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FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT
CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED UNCONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE
TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI
UNCONSOLIDATED FINANCIAL REPORT FOR THE
YEAR ENDED AT 31 DECEMBER 2014
(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
SECTION THREE
ACCOUNTING POLICIES
I. BASIS OF PRESENTATION
The Bank maintains its books of accounts in Turkish Lira in accordance with the Banking Act No. 5411 (“Banking Act”), which are effective from 1 November
2005, the Turkish Commercial Code (“TCC”) and Turkish tax legislation.
The unconsolidated financial statements are prepared in accordance with the “Regulation on the Principles and Procedures Regarding Banks’ Accounting
Application and Keeping Documents” published in the Official Gazette No. 26333 dated 1 November 2006 by the BRSA (“Banking Regulation and Supervision
Agency”) which refers to “Turkish Accounting Standards” (“TAS”) and “Turkish Financial Reporting Standards”(“TFRS”) issued by the Public Oversight Accounting
and Auditing Standards Authority, and other decrees, notes and explanations related to the accounting and financial reporting principles published by the BRSA
(all defined as “BRSA Principles”). The format and the details of the publicly announced financial statements and related disclosures to these statements have
been prepared in accordance with the “Communiqués Related to Publicly Announced Financial Statements of Banks and Explanations and Notes Related to
these Financial Statements” published in the Official Gazette No. 28337 dated 28 June 2012.
The accompanying consolidated financial statements are prepared in accordance with the historical cost basis as modified in accordance with inflation
adjustments applied until 31 December 2004, except for the financial assets at fair value through profit or loss, derivative financial assets and liabilities held for
trading purpose, available-for-sale financial assets and unconsolidated investments in associates and subsidiaries whose fair value can be reliably measured
and assets available for sale, which are presented on a fair value basis.
The preparation of financial statements requires the use of certain critical estimates on assets and liabilities reported as of balance sheet date or amount of
contingent assets and liabilities explained and amount of income and expenses occurred in related period. Although these estimates rely on the management’s
best judgment, actual results can vary from these estimates. Judgments and estimates are explained in related notes.
The accounting policies and valuation principles applied in the preparation of these financial statements are defined and applied in accordance with TAS. Those
accounting policies and valuation principles are explained in Notes II. to XXII. Below.
Additional paragraph for convenience translation to English
The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries,
in which the accompanying unconsolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”), may have
significant influence on the accompanying unconsolidated financial statements. Accordingly, the accompanying unconsolidated financial statements are not
intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries and IFRS.
II. STRATEGY FOR THE USE OF FINANCIAL INSTRUMENTS AND INFORMATION ON FOREIGN CURRENCY TRANSACTIONS
Strategy for the use of financial instruments
The Bank’s core operations are based on retail banking, corporate banking, private banking, foreign exchange operations, money market operations,
investment security transactions, and international banking. As a result of the nature of its operations, the Bank intensively utilizes financial instruments. The
Bank funds itself through deposits with different maturities as the main funding resources that are invested in assets earning higher returns.
The most important fund sources of the Bank other than the deposits are its equity and medium and long-term borrowings obtained from foreign financial
institutions. The Bank pursues an effective asset-liability management strategy by securing balance between funding resources and investments so as to
reduce risks and increase returns. Accordingly, the Bank attaches great significance to long-term placements bearing higher interest rates.
It is essential to consider the maturity structure of assets and liabilities in liquidity management. The essence of asset liability management is the keep the
liquidity risk, interest rate risk, exchange rate risk, and credit risk within reasonable limits; while enhancing profitability and strengthening the shareholders’
equity.
Investments in marketable securities and lending loans generate higher return than the average rate of return of the Bank’s operating activities on the basis of
maturity structures and market conditions. When bank placements are considered, they have short term maturity in terms of liquidity management but earn