Hesabat / Report 2013 1

Təbiəti qoruyaq! Let’s protect the nature!

Hesabat / Report 2013 Hesabat Report Mündəricat Content

Müşahidə Şurası Sədrinin müraciəti / Statement of Supervisory Board Chairman 05

Təməl informasiya / Key information 10 Strategiya və brend quruculuğu / Principles of Corporate Strategy 13 Təşkilatlarda üzvlük / Membership in organizations 16

İdarəetmə sistemi / Management system 20 Korporativ sistem/ Corporate system 21 Təşkilati struktur / Organizational structure 24 Strateji və operativ menecment / Team: strategic and operational management 28

Xarici mühit / Environment 34 Makroiqtisadi vəziyyət / Macroeconomics 35 Bank sistemi / Banking sistem 38

Maliyyə göstəriciləri / Financial Indexes 51 Aktivlər / Assets 52 Aktivlərin dinamikası / Assets breakdown 53 Öhdəliklər / Liabilities 55 Öhdəliklərin strukturu / Liability structure 56 Kapital / Capital 57 Kredit portfeli / Loan portfolio 59 Sektorlar üzrə təhlil / Breakdown by sectors 60 Fiziki şəxslərə verilmiş kreditlər / Loans to individuals 61 Fiziki şəxslərə verilmiş kreditlərin strukturu / Structure of loans to individuals 62 Müştəri hesabları / Customer accounts 63 Gəlirlər / Income 65 Xərclər / Expenses 69

Məhsul və xidmətlər / Products and services 73 Biznes kreditləri / Loans 74 Fiziki şəxslərin kreditləşməsi / Loans to individuals 75 Vəsaitlərin cəlb olunması / Funds Raising 77 Plastik kartlar və pul köçürmə sistemləri / Plastic Cards and Money Transfer 79 FOREX 82

Filiallar / Branches 87 Fəaliyyət şəbəkəsi / Branch network 88 Filialların və şöbələrin siyahısı / List of branches and sub-branches 90

Təminat funksiyaları / Business support 96 Beynəlxalq əməkdaşlıq / International cooperation 97 Marketinq / Marketing 100 Soraq informasiyası / Reference information 105

Audit Hesabatı / Auditors’ Report 106 Hesabat / Report 2013 5

Müşahidə Şurası Sədrinin müraciəti Statement by the Chairman of Supervisory Board

Hörmətli müştərilər, tərəfdaşlar və əməkdaşlar, Dear customers, partners and colleagues!

Böyük məmnuniyyət hissi ilə “Muğanbank” ASC üçün daha bir uğurlu ilin With great pleasure I would like to present the annual report for the year – 2013-cü ilin hesabatını diqqətinizə çatdırmaq istərdim. of 2013, one more successful year for “Muganbank” OJSC.

Ötən il ümumilikdə həm bütün ölkəmiz, həm də Muğanbank üçün In general, last year proved to be successful both for our country and səmərəli olmuşdur. Muganbank.

Elmir Mehdiyev 2013-cü ilin yekunlarına həsr olunmuş müxtəlif çıxışlarında Azərbaycan In his various speeches dedicated to the results of 2013, Mr. Ilham Aliyev, Respublikasının Prezidenti İlham Əliyev cənabları hesabat ilinin ölkə the President of Azerbaijan Republic has often emphasized that the üçün ən vacib olan sabitlik və inkişaf meyarları nöqteyi-nəzərindən reporting year was successful for the country from the most important uğurlu olduğunu dəfələrlə vurğulayıb. Səciyyəvi haldır ki, Muğanbankın perspectives – stability and development. Distinctively, Muganbank’s da 2013-cü ildəki fəaliyyətini məhz bu sözlər ilə xarakterizə etmək olar. performance in 2013 can be described in terms of these perspectives as Bu müqayisə bir daha sübut edir ki, bankımızın məqsədləri dövlətimizin well. This comparison once again proves that the objectives of our Bank məqsədlərindən irəli gəlir və bankımızın inkişafı vətənimizin inkişafının are motivated by the objectives of our state, and that the growth of our ayrılmaz tərkib hissəsidir. bank is an inseparable part of the development of our motherland.

Muğanbank üçün əsas məqsəd Respublikamızın dinamik iqtisadi inkişafına The core objective of Muganbank is to contribute to the dynamic economic və onun beynəlxalq bazarda rəqabət qabiliyyətinin artırılmasına töhfə development of our Republic and contribute to the enhancement of its vermək, Prezidentimizin tutduğu istiqaməti imkanlarımız çərçivəsində competitiveness in the global market as well as through its best efforts hərtərəfli dəstəkləməkdir. extensively support the line of development taken by our President.

The past 2013 was another year of Muganbank’s continuous progress. Hesabat / Report 2013 6

Geridə qalan 2013-cü il Muğanbankın daim yüksəlişdə olan növbəti ili oldu. Muganbank could not only retain its positions in the most important Muğanbank Azərbaycanın bank xidmətlərinin ən vacib seqmentlərində segments of Azerbaijani banking industry, but also could fortify them öz mövqelərini nəinki qoruyub saxladı, hətta bazara yeni xidmət və through introduction of new products and services to the market. That məhsullar təqdim edərək yetərincə möhkəmləndirdi. Bunu vaxtında qəbul became possible due to proper strategic decisions taken in good time. edilmiş düzgün strateji qərarlar təmin etdi. 2013-cü ildə Muğanbankın In 2013, we had significant achievements in reaching the targets set by strategiyasından irəli gələn məqsədlərimizə çatmaq yolunda əhəmiyyətli Muganbank strategy. Furthermore, we attained serious successes in nailiyyətlərimiz olmuşdur. O cümlədən, universal və müştərilərin təlabatına forming a universal commercial bank focused on customer demand. yönəldilmiş kommersiya bankı qurmaq işində ciddi uğurlara nail olduq. Annual report is certainly a space of figures first of all. However, Təbii ki, illik hesabat ilk növbədə rəqəmlər məkanıdır. Lakin, Muğanbankın Muganbank’s growth manifested itself not only in terms of quantity, but 2013-cü ildə inkişafı təkcə kəmiyyət baxımından deyil, keyfiyyət also in terms of quality factors in 2013. Expanded service network, newly amilləri nöqteyi-nəzərindən də təsbit olundu. Xidmət şəbəkəsinin opened branches and sub-branches, improved customer services are genişləndirilməsi, yeni açılmış filial və şöbələrin müştərilərin xidmətinə obvious example of that. verilməsi, müştəri xidmətlərinin keyfiyyətinin artırılması bunun bariz nümunəsidir. Besides innovations, Muganbank successfully continued its activities in other current lines of business as well: implementation of regular Yeniliklərdən başqa Muğanbank digər ənənəvi istiqamətlərdə də projects with international financial institutions, a wide scope of lending, fəaliyyətini uğurla davam etdirdi - nüfuzlu beynəlxalq maliyyə təşkilatları ilə continued international trade finance activities and provision of dozens of növbəti layihələr reallaşdı, kreditləşmə daha böyük vüsət aldı, müştərilərin other financial services. Along with that, the dedicated activities to raise xarici ticarət əməliyyatlarının maliyyələşdirilməsi davam etdirildi və the efficiency of the Bank’ performance and improve the risk management onlarla digər maliyyə xidmətləri göstərildi. Bununla yanaşı, 2013-cü ildə system got into new phases. Bankın fəaliyyətinin səmərəliliyinin artırılması və risklərin idarə olunması sisteminin inkişafı üzrə məqsədyönlü iş yeni mərhələlərə keçdi. The result of the performed work and attained successes make it apparent that we have a reliable platform for further success. The systemic Gördüyümüz işin nəticəsi və qazandığımız uğurlar gələcək inkişaf üçün nature of changes, their well-estimated and regular implementation, a etibarlı platformamızın mövcudluğuna şübhə doğurmur. Dəyişikliklərin good harmony of the local experience of the Bank’s management with sistemli xarakter alması, onların tətbiq edilməsinin düşünülmüş və davamlı international best practices were a real contribution, and we therefore are olması, menecmentin yerli təcrübəsinin beynəlxalq təcrübə ilə ahəngi looking ahead optimistically. artıq öz töhfələrini vermişdir və bizə gələcəyə nikbinliklə baxmağa əsas verir. There is no doubt that the ideological and financial achievements made in 2013 will be promoted further. Above all, the Bank will ensure Təbii ki, 2013-cü ildə qazanılan məfkurə və maliyyə uğurları gələcəkdə an enhanced level of customer service, its key advantage. Customer də möhkəmləndiriləcək. Ən başlıcası isə Bank öz əsas üstünlüyünü – attention, meeting customers’ expectations, listening to customers’ views Hesabat / Report 2013 7

müştəri xidmətlərinin yüksək səviyyəsini daha da inkişaf etdirəcək. Axı and ability to provide its services in as simple, convenient and transparent məhz müştərilərə diqqət, onların istəklərini qarşılamaq, onların fikirlərini way as possible have indeed ranked Muganbank among the most rapidly dinləmək və öz xidmətlərini mümkün qədər sadə, rahat və şəffaf etmək growing banks of Azerbaijan. bacarığı Muğanbankı Azərbaycanın ən sürətlə inkişaf edən bankları sırasına daxil edib. Finally, my best thanks to our customers, our local and foreign partners for the productive joint work. I hope your collaboration with the Bank İli yekunlaşdıraraq müştərilərimizə, yerli və xarici tərəfdaşlarımıza səmərəli completely meet your expectations and help the growth of your welfare birgə işə görə səmimi minnətdarlığımı çatdırıram. Ümidvaram ki, 2014-cü in 2014 as well. ildə də bankımızla birgə əməkdaşlığınız istəklərinizə tam cavab verəcək və rifahınızın artımına kömək edəcəkdir. Special thanks to the united and professional team of Muganbank staff, whose professional level is testifed by the results of 2013. The gained Yüksək peşəkarlıq səviyyəsi 2013-cü ilin yekunları ilə təsdiq olunan successes, to a greater degree, are due to you. I am sure that the following Muğanbank əməkdaşlarının vahid və peşəkar komandasına xüsusi years will be much more successful than 2013 for all of us. təşəkkürümü bildirmək istəyirəm. 2013-cü ildə Bankın əldə etdiyi uğurlar böyük dərəcədə Sizin sayənizdə qazanılmışdır. Əminəm ki, gələcək illər hamımız üçün 2013-cü ildən də uğurlu olacaq.

Biz gələcəyə inamla baxırıq! We are facing the future with confidence!

Hörmətlə, Elmir Mehdiyev Yours Faithfully, Elmir Mehdiyev Hesabat / Report 2013 8

Təbii sərvətlərə qənaət edək! Let’s save natural resources!

Ətraf mühitə qayğı ilə yanaşmaq – təkcə Azərbaycanın deyil, planetimizin hər bir Taking care of environment is the responsibility of not only Azerbaijan, but also müəssisəsinin borcudur, çünki bizlərin fəaliyyəti təbii resursların istehlakı ilə sıx every entity of our planet, since human activities are closely related to the use bağlıdır. Muğanbank olaraq, bu məsuliyyəti dərk edərək 2013-cü ilin hesabatını of natural resources. With knowledge of this responsibility, we at Muganbank kağız variantında çap etdirməkdən yan keçdik və yalnız elektron formada avoided publishing this report of 2013 in a paper format and chose to issue its buraxmağı qərara aldıq. soft copy only.

Bu simvolik addımla təbii ehtiyatlara az da olsa qənaət etməyə və tullantıların By this symbolic action we tried to make a contribution, though a small one, to miqdarını kiçik də olsa azaltmağa çalışdıq, çünki Yer hamımızın evidir. natural resources saving and emission reduction, since the Earth is a house that belongs to us all. Hesabat / Report 2013 9

Bu hesabatın çap olunmamasıyla 2 Həmin kağızın istehsalına sərf şam ağacını kəsilməkdən qoruduq. olunacaq su bir ailənin 3 aylıq 1 4 tələbatıdır. Not printing this report, we prevented 2 pine trees from being Water that would be used for cut down. production of the necessary paper is a family’s 3 month demand.

Həmin ağacların böyüməsi üçün üst- Bu ağaclar il ərzində havadakı 44 kq 2 üstə 14 il tələb olunacaqdı. 5 karbon-dioksid qazını azaldacaq. They would require 14 years These trees will reduce 44 kg of in all to grow. atmospheric CO2 per annum.

Hesabatın çapına sərf olunacaq Hər il təkcə kağız emalı üçün yer kağızı istehsal etmək üçün 2,1 ton üzündə 4 milyard ağac kəsilir. 3 taxta emal ediləcəkdi. 6 Every year 4 billions of trees are 2.1 tons of wood would be processed cut down worldwide for paper in order to produce the paper processing only. needed for the printing. Təməl informasiya Background information Hesabat / Report 2013 11

Bankın yaranması və fəaliyyətinin əsas istiqamətləri Establishment of the Bank and its core operations

Muğanbank 1992-ci ildə yaradılmışdır və Azərbaycan Respublikası Muganbank was established in 1992 and furnished with a license (№ 29) Milli Bankının bank fəaliyyəti və əməliyyatlarına icazə verən müvafiq from the National Bank of Azerbaijan permitting carrying out banking lisenziyasını (№ 29) almışdır. 2005-ci ildə Muğanbank, təşkilati-hüquqi activity and operations. In 2005, Muganbank changed its organizational- formasını dəyişib, Açıq Səhmdar Cəmiyyətinə çevrilmişdir. legal form and transformed into Open Joint-Stock Company.

Bu illər ərzində “Muğanbank” ASC bank fəaliyyətinin bütün Over these years Muganbank has been successful in all its business istiqamətlərində uğurlar qazana bilib və Azərbaycan maliyyə bazarında directions and gained strong positions in Azerbaijani financial market. möhkəm mövqelər əldə edib. Muganbank is offering the following banking products: Muğanbank aşağıdakı bank məhsullarını təklif edir: • Account opening and maintenance for individuals and corporate • Hüquqi və fiziki şəxslərin hesablarının açılışı və aparılması, (o entities (including provision of payment and cash services, cümlədən, kassa-hesablaşma, inkassasiya, hesab üzrə nağd pulların collection, cash receipts and payments over account) mədaxil və məxaric xidmətlərinin göstərilməsi) • Raising of funds from the population and companies (including • Əhalidən və müəssisələrdən əmanətlərin qəbulu (o cümlədən, through bonds and deposits); istiqraz kağızları və depozitlər vasitəsilə) • Rent of safety deposit boxes; • Depozit seyflərinin icarəsi • Plastic card operations; • Plastik kartlarla əməliyyatlar Hesabat / Report 2013 12

• Hər növ xarici valyuta əməliyyatlarının aparılması (o cümlədən, • All types of foreign exchange transactions (including cash and nağd və nağdsız formalarda alqı-satqı; sənədli akkreditiv, inkasso cashless purchase, documentary credits, collection and international və beynəlxalq bank praktikasında tətbiq olunan formatlarda idxal settlements under import and export contracts as applied in və ixrac müqavilələri üzrə beynəlxalq hesablaşmaların həyata international banking practices, etc.); keçirilməsi və s.) • International money transfers; • Beynəlxalq pul köçürmələri • Granting loans of different sectors (consumer, auto, mortgage, • Müxtəlif sahələr üzrə (istehlak, avto, ipoteka, biznesin business expansion, construction, education, trade, agriculture, etc.) genişləndirilməsi, inşaat, təhsil, ticarət, kənd təsərrüfatı və s.) və müxtəlif növ (dövriyyə vəsaitlərinin artırılması, alış, overdraft, kredit and types (working capital loans, purchase, overdraft, credit lines, xətləri və s.) kreditlərin verilməsi etc.); • Qarantiyaların verilməsi • Issue of guarantees; • Digər kommersiya əməliyyatları • Other commercial transactions. Hesabat / Report 2013 13

Strategiya və brend quruculuğu Strategy and branding

Muğanbankın brend-platformasının əsas tərkib hissələri aşağıdakı strateji The key components of Muganbank’s brand platform are the following müddəalardır: strategic tenets:

Bankın missiyası Mission Hər bir biznes tərəfdaşına fərdi yanaşmaqla və peşəkar komanda ilə Ensure sustainable growth of the Bank’s profitability and dynamic müştərilərinə yüksək keyfiyyətli xidmət göstərməklə, bankın stabil artan growth of investment value by providing high-quality services to gəlirliliyini və investisiyaların dəyərinin dinamik artımını təmin etmək. customers through an individual approach to each business partner and a professional team. Bankın şüarı Hər bir fərdi müştəriyə yüksək keyfiyyətli xidmət göstərmək, korporativ Slogan müştərilər üçün nüfuzlu simaya malik olmaq, dövlətə dayaq və dəstək To provide high-quality services to every client, get prestigious image vermək, beynəlxalq səviyyədə tanınmaq. for corporate customers, be support for the state and be internationally recognized. Bankın strategiyası Özünün maliyyə institutları ilə birlikdə müştərilərinə bütün növ maliyyə Strategy xidmətlərini yüksək səviyyədə həyata keçirən xarici investisiyalı maliyyə Together with its financial institutions to become a financial holding with holdinqinə çevrilmək. foreign investments, which will provide at high level any type of financial services to its customers. Bankın qısa Strateji Baxışı (Vision) Bankın əsasən əhali, kiçik və orta müəssisələrə istiqamətlənən Vision Respublikanın regional mərkəzlərində yerləşən filial şəbəkəsi olan To strengthen its market position by carrying on as a retail-oriented riteyl yönümlü universal bank kimi fəaliyyətini davam etdirməklə bazar universal bank focusing on the population and SMEs and with branch mövqeyini gücləndirmək. network located in regional centers of the Republic. Hesabat / Report 2013 14

Siyasətinin strateji əsaslarından çıxış edərək, “Muğanbank” ASC Muganbank, based on the strategic principles of its policy, values əhatəsində olan hər növ sosial-iqtisadi qrupa özəl munasibət every social-economic group it keeps terms with: bəsləyir: • Establishes long-term and stable relations by offering high-quality • Müştərilərin rifahının yaxşılaşdırılması və artımı naminə yüksək and innovative products to promote clients’ welfare; keyfiyyətli və innovativ məhsullar təklif etməklə etibarlı və • Ensures mutual understanding and transparency in relations with uzunmüddətli əlaqələr qurur. partners and follows the principles of mutual benefit and strict • Partnyorlar ilə anlaşıqlığı və şəffaflığı təmin edir, qarşılıqlı fayda və performance of obligations; öhdəliklərə şəksiz riayət etmə prinsiplərini güdür. • Extends its scope of business and financial-economic performances, • Səhmdar və investorlar üçün sabitliyi, dayanıqlığı və təhlükəsizliyi relying on stability, sustainability and safety for shareholders and əsas tutaraq biznesinin miqyasını və maliyyə-iqtisadi göstəricilərini investors; artırır. • Is guided by the principles of fairness in career development and • Səriştəli və loyal personal qoruyub saxlamaq məqsədi ilə əməkdaşları performance motivation through introduction of a common code of üçün vahid korporativ davranış qaydalarını tətbiq edərək karyera corporate conduct for its staff in order to maintain competent and inkişafında və əməyin motivasiyasında ədalət prinsiplərini rəhbər loyal personnel; tutur. • As a responsible partner for the state makes timely tax payments, • Dövlət üçün məsuliyyətli tərəfdaş olaraq nümunəvi vergi ödəyicisi, creates new jobs and takes an active part in the program on yeni iş yerlərinin təminatçısı və regionların iqtisadi inkişaf economic development of the regions. proqramının fəal iştirakçısı kimi çıxış edir. Thus, Muganbank esteems each counterparty of its business processes Beləliklə, “Muğanbank” ASC işgüzar proseslərdə onunla müxtəlif and this estimation is mutual: customers have confidence in the Bank; cür qarşılıqlı əlaqədə olan tərəflərə müvafiq dəyər verir və bu dəyər the Bank has undoubtedly a good reputation among its partners; qarşılıqlıdır: müştərilər “Muğanbank” ASC-yə daimi etimad gostərirlər; shareholders are doing their best for a balanced business growth; tərəfdaşlar arasında Bankın nüfuzu şəksizdir; səhmdarlar biznesin staff are acting as a professional united team in improving the internal tarazlaşdırılmış inkişafı üçün səylərini əsirgəmirlər; işci heyəti daxili processes and continuing the introduction of high standards of proseslərin təkmilləşdirilməsində və korporativ idarəetmənin yüksək corporate governance; state authorities render a methodological and standartlarının tətbiqinin davam etdirilməsində vahid peşəkar komanda other kinds of support to any project of Muganbank. kimi çıxış edir; dövlət qurumları “Muğanbank” ASC-nin istənilən bir layihəsinə metodoloji və digər növ dəstək verirlər. Hesabat / Report 2013 15

Bütün bu istiqamətlərdə əldə edilən uğurlara baxmayaraq, Muğanbank Notwithstanding the successes attained in these directions, through brend quruculuğu ilə məşğul olaraq, Bankın inkişafının hər yeni branding Muganbank updates its strategy and plans for any party mərhələsinə uyğun ona nüfuz edən və fəaliyyətilə əlaqədar olan bütün interacting with it or related to its activities, in line with every new stage tərəflər üçün strategiya və planlarını aktuallaşdırır. Həmçinin, Muğanbank of its development. Moreover, Muganbank is abided by the principles öz biznesində sosial məsuliyyət prinsipini həyata keçirir. Bank üçün of social responsibility in its business. For the Bank a social responsibility sosial məsuliyyət hər şeydən əvvəl müştərilərilərin və ümumiyyətlə means above all investments in customers’ future and in Azerbaijan’s Azərbaycanın gələcəyinə qoyulan investisiyalardır. 2013-cü ildə future, generally. In 2013, Muganbank took significant steps to be Muğanbank nümunəvi sosial təyinatlı təşkilat kimi qəbul edilmək üçün accepted as a model socially-oriented organization. əhəmiyyətli addımlar atmışdır. Hesabat / Report 2013 16

Təşkilatlarda üzvlük Membership in organizations

Muğanbank, həm beynəlxalq əlaqələrin, həm də Azərbaycanın işgüzar Perceiving the importance of both international relations and active mühitində fəal iştirakın vacibliyini dərk edərək, müxtəlif yerli və xarici participation in Azerbaijani business environment Muganbank has qurumların nüfuzlu üzvü olub: become a respectable member of various local and international organizations: • Azərbaycan Banklar Assosiasiyası; • Azerbaijan Banks Association; • Azərbaycan Respublikası Sahibkarlar Təşkilatları Milli Konfederasiyası; • National Confederation of Entrepreneurs (Employers) Organizations • Azərbaycan-Türkiyə İş Adamları Birliyi; of Azerbaijan Republic; • Azərbaycan Risk Peşəkarları Assosiasiyası; • Azerbaijani-Turkish Businessmen Union; • Azərbaycan Mikro-Maliyyə Assosiasiyası; • Azerbaijan Risk Professionals Association; • AzeriCard; • Azerbaijan Micro-Finance Association; • SWIFT, AZIPS, XÖHKS; • AzeriCard; • MasterCard International; • SWIFT, AZIPS, XÖHKS; • Visa International; • MasterCard International; • Sahibkarlığa Kömək Milli Fondu; • Visa International; • Kənd Təsərrüfatı Nazirliyi yanında Kənd Təsərrüfatı Kreditləri üzrə • National Fund for Entrepreneurship Support; Dövlət Agentliyi; • State Agency on Agricultural Credits under the Ministry of • Azərbaycan İpoteka Fondu; Agriculture; • Bakı Banklararası Valyuta Birjası; • Azerbaijan Mortgage Fund; • Bakı Fond Birjası; Hesabat / Report 2013 17

• Əmanətlərin Sığortalanması Fondu; • Baku Interbank Currency Exchange; • Avropa Yenidənqurma və İnkişaf Bankı; • Baku Stock Exchange; • Beynəlxalq Maliyyə Korporasiyası; • Azerbaijan Deposit Insurance Fund; • World Business Capital Inc.; • European Bank for Reconstruction and Development (EBRD); • NASDAQ OMX Riga; • International Finance Corporation (IFC); • Dünya Bankı; • World Business Capital Inc. (WBC); • Xarici Özəl İnvestisiyalar Korporasiyası; • NASDAQ OMX Riga; • ABŞ Beynəlxalq İnkişaf Agentliyi; • World Bank; • Özəl Sektorun İnkişafı üzrə İslam Korporasiyası. • Overseas Private Investment Corporation (OPIC); • US Agency for International Development (USAID); • Islamic Corporation for the Development of the Private Sector (ICD). Hesabat / Report 2013 18

Təbiəti qoruyaq! Let’s protect the nature!

İsmayıllı şəhər İcra Hakimiyyəti ilə birgə həyata keçirdiyimiz yaşıllığın qorunub While implementing a greenery protection and cultivaton initiative together artırılması təşəbbüsü zamanı meşəsalma işinin nə dərəcədə əziyyətli olduğunu with the Executive Power of Ismayilli district, we-Muganbank could see from our Muğanbank olaraq öz təcrübəmizdən bilirik. experience how troublesome was the afforestation work.

Əkdiyimiz ağacların böyüməsi kifayət qədər zaman alacaq, amma ildən-ilə The planted trees will take fairly a long time to grow. However, the joy we will böyüyən və yaşıllaşan ağacları görərkən və ölkəmizin yaşıllaşmasına kiçik də have when seeing them growing year by year and turning green, and when olsa töhfə verdiyimizi düşünərkən keçirəcəyimiz fərəh hissi çəkdiyimiz əziyyətə enjoying the thought of contributing, though a little, to the greening of our dəyəcək. country will be worth of the trouble taken. Hesabat / Report 2013 19

800 m2 yeni meşə zolağı salınıb. 80 şam və akasiya ağacları əkilib. Hazırda Azərbaycanda adambaşına düşən meşə örtüyü 0,14 ha təşkil edir. 1 A new 800 m2 strip of forest has been 2 80 pine trees and acacias have been 3 Bu, ümumdünya orta göstəricisindən planted. planted. 4 dəfə (0,48 ha) azdır.

At present the forest cover per capita in Azerbaijan is 0,14 ha. This is 4 times (0,48 ha) less than the worldwide average .

Bu ağaclar 240-dan çox insanı İlboyu 1,7 tondan çox karbon- Bu ağaclar üzərində təqribən 20-dən 4 oksigenlə təmin edəcək. 5 dioksid qazı ləğv olunacaq. 6 çox canlı növü yaşayacaq. These trees will supply more than More than 1.7 tons of carbon dioxide About more than 20 species will 240 people with oxygen. will be eliminated per year. inhabit on these trees. İdarəetmə Governance Hesabat / Report 2013 21

Korporativ sistem Corporate system

Muğanbankın korporativ idarəetmə sistemi Azərbaycan Muganbank’s corporate governance system is built upon strict qanunvericiliyinin və ölkənin Mərkəzi Bankının tələblərinə şərtsiz riayət compliance with the requirements of Azerbaijani legislation and the etməklə, ən yaxşı dünya təcrübəsindən yararlanaraq qurulur. requirements of Central Bank of Azerbaijan, using world best practices.

