TURKEY

Publication Date: May 30, 2014 “Global Knowledge supported by Local Experience” Copyright © 2007 by JCR Eurasia Rating. 19 Mayıs Mah., 19 Mayıs Cad., Nova Baran Plaza No:4 Kat: 12 Şişli-İSTANBUL Telephone: +90.212.352.56.73 Fax: +90 (212) 352.56.75

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creditworthiness of a security and issuer and not to be considered a recommendation to buy, hold or sell any security or to issue a loan. This rating report has been composed within

the methodologies registered with and certified by the SPK (CMB-Capital Markets Board of Turkey), BDDK (BRSA-Banking Regulation and Supervision Agency) and

internationally accepted rating principles and guidelines but is not covered by NRSRO regulations. http://www.jcrer.com.tr

Corporate Credit Rating

Leasing

*Assigned by Japan Credit Rating Agency, JCR on May 23, 2013

Senior Analyst: Gökhan IYIGUN/+90 212 352 56 74

gokhan.iyigun@jcrer.com.tr

Long Term

Short Term

Inte

rnatio

nal Foreign Currency BBB- A-3

Local Currency BBB- A-3

Outlook FC Stable Stable

LC Stable Stable

Natio

nal

Local Rating A- (Trk) A–1 (Trk)

Outlook Stable Stable

Sponsor Support 2 -

Stand Alone AB -

So

vere

ign

*

Foreign Currency BBB- -

Local Currency BBB- -

Outlook FC Stable -

LC Stable -

ŞEKER FİNANSAL KİRALAMA A.Ş. and ITS SUBSIDIARY

F i n a n c i a l D a t a March,

2014 ** 2013* 2012* 2011* 2010* 2009*

Total Assets (000 USD) 190,482 187,097 156,994 111,105 125,951 108,712

Total Assets (000 TRY) 410,621 398,592 279,073 209,867 193,662 161,688

Equity (000 TRY) 50,788 49,365 44,150 40,454 35,491 31,182

Net Profit (000 TRY) 1,421 5,248 3,546 4,956 4,301 10,344

Market Share (%) 1.37 1.40 1.38 1.13 1.23 1.10

ROAA (%) n.a. 1.91 1.81 1.84 1.19 0.48

ROAE (%) n.a. 13.87 10.48 9.79 6.37 3.53

Equity/Assets (%) 12.37 12.38 15.82 19.28 18.33 19.29

NPL (%) 9.05 10.17 12.22 16.43 17.59 16.15

Growth Rate (%) 52.60 42.83 32.98 8.37 19.78 -10.88

*End of year **YoY basis

Overview

Şeker Finansal Kiralama A.Ş. (hereinafter referred to as Şeker Leasing, or the Company), is a partially owned subsidiary of Şekerbank T.A.Ş. (the Bank), a mid-scale commercial bank in Turkey assigned a long-term national rating of „AA- (Trk)‟ on July 01, 2013 by JCR Eurasia Rating, with a 54.13% stake. The Company was founded in 1997 and listed on the BIST in 2004. As of March 26, 2014, the free float rate was 14.86% of TRY 45mn paid capital. The Company performs its activities through its headquarters and regional offices in Ankara, Izmir and Gaziantep as well as in the widespread branch network of Şekerbank T.A.Ş. and employs a staff force of 28 people as of March 31, 2014. Şeker Leasing, with a total asset size of TRY 398.59mn, had a 1.37% market share in the leasing sector worth a total of TRY 29.96bn as of 1Q2014. The Company‟s subsidiary Sekar Oto Kiralama Turizm Kargo Taşımacılık Hizmeti ve Tic. Ltd.Şti. is fully consolidated in its financial statements.

Strengths

Long term borrowing structure achieved mostly through

continuing bond issuances, relieving liquidity management and contributing to risk level

Continuously above sector average interest margin

contributing to profitability figures

Remarkably high collateral level ensuring full coverage with

a wide safety margin contributing to asset quality and risk level

High compliance to corporate governance principals as one

of the few publicly traded leasing companies

Reputable and robust shareholder structure

Increasing product diversity and tax incentives in the sector

leading to a positive sector outlook

Constraints

Ongoing above sector average pattern in the share of operating expenses in total income restraining profitability figures

Above sector average NPL ratios despite ongoing improvements along with a relatively high ratio of impaired receivables to equity

Perpetually below sector average standard ratio along with relatively high deteriorations in the last two years despite meeting legal requirements

Relatively high foreign currency position generating volatility in profitability figures despite its remarkable positive effect in the last

year

Increasing volatility in the markets deriving from global economic events, increased political tension and suppressed risk appetite of investors in the elections period

1.40 1.38 1.13 1.23 1.10

0.00

2.00

Market Share (%)

42.8 33.0

8.4 19.8

-10.9

-50

0

50

Growth Rate (%)

1.9 1.8 1.8 1.2

0.5

0.00

5.00

ROAA (%)

13.9 10.5 9.8

6.4 3.5

0

20

ROAE (%)

12.4 15.8 19.3 18.3 19.3

0

30

20132012201120102009

Equity/Assets (%)

10.2 12.2 16.4 17.6 16.2

0.00

20.00

20132012201120102009

NPL (%)

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 2

1. Rating Rationale

The Turkish Leasing Sector has been regulated and supervised by the Banking Regulation and Supervision Agency (BRSA) since 2006. The „Financial Leasing, Factoring and Financing Companies Law‟ No. 6361 came into effect on December 13, 2012. Moreover, the Regulation regarding organization and operating principals of financial leasing, factoring and financing companies entered into force on April 24, 2013. According to the most recent BRSA statistics, the total asset size of the Turkish Leasing Sector was TRY 29.96bn and involved 32 leasing companies, five of which are listed on the Borsa Istanbul (BIST) National Market, as of March 31, 2014.

The Company‟s consolidated independent audit report prepared in conformity with BRSA regulations, statistical year-end data on the sector produced by BRSA and updated on February 25, 2014, JCR Eurasia Rating‟s own studies and records, information and clarifications provided by the Company and non-financial figures constitute the major basis of Şeker Leasing‟s ratings.

In the assignment of Şeker Leasing‟s ratings, quantitative and qualitative assessments regarding profitability figures, asset quality, equity level, liquidity profile, efficiency and risk management practices, the main shareholders‟ financial and non-financial positions along with expected support, growth strategy and market shares have been taken into consideration. Prominent Rating Considerations are; Long Term Weighted Debt Structure While the sector was characterized by a short-term debt structure, the Company ratio of „short-term borrowings to total assets‟ exhibited an ongoing improvement since 2010. The stated ratio improved to 29.66% in 2013 from 61.75% in 2010, reliving the liquidity management and contributing to risk level. The Company improved its debt structure mainly through bond issuances starting in 2012. The Company has five tranches of active issued bonds with a total nominal value of TRY 119.27mn as of 1Q2014. The issued marketable securities, short-term and long-term borrowings have

approximately the same level of shares in the Company‟s funding sources with the rates of 35.24%, 31.13% and 33.63%, respectively, as of FYE2013. Reputable Shareholder Structure along with Privileges of Being a Bank Related Company Şekerbank T.A.Ş., a mid-scale commercial bank, is the main shareholders of the Company with stakes of 54.13. It is listed on the BIST with a free float of 32.25% as of August 28, 2013. The Company uses its advantages as a bank-related company regarding liquidity, funding term and costs, customer portfolio base and access network through its 312 domestic branches. High Collateral Level with a Wide Safety Margin The Company had a collateral amount of TRY 831.56mn composed of 88.35% bills, 7.83% mortgage and 3.82% pledges and letter of guarantee against its TRY 381.98mn gross receivables as of FYE2013. Accordingly, the Company‟s „collateral-to-total receivables‟ ratio realized a value of 217.70% as of FYE2013 with an almost straight trend over

