FİBABANKA A.Ş. US$300,000,000 6.000% Notes due 2023 Issue price: 100.00% Fibabanka A.Ş., a banking institution organised as a joint stock company under the laws of the Republic of Turkey ( Turkey ) and registered with the İstanbul Trade Registry under number 272902 (the Bank or the Issuer ), is issuing US$300,000,000 6.000% Notes due 2023 (the Notes ). The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), or the securities laws of any State or other jurisdiction of the United States and are being offered for sale only in offshore transactions to persons who are not U.S. persons ( U.S. persons ) as defined in, and in reliance upon, Regulation S under the Securities Act ( Regulation S ). For a description of certain restrictions on sale and transfer of investments in the Notes, see Subscription and Sale herein. AN INVESTMENT IN THE NOTES INVOLVES CERTAIN RISKS. SEE RISK FACTORS HEREIN. The Notes will bear interest from (and including) 25 January 2018 (the Issue Date ) to (but excluding) 25 January 2023 (the Maturity Date ) at a fixed rate of 6.000% per annum. Interest will be payable semi-annually in arrear in equal instalments on the 25th day of January and July in each year (each an Interest Payment Date ) up to (and including) the Maturity Date; provided that if any such date is not a Payment Day (as defined in Condition 7.4), then such payment will be made on the next Payment Day but without any further interest or other payment being made in respect of such delay. Principal of the Notes is scheduled to be repaid on the Maturity Date but may be repaid earlier under certain circumstances described herein. For a more detailed description of the Notes, see Terms and Conditions of the Notes herein. Reference to a Condition herein is to the corresponding clause of such Terms and Conditions of the Notes. This prospectus (this Prospectus ) has been approved by the Central Bank of Ireland, as competent authority under Directive 2003/71/EC as amended (including the amendments made by Directive 2010/73/EU) (the Prospectus Directive ). The Central Bank of Ireland only approves this Prospectus as meeting the requirements imposed under Irish and European Union ( EU ) law pursuant to the Prospectus Directive. Such approval relates only to Notes that are to be admitted to trading on the regulated market (the Main Securities Market ) of the Irish Stock Exchange plc (the Irish Stock Exchange ) or on another regulated market for the purposes of Directive 2014/65/EU (as amended, MiFID II ) and/or that are to be offered to the public in any member state (a Member State ) of the European Economic Area (the EEA ). Application has been made to the Irish Stock Exchange for the Notes to be admitted to its official list (the Official List ) and to trading on the Main Securities Market. References in this Prospectus to the Notes being listed (and all related references) shall mean that the Notes have been admitted to the Official List and have been admitted to trading on the Main Securities Market. The Main Securities Market is a regulated market for the purposes of MiFID II. Application has been made to the Capital Markets Board (the CMB ) of Turkey, in its capacity as competent authority under Law No. 6362 (the Capital Markets Law ) of Turkey relating to capital markets, for its approval of the issuance and sale of the Notes by the Issuer outside of Turkey. The Notes cannot be sold before the necessary approvals are obtained from the CMB. The CMB-approved issuance certificate dated 9 October 2017 and the CMB approval letter relating to the issuance of the Notes dated 10 October 2017 have been obtained and, to the extent (and in the form) required by applicable law, a written approval of the CMB relating to the Notes will also be obtained on or before the Issue Date. Under current Turkish tax law, withholding tax at the rate of 0% applies to interest on the Notes. See Taxation - Certain Turkish Tax Considerations. The Notes are expected to be rated BB- by Fitch Ratings Ltd. ( Fitch ) on the Issue Date. The Bank has also been rated by Fitch, as set out on page 93 of this Prospectus. Fitch is established in the EU and is registered under Regulation (EC) No. 1060/2009, as amended (the CRA Regulation ). As such, Fitch is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website (at http://www.esma.europa.eu/page/list-registered-and-certified-cras) in accordance with the CRA Regulation. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. The Notes are being offered in reliance upon Regulation S by each of Arab Banking Corporation B.S.C., Citigroup Global Markets Limited, ICBC Standard Bank Plc and Standard Chartered Bank (each a Joint Bookrunner and, collectively, the Joint Bookrunners ), subject to their acceptance and right to reject orders in whole or in part. It is expected that delivery of the Notes will be made in book-entry form only through the facilities of Euroclear Bank SA/NV ( Euroclear ) and/or Clearstream Banking S.A. ( Clearstream, Luxembourg and, with Euroclear, the Clearing Systems ), against payment therefor in immediately available funds on the Issue Date. Joint Bookrunners Bank ABC Citigroup ICBC Standard Bank Standard Chartered Bank The date of this Prospectus is 23 January 2018.