Muğanbankın korporativ idarəetmə sistemi səhmdarların və müştərilərin Muganbank’s corporate governance system embraces the principles hüquq və maraqlarının qorunması, İdarə Heyəti tərəfindən səmərəli of protection of shareholder and customer rights and interests, the rəhbərlik, Bankın fəaliyyəti haqqında məlumatlandırmanın şəffaflığı və principles of effective governance by Management Board, the principles obyektivliyi, qanunilik və etika, effektiv dividend siyasəti və effektiv kadr of transparency and objectivity of awareness raising on the Bank’s siyasəti prinsiplərini ehtiva edir. activities, the principles of legality and ethics, and the principles of effective dividend policy and effective personnel policy. Muğanbankın idarəetmə və nəzarət orqanları sistemi aşağıdakı qurumlardan ibarətdir: Muganbank’s governance and control system comprises of the following authorities: • Səhmdarların Ümumi Yığıncağı • Shareholders’ General Assembly • Sədr başda olmaqla Müşahidə Şurası • Supervisory Board headed by Chairman • Sədr başda olmaqla İdarə Heyəti • Management Board headed by Chairman • Audit Komitəsi • Audit Committee • Kənar auditor • External auditor Hesabat / Report 2013 22

Muğanbankın ali idarəetmə orqanı Səhmdarların Ümumi Yığıncağıdır. Supreme governing body of the Bank is Shareholders’ General Assembly Bankın fəaliyyəti ilə bağlı olan ən vacib, strateji qərarları məhz bu qurum where the most important and strategic decisions related to the Bank’s qəbul edir. Səhmdarların Ümumi Yığıncağında Müşahidə Şurası seçilir. activities are made and Supervisory Board is elected. Səhmdarların maraqlarını qorumaq məqsədilə Muğanbank tərəfindən korporativ idarəetmə və maliyyə-təsərrüfat fəaliyyətinə nəzarət edən In order to protect shareholders interests Muganbank has created an Audit Komitəsi və Daxili Audit Departamentindən ibarət effektiv sistem effective system comprising of Audit Committee and Internal Audit yaradılmışdır. Bu qurumlar müvafiq olaraq Səhmdarların Ümumi Department that controls the corporate governance and financial- Yığıncağına və Müşahidə Şurasının Sədrinə tabedirlər və idarəetmə economic performance of the Bank. These bodies are subordinated to orqanlarına effektiv fəaliyyəti təmin etməkdə dəstək verirlər. Shareholders’ General Assembly and to the Chairman of Supervisory Board, respectively, and support managerial bodies in ensuring an Müşahidə Şurası və onun Sədri müvafiq profilli Komitələrin işinə nəzarət effective management. edirlər. Komitələr aşağıdakı məsələlər üzrə qərarlar qəbul edirlər: The Supervisory Board and its Chairman supervise the activities of • Kredit Komitəsi—kredit siyasətinin icrası; həm bütün Bank üzrə, həm Committees of different profiles. The committees make decisions on the də ayrı-ayrı məsul şəxslər və filiallar üzrə kredit əməliyyatları limitinin following: müəyyən olunması • Credit Committee—implementation of lending policy; setting of • Aktiv/Passivlərin İdarə edilməsi Komitəsi—aktiv və passivlərin idarə limits on credit operations for the whole Bank as well as for separate edilməsi üzrə siyasətin icrası; vəsaitlər və müddətlər üzrə balansın responsible persons and branches strukturunun idarə olunması; Bankın vəsaitlərinə transfer qiymətlərin müəyyən olunması • Asset and Liability Committee—implementation of asset and liability management policy; management of balance sheet • Risklərin İdarə edilməsi Komitəsi — risklərin idarə edilməsi üzrə structure by funds and maturity; transfer pricing siyasətin icrası; Bankın qəbul etdiyi bütün risklərin optimal məhdudlaşdırılması məqsədi ilə onların müəyyən olunması, • Risk Management Committee — implementation of risk ölçülməsi, nəzarət edilməsi və tənzimlənməsi management policy; risk identification, assessment, control and management for the purposes of optimal mitigation of all risks taken • Yeni Məhsul Komitəsi — Bankın məhsul və xidmət portfelinin by the Bank genişləndirilməsi • Product Development Committee — expansion of the Bank’s • Tarif Komitəsi — Bankın məhsul və xidmətləri üzrə qiymətqoyma product and service portfolio siyasətinin icrası • Tariff Committee — implementation of pricing policy Hesabat / Report 2013 23

• İT Komitəsi — Bankda informasiya texnologiyalarının tətbiqi, • IT Committee — introduction, use and development of information istifadəsi və inkişafı; technologies at the Bank • Strateji Planlaşdırma Qrupu — Bankın strategiyasının • Strategic Planning Group— development and implementation of formalaşdırılması və reallaşdırılması the Bank’s strategy

Səhmdarlar və Müşahidə Şurası tərəfindən qoyulan məqsədləri İdarə The Management Board is responsible to implement the objectives set Heyəti realizə edir. Beləliklə, Muğanbankın cari fəaliyyəti ilə bağlı qərarlar by shareholders and the Supervisory Board. Thus, decisions on the day- İdarə Heyəti və onun Sədri tərəfindən qəbul olunur. to-day operations of the Bank are adopted by the Management Board and the Board Chairman. Maliyyə hesabatlarını yoxlamaq və təsdiq etmək məqsədilə, hər il olduğu kimi, 2013-cü ildə də Muğanbank və onun səhmdarları ilə əmlak və digər As in every year, independent external auditors not related to the maraqlar baxımından bağlılığı olmayan kənar auditor cəlb olunmuşdur. Bank or to its shareholders in terms of property or other interest were Mötəbər xarici audit şirkətinin rəyi üçün Bankın maliyyə vəziyyəti, iqtisadi involved in 2013 to audit and confirm the Bank’s financial statements. göstəriciləri, mülkiyyət strukturu və s. haqqında tam və dürüst məlumat For auditor’s opinion, the reputable international audit company was təqdim olumuşdur. Nəticədə, belə samballı maliyyə təhlilinin olması furnished with complete and accurate information on the Bank’s financial Muğanbankın səhmdarlarına və menecerlərinə növbəti illər üçün əsaslı standing, economic performance, ownership structure, etc. As a result, qərarlar qəbul etməyə imkan verir. availability of such monumental financial analysis enables Muganbank’s shareholders and managers to make reasonable decisions for the next years. Hesabat / Report 2013 24

Təşkilati struktur Organizational Structure

Səhmdarların Ümumi Yığınacağı Audit Komitəsi Daxili Audit Departamenti Shareholders’ General Assembly Audit Committee Internal Audit Department

Strateji Plan Qrupu İT Komitəsi Kredit Komitəsi Müşahidə Şurası Strategic Planning Group İT Committee Credit Committee Supervisory Board

Risklərin İdarə Aktiv / Passivlərin İdarə İdarə Heyətinin Sədri Mükafatlandırma Komitəsi Chairman of the Board edilməsi Komitəsi edilməsi Komitəsi Remuneration Committee Risk Management Committee Asset and Liability Committee

Katiblik Maliyyə Departamenti İT Departamenti Marketinq Departamenti Secretariat Financial Department IT Department Marketing Department

İnsan Resurslarının İdarə Bank Təhlükəsizliyi İnsan Resurslarının İdarə Təsərrüfat Şöbəsi edilməsi Departamenti Departamenti edilməsi Komitəsi General Service Division Departamenti Human Security Department HR Committee Resources Department Hesabat / Report 2013 25

Risklərin İdarə edilməsi İdarə Heyəti Sədrinin 1-ci Müavini Hesablaşmalar Departamenti Qiymətlilərlə İş Departamenti First Deputy Chairman of the Board Settlements Department Valuables Department Departamenti Risk Management Department

Kreditlərə Nəzarət İdarə Heyəti Sədrinin Müavini Hüquq Departamenti Kredit Departamenti Departamenti Deputy Chairman of the Board Legal Department Credit Department Loan Supervision Department

Pərakəndə Bankinq və Beynəlxalq Maliyyə Problemli Aktivlərin İdarə İnstitutları ilə İş Departamenti Edilməsi Departamenti Retail Banking & International Financial Department for the Management of Institutions Department Bad Assets

Filiallarla İş Departamenti Xəzinədarlıq Departmenti Plastik Kartlar Departamenti İdarə Heyəti Sədrinin Müavini Branch Development Department Treasury Department Plastic Cards Department Deputy Chairman of the Board

İnvestisiya və Biznesin Ödəniş Sistemləri və Təcili Pul Sənədli Əməliyyatlar və Qiymətli Müştərilərə Xidmət İnkişafı Departamenti Köçürmələri Departamenti Kağızlar Departamenti Departamenti Investment and Business Payment Systems & Express Money Documentray Operations & Securities Department Customer Service Department Development Department Transfers Department Hesabat / Report 2013 26

Strateji və operativ menecment Strategic and Operational Management

Müşahidə Şurası Supervisory Board

Mehdiyev Elmir Maqbet oğlu – Sədr Mehdiyev Elmir Magbet oglu – Chairman 25.04.1970-ci ildə anadan olub. Azərbaycan Dövlət Xalq Təsərrüfatı Born on 25.04.1970. Graduated from Azerbaijan National Economic İnstitutunu bitirib. Bank sistemində 1989-cu ildən çalışır. 05.07.2000-ci Institute. Working in the banking sector since 1989. Chairman of the ildən “Muğanbank” ASC-nin Müşahidə Şurasının Sədridir. Supervisory Board of “Muganbank” OJSC since 05.07.2000.

Göyüşov Urfan Rövşən oğlu – Üzv Goyushov Urfan Rovshan oglu – Member 30.01.1979-cu ildə anadan olub. Bakı Əmtəəşünaslıq Kommersiya Born on 30.01.1979. Graduated from Baku Commercial University of Universitetini, həmçinin, Azərbaycan Dövlət İqtisad Universitetini bitirib. Commodity Sciences and Azerbaijan State Economic University. Working Bank sistemində 2001-ci ildən çalışır. 20.04.2009-cu ildən “Muğanbank” in the banking sector since 2001. ASC-nin Müşahidə Şurasının Üzvüdür. Member of the Supervisory Board of “Muganbank” OJSC since 20.04.2009. Ələkbərov Şaiq Oqtay oğlu – Üzv 05.11.1973-cü ildə anadan olub. Bakı Dövlət Universitetini bitirib. Bank Alakbarov Shaig Ogtay oglu – Member sistemində 1994-cü ildən çalışır. 02.10.2008-ci ildən “Muğanbank” ASC- Born on 05.11.1973. Graduated from Baku State University. Working in nin Müşahidə Şurasının Üzvüdür. the banking sector since 1994. Member of the Supervisory Board of “Muganbank” OJSC since 02.10. 2008. Hesabat / Report 2013 27

Audit Komitəsi Audit Committee

Vüqar N.Vəliyev – Sədr Vugar N.Valiyev – Chairman 07.06.1977-ci ildə Naxçıvan Muxtar Respublikasında anadan olmuşdur. Born on 07.06.1977 in Autonomous Republic of Nakhchivan. Graduated Azərbaycan Respublikası Nazirlər Kabineti nəzdində Azərbaycan Xalq from the Institute of National Economy Management attached to the Təsərrüfatını İdarəetmə İnstitutunu fərqlənmə diplomu ilə bitirmişdir. Cabinet of Ministers of Azerbaijan Republic with honors. Working in 2002-ci ildən bank sistemində çalışır. 22.03.2009-cu ildən “Muğanbank” the banking sector since 2002. Chairman of the Audit Committee of ASC-nin Audit Komitəsinin Sədridir. ":Muganbank" OJSC since 22.03.2009.

Məmmədzadə Veis – Üzv Mammadzadeh Veis – Member 05.07.1975-ci ildə anadan olub. Azərbaycan Dövlət İqtisad İnstitutunu Born on 05.07.1975. Graduated from Azerbaijan State Economic Institute. bitirib. Bank sistemində 2006-cı ildən çalışır. 01.07.2009-cu ildən Working in the banking sector since 2006. Member of the Audit “Muğanbank” ASC-nin Audit Komitəsinin Üzvüdür. Committee of “Muganbank” OJSC since 01.07.2009.

Hüseynov Qabil – Üzv Goyushov Rufat – Member 27.06.1975-ci ildə anadan olub. Bakı Dövlət Universitetini, həmçinin, Born on 27.06.1975. Graduated from Baku State University, also Moscow Moskva Dövlət Akademiyasını bitirib. 17.06.2013-cü ildən “Muğanbank” State Academy. Member of the Audit Committee of “Muganbank” OJSC ASC-nin Audit Komitəsinin Üzvüdür. since 17.06.2013. Hesabat / Report 2013 28

İdarə Heyəti Management Board

Elmir Ə. Həsənov – Sədr Elmir A. Hasanov – Chairman 28.03.1971-ci ildə Bakı şəhərində anadan olub. 1996-cı ildə Azərbaycan Born on 28.03.1971 in Baku. Graduated from Azerbaijan State Economic Dövlət İqtisad Universitetini bitirib. 1994-cü ildən bank sistemində çalışır. University in 1996. Working in the banking sector since 1994. Graduated "Strathclyde Business School"-da MBA proqramını bitirib. 02.10.2008-ci from University of Strathclyde Business School with MBA degree. ildən “Muğanbank” ASC-nin İdarə Heyətinin Sədridir. Chairman of the Management Board of "Muganbank" OJSC since 02.10.2008. Rəsul M. Cəlilov – Sədrin birinci müavini 14.01.1974-cü ildə Rusiya Federasiyasının Dağıstan Muxtar Rasul M. Jalilov – First Deputy Chairman Respublikasında anadan olub. Azərbaycan Dövlət İqtisad İnstitutunu Born on 14.01.1974 in Autonomous Republic of Dagestan, Russian fərqlənmə diplomu ilə bitirib. 1996-cı ildən bank sistemində çalışır. Federation. 24.01.2005-ci ildən “Muğanbank” ASC-nin İdarə Heyəti Sədrinin I Graduated from Azerbaijan State Economic Institute with honors. müavinidir. Working in the banking sector since 1996. First Deputy Chairman of the Board of "Muganbank" OJSC since 24.01.2005. Etibar Q. Qasımlı – Sədrin müavini 31.08.1970-ci ildə Bakı şəhərində anadan olub. Azərbaycan Dövlət İqtisad Etibar G. Gasimli – Deputy Chairman İnstitutunu bitirib. 1991-ci ildən bank sistemində çalışır. 24.01.2005-ci Born on 31.08.1970 in Baku. Graduated from Azerbaijan State Economic ildən “Muğanbank”ASC-nin İdarə Heyəti Sədrinin müavinidir. Institute. Working in the banking sector since 1991. Deputy Chairman of the Board of "Muganbank" OJSC since 24.01.2005. Rasim M. İsmayılov – Sədrin müavini 21.05.1973-cü ildə Bakı şəhərində anadan olub. Azərbaycan Dövlət İqtisad Rasim M. Ismayilov – Deputy Chairman İnstitutunu fərqlənmə diplomu ilə bitirib. 2001-ci ildən bank sistemində Born on 21.05.1973 in Baku. Graduated from Azerbaijan State Economic çalışır. 28.12.2005-ci ildən İdarə Heyəti Sədrinin müavinidir. Institute with honors. Working in the banking sector since 2001. Deputy Chairman of the Board of "Muganbank" OJSC since 28.12.2005. Hesabat / Report 2013 29

Şakir N. Allahverdiyev – Üzv Shakir N. Allahverdiyev – Member 15.01.1971-ci ildə Qazax rayonunda anadan olub. Azərbaycan Dövlət Neft Born on 15.01.1971 in Gazakh district. Graduated from Azerbaijan State Akademiyasını bitirib. 2001-ci ildən bank sistemində çalışır. 03.03.2006- Oil Academy. Working in the banking sector since 2001. Director of the cı ildən “Muğanbank” ASC-nin Kreditlərə Nəzarət Departamentinin Department for the Supervision of Credits of "Muganbank" OJSC since direktorudur. İdarə Heyətinin üzvüdür. 03.03.2006 . Member of the Board.

Qalina D. Sidneva – Üzv Galina D. Sidneva – Member 14.08.1971-ci ildə Bakı şəhərində anadan olub. Azərbaycan Neft və Kimya Born on 14.08.1971 in Baku. Graduated from Azerbaijan Oil & Chemistry İnstitutunu bitirib. 1993-cü ildən bank sistemində çalışır. 29.10.2004-cü Institute. Working in the banking sector since 1993. Director of Finance ildən “Muğanbank” ASC-nin Maliyyə Departamentinin direktorudur. İdarə Department of "Muganbank" OJSC since 29.10.2004. Member of the Heyətinin üzvüdür. Board.

Samir A. İsmayılov – Üzv Samir A. Ismayilov – Member 13.03.1970-ci ildə Bakı şəhərində anadan olub. Azərbaycan Xalq Born on 13.03.1970 in Baku. Graduated from Azerbaijan National Təsərrüfatı İnstitutunu bitirib. 1998-ci ildən bank sistemində çalışır. Economic Institute. Working in the banking sector since 1998. Director of 09.02.2004-cü ildən “Muğanbank” ASC-nin Kredit Departamentinin Credit Department of "Muganbank" OJSC since 09.02.2004. Member of direktorudur. İdarə Heyətinin üzvüdür. the Board. Hesabat / Report 2013 30

Departament direktorları Department directors

Kamalə Mirzəyeva Kamala Mirzayeva Daxili Audit Departamentinin direktoru vəzifəsini icra edən Alternate Director of Internal Audit Department

Vüsal A. Göyüşov Vusal A. Goyushov Risklərin İdarə edilməsi Departamentinin direktoru Director of Risk Management Department

Samir A. İsmayılov Samir A. Ismayilov Kredit Departamentinin direktoru Director of Credit Department

Natalya T. Zərnəliyevə Natalya T. Zarnaliyeva Müştərilərə Xidmət Departamentinin direktoru Director of Customer Service Department

Qalina D. Sidneva Galina D. Sidneva Maliyyə Departamentinin direktoru Director of Finance Department

Renad F.Cəfərov Renad F.Jafarov İnformasiya Texnologiyaları Departamentinin direktoru Director of IT Department

Elxan G. Göyüşov Elkhan G. Goyushov Qiymətlilərlə İş Departamentinin direktoru Director of Valuables Department

Yusif Ə. Əsgərov Yusif A. Asgarov Hesablaşmalar Departamentinin direktoru Director of Settlements Department

Samir H. Süleymanov Samir H. Suleymanov Hüquq Departamentinin direktoru Director of Legal Department Hesabat / Report 2013 31

Rəşad T. Alıyev Rashad T. Aliyev Marketinq Departamentinin direktoru Director of Marketing Department

Şakir N. Allahverdiyev Shakir N. Allahverdiyev Kreditlərə Nəzarət Departamentinin direktoru Director of the Department for the Supervision of Credits

Elçin H. Seyidov Elchin H. Seyidov Filiallarla İş Departamentinin Direktoru Director of Branch Development Department

Bahar V. Əliyeva Bahar V. Aliyeva İnsan Resurslarının İdarə edilməsi Departamentinin direktoru Director of HR Department

Tapdıq M. Yusubov Tapdig M. Yusubov Bank Təhlükəsizliyi Departamentinin direktoru Director of Security Department Hesabat / Report 2013 32

Bitki müxtəlifliyimizi qoruyaq! Let’s protect our plant diversity!

Qafqaz dağlarının 600-1800 metrlik yamaclarında yerləşən Şərq palıdları... Eastern oaks on the 600-1800 meters slopes of Caucasus mountains ... birch trees ondan bir az daha hündürdə, qar uçqunları nəticəsində ağacları əyilmiş tozağacı stooped on the northern slopes because of snowy avalanches... thickets of reed meşəliyi... düzənlik rayonlarda ahəngləşmiş qamış cəngəllikləri, ya da Muğanda widely spread in the lowland districts ... short bushes of sarzasan in Mugan ... the qaraşoranın yerə sərilmiş budaqları… Abşeronda uzun illər boyu salınmış parklar parks established in Absheron through many years... Talysh forests formed over və ya milyon illər boyu formalaşmış Talış meşələri... millions of years...

Ərazicə kiçik olsa da 9 müxtəlif iqlim tipini özündə birləşdirən Azərbaycan təbiəti Azerbaijan nature which embraces 9 various climate types notwithstanding the hazırda ciddi təhlükə ilə üz-üzədir. Floramızın 4500-dən çox nümayəndəsinin small territorial coverage is confronting a serious danger at present. Nearly 400 400-ə yaxını Qırmızı Kitaba salınıb. Səbəblər müxtəlifdir - ekoloji tarazlığın of more than 4,500 species of plants in the country have been included in the pozulması, təbiətə etinasız münasibət, həmçinin torpaqlarımızın 20%-nin işğal list of Red Book species. There are different reasons: environmental disruption, altında olması. Bu vəziyyəti təbiətimizin xeyrinə dəyişmək isə bizim əlimizdədir. environmental negligence as well as the 20% of Azerbaijan’s territory being under occupation. And remedy of this situation in favor of our nature is in our hands. Hesabat / Report 2013 33

Pinus eldarica Pyrus salicifolia Platanus orientalis Eldar şamı: Dünyada təbii halda Söyüdyarpaq armud: Yalnız Qafqaz ərazisində tapılan bu ağacın Şərq çinarı: Azərbaycanda bitən 1 yalnız Azərbaycanda bitir. Bu 2 meyvələri toplanılır, calaq və ya dekorativ məqsədlərlə də istifadə 3 yeganə çinar növüdür. 1974-cü ildə ağacları qorumaq üçün 1910-cu ildə olunur. Nəslinin kəsilmək ehtimalı var. Zəngilanda Çinar meşəliyini qorumaq qrafinya K.S.Uvarovanın təklifi ilə üçün Bəsitçay Dövlət Təbiət Qoruğu Eldar düzünün 3,5 min hektar ərazisi “Söyüdyarpaq armud” is found only in the Caucasus. Its fruits yaradılıb. Hazırda Ermənistanın işğalı Qafqazda ilk yasaqlıq elan olunub. are gathered, and used also for grafting or decorative purposes. altında olan bu qoruqda ehtiyatları It is becoming endangered. sürətlə azalmaqdadır. “Eldar şamı” naturally grows only in Azerbaijan. To protect these “Şərq çinarı” is the only type of trees, in 1910 on the proposal of plane tree that grows in Azerbaijan. countess K.S.Uvarova a 3,5 thousand To protect rare plane tree forests, ha territory of Eldar lowland was Basitchay State Natural Reserve was declared the first preserved territory established in Zangilan in 1974. The in the Caucasus. stocks of “Şərq çinarı” are rapidly decreasing in this reserve which is now under Armenian occupation.

Parrotia persica Amygdalus fenzliana 6 Dəmirağac: Talış dağlarında rast 4 Dağ badamı: Naxçıvanın dağlıq gəlinən və 200 ilə qədər yaşayan hissəsində, həmçinin Kür düzənliyi, ağacdır. Oduncağının keyfiyyəti Kiçik Qafqazda tapılan balaca yüksək olduğu üçün uzun illər boyu ağac və ya koldur. Təbii bərpası müxtəlif məqsədlər üçün istismar azalır, ona görə də nəsli kəsilmək olunub. Hazırda isə nəslinin kəsilməsi Zelkova carpinifolia təhlükəsindədir. təhlükəsi ilə üz-üzə qalıb. Vələsyarpaq azat: Dekorativ ağacdır. Şuşada, “Dağ badamı” is a small tree or bush 5 Füzulidə, eləcə də Lənkəranın dağlıq hissəsində yayılıb. “Dəmirağac” is a tree which is found which is found on mountainous Getdikcə azalması müşahidə olunur. on Talysh mountains. Its length of life areas of Nakhchivan, as well as in the is up to 200 years. It has been used plain of Kura and Small Caucasus. It is “Vələsyarpaq azat” it is an ornamental tree spread in Shusha, for various purposes over many years becoming endangered as its natural Fuzuli as well as on the mountainous areas of Lankaran. Its because of its very strong wood. It is regeneration is abating. number is decreasing. becoming endangered. Xarici mühit External environment Hesabat / Report 2013 35

Makroiqtisadi vəziyyət Macroeconomic environment

Bank sisteminin fəaliyyətinə əhəmiyyətli təsiri olan ölkənin makroiqtisadi Macroeconomic environment of the country which has a significant mühiti iqtisadi aktivlik, qiymət və makroiqtisadi sabitliyin qorunması ilə impact on the banking sector performance is characterized by economic xarakterizə olunur. activity, price and maintenance of macroeconomic stability.

2013-cü ildə ÜDM real ifadədə 5.8% artaraq 57.7 mlrd. manat təşkil In 2013, GDP amounted to 57.7 billion manat growing by 5.8% in real etmişdir. significance.

20

15 ÜDM-in artım tempi

10 Neft-qaz hasilatı və istehsal 5 sektoru

0 Qeyri neft -qaz sektoru

-5

-10

2009 2010 2011 2012 2013 2013 1 rüb 2014 1 rüb Hesabat / Report 2013 36

ÜDM-in artımı əsasən qeyri-neft (q/n) sektorundakı fəallıq hesabına baş The growth of GDP was mainly due to activeness in non-oil sector. vermişdir. Belə ki, ÜDM-in 56.6%-i qeyri-neft sektorunun payına düşmüş Thus, 56.6% of GDP fell to the share of non-oil sector, and this sector of və iqtisadiyyatın bu sektoru ümumi artıma 5.3 f.b. artırıcı töhfə vermişdir. economy contributed to total growth by 5.3 pp.

Yaradılan əlavə dəyərin 2/3 hissəsi məhsul istehsalı sahələrinin, 1/3 2/3 of added cost fell to the share of manufacturing sectors and 1/3 to hissəsi isə xidmət sahələrinin payına düşmüşdür. Dövr ərzində qeyri-neft the share of service sectors. sektorunun bütün sahələrində artım müşahidə edilmişdir. Growth was observed in all areas of the non-oil sector during that period.

Sahələr arasında ən yüksək artım tempi tikinti, yaşayışın təşkili və ictimai Among the non-oil sector areas the highest growth rate was observed iaşə, rabitə və ticarətdə qeydə alınmışdır. Qeyri-neft iqtisadiyyatında in construction, tourism and public catering, communication and trade.

50 12 45 10 40 35 8 30 25 6 20 4 15

10 2 5 0 0 03.31.13 06.30.13 09.30.13 12.31.13 03.31.14

Qeyri neft -qaz sektoru Turistlərin yerləşdirilməsi Ticarət, nəqliyyat Kənd təsərrüfatı, meşə və ictimai iaşə vasitələrinin təmiri təsərrüfatı və balıqçılıq

Tikinti İnformasiya və rabitə Nəqliyyat və anbar Qeyri neft ÜDM-in artım təsərrufatı tempi, sağ şkala Hesabat / Report 2013 37

10%-lik artımın təqribən yarısı və ya 4.8 f.b. tikinti sahəsinin hesabına About half or 4.8 pp. of the 10% growth in the non-oil economy was formalaşmışdır. Qeyri-neft sənayesində artım əsasən qida, maşınqayırma, due to construction sector. Growth in non-oil industry was originated tikinti materialları istehsalı, gön-dəri istehsalı və mebel sənayesindən basically from food industry, engineering industry, manufacturing of qaynaqlanmışdır. Kənd təsərrüfatında isə müşahidə olunan artım həm construction materials, leather manufacture and furniture industry. And bitkiçilik məhsulları istehsalında, həm də heyvandarlıqda baş vermişdir. the growth observed in agriculture came of both crop production and Xidmət sahələri arasında ən yüksək artım ictimai iaşə və ticarətdə cattle-breeding. The highest growth among the service sectors was müşahidə olunmuşdur. Ticari sektorda neft sənayesi nəzərə alınmadan observed in catering and trade. Growth in trade sector exclusive of oil artım 4.6%, qeyri-ticari sektorda isə 11.2% təşkil etmişdir. industry amounted to 4.6%, and in non-trade sector it amounted to 11.2%. 2013-cü ildə ölkə iqtisadiyyatına investisiya qoyuluşu 15.1% artaraq 17.9 mlrd. manat təşkil etmişdir ki, bu da ÜDM-in 31%-inə bərabərdir. Investments in the country economy grew by 15.1% and amounted to Müqayisə üçün qeyd etmək lazımdır ki, 2012-ci ildə investisiyalar 17.9 billion manat in 2013, which is equal to 31% of GDP. For comparision, 20% artmasına baxmayaraq, ÜDM-in 28%-ini təşkil edirdi. Qeyri-neft though investments grew by 20% in 2012, they only amounted to 28% sektoruna investisiyalar 12.1% artmışdır. Bu investisiyaların ümumi of GDP. Investments in non-oil sector grew by 12.1%. The percentage investisiya qoyuluşlarında xüsusi çəkisi 73% təşkil etmişdir. İnvestisiyaların of these investments in total investments was 73%. As for the financial maliyyə mənbəyinə gəldikdə əsas kapitala yönəldilmiş vəsaitin 76.7%-i source of the investments, 76,7% of the funds aimed at fixed capital was daxili, 23.3%-i isə xarici mənbələr hesabına formalaşmışdır. from internal sources, and 23.3% from external sources.

İstehlak xərcləri 2013-cü ildə 14.2% (2012-ci ildə - 9.3%) artmışdır. İstehlak Consumer expenditure grew by 14.2% in 2013 (9.3% in 2012). Growth xərclərinin artımı pərakəndə ticarət dövriyyəsinin artmasına və xidmət of consumer expenditure enabled the growth of retail turnover and its sektorunda inkişafının davam etməsinə şərait yaratmışdır. Əmək haqqı və continuous growth in service sector. Growth in wages and state social dövlətin sosial transfertlərinin artımı əhalinin pul gəlirlərinin artmasında transfers played an important role in the growth of incomes of the (2013-cü ildə artım 8.4%) mühüm rol oynamışdır. Əhalinin sərəncamında population (8,4% growth in 2013). And the income at the population’s qalan gəlirlər isə dövr ərzində 8% artaraq 34.5 mlrd. manat olmuşdur. disposal amounted to 34.5 billion manat growing by 8% during that period. Hesabat / Report 2013 38

Bank sistemi Banking system

2013-cü ildə bank sisteminin inkişaf trendi saxlanılmış, bankların ölkə The growth trend of the banking system was maintained and iqtisadiyyatında rolunu xarakterizə edən makro göstəricilərin müsbət macroeconomic indicators that define the role of banks in the country’s dinamikası davam etmişdir. Bank sisteminin aktivləri 2013-cü ildə 3 855 economy had a continuous positive dynamics in 2013. Banking system mln. manat (23%) artaraq ilin sonuna 20 385 mln. manat səviyyəsinə assets grew by 3 855 mln. manat (23%) in 2013 and reached 20 385 mln. çatmışdır. manat by the year-end.

Bank sisteminin maliyyə vasitəçiliyini xarakterizə edən göstəricilərdən Ratio of assets that are one of the indicators defining the financial biri olan aktivlərin qeyri-neft ÜDM-ə nisbəti il ərzində 5 f.b. artaraq 68%-ə intermediary of banking system to non-oil GDP grew by 5 pp. during the yüksəlmişdir. year and rose to 68%.

90% 60% Aktivlər/ Qeyri-neft ÜDM, sol şkala 74% 72% 75% 68% 68% 55% 63% 63% Qeyri-neft ÜDM, %-in artım tempi 60% 40%

45% 35% Aktivlərin real artım tempi

30% 20% Aktivlərin nominal artım tempi 15% 10%

0% 0%

-15% -10% 31.12.08 31.12.08 31.12.08 31.12.08 31.12.08 31.12.08 Hesabat / Report 2013 39

Əhalinin müxtəlif növ bank xidmətlərindən istifadə etməsi artmışdır. People’s use of different kinds of banking services grew. Thus, deposits Belə ki, əhalinin əmanətlərinin artım dinamikası davam etmiş, qeyri-neft of the population had a continuous growth dynamics and their ratio to ÜDM-ə nisbəti 20.6%-ə çatmışdır. non-oil GDP reached 20,6%.

7000 25% 20.6% Əhalinin əmanətləri, mln. 6000 man. 19.8% 20% 5000 19.2% Əhalinin əmanətləri/ Qeyri- neft ÜDM, % 4000 15%

3000 13.8% 15.3% 10% 12.8% 2000 5% 1000

0 1,949.5 2,396.2 2,550.3 4,209.7 5,171.1 6,175.9 0% 31.12.08 31.12.08 31.12.08 31.12.08 31.12.08 31.12.08

Əhaliyə verilmiş kreditlərin həcmi, məhsul çeşidi və borcalanların sayı The volume of loans to the population, the range of products and the müntəzəm olaraq artır. 2012-ci ildə əhalinin yetkinlik yaşına çatmış number of borrowers are regularly increasing. While 148 of every 1000 hər 1000 nəfərinin 148-i banklarda kredit hesabına malik idisə, 2013- mature age people of the population maintained loan accounts with cü ilin sonuna bu göstərici 274 olmuşdur. Beynəlxalq müqayisədə də banks in 2012, that indicator was 274 as at the end of 2013. The level of Azərbaycanda əhali tərəfindən bank kreditlərindən istifadə səviyyəsi people’s use of bank loans in Azerbaijan is satisfactory in international qənaətbəxşdir. comparisons, too. Hesabat / Report 2013 40

2013-cü ildə bankların öhdəlikləri7 22% artaraq (3021 mln. manat) Liabilities of banks increased by 7 22% (3021 mln. manat) in 2013 and dövrün sonuna 16997 mln. manat təşkil etmişdir. O cümlədən, dövr amounted to 16997 mln. manat as at the end of the period. Also, during ərzində bankların qeyri-maliyyə korporativ müştərilərdən və əhalidən that period the funds of the banks raised from non-financial corporate cəlb olunmuş vəsaitləri 16% artaraq 8879 mln. manata çatmış və cəmi customers and from the population reached 8879 mln. manat increasing öhdəliklərin 52%-ni təşkil etmişdir. by 16% and amounted to 52% of total liabilities.

100% Kapital Maliyyə sektorundan alınmış kreditlər və depozitlər 80% Digər öhdəliklər Korporativ sektorun depozitləri 60% AMB qarşısında Əhalinin əmanətləri öhdəliklər 40%

20%

0% 2008 2009 2010 2011 2012 2013 2014 1 rüb

İl ərzində əhalinin əmanətləri 25% artaraq 6.0 mlrd. manatı ötmüş, bank Deposits of the population increased by 25% during the year and sisteminin öhdəliklərində payı isə dövrün sonuna 30% təşkil etmişdir. were more than 6.0 billion manat, and their percentage in the banking Əmanətlərin məbləğinin artması ilə yanaşı onların strukturunda da system liabilities amounted to 30% as at the end of the period. Besides müsbət meyllər davam etmişdir. Milli valyutada əmanətlərin xarici the increase of the amount of deposits, there were continuous positive valyutada əmanətlərlə müqayisədə daha sürətlə artması tendensiyası trends in their structure as well. The trend of more rapid growth in davam etmişdir. 2013-cü ildə manatla əmanətlər 31.2% artaraq ümumi deposits in national currency than the deposits in foreign currency əmanətlərin 61%-ni təşkil etmişdir (müqayisə üçün xarici valyutada continued. Deposits in manat grew by 31.2% and amounted to 61% of əmanətlər 16.7% artmışdır). Müddətli əmanətlər 1237 mln. manat (30.4%), total deposits in 2013 (deposits in foreign currency grew by 16.7% ). Term tələbli əmanətlər isə 45 mln. manat (4.4%) artmışdır. deposits increased by 1237 mln. manat (30.4%), and demand deposits by 45 mln. manat (4.4%). Hesabat / Report 2013 41

Bank sisteminin aktivlərinin strukturunda artım əsasən kredit portfeli Growth in the banking system assets structure was mainly observed in üzrə müşahidə olunmuşdur. Kredit qoyuluşları 2013-cü ildə 25.3% artaraq loan portfolio. Credit exposure grew by 25.3% in 2013 and amounted to dövrün sonuna 14990 mln. manat təşkil etmişdir. Sistem üzrə kreditlərin 14990 mln. manat as at the end of the period. The percentage of loans in aktivlərdə payı 01.01.2014-cü il tarixinə 70% təşkil edir. assets is 70% as of 01.01.2014.