the last years, fairly above the sector average of approximately 60%. High Compliance Level to Corporate Governance Principles The Company‟s board composition containing seven members, two of which are independent, the presence of audit, corporate governance and early detection of risk committees structured under the board, the existence of an effective shareholders relation unit and the comprehensive content of website regarding principles are the main factors of the stated high compliance level. Positive Outlook of Turkish Leasing Sector Recent legislative regulations reinforced the representative capability and power of the Non-Banking Financial Sector, consisting of 120 financial institutions, 32 of which are leasing companies, by gathering them under a single roof. Moreover, the stated legislative regulations enhanced product diversity and enabled tax exemptions to sell & lease back transactions of immovables in August, 2013. Accordingly, the Turkish Leasing Sector exercised a remarkable average growth of 40.56% as of FYE2013, following an 8.90% growth in 2012. It is anticipated that the high growth level will remain in the short term. Above Sector Average Interest Margin versus Comparatively High Share of Operating Expenses in Total Income The Company‟s interest margin that arises from the difference between interest rates for average earning assets and costly liabilities continuously stayed above the sector figures over the last five years, contributing to income generation capacity and profitability. On the other hand, the Company ratio of „total operating expenses to total income‟ also stood at above sector averages over the last five years, reducing the positive effect of the interest margin and restraining the profitability indicators. Downtrend in Standard Ratio along with Relatively High Share of Impaired Receivables in Equity Although Company equity level meets legal requirements through a Company Standard Ratio (equity to total assets) of 12.38% against the minimum legal requirement of 3%, its

share in total resources remained below the sector figures over the last five years. Moreover, the equity growth (11.81%) stayed remarkably behind the increase in total liabilities (48.66%) due to comparatively high growths funded mostly with external sources over the last two years, resulting in 2013 ratio of equity to total resources (14.14%) that was below the sector figure (23.14%). On the other hand, the Company‟s equity exceeded its paid-capital in 2013 for the first time since 2006. Accordingly, the suppressive effect of prior year losses on equity level was ended as of FYE2013.

Volatility Potential in Profit Figures due to Comparatively High FX Position The Company ratios of foreign exchange position to total assets and equity were 10.85% and 87.61%, respectively, as of FYE2013. The remarkably above sector average ratios along with a TRY 5.37mn FX gain in 2013 contributed to profitability but generated volatility potential in profitability figures.

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 3

Increased Volatility and Decelerated Growth in the National Economy Ongoing political tension, unrest in some bordering countries, upcoming presidential elections, decreases in investor risk appetite, slowing capital flow to Emerging Countries after the FED tapering policy, increasing interest rates and upside pressure in foreign currencies increased volatility and decelerated growth.

With respect to the above mentioned factors, JCR Eurasia Rating has affirmed the Long Term International Foreign Currency and Local Currency Ratings as ‘BBB-’, the same as that of the Sovereign Ratings of the Republic of Turkey, and

the Long Term National Local Ratings one notch to ‘A- (Trk)’ in JCR Eurasia Rating‟s notation system, which denotes a high investment grade.

2. Outlook

A ‘Stable’ outlook has been assigned for the Company‟s short and long term national grades, with the expectation of minimal changes in existing conditions, state of affairs and development trend due to actualized high growth rates over the last two years along with the positive outlook of the sector regarding growth potential, Şekerbank weighted shareholding structure contributing to liquidity, funding costs and clientele, long-term weighted debt composition as well as almost steady trend in profitability ratios, below sector average equity level, above sector figure NPL despite continuing improvements and comparatively high FX gains leading to volatility in profitability figures. Additionally, JCR Eurasia Rating has affirmed and assigned ‘Stable’ outlooks on the International Long and Short Term Local Currency Rating perspectives of Şeker Leasing, respectively, which are the Sovereign Ratings‟ Outlooks of the Republic of Turkey. The main driving forces that can call forth a revision in the current outlook status include Company related issues affecting asset quality, liability profile and profitability, along with Turkey‟s sovereign rating which is highly responsive to domestic and foreign political and economic uncertainties,

tensions and developments.

3. Sponsor Support & Stand Alone Assessment

Sponsor support grades and their risk estimations reflect the financial and non-financial state and expected support of the main shareholders of Şeker Leasing, Şekerbank T.A.Ş., and the sector‟s support level by public authorities. It is believed that the main shareholder, as a mid-scale commercial bank in Turkey with a domestic network of 312 branches, has the ample power and equipment to provide financial and efficient operational support as and when required. On the other hand, the sector‟s support level by public authorities falls behind the Banking Sector despite the improvements made through recent legislative regulations. The Stand-Alone Grade has been constituted with respect to the Company‟s asset size and quality, equity structure, market shares, growth rates, risk management practices, operating history length, track records and the development of existing risks in the markets and business environment.

Within the consideration of these assessments, JCR Eurasia Rating has assigned a Sponsor Support Grade of ‘2’, reflecting the financial and non-financial states and expected support by the shareholders. It has also assigned a Stand Alone Grade of ‘AB’ with the opinion that Şeekr Leasing has reached the level of adequate experience and facilities to manage the incurred risks on its balance sheet without any assistance from its shareholders provided that it improves its current customer base and profit generation capacity.

4. Company Profile

a) History & Activities

Şeker Leasing was established in 1997 and has been publicly traded since 2004, under the code SEKFK. It was one of five leasing company listed on the BIST and had a 14.86% free float of its paid-capital of TRY 45mn as of March 26, 2014.

The Company offers leasing services of investment support for domestic and international assets and capital goods needed by SMEs via the widespread branches of Şekerbank T.A.Ş., its headquarters and regional offices in Ankara, Izmir and Gaziantep.

b) Organization & Employees

The organizational chart of the Company has not been changed in the last year, and consists of eight departments, five of which (credit, IT, operating and insurance, accounting and financing, support personnel) report to the financial and administrative affairs directorate, two (marketing, legal consultancy) report to the general manager and one (internal audit) directly reports to the Board. Moreover, three representative office supervisors and a financial crimes specialist report directly to the general manager. Şeker Leasing‟s Board has 7 members, including one executive and two independent members. The actual labor force of the headquarters and regional offices involved 28 people as of March 31, 2014 (FYE2012: 26).

c) Shareholders, Subsidiaries & Affiliates The following table provides the Company‟s 2013 year-end shareholder structure and realized changes over time. The Company‟s paid capital amount had no change since 2009. The Company‟s majority shareholder was Şekerbank T.A.Ş, with an issued capital of TRY 1,000mn and a consolidated asset size of TRY 19.68bn as of FYE2013.

Number

of Staff

General Manager 1

Department Manager 1

Department Staff 26

Grand Total 28

Organization

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 4

The Company has a consolidated subsidiary with a 99% stake, Sekar Oto Kiralama Turizm Kargo Taşımacılık Hizmeti ve Tic. Ltd.Şti. (Sekar) that has a TRY 12.60mn assets size as of FYE2013 and offers long term car rental services primarily to Şekerbank T.A.Ş.

d) Corporate Governance The Board of Şeker Leasing consists of 7 members, one of which is executive and two independent. Audit and Corporate Governance committees have been established under the authority of the Board, and a board member is responsible for credit. Moreover, in line with the Corporate Governance Principles, an Early Detection of Risk Committee has been recently established. The Company shares are traded on the BIST and there is no limitation for the share transfer. The Company‟s web site provides sufficient information and disclosed documentation in terms of transparency, such as, the shareholder structure, audit reports, annual reports, articles of association, general assembly meeting documents, disclosure policy, mission/vision and code of ethics. Moreover, the Company had a Shareholder Relations Unit established within the scope of compliance to corporate governance principles reporting directly to the Board. On the other hand, some of the Company shares have privileges written into the articles of association, such as the right to nominate the majority of the board. Additionally, the Company‟s remuneration policy regarding board members and executive managers is not disclosed and the dividend policy and board members‟ and executive managers‟ CVs are not published on the Company web site. These constraints are factors pressuring the Company‟s compliance level to

corporate governance principles. Within the context of social responsibility, a TRY 2.81k aid and donations amount was realized by the Company in 2013.

e) The Company & Its Group Strategies The Company aims to grow above sector averages through a prudential and efficient lending policy, continue to support the investment of SMEs and achieve a wide customer base. Moreover, the strong and dynamic structure, solution-oriented quality service approach and widespread service network are the other main issues on which the Company has placed emphasis.

