(ACTUARIAL) NET PROFIT

Transcription

1

2

3

4

5 OYAK s Highlights (1) 2003 (2) (TL trillion) (TL trillion) (USD million) (USD million) (ACTUARIAL) NET PROFIT % % % % ANNUAL RATE OF RETURN TO MEMBERS CPI (CONSUMER PRICE INDEX) ANNUAL RATE OF RETURN TO MEMBERS/CPI (TL trillion) (TL trillion) (USD million) (USD million) EQUITY (TOTAL MEMBERS RESERVES) 3, , , ,629.7 TOTAL FUNDS UNDER MANAGEMENT 1, , , ,050.3 OYAK Group Combined Results (3) (TL trillion) (TL trillion) (USD million) (USD million) PRE-TAX PROFIT 1, TOTAL GROSS SALES (4) 11, , , ,298.6 TOTAL TRANSACTION VOLUME (5) 50, , , ,350.1 TOTAL SHAREHOLDERS EQUITY 5, , , ,610.0 TOTAL TAXES PAID TOTAL ASSETS 14, , , ,824.4 TOTAL EXPORTS 2, ,333.8 NUMBER OF EMPLOYEES 18,297 16,733 1) Average USD/TL rate 1,422,885; year end USD/TL rate 1,342,100 (for the year ended 31 December 2004) 2) Average USD/TL rate 1,495,297; year end USD/TL rate 1,395,835 (for the year ended 31 December 2003) 3) Excluding OYAK. Consolidated (IFRS) statements also available. 4) The total of gross sales revenues for production and sales companies. 5) Total transaction volume of OYAK Bank, OYAK Anker Bank, OYAK Yat r m and Halk Leasing. Contents 1 OYAK s Highlights : OYAK s 43rd year of operation 4 Chairman's Message 7 Board of Directors and Board of Auditors 8 A message from the CEO 11 Executive Management 12 Developments in member services 20 Developments in OYAK Group companies 31 Auditors Report and Financial Statements 37 OYAK Group Companies Annual Report 2004 [01]

6 2004: OYAK s 43rd year of operation January 2004 January For the first time in its history, OYAK undertakes and completes a syndicated loan project to secure financing for its investments by tapping international markets. Under a credit agreement signed with nine banks, OYAK receives a syndicated loan in the amount of USD 115 million on January 29th. March OYAK Beton commences operations and becomes the newest member of the OYAK Industrials Group. The company's shareholders consisted of Adana Çimento, Bolu Çimento, and Ünye Çimento and OYAK. April OYAK's 44th Annual General Assembly Meeting is held on April 17th, One of OYAK's long-term investment strategies is to play an active role in the energy sector. In line with that objective, OYAK acquires STEAG's 24% stake in skenderun Elektrik Üretim ve Ticaret A.fi. ( SKEN), an electricity company with an average production capacity of 9 billion Kwh a year. Azer-OMSAN Nakliyat MMC, an OMSAN subsidiary transport and shipping company is set up in Azerbaijan. July The final report of the feasibility study conducted by US-based Fannie Mae to develop a long-term mortgage-financing system for OYAK members is released. This report is used as a reference by the Capital Markets Board in developing a draft of legislation to govern the mortgage lending system in Turkey. Annual Report 2004 [02]

7 August The headquarters of OYAK nflaat, a Group construction subsidiary, are relocated to stanbul as part of the company's restructuring. OYAK Bank's stake in OYAK Anker Bank is acquired by OYAK. OMSAN's subsidiary Omfesa Logistics GmbH is set up in Germany. OYAK begins the process of selling off its 10.85% stake in Goodyear. October OYAK taps international markets for its second credit syndication, receiving a USD 125 million loan on October 27th. The acquisition of RWE Power AG's 25% stake in skenderun Enerji Üretim ve Ticaret A.fi. ( SKEN) is completed, giving OYAK a 49% control of the company. As a result of changes made in the legal framework governing privately owned security firms, such companies are required to divest themselves of all activities not directly related to security. Because of this, OYAK Güvenlik turns its hygiene services over to OYAK Pazarlama, the new name given to OYPA after that company was restructured in November OYAK Telekomünikasyon Hizmetleri A.fi., a telecommunication services provider, is set up as a subsidiary of OYAK Pazarlama for the OYAK NET project to provide value-added network services to OYAK subsidiaries and other corporate customers. A total of 1,152 units are allocated for OYAK members in Ankara/Eryaman Atakent Phase VI Stage III, a project being undertaken jointly by OYAK and TOK, the Housing Development Administration. December OYAK Turizm is wound up as a company with all ticket sales and agency activities being turned over to OYAK Pazarlama. HEKTAfi receives its license to make veterinary pharmaceuticals and immediately commences production of them. December 2004 Annual Report 2004 [03]

8 Chairman's Message I submit our report of our 43rd year of operation together with our financial statements for the year for your consideration and assessment. Actuarial balance Our fundamental duties at OYAK are to be watchful of our members' futures, ensure the survival and value of our assets, and, most important of all, maintain our actuarial balance. I am both pleased and proud to say that in 2004 we once again successfully fulfilled these important duties entrusted to us by our members. OYAK's equity, which is to say the total assets of all our members, reached TL 3.3 trillion in value in The excellent results achieved in business and investment activities enabled us to increase our members' assets by much more than the posted rate of inflation last year. What is OYAK? As has become customary, I want to begin this report by briefly summarizing who we are and what we do for those who are newcomers at OYAK. OYAK is an assistance and pension fund that is governed by its own statute. The Fund's assets consist of the dues that its members pay, members' contributions to the voluntary Pension System, and the returns generated on both. OYAK makes no use whatsoever of public funds and enjoys no special privileges. Its basic duty is to ensure the security of its members' future. In carrying out this principal duty, OYAK also provides its members with the forms of assistance that they require at different stages of their lives. In that capacity, OYAK extends loans (comparable to personal loans) to its members and also strives to make its members home-owners. Annual Report 2004 [04]

9 The importance of individual equality at OYAK All activities carried out at OYAK are shaped by the principle of equality of treatment and an equitable distribution of resources to members. Our basic objective is to ensure that our services are made available to all our members in a timely manner and without interruption and that our resources are distributed equitably among them. Equality among members is a fundamental principle at OYAK. It is a basic rule that each member must have access to the Fund's resources whenever he wants to do so and only to the degree to which he is entitled. High-quality, modern service OYAK is continuously in touch with its members. Fund-member communication takes place through a variety of channels and the traffic is measured in terms of hundreds of thousands of contacts. Each and every telephone call, fax, or received from our members is of equal importance and value and is treated in the same meticulous way. No matter what it does for its members, OYAK always strives to provide its services in a high-quality, modern format. The Member Services Department and indeed every part of our organization that serves the members makes every effort to achieve and increase unconditional member satisfaction and to ensure that our services reach our members in an uninterrupted way. OYAK also employs technology and innovations in order to provide its members with better and faster service. OYAK is acknowledged as the author of some of the most successful technological applications in our country. More than 40 subsidiaries More than 40 companies make up the OYAK Group. Active in a wide range of businesses from finance to cement and from energy to automotives, our subsidiaries are respected members of their sectors and some of them are global trademarks. Last year our subsidiaries continued to create increasingly more added value not just for our members but for the entire Turkish economy as well and all had a productive and profitable year. OYAK subsidiaries in 2004 created indirect economic benefit for more than 100,000 people were responsible for an important share of our country's foreign trade, with exports worth USD 2.2 billion paid a total of TL 442 trillion in taxes booked total sales amounting to TL 11.3 quadrillion. Annual Report 2004 [05]

10 Chairman's Message Looking at these overall numbers, one important fact becomes very apparent: OYAK represents a tremendous economic force in the Turkish economy and it stands in the front ranks of our Country's leading commercial and industrial conglomerates. This superior position is what supplies the energy that enables OYAK to fulfill its basic duty, which is to protect and grow its members assets. It also makes it possible for OYAK to create more and more added value for Turkey. New prospects await us Exciting new prospects lie before us. Turkey's efforts today are focused on joining the league of developed economies. Our national economy is going through its disinflationary process, the outcome of which will mean that working people, entrepreneurs, and retirees-in short, everyone-has to learn how to live and work in an economic climate in which low rates of inflation prevail. As consumption models keep changing, productivity and effectiveness become increasingly more imperative on the production front. At the same time, Turkey's EU accession process has reached a historically important turning point. Fullmembership negotiations, which are scheduled to begin in the last quarter of 2005, will advance our country to the next stage of its European Union journey. OYAK will continue to put its assets to work, transforming the business opportunities created by new prospects into added value and thereby growing even more. What gives OYAK the strength to make this journey is not just its material assets however: the most important guarantee of our futures is the whole OYAK family believing in our shared values and linked firmly together around our universal mission. OYAK will continue to belong to everyone through products and services that are offered to millions of people. OYAK is an inseparable part of and a source of pride for the Turkish nation. In closing, I extend my gratitude to all those who believe in us, trust us, and prefer to do business with us. Y ld r m Türker, (Ret.) Lieutenant General Chairman of the Board of Directors Annual Report 2004 [06]

