CHAIRMAN OF THE BOARD'S MESSAGE

Esteemed partners,

We have put behind us a year in which the world, our country, and business all suffered from severe turbulence that made itself felt both as diplomatic tensions at the global level and as serious economic volatility everywhere. A worldwide agenda beset with trade wars, a stalemate in the Brexit process, lingering policy uncertainty, and the reintroduction of monetary tightening in some developed countries all meant that the modest recovery that got under way in 2017 was replaced by the resumption of heightened perceived risks in 2018.

Last year's uncertainty-fraught global agenda also had a deep impact on our own country which, in many respects, had reached a critical threshold of its own. In an environment in which clarity is lost and uncertainty is accepted as the "new normal", it is apparent that this situation is not going to change in a short time. Corporate agility and a knack for keeping pace with change have become more important than ever in order to maintain one's footing on such slippery ground.

It is on this point that I am both proud and happy to say that Tekfen not only overcame all of the difficulties posed by 2018 but also made very important progress towards achieving both its financial and corporate objectives. In most of our main business lines we surpassed our turnover and profitability targets and even registered historically meaningful successes. Successfully completing such large-scale projects as the TANAP Pipeline and the Star Refinery in 2018, Tekfen Construction's outstanding business portfolio as of year-end was worth on the order of USD 2.75 billion. Having so far done business across a vast region of the world that embraces twenty countries and ten time zones, the Tekfen Contracting Group is resolutely exploring ways in which to further expand its geographical presence with the addition of new countries and customers to its portfolio and to enrich its existing business lines with the addition of new activities and services. It gives me pleasure to see the same resolve in our contracting division's other members as well. Having moved into new office premises in 2018, Tekfen Engineering is experiencing significant growth while Tekfen Manufacturing is strengthening its existing position with new contacts and markets and with innovative new products.

Despite having to contend with higher costs arising from exchange rate movements as well as with shrinking markets, Toros Tarım managed to overcome its home market difficulties by turning to exports. In recent years Toros Tarım has been taking important steps in the direction of streamlining its multi-stakeholder business processes involving the management of everything from supply chains to production and storage facilities to distribution networks. In 2018 we all took justifiable pride when Toros Tarım became the first Turkish company in its sector to receive the International Fertilizer Association's "Protect & Sustain" award.

In early 2018, majority stakes in Alanar Meyve (one of Turkey's leading fruit producers) and in its sister company Alara Fidan were acquired by Tekfen Tarım in a move into agricultural production that was as bold as it is befitting the Tekfen ethos. Gearing up to clinch its sectoral leadership with new orchards as well as handling and processing facilities, Alanar repeated its previous years' success in 2018 with its award-winning export performance.

We desire to reinvigorate the attributes that are inherent in Tekfen's genes with brand-new approaches and a brand-new spirit by placing technology and innovation at the heart of all of our activities. One of the main things that will distinguish us in technology is research and development, which we support by means of strong structures that are capable of shaping the direction of all of our business lines' activities. Following up the R&D centre which we set up at Toros Tarım's Mersin plant and which is very likely equipped with some of the most advanced kit to be found in Turkey's agri-industry today, we transformed our Agripark Techno-Agriculture centre, whose operations are also being overseen by Tekfen Tarım since the beginning of 2018, into an R&D centre in its own right. We regard the work that is being carried out at both of these centres as being essential to our role as an enduring pioneer and leader of Turkey's farming industry.

Having been set up to keep a close lookout for creative undertakings (no matter where they may be in the world) which will improve both our quality and our productivity in our business lines while also making us sustainably more competitive and capable of generating sustainable added value and which we embrace when they have reached just the right stage, our venture-capital company Tekfen Ventures increased the number of firms in which it has invested to seven in 2018. We take great pleasure to be seeing the first examples of the splendid synergy that arises out of the union of these youthful firms' exciting discoveries and inventions with Tekfen's 62 years of experience.

Sometimes with the right approach, difficulties can be transformed into opportunities. As an example, the Tekfen Real Estate Development Group, which suffered from the nearcomplete cessation of activities in Turkey's real estate sector in 2018, managed to do exactly that by undertaking a renovation project in Germany that enabled it to put its more than two decades of experience to work in another country. Feeling certain that this undertaking is going to open new doors for us in the future, we are committed to maintaining our entrepreneurial spirit in every potential endeavour and at all times.

Even more gratifying and encouraging than the successful results that we achieved in our business activities in 2018 is the progress that we made in the direction of strengthening and developing our human resources, our business processes, and our corporate structure.

Today's generation puts more store in how well companies make their values a reality and contribute to society than in just their balance-sheet performance. For this reason, we regard it as one of our fundamental objectives to properly fulfill and build the responsible corporate citizenship duties that we inherited from our group's founders. Our collaboration with the Darüşşafaka society in the areas of education and sport that we initiated in 2018 is a development that we shall always be able to recall with pride. This is a moral communion between two exemplary organizations that cherish our country's shared values and it is our sincerest hope that this union of hearts and minds will continue to endure for many years yet to come.

Another of our focuses in 2018 was our human resources, which we have always regarded as our most precious asset. Believing that our employees' ability to be more efficient, productive, and creative depends first and foremost on their being happy at work, we provide them with training and career opportunities as well as with workplace environments that are safe and healthy. Tekfen Group companies operate training programmes under the general heading of Tekfen Academy, whose aim is to increase not only their job-related knowledge and competencies but also their management skills.

Conducting our operations in ways which are respectful of people and nature, which minimize their environmental impact, and whose business processes are sustainable, was just as high a priority for us in 2018 as it ever was. Having joined the Carbon Disclosure Project in 2017 out of its awareness of its environmental responsibilities, Tekfen also joined the CDP Water Security programme in 2018 and achieved a notable success by being included in the "B" list in both programmes. The fact that there are only three companies in Turkey that have qualified for admission to the CDP "A" list and that there are none in the Water Security programme's "A" list at all, Tekfen Holding's inclusion in both "B" lists so soon after joining the programmes is evidence of the significant progress that it was able to make in very little time. Tekfen's signature of the United Nations Global Compact in 2018 is also a matter of great importance from the standpoint of the progress that it will be making in the future on sustainability-related issues.

After a successful year, we have embarked upon 2019 with hope and good expectations knowing full well all of the uncertainties and difficulties that await us. Our steps along the path of change and growth on which we are advancing will continue in this new year as we continue to keep pace with whatever developments may take place around us. With almost every day that passes we are witness to intellects unfettered by the limitations of political or economic turbulence achieving mind-boggling successes that are beneficial to humanity in every field of endeavour ranging from space exploration to agriculture and from human health to materials science. Tremendous advances in such areas as artificial intelligence, robotics, Industry 4.0, virtual reality, nanotechnology, and genetic engineering open vast horizons that keep reminding us that we cannot isolate ourselves from the great changes taking place all around us.

At a time when artificial intelligence has become a part of our everyday lives, we have launched a digital transformation that will continue without letup in the period ahead as well. Blending the benefits made possible by technology with our own knowledge, experience, and capabilities, our primary goal will be to take our group even further ahead in line with our commitment to the values inherited from Tekfen's founders and to the principles of sustainability.

As we journey into the future, our greatest source of confidence will be stakeholders whose support for us I believe will be no less in the future than it has been so far. In closing therefore and speaking both personally and on behalf of the other members of the board, I acknowledge the debt of thanks that we owe them all.

Very truly yours,

Murat Gigin
Chairman of the Board of Directors