2013-cü ildə kredit portfeli ay ərzində orta hesabla 264.7 mln. manat In 2013, loan portfolio grew by 264.7 mln. manat on average over a (2012-ci ildə 199.3, 2014-cü ilin I rübündə 172.7 mln. manat) artmışdır. month’s period (2012 - 199.3, 2014/I Q - 172.7 mln. manat).

20.000 100%

80% 15.000

60% 10.000

40%

5.000 20%

0 0%

2014 2008 2009 2010 2011 2012 2013 -5.000 1 rüb -20%

Kredit portfelinin qalığı Kredit portfelinin Kredit portfelinin (mln.manat) xalis artımı artım tempi (rüb ərzində)(mln.manat)

Kreditlərin artımı əsasən iri sistem əhəmiyyətli banklar hesabına baş Growth in loans happened mainly due to larger important banks. vermişdir. Belə ki, 2013-cü ildə kredit portfelinin 5.5% artmına kiçik Contribution of small banks to the 5.5% growth of loan portfolio was bankların töhfəsi cəmi 1.4 f.b. olmuşdur. only 1.4 pp. in 2013. Hesabat / Report 2013 42

100%

Ev təsərrüfatlarına Digər 80%

60% Ticarət və xidmət Kənd təsərrüfatı sektoru və emal

40% İnşaat və əmlak Nəqliyyat və rabitə

20% Sənaye və Energetika, kimya və istehsal sektoru təbii ehtiyatlar sektoru 0% 2008 2009 2010 2011 2012 2013 2014 1 rüb

2013-cü ildə kredit portfelinin sahəvi strukturunda əhəmiyyətli No significant change was observed in the sector classification of loan dəyişikliklər müşahidə olunmamışdır. portfolio in 2013.

Ev təsərrüfatlarına verilmiş kreditlərin ümumi portfeldə payı yüksək The percentage of household loans in total portfolio remains high. Also, olaraq qalır. Eyni zamanda qeyd etmək lazımdır ki, bankların hüquqi the sector classification of loans to corporate entities is changing, and şəxslərə verdiyi kreditlərin sahəvi strukturu dəyişir, istehsal sahələrinin lending to manufacturing sectors becomes attractive. kreditləşməsinə marağı artır. Over the last five years the percentage of loans to trade and service Son beş il ərzində ticarət və xidmət sektoruna verilən kreditlərin payı sectors has decreased from 21.8% to 14.4% as at the end of 2013, 21.8%-dən 2013-cü ilin sonuna 14.4%-dək azalmış, inşaat, əmlak, sənaye and the percentage of loans to construction, property, industry and və istehsal sektorlarına verilən kreditlərin payı isə artmışdır. manufacturing sectors has increased.

2013-cü ildə bank sistemində xalis mənfəət (elan olunmuş Net profit in the banking system (after declared dividends) amounted dividendlərdən sonra) 267.6 mln. manat (01.04.2014-cü il tarixinə 99.6 to 267.6 mln. manat in 2013 (99.6 mln. manat as at 01.04.2014), which is mln. manat) təşkil etmişdir ki, bu da ötən illə müqayisədə təxminən about two times higher than the previous year. The number of banks iki dəfə çoxdur. Son üç il ərzində mənfəətlə işləyən bankların sayı və operating at a profit and their percentage in the banking system have onların bank sistemində payı müntəzəm olaraq artmışdır. Belə ki, son regularly increased over the last three years. Thus, the number of banks Hesabat / Report 2013 43

üç il ərzində mənfəətlə işləyən bankların sayı 30-dan 39-a, onların bank operating at a profit has increased from 30 up to 39, and their percentage sistemində payı isə 47%-dən 96%-dək artmışdır. Zərərlə işləyən bankların in the banking system from 47% up to 96% over the last three years. məcmu zərəri isə əhəmiyyətli dərəcədə azalmış və cəmi 4.75 mln. manat And the total loss of banks operating at a loss has signifcantly decreased olmuşdur (müqayisə üçün 2011-ci ildə 322.5 mln. manat, 2012-ci ildə isə and amounted to 4.75 mln. manat only (that was 322.5 mln. manat in 65.5 mln. manat). Bankların gəlirlilik göstəricilərində də müsbət trend 2011 and 65.5 mln. manat in 2012). A positive trend was observed in müşahidə olunmuşdur. Belə ki, ROA il ərzində 0.7 f.b. artaraq 1.5%, ROE profitability ratios, too. Thus, ROA increased by 0.7 pp. during the year isə 4.7 f.b. artaraq 11.7% olmuşdur. and was 1.5%, and ROE increased by 4.7 pp. and was 11.7%.

400 20

Xalis mənfəət, mln.man 15 300 (sol şkala)

10 200 ROA,%

5 100 ROE,% 0

0 -5

-100 -10

-200 -15 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bank kreditləri bazarında rəqabətin artması və AMB-nin uçot dərəcəsinin Against the backdrop of growing competition in the credit market and azaldılması fonunda banklar mövcud resursların daha səmərəli istifadəsi reduced CBA discount rate, banks have reinforced their efforts towards istiqamətində səylərini gücləndirmişdir. Maliyyə resurslarının dəyərinin il more efficient use of current resources. Due to a 0.1 pp. increase of ərzində 0.1 f.b. artması halında aktivlərin gəlirlilyi 0.5 f.b. artmışdır. the value of financial resources during the year, return on assets has increased by 0.5 pp. Hesabat / Report 2013 44

16% 60% 14.6% 14% 12.6% 55% Xalis mənfəət, mln.man (sol şkala) 12% 10.7% 10.5% 10.7% 10.2% 40% 10% Maliyyələşdirmə 8.0% mənbələrinin dəyəri 7.2% 35% 8% 6.8% 6.9% 6.9% 7.0% Faiz spredi 6% 20% 4% 10% 2% Xalis faiz marjası

0% 0%

2008 2009 2010 2011 2012 2013 -10%

2013-cü il ərzində xalis faiz mənfəəti 39% (2012-ci ildə 16%) artmışdır. Net interest income increased by 39% in 2013 (16% in 2012). The Xalis faiz mənfəətinin dinamikasına faiz gəlirləri və xərclərinin artım dynamics of net interest income has been affected by the growth rate of tempi təsir etmişdir. Kredit portfelinin genişləndirilməsi hesabına faiz interest income and expenses. Due to the expansion of loan portfolio gəlirlərinin artım tempi (2013-cü ildə 31%) cəlb olunmuş resurslar üzrə the growth rate of interest income (31% in 2013) exceeded the growth faiz xərclərinin artım tempini (2013-cü ildə 24%) üstələmiş və fərq 7 f.b. rate of interest expenses on raised funds (24% in 2013), and the spread olmuşdur (Müqayisə üçün qeyd etmək lazımdır ki, 2012-ci ildə bu fərq was 7 pp. (that was 1 pp. only in 2012). cəmi 1 f.b. olmuşdur.).

Hesabat / Report 2013 45

400%

Cəmi faiz gəlirləri Cəmi faiz xərcləri

200% Cəmi qeyri-faiz gəlirləri Cəmi qeyri-faiz xərcləri

0% Ehtiyatlar Vergilər

-200 Xalis mənfəət

-400% 2008 2009 2010 2011 2012 2013

Bankların kapitalının minimal məbləğinə dair AMB-nin tələbinin The strict minimum capital requirement set by CBA pushed the speedup sərtləşdirilməsi kapitalın artım tempinin sürətlənməsinə təkan vermişdir. of the growth in capital. According to CBA decision banks’ total capital Belə ki, AMB-nin qərarına əsasən 01.01.2015-ci il tarixinə bankların shall not be less than 50 mln.manat as of 01.01.2015. As a result, the məcmu kapitalı 50 mln. manatdan az olmamalıdır. Nəticədə bank banking system capital increased by 33% (747 mln. manat) in 2013 and sisteminin kapitalı 2013-cü ildə 33% (747 mln. manat) artaraq 3 427 mln. reached 3 427 mln.manat. manata çatmışdır.

Hesabat / Report 2013 46

20 18.1 18.1 4.000 Məcmu kapital, mlrd.man., 17.3 sağ şkala 16.9 16.8 16.7 15.0 15.2 14.7 15 13.2 3.000 Məcmu kapitalın adekvatlıq əmsalı, %

12.2 Leverec əmsalı, % 10 11.4 2.000 10.9 10.6 10.4 10.8 10.8 9.4 9.9 9.9

5 1.000 1.886 2.086 2.297 2.582 2.680 2.884 3.160 3.427 3.571 0 2.085 0 31.12.11 31.03.12 30.06.12 30.09.12 31.12.12 31.03.13 31.06.13 31.09.13 31.12.13 31.03.14

2013-cü ildə kapital adekvatlığı əmsalı 1.2 f.b., leverec əmsalı isə 1 f.b. Capital adequacy ratio increased by 1.2 pp. and leverage ratio by 1 pp. artaraq 01.01.2014-cü il tarixinə müvafiq olaraq 18.1% və 11.4% olmuşdur. in 2013 and amounted to 18.1% and 11.4%, respectively as at 01.01.2014. Banklarda kapitalın artım strukturu 2013-cü il ərzində əvvəlki illərlə The growth structure of capital at banks did not change in 2013 in müqayisədə dəyişməmişdir. Ənənəvi olaraq kapital artımının əsas comparison with the previous years. The main source of capital increase mənbəyi səhmdar kapitalı olmuşdur – məcmu kapitalın artımında töhfəsi was share capital as usual - its contribution to the increase of total capital 25% (2012-ci ildə 29%). Mənfəətin (cari ilin mənfəəti və bölüşdürülməmiş was 25% (29% in 2012). The contribution of profit (profit of the current xalis mənfəət) artımda töhfəsi 2012-ci illə müqayisədə 5 f.b. artaraq 5% year and net retained earnings) to the capital increase grew by 5 pp. as olmuşdur. compared to 2012 and was 5%.

Dövr ərzində kredit portfelinin ümumi artımına baxmayaraq, banklar Notwithstanding the general growth of loan portfolio during that kredit risklərinin məqbul səviyyədə saxlanılmasına nail olmuşlar. Belə period, banks managed to maintain the credit risks at acceptable level. ki, əvvəlki dövrlərdən fərqli olaraq 2011-2014-cü ilin I rübü ərzində vaxtı Thus, unlike the previous periods, the annual average growth rate of past keçmiş kreditlərin orta illik artım tempi (16%) ümumi portfelin artım due loans (16%) was lower than the growth rate of total portfolio (21%) tempindən (21%) az olmuşdur. Vaxtı keçmiş kreditlərin artım tempinin during 2011 – Q1/ 2014. The slow growth of past due loans caused the səngiməsi onların portfeldə payının da tarixi maksimum olan 6.4%-dən falling of their percentage in the portfolio from the historically high 6.4% (2011-ci il) 5.1%-ə enməsinə (2013-cü il) səbəb olmuşdur. (2011) down to 5.1% (2013). Hesabat / Report 2013 47

Son illər istehlak kreditləri bazarında müşahidə olunan aktivlik kredit For the intensity observed in the consumer loan market in recent years risklərinin adekvat idarə olunması məsələsini aktuallaşdırmışdır. Belə adequate credit risk management has become of an immediate interest. ki, xüsusi artım təminatsız nağd kreditləri olan digər istehlak kreditləri For, an unusual growth was observed in unsecured cash loans, another seqmentində müşahidə olunmuşdur. Nəticədə bu növ kreditlərin consumer loan segment. As a result, the percentage of such loans in the portfeldə payı 2013-cü il ərzində təxminən 10 f.b. artaraq 37.3%-ə portfolio increased approximately by 10 pp. in 2013 and reached 37.3%. çatmışdır. Another important segment of consumer loans (percentage in the Əhaliyə verilən kreditlərin digər mühüm seqmenti (01.01.2014-cü il portfolio: 27.8% as of 01.01.2014) includes mortgage and real estate loans tarixinə portfeldə payı 27.8%) – ipoteka və daşınmaz əmlakla bağlı (tikinti, (construction, renovation, etc.). təmir və s.) bağlı kreditlərdir. Payment systems continued operating stably and incessantly during 2013-cü il və 2014-ci ilin I rübü ərzində ödəniş sistemlərinin sabit və the year of 2013 and the I quarter of 2014. The volume and number of fasiləsiz fəaliyyəti davam etmişdir. Ölkədəki iqtisadi aktivliyə adekvat transactions conducted through National Payment System increased in olaraq Milli Ödəniş Sistemində aparılan əməliyyatların həcmi və sayı line with the economic activity in the country. artmışdır.

120.000 113.190 AZIPS 106.985

100.000 99.279 XÖHKS 78.425 72.856

80.000 71.425

60.000 38.727 40.000

20.000 14.974 11.844 8.569 6.409 5.364 5.274 2.139 0 2007 2008 2009 2010 2011 2012 2013 Hesabat / Report 2013 48

2013-cü ilin sonuna ölkə ərazisində quraşdırılmış POS-terminalların sayı The number of POS terminals within the country was 33.3 thousand as at 33.3 min ədəd təşkil etmişdir. İl ərzində regionlar üzrə POS-terminalların the end of 2013. The number of POS terminals in regions has increased by sayı 34,5% artaraq (1114) 4345 ədəd olmuşdur. POS-terminallar vasitəsilə 34,5% (1114) over the year and became 4345. The number of transactions aparılan əməliyyatların sayı 2,4 dəfə (6.6 mln.) artaraq 11.2 mln. ədəd, conducted through POS terminals increased by 2,4 times (6.6 mln.) and həcmi isə 1.6 dəfə (384 mln. manat) artaraq 981 mln. manat olmuşdur. became 11.2 mln., and their volume increased by 1.6 times (384 mln. manat) and amounted to 981 mln. manat. Ümumilikdə, 2013-cü il ərzində ölkə bankları tərəfindən emissiya edilmiş ödəniş kartları ilə ölkə daxilində aparılmış əməliyyatların həcmi 9.56 mlrd. In general, over the year of 2013 the volume of transactions conducted manat, sayı isə 63 milyon ədəd olmuşdur ki, bunun da müvafiq olaraq within the country through payment cards issued by local banks has 6% və 18.3%-i nağdsız ödənişlərin payına düşür. Ötən illə müqayisədə been 9.56 billion manat and their number has been 63 million, 6% and ölkədaxili ödəniş kartları ilə aparılmış əməliyyatların həcmi 64.5%, sayı isə 18.3% respectively of which fall to the share of non-cash payments. 2.3 dəfə artmışdır. Ödəniş kartları ilə hesablaşmaların artdığı bir şəraitdə In comparison with the previous year, the volume and number of bu sahədə risklərin idarə olunması məsələləri diqqətdə saxlanılmışdır. transactions conducted through domestic payment cards increased by Ölkədə nağdsız ödənişlərin stimullaşdırılması, bu ödənişlər üzrə 64.5% and 2.3 times, respectively. In the context of growing payment infrastrukturun genişləndirilməsi və hüquqi bazanın möhkəmləndirilməsi card transactions, much attention has been given to risk management in üzrə təkliflər paketi hazırlanmışdır. this sphere. A package of proposals for the encouragement of non-cash payments in the country, expansion of non-cash payments infrastructure and reinforcement of non-cash payments juridical base has been established. Hesabat / Report 2013 49

Hər bir fəaliyyətdə ətraf mühitə qayğı göstərək! Let’s care for the environment in every activity!

Kağız və kağız məhsulları ən çox ofis və biznes məqsədləri üçün istehlak olunur. Paper and paper products are mostly used for office and business purposes. For Məsələn, bir ofis işçisi il ərzində orta hesabla 6000-dən çox vərəq istifadə edir. example, an office worker uses more than 6,000 sheets of paper on the average per year. Kağız istehsalı üçün ağaclardan əlavə tonlarla su və enerji də istifadə olunur. Odur ki, ətraf mühiti qorumaq üçün atacağımız ilk addım çalışdığımız yerdə Apart from woods, also tons of water and energy are used for paper production. istifadə etdiyimiz kağızlara qənaət etmək ola bilər. Therefore, the first step we shall take to protect the environment can be saving on the papers we use at our workplaces. Hesabat / Report 2013 50

Kağızların hər iki tərəfinə yazı çap etməklə istifadə edəcəyimiz 2 vərəqlərin sayını 2 dəfə azaldaq. Let’s decrease the number of the papers to be used for two times by printing on their both sides.

Hər bir kağızı çap etməzdən əvvəl Mümkün olduğu qədər elektron 1 düşünək və materialların yalnız son 3 məktublaşmaya üstünlük verək. variantlarını çap edək. Let’s prefer email correspondences as much as practical. Let’s think about the enviroment before printing and print only the latest versions of the materials.

E-mail məktublarının sonlarında Ətraf mühiti qorumaq üçün kağızla vacib olmayan məlumatların çap yanaşı digər resursların, məsələn 4 olunmamasına çağırış edən xüsusi 6 suyun, enerjinin və s. istifadəsində də qeydlər yazaq. diqqətli olaq.

Let’s add a special note at e-mail In order to protect the environment, ends calling for not to print unless besides paper, let’s be careful in the necessary. use of other resources too, such as Çap olunmuş, amma lazım olmayan vərəqləri qeyd aparmaq water, energy, etc. 5 üçün və ya qaralama kimi istifadə edək . Let’s use the printed, but no longer needed copies to take notes or use as rough copies. Əsas maliyyə göstəriciləri Key financial figures Hesabat / Report 2013 52

Aktivlər Assets

Son illər ərzində Muğanbankın aktivləri davamlı olaraq artmışdır. Bu Muganbank assets have continuously grown over the last years. By göstəriciyə görə, Bank stabil olaraq Azərbaycanın 15 ən yaxşı bankları assets, Muganbank is stably ranked among Top 15 of Azerbaijani banks. siyahısına daxildir. In 2013, Muganbank’s net assets increased by 17.03% and reached 333 2013-cü ildə Muğanbankın xalis aktivləri 17.03% artmış və 1 yanvar 2014- 908 thousand manat as at January 01, 2014 (they were 285 318 thousand cü il tarixinə 333 908 min manata çatmışdır (01.01.2012-ci il tarixinə bu manat as at 01.01.2012). göstərici 285 318 min manat olmuşdur). Hesabat / Report 2013 53

Aktivlərin dinamikası Dynamics of assets

400.000 333 908

300.000 285 318

200.000

100.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Aktivlərin il üzrə artımı / Growth of assets by years 285 318 min 333 908 min 17.03 Hesabat / Report 2013 54

Aktivlərin strukturu Asset structure

0.52% 0.18% min/ thousand 2013 (AZN) 10.65% Aktivlər / Assets 333 908

Pul vəsaitləri və Azərbaycan Respublikasının Mərkəzi Bankında yerləşdirilmiş vəsaitlər 64 018 Cash and balances with Central Bank of Azerbaijan Republic 65.30% Banklardan alınacaq vəsaitlər / Due from banks 13 497

Müştərilərə verilmiş kreditlər / Loans to customers 218 030

Əmlak və avadanlıqlar / Property and equipment 35 553 4.18% Satış üçün saxlanılan aktivlər / Assets held for sale 615 19.17% Digər aktivlər / Other assets 1 745 Hesabat / Report 2013 55

Öhdəliklər Liabilities

2013-cü ildə “Muğanbank” ASC-nin öhdəliklərinin cəmi ötən illə In 2013, Muganbank’s total liabilities increased by 18.31% or 44 418 müqayisədə 18.31% və ya 44 418 min manat artaraq 286 991 min manat thousand manat as compared with the previous year and amounted to (2012-ci ildə 242 573 min manat) olmuşdur. 286 991 thousand manat (they amounted to 242 573 thousand manat in 2012).

300.000 286 991 250.000 242 573 200.000

150.000

100.000

50.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Öhdəliklərin il üzrə artımı / Growth of labilities by years 242 573 min 286 991 min 18.31 Hesabat / Report 2013 56

Öhdəliklərin strukturu Liability structure

1.15% min/ thousand 0.10% 2013 (AZN) 0.11% 3.75% Öhdəliklər / Liabilities 286 991

Banklara və digər maliyyə qurumlarına ödəniləcək vəsaitlər 120 105 Due to banks and other financial institutions

53.05% Müştəri hesabları / Customer accounts 152 235

Buraxılmış borc qiymətli kağızları / Debt securities issued 10 747

41.85% Təxirə salınmış vergi öhdəliyi / Deferred tax liabilities 311

Cari gəlir vergisi öhdəliyi / Current income tax liability 286

Digər öhdəliklər / Other liabilities 3 307 Hesabat / Report 2013 57

Kapital Capital

2013-cü ildə “Muğanbank” ASC-nin kapitalının cəmi əvvəlki illə In 2013, Muganbank’s total capital increased by 9.76% or 4 172 müqayisədə 9.76% və ya 4 172 min manat artmaqla 46 917 min thousand manat as compared with the previous year and reached 46 manata (2012-ci ildə 42 745 min manata) çatmışdır ki, bu da bankın 917 thousand manat (that was 42 745 thousand manat in 2012), which maliyyə sabitliyini və dayanıqlığını ötən illərlə müqayisədə daha da further strengthened the Bank’s financial stability and sustainability in möhkəmləndirmişdir. comparison with the past years.

Azərbaycan Respublikası Mərkəzi Bankının banklarda məcmu kapitalı Pursuant to the minimum total capital requirement of 50 million manat, həcmini 50 mln. manata qədər artırmaq tələbinə uyğun olaraq 2013-cü set by CBA, Muganbank brought its chartered capital up to 41 306 ildə “Muğanbank” ASC öz nizamnamə kapitalının həcmini 41 306 min thousand manat in 2013 (that was 37 306 thousand manat in 2012), which manata (2012-ci ildə 37 306 min manata) çatdırmışdır ki, bu da ötən illə means a 4 000 thousand manat or 10.72% growth in comparision with müqayisədə 4 000 min manat və ya 10.72% artım deməkdir. the previous year. Hesabat / Report 2013 58

Kapital Capital

50.000 46 917

42 745 41 306 40.000 37 306

30.000

20.000

10.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Kapital, cəmi / Total capital: 42 745 min 46 917 min 9.76

Nizamnamə kapitalı / Chartered capital 37 306 min 41 306 min 10.72 Hesabat / Report 2013 59

Kredit portfeli Loan portfolio

“Muğanbank” ASC-nin hər il artmaqda davam edən kredit portfelinin Muganbank’s loan portfolio which continuously grows every year həcmi əvvəlki illə müqayisədə 17 876 min manat və ya 8.93% artaraq reached 218 030 thousand manat (that was 200 154 thousand manat in 2013-cü ildə 218 030 min manata (2012-ci ildə 200 154 min manat) 2012) in 2013 growing by 17 876 thousand manat or 8.93% as compared çatmışdır. to the previous year.

250.000 218 030 200 154 200.000

150.000

100.000

50.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Kredit portfeli / Loan portfolio 200 154 min 218 030 min 8.93 Hesabat / Report 2013 60

Sektorlar üzrə təhlil Breakdown by sectors

0.02% 0.01%

13.08% 10.39% 8.72% 13.10% 15.47% 14.68%

24.72% 26.06%

40.70% 33.07%

2012 2013

2012 (AZN) 100% 2013 (AZN) 100%

Fiziki şəxslər / Individuals 66 187 33.07% 88 731 40.70% Ticarət və xidmətlər / Trade and services 52 167 26.06% 53 893 24.72% Kənd təsərrüfatı / Agriculture 29 375 14.68% 33 729 15.47% İstehsal / Production 26 218 13.10% 19 008 8.72% Tikinti / Construction 26 175 13.08% 22 654 10.39% Digər /Other 32 0.02% 15 0.01% Hesabat / Report 2013 61

Fiziki şəxslərə verilmiş kreditlər Loans to individuals

100.000 88 731

80.000 66 187

60.000

40.000

20.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Fiziki şəxslərə verilmiş kreditlər / Loans to ındıvıduals 66 187 min 88 731 min 34.06 Hesabat / Report 2013 62

Fiziki şəxslərə verilmiş kreditlərin strukturu Structure of loans to individuals

5.45% 3.51% 6.24% 6.91%

20.87% 22.63%

21.98%

27.50%

44.79% 40.12%

2012 2013

2012 (AZN) 100% 2013 (AZN) 100%

Ipoteka kreditləri / Mortgage loans 29 641 44.79% 35 597 40.12%

İstehlak kreditləri / Consumer loans 14 550 21.98% 24 407 27.50%

Avtomobil kreditləri / Car loans 13 815 20.87% 20 077 22.63%

Plastik kartlar / Plastic cards 4 573 6.91% 5 534 6.24%

Digər / Other 3 608 5.45% 3 116 3.51% Hesabat / Report 2013 63

Müştəri hesabları Customer accounts

Fəaliyyəti dövründə müştərilərinin etimadını qazanaraq həmişə onlara The volume of customer accounts at Muganbank, a bank which ən yüksək səviyyədə xidmət göstərən “Muğanbank” ASC-də müştəri has always provided high-level services to customers winning their hesablarının həcmi durmadan artmaqdadır. Belə ki, 2013-cü ildə confidence throughout the years of its activitiy, is constantly growing. bankdakı müştəri hesablarının cəmi 152 235 min manat (2012-ci ildə Customer accounts at the bank amounted to 152 235 thousand manat 127 459 min manat) olmuşdur ki, bu da ötən illə müqayisədə 24 776 min in total in 2013 (127 459 thousand manat in 2012), which means a 24 776 manat və ya 19.44% artım deməkdir. Müştəri hesablarının strukturunda thousand manat or 19.44% growth as compared with the previous year. cari və hesablaşma hesablarının həcmi ötən illə müqayisədə 9 189 min The volume of current and settlement accounts in the customer account manat və ya 27.29% artaraq 42 866 min manata (2012-ci ildə 33 677 min structure has reached 42 866 thousand manat (33 677 thousand manat manata), əmanət hesablarının həcmi ötən illə müqayisədə 15 587 min in 2012) growing by 9 189 thousand manat or 27.29% comparing to the manat və ya 16.62% artaraq 109 369 min manata (2012-ci ildə 93 782 min previous year, and the volume of deposit accounts has reached 109 369 manata) çatmışdır. thousand manat (93 782 thousand manat in 2012 ) growing by 15 587 thousand manat or 16.62% comparing to the previous year.

200.000 Artım / 2012 (AZN) 2013 (AZN) 152 235 Growth (%) 150.000 127 459 Müştəri hesabları / 127 459 min. 152 235 min. 19.44 Customer accounts 100.000

50.000

0 2012 2013 Hesabat / Report 2013 64

Müştəri hesablarının strukturu Structure of customer accounts

120 000 109 369 100 000 93 782

80 000

60 000

42 866 40 000 33 677

20 000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth ( %)

Cari və hesablaşma hesabları / Current and settlement accounts 33,677 min 42 866 min 27.29 Əmanət hesabları / Deposit accounts 93 782 min 109 369 min 16.62 Hesabat / Report 2013 65

Gəlirlər Income

Əvvəlki illərdə olduğu kimi 2013-cü ildə də “Muğanbank” ASC gəlirlərinin As in previous years, the volume of Muganbank income increased in həcmini artırmışdır. Bankın 2013- cü ildə əldə etdiyi gəlirlərin cəmi 42 948 2013, too. The total income earned by the Bank in 2013 has amounted to min manat (2012-ci ildə 39 431 min manat) təşkil etmişdir ki, bu da 2012-ci 42 948 thousand manat (39 431 thousand manat in 2012), which means illə müqayisədə 3 517 min manat və ya 8.91% artım deməkdir. Bankın a 3 517 thousand manat or 8.91% growth versus 2012. The major portion gəlirlərinin strukturunda əsas pay faiz gəlirləri hesabına formalaşır. 2013- of the Bank’s income structure is formed by interest income. Interest cü ildə faiz gəlirləri əvvəlki illə müqayisədə 13.81% və ya 3796 min manat income amounted to 31 277 thousand manat in 2013 (27 481 thousand artaraq 31 277 min manat (2012-ci ildə 27 481 min manat) təşkil etmişdir. manat in 2012) growing by 13.81% or 3796 thousand manat versus the 2013-cü ildə “Muğanbank” ASC-nin əldə etdiyi qeyri-faiz gəlirlərinin previous year. In 2013, the volume of non-interest income earned by the həcmi də xeyli artmışdır. Qeyri-faiz gəlirlərinin həcmi isə 11 671 min Bank considerably increased, too. Non-interest income amounted to 11 manat təşkil etmişdir. Qeyri-faiz gəlirlərinin tərkibində haqq və komissiya 671 thousand manat. The portion of the fee and commission income in gəlirlərinin payı 11 156 min manat, xarici valyuta ilə əməliyyatlar üzrə the non-interest income structure amounted to 11 156 thousand manat, gəlirlərin payı 461 min manat, digər gəlirlərin payı isə 54 min manat təşkil the portion of the income from foreign exchange transactions amounted etmişdir. to 461 thousand manat, and the portion of other income amounted to 54 thousand manat. Hesabat / Report 2013 66

Gəlirlərin dinamikası Dynamics of income

11 950 min 11 671 min

27 481 min 31 277 min

39 431 min 42 948 min

2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Gəlirlər / Income 39 431 min 42 948 min 8.91 Faiz gəlirləri / Interest income 27 481 min 31 277 min 13.81 Qeyri- faiz gəlirləri / Non-interest income 11 950 min 11 671 min -2.33 Hesabat / Report 2013 67

Gəyri faiz gəlirlərin strukturu Non interest income structure

11 min 54 min

11 461 min 11 156 min

478 min 461 min

2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Xarici valyuta ilə əməliyyatlar üzrə / From foreign exchange transactions 478 min 461 min -3.56 Haqq və komissiya gəlirləri / Fee and commission income 11 461 min 11 156 min -2.66 Digər gəlirlər / Other income 11 min 54 min 491.91 Hesabat / Report 2013 68

Xərclər Expenses

Hər il olduğu kimi, 2013- cü ildə də “Muğanbank” ASC öz gəlirlərinin As in every year, in 2013 as well Muganbank spent the significant böyük hissəsini bankın inkişaf strategiyasının möhkəmlənməsi, qabaqcıl part of its income for the reinforcement of its strategy, introduction bank texnologiyalarının tətbiqi, yeni bank məhsullarının yaradılması, of advanced banking technologies, development of new banking kadr potensialının gücləndirilməsi, bank şəbəkəsinin genişləndirilməsi və products, human resource capacity building, expansion of branch digər məsələlərin həlli üçün xərcləmişdir. Bütün bunların məntiqi nəticəsi network, and for solution of other issues. As a logical consequence of olaraq, bankın ümumi xərclərinin həcmi davamlı olaraq artmaqdadır. the abovementioned facts, the volume of the Bank’s general expenses 2013-cü ildə “Muğanbank” ASC-nin ümumi xərclərinin cəmi 37 572 has been continuously growing. Muganbank’s general expenses min manat (2012-ci ildə 34 455 min manat) olmuşdur ki, bu da ötən illə totaled 37 572 thousand manat in 2013 (34 455 thousand manat in müqayisədə 3 117 min manat və ya 9.05% artım deməkdir. Xərclərin 2012), which means a 3 117 thousand manat or 9.05% growth as against strukturunda əsas pay əməliyyat və faiz xərclərinin payına düşür. Belə ki, the previous year. Major portion of the expenses structure falls to the 2013-cü ildə “Muğanbank” ASC-nin əməliyyat xərclərinin cəmi share of operating and interest income. Thus in 2013, Muganbank’s 17 818 min manat (2012-ci ildə 13 233min manat), faiz xərclərinin cəmi total operating expenses amounted to 17 818 thousand manat (13 233 isə 15 272 min manat (2012-ci ildə 12 243 min manat) olmuşdur ki, bu da thousand manat in 2012) and total interest expenses amounted to 15 ötən illə müqayisədə müvafiq olaraq əməliyyat xərclərində 34.65%, faiz 272 thousand manat (12 243 thousand manat in 2012), which means a xərclərində isə 24.74% artım deməkdir. 34.65% growth in operating expenses, and a 24.74% growth in interest expenses, respectively, as compared with the previous year. Hesabat / Report 2013 69

Xərclər Expenses

40.000 35 572 34 455 35.000

30.000

25.000

20.000

15.000

10.000

50.000

0 2012 2013

2012 (AZN) 2013 (AZN) Artım / Growth (%)

Xərclər / Expenses 34 455 mln 35 572 mln 9.05 % Hesabat / Report 2013 70

Xərclərin strukturu Structure of expenses

3 451 8 243

17 818 13 233

1 031 736

12 243 15 272

2012 2013

2012 (AZN) 2013 (AZN) Artım %-lə / Growth by %

Faiz xərcləri / Interest expenses 12 243 15 272 24.74 Haqq və komissiya xərcləri, o cümlədən xarici valyuta üzrə 736 1 031 40.08 Fee and commission expenses, including FX expenses Əməliyyat xərcləri / Operating expenses 13 233 17 818 34.65 Ehtiyatlar / Provisions 8 243 3 451 -58.13 Hesabat / Report 2013 71

Ətraf mühitə sevgini uşaqlara ötürək! Let’s inspire children with love for the environment!