11 Board of Directors 1 1 Y ld r m TÜRKER (Ret.) Lieutenant General, Chairman 2 Mustafa BIYIK Major General Gendarmerie, Board Member 3 Kamil BAfiO LU Brigadier General, Board Member (appointed on 25 October 2004) 4 Mehmet Ali ÇINAR Rear Admiral, Board Member 5 Ahmet Taner CANDEM R (Ret.) Brigadier General, Board Member 6 Lütfi Fikret TUNCEL Board Member (Retired Governor) 7 Prof. Necdet SER N Board Member (Retired Rector) 8 Coflkun ULUSOY, Ph.D. CEO and Board Member Board of Auditors 1 R dvan ULUGÜLER Brigadier General, Member (appointed on 18 October 2004) Haydar GEZM fi Member, Member of the Higher Supervisory Board of the Prime Ministry 3 Haluk ALTAY Member (Retired banker) Mehmet TAfi Major General, Board Member (until 1 October 2004) Ziya GÜLER Major General Member (until 1 October 2004) Annual Report 2004 [07]

12 A message from the CEO We are proud to report that last year we not only built on our successes but also broke new records in many of our financial outcomes. OYAK posted the highest consolidated net profit and enjoyed the highest profitability in return on assets and on equity of any leading Turkish corporate group on an International Financial Reporting Standards (IFRS) basis. In terms of its actuarial balance sheet, our Fund achieved the highest rate of real return in its history. The actuarial profit added to our members' savings in 2004 amounted to TL 925 trillion. This in turn implies that the rate of return on members' assets, the most crucial indicator of our success for our members, was 40.3% in This 40.3% rate of return is more than four times the last year's consumer price index increase of 9.3%. These highly pleasing results, achieved in an economic environment where inflation has shrunk to approximately 9%, are the outcome of OYAK's commitment to its core strategies and principles. OYAK is a major corporate group OYAK has stakes in more than 40 companies active in a wide range of businesses ranging from banking to energy, and from automotives to food processing. Therefore, OYAK is not only Turkey's biggest private pension fund but is also one of its biggest corporate groups. The leader in profits and profitability OYAK's consolidated financial statements are prepared and audited according to International Financial Reporting Standards. According to those statements, OYAK ended 2004 very successfully, ranking first among our Country's leading corporate groups in terms of both profits and profitability. Not only did the Fund show a very high profit, it also lead in terms of profitability. For the last four years, time and again OYAK has succeeded in outstripping Turkey's leading corporate groups on the basis of consolidated net profit/total assets and consolidated net profit/total shareholders' equity measures. Annual Report 2004 [08]

13 Profitability and productivity are two primary goals that are vital to OYAK. Seeking to achieve real, continuous growth in its members' assets and to pay the highest possible rate of return, profitability is a key indicator of our Fund's success. Accurate investment policies It is not only vital that our subsidiaries are amongst the leaders in their respective fields or achieve high sales volumes. Those factors are important only in view of their profitability. An approach that is mindful first and foremost of profitability shapes OYAK's investment decisions. Throughout its corporate history, OYAK has targeted areas it considers profitable and has quickly moved out of businesses with falling profitability. This strategy is a key to OYAK's success. SKEN, a recent investment for us, vindicates our investment policies. In just its first year, SKEN yielded a return of nearly a third of the entire investment and this performance made a significant contribution to the overall increase in our Fund's assets. The point we have reached today Looking at the point we have reached today from two different angles will enable us to see the results of our long-term efforts more clearly. The first of these is the axis of OYAK's own development through the years. Our equity, which stood at TL 633 trillion in 2000, reached TL 3.3 quadrillion as of year-end The TL 925 trillion in returns that we generated in 2004 alone are about 50% more in nominal terms than the value of our total assets were in The other axis is our position in the market vis-à-vis our benchmarking group through the years. On the basis of its IFRS audited financial statements over the years since 2000, OYAK has greatly strengthened its market position and, as noted above, has become the corporate group with the largest profit and the highest profitability in Turkey. Situated at the point where these two axes intersect, OYAK has substantially increased the value of its members' assets in real terms; greatly expanded the scope of the services and forms of assistance it provides its members. The amounts paid out on retirement alone have actually trebled since The point we have reached today is one that fully matches our mission. It is where we aimed to be, and it is the springboard for our future growth and development. Just as it is in Turkey today, OYAK has also become a recognized and respected figure in the international markets. Our Fund is prepared to use the rather substantial financial muscle at its disposal to be active abroad as well as at home. OYAK in the public eye In the past years, questions about OYAK's structure and about its relationship with the Turkish Armed Forces have been raised on both national and international platforms. Annual Report 2004 [09]

14 A message from the CEO As everyone knows OYAK is an assistance and pension fund for Turkish military personnel. The important point here is that there is no organic relationship between ourselves and the military, our corporate identities are statutorily distinct. The only relationship between OYAK and military is the fact that OYAK happens to be the pension fund in which the military personnel invest their savings. Those who forget that the military does not - and cannot and should not - engage in commerce are also of a mind to claim that OYAK is a military commercial concern and is active in military and defense-related industries. This assumption is false. Not a single one of the companies in which we have a direct or indirect stake is involved in any line of business connected to defense or to the armed forces. This is very important to us and is enshrined in our corporate rules of ethics. In short, OYAK is a powerful corporate group that operates under private law and free-market conditions and is run by civilians who take a thoroughly private-sector approach to management. Having put another successful year behind us, I am pleased to see that our assurances on this issue are understood and beyond Shifting economic conditions necessitate continuously adapting the way we do business. Profitability, productivity, and effectiveness have become the most important criteria for success. In the years ahead we can expect to seek competition get tougher in all aspects of our business. Only those who are good at what they do and who offer high-quality products and services will be the winners and, more important than that, the ones who endure. With the strength that it derives from our 43 years of corporate history, OYAK is determined to stay out in front in this race. To achieve that, we will continue to make the best possible use of the opportunities for growth and investment that the economy offers and to invest in new areas of business. The financial resources at our disposal provide the energy we need to grow. The ongoing support and confidence of our more than 220,000 members are the most important elements giving us the strength to continue our journey into the future. So long as we abide by our convictions, maintain our unity, and cherish our values, OYAK will continue to be highly profitable and will put that profitability to work for the benefit of its membership. Thank you for your continued support and interest in OYAK. Coflkun Ulusoy, Ph.D. Chief Executive Officer Annual Report 2004 [10]

15 Executive Management Coflkun ULUSOY, Ph.D. Chief Executive Officer Hülya ATAHAN Executive Vice President Financial and Administrative Affairs Ayd n MÜDERR SO LU, Ph.D. Executive Vice President New Business Development Ergün OKUR Executive Vice President Member Services Celalettin ÇA LAR Head of Cement and Automotive Groups Caner ÖNER, Ph.D. Executive Vice President Investments and Information Systems Annual Report 2004 [11]

16 Developments in member services In 2004, OYAK once again paid its members a return well above inflation. The 40.3% rate of return secured last year was more than four times the rise in the consumer price index in The member is everything At year-end 2004, OYAK's membership numbered 222,028, of whom 87% are on active duty and 13% are in the Pension System. The Pension System is a system that allows those who have become entitled to receive a retirement benefit and whose permanent OYAK membership would normally be terminated, to continue being a member and to take advantage of OYAK's services. If a member in the Pension System dies, his or her spouse can join the system if they so wish. 50% of the income secured as a result of applying the return determined at each year's General Assembly Meeting to the savings of members is paid quarterly to the members as a pension while the remaining 50% is added to their reserves to continue building up their reserves. OYAK is a pension fund that takes a modern approach to business and regards its members as the focal point of all its activities. In everything it does, OYAK is always mindful of the interests and happiness of its members. OYAK strives continuously to provide its members with the most suitable products and services. All of the efforts that the Fund has been making in the last three years converge around the common goal of facilitating OYAK-member communication and increasing member satisfaction. In 2004 OYAK secured a return for its members far in excess of inflation: the posted 40.3% rate of return is 4.3 times the rate of increase in the CPI announced by the State Institute of Statistics for Equity (Members Reserves) (TL Trillion) (USD Million) 3, , , , , ,165.9 Membership 216, , , Annual Report 2004 [12]

