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Message From The Managing Director

Message From The Managing Director

With nearly 90 companies operating in 20 countries including Turkey and a total of 30 thousand employees, OYAK continued its track record of success in 2017, offering 24.7% rate of return for its members’ savings, a figure significantly above the consumer price index rate. At the core of OYAK’s success is our belief in this country and its people and our pride in producing for the future.

Valued members, dear employees, and esteemed business partners,

2017 saw numerous economic challenges globally, including geopolitical risks in different regions around the world, the US Federal Reserve Bank (Fed)’s monetary tightening policy and interest rate hikes, as well oil price increases. Despite these headwinds, the global economy expanded 3.1% in 2017. And while protectionist policies proliferated around the globe, worldwide trade volume rose as global trade continued to pick up during the year.

Due to its geopolitical location, Turkey has been considerably affected by increasing global political tensions. Even so, the country retained fiscal discipline to post annual GDP growth of 7.4% in 2017. Under an agreement between the Undersecretariat for the Treasury and Kredi Garanti Fonu A.Ş. (KGF), funds provided to domestic companies paved the way for the wheels in the real economy to start turning again. This in turn restored confidence in the Turkish economy.

Nearly 90 Companies Located in 20 Countries Including Turkey...

In the current global and domestic economic environment, OYAK continues to play a pioneering role in all industries in which it operates. OYAK is among Turkey’s most important assets thanks to its deeply rooted corporate culture spanning 57 years. We achieved successful results once again in 2017, as we moved our members’ savings forward into the future.

Our total consolidated assets climbed to USD 19.6 billion, consolidated net assets amounted to USD 7.9 billion, and total distributable resources, as we call it – came in at USD 1.6 billion. With nearly 90 companies operating in 20 different countries including Turkey and a total of 30 thousand employees, OYAK continued its tradition of high performance in 2017. We offered a rate of return of 24.7% for our members’ savings, a figure significantly above the consumer price index.

Cost cutting measures and high added-value investments undertaken in companies operating under OYAK yielded strong financial results. In 2017, OYAK continued to contribute to Turkey’s sustainable development journey. The Group posted consolidated revenue of USD 10.2 billion, up 44.3% year-on-year, while operating profit totaled USD 2.4 billion, up 56%. OYAK companies in various business lines continue rank among the top tax-paying champions in the provinces where they operate; the Group paid total taxes of USD 2.0 billion in 2017. In addition, OYAK recorded total exports of USD 4.4. billion for the year. OYAK is a consistent global player in all the industries in which it operates. The Group will continue to positively represent Turkey across the globe in the coming period.

Our Sustainability Approach is Focused on Long-Term Targets

As part of its sustainability approach, OYAK has engaged in sustainability reporting since 2013. This effort aims to promote and publicize the Group’s sustainability guidelines and activities for all stakeholders that fall within its sphere of influence. Committed to shaping its operations by generating lasting added-value, OYAK and its group companies continued to support their financial successes with environmental and social responsibility projects in 2017.

We are Stronger with Our New Organizational Structure...

As the umbrella institution for group companies operating in different business areas, OYAK made major changes to its organizational structure in 2017. OYAK aims to consolidate group synergies and ensure the internalization of its well-defined corporate culture in line with mutual corporate targets. To this end, OYAK adopted a corporate management structure through which it can implement its growth strategy, while effectively responding to member requests and expectations. I would also like to present for your attention that through our savings and efficiency efforts implemented largely by our group companies, we further bolstered our financial and operational performance.

Propelled by our strength and pride, while committed to believing in and serving this country and its people, OYAK continues to take confident steps toward the future. OYAK has implemented a universal human resources policy that encompasses all companies of the Group. In addition, OYAK has standardized Group companies’ human resources-related areas, including wages and vested benefits, job title structures and recruitment processes.

In 2017, OYAK Mine Metallurgy Group produced a total of 9.2 million tons of raw steel, meeting 25% of Turkey’s total production in this area.

25% of Turkey’s Total Iron and Steel Production Met

The iron and steel industry is one of the primary engines of growth in modern economies. Turkey is one of the leading countries in this sector, in both production and consumption. OYAK’s Mine Metallurgy Group is one of Turkey’s first and largest integrated iron and steel producers. In fact, it is one of the few steel producers in the world. The Mine Metallurgy Group completed fiscal year 2017 with success. During the year, the Group produced a total of 9.2 million tons of raw steel – meeting 25% of Turkey’s total production in this area. Our Mine Metallurgy Group recorded a total of 8.96 million tons of final product sales this year, up 10% year-on-year. The Group also posted exports of

1.2 million tons to 45 countries. As of end-2017, OYAK Mining Metallurgy Group reported total assets of

USD 7.5 billion and net profit of

USD 1 billion. The Group also added value to investors’ savings with its strong stock performance. Erdemir and İsdemir well outperformed the BIST (Istanbul Stock Exchange) 100 Index in terms of market value increase, further proof of our strong position in capital markets.