5. Sector Overview & Operational Environment

The Turkish Leasing Sector aims to provide direct investment financing of Small and Medium Sized Enterprises (SMEs) with limited access to resources and operates as a complement to the banking sector. The sector is currently subject to the regulations of the Banking Regulatory and Supervisory Authority (BRSA) principally through the “Financial Leasing, Factoring and Financing Companies Act” which came into force in December 2012. The current set of laws and regulations have significantly improved the existing operating environment, contributing to the development of leasing companies‟ corporate structure, the transparency and standardization of their financial reporting practices and the maintenance of fair competition throughout the sector. It is expected that the recent developments will provide the sector, which has been classified as “Non-Banking Financial Institutions”, with a solid legal foundation and increase the extent of regulatory activity. Under the stated regulations,

The 4-year minimum requirement for leasing agreements has been abolished enabling the concerned parties to freely determine the length of the leasing agreement,

The requirement for the approval of leasing agreements by public notary has been removed and the use of written agreements deemed satisfactory,

Financial leasing companies have been given the right to establish a separate wholly owned leasing company for every ship leasing transaction with no additional permission. Therefore, the claims derived from disagreements on a particular transaction is kept limited with the related ship excluding other ships leased out by the same company,

Leasing contracts concerned with movable goods (i.e. automotive) used to be recorded under the real estate registry where the immovable is located, however recent changes made it mandatory for contracts to be declared separately to the Leasing Association, which will function as the new registry, by the lessor,

New products such as operational leasing and sale & leaseback transactions have been introduced, as well as the leasing of copies of computer software,

It is clarified that all the complementary parts and add-ons can be subject to leasing transactions, compared to the old system where only unique, independent goods could be leased,

Foreign leasing companies have been given the same legal rights as Turkish firms in the fields of aircraft and ship leasing, placing them on an equal footing with other competitors in the market,

It‟s been clarified that financial leasing contracts, their possible amendments, transfer and transactions regarding these documents will be exempt from stamp duty and charges,

March,

2014 2013 2012 2011 2010

Şekerbank T.A.Ş. 54.13 54.13 50.95 50.95 50.95

Şekerbank T.A.S. Personel Munzam

Sosyal Güvenlik ve Yardımlaşma Vakfı15.89 15.89 15.89 15.89 15.89

Şekerbank T.A.S. Personeli Sosyal

Güvenlik ve Yardımlaşma Sandığı Vakfı8.11 8.11 8.11 8.11 8.11

Seker Yatırım Menkul Değerler A.Ş. 7.01 3.96 3.85 3.85 3.85

SS. Eskişehir Pancar Ekicileri Kooperatifi - - 1.65 1.65 1.65

Public 14.86 17.91 19.55 19.55 19.55

TOTAL 100.00 100.00 100.00 100.00 100.00

Paid Capital (TRY/000)

Şeker Finanasal Kiralama A.Ş.

Shareholders Structure

Share %

45,000

(000,000) March, 2014 2013 2012 2011 2010 2009

Asset Size-TRY 29,957 28,477 20,260 18,604 15,749 14,701

Asset Size-USD 13,897 13,367 11,397 9,849 10,460 9,721

Equity-TRY 5,518 5,351 4,614 4,177 3,853 3,489

P/L-TRY 182 449 443 510 466 576

ROAA % n.a. 2.33 2.88 3.40 3.44 3.45

ROAE % n.a. 11.39 12.72 14.54 14.27 14.88

NPL Ratio% 6.72 6.82 8.00 8.57 12.20 12.06

Equity / T. Assets 18.42 18.79 22.78 22.45 24.47 23.51

THE KEY INDICATORS OF TURKISH FINANCIAL LEASING SECTOR

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 5

The immovable goods that will be rented as part of leasing transactions through the sale and leaseback method will be kept exempt from title deed feeds at the time of registration to the land registry in the name of the lessee by the end of the contract term,

These companies, defined as public Non-Banking Financial Institutions, have been brought together under the roof of “Financial Leasing, Factoring and Financing Companies‟ Union”,

The minimum requirement for paid-in capital per company has been raised to TRY 20mn and must be met by FY2015,

The sector will be allowed to only open branches and will no longer be able to operate representational offices or any other form of such entity.

Moreover, sell & leaseback transactions for immovables were incentivized in August 2013 through the regulations enabling vat and corporate tax exemption. As such, the new regulations address important sector issues and will make a significant contribution to the operational volume of the sector. The activations such as ship machine hiring, renovation of building sidings and roof construction have been clearly addressed and provided with a legal foundation interms of leasing. It is expected that the updated and revised regulatory framework will contribute to the growth of the sector leading to the greater interest of foreign investors in leasing companies and the wider leasing sector in general. Leasing practices in Turkey date back to 1983 and were first carried out under the regulation and supervision of the Undersecretariat of the Treasury. The first formal leasing company was established in 1986. However, the regulatory and supervisory functions regarding the sector were transferred to the BRSA after the establishment of the new Banking Act came in 2005. According to February 2012 BRSA statistics, there were a total of 31 leasing companies operating in the sector, all of which are located in Istanbul. Licenses held by approximately 60 companies have been revoked since FY2006 due to various reasons such as failure to comply with BRSA regulations, mergers or at their own request.

Since the first establishment, the leasing sector underwent rapid growth till the end of FY2008 and slowed down in activity as a result of new tax regulations that came into force after that period. The penetration rate of the leasing sector across Turkey remains quite low. In the leasing literature, penetration rate is defined by the ratio of leasing volume excluding immovables to fixed asset investments in the private sector. The average penetration rate observed throughout the leasing sector in the developed world currently stands at 15-20% compared to 2% in Turkey. As such, Turkey promises major catch-up growth opportunities in this field in the medium and long term. The Financial Leasing sector operates via the leasing of production and investment vehicles enabling companies to increase their productivity and cut down on costs. This helps companies to combat possible expenses resulting from the procurement of such services crucial for their operations. Financial leasing involves an agreement between the lessor and lessee whereby the lessor receives lease payments to cover its ownership costs which have been pre-determined

with the maintenance, insurance and tax expenses belonging to the lessee. As such, it offers a major financing facility for companies enabling them with the means to use their capital more effectively. As of 1Q2014, there are 32 companies operating in the sector, all of which are headquartered in Istanbul. The financial leasing sector serves a complimentary function to the larger banking sector in Turkey and has a relatively low market share across the entire financial services industry. The total asset size of the sector reached TRY 29.96bn as of March 31, 2014 whereas total sector equity was TRY 5.52bn.

The sector exhibited a successful growth performance in the 27-year period leading up to FY2008. However, the sector underwent a 14.23% contraction in FY2009 due to new tax regulations global economic crisis and continued its growth afterwards. The sector displayed a Cumulative Asset Growth Rate of 325.02% between 2004 and 2013. Moreover, the sector maintained its high growth in 1Q2014 with the YoY growth rate of 45.31% as of March 31, 2014.

The major field of risk concentration in the sector is focused on the manufacturing industry with a rate of 48.30%, specifically in the leather industry and metal industry and processed materials industry. On the other hand, among the services sector, the highest level of concentration is observed in the construction, logistics, storage, wholesale and retail trade and hotel sub-sectors.