17 When the changes that have been taking place in our country over the last three years are taken into account, the value of this excellent performance on OYAK's part becomes even more apparent. Compulsory benefits reach TL trillion in value The benefits that OYAK is statutorily required to pay its members continued to increase last year and reached TL trillion in value, the biggest share of which consisted of lump-sum payments made to retirees. In 2004 the Fund paid a total of TL trillion to 5,617 members as their retirement benefits. The compulsory benefits that OYAK pays its members consist of Retirement Benefits, Pension System Payments, Payments for Withdrawals from the Pension System, Refunds on Dues, Death Benefits, and Disability Benefits. OYAK members continued to make heavy use of the Fund's social services. In addition to compulsory benefits, OYAK also provides its members with a number of non-compulsory services as well. There are basically two types of such services that OYAK provides its members: Financing options similar to personal loans that are intended to meet members' current needs Long-term housing loans that is provided in line with the Fund's mission of making each of its members a home-owner. Total non-compulsory benefit payments made to members in 2004 reached TL 89.4 trillion in value. Housing Loans OYAK's housing related loans are provided to members under three headings: Personal Housing Loans, Building Cooperative Loans, Mass Housing Production Loans. Breakdown of Compulsory Benefits Paid 12.9% Pension System Payments 10.2% 3.1% Payments for Withdrawals from the Pension System 5.0% 0.3% Refunds on Dues 0.3% 1.2% Disability Benefits 0.9% 2.1% 80.4% Death Benefits Retirement Benefits 1.6% 82.0% Annual Report 2004 [13]

18 Developments in member services In 2004 OYAK extended a total of 1,211 new home loans and the number of members that benefited from personal loan services reached 31,167. OYAK-supplied loans are available on terms of three to ten years and with fixed-installment options. In 2004 OYAK extended a total of 1,211 new home loans. In terms of numbers this represents a year-on increase of 88.9%. The volume of lending on the other hand increased 150.9% year-on and reached TL 28.1 trillion. Providing its members with the forms of support that they require at different stages of their lives, OYAK also joins its members in their efforts to become home-owners as well. All of the 1,660 units in the first and second phases of the Eryaman/Atakent Project, the allocation of which began in 2003, have been turned over to their owners. In addition, all of the 1,152 units in the third phase of the project, allocation of which began in 2004, have been allocated totally to OYAK members. The number of OYAK members taking advantage of the entire Eryaman/Atakent Project has reached 2,812. Personal Loan Services OYAK provides personal loans from its own resources as well as from those of Vak fbank. Under the heading of OYAK's personal loan services, a total of TL 46.0 trillion was lent out to 31,617 members in These loans made available from OYAK's resources are fixed-installment loans with terms of six, nine, or twelve months, in amounts up to twice the one-month salary on which a permanent member's contributions are based. Breakdown of Non-Compulsory Services 17.8% Housing Loans 33.7% 5.3% 11.2% Commissary Services Lump-sum Loans of up to 80% of Members Reserves 4.8% 10.1% 65.7% Other Loans 51.4% Annual Report 2004 [14]

19 When communicating with its members, OYAK makes active use of the internet as an alternative communication channel. The Fund has made it possible for OYAK members to apply for loans online at its internet web site. This option is important not only because it minimizes the operational workload but also because it enhances the effectiveness and quality of service. In 2004, 16,925 OYAK members applied online for loans. In 2003 the percentage of online loan applications to total applications was 42.9%; in 2004, this ratio increased to 53.5%. Paralleling the increasing and wider use of the internet among our membership, we expect that this percentage will become even higher over the next few years. Members also continued to take advantage of personal loans and fixedinstallment consumer loans under an agreement with Vak fbank as an alternative to OYAK-sourced loans. The loans made available from Vak fbank's resources are fixed-installment consumer-finance loans with terms of six, nine, twelve, or eighteen months that are extended in amounts up to three times the onemonth salary on which a permanent member's dues are based. A total of TL trillion was extended during 2004 as fixed-installment consumer-finance credit. Donation Based Retirement Income System: An investment option with high real returns The Donation Based Retirement Income System, which was introduced in 1989, is an investment option that makes it possible for members to earn additional income that is payable while on active duty and/or after retirement. The pool of contributions provided by members taking part in the system are invested by OYAK in government bonds, T-bills, time deposits, foreign currency deposits, so as to generate the maximum returns possible with the least amount of risk. The income generated by the system is partially paid out at quarterly intervals with the rest being added to his reserve. In 2004 the system generated a return of 30.0%. This was 3.2 times the posted rate of CPI inflation and higher than that of any other alternative investment vehicle available in Turkey last year. System participants received a total of TL 44.0 trillion in quarterly payments while TL 28.0 trillion was added to their reserves. As of 31 December 2004, the pool of funds available for investment in the Donation Based Retirement Income System was TL trillion Housing Savings Fund: An investment option with high, real returns that is focused on home-ownership The Housing Savings Fund was set up to make it possible for OYAK members to save up the down-payment they would need to buy a home of their own. The Fund's sources consist of voluntary additional 10% contributions that OYAK members pay. These savings are invested by OYAK in order to secure the maximum possible return on them. Annual Report 2004 [15]

20 Developments in member services In 2004 the Fund provided its participants a return of 28.9% on their savings. This was 3.1 times the CPI increase for the year. OYAK's other mission-making as many of its members as possible the owners of their own homes-is second in importance and priority only to that of guaranteeing their futures in their retirement years. The increase registered in the number of members participating voluntarily in the Housing Savings Fund is a concrete example of the interest and confidence that OYAK's membership has in the efforts that the Fund has been making on the matter of home-ownership. In 2004, the number of members withdrawing their savings from the Fund for use was 18,000 while the number of them participating in the Fund topped 103,000. As of 31 December 2004, the pool of Housing Savings Fund savings under management was TL trillion. Developments in OYAK-member communications All member-related services are under the responsibility of the Ankara-based Member Services Department. In addition to maintaining day-to-day communication between OYAK and its membership and conducting all activities involved in member services, the Department's duties also include developing and improving relations with members as well as identifying members' complaints and wishes and resolving problems as quickly as possible. OYAK pays attention to making intensive use of technology in the process of providing its members with high-quality products and services. The internet, call center, and other alternative delivery channels that the Fund has developed in recent years are popular and are being used by more and more members. Comparison of Returns on Donation Based Retirement Income System and CPI (%) 30.0 Comparison of Returns on Housing Savings Fund and CPI (%) times 3.1 times Return CPI Return CPI Annual Report 2004 [16]

21 Throughout 2004 OYAK maintained increasingly effective communication with its members. OYAK ranks among the organizations making the best and most effective use of alternative delivery channels in reaching out to and serve a large and geographically dispersed audience. Throughout 2004 the Member Services Department strove to provide OYAK members with the best service possible. In addition to being a unit responsible for the operational conduct of all services provided by OYAK to its membership, the Member Services Department is also the full-time point of contact between the Fund and members. The department can be accessed in a variety of ways such as: OYAK Call Center OYAK Website ALO-OYAK Interactive Voice Response System Mail, fax, Suggestion boxes Incoming member queries are registered, statistics are maintained on them, assessments are made, and senior management is advised as to what action needs to be taken. Everything is done to increase the effectiveness of the interaction between OYAK and its members. Members' questions, complaints, requests, and queries were received at OYAK through many different channels such as telephone, letters, SMS, and as well as in face-to-face contacts at OYAK offices. Every effort was made to respond immediately and resolve whatever issue there might be. Members' requests and suggestions that could not immediately be dealt with because of their nature were forwarded to the appropriate unit where they were considered and resolved within the framework of OYAK's governing statute, general assembly meeting resolutions, and the requirements of prevailing regulations. As in previous years, presentations, conferences, and meetings were conducted in 2004 to better acquaint members with OYAK's activities and with the services that they can have the benefit of in the pensioning process. Besides these presentations and meetings about OYAK's annual activities, investments, projects, and member benefits and services, a series of conferences that began in December 2004 and will end in September 2005 is being held according to a planned schedule. These conferences will make it possible to establish direct contact with about 8,000 of our members. Eleven such conferences in which OYAK's chairman and chief executive officer are personally in attendance are planned and are being held at military installations where members are concentrated. Another 41 conferences are also being held in which the assistant general manager responsible for OYAK member services is involved. The Member Services Department identifies the main issues on which members are having problems and then develops and carries out action plans aimed at deciding upon and implementing the best measures to resolve them and also to increase and diversify member services. Annual Report 2004 [17]

