonds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a b) Other Investment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Repurchase Agreement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a B- INVESTMENTS IN ASSOCIATES (net)+equity SHARE 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a a) Investments in Associates (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a b) Equity Share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a C-NON-EARNING ASSETS 1,912.98 3,400.51 4,346.55 5,292.59 3,101.76 910.93 1,779.65 2,648.37 4.87 99.97 18.11-35.75 481.01-65.60 a) Cash and Cash Equivalents 0.23 0.41 2,634.13 5,267.85 3,065.78 863.71 1,375.80 1,887.88 0.00 99.50 17.17-99.99 509.91-54.25 b) Financial Assets at Fair Value through P/L 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Asset Held For Sale And Discontinued Operations (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a d) Other 1,912.74 3,400.10 1,712.42 24.74 35.98 47.22 403.85 760.49 4.87 0.47 0.94 13,642.20-47.60-93.79 - Intangible Assets 0.00 0.00 0.00 0.00 0.00 0.00 2.48 4.95 n.a n.a 0.00 n.a -100.00-99.98 - Property and Equipment 1,849.77 3,288.16 1,644.08 0.00 3.09 6.17 19.13 32.08 4.71 n.a 0.12 n.a -100.00-80.77 - Deferred Tax 8.50 15.11 7.56 0.00 0.87 1.74 198.65 395.57 0.02 n.a 0.03 n.a -100.00-99.56 - Other 54.47 96.83 60.78 24.74 32.03 39.32 183.60 327.89 0.14 0.47 0.78 291.34-37.07-88.01 TOTAL ASSETS 39,248.78 69,768.63 37,531.39 5,294.14 5,161.56 5,028.98 5,283.14 5,537.29 100.00 100.00 100.00 1,217.85 5.27-9.18 7

(Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) As % of As % of As % of PRİME FAKTORİNG HİZMETLERİ A.Ş. 2012 2012 2012 2011 2011 2010 2010 2009 2012 2011 2010 2012 2011 2010 BALANCE SHEET-LIABILITIES+EQUITY USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth TRY (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate Rate Rate C- COST BEARING RESOURCES (I+II) 31,096.24 55,276.67 27,638.34 0.00 0.00 0.00 0.00 0.00 79.23 n.a n.a n.a n.a n.a I- PAYABLES 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a a) Factoring Payables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a b) Lease Payables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a II- BORROWING FUNDING LOANS & OTHER 31,096.24 55,276.67 27,638.34 0.00 0.00 0.00 0.00 0.00 79.23 n.a n.a n.a n.a n.a a) Fund Borrowed-Short Term 31,096.24 55,276.67 27,638.34 0.00 0.00 0.00 0.00 0.00 79.23 n.a n.a n.a n.a n.a b) Fund Borrowed-Long Term 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a c) Marketable Securities For Issued (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a d) Securities Sold Under Repurchase Agreements 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a e) Subordinated Loans 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a D- NON COST BEARING RESOURCES 799.03 1,420.35 714.89 9.42 19.58 29.74 203.06 376.38 2.04 0.18 0.59 14,984.47-68.34-92.10 a) Provisions 436.06 775.14 387.57 0.00 9.26 18.53 25.48 32.43 1.11 n.a 0.37 n.a -100.00-42.86 b) Current & Deferred Tax Liabilities 39.42 70.08 38.51 6.95 6.18 5.41 26.17 46.92 0.10 0.13 0.11 908.29 28.49-88.47 c) Trading Liabilities (Derivatives) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a d) Other Liabilities 323.55 575.14 288.80 2.47 4.13 5.80 151.41 297.03 0.82 0.05 0.12 23,222.91-57.49-98.05 E- TOTAL LIABILITIES 602,034.9 5-68.34-92.10 31,895.27 56,697.03 28,353.22 9.42 19.58 29.74 203.06 376.38 81.26 0.18 0.59 F- MINORITY INTEREST 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a F- EQUITY 7,353.51 13,071.60 9,178.17 5,284.73 5,141.99 4,999.25 5,080.08 5,160.91 18.74 99.82 99.41 147.35 5.71-3.13 a) Prior Year's Equity 2,972.96 5,284.73 5,139.85 4,994.98 5,077.94 5,160.91 5,632.20 6,103.48 7.57 94.35 102.62 5.80-3.22-15.44 b) Equity (Internal & external resources added during the year) 1,406.39 2,500.00 1,250.00 0.00 2.14 4.27 2.14 0.00 3.58 n.a 0.08 n.a -100.00 n.a c) Minority Interest 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a d) Profit & Loss 2,974.16 5,286.87 2,788.31 289.75 61.91-165.94-554.25-942.56 7.58 5.47-3.30 1,724.61-274.61-82.39 TOTAL LIABILITY+EQUITY 39,248.78 69,768.63 37,531.39 5,294.14 5,161.56 5,028.98 5,283.14 5,537.29 100.00 100.00 100.00 1,217.85 5.27-9.18 USD 1 = TRY 1.7776 1.8889 1.5376 1.4873 8