This Prospectus constitutes a prospectus for the purposes of the Prospectus Directive. This Prospectus is to be read in conjunction with the financial statements that are incorporated herein by reference (see Documents Incorporated by Reference ). This Prospectus shall be read and construed on the basis that such documents (or the applicable portions thereof) are incorporated into, and form part of, this Prospectus. The Issuer accepts responsibility for the information contained in (including incorporated by reference into) this Prospectus. To the best of the knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case), the information contained in (including incorporated by reference into) this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Neither this Prospectus nor any other information supplied by (or on behalf of) the Issuer in connection with the Notes: (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer or any of the Joint Bookrunners that any recipient of this Prospectus or any other information supplied in connection with the Notes should invest in the Notes. Each investor contemplating investing in the Notes should: (i) determine for itself the relevance of the information contained in (including incorporated by reference into) this Prospectus, (ii) make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer based upon such investigation as it deems necessary and (iii) make its own determination of the suitability of any such investment in light of its own circumstances, with particular reference to its own investment objectives and experience, and any other factors that may be relevant to it in connection with such investment, in each case based upon such investigation as it deems necessary. Neither this Prospectus nor, except to the extent explicitly stated therein, any such other information constitutes an offer or invitation by or on behalf of the Issuer or any of the Joint Bookrunners to any person to subscribe for or purchase any Notes (or beneficial interests therein). This Prospectus is intended only to provide information to assist potential investors in deciding whether or not to subscribe for or purchase Notes (or beneficial interests therein) in accordance with the terms and conditions specified by the Joint Bookrunners. The Notes (and beneficial interests therein) may not be offered or sold, directly or indirectly, and this Prospectus may not be circulated, in any jurisdiction except in accordance with legal requirements applicable to such jurisdiction. Neither the delivery of this Prospectus nor the offering, sale or delivery of the Notes (or beneficial interests therein) shall in any circumstances imply that the information contained herein is correct at any time subsequent to the date hereof (or, if such information is stated to be as of an earlier date, subsequent to such earlier date) or that any other information supplied in connection with the Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Joint Bookrunners expressly do not undertake to review the financial condition or affairs of the Issuer during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. The distribution of this Prospectus and/or the offer or sale of the Notes (or beneficial interests therein) might be restricted by law in certain jurisdictions. The Issuer and the Joint Bookrunners do not represent that this Prospectus may be lawfully distributed, or that the Notes (or beneficial interests therein) may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer that is intended to permit a public offering of the Notes (or beneficial interests therein) or distribution of this Prospectus, any advertisement or other offering material in any jurisdiction in which action for that purpose is required. Accordingly: (a) no Notes (or beneficial interests therein) may be offered or sold, directly or indirectly, and (b) neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction except, in each case, under circumstances that will result in compliance with all applicable laws. Persons into whose possession this Prospectus or any Notes (or beneficial interests therein) come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus, any advertisement or other offering material and the offering and sale of Notes (or beneficial interests therein). In particular, there are restrictions on the distribution of this Prospectus and the offer and/or sale of Notes (or beneficial interests therein) in (inter alia) the United States, Turkey and the United Kingdom. For a description of certain restrictions on offers, sales and deliveries of the Notes (or beneficial interests therein) and on the distribution of this Prospectus and other offering materials relating to the Notes, see Subscription and Sale. No person has been authorised by the Issuer to give any information or make any representation not contained in or not consistent with this Prospectus or any other information supplied by (or with the consent of) the Issuer in 2
connection with the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer or any of the Joint Bookrunners. In making an investment decision, investors must rely upon their own examination of the Issuer and the terms of the Notes, including the merits and risks involved. The Notes have not been approved or disapproved by the United States Securities and Exchange Commission (the SEC ) or any other securities commission or other regulatory authority in the United States and, other than the approvals of the Banking Regulation and Supervision Agency (the BRSA ) and the CMB (i.e., the Approvals described below) and the Central Bank of Ireland described herein, have not been approved or disapproved by any other securities commission or other regulatory authority in Turkey or any other jurisdiction, nor have the foregoing authorities (other than the Central Bank of Ireland to the extent described herein) approved this Prospectus or confirmed the accuracy or