22 Developments in member services In addition to the operational services that the Member Services Department provided all year long, the department was involved in member communication services through a variety of channels, the details of which are summarized below. OYAK Call Center: One of the most important channels of communication between OYAK and its members. A total of 438,797 calls were received at the OYAK Call Center in OYAK website: OYAK's website at has become the channel of communication most popular with OYAK members. The number of visits to the site last year reached 1,490,012 while visitors accessed the On-Line Member Services option 828,468 times to manage their personal accounts. 64,717 members applied for and received the personal identification numbers that were introduced to head off possible security risks arising from internet abuse. 8,762 members signed up for the Keep me Informed service in which news bulletins about developments at OYAK are sent out regularly by . contacts: During 2004, OYAK communicated with 5,227 members by . ALO-OYAK Interactive Voice Response System: The system was used by 18,151 members in In early 2005 the existing system is to be replaced with a more advanced one. Mail and fax: The OYAK Member Services Department received a total of 7,289 requests, suggestions, and complaints by mail and fax in Walk-ins: A total of 41,507 members called in person at the Member Services Department to make queries or to apply for services. Statistics on all telephone calls, s, letters, faxes, and visitors arriving at OYAK and the hits on its web site are maintained on a daily, weekly, monthly, and yearly basis. Last year, there was a total of 2,274,508 instances of communication between OYAK and its members. This represents a year-on increase of 46.2%. Member-focused, high-quality service All of the systems that OYAK has developed and set up for its members have the same common goal: to put members' savings to work by taking a long-term approach and to apportion the returns among members equitably and according to their entitlements. In other words, all of OYAK's activities are focused on resources that will enable its members to enjoy a comfortable standard of living when they retire. Annual Report 2004 [18]

23 All of OYAK's efforts are directed towards its main aim of safeguarding its members' futures. OYAK puts the savings entrusted to it by its members to work with an approach that is mindful of the balance between risk and return, is based on a long-term view, is considerate of the needs of society and the environment, and is able to create additional resources by generating returns in the short term. All of OYAK's efforts are directed towards ensuring that the products and services that it is statutorily required to provide are made available without impairing its actuarial balance and in such a way as to fulfill its real aim of safeguarding its members' futures, which is to say, their retirements. This is a very important and also very critical balance. OYAK is an institution which meticulously preserves and improves upon its principle of member-focused, high-quality service and whose every activity is shaped by the notions of continuity, reliability, and quality. An approach to quality that seeks to improve the quality of products and services beyond wishes and expectations is crucial to becoming a business that creates the highest value possible. In that respect, it is very important to install and ensure the ongoing continuity and improvement of a quality management system that involves the active participation of all our employees and seeks to achieve perfection in member satisfaction by maximizing the added value of our services in line with our corporate mission and vision. Taking this as its point of departure, the project launched in November 2004 to set up and document an ISO quality management system at OYAK headquarters was successfully brought to completion in short time. OYAK was awarded its certificate in April of The OYAK-member relationship is one that demands unconditional member satisfaction accurate and essential information timely fulfillment of expectations continuous development of services and their quality mutual trust a long-term view. In line with its vision, OYAK will continue to place the well-being of its members above everything else recognize the inevitability of change and keep pace with the new demands of the present and future invest in undertakings that are as beneficial to the Country as they are to the Fund secure higher real returns for its members every year without putting its resources at risk. Annual Report 2004 [19]

24 Developments in OYAK Group companies OYAK subsidiaries are active in the areas of finance, industry, and services. As of year-end 2004 there were more than 40 subsidiaries in the OYAK portfolio. OYAK's subsidiaries posted successful results in Active in a diversified range of businesses from finance to automotives and from cement to food processing, OYAK subsidiaries performed successfully last year, taking maximum advantage of the business opportunities presented by the economic environment. Exploiting the competitive advantages and economies of scale that most of them have, OYAK Group companies continued to strengthen their market shares in their individual areas of activity. Finance OYAK Bank is a strong national bank focused on wide-ranging, high-quality services. OYAK Bank provides banking products and services to a customer base spread out all over Turkey in the corporate, commercial, and retail banking segments with nearly 300 branches, close to 1,000 ATMs, POS devices, internet banking, and telephone banking. OYAK Bank continued to grow in 2004, a year in which its total assets were up 20% to TL 6.2 quadrillion, its deposits reached TL 4.6 quadrillion, real profits were up 60% to TL 115 trillion, and shareholders' equity topped TL 714 trillion. The Bank's capital adequacy ratio, which has been consistently high over the years, was 16.7% in The year-on increase in total loans, which amounted to TL 3.5 quadrillion, was 40%. At 1%, the ratio of non-performing loans to total loans was well below the sectoral average. Improvements in productivity, the most important of the Bank's objectives in 2004, were all successfully achieved. Despite very modest increases in personnel and branch numbers last year, the real growth achieved in total assets was 20.1%. Return on equity, which was 11.9% in 2003, was 16.1% in OYAK Bank has two subsidiaries that are active in the business of financial services: OEF-OYAK European Finance and OYAK Portföy Yönetimi, asset management. Annual Report 2004 [20]

25 OYAK European Finance (OEF) is a financial services company based in the Dublin International Finance Center in Ireland. OEF offers a wide range of services from corporate finance consultancy to project finance. The company performed successfully in 2004 in terms of both transaction volumes and profitability. OYAK Portföy Yönetimi was the first portfolio management company set up in Turkey to provide asset management services for corporate and individual customers. The company is a joint venture of OYAK Bank and OYAK Yat r m Menkul De erler (brokerage services). Exploiting its accumulated market knowledge and experience so as to generate the highest possible returns on the assets under its management, OYAK Portföy Yönetimi is also responsible for the management of a large number of mutual funds. As of year-end 2004, it was managing a portfolio worth TL 791 trillion, putting the firm in eighth place among all asset management companies in Turkey. OYAK Anker Bank has been an OYAK Bank subsidiary since 1996 when the Bank acquired a 100% stake in Koblenz-based Anker Bank. On August 2004, OYAK acquired full ownership of this Bank. OYAK Anker Bank is a commercial bank and a member of the Association of German Banks. In addition to its main branch in Koblenz, OYAK Anker Bank has branches in Berlin, Bonn, Mannheim, and Augsburg. OYAK Anker Bank is active in all segments of banking and serves German and international customers especially in the areas of international trade finance and retail banking services. OYAK Yat r m, founded in 1982, is one of the foremost, oldest, well-established, and trusted brokerage houses in Turkey. Nearly 30,000 clients consisting of individual and corporate customers and international mutual funds and brokerages prefer OYAK Yat r m when investing in today's rapidly evolving capital markets. Paralleling the expansion witnessed in capital markets in 2004, OYAK Yat r m continued to grow and increase its market share. The company's share of stock market transactions, which was 3.44% in 2003, rose to 3.83% in During 2004 the company provided brokerage services for a total of USD 682 million in customers' assets. OYAK Yat r m is the seventh biggest brokerage house in Turkey. It is an active participant in the Turkish Derivatives Exchange (TURKDEX), which opened in February 2005 in zmir. AXA OYAK Holding, a holding company through which OYAK and the French AXA Group jointly carry out their insurance-industry activities in Turkey, has been cited as the country's most successful insurance group in the last five years. The holding company's portfolio consists of two insurers: AXA OYAK Sigorta and AXA OYAK Hayat Sigorta. Annual Report 2004 [21]

26 In 2004, OYAK subsidiaries posted generally successful results, increased their business turnovers and strengthened their market presence. AXA OYAK Sigorta is active in elementary branches, other than life and particularly in auto, fire, shipping, accident, engineering, personal accident, legal liability, and agriculture. An extensive distribution network with a nationwide reach enabled AXA OYAK Sigorta to outstrip the sector's average rate of growth by 9.8% in 2004 and rank in second place among elementary insurers. The company's premium production was up 51.4% in AXA OYAK Sigorta was awarded the Consumer 2004 Quality Award by Tüketici, a consumer rights magazine in its survey of trademarks whose quality consumers have the greatest confidence in. AXA OYAK Hayat Sigorta is a life insurance company. It was the author of a first in Turkey when it introduced a specially designed product for Turkish military personnel incorporating the group life insurance concept. At the end of 2004 the number of policyholders covered by this program exceeded 500,000. AXA OYAK Hayat Sigorta's premium production was up 6.2% last year. OYAK Emeklilik, the first company in Turkey to be incorporated solely for the purpose of selling and managing private pension plans, began offering its products and services on 27 October The company reaches and serves its customers through nearly 1,000 agents in OYAK Bank branches. OYAK Emeklilik ranked among the top three private pension providers from the standpoint of number of policyholders at year-end Halk Leasing, which commenced operations in 1991 and in which OYAK controls a 46.4% stake, ranks among the ten biggest leasing companies in Turkey. Halk Leasing provides fast and highly advantageous leasing services to domestic and foreign investors, private and public-sector concerns, and industrial enterprises of every size. Known for its high-quality service policy and sterling reputation, Halk Leasing successfully reached all its targets and wrote USD million worth of new leasing business in The company controls a 4.2% share of its sector. Annual Report 2004 [22]