PRİME FAKTORİNG HİZMETLERİ A.Ş. INCOME STATEMENT TRY (000) 2012 2011 2010 Net Interest Income 7,526.49 356.12 914.99 A) Interest income 10,925.02 356.12 917.95 a) Factoring Interest Income 10,742.30 0.99 781.09 b) Financing Loans Interest Income 0.00 0.00 0.00 c) Lease Income 0.00 0.00 0.00 d) Banks 182.72 355.13 136.86 B) Fınancial Expense 3,398.53 0.00 2.97 Net Fee and Commission Income 1,505.71 0.30 53.38 a) Fee and Commission Income 1,505.71 0.30 53.38 b) Fee and Commission Expense 0.00 0.00 0.00 Total Operating Income 36.89 251.12-148.36 Interest Income from Other Operating Field 0.00 0.00 0.00 Foreign Exchange Gain or Loss (net) (+/-) 36.89 39.79 170.34 Gross Profit from Retail Business 0.00 0.00 0.00 Gains or Loss on Derivative Instruments (+/-) 0.00 0.00 0.00 Income on Sale of Equity Participations and Consolidated Affiliates 0.00 0.00 0.00 Gains from Investment Securities (net) 0.00 0.00 0.00 Other Operating Income 0.00 211.34-318.70 Taxes other than Income Tax 0.00 0.00 0.00 Dividend 0.00 0.00 0.00 Provisions 0.00 0.00 117.58 Provision for Impairment of Loan and Trade Receivables 0.00 0.00 117.58 Other Provision 0.00 0.00 0.00 Total Operating Expense 2,434.24 282.57 434.35 Salaries and Employee Benefits 1,701.40 157.22 228.25 Depreciation and Amortization 16.31 2.42 30.86 Other Expenses 716.53 122.93 175.24 Profit from Operating Activities before Income Tax 6,634.86 324.98 268.08 Income Tax Current 1,363.10 37.76 38.42 Income Tax Deferred -15.11-2.54 395.60 Net Profit for the Period 5,286.87 289.75-165.94 Total Income 9,069.09 607.55 820.01 Total Expense 2,434.24 282.57 434.35 Provision 0.00 0.00 117.58 Pretax Profit 6,634.86 324.98 268.08 9

PRİME FAKTORİNG HİZMETLERİ A.Ş. FINANCIAL RATIOS % I. PROFITABILITY & PERFORMANCE 1. ROA - Pretax Profit / Total Assets (avg.) 2012 17.68 2011 6.30 2010 5.07 2. ROE - Pretax Profit / Equity (avg.) 72.29 6.32 5.28 3. Total Income / Equity (avg.) 98.81 11.82 16.14 4. Total income / Total Assets (avg.) 24.16 11.77 15.52 5. Provisions / Total Income 0.00 0.00 14.34 6. Total Expense / Total Resources (avg.) 8.59 1,443.37 213.91 7. Net Profit for the Period / Total Assets (avg.) 14.09 5.61-3.14 8. Total Income / Total Expenses 372.56 215.01 188.79 9. Non Cost Bearing Liabilities + Equity- Non Earning Assets / Assets 15.90 0.03 81.89 10. Non Cost Bearing Liabilities - Non Earning Assets / Assets -2.84-99.79-17.52 11. Total Operating Expenses / Total Income 26.84 46.51 52.97 12. Interest Margin 22.68 17.29 26.12 13. Operating ROAA (avg.) 26.73 6.30 5.13 14. Operating ROAE (avg.) 109.32 6.32 5.34 15. Interest Coverage EBIT / Interest Expenses 295.23 n.a. 9,135.32 16. Net Profit Margin 58.30 47.69-20.24 17. Gross Profit Margin 73.16 53.49 32.69 18. Market Share 0.38 0.03 0.03 19. Growth Rate 1,217.85 5.27-9.18 II. CAPITAL ADEQUACY (year end) 1. Equity Generation / Prior Year s Equity 47.31 0.00 0.08 2. Internal Equity Generation / Previous Year s Equity 100.04 5.80-3.22 3. Equity / Total Assets 18.74 99.82 99.41 4. Equity / Total Liabilities 23.06 56,124.98 16,810.97 5. Free Equity / Total Receivables Ratio 15.15 n.a. n.a. 6. Tangible Assets / Total Assets 4.71 0.00 0.12 7. Intangible Assets / Total Assets 0.00 0.00 0.00 8. Equity / Total Guarantees and Commitments + Equity 100.00 100.00 100.00 III. LIQUIDITY (year end) 1. Liquid Assets + Marketable Securities / Total Assets 2.58 99.53 99.06 2. Liquid Assets + Marketable Securities / Total Liabilities 3.17 55,962.21 16,752.18 3. Short Term Borrowings / Total Assets 79.23 0.00 0.00 4. Net Interest and Commission / Total Assets 12.95 6.73 19.26 5. Liquid Assets + Marketable Securities / Equity 13.77 99.71 99.65 IV. ASSET QUALITY 1. Loan and Receivable s Loss Provisions / Total Loans and Receivables 0.00 n.a. 100.00 2. Total Provisions / Profit Before Provision and Tax 0.00 0.00 30.49 3. Impaired Receivables / Gross Receivables 0.00 n.a. 100.00 4. Impaired Receivables / Equity 0.00 0.00 34.44 5. Loss Reserves for Receivables / Impaired Receivables n.a. n.a. 100.00 6. Collaterals / Total Receivables 118.17 n.a. 8.20 7. Total FX Position / Total Assets 0.00 0.00 13.80 8. Total FX Position / Equity 0.00 0.00 13.89 9. Assets / Total Guarantees and Commitments + Assets 100.00 100.00 100.00 10