Summary of the Board of Directors Report Presented to the General Assembly

Esteemed Shareholders,

We would like to warmly welcome you to our Bank’s 33rd Ordinary Annual General Meeting. On behalf of the Board of Directors, we respectfully extend our sincere greetings to you, our esteemed shareholders, who have honored us with your presence at our Bank’s 2023 Annual General Meeting.

Before submitting the Board of Directors Report and Independent Audit Reports and Financial Statements for the 2023 fiscal year to your review and approval, we would like to inform you of the economic developments during the year as well as our Bank’s activities in 2023.

The Macroeconomic situation in 2023

In 2023, the policies of central banks and increasingly rising geopolitical risks in the global economy left their mark on the year. In order to prevent the inflationary pressure caused by macroeconomic supply shocks on a global scale and the jumps in commodity prices caused by the Russia-Ukraine war, major central banks continued to implement the tightest monetary policy of the last 25 years. Global inflation, which was recorded as 9.4% in 2022, decreased to 5.5% at the end of 2023 with the effect of these tight monetary policies. Global economic growth continued in 2023, albeit at a slower pace. In 2024, inflation is expected to continue its downward trend and real incomes will strengthen as the cumulative effects of tightening monetary policies on growth become more evident.

Turkish Banking Sector in 2023

Participation banks, which increased their funds disbursed by 65% to TL 1,060 billion in 2023, have grown above the banking sector, which increased their loans by 56% to TL 12,180 billion. Participation banking, which aims to meet the needs of the real economy, has continued to develop and grow with the innovative, technological solutions it provides and focusing on digitalization.

Deposit growth in the banking sector increased by 69% to TL 15,754 billion while participation banks recorded a 71% increase in collected funds to TL 1,550 billion. The average ratio of loans to deposits among all banks stood at 76%, while the ratio among participation banks was around 67%.

There was an improvement in asset quality both in the banking sector and in the participation banking sector in 2023 when compared to the previous year. The NPL ratio in the sector decreased from 2.0% at the end of 2022 to 1.6% at the end of 2023, while this ratio decreased from 1.4% to 0.9% for participation banks. There was a decrease in the special prevision ratios for NPLs in the banking sector and an increase among participation banks. At the end of 2023, the special provision ratios for non-performing loans declined from 84% to 82% in the banking sector and rose from 99% to 99.8% among participation banks.

Türkiye Finans in 2023

The volume of assets held by Türkiye Finans stood at TL 240 billion at the end of 2023, an increase of 57% compared to the previous year, while funds allocated, which constitute the largest share in its assets, increased by 49% compared to the previous year to reach TL 122 billion. Funds collected, which constitute the largest share in liabilities, stood at TL 177 billion, an increase of 72% compared to the previous year.

As of the end of 2023, the Bank commanded a share of 1.0% in funds allocated in the sector and 1.1% in funds collected. Maintaining its strong capital structure, Türkiye Finans increased its shareholders’ equity according to legal records by 70% to TL 27.9 billion in 2023. With a capital adequacy ratio increased to 25.85%, Türkiye Finans closed 2023 with a profit of TL 5.8 billion, marking an increase of 101% compared to the previous year.

Esteemed Shareholders,

We have submitted our Annual Report, which sets out our activities for the year 2023, our Balance Sheet and our Income Statement for your review and approval.

On behalf of the Board of Directors, we would like to thank all of our shareholders, employees and customers for their contribution to our success and the confidence they have placed in our Bank. We extend our respect to you, our valuable partners, for honoring us with your presence at our Annual General Meeting.

Yours faithfully

TÜRKİYE FİNANS KATILIM BANKASI A.Ş.

BOARD OF DIRECTORS