27 Developments in OYAK Group companies Industry OYAK Cement Group consists of six cement companies whose consolidated cement production capacity of 12.2 million tons a year continues to make the group the biggest cement producer in Turkey. Adana Çimento is a leader of the industry and one of the biggest cementproducers in the country with a clinker production capacity of 2.3 million tons and a cement milling capacity of 3.5 million tons a year. Adana Çimento has consistently ranked high on the list of Turkey's 500 biggest industrial concerns. In 2004 the company increased output to meet strong demand for cement both within the country and in Iraq and a number of Mediterranean countries. Adana Çimento, which has the highest installed cement manufacturing capacity in a single location in Turkey, increased its sales in 2004 and registered significant developments in profitability. The company turned its ready-mix concrete plants over to newly-incorporated OYAK Beton in Bolu Çimento successfully defended its strong market position in 2004, a year in which the company performed very well in production, sales, and profitability. Bolu Çimento sells to a territory that amounts to 19% of the country's area and in which 15% of the country's population dwells. In 2004 it increased its share of the domestic market from 4.9% to 5.2%. The company exported a number of small shipments of cement to Iraq in Bolu Çimento's annual clinker production capacity is 1.3 million tons and its cement manufacturing capacity is 2.6 million tons. Bolu Çimento turned its ready-mix concrete plants over to newly-incorporated OYAK Beton in Ünye Çimento supplied cement to the domestic market while also exporting goods to Portugal, the UK, Italy, and Belgium. In addition to sales to its traditional markets, the company made sales to Iraq as well. Ünye Çimento sold clinker to Italy, Albania, Spain, Slovenia, and the UK last year. The company's annual clinker production capacity is 1.5 million tons and its cement milling capacity is 1.8 million tons. Ünye Çimento turned its ready-mix concrete plants over to newly-incorporated OYAK Beton in Annual Report 2004 [23]

28 Developments in OYAK Group companies Mardin Çimento sold more than 1 million tons of cement and nearly 150,000 m 3 of ready-mix concrete in 2004, a record-breaking year for the company's cement sales. Exports accounted for a 44% share of total sales. During the year Mardin Çimento increased its annual clinker production capacity from 640,000 tons to 742,000 tons. The profit margin on the company's operations last year was 35%. Mardin Çimento has two ready-mix concrete plants located one each in fianl urfa and Diyarbak r. The magazine Forbes has put Mardin Çimento in its list of the hundred best Asia/Pacific and European companies. Mardin Çimento was the only Turkish company on Forbes' Best Under a Billion list of companies in Elaz Çimento completed its new clinker production line project in This recently completed investment has enabled the company to increase its capacity, achieve greater economies in energy use, and reduce the potential environmental impact of its production activities well below acceptable limits. The export sales to Iraq that Elaz Çimento began in 2003 continued in The year-on increase in sales to that country last year was 184% and they amounted to USD 8.5 million in value. Elaz Çimento's annual clinker production capacity is 495,000 tons and its cement milling capacity is 953,000 tons. The company has one ready-mix concrete plant, located in Malatya. OYSA Çimento, regarded as one of the strongest players in the sector, launched a pre-milling project at its skenderun mill in 2004 to reduce costs Group s Total Gross Sales* (TL Trillion) (USD Million) 11, ,913.4 Group s Total Transaction Volume** (TL Trillion) (USD Million) 50, , , , , , , , , , * The total of gross sales revenues for production and sales companies. ** Total transaction volume of OYAK Bank, OYAK Anker Bank, OYAK Yat r m and Halk Leasing. Annual Report 2004 [24]

29 and increase production capacity. This investment is scheduled for completion in the first half of OYSA Çimento's huge capacity has given impetus to its domestic and foreign sales, which have further strengthened its position in the sector. The company's annual clinker production capacity is 415,000 tons and its cement milling capacity is 1.9 million tons. At year-end 2004 OYSA Çimento had seven readymix concrete plants in different provinces and a milling operation in skenderun. OYKA Ka t Ambalaj is the only integrated manufacturer of kraft paper in Turkey. In 2004 it launched productivity, quality, and environment-related investments at the Çaycuma paper mill. These investments are scheduled for completion in The Çaycuma paper mill manufactures kraft paper and cellulose suitable for making industrial paper sacks. In 2004 the factory produced 55,000 tons and sold 58,000 tons, giving it an important place in our country's kraft paper market. Paper manufactured at the factory is also exported to countries such as Azerbaijan, Syria, Romania, Greece, United Arab Emirates, Algeria, Macedonia, and Jordan. OYKA Ka t Ambalaj's paper sack factory in Adana is one of the biggest paper sack makers in Turkey. The factory manufactures industrial paper sacks for a wide range of commodities such as cement, foods, seeds, starches, quicklime, plaster, barite, and dry chemicals. OYAK Beton, which commenced operations in 2004, is the newest member of the OYAK Industrials Group. The company's startup capital consisted of the ready-mix concrete plants of Adana Çimento, Bolu Çimento, and Ünye Çimento and a cash injection from OYAK. The result was the birth of a readymix concrete giant serving five different regions of the country with 27 readymix concrete plants, six of them mobile, and all equipped with the latest technology. Group s Total Assets (TL Trillion) (USD Million) 14, ,483.8 Group s Total Shareholders Equity (TL Trillion) (USD Million) 5, , , , , , , , , Annual Report 2004 [25]

30 Developments in OYAK Group companies In just its first eight months' of operation, OYAK Beton managed to sell 1.7 million m 3 of concrete. OYAK Renault once again retained its title as the Country's leading automotives exporter. As a result of the positive developments taking place in the national economy, domestic demand for automobiles was very strong and rising. With the impetus gained by the Mégane II Sedan, manufacture of which began in Bursa for sale to world markets, the company exceeded all performance targets and had a very successful year. OYAK Renault exported 133,262 automobiles last year. The undisputed leader of the Turkish automotive sector and its star exporter, OYAK Renault operates under a license from the French automotive maker Renault. Bursa plant has two separate units one produces engines and transmissions and the other assembles bodies. SKEN, which is active in energy production, is a minority stake acquired by OYAK in In April of the year OYAK bought a 24% share of the firm, which it subsequently increased in October by acquiring another 25% block of shares, bringing its total control of the company to 49%. The remaining 51% belongs to STEAG of Germany. SKEN is the owner of the skenderun Sugözü power plant, the first thermal power plant in Turkey designed to use imported coal. The plant, which was designed and constructed on the build-operate-transfer model, was commissioned in November 2003 and consists of two units, each with a net rating of 605 MW. This makes the skenderun Sugözü facility one of the biggest thermal plants in Turkey. SKEN's goal is to generate an average of 9.1 billion Kwh of electricity a year, an amount that corresponds to about 7% of all the electrical power produced in Turkey nationwide in one year. HEKTAfi once again remained the leader of its sector in 2004 with a 22.8% market share. HEKTAfi, widely acknowledged to be one of the most successful companies in the agricultural chemicals industry in Turkey, has received the licensing it needs to begin manufacturing veterinary pharmaceuticals and introduced thirteen new products to the market in 2005: nine of them veterinary pharmaceuticals and four concerned with environmental health. Annual Report 2004 [26]

31 In addition to being a manufacturer, HEKTAfi is also the Turkish distributor for such global giants as DuPont and FMC. As part of its efforts to diversify its product portfolio, HEKTAfi has also become the Turkish distributor for the firms of Crompton and Makhteshim Agan. HEKTAfi's product catalogue currently contains nearly 200 chemicals and pharmaceuticals. The company's installed manufacturing capacity is greater than that of any other firm in the sector and it also has the most extensive range of products and widespread sales and distribution network in the country. TUKAfi is one of the best-known food brands in Turkey. During 2004 it aggressively pursued its strategy of increasing the number of its national market sales points, of which it had more than 58,000 at the end of the year. TUKAfi's export performance is also strong and the company's goods are shipped to more than 60 countries. TUKAfi's export revenues in the amount of USD 38.5 million in 2004 made it the biggest exporter in the Aegean region. In recognition of its export performance, the company received an award from the Association of Aegean Exporters Unions. Nationwide, TUKAfi ranked as the country's second biggest exporter last year. TUKAfi procures the fruits and vegetables that it needs as raw materials directly from producers under a contract-farming system. In 2004 TUKAfi had entered into contractual agreements with more than 10,000 producers for 213,000 tons of produce. TUKAfi's products continue to appeal to more and more customers in Turkey and in markets abroad. Its prepared mix for the traditional Turkish aflure pudding that it entered in the Sial d'or food industry award competition held in France every other year won the Best of Country award for Turkey. TUKAfi tomato paste received the Golden Quality Award in 2004 in a competition held by Tüketici Raporu, a consumer report magazine in Turkey. With its highly diversified line of products, TUKAfi is rapidly becoming a mega food brand in Turkey while the company's booming exports are turning it into a global brand as well. Annual Report 2004 [27]