determined the adequacy of the information contained in this Prospectus. Any representation to the contrary might be unlawful. No representation or warranty, express or implied, is made by the Joint Bookrunners as to the accuracy or completeness of the information set forth in this Prospectus, and nothing contained in this Prospectus is, or should be relied upon as, a promise or representation, whether as to the past or the future, by the Joint Bookrunners. None of the Joint Bookrunners assumes any responsibility for the accuracy or completeness of the information set forth in this Prospectus. Each potential investor contemplating making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Issuer and its own determination of the suitability of any such investment in light of its own circumstances, with particular reference to its own investment objectives and experience, and any other factors that might be relevant to it in connection with such investment. The Notes might not be suitable investments for all investors. In particular, each potential investor should consider, either on its own or with the help of its financial and other professional advisers, whether it: (a) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in (including incorporated by reference into) this Prospectus or any supplement hereto, (b) has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular circumstances, an investment in the Notes and the impact such investment will have on its overall investment portfolio, (c) has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal and interest payments is different from the potential investor s currency, (d) understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets, and (e) is able to evaluate possible scenarios for economic, interest rate and other factors that might affect its investment in the Notes and its ability to bear the applicable risks. Legal investment considerations might restrict certain investments. The investment activities of certain investors are subject to applicable laws and/or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent: (a) Notes (or beneficial interests therein) are legal investments for it, (b) Notes (or beneficial interests therein) can be used by it as collateral for various types of borrowing and (c) other restrictions apply to its purchase or pledge of any Notes (or beneficial interests therein). Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of their investments in the Notes under any applicable risk-based capital or other rules. Each potential investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of an investment in the Notes. None of the Issuer, the Joint Bookrunners or any of their respective counsel or other representatives is making any representation to any offeree or purchaser of the Notes (or beneficial interests therein) regarding the legality of any investment by such offeree or purchaser under any applicable laws. Any investor in the Notes should ensure that it is able to bear the economic risk of an investment in the Notes for an indefinite period of time. 3
GENERAL INFORMATION In this Prospectus, Bank means Fibabanka A.Ş. on a stand-alone basis and Group means the Bank and its subsidiary. The Issuer has obtained the CMB approval letter (dated 10 October 2017 (No. 29833736-105.02.02-E.11385), which includes the final CMB approved issuance certificate (in Turkish: onaylanmış ihraç belgesi) dated 9 October 2017 (together, the CMB Approvals ), and the approval of the BRSA (dated 14 June 2017 (No. 32521522-101.01[55]- E.9044)) (the BRSA Approval and, together with the CMB Approvals, the Approvals ) required for the issuance of the Notes. In addition, the CMB introduced an amendment to the Capital Markets Law and Communiqué VII-128.8 on Debt Instruments (the Debt Instruments Communiqué ) on 18 February 2017 pursuant to which an issuer is required, using an electronic application platform, to apply to the CMB before the issue date of securities to obtain the CMB s approval in respect of such securities; however, since the electronic application platform is yet to be operational as of the date of this Prospectus, a written approval from the CMB relating to the approval of the issue of the Notes is expected to be obtained on or before the Issue Date. Pursuant to the Approvals, the offer, sale and issue of the Notes have been authorised and approved in accordance with Decree 32 on the Protection of the Value of the Turkish Currency (as amended from time to time, Decree 32 ), the Turkish Banking Law No. 5411 of 2005, as amended (the Banking Law ), and its related regulations and the Debt Instruments Communiqué and its related regulations. In addition, in accordance with the Approvals, the Notes (or beneficial interests therein) may only be offered or sold outside of Turkey. Under the CMB Approvals, the CMB has authorised the offering, sale and issue of the Notes on the condition that no transaction that qualifies as a sale or offering of Notes (or beneficial interests therein) in Turkey may be engaged in. Notwithstanding the foregoing, pursuant to the BRSA decision dated 6 May 2010 No. 3665 and in accordance with Decree 32, residents of Turkey may purchase or sell Notes (or beneficial interests therein) (as they are denominated in a currency other than Turkish Lira) in offshore transactions on an unsolicited (reverse inquiry) basis in the secondary markets only; provided that such purchase or sale is made through licensed banks or licensed brokerage institutions authorised pursuant to BRSA and/or CMB regulations and the purchase price is transferred through licensed banks authorised under BRSA regulations. As such, Turkish residents should use such licensed banks or licensed brokerage institutions when purchasing Notes (or beneficial interests therein) and should transfer the purchase price through such licensed banks. Monies paid for the purchase of Notes (or beneficial interests therein) are not protected by the insurance coverage provided by the Savings Deposit Insurance Fund (Tasarruf Mevduatı Sigorta Fonu) of Turkey (the SDIF ). Pursuant to the Debt Instruments Communiqué, the Issuer is required to notify the Central Registry Agency (Merkezi Kayıt Kuruluşu A.