Leasing receivables form the largest item among the sector‟s assets with a share of 88.16% as of FYE2013. Short-term loans make up the largest item among its resources with a share of 69.70%. The sector, which usually meets a significant part of its resource requirements through short-term loans from the banking sector, experiences difficulty in diversifying its resource streams. The share of equity to the total resources currently stands at 18.79% and is unable to keep up with the growth observed in total asset size. The share of non-performing receivables to total receivables realized a value of 6.82% as of FY2013, almost triple the amount observed throughout the banking sector. Furthermore, the relatively high share of non-performing leasing receivables to equity (34.16%) leads to a rise in general risk levels across the sector and weakens its asset quality. Sector profitability indicators remained generally below those of the banking sector in FY2013. The ratios of Return of Average Assets (ROAA) and Return on Average Equity (ROAE) were 2.01% and 16.62%, respectively, whereas the

63.76%

37.44% 25.00%-14.23% 7.13% 18.13% 8.90%

40.56%

-9.07%

48.90%

104.64%

155.80%

119.42%135.06%

177.67%202.39%

325.02%

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Turkish Leasing Sector Asset Growth Rate

Annual Cumulative

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 6

same ratios were 2.33% and 11.39%, respectively, for the leasing sector. A similar trend is observed in the Interest Coverage Ratio and Net/Gross Profit Margins. However, when the ratio of equity to total assets is taken into account, the leasing sector operates with a higher level of equity. As such, the leasing sector achieved a value of 18.79% and the banking sector 11.19%. The level of concentration with respect to asset distribution and transactional volume is relatively high among the 33 companies active in the sector. The highest level of concentration is seen among players which have banks in their shareholder structure.

6. Financial Foundation

a) Financial Indicators & Performance

Indices Relating to Size The percent dispersion of the activities of Şeker Leasing and its consolidated subsidiary (Sekar) in terms of assets, liabilities and profit/loss, can be seen in the table below.

2013

The Share of Activities

Leasing Car Rental Total Amount

(TRY 000)

P/L 81.16% 18.84% 5,248.00

Assets 96.85% 3.15% 398,592.00

Liabilities 97.62% 2.38% 349,227.00

The Turkish Leasing Sector exercised a remarkable growth (40.56%) by virtue of the latest legal regulations and new products enabled under these regulations and maintained its upward growth trend in 2013. Moreover, sector-wide high growth continued in 1Q2014 with a YoY growth of 45.31%. Equally, the Company realized a high asset growth of 42.83%, slightly above the sector average, as of FYE2013, and maintained its above sector growth trend in 1Q2014 with a YoY growth rate of 52.60%. A 76.41% increase in „lease receivables‟ from TRY 194.51mn in 2012 to TRY 343.13mn in 2013 is the main driving force behind the above stated Company year-end growth.

The Company‟s five-year cumulative growth rate amounted to the above sector average (66.09%) value of 119.70% as of FYE2013 and maintained its continuously above sector average pattern thanks to average growth rates exceeding those of the sector during the last five years, with the exceptions of 2009 and 2011.

Accordingly, the Company‟s market share preserved its increasing trend despite the deceleration and exercised a ratio of 1.40% as of FYE2013. The Company market share increased by 27.27% since 2009.

An 11.81% increase in equity against a 42.83% asset growth led to a descending equity level in the Company‟s resource distribution. Successive two years of remarkable growths mostly funded with external sources pulled down the equity share to 12.38% FYE2013 from 19.28% FYE2011. Accordingly, the borrowings‟ share increased to 82.91% FYE2013.

Indices Relating to Profitability While both sector profitability figures deteriorated over the last two years, the profitability ratios ROAA and ROAE of the Company maintained their improvement in 2013. A 46.24% increase in pre-tax profit against a 10.53% increase in average equity resulted in a remarkable improvement in the Company‟s 2013 year-end ROAE ratio with a rate of 13.87%. The stated ratio stood at above the sector average (11.40%) for the first time over the last five years. Although the Company ROAA ratio has continuously remained below the sector figures since 2009, diminishing spread trend continued

40.56

8.90

18.13

7.57

-14.61

42.83

32.98

8.37

19.78

-10.88

-20

-10

0

10

20

30

40

50

20132012201120102009

Annual Asset Growth Rates %

TURKISH LEASING SECTOR

ŞEKER FİNANSAL KİRALAMA A.Ş.

66.09

18.17

8.51

-8.14 -14.61

119.70

53.82

15.686.74

-10.88

-40

-20

0

20

40

60

80

100

120

140

20132012201120102009

Cumulative Asset Growth Rates %

TURKISH LEASING SECTOR

ŞEKER FİNANSAL KİRALAMA A.Ş.

1.401.38

1.131.23

1.10

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

20132012201120102009

Market Share % trend line

3.852.862.284.582.60

82.9181.0678.1176.8177.93

0.860.260.330.280.19

12.3815.8219.2818.3319.29

0%10%20%30%40%50%60%70%80%90%100%

20132012201120102009

Resource Distribution %

Equity Non-Costly Liabilities Other Borrowing Payables

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 7

over the same period. The Company and sector ROAA ratios stood at 1.91% and 2.33%, respectively, as of FYE2013.

The Company‟s interest margin stood at the above sector average (3.25%) value of 4.47% as of FYE2013 and exhibited a continuously above sector average pattern over the last five years. Although both the Company interest rates for earning assets and costly liabilities displayed an above sector trend over the review period, the higher spread for earning assets led to above stated over sector figure interest margin.

The Company‟s total income was composed of 62.06% net interest and commission income and 37.94% total operating income as of FYE2013. The share of total operating income presented an ongoing increasing trend over the last five years due to cancellations of provisions recognized as an expense in

the previous periods and net FX gains incurred particularly in the last year with an amount of TRY 5.37mn together with TRY 1.05mn loss on derivative instruments as of FYE2013.

Although the increase in financial expenses (41.42%) was less than the borrowings‟ growth (46.08%), the comparatively low increase in interest and commission income (29.02%) due to decreasing interest margin led to a deterioration in the

Company ratio of „financial expenses to interest and net commission‟, in contrast to improvement in the sector figure.

The share of the operating expenses in the Company‟s total income exhibited an ongoing above sector average pattern since 2009. On the other hand, while the sector average deteriorated, the Company figure improved due to a 22.77% increase in total operating expenses against a 43.72% increase in total income.

The Company ratio of „pre-tax profit to total income‟ displayed an almost steady trend at the level of 28% over the last three years following a two-year rapid improvement period. On the other hand, the stated ratio of the Company stood continuously at below the sector average values since 2009 due to the above sector operating and financial expenses.

The foreign exchange (FX) losses applied downward pressure on the Company‟s pre-tax profit since 2008, with the exception of the last year. The Company achieved a significant FX gain of TRY 5.37mn and derivative instruments loss of TRY 1.05mn, derived from positions compatible with the Company year-end exchange rate projection, along with an 82.85% related ratio as of FYE2013, contributing to profitability.

1.911.811.841.19

0.48

2.332.983.403.45

1.92

13.87

10.489.796.37

3.53

11.40

13.1714.54

14.26

9.40

0

2

4

6

8

10

12

14

16

18

20132012201120102009

ROAA & ROAE Comparison %

ROAA ŞEKER FİNANSAL KİRALAMA A.Ş.

ROAA TURKISH LEASING SECTOR

ROAE ŞEKER FİNANSAL KİRALAMA A.Ş.