32 Developments in OYAK Group companies Services MA S, Turkey's biggest automobile sales organization, sells Renault automobiles and light commercial vehicles and provides after-sales services for them in Turkey, the Turkish Republic of Northern Cyprus, and a number of Central Asian countries. MA S had a very successful year in 2004 and maintained its position as the leading seller of automobiles for the seventh year in a row with a market share of 18.8%. With six branches ( stanbul, Ankara, zmir, Bursa, Adana, and Diyarbak r) and an extensive dealership network that reaches everywhere in Turkey, MA S is the country's biggest automobile sales and service organization. MA S imports the Renault automobiles and light commercial vehicles that are sold in the Turkish market. Its service network provides Renault owners everywhere in the country with complete spare parts, warranty, and repair and maintenance services. OMSAN Lojistik made important progress in 2004, successfully maintaining its position as the sector's leader with a turnover amounting to over USD 200 million. OMSAN Lojistik continued to expand its international network in As part of its strategy to provide integrated logistical services throughout the European Union, the company has added OMFESA, a joint venture with Spain-based Transportes Ferroviarios Especiales SA (Transfesa), to the list of companies that it has set up in Germany, France, Romania, Bulgaria, Russia, and Azerbaijan. With 27 years of experience, advanced notions of service quality, and stateof-the-art technological infrastructure, OMSAN Lojistik continues to expand its operations in Turkey and around the world as the leader of the Turkish logistical services sector. OMSAN Lojistik employs more than a thousand people in the successful management of its own 605 vehicle fleet as well as of the thousands of other vehicles in its service. OYTAfi handles the export sales of the cement companies in the OYAK Group. It also procures and imports from international markets the coal and petrocoke that the companies need as fuel in their operations. Annual Report 2004 [28]

33 In 2004 OYTAfi was once again the biggest dealer in petrocoke and coal dust needed by the cement industry in Turkey. Preferred by customers for its highquality service, it was also the leading provider of coal used for heating purposes. The volume of foreign trade passing through OYTAfi was up 19.7% year-on in 2004 and reached more than USD 60 million in value. OYAK Savunma ve Güvenlik Sistemleri (OYAK SGS), the OYAK Group's defense and security systems service provider, continued last year with its activities to provide physical security, training, alarm center subscription and electronic security systems to non-group companies as well. The company employs a well-trained team of specialists who are experienced in defense and security. As a result of a change in the law governing private security companies, OYAK SGS turned all of its hygiene service operations over to OYAK Pazarlama last year. OYAK Teknoloji, a technology services provider, comes to the aid of customers in a variety of sectors with high-quality and innovative solutions and services. OYAK Teknoloji develops and implements the main banking application solutions for OYAK Bank. In addition to OYAK Bank, the company also responds actively to the particular technology needs of all OYAK Group companies. In 2004 OYAK Teknoloji focused its attentions on increasing its market share and expanding its non-group activities. It substantially enlarged the size of the customer base that it serves in both the public and private sectors by successfully bidding on new contracts. Group s Total Exports (USD Million) 2,160.0 Group s Total Taxes Paid (TL Trillion) (USD Million) , , Annual Report 2004 [29]

34 Developments in OYAK Group companies OYAK nflaat is a construction contractor that is involved in project development, construction and installation work on a wide range of structures from industrial plants to touristic facilities and hospitals. Founded in 1982, the company also develops housing projects for OYAK members. OYAK nflaat underwent a restructuring in 2004 during which its headquarters were relocated to stanbul. In addition to the projects that it undertakes for the State s Social Security Institution, OYAK nflaat is also successfully conducting the Ankara Zirvekent Housing project, which it designed and launched for the housing market. OYAK Konut was set up to develop and carry out land development projects. In addition to mass housing projects, the company also designs and carries out projects in other areas of specialization such as commercial and industrial buildings. OYAK Konut is also continuing to work on the development of a mortgagebased long-term home financing model, which it views as an essential and complementary element of its activities. OYAK Pazarlama, whose supermarket operations were suspended and was put into dormancy in 2002, was reactivated in 2004 and reconstituted as OYAK Pazarlama Hizmet ve Turizm A.fi., a marketing, services, and tourism company. In its restructuring, the company took over the hygiene services previously provided by OYAK SGS which that company had to give up because of a change in the legal framework. It is also carrying out the ticket sales and agency services previously provided by OYAK Turizm, a group company that was wound up last year. OYAK Telekomünikasyon Hizmetleri A.fi., a network services provider, was founded as a subsidiary of OYAK Pazarlama to conduct, provide, and supply communication services and also to install the infrastructure for them. The company is currently involved in the OYAK NET project, which is being undertaken within the framework of a strategic business partnership agreement with Equant, a member of the France Telecom Group, to supply value-added network services on a domestic backbone to OYAK subsidiaries and to other non-group corporate customers. Annual Report 2004 [30]

35 Auditors Report and Financial Statements Annual Report 2004 [31]

36 ORDU YARDIMLAfiMA KURUMU (ARMED FORCES ASSISTANCE FUND) INDEPENDENT AUDITORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2004 Denetim Serbest Mali Müflavirlik A.fi. ran Caddesi 33/ Gaziosmanpafla Ankara, Türkiye Tel: (312) (pbx) Faks: (312) We have audited the accompanying balance sheet of Ordu Yard mlaflma Kurumu (Armed Forces Assistance Fund) ('OYAK - the 'Fund') as at 31 December 2004 and the related statement of income for the year then ended. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. Under the terms of the existing social legislation in Turkey and the labor union agreement, the Fund is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. However, as of December 31, 2004 the Fund did not provide a reserve for the retirement pay liability of TL 2,930 Billion ( : TL 2,526 Billion) since such reserve is not compulsory under the Uniform Chart of Accounts. (Note: 20) 4. As of December 31, 2004, the Fund did not provide a reserve for the Civilian Defense Fund liability, amounting to TL 4,627 Billion ( : TL 3,307 Billion) in the accompanying financial statements (Note 19). 5. In accordance with decisions taken by the Banking Regulation and Supervision Agency (BRSA) and the Capital Market Board (CMB), entities subject to legislations published by these regulators are to implement inflation accounting while preparing their financial statements, and for profit distribution, are to take into account, the lower net period profit shown in inflation adjusted financial statements and those prepared in accordance with the Turkish Commercial Code. Furthermore, in cases where such entities have accumulated losses in their equities, it is prohibited for companies to distribute their profits until the accumulated losses have been eliminated. Giving priority to the principles of profit distribution of the Turkish Commercial Code and parallel to Decrees No.1 of the 43PrdP and 44PthP of the OYAK General Assembly, the Fund has recorded dividend income from participations amounting to TL 50,850 Billion as of 2002, and TL 97,543 Billion for 2003, with the total amount of TL 148,393 Billion as Inflation Accounting Difference under associates and subsidiaries accounts while accruing the dividend income from associates and subsidiaries. Within 2004, as a result of capital increases by certain associates and subsidiaries from Inflation Adjustment Difference from Equity Accounts, followed under Shareholder's Equity,, the amount of Inflation Accounting Difference has decreased by TL 41,648 Billion and as of , the balance is amounting to TL 106,745 Billion in the accompanying financials. Although such balances are not distributable in the future in accordance with the regulations of BRSA and CMB in force, they are recorded as Undistributed Profit account in the shareholders' equity of the relevant associates and subsidiaries' financial statements. Annual Report 2004 [32]

37 ORDU YARDIMLAfiMA KURUMU (ARMED FORCES ASSISTANCE FUND) INDEPENDENT AUDITORS' REPORT FOR THE YEAR ENDED 31 DECEMBER According to the General Assembly decree dated 30 March 2005 of skenderun Enerji Üretim ve Tic A.fi., USD 126 Million has been decided to be paid as dividend from the total distributable profit of TL 325,000 Billion. The Fund's share amounting to TL 71,944 Billion (USD 51,990,502) (related with USD 126 Million) was paid as of 30 March On the other hand, although there is no decision for payment of the remaining part of the profit and no arrangement has been set up within the articles of Turkish Commercial Code related to the dividend distribution in incorporations, the Fund added the remaining part of its share on profit amounting to TL 59,446 Billion after the deduction of tax and reserve, to the dividend income of The additional amount mentioned above is recorded under Retained Earnings in the company's financial statements, with an intention of paying as dividend depending on the cash generation and other conditions in future. 7. In our opinion, except for the effects of the matters discussed in the paragraphs above, the financial statements present fairly, in all material respects, the financial position of Ordu Yard mlaflma Kurumu (Armed Forces Assistance Fund) as of 31 December 2004 and the results of its operations for the year then ended in accordance with the rules and principles indicated in the Law of Ordu Yard mlaflma Kurumu (Law Number 205 "the Code"- Note 1 and 2) and the articles of the Turkish Commercial Code. Ankara, 22 April 2005 DENET M SERBEST MAL MÜfiAV RL K A.fi. Member of DELOITTE TOUCHE TOHMATSU Bülent BEYDÜZ Partner Additional paragraph for English translation: The above mentioned accounting principles differ from International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board. The effects of the differences between these accounting principles and accounting principles generally accepted in the countries in which the accompanying financial statements are to be used and IFRS have not been quantified in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in the countries of users of IFRS. Annual Report 2004 [33]

