Aktif Bank: Annual Report 2020

Transcription

1. IN THE ENDLESS MARATHON OF LIFE , AKTİF BANK IS ALWAYS BY YOUR SIDE! 1 1234 2020 Annual Report
2. WE ARE BY YOUR SIDE IN THE ENDLESS MARATHON OF LIFE … As Turkey's most comprehensive fintech ecosystem, Aktif Bank endeavors to facilitate society's access to financial products and services. We work to meet the needs of customers in all aspects of life through the products we offer through physical and digital channels, as well as our customer-oriented approach to business. The most prominent investment of Aktif Bank is N Kolay, its versatile digital bank, with a wide selection of solutions to make life easier, anytime, anywhere. N Kolay also supports a healthy living in the fast-paced marathon of life, having become the naming sponsor of Istanbul Marathon, one of the leading events of its kind around the globe, combining the race's energy with the dynamic spirit of N Kolay. This synergy and dynamizm also shaped the 2020 Annual Report of Aktif Bank. The report compares the continuous, frenetic activity of life to that of a marathon as it explains in detail the activities Aktif Bank and its digital bank N Kolay carried out in 2020 to meet financial needs. We hope you will enjoy reading it. 1234 1234 2 1
3. INDEX Introduction Who We Are 5 Our Purpose 5 Milestones 6 About Aktif Bank 8 Financials10 Performance Ratios 11 Capital and Shareholding Structure 11 Amendments to the Articles of Association and Reasons 11 Çalık Holding 12 Message from the Chairman 14 Message from the CEO 16 Sectoral Position and Activities in 2020 Retail Digital Banking and Payment Systems Corporate Banking Private Banking Treasury Credit Analytics and Capital Markets International Banking Information Technologies Talent and Development N Kolay World 20 22 24 24 25 25 25 27 28 Unique and Innovative Subsidiaries E-Kent UPT Sigortayeri PAVO N Kolay Payment Institution Echo Information Management Systems Aktif Asset Management 43 43 46 47 47 50 50 Emlak Invest Inovaban Innovation and Financial Consulting SECOM Workindo Subsidiaries Established Overseas 51 51 52 52 52 Management and Corporate Management Practices Board of Directors Senior Management Internal Systems Managers Committees Board and Committee Members’ Attendance to Meetings Board of Directors Summary Report Presented to the 2020 General Assembly Corporate Governance Principles Compliance Report Statement of Responsibility Talent and Development Practices The Bank’s Transactions within Its Risk Group Individuals and Organizations Providing Support Services 54 58 60 60 62 63 64 73 74 74 75 Financial Information and Risk Management Audit Committee Report Overview of Financial Position Risk Management Policies by Risk Types Risk Management Policies Credit Ratings by Rating Agencies Five-Year Summary Financial Highlights 75 77 78 78 79 80 Independent Audit Reports, Financial Statements and Notes Consolidated Financial Statements as at and for the Year Ended 31 December 2020 with Independent Auditor's Report 81 1234 1234 2 3
4. WE ARE THE LARGEST FINTECH ECOSYSTEM OF TURKEY Utility Payments Banking & Finance Card & Payment Systems Sports & Entertainment Transportation Insurance Money Transfer Electronic Security OUR GOAL IS TO ENSURE THAT FINANCIAL PRODUCTS AND SERVICES ARE EASILY ACCESSIBLE FOR EVERYONE
5. OUR MILESTONES 2016 2011 Turkey ’s first asset-backed security is issued Turkey's first Eurobond is issued 2009 1999 2018 2019 N Kolay Ankara Card N Kolay Mobile Turkey's first bank bond is issued Çalık Bank is founded 2008 Change of title as 2010 2013 2014 2015 2017 Turkey’s first mudaraba sukuk is issued passo.com.tr N Kolay Credit Turkey's first Euro sukuk is issued Passolig Card Turkey’s first digital bank bond 2020 Ankara Card Mobile Passo Events * nkolay.com N Kolay Card Passo Mobile * Aktif Bank, Hitachi and Mitsubishi Corporation technology partnership
6. ABOUT AKT İF BANK We draw inspiration from global trends to chart our own path! Every service and innovation we offer is designed for one specific purpose: enhance the quality of life! Aktif Bank, Turkey’s largest privately-held investment bank, continues to serve as the largest fintech ecosystem of Turkey thanks to innovative business models and technology investments that redefine investment banking. Aktif Bank both collaborates and competes with domestic and global fintech companies with products offered via physical and digital channels. Customer focus is ingrained in the DNA of the Bank, which, together with its subsidiaries, business partners and over 1,000 employees, provides 360-degree services to more than 10 million customers across more than 10 lines of business, meeting their daily needs in various areas including loans, insurance, transportation, security systems, payment systems and entertainment. With 12 branches across Turkey, Aktif Bank focuses on corporate banking, investment banking and private banking services that require predominantly face-to-face communications. Aktif Bank maintained its innovation-oriented efforts at pace in 2020 as it continued to diversify its digital offering with a view to excellence in customer experience. Since its inception, Aktif Bank has invested in technology to make life easier for customers, with the Bank’s versatile digital bank “N Kolay” continuously being expanded to include new products and services. 1234 8 The N Kolay mobile app was downloaded by 150,000 new customers in 2020, thanks to its products such as N Kolay Bond, which offers the convenience of digital transactions during the pandemic, as well as the FX platform with its bill payment and foreign exchange features. N Kolay will continue to expand its scope in 2021 in line with customer expectations, as befits a next-generation, branchless digital bank that makes life easier and meets its users’ expectations anytime, anywhere. To date, Aktif Bank’s alternative digital channels and platforms reached 330,000 retail loan transactions, 516,000 prepaid and bank cards, around 2 million overseas UPT money transfers, approximately 70 million bill payments and 4 million public transport trips. Aktif Bank was the naming sponsor of the 2020 Istanbul Marathon with its N Kolay brand. The combination of dynamism and the egalitarian and lean service model combined with the spirit of Istanbul Marathon, one of the leading events of its kind around the globe to create a harmonious collaboration. Meanwhile, Aktif Bank continues to offer convenient access to sporting and cultural events alike with its other brand in digital, the Passo mobile application. The Bank is committed to continuously developing and refining the Passo app, diversifying its offering at stadiums with features such as 24/7 money transfer with QR code, shopping, on-demand loan, game and entertainment payments. Passo mobile app reached 5.8 million downloads, while Passolig, the key to security and comfort at stadiums, exceeded 5.5 million cards. In 2020, Aktif Bank accurately analyzed customer needs and added indiBindi mobile app to its portfolio of solutions it offers to customers. This user-friendly app allows contactless QR-code payments in public minibuses which traditionally only accept cash. indiBindi aims to digitize minibus transportation, and also allows users to reserve minibus seats. Meanwhile, Aktif Bank continued to break the molds of traditional investment banking by issuing a YEDAŞ lease certificate in 2020. Designed to generate funds for electricity distribution companies to use in their investments, the lease certificate was an important step in terms of sustainability by enabling companies to supply electricity to more people and with a better infrastructure. Active in various sectors as befits its name thanks to its innovative and entrepreneurial vision, the Bank began to join forces with Japanese tech firms by partnering with SECOM in security technologies in 2019, followed by two partnership agreements with Mitsubishi in 2020. Aktif Bank partnered with Japanese tech giants Hitachi and Mitsubishi to develop technology solutions on cyber security and biometric authentication, and subsequently, introduced in Turkey the VeinID Five technology, which scans vein patterns on the user’s hand to sign in to a PC or a mobile device. In 2020, Aktif Bank also developed end-toend solutions to the construction industry with Workindo, an industry specific career platform developed in partnership with Mitsubishi and Çalık Enerji that brings together all industry stakeholders. In 2020, the Bank moved to a new head office location to create a more comfortable and convenient workplace for its team. Aktif Bank’s achievements were not limited to business outputs. In 2020, the Bank won 10 new accolades, bringing the total number of international awards to over 180. 1234 Turkey’s Largest Fintech Ecosystem 9
7. FINANCIALS Performance Ratios Sustainable income growth through a unique model . 2020 2019 (Thousand TRY) (Thousand TRY) Capital Adequacy Standard Ratio 14.39% 14.85% Return on Average Equity 23.83% 22.37% Return on Average Assets (Net Profit Basis) 2.78% 2.54% Non-Performing Loans / Total Loans 3.03% 4.05% 179.05% 140.80% 80.35% 81.19% Interest Income / Interest Expenditures Yielding Assets / Total Assets 2020 (Thousand TRY) Investment Securities (Net) 2019 (Thousand TRY) Change 6,242,050 3,914,090 59% 10,176,417 7,568,126 34% 2,602,044 2,097,840 24% 21,898,158 18,409,081 19% 2,172,513 1,485,218 46% Net Interest Income 886,747 526,776 68% Profit Before Taxes 734,034 512,007 43% Net Profit 560,047 410,663 36% Loans & Factoring Receivables (Net) Shareholders’ Equity Total Assets Guarantees and Indemnities Capital and Shareholding Structure Total Value of Shares Share (%) Paid Shares Unpaid Shares Çalık Holding A.Ş. Çalık Denim Tekstil San. ve Tic. A.Ş. Ahmet Çalık Başak Yönetim Sistemleri A.Ş. Irmak Yönetim Sistemleri A.Ş. 1,186,791 3,597 1,599 799 799 99.43 0.30 0.13 0.07 0.07 1,186,791 3,597 1,599 799 799 - Total 1,193,585 100.00 1,193,585 - Amendments to the Articles of Association and Reasons There were no amendments to the articles of association of Aktif Yatırım Bankası A.Ş. at the 2019 Ordinary General Assembly meeting that convened on March 24, 2020. 1234 1234 10 11
8. Founded in 1981 Çalık Holding operates across a wide range of industries including energy, construction and real estate, mining, textile, finance, telecommunications and digital. With operations in 28 countries across Central Asia, Balkans and MENA, the Group employs over 15,000 people. Çalık Holding is a major player in Turkey and in the world with its subsidiaries: Çalık Enerji in the energy sector; Çalık Petrol in oil exploration; YEDAŞ, YEPAŞ, Limak joint venture KEDS and Kiler joint ventures ARAS EDAŞ and ARAS EPAŞ in electricity distribution; Lidya Madencilik in mining; Gap Inşaat in construction; Aktif Bank, BKT (Banka Kombetare Tregtare) Albania and BKT Kosovo in finance; Çalık Denim and Gap Pazarlama in textile; Albtelecom in telecom; and Çalık Dijital in digital. Throughout its operations across the world, Çalık Holding is known for its integrity, reliability, robust financial structure, and long-term collaborations with international companies. It develops innovative business models and moves forward in its lines of business with sustainable growth. Dedicated to creating lasting value in every region it operates, Çalık Holding creates pioneering business projects through corporate processes, services and products developed in accordance with by its focus areas of Industry 4.0, Society 5.0 and sustainability. 1234 1234 12 13
9. MESSAGE FROM THE CHAIRMAN Aktif Bank continued to facilitate access to financial services and make customers ’ lives easier in 2020 with an innovative approach guided by the values of Çalık Group. Esteemed Business Partners and Colleagues, 2020 was marked as a year of significant global transformation due to the COVID-19 pandemic. According to the preliminary data from the last quarter of 2020, Turkish economy recorded a GDP growth of 1% during the year overshadowed by the pandemic. The positive trend in asset flows in the final quarter indicate the important role Turkey is set to play in influencing the direction of global liquidity after the pandemic. The stabilization in exchange rates brought about by a return to traditional fiscal policies in the final quarter of 2020, coupled with the steps taken against inflation, suggest a stable economic outlook for the coming period. In 2020, Turkey was the only country alongside China to record economic growth despite the pandemic, with a growth rate of 1.8%. The country is expected to grow by over 5% in 2021 as economic activity recovers. Ahmet Çalık Chairman Meanwhile, the global economy focused on minimizing the impact of the unprecedented economic recession caused by the pandemic. According to IMF’s World Economic Outlook report of October 2020, the global economy started on a path of recovery by late 2020 after bottoming out after March due to the large-scale quarantine. However, this upwards trend was checked by the reintroduction of lockdown measures in many countries due to the continued spread of COVID-19. However, market sentiment took an optimistic turn in the last two months with promising news regarding the development and rapid rollout of COVID-19 vaccines. Despite the challenges of 2020, Aktif Bank maintained its course of robust growth by combining its innovative and digital mindset with its disciplined and proactive approach. Financial results for 2020 show that the Bank clearly outperformed its competitors, recording USD 100 million in consolidated profits before tax. Contributing to Turkish economy by leveraging its global partnerships, Aktif Bank continued its innovative operations with a unique take on the investment banking model. As Turkey’s most comprehensive fintech ecosystem, Aktif Bank added new Japanese tech giants to its list of partners in 2020. After joining forces with leading Japanese security tech company SECOM in 2019, Aktif Bank went on to sign two important partnership agreements with Mitsubishi in 2020 in the fields of cyber security and biometric authentication. A testament to the foreign investors’ confidence in Turkey, these partnerships are a major contribution to the nation’s economy. Meanwhile, the synergy between Çalık Group companies was crowned by a significant achievement as Aktif Bank issued the YEDAŞ lease certificate, a first in Turkey. This issuance is designed to enable electricity distribution companies to generate the funds they require for investments, and also serves to create an innovative instrument in terms of sustainability. Its pioneering subsidiaries in the field of payment systems enable Aktif Bank to continue its trend of leadership not only in banking but in fintech as well, proving once again the accuracy of Çalık Group’s digitization strategy. In line with this understanding, we aim to take our investments in digital above and beyond the norms of the sector and further enhance our efficiency in 2021 through a proactive approach to our business. I would like to express my gratitude to our colleagues, business partners and stakeholders for their contributions to our activities. Sincerely, Ahmet Çalık 1234 1234 14 15
10. MESSAGE FROM THE CEO Guided by our vision of offering the best possible service to customers and facilitating access to financial services , Aktif Bank and its subsidiaries will continue creating lasting value for our country, economy and society in 2021. Dear Stakeholders, Market volatilities that emerged as a result of the global pandemic also affected the economy of Turkey in a number of ways. Looking at the breakdown of GDP, finance and insurance recorded a 41.1% increase in the third quarter of the year in terms of chained volume series. According to end of 2020 data, banking suffered a 22.1% decline in total equity yearover-year. Dr. Serdar Sümer CEO Meanwhile, despite the unforeseen global impact of COVID-19, 2020 was a productive year all-around for Aktif Bank. Thanks to our effective business partnerships, collaborations with global tech giants and a portfolio of innovative products and services, Aktif Bank recorded the highest return on equity in Turkey with pre-tax profits of USD 100 million. As Turkey’s most comprehensive fintech ecosystem, we entered into global partnerships in several industries, contributing to Turkey’s attractiveness to global investors as well as the country’s integration into the global economy, which is a source of great pride for us. It is safe to say that our digital way of doing business, flexible organization, our appetite for the “different” and innovativeness helped us overcome this challenging year. Aktif Bank differentiates itself from the competition with an original business approach, making optimum use of resources and driving efficiency with fintech subsidiaries that each rank in the top two of their respective markets, and a unique investment banking model. We are proud to create employment and reach over 10 million customers in our more than 10 lines of business. 2020 was an unprecedented year due to the pandemic, but it was also a time of innovation and accomplishments for our Bank. We kicked off 2020 by completing our move to a new head office, and achieved a new work environment that reflects our team spirit and enriches our synergy. We added Ankara and Bodrum private banking branches to our existing network of 10 locations, proving our productivity even in these trying times. We introduced several new capital market instruments, including the YEDAŞ issuance designed to generate funds for electricity distribution companies to use in their investments, serving as an important instrument in terms of sustainability by enabling companies to supply electricity to more people and with a better infrastructure. We continued to support Turkish exporters in all regions they operate. We maintained our unique approach to foreign trade in 2020, going above and beyond banking in all regions near and far. We facilitated foreign trade transactions of Turkish exporters through active trade limits for 386 banks in 88 countries. Our Bank built on its achievements in Africa by increasing its trade volume with the region from USD 450 million in 2019 to USD 570 million in 2020. We provided our services to exporters via 314 correspondent banks in Africa. Meanwhile, we continued to add new features to our digital bank N Kolay. We introduced N Kolay FX and investment fund transactions to the N Kolay app, and developed strategies to add stock trade and tailored financial instruments in the coming year. Furthermore, we added a brand new application “indiBindi” to our fintech ecosystem in 2020, a first in public transportation. The app allows contactless and hygienic payments in public minibuses which traditionally only accept cash. 1234 1234 16 17
11. MESSAGE FROM THE CEO Another important development in 2020 was our marathon sponsorship with the N Kolay brand . Accordingly, N Kolay is now the naming sponsor of the Istanbul Marathon for a period of three years. We advanced our longstanding support of sports by combining of dynamism and the egalitarian and lean service model of N Kolay with the spirit of Istanbul Marathon, one of the leading events of its kind around the globe to create a harmonious collaboration. Passo, the key player of our digital ecosystem, continued to offer convenient access to sporting and cultural events alike. Passo continued to offer tickets for events that have moved online as a result of the pandemic. Passo mobile reached 5.5 million downloads, while Passolig, the key to security and comfort at stadiums, exceeded 5.8 million cards. In 2020, we carried out two important studies that analyzed the COVID-19 situation in detail. One of these is the EkoLig report that compared the situation of the Süper Lig before and after the COVID-19, and was very well received. The report also explored the impact of COVID-19 on European premier leagues and the Süper Lig, drawing comparisons with the Big Five. Meanwhile, a broad survey conducted via Passo revealed how much people missed going to football games, as well as their perspective on sports and culture & arts events. In 2020, we took our collaboration with the PTT channel to a new level as part of its ambitious growth, and become industry leader in pension payments. We also rolled out new software during the year. On the subsidiaries side, Sigortayeri offered its full suite of insurance services to customers and business partners in a rapid manner during the pandemic and enhanced its profitability with new business deals. The ongoing group life insurance agreement with Fibaemeklilik was extended for five more years, which is expected to bring additional policy premiums of TRY 1.6 billion. On the other hand, UPS’s recently launched mobile app UPTION moved all domestic and international money transfers to the digital. Committed to become a next-gen solutions partner for the retail industry, EchoPos saw a significant surge in the usage of its innovative services during the COVID-19 pandemic as contactless digital services grew in prevalence. N Kolay payment provider partnered with the Şok grocery store chain, which has over 7,000 locations. Mükafat Asset Management was rebranded as Aktif Asset Management, and its assets under management grew 30% in 2020 to reach TRY 1.7 billion. Aktif Asset Management achieved great success in sustainable investments in a short span of time with the first ESG fund in Turkey. In 2020, we signed two partnership agreements with Mitsubishi, one of the most prestigious tech companies of Japan. We partnered with Japanese tech giants Hitachi and Mitsubishi to develop technology solutions on cyber security and biometric authentication, and introduced in Turkey the VeinID Five technology, which scans vein patterns on the user’s hand to sign in to a PC or a mobile device. In addition, we launched Workindo, an industry specific career platform for the construction industry in partnership with Mitsubishi and Çalık Enerji, which reached 20,000 subscribers in a short period of time. Workindo had the advantages of being a digital start-up during the COVID-19 pandemic, and produced informative content in a time where human resource needs were lower with the advent of the remote working model. SECOM, another Japanese tech partner, leveraged its expertise in security technologies to develop thermal camera solutions during the COVID-19 pandemic. Our subsidiary provides this its service in hotels, shopping malls, factories and company headquarters of over 500 customers using its both its own channels as well as solution partners such as Vodafone. As a bank that has always been there for its customers with a robust technological infrastructure developed in-house but compatible with the digital world on a global scale, we closed 2020 with the best possible results given the circumstances, hoping that we will never experience such trying times. With our accurate initiatives, effective partnerships and subsidiaries that make a difference in their respective fields, we are set to continue our trend of leadership in not only banking, but in financial technologies as well. Guided by our vision of offering the best possible service to customers and facilitating access to financial services, Aktif Bank and its subsidiaries will continue creating lasting value for our country, economy and society in 2021. Sincerely, Dr. Serdar Sümer 1234 1234 18 19
12. SECTORAL POSITION AND 2020 ACTIVITIES We endeavor to create an excellent customer experience through business models centered on human-oriented technologies . Outstanding technology experience through novel sales models Having adopted a sustainable and low-cost oriented growth strategy, Aktif Bank increased its net profits to TRY 560 million with a 36% increase at the end of 2020 and continued to grow profitably as it has in the previous years. The Bank’s asset size grew 19% over the previous year and reached TRY 21.9 billion. Return on average equity was 23.83% in 2020. Aktif Bank continued to actively support the growth of Turkey’s economy by extending TRY 10.2 billion in loans to retail and corporate customers in 2020. Driven by its commitment to make its customers’ life easier, Aktif Bank continued to enhance business processes in all areas of operation, and achieved an upwards momentum with its innovative products and services and its investments in digital channels. Together with its subsidiaries, Aktif Bank serves over 10 million retail customers as of the end of 2020, utilizing a unique business model that provides marketing and operational support without the cost of branching. The Bank’s novel organization of subsidiaries, combined with their effective operating models, contribute to its consolidated profit. Retail Digital Banking and Payment Systems A Robust, Digital-Driven Organization In 2020, the Bank focused on expanding its digital products and improving its processes, leveraging its ability to quickly adapt to changing market conditions and customer expectations. N Kolay Bond, an investment instrument that offers consistent interest rates until maturity, became a popular product among customers in the volatile market conditions of 2020, and continued its stable growth with a 42% increase in its customer base. N Kolay Bond offers various features to its users, such as no-charge money transfer and bill payments, and unlimited, no-charge money withdrawals from all ATMs across Turkeys with its N Kolay Card, and marketing of the N Kolay Bond continued throughout the year on digital channels and social media. In 2020, the N Kolay app continued to enhance product diversity and offered new alternatives to customers alongside the existing N Kolay Bond and FX products. The app’s offering was enhanced with Turkish lira and foreign currency repo with maturity options ranging from 1 day, as well as fund products for diverse yield expectations and risk appetites. Meanwhile, N Kolay FX, which offers advantageous rates in foreign exchange and commodity trade, was further diversified with the addition of silver trading. Order structure has been finalized, and rollout is expected to take place in early 2021. Having placed digital at its core, Aktif Bank received around 1 million loan applications worth TRY 12 billion via nkolaykredi.com.tr, which saw 2.7 million visits by 1.5 million visitors last year. In terms of consumer loans, N Kolay Loan recorded a growth rate of 88% compared to the industry average of 48%, all thanks to its fast and secure digital sales strategy. The Bank diversified its product range by offering tailored interest rates based on customer risk profiles. Aktif Bank also continued to develop its Passo mobile application, complementing the advantages the app offers at stadiums with 24/7 money transfers, payments and on-demand loans using QR code. Meanwhile, Passo experience expanded to the world of entertainment and events, and the app, which has been downloaded to 6 million devices to date, has grown into an integrated and unique platform for not only football, but also cultural and artistic events. Having been active in the public transport industry, the lifeblood of urban life, for many years, Aktif Bank continued to develop the AnkaraKart mobile app, an unprecedented innovation in the sector, which reached 750,000 downloads. As a result of this focus on mobile, around 70% percent of all customer acquisitions came through mobile channels. N Kolay Ankara Card, which brings together public transportation and shopping features within a single platform, reached approximately 400,000 cards. N Kolay Ankara remained the only boarding pass - bank card combo in the sector. Another new development in 2020 was the indiBindi app, the first public transportation app in the world that allows contactless payment and reservations for urban minibuses, which only accept cash payments. indiBindi allows commuters to use minibuses without having to handle or carry cash, as well as reserve seats for intracity trips without leaving their home. The app also helps save time with its minibus tracking feature. PTT was another channel through which the Bank maintained its strong growth momentum. The SMS loans feature, developed for pensioner customers in particular, enabled these customers to meet their cash needs without having to go outside. As at the end of 2020, the PTT channel reached a total balance of TRY 3 billion, indicating a 76% growth yearover-year. Pensioner customers who were in lockdown during the pandemic were offered easy and practical 1234 1234 20 21
13. SECTORAL POSITION AND 2020 ACTIVITIES loans at home through products such as PTT SMS Loan , which was launched in the first quarter. In doing so, PTT SMS Loans also provided public benefit, and became the main drivers of the growth in the PTT channel during the market recession brought about by the pandemic. Offering the first vehicle loan with digital document flow in the market, the Bank expanded its network of dealers that use digital documentation, and enhanced its competitive edge through process optimization without sacrificing profitability. As a result, the Bank increased its balance to TRY 423 million with a 103% growth. The Consumer Durables channel, which finances consumer durables purchases, was transformed into a customer acquisition machine in a strategic decision. Customer base was expanded by 146% via competitive interest rates. Subsequently, product balance climbed to TRY 123 million with a 324% growth. In 2020, Aktif Bank’s Call Center, designed to offer 24/7 services for a top-notch customer experience, received 2.6 million calls and contacted 1 million customers as part of marketing and sales activities. The Call Center achieved a high performance in sales activities without compromising service quality in line with customer needs and the Bank’s overall strategy. The Call Center is always available to provide assistance to customers, and plays a significant role in enhancing customer loyalty and ensuring the accuracy of the Bank’s product offering. Alternative Delivery Channels and the Call Center continued to transform their expenses into profitability via sales and collections, contributing to the Bank’s revenues. At the same time, customers who report they are “very satisfied” with the Bank’s services climbed further this year, bringing the Bank’s total score to 4.7 out of 5. Corporate Banking Leading Player in Challenging Regions In line with the importance Aktif Bank attaches to foreign trade, the Corporate Banking Group provides exclusive products to foreign trade customers while also focusing on Aktif Bank’s collaboration with its subsidiaries to develop strategies that bring a competitive advantage, utilizing existing channels and resources in the most effective way to increase the Bank’s total productivity and profitability. As was the case in 2018 and 2019, the Bank continued to serve as an intermediary in foreign trade transactions in various challenging regions, predominantly Sub-Saharan Africa, Middle East and CIS, offering Turkish exporters the foreign trade solutions they would otherwise be unable to access. Developing projects to meet sectoral needs in line with the Bank’s innovative approach, the Corporate Banking Group also offers advantageous banking service packages that aim increase the business volume of the Bank’s subsidiaries. As was the case in 2018 and 2019, the Bank continued to serve as an intermediary in foreign trade transactions in various challenging regions, predominantly Sub-Saharan Africa, Middle East and CIS, offering Turkish exporters the foreign trade solutions they would otherwise be unable to access. In addition to ensuring timely collection of export revenues from the aforementioned regions, the Bank also helped streamline export transactions by assuming banking risks and providing necessary funding before maturity dates. In the coming period, provision of highvalue-added banking solutions for customers active in challenging regions will remain the main aspect of the Corporate Banking strategy. In 2020, approximately TRY 220 million, USD 59 million and EUR 4.4 million in working capital facilities were extended to companies with favorable terms; these included tailored end-to-end funding solutions to companies operating in food trade using the commodity pledge model, as well as to loans provided to farmers to meet their pre-plant cash needs. Meanwhile, the Bank maintained its appetite towards investments and financing of renewable energy sources in 2020. Currently, the Bank has a total cash and non-cash loan book of USD 147 million extended to 31 renewable energy projects (solar, wind, hydroelectric) with a total installed capacity of 209 MW. It is worthy of note that all of these facilities are for greenfield projects. As part of its investments into football, the Bank continued to provide corporate banking services to football clubs in 2020. Having secured over TRY 3 billion in financing to 18 football clubs since 2014, the Bank remains the premier resource provider of the sector with TRY 50 million in loans in 2020 that complemented the syndicated loans in which it took part. 1234 1234 22 23
14. SECTORAL POSITION AND 2020 ACTIVITIES Private Banking Treasury Credit Analytics and Capital Markets Adapting Rapidly to Changing Conditions to Support Customers at All Times Offering Guidance and High Yields to Investors with an Innovative Approach Pioneer and Competent in Capital Markets The Bank continued customer transactions without any disruption during the global pandemic , and achieved business continuity and an above-expected profitability. The Treasury Group continued to increase its contribution to the Bank’s growth and profitability in 2020. It sustained its expansive scope with Islamic finance instruments and the innovative securities products it brokers alongside conventional products. Aktif Bank diversified its Private Banking product range by expanding into new business areas, pioneering the introduction of Turkish Capital Markets’ emerging new debt instruments such as asset-backed securities (ABS) and structured debt instruments (SDI) alongside its conventional offering of bond and repo products. The Bank also expanded its branch network during 2020, and is serving its customers from 13 locations, including 12 branches and the Head Office Private Banking Team. 2020 was a challenging year during which financial markets experienced significant volatility and liquidity management became even more important, whereas the Treasury rose to the challenge and managed to close the year by increasing its transaction volume, profitability and market integration. During the year, the Group continued its ABS issuances, which have become synonymous with the Aktif Bank brand, while also expanding its product range with innovative lease certificates for Construction and Electricity Distribution industries. The Group aims to provide quick and flexible solutions for customer needs, and the recent introduction of the FX platform during the year enabled it to surpass expectations in terms of customer satisfaction and transaction volumes. As a pioneer in Turkish capital markets, Aktif Bank continued to introduce innovations to the sector in 2020. For the first time in Turkey, Aktif Bank introduced an interestfree capital markets instrument for financing investments by electricity distribution companies, with repayments guaranteed by public organizations. In addition, the Bank also issued the first inflation-indexed sukuk as an alternative for long-term financing needs. Public offerings of N Kolay Bond, one of Aktif Bank’s fully digital products, continued on an increasing scale. As an indicator of Aktif Bank’s competence in international markets, in 2020 the Bank successfully completed a Eurobond issue worth USD 85 million, and the issued debt instruments are now being traded on the Irish Stock Exchange. International Banking Over 1,000 Correspondents in 144 Countries In 2020, the Group continued its efforts to set new cash and non-cash limits to broker foreign trade transactions and perform treasury transactions for the Bank’s customers. With 1,012 correspondents in 143 countries, Aktif Bank continued to follow its strategy of supporting Turkish exports in 2020, achieving a total transaction volume of TRY 5 billion to become a leading player in challenging regions. Looking ahead, the Group aims to diversify and expand upon the lending schemes in the areas of foreign trade financing and capital markets. Information Technologies The Information Technologies Group continued to bring the latest technologies and the highest quality of service to the Bank’s customers, business partners and employees while also working towards the goal of becoming an agile, creative, and human-focused technology center. Having been designated as an “R&D Center” by the Ministry of Industry and Technology in August 2016 on the basis of its planned technology investments and competent innovation initiatives, the Group continued its R&D Center projects unabated in 2020 and completed certification audits despite the pandemic. The Group also continued to work on its joint project proposal with a leading Turkish university for Horizon 2020, the leading research and innovation program in Europe. 1234 1234 24 25
15. SECTORAL POSITION AND 2020 ACTIVITIES The Bank transitioned to an agile working model in order to ensure the sustainability of its productive and transparent working environment that promotes learning . The Bank supports its employees’ participation in academic work, and at the same time, offers younger recruits opportunities to gain experience with long-term internship programs. The ISO 27001 Information Security Management and PCI-DSS certifications, testament to the Bank’s security efforts, were renewed in 2020. Meanwhile, the Group continued to enhance security control processes for a more effective defense against cyber-attacks in order to ensure continuity in software quality and information security. In 2020, the Group obtained ISO20000 (ITSM) and ISO 22301 (Business Continuity) certification, documenting the standards of its IT processes and business continuity practices. In 2020, the Group completed and deployed a new payment system. Efforts continue to provide services to our foreign subsidiaries and potential customers through this new payment system, as well as to enhance its function set. Investments and development activities were carried out in order to enable the use of cloud and microservice architectures, and started to be used in line with the requirements of the projects. In addition to these technologies, the Group commenced widespread implementation of open-source data base management systems, starting with new projects. The Bank transitioned to an agile working model in order to ensure the sustainability of its productive and transparent working environment that promotes learning. The Bank supports its employees’ participation in academic work, and at the same time, offers younger recruits opportunities to gain experience with long-term internship programs. In light of the global pandemic in 2020, the Bank has accelerated the transition of non-digital products and services into digital, with a particular focus on mobile technologies. The pandemic has underscored the need for digital transformation across the globe. With each new service we develop, we endeavor to meet the needs of our customers, employees and our fintech ecosystem with user-friendly flows, expansion into new areas and new business models. Talent and Development The Key to the Bank’s Success: Competent Human Resources In 2020, the Bank launched the employer brand project to enhance its employer perception, and revised all practices and processes accordingly. The Human Resources Group was renamed as Talent and Development. With the new employer branding, the Bank began conducting its talent and development communication activities with the slogan “Overcoming Any Challenge”. Driven by the belief that human resources are the most valuable asset, Aktif Bank continued to embrace an egalitarian talent and development policy in 2020 to maintain employee satisfaction, developing the knowledge, skills and competences of its employees and creating equal opportunities in career planning. Recruitment interviews were moved to digital platforms. The Bank regards its employees and the people they recommend as priority candidates in recruitment, and as such, “We Have Priority” and “We Want Your Friend” practices were widely used within the bank. Meanwhile, the “Aktif Rehber” program, designed to facilitate orientation of new recruits, was rebranded as “Companion”. Training courses "Time to Develop at Aktif Academy", "Time to Have Fun at Aktif Academy” and "Aktif Café” were also restructured into “Have Fun, Learn, Share” as part of the new employer branding. Training programs organized in this context were continued in 2020. Furthermore, the Bank supported the various certification trainings for employees, and assigned mandatory training courses via the digital training platform. The E-Archive project and digital documentation are still in development. The Performance Management System Portal was named “Harmony”, while the talent and development portal was renamed “Overcoming Any Challenge”. Employee competence scores were calculated as part of Talent Management. The Bank continued to improve talent and development processes, including the automation of various processes that were previously handled manually. Furthermore, the Bank continued to utilize the existing reporting system to deliver automatic employee metrics reports, developed a per capita human resources budget and defined standard rules for premiums. The “Flexible Work Day” and “Flexible Office Hours” practices, launched in 2017 to enhance employee motivation, continued in 2012. In addition, internal communication activities under the “Overcoming Any Challenge” employer brand continued, and the Bank continued to collaborate with non-governmental organizations as part of its corporate social responsibility efforts. 1234 1234 26 27
