TURKEY Corporate Governance Rating Report Revised Report Brokerage House This Report has been prepared by JCR-ER in compliance to the regulations of Capital Market Board of Turkey 8.91 İŞ YATIRIM MENKUL DEĞERLER A.Ş. AAA(Trk)/a (STABLE) Financial Data 8.83 Corporate Governance Score & Outlook Shareholders AAA(Trk)/a (Stable) 9.04 Public Disclosure & Transparency AAA(Trk)/aa (Stable) Stakeholders Board of Directors Web Total Assets (000 USD) 2,316,544 2,343,855 1,621,751 1,746,684 1,706,961 Total Assets (000 TRY) 4,935,166 4,166,436 3,063,325 2,685,702 2,538,764 Equity (000 TRY) 917,223 853,622 687,521 650,022 597,464 Net Profit (000 TRY) 125,312 137,364 84,893 98,191 114,131 Sales (000 TRY) 344,656 311,928 230,669 209,805 214,829 36.36 44.04 36.80 46.80 53.13 3.01 4.26 3.44 4.31 10.03 9.05 ROAE (%) 15.49 19.96 14.79 18.07 42.63 AAA(Trk)/aa (Stable) Equity / Total Assets (%) 18.59 20.49 22.44 24.20 23.53 Net Working Capital / T. Assets (%) 17.77 18.65 19.80 20.19 20.39 Debt Ratio (%) 81.41 79.51 77.56 75.80 76.47 18.45 36.01 14.06 5.79 71.21 Asset Growth Rate (%) *end of year Overview İş Yatırım Menkul Değerler A.Ş. (referred hereinafter as İş Yatırım or the Company), established by T. İş Bankası A.Ş. in 1996, is an investment company which offers the services of local and international brokerage, investment advisory, portfolio management and corporate finance. Beginning trading on the BIST (Borsa Istanbul) in 2007, 29.32% of the Company’s shares are publicly traded while the remaining shares are owned by T. İş Bankası A.Ş. and its subsidiaries. The Company has 6 subsidiaries, two of which operate abroad and two are traded on the BIST. Mr. A. Erdal ARAL Deputy CEO, Ms. Çağlan Mursaloğlu Head of IR, Mr. Ozan Altan IR Specialist, Mr. Alper Alkan Phone: +90.212.350.28.72 yatirimciiliskileri @isyatirim.com.tr www.isyatirim.com.tr www.isinvestment.com Investor Relations 2009* ROAA (%) İş Kuleleri-2 Kat: 12 4. Levent 34330 Beşiktaş/ISTANBUL Mr. İlhami KOÇ CEO 2010* Net Profit Margin (%) IŞ YATIRIM MENKUL DEGERLER A.Ş. Chairman 2011* 8.51 Company Information Address 2012* AAA(Trk)/a (Stable) Analyst: Ceyhun KIR/ +90 212 352 56 73 ceyhunk@jcrer.com.tr Analyst: Gökhan İYİGÜN/ +90 212 352 56 73 gokhani@jcrer.com.tr Trade Name 2013* The Company, having a widespread service network of 11 branches, 5 representative offices and T. İş Bankası A.Ş. branches utilized as its agencies, employs a staff force of 406. As a leading institution in terms of both market share and transaction volume for years, İş Yatırım is the market’s leader with market share of 8.4% in terms of transaction volume of equity market as of the end of 2013. Board of Directors consists of 9 members, two of them are independent, and two of them women and 7 of the members are determined by İşbank and elected from among the experienced managers working in the relevant capital market departments of the Bank. The audit, Risk and Corporate Governance committees exist within scope of the board. Strengths Constraints Board members and top managers were provided assurance with liability insurance Absence of internal regulations to broaden the exercise of minority rights beyond Well organized the Investors Relation Department and sufficient activities Utilization of Company A group share privilege to determine majority of the Board members the current legislation, Lack of disclosure of senior management’s remunerations per person website as an effective Absence of an objective performance evaluation method for the Board members transparency platform in Turkish and English Exiting the sufficient risk management system High qualifications of the Board members and senior management in terms of education and track record Publication Date: September 05, 2014 “Global Knowledge supported by Local Experience” Copyright © 2011 by JCR Eurasia Rating. 