Uşaqlarımızın sağlam olması üçün onlara sağlam ətraf mühit verməklə yanaşı, bu For the good health of our children, along with ensuring a healthy environment mühiti qorumağı da öyrətməliyik. Böyüyən nəsilə təbiəti qorumağın vacibliyini for them, we should also foster their environmental consciousness. Conveying çatdırmaq, onları ekoloji cəhətdən daha məsuliyyətli böyütmək biz valideynlərin the importance of protecting the nature to the growing generation and bringing üzərinə düşən əsas vəzifələrdən biridir. them up with environmental responsibility is one of the main duties of parents.

Bunun üçün uşaqları sadəcə məlumatlandırmaqla kifayətlənməməli, onlara To this effect, besides raising environmental awareness in children, we should ətraf mühitə qayğıkeş yanaşmanı öz davranışlarımızla gündəlik həyatda belə also demonstrate the careful attitude towards the environment to them even in nümayiş etdirməliyik – Planetimizi xilas edəcək qəhrəmanlar yetişdirdiyimizi ordinary life through our proper behaviors and remember that we are raising a unutmamalıyıq. hero who will save the Earth. Hesabat / Report 2013 72

İstər meşədə, istərsə də şəhərdə zibili yerə atmağın ətraf mühitə verəcəyi 2 ziyanları izah edək. Uşaqlarla gəzməyə çıxarkən suallarını İldə ən azı bir dəfə uşaqlarımızla həvəslə cavablandıraq, onları ətraf Let’s explain the harms that birlikdə ağac və ya gül əkək, ağaclara 1 mühitlə tanış edək. dropping litter either in a wood or 3 qulluq edək. Bu, unudulmaz xoş city may cause to the environment. xatirə olmaqla yanaşı, həm də onlara When going out for a walk with təbiəti sevməyi də öyrədəcək. children, let’s answer their questions willingly and make them aware of At least once a year let’s plant a tree the environment. or flower, or look after the trees together with our children. This will not only stick as happy moments in their memories, but also will encourage them to love the nature.

Uşaqlara enerjidən, sudan qənaətlə Kitabla səliqəli, dəftərlə isə qənaətcil istifadə etməyi öyrədək. Onların davranmağı izah edək. Bir vərəqin 4 evə necə gəlib çıxdığını və qənaət 6 hazırlanması üçün nə qədər ağacın, etməsək bir gün bitə biləcəyini izah suyun sərf olunduğu barədə onlara edək. məlumatlar verək.

Let’s teach them how to save energy Let’s explain that they should treat and water. Let’s explain how energy books with due care and should use Onlara ağacların insanlar üçün nə and water get to houses and that copy-books frugally. Let’s explain qədər önəmli olduğunu sadə sözlər they may come to an end some day how many trees and how much 5 və şəkillərlə izah edək. unless they are thriftily used. water is utilized for making a sheet of paper. Let’s explain through simple words and using pictures how important are trees for people. Məhsul və xidmətlər Products and services

2013-cü ildə “Muğanbank” ASC-nin kredit portfeli 2012-ci illə müqayisədə Muganbank’s loan portfolio amounted to 218 030 thousand manat in 8.9 % artaraq 218 030 min manat təşkil edib. Daha öncəki illərdə 2013 growing by 8.9 % versus 2012. As in previous years, Muganbank olduğu kimi 2013- cü ildə də Muğanbank həm əhali tərəfindən, həm də continued offering advanced lending products demanded by both iqtisadiyyatın müxtəlif sahələrinə məxsus müəssisələr tərəfindən tələb the population and companies of various economic sectors in 2013 as olunan yüksək keyfiyyətli kredit məhsullarının təklifini davam etdirdi. well. As is known, improvement of quality and service speed-up are Məlum olduğu kimi, keyfiyyətin mükəmməlləşdirilməsi və xidmətin Muganbank’s permanent priorities. sürətləndirilməsi Muğanbankın dəyişilməz prioritetidir. Muganbank’s lending activity in 2013 should be analyzed in two Muğanbankın 2013-cü ildəki kreditvermə fəaliyyəti iki istiqamətdə təhlil directions: olunmalıdır: Hesabat / Report 2013 74

Biznes kreditləri Business loans

Məlumdur ki, qeyri-neft sektorunun inkişafı Azərbaycan dövlətinin Growth of non-oil sector is obviously a core component of the economic iqtisadi siyasətinin özəyini təşkil edir. Kiçik və orta biznesi policy of Azerbaijan. Through lending to small and medium-sized kreditləşdirməklə “Muğanbank” ASC 2013-cü ildə də bu siyasətə öz businesses Muganbank made its contribution to this policy in 2013 as töhfəsini verib. Belə ki, 2013-cü ildə Bank real iqtisadi artımı təmin edən well. Thus, Muganbank provided small and medium-sized businesses kənd təsərrüfatı, ticarət və istehsal sahələrində çalışan kiçik və orta biznes operating in agricultural, trade and production sectors which ensure a təmsilçilərinə müxtəlif həcmdə kreditlər verib. real economic growth with loans in different amounts in 2013.

“Muğanbank” ASC orta, kiçik müəssisələrə və fərdi sahibkarlara Muganbank offers small and medium-sized enterprises and private uyğunlaşdırılmış kreditləşmə proqramı təklif edir. Bu proqramın owners a tailored lending program. For standardized products of this standartlaşdırılmış məhsulları hər bir növ biznesin maliyyə imkanlarını program financial capacity and specification of each business type are və spesifikasını nəzərə alır. Kiçik və orta biznes nümayəndələri üçün yeni taken into account. For small and medium-sized businesses new lending kreditləşmə texnologiyaları tətbiq olunur. Bankda təklif olunan maliyyə technologies are applied. Financial terms and conditions offered by the şərtləri müştərilərə bizneslərinin böyüməsinə heç bir xələl gəlmədən Bank allow customers to protect their solvency, paying principal amount maliyyələşmə məbləğini və faizini ödəyərək, rentabelliyi qorumağa and interests without any damage to their business growth. imkan yaradır. Generally, the Bank has been guided by acceptable conservative Ümumiyyətlə, korporativ müştərilərin kreditləşməsi zamanı Bank principles in crediting corporate clients. The loans were issued mostly məqbul mühafizəkarlıq prinsiplərini əsas tutub. Kreditlər əsasən to real economic sector enterprises with reliable reputation, good credit etibarlı reputasiyaya, müsbət kredit tarixçəsinə və sabit maliyyə history and stable financial position. At the same time, positive changes vəziyyətinə malik olan iqtisadiyyatın real sektorunun təşkilat və were implemented at Muganbank in 2013 aimed at optimization of SME müəssisələrinə verilirdi. Eyni zamanda, 2013-cü ildə Muğanbankda lending procedures. So, more loyal attitude towards collateral structure kiçik və orta sahibkarlıq subyektlərinin kreditləşməsi prosedurlarının of loans was approved and independent lending authorities of the optimallaşdırılması üçün müsbət dəyişikliklər edilmişdir. Belə ki, kreditin branches were expanded. təminat strukturuna daha loyal yanaşma təsdiq olunmuşdur və filialların müstəqil kreditləşdirmə səlahiyyətləri genişləndirilmişdir. Hesabat / Report 2013 75

Fiziki şəxslərin kreditləşməsi Loans to individuals

2013-cü ildə Muğanbank pərakəndə biznes əməliyyatlarının prioritet In 2013, Muganbank actively continued its retail lending activities which sahələrindən biri olan fiziki şəxslərin kreditləşməsini fəal şəkildə davam are one of the priority areas of its retail business operations. Due to this etdirmişdir. Belə fəallıq bu seqmentdə olan kredit portfelini 2012-ci ilə active performance, the retail loan portfolio grew by 34.06% versus 2012 nisbətən 34.06% artıraraq, 88,731 min manata çatdırılmasında öz əksini and reached 88 731 thousand manat. tapmışdır. According to the results of 2013, the retail loan portfolio has the 2013-cü ilin yekunlarına görə, pərakəndə müştərilərin kredit portfelinin following composition: consumer loans (in total 27.51%), car loans tərkib hissəsi əsasən aşağıdakı kredit növlərindən ibarətdir: istehlak (22.63%), credit cards (6.24%) and mortgage loans (40.12%). kreditləri (ümumi həcmdə 27.51%), avtomobil alınması üçün kreditlər (22.63%), kredit kartları (6.24%) və ipoteka (40.12%). Undoubtedly, the performance results of 2013 showcase customers trust in Muganbank on one side, and the high-quality provision of customer Şübhəsiz ki, 2013-cü ilin bu göstəriciləri bir tərəfdən müştərilərin services on the other side. Muğanbanka olan inamından, digər tərəfdən isə onlara yüksək xidmətin göstərilməsindən xəbər verir. Along with credit services, Muganbank supports its private customers also in financial planning. Demonstrating high-quality services, the Bank Muğanbank özəl müştərilərinə yalnız kredit vermək ilə offers full range of contract follow-up / post contract servicing, since kifayətlənməyərək, onlara maliyyə planlaşdırmasında da yardım göstərir. Muganbank’s aim is to be a partner and financial adviser to its customers. Xidmətinin yüksək səviyyəsini nümayiş etdirərək, Bank müştərilərə sazişlərin müşayiəti üzrə xidmətlərin tam spektrini təqdim edir. Çünki, Muğanbankın məqsədi müştərilər üçün partnyor və maliyyə məsləhətçisi olmaqdır. Hesabat / Report 2013 76

Yüksək xidmət, çevik faiz siyasəti və müştərilər arasında olan nüfuzu Advanced service, flexible interest policy and good reputation among “Muğanbank” ASC-ni bəzi kredit növləri üzrə bazarda fərqləndirib. customers have distinguished Muganbank in the market for some types Belə ki, 2013- cü ildə bank bazara yeni istehlak kreditləri təqdim of loans. Thus, Muganbank through introduction of new consumer loans edərək bu sahədə kredit portfelinin həcmini 2012-ci illə müqayisədə to the market considerably increased its respective portflolio in 2013 nəzərəçarpacaq dərəcədə artırıb. comparing to 2012.

Hesabat ilində Muğanbankın kredit siyasətinin nəticələrinin təhlilini Finalizing the analysis of the performance results of Muganbank’s tamamlayaraq, qeyd etmək vacibdir ki, əldə edilən uğurlar Bankın lending policy in the reporting period, it is worth noting that the istənilən xidmətlər kompleksinin postulatlarının — keyfiyyət, sürət və attained successes are the logical consequence of implementing the müştərilərin rahatlığı — yerinə yetirilməsinin məntiqi yekunudur. following postulates on any service rendered by the Bank: quality, speed and customers’ comfort. Hesabat / Report 2013 77

Vəsaitlərin cəlb olunması Raising funds

Muğanbankın inkişafının əsas istiqamətlərindən biri pərakəndə biznesdir. One of the mainstreams of Muganbank’s growth is retail business. Bu seqmentdə depozit əməliyyatlarına xüsusi önəm verilir. Special emphasis is placed on deposits to this effect.

Təbiidir ki, 2013-cü ildə əhalinin depozitlərinin həcminin əhəmiyyətli No doubt that figures reported on the considerable growth in deposits dərəcədə artması haqqında qeyd edilən rəqəmlər pərakəndə bank from the population in 2013 evidence Muganbank’s successful biznesi əməliyyatarı sahəsində Muğanbankın uğurlu fəaliyyətini performance in the sphere of retail banking. This fact is also a striking sübut edir. Eyni zamanda, bu fakt ölkə əhalisinin Muğanbanka yüksək proof of people’s trust in Muganbank. səviyyədə olan etibarının parlaq göstəricisidir. Muganbank was offering diversified deposit services in 2013 as well: prize 2013-cü ildə də Muğanbank çoxşaxəli əmanət xidmətlərini təklif edib: bonds, current accounts, term deposits, special deposits, etc. Growth in uduşlu istiqrazlar, cari hesablar, müddətli əmanətlər, xüsusi depozitlər the number of the clients trusting their deposits to Muganbank in 2013 və s. Keçən il vəsaitlərini Muğanbanka etibar edən müştərilərin sayının is due to the following reasons as usual: good profitability, wide branch artmasının səbəbləri, həmişə olduğu kimi, aşağıdakılardan ibarətdir: network and permanent high-level service. sərfəli gəlirlilik, geniş filial şəbəkəsi və daim yüksək səviyyəli xidmət. Muganbank bearer bonds have formed a glorious history in a period of Muğanbankın adsız istiqrazları maliyyə aləti üçün kifayət qədər qısa time short enough for a financial instrument. müddətdə şanlı tarixini formalaşdırmışdır. The draw process can be watched online via the Bank’s website: www. Tiraj bankın www.muganbank.az saytından canlı yayımlanır. Tirajın muganbank.az. Results of the draw are published on the Bank’s website nəticələri ilə bağlı məlumatla bankın saytından və “Xalq” qəzetinin and “Xalq qəzeti” newspaper. nömrələrindən tanış olmaq olar. Hesabat / Report 2013 78

2011-ci ildən Muğanbankın istiqrazları ilə əməliyyatlar (alış, nağd From 2011, the bearer bond transactions (purchase, conversion into pula konvertasiya, uduş məbləğlərinin alınması) təkcə Bankın geniş cash, collection of prize amounts) can be performed not only through filial şəbəkəsində deyil, həm də Zaminbank, Atrabank və Parabankın the Bank’s wide branch network, but also at retail outlets of Zaminbank, pərakəndə nöqtələrində də həyata keçirilə bilər. Atrabank and Parabank.

Müştərilərin istəklərinə hər zaman həssas olan Muğanbank, depozit Muganbank which always sensitively takes care of customer demands çeşidini əhalinin geniş təbəqələrinə yönəldib. Manat və aparıcı xarici has focused its deposit products on broad masses of population. valyutalardan ibarət Bankın depozit sisteminə cari hesablar, tələbli The Bank’s spectrum of deposits in both manat and leading foreign əmanətlər, müxtəlif müddətli depozitlər, xüsusi depozitlər daxildir. currencies includes current accounts, demand deposits, term deposits, special deposits. Həm cari, həm də potensial müştərilərin gözündə həmişə etibarlılıq və sabitlik ilə seçilən Muğanbank yeni kəmiyyət və keyfiyyət uğurlarına (o Muganbank always having a good image distinguished by reliability and cümlədən, depozitlər sahəsində) imza atmağı planlaşdırır. Yeni uğurlar stability for its both current and potential customers is planning to make isə, öz növbəsində, yeni müştərilər, nüfuz və bank sektorunda işləmək new achievements from both quantity and quality perspectives (as well üçün əsas hesab edilən inamın artırılması deməkdir. as in deposit operations). And, new achievements mean new customers, reputation, also increased reliability which is considered a basis for a banking business. Hesabat / Report 2013 79

Plastik kartlar və pul köçürmə sistemləri Plastic cards and money transfer systems

İstənilən bankda xidmət alan müştərilər tərəfindən ən çox tələb olunan Plastic cards are one of the most demanded products by customers at əmtəələrdən biri plastik kartlardır. Muğanbank müştərilərin maliyyə any bank. Muganbank as a bank meeting all demands of customers for xidmətlərində bütün təlabatlarını ödəyən bir bank olaraq, uzun illərdir ki, financial services has shown high-performance activity in this segment bu seqmentdə yüksək fəallıq göstərir. for years.

Bank VISA International və MasterCard Worldwide beynəlxalq ödəniş The Bank is a member of international payment systems VISA sistemlərinin üzvüdür. Bu sistemlər çərçivəsində Muğanbank Maestro, International and MasterCard Worldwide. Within these systems Standard, Gold, Infinity kateqoriyalı kartları emissiya edir. İstifadə Muganbank issues plastic cards of Maestro, Standard, Gold and Infinity parametrlərinə görə debet, overdraft, əmək haqqı, kredit və güzəştli categories. Divided by usage parameters into debit, overdraft, salary, ödəmə müddətli olan bu kartlar həm fiziki şəxslər, həm də şirkətlər credit and deferred payment card types, these cards are widely used by arasında yüksək istehlak təlabatına malikdirlər. individuals and companies.

Bu təlabatın nəticəsi olaraq, Muğanbankda 2013-cü ildə aktiv plastik As a result, the number of active plastic cards at Muganbank became 11 kartların sayı 1 731 ədəd artaraq (2012-ci ildə 9 612 ), 11 343 ədəd təşkil 343 in 2013 (it was 9 612 in 2012) increasing by 1 731. etdi. In line with the growth of cards the Bank is also expanding their service Bank kartlarının artımı müvafiq olaraq, bu xidmətin infrastrukturunu infrastructure. In 2013, the number of Muganbank ATMs in the Republic da genişləndirir. Belə ki, 2013-cü ildə bankın Respublika üzrə was brought up to 55, and the number of its POS-terminals up to 659. So, bankomatlarının sayı 55-ə, POS-terminalların sayı isə 659-a çatdırıldı. Muganbank customers got broader options to collect cash conveniently Muğanbankın müştərilərinin nağd pulları rahat və maneəsiz əldə etmək and easily. üçün imkanları daha da genişləndi. Hesabat / Report 2013 80

2013-cü ildə Muğanbank müştərilərinə yeni “VISA Gift” hədiyyə kartı In 2013, Muganbank introduced a new product called “VISA Gift” card adlı məhsulunu təqdim etdi. Hədiyyə kartının nominal məbləği 50, 100 to its customers. The nominal amounts of the gift cards are 50, 100 and və 150 AZN təşkil edir və kartı alan zaman ödənilir. Heç bir sənəd tələb 150 AZN which are paid when buying the cards. These gift cards which olunmadan, Muğanbankın istənilən filialında və iri supermarketlərdə are sold at any Muganbank branch, also in supermarkets and without satılan bu kartlar əlamətdar günlərdə əzizlərə bağışlamaq üçün dəyərli requiring submission of any document, were introduced as valuable gift hədiyyə kimi təqdim olundu. to present to dear ones in important days.

Bu hədiyyə kartı həm ölkə daxilində, həm də ölkədən kənarda mal və These gift cards are designed to pay for goods and services in non-cash xidmətlərin haqqının nağdsız ödənilməsi üçün nəzərdə tutulmuşdur. form both within the country and abroad.

Muğanbankın hədiyyə kartları ilə VISA kartlarının qəbul olunduğu These gift cards of Muganbank can be used to pay bills anywhere where istənilən yerdə hesabları ödəmək mümkündür: VISA cards are acceptable:

• Mağazalarda alış-veriş etmək, • Doing shopping; • Gözəllik salonlarının və fitnes mərkəzlərinin xidmətlərindən istifadə • Using the services of beauty salons and fitness centers; etmək, • Travelling; • Səyahət etmək, • Buying air & train tickets; • Təyyarə və qatar biletləri almaq, • Paying for services at cafés & restaurants; • Kafe və restoranlarda xidmətlərin haqqını ödəmək, • Doing online shopping; • İnternet şəbəkəsində internet-mağazalarda mal almaq, • Paying subscription fees for online games; • Onlayn oyunların abunə haqqını ödəmək, • Participating at online auctions; • Beynəlxalq internet-hərraclarda iştirak etmək, • Paying for music, games and programs; • Musiqi, oyun və proqramların haqqını ödəmək, • Paying for mobile phone services, cabel-TV services, etc. • Mobil rabitə, TV və s. üçün ödəmələri həyata keçirmək. Relying on state-of-the-art banking technologies and gained experience, Müasir bank texnologiyalarına və toplanılmış təcrübəyə əsaslanaraq, Muganbank will continue offering high-quality services in plastic card Muğanbank gələcək illərdə də plastik kartlar seqmentində yüksək segment as well as in the next years. keyfiyyətli xidmətlərin təklifini davam etdirəcək. Hesabat / Report 2013 81

Müştərilərin maliyyə alətlərinə olan bütün təlabatlarını ödəmək In order to meet all demands of customers for financial instruments, the məqsədilə, Bank fiziki şəxslər tərəfindən ən çox tələb olunan Bank is demonstrating high-performance activity also in express money xidmətlərdən biri olan təcili pul köçürmələrində də xüsusi fəallıq nümayiş transfers which are one of the most demanded services by individuals. etdirir. Bu seqmentdə Muğanbank Azərbaycanda liderlərdən biridir. Muganbank is one of the leaders in Azerbaijan in this segment.

Hesabat ilində Bank özünün “Monex” təcili pul köçürmələri sistemini Muganbank improved its own express money transfer system “Monex” inkişaf etdirdi. Məlum olduğu kimi, 2011-ci ildən təqdim olunan bu during the reporting period. As you know, this service which has being xidmət, Azərbaycanın bir çox şəhərləri arasında və eyni zamanda bir offered since 2011 enables express money transfers among a number sıra ölkələrə təcili pul köçürməsinə imkan yaradır. “Monex” sistemi of cities of Azerbaijan as well as to several countries. “Monex” enables Azərbaycanı və dünyanın bir sıra ölkələrini əhatə edən 2500-dən remitting funds to more than 2500 points of service which cover çox məntəqəyə pul köçürməsini həyata keçirməyə imkan yaradır. Bu Azerbaijan and many other countries. This network includes both şəbəkəyə həm Muğanbankın öz filial və şöbələri, həm də partnyor Muganbank branches and sub-branches, and the branches and offices of bankların və sistemlərin filial və bölmələri daxildir. Ölkədaxili partner banks and systems. Minimum service charge is 2 AZN/USD/EUR köçürmələrdə minimum xidmət haqqı 2 AZN/USD/EUR və 60 RUB, xarici and 60 RUB for domestic transfers, and 1,5 % for international transfers. köçürmələrdə isə 1,5 % təşkil edir. Along with arranging for promotion of its product, Muganbank was Öz məhsulunun irəliləməsinin təşkili ilə yanaşı, 2013-cü ildə Muğanbank taking an active part also in different international express money müxtəlif beynəlxalq təcili pul köçürmələri sistemlərində də fəal iştirakını transfer systems in 2013. Through a number of partners Muganbank davam etdirdi. Bank öz müştərilərinə xaricə pul köçürmə məsələlərində creates favorable conditions for its customers in transfers abroad. bir sıra tərəfdaşları vasitəsi ilə münbit şərait yaradır. Hesabat / Report 2013 82

Forex Forex

2013-cü ildə Muğanbank tərəfindən təklif olunan FOREX xidmətinin In 2013, Muganbank further improved and developed the offering of səviyyəsi daha da təkmilləşdirilmiş və inkişaf etdirilmişdir. FOREX service.

FOREX xidmətini Muğanbank ilk dəfə 2010-cu ildə təqdim etmişdir. Bu FOREX was introduced by Muganbank for the first time in 2010. Over illər ərzində FOREX-də ticarət əməliyyatları həyata keçirmək üçün Bank these years the Bank has continuously offered advantageous and flexible tərəfindən hər zaman sərfəli və çevik şərtlər təklif edilmişdir. terms and conditions for trading transactions at FOREX.

Müştərilər artıq əmindirlər ki, bu bank vasitəsilə FOREX əməliyyatları Now customers are sure that by performing FOREX transactions through apararaq: this Bank:

• İlk növbədə yüksək etibarlılıq əldə edirlər. Bunu Muğanbankın öz • Above all they get high reliability which is ensured by Muganbank’s işgüzar nüfuzuna olan daimi qayğısı təmin edir; permanent care about its business reputation; • Bank çərçivəsində aparılan ticarətin həcmi və yeni məhsullara • Great volumes of trading transactions performed within a bank inteqrasiya səmərəli əməkdaşlığa zəmanət verir; framework and integration to new products guarantee an efficient cooperation; • Onlayn ticarət yüksək texnoloji məhsul ilə təmin olunur. Yəni “Muganbank Trading Station” ticarət platforması bütün lazım olan • Online trading is ensured by high-technology product. This məlumatları həm kompüter ekranında, həm də mobil telefon və ya means that “Muganbank Trading Station” will display all required planşetdə əks etdirir. Müştəri istənilən yerdə onlayn rejimdə işləyə information both on computer screen and mobile phones or pads. bilir və heç vaxt bazarda baş verən əsas hadisələri qaçırmır. A customer will be able to work online at any place, without missing any important market event. Hesabat / Report 2013 83

“Muganbank Trading Station” ticarət platformasında təklif olunan The variation of the FOREX Service offered in “Muganbank Trading FOREX xidmətinin variasiyasının bir çox üstün cəhətləri var: valyutaların Station” has the following advantages: a maximal wide range of maksimal geniş çeşidi; ən dar spred; müştərilər üçün hesablardan currencies; narrowest spread; no restrictions to customers’ withdrawl istənilən vəsaiti çıxarmaq məhdudiyyətinin olmaması; valyuta bazarının of any funds from theirs accounts, full technical and methodological tendensiyalarını real vaxt şəraitində izləmək və təhlil etmək üçün support to follow up and analyze FX market trends in a real time mode, tam texniki və metodoloji dəstək və s. Bu üstünlüklər, demək olar ki, etc. These advantages enable almost all customer segments (long-term potensial müştərilərin bütün seqmentlərinə (uzunmüddətli investorlara, imvestors, short-term speculators, etc.) to find their place in FOREX qısamüddətli möhtəkirlərə və s.) FOREX bazarında realizə olunmağa market. imkan yaradır. Muganbank, remaining loyal to the tradition of offering its intellectual Muğanbank özünün intellektual tutumlu məhsullarını təklif etmə products, has established the marginal trading system in conformity ənənəsinə sadiq qalaraq, valyuta ilə marjinal alış-veriş sistemini dünya with world standards. The highest requirements set on the information standartlarına uyğun qurub. Xidmətin infrastrukturuna daxil olan technologies and the respective equipment included by the informasiya texnologiyalarının və müvafiq avadanlıqların səviyyəsinə infrastructure of this service have been definitely met by the Bank. qoyulan ən yüksək tələblərə Bank tərəfindən şəksiz riayət olunub. Belə Thus, the Bank regularly updates the new FOREX market research ki, Bank FOREX bazarının tədqiq etmə və məlumat axtarma üzrə yeni and information retrieval instruments. Customer will always have the alətlərini daim aktual saxlayır. Müştəri hər zaman qrafikləri, cədvəlləri, opportunity to follow up on the diagrams, charts, ratings, news and reytinqləri, xəbərləri və digər məlumatları real zaman rejimində izləmək other information in a real-time mode, and due to this make decisions imkanına malik olur və bunun vasitəsilə o, FOREX bazarındakı vəziyyətin basing on the precise prognosis of FOREX market. dəqiq proqnozuna əsaslanaraq qərarlar qəbul edə bilir. Muganbank offers a wide range of options on FOREX accounts in terms Muğanbank FOREX hesablarının funksiyalar və variantlar üzrə geniş of functions and variants. Besides, it offers small and standard accounts seçimini təklif edir. O cümlədən, minimal depozitlərlə kiçik və standart against minimal deposits. By offering FOREX service the Bank has hesablar təqdim edir. Bununla da Bank FOREX xidmətini təklif etməklə, determined a number of target groups among potential customers. For potensial müştərilər arasında bir neçə məqsədli qrup nəzərdə tutub. instance, a consumer of this service may be an investor wishing to create Məsələn, xidmətin istehlakçısı kapitalını qorumaq məqsədi ilə bir neçə several FX reserves and promptly react at the changing conditons in the valyuta ehtiyatları yaratmaq və maliyyə bazarlarında dəyişən şəraitə financial markets with the aim to protect capitals, or a speculator who operativ reaksiya vermək istəyən investor və ya sırf qısamüddətli mənfəət performs exchange transactions with the aim to get short-term profit. əldə etmək məqsədi ilə mübadilə əməliyyatları aparan möhtəkir ola bilər. Thus, any person interested in FOREX get an opportunity of trading at Beləliklə, FOREX ilə maraqlanan hər bir kəs Muğanbank vasitəsilə istədiyi any level through Muganbank. səviyyədə ticarət etmək imkanı əldə edir. Hesabat / Report 2013 84

Görülən işlərin nəticəsində 2013-cü ildə Muğanbankın FOREX üzrə As a result, Muganbank’s FOREX customer base and accordingly its müştəri bazası və müvafiq olaraq bu seqmentdə əldə etdiyi gəlirlər proceeds from this segment considerably increased in 2013. əhəmiyyətli dərəcədə artdı. Thus, Muganbank has developed an instrument which offers best prices Beləliklə, Muğanbank müştərilərə FOREX bazarında ən yaxşı qiymət və and trading conditions to customers in FOREX market. Both the Bank’s ticarət şərtləri təklif edən alət yaradıb. Bankın həm ümumi, həm də bu general growth and its dynamic growth in this segment, as well as its sahədə olan dinamik inkişafı və nəticəyə maksimal səmtlənmə ümid maximal outcome orientation make us hope that the Bank will maintain verir ki, o, 2014-cü ildə də pərakəndə FOREX xidmətləri sahəsində lider its leading positions in retail FOREX services segment in 2014, too. mövqelərini qoruyub saxlayacaq. Hesabat / Report 2013 85

Planetimizi xilas etməliyik! We must save the Earth!

Ətraf mühit bütün planetimizdə təhlükələrlə üz-üzə qalıb. Qlobal istiləşmə, The environment is confronting dangers in the whole planet. Global warming, iqlim dəyişikliyi, təbiətdə heyvanların və bitkilərin nəslinin kəsilməsi, günbəgün climate change, endangered flora and fauna, growing air pollution – these are artan hava çirklənməsi – bunlar dövrün problemlərinin sadəcə bir hissəsidir. only a part of the problems of this epoch. According to research, over the last 20 Araşdırmalara görə, son 20 ildə 400 il ərzində qeydə alınan ən isti temperatur years, the warmest temperature ever recorded in 400 years has been observed müşahidə olunub və bu artan templə davam edir. and is continuing at a growing rate.

Əgər insanlar təbiətdən düzgün istifadə etməsələr, daha ciddi təhlükələr ortaya More serious dangers may emerge unless people use the nature in a proper way. çıxa bilər. Bəşəriyyət sağlam təbiət olmadan mövcud ola bilməz. Mankind can not exist without a healthy environment. Hesabat / Report 2013 86

Dünyadakı meşələrin təxminən 80%-i Proqnozlara görə, 2025-ci ildə dünya insanın fəaliyyəti nəticəsində qırılıb. əhalisinin təxminən 74%-nin yaşadığı 1 2 ərazilərdə içməli su problemi olacaq. About 80% of the woods worldwide has been cut as a result of human According to the forecasts, in activities. 2025. There will be drinking water problems in the areas where about 74% of the world population resides.