38 OYAK ORDU YARDIMLAfiMA KURUMU COMPARATIVE BALANCE SHEET AS OF 31 DECEMBER 2004 AND 2003-ASSETS (Billion TL) I. CURRENT ASSETS 1,915,443 1,413,489 A. Cash and Cash Equivalents 1,168,950 1,083, Cash Banks 1,168,783 1,083, Cheques Given and Payment Orders (-) (42) (54) 4. Other Cash Equivalents B. Marketable Securities 54,735 14, Securities Private Sector Notes, Bonds and Bills 2,583 2, Public Sector Notes, Bonds and Bills 52,152 12,209 C. Trade Receivables 570, , Receivables from Retired Members 1,619 1, Receivab. from Govern. Finan. Offices and Serv. Borrowings Dividend Receivables 556, , Other Trade Receivables 325 2, Doubtful Trade Receivables 12,005 12,325 D. Other Receivables 82,340 91, Receivables from Associates 131 9, Receivables from Subsidiaries , Investments with Social Purposes 81,108 64, Receivables from the Personnel Other Various Receivables E. Inventories 1,582 1, Raw Material Tradeable Goods 1,510 1,321 F. Short Term Prepaid Expenses and Income Accruals 35,201 24, Prepaid Expenses Income Accruals 35,137 24,419 G. Other Current Assets 2,155 1, VAT Carry-forward 1, VAT Deductible Job Advances Personnel Advances Other Current Assets II. NON - CURRENT ASSETS 1,743,189 1,035,264 A. Trade Receivables Deposits and Guarantees - - B. Financial Non Current Assets 1,687, , Equity Shares Capital Commitments to Equity Shares Associates 637, , Capital Commitments to Associates Subsidiaries 1,050, , Capital Commitments to Subsidiaries (1,000) - 7. Other Financial Non Current Assets - - C. Fixed Assets 54,182 47, Land 10,189 6, Buildings 44,834 40, Machinery and Equipment Vehicles Furnitures and Fixtures 2,444 2, Other Tangible Fixed Assets Accumulated Depreciation (4,718) (4,196) 8. Construction in Progress D. Intangible Fixed Assets 1,690 1, Rights 1, Leasehold Improvements 1,056 1, Accumulated Depreciation (967) (321) E. Other Non-Current Assets - - TOTAL ASSETS 3,658,632 2,448,753 Supplementary Housing Pre-Accumulation Fund Assets 370, ,831 Donation Based Retirement Income System Assets 303, ,778 TOTAL ASSETS INCLUDING FUNDS 4,332,524 2,935,362 Annual Report 2004 [34]

39 OYAK ORDU YARDIMLAfiMA KURUMU COMPARATIVE BALANCE SHEET AS OF 31 DECEMBER 2004 AND 2003-LIABILITIES (Billion TL) I. CURRENT LIABILITIES 334,729 10,374 A. Financial Payables 322, Bank Loans 322,104 - A. Trade Payables 2,190 2, Suppliers 1,682 1, Payables to Members Payables to Govern. Financial Offices Deposits and Guarantees Taken 10 - B. Other Payables 2,297 2, Payables to Associates Payables to Subsidiaries Payables to Personnel Other Miscellaneous Payables 2,099 2,438 C. Advances Received Resources for House Constructions - - D. Taxes and Other Liabilities Payable Taxes and Funds Payable Social Security Deductions Payable Other Liabilities Payable E. Reserves Reserves for Taxes Other Reserves F. Deferred Income and Expense Accruals 6,807 4, Short Term Deferred Income 3,668 4, Expense Accruals 3, G. Other Short Term Liabilities Current Accounts of Headquarter and Branches Count Differences Other Short Term Liabilities II. NON - CURRENT LIABILITIES 939 1,413 A. Trade Payables Deposits and Guarantees Taken - - B. Deferred Income and Expense Accruals 794 1, Long Term Deferred Income 794 1,413 C. Provision for Employment Termination Benefits - - D. Other Payable and Expense Accruals 145 III. EQUITY 3,322,964 2,436,966 A. Reserves 2,397,595 1,775,573 B. Revaluation Funds - - C. Profit 925, , Current Year Income 925, ,393 D. Capitals of Army Markets - - TOTAL LIABILITIES 3,658,632 2,448,753 Supplementary Housing Pre-Accumulation Fund Liabilities 370, ,831 Donation Based Retirement Income System Liabilities 303, ,778 TOTAL LIABILITIES INCLUDING FUNDS 4,332,524 2,935,362 Annual Report 2004 [35]

40 OYAK ORDU YARDIMLAfiMA KURUMU COMPARATIVE INCOME STATEMENTAS OF 31 DECEMBER 2004 AND 2003 (Billion TL) A. Investment Income 755, , Dividend Income from Associates 254,228 69, Current Period Dividend Income Accruals 254,243 70, Diff. bw. prior per. acc and current per. coll. (15) (765) 2. Dividend Income from Subsidiaries 209, , Current Period Dividend Income Accrual 206, , Diff. bw. prior per. acc and current per. coll. 3,395 4, Rent Income 5,023 5, Income from Financial Investments 286, ,526 B. Income from Social Investments 23,742 25, Income from Army Markets 1,773 1, Loan Lending Assis. and Commodity Credits Inc. 11,953 13, Housing Benefit Income 10,016 9,906 C. Other Income 35,216 44, Interest and Commissions Income 17,845 8, Other Income 17,371 36,093 D. Revaluation Fund 171, , Financial Non Current Assets Revaluation Fund 44, , Fixed Assets Revaluation Fund 4,209 7, Inflation Adjustment Difference from Equity Accounts 123,353 - TOTAL INCOME 986, ,649 E. Administrative Expenses (24,820) (21,538) 1. Personnel Expenses (14,841) (13,358) 2. Legal Branch Expenses (239) (315) 3. Office Expenses (1,139) (1,222) 4. Fixed Assets Expenses (689) (445) 5. Miscellaneous Expenses (6,026) (4,246) 6. Social and Cultural Expenses (871) (1,126) 7. Depreciation Expenses (1,015) (826) F. Financial Expenses (13,565) (493) 1. Bank Commission Expenses (1,506) (493) 2. Share Certificate Commissions and Expenses Long&Medium Term Bank Loans Interest&Expenses (12,059) - 4. Other Financial Expenses - - G. Real Estate Operational Expenses (351) (884) H. Financial Investment Expenses (8,115) (29,394) I. Other Expenses (6,049) (330) TOTAL EXPENSES (52,900) (52,639) OPERATIONAL INCOME 933, ,010 J. Technical Income/(Expense), net (8,190) (2,617) K. Civilian Defense Fund - - NET CURRENT YEAR PROFIT 925, ,393 Annual Report 2004 [36]

41 OYAK Group Companies Annual Report 2004 [37]

42 Finance OYAK BANK A.fi. Date of Establishment 1984 OYAK Group s Participation 1990 Field of Activity Banking OYAK Group s Share % Eski Büyükdere Cad. Ayaza a Köy Yolu No: Maslak / stanbul / TURKEY Tel ( ) / Fax ( ) OYAK EUROPEAN FINANCE PLC Date of Establishment 1994 OYAK Group s Participation 1994 Field of Activity Financial services OYAK Group s Share % 87 Lower Leeson Str. Dublin 2 / IRELAND Tel (+353 1) / Fax (+353 1) OYAK PORTFÖY YÖNET M A.fi. Date of Establishment 1997 OYAK Group s Participation 1997 Field of Activity Portfolio management OYAK Group s Share % Eski Büyükdere Cad. Ayaza a Köy Yolu No: 6 Kat: Maslak / stanbul / TURKEY Tel ( ) / Fax ( ) OYAK ANKER BANK GMBH Date of Establishment 1958 OYAK Group s Participation 1996 Field of Activity Banking OYAK Group s Share % Am Plan Koblenz / GERMANY Tel ( ) / Fax ( ) AXA OYAK HOLD NG A.fi. Date of Establishment 1999 OYAK Group s Participation 1999 Field of Activity To participate in insurance companies OYAK Group s Share 50.00% Meclisi Mebusan Cad. No: 81 OYAK flhan Sal pazar / stanbul / TURKEY Tel ( ) / Fax ( ) AXA OYAK S GORTA A.fi. Date of Establishment 1968 OYAK Group s Participation 1968 Field of Activity Insurance (none life) OYAK Group s Share 70.90% AXA OYAK HAYAT S GORTA A.fi. Date of Establishment 1995 OYAK Group s Participation 1995 Field of Activity Insurance (life and health) OYAK Group s Share % Annual Report 2004 [38]