19 Mayıs Mah. 19 Mayıs Cad. Nova Baran Plaza No:4 Kat:12 34360 Şişli /İST Telephone: +90.212.352.56.73 Fax: +90 (212) 352.56.75 Reproduction is prohibited except by permission. All rights reserved. All of the information has been obtained from sources JCR ER believes are reliable. However, JCR-ER does not guaranty the truth, accuracy, adequacy of this information. A JCR ER Rating is an objective and independent opinion as to the creditworthiness of a security and issuer, not a recommendation to buy, hold, sell any security and to issue a loan. This rating report has been composed within the frameworks of SPK (Capital Markets Board of Turkey) regulations and internationally accepted rating principles and guidelines. http://www.jcrer.com.tr BROKERAGE HOUSE In compliance with changes in the Corporate Governance Ratings Methodology was made by CMB, JCR Eurasia Rating has revised and announced the compliance notes and outlooks of Is Yatirim in March 3, 2014. Details of the adjusted notes can be seen in the table below. 1- Executive Summary and Rating Rationale This revised report was prepared in light of JCR Eurasia Rating’s original methodological procedures in accordance with the Corporate Governance Principles (the code) set by the Capital Market Board (CMB) and states the Company’s level of compliance with corporate governance principles as of September 2014. March 03, 2014 Numerical Convergence Notch Degree Outlook Value Level AAA(Trk) a Shareholders 8.54 Stable Distinctive Excellent Public Disclosures AAA(Trk) aa 9.04 Stable and Transparency Distinctive Superior AAA(Trk) a Stakeholders 8.51 Stable Distinctive Excellent AAA(Trk) a Board of Directors 8.96 Stable Distinctive Excellent AAA(Trk) a Overall 8.81 Stable Distinctive Excellent Fields The Capital Market Board’s Corporate Governance Principles were first published in 2003. Important revisions and changes were made at the beginning of 2012 and again in January 3, 2014, as detailed in the Communiqué II-17.1 (accessible on www.spk.gov.tr) An additional important change regarding the method of calculation of compliance notes was made in the beginning of 2014. Based on the recent CMB legislation, the new scoring methodology consists of two stages in which companies given a base and full score. In the new system, companies are first assigned a base score of a maximum of 85 points determining their compliance with the rules and practices outlined in the Code. In the second stage, an additional 15 points may be awarded depending on the efficient implementation and value creation achieved through practices exceeding those in the articles. Practices not stated in the Code but determined by JCR Eurasia Rating as best governance practices are also considered as criteria in assigning the additional points. Through the analysis of JCR ER’s original methodology, the general compliance level of the Company with corporate governance principles as of September 2014 and the corresponding levels within the JCR ER’s notation have been determined as follows; Numerical value is 8.91, Convergence Level AAA(Trk) representing the category of “Distinctive Compliance”, Notch degree (a) representing the category of “Excellent”, Outlook (Stable) The code consists of four main section; Shareholders, Public Disclosure and Transparency, Stakeholders and Board of Directors. These main sections’ coefficients, which were determined by the CMB, have been recently changed as below; Distinct levels of 4 main categories regarding compliance with the corporate governance principles are exhibited in the following table. Overall score has been assigned based on weightings assessed for these 4 categories by CMB regulations. Shareholders: 25% Public Disclosure and Transparency: 25% Stakeholders: 15% Board of Directors: 35% September 05, 2014 These coefficients were 25%, 35%, 15% and 25%, respectively, in the previous reports. Numerical Convergence Notch Degree Outlook Value Level AAA(Trk) a Shareholders 8.83 Stable Distinctive Excellent Public Disclosures AAA(Trk) aa 9.04 Stable and Transparency Distinctive Superior AAA(Trk) a Stakeholders 8.51 Stable Distinctive Excellent AAA(Trk) aa Board of Directors 9.05 Stable Distinctive Superior AAA(Trk) a Overall 8.91 Stable Distinctive Excellent Fields Subject to the preservation of integrity of regulations by the CMB and compliance with the limitations thereof, this report also covers such topics as implementations regarding “Outlook” determinations and “Financial