16. A Digital Platform for Aktif Bank Ecosystem ’s Products and Services WELCOMES YOU!
17. PAYMENT , MONEY TRANSFER, LOAN AND E-TICKET SERVICES THROUGH A digital platform to meet all your financial needs as they emerge, anytime, anywhere! DIGITAL LOAN PRODUCT Anında Kredi Başvurusu "N KOLAY PAY" QR CODE: A QUICK AND EASY SHOPPING EXPERIENCE N KOLAY ANKARA CARD AND MOBILE APPLICATION DEALER AND VEHICLE LOANS DIGITAL INVESTMENT PRODUCT COMMUNICATION AND SOLUTION CENTER DEDICATED TO BOND AND LOAN CUSTOMERS N KOLAY FX N KOLAY CARD LOAN OPTIONS AT PTT BRANCHES FOR PENSIONERS
18. Whether interest rates rise or fall , N Kolay always offers high yield Customers who utilize their savings in N Kolay Bond enjoy high daily interest rates, as well as the opportunity to carry out their transactions quickly 24/7 through a dedicated customer representative and N Kolay Mobile. nkolay.com
19. N Kolay Loan has got you covered for any unexpected needs that may arise in the hustle and bustle of daily life Instantly meet all your needs from white goods to furniture , technology products to shopping with Aktif Bank's new generation retail loan platform N Kolay Loan. Simply text the amount you need, and the loan is in your account immediately. nkolaykredi.com.tr Anında Kredi Başvurusu
20. nkolayode .com Pay with N Kolay: The easy way to send and receive payments Introducing a brand-new payment system in Turkey, N Kolay Pay offers a streamlined platform for receiving payments via QR code. Enjoy easy and fast payments free of commissions and service charges in all cash money transfers. Passo’s advantages extend beyond stadiums with Passo Mobile The renewed Passo Mobile offers convenient access to not only sports games, but a wide variety of events from concerts to theater plays. You can also benefit from zero-interest Kolay Packages, and complete your loan application within seconds. Top off your Passolig card using any credit card, and send and receive contactless money transfers 24/7 via QR code. 1234 1234 36 37
21. N Kolay Wallet is here to help you organize the endless marathon of life and enjoy the things you simply cannot spend time for . N Kolay Wallet is more than a card. Pay bills, play games, deposit allowance; these are but some of the features offered by N Kolay Wallet, the official card of the N Kolay World. 1234 38 One card to get ahead in the marathon of life N Kolay Ankara Card will boost your speed and help you get ahead in the marathon of life with one card for both shopping and public transport. An essential for the residents of Turkey’s capital, Ankara Card Mobile app is an all-in-one public transport solution. 1234 Life is easier with N Kolay Wallet 39
22. We are always rushing towards somewhere or something in life . On this marathon, we cannot simply let go of our dreams. N Kolay is here to make those dreams a reality. 1234 Need a loan to buy the car of your dreams? N Kolay Vehicle Loan is there for you. Need installments in your purchases? N Kolay is always by your side. N Kolay Installment is set to make your life easier in your daily hustle and bustle, with installment opportunities for various purchases from white goods to furniture, natural gas utilities to healthcare products and services. 40 Life is easier for pensioners using with N Kolay N Kolay Pension Loan offers pensioners who receive their pension from PTT the loans they need without having to provide any guarantors. Life is an endless marathon, and N Kolay is here to help you enjoy life to the fullest. 1234 N Kolay is the right address for your dreams 41
23. Providing smart urban solutions and integration services , E-Kent carries out 1 billion smart transport transactions annually. E-Kent brings technological transformation to the cities it serves while developing value-added business models for public administrations. E-Kent offers smart public transport solutions and manages transportation operations for nearly 8 million citizens in various provinces, including Turkey’s capital, Ankara. Since the day of its inception, E-Kent has carried out 15 million smart transport card transactions and 375 million transport ticket operations in total. Since April 2014, over 20 million football fans accessed stadiums using the e-ticket project of E-Kent, which sold around 10 million match-day tickets for over 4,000 games and more than 1 million seasonal tickets, generating revenues of over TRY 2 billion for sports clubs. As part of its strategy to expand to international markets, E-Kent continued to market its software and hardware solutions overseas, and its products and services are making a name for themselves in international organizations, such as the 2022 Qatar World Cup. E-Kent has also successfully carried out the world’s biggest stadium infrastructure transformation project, which involves entrance control and surveillance systems, integrated ticketing, stadium box office services and infrastructure for 60 stadiums in 31 provinces in Turkey. E-Kent entered the entertainment and event organization industry in March 2019, and already achieved around 50% market share, thanks to its partnerships with leading event organizers as well as its existing expertise and experience. UNIQUE AND INNOVATIVE SUBSIDIARIES UPT, Turkey’s first licensed payment institution, offers money transfer services in multiple currencies to cards and accounts both in Turkey and abroad. UPT reaches customers via nearly 8,000 points including UPT branches and post offices as well as dealers and distributors, delivering its services through the most expansive distribution network in the industry. We are the largest fintech ecosystem of Turkey. We reach over 10 million customers with our online & offline channels, diversified distribution networks and the synergy we create with our subsidiaries. In 2020, UPT carried out 1.9 million transactions in 170 countries, achieving a transaction volume of more than TRY 7 billion. UPT increased the number of foreign partner banks and payment service providers to 107 to expand the range and reach of its services, and at the same time, began offering its services to domestic payment service providers through new contracts. In 2020, the UPT brand and system expanded its service region to six countries, showing once again its determination to become a global player. UPT transactions between countries other than Turkey climbed 249% in 2020. In total, 40 overseas banks or payment providers from 55 countries utilized the UPT infrastructure to carry out money transfers to 60 countries. 1234 1234 UPT places customer needs and experience at the core of its service offering, and the company has made significant progress in software development for mobile and webbased solutions to carry its services to the digital. The mobile money transfer app UPTION was launched in 2020. For 2021, UPT aims to offer high-quality services and experience to customers on digital channels as well. 42 43
24. For those who feel the rhythm of life Life is a fast-paced marathon ; sometimes we need to slow down and spend some time doing things we love. Passo Mobil application brings you tickets to numerous events such as concerts, theater plays and festivals. Passo Mobile also has 24/7 money transfers, one-tap loan applications and Kolay Packages with zero interest rate. So you can just lean back and enjoy the things you love... For those looking to take a break from life's hustle and bustle 44 1234 1234 Millions of sport fans buy game tickets and enter stadiums in a safe, fast and easy manner with Passolig. Tired of the hustle and bustle of life? Enjoy the excitement of the game with Passolig. Passolig users can also use their Passolig cards for shopping and cash withdrawals, both inside and outside Turkey. Let the vibrancy of the stadium into your life with Passolig. 45
25. UNIQUE AND INNOVATIVE SUBSIDIARIES In 2020 , PAVO expanded its range of next-gen payment systems services to offer modern solutions leveraging its experience and expertise. Turkey’s innovative Insurance broker Sigortayeri, maintained its trend of profitability in 2020 to record an above 100 percent growth over the previous year, cementing its position as “Turkey’s largest domestic broker” providing insurance brokerage services to retail and corporate clients. In addition to its existing distribution channels, Sigortayeri expanded upon its partnership deals with leading players in the retail industry for its digital services, enhancing the integration of its insurance capability into customerbased “ecosystems". In line with its robust retail insurance distribution network and guided by its principle of facilitating access to financial services, Sigortayeri continued to serve its customers during the global pandemic by digitizing the services it offered to business partners in a physical environment, complementing its range of customizable, comparative products that cater to the needs of end consumers. Offering corporate Insurance solutions via its Asron Sigorta brand, Sigortayeri took part in the insurance placement of major projects in Turkey and 15 other countries in the region. Asron Sigorta boasts considerable experience in major Insurance coverage in construction, healthcare, energy, textile, automotive and financial services industries, as well as trade receivables insurance, bail bonds, engineering, professional liability, cyber risk and project finance insurance products that replace or supplement banking solutions. In renewable energy, Asron Sigorta developed a special Insurance facility suitable for project development for the construction and operation phases of solar and wind power plants, enabling the company to maintain its sector leadership in SPP project Insurance in 2020, with Asron Sigorta serving as the Insurance broker for 30% of Turkish solar power generation. PAVO offers its services to customers through over 250,000 cash register POS devices across Turkey, and Boasting Turkey’s largest and widest network in its respective industry, N Kolay Payment offers its services through over 570 N Kolay Stores and around 3,500 N Kolay Kiosks. With new partnership deals signed in 2019 with Turkey’s leading retailers and telecommunication companies, N Kolay Payment increased its physical service points to over 12,000. Acting as an agent in all provinces of Turkey in a variety of payment services including utility bill collections and domestic and international money transfers, N Kolay provides fast, convenient, and reliable payment transactions to over 360,000 card users. N Kolay’s application to the Central Bank of the Republic of Turkey for offering POS services to SMEs was approved on December 17, 2020. N Kolay continues its operations diversifies its operations with software integration, operator organization, special integration, Android device solutions and Interbank Card Center’s Techpos app. to provide easy and convenient POS services in a time when digitization has become much more prevalent and important. N Kolay Payment allows customers to transfer money and pay utility bills via approximately 8,000 retail service points across 81 provinces on a 24/7 basis without having to wait for business hours or requiring a bank account. N Kolay achieved remarkable success in a short amount of time thanks to its fast and convenient online processes and guaranteed transactions. N Kolay is the largest collection and payment channel in Turkey with 7 million transactions per month. The N Kolay Kiosk project brought Aktif Bank first place in the competition organized by European Financial Management Association (EFMA). 1234 1234 46 47
26. How do you prepare for the marathon of life ? Can you start running without any security? Sigortayeri is your greatest ally when your motor vehicle insurance is about to expire, when you need travel insurance for your overseas vacation, or when it is time to renew your health insurance policy. At Sigortayeri, which is the largest local insurance and reinsurance broker in Turkey, you can find all the insurance products you need to make your life easier. Complete your insurance policies and transactions with only a few clicks, and now you are ready for the marathon. 1234 48 Security Guru You have a lot on your mind in the hustle and bustle of daily life. This includes the safety and security of your home and office. This is no longer an issue with Japanese security specialist SECOM, and you can now enjoy peace of mind no longer worried about your home and office. Your home and office are under control with 24/7 security services. You can also monitor your home in real-time via the mobile app, and video chat with visitors. The app also offers HD video feed and alarm control. With SECOM, time and space are shaped according to you, regardless of where you are. 49 1234 You are only few clicks away from the marathon
27. UNIQUE AND INNOVATIVE SUBSIDIARIES Echo Information Management Systems commenced operations in August 2020 with the EchoPOS brand , and by the end of 2020, the company has completed over 10,000 software and hardware installations in 81 provinces of Turkey, becoming a “Next-Gen Solution Partner” with end-to-end payment systems and integration solutions for front and back offices of enterprises. Having partnered with Turkey’s leading retailers, EchoPos provides a robust, error-free infrastructure for over 2 million daily transactions on average. Emlak Invest was founded to seize business opportunities in the real estate and construction industries, participate in investment projects, primarily those in the energy industry, and become a major player in international trade. In line with the growth trend in the real estate industry, the company aims to be a leader with direct partnerships, profit-loss sharing investments, and urban renewal projects. The company has investments and operations in a variety of industries including energy and international trade. One of the most important investments by Emlak Invest is the Istanbul International Finance Center (IIFC), one of the largest regional planning projects of Turkey with a construction site sprawling over 3 million square meters, set to be one of the top financial hubs across the globe. Emlak Invest also completed a significant investment as a profit and loss partner to the Metropol Istanbul project in the Ataşehir district. In addition, in 2017, the company became one of the leading players in the industry by investing in a 61 MWp solar power plant project. Aktif Asset Management was established in 2016 as an Aktif Bank subsidiary engaged in asset management under the CMB regulations. Aktif Asset Management leverages its extensive know-how and industry expertise to offer alternative revenue streams to investors via investment funds it creates and manages for various risk/ yield expectations. In addition to investment funds, Aktif Asset Management offers the high yield of real economy to investors via investment capital and real estate funds, while its pension funds offer long-term solutions to customers in the pension system. With approximately 60,000 domestic and international corporate and individual investors, Aktif Asset Management manages total assets worth TRY 2 billion, which is continuously grown and diversified with accurate prediction of emerging needs. Inovaban Innovation and Financial Consulting provides “Growth Strategies and Process Management” services for companies that aim for a competitive advantage through R&D and innovation. It is the only firm in its field to offer its customers integrated solutions that focus on fully utilizing R&D incentives and support programs, financial and legal risk management, and consultancy on intellectual and industrial property rights. Its primary customers include Technology Development Zones, R&D and Design centers, Incubation Centers, Technology Transfer Offices, Investment Funds, Investor Networks and companies operating within these. companies of all scales categorized by TurkStat as enterprises engaged in the manufacture of high and medium-high technology products. Inovaban also established relations with private banks, investment funds and investment networks that understand the importance of an R&D ecosystem, and signed protocols for business development. In 2020, Inovaban engaged and formed business relationships with several manufacturing and software Inovaban continued to enable value-added production in Turkey and to provide Turkish companies with a competitive advantage in international markets to expedite their commercialization and globalization efficiently. In this context, Inovaban employees participated in over 30 training events, virtual fairs and conferences as trainers and panelists. 1234 1234 50 51
28. UNIQUE AND INNOVATIVE SUBSIDIARIES In 2019 , Secom Aktif Yatırım A.Ş., a joint venture between Turkey’s largest privately-held investment bank Aktif Bank and the Japanese SECOM, a security and technology company that serves 3.4 million subscribers in 19 countries with over 60,000 employees, acquired all shares of Kent Güvenlik Through this partnership, SECOM now offers electronic security services across Turkey with a continuously growing customer base. Offering product sale and installation services in 81 provinces of Turkey, SECOM is taking firm steps forward with home, office and corporate electronic security services. Subsidiaries Established Overseas KIC (Kazakhstan Ijara Company Joint Stock Company) Founded in 2013 and having started operations in early 2014, KIC is the first Financial Leasing company in Kazakhstan to comply with Islamic rules and regulations. Offering leasing services to predominantly small and medium-sized enterprises (SMEs), KIC continues operations with a vision to become one of the biggest private leasing companies in Kazakhstan within five years. ELC (Euroasia Leasing Company) Workindo was established in 2020 to offer solutions to the construction industry’s problems of finding contractors, bidding for projects and accessing labor. EGAŞ has invested in Workindo, which is currently active in 5 countries. Workindo adds lasting value to the life of clients in all regions in which it operates, thanks to its entrepreneurship, smart strategies, the importance it attaches to inclusivity and diversity, innovative and sustainable business models, and investments in technology and human resources. Founded in Tatarstan in 2012, “ELC” is the first “Islamic Financial Leasing” company to operate in Russia. Offering leasing services to small and medium-sized enterprises (SMEs) in particular, ELC is a leading Islamic financial leasing company in Russia. EMIC (Euro - Mediterranean Investment Company Ltd.) Founded in Nicosia in 2015, EMIC is the first and only Islamic Investment Company of Cyprus and the biggest international investment company in the Turkish Republic of Northern Cyprus (TRNC). 1234 1234 52 53
29. BOARD OF DIRECTORS AHMET ÇALIK Chairman Deputy Chairman MEHMET USTA MEHMET ERTUĞRUL GÜRLER* Board Member Board Member Born in Malatya in 1958, Ahmet Çalık began his own personal enterprise in textile in 1981 as a member of a family that has been engaged in the textile industry since 1930. Ahmet Çalık is one of the leading players in Turkey and abroad with sustainable investments in seven sectors, namely energy, construction, mining, textile, telecom, finance and digital, which he brought under the same roof in 1997 with the foundation of Çalık Holding. Born in 1950, Mehmet Usta graduated from the Economics and Finance Department of Eskişehir Academy of Economics and Commercial Sciences. He has a background of more than 40 years in banking. He served as inspector and manager in Anadolu Bank between 1979 and 1987 and held senior management positions in Emlak Bank, both in Turkey and abroad in the Netherlands and France, between 1987 and 1994. From May 1994 to March 2007, he served at Banque du Bosphore, Paris as the General Manager and Board Member, and in April 2008, he joined Aktif Bank as the Deputy Chairman. In December 2008, he assumed the position of Deputy Chairman at Çalık Holding company Banka Kombetare Tregtare Albania before becoming Chairman in July 2009. He has also been the Founding Chairman of Banka Kombetare Tregtare Kosovo since May 2018. Since May 2012, he has been a Board Member of the Brussels-based WSBI (World Savings and Retail Banking Institute), and from March 2015 onwards, he has held the title of Chairman at Aktif Bank subsidiaries UPT Ödeme Hizmetleri A.Ş., Sigortayeri Sigorta, and Reasürans Brokerlik A.Ş. Born in 1958, Mehmet Ertuğrul Gürler graduated from Marmara University Faculty of Management. Gürler has over 40 years of professional experience. From 1978 to 1981, he worked at the Personnel Affairs and Accounting department of Marshall Boya ve Vernik San. A.Ş., and between 1983 and 1987, at BP Overseas Refining Company Ltd. Refinery Department as the Department Assistant. He held several positions at Dow Türkiye A.Ş. from 1987 to 1994, including Financial Affairs Manager and Board Member. Between 1994 and 1998, he was the Deputy General Manager at Total Oil Turkey A.Ş. before joining Çalık Holding A.Ş. as the General Manager. Born in 1959, Veysel Şahin has a degree in Public Administration from Ankara Academy of Economic and Commercial Sciences. He received his master’s degree in Business Administration from Bahçeşehir University. He has 36 years of experience in banking, and is a certified public accountant and independent auditor. He started his career in banking as a deputy inspector in 1985. He served as an inspector, department and branch manager, overseas representative and Chairman of the Inspection Board at Anadolu Bank, Emlak Bank, Ziraat Bank International AG and Ziraat Bank. He was a member of the Audit Committee of Axa Insurance and a Board Member of TKI Bank Kazakhstan. In 2009 Şahin joined Aktif Bank as a Board Member and since then he has served as the Audit Committee Chairman and Corporate Governance Committee Member. He is also the Chairman of the Board of Aktif Bank subsidiary N Kolay Payment Institution and a member of the Audit Committee at GAP Inşaat. Ahmet Çalık’s visionary philosophy drives him to invest in projects that benefit people and the society at large, and his activities across the globe and long-term collaborations with international enterprises have earned him a well-deserved reputation for integrity and reliability. Ahmet Çalık was awarded numerous honors in Turkey and abroad, including Japanese Order of the Rising Sun with Gold Rays and Neck Ribbon, Turkmenistan Order of the State, Magtymguly International Prize and Gaýrat Medal, US Ellis Island Medal of Honor, and Republic of Turkey State Medal of Distinguished Service Medal, Ministry of the Exterior Distinguished Service Medal and the Grand National Assembly Distinguished Service Award. Ahmet Çalık was granted the title Honorary Consul of the Republic of Kazakhstan in Bursa, and holds honorary PhDs from Matsumoto Dental University and Kindai University in Japan, University of Tirana in Albania and Malatya Turgut Özal University. Ahmet Çalık is currently serving as the Chairman of Çalık Holding and its group companies. Currently, Gürler serves as the Deputy Chairman at Çalık Holding, Banka Kombetare Tregtare, ALBtelecom, Çalık Denim, Başak Yönetim Sistemleri, Cetel Telekom, Çalık Finansal Hizmetler, Çalık Hava Taşımacılık, Irmak Yönetim Sistemleri, Kentsel Dönüşüm Inşaat and Enrich Cotton, and a Board Member at Aktif Bank, Gap Inşaat, Gap Pazarlama, Çalık Emlak ve Gayrimenkul, Çalık Inşaat and Doğu Akdeniz Petro Kimya. Since 2017, he has served as the Chairman of the Audit Committee at Banka Kombetare Tregtare, Çalık Holding, Çalık Enerji, YEPAŞ, Albtelecom and Gap Inşaat. He is also a member of the Credit, Remuneration and Corporate Governance Committees at Aktif Bank. VEYSEL ŞAHIN * Mehmet Ertuğrul Gürler has resigned from his position as Board Member as of January 2021. 1234 1234 54 55
30. BOARD OF DIRECTORS DR . SERDAR SÜMER* Board Member TARIK BAŞARA Board Member AYŞEGÜL ADACA OĞAN* Board Member CEO and Board Member Born in 1970, Kemaleddin Koyuncu studied Business Administration at Middle East Technical University and received an MBA from the University of Illinois at Urbana-Champaign. Koyuncu has a professional background of 29 years. He began his career in banking in 1992 as a deputy inspector at Türkiye Iş Bankası A.Ş. Between 1996 and 2001, he served as a Treasury Specialist at the Republic of Turkey Prime Ministry Undersecretariat of Treasury. From 2001 to 2015, he worked as a Banking Specialist, Deputy Head of Department, Senior Chief Specialist of Banking, Department Head and Deputy Department Head at the Banking Regulation and Supervision Agency (BRSA). Between 2003 and 2004, he sat on the Board of Toprak Sigorta/Ege Sigorta. He joined Aktif Bank in 2015 as Executive Vice President. Since September 2017, he has served as a member of the Board and the Audit Committee of Aktif Bank. Born in 1961, Tarık Başara graduated from Istanbul University Faculty of Business Administration. Başara has over 30 years of experience in banking, which he began at Türkiye Iş Bankası as inspector in 1986. From 1993 to 2003, he worked at Işbank GmbH where he was responsible for managing organization, accounting and information technologies departments, and took part in several restructuring and IT projects. Başara returned to Turkey in 2005 to rejoin Türkiye Iş Bankası where he served as unit head at the Subsidiaries Department between 2005 and 2007, led various branches from 2007 to 2012, and worked as Department Head of Banking Core Operations from 2012 to 2017 before his retirement from the company. Since April 2019, Başara has been a member of the Board of Directors and the Audit Committee at Aktif Bank. Born in 1974, Ayşegül Adaca Oğan has a bachelor’s degree in Civil Engineering from Boğaziçi University, and a master’s degree from Stanford University. With 22 years of experience in banking, Oğan joined Aktif Bank in 2015. Ayşegül Adaca Oğan was elected as a Board Member at the General Assembly meeting held on 24 March 2020. Born in 1973, Serdar Sümer holds a degree in Business Administration from Ankara University Faculty of Political Sciences. He completed his master’s in Business Administration at the College of William and Mary in Virginia, USA, and in April 2011, received a PhD in banking at the Marmara University Institute of Banking and Insurance. Sümer is a certified Financial Risk Manager (FRM) and Certified Public Accountant. He started his career in 1996 as a Sworn-in Bank Auditor. From 2008 to 2014, he served as the Executive Vice President of Subsidiaries Management and Capital Markets at Aktif Bank. Having developed various innovative solutions to address customers’ financial needs to increase the effectiveness of products and channels in capital markets; in 2013 Sümer led the issue of the first lease certificate for project financing in Turkey. He oversaw the launch of Turkey’s first bank bond and ABS products and the coordination of the Bank’s subsidiaries and affiliates within the most effective management structure. KEMALETTIN KOYUNCU * Ayşegül Adaca Oğan was appointed as CEO as of January 2021. After working as an executive at an industry-leading investment company, Sümer returned to Aktif Bank in 2015 to assume the role of CEO, and has since been the Bank’s CEO and a Board Member leading the Aktif Bank’s subsidiaries. Sümer is also a Board Member at N Kolay Ödeme Kuruluşu A.Ş., one of the leading payment institutions in Turkey; international money transfer service provider UPT Ödeme Sistemleri A.Ş.; smart city and ticket solutions provider E-Kent Geçiş Sistemleri ve Biletleme Teknolojileri A.Ş.; payment systems providers PAVO Teknik Servis Elektrik Elektronik San. Tic. A.Ş. and Echo Bilgi Yönetim Sistemleri A.Ş.; and Insurance provider comparison platform Sigortayeri Sigorta ve Reasürans Brokerliği A.Ş. * Serdar Sümer has resigned from his position as CEO as of January 2021. He continues to serve as a Board Member. 1234 1234 56 57
31. SENIOR MANAGEMENT SELCAN ARKALI Executive Vice President , Talent Development and Operations Born in 1974, Selcan Arkalı holds a bachelor’s degree from the Political Sciences and Public Administration Department, Middle East Technical University and a master’s degree in Human Resources from Bahçeşehir University. With 22 years of experience in banking, Kaytancı joined Aktif Bank in 2014. AHMET ERDAL GÜNCAN DR. SERDAR SÜMER CEO and Board Member Serdar Sümer’s resume is provided above, on the Board of Directors page of this report. MURAT BARLAS FILIZ ERENDAÇ Executive Vice President, Treasury Chief Legal Counsel Born in 1968, Murat Barlas holds a Mathematics degree from Istanbul University. With 24 years of experience in banking, Barlas joined Aktif Bank in 2015. Born in 1976, Filiz Erendaç earned a Bachelor's Degree at the Ankara University Faculty of Law and completed a Master's Degree in Commercial Law at the same university. Erendaç has 21 years of experience in business and joined Aktif Bank in 2016. UFUK KARAKAYA BETÜGÜL TOKER Executive Vice President, Corporate Banking Managing Director, Subsidiary Management Executive Vice President, Retail Digital Banking and Payment Systems Born in 1969, Ahmet Erdal Güncan holds a bachelor’s degree in Civil Engineering and a master’s degree in Construction Management, both from Istanbul Technical University. With 23 years of experience in banking, Güncan joined Aktif Bank in 2008. Born in 1975, Ufuk Karakaya holds a degree in Public Administration from Gazi University. He also has a master’s degree in Finance from George Washington University. With 22 years of experience in banking, Karakaya joined Aktif Bank in 2018. Born in 1976, Betügül Toker graduated from Bilkent University with a degree in Economics. With 20 years of professional experience, Toker joined Aktif Bank in 2018. NALAN AYDIN TÜFEKÇI MUZAFFER SUAT UTKU ATILA YANPAR Executive Vice President, Information Technologies Executive Vice President, International Banking Executive Vice President, Credit Analytics and Capital Markets Born in 1972, Nalan Aydın Tüfekçi holds a Computer Engineering degree from Hacettepe University. With 26 years of professional experience, Nalan Aydın Tüfekçi joined Aktif Bank in 2019. Born in 1974, Muzaffer Suat Utku holds a degree in Business Administration from U.S. International University, San Diego. He also has an MBA degree from London University College. With 21 years of experience in banking, Utku joined Aktif Bank in 2007. Born in 1979, Atila Yanpar graduated from the Faculty of Political Sciences, Ankara University with a degree in Finance. He also holds a master’s degree in Public Policy from Oxford University. With 16 years of professional experience, Atila Yanpar joined Aktif Bank in 2019. 1234 1234 58 Resigned Executives: Özer Burhan, Managing Director, Finance (April 2020). 59
32. INTERNAL SYSTEMS MANAGERS Corporate Governance Committee The Credit Committee is composed of the CEO and two members elected among those Board Members who meet the qualifications required of the CEO , with the exception of years of experience. The committee exercises the authority to open credit lines as delegated by the Board of Directors. The Corporate Governance Committee is responsible for monitoring the Bank’s compliance with corporate governance principles (mission and vision, corporate values and code of conduct, articles of association, internal policies, interbank regulations, etc.), improving compliance with corporate governance principles and presenting relevant suggestions to the Board of Directors. ALPER ÖZDEMIR Chairman, Inspection Board PINAR GÜRKAN Head of Compliance Born in 1985, Alper Özdemir holds a bachelor’s degree in Business Administration from Istanbul University. He also has a master’s degree in International Banking and Finance from Istanbul Commerce University. With 12 years of experience in banking, Özdemir joined Aktif Bank in 2014. Born in 1981, Pınar Gürkan graduated from the Econometrics Department, Faculty of Economics and Administrative Sciences, Marmara University. With 16 years of experience in banking, Gürkan joined Aktif Bank in 2009. VOLKAN KÖLEGE Head of Internal Control HAMDI ÖNDER Head of Risk Management MEHMET USTA CredIt CommIttee ChaIrman Born in 1977, Volkan Kölege graduated from the Business Administration Department, Faculty of Economics and Administrative Sciences, Anadolu University. With over 20 years of experience in banking, Kölege joined Aktif Bank in 2008. Volkan Kölege has been a Member of the Audit Committee of Banka Kombetare Tregtare, a Çalık Holding company with operations in Kosovo, since June 2019. Born in 1982, Hamdi Önder holds a Mathematics Engineering degree from Istanbul Technical University. He also has a master’s degree in Business Administration (MBA) from Koç University. With 12 years of experience in banking, Önder joined Aktif Bank in 2009. MEHMET ERTUĞRUL GÜRLER CredIt CommIttee Deputy ChaIrman KEMALEDDIN KOYUNCU Alternate Member internal bank regulations, and ensured the integrity of the information produced. It conducts preliminary assessments to assist the Board of Directors in the selection of independent audit companies as well as rating, appraisal and support service providers. It regularly monitors the activities of firms selected by the Board of Directors and subsequently signed contract with, and ensures the consolidated delivery and coordination of internal audit activities covering all departments/units/ branches. The Corporate Governance Committee meets once a year, or more frequently when necessary, with all members attending. Other participants may also be invited to meetings by the Committee Chairman. The Bank’s Corporate Governance Principles Compliance Report is prepared and published on the corporate website on an annual basis. Committee Members: MEHMET USTA Deputy ChaIrman of the Board CommIttee ChaIrman MEHMET ERTUĞRUL GÜRLER Board Member CommIttee Deputy ChaIrman VEYSEL ŞAHIN Board Member CommIttee Membe It submits an audit report to the Board of Directors at least once every six months. 1234 Committee Members: KEMALEDDIN KOYUNCU Audit Committee Chairman TARIK BAŞARA Audit Committee Member 1234 On behalf of the Board of Directors, the Audit Committee supervises the efficiency and adequacy of the Bank’s internal systems and the functioning of these systems as well as accounting and reporting systems in line with the Banking Law, other relevant legal provisions and DR. SERDAR SÜMER CredIt CommIttee Member CEO VEYSEL ŞAHIN Alternate Member Audit Committee In order to assist with its audit and supervision duties, the Board of Directors has appointed two of its members, who meet the criteria stipulated by the Banking Regulation and Supervision Institution (BRSA), to form the Audit Committee. These directors are tasked to jointly supervise the administration, management and execution of the departments within the scope of internal systems under the title of internal systems officers. Committee Members: Credit Committee Alternate Members: COMMITTEES 60 Credit Committee 61