ROAE TURKISH LEASING SECTOR

6.56 6.68 6.78 6.63 9.45 11.04

12.1312.2912.72

14.05

4.47 5.45 5.50 6.09 4.60

3.25 3.05 3.42 4.47 4.43

0

2

4

6

8

10

12

14

16

20132012201120102009

Interest Margin %

Interest Rate for Costly Liabilities (avg.) %Interest Rate for Earning Assets (avg.) %Margin %Sector Margin %

62.06

77.3177.45

86.5688.08

37.9420.3217.17

6.995.05

0

20

40

60

80

100

20132012201120102009

Total Income Distribution %

Net Interest and Commission

Net Other Operating Income

43.9646.50

42.46

35.37

43.09

57.44

52.4051.1648.59

65.28

20

30

40

50

60

70

80

20132012201120102009

Financial Expenses/Interest and Net Commission %

TURKISH LEASING SECTOR

ŞEKER FİNANASAL KİRALAMA A.Ş.

26.27

19.37

39.21

26.52

37.46

41.2448.28

44.10

44.70

66.50

0

10

20

30

40

50

60

70

80

20132012201120102009

Total Operating Expenses/Total Income %

TURKISH LEASING SECTOR ŞEKER FİNANSAL KİRALAMA A.Ş.

42.9346.0944.2143.79

28.19 28.5328.0327.27

18.20

9.860

10

20

30

40

50

60

20132012201120102009

Pre-Tax Profit/Total Income %

TURKISH LEASING SECTOR

ŞEKER FİNANSAL KİRALAMA A.Ş.

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 8

b) Asset Quality The Company had a total assets size of TRY 398.59mn (TRY 279.07mn FYE2012) with a dispersion of 92.47% earning assets and 7.53% non-earning assets as of FYE2013. The Company asset distribution has improved in favour of earning assets since 2010. The earning assets‟ share (92.47%) is composed of 91.13% loans and receivables and 1.34% bank and other earning assets. The earning assets weighted dispersion contributes to the Company‟s asset quality.

NPL ratios of Şeker Leasing exhibited an ongoing over sector figures pattern over the last five years. On the other hand, improvements in the NPL starting in 2011 continued in 2013 and were accompanied with a diminishing spread with the sector average and lessening adverse effect on asset quality.

Although the overdue loans of the Company increased 43.43% from TRY 27.08mn in 2012 to TRY 38.85mn in 2013, a higher increase (75.88%) in loans and receivables resulted in an improvement in 2013 NPL ratio. Moreover, it is foreseen by the Company that the sale of property collateral approximately worth of TRY 10mn on doubtful receivables will be completed in the short-term, contributing to NPL ratio and profitability.

The provisioning level of the Company exhibited an almost similar pattern to the sector figures over the years. On the other hand, the deterioration in the Company ratio, depending on the nature of maturity and collateral level of non-performing loans, against the improvement in sector figure pressured the asset quality.

A 43.43% increase in overdue loans along with an 11.81% increase in equity resulted in a deterioration in the ratio of „impaired receivables to equity‟ with a year-end value of 78.70%. An above sector average increase in overdue loans together with lower improvement in equity ended up as escalating the gap with the sector figure, suppressing asset quality.

On the other hand, the Company took steps to improve the impaired loans portfolio via its strong collateral structure with

2013 year end „collateral to receivables‟ ratio of 217.70%, contributing to asset quality.

The share of provisions in total expenses exhibited a remarkable increase following a two-year improvement. A 103.86% increase in provisions along with a 17.02% rise in total expenses led to deterioration in the stated ratio with a year-end rate of 42.30%.

82.85%

-8.46%

-19.74%

-35.44%

-69.68%

-16.15%

-4.83%

0.00%0.00%

10.11%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

20132012201120102009

FX Gain (Loss), net / Profit Before Tax

Derivative Instruments Gain (Loss), net / Profit Before Tax

91.13%

74.01%86.72%87.91%84.51%

1.34%

16.50%2.05%0.48%4.22%

7.53%9.50%11.23%11.61%11.27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20132012201120102009

Asset Distribution

Other Assets Associates and Equity Share

Securities Banks and Other Earnings Assets

Loans and Receivables

6.82

8.00 8.57

12.20 12.25

10.17

12.22

16.43 17.59

16.15

0

4

8

12

16

20

20132012201120102009

NPL %

TURKISH LEASING SECTOR ŞEKER FİNANSAL KİRALAMA A.Ş.

53.35 50.13 50.45 48.76

41.97

48.24

55.62

44.24 38.11 38.80

0

10

20

30

40

50

60

70

20132012201120102009

Loss Reserves / Impaired Receivables %

TURKISH LEASING SECTOR ŞEKER FİNANSAL KİRALAMA A.Ş.

34.16 32.34 33.90 38.62

44.22

78.70

61.35

79.69

90.45

75.51

0

10

20

30

40

50

60

70

80

90

100

20132012201120102009

Impaired Receivables / Equity %

TURKISH LEASING SECTOR ŞEKER FİNANSAL KİRALAMA A.Ş.

217.70227.89253.35

223.59

299.39

0

50

100

150

200

250

300

350

20132012201120102009

Collaterals / Total Receivables %Collaterals / Total Receivables %

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 9

c) Funding & Adequacy of Capital

Recent BRSA regulations stipulate that the provision related to equity ratio (standard ratio) that the ratio of the company‟s equity to total assets should be at least 3%. The Company materialized a below sector average (18.79%) standard ratio of 12.38% as of FYE2013.

The Company realised remarkable growths of 42.83% in 2013 and 32.98% in 2012. On the other hand, the increases in equity were 11.81% and 9.14%, respectively. Accordingly, the stated growths funded mostly with external sources resulted in a decreasing trend in the ratio of „equity to total resources‟ over the last two years with a below sector figure year-end ratio of 14.14%.

Although the sector had a sort-term weighted debt structure, the Company ratio of „short-term borrowings to total assets‟ exhibited an ongoing improvement since 2010. The Company improved its debt structure on behalf of long-term borrowings through the bond issuances starting in 2012.

The Company completed the fourth and fifth tranches of bond

issuances amounting to TRY 50mn in December 2013. All the five tranches are active bonds with a total face value of TRY 119,265k, as of FYE2013. These bond issuances, particularly in a leasing sector with scarce alternative funding sources, presented the advantages of reducing funding coasts, relieving liquidity management and raising the reputation of the Company. While the short-term borrowed funds increased 1.87%, the long-term borrowings and issued marketable securities increased 314.38% and 18.34%, respectively, in 2013, approximating all the shares almost at the same level in the Company‟s borrowing structure.

7. Risk Profiles & Management

a) Risk Management Organization & Its Function – General Informatıon

The Company is exposed to credit, liquidity, market and operational risks derived from its leasing activities. The risk management organization and practices of the Company have not been changed since the last year. The Treasury and Finance departments of the Group are responsible for providing steady access to domestic and foreign financial markets and monitoring and management of financial risk exposures associated with the activities of the Group through intra-Group risk reports. The Company is audited by third party institutions in the matters of independent audit, information technologies and tax legislation. Moreover, the Company is also supervised by the Inspection Board of major shareholder, Şekerbank T.A.Ş., and its Internal Control Department.

b) Credit Risk

The Credit department, credit committee and Board of Directors of Şeker Leasing are responsible for the follow-up

42.30%

29.62%31.97%

37.47%

18.62%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

20132012201120102009

Provisions / Total Operating Expense

9.38

12.82

16.2815.33

16.29 12.38

15.82

19.28 18.33

19.29

0

5

10

15

20

25

20132012201120102009

Standard Ratio (Equity / Total Assets) %

Free Equity / Total Assets Ratio %

Realized Equity / Total Assets Ratio %

23.14

29.41 28.96 32.39 31.35

14.14

18.79

23.88 22.44 23.89

0.00

10.00

20.00

30.00

40.00

50.00

20132012201120102009

Equity / Total Resources %

TURKISH LEASING SECTOR

ŞEKER FİNANSAL KİRALAMA A.Ş.

