DENİZBANK FINANCIAL SERVICES GROUP ANNUAL REPORT 2013 DenizBank is a member of Sberbank Group. SECTION I INTRODUCTION 37 Operations Group 1 DenizBank Financial Services Group (DFSG) 37 Information Technology and Support Operations Group 2 DenizBank’s Mission and Vision 37 Organization 2 Dividend Distribution Policy 38 Service Quality 3 Dividend Distribution Proposal 39 CRM- Customer Relationship Management 3 Amendments to the Articles of Association 39 Card Payment R&D/Operations 3 Shareholding Structure, Paid-in Capital and Changes, Shares 40 Credits Project Management Held by the Management 40 Branch and Central Operations Group 3 Changes in the Management, Shareholding Structure and 43 Foreign Subsidiaries Activities of DFSG Companies 44 Information Technology (IT) Services 4 DenizBank in Brief 46 Investment Banking and Brokerage Services 6 Sberbank in Brief 48 Leasing, Factoring and Asset Management Services 8 Financial Highlights 50 Cultural Services 10 2013 at a Glance… 11 Awards 12 Message from the Chairman SECTION II MANAGEMENT AND CORPORATE 13 Message from the CEO GOVERNANCE 15 Banking Services 16 Retail Banking Group 51 Board of Directors 16 Affluent Banking 59 Resident Board Members 17 Mass Banking 60 Executive Board 18 Retail Banking Products 64 Executive Management 19 Branch and ATM Planning 65 Committees 20 SME and Agricultural Banking Group 66 Summary Report of Board of Directors to the General Assembly 20 SME Banking 67 Donations Made in 2013 21 Agricultural Banking 67 Related Party Transactions 23 Merchant Relations 67 Human Resources 23 Gold Banking 69 Training 24 Wholesale Banking Group 70 Support Services 24 Corporate Banking Group 72 DenizBank Corporate Governance Principles Compliance Report 24 Corporate Banking 25 Cash Management 25 Commercial Banking and Public Finance Group 26 Commercial Banking SECTION III FINANCIAL INFORMATION AND RISK 26 Public Finance MANAGEMENT 26 Bancassurance (Non-Life) 27 Project Finance 80 Internal Audit, Internal Control, Compliance and Risk 28 Payment Systems and Non-Branch Channels Group Management Systems 28 Credit Cards 83 Assessments of the Audit Committee 28 Debit Cards 85 Annual Report Compliance Opinion 29 Call Center 86 Five-Year Summary Financial Highlights 30 Telemarketing and Customer Retention 88 Assessment of Financial Position 30 Direct Sales 89 Capital Market Instruments Issued by DenizBank 31 Treasury, Financial Institutions, Private Banking Group 89 Ratings of DenizBank by International Rating Agencies 31 Treasury 31 Treasury Sales 32 Financial Institutions SECTION IV INDEPENDENT AUDIT REPORTS, FINANCIAL 32 Structured Finance STATEMENTS AND NOTES 33 Private Banking 34 Digital Generation Banking 91 Consolidated Financial Statements as of December 31, 2013 34 Digital Strategy, Marketing and Performance with Independent Auditor’s Report Management 201 Directory 35 Cloud-Mobile Platforms Management and ATM Projects 36 Internet Banking, Web Platforms and Social Media Management 1 DENİZBANK FINANCIAL SERVICES GROUP (DFSG) BANKING SERVICES INVESTMENT BANKING AND DENİZBANK BROKERAGE SERVICES DENİZBANK AG (AUSTRIA) DENİZYATIRIM SECURITIES DENİZBANK MOSCOW (RUSSIAN FEDERATION) EKSPRESINVEST SECURITIES EURODENİZ INTERNATIONAL BANKING UNIT LTD. (TRNC) DENİZ REAL ESTATE INVESTMENT TRUST DENİZPORTFOLIO MANAGEMENT LEASING, FACTORING AND ASSET INFORMATION TECHNOLOGY MANAGEMENT SERVICES SERVICES DENİZLEASING INTERTECH DENİZFACTORING DENİZASSET MANAGEMENT CULTURAL SERVICES DENİZKÜLTÜR OTHER SERVICES BANTAŞ PUPA 2 SECTION I INTRODUCTION DENİZBANK’S MISSION, VISION DIVIDEND DISTRIBUTION POLICY MISSION After deducting any sums which would be compulsory for the Bank to pay or set aside such as general expenditures DenizBank’s mission is to and miscellaneous depreciation costs as well as any amount of taxes which would be compulsory for the Bank to pay, enhance shareholder value from the calculated income at the end of the accounting year, the remaining sum shall constitute the net income; with her market position, after deducting the previous year’s losses if any, the net image and corporate income shall be distributed as follows: characteristics by employing First Scheme Legal Reserves: a supermarket approach a) 5% of this sum shall be allocated to the legal reserves. to financial services, thus First Dividends: b) Out of the remaining amount, such rate and amount ensuring satisfaction to as established by the Capital Markets Board of Turkey is shareholders, employees and allocated to the first dividend. Second Dividends: customers. c) After deducting any sums specified in item (a) and (b) from the net income, the General Assembly shall be authorized to distribute such remaining amount, in part or in full, or to allocate as the extraordinary reserves. VISION