İnsanların fəaliyyəti nəticəsində İnsan fəaliyyəti hazırkı templə atmosferə atılan karbon-dioksidin gedərsə, 2040-cı ildə Arktikanın 3 miqdarı bitki, eləcə də okeanların 4 tamamilə buzsuz sahə olacağı onu udma və ləğv etmə miqdarından proqnozlaşdırlır. daha çoxdur. It is projected that should human The amount of carbon dioxide activities go on at this rate, the Artic released into the atmosphere as a Region could become completely result of human activities is more ice-free in 2040. than the plants and oceans can absorb and eliminate it.

Ötən 50 il ərzində insanlar Təkcə dəniz və okeanların çirklənməsi bəşəriyyətin mövcud olduğu bütün nəticəsində hər il 1 milyondan artıq 5 dövrlərdə istifadə olunandan daha 6 dəniz quşları və 100 mindən artıq çox resurs istehlak ediblər. dəniz məməliləri məhv olur.

Over the past 50 years, people have As a result of pollution of the seas and used more resources than they have oceans only, more than 1 million sea used through the whole period of birds and more than 100 thousand human existence. marine mammals perish each year. Filiallar Branches Hesabat / Report 2013 88

Fəaliyyət şəbəkəsi Coverage

Muğanbank filiallarının sayına görə daim Azərbaycanın aparıcı kredit Muganbank keeps on being among the leading credit organizations of təşkilatları sırasındadır. Azərbaycanın əksər bölgələrində təmsil olunması Azerbaijan for the number of its branches. Through being represented ilə Muğanbank öz müştərilərinin regionlarda aparılan əməliyyatlar üçün in most part of the regions of Azerbaijan, the Bank meets the demands bank xidmətlərinə olan təlabatlarını ödəyir. Belə ki, Bankın istənilən of its customers for banking services in operations in regions. Thus, all filialında bütün növ əməliyyatlar (əmanətlərin qəbulu, kreditlərin types of transactions (receipt of deposits, granting of credits, realization verilməsi, plastik kartların realizə olunması, digər ölkələrə pulların of plastic cards, money transfers, different kinds of payments, cash and köçürülməsi, müxtəlif ödənişlərin həyata keçirilməsi, kassa-hesablaşma settlement, currency exhange) are carried out at any branch of the Bank. və valyuta mübadiləsi) həyata keçirilir. In 2013, Muganbank continued the offering of high-quality services Beləliklə, 2013-cü ildə regional şəbəkənin hər bir tərkib hissəsində - 31 based on standardization principles in every part of its regional network filialda və 6 şöbədə - Bank yüksək səviyyəli xidmətlərin standartlaşdırma which included 31 branches and 6 sub-branches. Muganbank’s up-to- prinsipləri əsasında təklifini davam etdirmişdir. Muğanbankın aktual date and in-demand services were rendered to grass-roots throughout və bazarda tələb olunan xidmətləri bütün Azərbaycan miqyasında və Azerbaijan. In the cities where the bank is represented, its activity kütləvi şəkildə təqdim olunmuşdur. Bank mövcud olduğu şəhərlərdə öz became more dynamic and the quality of the services offered in a single fəaliyyətini aktivləşdirmiş, vahid paketdə təklif etdiyi bank məhsullarının package was improved. Respectively, relations with customers became keyfiyyətini artırmışdır. Bu isə müştərilər ilə əlaqələri daha da closer. sıxlaşdırmışdır. Wide branch network is one of the Bank’s main growth engines and Filial şəbəkəsinin genişliyi Muğanbankın inkişafının əsas hərəkətverici consequently a factor of key competitive advantage. Muganbank is qüvvələrindən biridir və nəticə etibarilə aparıcı rəqabət üstünlüyü successful in the retail services market and expands its branch network in amilidir. Muğanbank daim pərakəndə xidmətləri bazarına nüfuz edir və regions with high business potential. bank biznes üçün yüksək potensiala malik olan regionlarda öz filiallar şəbəkəsini genişləndirir. Hesabat / Report 2013 89

2014-cü ildə də filial şəbəkəsinin səmərəliliyinin artırılması siyasəti The policy of enhancing the efficiency of branches performance as well ölkənin regionlarında Muğanbankın dinamik inkişaf strategiyasının əsas as in 2014 is a key part of Muganbank’s regional dynamic development hissəsidir. Bu inkişaf həm kəmiyyət, həm də keyfiyyət göstəricilərinin strategy. And, this development will be ensured by improvement of both yaxşılaşdırılması ilə təmin olunacaq. quantity and quality indicators. Hesabat / Report 2013 90

Filialların və şöbələrin siyahısı List of branches and sub-branches

Filiallar Branches

Filialın adı Ünvan Əlaqə nömrələri Elektron ünvan Branch name Address Contact numbers E-mail Bakı ş., Ə.Rəcəbli küç. 21 B T: (+99412) 933 Baş ofis [email protected] 21B, A.Rajabli str., Baku F: (+99412) 564 2135 Bakı ş., Koroğlu Rəhimov küç. 4, m.20 T: (+99412) 564 8020 "Səbayıl" [email protected] Apt.30, 4, K. Rahimov str., Baku F: (+99412) 564 4361 Bakı ş., Ağa Nemətulla küç. 31 T: (+99412) 514 2661/71 "Nərimanov" [email protected] 31, A. Nematulla str., Baku F: (+99412) 566 9813 Bakı ş., Cavadxan küç. 11 T/F: (+99412) 430 9676; "Mərkəz" [email protected] 11, Javadkhan str., Baku (+99412) 430 9414 Bakı ş., Azadlıq pr. 95 Т/F: (+99412) 440 6479; "Bakı" [email protected] 95, Azadlig ave., Baku (+99412) 440 9221 Bakı ş., Bül-bül pr. 53, m.4,9 T: (+99412) 596 3642 "Nəsimi" [email protected] 53, Bul-bul ave., Baku F: (+99412) 597 4591 Bakı ş., Nizami küç.96 T: (+99412) 497 4845 “Qərb” [email protected] 96, Nizami str., Baku F: (+99412) 497 0985 Bakı ş., H.Cavid pr.13/46A T: (+99412) 510 3481 “Şərq” [email protected] 13/46A, H.Javid ave., Baku F: (+99412) 510 3480 Bakı ş., 8-ci mikr., S.S.Axundov küç.,2-4 T: (+99412) 563 5647/48 "Binəqədi" [email protected] 2-4, S.S.Akhundov str., 8th m-district, Baku F: (+99412) 440 2484 Bakı ş., Ağa Nemətulla küç. 51 T: (+99412) 465 4259 "Dostluq" [email protected] 51, Agha Nematulla str., Baku F: (+99412) 465 4223 Hesabat / Report 2013 91

Filialın adı Ünvan Əlaqə nömrələri Elektron ünvan Branch name Address Contact numbers E-mail Bakı ş., Azadlıq pr. 132, m.3 T: (+99412) 440 0401 "Azadlıq" [email protected] Apt.3, 132, Azadlig ave., Baku F: (+99412) 440 1020 Bakı ş., N.İsmayılov pr. 5 T: (+99412) 425 6204 "Bakıxanov" [email protected] 5, N.Ismayilov ave., Baku F: (+99412) 425 6203 Bakı ş., M.Seyidov küç. 35 T: (+99412) 433 0011 "Yasamal" [email protected] 35, M. Seyidov str., Baku F: (+99412) 433 0010 Bakı ş., Murtuza Muxtarov küç., ev 190 T: (+99412) 495 1095 "Paytaxt" [email protected] Apt.190, Murtuza Mukhtarov str., Baku F: (+99412) 596 2797 Bakı ş., M. Zeynalabdiyev küç.8/10 T: (+99412) 490 1216 "Xətai" [email protected] 8/10, M. Zeynalabdiyev str., Baku F: (+99412) 490 1226 Bakı ş., Ataturk pr.31 T: (+99412) 561 6703/30 "Xəzər" [email protected] 31, Ataturk ave., Baku F: (+99412) 561 4836 Bakı ş., Neapol küç.2348 T: (+99412) 570 9250/64 "Əhmədli" [email protected] 2348, Neapol str., Baku F: (+99412) 570 9250/64 Bakı ş., N. Əliyev küç. 10, ev 3"E" T: (+99412) 464 3301/02 "Sahil" [email protected] Apt.3 "E", 10, N.Aliyev str., Baku F: (+99412) 464 3301/02 Bakı ş., 28 may küç., 4 T: (+99412) 598 3411/3682 "Nizami" [email protected] 4, 28 May str., Baku F: (+99412) 593 9999 Xocalı pr.37, Demirchi Tower "Mətbuat" T: (+99412) 404 8886/87 [email protected] Demirchi Tower, 37, Khojaly ave. Nəsimi r-nu A. Cəmil küç. 51 T: (+99412) 433 0447 “İnvest” [email protected] 51, A. Jamil str., Nasimi district F: (+99412) 433 0448 Nizami r-nu, Ə.Əzimzadə küçəsi 19 Tel: (+99412) 520 3648 "Neftçilər" [email protected] 19, A. Azimzadeh str., Nizami district Fax: (+99412) 520 3649 Bakı ş., Azadlıq pr. 42 “Cənub” T/F: (+99412)440 2426; 440 2484 [email protected] 42, Azadlig ave., Xırdalan ş., M.Hüseynzadə küç. 1 T/F: (+99412) 342 2767 "Abşeron" [email protected] 1, M. Huseynzadeh str., Khirdalan F: (+99412) 342 3930 Sumqayıt ş. , 5-ci mikr-n, ev 36 T/F: (+99412) 448 2910 "Sumqayıt" sumgait@muganbank.az Apt.36, 5th micro-district, Sumgait (+994164) 2 0778 Gəncə ş., Cavadxan küç. 26 T: (+99412) 418 7033 (+99422) 256 9016 "Gəncə" [email protected] 26, Javadkhan str., Ganja F: (+99422) 252 1304 Hesabat / Report 2013 92

Filialın adı Ünvan Əlaqə nömrələri Elektron ünvan Branch name Address Contact numbers E-mail İsmayıllı ş., M.F.Axundov küç.21 "İsmayıllı" T/F: (+994178) 5 1278 [email protected] 21, M.F. Akhundov str., Ismayilli Quba ş., H.Əliyev pr-ti 227 "Quba" T/F: (+99402333) 5 0498 [email protected] 227, H.Aliyev ave., Guba Mingəçevir ş., Fizuli k. 24B T/F: (+99402447) 4 9214; "Mingəçevir" mingachevir@muganbank.az 24B, Fuzuli str., Mingachevir 4 9314; 4 4930; 417 6369 Biləsuvar ş., H. Əliyev küç. 42A "Biləsuvar" T/F: (+99402529) 5 1081; 5 0270 [email protected] 42A, H.Aliyev str., Bilasuvar Masallı ş., H.Əliyev pr. T/F: (+99402521) 5 3007; "Masallı" [email protected] H. Aliyev ave., Masalli 5 3008/09 Qazax ş., Heydər Əliyev pr. 108 T/F: (+99402229) 5 2976; “Qazax” [email protected] 108, Heydar Aliyev ave., Gazakh (+99402229) 5 4939 Hesabat / Report 2013 93

Şöbələr Sub-branches

Şöbənin adı Ünvan Əlaqə nömrələri Elektron ünvan Sub-branch name Address Contact numbers E-mail Lənkəran ş., Qala Xiyabanı. Dram teatrının qarşısı “Lənkəran” T: (+99402525) 5 1419 [email protected] Lankaran, Gala ave., opposite the Drama Theatre Bakı ş., Nəsimi r-nu, S.Rəhimov küç. 179A “Veraj” T: (+99412) 404 8532 [email protected] 179A, S.Rahimov str., Nasimi district, Baku Bakı ş., Tbilisi pr-ti 58 T/F: (+99412) 431 7927 5 SAYLI [email protected] Baku city., Tbilisi ave., 58 (+99412) 431 7927 Astara ş., Azərbaycan küç.,52 “Astara” T: (+99402522) 5 4427, 5 4437 [email protected] 52, Azerbaijan str., Astara Sumqayıt ş.,15-ci məh., ev 42 “D” T/F: (+99418) 654 3120 “Asan Sumqayıt” [email protected] Apt. 42 “D”, 15th block, Sumgait (+99418) 654 3120 Gəncə ş., Heydər Əliyev pr. T/F: (+994022) 265 0896 (ASAN GƏNCƏ “Asan Gəncə” [email protected] Heydar Aliyev ave., Ganja məlumat köşkü) Hesabat / Report 2013 94

Hərəyə bir ağac əkək! Let’s plant a tree!

“Hər insan həyatı boyunca ev tikməli, oğul böyütməli və bir ağac əkməlidir” “Everyone should build a house, bring up a child and plant a tree in their – əsrlərdən gələn bu məsəldə ağac əkməyin də olması boşuna deyil, çünki lifetime”. This saying that comes through the ages, comprising also the planting övladlarımız bizim gələcəyimizdirsə, sağlam ətraf mühitsiz bu gələcək mövcud of a tree is not without a reason, for if children are our future, without a healthy olmaya bilər. Ona görə də hər birimiz çalışmalıyıq ki, gələcək nəsillərə daha yaşıl environment this future may not exist. We should therefore do our best to favour Azərbaycan bəxş edək. the next generations with greener Azerbaijan.

“Bir ağac” – heç də az bir şey demək deyil, çünki hər bir ağacın ətraf mühitdə, “A tree” is not a small matter at all, as the role of every tree in the environment, iqlimdə, həyatımızda və hətta ölkənin iqtisadiyyatında rolu düşündüyümüzdən climate and our life, and even in the country economy is much more than we daha çoxdur. Sadəcə “Bir ağac”la övladlarımız və nəvələrimiz daha sağlam think. With just “one tree” our children and grandchildren can live in more mühitdə, daha yaşıl, daha abad bir ölkədə yaşaya bilərlər. healthy environment, in more flourishing and greener country. Hesabat / Report 2013 95

Bir yetkin ağac orta hesabla 3 adamın 2 tənəffüs etdiyi oksigeni istehsal edir. Kiçik tingləri mart, nisbətən böyük A mature tree produces the oxygen Ağacla zəngin ərazidə yay vaxtı ağacları isə oktyabr- noyabr aylarında that 3 people on the avarage havanın temperaturu 3-5⁰ daha 1 əkmək əlverişli hesab olunur. breathe. 3 sərin olur.

It is considered fit to plant seedings In areas rich with trees air in March, and relatively big trees in temperature is 3-5⁰ cooler in October-November. summer season.

Pəncərəsi yaşıl zonaya, parklara, Ağaclar çox olan yerlərdə xəstəlik meşələrə açılan xəstələr daha tez törədən zərərli mikroorqanizmlər 8 4 sağalırlar. 6 dəfə az olur.

Patients whose windows open to Disease causing harmful Bir hektar yaşıl örtük ildə 80 ton toz greenfield areas, parks or woods microorganisms are 8 times less in udmaq qabiliyyətinə malikdir. recover more quickly. 5 areas where there are lots of trees. An acre of green cover can absorb 80 tons of dust per year. Təminat funksiyaları Business Support Hesabat / Report 2013 97

Beynəlxalq əməkdaşlıq International Cooperation

Hər il olduğu kimi bu il də “Muğanbank” ASC-nin fəaliyyətində As in every year, international cooperation and participation in beynəlxalq əməkdaşlıq və beynəlxalq layihələrdə iştirak prioritet international projects have remained a priority of Muganbank’s activity olaraq qalıb. 2013-cü ildə “Muğanbank” ASC beynəlxalq fəaliyyətini also in this year. In 2013, Muganbank performed its international activity bir neçə istiqamətdə reallaşdırıb. Bura müxtəlif ölkələrin aparıcı in several directions: establishment of correspondent relations with the bankları ilə müxbir münasibətlərin qurulması, müştərilərin idxal- leading banks of different countries, financing and support of customers ixrac əməliyyatlarının maliyyələşdirilməsi və təminatı, aparıcı reytinq import-export transactions, cooperation with leading rating agencies, agentlikləri ilə əməkdaşlıq, beynəlxalq maliyyə təşkilatları ilə əməkdaşlıq, cooperation with international financial institutions, raising of funds at beynəlxalq pul bazarlarında vəsaitlərin cəlb edilməsi daxildir. international money markets.

Muğanbankın beynəlxalq biznesinin kəmiyyət və keyfiyyət There has been a continuous growth both in quantity and quality göstəricilərində uzun illərdir ki, davamlı artım müşahidə olunur. indicators of Muganbank’s international business for years. The success Uğurlar xarici partnyorlar ilə inkişaf etmiş münasibətlərdə, beynəlxalq has been proved by developed relationship with foreign partners, maliyyələşmə alətlərinin geniş çeşidinin istifadəsində, xarici əlaqələr wide use of wide spectrum of international financing instruments, high ilə məşğul olan işçi heyətinin yüksək peşəkarlığında və digər amillərdə professionalism of the staff involved in international relations and so on. özünü sübut edir. Above all, Muganbank’s achievements in the area of international Hər şeydən əvvəl, Muğanbankın beynəlxalq əməkdaşlıq sahəsində cooperation enable strengthening its position in Azerbaijani market. olan nailiyyətləri onun Azərbaycan bazarında mövqeyinin daha da möhkəmlənməsinə imkan yaradır. Hesabat / Report 2013 98

“Muğanbank” ASC 2013-cü ildə Latviyanın NASDAQ OMX Riqa fond In 2013, Muganbank took the next confident step in the international birjasında qiymətli kağızlar yerləşdirərək beynəlxalq maliyyə bazarında financial market by placing at NASDAQ OMX Riga 7’000 Muganbank növbəti inamlı addımını atdı. Hər birinin nominal dəyəri 1000 ABŞ dolları notes with the face value of USD 1 ‘000, recorded by JSC “Latvian olan 7 min ədəd qiymətli kağız Latviya Mərkəzi Depozitariyası (“LMD”) Central Depository” ( LCD). Such initiative sets a base for Muganbank’s tərəfindən qeydiyyata alınmışdır. Belə bir təşəbbüs “Muğanbank” ASC- integration to international financial market. nin beynəlxalq maliyyə bazarına inteqrasiyası üçün baza yaradır. In 2013, Muganbank launched a partnership with Islamic Corporation Hesabat ilində “Muğanbank” ASC Özəl Sektorun İnkişafı üzrə İslam for the Development of the Private Sector (ICD) by signing a financing Korporasiyası (“ICD”) ilə 3 mln. ABŞ dolları məbləğində maliyyə agreement with ICD in a total amount of USD 3 mln. The ICD line of müqaviləsi imzalayaraq ICD ilə tərəfdaşlığa başladı. Müqavilə financing will be used exclusively to finance small and medium-size çərçivəsində alınacaq vəsaitlər istehsal, ticarət, sənaye, kənd təsərrüfatı və enterprises (SMEs) in Azerbaijan in manufacturing, trade, industry, digər sahələrdə fəaliyyət göstərən kiçik və orta sahibkarların layihələrinin agriculture and other spheres. maliyyələşdirilməsinə yönəldiləcəkdir. Furthermore, Muganbank supported various conferences and events in Əlavə olaraq qeyd etmək istərdik ki, 2013-cü il ərzində “Muğanbank” ASC 2013 as a primary sponsor, such as International Banking Conferences Moskva Beynəlxalq Valyuta Assosiasiyası (“MBVA”) tərəfindən İsrail və (IBC-2013) in Israel and Russia, organized by The Moscow International Rusiyada təşkil olunmuş Beynəlxalq Bank Konfransları (“BBK – 2013”) kimi Currency Association (MICA). müxtəlif konfrans və tədbirlərdə dəfələrlə baş sponsor qismində çıxış etmişdir. Also, significant steps were taken in the direction of developing international cooperation for “Monex”, an express money transfer “Monex” təcili pul köçürmə sistemi layihəsi üzrə də beynəlxalq system. The process of integrating “Monex” to “MoneyPolo” was əməkdaşlıq istiqamətində əhəmiyyətli addımlar atılmışdır. “Monex” accomplished in 2013. Thus, the number of “Monex” points exceeded təcili pul köçürmə sisteminin “MoneyPolo” təcili pul köçürmə sisteminə 2000 considerably expanding the geographical coverage of “Monex” inteqrasiyası prosesi 2013-cü ildə yekunlaşmışdır. Beləliklə, “Monex” operations. It should be recalled that customers can send and receive təcili pul köçürmə sisteminin fəaliyyət coğrafiyası genişlənərək, express remittances both within the country and abroad through the məntəqələrinin sayı 2000-ni keçmişdir. Xatırlatmaq istərdik ki, express money transfer system “Monex”, set up by Muganbank in 2011. “Muğanbank” ASC tərəfindən 2011-ci ildə yaradılmış “Monex” təcili pul köçürmə sistemi vasitəsilə müştərilər istər ölkə daxilində, istərsə də xaricə As is known, high-quality service to corporate customers always was təcili pul vəsaiti göndərə və ya ala bilərlər. and will be one of Muganbank’s priority objectives. The Bank maintains reliable partnership relations with different companies, involved in Məlum olduğu kimi, korporativ müştərilərə yüksək səviyyəli xidmətlərin various sectors of economy, The Bank also creates favorable conditions göstərilməsi Muğanbank üçün hər zaman prioritet məqsədlərdən biri for the implementation of transactions under economic contracts olub və biri olaraq da qalacaq. Bank iqtisadiyyatın müxtəlif sahələrində of companies involved in import-export areas. Modern banking Hesabat / Report 2013 99

iş aparan şirkətlərlə etibarlı partnyorluq edir. O cümlədən, idxal-ixrac technologies and gained experience enable Muganbank to offer its sahəsində çalışan müəssisələr üçün xarici iqtisadi kontraktlar üzrə corporate customers the following high-quality services in international əməliyyatların keçirilməsi sahəsində münbit şərait yaradır. Müasir bank business segment for competitive prices: texnologiyaları və toplanılmış təcrübə Muğanbanka öz korporativ müştərilərinə beynəlxalq biznes seqmentində aşağıdakı yüksək • Settlements in main foreign currencies; keyfiyyətli xidmətləri rəqabətədavamlı tariflər ilə təklif etməyə imkan • Short-term loans; verir: • Bank guarantees; • Əsas xarici valyutalarda hesablaşma • Letters of credit and collection; • Qısamüddətli kreditlər • Forfaiting, factoring, etc. • Bank zəmanətləri • Akkreditivlər və inkasso Professional use of all these instruments helps Muganbank consider demands of each customer, through contract follow-up/post contract • Forfeytinq, faktorinq və s. servicing. And, this regularly increases the volume of the services rendered by the Bank to entrepreneurs in their import-export Bütün bu alətlərin peşəkarcasına istifadə olunması Muğanbanka xarici transactions. Muganbank will further develop its international trade kontraktların müşayiəti xidmətlərini göstərməklə, hər müştərinin fərdi finance activity, by rendering high-quality services to customers and tələblərini nəzərə almağa imkan verir. Bu da öz növbəsində, Bankın partners and by demonstrating a professional approach to each sahibkarlara idxal-ixrac əməliyyatlarında göstərdiyi xidmətlərin transaction. həcmini müntəzəm olaraq artırır. Gələcəkdə də Muğanbank müştəri və partnyorlara daim keyfiyyətli xidmətlər göstərməklə və hər əməliyyata peşəkar yanaşma nümayiş etdirməklə, xarici ticarətin maliyyələşdirilməsi istiqamətini fəal şəkildə inkişaf etdirəcək. Hesabat / Report 2013 100

Marketinq Marketing

Muğanbankda marketinq sistemi aşağıdakı elementləri əhatə edir: Marketing system at Muganbank covers the following components:

Təhlil (həm “kabinet”, həm də “çöl” tədqiqatları), mütəmadi olaraq, bir The study (both the “desk” and “field”research) is carried out regularly neçə istiqamət üzrə aparılır: and in several directions:

• Ümumi iqtisadi mühit (makroiqtisadi konyuktura, dünyada və • General economic environment (macroeconomic condition, current Azərbaycanda maliyyə-kredit və valyuta sistemlərinin cari vəziyyəti, state of financial-credit and currency systems in Azerbaijan and in sosial və demoqrafik tendensiyalar və s.) the world, social and demographic trends, etc); • İstehlakçıların meylləri — məqsədli seqmentlərdə (o cümlədən, • Consumer trends - in target segments (including regions where filiallar olan bölgələrdə): davranış xüsusiyyətlərinin müəyyən there are branches): studying customer behavior, exploring financial edilməsi, maliyyə məhsullarının seçim meyarlarının araşdırılması; product selection criteria and revealing unmet needs; ödənilməmiş tələbatların aşkar olunması • Competitors – analysing the performances of Azerbaijan banking • Rəqiblərin mövqeyi — Azərbaycan bank bazarının ümumiyyətlə market leaders in general, and in particular segments and və müəyyən seqmentlərdə olan liderlərinin fəaliyyətinin təhlili identifying the strengths and weaknesses in various areas (range of və müxtəlif meyarlar üzrə (xidmətlər çeşidi, servis səviyyəsi, tarif services, service level, rate policy, AD&PR instruments used, network siyasəti, istifadə olunan reklam və PR alətləri, şəbəkənin genişliyi və expanse, etc.); s.) güclü və zəif tərəflərinin dəqiqləşdirilməsi • Market performance indicators – market volume and competitors • Bazarın kəmiyyət göstəriciləri — məqsədli seqmentlərdə bazarın market shares in target segments; həcmi və rəqiblərin payı • Intrabank situation – exploring the current situation and potential for • Bankın daxili vəziyyəti — rəqabətədavamlılığı qiymətləndirmək all functional components of performance (strategy, management, məqsədi ilə fəaliyyətinin bütün funksional istiqamətləri (strategiya, marketing, personnel, etc. ) to assess the competitiveness. idarəetmə, marketinq, personal və s.) üzrə mövcud vəziyyətin və potensialın müəyyən olunması Hesabat / Report 2013 101

Strategiya Strategy

2013-cü ildə də Marketinq Departamenti Muğanbankın müxtəlif aspektli Marketing department of Muganbank upated the Bank’s strategies of strategiyalarını aktuallaşdırdı: various aspects in 2013 as well:

• “Xidmət-bazar” (diversifikasiya, yeni seqmentlər, yeni xidmətlər) • Service-market (diversification, new segments, new services) strategiyasını strategy; • Rəqabət (differensiasiya, xidmətlərinin unikallığı, cəmləşmə) • Competitiveness (differentiation, unique products, concentration) strategiyasını strategy; • Xidmətlər təsnifatı strategiyasını • Service classification strategy; • Pozisionlaşma siyasətini • Positioning policy; • Brendin idarə olunmasını • Brand management.

Xidmətlər Services

Təhlil nəticələrinin əsasında Marketinq Departamenti istehlakçıların Based on research results, Marketing department identifies an optimal tələbinə və rəqiblərin ən uğurlu təcrübəsinə uyğun optimal məhsul assortment of products pursuant to consumer demand and best çeşidi müəyyən edir. Son illərdə məhz bu işin nəticəsində Muğanbankın practices of competitors. Due to this exactly, Muganbank service xidmətlər portfelində adsız istiqrazlar, FOREX, MONEX, plastik kartların və portfolio has been enriched with such products as bearer bonds, FOREX, depozitlərin müxtəlif növləri və s. məhsullar öz yerini tutdu. MONEX, different types of plastic cards and deposits, etc. in recent years. Hesabat / Report 2013 102

Reklam Advertising

Muğanbank məhsul və xidmətlərinin bazarda irəliləməsi üçün aşağıdakı Muganbank uses the following adversting items in promoting its reklam daşıyıcılarından istifadə edir: products and services on the market:

• TV-də reklam çarxlarının yerləşdirilməsi və ən populyar verilişlərə • TV advertising, and sponsorship in most popular programs; sponsorluq • Magazine advertising; • Aparıcı jurnallarda çap modullarının yerləşdirilməsi • Banner ads on leading Internet portals; • Aparıcı internet-portallarda reklam bannerlərinin yerləşdirilməsi • Outdoor advertising (billboards, prism visions, bus advertising); • Zahiri reklam (bilbordlar, prizm-vijn, avtobuslarda reklam) • Graphic printing products (booklets, pamphlets, etc.). • Poliqrafiya məhsulları (buklet, kitabça və s.) In a certain part of its advertising campaigns Muganbank aims to Muğanbank apardığı reklam kampaniyalarının bir qismində communicate information, and in other part to directly meet sales informasiyanın çatdırılmasını, bir qismində isə bilavasitə məhsul və targets of its products and services. xidmətlərinin satış hədəflərinin yerinə yetirilməsini qarşısına məqsəd qoyur.

İctimai Əlaqələr Public Relations

2013-cü ildə PR kampaniyalar Bankın marketinqinin təşkilində əsas yer In 2013, PR campaigns had a primary role in organizing the Bank’s tutub. Bu kampaniyaların məqsədi Muğanbank brendinin daha geniş marketing. These campaigns were aimed to raise a good awareness kütlə arasında müsbət qarşılanması olub. about Muganbank brand among broader masses of population.

Təbii ki, istifadə olunan PR-kommunikasiyalar arasında müxtəlif There were, of course, different methods among the PR communications üsullar var idi. Məsələn, aparıcı çap KİV-lərdə və İnternet-portallarda used. For instance, the publishing of PR backgrounds and press releases Hesabat / Report 2013 103

PR bəkqraundun və pres-relizlərin yayılması, digər təbliğat xarakterli in leading printed media, and posting of other materials of publicity materialların (məqalələr, müsahibələr və s.) yerləşdirilməsi. (articles, interviews, etc.).

Bununla belə Muğanbank daha öncəki illərdə olduğu kimi 2013-cü ildə However, as in previous years Muganbank focued the key potential on də əsas gücü sponsorluq fəaliyyətinə yönəltmişdir. Bu istiqamət üzrə sponsorship activity in 2013, too. The sponsorship opportunities were tədbirlər bir neçə müstəvidə realizə olundu. realized in a number of events.