29.66

39.05

53.65

61.75

42.12

0.00

20.00

40.00

60.00

80.00

100.00

20132012201120102009

Short Term Borrowings / Total Assets %

31.13

44.64

65.77

74.4350.71

33.63

11.86

34.23

25.5749.29 35.24

43.50

0.000.000.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

20132012201120102009

Borrowing Structure %

Short Term Borrowings Long Term Borrowings

Marketable Securities Isued

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 10

of lease receivables. All lending decisions are approved within the credit committee or the Board. In addition, the Company has an internal scoring analysis system. According to their results, the Company‟s risk levels of leasing receivables was concentrated in the “A” (very well) scoring categories at a rate of 28.57% as of FYE2013. Moreover, the concentration in the “A+” (excellent) category improved to 21.17% from 15.13% (FYE2011: 10.12%). In all, 66.16% of the leasing receivables were in the scoring categories of „B+‟ (satisfactory) or higher. The Company manages its credit risk by limiting transactions

regarding some specific sectors as well as the continuous control and reevaluation of debtor credibility. Additionally, the Company also tries to take into account the sector and regional concentration in managing its credit risk. Moreover, the Company obtains additional security for its receivables if possible. The Company had a collateral amount of TRY 831.56mn against its TRY 381.98mn gross receivables as of FYE2013. Accordingly, the Company‟s „collateral-to-total receivables‟ ratio realized a value of 217.70% as of FYE2013 with an almost straight trend over the last years, fairly above the sector average of approximately 60%. Additionally, the matter of collateral level has been lessened via customer portfolio mostly matched with that of Şekerbank. The Company‟s leasing receivables followed a sector dispersion of 20.57% in the mining, metal and chemical industry, 17% in machinery and equipment, 16.90% in finance and 13.33% in construction, amounting to a total of 67.80% as of FYE 2013, all of which are above the international reference and sector average values.

The Company‟s top 10 customers, including two group companies, composed 47.41% (43.02% and 39% as of FYE2012 and FYE2011, respectively) of the total receivables portfolio as of FYE2013, 69.06% (57.58% FYE2012) the top 20 and 85.17% (71.86% FYE2012) the top 50. All ratios were remarkably high and increased compared to the previous year‟s concentration rates, pressuring asset quality.

c) Market Risk The Company is exposed to interest rate risk due to its financial assets and liabilities mainly composed of leasing receivables, borrowings and bond issuances. All Company leasing receivables are fixed rated as of FYE2013. The Company tries to minimize the interest rate risk through efforts to ensure an appropriate mix of fixed and floating rated payables. While all of the Company‟s financial assets were fixed rated, 45.17% of the Company financial liabilities were floating rated as of FYE2013. Moreover, the Company‟s financial statement had a negligible variance range of (+/-) TRY 23k in the case of 100bp increase or decrease in interest rates as of FYE2013. The Company is exposed to foreign currency risk due to assets and liabilities denominated in foreign currency and had a net FX position of TRY 43.25mn as of FYE2013. Accordingly, the Company‟s financial statement had a variance range of (+/-) TRY 4.35mn in the case of increases or decreases of 10% (the administrative expectation of possible change in foreign exchange rates) in exchange rates as of FYE2013.

d) Liquidity Risk

The funding unit of the Group reports expected cash flows daily and is managed in coordination with the asset and liability committee (ALCO) through monthly meetings. The Company makes an effort to diversify its funding sources and reduce mismatches of assets and liabilities to avoid liquidity risk. Within this scope, funding through bond issuances continues. The Company‟s liquidity risk exposure is at negligible levels due to the liquidity gap of only TRY 3.85mn in three to twelve

month period. The Company had a dispersion of 31.13% short term borrowings and 68.87% long term borrowings and bond issuances as of FYE2013. As of April 18, 2014, credit lines worth TRY 353.04mn were extended to Şeker Leasing by 19 different banking institutions and only 36.53% of this total line was drawn upon, with a free cash line amounting to TRY 204.52mn. Moreover, there are no pending or active lawsuits that would affect the Company‟s activities and financial position.

8. Budget & Debt Issue

Şeker Leasing projects a bond issuance of TRY 100 following the Capital Market Board authorization to finance its funding needs and implement its growth strategies. It is envisaged by the Company that almost 65% of the fund obtained through bond issuance is to be utilized in the financing of new leasing transactions, with the remaining 35% in repayment of short-term loans. The estimated budget projection submitted by the Company is shown in the table below. The budget projection covers bond issuance related issues. All other figures are compatible with the balance of current financial statements. The Company projected a 2014 year-end asset size of TRY 466.67mn through an annual growth rate of 17.08%. The Company‟s assets size increased 3.02% in the first quarter of the current year and amounted to TRY 410.62mn as of 1Q2014. Moreover, all the Company‟s 2013 year-end projections except the one related to „equity to total assets had realization rates of above 100%.

Integrating the above stated projected growth with the last five years‟ growth series results in a cumulative assets growth rate of 157.22% from 2008 to FYE2014, and is compatible with the balance of current financial statements.

Budgeted Actual Realization Budgeted

2013 2013 2013 (%) 2014

Cash & Cash Equivalents 3,931 5,349 136.07 6,308

Leasing Receivables (net) 272,419 343,132 125.96 411,668

Over Due Loans 28,500 38,850 136.32 48,000

Allowance for Loan and Receivables Losses -16,850 -18,742 111.23 -22,560

Other Assets 27,000 30,003 111.12 23,254

Total Assets 315,000 398,592 126.54 466,670

Bank Loans 160,501 214,015 133.34 248,481

Issued Bonds 100,000 116,449 116.45 139,739

Other Liabilit ies 8,142 18,763 230.45 27,168

Equity 46,357 49,365 106.49 51,282

Total Liability 315,000 398,592 126.54 466,670

Profit & Loss 4,652 5,248 112.81 5,348

Annual Asset Growth % 15.52 42.83 275.95 17.08

Equity/Total Asset % 14.72 12.38 84.14 10.99

ROAA % 1.89 1.91 101.23 1.50

ROAE % 12.64 13.87 109.69 12.91

Budget TRY (000)

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 11

The stated growth projection will be financed through available credit lines and projected bond issuance, with terms to be determined depending on market conditions.

96.88 124.09 155.42

178.76

211.69 223.79

-10.886.74 15.68

53.82

119.70

157.22

-21.19

-97.40

2.31

41.87

110.90

150.85

-150

-100

-50

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014

Cumulative Equity Growth Rate %Cumulative Asset Growth Rate %Cumulative Liability Growth Rate %

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 12

(Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) As % of As % of As % of

ŞEKER FİNANSAL KİRALAMA A.Ş. 2013 2013 2013 2012 2012 2011 2011 2010 2013 2012 2011 2013 2012 2011

BALANCE SHEET - ASSET USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth

TRY (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate Rate Rate

A-TOTAL EARNING ASSETS (I+II+III) 173,013.99 368,589.00 310,579.50 252,570.00 219,433.50 186,297.00 178,739.00 171,181.00 92.47 90.50 88.77 45.94 35.57 8.83

I- LOANS AND RECEIVABLES (net) 170,503.19 363,240.00 284,885.50 206,531.00 194,262.00 181,993.00 176,123.50 170,254.00 91.13 74.01 86.72 75.88 13.48 6.89

a) Factoring Receivables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

b) Financing Loans 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c) Lease Receivables 161,064.59 343,132.00 268,821.50 194,511.00 179,263.00 164,015.00 157,200.00 150,385.00 86.09 69.70 78.15 76.41 18.59 9.06

d) Over Due Loans 18,236.01 38,850.00 32,968.50 27,087.00 29,663.00 32,239.00 32,170.50 32,102.00 9.75 9.71 15.36 43.43 -15.98 0.43

e) Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

f) Receivable from Customer due to Brokerage Activities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

g) Allowance for Loan and Receivables Losses (-) -8,797.41 -18,742.00 -16,904.50 -15,067.00 -14,664.00 -14,261.00 -13,247.00 -12,233.00 -4.70 -5.40 -6.80 24.39 5.65 16.58