43 OYAK YATIRIM MENKUL DE ERLER A.fi. Date of Establishment 1982 OYAK Group s Participation 1982 Field of Activity Capital market brokerage services OYAK Group s Share 99.44% Akatlar Ebulula Cad. F2 C Blok Levent / stanbul / TURKEY Tel ( ) Fax ( ) OYAK EMEKL L K A.fi. Date of Establishment 2003 OYAK Group s Participation 2003 Field of Activity Private pension OYAK Group s Share % Karaköy Meydan, Nordstern Han No: Karaköy / stanbul / TURKEY Tel ( ) (20 lines) Fax ( ) Customer contact Center HALK F NANSAL K RALAMA A.fi. Date of Establishment 1991 OYAK Group s Participation 1991 Field of Activity Leasing OYAK Group s Share 46.40% 19 May s Cad. Golden Plaza No: 1 K: fiiflli / stanbul / TURKEY Tel ( ) Fax ( ) Industry ADANA Ç MENTO SANAY T.A.fi. Date of Establishment 1954 OYAK Group s Participation 1963 Field of Activity Production and sale of clinker and cement OYAK Group s Share 57.00% Ceyhan Yolu Üzeri 12. km Adana / TURKEY Tel ( ) Fax ( ) BOLU Ç MENTO SANAY A.fi. Date of Establishment 1968 OYAK Group s Participation 1969 Field of Activity Production and sale of clinker and cement OYAK Group s Share 51.00% Bolu Mengen Yolu Üzeri Çaydurt / Bolu / TURKEY Tel ( ) Fax ( ) ÜNYE Ç MENTO SAN. VE T C. A.fi. Date of Establishment 1969 OYAK Group s Participation 1969 Field of Activity Production and sale of clinker and cement OYAK Group s Share 52.74% Devlet Sahil Yolu, Cevizdere Mevkii Ünye / Ordu / TURKEY Tel ( ) Fax ( ) Annual Report 2004 [39]

44 Industry MARD N Ç MENTO SAN. VE T C. A.fi. Date of Establishment 1969 OYAK Group s Participation 1969 Field of Activity Production and sale of clinker and cement, ready-mix concrete OYAK Group s Share 55.85% Savur Yolu 6. km Mardin / TURKEY Tel ( ) Fax ( ) ELAZI -ALTINOVA Ç MENTO SAN. T.A.fi. Date of Establishment 1954 OYAK Group s Participation 1996 Field of Activity Production and sale of clinker and cement, ready-mix concrete OYAK Group s Share 70% K z lay Mah. Kaz m Karabekir Caddesi No: Elaz / TURKEY Tel ( ) (7 lines) Fax ( ) OYSA Ç MENTO SAN. VE T C. A.fi. Date of Establishment 1957 OYAK Group s Participation 1992 Field of Activity Production and sale of clinker and cement, ready-mix concrete Group s Share 41.09% Hac Sabanc Bulvar Ni de / TURKEY Tel ( ) Fax ( ) OYKA KA IT AMBALAJ SAN. VE T C. A.fi. Date of Establishment 1963 OYAK Group s Participation 1963 Field of Activity Packaging materials OYAK Group s Share % Ceyhan Yolu Üzeri 12. km Adana Çimento Fabrikas çi Adana / TURKEY Tel ( ) Fax ( ) OYAK BETON SAN. VE T C. A.fi. Date of Establishment 2004 OYAK Group s Participation 2004 Field of Activity Production and sale of ready-mix concrete OYAK Group s Share % stanbul Yolu 12. km Türkkuflu Karfl s No: Etimesgut / Ankara / TURKEY Tel ( ) Fax ( ) Annual Report 2004 [40]

45 OYAK RENAULT OTOMOB L FABR KALARI A.fi. Date of Establishment 1969 OYAK Group s Participation 1969 Field of Activity Manufacturing of Renault automobiles and their spare parts OYAK Group s Share 49.00% Barbaros Plaza Emirhan Cad. No: 145/C Dikilitafl / stanbu l/ TURKEY Tel ( ) Fax ( ) SKENDERUN ENERJ ÜRET M VE T C. A.fi. Date of Establishment 1998 OYAK Group s Participation 2004 Field of Activity Energy Production OYAK Group s Share 49.00% Budak Sokak No: GOP / Ankara / TURKEY Tel ( ) Fax ( ) OYAK ENERJ SAN. VE T C. A.fi. Date of Establishment 2002 OYAK Group s Participation 2002 Field of Activity Energy production-distribution OYAK Group s Share % Ziya Gökalp Cad. No: Kurtulufl / Ankara / TURKEY Tel ( ) Fax ( ) HEKTAfi T CARET T.A.fi. Date of Establishment 1956 OYAK Group s Participation 1963 Field of Activity Manufacturing and sale of agricultural chemicals OYAK Group s Share 53.81% Gebze Organize Sanayi Bölgesi hsan Dede Cad Sok Gebze / Kocaeli / TURKEY Tel ( ) Fax ( ) TUKAfi GIDA SAN. VE T C. A.fi. Date of Establishment 1962 OYAK Group s Participation 1967 Field of Activity Food OYAK Group s Share 72.00% Nadir Nadi Cad. No: 15/ Konak / zmir / TURKEY Tel ( ) Fax ( ) TAM GIDA SAN. VE T C. A.fi. Date of Establishment 1980 OYAK Group s Participation 1982 Field of Activity Manufacture of biscuits, crackers, cakes etc. OYAK Group s Share 29.09% Organize Sanayi Bölgesi Eskiflehir / TURKEY Tel ( ) Fax ( ) Annual Report 2004 [41]

46 Services MA S MOTORLU ARAÇLAR MAL VE SATIfi A.fi. Date of Establishment 1968 OYAK Group s Participation 1968 Field of Activity Sale and after-sale services for Renault motor vehicles OYAK Group s Share 51.00% Büyükdere Cad. No: Levent / stanbul / TURKEY Tel ( ) Fax ( ) OMSAN LOJ ST K A.fi. Date of Establishment 1978 OYAK Group s Participation 1978 Field of Activity Logistical services; national and international highway, air, and sea transport OYAK Group s Share % Tugay Yolu No: 10 Cevizli Maltepe / stanbul / TURKEY Tel ( ) Fax ( ) OYTAfi Ç VE DIfi T C. A.fi. Date of Establishment 1974 OYAK Group s Participation 1974 Field of Activity Domestic and international trade OYAK Group s Share 99.48% Kemeralt Cad. No: 28 K: Karaköy / stanbu / TURKEY Tel ( ) Fax ( ) OYAK SAVUNMA VE GÜVENL K S STEMLER A.fi. Date of Establishment 2001 OYAK Group s Participation 2001 Field of Activity Security services OYAK Group s Share % Nasuh Akar Mahallesi Süleyman Hac Abdullaho lu Caddesi No: Balgat / Ankara / TURKEY Tel ( ) Fax ( ) OYAK TEKNOLOJ B L fi M VE KART H ZMETLER A.fi. Date of Establishment 1967 OYAK Group s Participation 2001 Field of Activity Information technologies OYAK Group s Share 99.97% Eski Büyükdere Cad. No: Levent / stanbul / TURKEY Tel ( ) Fax ( ) Annual Report 2004 [42]

47 OYAK NfiAAT A.fi. Date of Establishment 1982 OYAK Group s Participation 1982 Field of Activity Project, construction, and installation works for any kind of building OYAK Group s Share 75.00% 105 Evler Halk Sokak No: Kozyata / stanbul / TURKEY Tel ( ) Fax ( ) OYAK KONUT NfiAAT A.fi. Date of Establishment 2002 OYAK Group s Participation 2002 Field of Activity Housing project development and management OYAK Group s Share % 105 Evler Halk Sok. No: Kozyata / stanbul / TURKEY Tel ( ) Fax ( ) OYAK PAZARLAMA H ZMET VE TUR ZM A.fi. Date of Establishment 1998 OYAK Group s Participation 1998 Field of Activity Hygiene services and Tourism OYAK Group s Share % Kemeralt Caddesi Hektafl Han No: 28 Arka Blok Kat: Karaköy / stanbul / TURKEY Tel ( ) Fax ( ) OYAK TELEKOMÜN KASYON H ZMETLER A.fi. Date of Establishment 2004 OYAK Group s Participation 2004 Field of Activity Telecommunication services OYAK Group s Share % Kemeralt Caddesi Hektafl Han No: 28 Arka Blok Kat: Karaköy / stanbul / TURKEY Tel ( ) Fax ( ) ET PAZARLAMA VE SAN. A.fi. Date of Establishment 1981 OYAK Group s Participation 1982 Field of Activity Marketing and distribution of biscuits, crackers, cakes etc. OYAK Group s Share 26% Gültepe Mah. Harman Cad. Ali Kaya Sok. Polat Plaza B Blok No: Levent / stanbul / TURKEY Tel ( ) Fax ( ) Annual Report 2004 [43]

48 OYAK Headquarters Ziya Gökalp Cad. No: Kurtulufl / Ankara / TURKEY TEL ( ) FAX ( ) Annual Report 2004 [44]

49

50