“Muğanbank” ASC-nin baş sponsorluğu ilə aprelin 17-20 tarixlərində Muganbank was the major sponsor of «V International Interbank Forum» İsraildə «David InterContinental Tel Aviv» mehmanxanasında Moskva of The Moscow International Currency Association (MICA) on “Interbank Beynəlxalq Valyuta Assosiasiyasının “Ümumdünya Ticarət Təşkilatına Cooperation of WTO States: New realities, new challenges” held on April üzv ölkələrin banklararası əməkdaşlığı: yeni reallıqlar, yeni çağırışlar” 17 – 20 at «David InterContinental Tel Aviv» Hotel in Israel. mövzusunda “V Beynəlxalq Banklararası Forum”u keçirilmişdir. Among about 300 participants and guests of the Forum were Forumun təxminən 300 iştirakçısı və qonaqları arasında dövlət representatives of government regulatory authorities, top managers tənzimləyici orqanların nümayəndələri, bank və birjaların top- of banks and stock exchanges, managers and officers of treasury menecmenti, xəzinədarlıq və müxbir əlaqələr şöbələrinin rəhbərləri and correspondent relations departments, representatives of financial və işçiləri, maliyyə institutlarının, banklararası biznes sahəsinin institutions and interbank businesses, managers of financial, broker’s and nümayəndələri, maliyyə, broker və konsaltinq şirkətlərinin rəhbərləri, consulting companies, experts, analysts and mass media representatives. ekspertlər, analitiklər və KİV nümayəndələri təmsil olunmuşlar. The forum was organized by The Moscow International Currency Forumun təşkilatçısı qismində Moskva Beynəlxalq Valyuta Assosiasiyası Association (MICA). çıxış etmişdir. Muganbank delegation took an active part in the international forum. “Muğanbank” ASC-nin nümayəndə heyəti beynəlxalq forumun işində fəal iştirak etmişdir. Muganbank reporters delivered interesting speeches on “Muganbank products and market innovations”, “The efficiency of forex market Bankın məruzəçiləri “Muğanbankın məhsulları və bazarda innovasiyalar” forecasting through currencies relative strength indicator”, development, və “Valyutaların nisbi güc indikatoru vasitəsilə valyuta bazarlarının introduction and use of state-of-the-art products and technologies for proqnozlaşdırılmasının effektivliyi” mövzusunda, beynəlxalq maliyyə the analysis of international financial markets. bazarlarının təhlilinin həyata keçirilməsi üçün müasir məhsul və texnologiyaların işlənib-hazırlanması, tətbiqi və istifadəsi haqqında On October 2-5, 2013 the next International Banking Conference maraqlı məruzələrlə çıxış etmişlər. on “Regulatory innovations and state-of-the art technologies in the Hesabat / Report 2013 104

Oktyabrın 2-5 tarixlərində isə Rusiyanın Kalininqrad şəhərində interbank financial market” took place in Kaliningrad, Russia. “Banklararası maliyyə bazarında tənzimləmə ilə bağlı yeniliklər və For the third time running Muganbank was the primary sponsor of the müasir texnologiyalar” mövzusunda növbəti Beynəlxalq Bank Konfransı international conference. (“BBK-2013”) keçirilmişdir. “Muğanbank” ASC ardıcıl olaraq üçüncü dəfə beynəlxalq konfransın baş sponsoru olmuşdur. The conference participants and guests included about 200 people – managers and officers from central (national) banks, professional Konfransda iştirakçı və qonaq qismində mərkəzi (milli) bankların, peşəkar associations, exchange markets, credit organizations, financial, brokerage assosiasiyaların, valyuta birjalarının, kredit təşkilatlarının, maliyyə, and investment companies, experts, analysts and mass media. The broker və investisiya şirkətlərinin rəhbərləri və əməkdaşları, ekspertlər participants were representing banks and non-banking organizations və analitiklər, KİV nümayəndələri olmaqla təxminən 200 nəfər iştirak from such countries as Azerbaijan, Austria, Belarus, Great Britain, etmişdir. Konfransda Azərbaycan, Avstriya, Belarus, Böyük Britaniya, Hungary, Germany, Latvia, Russia, Ukraine, Switzerland and Estonia. Macarıstan, Almaniya, Latviya, Rusiya, Ukrayna, İsveçrə, Estoniya kimi ölkələrin bank və qeyri-bank təşkilatları təmsil olunmuşlar. The speech topics covered macroeconomic and regulatory issues (macroeconomic overviews, actual aspects of regulatory, monetary and Konfransda çıxışlar makroiqtisadi və tənzimləmə xarakterli mövzulara exchange rate policies, improvement of the regulatory framework of (makroiqtisadi təhlillər, nəzarət, valyuta və məzənnə siyasətinin aktual conducting financial transactions, etc.). The topics of discussion in the aspektləri, maliyyə əməliyyatlarının aparılmasının normativ bazasının conference also covered typically the issues relating to infrastructure təkmilləşdirilməsi və s.) həsr olunmuşdu. Konfransda, həmçinin, development of the interbank market (FX&MM, forward contract trade, ənənəvi olaraq banklararası bazarın infrastrukturunun inkişafı (FX&MM, REPO transactions, SWAP, long-term financial instrument markets, forvard kontraktları ilə ticarət, REPO əməliyyatları, SWAP, uzunmüddətli application of new electronic systems, cross-border transactions, money maliyyə alətləri bazarları, yeni elektron sistemlərin tətbiqi, transsərhəd transfers, etc.). əməliyyatları, pul köçürmələri və s. ) ilə bağlı məsələlər müzakirə olunmuşdur. Muganbank’s sponsorship activity in 2013 again evidenced that for Muganbank social responsibility is one of key critera in implementing 2013-cü ilə aid olan sponsorluq fəaliyyətinin nümunələri bir daha sübut any project. etdi ki, Muğanbank üçün istənilən layihəni həyata keçirərkən sosial məsuliyyət əsas meyarlardan biridir. Hesabat / Report 2013 105

Soraq informasiyası Reference information

Bankın tam adı: Full name: "Muğanbank" Açıq Səhmdar Cəmiyyəti Open Joint-Stock Company “Muganbank”

Qısaldılmış adı: Short name: ASC "Muğanbank" OJSC “Muganbank”

Hesablaşmalar üçün rekvizitlər: Bank details: M/h: AZ41NABZ013501000 000 00018944 C/a: AZ41NABZ013501000 000 00018944 Kod: 506162 Code: 506162 VÖEN: 1400122681 TIN: 1400122681 S.W.I.F.T.: MUGAAZ22 S.W.I.F.T.: MUGAAZ22

Əlaqə informasiyası Contact information: Hüquqi ünvanı və Baş ofis: Azərbaycan, Bakı ş., AZ1052, Ə.Rəcəbli 21B Legal address and head office: A. Rajabli 21B, AZ1052,Baku, Azerbaijan Tel: (+99412) 564 35 11; 564 20 35; 564 21 35; 933 Tel: (+99412) 564 35 11; 564 20 35; 564 21 35; 933 Faks: (+99412) 564 21 35; 564 35 11; 933 Fax: (+99412) 564 21 35; 564 35 11; 933 Teleks: 142548 SARUR AI Telex: 142548 SARUR AI E-mail: [email protected] E-mail: [email protected] www.muganbank.az www.muganbank.az “MUGANBANK” OPEN JOINT STOCK COMPANY

The International Financial Reporting Standards Financial Statements and Independent Auditors’ Report For the Year Ended December 31, 2013 Hesabat / Report 2013 107

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

The following statement is made with a view to distinguishing respective responsibilities of the management and those of the independent auditors in relation to the financial statements of “Muganbank” OJSC (the “Bank”).

Management is responsible for the preparation of the financial statements that present fairly the financial position of the Bank as at December 31, 2013, the results of its operations, cash flows and changes in equity for the year then ended, in accordance with International Financial Reporting Standards (“IFRS”).

In preparing the financial statements, management is responsible for:

• Selecting suitable accounting principles and applying them consistently; • Making judgements and estimates that are reasonable and prudent; • Stating whether IFRS have been followed, subject to any material departures disclosed and explained in the financial statements; and • Preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Bank will continue in business for the foreseeable future.

Management is also responsible for:

• Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Bank; • Maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Bank, and which enable them to ensure that the financial statements of the Bank comply with IFRS; • Maintaining statutory accounting records in compliance with legislation and accounting standards of the Republic of Azerbaijan; Hesabat / Report 2013 108

• Taking such steps as are reasonably available to them to safeguard the assets of the Bank; and • Detecting and preventing fraud, errors and other irregularities.

The financial statements for the year ended December 31, 2013 were authorized for issue on April 15, 2014 by the Management Board of the Bank.

On behalf of the Management Board:

Elmir Hasanov Galina Sidneva Chairman of the Management Board Head of Finance Department

April 15, 2014 April 15, 2014 Baku, the Republic of Azerbaijan Baku, the Republic of Azerbaijan Hesabat / Report 2013 109

6 Bakikhanov Street AZ1022, Baku, Azerbaijan

Tel: +994 (12) 404 51 52 Fax: +994 (12) 404 51 53

INDEPENDENT AUDITORS’ REPORT

To the Shareholders and the Board of Directors of “Muganbank” Open Joint Stock Company:

We have audited the accompanying financial statements of “Muganbank” Open Joint Stock Company (the “Bank”), which comprise the statement of financial position as at December 31, 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether Hesabat / Report 2013 110

due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at December 31, 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

April 15, 2014 Baku, the Republic of Azerbaijan Hesabat / Report 2013 111

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2013 (In thousands of Azerbaijani Manats)

Year ended Year ended Notes December 31, 2013 December 31, 2012

Interest income 5,24 31,277 27,481

Interest expense 5,24 (15,272) (12,243)

Net interest income before provision for impairment losses on interest bearing assets 16,005 15,238

Provision for impairment losses on interest bearing assets 6,24 (2,664) (7,732)

Net interest income 13,341 7,506

Net gain on foreign exchange operations 7 461 478

Fee and commission income 8 11,156 11,461

Fee and commission expense 8 (1,031) (736)

Provision for impairment losses on other operations 6 (787) (511)

Other income 54 11

Net non-interest income 9,853 10,703

Operating income 23,194 18,209

Operating expenses 9,24 (17,818) (13,233)

Profit before income tax 5,376 4,976

Income tax expense 10 (1,352) (1,099) Hesabat / Report 2013 112

Year ended Year ended Notes December 31, 2013 December 31, 2012

Net profit for the year 4,024 3,877

Other comprehensive income 25 16

Other comprehensive income for the year 25 16

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 4,049 3,893

Earnings per share Basic and diluted (AZN) 11 20.13 28.79

On behalf of the Management Board:

Elmir Hasanov Galina Sidneva Chairman of the Management Board Head of Finance Department

April 15, 2013 April 15, 2013 Baku, the Republic of Azerbaijan Baku, the Republic of Azerbaijan Hesabat / Report 2013 113

STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2013 (In thousands of Azerbaijani Manats)

Notes December 31, 2013 December 31, 2012

ASSETS

Cash and balances with the Central Bank of the Republic of Azerbaijan 12 64,018 56,529

Due from banks 13 13,947 2,340

Loans to customers 14,24 218,030 200,154

Property and equipment 15 35,553 23,103

Assets classified as held for sale 16 615 481

Other assets 17 1,745 2,711

TOTAL ASSETS 333,908 285,318

LIABILITIES AND EQUITY

LIABILITIES:

Due to banks and other financial institutions 18 120,105 106,913

Customer accounts 19,24 152,235 127,459

Debt securities issued 20 10,747 5,053

Deferred tax liability 10 311 339

Current income tax payable 10 286 -

Other liabilities 21 3,307 2,809

Total liabilities 286,991 242,573

EQUITY: Hesabat / Report 2013 114

Notes December 31, 2012 December 31, 2012

Share capital 22 41,306 37,306

Revaluation reserve 808 838

Retained earnings 4,803 4,601

Total equity 46,917 42,745

TOTAL LIABILITIES AND EQUITY 333,908 285,318

On behalf of the Management Board:

Elmir Hasanov Galina Sidneva Chairman of the Management Board Head of Finance Department

April 15, 2014 April 15, 2014 Baku, the Republic of Azerbaijan Baku, the Republic of Azerbaijan Hesabat / Report 2013 115

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2013 (In thousands of Azerbaijani Manats)

Share capital Revaluation reserve Retained earnings Total equity

January 1, 2012 22,250 822 6,779 29,851

Issue of ordinary shares 15,056 - - 15,056

Total comprehensive income for the year - 16 3,877 3,893

Retained earnings directed to share capital - - (6,055) (6,055)

December 31, 2012 37,306 838 4,601 42,745

Issue of ordinary shares 4,000 - - 4,000

Total comprehensive income for the year - 25 4,024 4,049

Retained earnings directed to share capital - - (3,877) (3,877)

Transfer to retained earnings - (55) 55 -

December 31.2013 41,306 808 4,803 46,917

On behalf of the Management Board:

Elmir Hasanov Galina Sidneva Chairman of the Management Board Head of Finance Department

April 15, 2014 April 15, 2014 Baku, the Republic of Azerbaijan Baku, the Republic of Azerbaijan Hesabat / Report 2013 116

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2013 (In thousands of Azerbaijani Manats)

Year ended Year ended Notes December 31, 2013 December 31, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Profit before income tax 5,376 4,976

Adjustments for non-cash items:

Provision for impairment losses on interest bearing assets 6 2,664 7,732

Provision for impairment losses on other operations 6 787 511

(Gain) / loss on disposal of property, equipment and intangible assets (37) 6

Foreign exchange translation loss 17 21

Depreciation and amortization 9 3,433 2,366

Change in interest accruals, net (3,840) (1,325)

Cash inflow from operating activities before changes in operating assets and liabilities 8,400 14,287

Changes in operating assets and liabilities

(Increase)/decrease in operating assets:

Minimum reserve deposit with the Central Bank of the Republic of Azerbaijan (1,439) (854)

Due from banks (1,252) 963

Loans to customers (17,508) (34,404)

Assets clasified as held for sale 32 - Hesabat / Report 2013 117

Year ended Year ended Notes December 31, 2013 December 31, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Other assets 1,039 (1,348)

Increase/(decrease) in operating liabilities:

Due to banks 12,896 5,095

Customer accounts 25,925 25,288

Other liabilities (289) 1,181

Cash inflow from operating activities before taxation 27,804 10,208

Income tax paid (1,069) (1,231)

Net cash inflow from operating activities 26,735 8,977

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for property, equipment and intangible assets (15,982) (1,425)

Proceeds from sale of property and equipment 121 17

Net cash outflow from investing activities (15,861) (1,408) Hesabat / Report 2013 118

Notes Year ended Year ended December 31, 2013 December 31, 2012

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issue of ordinary shares 22 123 9,001

Proceeds from debt securities issued 5,445 -

Repayment of debt securities issued - (453)

Net cash inflow from financing activities 5,568 8,548

Effect of exchange rates change on cash and cash equivalents (34) (28)

NET INCREASE IN CASH AND CASH EQUIVALENTS 16,408 16,089

CASH AND CASH EQUIVALENTS at the beginning of the year 12 55,159 39,070

CASH AND CASH EQUIVALENTS at the end of the year 12 71,567 55,159

Interest paid and received by the Bank during the year ended December 31, 2013 amounted to AZN 15,874 thousand and AZN 28,042 thousand, respectively (2012: AZN 10,643 thousand and AZN 24,610 thousand, respectively).

On behalf of the Management Board:

Elmir Hasanov Galina Sidneva Chairman of the Management Board Head of Finance Department

April 15, 2014 April 15, 2014 Baku, the Republic of Azerbaijan Baku, the Republic of Azerbaijan Hesabat / Report 2013 119

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013 (In thousands of Azerbaijani Manats)

1. INTRODUCTION

“Muganbank” Open Joint Stock Company (the“Bank”) is a joint stock bank, which was incorporated in the Republic of Azerbaijan in 1992 as a closed joint stock company and later in 2005 it was registered as an open joint stock company. The Bank is regulated by the Central Bank of the Republic of Azerbaijan (the “CBRA”) and conducts its business under the general license for banking activities and foreign currency operations No: 29 issued on November 25, 1992 and renewed on November 10, 2000. The Bank had 30 branches and 6 divisions within the Republic of Azerbaijan as at December 31, 2013 (2012: 30 branches and 4 divisions). During the year 2 divisions have been opened in “ASAN service” centres in Ganja and Sumgayit and 1 representative office has been established in Moscow. The Bank’s primary business consists of making payments and money transfers, commercial activities, trading with foreign currencies and originating loans and deposits and also guarantees.

Registered address and place of business: The address of its registered office is 21 B, A. Rajabli Street, Baku, the Republic of Azerbaijan.

Shareholders of the Bank As at December 31, 2013 and 2012, the following individuals owned issued shares of the Bank:

Shareholder December 31, 2013, % December 31, 2012, %

Elmir Mehdiyev 63.50 63.50 Maqbet Mehdiyev 13.10 13.10 Vafa Valiyeva 12.05 12.05 Farida Mehdiyeva 11.35 11.35

Total 100.00 100.00 Hesabat / Report 2013 120

Operating Environment of the Bank The Republic of Azerbaijan displays certain characteristics of an emerging market, including the existence of a currency that is not freely convertible in most countries outside of the Republic of Azerbaijan, restrictive currency controls, relatively high inflation and economic growth. The banking sector in the Republic of Azerbaijan is sensitive to adverse fluctuations in confidence and economic conditions. The global financial crisis resulted in capital markets instability, deterioration of liquidity in the banking sector, and tighter credit conditions within Azerbaijan. The Azerbaijan Government has introduced a range of stabilization measures aimed at ensuring solvency and providing liquidity and supporting refinancing of foreign debt for Azerbaijan banks and companies. While management believes it is taking appropriate measures to support the sustainability of the Bank’s business in the current circumstances, unexpected further deterioration in the areas described above could negatively affect the Bank’s results and financial position in a manner not currently determinable.

The tax, currency and customs legislation within the Republic of Azerbaijan is subject to varying interpretations, and changes, which can occur frequently. Furthermore, the need for further developments in the bankruptcy laws, the absence of formalized procedures for the registration and enforcement of collateral, and other legal and fiscal impediments contribute to the difficulties experienced by banks currently operating in the Republic of Azerbaijan. The future economic direction of the Republic of Azerbaijan is largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the government, together with tax, legal, regulatory, and political developments.

2. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance These financial statements of the Bank have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

Going concern These financial statements have been prepared on the assumption that the Bank is a going concern and will continue in operation for the foreseeable future.

Other basis of presentation criteria These financial statements are presented in thousands of Azerbaijani Manats (“AZN”), unless otherwise indicated. These financial statements have been prepared under the historical cost convention, except measurement at a fair value of certain financial instruments and measurement of buildings at revalued amounts according to IFRS. Hesabat / Report 2013 121

The Bank maintains its accounting records in accordance with the laws of the Republic of Azerbaijan. These financial statements have been prepared from the the statutory accounting records and have been adjusted to conform to IFRS. These adjustments include certain reclassifications to reflect the economic substance of underlying transactions including reclassifications of certain assets and liabilities, income and expenses to appropriate financial statement captions.

The principal accounting policies are set out below:

Recognition of interest income and expense Interest income and expense are recognized on an accrual basis using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

Once a financial asset or a group of similar financial assets has been written down (partly written down) as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Interest earned on assets at fair value is classified within interest income.

Recognition of fee and commission income and expense Loan origination fees are deferred, together with the related direct costs, and recognized as an adjustment to the effective interest rate of the loan. Where it is probable that a loan commitment will lead to a specific lending arrangement, the loan commitment fees are deferred, together with the related direct costs, and recognized as an adjustment to the effective interest rate of the resulting loan. Where it is unlikely that a loan commitment will lead to a specific lending arrangement, the loan commitment fees are recognized in profit and loss accounts over the remaining period of the loan commitment. Where a loan commitment expires without resulting in a loan, the loan commitment fee is recognized in the profit and loss accounts on expiry. Loan servicing fees are recognized as revenue as the services are provided. All other commissions are recognized when services are provided.

Financial instruments The Bank recognizes financial assets and liabilities in its statement of financial position when it becomes a party to the contractual obligations of the instrument. Regular way purchases and sales of financial assets and liabilities are recognized using settlement date accounting. Hesabat / Report 2013 122

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit and loss accounts.

Financial assets Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (FVTPL), “held-to-maturity” investments, “loans and receivables” and “available-for-sale” (AFS) financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at FVTPL Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or losses on financial assets held for trading are recognized in the profit and loss accounts.

Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity.

Held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as trading securities or designated as investment securities available-for-sale. Such assets are carried at amortized cost using the effective interest method.

Gains and losses are recognized in profit and loss accounts when the loans and receivables are derecognized or impaired, as well as through the amortization process.

Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial recognition available-for sale financial assets are measured at fair value with gains or losses being recognized Hesabat / Report 2013 123

in other comprehensive income until the investment is derecognized or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in other comprehensive income is reclassified to profit and loss accounts. However, interest calculated using the effective interest method is recognized in profit and loss accounts.

Fair value measurement

Policy applicable before January 1, 2013 Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.

When available, the Bank measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, then the Bank establishes fair value using a valuation technique. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Bank, incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments.

Policy applicable from January 1, 2013 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Bank has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Bank uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is signifıcant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Hesabat / Report 2013 124

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; Level 3 - Valuation techniques for which the lowest level input that is signifıcant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Cash and cash equivalents Cash and cash equivalents include cash on hand, unrestricted balances on correspondent and time deposit accounts with the CBRA and advances to banks in countries included in the Organization for Economic Co-operation and Development (“OECD”) with original maturities up to 90 days. For purposes of determining cash flows, the minimum reserve deposits required by the CBRA are not included as a cash equivalent due to restrictions on their availability.

Due from banks In the normal course of business, the Bank maintains advances or deposits for various periods of time with other banks. Due from banks are initially recognized at a fair value. Due from banks with a fixed maturity term are subsequently measured at amortized cost using the effective interest method and are carried net of any allowance for impairment losses. Those that do not have fixed maturities are carried at amortized cost based on expected maturities. Amounts due from banks are carried net of any allowance for impairment losses.

Loans to customers Loans granted by the Bank are initially recognized at a fair value plus related transaction costs. Where the fair value of consideration given does not equal the fair value of the loan, for example where the loan is issued at lower than market rates, the difference between the fair value of consideration given and the fair value of the loan is recognized as a loss on initial recognition of the loan and included in the statement of comprehensive income according to nature of these losses. Subsequently, loans are carried at amortized cost using the effective interest method. Loans to customers are carried net of any allowance for impairment losses.

Reclassification of financial assets If a non-derivative financial asset classified as held for trading is no longer held for the purpose of selling in the near term, it may be reclassified out of the fair value through profit or loss category in one of the following cases:

A financial asset that would have met the definition of loans and receivables above may be reclassified to loans and receivables category if the Bank has the intention and ability to hold it for the foreseeable future or until maturity; Hesabat / Report 2013 125

Other financial assets may be reclassified to available-for-sale or held-to-maturity categories only in rare circumstances.

A financial asset classified as available-for-sale that would have met the definition of loans and receivables may be reclassified to loans and receivables category of the Bank has the intention and ability to hold it for the foreseeable future or until maturity.

Financial assets are reclassified at their fair value on the date of reclassification. Any gain or loss already recognized in profit and loss accounts is not reversed. The fair value of the financial asset on the date of reclassification becomes its new cost or amortized cost, as applicable.

Impairment of financial assets The Bank assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Assets carried at amortized cost The Bank accounts for impairment losses of financial assets when there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment losses are measured as the difference between carrying amounts and the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the financial asset’s original effective interest rate.

Such impairment losses are not reversed, unless if in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, such as recoveries, in which case the previously recognized impairment loss is reversed by adjustment of an allowance account.

For financial assets carried at cost, impairment losses are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

Available-for-sale financial assets For available-for-sale financial investments, the Bank assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. Hesabat / Report 2013 126

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit and loss accounts – is reclassified from other comprehensive income to profit and loss acounts. Impairment losses on equity investments are not reversed through profit and loss acounts; increases in their fair value after impairment are recognized in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded in profit and loss accounts. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit and loss accounts, the impairment loss is reversed through profit and loss accounts.

Renegotiated loans Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions.

Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original or current effective interest rate.

Write off of loans and advances Loans and advances are written off against the allowance for impairment losses when deemed uncollectible. Loans and advances are written off after management has exercized all possibilities available to collect amounts due to the Bank and after the Bank has sold all available collateral. Subsequent recoveries of amounts previously written off are reflected as an offset to the charge for impairment of financial assets in profit and loss accounts in the period of recovery.

Derecognition of financial assets The Bank derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Bank neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Bank recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Bank retains substantially all the risks and rewards of ownership of a transferred financial asset, the Bank continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. Hesabat / Report 2013 127

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit and loss accounts.

On derecogntion of a financial asset other than in its entirety (for example, when the Bank retains an option to repurchase part of the transferred asset or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Bank retains control), the Bank allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit and loss accounts. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

Financial liabilities and equity instruments Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Bank are recognized at the proceeds received, net of direct issue costs.

Financial liabilities Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.

FVTPL

Financial liabilities are classified as FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit and loss accounts. The net gain or loss recognized in profit and loss accounts incorporates any interest paid on the financial liability and is included in the “other income/(loss)” line item in the statement of comprehensive income. Hesabat / Report 2013 128

Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Due to banks and other financial institutions Amounts due to banks and other financial institutions are recorded when money or other assets are advanced to the Bank by counterparty banks. The non-derivative liability is carried at amortized cost. If the Bank purchases its own debt, it is removed from the statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in gains or losses arising from early retirement of debt.

Customer accounts Customer accounts are non-derivative liabilities to individuals, state or corporate customers and are carried at amortized cost.

Debt securities issued Debt securities in issue include promissory notes, bonds, certificates of deposit and debentures issued by the Bank. Debt securities are stated at amortized cost. If the Bank purchases its own debt securities in issue, they are removed from the statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in gains arising from retirement of debt.

Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contracts issued by the Bank are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:

The amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Hesabat / Report 2013 129

The amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with the revenue recognition policies.

Derecognition of financial liabilities The Bank derecognizes financial liabilities when, and only when, the Bank’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit and loss accounts.

Offset of financial assets and liabilities Financial assets and liabilities are offset and reported net on the statement of financial position when the Bank has a legally enforceable right to set off the recognized amounts and the Bank intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. In accounting for a transfer of a financial asset that does not qualify for derecognition, the Bank does not offset the transferred asset and the associated liability.

Leases Financial leases are leases that transfer substantially all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than the form of the contract. The lease is classified as finance lease if:

The lease transfers ownership of the asset to the lessee by the end of the lease term; The lease term is for the major part of the economic life of the asset even if title is not transferred; At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and The leased assets are of a specialized nature such that only the lessee can use them without major modifications being made.

The Bank as leasee Assets held under finance leases are initially recognized as assets of the Bank at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit and loss accounts unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Bank’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred. Hesabat / Report 2013 130

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Property, equipment and intangible assets Property, equipment and intangible assets, except buildings are carried at historical cost less accumulated depreciation and amortization and any recognized impairment loss.

Depreciation on assets under construction and those not placed in service commences from the date the assets are ready for their intended use.

Depreciation and amortization are charged on the carrying value of property, equipment and intangible assets and is designed to write-off assets over their useful economic lives. The estimated useful lives, residual values and depreciation/amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis at the following useful lives:

Buildings 17 years

Furniture and fixtures 8 years

Computer and equipments 6 years

Vehicles 10 years

Other fixed assets 5 years

Intangible assets 10 years

Expenses related to repairs and renewals are charged when incurred and included in operating expenses unless they qualify for capitalization.

Leasehold improvements are amortized over the life of the related leased asset. Expenses related to repairs and renewals are charged when incurred and included in operating expenses unless they qualify for capitalization. Hesabat / Report 2013 131

Buildings are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, determined from market-based evidence by appraisal undertaken by professional independent appraisers, less any subsequent accumulated depreciation and impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date.

The date of the latest appraisal was December 30, 2011. The next revaluation is scheduled as at December 31, 2014.

Market value of property is assessed using the comparable sales method which involves analysis of market sales prices for similar real estate property which was also equal to the fair value of building under IFRS 13.

Any revaluation increase arising on the revaluation of such buildings is credited to the property revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognized as an expense, in which case the increase is credited to the statement of comprehensive income to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to profit and loss acounts. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

At the end of each reporting period, the Bank reviews the carrying amounts of its property, equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Bank estimates the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or Hesabat / Report 2013 132

cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit and loss accounts, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit and loss accounts, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

An item of property, equipment and intangible assets is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit and loss accounts.

Assets classified as held for sale The Bank classifies a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the non-current asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable.

The sale qualifies as highly probable if the Bank’s management is committed to a plan to sell the non-current asset and an active program to locate a buyer and complete the plan must have been initiated. Further, the non-current asset must have been actively marketed for a sale at price that is reasonable in relation to its current fair value and in addition the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification of the non-current asset as held for sale.

The Bank measures an asset classified as held for sale at the lower of its carrying amount and fair value less costs to sell. The Bank recognizes an impairment loss for any initial or subsequent write-down of the asset to fair value less costs to sell if events or changes in circumstance indicate that their carrying amount may be impaired. Any subsequent increase in an asset’s fair value less costs to sell is recognized to the extent of the cumulative impairment loss that was previously recognized in relation to that specific asset.

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax expense.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never Hesabat / Report 2013 133

taxable or deductible. The Bank’s current tax expense is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred income tax assets and deferred income tax liability are offset and reported net on the statement of financial position if:

The Bank has a legally enforceable right to set off current income tax assets against current income tax liabilities; and Deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

The Republic of Azerbaijan also has various other taxes, which are assessed on the Bank’s activities. These taxes are included as a component of operating expenses in the statement of comprehensive income.

Provisions Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). Hesabat / Report 2013 134

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Retirement and other benefit obligations In accordance with the requirements of the legislation of the Republic of Azerbaijan state pension system provides for the calculation of current payments by the employer as a percentage of current total payments to staff. This expense is charged in the period the related salaries are earned. Upon retirement all retirement benefit payments are made by pension funds selected by employees. The Bank does not have any pension arrangements separate from the state pension system of the Republic of Azerbaijan. In addition, the Bank has no post-retirement benefits or other significant compensated benefits requiring accrual.

Contingencies Contingent liabilities are not recognized in the statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote. A contingent asset is not recognized in the statement of financial position but disclosed when an inflow of economic benefits is probable.

Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. Dividends on ordinary shares are recognized in equity as a reduction in the period in which they are declared.

Dividends that are declared after the reporting date are treated as a subsequent event under International Accounting Standard 10 “Events after the Reporting Date” (“IAS 10”) and disclosed accordingly.

Foreign currency translation The functional currency of the Bank is the currency of the primary economic environment, in which it operates. The Bank’s functional currency is AZN.

Monetary assets and liabilities denominated in foreign currencies are translated into AZN at the appropriate spot rates of exchange of the CBRA ruling at the end of reporting date. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transaction. Profits and losses arising from these translations are included in net gain/(loss) on foreign exchange operations. Hesabat / Report 2013 135

Rates of exchange The exchange rates at reporting date used by the Bank in the preparation of the financial statements are as follows:

December 31, 2013 December 31, 2012

USD/AZN 0.7845 0.7850

EUR/AZN 1.0780 1.0377

Operating Segments Operating segments are identified on the basis of internal reports about components of the Bank that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Bank’s segmental reporting is based on the following operating segments: Retail banking (Principally handling individual customers’ deposits, and providing consumer loans, overdrafts, credit cards facilities and funds transfer facilities) and Corporate banking (Principally handling loans and other credit facilities and deposit and current accounts for corporate and institutional customers).

The Bank measures information about reportable segments in accordance with IFRS. Information about reportable operating segment meets any one of the following quantitative thresholds:

Its reported revenue, from both external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments; or The absolute measure of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss; or Its assets are 10 per cent or more of the combined assets of all operating segments.

If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity’s revenue, additional operating segments are identified as reportable segments (even if they do not meet the quantitative thresholds set out above) until at least 75 per cent of the Bank’s revenue is included in reportable segments.

Critical accounting judgements and key sources of estimation uncertainty The preparation of the Bank’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the reporting date and the reported amount of income and expenses during the period ended. Management evaluates its estimates and judgments on an ongoing basis. Management bases its estimates and judgments on historical experience and on various other factors Hesabat / Report 2013 136

that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The following estimates and judgments are considered important to the portrayal of the Bank’s financial condition.

Allowance for impairment of loans The Bank regularly reviews its loans to assess for impairment. The Bank’s loan impairment provisions are established to recognize incurred impairment losses in its portfolio of loans and receivables. The Bank considers accounting estimates related to allowance for impairment of loans and receivables a key source of estimation uncertainty because (i) they are highly susceptible to change from period to period as the assumptions about future default rates and valuation of potential losses relating to impaired loans and receivables are based on recent performance experience, and (ii) any significant difference between the Bank’s estimated losses and actual losses would require the Bank to record provisions which could have a material impact on its financial statements in future periods.

The Bank uses management’s judgment to estimate the amount of any impairment loss in cases where a borrower has financial difficulties and there are few available sources of historical data relating to similar borrowers. Similarly, the Bank estimates changes in future cash flows based on past performance, past customer behavior, observable data indicating an adverse change in the payment status of borrowers in a group, and national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the group of loans. The Bank uses management’s judgment to adjust observable data for a group of loans to reflect current circumstances not reflected in historical data.