Efficiency” analyses all of which exist in JCR Eurasia Rating’s original methodological structure. Findings and assessments within the content of the report are based on information and documents disclosed by the Company to the public through various channels and also submitted to JCR Eurasia in writing and verbally, as well as reports and statistics by the CMB and Central Registry Agency (CRA). İş Yatırım Menkul Değerler A. Ş. JCR ER’s notation system may be viewed at: http://www.jcrer.com.tr/Administrator/files/436_kyder_notation.pdf 2 NON-FINANCIAL According to the current shareholder structure disclosed on the Company’s website, T. İş Bankası A.Ş. is the major shareholder, holding a 65.7% share. Additionally, T. İş Bankası A.Ş. holds 150,000 shares with the privilege of determining the majority of the Board members. Of the other remaining shares, İş Factoring owns 2.4%, İş Leasing 2.4% and 0.2% Cam İş Yatırım Holding, while 29.3% are publicly traded. The Company’s consolidated subsidiaries are given in Table: 2 in the Appendices. Shares of İş Girişim and İş Yatırım Ortaklığı, which offer financial services locally and internationally, are publicly traded while two other companies are located outside Turkey. The Company has 11 branches in the cities of Istanbul, Ankara, Izmir, Bursa, Adana and Antalya and 5 representative offices in Kazakhstan, Istanbul, Mersin, Kırıkkale, and Diyarbakır. In addition, more than 1,300 İşbank branches in Turkey also act as agencies of İş Yatırım. The Company has maintained an uninterrupted leading position in the stock market since 2003 and in the derivatives market since its establishment in 2005 through its widespread service network. A workforce of 406 was employed as of July, 2014. Corporate Governance Overall Results İş Yatırım’s Board consists of 9 members. There are two independent and two women members in the Board. Currently, 7 of the members are determined by İşbank and elected from among the experienced managers working in the relevant capital market departments of the Bank. Detailed information on the Board is presented in Table: 3. The General Manager and 7 Assistant General Managers compose the top level management of the Company. 8,91 AAA (Trk)/a Stable Outlook (Corporate Governance): 3. Shareholders JCR-ER believes that İş Yatırım will maintain its high level of compliance during the 12 month monitoring period following the publication of the revised report. For this reason, the Company’ Outlook has been determined as “Stable” for this rating period. The Company’s Shareholder score has been raised to 8.83 from 8.54. Appointment of Ozan Altan, who is manager in Investors Relation Department, a member of the corporate governance Committee and effective activities performed by this department have been effective in this increase. The company’s level in this section and their corresponding notes are outlined below; 2. Company Overview Numerical value is 8.83, Convergence Level AAA(Trk) representing the category of “Distinctive Compliance”, Notch degree (a) representing the category of “Excellent”, Outlook (Stable) İş Yatırım was established in 1996 by the major shareholder T. İş Bankası A.Ş. to offer services of intermediation in local and international financial markets. The company offers the services of brokerage of securities traded in secondary markets, investment advisory, portfolio management and corporate finance. The Company, breaking new ground in the capital markets following its establishment, offered nearly 30% of its shares in 2007 to the public and its shares began trading on the Borsa Istanbul (BIST-). Currently, 29.3% of the Company’s shares are publicly traded. With regard to 1H2014 financial statements, the Company, with an asset size of TL4,972 bn, had equity in the amount of TL908 mn and a net profit of TL57 mn. Key balance sheet items and ratios can be found in first page. İş Yatırım also has the largest amount of paid-in capital at TL332 mn. İş Yatırım Menkul Değerler A. Ş. 3 NON-FINANCIAL Shareholders Results Outlook 8,83 JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Shareholders field during the following monitoring period. For