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Tüpraş 2018 Annual Report

ALWAYSFOR BETTER

CONTENTS

1 TüpraşataGlance12 KeyIndicators

GENERAL ASSEMBLY14 GeneralAssemblyAgenda15 IndependentAuditor’sReportontheAnnualReport16 MessageFromtheChairman20 IndependentAuditor’sReport(Opinion)21 ConsolidatedBalanceSheet/ConsolidatedIncome

Statement22 BoardofDirectors24 BoardofDirectors’Resumes30 ProfitDistributionPolicy30 ProfitDistributionProposal31 DividendDistributionTable32 2019BoardofDirectorsCandidates33 RemunerationPolicy

TÜPRAŞ IN BRIEF34 MessagefromtheGeneralManager38 SeniorManagement40 Strategy42 2018Developments44 MilestonesinTüpraşHistory48 InvestorRelations52 HumanResources58 AchievementsandAwards

2018 PERFORMANCE62 Sector64 ProductionandSales80 MarineTransportation85 RailwayTransportation87 Investments90 R&D94 Innovation97 DigitalTransformationandCyberSecurity

SUSTAINABILITY100 HealthandSafetyPractice102 QualityManagementSystems104 EnvironmentalManagement106 EnergyEfficiency108 PerformanceIndicators112 CorporateResponsibilityProjects

CORPORATE GOVERNANCE121 LegalDisclosures123 CorporateGovernancePrinciplesComplianceReport142 RiskManagementandtheActivitiesoftheRisk

ManagementCommittee150 ConvenienceTranslationintoEnglishofIndependent

Auditor’sReportontheEarlyRiskIdentificationSystemandCommitteeOriginallyIssuedinTurkish

151 EvaluationofOperatingPrinciplesandEffectivenessofBoardCommittees

153 AuditCommitteeReport(RelatedtoFinancialStatements)154 StatementofResponsibility(RelatedtoApprovalofFinancial

Statements)155 AuditCommitteeReport(RelatedtoAnnualReport)156 StatementofResponsibility(RelatedtoApprovalof

AnnualReport)157 DeclarationforIndependency

FINANCIAL STATEMENTS160 1January-31December2018ConsolidatedFinancial

StatementsTogetherwithTheIndependentAuditor’sReport

Contact

TÜPRAŞ AT A GLANCE

Tüpraş is Turkey’s largest industrial company on the basis of turnover achieved and the added value created.

RefiningoperationsofTüpraş,whichhasstartedin1955byprocessingdomesticcrudeoilinBatman,hascontinuedwithfourrefineriesestablishedinKocaeli,İzmir,KırıkkaleandBatmansince1983.Tüpraşhasanameplateannualcrudeoilprocessingcapacityof28.1milliontons.

BeingEurope’s7thlargestrefiningcompany,TüpraşisTurkey’slargestindustrialcompanyonthebasisofturnoverachievedandtheaddedvaluecreated.Atthesametime,TüpraşisoneofthefewMediterraneanrefinerieshavingahighcomplexity,withanaverageNelsoncomplexityindexof9.5.

TüpraşcloselyfollowsupbusinessandinvestmentopportunitiesbothinTurkeyandabroad.Thecompanyinvestsinsectoralintegrationandalternativeenergyresources,andcooporateswithstart-upstosupportentrepreneursaspartofitsdiversificationstrategy.Placingpriorityonmeetingtheenergyneedsofitsrefineriesinthefieldofrenewableenergy,Tüpraşalsoaimstoreduceenergycostsandtominimizeitscarbonfootprint.

GENERAL ASSEMBLY 2018PERFORMANCE CORPORATEGOVERNANCETÜPRAŞINBRIEF SUSTAINABILITY FINANCIALSTATEMENTS

WITH OUR PRODUCTION POWER AND REGIONAL COMPETITIVE ADVANTAGES

2 | Tüpraş 2018ANNUALREPORT

HIGH COMPLEXITY

As Europe’s 7th largest refinery, Tüpraş is among the few high complex Mediterranean refineries with an average Nelson complexity index of 9.5.

