Valued shareholders,

Everyone in the Tekfen Group was saddened in 2017 by the loss of Feyyaz Berker, one of Tekfen's founding partners. As someone who distinguished himself through his great services on behalf of our country, we shall miss him and forever recall his memory with respect.

Putting yet another operational year behind us, we have the satisfaction of having authored some extremely successful results for all of our stakeholders.

2017 was a year in which we experienced many challenges at home, in the countries in which we do business, and around the world in general. In an environment in which escalating calls for protectionist policies are prompting debates over globalization and in which opportunities and risks are intertwined, it is going to take time for the dust to settle.

In an environment so fraught with economic and political uncertainties, Tekfen Holding nonetheless succeeded in surpassing nearly every one of the targets that it set for 2017 by taking an approach which never strayed from prudence yet which always remained decisive. We posted historically high levels of turnover and profitability while the market value of Tekfen Holding's shares broke new records. These developments indicate to us that our efforts to fulfill our redefined goal of "new growth through profitability" are also being approved and supported by investors.

More than 45% of Tekfen Holding's shares are publicly traded, which is a high percentage for a company such as ours. The 2017 increase in the value of our shares was about four times the average rise in the BIST-100 index. This can be seen as a powerful market response to the transformation that we have initiated at Tekfen.

The Tekfen Contracting Group, which is responsible for the conduct of one of Tekfen Holding's three core business activities, added new projects to its portfolio that successfully maintained its total business value at a high US$3.4 billion as of end-2017. In line with its objective of sustainably increasing that figure to even higher levels, the group engaged in intensive efforts all year long to venture into new markets, to enrich its existing operations with new business lines, to give attention to higher added-value projects that demand engineering know-how and to strengthen its engineering skills for that purpose as well as its human resources and management abilities, and to make its entire organization more productive and competitive by identifying points of synergy among companies operating in complementary business lines.

One step that we have already taken in that direction is our decision to amalgamate all of our equipment, capacity, competency, and reference resources in steel manufacturing, which is a substantial contributor to the Tekfen Contracting Group's operations. In a similar vein we have also begun to coordinate complementary business line activities between our real estate development and contracting groups. This initiative will serve as a model for other potential groupwise collaborations.

The Tekfen Agri-Industry Group had a very successful year thanks to a number of quick and correct strategic decisions that were made in order to deal not only with risks arising from chronic exchange rate volatilities all year long but also with a government ban on the sale of nitrate-based fertilizers and the distribution difficulties that were caused by ensuing changes in the regulatory framework. While significantly alleviating the adverse effects both of a domestic market contraction and of rising exchange rates by tapping export market potential, Toros Tarım racked up a new export performance record and even booked noteworthy exchange rate gains on its raw materials procurements.

In 2017, the Tekfen Agri-Industry Group further bolstered its position as a market's leader by enriching its product portfolio with new fertilizer varieties while also continuing to make its corporate structure more functional, efficient, and dynamic. While engaging in significant efforts to optimize all of its processes through lean production, to work through Toros Academy in the development of its human resources, to create an even better workplace environment through improvements in occupational health and safety, and to minimize the environmental impact of its operations, Toros Tarım will similarly continue to play an important role in the sustainable future of farming in Turkey through the investments that it undertakes.

We at Tekfen regard making agriculture in Turkey more productive through rationalization, technology, institutional discipline, and financial resourcing as a responsibility that transcends solely material expectations. For this reason in 2017 we completed the formation of Tekfen Tarımsal Araştırma Üretim ve Pazarlama A.Ş., (Tekfen Agricultural Research Production and Marketing Inc.) a new company that will put our many years of knowledge, experience, and leadership in the agricultural inputs business line to work directly in that of agricultural production. Having completed the preliminaries last year, in early 2018 Tekfen Agricultural Research made its first big move into agricultural production by acquiring 90% stakes in Alanar Meyve, one of Turkey's leading fruit producers, and in its sister company, Alara Fidan.

Although the activities of the Tekfen Real Estate Development Group fell short of expectations last year owing to adverse market conditions, the Group will nonetheless continue to have an important place in Tekfen's plans for the future.

We believe that Tekfen Ventures, the venture-capital arm of Tekfen Holding, will be bringing a brand-new dynamism and vision to the Tekfen Group through the investments that it undertakes in innovative technologies. Having entered into its first agreements to provide investment financing to promising new endeavours in 2017, Tekfen Ventures has the important mission of supporting our Group's principal business lines through the addition of new ideas, technologies, and products.

In the effort to ready Tekfen for tomorrow and to safeguard its future in line with our world's constantly evolving trends and needs, we do not regard it as enough simply to expand the range of our existing business activities. Instead we also want to make use of our sixty-two years of accumulated intellectual, reputational, and financial capital in order to enter new businesses and to make such values as excellence, strict work ethic, and reputation for keeping one's word that are inherent in Tekfen's genes the hallmarks of the Tekfen name in those businesses as well.

As we ready Tekfen for the future, we are also going to need to make the successes that we have achieved to date structurally sustainable while likewise continuing to redefine our business processes and the ways in which we do business so as to accommodate the requirements of the new world order. The role that technology plays in our everyday lives today means that organizations which do not formulate their digital strategies appropriately or which fail to transform themselves digitally are inevitably going to fall behind. With this realization in mind, we gave priority to this issue last year and made a number of organizational changes accordingly. We have similarly begun allocating significant budget resources for investments in the development of our own digital infrastructure.

Aware that a fundamental and essential requirement of any company's sustainability is respect for the environment, in 2017 the Tekfen Group officially decided to join the Carbon Disclosure Project (CDP) and to publish the results of its efforts to combat climate change. Having been recording its carbon emissions in a manner compatible with CDP reporting criteria since 2010, Tekfen Holding's report earned it a "B" rating, which is the highest grade that can be given to an industrial concern that is disclosing its carbon performance for the first time. This result has motivated us to accelerate such sustainability-related efforts in all Tekfen Group companies and to make the entire Tekfen organization one that is pointed to as an exemplary role model in this respect in Turkey as well.

Having striven across all of its business lines to improve people's living conditions and lives for more than six decades, Tekfen has been making that effort by employing human resources which it sees as being its most precious asset.

Providing our employees with the best and most wholesome workplace environment in which we have maximized occupational health and safety (OHS) is an essential focal point of our sense of corporate responsibility. The goal of a long-term and comprehensive social responsibility project that was launched in 2017 is to make the Tekfen Group an exemplary model for dealing with OHS issues in Turkey. We give serious importance to such efforts and we value them greatly. Another area in which we gained considerable momentum last year was that of organizational restructuring. Management effectiveness has been increased through new functions that have been introduced for the first time or by means of making existing ones more effective through better coordination. While doing this, we also made significant progress in the direction of enriching our management team with the addition of new and youthful members.

As always, our underlying corporate goal is to ensure that Tekfen enjoys its rightful position among those companies that are the most highly respected and that young people in Turkey most want to work for. That is something that we always keep in mind because that goal informs all of our plans for the future, it keeps us dynamic, and it makes us strong.

While regarding the successful results of 2017 as just one more step in the direction of realizing our ultimate objectives, I offer my sincerest appreciation to all of our stakeholders for the confidence and support they give us in our never-ending efforts to go even further ahead.

Very truly yours,

Murat Gigin
Chairman of the Board