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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.)
The first paragraph of the temporary article no. 23 which states the Banks should transfer pension funds to the Social Security Institution within three years
after the issue date of the Banking Law no.5411, issued in the 1 November 2005 dated and 25983 numbered Official Gazette, has been cancelled by the
Constitutional Court’s 22 March 2007 dated and 2007/33 numbered decision. Reasoned ruling of the Constitutional Court has been issued on 15 December
2007 in the Official Gazette no. 26731. The reason for the cancellation decision by Constitutional Court was stated as possible future losses on acquired rights of
Fund members.
Following the publication of the ruling, the Turkish Parliament started to work on new legal arrangements and the Social Security Law no. 5754 (“the Law”)
has been approved on 17 April 2008. The Law is enacted by the approval of the President of Turkey and issued on the 8 May 2008 dated and 26870 numbered
Official Gazette.
In accordance with the temporary article no. 20 of the Article no. 73 of the Law;
The discounted liability for each fund in terms of the persons transferred as at the transfer date, including the contributors left the fund, should be calculated by
the assumptions below:
a) The technical interest rate to be used for the actuarial calculation is 9.80%
b) Income and expenditures in respect to fund’s insurance division are considered in the calculation of discounted liability.
Law requires the transfer to be completed in three years beginning from 1 January 2008. The three year period has expired on 8 May 2011; however, it has
been extended to 8 May 2013 with the decision of Council of Ministers published in Official Gazette dated 9 April 2011. Before the expiration date, with the
decision of Council of Ministers published in Official Gazette dated 3 May 2013, the period for transferring banks, insurance and reassurance firms, board
of trade, exchanges or participants, monthly salary paid individuals and beneficiaries of the funds that are constructed for their personnel to Social Security
Institution in the scope of the temporary article no. 20 of the Social Security Law no. 506 published in Official Gazette dated 30 April 2014 has extended for one
year.
The employer of pension fund participants (the Banks) will continue to pay the non-transferable social rights, which are already disclosed in the article of
association of the pension fund, to the pension participants and their right owners, even though the salary payment obligation has been transferred to the
Social Security Foundation.
The technical financial statements of the Fund are audited by the certified actuary according to the “Actuaries Regulation” which is issued as per the Article
no. 21 of the 5684 numbered Insurance Law. As per the actuarial report dated February 2015 in compliance with the principles explained above, there is no
technical or actual deficit determined which requires provision against.
XVI. INFORMATION ON TAXATION
Corporate tax
Corporate tax rate is 20% in Turkey. This rate is applied to total income of the Bank adjusted for certain disallowable expenses, exempt income and any other
allowances.
Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. Except for
the dividend payments to these institutions, the withholding tax rate on the dividend payments is 15%. In applying the withholding tax rates on dividend
payments to the nonresident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into
account. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.
The prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax
calculated for the whole year earnings.
In accordance with the tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be
carried back to offset profits from previous periods.
In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th
of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that
follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based,
and may issue re-assessments based on their findings.