Ş.) (trade name: Central Registry İstanbul (Merkezi Kayıt İstanbul)) ( Central Registry İstanbul ) within three İstanbul business days from the Issue Date of the amount, Issue Date, ISIN code, interest commencement date, maturity date, interest rate, name of the custodian and currency of the Notes and the country of issuance. The Notes will be offered and sold only in offshore transactions to persons who are not U.S. persons pursuant to Regulation S and initially will be represented by beneficial interests in a permanent global note in fully registered form without interest coupons (the Global Note ). The Global Note will be deposited on or about the Issue Date with a common depositary (the Common Depositary ) for Euroclear and Clearstream, Luxembourg, and will be registered in the name of a nominee of the Common Depositary. Except as described in this Prospectus, beneficial interests in the Global Note will be represented through accounts of financial institutions acting on behalf of beneficial owners as direct and indirect accountholders in Euroclear and Clearstream, Luxembourg. Except as described in this Prospectus, owners of beneficial interests in the Global Note will not be entitled to have the Notes registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered holders of the Notes under the Notes and the agency agreement relating to the Notes to be dated the Issue Date (the Agency Agreement ). MIFID II PRODUCT GOVERNANCE / ELIGIBLE COUNTERPARTIES AND PROFESSIONAL CLIENTS ONLY TARGET MARKET Solely for the purposes of each manufacturer s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (a) the target market for the Notes (and beneficial interests therein) is eligible counterparties and professional clients only, each as defined in MiFID II, and (b) all channels for distribution of the Notes (and beneficial interests therein) to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (or beneficial interests therein) (a distributor ) should take into consideration the manufacturers target market assessment; however, a distributor subject to MiFID II 4
is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers target market assessment) and determining appropriate distribution channels. STABILISATION In connection with the issue of the Notes, Citigroup Global Markets Limited (the Stabilisation Manager ) (or persons acting on behalf of the Stabilisation Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail; however, stabilisation might not necessarily occur. Any stabilisation action or over-allotment might begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the Issue Date and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment must be conducted by the Stabilisation Manager (or persons acting on behalf of the Stabilisation Manager) in accordance with all applicable laws. Notwithstanding anything herein to the contrary, the Bank may not (whether through over-allotment or otherwise) issue more Notes than have been authorised by the CMB. INFORMATION CONTAINED IN THIS PROSPECTUS To the fullest extent permitted by law, none of the Joint Bookrunners accepts any responsibility for the information contained in, or incorporated by reference into, this Prospectus or any other information provided by the Issuer in connection with the Notes or for any statement made, or purported to be made, by a Joint Bookrunner or on its behalf in connection with the Notes. Each Joint Bookrunner accordingly disclaims all and any liability that it might otherwise have (whether in tort, contract or otherwise) in respect of the accuracy or completeness of any such information or statements. All of the information contained in this Prospectus concerning the Turkish market and the Bank s competitors has been obtained (and extracted without material adjustment) from publicly available information. Where third-party information has been used in this Prospectus, the source of such information has been identified. The Issuer confirms that all such information has been accurately reproduced and, so far as it is aware and is able to ascertain from the information published by such third-party sources, no facts have been omitted that would render the reproduced information inaccurate or misleading. Without prejudice to the generality of the foregoing statement, third-party information in this Prospectus, while believed to be reliable, has not been independently verified by the Bank or any other party. The language of this Prospectus is English. Certain legal references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. In particular, but without limitation, the titles of Turkish laws and the names of Turkish institutions referenced herein have been translated from Turkish into English. The translations of these titles and names are direct and accurate. All data relating to the Turkish banking sector in this Prospectus have been obtained from the BRSA s website at www.bddk.org.tr, the Turkish Banks Association (Türkiye Bankalar Birliği) (the Turkish Banks Association ) website at www.tbb.org.tr or the website of the Interbank Card Centre (Bankalararası Kart Merkezi) at bkm.com.tr/bkm, and all data relating to the Turkish economy, including statistical data, have been obtained from the website of the Turkish Statistical Institute (Türkiye İstatistik Kurumu) ( TurkStat ) at www.turkstat.gov.tr, the website of the Central Bank of Turkey (Türkiye Cumhuriyet Merkez Bankası) (the Central Bank ) at www.tcmb.gov.tr, the Turkish Treasury s website at www.hazine.gov.tr (the Undersecretariat of Treasury ) or the European Banking Federation s website at www.ebf.fbe.eu. Such data have been extracted from such websites without material adjustment, but might not appear in the exact same form on such websites or elsewhere. Such websites do not, and should not be deemed to constitute a part of, or be incorporated into, this Prospectus. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Prospectus contains some statements that might be considered to be forward-looking statements. Forward-looking statements include (without limitation) statements concerning the Issuer s plans, objectives, goals, strategies, future operations and performance and the assumptions underlying these forward-looking statements. When used in this Prospectus, the words anticipates, estimates, expects, believes, intends, plans, aims, seeks, may, might, will, should and any similar expressions generally identify forward-looking statements. Forwardlooking statements appear in a number of places throughout this Prospectus, including (without limitation) under Risk 5
Factors, Use of Proceeds, Operating and Financial Review and The Group and its Business and include, but are not limited to, statements regarding: strategy and objectives, trends affecting the Group s results of operations and financial condition, asset portfolios, loan loss reserves, capital spending, legal proceedings, and the Group s potential exposure to market risk and other risk factors. Forward-looking statements involve risks, uncertainties and assumptions. Actual results might differ materially from those expressed in these forward-looking statements. The Issuer has identified certain of the risks inherent in these forward-looking statements and these are set out under Risk Factors. The Issuer has based these forward-looking statements on the current view of its management with respect to future events and financial performance. Although the Issuer s management believes that the expectations, estimates and projections reflected in such forward-looking statements are reasonable as of the date of this Prospectus, if one or more of the risks or uncertainties inherent in these forward-looking statements materialise(s), including those identified in this Prospectus, or if any of the Issuer s underlying assumptions prove to be incomplete or incorrect, then the Issuer s actual results of operation might vary from those expected, estimated or projected and those variations might be material. There might be other risks, including some risks of which the Issuer is unaware, that could adversely affect the Group s results, the Notes or the accuracy of forward-looking statements in this Prospectus. Therefore, potential investors should not consider the factors discussed under Risk Factors to be a complete discussion of all potential risks or uncertainties of investing in the Notes. Potential investors should not place undue reliance upon any forward-looking statements. Any forwardlooking statements contained in this Prospectus speak only as of the date of this Prospectus. Without prejudice to any requirements under applicable laws, the Issuer expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances upon which any such forwardlooking statement is based. 6
PRESENTATION OF FINANCIAL AND OTHER INFORMATION Presentation of Financial Information The Bank maintains its books and prepares its statutory financial statements in Turkish Lira in accordance with the BRSA s accounting and reporting regulations, which include the Regulation on Accounting Policies for Banks and Safeguarding of Documents, published in the Official Gazette No. 26333 dated 1 November 2006, other regulations on accounting records of banks published by the Banking Regulation and Supervision Board, circulars and pronouncements published by the BRSA and requirements of the Turkish Auditing Standards for matters that are not regulated by the aforementioned regulations (together, the BRSA Accounting and Reporting Regulations ). The Group s consolidated and the Bank s unconsolidated annual statutory financial statements as of and for the years ended 31 December 2015 and 2016 (including any notes thereto and the independent auditor s audit reports thereon, together the BRSA Annual Financial Statements ) and the Group s consolidated and the Bank s unconsolidated unaudited interim financial statements for the six month period ended 30 June 2017 and the nine month period ended 30 September 2017 (including any notes thereto and the independent auditor s review reports thereon, the BRSA Interim Financial Statements and, with the BRSA Annual Financial Statements, the BRSA Financial Statements ) have been prepared and presented in accordance with the BRSA Accounting and Reporting Regulations. The BRSA Financial Statements are prepared on a historical cost basis except for: (a) financial assets at fair value through profit or loss (including financial assets held for trading), financial assets available-for-sale, derivative financial instruments, equity shares that are traded in an active market (i.e., a stock exchange), which are recorded with their market prices, and equity shares that are not traded in an active market, which are recorded on a historical cost basis less impairment, and (b) loans and other financial assets, which are, in each case, presented at amortised cost. The BRSA Annual Financial Statements have been audited by DRT Bağımsız Denetim ve SMMM A.