The allowances for impairment of financial assets in the financial statements have been determined on the basis of existing economic and political conditions. The Bank is not in a position to predict what changes in conditions will take place in the country and what effect such changes might have on the adequacy of the allowances for impairment of financial assets in future periods.

The carrying amount of the allowance for impairment of interest bearing assets was AZN 9,146 thousand and AZN 7,821 thousand as at December 31, 2013 and 2012, respectively.

Valuation of Financial Instruments Financial instruments that are classified at a fair value through profit or loss or available-for-sale, and all derivatives, are stated at a fair value. The fair value of such financial instruments is the estimated amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. If a quoted market price is available for an instrument, the fair value is calculated based on the market price. When valuation parameters are not observable in the market or cannot be derived from observable market prices, the fair value is derived through analysis of other observable market data appropriate for each product and pricing models which use a mathematical methodology based on accepted financial theories. Pricing models take into account the contract terms of the securities as well as market-based valuation parameters, such as interest rates, volatility, exchange rates and the credit rating of the counterparty.

Hesabat / Report 2013 137

Where market-based valuation parameters are not directly observable, management will make a judgment as to its best estimate of that parameter in order to determine a reasonable reflection of how the market would be expected to price the instrument. In exercising this judgment, a variety of tools are used including proxy observable data, historical data, and extrapolation techniques. The best evidence of fair value of a financial instrument at initial recognition is the transaction price unless the instrument is evidenced by comparison with data from observable markets. Any difference between the transaction price and the value based on a valuation technique is not recognized in the statement of comprehensive income on initial recognition. Subsequent gains or losses are only recognized to the extent that it arises from a change in a factor that market participants would consider in setting a price.

The Bank considers that the accounting estimate related to valuation of financial instruments where quoted markets prices are not available is a key source of estimation uncertainty because: (i) it is highly susceptible to change from period to period because it requires management to make assumptions about interest rates, volatility, exchange rates, the credit rating of the counterparty, valuation adjustments and specific feature of the transactions and (ii) the impact that recognizing a change in the valuations would have on the assets reported on its statement of financial position as well as its profit and loss accounts could be material.

Had management used different assumptions regarding the interest rates, volatility, exchange rates, the credit rating of the counterparty and valuation adjustments, a larger or smaller change in the valuation of financial instruments where quoted market prices are not available would have resulted that could have had a material impact on the Bank’s reported net income.

3. ADOPTION OF NEW AND REVISED STANDARDS

In the current year, the Bank has adopted all of the new and revised Standards and Interpretations issued by the IASB and the IFRIC of the IASB that are relevant to its operations and effective for annual reporting periods ending in December 31, 2013. The adoption of these new and revised Standards and Interpretations has not resulted in significant changes to the Bank’s accounting policies that have affected the amounts reported for the current or prior years.

Amendment to IAS 1 “Financial statement Presentation” regarding other comprehensive income – The main change resulting from these amendments is a requirement for entities to group items presented in “other comprehensive income” (OCI) on the basis of whether they are potentially re-classifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The effective date for the application of the amendment is annual periods beginning on or after July 1, 2012. Hesabat / Report 2013 138

Amendment to IAS 19 “Employee benefits” – These amendments eliminate the corridor approach and calculate finance costs on a net funding basis. The effective date for the application of the amendment is annual periods beginning on or after January 1, 2013.

Amendments to IFRS 1 “First-time Adoption” on government loans – This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existent preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. The effective date for the application of the amendment is annual periods beginning on or after January 1, 2013.

Amendment to IFRS 7 “Financial instruments: Disclosures’, on asset and liability offsetting – This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The effective date for the application of the amendment is annual periods beginning on or after January 1, 2013.

Amendment to IFRSs 10, 11 and 12 on transition guidance – These amendments provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. The effective date for the application of the amendment is annual periods beginning on or after January 1, 2013.

Annual improvements 2011 – These annual improvements, address six issues in the 2009-2011 reporting cycle. It includes changes to:

IFRS 1 “First time adoption” IAS 1 “Financial statement presentation” IAS 16 “Property plant and equipment” IAS 32 “Financial instruments: Presentation” IAS 34 “Interim financial reporting”

The effective date for the application of the amendment is annual periods beginning on or after January 1, 2013.

IFRS 10 “Consolidated Financial Statements” – IFRS 10 “Consolidated Financial Statements” provides a single consolidation model that identifies control as the basis for consolidation for all types of entities. The standard sets out requirements for situations when control is difficult to assess, including cases involving potential voting rights, agency relationships, control of specified assets and circumstances in which voting rights are not the dominant factor in determining control. In addition IFRS 10 introduces specific application guidance for agency relationships.

The standard also contains accounting requirements and consolidation procedures, which are carried over unchanged from IAS 27. IFRS 10 replaces Hesabat / Report 2013 139

the consolidation requirements in SIC-12 “Consolidation - Special Purpose Entities” and IAS 27 “Consolidated and Separate Financial Statements” and is effective for annual periods beginning on or after January 1, 2013.

IFRS 11 “Joint Arrangements” – IFRS 11 “Joint Arrangements” improves the accounting for joint arrangements by introducing a principle-based approach that requires a party to a joint arrangement to recognize its rights and obligations arising from the arrangement. The classification of a joint arrangement is determined by assessing the rights and obligations of the parties arising from that arrangement. There are only two types of arrangements provided in the standard - joint operation and joint venture. IFRS 11 also eliminates proportionate consolidation as a method to account for joint ventures. IFRS 11 supersedes IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-monetary Contributions by Venturers” and is effective for annual periods beginning on or after January 1, 2013.

IFRS 12 “Disclosure of Interests in Other Entities” – IFRS 12 “Disclosure of Interests in Other Entities” issued in May 2011 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013.

IFRS 13 “Fair Value Measurement” – IFRS 13 “Fair Value Measurement” defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. The standard applies when other IFRS require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRSs or address how to present changes in fair value. IFRS 13 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IAS 27 (revised 2011) “Separate financial statements” – IAS 27 (revised 2011) includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. It is effective for annual periods beginning on or after January 1, 2013.

IAS 28 (revised 2011) “Associates and joint ventures” – IAS 28 (revised 2011) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. It is effective for annual periods beginning on or after January 1, 2013

IFRIC 20 “Stripping costs in the production phase of a surface mine” – This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine. The interpretation may require mining entities reporting under IFRS to write off existing stripping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body. It is effective for annual periods beginning on or after January 1, 2013.

Unless otherwise described above, the new Standards and Interpretations are not expected to significantly affect the Bank’s financial statements. Hesabat / Report 2013 140

4. STANDARDS AND INTERPRETATIONS ISSUED AND NOT YET ADOPTED

At the date of authorization of these financial statements, other than the Standards and Interpretations adopted by the Bank in advance of their effective dates, the following Interpretations were in issue but not yet effective.

Amendment to IAS 32, “Financial instruments: Presentation”, on asset and liability offsetting – These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. It is effective for annual periods beginning on or after January 1, 2014.

Amendments to IFRS 10, IFRS 12 and IAS 27 on Investment Entities – Amends IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 27 “Separate Financial Statements” to:

Provide “investment entities” (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 “Financial Instruments” or IAS 39 “Financial Instruments: Recognition and Measurement”; Require additional disclosure about why the entity is considered an investment entity, details of the entity’s unconsolidated subsidiaries, and the nature of relationship and certain transactions between the investment entity and its subsidiaries; Require an investment entity to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements (or to only provide separate financial statements if all subsidiaries are unconsolidated).

It is effective for annual periods beginning on or after January 1, 2014.

Amendment to IAS 36, “Impairment of Assets”: Recoverable Amounts Disclosures for Non-Financial Assets – Amends IAS 36 Impairment of Assets to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. The amendments are to be applied retrospectively for annual periods beginning on or after January 1, 2014. Earlier application is permitted for periods when the entity has already applied IFRS 13.

Amendment to IAS 39, “Financial Instruments: Recognition and Measurement”: Novation of Derivatives and Continuation of Hedge Accounting – Amends IAS 39 Financial Instruments: Recognition and Measurement make it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. A novation indicates an event where the original parties to a derivative agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each of the parties. In order Hesabat / Report 2013 141

to apply the amendments and continue hedge accounting, novation to a central counterparty (CCP) must happen as a consequence of laws or regulations or the introduction of laws or regulations.

It is effective for annual periods beginning on or after January 1, 2014. Earlier application is permitted.

IFRIC 21 “Levies” – Provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and those where the timing and amount of the levy is certain. The Interpretation identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. It provides the following guidance on recognition of a liability to pay levies:

• The liability is recognized progressively if the obligating event occurs over a period of time; • If an obligation is triggered on reaching a minimum threshold, the liability is recognized when that minimum threshold is reached.

It is effective for annual periods beginning on or after January 1, 2014.

IFRS 9 “Financial Instruments” – issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for de-recognition.

• IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods;

• The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit and loss accounts. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit and loss accounts. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit and loss accounts was recognized in profit and loss accounts. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. Hesabat / Report 2013 142

The Bank is considering the implications of the standard, the impact on the Bank and the timing of its adoption by the Bank.

Unless otherwise described above, the new Standards and Interpretations are not expected to significantly affect the Bank’s financial statements.

5. NET INTEREST INCOME

Year ended Year ended December 31, 2013 December 31, 2012

Interest income comprises:

Interest income on financial assets recorded at amortized cost:

Interest income on impaired financial assets 3,311 16,250

Interest income on unimpaired assets 27,104 10,702

Interest income on guarantees 859 529

Other interest income 3 -

Total interest income 31,277 27,481

Interest income on financial assets recorded at amortized cost comprises:

Interest income on loans to customers 30,341 26,772

Interest income on due from banks 74 180

Total interest income on financial assets recorded at amortized cost 30,415 26,952

Interest income on guarantees 859 529

Other interest income 3 -

Total interest income on other assets 862 529

Total interest income 31,277 27,481 Hesabat / Report 2013 143

Year ended Year ended December 31, 2013 December 31, 2012

Interest expense comprises:

Interest expense on financial liabilities recorded at amortized cost comprises:

Interest expense on customer accounts (10,577) (7,769)

Interest expense on due to banks and other financial institutions (3,672) (4,026)

Interest expense on debt securities issued (1,023) (448)

Total interest expense (15,272) (12,243)

Net interest income before provision for impairment losses on interest bearing financial assets 16,005 15,238

6. ALLOWANCE FOR IMPAIRMENT LOSSES, OTHER PROVISIONS

The movements in allowance for impairment losses on interest bearing assets were as follows:

Loans to customers Due from banks Total

January 1, 2012 6,389 30 6,419

Additional provisions recognised/(recovery of provisions) 7,756 (24) 7,732

Write-off of loans (6,333) - (6,333)

Recoveries of loans previously written off 3 - 3

December 31, 2012 7,815 6 7,821

Additional provisions recognised 2,661 3 2,664

Write-off of loans (1,341) - (1,341)

Recoveries of loans previously written off 2 - 2

December 31, 2013 9,137 9 9,146 Hesabat / Report 2013 144

The movements in allowances for impairment losses on other assets, guarantees and other commitments were as follows:

Guarantees and other commitments

January 1, 2012 539

Provision 511

December 31, 2012 1,050

Provision 787

December 31, 2013 1,837

7. NET GAIN ON FOREIGN EXCHANGE OPERATIONS

Net gain on foreign exchange operations comprises:

Year ended Year ended December 31, 2013 December 31, 2012

Dealing, net 478 499

Translation differences, net (17) (21)

Total net gain on foreign exchange operations 461 478 Hesabat / Report 2013 145

8. FEE AND COMMISSION INCOME AND EXPENSE

Fee and commission income and expense comprise:

Year ended Year ended December 31, 2013 December 31, 2012

Fee and commission income:

Cash operations 6,743 8,854

Foreign exchange operations 2,523 1,089

Settlements and account servicing operations 832 916

Plastic card operations 550 341

Documentary operations 508 252

Other - 9

Total fee and commission income 11,156 11,461

Fee and commission expense:

Documentary operations (321) (401)

Cash operations (294) (13)

Plastic card operations (257) (210)

Settlements and account servicing operations (152) (110)

Securities operations (7) (2)

Total fee and commission expense (1,031) (736) Hesabat / Report 2013 146

9. OPERATING EXPENSES

Operating expenses comprise:

Year ended Year ended December 31, 2013 December 31, 2012

Staff costs 8,791 6,828

Depreciation and amortization 3,433 2,366

Rent expenses 947 737

Advertising expenses 657 719

Security expenses 622 560

Taxes other than income tax 618 323

Communication expenses 493 385

Payments to the deposit insurance fund 391 291

Printing and office supplies 349 255

Business trip expenses 292 131

Repair and maintenance 237 181

Professional fees 215 158

Utilities 119 119

Insurance expenses 88 57

Software maintenance 61 51

Membership fees 16 18

Other expenses 489 54

Total operating expenses 17,818 13,233 Hesabat / Report 2013 147

10. INCOME TAXES

The Bank measures and records its current income tax payable and its tax bases related to assets and liabilities in accordance with the statutory tax regulations of the Republic of Azerbaijan where the Bank operates, which differ from IFRS.

The Bank is subject to certain permanent tax differences due to non-tax deductibility of certain expenses and certain income being treated as non- taxable for tax purposes.

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Temporary differences as at December 31, 2013 and 2012 relate mostly to different methods/timing of income and expense recognition as well as to temporary differences generated by taxation bases’ differences for certain assets.

Tax legislation of the Republic of Azerbaijan in particular may give rise to varying interpretations and amendments. In addition, as management’s interpretation of tax legislation may differ from that of the tax authorities, transactions may be challenged by the tax authorities, and as a result the Bank may be assessed additional taxes, penalties and interest which could be material for these financial statements.

Temporary differences as at December 31, 2013 and 2012 comprise:

December 31, 2013 December 31, 2012

Taxable temporary differences:

Property and equipment (1,557) (1,697)

Total taxable temporary differences (1,557) (1,697)

Net taxable temporary differences (1,557) (1,697)

Net deferred income tax liability 311 339 Hesabat / Report 2013 148

Relationships between tax expenses and accounting profit for the year ended December 31, 2013 and 2012 are explained as follows:

Year ended Year ended December 31, 2013 December 31, 2012

Profit before income tax 5,376 4 ,976

Statutory tax rate 20% 20%

Theoretical tax at the statutory tax rate 1,075 995

Tax effect of permanent differences 277 104

Income tax expense 1,352 1,099

Year ended Year ended December 31, 2013 December 31, 2012

Current income tax expense 1,355 1,122

Deferred tax benefit recognized in profit and loss accounts (3) (23)

Income tax expense 1,352 1,099 December 31, 2013 December 31, 2012

Deferred tax liability

Beginning of the period 339 378

Change in the deferred income tax recognized in profit and loss accounts (3) (23)

Change in the deferred income tax recognized in other components of comprehensive income (25) (16)

End of the period 311 339 Hesabat / Report 2013 149

11. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares used in calculation of basic and diluted earnings per share are as follows:

Year ended Year ended December 31, 2013 December 31, 2012

Profit:

Net profit for the year 4,024 3,877

Earnings used in calculation of earnings per share 4,024 3,877

Weighted average number of ordinary shares for basic earnings per share 199,899 134,668

Earnings per share – basic and diluted (AZN) 20.13 28.79 Hesabat / Report 2013 150

12. CASH AND BALANCES WITH THE CENTRAL BANK OF THE REPUBLIC OF AZERBAIJAN

Cash and balances with the CBRA comprise:

December 31, 2013 December 31, 2012

Balances with the CBRA 47,261 47,403

Cash 16,757 9,126

Total cash and balances with the CBRA 64,018 56,529

The obligatory minimum reserve deposits with the CBRA included in the balances with the CBRA as at December 31, 2013 and 2012, include AZN 4,158 thousand and AZN 2,719 thousand, respectively, which represent the minimum reserve deposits required by the CBRA. The Bank is required to maintain the reserve balance at the CBRA at all times provided that average daily balance for 30 days period will be eventually higher than required mandatory reserve.

Cash and cash equivalents for the purposes of the statement of cash flows comprise:

December 31, 2013 December 31, 2012

Cash and balances with the CBRA 64,018 56,529

Due from banks in OECD countries excluding restricted balance (Note 28) 11,707 1,349 75,725 57,878

Less minimum reserve deposit with the CBRA (4,158) (2,719)

Total cash and cash equivalents 71,567 55,159 Hesabat / Report 2013 151

13. DUE FROM BANKS

Due from banks comprises:

December 31, 2013 December 31, 2012 Correspondent accounts with other banks 13,210 1,875 Loans to banks 450 300 Restricted deposits 296 171 Less allowance for impairment losses (9) (6) Total due from banks 13,947 2,340

Accrued interest receivable on due from banks was nil as at December 31, 2013 (2012: nil).

As at December 31, 2013 and 2012, maximum credit risk exposure of due from banks amounted to AZN 13,947 thousand and AZN 2,340 thousand, respectively.

14. LOANS TO CUSTOMERS

Loans to customers comprise:

December 31, 2013 December 31, 2012 Originated loans 227,167 207,969 Less allowance for impairment losses (9,137) (7,815) Total loans to customers, net 218,030 200,154

Included in loans to customers is accrued interest receivable in the amount of AZN 9,469 thousand and AZN 6,291 thousand as at December 31, 2013 and 2012, respectively. Hesabat / Report 2013 152

Movements in allowance for impairment losses for the years ended December 31, 2013 and 2012 are disclosed in Note 6.

The table below summarizes carrying value of loans to customers analyzed by type of collateral obtained by the Bank:

December 31, 2013 December 31, 2012 Loans collateralized by pledge of real estate 130,936 137,265 Loans collateralized by pledge of vehicles 29,541 23,151 Loans collateralized by cash deposits 8,901 7,545 Loans collateralized by guarantees 8,161 5,933 Loans collateralized by pledge of inventories 1,973 1,954 Loans collateralized by securities 1,018 693 Loans collateralized by others 4,645 4,259 Unsecured loans 32,855 19,354 Total loans to customers 218,030 200,154

December 31, 2013 December 31, 2012 Analysis by industry: Individuals 88,731 66,187 Trade and service 53,893 52,167 Agriculture 33,729 29,375 Construction 19,008 26,218 Manufacturing 22,654 26,175 Other 15 32 Total loans to customers 218,030 200,154 Hesabat / Report 2013 153

Loans to individuals comprise the following products:

December 31, 2013 December 31, 2012

Mortgage loans 35,597 29,641

Consumer loans 24,407 14,550

Car loans 20,077 13,815

Plastic cards 5,534 4,573

Other 3,116 3,608

Total loans to individuals, net 88,731 66,187

Information about collateral at December 31, 2013 is as follows:

Corporate Loans to individuals Loans to individuals Loans to individuals Loans to individuals Loans to individuals Total loans -mortgage loans -consumer loans -car loans - plastic cards -others

Unsecured loans 9,687 - 20,190 25 3,415 762 34,179

Loans collateralized by:

Real estate 98,522 36,324 212 - 37 2,073 137,168 Vehicles 9,589 - 206 20,596 1 - 30,392 Guarantees 7,027 - 1,010 - 1,029 13 9,079 Cash deposits 5,577 - 1,708 - 1,172 24 8,481 Inventories 2,033 - - - - - 2,033 Securities 532 - - - - 521 1,053 Others 2,788 - 1,994 - - - 4,782 Less: Provision for loan impairment (6,456) (727) (1,013) (544) (120) (277) (9,137)

Total loans to customers, net 129,299 35,597 24,407 20,077 5,534 3,116 218,030 Hesabat / Report 2013 154

Information about collateral at December 31, 2012 is as follows:

Loans to individuals Loans to individuals Loans to individuals Loans to individuals Loans to individuals Corporate loans Total -mortgage loans -consumer loans -car loans -plastic cards -others

Unsecured loans 7,821 - 9,280 1 2,938 110 20,150

Loans collateralized by:

Real estate 108,498 30,242 3,857 - 48 502 143,147

Vehicles 9,439 - 96 14,176 18 12 23,741

Guarantees 5,936 - 922 - 834 - 7,692

Cash deposits 4,158 - 1,153 - 840 - 6,151

Inventories 1,984 - 18 - - - 2,002

Securities 389 - 318 - - - 707

Others 1,313 - - - - 3,066 4,379

Less: Provision for loan impairment (5,571) (601) (1,094) (362) (105) (82) (7,815)

Total loans to customers, net 133,967 29,641 14,550 13,815 4,573 3,608 200,154 Hesabat / Report 2013 155

The analysis by credit quality of loans outstanding in December 31, 2013 is as follows:

Loans to Loans to Loans to Loans to Loans to Corporate individuals individuals individuals - individuals - individuals Total loans -mortgage -consumer car loans plastic cards -others loans loans Total current and not impaired loans 127,700 36,203 23,124 19,305 5,293 2,990 214,615 Loans individually determined to be impaired Less than 30 days overdue 593 - 200 585 23 66 1,467 30 to 90 days overdue 1,164 - 177 400 40 18 1,799 90 to 180 days overdue 2,489 72 210 204 14 77 3,066 180 to 360 days overdue 1,889 49 213 86 82 41 2,360 Over 360 days overdue 1,922 - 1,496 41 202 199 3,860 Total individually impaired loans 8,057 121 2,296 1,316 361 401 12,552 Gross carrying value of total loans to customers 135,757 36,324 25,420 20,621 5,654 3,391 227,167 Less provision for loan impairment (6,456) (727) (1,013) (544) (120) (277) (9,137) Total loans to customers, net 129,301 35,597 24,407 20,077 5,534 3,114 218,030 Hesabat / Report 2013 156

The analysis by credit quality of loans outstanding in December 31, 2012 is as follows:

Loans to Loans to Loans to Loans to Loans to Corporate individuals individuals individuals - individuals - individuals Total loans -mortgage -consumer car loans plastic cards -others loans loans Total current and not impaired loans 132,685 30,069 13,294 13,804 4,392 3,656 197,900 Loans individually determined to be impaired Less than 30 days overdue 524 124 220 242 46 28 1,184 30 to 90 days overdue 1,337 - 648 33 21 6 2,045 90 to 180 days overdue 2,115 - 931 23 125 - 3,194 180 to 360 days overdue 1,237 49 265 34 37 - 1,622 Over 360 days overdue 1,640 - 286 41 57 - 2,024 Total individually impaired loans 6,853 173 2,350 373 286 34 10,069 Gross carrying value of total loans to customers 139,538 30,242 15,644 14,177 4,678 3,690 207,969 Less provision for loan impairment (5,571) (601) (1,094) (362) (105) (82) (7,815) Total loans to customers, net 133,967 29,641 14,550 13,815 4,573 3,608 200,154

As at December 31, 2013 and 2012, the Bank had 1 loan to customer totaling to AZN 4,925 thousand and 3 loans to customers totaling to AZN 12,768 thousand, respectively, which individually exceeded 10% of the Bank’s equity.

As at December 31, 2013 and 2012, maximum credit risk exposure of loans to customers amounted to AZN 218,030 thousand and AZN 200,154 thousand, respectively.

As at December 31, 2013 and 2012, loans to customers included loans in the amount of AZN 13,773 thousand and AZN 8,956 thousand, respectively, with original terms renegotiated. Otherwise these loans would be past due or impaired. Hesabat / Report 2013 157

15. PROPERTY AND EQUIPMENT

Furniture and Computer and Buildings Vehicles Other fixed assets Total fixtures equipments

At revalued/initial cost January 1, 2012 20,780 4,102 1,114 779 138 26,913 Additions 99 293 350 411 27 1,180 Disposals (12) (1) (15) (14) (1) (43) December 31, 2012 20,867 4,394 1,1449 1,176 164 28,050 Additions 13,804 1,358 289 412 46 15,909 Disposals (85) (19) (139) (117) (34) (394) December 31, 2013 34,586 5,733 1,599 1,471 176 43,565 Accumulated depreciation January 1, 2012 - (1,739) (478) (372) (64) (2,653) Charge for the year (1,567) (454) (196) (70) (27) (2,314) Eliminated on disposals - 1 13 5 1 20 December 31, 2012 (1,567) (2,192) (661) (437) (90) (4,947) Charge for the year (2,362) (611) (248) (122) (32) (3,375) Eliminated on disposals 17 19 139 101 34 310 December 31, 2013 (3,912) (2,784) (770) (458) (88) (8,012) Net book value December 31, 2013 30,674 2,949 829 1,013 88 35,553 December 31, 2012 19,300 2,202 788 739 74 23,103

As at December 31, 2013 and 2012, included in property and equipment were fully depreciated assets in the amount of AZN 210 and AZN 195 thousand, respectively.

As at December 31, 2013 and 2012, included in property and equipment insured in the amount of AZN 18,678 and AZN 20,039 thousand, respectively. Hesabat / Report 2013 158

16. NON-CURRENT ASSETS HELD FOR SALE

According to the state registration certificate of the Azerbaijan Republic the real estate collateralized for customer loans have been repossessed by the Bank, due to default of the borrowers. The fair value of the real estate approximate to AZN 615 thousand as at December 31, 2013 (2012: AZN 481 thousand). Management believes that these assets will be sold within one year period after the reporting date.

17. OTHER ASSETS

Other assets comprise:

December 31, 2013 December 31, 2012 Other financial assets: Foreign currency trading funds 554 610 Accrued interest receivable on gurantees issued 165 107 Settlements on money transfers 40 248 Settlements on plastic cards 26 27 Receivable from Azerbaijan Deposit Insurance Fund - 540 Other receivables - 69 Total other financial assets 785 1,601 Other non-financial assets: Prepayments 537 655 Intangible assets 381 385 Other prepayments 39 - Prepaid taxes 3 70 Total other assets 1,745 2,711 Hesabat / Report 2013 159

Foreign currency trading funds in the amount of AZN 554 thousand as at December 31, 2013 (2012: AZN 610 thousand) represents deposits kept with international financial institution LMAX Ltd., which primarily are being used to hedge the Bank’s risks regarding the traders utilizing the Bank’s trading platform to trade on international foreign exchange markets.

The receivable from Azerbaijan Deposit Insurance Fund (the “ADIF”) in the amount of AZN 540 thousand represents balance of receivable from the ADIF for funds payable to customers of “Royalbank” OJSC as at December 31, 2012, whose deposits were insured by the ADIF. The Bank merely acted as a disbursment agent of the ADIF. The whole amount was received from the ADIF and paid to customers of “Royalbank” OJSC during 2013.

Intangible assets include software and licenses.

Intangible Assets

At cost January 1, 2012 481 Additions 90 December 31, 2012 571 Additions 54 December 31, 2013 625 Accumulated amortization January 1, 2012 (134) Charge for the year (52) December 31, 2012 (186) Charge for the year (58) December 31, 2013 (244) Net book value December 31, 2013 381 December 31, 2012 385 Hesabat / Report 2013 160

18. DUE TO BANKS AND OTHER FINANCIAL INSITUTIONS

Due to banks and other financial institutions comprise:

December 31, 2013 December 31, 2012 Loans from National Fund for Support of Entrepreneurship 29,983 30,909 Loans from Mortgage Fund under the CBRA 34,505 29,792 Loans from EBRD and other financial institutions 29,694 23,313 Loans from the CBRA 12,100 11,266 Deposits from Mortgage Fund under the CBRA 7,249 9,269 Loro accounts of other banks 6,574 2,364 Total due to banks and other financial institutions 120,105 106,913

Included in due to banks and other financial institutions in the amount of AZN 715 thousand and AZN 415 thousand as at December 31, 2013 and 2012, respectively is accrued interest payable.

The Bank is obligated to comply with financial covenants in relation to certain balances due to banks and other financial institutions disclosed above. These covenants include stipulated ratios, debt to equity ratios and various other financial performance ratios. The Bank did not have any significant issues with these covenants during the years ended December 31, 2013 and 2012 which could cause early withdrawal of the borrowings. Hesabat / Report 2013 161

19. CUSTOMER ACCOUNTS

Customer accounts comprise:

December 31, 2013 December 31, 2012 Deposits 109,369 93,782 Current and settlement accounts 42,866 33,677 Total customer accounts 152,235 127,459

Included in customer accounts in the amount of AZN 2,620 thousand and AZN 3,773 thousand as at December 31, 2013 and 2012, respectively is accrued interest payable.

Included in customer accounts in the amount of AZN 14,090 thousand and AZN 12,265 thousand as at December 31, 2013 and 2012, respectively are deposits blocked as collateral for loans issued.

Included in customer accounts in the amount of AZN 64,619 thousand and AZN 68,907 thousand as at December 31, 2013 and 2012, respectively are deposits secured by the ADIF.

As at December 31, 2013 and 2012, customer accounts in the amount of AZN 19,469 thousand (13%) and AZN 13,250 thousand (10%), respectively, were due to two customers, which represents significant concentration. Hesabat / Report 2013 162

December 31, 2013 December 31, 2012 Analysis by sector: Individuals 101,742 88,919 Construction 19,487 15,330 Insurance and leasing 15,580 10,421 Trade 12,927 10,813 Manufacturing 1,648 481 Agriculture 688 644 Transport and communications 28 109 Other 135 742 Total customer accounts 152,235 127,459

20. DEBT SECURITIES ISSUED

Customer accounts comprise:

December 31, 2013 December 31, 2012 Registered bonds in State Committee for Securties of the Republic of Azerbaijan 5,127 5,053 Registered bonds in Central Depository of Latvia 5,620 - Total customer accounts 10,747 5,053

Debt securities issued represent bonds for the total amount of AZN 10,747 thousand as at December 31, 2013 (2012: AZN 5,053 thousand) of which AZN 5,127 thousand issued by the Bank registered in the State Committee for Securties of the Republic of Azerbaijan with the face value of AZN 50 each and on demand with annual fixed coupon rate equal to 2%. Bond holders have the right to demand repayment of principal any time. There are no restrictions regarding sale and purchase of the bonds in the secondary markets. Hesabat / Report 2013 163

In addition during the year 2013 as an agreement between Muganbank OJSC and LCD JSC (Central Depository of Latvia) the Bank issued 7,000 debt securities with the face value of USD 1,000 each with maturity date on March 5, 2016 with annual fixed coupon rate equal to 11%. The issuer will with- hold 10% tax on source, the coupon rate net of tax to be transferred to the LCD is 9.9%. Bond holders have the right to demand early repayment of principal on March 5, 2015. There are no restrictions regarding sale and purchase of the bonds in the secondary markets.

Included in debt securities issued is accrued interest payable in the amount of AZN 468 thousand and AZN 219 thousand as at December 31, 2013 and 2012, respectively.

21. OTHER LIABILITIES

Other liabilities comprise:

December 31, 2013 December 31, 2012 Other financial liabilities: Accounts of foreign currency traders 537 1,453 Settlements payable 498 160 Accrued expenses 132 74 Settlements on plastic cards 91 - Salaries payable 10 3 Total other financial liabilities 1,268 1,690 Other non-financial liabilities: Provision for guarantees and other commitments (see Note 6) 1,837 1,050 Taxes, other than income tax payable 136 45 Other 66 24 Total other liabilities 3,307 2,809

The balance of accounts of foreign currency traders in the amount of AZN 537 thousand represents deposits received by the Bank from its customers who utilize the Bank’s trading platform to trade on international foreign exchange markets as at December 31, 2013 (2012: 1,453 thousand). Hesabat / Report 2013 164

22. SHARE CAPITAL

As at December 31, 2013 and 2012, authorized, issued and paid-in share capital consisted of 206,529 and 186,529 ordinary shares with par value of AZN 200 each. All shares are ranked equally and carry one vote.