STRONG REFINING CAPACITY

Carrying out activities through four refineries in Kocaeli, İzmir, Kırıkkale and Batman

28.1million tons/year

9.5Crude oil refining capacity

Average Nelson complexity

UNIQUE LOGISTICS ADVANTAGE

Tüpraş enjoys competitive advantage thanks to its four refineries that allow production and sales optimization and are located close to high consumption regions throughout the country with their existing warehouses and terminals.

SUPERIOR STORAGE CAPACITY

With competitive strength of its storage capacity and terminal infrastructure, Tüpraş meets the country’s entire need.

7.0*million m3

Storage capacity

5.0million tons

Transportation between refineries

* Corresponding to a domestic market share of 50%, excluding the 7% domestic market share of the subsidiary Opet.

Tüpraş 2018ANNUALREPORT|3

GENERAL ASSEMBLY 2018 PERFORMANCE CORPORATE GOVERNANCETÜPRAŞ IN BRIEF SUSTAINABILITY FINANCIAL STATEMENTS

WITH OUR EFFECTIVE DISTRIBUTION, LOGISTICS, TRADING NETWORK AND OUR INVESTMENTS


OPET

Opetoperatesinthefueloildistributionsectorviaretail,commercialandindustrialfuelsales,storageandinternationalproducttrade.

• 1,615stationsincludingitsSunpetbrand

• 1.1millionstoragecapacity• 5terminals• Secondplaceinitssectorwithamarketshareof17.8%inwhiteproducts

• Firstplaceinitssectorwithamarketshareof36.2%inblackproducts

DİTAŞ

OneofthelargestTurkishmarinetransportationcompaniesofcrudeoilandpetroleumproducts,DitaşcarriesmainlyTüpraş’scrudeoilpurchasesanditsfinishedandsemi-finishedproducts.

• 11tugboats• 8mooringboats• 2serviceboats• 1pilotboat• 2newproducttankerstostartoperatingin2019

KÖRFEZ ULAŞTIRMA A.Ş.

Turkey’sfirstprivaterailwayoperator,KörfezUlaştırmaA.Ş.aimstoincreasetheshareofrailwayintransportationoffuelsbetweenTüpraşRefineries.

• 439Tüpraşwagons,26Opetwagons,100-200tankwagonsofTCDD

• 5TCDDlocomotives• 1.8millionton/yeartransportationoffinishedandsemi-finishedproducts

LONDON TRADING OFFICE

TüpraşopeneditsLondonTradingOfficein2018to• closelymonitorglobalmarketopportunities

• createaddedvaluefromsupplychainandsalesactivities

• leverageitsoperationaleffectivenesswithinternationalintegration.



WITH SUSTAINABLE AND PROFITABLE GROWTH


LONG-STANDING

•Withrootsdatingbackto1955,Tüpraşhasauniquerefiningexperienceintheregionitoperates.

• ListedinTurkey’sFortune500,TüpraşhasachievedmanyoperationalandfinancialbreakthroughsfromthemomentitwastransferredtoKoçGroup.

• TüpraşisthelargestindustrialcompanyinTurkeybasedontheaddedvalueitcreatesanditsturnover.

TURKEY’S LARGEST INDUSTRIAL COMPANY

GROWING

•Operatesinamarketwithadieselshortageandincreasingjetfuelconsumptioneverypassingyear,Tüpraşcovers45%ofdieseldemand.

• Investscontinuouslytoincreaselogistic,infrastructuralandcommercialcompetencies.

WELL-POSITIONED TO CAPTURE FUTURE OPPORTUNITIES

RESILIENT

• Strongbalancesheet• Securetradereceivableportfolio

• Effectiveworkingcapitalmanagement

• Riskmanagementpoliciesandstrongpricingmechanismstocopewithcrudeoil,productandcurrencyfluctuations

STRONG AND SECURE OPERATIONAL AND FINANCIAL STRUCTURE

PROFITABLE

• Benefitsfromanintegratedsystemoptimizationgivenhighcomplexity,procurementandlogisticsflexibility.

• Adoptsprudenthedgingpracticestoensurestableearningsoutlookandmanagesectoralrisk.