Ş. (Member of Deloitte Touche Tohmatsu Limited) ( Deloitte ) in accordance with the Regulation on Independent Audit of Banks, published by the BRSA in the Official Gazette No. 29314 dated 2 April 2015, and the Independent Standards on Auditing, which are a component of the Turkish Auditing Standards published by the Public Oversight, Accounting and Auditing Standards Authority (Kamu Gözetimi Muhasebe ve Denetim Standartları Kurumu). See Deloitte s reports included within the BRSA Annual Financial Statements. According to Turkish laws, the Bank is required to rotate its external auditors every seven years. On 28 February 2017, the Bank s Board of Directors resolved to submit the appointment of Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (a member firm of Ernst & Young Global Limited) ( Ernst & Young ) as the Bank s external auditors for 2017 for the approval of the General Assembly. In the General Assembly meeting held on 27 March 2017, the Bank s shareholders approved the appointment of Ernst & Young. See Risk Factors Risks Relating to the Group s Business Audit Qualification. The BRSA Interim Financial Statements have been reviewed in accordance with the Standard on Review Engagements (SRE) 2410, Limited Review of Interim Financial Information Performed by the Independent Auditor of the Entity by Ernst & Young. See Ernst & Young s review reports included within the BRSA Interim Financial Statements, which are incorporated by reference into this Prospectus. With respect to the unaudited BRSA Interim Financial Statements, Ernst & Young s review reports included within such BRSA Interim Financial Statements note that: (a) a review of interim fınancial information: (i) consists of making inquiries primarily of persons responsible for fınancial reporting process and applying analytical and other review procedures and (ii) is substantially less in scope than an independent audit performed in accordance with independent auditing standards and (b) it does not express an opinion. Accordingly, the degree of reliance upon their reports on such information should be restricted in light of the limited nature of the review procedures applied. In each of the BRSA Interim Financial Statements, Ernst & Young noted that: (A) the Group s consolidated and the Bank s unconsolidated audited financial statements (as applicable) as of and for the year ended 31 December 2016, each of which were audited by Deloitte instead of Ernst & Young, expressed a qualified opinion and (B) the Group s consolidated and the Bank s unconsolidated (as applicable) unaudited financial statements as of and for the six month period ended 30 June 2016 and the nine month period ended 30 September 2016 were subject to a limited review by Deloitte instead of Ernst & Young. See Risk Factors Risks Relating to the Group s Business Audit Qualification. Unless otherwise indicated, the financial information presented herein is based upon the BRSA Financial Statements and has been extracted from the BRSA Financial Statements without material adjustment. The BRSA Financial Statements, all of which are in English, were prepared as convenience translations of the Turkish language BRSA Financial Statements (which translations the Bank confirms were direct and accurate). The English language BRSA Financial Statements were not prepared for the purpose of their incorporation by reference into this Prospectus. 7
While neither the Bank nor the Group is required by law to prepare its accounts under any accounting standards other than according to the BRSA Accounting and Reporting Regulations, including under International Financial Reporting Standards ( IFRS ), the Bank s management has elected to publish audited annual (consolidated and unconsolidated) financial statements that have been prepared in accordance with IFRS, with the most recent such financial statements being the Group s audited IFRS financial statements for the fiscal year ended 31 December 2016. IFRS financial statements are not used for any regulatory purposes and the Bank s management uses the BRSA Financial Statements and the BRSA Accounting and Reporting Regulations for the management of the Bank and communications with investors. While the information in this Prospectus is based upon the BRSA Financial Statements, the Group s IFRS audited financial statements as of and for the years ended 31 December 2015 and 2016 (including any notes thereto and the independent auditor s audit reports thereon, together the IFRS Financial Statements ) have been incorporated herein by reference. There are differences between the BRSA Financial Statements and the IFRS Financial Statements. A summary of the most material of such differences as they apply to the Group has been included in Appendix A ( Summary of Significant Differences Between IFRS and the BRSA Accounting and Reporting Regulations ). Certain figures included in, or incorporated by reference into, this Prospectus have been subject to rounding adjustments (e.g., certain U.S. Dollar amounts have been rounded to the nearest million). Accordingly, figures shown for the same category presented in different tables might vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. Unless otherwise indicated, the sources for statements and data concerning the Bank and its business are based upon best estimates and assumptions of the Bank s management. The Bank s management believes that these assumptions are reasonable and that its estimates have been prepared with due care. The data concerning the Bank included herein, whether based upon external sources or based upon the Bank s internal research, constitute the best current estimates of the information described. The contents of any website referenced herein do not form part of (and are not incorporated into) this Prospectus. Alternative Performance Measures To supplement the Bank s consolidated and unconsolidated financial statements presented in accordance with the BRSA Accounting and Reporting Regulations, the Bank uses certain ratios and measures included in this Prospectus that might be considered to be alternative performance measures (each an APM ) as described in the ESMA Guidelines on Alternative Performance Measures (the ESMA Guidelines ) published by the European Securities and Markets Authority on 5 October 2015. The ESMA Guidelines provide that an APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. The ESMA Guidelines also note that they do not apply to APMs: disclosed in accordance with applicable legislation, other than the applicable financial