General Legal Reserves: DenizBank envisions d) Out of the sum calculated after deducting a dividend of 5% of the paid-in capital from the established amount becoming one of the five to be distributed to the shareholders and other parties participating in the profit, 10% shall be added to the largest banks in Turkey general legal reserves in accordance with Article 519, and the foremost financial Paragraph 2, Item c of the Turkish Commercial Code. Unless the discretionary legal reserves are duly set aside, institution in the region and unless the dividends determined for the shareholders are distributed in cash and/or in the form of share defined as the Middle East, certificates as per the Articles of Association, no decision may be adopted to allocate further legal reserves, to pass Balkans, Caucasus and any profits to the following year, or to distribute any dividends to the members of the Board of Directors as well CIS (Commonwealth of as any officials, workers and employees, to foundations established for various purposes, and to similar person Independent States) through and/or persons. sustainable and profitable The date and manner of distribution to shareholders of the annual profit shall be determined by the General Assembly growth. upon a proposal by the Board of Directors prepared under the relevant legislation issued by the Capital Markets Board. As of the accounting period of dividend, irrespect of its issuing and acquiring dates, annual profit shall be distributed equally to all shares existed. The profits distributed according to the provisions of these Articles of Association shall not be recalled. DENİZBANK FINANCIAL SERVICES GROUP ANNUAL REPORT 2013 3 DIVIDEND DISTRIBUTION PROPOSAL CHANGES IN THE MANAGEMENT, SHAREHOLDING STRUCTURE AND At its meeting No. 2014/24 on February 28, 2014, the ACTIVITIES OF DFSG COMPANIES Board of Directors resolved to propose for the General Assembly’s approval that: Transfer of EkspresYatırım’s operations to DenizYatırım Our Bank’s net profit accruing according to the DenizYatırım, fully owned by DenizBank along with EkspresYatırım unconsolidated balance sheet for the year 2013 is TL controlled by DenizBank (70.58%) and DenizYatırım (29.42%), 454,155,169.53 and since the total of general legal merged their operations under the umbrella of DenizYatırım, to deliver reserves has reached 20% of the paid-in capital in brokerage and corporate financial services to DFSG customers from accordance with Article 519/1 of the Turkish Commercial a single source. The integration process was completed as of 31 Code numbered 6102, general legal reserves shall not be December 2013. EkspresYatırım operations were stopped temporarily. allocated from 2013 profit, -TL 454,155,169.53 net profit that accrued shall not Capital increase and shares purchase of DenizBank AG be distributed to shareholders and the whole of it be The capital of DenizBank AG, controlled by DenizBank (89.56%) and allocated as Excess Reserves, DenizLeasing (10.43%), was raised in early 2013 from EUR 95,830 thousand to EUR 127,830 thousand; DenizLeasing’s share was lowered Respectfully yours, to 7.82%. The capital was increased once again to EUR 159,830 thousand; subsequently DenizLeasing’s shares in the Company were DENİZBANK A.Ş. purchased by DenizBank, which turned DenizBank AG into a fully Board of Directors owned subsidiary of DenizBank. Capital increase and renaming of Deniz Real Estate Investment Trust [Deniz REIT] At the Extraordinary General Assembly meeting dated December 20, 2013, a decision was made to transform DenizInvestment Trust into a real estate investment trust and the Company was renamed Deniz Real Estate AMENDMENTS TO THE ARTICLES Investment Trust when resolutions were confirmed on December 26, 2013. On December 25, 2013, the Company’s capital was increased from OF ASSOCIATION TL 14,985 to TL 50,000 thousand, with the allocation of shares worth TL 35,015 thousand to DenizYatırım. After the increase, DenizYatırım’s There were no changes in the Articles of Association total share rose from 55.82% to 86.76%; the free-float ratio dropped in 2013. from 44.18% to 13.24%. Due to CMB’s regulations, as a result of the mandatory tender call made in Borsa Istanbul on January 23, 2013, the share of DenizYatırım increased to 91.38%. Capital increase and share transfer at Pupa SHAREHOLDING STRUCTURE, PAID- The capital of DenizLeasing’s fully-owned subsidiary Pupa was raised from TL 85,000 thousand to TL 340,000 thousand in October 2013. IN CAPITAL AND CHANGES, SHARES DenizLeasing’s shares were purchased by Deniz REIT on December 31, HELD BY THE MANAGEMENT 2013. Merge of Deniz REIT and Pupa DenizBank’s shareholding structure, and the shares held by At the meeting of its Board of Directors held on 6 February 2014,