33. Remuneration Committee Assets-Liabilities Committee The Remuneration Committee is responsible for evaluating the remuneration policy and practices established by the Head Office within the context of risk management . The Committee reports its suggestions to the Board of Directors on an annual basis. The Assets-Liabilities Committee is an advisory board that sets rules in line with the financial policies and strategies in order to manage the Bank’s assets and liabilities in relation with liquidity restrictions, foreign exchange risk and capital adequacy. The Remuneration Committee holds ordinary meetings once a year and extraordinary meetings when necessary, with all members attending. Committee Members: Committee Members: MEHMET USTA Deputy ChaIrman of the Board CommIttee ChaIrman MEHMET ERTUĞRUL GÜRLER Board Member CommIttee Deputy ChaIrman DR. SERDAR SÜMER CEO, CommIttee ChaIrman AHMET ERDAL GÜNCAN ExecutIve VIce PresIdent, Corporate BankIng MUZAFFER SUAT UTKU ExecutIve VIce PresIdent, InternatIonal BankIng ATILA YANPAR ExecutIve VIce PresIdent, CredIt AnalytIcs and CapItal Markets MURAT BARLAS ExecutIve VIce PresIdent, Treasury BETÜGÜL TOKER ExecutIve VIce PresIdent, RetaIl DIgItal BankIng and Payment Systems Board and Committee Members’ Attendance to Meetings • In 2020, the Board of Directors convened 12 times with the necessary majority and quorum. • The Audit Committee convened 4 times in 2020; four of those meetings were attended by the independent auditors. • The Credit Committee convened 19 times in 2020. • The Corporate Governance Committee convened twice in 2020. BOARD OF DIRECTORS SUMMARY REPORT PRESENTED TO THE 2020 GENERAL ASSEMBLY Esteemed Shareholders, Our Bank completed a productive year in 2020, successfully accomplishing all planned activities for the year thanks to the efforts of the management. As a result of activities conducted throughout 2020: Our net profit was TRY 560,047,000 and total asset size was TRY 21,898,158,000. With these results, our net profit increased by 36.38%, while our asset size grew by 18.95% over the previous year. Our capital adequacy ratio stood at 14.39%. Our Bank succeeded in meeting the equity requirements due to Balance Sheet growth, with the profit obtained from operations in the period. Our Bank has been one of the most profitable banks in the sector with an average Return on Equity of 23.83% and an average Return on Assets of 2.78%. Our non-equity foreign assets pioneered growth, surging by 18.30% to TRY 19,296,114,000. This significant development in foreign assets’ inflow is a highly positive development in terms of our Bank’s credibility. Our cash loans increased by 34.46% compared to the previous year, rising to TRY 10,176,417,000. The NPL ratio stood at 3.03%. Given these results, while growing quite significantly in Balance Sheet terms, Aktif Bank has maintained its profitability and asset quality at a high level. The Financial Statements of our Bank showing the activity outcomes pertaining to the Balance Sheet period January 1, 2020 - December 31, 2020, the respective highlights and footnotes, Independent Auditor’s Report, and Annual Report have been submitted for your evaluation and approval. The Board of Directors hereby presents this Report, as well as the aforementioned reports, for the consideration of the General Assembly and for its subsequent release from liability upon the Assembly’s approval, and extends its wishes for an even more productive and profitable year ahead. Sincerely, On Behalf of the Aktif Bank A.Ş. Board of Directors, Ahmet Çalık Chairman Mehmet Usta Deputy Chairman 1234 1234 62 63
34. 1 . Corporate Statement Governance Principles Compliance Aktif Bank pledges to exercise utmost diligence in the implementation of the Corporate Governance Principles. The Bank’s Board of Directors and Senior Management carry out their duties and responsibilities guided by the principles of transparency, inclusion and equality while prioritizing the Bank’s profitability and the interests of shareholders and other stakeholders. Aktif Bank operates in full compliance with all legal provisions on banking, particularly the Banking Law No. 5411 and related regulations. Aktif Bank executives aim to increase the value of the Bank. To this end, they follow a management approach based on the corporate governance principles of fairness, transparency, equality, responsibility and accountability. With the exception of trade secrets and non-public information, financial and non-financial information about the Bank is disclosed to the public in an accurate, complete, clear, comprehensible and accessible manner. The Bank’s disclosure activities are carried out in line with the principle of transparency. Accordingly, the Bank’s website is designed to offer easy access to information for all stakeholders. The Bank’s annual reports, independent audit reports, financial statements, general assembly information, code of ethics, organizational structure and other announcements can be found on the Bank’s website. 1234 64 PART I – SHAREHOLDERS 2. Shareholder Relations Unit The Bank has no “Shareholder Relations Unit” as its shares are not publicly listed. The Bank’s shareholding structure is as follows. Shareholder’s Name/Title Share (%) Çalık Holding A.Ş. 99,43 Çalık Denim Tekstil Sanayi ve Ticaret A.Ş. 0,30 Ahmet Çalık 0,13 Başak Yönetim Sistemleri A.Ş. 0,07 Irmak Yönetim Sistemleri A.Ş. 0,07 Total 100,00 3. Exercise of Shareholders’ Right to Information Developments that may affect the decisions of investors are announced via the Public Disclosure Platform. The “Corporate Governance” section on the Bank’s website provides documents containing information for the public. The Bank has responded to the information requests made during the period. All information requests by the Bank’s shareholders are met, with the exception of trade secrets and non-public information. Aktif Bank is audited by both the independent auditors as mandated by the Banking Legislation and the auditors assigned in accordance with the Turkish Commercial Code and the Bank’s Articles of Association. 4. General Assembly Meetings 5. Voting Rights and Minority Rights The Bank’s Ordinary General Assembly Meeting for the year 2019 was held on March 24, 2020. As the Bank’s shareholding structure is suitable for organizing General Assembly meetings through “Invitation Procedure”, the shareholders were informed of the venue, date and agenda of the said meeting. Without prejudice to the provisions regarding participation in the General Assembly and organization of General Assembly meetings; the Ordinary General Assembly was convened without a convocation as per Article 416 of Turkish Commercial Code whereas invitation to participate in the said General Assembly was made in accordance with the relevant provisions of the law, and the meeting was held at the Aktif Bank Head Office building located at Esentepe Mahallesi Kore Şehitleri Caddesi Aktif Bank Genel Müdürlük No:8/1 Şişli/Istanbul. The shareholders did not exercise their right to make inquiries at this General Assembly. The Bank’s shareholding structure does not include any minority shareholders. The Bank’s shareholders do not have any privileges in voting rights. The annual report, financial statements, profit distribution proposal, general assembly agenda, independent auditor’s report and the Bank’s articles of association that form the basis of the agenda items are made available for shareholders’ review at least 15 days prior to the General Assembly Meeting. Minutes of the General Assembly are accessible to shareholders at the Bank’s head office and published on the Turkish Trade Registry Gazette in accordance with the relevant legal provisions, as well as the Bank’s website as per regulations. 6. Right to Dividends There are no dividend distribution policies disclosed to the public other than the provisions included in Articles 57 and 58 of the Bank’s Articles of Association, titled “Distribution of Profit” and “Reserves” respectively. Pursuant to the relevant legal regulations, resolutions on dividend distribution are drafted and adopted at Annual Ordinary General Assembly. 7. Transfer of Shares As stipulated in Article 10 of the Bank’s Articles of Association, titled “Transfer of Shares”, the relevant provisions of the Turkish Commercial Code are followed in the transfer of shares. PART II – PUBLIC DISCLOSURE AND TRANSPARENCY 8. Disclosure Policy The Bank’s Disclosure Policy is updated as required by the relevant legislation and published on the Bank’s website in Turkish and English. The disclosure policy aims to make all necessary information, with the exception of trade secrets, and statements accessible to the Bank’s shareholders, 1234 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 65
35. employees , customers, and other relevant parties in a timely, accurate, complete, clear, convenient, and costefficient manner under equal terms. Accordingly, all financial information, other disclosures and notifications are provided pursuant to relevant legislation, generally accepted accounting principles, and corporate governance principles. The Board of Directors is responsible for monitoring, supervising and improving the Public Disclosure Policy. The Bank issues press statements through print or visual media as necessary. Press statements for print or visual media are made by the Chairman or CEO, or the authorized unit’s personnel. Pursuant to legislation and banking regulations, the annual report including the necessary information and announcements is prepared, presented to the Board of Directors and published on the Bank’s website (www. aktifbank.com.tr) prior to the annual General Assembly meeting. The annual report is prepared in accordance with BRSA regulations, sent to the relevant institutions within the statutory deadlines and published on the Bank’s website. The Bank’s financial statements are signed and attested by the Chairman of the Board, Audit Committee Members, CEO and the bank officers responsible for financial reporting. The annual report contains information on the Bank’s market position, overall financial performance and other material issues. Aktif Yatırım Bankası A.Ş. website is utilized as an effective channel for public disclosure. 9. Corporate Website and Its Content The Bank’s website is www.aktifbank.com.tr. Disclosures and announcements are made in Turkish and English. The Bank’s website contains information and data as required by the relevant legislation. The website is kept up-to-date and used actively and effectively for public disclosure. The main headings on the website are as follows: • Detailed information on Corporate Identity • The Bank’s vision and mission • The company’s capital structure • Trade registry information • • • • • • • • Members of the Board of Directors The Articles of Association Financial Statements General Assembly information Corporate Governance Practices Appraisals and Ratings Annual Reports Independent Audit Reports 10. Annual Report The Annual Report contains information listed in the Corporate Governance Principles and information required to be disclosed as per the relevant legislation. PART III – STAKEHOLDERS 11. Informing Stakeholders The Bank informs stakeholders about matters of interest through minutes of General Assembly meetings, material disclosures, press statements, meetings, e-mails and the website. Employees are informed via the corporate intranet. Necessary procedures have been established to enable the reporting of illicit and unethical activities to the Audit Committee. Information regarding the Bank’s shareholders is provided through the Bank’s website, General Assembly and press statements. Customers Customers are informed about the Bank and its activities. Customers are offered information and guidance directly through branches as needed. The Bank’s website contains all information, news and announcements about the Bank, and customers are informed via e-mail, SMS, and other communication channels. Employees The Bank’s primary goals involve supporting employee development and ensuring motivation and job satisfaction. The written and non-written principles of conduct, and rules that govern relations with persons and organizations both inside and outside the Bank are compiled into a written “Code of Ethics”, which may be found on the Bank’s website (http://www.aktifbank.com. tr). All Bank practices regarding employees are conducted in accordance with the Labor Law and other relevant legislation. Employment contracts are kept in a written format. Employee recruitment, promotion, and dismissal policies and other related issues have been laid out in writing in the Bank’s “Human Resources Practices Procedure”. The Bank has prepared workflow documents for all operations, as well as documents containing the job descriptions of all Branch and Head Office personnel based on title. The Bank has procedures and instructions in place regarding its operations and practices. Job descriptions, workflows, regulations, procedures, instructions, and other documentation have been uploaded on the Bank’s intranet for easy access by employees. Regular meetings with Branch Managers and performance meetings are held to foster participatory management. Additionally, Executive Vice Presidents and Department Heads hold regular meetings with department employees for sharing information. Regulatory and Supervisory Authorities All operations of the Bank are audited by Sworn-in Bank Auditors of BRSA. The Bank periodically prepares the reports mandated by regulatory and supervisory authorities. 12. Stakeholder Participation in Management The Bank’s shareholders are represented in the Bank’s management as per the relevant provisions of the Articles of Association. Participation in management is always encouraged. Through the suggestion system, personnel submit innovative ideas to improve and develop the Bank’s operations to the relevant management functions, which are then meticulously evaluated and rewarded. The Bank organizes regular corporate social responsibility activities and team-building activities to help establish effective and productive professional relationships and to support the team spirit. Customer feedback and 1234 1234 66 67
36. complaints received via the branches , website or other communication channels are duly evaluated. Information on employee suggestions implemented are communicated across the Bank. 13. Human Resources Policy In line with the Bank’s goals and strategies, the Human Resources Policy aims to increase employee productivity and satisfaction using human resources tools such as remuneration, performance evaluation, career planning and trainings. The Bank thus aims to create a workplace environment that promotes the energy and creativity of employees and enables them to show their skills. Aktif Bank embraces the principle of ensuring employee motivation and loyalty through efficient and peopleoriented human resources practices. The Bank’s Human Resources policy and practices are communicated and implemented through procedures. The Human Resources Practices Procedure and Discipline Procedure establish the Bank’s working conditions, recruitment standards, personnel affairs, performance evaluations, career planning, provisions about rewards and punishments, and training opportunities. The Bank has established a safe working environment for its employees and strives to improve these conditions and opportunities as necessary. Decisions and developments concerning employees are communicated through announcements and procedures. The Bank takes the necessary measures to prevent all forms of discrimination of employees on the basis of race, ethnicity, language, religion and gender; to ensure that human rights are respected and its employees are protected against all kinds of physical, mental and emotional abuse within the company. 14. Code of Ethics and Social Responsibility Customer relations topic is addressed under a specific section within the “Ethical Principles” document, which is made available on the Bank’s website. As part of its corporate governance approach, the Bank has adopted the “Principles of Banking Ethics” published by the Banks Association of Turkey. The Ethical Principles are built around the core principles of the Bank’s corporate culture and management (integrity, reliability, impartiality, compliance and transparency) and disclosed to the public via the Bank’s website in accordance with its disclosure policy. All Bank personnel is informed about the ethical principles and asked to sign documents to vouch for their dedication to embrace these principles in their works. Aktif Bank continues its efforts to improve and enhance its quality of service through a customer-oriented approach. It regularly monitors customer satisfaction through periodic surveys and social media channels, planning and promptly implementing actions regarding areas that require improvement as demonstrated by customer feedback. The Bank has a dedicated system for responding to customer complaints, a customer complaints database, and operating guidelines and procedures including the procedure for handling customer complaints. The Bank’s existing and prospective customers, suppliers and other stakeholders are informed through the Bank’s website, announcements, product pamphlets, presentations and visits. The Bank’s Support Services Operating Procedure sets out the guidelines to be followed in transactions involving suppliers and in procurements. In all its operations and investments, the Bank endeavors to support social and cultural activities, giving due consideration to social benefit and protection of the environment, alongside its own public image, benefit and profitability. It strives for the progress of the banking industry and works to maintain the public trust in banking. It contributes to the healthy development of the society Board of Directors by ensuring compliance with regulations on consumer and public health. The Bank also supports social and cultural associations, foundations and organizations. PART IV – BOARD OF DIRECTORS 15. Structure and Composition of the Board of Directors The Bank’s Board of Directors is composed of the following 8 members. Professional Experience (Years) Title Full Name Education Chairman Ahmet ÇALIK High School 39 Deputy Chairman of the Board Mehmet USTA Bachelor’s 42 Board Member Mehmet Ertuğrul GÜRLER Bachelor’s 43 Board Member Veysel ŞAHIN Master’s 36 Board Member, Audit Committee Member Kemaleddin KOYUNCU Master’s 29 Board Member, Audit Committee Member Tarık BAŞARA Bachelor’s 35 Executive Board Member Ayşegül ADACA OĞAN(*) Master’s 23 Board Member, CEO Serdar SÜMER PhD 25 (*) Ayşegül Adaca Oğan took office in August 2020. 1234 1234 68 69
37. The current list of Board Members and their resumes can be found in the Annual Report and under the “About Us” section of the Bank’s website. Members of the Aktif Bank Board of Directors are elected pursuant to Article 32 of the Bank’s Articles of Association and the provisions of the Banking Law. As per the Banking Law, in the absence of the CEO, his/her proxy serves as an ordinary member of the Board. The Board of Directors may convene as frequently as required. However, it must convene at least once a month. The composition, powers, responsibilities, rights, working principles and procedures of the Board of Directors are established by the Bank’s “Regulation on the Board of Directors.” The criteria that Board Members must meet are set forth by the Banking Law, and Aktif Bank ensures full compliance with said legislation when electing members. The Articles of Association dictates that the Board Members must be elected in accordance with the relevant provisions of the Turkish Commercial Code and relevant banking legislation, and that as per Article 23 of the Banking Law, one more than half of the Board Members must meet the required criteria for CEO as stipulated in the Law (as a minimum, bank CEOs must hold a bachelor’s degree in either law, economics, finance, banking, business administration, public administration or related fields and have at least 10 years of professional experience in banking or business administration; those with a bachelor’s degree in engineering must also hold a master’s degree in one of these fields). Board Members comply with the regulations stipulated by the Banking Law and the relevant provisions in the BRSA regulations in their activities outside the Bank. No events occurred during the period that compromised the independence of the independent Board Members. by the Bank’s Articles of Association and Regulation on Board of Directors. 16. Operating Principles of the Board of Directors Board Members do not have weighed voting rights and/ or veto rights. The Banking Law and relevant legislations, the Turkish Commercial Code, Aktif Bank’s Articles of Association and Regulation on Board of Directors regulate the powers and responsibilities of the Bank’s Board of Directors, which operates to ensure the Bank’s progress towards its strategic goals in line with its Mission, Vision, and Values. All administrative operations, documentation, archiving, and secretarial activities of the Board are conducted by the Board of Directors Private Office. The Board of Directors Private Office operates under the supervision and control of the Chairman/Deputy Chairman and serves all Board Members. Meetings are held whenever necessitated by the Bank’s operations and in any case at least 12 times per year. Meeting agenda is shared with the Board Members prior to meetings. The quorum for any Board of Directors meeting is the attendance of at least one more than half of its members. Resolutions are passed by majority vote of attending members. Minutes of the Board of Directors meetings are duly recorded by the Board of Directors Private Office. All attending Board Members are required to sign the meeting minutes, and if there are members opposing to the resolution their reasons for opposition must be written in the minutes and signed by the respective voting member. Resolutions are only valid when they are written down and bear the signatures of Board Members. The guidelines regarding resolution records are established 17. Number, Structure and Independence of Committees Formed within Board of Directors The Bank has established the necessary organizations pursuant to the Banking Law No. 5411 and the relevant legislation. In this respect, information about the Credit Committee, Audit Committee, Corporate Governance Committee and Remuneration Committee is presented below. Audit Committee The Audit Committee, established pursuant to Article 24 of the Banking Law, conducts its activities in accordance with the provisions of the BRSA Regulation on Internal Systems of Banks and Internal Capital Adequacy Assessment Process and Aktif Bank's Regulation on Board of Directors and Regulation on Audit Committee. The Audit Committee Members are Kemaleddin KOYUNCU, Board Member and Tarık BAŞARA, Board Member. The Audit Committee convenes with the heads of the units formed under the Internal Control, Compliance, Inspection Board and Risk Management Systems functions whenever necessary, but in any case at least 4 times in a year with the attendance of Independent Auditors as well to evaluate the activities performed during the period, and reports its findings to the Board of Directors every six months. Corporate Governance Committee The Bank has established a Corporate Governance Committee composed of three members to monitor compliance with the Corporate Governance Principles, drive improvements in this area and present relevant suggestions to the Board of Directors. The Corporate Governance Committee operates within its own power and responsibilities and offers advice to the Board of Directors, but the final decision is made by the Board The Corporate Governance Committee Members are Mehmet USTA, M. Ertuğrul GÜRLER and Veysel ŞAHIN, who are non-executive Board Members. The Corporate Governance Committee convenes twice a year upon the invitation of the Chairman. The Corporate Governance Committee convened twice in 2020. The Committee conducts its activities in accordance with the BRSA’s “Regulation on Corporate Governance Principles” published in the Official Gazette No.26333 dated November 1, 2006. Credit Committee As per statutory requirements, Aktif Bank has a Credit Committee consisting of three Board Members to regulate its credit operations. The Credit Committee Members are Mehmet USTA, Board Member, M. Ertuğrul GÜRLER, Board Member and Serdar SÜMER, Board Member and CEO. The Credit Committee is the decisionmaking authority on credit allocation and reviews loan offers, which pass the loan assessment process of the Head Office, in terms of compliance with legal regulations, Banking Principles and the Bank’s own targets and Credit Policies. The Credit Committee is responsible for making credit allocation decisions within the scope of its authority as stipulated by the legislation. Such credit facilities are granted through the Committee’s resolution 1234 1234 70 71
38. upon the proposal of the Head Office . The activities and decisions of the Credit Committee are supervised by the Board of Directors. Remuneration Committee The Remuneration Committee, established to monitor and supervise the Bank’s remuneration practices on behalf of the Board of Directors, consists of Board Members Mehmet USTA and M. Ertuğrul GÜRLER. The Committee convened once in 2020. The Committee conducts its activities in accordance with the BRSA’s “Regulation on Corporate Governance Principles” published in the Official Gazette No.26333 dated November 1, 2006 and Aktif Bank’s Regulation on the Board of Directors. 18. Risk Management and Internal Control Mechanism its supervision and audit duties. The Audit Committee reports its activities in each period to the Bank’s Board of Directors. An overview of the 2020 activities of the Internal Systems Units is included in the Annual Report. STATEMENT OF RESPONSIBILITY 19. The Company’s Strategic Goals The Bank’s Vision and Mission, as stated below, has been determined and disclosed to the public via the Bank’s website. Vision To provide easy access to financial services that meet the needs of all segments of society through innovative and beneficial solutions, and to become the widest reaching financial services organization in Turkey and the region. The Internal Systems organization has been established in accordance with the Banking Law No. 5411 in order to determine, measure, monitor and control potential risk exposures resulting from the Bank’s strategy and activities, and it is structured in a manner that is consistent with the scope and nature of the Bank’s activities, adaptable to the changing conditions and inclusive of its consolidated subsidiaries. Mission The Inspection Board, Internal Control, Risk Management and Compliance units form the Internal Systems Group and report to the Audit Committee. 20. Financial Rights The Audit Committee has been established in accordance with the provisions of the Banking Law, the BRSA Regulation on the Internal Systems of Banks and Internal Capital Adequacy Assessment Process and Aktif Bank’s Regulation on Board of Directors and Regulation on Audit Committee to assist the Board of Directors with PURSUANT TO THE COMMUNIQUÉ (II-14.1) OF THE CAPITAL MARKETS BOARD ON PRINCIPLES OF FINANCIAL REPORTING IN CAPITAL MARKETS To create lasting value for our country, economy and society through our innovative solutions and entrepreneurial approach in all areas that we provide services; and to become the most preferred financial institution to work with for both our stakeholders and human resource. Upon our evaluation of the year-end Annual Report of Aktif Yatırım Bankası A.Ş. for the period January 1, 2020-December 31, 2020, drawn up in accordance with the Communiqué (II-14.1) of the Capital Markets Board on Principles of Financial Reporting in Capital Markets, we have concluded that: • Within the framework of our duties and responsibilities at the Bank and the information at our disposal, the Annual Report does not contain any misrepresentations as to material events, or any omissions that might make the statements therein misleading as of their date of issue; • Within the framework of our duties and responsibilities at the Bank and the information at our disposal, the Annual Report truthfully represents the course of business, performance and financial position of the Bank, as well as the key risks and uncertainties that it faces. Sincerely, Kemaleddin Koyuncu Audit Committee Chairman Ayşegül Adaca Oğan CEO Atila Yanpar Executive Vice President The means and amount of remuneration to be paid to Board Members are assessed and determined at the annual Ordinary General Assembly. Loans to be extended by Aktif Bank to the Board Members are subject to the restrictions stipulated in Article 50 of the Banking Law. Loans to the Board Members may not violate these restrictions. 1234 1234 72 73
39. Talent and Development Practices Aktif Bank ’s growth strategy is based on a philosophy of becoming an organization that rapidly adapts to new technologies and global developments and creates new employment opportunities. In line with this approach, the Bank carries out activities supported by cost and productivity targets to render business processes more productive and effective; these include process modeling, process automation, end-to-end organizational structure analysis and modeling, projectbased norm staff analysis, and an individual and objective performance management system for all employees. In light of this strategy, and with the understanding that the human resource is the most valuable asset of the Bank, the best local and global practices are monitored in order to enrich this asset and improve the Bank’s talent and development activities, while developing practices to promote creativity among and recognize value added created by Aktif Bank employees to foster a culture of high performance. Aktif Bank aims to offer a working environment where employees can develop themselves without discrimination. The Bank provides equal career opportunities and has established incentive systems that promote success. In line with this understanding, Aktif Bank is able to attract highly competent and experienced employees as well as high-potential new graduates through the right recruitment tools. In 2020, 142 new employees joined Aktif Bank. A total of 22 hours per employee was allocated for training in 2020 in order to provide Aktif Bank employees with resources and opportunities to improve their knowledge and skills for successful development. Master’s degree / PhD 14% Bachelor’s degree 81% Number of employees Average age 764 35,03 The Bank’s Transactions within Its Risk Group Detailed explanations about the Bank’s transactions within its risk group may be found in the Non-consolidated Financial Statements, Explanations and Notes for the Year Ended December 31, 2020, and the Independent Audit Report section five, footnote VII. The information is also available in the Consolidated Financial Statements, Explanations and Notes and the Independent Audit Report section five, footnote VII. Individuals Services and Organizations Providing Support Infina Yazılım A.Ş., Koç Sistem Bilgi ve Iletişim Hizmetleri A.Ş., OBSS Bilişim Bilgisayar Hizmetleri Ltd. Şti., Almbase Teknoloji A.Ş., EGA Elektronik Güvenlik Altyapısı A.Ş., Overtech Bilgi Teknolojileri A.Ş., Formalis Bilgi Teknolojileri Ltd. Şti., Codec Iletişim ve Dan. Hizm. Ltd. Şti., Kartek Kart ve Bilişim Ltd. Şti., Mapa Global Bilgisayar Yazılım Dan. San. Ltd. Şti., Küresel Beta Teknoloji Telekomünikasyon San. Tic. Ltd. Şti., Gantek Teknolojileri Bilişim Çözümleri A.Ş., Superonline Iletişim Hizmetleri A.Ş., Netaş Telekomünikasyon A.Ş., V.R.P. Veri Raporlama Programlama Bilişim Yazılım ve Dan. Hiz. Tic. A.Ş., Risk Yazılım Teknolojileri Ltd. Şti., Ideal Bilişim Hizmetleri San. ve Tic. Ltd. Şti., ATP Ticari Bilgisayar Ağı ve Elektrik Güç Kaynakları Üretim ve Pazarlama Tic. A.Ş., E-Kalite Yazılım Donanım Mühendislik Tasarım ve Internet Hizmetleri San. Tic. Ltd. Şti., Neyasis Bilgi Teknolojileri A.Ş., Link Bilgisayar Sistemleri Yaz. ve Don. San. ve Tic. A.Ş., Servicium Bilgisayar Hizmetleri Sanayi ve Dış Ticaret A.Ş. ve Fineksus Bilişim Çözümler Tic. A.Ş. provide support services to the Bank for Information Technologies processes. Vega Bilgisayar Ltd. Şti. also provides support services in relation to Financial Management processes. Nuevo Yazılım Çözümleri A.Ş., Etcbase Yazılım ve Bilişim Teknolojileri A.Ş., Data Market Bilgi Hizmetleri Ltd. Şti., Brink's Güvenlik Hizmetleri A.Ş., AGT Kurye Hizmetleri A.Ş., PTT Para Lojistik ve Özel Güvenlik Hizm. A.Ş. and Fu Gayrimenkul Yatırım Danışmanlık A.Ş. provide support services to the Bank for Corporate Banking processes. Iron Mountain Arşivleme Hizmetleri A.Ş., Desmer Güvenlik Hizm. Tic. A.Ş., Aras Kurye Servisi A.Ş., Kuryenet Motorlu Kuryecilik ve Dağıtım Hiz. A.Ş., Güzel Sanatlar Çek Basım Ltd. Şti., Webhelp Çağrı Merkezi ve Müşteri Hizmetleri A.Ş., Arvato Telekomünikasyon Hizmetleri A.Ş., CMC Iletişim ve Çağrı Merkezi Hizm. A.Ş., Global Bilgi Pazarlama Danışman ve Çağrı Servisi Hizmetleri A.Ş., Plastikkart Akıllı Kart Iletişim Sistemleri Sanayi ve Ticaret A.Ş., E-Kart Elektronik Kart Sistemleri San. ve Tic. A.Ş., Loomis Güvenlik Hizmetleri A.Ş., Hobim Arşivleme ve Basım Hizmetleri A.Ş., Taşlar Kağıt Inş.Met.Plas.San. Ltd. Şti., EKent Teknoloji ve Ödeme Sistemleri San. ve Tic. A.Ş. provide support services to the Bank for Operational processes. Intellica-Evam Yazılım Danışmanlık A.Ş., Inviso Destek Hizmetleri A.Ş., PTT (Post and Telegraph Corporation) and Experian Bilgi Hizmetleri Ltd. Şti. provide support services to the Bank for Retail Banking processes. Furthermore, dealerships selling furniture, white goods, building hardware and medical and heating equipment provide support services to the Bank in relation to retail lending operations. Financial Information and Risk Management Audit Committee Report The Audit Committee Report on the Operations and Activities of Internal Control Department, Inspection Board, Regulatory Compliance Department and Risk Management Department during the Accounting Period Aktif Bank’s Internal Systems organization consists of the Inspection Board, Internal Control, Regulatory Compliance and Risk Management departments that operate in line with the scope and nature of the Bank’s business processes and are qualified and effective to respond to the changing conditions to safely monitor and manage the risks that the Bank may be exposed. 1234 1234 74 75