reporting framework, that sets out specific requirements governing the determination of such measures. The APMs included in this Prospectus are not alternatives to measures prepared in accordance with the BRSA Accounting and Reporting Regulations and might be different from similarly titled measures reported by other companies. The Bank s management believes that this information, when considered in conjunction with measures reported under IFRS and the BRSA Accounting and Reporting Regulations, is useful to investors because it provides a basis for measuring the organic operating performance in the periods presented and enhances investors overall understanding of the Group s financial performance. In addition, these measures are used in internal management of the Group, along with financial measures reported under the BRSA Accounting and Reporting Regulations, in measuring the Group s performance and comparing it to the performance of its competitors. Furthermore, because the Group has historically reported certain APMs to investors, the Bank s management believes that the inclusion of APMs in this Prospectus provides consistency in the Group s financial reporting and thus improves investors ability to assess the Group s trends and performance over multiple periods. APMs should not be considered in isolation from, or as a substitute for, financial information presented in compliance with the BRSA Accounting and Reporting Regulations. For the Group, measures that might be considered to be APMs in this Prospectus (and that are not defined or specified by the BRSA Accounting and Reporting Regulations or any other legislation applicable to the Bank) include (without limitation) the following (such terms being used in this Prospectus as defined below): 8
adjusted net interest income as a percentage of average interest-earning assets: For a particular period, this is: (a) the sum of: (i) net interest income for such period plus/minus (ii) net foreign exchange gains/losses for such period plus/minus (iii) net derivative financial transactions gains/losses plus/minus (iv) net provision for probable loan losses, excluding general loan loss provisions, during such period as a percentage of (b) average interest-earning assets during such period. adjusted net interest margin: For a particular period, this is: (a) net interest income for such period reduced by net provision for loan losses, excluding general loan loss provisions, during such period as a percentage of (b) average interest-earning assets. adjusted operating expenses to average total assets: For a particular period, this is: (a) total operating expenses for such period excluding depreciation and amortisation expenses and reserve for employee severance indemnities for such period as a percentage of (b) average total assets calculated as the average of the opening, quarter-end and closing balances during such period. free capital ratio: As of a particular date, this is: (a) total shareholders equity minus goodwill, tangible assets, assets held for resale, investment property, investments in equity participations and net non-performing loans ( NPLs ) excluding allowance made on a portfolio basis to cover any inherent risk of loss as a percentage of (b) total assets. loan loss provisions to gross loans: As of a particular date, this is: (a) the total loan loss provisions as of such date as a percentage of (b) the sum of total cash loans and non-cash loans as of such date. loan to deposit ratio: As of a particular date, this is: (a) the total loans as of such date as a percentage of (b) the total deposits as of such date. net interest margin: For a particular period, this is: (a) net interest income during such period as a percentage of (b) average interest-earning assets during such period. NPL coverage ratio: As of a particular date, this is: (a) the allowance for probable loan losses as of such date excluding allowances made on a portfolio basis to cover any inherent risk of loss as a percentage of (b) the total NPLs as of such date. NPL ratio: As of a particular date, this is: (a) the total NPLs as of such date as a percentage of (b) the total cash loans as of such date. return on average shareholders equity: For a particular period, this is: (a) net income for such period as a percentage of (b) average shareholders equity for such period. return on average total assets: For a particular period, this is: (a) net income for such period as a percentage of (b) average total assets for such period. Reconciliations for the above APMs to the applicable financial statements are not included as they are not required by the ESMA Guidelines in these circumstances, including as a result of Article 29 thereof where the items described in the APM are directly identifiable from the financial statements (e.g., where an applicable APM is merely a calculation of one item in the financial statements as a percentage of another item in the financial statements). The following are definitions of certain terms that are used in the calculations of the APMs listed above (such terms as so defined above having the same meaning when used elsewhere in this Prospectus): average interest-earning assets: For a particular period, this is the average of the amount of interest-earning assets as of the balance sheet date immediately prior to the commencement of such period (e.g., for any year, 31 December of the previous year) and each intervening quarter-end date during such period. average interest-bearing liabilities: For a particular period, this is the average of the amount of interest-earning liabilities as of the balance sheet date immediately prior to the commencement of such period (e.g., for any year, 31 December of the previous year) and each intervening quarter-end date during such period. 9
