CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ON THE BOARD OF DIRECTORS’ ANNUAL REPORT ORIGINALLY ISSUED IN TURKISH

To the Shareholders of Türkiye Finans Katılım Bankası Anonim Şirketi

Qualified Opinion

We have audited the annual report of Türkiye Finans Katılım Bankası Anonim Şirketi (the “Bank”) for the period between 1 January 2023 and 31 December 2023, since we have audited the complete set consolidated and unconsolidated financial statements for this period.

In our opinion, except for the effects of the matter described in the Basis For Qualified Opinion section of our report, the consolidated and unconsolidated financial information included in the annual report and the analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent, in all material respects, with the audited complete set of consolidated and unconsolidated financial statements and information obtained during the audit and provides a fair presentation.

Basis for Qualified Opinion

As described in the Basis For Qualified Opinion section of Independent Auditor’s Report on the complete set of audited consolidated and unconsolidated financial statements of the Bank for the period between 1 January 2023 and 31 December 2023 dated 15 February 2024; The complete set of consolidated and unconsolidated financial statements of the Bank as at 31 December 2023 include a general provision of total of TL 1,155,000 thousands, of which TL 1,155,000 thousands was recognised as expense in the current period, which does not meet the requirements of BRSA Accounting and Reporting Legislation. This general provision is provided by the Group management for the possible effects of the negative circumstances which may arise in economy or market conditions.

The purpose and scope of the “General Communique of Tax Procedure Law No. 555” of Republic of Türkiye Ministry of Treasury and Finance published in the Official Gazette dated 30 December 2023 and numbered 32414 is to determine the principles and procedures regarding to inflation adjustments to be recognised in accordance with Article 298 of Law No. 213 and provisional Article 33 in 2023 and following accounting periods based on the fulfilment of the conditions for adjustments. As at 31 December 2023, the Bank has not recognised deferred tax asset on temporary differences arising from inflation adjustment to financial statements prepared for taxation purposes. Had the Bank recognised deferred tax asset on temporary differences, deferred tax asset, other accumulated comprehensive income that will not reclassified in profit or loss, net profit or loss and deferred tax credit would have been increased by TL 202,087 thousand, TL 134,397 thousand, TL 67,690 thousand and TL 67,690 thousand, respectively in the accompanying consolidated financial statements.

We conducted our audit in accordance with “Regulation on Independent Audit of the Banks” published in the Official Gazette No.29314 dated 2 April 2015 by Banking Regulation and Supervision Agency (“BRSA Auditing Regulation”) and Standards on Auditing which is a component of the Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) (“Standards on Auditing issued by POA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Annual Report section of our report. We declare that we are independent of the Bank in accordance with the Code of Ethics for Auditors issued by POA (including Independence Standards) (POA’s Code of Ethics) and the ethical requirements in the regulations issued by POA that are relevant to audit of financial statements, and we have fulfilled our other ethical responsibilities in accordance with the POA’s Code of Ethics and regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. 

Auditor’s Opinion on Complete Set of Consolidated and Unconsolidated Financial Statements

We have expressed an qualified opinion on the complete set of consolidated and unconsolidated financial statements of the Bank for the period between 1 January 2023 and 31 December 2023 on 15 February 2024.

Board of Directors’ Responsibility for the Annual Report

In accordance with the Articles 514 and 516 of the Turkish Commercial Code numbered 6102 (“TCC”) and Regulation on the Principles and Procedures Concerning the Preparation of and Publishing Annual Reports by the Bank (“Regulation”) published in the Official Gazette dated 1 November 2006 and Numbered 26333, the Bank’s management is responsible for the following regarding the annual report:

a)    The Bank’s management prepares its annual report within the first three months following the date of statement of financial position and submits it to the general assembly.

b)    The Bank’s management prepares its annual report in such a way that it reflects the operations of the year and the consolidated and unconsolidated financial position of the Bank accurately, completely, directly, true and fairly in all respects. In this report, the financial position is assessed in accordance with the Bank’s consolidated and unconsolidated financial statements. The annual report shall also clearly indicates the details about the Bank’s development and risks that might be encountered. The assessment of the Board of Directors on these matters is included in the report.

c)    The annual report also includes the matters below:

-      Significant events occurred in the Company after the reporting period,

-      The Bank’s research and development activities.

-      Financial benefits such as wages, premiums and bonuses paid to board members and key management personnel, appropriations, travel, accommodation and representation expenses, benefits in cash and kind, insurance and similar guarantees.

When preparing the annual report, the Board of Directors also considers the secondary legislation arrangements issued by the Ministry of Trade and related institutions.

Auditor’s Responsibility for the Audit of the Annual Report

Our objective is to express an opinion on whether the consolidated and unconsolidated financial information included in the annual report in accordance with the TCC and the Regulation, and analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent with the audited consolidated and unconsolidated financial statements of the Bank and the information obtained during the audit and give a true and fair view and form a report that includes this opinion.

We conducted our audit in accordance with BRSA Auditing Regulation and Standards on Auditing issued by POA. Those standards require compliance with ethical requirements and planning of audit to obtain reasonable assurance on whether the consolidated and unconsolidated financial information included in the annual report and analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent with the consolidated and unconsolidated financial statements and the information obtained during the audit and provides a fair presentation.

KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi

 

Alper Güvenç, SMMM
Partner

 

3 April 2024
İstanbul, Türkiye