40. The internal organization and working principles of the departments are determined in consideration of national laws and regulations as well as international standards . The activities of the Inspection Board, Internal Control, Regulatory Compliance and Risk Management Departments, which have been established in accordance with the BRSA Regulation on the Internal Systems of Banks and the Internal Capital Adequacy Assessment Process, dated July 11, 2014, are evaluated at meetings held with the Audit Committee. In 2020, 4 Audit Committee meetings were held; the activities of Internal Systems Departments were monitored closely, and Audit Committee members shared all significant issues with the Board of Directors. In 2020, Inspection Board, Internal Control, Regulatory Compliance and Risk Management Departments carried out control, audit, monitoring and advisory activities as well as process-related efforts. The departments made suggestions for the establishment of new control points, thus improving the Bank’s operational processes. In line with the “Annual Audit Plan” approved by the Board of Directors, audit activities continued in 2020 at the branches, head office units, external service providers and subsidiaries. Over the year, the Inspection Board carried out 5 Support Service Provider Audits, 5 Subsidiary Audits, 3 Monitoring Audits, 6 Process Audits, 6 Branch Audits, 9 Mandatory Audits and 4 Information Technologies Audits for a total of 36 audit activities. In 2020, in addition to the planned audits, 16 inspection activities were completed with their results reported. Three Finding Follow-up Reports were published in 2020. In 2020, the Internal Control Department inspected 644 control points, which are established for banking activities, and prepared four control reports on banking processes that are consolidated under a single report. Furthermore, within the scope of Management Statement, 609 first-level controls on the Bank’s information systems and banking processes were tested. The Regulatory Compliance Department provided advisory service with regard to the compliance of the Bank’s current and planned activities, new services, products, projects, advertising, promotions and campaigns with the Banking Law and other relevant legal regulations, internal policies and rules and banking practices. Processes were revised pursuant to the changes in legal regulations, and relevant personnel were informed about the said changes. The duties and responsibilities assigned to the compliance officer by the Law on the Prevention of Laundering Proceeds of Crime and the relevant legal provisions were performed by the Head of Regulatory Compliance, who is also the Bank’s designated Compliance Officer. Within the scope of the prevention of laundering proceeds of crime and the financing of terrorism, the necessary Bank policies and procedures were established and kept up-to-date. To fulfill the requirements of the relevant legal regulations, customer transactions were monitored, correspondent banks were controlled, suspicious activities were identified and duly reported. Also, national and international regulations were monitored, and necessary actions were taken accordingly. In-class and web-based training sessions were organized to raise the awareness of personnel on the prevention of laundering proceeds of crime and the financing of terrorism. The Risk Management Department continued to identify risk exposures, conducting various stress tests and scenario analyses, working to manage risks within the limits determined by the Board of Directors. The work carried out in this area and the reports drawn up were shared with APKO and the Board of Directors. In 2020, within the scope of the calculation of expected losses on the loan portfolio, modeling activities were carried out to calculate the customers’ probability of default and the total amount of expected recoveries from loans in case of default; also, loan loss provisions were calculated using the said models. Considering the Bank’s growing and developing organizational structure, balance sheet size, transaction volume and variety in 2020, the activities of the Inspection Board, Internal Control, Regulatory Compliance and Risk Management Departments aimed to increase the effectiveness and productivity of the Bank’s activities, reduce the risk of damage to its assets and resources and ensure that Annual Reports are accurate and reliable and that the Bank’s activities are carried out in in compliance with the laws and legal obligations. Their activities also ensured maintaining the Bank’s risk exposure at a minimal level. Evaluation of Financial Status As of the end of 2020 the Bank’s total assets increased by 18.95% to reach TRY 21,898 million since the end of the previous year. As of the end of 2020, the Bank recorded a net profit of TRY 560 million, which constitutes a 36.38% increase compared to the end of 2019. While the return on average assets based on net profit was 2.54% in 2019, this ratio stood at 2.78% in 2020. In 2020, return on average equity was 23.83% and in 2019, it was 22.37%. By the end of 2020, the Bank’s equity grew by TRY 504 million to reach TRY 2,602 million. Thus further strengthening its equity structure, Aktif Bank recorded a capital adequacy ratio of 14.39%. In 2020, the Bank continued to manage its loan portfolio with an optimal risk-return balance and met customers’ funding needs of various maturities with the most convenient conditions. Loans and financial lease transactions grew by 34.46% in 2020 to reach TRY 10,176 million. The Bank holds non-cash loans worth TRY 2,173 million. Despite the economic fluctuations, the Bank’s rational and balanced risk management policies enabled restricting the ratio of non-performing loans to only 3.03% within all loans. On October 20, 2011, the Bank established Turkey’s first Asset Finance Fund and issued the first asset backed security (ABS). The Bank also completed a total of four issues in 2019, two internal and two external (Turkcell Finansman A.Ş.). The internal securitization transaction based on Aktif Bank’s retail loan portfolio was rated AAA, the highest credit rating available in Turkey. By completing this transaction, which constitutes the first issue in Turkey based on retail loans, the Bank has presented a groundbreaking and innovative solution to fund raising, an essential problem of investment banks. Risk Management Policies by Risk Types Aktif Bank conducts its Risk Management operations in accordance with legal regulations and the Bank’s internal regulations. The Risk Management Department is responsible for establishing risk management policies and minimization of risks by identifying, measuring and managing credit, market and operational risks defined as Pillar 1 risks as well as country risk, residual risk, reputation risk and concentration risk defined as Pillar 2 risks. 1234 1234 76 77
41. All projected risks are subject to the upper limits within the framework of risk limits proposed by the Risk Management Department and approved by the Board of Directors . The risk appetite structure of the Bank has been developed by the Risk Management Department and approved by the Board of Directors. Risk appetite limits are regularly monitored by the Risk Management Department. The Bank has developed the internal capital adequacy assessment process (“ICAAP”), which is carried out annually in parallel with the budget process. Risk Management Policies Credit Risk The purpose of credit risk management is to identify and manage the risks which the credit portfolio may be exposed to, in line with the key strategies and objectives of the Bank. For the credit analysis, allocation and disbursement processes, a dynamic credit portfolio management approach has been adopted, taking early warning signals into consideration. Aktif Bank has based its lending strategy on working with highly credible customers, mitigating credit risk through effective collateralization and obtaining high return. The policies, processes, responsibilities and limits for an effective credit risk management have been established and documented in writing. The bank developed a borrower evaluation model that could be used to measure and make a quantitative and qualitative analysis in calculating risk exposure levels at the corporate customer level. Moreover, within the scope of the calculation of expected losses on the retail loans portfolio, modeling activities are carried out to calculate the probability of default of each retail loan customer and the total amount of expected recoveries from loans in case of default. The Risk Management Department monitors the creditworthiness of corporate and retail loan portfolios and the increases in risk and concentration levels to check compliance with the limits set by the Board of Directors. Results are reported to the Audit Committee and the Board of Directors. Stress tests and scenario analyses are applied to the portfolios in order to measure the resilience of the Bank's capital against the risks, to which the Bank may be exposed due to credit risk. Market and Liquidity Risks Aktif Bank aims to achieve a profitable and sustainable growth by identifying its risks accurately and maintaining its resilient balance sheet and strong capital structure. In line with this strategy, market and liquidity risks are managed pursuant to legal regulations and internal limits. Taking into consideration the Bank’s risk capacity, the Board of Directors has determined the acceptable risk levels and set risk limits accordingly. Furthermore, early warning and swift decision-making mechanisms were developed to enable the Bank to incur minimum losses in the case of a potential financial crisis, and financial contingency indicators were determined for this purpose. The said risk limits and contingency indicators are regularly monitored and reported by the Risk Management Department as per relevant procedures and regulations. Within the scope of market and liquidity risk management, the Risk Management Department applies risk models and parameters accepted in national and international practices to identify, measure and monitor the liquidity risk, interest risk, exchange rate risk, and structural interest rate risk. Internal methodologies and models are developed and improved on a regular basis. Furthermore, the said risks are monitored using various scenario analyses and stress tests and the results are shared with the senior management, ALCO, Audit Committee and the Board of Directors. Operational Risk In managing operational risk, operational risk categories are identified in line with the Basel criteria, and operational losses data are collected within the framework of these categories and monitored over a database. The Bank also conducts Business Impact Analyses and Risk SelfEvaluations and draws up risk inventories in order to determine points of risks in banking processes and products and express them in measurable terms. Within the framework of Business Continuity planning, a Contingency Center was established in Ankara in order to enable the Bank to continue its activities in case of disasters such as earthquakes, fires and floods. A backup of all corporate accesses and critical servers is simultaneously kept at this center in Ankara. The Hotsite Center located in Istanbul's Ümraniye District was set up to be an emergency center for the core staff that will act in accordance with the contingency plans in the event of regional disasters. Both centers feature an office environment that meets all technical requirements of the core staff. Credit Ratings by Rating Agencies Long-Term International Foreign Currency Rating BB+ / (Negative outlook) Short-Term International Foreign Currency Rating Long-Term International Local Currency Rating BB+ / (Negative outlook) Short-Term International Local B / (Negative outlook) Currency Rating Long-Term National Rating AA+ (Trk) / (Stable outlook) Short-Term National Rating A-1+ (Trk) / (Stable outlook) Standalone Rating AB Support Rating 2 B / (Negative outlook) In 2020, JCR evaluated Aktif Yatırım Bankası A.Ş. in the “High-Level Investment Grade” category and assigned a Long-Term National rating of “AA+ (Trk)” with “stable” outlook. Furthermore, JCR has assigned Long Term International Foreign and Local Currency Ratings of “BB+” with a “negative” outlook based on its evaluation of the country rating. 1234 1234 78 79
42. FIVE-YEAR SUMMARY FINANCIAL HIGHLIGHTS 5 Year Summary Financial Highlights -In Nominal Values (TRY Thousand) 2020 2019 2018 2017 2016 Investment Securities (Net) Loans & Factoring Receivables (Net) Shareholders’ Equity 6,242,050 10,176,417 2,602,044 3,914,090 7,568,126 2,097,840 2,337,493 6,903,543 1,574,102 1,564,817 6,539,477 1,222,950 1,123,740 5,520,369 983,622 Total Assets 21,898,158 18,409,081 13,882,523 11,070,991 9,483,016 2,172,513 886,747 734,034 1,485,218 526,776 512,007 1,232,225 425,574 480,450 1,308,957 570,519 310,765 928,423 355,663 141,185 560,047 410,663 381,672 233,827 98,054 Guarantees and Indemnities Net Interest Income Profit Before Taxes Net Profit AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES Consolidated Financial Statements As at and for the year ended 31 December 2020 with Independent Auditor’s Report Thereon 26 April 2021 1234 80 This report contains “Independent Auditors’ Report” comprising 5 pages and “Consolidated Financial Statements and Related Disclosures and Footnotes” comprising 68 pages.
43. INDEPENDENT AUDITOR ’S REPORT To the Shareholders of Aktif Yatırım Bankası Anonim Şirketi, Qualified Opinion We have audited the consolidated financial statements of Aktif Yatırım Bankası Anonim Şirketi (“the Bank”) and its subsidiaries (together refer to as “the Group”), which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2020 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”). Basis for Qualified Opinion As stated in Note 23, the accompanying consolidated financial statements as at 31 December 2020 include a general reserve amounting TL 187,000 thousand, of which TL 54,000 thousand was recognized as expense in the current period and TL 133,000 thousand had been recognized as expense in prior periods, which does not meet the requirements of International Accounting Standard (“IAS”) 37 “Provisions, Contingent Liabilities and Contingent Assets”. This general reserve is provided by the Group management for the possible effects of the negative circumstances which may arise in economy or market conditions. We conducted our audit in accordance with International Standards on Auditing (“ISA”s). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Turkey, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. Impairment of loans and advances to customers Refer to “Significant accounting policies” Note 3.10 to the consolidated financial statements relating to the impairment of loans and advances to customers. Key audit matter As at 31 December 2020, loans and advances to customers comprise 46% of the Group’s total assets. How the matter is addressed in our audit Our procedures for testing impairment of loans and advances to customers included below: • We tested the design, implementation and operating effectiveness of the controls on lending, collateralization, collection, follow-up, classification and impairment process with the involvement of information risk management specialists. • We evaluated the Group’s business model whose objective is to hold financial assets in order to collect contractual cash flows and we tested the appropriateness of the loan agreements with the model by selecting samples. The significant assumptions and estimates used in the model by the Group’s management are as follows: • • Significant increase in credit risk, We evaluated the adequacy of the subjective and objective criteria that is defined in the Group’s impairment accounting policy compared with the Standard. • • Incorporating the forward looking macroeconomic information in calculation of credit risk, and We evaluated the Group’s business model and methodology and the calculations carried out by the Group with the control testing and detailed analysis by the involvement of specialist. • Design and implementation of expected credit loss model. • We performed loan reviews for selected loan samples which include a detailed examination of loan files and related information and tested their classification. In this context, the current status of the loan customer has been evaluated by including the impact of COVID-19 on prospective information and macroeconomic variables. The Group recognizes its loans and advances to customers in accordance with IFRS 9 Financial Instruments (“Standard”). The Group applies the “expected credit loss model” in determining the impairment of loans and advances to customers in accordance with the Standard. This model, which contains significant assumptions and estimates, is reviewed by the Group management annually. 1234 1234 82 83
44. The determination of the impairment of loans and advances to customers depends on the credit default status , the model based on the change in the credit risk at the first recognition date and the classification of the loans and advances to customers according to the model. Establishing an accurate classification is a significant process as the calculation of expected credit loss varies to the staging of the financial assets. The Group calculates expected credit losses on a collective basis. The collective basis expected credit loss calculation is a complex process which is modelled by using current and past data sets, expectations and the forward looking expectations are reflected by macroeconomic models. • We tested the accuracy and completeness of the data in the calculation models for the loans which are assessed on collective basis. The expected credit loss calculation was tested through recalculation. The models used for the calculation of the risk parameters were examined and the risk parameters for the selected sample portfolios were recalculated. • We assessed the macroeconomic models that includes COVID-19 effects which are used to reflect forward looking expectations and tested the effect of the risk parameters by recalculation method. • We evaluated the qualitative and quantitative factors that includes COVID-19 effects which are used in determining the significant increase in credit risk. • We evaluated the sufficiency and appropriateness of the notes to the consolidated financial statements related to impairment of loans and advances to customers. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Those charged with governance are responsible for overseeing the Group’s financial reporting process. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. Impairment on loans and advances to customers has been identified as a key audit matter, due to its complex structure, significant estimates and assumptions including the impact of COVID-19, and management's judgments. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 1234 1234 84 85
45. We communicate with those charged with governance regarding , among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Aktif Yatırım Bankası Anonim Şirketi and Its Subsidiaries We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. TABLE OF CONTENTS Independent auditor’s report 82 KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Consolidated statement of financial position 88 Consolidated statement of profit or loss and other comprehensive income 89 Consolidated statement of changes in equity 90 Consolidated statement of cash flows 92 Notes to the consolidated financial statements 93 Erdal Tıkmak Partner 26 April 2021 İstanbul, Turkey 1234 1234 86 87
46. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME AS AT 31 DECEMBER 2020 (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 31 December 2019 1,508,229 1,251,914 699,294 70,526 12,843 10,176,417 6,242,050 76,765 528,114 232,240 22,632 63,172 79,024 934,938 3,833,184 959,283 449,007 112,580 17,692 7,568,126 3,914,090 60,976 613,962 265,591 43,054 45,677 71,999 453,860 21,898,158 18,409,081 143,559 205,387 4,078,171 8,194 7,449,428 2,917,314 320,901 44,468 13,989 4,114,703 17,029 256,574 2,261,189 8,335 6,099,310 4,940,961 248,701 20,153 34,571 2,424,418 19,296,114 16,311,241 1,198,095 104,541 17,801 (3,497) 61,173 9,385 1,213,292 1,198,095 87,456 64,728 (1,066) 71,495 5,548 670,600 Total equity attributable to equity holders of the Group 2,600,790 2,096,856 Non-controlling interests Total equity 1,254 2,602,044 984 2,097,840 Total liabilities and equity 21,898,158 18,409,081 Note Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Trade and other receivables Inventories Loans and advances to customers Investment securities Equity accounted investees Tangible assets Intangible assets Goodwill Deferred tax assets Assets held for sale Other assets 9 10 11 13 12 14 15 16 7 22 18 17 Total assets LIABILITIES Trading liabilities Trade and other payables Obligations under repurchase agreements Lease liabilities Debt securities issued Funds borrowed Provisions Income taxes payable Deferred tax liability Other liabilities 11 19 24 21 20 23 22 22 25 Total liabilities EQUITY Share capital Legal reserves Fair value reserves Actuarial gain/ (loss) Special funds Translation reserves Retained earnings 26 1234 The accompanying notes are an integral part of these consolidated financial statements. 88 Note 31 December 2020 31 December 2019 Interest income Interest expense Net interest income 27 27 2,008,512 (1,121,765) 886,747 1,817,780 (1,291,004) 526,776 Fees and commission income Fees and commission expense Net fee and commission income 28 28 179,105 (118,033) 61,072 174,811 (101,802) 73,009 29 30 31 13,32 84,365 390,490 135,660 (99,000) (491,679) (231,557) (78,419) (181,703) (50,339) (53,783) (119,780) 124,890 528,612 227,188 (90,996) (484,540) (199,753) (65,250) (219,537) (200,815) (131,829) (53,096) 743,753 519,199 Net trading gain/loss Sales income Other income Net impairment loss on financial assets Operating expenses - Personnel expenses -Depreciation and amortisation -Administrative expenses Cost of sales Cost of services Other operating expenses 33 15,16 34 30 35 Total operating income Share of profit of equity accounted investee Profit before income tax 14 (9,719) 734,034 (7,192) 512,007 Income tax expense Net profit for the year from continuing operations 22 (173,987) 560,047 (101,344) 410,663 559,777 270 560,047 411,158 (495) 410,663 (4,216) (332) (3,117) (2,288) 1,189 (41,110) (57,875) 3,837 251 12,677 (45,326) (2,358) 1,932 94 109,405 135,399 3,258 688 (29,940) 109,073 Total comprehensive income for the year 514,721 519,736 Total comprehensive income attributable to: Equity holders of the Bank Non-controlling interest Total comprehensive income for the year 514,451 270 514,721 520,231 (495) 519,736 0.469 0.344 Profit attributable to Equity holders of the Bank Non-controlling interest Profit for the year Other comprehensive income Items that will not be reclassified to profit or loss: Change in actuarial (loss) / gain related to employee benefits Equity investments at FVOCI –change in fair value Tax effect Items that are or may be reclassified subsequently to profit or loss: Debt investments at FVOCI –change in fair value Foreign currency translation differences Special fund Income tax on other comprehensive income Other comprehensive income for the year, net of tax Basic and diluted earnings per share (full TL amount per TL 1 face value each) 23 22 22 2.5 1234 31 December 2020 ASSETS The accompanying notes are an integral part of these consolidated financial statements. 89
47. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019 At 1 January 2019 Total comprehensive income for the year Profit for the year Other comprehensive income Equity investments at FVOCI – net change in fair value Debt investments at FVOCI – net change in fair value Net change in actuarial gain related to employee benefits Foreign currency translation differences Other Adjustment to share Legal Fair Value capital reserves Reserves Translation reserves Actuarial gain/(loss) Special funds Retained earnings Noncontrolling interest Total Total equity Note 1,193,585 4,510 56,353 (42,390) 2,290 773 37,112 307,933 1,560,166 13,936 1,574,102 - - - 107,118 1,507 105,611 - 3,258 3,258 - (1,839) (1,839) - 536 536 411,158 - 411,158 109,073 1,507 105,611 (1,839) 3,258 536 (495) - 410,663 109,073 1,507 105,611 (1,839) 3,258 536 At 1 January 2020 Total comprehensive income for the year Profit for the year Other comprehensive income Equity investments at FVOCI – net change in fair value Debt investments at FVOCI – net change in fair value Net change in actuarial gain related to employee benefits Foreign currency translation differences Other Total comprehensive income for the year - - - 107,118 3,258 (1,839) 536 411,158 520,231 (495) 519,736 Transactions with owners, recorded directly in equity Transfer to reserves Changes in non-controlling interests - - 29,506 1,597 - - - 23,329 10,518 (52,835) 4,344 16,459 (12,457) Total transactions with owners, recorded directly in equity - - 31,103 - - - 33,847 (48,491) 16,459 1,193,585 4,510 87,456 64,728 5,548 (1,066) 71,495 670,600 2,096,856 At 31 December 2019 26 1234 The accompanying notes are an integral part of these consolidated financial statements. 90 Share capital Adjustment to share Legal Fair Value capital reserves Reserves Translation reserves Actuarial gain/(loss) Special funds Retained earnings Noncontrolling interest Total Total equity 1,193,585 4,510 87,456 64,728 5,548 (1,066) 71,495 670,600 2,096,856 984 2,097,840 - - - (46,927) (1,785) (45,142) - 3,837 3,837 - (2,431) (2,431) - 195 195 559,777 - 559,777 (45,326) (1,785) (45,142) (2,431) 3,837 195 270 - 560,047 (45,326) (1,785) (45,142) (2,431) 3,837 195 Total comprehensive income for the year - - - (46,927) 3,837 (2,431) 195 559,777 514,451 270 514,721 4,002 Transactions with owners, recorded directly in equity Transfer to reserves Changes in non-controlling interests - - 17,085 - - - - (10,517) (17,085) - (10,517) - (10,517) (12,457) 4,002 Total transactions with owners, recorded directly in equity - - 17,085 - - - (10,517) (17,085) (10,517) - (10,517) 984 2,097,840 1,193,585 4,510 104,541 17,801 9,385 (3,497) 61,173 1,213,292 2,600,790 1,254 2,602,044 At 31 December 2020 26 1234 Note Share capital CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 The accompanying notes are an integral part of these consolidated financial statements. 91
48. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 (Currency - In thousands of Turkish Lira (“TL”)) Cash flows from operating activities Net profit for the year Adjustments for: Depreciation and amortisation expenses Retirement pay provision expense Unused vacation provision expense Bonus provision expense Impairment on financial assets Net interest income and expense Share of profit of equity investee General reserve Unrealised foreign exchange loss / (gain) Gain on sale of assets Gain on sale of subsidiary Other accruals Income tax Note 15,16 23 32 14 31 31 31 22 Change in reserve deposit at Central Bank Change in trading assets Change in loans and advances to customers Change in other assets Change in obligations under repurchase agreements Proceeds from borrowings Change in other liabilities Interest received Interest paid Retirement pay provision and unused vacation paid Bonus payment Income tax paid Net cash used in operating activities Cash flows from investing activities Purchase of investment securities Sale of investment securities Purchase of tangible assets Equity accounted investees Proceeds from the sale of tangible assets Proceeds from the sale of subsidiary Purchase of intangible assets Acquisition of subsidiaries Proceeds from the sale of intangible assets Net cash used in investing activities 9 23 22 15 14 16 38 16 Cash flows from financing activities Proceeds from debt securities issued Repayment of debt securities issued Lease payments Net cash provided from financing activities 2020 2019 560,047 410,663 78,419 5,417 (425) 81,741 99,000 (886,747) 9,719 54,000 (461,343) (65,762) (44,637) 66,325 173,987 (330,259) 65,250 3,322 117 67,627 90,996 (651,302) 7,192 163,643 (36,126) (140,118) 1,547 101,344 84,155 (292,631) (168,157) (2,413,667) (443,608) 1,814,047 (2,085,954) 1,622,214 (1,967,756) 1,788,462 (1,283,941) (4,947) (44,976) (194,866) 259,732 112,943 27,772 (1,164,454) 265,613 969,113 1,107,392 (50,321) 1,268,058 1,958,677 (1,154,912) (1,641) (43,822) (168,146) 590,156 (9,800,694) 7,448,586 (47,209) (22,965) 106,578 74,702 (54,514) 37,637 (2,257,879) (9,534,167) 8,163,609 (185,846) (14,112) 202,468 156,868 (44,838) (40,573) (1,296,591) 50,935,623 (49,394,449) (6,304) 1,534,870 32,740,076 (31,189,466) (3,299) 1,547,311 2,193,089 251,466 1,384,386 3,828,941 Net increase/(decrease) in cash and cash equivalents Effect of exchange rate fluctuations on cash Cash and cash equivalents on 1 January 9 (2,761,292) 434,570 3,828,941 Cash and cash equivalents on 31 December 9 1,502,219 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 (Currency - In thousands of Turkish Lira (“TL”)) Notes to the consolidated financial statements Reporting entity Basis of preparation Significant accounting policies Use of estimates and judgements Explanations of IFRS 16 Leases Financial risk management Business combinations Segment reporting Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Investment securities Loans and advances to customers Equity accounted investees Tangible assets Intangible assets Other assets Assets held for sale Obligations under repurchase agreements Funds borrowed Debt securities issued Taxation Provisions Lease liabilities Other liabilities Capital and reserves Net interest income Net fee and commission income Net trading income Sales income and cost of services Other income Net impairment on financial assets Personnel expenses Administrative expenses Other operating expenses Related parties Commitments and contingencies Acquisition of subsidiaries Subsequent events 94 97 99 129 130 134 150 150 151 152 153 155 156 158 160 161 162 162 162 162 163 163 166 167 168 168 170 170 171 171 171 172 172 172 172 173 174 174 176 1234 1234 AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES The accompanying notes are an integral part of these consolidated financial statements. 92 93
49. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Reporting entity 1. Reporting entity (continued) Aktif Yatırım Bankası Anonim Şirketi (‘‘the Bank”) was incorporated under the name of Çalık Yatırım Bankası A.Ş. in Turkey in July 1999. The Bank changed its name as Aktif Yatırım Bankası A.Ş. on 1 August 2008. EPost Elektronik Perakende Otomasyon Satış Ticaret A.Ş. (“Epost”) operates as a retail vendor sales channel and provides secured devices that businesses use in conducting sales and payments collection transactions. The Bank operates as an investment bank and is mainly involved in corporate and consumer services such as cash or non-cash, financial leasing, factoring, corporate lending. As an investment bank, the Bank borrows funds from other banks, financial markets, partners and credit customers but is not entitled to receive deposits from customers. E-Kent Geçiş Sistemleri ve Biletleme Teknolojileri A.Ş. (“E-Kent”) is a technology integrator offering smart city solutions to provide infrastructural transformation and introduces value added profitable business models. In addition, as a result of the tender performed by Turkey Football Federation (TFF) in 2013, the Company is appointed as ‘E-Ticket System Integrator’ and realized the world's largest stadium transformation project including infrastructure transformation in 53 stadiums in 29 different cities, access control and monitoring systems, centralized integrated ticketing and stadium box office services infrastructure. The head office of the Bank is located at Esentepe Mah. Kore Şehitleri Cad. No: 8/1 Şişli İstanbul, and the Bank have also ten branches. The Bank employs 764 people as at 31 December 2020 (31 December 2019: 714). As at 31 December 2020 and 2019, the composition of shareholders and their respective percentage of ownership are summarised as follows: Amount 31 December 2020 % Amount 31 December 2019 % Çalık Holding A.Ş. Çalık Denim Tekstil San. ve Tic. A.Ş. Ahmet Çalık Başak Yönetim Sistemleri A.Ş. Irmak Yönetim Sistemleri A.Ş. 1,186,791 3,597 1,599 799 799 99.43 0.30 0.13 0.07 0.07 1,186,791 3,597 1,599 799 799 99.43 0.30 0.13 0.07 0.07 Total paid-in-capital 1,193,585 100.00 1,193,585 100.00 Restatement effect per IAS 29 Total share capital 4,510 4,510 1,198,095 1,198,095 The Bank and its subsidiaries are hereafter referred to as ‘‘the Group”. The Group controls equity stakes in companies that are active in the areas of technology system integration, payment centre, insurance brokerage, consulting in real estate projects, real estate, Islamic financial leasing and electronic payment systems. Activities carried out in these business areas and main companies are explained below in summary. Sigortayeri Sigorta ve Reasürans Brokerliği A.Ş. (“Sigortayeri”) is an online insurance comparison website which ensures the best match between insurance products and customer needs in minutes. Operating across the global market since 2013, Sigortayeri has differentiated its corporate insurance services under the brand of “Asron Sigorta” since May 2017. Pavo Teknik Servis Elektrik Elektronik Sanayi ve Ticaret A.Ş. (“Pavo”) with its long-standing experience in cash register systems, offers local and foreign customers a solution in the field of payment systems, especially in financial approved cash registers (New Generation Payment Recorder). N Kolay Ödeme Kuruluşu A.Ş. (“N Kolay”) is one of the biggest payment institution in Turkey by volume. N Kolay business model mainly focuses on bill payment, money transfers and other financial services. Emlak Girişim Danışmanlığı A.Ş. (“Emlak Girişim A.Ş.”) was founded on January 2013 in order to seize business opportunities in real estate and construction industries, participate in investment projects, especially those in the renewable energy industry (solar power and biomass), and become a major player in international trade. In the real estate industry, the Company aims to be a leader with direct partnerships, profit-loss sharing investments and urban renewal projects. The Company invests and conducts activities in a variety of industries including energy, construction, professional services and security systems. The most important investment by Emlak Girişim A.Ş. is Istanbul International Finance Center (IIFC), one of the biggest regional planning projects of Turkey with a construction site sprawling over 3 million square meters, set to be among the top finance centers in the world. Major financial actors involved in the project are the Central Bank of the Republic of Turkey, the Capital Markets Board, Halk REIT (Real Estate Investment Trust), Vakıf REIT and Emlak Konut A.Ş. In a profit-sharing partnership model, Emlak Girişim A.Ş. completed a significant investment Project into the Metropol İstanbul project in Ataşehir district in İstanbul. Emlak Girişim A.Ş. invested in 2018 in the office building of 11.250 m² in Şişli district, İstanbul which will be rented to Aktif Bank and Sigortayeri as Headquarters. Total investment amount of the office building is around TL 355 mn. Also in 2017, the Company became one of the biggest players in the renewable energy industry with the investments into the solar power plants with the capacity of 33,5 MWp Project, in addition to the EPC services to the solar power projects with a capacity of 32 MWp for three SPPs in three cities. Emlak Girişim is still keen to develop partnerships and projects in licensed SPP projects and biomass power plant projects. Euroasian Leasing Company (“ELC”) is the first in Russia to provide leasing solutions to the SME sector in accordance with the Islamic principles. 1234 1234 94 95
50. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 1. Reporting entity (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 1. Reporting entity (continued) Kazakhstan Ijara Company Jsc. (“KIC”) carries on Islamic leasing business. The aim of firm in Kazakhstan is to support the development of small and medium enterprises (SMEs) by providing alternative sources of Shariah compliant financing for their projects. Secom Aktif Güvenlik Yatırım A.Ş.: Secom Aktif Güvenlik Yatırım A.Ş is established as an HoldCo (a holding/umbrella company) to acquire and to invest in Kent Güvenlik A.Ş by the shareholders of Secom Co. Ltd (%50) and Emlak Girişim Danışmanlığı A.Ş. (%50). Euro Mediterranean Investment Company (“EMIC”) is a real estate development and portfolio management company in North Cyprus. Kent Güvenlik A.Ş.: Kent Güvenlik A.Ş. changed the title as Secom Aktif Elektronik Güvenlik Çözümleri A.Ş. is established for the purposes below: UPT Ödeme Hizmetleri A.Ş. (“UPT”) is Turkey’s first and only local, global money transfer and payment platform for domestic and international transfers to account, credit cards or for cash payments in multiple currencies. UPT established a subsidiary named UPT Lithuania UAB (“UPT Lithuania”) in Lithuania on 4 December 2019. UPT is owned 100% of nominal shares of UPT Lithuania. • Security systems and services (Monitoring and installation of security systems such as theft and fire alarm, electronic safe, verification of the alarms and activation of the units such as police, fire department). • Import, export, manufacture, trade and marketing all kinds of security systems materials. Mükafat Portföy Yönetimi A.Ş. (“Mükafat”) strives to carve out a niche for itself with its alternative investment products such as Private Equity Funds and Real Estate Funds. Mükafat is also managing Mutual Funds as well as Pension Funds. The Company’s trade name has been changed to Aktif Portföy Yönetimi on 8 June 2020. • Engineering and installation of fire, burglar and general purpose alarm systems for the public and/or private buildings. • Establishing, operating alarm-monitoring centers within the framework of the related laws and accepting subscribers to the monitoring center. Haliç Finansal Kiralama A.Ş. (“Haliç) is the first financial leasing company offering Islamic products to its customers in Turkey, Haliç develops customer-tailored development packages for its customers, especially SMEs, as well as financing options in order to provide support to their investments in technological machines and equipment. Haliç aims to bring long-term resources to Turkey from the Gulf and Asian countries through Sukuk issues by leveraging on Aktif Bank's knowledge in capital markets. Halk Yenilenebilir Enerji A.Ş.: The Company, which established in April 2017, is engaged in the construction of solar energy production facilities. Oniki Teknoloji A.Ş. (formerly known as Epost Dış Ticaret A.Ş.): The Company will engage in the trade of all kinds of different products that are valued in the world market such as basic needs of countries. Oniki Teknoloji A.Ş., which intends to conduct Turkey as a main hub, aims to bring together trade facilities whether inside Turkey or different suppliers and sales opportunities. The Company provides structural trade finance models that make domestic production to reach wide geographies all around the World, being a bridge between different countries and regions. Eko Biokütle Enerji Üretim A.Ş.: The company will establish two biomass power plants with a capacity of 10 MW in Şanlıurfa for the production of electricity from the cotton stalk within the scope of the electricity generation support of YEKDEM regulation – no: 5346 which entitles the company to sell the electricity by $13.3 cent per kWh for electricity generation from biomass through 10 years. Dome Zero Inch: Dome Zero Inch operates in packing sector. Workindo Teknoloji A.Ş.: Workindo Teknoloji A.Ş. is established to operate in business to business professional services. 2. Basis of preparation 2.1 Statement of compliance The Bank and its subsidiaries operating in Turkey maintain their books of account and prepare their statutory consolidated financial statements in Turkish Lira (“TL”) in accordance with the accounting principles as promulgated by the Banking Regulation and Supervision Agency (“BRSA”), Turkish Accounting Standards promulgated by the Public Oversight Accounting and Auditing Standards Authority, Capital Markets Board of Turkey, the Turkish Commercial Code and tax legislation. The foreign subsidiaries maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. The accounting policies and valuation principles applied in the preparation of accompanying financial statements are determined and applied in accordance with principles in the context of IAS and IFRS. The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and its interpretations adopted by the International Accounting Standards Board (“IASB”). The consolidated financial statements were authorised for issue by the Group’s management on 26 April 2021. 1234 1234 96 97
51. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 2. Basis of preparation (continued) 2. Basis of preparation (continued) 2.2 Basis of measurement 2.5 Earnings per share The consolidated financial statements have been prepared on the historical cost basis as adjusted for the effects of inflation, except for the following: • derivative financial instruments are measured at fair value In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonus shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of bonus shares issued without a corresponding change in resources by giving them a retroactive effect for the year in which they were issued and for each earlier period. • financial assets measured at fair value through profit or loss There is no bonus share issuance as at 31 December 2020 (31 December 2019: None). • financial assets measured at fair value through other comprehensive income The earnings attributable to basic shares for each period are as follows: 2.3 Functional and presentation currency These consolidated financial statements are presented in TL, which is the Bank’s functional currency. Except as indicated, financial information presented in TL has been rounded to the nearest thousand. 2.4 Use of estimates and judgements The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at 31 December 2019. The COVID-19 epidemic, which emerged in 2020 and has global impacts, causes disruptions in operations and creates uncertainties both in regional and global economic conditions. As of 30 June 2020, the Bank has reflected the effects of the outbreak on the estimates used in the expected loan loss calculations in the light of the available information and developments. Due to the effects of the COVID-19 epidemic, the Bank revised the scenario weights created from macroeconomic expectations and reflected the calculations made in consideration of the changes in probability of default and loss given default values. In this context, the Bank measured the effect of the change in macroeconomic data used in the expected credit loss calculations on the non-performing loans within different scenarios and reflected the increase coefficient, which is evaluated to reflect best the current situation in the non-performing loans ratio, to the loan parameters. Profit attributable to equity holders of the Bank Weighted average number of ordinary shares in issue Basic and diluted earnings per share (full TL amount per TL 1 face value each) 3. Significant accounting policies 3.1 Accounting in hyperinflationary economies 31 December 2020 31 December 2019 559,777 1,193,585 0.469 411,158 1,193,585 0.344 The consolidated financial statements of the Turkish entities have been restated for the changes in the general purchasing power of the Turkish Lira based on International Accounting Standard (“IAS”) No. 29 “Financial Reporting in Hyperinflationary Economies” as at 31 December 2005. IAS 29 requires that consolidated financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current on the reporting date, and that corresponding figures for prior periods be restated in the same terms. One characteristic that necessitates the application of IAS 29 is a cumulative three-year inflation rate approaching or exceeding 100%. The cumulative three-year inflation rate in Turkey has been 35.61% as at 31 December 2005, based on the Turkish nation-wide wholesale price indices announced by the Turkish Statistical Institute (“TURKSTAT”). By taking this into consideration, together with the sustained positive trend in quantitative factors, such as the stabilisation in financial and monetary markets, decrease in interest rates and the appreciation of TL against USD and other hard currencies, it was declared that Turkey should be considered a non-hyperinflationary economy under IAS 29 from 1 January 2006 as stated in International Standards Alert No. 2006/17 issued on 8 March 2006. Therefore, IAS 29 has not been applied to the accompanying consolidated financial statements starting from 1 January 2006. 1234 1234 98 99
52. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.2 Foreign currency transactions 3.3 Basis of consolidation (continued) Foreign currency transactions Business combinations Transactions in the financial statements of the Group are recorded in TL, which is the Bank’s functional currency and the presentation currency for the accompanying consolidated financial statements. Transactions in foreign currencies are translated into the functional currency of the Group at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into TL at the exchange rates ruling at date of the statement of financial position with the resulting exchange differences recognized in income as foreign exchange gain or loss. Gains and losses arising from foreign currency transactions are reflected in income as realized during the period. The Group accounts for business combinations using the acquisition method when control is transferred to the Group. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to TL at foreign exchange rates ruling at the date of the statement of financial positions. The revenues and expenses of foreign operations are translated to TL using average exchange rates. Foreign exchange differences arising on translation are recognized directly in a separate component of equity. When a foreign operation is disposed of in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss. 3.3 Basis of consolidation Subsidiaries The consolidated financial statements incorporate the consolidated financial statements of the Bank and entities controlled by the Bank. The control exists if and only if; 1) when the Bank has the power over an affiliate which that power, directly or indirectly, give rights to govern the financial and operating policies of the entity so as to obtain benefits from its activities, 2) exposure, or rights, to variable returns from its involvement with the affiliate, 3) the ability to use its power over the affiliate to affect the amount of its returns. The Bank reassess its control power over its subsidiaries if there is an indication that there are changes to any of the three elements of control. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of income from the effective date of acquisition or up to the effective date of disposal, as appropriate. 1234 100 The Group measures goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss. Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Interests in equity-accounted investees The Group’s interests in equity-accounted investees comprise interests in associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 101
53. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.3 Basis of consolidation (continued) 3.3 Basis of consolidation (continued) Interests in associates and the joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases. Non-controlling interests Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within the Group equity and any gain/loss arising is recognised directly in equity. 1234 102 Group entities Subsidiaries Insurance Brokerage Sigortayeri Sigorta ve Reasürans Brokerliği A.Ş. Payment Systems Epost Elektronik Perakende Otomasyon Satış Tic. A.Ş. E-Kent Geçiş Sistemleri ve Biletleme Teknolojileri A.Ş. N Kolay Ödeme Kuruluşu A.Ş. (Formerly known as N Kolay Mağazacılık A.Ş.) UPT Ödeme Hizmetleri A.Ş. UPT Lithuania UAB Real Estate Emlak Girişim Danışmanlığı A.Ş. Service Pavo Teknik Servis Elektrik Elektronik Sanayi ve Ticaret A.Ş. Mükafat Portföy Yönetimi A.Ş. Solar Energy Albatros Solar Enerji Üretim A.Ş Kamelya Solar Enerji Üretim A.Ş Kırlangıç Solar Enerji Üretim A.Ş Çöl Yıldızı Solar Enerji Üretim A.Ş Deniz Yıldızı Solar Enerji Üretim A.Ş İpek Güneş Enerjisi Üretimi A.Ş. Esen Güneş Enerjisi Üretimi A.Ş. Mehtap Güneş Enerjisi Üretim A.Ş. Tanyeri Güneş Enerjisi Üretim A.Ş. Seher Güneş Enerjisi Üretimi A.Ş. Ufuk Güneş Enerjisi Üretim A.Ş. Yakamoz Güneş Enerjisi Üretim A.Ş. Duru Güneş Enerjisi Üretimi A.Ş. Deniz Güneş Enerjisi Üretimi A.Ş. Pasifik Solar Enerji Üretim A.Ş Olimpos Solar Enerji Üretım A.Ş. Yakut Solar Enerji Üretim A.Ş Seher Yıldızı Solar Enerji Üretim A.Ş. Kuzey Yıldızı Solar Enerji Üretim A.Ş. Gök Safir Solar Enerji Üretim A.Ş Kızıl Yıldızı Solar Enerji Üretim A.Ş. Kasımpatı Solar Enerji Üretim A.Ş Martı Solar Enerji Üretim A.Ş Country of Incorporation Turkey Direct ownership 31 December 2020 100.00% 31 December 2019 Indirect ownership 100.00% 31 December 2020 31 December 2019 - - Turkey Turkey Turkey Turkey Lithuania 99.86% 90.04% 100.00% 100.00% 99.86% 90.04% 100.00% 100.00% 99.86% - 99.86% - Turkey 100.00% 100.00% - - Turkey Turkey 80.00% 80.00% 100.00% - 100.00% - Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey - - 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 26.87% 26.58% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 103
54. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.3 Basis of consolidation (continued) 3.3 Basis of consolidation (continued) Group entities Subsidiaries Nilüfer Solar Enerji Üretim A.Ş. Mercan Solar Enerji Üretim A.Ş. Kadıkalesi Enerji İnş.Tar. Hayv.İth. İhr. A.Ş. Akyarlar Enerji İnş.Tar. Hayv.İth. İhr. A.Ş. Yalıkavak Enerji İnş.Tar. Hayv.İth. İhr. Ltd. Şti. Çiğdem Solar Enerji Üretim A.Ş. Defne Solar Enerji Üretim A.Ş. Gelincik Solar Enerji Üretim A.Ş. Leylak Solar Enerji Üretim A.Ş. Lilyum Solar Enerji Üretim A.Ş. Akuamarin Solar Enerji Üretim A.Ş. Ametist Solar Enerji Üretim A.Ş. Aytaşı Solar Enerji Üretim A.Ş. Güneştaşı Solar Enerji Üretim A.Ş. Kaplan Gözü Solar Enerji Üretim A.Ş. Kuvars Solar Enerji Üretim A.Ş. Lapis Solar Enerji Üretim A.Ş. Olivin Solar Enerji Üretim A.Ş. Oniks Solar Enerji Üretim A.Ş. Opal Solar Enerji Üretim A.Ş. Sedef Solar Enerji Üretim A.Ş. Turkuvaz Solar Enerji Üretim A.Ş. Zirkon Solar Enerji Üretim A.Ş. Other İnovaban İnovasyon ve Finansal Danışmanlık A.Ş. Attivo Bilişim Anonim Şirketi Oniki Teknoloji A.Ş. (formerly known as Epost Dış Ticaret A.Ş.) Eko Biokütle Enerji Üretim A.Ş. Workindo Teknoloji ve İnsan Kaynakları Danışmanlık A.Ş. Passo Spor Oyunları Kulübü Yazılım ve Pazarlama A.Ş. Group entities Country of Incorporation Direct ownership 31 December 31 December 2020 2019 Indirect ownership 31 December 31 December 2020 2019 Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey - - 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% - 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Turkey Turkey Turkey Turkey Turkey Turkey - - 67.00% 90.00% 99.86% 100.00% 33.33% 74.90% 67.00% 90.00% 99.86% 100.00% 96.10% 74.90% 31 December 2020 Ownership 31 December 2019 Ownership Kazakhstan Republic of Tatarstan Turkey Turkey Turkish Republic of Northern Cyprus Turkey Turkey USA Turkey 14.31% 36.71% 32.00% 50.00% 25.53% 50% 50% 1.98% 33.33% 14.31% 36.71% 32.00% 50.00% 25.53% 50% 50% 1.98% 96.10% Turkey 33.33% - Equity accounted investees Country of Incorporation Kazakhstan Ijara Company Jsc Euroasian Leasing Company Haliç Finansal Kiralama Anonim Şirketi Halk Yenilenebilir Enerji Anonim Şirketi Euro Mediterianean Investment Company Secom Aktif Güvenlik Yatırım A.Ş. Secom Aktif Elektronik Güvenlik Çözümleri A.Ş. Dome zero Inc. Workindo Teknoloji ve İnsan Kaynakları Danışmanlık A.Ş. Kırmızı Elmas Enerji Ve Alt Yapı Yat. A.Ş. Emlak Gir. Dan.A.Ş.- Hitachi Europe Ltd. İş Ortaklığı 3.4 Interest income / expense Interest is recorded according to the effective interest rate method (rate equal to the rate in calculation of present value of future cash flows of financial assets or liabilities) defined in the IFRS 9 Financial instruments standard by applying the effective interest rate to the gross carrying amount of a financial asset except for: purchased or originated credit-impaired financial assets or financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. In applying the effective interest method, an entity identifies fees that are an integral part of the effective interest rate of a financial instrument. Fees that are an integral part of the effective interest rate of a financial instrument are treated as an adjustment to the effective interest rate, unless the financial instrument is measured at fair value, with the change in fair value being recognised in profit or loss. In those cases, such fees are accounted as revenue or expense when the instrument is initially recognised in the financial statements. When applying the effective interest method, it is amortised any fees, transaction costs and other premiums or discounts that are included in the calculation of the effective interest rate over the expected life of the financial instrument. 1234 104 1234 In case an interest was accrued on a security before its acquisition, the collected interest is divided into two parts as interest before and after the acquisition and only the interest income of the period after the acquisition is recorded as interest income in the financial statements. 105
55. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3.4 Interest income / expense (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) If the expectations for the cash flows in the financial asset are revised for reasons other than the credit risk, the amendment is reflected in the carrying amount of the asset and in the related statement of profit or loss and other comprehensive income line and is amortised over the estimated life of the financial asset. 3.8 Leases If the financial asset is impaired and classified as a non-performing receivable, the effective interest rate is applied to the amortized cost of the asset for subsequent reporting periods. Such interest income calculation is performed on an individual contract basis for all financial assets subject to impairment calculation. The effective interest rate is used for the calculation of loss given default parameter in the expected credit loss models and therefore the calculated expected credit losses, includes this calculated interest amount. Accordingly a reclassification is performed between the accounts of “expected credit losses” expense and “interest income from loans” for such calculated interest amount. If the credit risk of the financial instrument improves to the extent that the financial asset is no longer considered as impaired and the improvement can be attributed to an incident that eventually takes place (such as an increase in the loan’s credit rating), the system calculates interest income at subsequent reporting periods by applying the effective interest rate to the gross amount. IFRS 16 Leases standard abolishes the dual accounting model currently applied for lessees through recognising finance leases in the balance sheet whereas not recognising operational lease. Instead, it is set forth a single model similar to the accounting of finance leases (on balance sheet). The lease transactions were started to be recognised under “Tangible Fixed Assets” as an asset (tenure) and under “Financial Lease Liabilities” as a liability. For lessors, the accounting stays almost the same. 3.5 Fees and commission Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income are recognised as the related services are provided. Other fees and commission expense relates mainly to transaction and service fees, which are expensed as the services are received. 3.6 Net trading income Net trading income/(expense) includes gains and losses arising from sale of financial assets measured at fair value through profit or loss (FVPL) and through other comprehensive income (FVOCI) in addition to changes in fair value of financial assets measured at FVPL and derivatives. 3.7Dividends The Group has started to apply IFRS 16 Leases standard as of 1 January 2019. The Group recognizes the right of use and the lease liabilities on the financial statements at the effective date of the lease. The right of use is measured initially at cost value and subsequently measured at cost less accumulated depreciation and accumulated impairment losses and adjusted for the re-measurement of the lease obligation. IAS 36 Impairment of Assets is applied in order to determine whether the real estates that are entitled to use have been impaired and to recognize the impairment loss. IFRS 16 introduces a single leasing accounting model for lessees. As a result, the Group, as a lessee, has acquired the lease rights representing the lease rights representing the right to use the underlying asset and the lease payments to the financial statements. Accounting for the lessor is similar to the previous accounting policies. Recognition of right of use assets: • The right of use asset is first recognized by cost method and includes: • The initial measurement amount of the lease obligation, • The amount obtained by deducting all the rental incentives received from all lease payments made at or before the beginning of the lease; • All initial direct costs incurred by the Group and 1234 106 1234 Dividend income is recognised when the right to receive income is established. 107
56. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.8 Leases (continued) 3.9 Other operations revenue When applying the cost method, the existence of the right of use: • Accumulated depreciation and accumulated impairment losses are deducted and • Measures the restatement of the lease obligation at the restated cost. The Group applies depreciation provisions in IAS 16 Property, Plant and Equipment while depreciating the right of use assets. The Lease obligations At the effective date of the lease, the Group measures its leasing liability at the present value of the lease payments not paid at that time. Lease payments are discounted using the Group’s average borrowing interest rates. The Group recognises revenue based on the following five principles in accordance with the IFRS 15, “Revenue from Contracts with Customers Standard” effective from 1 January 2018: • Identification of customer contracts • Identification of performance obligations • Determination of the transaction price in the contracts • Allocation of transaction price to the performance obligations • Recognition of revenue when the performance obligations are satisfied The lease payments included in the measurement of the lease liability consist of the payments to be made for the right of use during the lease term of the underlying asset and the unpaid payments at the effective date of the lease. The Group evaluates each contracted obligation separately and respective obligations, committed to deliver the distinct goods or perform services, are determined as separate performance obligations. After the effective date of the lease, the Group measures the leasing liability as follows: The Group determines at contract inception whether the performance obligation is satisfied over time or at a point in time. When the Group transfers control of a good or service over time, and therefore satisfies a performance obligation over time, then the revenue is recognised over time by measuring the progress towards complete satisfaction of that performance obligation. • Increase the book value to reflect the interest on the lease obligation • Reduces the book value to reflect the lease payments made and • The book value is measured to reflect reassessments and restructuring, or reflect to fixed lease payments as of revised nature. The interest on the lease liability for each period in the lease period is the amount calculated by applying a fixed periodic interest rate to the remaining balance of the lease liability. When a performance obligation is satisfied by transferring promised goods or services to a customer, the Group recognises the revenue as the amount of the transaction price that is allocated to that performance obligation. The goods or services are transferred when the control of the goods or services is delivered to the customers. Following indicators are considered while evaluating the transfer of control of the goods and services: a) presence of Group’s collection right of the consideration for the goods or services, b) customer’s ownership of the legal title on goods or services, 1234 108 1234 c) physical transfer of the goods or services, 109
57. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.9 Other operations revenue (continued) 3.10 Financial assets and liabilities (continued) d) customer’s ownership of significant risks and rewards related to the goods or services, Derecognition e) customer’s acceptance of goods or services. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. If the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less, the promised amount of consideration for the effects of a significant financing component is not adjusted. On the other hand, when the contract effectively constitutes a financing component, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised on an accrual basis as other operating income. The Group generates revenue primarily from banking services, payment solutions, money transfer services, insurance brokerage, transportation solutions, ticketing services, portfolio management, energy production and real estate. The Group recognizes revenue generated from the services given as the customers benefit from the services at their premises at a point in time. Customers obtain control of energy produced when the energy delivered to distributing point and invoices are issued according to contractual terms. Revenue is recognised when the energy production amount is measured reciprocally and reconciled between the Group and customers at their premises. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Offsetting Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity. Amortised cost measurement The Group recognizes revenue generated from real estate sales as control of each of the independent sections are obtained and have been accepted by customers at their premises at a point in time. The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. 3.10 Fair value measurement Recognition The Group initially recognises loans and advances to customers, investment securities, funds borrowed, customer accounts and debt securities issued on the date that they are originated. Regular way purchases and sales of financial assets are recognised on the trade date at which the Group commits to purchase or sell the asset. All other financial assets and liabilities are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. 1234 110 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 Group has access at that date. The fair value of a liability reflects its non-performance risk. When available, the Group 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. 1234 Financial assets and liabilities 111
58. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.10 Financial assets and liabilities (continued) 3.10 Financial assets and liabilities (continued) Fair value measurement (continued) Identification and measurement of impairment If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise 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. As of 1 January 2018, the Group recognizes provisions for impairment in accordance with IFRS 9 requirements. The expected credit loss estimates are required to be unbiased, probability-weighted and include supportable information about past events, current conditions, and forecasts of future economic conditions. These financial assets are divided into three categories depending on the gradual. The Group calculates expected credit losses based on a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. A cash shortfall is the difference between the cash flows that are due based on the contract and the cash flows that are expected to be received. The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. Derivative financial instruments The Group enters into transactions with derivative instruments including forwards, swaps, currency options and interest rate cap/floor agreements in the foreign exchange and capital markets. Most of these derivative transactions are considered as effective economic hedges under the Group’s risk management policies; however, since they do not qualify for hedge accounting under the specific provisions of International Accounting Standard 39 – Financial instruments: Recognition and measurement (“IAS 39”), they are treated as derivatives held for trading. IFRS 9 also includes new hedge accounting rules aiming alignment with risk management activities. IFRS 9 permits to defer application of IFRS 9 hedge accounting and continue to apply hedge accounting provisions of IAS 39 as a policy choice. Derivative financial instruments are initially recognised at fair value on the date which a derivative contract is entered into and subsequently remeasured at fair value. Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are recognised in profit or loss. Fair values are obtained from quoted market prices in active markets, including recent market transactions, to the extent publicly available, and valuation techniques, including discounted cash flow models and options pricing models as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. 1234 112 Probability of Default (PD): PD refers to the likelihood that a loan will default within a specified time horizon, which is usually set at 12 months, given certain characteristics. The Group uses two different probability of default rates while calculating expected credit losses as per the IFRS 9. • 12-month PD: as the estimated probability of default occurring within the next 12 months (or over the remaining life of the financial instrument if that is less than 12 months) following the balance sheet date. • Lifetime PD: as the estimated probability of default occurring over the remaining life of the financial instrument. Loss Given Default (LGD): If a loan default occurs, it represents the economic loss incurred on the loan. It is expressed as a percentage. Exposure at Default (EAD): For cash loans, it corresponds to the amount of loan granted as of the reporting date. For non-cash loans and commitments, it is the value calculated through using credit conversion factors. Credit conversion factor corresponds to the factor which adjust the potential increase of the exposure between the current date and the default date. Stage 1: For the financial assets at initial recognition or that do not have a significant increase in credit risk since initial recognition. Impairment for credit risk is recorded in the amount of 12-month expected credit losses. Stage 2: Includes financial assets which have a significant increase in credit risk since initial recognition but an unbiased evidence does not occur. Lifetime expected credit losses are recognized for these financial instruments. Stage 3: Stage 3 includes financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime expected credit losses are recognized and interest revenue is calculated on the net carrying amount. 1234 The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out. 113
59. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.10 Financial assets and liabilities (continued) 3.10 Financial assets and liabilities (continued) Rating system for corporate loans Rating system for corporate loans (continued) Internal credit risk assessment system of the Bank grades loans in 12 categories in the wide range from the highest (AAA) to the lowest (D3). The structure, which includes rule-based and comprehensive strategy trees, enables the implementation of more common policy rules. A scorecard structure which works with Cut-off logic is only included in the N Kolay Personal Loans which is given by the digital channel, but not preferred in the application of PTT and Dealer loans. The Bank utilizes an internal rating system, which is based on quantitative and qualitative data. Rating table for each customer is prepared annually by CRM and reviewed by the Credit Allocation Department based on year-end financials and updated information. For Financial Risks (objective) the company can get maximum 70 points and for Business and Sector Risks (subjective) maximum 30 points, respectively. Financial risk is assessed considering financial indicators and ratios like equity strength, profitability, liquidity and profit margins. On the other hand, business risk is freely evaluated by the rater based on information available, intelligence and track record of the company and owners. Market position, prospects for growth, as well as ownership strength is appraised. These soft and hard facts lead us to reach final “Risk Rating” of the company. PTT Retirement Loans are a credit system based on automatic collection from pension, therefore the systems have been developed especially to guarantee the collection process from the salary and prevent the customer from borrowing more than the amount of pension. Dealers are intermediary for lending of vehicle credits- especially second hand- and credits for durables goods like furniture, refrigerator, washing machine, etc. For the dealer channel, credit applications are evaluated based on main Aktif Bank’s strategies and dealers’ risk segments. Dealers’ risk segments are based on non-performing loan ratio and profit for each dealer. The vehicle mentioned in the loan is taken as collateral then loan disbursement is realized. Equity structure, profitability and liquidity are the basic parameters that affect financial risk (objective). Indebtedness, profitability and rational equity structure analysis are evaluated by means of 12 financial ratios which have 30 % effect on rating calculation. For the purpose of evaluating trend analysis based on company’s financial statements, 21 ratios are calculated which have 30 % effect on rating calculation. Foreign currency position and effect on equity thereof are evaluated by means of 3 ratios which have 10 % effect on rating calculation. In addition, the risk measurement of policy trees and rules is reviewed and analysed as necessary, with the rejection / grey area / automatic approval rules and performance trees for all credit products being reviewed at least once a year. Sector, shareholder’s financial power, institutionalization and intelligence records are the parameters that affect business risk (subjective). Business risk is evaluated by means of 19 questions. Corporate branch executives are responsible for answering aforementioned questions accurately. As for financial statement analysis, Independent Auditor’s Reports or Corporate Tax Declaration Reports (balance sheet and income statement) are taken into consideration. Financial statements of last 3 periods are evaluated and trend of financial structure in the course of these periods is taken into consideration. Forward-looking macroeconomic information 1234 114 The Group incorporates forward-looking macroeconomic information including Unemployment Rate, Consumer Confidence Index (CCI), Composite Leading Indicator (CLI) and Consumption Expenditure of General Government, when assessing the significant increase in credit risk and expected credit loss calculation. Forward-looking expectations for these parameters are updated at least once a year and used in expected credit loss calculations. 1234 There is a comprehensive rule-based systematic infrastructure in personal loan. In this structure, besides the KKB (Credit Bureau) information, the customer's demographic information, employment information, risk center data, bank database information etc. is also used. The scorecard system for the digital channel -which includes N Kolay Personal Loans that receives too many loan applications-, was started in 2017 and validation was completed in April 2019 and in September 2020 the scorecard will be renewed. 115
60. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.10 Financial assets and liabilities (continued) 3.10 Financial assets and liabilities (continued) Significant increase in credit risk Definition of default (continued) In the event of a significant increase in credit risk, the financial asset is transferred to Stage 2. In assessing whether a borrower is in default, the Group considers indicators that are: Qualitative and quantitative considerations taken into determining the significant increase in the credit risk of a financial asset as follows; • qualitative: e.g. breaches of covenant; • quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and • based on data developed internally and obtained from external sources. • Delay days as of the reporting date is 30 or more • Refinancing and restructuring the credit account • Loans under close monitoring Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. • Significant increase in probability of default. 3.11 Definition of the significant increase in the probability of default, the comparison of the probability of default at the opening date of the loan with the probability of default at the reporting date. If the probability of default calculated for the loan at the reporting date exceeds the set thresholds, it is considered to be a deterioration of the probability of default. The thresholds used in the probability of default are differentiated on the basis of segment/credit group. Cash and cash equivalents Cash and cash equivalents include cash on hand, unrestricted balances with Central Bank and highly liquid financial assets with original maturities of less than three months, which are subject to insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. The Group considers a financial asset to be in default when: When the Group purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a future date (“reverse repo or stock borrowing”), the arrangement is accounted for as cash and cash equivalents, and the underlying asset is not recognised in the Group’s consolidated financial statements. Cash and cash equivalents are carried at amortised cost in the statement of financial position. • the borrower is unlikely to pay its credit obligations to the Group in full; 3.12 • the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or • it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability to pay its credit obligations. The Group categorizes and recognizes its financial assets as “Financial Assets at Fair Value through Profit/Loss”, “Financial Assets Measured at Fair Value through Other Comprehensive Income” or “Financial Assets at Measured at Amortized Cost”. Such financial assets are recognized or derecognized according to IFRS 9 Financial Instruments. Financial assets are measured at fair value at initial recognition in the financial statements. During the initial recognition of financial assets other than “Financial Assets Measured at Fair Value through Profit or Loss”, transaction costs are added to fair value or deducted from fair value. 1234 116 Explanations and disclosures on financial assets 1234 Definition of default 117
61. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.12 Explanations and disclosures on financial assets (continued) 3.12 Explanations and disclosures on financial assets (continued) The Group recognizes a financial asset into financial statements when it becomes a party to the contractual terms of a financial instrument. During the first recognition of a financial asset into the financial statements, business model determined by Group management and the nature of contractual cash flows of the financial asset are taken into consideration. Financial assets measured at fair value through profit or loss Financial assets at fair value through profit/loss” are financial assets other than the ones that are managed with business model that aims to hold to collect contractual cash flows or business model that aims to collect both the contractual cash flows and cash flows arising from the sale of the assets; and if the contractual terms of the financial asset do not lead to cash flows representing solely payments of principal and interest at certain date; that are either acquired for generating a profit from short term fluctuations in prices or are financial assets included in a portfolio aiming to short term profit making. Financial assets at the fair value through profit or loss are initially recognized at fair value and remeasured at their fair value after recognition. All gains and losses arising from these valuations are reflected in the income statement. Financial assets measured at fair value through other comprehensive income In addition to financial assets within a business model that aims to hold to collect contractual cash flows and aims to hold to sell, financial asset with contractual terms that lead to cash flows are solely payments of principal and interest at certain dates, they are classified as fair value through other comprehensive income. Financial assets measured at fair value through other comprehensive income are recognized by adding transaction cost to acquisition cost reflecting the fair value of the financial asset. After the recognition, financial assets measured at fair value through other comprehensive income are remeasured at fair value. Interest income calculated with effective interest rate method arising from financial assets measured at fair value through other comprehensive income and dividend income from equity securities are recorded to income statement. “Unrealized gains and losses” arising from the difference between the amortized cost and the fair value of financial assets measured at fair value through other comprehensive income are not reflected in the income statement of the period until the acquisition of the asset, sale of the asset, the disposal of the asset, and impairment of the asset and they are accounted under the “Accumulated other comprehensive income or expense to be reclassified through profit or loss” under shareholders’ equity. Equity securities, which are classified as financial assets measured at fair value through other comprehensive income, are carried at fair value. 1234 118 Financial assets measured at fair value through other comprehensive income (continued) At initial recognition, it can be made an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of IFRS 9 that is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which IFRS 3 applies. Such election is made on an instrument by instrument basis. Amounts presented in other comprehensive income shall not be subsequently recycled to profit or loss. However, the cumulative gain or loss shall be recycled to prior period’s profit or loss. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. IFRS 9 impairment requirements are not applicable for equity instruments. Financial assets measured at amortized cost Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are classified as financial assets measured at amortized cost. Financial assets measured at amortized cost are initially recognized at acquisition cost including the transaction costs which reflect the fair value of those instruments and subsequently recognized at amortized cost by using effective interest rate method. Interest income obtained from financial assets measured at amortized cost is accounted in income statement. Loans Loans are non-derivative financial assets that have fixed or determinable payments terms and are not quoted in an active market. Stated loans are initially recognized at acquisition cost plus transaction costs presenting their fair value and thereafter measured at amortized cost using the “Effective Interest Rate (internal rate of return) Method”. The Group’s all loans are recorded under the “Measured at Amortized Cost” account. 3.13 Repurchase transactions The Group enters into purchases/sales of investments under agreements to resell/repurchase identical investments at a certain date in the future at a fixed price. Investments purchased subject to commitments to resell them at future dates are not recognised. The amounts paid are recognised as receivables from reverse repurchase agreements in the accompanying 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 119
62. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.13 Repurchase transactions (continued) 3.16 Tangible assets consolidated financial statements. The receivables are shown as collateralized by the underlying security. Investments sold under repurchase agreements continue to be recognised in the consolidated statement of financial position and are measured in accordance with the accounting policy for either financial assets measured at fair value through profit or loss, financial assets measured at fair value through other comprehensive income or financial assets at measured at amortized cost as appropriate. The proceeds from the sale of the investments are reported as obligations under repurchase agreements. Recognition and measurement Income and expenses arising from the repurchase and resale agreements over investments are recognised on an accruals basis over the period of the transaction and are included in “interest income” or “interest expense”. Cost includes expenditures that are directly attributable to the acquisition of the asset. 3.14 Trade receivables Trade receivables that are created by way of providing goods or services directly to a debtor are carried at amortised cost. Trade receivables, net of unearned financial income, are measured at amortised cost, using the effective interest rate method, less the unearned financial income. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant. As of 1 January 2018, the Group recognizes provisions for impairment in accordance with IFRS 9 requirements. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is recognised in profit or loss. 3.15 Inventories Inventories are valued at the lower of cost or net realisable value. Cost elements included in inventories are materials, labour and an appropriate amount for factory overheads. The cost of borrowings is not included in the costs of inventories. The cost of inventories is determined on the weighted average basis for each purchase. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. Inventories consist of raw material, semi-finished goods, finished goods, commercial goods and other stocks. Items of tangible assets are restated for the effects of inflation to 31 December 2005, less accumulated depreciation and impairment losses. Tangible assets acquired after 31 December 2005 is reflected at cost, less accumulated depreciation and impairment losses. Subsequent costs The cost of replacing part of an item of machinery or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of tangible assets are recognised in profit or loss as incurred. Depreciation Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets. Leased assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for as at 31 December 2020 and 2019 are as follows: • machinery or equipment 3-25 years • furniture and fixtures 2-60 years • motor vehicles 5 years • other fixed assets 2-50 years 1234 120 1234 Leasehold improvements are depreciated on a straight-line method over the shorter of the lease term and their useful lives. 121
63. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.17 Intangible assets 3.17 Intangible assets (continued) (i) Service agreements Acquisitions of non-controlling interests Service agreements acquired in a business combination are recognised at fair value at the acquisition date. The service agreements have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the service agreements. (ii) Software Software acquired by the Group is restated for the effects of inflation to 31 December 2005, less accumulated amortisation and impairment losses. Intangible assets acquired after 31 December 2005 are reflected at cost, less accumulated amortisation and impairment losses. Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits and can reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly attributable to developing the software and are amortised over its useful life. Internally developed software is stated at capitalised cost less accumulated amortisation and impairment. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimate useful life of software is 3 to 15 years. (iii) Goodwill Goodwill that arises upon the acquisition of subsidiaries the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative bargain), it is recognised immediately in profit or loss. Acquisition of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. (iv) Intangible assets acquired in a business combination Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they meet the definition of an intangible asset and their fair value can be measured reliably. Cost of such intangible assets is the fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets acquired separately. 3.18 Non-current assets held for sale Certain non-current assets primarily related to the collateral collected on non-performing loans are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of carrying value and fair value less costs to sell. 3.19 Impairment of non-financial assets 1234 122 1234 The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed on each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. 123
64. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 3. Significant accounting policies (continued) 3.19 Impairment of non-financial assets (continued) 3.22 Employee benefits An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cashgenerating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 3.20 Funds borrowed and debt securities issued Funds borrowed and debt securities issued are initially measured at fair value plus transaction costs, and subsequently measured at their amortised cost using the effective interest method. 3.21Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for. A provision for onerous contract is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. 1234 124 Under IAS 19, the Group determines the net interest expense (income) for the period on the net defined benefit liability by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability at the beginning of the annual period, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability now comprises: • interest cost on the defined benefit obligation; • interest income on plan assets; and • interest on the effect on the asset ceiling. As per revised IAS 19, all actuarial gain or losses are recognized under other comprehensive income starting from 1 January 2013. 3.23 Trade and other payables Trade payables are payments to be made arising from the purchase of goods and services from suppliers within the ordinary course of business. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 3.24 Income tax expense Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted on the reporting date, and any adjustment to tax payable in respect of prior years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 125
65. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 3. Significant accounting policies (continued) 4. 3.24 Income tax expense (continued) A number of new standards, interpretations of and amendments to existing standards are not effective at reporting date and earlier application is permitted; however the Group has not early adopted are as follows. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed on each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 3.25 Events after the reporting period Events after the reporting period that provide additional information about the Group’s position at the reporting dates (adjusting events) are reflected in the consolidated financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material. 3.26 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the Board of Directors (being chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. 3.27 Borrowing costs The Group, whenever required, generates funds from domestic and foreign sources in the form of borrowings, and bill and bond issuances in the local and international markets. The funds borrowed are recorded at their purchase costs and valued at amortised costs using the effective interest method. An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other borrowing costs as an expense in the period in which it incurs them. 1234 126 IFRS 17 Insurance Contracts On 18 May 2017, IASB issued IFRS 17 Insurance Contracts. This first truly globally accepted standard for insurance contracts will help investors and others better understand insurers’ risk exposure, profitability and financial position. IFRS 17 replaces IFRS 4, which was brought in as an interim Standard in 2004. IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. As a consequence, it is difficult for investors to compare and contrast the financial performance of otherwise similar companies. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies. Insurance obligations will be accounted for using current values – instead of historical cost. The information will be updated regularly, providing information that is more useful to users of financial statements. IFRS 17 has an effective date of 1 January 2023 but companies can apply it earlier. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 17. The revised Conceptual Framework (Version 2018) The revised Conceptual Framework issued on 28 March 2018 by the IASB. The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS Standards. It helps to ensure that the Standards are conceptually consistent and that similar transactions are treated the same way, so as to provide useful information for investors, lenders and other creditors. The Conceptual Framework also assists companies in developing accounting policies when no IFRS Standard applies to a particular transaction, and more broadly, helps stakeholders to understand and interpret the Standards. The revised Framework is more comprehensive than the old one – its aim is to provide the Board with the full set of tools for standard setting. It covers all aspects of standard setting from the objective of financial reporting, to presentation and disclosures. For companies that use the Conceptual Framework to develop accounting policies when no IFRS Standard applies to a particular transaction, the revised Conceptual Framework is effective for annual reporting periods beginning on or after 1 January 2020, with earlier application permitted. Amendments to IAS 1 and IAS 8 - Definition of Material In October 2018, IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). The amendments clarify and align the definition of ‘material’ and provide guidance to help improve consistency in the application of that concept whenever it is 1234 temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. New and Revised International Financial Reporting Standards 127
66. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 4. New and Revised International Financial Reporting Standards (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 4. New and Revised International Financial Reporting Standards (continued) Amendments to IAS 1 and IAS 8 - Definition of Material (continued) Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) (continued) used in IFRS Standards. The amended “definition of material “was added to the important definition and it was stated that this expression could lead to similar results by not giving and giving misstating information. • In addition, with these amendment, the terminology used in its definition of material has been aligned with the terminology used in the Conceptual Framework for Financial Reporting (Version 2018). Those amendments are prospectively effective for annual periods beginning on or after 1 January 2020 with earlier application permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of the amendments to IAS 1 and IAS 8. IASB considered the pre-replacement issues to be more urgent and decided to address the following hedge accounting requirements as a priority in the first phase of the project: Amendments to IFRS 3 - Definition of a Business (b) Prospective assessments; Determining whether a transaction results in an asset or a business acquisition has long been a challenging but important area of judgement. IASB has issued amendments to IFRS 3 Business Combinations to make it easier for companies to decide whether activities and assets they acquire are a business or merely a group of assets. With these amendments confirmed that a business must include inputs and a process, and clarified that the process shall be substantive and the inputs and process must together significantly contribute to creating outputs. It narrowed the definitions of a business by focusing the definition of outputs on goods and services provided to customers and other income from ordinary activities, rather than on providing dividends or other economic benefits directly to investors or lowering costs and added a concentration test that makes it easier to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets. This is a simplified assessment that results in an asset acquisition of substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The amendment applies to businesses acquired in annual reporting periods beginning on or after 1 January 2020; with earlier application permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of the amendments to IFRS 3. (c) IAS 39 retrospective assessment; and Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) Key sources of estimation uncertainty Interest Rate Benchmark Reform, which amended IFRS 9, IAS 39 and IFRS 7 issued in September 2019, added Section 6.8 and amended paragraph 7.2.26. About this issue, IASB identified two groups of accounting issues that could affect financial reporting. These are: Allowances for loan losses • Probability of Default (PD): PD refers to the likelihood that a loan will default within a specified time horizon, which is usually set at 12 months, given certain characteristics. The Group uses two different probability of default rates while calculating expected credit losses as per the IFRS 9. (a) The highly probable requirement; (d) Separately identifiable risk components. All other hedge accounting requirements remain unchanged. A company shall apply the exceptions to all hedging relationships directly affected by interest rate benchmark reform. The Group shall apply these amendments for annual periods beginning on or after 1 January 2020 with earlier application permitted. 5. Use of estimates and judgements Management decides to the development, selection and disclosure of the Group’s critical accounting policies and estimates, and the application of these policies and estimates. These disclosures supplement the commentary on financial risk management (see note 6). Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy 3.10. 1234 1234 128 pre-replacement issues—issues affecting financial reporting in the period before the reform; and replacement issues—issues that might affect financial reporting when an existing interest rate benchmark is either reformed or replaced. 129
67. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 5. Use of estimates and judgements (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 5. Use of estimates and judgements (continued) Key sources of estimation uncertainty (continued) Key sources of estimation uncertainty (continued) Allowances for loan losses (continued) In assessing whether a borrower is in default, the Group considers indicators that are: - 12-month PD: as the estimated probability of default occurring within the next 12 months (or over the remaining life of the financial instrument if that is less than 12 months) following the balance sheet date. • qualitative: e.g. breaches of covenant; • quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and • based on data developed internally and obtained from external sources. - Lifetime PD: as the estimated probability of default occurring over the remaining life of the financial instrument. Loss Given Default (LGD): If a loan default occurs, it represents the economic loss incurred on the loan. It is expressed as a percentage. Exposure at Default (EAD): For cash loans, it corresponds to the amount of loan granted as of the reporting date. For non-cash loans and commitments, it is the value calculated through using credit conversion factors. Credit conversion factor corresponds to the factor which adjust the potential increase of the exposure between the current date and the default date. Stage 1: For the financial assets at initial recognition or that do not have a significant increase in credit risk since initial recognition. Impairment for credit risk is recorded in the amount of 12-month expected credit losses. Stage 2: Includes financial assets which have a significant increase in credit risk since initial recognition but an unbiased evidence does not occur. Lifetime expected credit losses are recognized for these financial instruments. Stage 3: Stage 3 includes financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime expected credit losses are recognized and interest revenue is calculated on the net carrying amount. Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy 3.10. For financial instruments that require varying degrees of judgement depending liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. See also “Valuation of financial instruments” below. Critical accounting judgements in applying the Group’s accounting policies Critical accounting judgements made in applying the Group’s accounting policies include: The Group considers a financial asset to be in default when: Valuation of financial instruments • the borrower is unlikely to pay its credit obligations to the Group in full; The Group’s accounting policy on fair value measurements is discussed in accounting policy 3.10. • the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. • it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability to pay its credit obligations. Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments using valuation techniques where all significant inputs are directly or indirectly observable from market data. 1234 1234 130 Level 1: Quoted market price (unadjusted) in an active market for identical instrument. 131
68. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Use of estimates and judgements (continued) 5. Critical accounting judgements in applying the Group’s accounting policies (continued) Critical accounting judgements in applying the Group’s accounting policies (continued) Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length. The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like forwards and currency swaps that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt securities. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets. This table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised: At 31 December 2020 Financial assets at fair value through profit or loss Investment securities – FVOCI portfolio Trading liabilities 1234 132 Note Level 1 Level 2 Level 3 Total 11 12 985 2,685,522 698,309 3,085,086 - 699,294 5,770,608 2,686,507 3,783,395 - 6,469,902 - (143,559) - (143,559) - (143,559) - (143,559) 11 Use of estimates and judgements (continued) At 31 December 2019 Financial assets at fair value through profit or loss Investment securities – FVOCI portfolio Trading liabilities Note Level 1 Level 2 Level 3 Total 11 12 3,216 2,254,288 445,791 1,272,660 - 449,007 3,526,948 2,257,504 1,718,451 - 3,975,955 - (17,029) - (17,029) - (17,029) - (17,029) 11 Financial asset and liability classification The Group’s accounting policies provide scope for assets and liabilities to be designated on inception into different accounting categories in certain circumstances. The classification of financial assets is explained in footnote 3.12. Deferred taxes Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect of temporary differences between book and tax bases of assets and liabilities. Currently, there are deferred tax assets resulting from operating loss carryforwards and deductible temporary differences, all of which could reduce taxable income in the future. Based on available evidence, both positive and negative, it is determined whether it is probable that all or a portion of the deferred tax assets will be realized. The main factors which are considered include future earnings potential; cumulative losses in recent years; history of loss carry-forwards and other tax assets expiring; the carry-forward period associated with the deferred tax assets; future reversals of existing taxable temporary differences; tax-planning strategies that would, if necessary, be implemented, and the nature of the income that can be used to realize the deferred tax asset. If based on the weight of all available evidence, it is the Group’s belief that taxable profit will not be available sufficient to utilize some portion of these deferred tax assets, then some portion of or all of the deferred tax assets are not recognized. Impairment of tangible and intangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible 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 1234 5. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 133
69. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 5. Use of estimates and judgements (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 6. Financial risk management (continued) Critical accounting judgements in applying the Group’s accounting policies (continued) Introduction and overview (continued) amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations. 6. The Audit Committee is responsible for monitoring compliance with the Bank’s risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. The Audit Committee is assisted in these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. Introduction and overview The Bank has exposure to the following risks from its use of financial instruments: • Credit risk • Liquidity risk • Market risks • Operational risks This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and processes for measuring and managing risk, and the Bank’s management of capital. Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has established the Audit Committee and Risk Management Department, which are responsible for developing and monitoring Bank risk management policies in their specified areas. The Audit Committee has non-executive members and report regularly to the Board of Directors on their activities. 1234 134 Credit risk Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans and advances to customers and other banks and investment securities. For risk management reporting purposes, the Bank considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector risk). For risk management purposes, credit risk arising on trading securities is managed independently, but reported as a component of market risk exposure. Management of credit risk The Bank’s credit risk management strategy is based on a three-part methodology that embraces the customer selection, credit allocation, and credit pricing stages. Since it was founded, the Bank has always managed its credit risks by taking a portfolio-logic approach. This sums up the Bank’s basic risk management strategy. In the first stage of the lending process, industry weightings are determined and firms that are seeking credit are given a preliminary screening. This initial check is followed by the credit allocation stage in which firms are individually rated and the Bank’s guarantee strategy is determined according to the results of this rating. In the final stage of the lending process, prices are determined by taking a risk-premium approach. 1234 Financial risk management 135
70. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Financial risk management (continued) Credit risk (continued) Credit risk (continued) The disclosures set out in the tables below include financial assets and financial liabilities that: • are offset in the Group’s statement of financial position; or • are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the statement of financial position. The similar agreements include derivative clearing agreements. Similar financial instruments include derivatives. Financial instruments such as loans and funds are not disclosed in the tables below unless they are offset in the statement of financial position. Types financial of assets Gross amounts Net amounts of of recognised financial assets financial liabilities offset in the presented in the Gross amounts statement of statement of of recognised financial assets financial position financial position Related amounts not offset in the statement of financial position Financial instruments (including noncash collateral) Cash collateral received Net amount 31 December 2020 Derivatives trading liabilities 143,559 - 143,559 (143,559) - - 31 December 2019 Derivatives trading liabilities 17,029 - 17,029 (17,029) - - Such collateral is subject to each agreement terms. The terms also give each party the right to terminate the related transactions on the counterparty’s failure to post collateral. Definition of default The Group receives and gives collateral in the form of cash in respect of the derivative transactions. The Group considers a financial asset to be in default when: Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements • the borrower is unlikely to pay its credit obligations to the Group in full; • the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or • it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability to pay its credit obligations. Financial instruments (including noncash collateral) Cash collateral received Net amount 31 December 2020 Derivatives trading assets 97,862 - 97,862 (97,862) - - 31 December 2019 Derivatives trading assets 29,364 - 29,364 (29,364) - - 1234 136 In assessing whether a borrower is in default, the Group considers indicators that are: • qualitative: e.g. breaches of covenant; • quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and • based on data developed internally and obtained from external sources. 1234 Types financial of assets Gross amounts Net amounts of of recognised financial assets financial liabilities offset in the presented in the Gross amounts statement of statement of of recognised financial assets financial position financial position Related amounts not offset in the statement of financial position 137
71. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Financial risk management (continued) Credit risk (continued) Credit risk (continued) Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. Concentration risk by location Allowance for impairment When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and expert credit assessment and including forward-looking information. The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing: • the remaining lifetime probability of default (PD) as at the reporting date; with • the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where relevant for changes in prepayment expectations). Write-off policy The Group writes off a loan balance, and any related allowances for impairment losses, when Bank determines that the loan is uncollectible. This determination is reached after considering information such as occurrence of significant changes in the borrower’s / issuer’s financial position such that the borrower / issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. Set out below is an analysis of the gross and net (of allowances for impairment) amounts of individually impaired assets by risk grade. Loans and advances to customers Gross Net 31 December 2020 Individually impaired 318,636 59,512 31 December 2019 Individually impaired 316,551 123,454 1234 138 The Group’s total risk for loans and advances to customers and investment debt securities are mainly concentrated on Turkey. The Group monitors concentrations of credit risk for cash loans and advances to customer and non-cash loans to customers by sector. An analysis of concentrations of credit risk at the reporting date is shown below: 31 December 2020 Sector Construction Financial institution General services Textile Mining Telecommunication Electricity industry Public Energy industry Trade Transportation Sports Chemistry industry IT industry Agriculture Consumer Loans - Credit card - Auto loans - Mortgage loans - Other Consumer Loans Other Total 31 December 2019 Cash loans % Non-cash loans % Cash loans % Non-cash loans % 568,455 375,145 343,524 1,215,727 587,156 393,440 34,033 66,291 685,636 354,935 2,861 736,603 808 276,019 4,469,926 45,048 417,458 730 4,006,690 65,858 6 4 3 11 6 4 1 7 3 7 3 44 4 40 1 489,664 462,634 7 129,914 1,433 1,760 331,660 157,511 135,671 72,870 6,020 45,679 124,576 51,177 161,937 24 22 6 15 7 6 3 2 6 2 7 243,383 341,044 728,009 892,004 678,565 354,736 28,462 115,174 667,548 241,593 4,686 638,544 54 55,507 2,547,409 47,686 212,638 826 2,286,259 31,408 3 5 10 12 9 5 2 9 3 8 1 33 1 3 29 - 340,880 347,220 121 61,071 1,378 1,760 129,191 272,485 74,769 127,332 4,378 6,214 7,499 110,920 23 23 4 9 19 5 9 1 7 10,176,417 100 2,172,513 100 7,568,126 100 1,485,218 100 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 139
72. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Financial risk management (continued) Liquidity risk Liquidity risk (continued) Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations from its financial liabilities. Residual contractual maturities of financial liabilities Management of liquidity risk The Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation. The Bank funds its short-term liquidity with interbank. In the case of long-term liquidity need, the Bank utilises capital market instruments. Additionally, the Bank also funds itself from the domestic and foreign market when it needs additional funds. Exposure to liquidity risk The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to short-term funds borrowed. For this purpose, net liquid assets are considered as including cash and cash equivalents and trading debt securities for which there is an active and liquid market less any short-term funds borrowed and commitments. A similar, but not identical, calculation is used to measure the Bank’s compliance with the liquidity limit established by the BRSA. Average for the year Maximum for the year Minimum for the year 31 December 2020 31 December 2019 105% 126% 92% 126% 150% 115% 31 December 2020 Non-derivative liabilities Obligations under repurchase agr. Debt securities issued Funds borrowed Trade and other payables Financial lease liabilities Customer accounts (*) Derivative financial instruments Inflow Outflow Note 19 21 20 Carrying amount Non-derivative liabilities Obligations under repurchase agr. Debt securities issued Funds borrowed Trade and other payables Financial lease liabilities Customer accounts (*) Derivative financial instruments Inflow Outflow 3 months to Less than 1 1 year month 1-3 months 1-5 years More than 5 years (18,412) (18,575) (50,062) (8,854) - (299,225) (2,984) - 24 25 4,078,171 7,449,428 2,917,314 205,387 8,194 2,414,666 (4,088,558) (7,645,445) (2,932,076) (207,828) (14,479) (2,414,737) (2,377,383) (2,950,496) (4,636,562) (843,667) (72,824) (220) (17,868) (1,048,875) (2,074,881) (1,329,524) (35,599) (440) (19,486) (70,775) (915,427) (459,660) (49,343) (1,981) - 11 11 (97,862) 143,559 6,411,724 (6,489,123) - 2,646,044 (2,637,961) 1,328,079 (1,365,803) 1,877,269 (1,925,036) 560,332 (560,323) - 17,118,857 (17,380,522) (2,377,383) (8,513,554) (4,546,529) (1,544,953) (95,894) (302,209) 3 months to Less than 1 1 year month 1-3 months 1-5 years More than 5 years (2,356) (48,459) (27,716) (45,377) (13,552) - - (*) Included in other liabilities. 31 December 2019 Gross nominal inflow / (outflow) On demand Note 19 21 20 Carrying amount Gross nominal inflow / (outflow) On demand 24 25 2,261,189 6,099,310 4,940,961 256,574 8,335 1,507,780 (2,266,448) (6,196,855) (4,959,624) (268,140) (15,907) (1,507,826) (110,409) (1,498,274) (1,512,592) (4,469,915) (1,747,428) (102) (9,552) (671,475) (1,223,361) (2,334,656) (46,394) (186) - (80,025) (455,120) (849,824) (65,960) (2,067) - 11 11 (29,364) 17,029 4,092,388 (4,039,052) - 1,015,348 (1,016,270) 1,406,051 (1,402,597) 765,824 (719,392) 905,165 (900,793) - 15,061,814 (15,161,464) (1,608,683) (7,740,511) (4,272,618) (1,406,564) (133,088) - 1234 140 1234 (*) Included in other liabilities. 141
73. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Financial risk management (continued) Market risk (continued) Liquidity risk (continued) The gross nominal inflow / (outflow) disclosed in the table above is the contractual, undiscounted cash flow on the financial liability or commitment. Market risk Market risk is the risk that, measured by changes in market prices, such as interest rate, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s / issuer’s credit standing) which will affect the Bank’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The following table sets out the allocation of assets subject to market risk. 31 December 2020 Financial assets measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Derivative financial assets Carrying amount 601,432 5,770,608 97,862 Market risk measuring 601,432 5,770,608 97,862 31 December 2019 Financial assets measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Derivative financial assets 419,643 3,526,948 29,364 419,643 3,526,948 29,364 Overall authority for market risk is vested in Asset and Liability Committee (“ALCO”). Interest rate risk Exposure to market risks – trading portfolios Exposure to interest rate risk The principal tool used to measure and control market risk exposure within the Bank’s portfolios is Standard Method. A summary of the Standard Method position of the Bank’s portfolios on 31 December 2020 and 2019 and during the period is as follows: Interest rate risk Foreign currency risk Other risk 31 December 2020 31 December 2019 13,112 4,159 7,716 126,203 981 1,061 24,987 128,245 The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. The ALCO is the monitoring body for compliance with these limits and is assisted by Risk Management Department of the Bank in its day-to-day monitoring activities. A summary of the Bank’s interest rate gap position is as follows: 31 December 2020 Carrying amount Unallocated(*) On demand Less than 3 month 3-6 months 6-12 months 1-5 years More than 5 years Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Loans and advances to customers Investment securities 9 10 1,508,229 1,251,914 - 222,888 - 1,285,341 1,251,914 - - - - - - - 11 13 12 Obligations under repurchase agr. Debt securities issued Lease liabilities Funds borrowed Trading liabilities 19 21 24 20 11 699,294 10,176,417 6,242,050 19,877,904 4,078,171 7,449,428 8,194 2,917,314 143,559 14,596,666 97,862 (36,026) 5,992 67,828 143,559 143,559 500,867 723,755 18,735 4,274,263 969,107 7,799,360 3,990,921 6,623,525 234 2,165,793 12,780,473 39,474 499,472 398,303 937,249 63,107 274,562 247 145,157 483,073 41,371 323,823 651,205 1,016,399 6,837 535,668 533 307,139 850,177 985 4,852,977 3,452,860 8,306,822 17,306 15,673 4,838 37,817 261,908 764,583 1,026,491 2,342 299,225 301,567 5,281,238 (75,731) (4,981,113) 454,176 166,222 8,269,005 724,924 Interest rate gap 1234 142 Note (*) includes derivative assets, non-performing loans and stock investments. 723,755 1234 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 143
74. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) Interest rate risk (continued) 31 December 2019 Note 6. Carrying amount Unallocated On demand Less than 3 month 3-6 months 6-12 months More than 5 1-5 years years Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Loans and advances to customers Investment securities 9 10 3,833,184 959,283 - 937,706 - 2,888,809 959,283 - - - - - 6,669 - 11 13 12 Obligations under repurchase agr. Debt securities issued Lease liabilities Funds borrowed Trading liabilities 19 21 24 20 11 449,007 7,568,126 3,914,090 16,723,690 2,261,189 6,099,310 8,335 4,940,961 17,029 13,326,824 29,364 62,063 7,593 99,020 17,029 17,029 405,379 1,343,085 - 9,095 3,306,791 600,868 7,764,846 2,179,797 5,616,206 417 4,072,069 11,868,489 3,713 49,883 707,636 761,232 67,267 342,740 427 460,480 870,914 168,566 804,709 973,275 11,850 97,947 437 157,065 267,299 1,456 3,361,433 1,416,999 4,779,888 2,275 42,417 3,528 26,703 74,923 619,390 376,285 1,002,344 3,526 224,644 228,170 3,396,866 81,991 1,343,085 (4,103,643) (109,682) 705,976 4,704,965 774,174 Interest rate gap Interest rate sensitivity 31 December 2020 TL EUR USD Total (for negative shocks) Total (for positive shocks) 1234 144 Interest rate risk (continued) Summary of average interest rates As at 31 December 2020 and 2019, the summary of average interest rates for different assets and liabilities is as follows: 31 December 2020 Assets Cash and cash equivalents Loans and advances to customers Investment securities – Financial assets measured at fair value through other comprehensive income Investment securities – Financial assets measured at amortized cost Liabilities Obligations under repurchase agreements Debt securities issued Funds borrowed 31 December 2019 Euro USD TL Euro USD TL 0.84 6.79 4.50 - 3.09 7.60 6.16 7.12 12.00 23.12 13.40 14.89 0.26 7.07 - 1.43 8.24 6.45 7.12 10.00 25.38 14.80 20.59 1.58 1.37 1.06 2.81 2.79 2.23 17.07 18.18 14.02 0.87 0.99 0.64 2.73 2.98 3.14 10.12 15.47 12.07 Euro USD Other Total 489,188 466,393 1,753,017 284,423 39,003 (446,876) (429,396) (196,945) (1,799,850) 158,957 (170,892) 561,729 647,363 1,210,002 2,718,723 20,122 152,090 (1,749,969) (2,652,426) (831,256) (1,051,133) (974,755) 732,104 27,369 138,158 5 14,847 14 (76,906) (25,582) (757,979) (680,074) 705,261 1,078,286 1,251,914 2,963,019 3,003,151 34,969 191,107 (2,273,751) (3,107,404) (1,028,201) (3,608,962) (1,495,872) 1,266,473 (11,935) (242,651) 25,187 (229,399) Foreign currency risk The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank’s financial assets and liabilities in accordance with the regulation on measurement and evaluation with the standard shock method. An analysis of the Bank’s sensitivity is as follows: Currency Financial risk management (continued) 31 December 2019 Applied Shock (+/x basis points) Gains /Losses Gains (Losses)/ Shareholder’s Equity Gains /Losses Gains (Losses)/ Shareholder’s Equity 500 (400) 200 (200) 200 (200) (278,923) 256,681 17,445 4,736 (120,013) 45,348 (12.08)% 11.11% 0.76% 0.21% (5.20)% 1.96% (121,527) 117,666 (25,233) (3,448) (48,982) 45,423 (6.40)% 6.19% (1.33)% (0.18)% (2.58)% 2.39% 306,765 13.28% 159,641 8.40% (381,491) (16.52)% (195,742) (10.31)% 31 December 2020 Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Trade and other receivables Loans and advances to customers Investment securities Equity accounted investees Other assets Trade and other payables Funds borrowed Obligations under repurchase agreements Debt securities issued Other liabilities Net statement of financial position Derivative financial instruments Net total position 1234 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 145
75. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Foreign currency risk (continued) 31 December 2019 Cash and cash equivalents Reserve deposits at Central Bank Financial assets at fair value through profit or loss Trade and other receivables Loans and advances to customers Investment securities Equity accounted investees Other assets Trade and other payables Funds borrowed Obligations under repurchase agreements Debt securities issued Other liabilities Net statement of financial position Derivative financial instruments Net total position Foreign currency risk (continued) Euro USD Other Total 1,674,849 483,207 2,751,328 1,951 33,008 (2,604,922) (419,611) (571,060) (938,489) 410,261 (392,246) 607,450 476,075 997,512 1,567,391 15,975 28,879 (1,513,792) (1,649,205) (431,120) (903,647) (804,482) 363,249 122,594 6,400 18 (150,444) (59,493) (90,513) (171,438) 179,501 2,404,893 959,282 3,748,840 1,569,342 22,375 61,905 (4,269,158) (2,128,309) (1,002,180) (1,932,649) (565,659) 150,504 18,015 (441,233) 8,063 (415,155) Sensitivity analysis A 10 percent weakening of TL against the foreign currencies on 31 December 2020 and 2019 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. 31 December 2020 Euro USD Other currencies 31 December 2019 Euro USD Other currencies 1234 146 Financial risk management (continued) Equity Profit or loss (1,194) (24,265) 2,519 (22,940) (1,986) (26,741) 2,519 (26,208) Equity Profit or loss 1,801 (44,123) 806 (41,516) 1,801 (46,128) 806 (43,521) A 10 percent strengthening of the TL against the foreign currencies on 31 December 2020 and 2019 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks, such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Bank’s operations and are faced by all business entities. The operational risk items in the Bank are determined in accordance with the definition of operational risk by considering as whole processes, products and departments. The control areas are set for operational risks within the Bank and all operational risks are followed by assigning the risks to these control areas. In this framework, an appropriate monitoring methodology is developed for each control area that covers all operational risks and control frequencies are determined. All the operational risks that are exposed during the operations, the risk levels of the operations and/or new products/ services, together with the losses of the Bank arising from operational risks are regularly monitored by the Risk Management Department of the Bank, and if deemed necessary, the risk levels are updated and periodically reported to the Risk Committee and the Board of Directors. The Bank calculated the value of operational risk in accordance with the fourth section regarding the “Computation of Value of Operational Risk” of the circular, “Regulation on Measurement and Assessment of Capital Adequacy of Banks” Communiqué, using gross profit of the last three years 2019, 2018 and 2017 (“the Basic Indicator Approach). The amount calculated as TL 110,246 as at 31 December 2020 (31 December 2019: TL 91,726) represents the operational risk that the Bank may be exposed to and the amount of minimum capital requirement to eliminate this risk. Value of operational risk amounted to TL 1,378,073 (31 December 2019: TL 1,146,578) and is calculated as 12.5 times the operational risk. Capital management The Bank’s lead regulator, BRSA, sets and monitors capital requirements for the Bank as a whole. Capital adequacy ratio has been calculated in accordance with the “Regulation on Measurement and Assessment of Capital Adequacy of Banks”, “Credit Risk Mitigation Techniques” and “Calculation of Risk weighted Amounts for Securitizations” Communiqués. 1234 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 147
76. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 6. Financial risk management (continued) Capital management (continued) Accounting classification and fair values (continued) Capital adequacy ratio is calculated based on total capital requirements needed for credit risk, market risk and operational risk. Credit risk is calculated by holding risk-weighted assets and non-cash loans subject to risk weights in the relevant legislation and considering risk mitigation techniques; the standard method is used to calculate market risk and the basic indicator approach is used to calculate operational risk. In implementing current capital requirements, the BRSA requires the banks to maintain a prescribed ratio of minimum 8% of total capital. The fair value of financial assets measured at amortized cost is determined based on quoted market prices. If the market prices cannot be obtained, the quoted market prices of other marketable securities are used for which have the same qualification in terms of interest, maturity and other terms. Tier 1 Capital Tier 2 Capital Total regulatory capital Value at credit, market and operational risks Capital ratios (%) Total regulatory capital ratio Total tier 1 capital ratio 2020 2019 2,224,941 84,529 2,309,470 16,047,490 1,848,001 51,834 1,899,835 12,794,532 14.39 13.87 14.85 14.44 Financial assets and liabilities Accounting classification and fair values The determination of fair values of financial assets and financial liabilities is based on quoted market prices or dealer price quotations for financial instruments traded in active markets or valuation techniques. However, the Group expects no significant difference between the fair value and carrying value of the financial instruments below since most of the financial instruments’ maturities are short-term except for the loans and advances to customers and investment securities- financial assets measured at amortised cost. These instruments include cash and cash equivalents, reserve deposits at Central Bank, trade and other receivables, trade and other payables, obligations under repurchase agreements, debt securities issued, funds borrowed and miscellaneous liabilities. For disclosure purpose, valuation technique used for determining the fair value of the loans and advances to customers is net present value model. Assumptions and inputs used in net present value model include benchmark interest rates, credit spreads or other premium used in estimating discount rates. The fair value measurement for fixed rate loans and receivables are calculated by using the discounted cash flow method and has been categorised as a Level 2 fair value based on the inputs to the valuation technique used. 1234 148 The fair value hierarchy for the financial instruments measured at fair value at the end of the reporting period is presented in note 5, Use of estimates and judgements. The table below sets out the Group’s classification of each class of financial assets and liabilities and their fair values. Financial assets at fair value through profit or loss Note 31 December 2020 Cash and cash equivalents Trade and other receivables Reserve deposits at Central Bank Financial assets at fair value through profit or loss Loans and advances to customers Investment securities Trading liabilities Trade and other payables Lease liabilities Obligations under rep. agr. Debt securities issued Funds borrowed Financial assets measured at amortized cost Financial assets measured at FVOCI Total carrying amount Fair value 10 - 1,508,229 70,526 1,251,914 - 1,508,229 70,526 1,251,914 1,508,229 70,526 1,251,914 11 13 12 699,294 - 10,176,417 471,442 5,770,608 699,294 10,176,417 6,242,050 699,294 9,959,059 6,256,717 699,294 13,478,528 5,770,608 19,948,430 19,745,739 143,559 - 205,387 8,194 4,078,171 7,449,428 2,917,314 - 143,559 205,387 8,194 4,078,171 7,449,428 2,917,314 143,559 205,387 8,194 4,078,171 7,449,428 2,917,314 143,559 14,658,494 - 14,802,053 14,802,053 9 11 24 19 21 20 1234 The Bank’s regulatory capital positions are as follows: The objective of valuation technique is to arrive at a fair value determination that reflects the prices of the loans and advances to customers and investment securities at the reporting date that would have been determined by market participants acting at arm’s length. 149
77. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial risk management (continued) 8. Accounting classification and fair values (continued) Cash and cash equivalents Trade and other receivables Reserve deposits at Central Bank Financial assets at fair value through profit or loss Loans and advances to customers Investment securities Trading liabilities Trade and other payables Lease liabilities Obligations under rep. agr. Debt securities issued Funds borrowed 7. Financial assets measured at FVOCI Total carrying amount Fair value 10 - 3,833,184 112,580 959,283 - 3,833,184 112,580 959,283 3,833,184 112,580 959,283 11 13 12 449,007 - 7,568,126 387,142 3,526,948 449,007 7,568,126 3,914,090 449,007 7,748,228 3,951,938 449,007 12,860,315 3,526,948 16,836,270 17,054,220 17,029 - 256,574 8,335 2,261,189 6,099,310 4,940,961 - 17,029 256,574 8,335 2,261,189 6,099,310 4,940,961 17,029 256,574 8,335 2,261,189 6,099,310 4,940,961 17,029 13,566,369 - 13,583,398 13,583,398 11 19 21 20 Business combinations Goodwill arising from Emlak Girişim and Pavo is TL 22,632 (31 December 2019: TL 43,054 (Note 38) ) decreased by TL 20,422 due to subsidiary sales. 8. Corporate banking Investment banking Other banking Total banking Brokerage Other 368,863 (316,430) 52,433 52,433 301,998 (61,151) 240,847 240,847 492,665 (101,370) 391,295 391,295 88,977 (182,338) (93,361) (140,570) (233,931) 1,252,503 (661,289) 591,214 (140,570) 450,644 158,123 (20,016) 138,107 (30,680) 107,427 382,484 (377,771) 4,713 (2,737) 1,976 1,793,110 (1,059,076) 734,034 (173,987) 560,047 (99,709) 99,709 - 1,693,401 (959,367) 734,034 (173,987) 560,047 Segment assets Investments in equity participations Other assets Total assets 4,469,926 4,469,926 5,972,540 5,972,540 9,267,907 387,358 9,655,265 1,085,050 1,085,050 19,710,373 387,358 1,085,050 21,182,781 348,848 4,423 353,271 464,720 269,891 697,770 1,432,381 20,523,941 657,249 1,787,243 22,968,433 (562,668) (580,484) 72,877 (1,070,275) 19,961,273 76,765 1,860,120 21,898,158 Segment liabilities Equity and other liabilities Total liabilities and equity 8,679,354 8,679,354 5,489,398 5,489,398 4,199,403 4,199,403 2,814,626 2,814,626 18,368,155 2,814,626 21,182,781 16,009 337,262 353,271 732,790 699,591 1,432,381 19,116,954 3,851,479 22,968,433 (4,314,901) 3,244,626 (1,070,275) 14,802,053 7,096,105 21,898,158 - - - - Corporate banking Investment banking Other banking Total banking - - Retail banking - - - 101,723 75,631 Brokerage Other 269,297 (282,340) (13,043) (13,043) 358,109 (64,495) 293,614 293,614 170,972 (159,193) 11,779 11,779 198,803 (86,700) 112,103 (62,770) 49,333 997,181 (592,728) 404,453 (62,770) 341,683 92,900 (21,600) 71,300 (15,665) 55,635 638,263 (561,965) 76,298 (22,909) 53,389 1,728,344 (1,176,293) 552,051 (101,344) 450,707 (176,499) 136,455 (40,044) (40,044) 1,551,845 (1,039,838) 512,007 (101,344) 410,663 Segment assets Investments in equity participations Other assets Total assets 2,547,409 2,547,409 5,367,051 5,367,051 9,069,082 387,358 9,456,440 485,178 485,178 16,983,542 387,358 485,178 17,856,078 158,790 3,936 162,726 436,973 254,102 829,354 1,520,429 17,579,305 641,460 1,318,468 19,539,233 (725,343) (580,484) 175,675 (1,130,152) 16,853,962 60,976 1,494,143 18,409,081 Segment liabilities Equity and other liabilities Total liabilities and equity 6,479,363 6,479,363 3,965,575 3,965,575 5,120,015 5,120,015 2,291,125 2,291,125 15,564,953 2,291,125 17,856,078 28,118 134,608 162,726 792,310 728,119 1,520,429 16,385,381 3,153,852 19,539,233 (2,801,983) 1,671,831 (1,130,152) 13,583,398 4,825,683 18,409,081 - - - - - - - - - 272,034 65,250 Operating income Operating expense Income from operations Income tax expense Net income for the year Financial assets measured at amortized cost 9 Retail banking 2020 Financial assets at fair value through profit or loss Note 31 December 2019 Segment reporting (continued) Segment reporting The Group’s main business segments are retail and corporate banking, consisting of loans, customer accounts and other transactions and balances with retail and corporate customers, investment banking, including trading and corporate finance activities and brokerage, containing insurance services. Operating income includes net interest income, fee and commission income, net trading gain, sales income and other income. Operating expense consists of fee and commission expense, personnel expense, depreciation and amortization expense, administrative expense and other expenses. Other segment items Capital investment Depreciation 2019 Operating income Operating expense Income from operations Income tax expense Net income for the year Other segment items Capital investment Depreciation 9. Cash and cash equivalents Cash and balances with Central Bank - Cash on hand - Unrestricted balances with Central Bank Placements at money markets Placements with other banks Cash and cash equivalents Less: Interest income accruals on cash and cash equivalents Cash and cash equivalents in the statement of cash flows 1234 150 Combined Adjustments Combined Adjustments Total Total 31 December 2020 31 December 2019 1,029,937 77,072 952,865 100,051 378,241 1,508,229 817,365 30,047 787,318 1,372,818 1,643,001 3,833,184 (6,010) (4,243) 1,502,219 3,828,941 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 151
78. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Cash and cash equivalents (continued) 10. Explanation for statement cash flows Expected credit losses on reserve deposits at Central Bank (-) The effect of changes in foreign exchange rates on cash and cash equivalents includes the foreign exchange differences resulted from the translations of cash and cash equivalents in foreign currencies into TL at the exchange rates prevailing at the three months periods. Expected credit losses on cash and cash equivalents (-) Balances at 1 January Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Write-offs Provision for the period Recoveries and reversals Balances at the end of the period 10. 31 December 2020 31 December 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total 381 (113) - - 381 (113) 65 316 - - - - 65 316 - 268 - - 268 381 - - 381 Reserve deposits at Central Bank Foreign currency 31 December 2020 31 December 2019 1,251,914 959,283 1,251,914 959,283 According to the regulations of the Central Bank of Turkish Republic (the “Central Bank”), banks are obliged to reserve a portion of certain liability accounts as specified in the related decree. Such mandatory reserves are not available for use in the Group’s day-to-day operations. The Banks operating in Turkey keep reserve deposits for Turkish currency and foreign currency liabilities in TL and USD at the rates of 1-6% and 5-22%, respectively according to their maturity terms as per the Communiqué no. 2005/5 “Reserve Deposits” of the Central Bank of Turkey (31 December 2019: 1-7% for TL and 5-21% for USD). 1234 152 Reserve deposits at Central Bank (continued) 31 December 2020 31 December 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Balances at 1 January Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Write-offs Provision for the period Recoveries and reversals 104 197 - - - 104 197 - 277 (173) - - - 277 (173) Balances at the end of the period 301 - - 301 104 - - 104 11. Financial assets at fair value through profit or loss and trading liabilities 31 December 2020 Interest rate % Financial assets at fair value through profit or loss - Government bonds and treasury bills - Corporate Bonds - Investment funds Derivative assets - Foreign exchange -Swap contracts -Forward contracts -Options Total 10.20 11.96-13.81 - 31 December 2019 Latest maturity Carrying amount 17 August 2022 26 October 2021 - Carrying amount 985 99,580 500,867 3,216 1,315 415,112 97,862 74,404 16,758 6,700 29,364 21,048 1,699 6,617 699,294 449,007 Financial assets at fair value through profit and loss, which are subject to repurchase agreements as at 31 December 2020 are amounting to TL 99,580 (31 December 2019: TL 1,608). 1234 9. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 153
79. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 11. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Financial assets at fair value through profit or loss and trading liabilities (continued) 12. Trading liabilities Derivative liabilities - Foreign exchange -Swap contracts -Forward contracts -Options Total 31 December 2020 31 December 2019 143,559 124,255 13,314 5,990 17,029 7,938 1,663 7,428 143,559 17,029 On the reporting date, the total notional amounts of outstanding derivative financial instruments contracts to which the Group is committed are as follows: 31 December 2020 31 December 2019 Forward foreign exchange contracts – buy (*) Forward foreign exchange contracts – sell (*) 1,212,863 1,209,788 752,269 704,358 Swap foreign exchange contracts – buy Swap foreign exchange contracts – sell 3,859,906 3,942,625 1,853,891 1,850,866 Swap interest rate contracts – buy Swap interest rate contracts – sell 551,000 551,000 10,000 10,000 Option contracts – buy Option contracts – sell 787,955 785,710 1,476,228 1,473,828 Future contracts – buy Future contracts – sell (*) Includes spot and forward transactions There is no derivative transaction for hedging purpose. 1234 154 - - Investment securities 31 December 2020 Financial assets measured at amortized cost - Corporate bonds Financial assets measured at fair value through other comprehensive income - Government bonds - Corporate bonds Interest rate % Latest maturity Carrying amount 7.12-28.76 31 December 2024 471,442 1.95-26.54 3.85-28.76 11 May 2047 25 April 2030 2,685,522 3,085,086 6,242,050 31 December 2019 Financial assets measured at amortized cost - Corporate bonds Financial assets measured at fair value through other comprehensive income - Government bonds - Corporate bonds Interest rate % Latest maturity Carrying amount 7.12-28.76 10 May 2024 387,142 1.95-26.54 3.85-28.76 11 May 2047 1 August 2029 2,254,288 1,272,660 3,914,090 As at 31 December 2020, TL 358,175 and TL 4,661,424 of investment securities are given as collateral for performing transaction at stock exchange and repurchase agreement, respectively (31 December 2019: TL 81,272 and TL 2,532,786, respectively). Expected credit losses on financial assets measured at fair value through other comprehensive income 31 December 2020 31 December 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Balances at 1 January Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Write-offs Provision for the period Recoveries and reversals 477 252 - - - 477 252 - 262 215 - - - - 262 215 - Balances at the end of the period 729 - - 729 477 - - 477 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 155
80. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Investment securities (continued) 13. Expected credit losses on financial assets measured at amortized cost The movement of the non-performing loans is as follows: 31 December 2020 31 December 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Balances at 1 January Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Write-offs Provision for the period Recoveries and reversals 38 26 - - - 38 26 - 48 (10) - - - 48 (10) Balances at the end of the period 64 - - 64 38 - - 38 13. Loans and advances to customers As at 31 December 2020 and 2019, all loans and advances to customers are recognized at amortised cost. 31 December 2020 Gross amount Other lending Corporate loans Consumer loans Impairment allowance Carrying amount 31 December 2019 Gross amount Impairment allowance Carrying amount 10,517,114 5,778,947 4,738,167 (340,697) (72,456) (268,241) 10,176,417 5,706,491 4,469,926 7,811,904 5,086,128 2,725,776 (243,778) (65,411) (178,367) 7,568,126 5,020,717 2,547,409 10,517,114 (340,697) 10,176,417 7,811,904 (243,778) 7,568,126 The credit quality analysis of cash loans is as follows 31 December 2020 31 December 2020 31 December 2019 Opening balance Addition Collection Debt sales and write-offs 316,551 68,907 (66,298) (524) 270,617 137,895 (49,986) (41,975) Balance at the end of the period 318,636 316,551 Expected credit losses on loans and advances to customers Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 9,563,272 - 635,206 - 318,636 7,053,063 - - 442,290 - 316,551 Total Loans 9,563,272 635,206 318,636 7,053,063 442,290 316,551 31 December 2020 31 December 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Balances at 1 January Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Provision for the period Recoveries and reversals Debt sales and write-offs 31,331 1,550 (1,043) (205) 26,707 (7,918) - 19,350 (1,367) 1,181 (4,304) 22,776 (6,485) - 193,097 (183) (138) 4,509 93,740 (31,901) - 243,778 143,223 (46,304) - 21,954 1,295 (1,054) (271) 18,061 (8,654) - 18,885 (1,195) 1,114 (722) 8,576 (7,308) - 147,803 (100) (60) 993 99,595 (19,719) (35,415) 188,642 126,232 (35,681) (35,415) Balances at 31 December 50,422 31,151 259,124 340,697 31,331 19,350 193,097 243,778 Credit quality of loans and advances to customer 31 December 2019 Stage 1 1234 156 Loans and advances to customers (continued) 2020 Stage 1 Stage 2 Stage 3 Total 2019 Total Current Overdue < 30 days Overdue > 30 days 9,122,463 440,809 - 292,873 151,713 190,620 318,636 9,415,336 592,522 509,256 6,994,282 392,359 425,263 Total 9,563,272 635,206 318,636 10,517,114 7,811,904 The collaterals held against loans including accruals are presented below as per the collateral type, up to the outstanding total amount of exposures. 1234 12. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 157
81. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 13. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Loans and advances to customers (continued) 14. Credit quality of loans and advances to customer (continued) 2020 Corporate/Commercial Loans Consumer Loans Credit Cards Total Cash collateral Pledge assets Unsecured 165,253 3,159,094 2,454,600 423,377 4,264,222 50,568 165,253 3,582,471 6,769,390 Total 5,778,947 4,687,599 50,568 10,517,114 2019 Corporate/Commercial Loans Consumer Loans Credit Cards Total Cash collateral Pledge assets Unsecured 117,908 2,529,601 2,438,619 210,347 2,463,547 51,882 117,908 2,739,948 4,954,048 Total 5,086,128 2,673,894 51,882 7,811,904 Financial lease receivables None (31 December 2019: None). 14. Equity accounted investees Carrying amount of equity accounted investees is summarized below: 31 December 2020 31 December 2019 Aktif Bank Sukuk Varlık Kiralama A.Ş.(*) Kazakhstan Ijara Company Jsc. Euroasian Leasing Company Euro Mediterranean Investment Company Haliç Finansal Kiralama Anonim Şirketi Halk Yenilenebilir Enerji A.Ş. Idea Farm Ventures Limited Oniki Teknoloji A.Ş. (formerly known as Epost Dış Ticaret A.Ş.) Dome Zero Inch. Secom Aktif Yatırım A.Ş. Workindo Teknoloji ve İnsan Kaynakları Danışmanlık A.Ş. Kırmızı Elmas Enerji Ve Alt Yapı Yat. A.Ş. - Emlak Gir. Dan.A.Ş.- Hitachi Europe Ltd. İş Ortaklığı 100 19,302 6,752 8,918 6,704 8,095 50 820 18,951 5,424 1,649 100 15,975 6,400 7,020 6,537 11,190 8,095 50 820 4,789 - Equity accounted investees 76,765 60,976 1234 158 (*) Aktif Bank Sukuk Varlık Kiralama A.Ş. (“VKŞ”) engages in the operating activities of issuance of Sukuk. According to IFRS 10, the Bank should have the power, exposure to variable returns and the ability to use such power to affect those returns over the company. On the other hand, the Bank does not have power on VKŞ’s financial statements, exposure or rights to variable returns from its involvement with VKŞ and the ability to use its power over VKŞ to affect the VKŞ’s returns. Thus, VKŞ does not comply with consolidation requirements of IFRS 10 so, it is not consolidated in the financial statements as at 31 December 2020 and 31 December 2019. Equity accounted investees (continued) 2020 2019 Balance at 1 January Share of profit/(loss) of equity-accounted investees Additions Currency translation difference 60,976 (9,719) 22,965 2,543 50,798 (7,192) 14,112 3,258 Balance at 31 December 76,765 60,976 Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group, is as follows: 2020 Aktif Bank Sukuk Varlık Kiralama A.Ş. Kazakhstan Ijara Company Jsc. Euroasian Leasing Company Euro Mediterranean Investment Company Haliç Finansal Kiralama Anonim Şirketi Idea Farm Ventures Limited Oniki Teknoloji A.Ş. (formerly known as Epost Dış Ticaret A.Ş.) Secom Aktif Yatırım A.Ş. Dome zero inch. Workindo Teknoloji ve İnsan Kaynakları Danışmanlık A.Ş. Kırmızı Elmas Enerji Ve Alt Yapı Yat. A.Ş. 2019 Aktif Bank Sukuk Varlık Kiralama A.Ş. Kazakhstan Ijara Company Jsc. Euroasian Leasing Company Euro Mediterranean Investment Company Haliç Finansal Kiralama Anonim Şirketi Halk Yenilenebilir Enerji A.Ş. Idea Farm Ventures Limited Oniki Teknoloji A.Ş. (formerly known as Epost Dış Ticaret A.Ş.) Secom Aktif Yatırım A.Ş. Dome zero inch. Ownership (%) Total assets Total liabilities and Equity Profit / (loss) in the year 100 14.31 36.71 25.53 32 30 99.86 50 1.98 33.33 33.33 2,168,679 207,862 21,052 77,240 28,417 16,447 50 116,965 20,802 - 2,168,650 196,729 20,751 72,034 27,896 16,447 50 141,767 21,781 577 29 11,133 301 5,206 521 (24,802) (979) (577) Ownership (%) Total assets Total liabilities and Equity Profit / (loss) in the year 100 14.31 36.71 25.53 32 50 30 99.86 50 1.98 1,428,525 135,621 20,146 63,661 34,742 5,150 8,095 50 93,137 820 1,428,500 127,100 19,752 61,442 37,110 4,923 8,095 50 110,143 820 25 8,521 394 2,219 (2,368) 227 (17,006) - 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 159
82. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 15. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Tangible assets 16. Buildings Machinery and equipment Furniture Leasehold and fixtures improvements Motor vehicles Construction in progress Right-of-use assets Other fixed assets Total Cost Balance on 1 January 2019 Impact of adopting IFRS 16 Acquisitions through business combinations (Note 38) Additions Transfers Disposals - 164,433 127,201 8,309 60 (519) 38,252 6,649 (326) 6,973 501 190 - 9,199 4,341 1,649 (320) 394,582 18 164,929 (1,899) (201,469) 6,716 1,462 - 7,264 5,159 1,117 (47) 620,703 6,716 132,378 187,308 (202,681) Balance on 31 December 2019 - 299,484 44,575 7,664 14,869 356,161 8,178 13,493 744,424 Balance on 1 January 2020 Additions Transfers Disposals 9,915 339,278 - 299,484 7,688 (1,321) (101,317) 44,575 6,096 7,519 (64) 7,664 5 (736) 14,869 498 (1,182) 356,161 16,417 (345,476) (7,782) 8,178 1,712 (559) 13,493 6,590 (3,519) 744,424 48,921 (115,159) Balance on 31 December 2020 349,193 204,534 58,126 6,933 14,185 19,320 9,331 16,564 678,186 Depreciation and impairment Balance on 1 January 2019 Acquisitions through business combinations Depreciation for the year Disposals Transfers to intangible assets - 67,464 6,377 9,319 (62) - 28,186 6,424 (69) - 3,828 997 - 202 2,567 (82) - - 971 - 3,019 1,321 - 102,699 6,377 21,599 (213) - Balance on 31 December 2019 - 83,098 34,541 4,825 2,687 - 971 4,340 130,462 Balance on 1 January 2020 Depreciation for the year Disposals Transfers to intangible assets 2,788 - 83,098 11,426 (7,960) (783) 34,541 8,065 (5) 783 4,825 120 (115) - 2,687 3,046 (371) - 971 1,217 (99) - 4,340 1,529 (31) - 130,462 28,191 (8,581) - Balance on 31 December 2020 2,788 85,781 43,384 4,830 5,362 - 2,089 5,838 150,072 Carrying amounts Balance on 1 January 2019 Balance on 31 December 2019 Balance on 31 December 2020 346,405 96,969 216,386 118,753 10,066 10,034 14,742 3,145 2,839 2,103 8,997 12,182 8,823 394,582 356,161 19,320 7,207 7,242 4,245 9,153 10,726 518,004 613,962 528,114 Intangible assets Software Computer programme Rights Total 55,646 - 83,043 - 253,470 47,916 392,159 47,916 9,144 - 33,689 - 2,005 - 11,149 33,689 - Balance on 31 December 2019 64,790 116,732 303,391 484,913 Balance on 1 January 2020 Additions: -Purchases -Internally developed Disposals Transfers from property and equipment 64,790 116,732 303,391 484,913 23,793 - 23,935 - 6,786 (45,684) - 30,579 23,935 (45,684) - Balance on 31 December 2020 88,583 140,667 264,493 493,743 Amortisation and impairment Balance on 1 January 2019 Amortisation for the year Disposals Transfers from property and equipment 34,098 3,879 - 37,408 9,937 - 104,165 29,835 - 175,671 43,651 - Balance on 31 December 2019 37,977 47,345 134,000 219,322 Balance on 1 January 2020 Amortisation for the year Disposals Transfers from property and equipment 37,977 5,565 - 47,345 15,887 - 134,000 28,776 (8,047) - 219,322 50,228 (8,047) - Balance on 31 December 2020 43,542 63,232 154,729 261,503 Carrying amounts Balance on 1 January 2019 Balance on 31 December 2019 Balance on 31 December 2020 21,548 26,813 45,041 45,635 69,387 77,435 149,305 169,391 109,764 216,488 265,591 232,240 Cost Balance on 1 January 2019 - Acquisitions through business combinations Additions: -Purchases -Internally developed Disposals Transfers from property and equipment 1234 160 1234 There is no capitalised borrowing cost related to the internally developed software during the year (31 December 2019: None). 161
83. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 17. Other assets NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 21. Debt securities issued 31 December 2020 31 December 2019 99,995 75,246 521,972 151,114 28,203 36,869 161 21,378 203,980 87,196 84,133 20,909 20,529 8,266 2,269 840 25,738 934,938 453,860 2020 2019 Balance at 1 January Addition Disposal 71,999 8,140 (1,115) 71,999 - Balance at 31 December 79,024 71,999 In 2020, the Group issued TL debt securities with maturities between 4 January 2021 and 4 November 2022 (2019: 2 January 2020 and 23 September 2020). The interest rate for TL debt securities is between 8.61%-22.39% (2019: 0.0001%-28.65%). 31 December 2020 31 December 2019 794,538 3,107,404 176,229 132,880 2,128,309 - In 2020, the Group issued USD denominated debt securities with maturities between 4 January 2021 and 8 June 2022 (2019: 2 January 2020 and 8 June 2022). The interest rate for USD debt securities is between 0.50%-4.65% (2019: 2%-7.50%). 4,078,171 2,261,189 31 December 2020 31 December 2019 450,057 88,209 193,506 2,185,542 398,487 607,236 273,316 3,661,922 2,917,314 4,940,961 18. 19. Assets held for sale Obligations under repurchase agreements Obligations under repurchase agreements-TL Obligations under repurchase agreements-FC Money market fundings-TL 20. Funds borrowed Domestic banks – TL Domestic banks – Foreign currency Foreign banks – TL Foreign banks – Foreign currency 1234 162 As at 31 December 2020 and 2019, all debt securities issued are at amortised cost. Debt securities issued-TL Debt securities issued-FC Nominal of debt securities issued Unaccrued interest expense 31 December 2020 31 December 2019 6,421,227 1,028,201 5,097,130 1,002,180 7,449,428 6,099,310 31 December 2020 31 December 2019 8,206,246 (756,818) 6,727,520 (628,210) 7,449,428 6,099,310 In 2020, the Group issued EUR denominated debt securities with maturities between 4 January 2021 and 30 July 2021 (2019: 2 January 2020 and 29 December 2020). The interest rate for EUR debt securities is between 0.40%-2.31% (2019: 0.50%-2%). 22. Taxation General information The Group is subject to taxation in accordance with the tax procedures and the legislation effective in Turkey. In Turkey, effective from 1 January 2006 corporate tax rate is 20% (Corporate tax rate is going to be 22% for 2018, 2019 and 2020). The tax legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts which are calculated and paid are offset against the final corporate tax liability for the year. Corporate tax losses can be carried forward for a maximum period of five years following the year in which the losses were incurred. The tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years. Corporate tax returns are required to be filed by the twenty-fifth day of the fourth month following the year-end balance sheet date and taxes must be paid in one instalment by the end of the fourth month. 1234 Blocked accounts Advances given Prepaid expenses Guarantees given Suspense accounts Fund service fee accrual Income accrual Credit card accounts Others 163
84. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Taxation (continued) 22. Deferred tax As at 31 December 2020 and 2019, the current tax liability is as follows: 31 December 2020 31 December 2019 219,181 (174,713) 139,710 (119,557) 44,468 20,153 Income tax liability Prepaid taxes Income taxes payable For the year ended 31 December 2020 and 2019, the income tax expense recognised in profit or loss and income tax recognised directly in equity are as follows: Recognised in profit or loss 2020 2019 Current tax expense from continuing operations Deferred tax from continuing operations (198,198) 24,211 (119,978) 18,634 Total income tax (173,987) (101,344) Reconciliation of effective tax rate Reconciliation between tax expense and the accounting profit multiplied by the statutory income tax rate of the Group for the year ended 31 December 2020 and 2019 is as follows: 2020 Rate % 2019 (22.00) (0.26) 0.52 1.22 0.73 (19.79) Profit for the year Total income tax expense Profit before income tax Income tax using the domestic corporation tax rate Non-deductible expenses Usage of non-utilized tax losses Tax exempt income Other 560,047 173,987 734,034 (161,487) (12,868) (1,233) 1,601 (22.00) (1.75) (0.17) 0.22 410,663 101,344 512,007 (112,642) (1,306) 2,649 6,241 3,714 Total income tax in the profit or loss (173,987) (23.70) (101,344) 1234 164 Taxation (continued) Recognised deferred tax assets and liabilities The deferred tax included in the statement of financial position and recognised in profit or loss and in equity are as follows: Assets Liabilities Financial assets measured at fair value through other comprehensive income Reserve for employee benefits Tangible assets and intangible assets Tax losses carried forward Expected credit losses Acquisition of subsidiaries Other 4,626 11,490 16,906 38,311 Deferred tax 71,333 31 December 2020 31 December 2019 Net Assets Liabilities Net (9,045) (13,105) - (9,045) 4,626 (1,615) 16,906 38,311 6,573 8,759 462 10,370 27,060 (5,907) (30,743) (442) (5,026) - (5,907) 6,573 (21,984) 462 9,928 (5,026) 27,060 (22,150) 49,183 53,224 (42,118) 11,106 Recognised deferred tax assets and liabilities in the statement of financial position are as follows: 31 December 2020 31 December 2019 63,172 (13,989) 45,677 (34,571) 49,183 11,106 Deferred tax assets Deferred tax liabilities Rate % Movements in temporary differences during the year 2020 Financial assets measured at fair value through other comprehensive income Reserve for employee benefits Tangible assets and intangible assets Tax losses carried forward Expected credit losses Acquisition of subsidiaries Other Opening balance Recognised in profit or loss Recognised in equity Closing balance (5,907) 6,573 (21,984) 462 9,928 (5,026) 27,060 (16,374) (2,633) 20,369 (462) 6,978 5,026 11,307 13,236 686 (56) (9,045) 4,626 (1,615) 16,906 38,311 11,106 24,211 13,866 49,183 1234 22. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 165
85. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 Taxation (continued) 23. Employee termination benefits Movements in temporary differences during the year (continued) 2019 Financial assets measured at fair value through other comprehensive income Reserve for employee benefits Tangible assets and intangible assets Tax losses carried forward Expected credit losses Acquisition of subsidiaries Other Opening balance Recognised in profit or loss Recognised in equity Closing balance 152 2,146 7,244 7,824 6,866 (14,444) 12,531 24,154 3,908 (29,228) (7,362) 3,062 9,418 14,681 (30,213) 519 (152) (5,907) 6,573 (21,984) 462 9,928 (5,026) 27,060 22,319 18,633 (29,846) 11,106 Expiration schedule of carry forward tax losses is as follows: 31 December 2020 31 December 2019 Expiring in 2020 Expiring in 2021 Expiring in 2022 Expiring in 2023 Expiring in 2024 - 388 507 2 894 309 Total - 2,100 31 December 2020 31 December 2019 Provision for possible losses (*) Vacation pay liability Employee termination benefits Other (**) 187,000 4,052 14,125 115,724 133,000 4,477 10,538 100,686 Total 320,901 248,701 23.Provisions (*) As at 31 December 2020, the accompanying consolidated statement of financial position includes a free provision amounting to TL 187,000 provided by the Group management in line with conservatism principle considering the circumstances which may arise from any changes in the economy or market. (**) Includes bonus, lawsuit and other provisions. 1234 166 Provisions (continued) In accordance with existing social legislation in Turkey, the Group is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. In Turkey, such payments are calculated on the basis of 30 days’ pay (limited to a maximum of TL 7.12 and TL 6.38 on 31 December 2020 and 2019, respectively) per year of employment at the rate of pay applicable on the date of retirement or termination. In the consolidated financial statements as at 31 December 2020 and 2019, the Group reflected a liability calculated using the hypothetical method and based upon factors derived using their experience of personnel terminating their services and being eligible to receive retirement pay and discounted by using the current market yield on government bonds on the reporting date. The principal actuarial assumptions used on the reporting dates are as follows: 31 December 2020 31 December 2019 12.40% 9.70% 12.10% 8.20% 2020 2019 Opening balance Interest cost Service cost Payment during the year Actuarial loss/(gain) 10,538 1,130 4,287 (4,947) 3,117 6,499 1,106 2,216 (1,641) 2,358 Balance at the end of the year 14,125 10,538 31 December 2020 31 December 2019 1,015 1,214 1,238 1,216 3,511 1,279 808 961 925 4,362 8,194 8,335 Discount rate Inflation rate The movement in provision for employee termination benefits is as follows: 24. Lease liabilities Due in one year One to two years Two to three years Three to four years Over four years 1234 22. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 167
86. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 25. Other liabilities NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 31 December 2020 31 December 2019 2,414,666 1,292,047 45,755 70,403 43,200 41,273 2,493 6,632 13,702 115,737 68,795 1,507,780 323,865 152,789 229,391 30,174 27,579 25,428 25,015 9,541 4,973 87,883 4,114,703 2,424,418 31 December 2020 31 December 2019 1,193,585 1,193,585 Customer accounts (*) Intermediary payment account Blocked amounts Cash collaterals received Taxes and due payable Suspense accounts Credit card accounts Unearned income Payables to compulsory government funds Income accrual Other (*) The Bank is not entitled to collect deposits. The customer accounts represent the current balances of loan customers. 26. Capital and reserves Number of common shares, TL 1,000 (in full TL), par value (Authorised and issued) As at 31 December 2020 and 2019, all issued shares are fully paid and there is no preference shares assigned to shareholders of the Bank. 26. Capital and reserves (continued) Reserves Fair value reserves As at 31 December 2020, this reserve includes the cumulative net change in the fair value of financial assets measured at fair value through other comprehensive income until the investment is derecognised or impaired. Fair value reserve is as follows: 31 December 2020 31 December 2019 TL FC TL FC Valuation differences (7,686) 25,487 49,087 15,641 Total (7,686) 25,487 49,087 15,641 Other reserves Other reserves consist of legal reserves. The legal reserves consist of first and second legal reserves. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted. Share capital and share premium Actuarial gain/ (loss) As at 31 December 2020 and 2019, the composition of shareholders and their respective percentage of ownership are As per revised IAS 19, all actuarial gain or losses are recognized under other comprehensive income starting from 1 January 2013. summarised as follows: Amount 31 December 2020 % Amount 31 December 2019 % Çalık Holding A.Ş. Çalık Denim Tekstil San. ve Tic. A.Ş. Ahmet Çalık Başak Yönetim Sistemleri A.Ş. Irmak Yönetim Sistemleri A.Ş. 1,186,791 3,597 1,599 799 799 99.43 0.30 0.13 0.07 0.07 1,186,791 3,597 1,599 799 799 99.43 0.30 0.13 0.07 0.07 Special funds refer to the funds allocated from net income or retained earnings due to the tax advantage of local legal regulations. Total paid-in-capital 1,193,585 100.00 1,193,585 100.00 The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Total share capital 1234 168 4,510 4,510 1,198,095 1,198,095 Translation reserves 1234 Restatement effect per IAS 29 Special funds 169
87. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 27. Net interest income NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 2020 2019 Interest income Loans and advances to customers Investment securities Cash and cash equivalents Other 1,438,735 488,432 80,127 1,218 1,265,824 353,649 194,770 3,537 Total interest income 2,008,512 1,817,780 841,879 151,440 90,966 37,480 972,933 183,442 75,114 59,515 1,121,765 1,291,004 886,747 526,776 Interest expense Debt issued Funds borrowed Money market transactions Other Total interest expense Net interest income 28. Net fee and commission income 2019 54,124 33,658 25,597 6,063 42,391 17,272 82,766 27,595 20,266 14,272 14,211 15,701 179,105 174,811 Fees and commission expense Clearance commissions Credit card commissions Financial guarantee contracts issued Other 94,652 14,869 3,349 5,163 65,461 20,522 2,259 13,560 Total fees and commission expense 118,033 101,802 61,072 73,009 Total fees and commission income Net fees and commission income 1234 170 Net trading loss / Income 2020 2019 Foreign exchange gain/(loss) Trading account gain/(loss) Gain/(loss) from derivative financial instruments (2,137) 89,861 (3,359) 14,217 56,804 53,869 Total 84,365 124,890 2020 2019 Revenue from sale of goods Insurance commission income Transaction and other commission income Revenue from cash register POS Other sales income 26,670 136,722 112,663 31,610 82,825 310,287 83,414 75,855 31,820 27,236 Total 390,490 528,612 2020 2019 Cost of merchandises sold Dealer commission and other commission expenses Maintenance expenses Consultancy expenses Cost of cash register POS Rent expenses Other expenses 34,842 2,228 5,436 5,503 3,507 2,267 53,899 43,573 9,912 9,382 8,340 3,706 3,017 Total 53,783 131,829 2020 2019 44,637 65,762 25,261 140,118 36,126 21,072 29,872 135,660 227,188 30. Sales income and cost of services Sales income: Cost of services: 2020 Fees and commission income Intermediary commissions Delivery fee Financial guarantee contracts issued Commitment fee Remittance fee Other 29. 31. Other income Gain on sale of subsidiary Gain on sale of assets Reversal of provision for corporate tax Other Total (*) Consists of gain on sales of from the shares in İstanbul Finans Merkezi, Aktif Halk Enerji Yatırımları A.Ş. and Kumtaşı Solar Enerji Üretim A.Ş.. 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 171
88. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 32. Net impairment on financial assets NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 2020 2019 Stage 3 Stage 1, 2 66,027 32,973 79,876 11,120 Total 99,000 90,996 2020 2019 Wages and salaries Social security premiums Provision for employee benefits Other 151,208 26,942 9,179 44,228 122,665 22,583 3,676 50,829 Total 231,557 199,753 33. 34. Personnel expenses Administrative expenses System usage expenses Publicity expenses Taxes and dues other than on income Maintenance expenses Communication expenses Outsource expenses Consultancy expenses Expenses on vehicles Others Total 35. Other operating expenses Provision for possible losses Marketing expenses Provision expenses Other Total 1234 172 2020 2019 20,254 23,857 26,721 15,702 14,803 16,628 12,164 4,349 47,225 46,391 43,265 27,933 14,724 13,129 12,709 9,054 6,471 45,861 181,703 219,537 2020 2019 54,000 8,848 22 56,910 2,756 296 50,044 119,780 53,096 36. Related parties Parent and ultimate controlling party The Bank is controlled by Çalık Holding A.Ş. which owns 99.43% of ordinary shares (31 December 2019: 99.43%). Compensation of key management personnel of the Group Total salaries and other benefits paid to the Board of Members and top management during the year is TL 44,763 (31 December 2019: TL 38,611). Balances with related parties 31 December 2020 Loans and advances to customers Other liabilities (Customer accounts) Debt securities issued 31 December 2019 Loans and advances to customers Other liabilities (Customer accounts) Debt securities issued Related party balances Total balance Rate (%) 2,622,259 94,164 29,565 10,176,417 2,414,666 7,449,428 25.77 3.90 0.40 Related party balances Total balance Rate (%) 2,684,379 9,832 20,634 7,568,126 1,507,780 6,099,310 35.47 0.65 0.34 Related party balances Total balance Rate (%) 133,585 2,172,513 6.15 Related party balances Total balance Rate (%) 605,042 1,485,218 40.74 2020 2019 295,588 5,524 14,987 370,876 5,165 16,777 Off statement of financial position balances with related parties 31 December 2020 Non-cash loans 31 December 2019 Non-cash loans Transactions with related parties Interest income on loans Fee and commission income Other expenses 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 173
89. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES AKTİF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES (Currency - In thousands of Turkish Lira (“TL”)) (Currency - In thousands of Turkish Lira (“TL”)) 37. Commitments and contingencies NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 31 December 2020 31 December 2019 Letters of guarantee Letters of credit Other guarantees 1,959,356 133,618 79,539 1,036,631 155,662 292,925 Total non-cash loans 2,172,513 1,485,218 Check limits Other commitments 3,293 176,994 2,844 423,182 2,352,800 1,911,244 Total 38. Acquisitions of subsidiaries Business combinations/acquisition of solar energy SPVs According to share transfer agreements dated 15 February 2019, Emlak Girişim Danışmanlığı A.Ş. decided to purchase 100% of shares of solar energy SPVs for a total consideration of TL 41,350. On 30 June 2019, share transfers were finalised and Emlak Girişim Danışmanlığı A.Ş. obtained control by acquiring 100% of shares and voting rights in SPVs. Preacquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values. As of 31 December 2019, the following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 41,350 Total consideration 41,350 1234 174 38. Acquisitions of subsidiaries (continued) Business combinations/acquisition of solar energy SPVs (continued) Identifiable assets acquired and liabilities assumed Recognized values on acquisition Cash & cash equivalents Trade and other receivables Other assets Tangible assets (note 15) Intangible assets (note 16) 777 63,952 7,574 126,001 47,916 Total assets 246,220 Funds borrowed Trade and other payables Other liabilities Deferred tax liability (166,424) (68,391) (126) (12,479) Total liabilities (247,420) Total net identifiable liabilities (1,200) Total consideration transferred Less: Value of net identifiable liabilities 41,350 1,200 Goodwill 42,550 Cash consideration transferred Cash & cash equivalents acquired 41,350 (777) Net cash outflow arising from acquisition 40,573 1234 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 175
90. AKT İF YATIRIM BANKASI ANONİM ŞİRKETİ AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020 (Currency - In thousands of Turkish Lira (“TL”)) 38. Acquisitions of subsidiaries (continued) Measurement of fair values The valuation techniques used for measuring the fair value of material assets acquired were as follows. Assets acquired Valuation technique Tangible assets Cost technique: Depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence. Intangible assets Discounted cash flows: The valuation model considers the present value of the net cash flows expected to be generated by the right of purchasing guarantee of solar energy production arising from Renewable Energy Resources Support Mechanism. The expected net cash flows are discounted using risk-adjusted discount rate of 14%. Significant unobservable inputs are expected revenue growth rate, approximately minus 0.3%, and risk adjusted discount rate of 14%. Disposals of subsidiaries In 2020, the Group sold 18 solar power projects to various parties with a total consideration amounting to 74,702 TL received. The Group recognized 44,637 TL gain from sales of subsidiaries for the year ended 31 December 2020. 39. None. 1234 176 Subsequent events
91. Head Of fice Esentepe Mah. Kore Şehitleri Cad. No:8/1 Şişli, 34394 İstanbul T: +90 (212) 340 80 00 F: +90 (212) 340 88 65 +90 850 724 30 50 www.aktifbank.com.tr