this reason, the Outlook for this section has been determined as “Stable”. Stable AAA (Trk)/a 4. Public Disclosure and Transparency Activities carried out during the monitoring period in the Shareholder field: In this important section focusing on the disclosure of information and documents needed by shareholders and stakeholders while protecting trade secrets. The Company’s level in this field and their corresponding notes are outlined below; Mr. Ozan Altan who has three licenses from CMB and is manager of the investor relations department was appointed as the member of corporate governance committee in 05.03.2014. A “road show” was organized by the Investor Relations Department on April 10-11, 2014 in London and attended by foreign institutional investors. Additionally, the department held a conference in Istanbul for portfolio management companies. The 2013 general meeting was held on March 25, 2014 at İş Kuleleri Kule-1 4.Levent Beşiktaş, İSTANBUL. The meeting was observed by a JCR-ER analyst and the works undertaken by the Company were closely observed prior, during and following the meeting. Pre-meeting preparations, announcements and invitations were carried out by the Investor Relations Department according to the Code. Within the framework of democratic principles, all shareholders were treated equally, the Company’s 2013 activities were outlined, all shareholders were given the right to address each agenda item and voting was done by an open show of hands during the meeting. Following the meeting, the relevant documents were disclosed to investors on the Company’s internet site. Shareholders, stakeholders and prospective investors were regularly informed by the investor relations department via the web site, e-mail, teleconference, PDP (public disclosure platform) and e-governance platform of Central Registry Agency. Additionally, the managers of the department responded questions and inquiries received by telephone from the shareholders and stakeholders. No complaints were made by the shareholders in the observation period. No shareholders have canceled any agreement or opened any lawsuit against the Company. No findings of discrimination against any shareholder were found. The company realized a net profit of TL70.813.280 in 2013 and the decision to distribute TL 20.825.000 as the cash and TL 21.500.000 as the stock dividend of this to shareholders was made in the general meeting on March 25, 2014. The dividend distribution table was disclosed to the public via the company’s website and the PDP following the general meeting. İş Yatırım Menkul Değerler A. Ş. Numerical value of 9.04, Convergence Level AAA(Trk) representing the category of “Distinctive Compliance”, Notch degree (aa) representing the category of “Superior”, Outlook (Stable) Public Disclosures & Transparency Results 9,04 AAA (Trk)/aa Stable Activities carried out during the monitoring period in this field: İş Yatırım disclosed 75 notifications to the Public Disclosure Platform (PDP) in the monitoring period. Following these disclosures, the Company was not delisted on the BIST and no additional information was requested. The Company’s quarterly financial statements were released to the public within the period specified by CMB legislation and posted on its internet site. The company’s website is kept up to date in Turkish and English. A link to the PDP is included. Significant improvements in the Company’s organizational structure and operations are published in a timely manner. The company publishes quarterly activity reports that include compliance report with the code. The 2013 annual report was also published with high compliance level with the code. 4 NON-FINANCIAL in employee rights was observed during these developments. Four lawsuits were filed by the customers against the Company. These are currently ongoing. No lawsuits were filed against the Company by suppliers. Within the scope of social responsibility, the Company granted the amount of TL1.500 out of the 2013 profit to Türk Eğitim Vakfı. The Company’s 2013 financial tables were audited by the independent audit firm Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş – KPMG. There is no conflict interest with the audit firm. Outlook JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Public Disclosure and Transparency field during the upcoming monitoring period. For this reason, the Outlook for this section has been determined as “Stable”. Outlook JCR-ER is of the opinion that during the following monitoring period the Company will maintain its level of compliance with the code in the Stakeholders field. For this reason, the Outlook for this section has been determined as “Stable”. 