average shareholders equity: For a particular period, this is the average of the amount of shareholders equity as of the balance sheet date immediately prior to the commencement of such period (e.g., for any year, 31 December of the previous year) and each intervening quarter-end date during such period. average total assets: For a particular period, this is the average of the amount of total assets as of the balance sheet date immediately prior to the commencement of such period (e.g., for any year, 31 December of the previous year) and each intervening quarter-end date during such period. net interest income: For a particular period, this is total interest earned during such period minus total interest expensed during such period. Currency Presentation and Exchange Rates In this Prospectus, all references to: U.S. Dollars, US$ and $ refer to United States dollars, Turkish Lira and TL refer to the lawful currency for the time being of Turkey, and euro and refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended. No representation is made that the Turkish Lira or U.S. Dollar amounts in this Prospectus could have been or could be converted into U.S. Dollars or Turkish Lira, as the case may be, at any particular rate or at all. For a discussion of the effects on the Group of fluctuating exchange rates, see Risk Factors Risks Relating to the Group s Business - Foreign Exchange and Currency Risk and Operating and Financial Review. Certain Defined Terms, Conventions and Other Considerations in Relation to the Presentation of Information in this Prospectus Capitalised terms that are used but not defined in any particular section of this Prospectus have the meaning attributed thereto in Terms and Conditions of the Notes or any other section of this Prospectus. In this Prospectus, any reference to law shall (unless the context otherwise requires) be deemed to include legislation, regulations and other legal requirements. In the case of the presented statistical information, similar statistics might be obtainable from other sources, although the underlying assumptions and methodology, and consequently the resulting data, might vary from source to source. Where information has been sourced from a third party, such publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Information in this Prospectus regarding the Bank s shareholders has been based upon public filings, disclosure and announcements by such shareholders. 10
TABLE OF CONTENTS Overview... 12 Risk Factors... 15 Documents Incorporated by Reference... 40 Enforcement of Judgments and Service of Process... 41 Use of Proceeds... 42 Summary Financial and Other Information... 43 Capitalisation of the Group... 45 Operating and Financial Review... 46 Recent Developments... 76 The Group and its Business... 79 Risk Management... 94 Management... 98 Ownership... 106 Related Party Transactions... 108 Turkish Banking System... 110 Turkish Regulatory Environment... 113 Terms and Conditions of the Notes... 138 The Global Note... 152 Taxation... 154 Subscription and Sale... 156 Other General Information... 158 Index of Terms... 161 Summary of Significant Differences between IFRS and the BRSA Accounting and Reporting Regulations... 163 Page 11
OVERVIEW The following overview of the Notes does not purport to be complete but sets out certain information relating to the offering of the Notes, including the principal provisions of the terms and conditions thereof. The following information is indicative only, does not purport to be complete and is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. See, in particular, Terms and Conditions of the Notes. Words and expressions defined in Terms and Conditions of the Notes shall have the same meanings in this overview. Issue:... US$300,000,000 6.000% Notes due 2023. Interest and Interest Payment Dates:... Maturity Date:... Use of Proceeds:... Status:... The Notes will bear interest from (and including) the Issue Date (i.e., 25 January 2018) to (but excluding) the Maturity Date (i.e., 25 January 2023) at the rate of 6.000% per annum, payable semi-annually in arrear on each Interest Payment Date (i.e., 25 January and 25 July in each year, including the Maturity Date); provided that if any such date is not a Payment Day (as defined in Condition 7.4), then such payment will be made on the next Payment Day but without any further interest or other payment being made in respect of such delay. The first payment (representing a full six months interest) shall be made on the first Interest Payment Date. Unless previously redeemed or purchased and cancelled as provided in the Conditions, the Notes will be redeemed by the Issuer at their principal amount on the Maturity Date (i.e., 25 January 2023). The net proceeds of the offering of the Notes will be used by the Issuer for general corporate purposes. The Notes will be direct, unconditional, unsubordinated and (subject to the provisions of Condition 4) unsecured obligations of the Issuer and (subject as provided above) will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors rights. Negative Pledge:... Certain Covenants:... The terms of the Notes will contain a negative pledge in relation to Relevant Indebtedness, subject to certain customary carve-outs as described in Condition 4. The Issuer will agree to certain covenants, including covenants limiting transactions with affiliates, subject in each case to certain customary carveouts. Please refer to Condition 5. Taxation; Payment of Additional Amounts:... All payments in respect of the Notes by or on behalf of the Issuer will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature ( Taxes ) imposed or levied by or on behalf of any Relevant Jurisdiction (as defined in Condition 9), unless such withholding or deduction of the Taxes is required by law or regulation. In such event, the Issuer will (subject to certain exceptions set out in Condition 9) pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes after such withholding or deduction will equal the respective amounts that would otherwise have been 12