II-BANKS AND OTHER EARNING ASSETS 2,510.80 5,349.00 25,694.00 46,039.00 25,171.50 4,304.00 2,615.50 927.00 1.34 16.50 2.05 -88.38 969.68 364.29

a) Banks 2,510.80 5,349.00 25,694.00 46,039.00 25,171.50 4,304.00 2,615.50 927.00 1.34 16.50 2.05 -88.38 969.68 364.29

b) Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c) Balance With Banks-Current Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

III-SECURITIES AT FAIR VALUE THROUGH P/L 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

a) Treasury Bills and Government Bonds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

b) Other Investment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c) Repurchase Agreement 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

B- INVESTMENTS IN ASSOCIATES (net)+EQUITY SHARE 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

a) Investments in Associates (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

b) Equity Share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

C-NON-EARNING ASSETS 14,083.27 30,003.00 28,253.00 26,503.00 25,036.50 23,570.00 23,025.50 22,481.00 7.53 9.50 11.23 13.21 12.44 4.84

a) Cash and Cash Equivalents 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

b) Financial Assets at Fair Value through P/L 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c) Asset Held For Sale And Discontinued Operations (net) 418.70 892.00 556.00 220.00 144.50 69.00 105.00 141.00 0.22 0.08 0.03 305.45 218.84 -51.06

d) Other 13,664.57 29,111.00 27,697.00 26,283.00 24,892.00 23,501.00 22,920.50 22,340.00 7.30 9.42 11.20 10.76 11.84 5.20

- Intangible Assets 1.41 3.00 8.00 13.00 27.00 41.00 50.50 60.00 0.00 0.00 0.02 -76.92 -68.29 -31.67

- Property and Equipment 5,522.44 11,765.00 10,048.00 8,331.00 7,195.00 6,059.00 5,693.50 5,328.00 2.95 2.99 2.89 41.22 37.50 13.72

- Deferred Tax 5,878.71 12,524.00 12,987.50 13,451.00 13,946.00 14,441.00 13,754.50 13,068.00 3.14 4.82 6.88 -6.89 -6.86 10.51

- Other 2,262.02 4,819.00 4,653.50 4,488.00 3,724.00 2,960.00 3,422.00 3,884.00 1.21 1.61 1.41 7.38 51.62 -23.79

TOTAL ASSETS 187,097.26 398,592.00 338,832.50 279,073.00 244,470.00 209,867.00 201,764.50 193,662.00 100.00 100.00 100.00 42.83 32.98 8.37

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 13

(Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) As % of As % of As % of

ŞEKER FİNANSAL KİRALAMA A.Ş. 2013 2013 2013 2012 2012 2011 2011 2010 2013 2012 2011 2013 2012 2011

BALANCE SHEET-LIABILITIES+EQUITY USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth

TRY (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate Rate Rate

C- COST BEARING RESOURCES (I+II) 162,323.04 345,813.00 290,010.00 234,207.00 201,459.00 168,711.00 163,166.50 157,622.00 86.76 83.92 80.39 47.65 38.82 7.04

I-PAYABLES 7,204.75 15,349.00 11,670.00 7,991.00 6,386.00 4,781.00 6,827.00 8,873.00 3.85 2.86 2.28 92.08 67.14 -46.12

a) Factoring Payables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

b) Lease Payables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c) Other 7,204.75 15,349.00 11,670.00 7,991.00 6,386.00 4,781.00 6,827.00 8,873.00 3.85 2.86 2.28 92.08 67.14 -46.12

II-BORROWING FUNDING LOANS & OTHER 155,118.29 330,464.00 278,340.00 226,216.00 195,073.00 163,930.00 156,339.50 148,749.00 82.91 81.06 78.11 46.08 38.00 10.21

a) Fund Borrowed-Short Term 100,457.66 214,015.00 170,914.50 127,814.00 145,872.00 163,930.00 156,339.50 148,749.00 53.69 45.80 78.11 67.44 -22.03 10.21

b) Fund Borrowed-Long Term 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

c ) Marketable Securities For Issued (net) 54,660.63 116,449.00 107,425.50 98,402.00 49,201.00 0.00 0.00 0.00 29.22 35.26 n.a 18.34 n.a n.a

d) Securities Sold Under Repurchase Agreements 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

e) Subordinated Loans 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

D- NON COST BEARING RESOURCES 1,602.52 3,414.00 2,065.00 716.00 709.00 702.00 625.50 549.00 0.86 0.26 0.33 376.82 1.99 27.87

a) Provisions 1,095.57 2,334.00 1,311.50 289.00 240.50 192.00 158.00 124.00 0.59 0.10 0.09 707.61 50.52 54.84

b) Current & Deferred Tax Liabilities 313.09 667.00 525.50 384.00 447.00 510.00 467.50 425.00 0.17 0.14 0.24 73.70 -24.71 20.00

c) Trading Liabilities (Derivatives) 193.86 413.00 228.00 43.00 21.50 0.00 0.00 0.00 0.10 0.02 n.a 860.47 n.a n.a

d) Other Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

E- TOTAL LIABILITIES 163,925.55 349,227.00 292,075.00 234,923.00 202,168.00 169,413.00 163,792.00 158,171.00 87.62 84.18 80.72 48.66 38.67 7.11

F- MINORITY INTEREST 0.00 0.00 0.00 0.00 n.a n.a n.a n.a n.a n.a

F- EQUITY 23,171.70 49,365.00 46,757.50 44,150.00 42,302.00 40,454.00 37,972.50 35,491.00 12.38 15.82 19.28 11.81 9.14 13.98

a) Prior Year's Equity 20,723.81 44,150.00 42,302.00 40,454.00 37,972.50 35,491.00 33,336.50 31,182.00 11.08 14.50 16.91 9.14 13.98 13.82

b) Equity (Internal & external resources added during the year) -35.67 -76.00 20.50 117.00 45.00 -27.00 -23.00 -19.00 -0.02 0.04 -0.01 -164.96 -533.33 42.11

c) Minority Interest 20.18 43.00 38.00 33.00 33.50 34.00 30.50 27.00 0.01 0.01 0.02 30.30 -2.94 25.93

d) Profit & Loss 2,463.39 5,248.00 4,397.00 3,546.00 4,251.00 4,956.00 4,628.50 4,301.00 1.32 1.27 2.36 48.00 -28.45 15.23

TOTAL LIABILITY+EQUITY 187,097.26 398,592.00 338,832.50 279,073.00 244,470.00 209,867.00 201,764.50 193,662.00 100.00 100.00 100.00 42.83 32.98 8.37

USD 1 = TRY 2.1304 1.7776 1.8889 1.5376

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 14

ŞEKER FİNANSAL KİRALAMA A.Ş. 2013 2012 2011 2010 2009 INCOME STATEMENT

TRY (000)

Net Interest Income 15,238.00 13,165.00 10,895.00 10,469.00 8,034.00

A) Interest income 34,273.00 26,625.00 21,960.00 20,011.00 21,996.00

a) Factoring Interest Income 0.00 0.00 0.00 0.00 0.00

b) Financing Loans Interest Income 0.00 0.00 0.00 0.00 0.00

c) Lease Income 33,805.00 26,310.00 21,950.00 20,008.00 21,976.00

d) Banks 468.00 315.00 10.00 3.00 20.00

B) Fınancial Expense 19,035.00 13,460.00 11,065.00 9,542.00 13,962.00

Net Fee and Commission Income -1,134.00 -940.00 -331.00 -375.00 -607.00

a) Fee and Commission Income 0.00 0.00 0.00 0.00 0.00

b) Fee and Commission Expense 1,134.00 940.00 331.00 375.00 607.00

Total Operating Income 8,623.00 3,213.00 2,342.00 815.00 426.00

Interest Income from Other Operating Field 0.00 0.00 0.00 0.00 0.00

Foreign Exchange Gain or Loss (net) (+/-) 5,371.00 -375.00 -734.00 -752.00 -579.00