5. Stakeholders With the exception of upper-level managers, a company’s employees, customers, suppliers, creditors, public authorities and the public in general are considered stakeholders of an institution. The rules and practices in this main section primarily aim to secure the rights of stakeholders, facilitate the exercise of their rights and thus to maximize their contributions to the institution. The Company’s level in this field and their corresponding notes are outlined below; 6. Board of Directors This section consists of the board functions, qualifications, duties, powers and responsibilities of its members and upperlevel managers, and the rules and practices related with established systems for effective supervision and control. The company’s compliance in the field of Board of Directors was increased to 9.05 from 8.96. Provided assurance with liability insurance to board members and top managers have been effective in this increase. The company’s level in this field and their corresponding notes are outlined below: Numerical value of 8.51, Convergence Level AAA(Trk) representing the category of “Distinctive Compliance”, Notch degree (a) representing the category of “Excellent”, Outlook (Stable) Numerical value is 9.05, Convergence Level AAA(Trk) representing the category of “Distinctive Compliance”, Notch degree (aa) representing the category of “Superior”, Outlook (Stable) Stakeholders Results 8,51 AAA(Trk)/a Stable Board of Directors Results Activities carried out during the monitoring period in the Stakeholders field: 9,05 AAA(Trk)/aa One lawsuit that was opened by an employee was concluded against the Company by an employee in the monitoring period. İş Yatırım hired 54 new employees, 60 employees left the company and 7 employees retired. No loss İş Yatırım Menkul Değerler A. Ş. Stable 5 NON-FINANCIAL Activities carried out during the monitoring period in this field: Under these licenses, Iş Yatırım carries on the following activities; Board members and top managers were provided assurance with liability insurance by the Company. At the general meeting held on March 25, 2014 the shareholders approved the 2013 activities of the Board of Directors. Mr. Sezai Sevgin was elected as the new member to the Board replacing Mr. Ahmet Baş in the general meeting. Mr. Mete Uğurlu was appointed as a board member replacing Mr. Tolga Achim MÜLLER by the Board of Directors until next general meeting in 17.07.2014. These changes were disclosed in a timely manner to the PDP. Mr. Rıfat Cenk Aksoy was appointed as new the Assistant General Manager in July 02, 2013. Seven Board of Director meetings were held in year to date. All Board of Director Meeting preparations, applications and follow-ups were handled in accordance to Corporate Governance principles. The Corporate Governance Committee held 5, the Audit committee 7 and the Risk committee 7 meetings in the monitoring period. Recommendations made in these meetings were presented to the Board. Public offering intermediation in primary markets, Repurchase and reverse repurchase of capital market instruments, Portfolio management (individual and institutional investors, mutual funds, etc.), Investment advisory and M&A consultancy Credit and derivative trading intermediation. Leveraged FX Trading - Market Maker Iş Yatırım’s market share amongst brokerage houses in terms of asset size rose to 29.40% at the end of 2013 from 11.75% in 2004. Outlook JCR-ER is of the opinion that the Company will maintain its level of compliance with Code in the Board of Directors field during the following monitoring period. For this reason, the Outlook for this section has been determined as “Stable”. Iş Yatırım’s market shares in terms of trading volume are shown in the table below, which indicate its extent and effectiveness across most of the transaction types. 