Annual Production Capacity of 22 Million Tons of Cement

With a yearly cement production capacity of 22 million tons; our OYAK Cement Concrete Paper Group boosted its domestic market share to 15.9% in 2017, driven by robust sales. Our Group supplies cement and ready-mixed concrete products to the construction industry – Turkey’s economic dynamo – and the country’s most distinguished projects. OYAK also continued to march toward new records in the area of paper production and sales. The OYAK Cement Concrete Paper Group was restructured in 2017 to build a customer- and market-based organizational structure. We aim to become a global player in the next 5-year period and reach turnover of USD 2.5 billion. In addition, our Group works constantly to improve its production infrastructure. With the investment in Adana Çimento, the Cement Concrete Group increased its yearly white clinker production capacity to 1 million tons.

Global Player in Refractor and Alumina Production and Marketing

OYAK Chemistry Group boasts 19 integrated plants on five continents and a worldwide distribution network. The Group has become a global manufacturer and marketer of PVC stabilizers, refractors and specialty alumina, which are widely seen as high-demand products of the future. After the acquiring of Chemson and Akdeniz Kimya, OYAK Chemistry Group attained a leading position in global stabilizers with a market share of 14%. The Group also experienced a 10% demand increase in the alumina segment thanks to its strong growth in the steel industry. In terms of sales in 2017, Almatis recorded its most successful year since 2007, boosting its sales of tabular products, mainly used by refractor producers, by 9.5% year-on-year.

With an annual cement production capacity of 22 million tons; our OYAK Cement Concrete Paper Group boosted its domestic market share to 15.9% thanks to increased sales in 2017.

Energy Supply for Group Companies

OYAK Group includes the İSKEN Thermal Power Plant, which has an installed capacity of 1,320 MW and meets 3.2% of Turkey’s total electricity need. In 2017, the facility continued to capitalize on new investment opportunities. Preparation efforts for İSKEN’s commercial enterprise period were executed successfully in 2017 and OYAK Energy became operational during the year. The energy supply process for our Group companies also commenced. Besides obtaining an important competitive advantage thanks to this supply process, OYAK was able to bolster its Group synergy.

We are Leader in Every Field in the Automotive Sector

In 2017, OYAK continued to successfully conduct business activities in automobile, engine and mechanical parts production with OYAK Renault; automotive sales with MAİS; and automobile financing with ORFİN. Our Automotive Group continued to be the leader in total automobile production with a 31.9% market share for the year. With MAİS, the Group sold a total of 179 thousand vehicles, capturing a market share of 18.7%. Thanks to the export of 288 thousand automobiles, OYAK Automotive Group ranked first in automobile exports and second in overall vehicle exports.

Important Initiatives in Real Estate

OYAK İnşaat, one of our Group companies operating in real estate and construction, has undertaken 35 development projects since its establishment. To date, the company has completed the construction of and delivered to owners a total of 11,603 residential housing units. As part of projects initiated in 2017, OYAK İnşaat plans a step-by-step evaluation of the İstanbul İkitelli OYAKKENT and İstanbul Maltepe OYAK Dragos projects with a Revenue Sharing from Tract Sales method. Construction of the OYAK Göksupark housing units in Ankara continues at full pace with the quality and security of OYAK İnşaat. We are also engaging in city planning and urban design activities for tracts we purchased in Ankara, İzmir and Yalova as part of OYAK Gayrimenkul Yatırımları (Real Estate Investments).

OYAK Success Journey will Continue with Our Group Synergies…

I would like to thank, first and foremost, our members and all our shareholders for their unwavering support to OYAK’s 2017 business operations. As Turkey’s largest complementary occupational pension fund, we aim to add value to our members’ savings and support the Turkish economy.

At OYAK, we have always believed that the world will continuously change, and that Turkey will be able to keep up with these changes. We believe in the value of dedicated efforts and that this is a struggle of solidarity. In addition to serving as an exemplary model for Turkey and a strong institution in the global economy, we believe that we will continue moving forward on our success journey in the coming period. We are pushing ahead, driven by the strength we draw from our deep-rooted corporate culture and our Group synergy.

We hope that our successes will open new horizons for us all in the coming year…

Respectfully yours,

Süleyman Savaş ERDEM

CEO