Gross Profit from Retail Business 0.00 0.00 0.00 134.00 0.00

Gains or Loss on Derivative Instruments (+/-) -1,047.00 -214.00 0.00 0.00 84.00

Income on Sale of Equity Participations and Consolidated Affiliates 0.00 0.00 0.00 0.00 0.00

Gains from Investment Securities (net) 0.00 0.00 0.00 0.00 0.00

Other Operating Income 4,299.00 3,802.00 3,076.00 1,433.00 921.00

Taxes other than Income Tax 0.00 0.00 0.00 0.00 0.00

Dividend 0.00 0.00 0.00 0.00 0.00

Provisions 6,872.00 3,371.00 3,172.00 3,574.00 1,415.00

Provision for Impairment of Loan and Trade Receivables 6,872.00 3,371.00 3,172.00 3,574.00 1,415.00

Other Provision 0.00 0.00 0.00 0.00 0.00

Total Operating Expense 9,372.00 7,634.00 6,015.00 5,213.00 5,607.00

Salaries and Employee Benefits 4,665.00 3,308.00 2,932.00 2,958.00 2,717.00

Depreciation and Amortization 1,109.00 1,750.00 0.00 0.00 0.00

Other Expenses 3,598.00 2,576.00 3,083.00 2,255.00 2,890.00

Profit from Operating Activities before Income Tax 6,483.00 4,433.00 3,719.00 2,122.00 831.00

Income Tax – Current 14.00 23.00 51.00 0.00 12.00

Income Tax – Deferred 1,221.00 864.00 -1,288.00 -2,179.00 -9,525.00

Net Profit for the Period 5,248.00 3,546.00 4,956.00 4,301.00 10,344.00

Total Income 22,727.00 15,813.00 13,640.00 11,661.00 8,432.00

Total Expense 9,372.00 8,009.00 6,749.00 5,965.00 6,186.00

Provision 6,872.00 3,371.00 3,172.00 3,574.00 1,415.00

Pretax Profit 6,483.00 4,433.00 3,719.00 2,122.00 831.00

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 15

ŞEKER FİNANSAL KİRALAMA A.Ş.

2013 2012 2011 FINANCIAL RATIO %

I. PROFITABILITY & PERFORMANCE

1. ROA - Pretax Profit / Total Assets (avg.) 1.91 1.81 1.84

2. ROE - Pretax Profit / Equity (avg.) 13.87 10.48 9.79

3. Total Income / Equity (avg.) 48.61 37.38 35.92

4. Total income / Total Assets (avg.) 6.71 6.47 6.76

5. Provisions / Total Income 30.24 21.32 23.26

6. Total Expense / Total Resources (avg.) 3.21 3.96 4.12

7. Net Profit for the Period / Total Assets (avg.) 1.55 1.45 2.46

8. Total Income / Total Expenses 242.50 197.44 202.10

9. Non Cost Bearing Liabilities + Equity- Non Earning Assets / Assets 5.71 6.58 8.38

10. Non Cost Bearing Liabilities - Non Earning Assets / Assets -6.67 -9.24 -10.90

11. Total Operating Expenses / Total Income 41.24 48.28 44.10

12. Interest Margin 4.91 6.00 6.10

13. Operating ROAA = Operating Net Incomes / Assets (avg.) 7.53 7.32 7.33

14. Operating ROAE = Operating Net Incomes / Equity Capital (avg.) 54.58 42.30 38.93

15. Interest Coverage – EBIT / Interest Expenses 134.06 132.93 133.61

16. Net Profit Margin 23.09 22.42 36.33

17. Gross Profit Margin 28.53 28.03 27.27

18. Market Share 1.40 1.38 1.13

19. Growth Rate 42.83 32.98 8.37

II. CAPITAL ADEQUACY (year-end)

1. Equity Generation / Prior Year‟s Equity -0.17 0.29 -0.08

2. Internal Equity Generation / Previous Year‟s Equity 11.89 8.77 13.96

3. Equity / Total Assets (Standard Ratio) 12.38 15.82 19.28

4. Equity / Total Liabilities 14.14 18.79 23.88

5. Free Equity / Total Receivables Ratio 10.35 17.34 18.88

6. Tangible Assets / Total Assets 2.95 2.99 2.89

7. Intangible Assets / Total Assets 0.00 0.00 0.02

8. Equity / Total Guarantees and Commitments + Equity 0.12 0.15 0.19

III. LIQUIDITY (year-end)

1. Liquid Assets + Marketable Securities / Total Assets 1.34 16.50 2.05

2. Liquid Assets + Marketable Securities / Total Liabilities 1.53 19.60 2.54

3. Short Term Borrowings / Total Assets 29.66 39.05 53.65

4. Net Interest and Commission / Total Assets 3.54 4.38 5.03 5. Liquid Assets + Marketable Securities / Equity 10.84 104.28 10.64

IV. ASSET QUALITY

1. Loan and Receivable‟s Loss Provisions / Total Loans and Receivables 4.91 6.80 7.27

2. Total Provisions / Profit Before Provision and Tax 51.46 43.20 46.03

3. Impaired Receivables / Gross Receivables 10.17 12.22 16.43

4. Impaired Receivables / Equity 78.70 61.35 79.69

5. Loss Reserves for Receivables / Impaired Receivables 48.24 55.62 44.24

6. Collaterals / Total Receivables 217.70 227.89 253.35

7. Total FX Position / Total Assets 10.85 6.87 2.57

8. Total FX Position / Equity 87.61 43.40 13.34

9. Assets / Total Guarantees and Commitments + Assets 0.95 0.92 0.95

LEASING

Şeker Finansal Kiralama A.Ş. and Its Subsidiary 16

Long Term Short Term Long Term Short Term Long Term Short Term Long Term Short Term Long Term Short Term Long Term Short Term

BB B BB B BB B BB B BBB- A-3 BBB- A-3

BB B BB B BB B BB B BBB- A-3 BBB- A-3

FC Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable

LC Stable Stable Stable Stable Stable Stable Positive Stable Stable Stable Stable Stable

BBB (Trk) A-3 (Trk) BBB+ (Trk) A-2 (Trk) BBB+ (Trk) A-1 (Trk) A- (Trk) A-1 (Trk) A- (Trk) A-1 (Trk) A- (Trk) A-1 (Trk)

Stable Stable Stable Stable Positive Stable Stable Stable Stable Stable Stable Stable

2 - 2 - 2 - 2 - 2 - 2 -

AB - AB - AB - AB - AB - AB -

Foreign

CurrencyBB B BB B BB B BB B BBB- - BBB- -

Local

CurrencyBB B BB B BB B BB B BBB- - BBB- -

FC Stable Stable Stable Stable Stable Stable Stable Stable Stable - Stable -

LC Stable Stable Stable Stable Stable Stable Positive Stable Stable - Stable -

 (*):Assigned by JCR on

May 23, 2013

 (*):Assigned by JCR on

May 23, 2013

September 15,

2010

(*):Affirmed by JCR on

February 01, 2010

April 25,

2011

(*):Affirmed by JCR on

February 21, 2011

Sponsor Support

Stand Alone

So

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n*

Outlook

(*):Affirmed by JCR on

February 21, 2011

(*):Affirmed by JCR on

June 28, 2012

Inte

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na

l Foreign Currency

Local Currency

Outlook

Na

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Local Rating

Outlook

March 30, May 16, May 29, May ..,

2012 2013 2013 2014

The Historical Development of the Company's Credit Rating Notes