7. Financial Efficiency Market Shares İş Yatırım which is the biggest brokerage company in Turkey currently has the following authorizations, obtained from the CMB. (In terms of transaction volume) Markets and Activities Authorization Licenses Obtained from CMB 2009 2010 2011 2012 2013 Equity Market Volume 7.9% 6.9% 7.3% 7.6% 8.4% Fixed Income Securities Trading Volume* 12.9% 20.0% 10.2% 12.4% 6.8% Brokerage Turkish Derivatives Exchange Trading Volume 13.2% 11.5% 12.6% 14.8% 13.5% Public Offering Intermediation Eurobond Trading Volume 0.9% 0.3% 0.2% 0.2% 0.3% Repo - Reverse Repo *Among Brokerage Houses Portfolio Management With an asset size of TRY4,94 bn according to the end of 2013 data, Iş Yatırım is Turkey’s largest brokerage house. Investment consultancy Credit Operations Permit Derivatives Trading Intermediation TAASA (Overseas) – (VOBAŞ) Leveraged FX Trading-Market Maker İş Yatırım Menkul Değerler A. Ş. 6 NON-FINANCIAL 8. Appendix (3 Tables) The Company’s profitability trend has followed a generally fluctuating yet downward course, despite being above general reference values, in connection with Turkey’s conditions. The Company’s equity level continues to increase at a level necessary to meet the required funding needs for the continuance and development of İş Yatırım’s compliance with corporate governance principles. As a result, high levels of İş Yatırım’s equity capital structure, asset quality and internal profit generation capacity are maintained and these contribute to the sustainability and improvement of compliance level with the corporate governance principles. İş Yatırım Menkul Değerler A. Ş. 7 BROKERAGE HOUSE Table:1 İŞ YATIRIM MENKUL DEĞERLER A.Ş. SHAREHOLDING STRUCTURE Years 2010 2011 2012 TL (000) 200.000 260.000 USD (000) 129.366 137.646 Shareholders Share Share 2013 August,2014 286.000 310.500 332.000 161.318 160.051 153,000 Share Share Share İş Bankası A.Ş. (A Group) 0,08% 0,08% 0,05% 0,05% 0,05% İş Bankası A.Ş. (B Group) 65,58% 65,57% 65,60% 65,60% 65,60% Publicly Traded (B Group) 29,31% 29,31% 29,32% 29,32% 29,32% 5,04% 5,04% 5,03% 5,03% 5,03% 100,00% 100,00% 100,00% 100,00% 100,00% Other (B Group) Total İş Yatırım Menkul Değerler A. Ş. 8 BROKERAGE HOUSE Table: 2 AFFILIATES AND SUBSIDIARIES as of September 2014 Head Quarters Fields Of Activities Interest Share % Acquisition Date Efes Varlık Yönetim A.Ş. Turkey Asset Management 74 14.02.2011 İŞ Girişim Sermayesi Yat. Ortaklığı A.Ş. Turkey Private equity 29 23.10.2000 İş Portföy Yönetimi A.Ş. Turkey Portfolio management 70 04.10.2000 İş Yatırım Ortaklığı A.Ş. Turkey Investment trust 28.9 03.06.2003 United Kingdom Securities brokerage 100 29.09.2005 Dubai Securities brokerage 100 01.07.2011 Consolidated Subsidiaries Maxis Securities Ltd. Is Investments Gulf Ltd. İş Yatırım Menkul Değerler A. Ş. 9 BROKERAGE HOUSE Table: 3 BOARD OF DIRECTORS Name Task Profession Election Date Experience (Years) Education Executive/Non Independent/Not Executive Independent Committee Membership İlhami KOÇ Chairman Banker 30.01.2013 28 Graduate Non Executive Not Independent Feray DEMİR ViceBanker Chairwoman 26.04.2010 26 Graduate Non Executive Not Independent Volkan KUBLAY Member Banker 16.08.2012 14 Graduate Non Executive Not Independent Sezai SEVGİN Member Banker 25.03.2014 24 Graduate Non Executive Not Independent Işıl DADAYLI Member Banker 01.04.2013 23 Graduate Non Executive Not Independent Mete UĞURLU Member Insurance 17.07.2014 36 Graduate Non Executive Not Independent Özgür TEMEL Member Banker 30.04.2013 20 Master Degree Non Executive Not Independent Abdullah AKYÜZ Member Manager 26.10.2011 28 Master Degree Non Executive Independent Audit Committees’ member Behzat YILDIRIMER Member Banker 09.05.2012 31 Graduate Non Executive Independent Audit, Corporate Governance and Risk Committees’ chairman İş Yatırım Menkul Değerler A. Ş. 10 Corporate Governance and Risk committees’ member
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