The below table provides a reconciliation of the number of ordinary shares outstanding as at December 31, 2013 and 2012:

Ordinary shares January 1, 2012 111,250 Issue of ordinary shares 75,279 December 31, 2012 186,529 Issue of ordinary shares 20,000 December 31, 2013 206,529

During 2013 year net profit of 2012 in the amount of AZN 3,877 thousand was capitalized as a share capital increase, (2012: net profit of 2011 in the amount of AZN 6,055 thousand was capitalized as a share capital increase).

23. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank is a party to financial instruments with off-balance sheet risk in order to meet the needs of its customers. These instruments, involving varying degrees of credit risk, are not reflected in the statement of financial position.

The Bank’s maximum exposure to credit loss under contingent liabilities and commitments to extend credit, in the event of non-performance by the other party where all counterclaims, collateral or security prove valueless, is represented by the contractual amounts of those instruments.

The Bank uses the same credit control and management policies in undertaking off-balance sheet commitments as it does for on-balance operations.

Provision for losses on contingent liabilities amounted to AZN 1,837 thousand and AZN 1,050 thousand as at December 31, 2013 and 2012, respectively. Hesabat / Report 2013 165

As at December 31, 2013 and 2012 contingent liabilities comprise:

December 31, 2013 December 31, 2012 Contingent liabilities and credit commitments Guarantees issued and similar commitments 90,129 58,852 Commitments on loans and unused credit lines 13,882 10,689 Letters of credit 69 121 Total contingent liabilities and credit commitments 104,080 69,662

As at December 31, 2013 and 2012, included in commitments on loans and unused credit lines are AZN 13,882 thousand and AZN 10,689 thousand, respectively, representing the Bank’s commitments to extend loans within unused credit line limits that are conditioned on the following: a borrower has to apply to the Bank each time it wants to extend its borrowings within preliminary unused portion and the Bank may approve the extension of finance based on a borrower’s financial performance, debt service and other credit risk characteristics.

Capital regulatory commitment On July 25, 2012 Management Board of the Central Bank of the Republic of Azerbaijan took a decision to increase the threshold of aggregate capital for existent banks, as well as share capital for newly established banks up to AZN 50 million. Deadline for adjustment to the new capital requirement was January 1, 2014, however later on November 14, 2013, the CBRA Management Board decided to extend the deadline for the threshold of aggregate capital to January 1, 2015. The management of the Bank plans to increase its aggregate capital up to required level by January 1, 2015 through issuing new shares to existing shareholders. Breach of this requirement may result in revocation of banking license given by the CBRA (Please refer to Note 27 “Capital Management”).

Legal proceedings From time to time and in the normal course of business, claims against the Bank are received from customers and counterparties. Management is of the opinion that no material unaccrued losses will be incurred and accordingly no provision has been made in these financial statements.

Taxation Commercial legislation and tax legislation of the Republic of Azerbaijan in particular may give rise to varying interpretations and amendments. In addition, as management’s interpretation of tax legislation may differ from that of the tax authorities, transactions may be challenged by the tax authorities, and as a result, the Bank may be assessed additional taxes, penalties and interest. The Bank believes that it has already made all tax payments, and therefore no allowance has been made in the financial statements. Tax years remain open to review by the tax authorities for three years. Hesabat / Report 2013 166

24. TRANSACTIONS WITH RELATED PARTIES

Related parties or transactions with related parties, as defined by IAS 24 “Related party disclosures”, represent:

(a) Parties that directly, or indirectly through one or more intermediaries: control, or are controlled by, or are under common control with, the Bank (this includes parents, subsidiaries and fellow subsidiaries); have an interest in the Bank that gives then significant influ- ence over the Bank and that have joint control over the Bank; (b) Associates – enterprises on which the Bank has significant influence and which is neither a subsidiary nor a joint venture of the investor; (c) Members of key management personnel of the Bank or its parent; (d) Close members of the family of any individuals referred to in (a) or (c); (e) Parties that are entities controlled, jointly controlled or significantly influenced by, or for which; (f) Significant voting power in such entity resides with, directly or indirectly, any individual referred to in (c) or (d); or (g) Post-employment benefit plans for the benefit of employees of the Bank, or of any entity that is a related party of the Bank.

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. Details of transactions between the Bank and other related parties are disclosed below:

December 31, 2013 December 31, 2012 Related party Total category as per financial Related party Total category as per financial balances statements caption balances statements caption Loans to customers: 218,030 200,154 - Shareholders of the Bank 3,292 2,716 - Key management personnel 2,059 2,247 Allowance for impairment losses, other provisions 9,146 7,821 - Shareholders of the Bank 50 48 - Key management personnel 41 44 Customer accounts 152,235 127,459 - Shareholders of the Bank 6,583 6,201 - Key management personnel 6,157 4,619 Hesabat / Report 2013 167

Included in statement of comprehensive income for the year ended December 31, 2013 and 2012 are the following amounts which arose due to transactions with related parties:

Year ended December 31, 2013 Year ended December 31, 2012 Related party Total category as per financial Related party Total category as per financial transactions statements caption transactions statements caption Interest income 31,277 27,481 - Shareholders of the Bank 591 267 - Key management personnel 251 262 Interest expense (15,272) (12,243) - Shareholders of the Bank (1,008) (681) - Key management personnel (440) (337) Provision for impairment losses on interest bearing assets (2,664) (7,732) - Shareholders of the Bank (2) (54) - Key management personnel 3 (13) Key management personnel compensation: 8,791 6,828 - Short-term employee benefits 710 530 Hesabat / Report 2013 168

25. OPERATING SEGMENTS

Business segments

The Bank is organized on the basis of two main business segments:

• Retail banking – representing private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages; • Corporate banking – representing direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.Transactions between the operating segments consist only of reallocating of funds. Funds are ordinarily reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds are based on the Bank’s cost of capital. There are no other material items of income or expense between the business segments. Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis. Hesabat / Report 2013 169

Segment information about these businesses is presented below:

As at and for the year ended Retail Banking Corporate banking Non-allocated December 31, 2013 Interest income 19,594 11,683 - 31,277 Interest expense (9,188) (6,084) - (15,272) Provision for impairment losses on interest bearing assets (404) (2,260) - (2,664) Net gain on foreign exchange operations - - 461 461 Fee and commission income 5,593 5,563 - 11,156 Fee and commission expense - (1,031) - (1,031) Provision for impairment losses on other operations - (787) - (787) Other income - - 54 54 Operating income 15,595 7,084 515 23,194 Operating expenses - - (17,818) (17,818) Profit/(loss) before income tax 15,595 7,084 (17,303) 5,376 Income tax expense - - (1,352) (1,352) Net profit for the year 15,595 7,084 (18,655) 4,024 Segment assets 88,729 209,245 35,934 333,908 Segment liabilities 106,868 176,219 3,904 286,991 Other segment items: Depreciation and amortization charge on property, equipment and intangible assets - - 3,433 3,433 Loans to customers 88,729 129,301 - 218,030 Property, equipment and intangible assets - - 35,934 35,934 Customer accounts 101,741 50,494 - 152,235 Hesabat / Report 2013 170

As at and for the year ended Retail Banking Corporate banking Non-allocated December 31, 2012 Interest income 17,518 9,963 - 27,481 Interest expense (8,116) (4,127) - (12,243) Provision for impairment losses on interest bearing assets (6,708) (1,024) - (7,732) Net gain on foreign exchange operations - - 478 478 Fee and commission income 6,923 4,538 - 11,461 Fee and commission expense - (736) - (736) Provision for impairment losses on other operations - (511) - (511) Other income - - 11 11 Operating income 9,617 8,103 489 18,209 Operating expenses - - (13,233) (13,233) Profit/(loss) before income tax 9,617 8,103 (12,744) 4,976 Income tax expense - - (1,099) (1,099) Net profit for the year 9,617 8,103 (13,843) 3,877 Segment assets 66,187 195,643 23,488 285,318 Segment liabilities 88,919 150,506 3,148 242,573 Other segment items Depreciation and amortization charge on property, equipment and intangible assets - - 2,366 2,366 Loans to customers 66,187 133,967 - 200,154 Property, equipment and intangible assets - - 23,488 23,488 Customer accounts 88,919 38,540 - 127,459

The Bank conducts its activities only within the Republic of Azerbaijan and major parts of its revenue and net profit arrives from operations in the Republic of Azerbaijan. Hesabat / Report 2013 171

26. FAIR VALUE OF FINANCIAL INSTRUMENTS

As at December 31, 2013 and 2012 the Bank had no financial instruments measured at fair value.

The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.

Fair value measurement using

Quoted prices in active Significant observable Significant unobservable Date of valuation Total markets (Level 1) inputs (Level 2) inputs (Level 3) Assets for which fair values are disclosed Cash and balances with CBRA December 31, 2013 64,018 - - 64,018 Due from banks December 31, 2013 - - 13,947 13,947 Loans to customers December 31, 2013 - - 218,030 218,030 Other financial assets December 31, 2013 - - 785 785 Liabilities for which fair values are disclosed Due to banks and other financial institutions December 31, 2013 - - 120,105 120,105 Customer accounts December 31, 2013 - - 152,235 152,235 Debt securities issued December 31, 2013 - 5,620 5,127 10,747 Other financial liabilities December 31, 2013 - - 1,268 1,268 Hesabat / Report 2013 172

Fair value measurement using

Quoted prices in active Significant observable Significant unobservable Date of valuation Total markets (Level 1 inputs (Level 2 inputs (Level 3) Assets for which fair values are disclosed Cash and balances with CBRA December 31, 2012 56,529 - - 56,529 Due from banks December 31, 2012 - - 2,340 2,340 Loans to customers December 31, 2012 - - 200,154 200,154 Other financial assets December 31, 2012 - - 1,601 1,601 Liabilities for which fair values are disclosed Due to banks and other financial institutions December 31, 2012 - - 106,913 106,913 Customer accounts December 31, 2012 - - 127,459 127,459 Debt securities issued December 31, 2012 - - 5,053 5,053 Other financial liabilities December 31, 2012 - - 1,690 1,690

Fair value of financial assets and liabilities not carried at fair value

Set out below is a comparison by class of the carrying amounts and fair values of the Company’s financial instruments that are not carried at fair value in the statement of financial position. The table does not include the fair values of non-financial assets and non-financial liabilities. Hesabat / Report 2013 173

Carrying value Fair value Unrecognized Carrying value Fair value Unrecognized 2013 2013 gain/(loss) 2013 2012 2012 gain/(loss) 2012

Financial assets Cash and balances with the CBRA 64,018 64,018 - 56,529 56,529 - Due from banks 13,947 13,947 - 2,340 2,340 - Loans to customers 218,030 218,030 - 200,154 200,154 - Other financial assets 785 785 - 1,601 1,601 -

Financial liabilities Due to banks and other financial institutions 120,105 120,105 - 106,913 106,913 - Customer accounts 152,235 152,235 - 127,459 127,459 - Debt securities issued 10,747 10,747 - 5,053 5,053 - Other financial liabilities 1,268 1,268 - 1,690 1,690 - Total unrecognized change in unrealised fair value - -

Assets and liabilities for which fair value approximates carrying value

For financial assets and financial liabilities that are liquid or having a short term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, without a specific maturity and variable rate financial instruments.

Fixed and variable rate financial instruments

For quoted debt instruments the fair values are determined based on quoted market prices. The fair values of unquoted debt instruments are estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. Hesabat / Report 2013 174

27. CAPITAL MANAGEMENT

Quantitative measures established by the Basel Committee to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total (8%) and tier 1 capital (4%) to risk weighted assets.

The ratio was calculated according to the principles employed by the Basel Committee by applying the following risk estimates to the assets and off- balance sheet commitments net of allowances for impairment losses:

Estimate Description of position

0% Cash and balances with the CBRA

0% State debt securities in Azerbaijani Manats

20% Loans and advances to banks for up to 1 year

100% Loans and advances to customers (excluding others for residential purposes which are at 50%)

100% Other assets

50% Obligations and commitments on unused loans with the initial maturity of over 1 year

100% Guarantees

As at December 31, 2013, the Bank’s total capital amount for Capital Adequacy purposes was AZN 50,778 thousand and tier 1 capital amount was AZN 45,728 thousand with ratios of 15 % and 13.5%, respectively.

As at December 31, 2012, the Bank’s total capital amount for Capital Adequacy purposes was AZN 46,207 thousand and tier 1 capital amount was AZN 41,907 thousand with ratios of 16.7% and 15.1%, respectively. Hesabat / Report 2013 175

28. RISK MANAGEMENT POLICIES

Management of risk is fundamental to the banking business and is an essential element of the Bank’s operations. The main risks inherent to the Bank’s operations are those related to:

• Credit exposures; • Liquidity risk; • Market risk.

The Bank recognizes that it is essential to have efficient and effective risk management processes in place. To enable this, the Bank has established a risk management framework, whose main purpose is to protect the Bank from risk and allow it to achieve its performance objectives. Through the risk management framework, the Bank manages the following risks:

Credit risk The Bank is exposed to credit risk which is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

Risk management and monitoring is performed within set limits of authority, by the Credit Committees and the Bank’s Management Board. Before any application is made by the Credit Committee, all recommendations on credit processes (borrower’s limits approved, or amendments made to loan agreements, etc.) are reviewed and approved by the branch risk-manager or the Risk Management Department. Daily risk management is performed by the Head of Credit Department and the Branch’s management.

Credit divisions The Bank structures the level of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry (and geographical) segments. Limits on the level of credit risk by a borrower and a product (by industry sector, by region) are approved quarterly by the Management Board. The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on and off-balance sheet exposures which are set by the Credit Committee. Actual exposures against limits are monitored daily.Where appropriate, and in the case of most loans, the Bank obtains collateral and corporate and personal guarantees but a significant portion is personal lending, where no such facilities can be obtained. Such risks are monitored on a continuous basis and subject to annual or more frequent reviews.

Commitments to extend credit represent unused portions of credit in the form of loans, guarantees or letters of credit. The credit risk on off-balance sheet financial instruments is defined as a probability of losses due to the inability of counterparty to comply with the contractual terms and Hesabat / Report 2013 176

conditions. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to a loss in an amount equal to the total unused commitments.

However, the likely amount of the loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Bank applies the same credit policy to the contingent liabilities as it does to the statement of financial position financial instruments, i.e. the one based on the procedures for approving the grant of loans, using limits to mitigate the risk, and current monitoring. The Bank monitors the term to maturity of off-balance sheet contingencies because longer term commitments generally have a greater degree of credit risk than short-term commitments.

Maximum Exposure of credit risk The Bank’s maximum exposure to credit risk varies significantly and is dependant on both individual risks and general market economy risks.

The following table presents the maximum exposure to credit risk of financial assets and contingent liabilities. For financial assets the maximum exposure equals to a carrying value of those assets prior to any offset or collateral. For financial guarantees and other contingent liabilities the maximum exposure to credit risk is the maximum amount the Bank would have to pay if the guarantee was called on or in the case of commitments, if the loan amount was called on.

December 31, 2013

Net exposure Net exposure after Maximum exposure Offset Collateral pledged after offset offset and collateral

Due from banks 13,947 - 13,947 - 13,947

Loans to customers 218,030 8,901 209,129 176,274 32,855

Other financial assets 785 - 785 - 785

Guarantees issued and similar commitments 90,129 - 90,129 - 90,129

Unused loan commitments 13,882 - 13,882 - 13,882

Letters of credit and other transaction related contingent obligations 69 - 69 - 69 Hesabat / Report 2013 177

December 31, 2012

Net exposure Net exposure after Maximum exposure Offset Collateral pledged after offset offset and collateral

Due from banks 2,340 - 2,340 - 2,340

Loans to customers 200,154 7,545 192,609 173,255 19,354

Other financial assets 1,601 - 1,601 - 1,601

Guarantees issued and similar commitments 58,852 - 58,852 - 58,852

Unused loan commitments 10,689 - 10,689 - 10,689

Letters of credit and other transaction related contingent obligations 121 - 121 - 121

Financial assets are graded according to the current credit rating they have been issued by an international rating agency. The highest possible rating is AAA. Investment grade financial assets have ratings from AAA to BBB. Financial assets which have ratings lower than BBB are classed as speculative grade.

The following table details the credit ratings of financial assets held by the Bank:

December 31, 2013

AAA AA A BBB

December 31, 2012

AAA AA A BBB

The Bank has developed internal rating model, which allow it to determine the rating of counterparties. The rating of corporate borrower is based on an analysis of the financial ratios of the borrower, and an analysis of the market and industry sector, in which the borrower operates. The model also takes into consideration various qualitative factors, such as management efficiency and borrower’s market share.

The application of the internal rating model results in a standardized approach in the analysis of corporate borrowers and provides a quantitative assessment of the creditworthiness of a borrower that does not have a rating from an international rating agency. The model takes into account specific local market conditions.

The quality of the internal rating model is examined on a regular basis through an assessment of both its effectiveness and validity. The Bank revises the model when deficiencies are identified.

The Bank applies internal rating methodologies to specific corporate loans and groups of retail and small business loans, which incorporate various underlying master scales that are different from that used by international rating agencies. As a result, it is not possible to make a cross-product score comparison which would agree to the outstanding balance of loans to customers per the statement of financial position. As such, more detailed information is not being presented.

The banking industry is generally exposed to credit risk through its financial assets and contingent liabilities. Credit risk exposure of the Bank is concentrated within the Republic of Azerbaijan.

The exposure is monitored on a regular basis to ensure that the credit limits and creditworthiness guidelines established by the Bank’s risk management policy are not breached.

Geographical concentration

The Asset Liability Management Committee (“ALMC”) exercises control over the risk in the legislation and regulatory area and assesses its influence on the Bank’s activity. This approach allows the Bank to minimize potential losses from the investment climate fluctuations in the Republic of Azerbaijan. Hesabat / Report 2013 179

The geographical concentration of financial assets and liabilities is set out below:

The Republic Other non-OECD OECD December 31, 2013 of Azerbaijan countries countries Total

FINANCIAL ASSETS Cash and balances with the CBRA 64,018 - - 64,018 Due from banks 1,032 1,153 11,762 13,947 Loans to customers 217,927 65 38 218,030 Other financial assets 197 33 555 785 TOTAL FINANCIAL ASSETS 283,174 1,251 12,355 296,780 FINANCIAL LIABILITIES Due to banks and other financial institutions 105,929 785 13,391 120,105 Customer accounts 150,686 1,542 7 152,235 Debt securities issued 5,127 5,620 - 10,747 Other financial liabilities 672 14 582 1,268 TOTAL FINANCIAL LIABILITIES 262,414 7,961 13,980 284,355 NET POSITION 20,760 (6,710) (1,625) 12,425 Hesabat / Report 2013 180

The Republic Other non-OECD OECD December 31, 2012 of Azerbaijan countries countries Total

FINANCIAL ASSETS Cash and balances with the CBRA 56,529 - - 56,529 Due from banks 596 275 1,469 2,340 Loans to customers 200,061 91 2 200,154 Other financial assets 291 1,010 300 1,601 TOTAL FINANCIAL ASSETS 257,477 1,376 1,771 260,624 FINANCIAL LIABILITIES Due to banks and other financial institutions 98,831 - 8,082 106,913 Customer accounts 125,058 2,394 7 127,459 Debt securities issued 5,053 - - 5,053 Other financial liabilities 164 1,376 150 1,690 TOTAL FINANCIAL LIABILITIES 229,106 3,770 8,239 241,115 NET POSITION 28,371 (2,394) (6,468) 19,509

Liquidity risk

Liquidity risk refers to the availability of sufficient funds to meet deposit withdrawals and other financial commitments associated with financial instruments as they actually fall due.

The Assets and Liabilities Management Committee (“ALMC”) controls these types of risks by means of maturity analysis, determining the Bank’s strategy for the next financial period. Current liquidity is managed by the Treasury Department, which deals in the money markets for current liquidity support and cash flow optimization.

In order to manage liquidity risk, the Bank performs daily monitoring of future expected cash flows on clients’ and banking operations, which is a part of assets/liabilities management process. The Management Board sets limits on the minimum proportion of maturing funds available to meet deposit withdrawals and on the minimum level on interbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand. Hesabat / Report 2013 181

An analysis of the liquidity and interest rate risks is presented in the following table. The tables have been drawn up to detail:

(i) The remaining contractual maturity of non-derivative financial liabilities based on the undiscounted cash flows of financial liabilities (both interest and principal cash flows) based on the earliest date on which the Bank can be required to pay; and (ii) The expected maturity for non-derivative financial assets based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Bank anticipates that the cash flow will occur in a different period.

An analysis of the liquidity and interest rate risks is presented in the following table. The presentation below is based upon the information provided internally to key management personnel of the entity. Hesabat / Report 2013 182

1 month 3 months 1 year to December 31, Up to 1 month Over 5 years Overdue to 3 months to 1 year 5 years 2013 Total

FINANCIAL ASSETS Due from banks - - 441 - - - 441 Loans to customers 17,305 18,098 61,014 78,216 33,637 9,760 218,030 Total interest bearing financial assets 17,305 18,098 61,455 78,216 33,637 9,760 218,471 Cash and balances with the CBRA 59,860 - - 4,158 - - 64,018 Due from banks 13,443 - 55 - 8 - 13,506 Other financial assets 785 - - - - - 785 Total financial assets 91,393 18,098 61,510 82,374 33,645 9,760 296,780 FINANCIAL LIABILITIES Due to banks and other financial institutions 10,922 4,759 15,314 53,313 29,223 - 113,531 Customer accounts 8,671 11,378 58,354 30,966 - - 109,369 Debt securities issued 5,127 193 - 5,427 - - 10,747 Total interest bearing financial liabilities 24,720 16,330 73,668 89,706 29,223 - 233,647 Due to banks and other financial institutions 6,574 - - - - - 6,574 Customer accounts 42,866 - - - - - 42,866 Other financial liabilities 1,268 - - - - - 1,268 Total financial liabilities 75,428 16,330 73,668 89,706 29,223 - 284,355 Liquidity gap 15,965 1,768 (12,158) (7,332) 4,422 - Interest sensitivity gap (7,415) 1,768 (12,213) (11,490) 4,414 - Cumulative interest sensitivity gap (7,415) (5,647) (17,860) (29,350) (24,936) - Cumulative interest sensitivity gap as a percentage of total financial assets (2.50%) (1.90%) (6.02%) (9.89%) (8.40%) - Hesabat / Report 2013 183

1 month 3 months 1 year to December 31, Up to 1 month Over 5 years Overdue to 3 months to 1 year 5 years 2012 Total

FINANCIAL ASSETS Due from banks - - 294 - - - 294 Loans to customers 12,077 13,441 64,583 75,521 30,904 3,628 200,154 Total interest bearing financial assets 12,077 13,441 64,877 75,521 30,904 3,628 200,448 Cash and balances with the CBRA 53,810 - - 2,719 - - 56,529 Due from banks 2,042 - - - 4 - 2,046 Other financial assets 1,601 - - - - - 1,601 Total financial assets 69,530 13,441 64,877 78,240 30,908 3,628 260,624 FINANCIAL LIABILITIES Due to banks and other financial institutions 10,500 3,797 18,433 41,437 30,382 - 104,549 Customer accounts 6,855 3,830 57,883 25,214 - - 93,782 Debt securities issued 5,053 - - - - - 5,053 Total interest bearing financial liabilities 22,408 7,627 76,316 66,651 30,382 - 203,384 Due to banks and other financial institutions 2,364 - - - - - 2,364 Customer accounts 33,677 - - - - - 33,677 Other financial liabilities 1,690 - - - - - 1,690 Total financial liabilities 60,139 7,627 76,316 66,651 30,382 - 241,115 Liquidity gap 9,391 5,814 (11,439) 11,589 526 - Interest sensitivity gap (10,331) 5,814 (11,439) 8,870 522 - Cumulative interest sensitivity gap (10,331) (4,517) (15,956) (7,086) (6,564) - Cumulative interest sensitivity gap as a percentage of total financial assets (3.96%) (1.73%) (6.12%) (2.72%) (2.52%) -

The majority of the Bank’s interest earning assets and interest bearing liabilities are at fixed rates of interest.

Asset and liability maturity periods and the ability to replace interest liabilities at an acceptable cost when they mature are crucial in determining the Bank’s liquidity and its susceptibility to fluctuations in interest rates and exchange rates. Hesabat / Report 2013 184

A further analysis of the liquidity and interest rate risks is presented in the following tables in accordance with IFRS 7. The amounts disclosed in these tables do not correspond to the amounts recorded on the statement of financial position as the presentation below includes a maturity analysis for financial liabilities that indicates the total remaining contractual payments (including interest payments), which are not recognized in the statement of financial position under the effective interest rate method.

The maturity analysis of financial liabilities at December 31, 2013 is as follows:

Weighted average Up to 1 month 3 months 1 year Over December 31, effective interest rate 1 month to 3 months to 1 year to 5 years 5 years 2013 Total FINANCIAL LIABILITIES Due to banks and other financial institutions 3.47% 11,073 5,212 16,865 60,549 36,840 130,539 Customer accounts 10.15% 16,429 12,053 62,281 35,391 - 126,154 Debt securities issued 6.78% 4,855 293 261 6,388 - 11,797 Total interest bearing financial liabilities 32,357 17,558 79,407 102,328 36,840 268,490 Due to banks and other financial institutions 6,574 - - - - 6,574 Customer accounts 42,866 - - - - 42,866 Other financial liabilities 1,268 - - - - 1,268 TOTAL FINANCIAL LIABILITIES 83,065 17,558 79,407 102,328 36,840 319,198

Weighted average Up to 1 month 3 months 1 year Over December 31, effective interest rate 1 month to 3 months to 1 year to 5 years 5 years 2012 Total FINANCIAL LIABILITIES Due to banks and other financial institutions 3.17% 10,579 4,490 21,125 51,751 47,125 135,070 Customer accounts 10.68% 6,989 4,418 62,799 29,491 - 103,697 Debt securities issued 2.00% 5,061 - - - - 5,061 Total interest bearing financial liabilities 22,629 8,908 83,924 81,242 47,125 243,828 Due to banks and other financial institutions 2,364 - - - - 2,364 Customer accounts 33,677 - - - - 33,677 Other financial liabilities 1,690 - - - - 1,690 Total financial liabilities 60,360 8,908 83,924 81,242 47,125 281,559 Hesabat / Report 2013 185

Market risk

Market risk covers interest rate risk, currency risk and other pricing risks to which the Bank is exposed. There have been no changes as to the way the Bank measures risk or to the risk it is exposed in 2013 and 2012.

The ALMC also manages interest rate and market risks by matching the Bank’s interest rate position, which provides the Bank with a positive interest margin. The Department of Financial Control conducts monitoring of the Bank’s current financial performance, estimates the Bank’s sensitivity to changes in interest rates and its influence on the Bank’s profitability.

Interest rate risk

The Bank manages fair value interest rate risk through periodic estimation of potential losses that could arise from adverse changes in market conditions. The Department of Financial Control conducts monitoring of the Bank’s current financial performance, estimates the Bank’s sensitivity to changes in fair value interest rates and its influence on the Bank’s profitability.

The following table presents a sensitivity analysis of interest rate risk, which has been determined based on “reasonably possible changes in the risk variable”. The level of these changes is determined by management and is contained within the risk reports provided to key management personnel.

Impact on profit before tax:

As at December 31, 2013 As at December 31, 2012

Interest rate +1% Interest rate +1% Interest rate +1% Interest rate +1%

FINANCIAL ASSETS Due from banks 4 (4) 3 (3) Loans to customers 2,180 (2,180) 2,002 (2,002) FINANCIAL LIABILITIES Due to banks and other financial institutions (1,135) 1,135 (1,045) 1,045 Customer accounts (1,094) 1,094 (938) 938 Debt securities issued (107) 107 (51) 51 Net impact on profit before tax (152) 152 (29) 29 Hesabat / Report 2013 186

Currency risk

Currency risk is defined as the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.

The ALMC controls currency risk by management of the open currency position on the estimated basis of AZN devaluation and other macroeconomic indicators, which gives the Bank an opportunity to minimize losses from significant currency rates fluctuations toward its national currency. The Treasury Department performs daily monitoring of the Bank’s open currency position with the aim to match the requirements of the CBRA.

The Bank’s exposure to foreign currency exchange rate risk is presented in the table below:

December 31, 2013

AZN USD EUR Other Total FINANCIAL ASSETS Cash and balances with the CBRA 58,449 4,502 807 260 64,018 Due from banks 441 11,800 1,374 332 13,947 Loans to customers 180,551 36,688 791 - 218,030 Other financial assets 89 678 15 3 785 TOTAL FINANCIAL ASSETS 239,530 53,668 2,987 595 296,780 FINANCIAL LIABILITIES Due to banks and other financial institutions 102,478 17,505 119 3 120,105 Customer accounts 123,546 25,906 2,763 20 152,235 Debt securities issued 5,127 5,620 - - 10,747 Other financial liabilities 619 642 5 2 1,268 TOTAL FINANCIAL LIABILITIES 231,770 49,673 2,887 25 284,355 OPEN CURRENCY POSITION 7,760 3,995 100 570 12,425 Hesabat / Report 2013 187

December 31, 2012

AZN USD EUR Other Total FINANCIAL ASSETS Cash and balances with the CBRA 52,916 3,130 278 205 56,529 Due from banks 294 623 1,330 93 2,340 Loans to customers 161,758 37,526 870 - 200,154 Other financial assets 222 1,203 117 59 1,601 TOTAL FINANCIAL ASSETS 215,190 42,482 2,595 357 260,624 FINANCIAL LIABILITIES Due to banks and other financial institutions 96,366 10,433 114 - 106,913 Customer accounts 95,970 28,628 2,753 108 127,459 Debt securities issued 5,053 - - - 5,053 Other financial liabilities 164 1,514 9 3 1,690 TOTAL FINANCIAL LIABILITIES 197,553 40,575 2,876 111 241,115 OPEN CURRENCY POSITION 17,637 1,907 (281) 246 19,509

Currency risk sensitivity

The following table details the Bank’s sensitivity to a 10% increase and decrease in the USD and EUR against AZN. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign currency exchange rates.

The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the period for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Bank where the denomination of the loan is in a currency other than the currency of the lender or the borrower. Hesabat / Report 2013 188

As at December 31, 2013 As at December 31, 2012 AZN/USD +10% AZN/USD -10% AZN/USD +10% AZN/USD -10% Impact on profit before tax 400 (400) 191 (191)

As at December 31, 2013 As at December 31, 2012 AZN/EUR +10% AZN/EUR -10% AZN/EUR +10% AZN/EUR -10% Impact on profit before tax (10) 10 (28) 28

Price risks Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market. The Bank is exposed to other price risks of its products which are subject to general and specific market fluctuations.

Limitations of sensitivity analysis The above tables demonstrate the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is a correlation between the assumptions and other factors.

It should also be noted that these sensitivities are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results.

The sensitivity analysis does not take into consideration that the Bank’s assets and liabilities are actively managed. Additionally, the financial position of the Bank may vary at the time that any actual market movement occurs. For example, the Bank’s financial risk management strategy aims to manage the exposure to market fluctuations. As investment markets move past various trigger levels, management actions could include selling investments, changing investment portfolio allocation and taking other protective action. Consequently, the actual impact of a change in the assumptions may not have any impact on the liabilities, whereas assets are held at market value on the statement of financial position. In these circumstances, the different measurement bases for liabilities and assets may lead to volatility in shareholder equity.

Other limitations in the above sensitivity analyses include the use of hypothetical market movements to demonstrate potential risk that only represent the Bank’s view of possible near-term market changes that cannot be predicted with any certainty; and the assumption that all interest rates move in an identical fashion.