• Distributeshighdividendsannually.

DELIVERING HIGH ADDED VALUE TO STAKEHOLDERS



WITH OUR FOCUS ON SUSTAINABILITY


ROBUST CORPORATE GOVERNANCE

As a result of the evaluation done by Saha Kurumsal Yönetim ve Derecelendirme Hizmetleri A.Ş., Tüpraş has one of the highest corporate governance ratings in Turkey.

UNCOMPROMISING COMPLIANCE WITH HSE STANDARDS

Tüpraş expects all of its solution partners as well as its employees to uncompromisingly comply with the Health, Safety and Environment (HSE) standards.

ENVIRONMENT-FRIENDLY PRODUCTION

Looking out for environmental awareness at all of its activities, Tüpraş aims to minimize the environmental impact of its operations.

CONSCIOUSNESS OF SOCIAL RESPONSIBILITY

Tüpraş fulfills its social responsibility by developing responsibility projects or by supporting existing initiatives which enhance the society’s quality of life.

9.48 74%Corporate Governance Rating

244Greenhouse gas emission reductions

thousand tons CO2e

Accident Frequency Rate Decrease in 2018



60%Tüpraş has ~60% share in Turkey’s total petroleum products market consisting of gasoline, diesel, fuel oil and jet fuel.

İZMİR REFINERYCapacity: 11milliontons/year

Nelson Complexity: 7.66Storage Capacity: 2.5millionm3

KIRIKKALE REFINERYCapacity:5.0milliontons/year

Nelson Complexity: 6.32Storage Capacity: 1.3millionm3

ANTALYA OPET TERMINAL

Storage Capacity:19,392m3

MERSİN OPET TERMINALStorage Capacity:

240,000m3

Petroleum products market

53

4 1

İZMİT REFINERYCapacity: milliontons/yearNelson Complexity: 14.5

Storage Capacity 3.0millionm3

KÖRFEZ OPET TERMINALStorage Capacity: 45,450m3

DİTAŞ3 Crude Oil Tankers: 479,765DWT

1 Crude Oil/Product Tanker: 51,532DWT 7 Product Tankers: 90,535DWT

KÖRFEZ ULAŞTIRMA A.Ş.439 Wagons (Tüpraş)

26 Wagons(Opet)5 Locomotives(TCDDrental)

MARMARA OPET TERMINALStorage Capacity: 721,000m35

3

4

2

2

1


TOTAL ANNUAL CRUDE OIL PROCESSING CAPACITY FOUR REFINERIES OF TÜPRAŞ ESTABLISHED IN KOCAELİ, İZMİR, KIRIKKALE AND BATMAN IS 28.1 MILLION TONS.

74%Tüpraş accounts for 74% of Turkey’s current refining capacity.

BATMAN REFINERYCapacity: 1.1milliontons/year

Nelson Complexity: 1.83Storage Capacity:268binm3

GİRESUN OPET TERMINALStorage Capacity:

43,130m3

DitaşRefining capacity

Opet

Körfez Ulaştırma A.Ş.

Tüpraşholds79.98%ofDitaş’sshares

3 Crude Oil Tankers: 479,765DWT1 Crude Oil/Product Tanker: 51,532DWT 7 Product Tankers: 90,535DWT11Tugboats,8MooringBoats,2ServiceBoats,1PilotBoats

Tüpraşholds40%ofOpet’sshares

Filling Stations:1,615Storage Capacity:1.1millionm3

Trading,lubricants,bunkerfuel,jetfuelopera-tions,storageactivities

Tüpraşholds100%ofKörfezUlaştırma’sshares

Number of Wagons:439(Tüpraş),26(Opet)Number of Locomotives:5(TCDDrental)

79.98%

40%

100%



KEY INDICATORS

2014 2015 2016 2017 2018

Net Sales 39,723 36,893 34,855 53,948 88,552

Operating Profit 436 2,752 2,357 4,857 5,736

Profit Before Tax 184 2,225 1,944 4,474 3,724

Profit After Tax* 1,470 2,564 1,813 3,841 3,761

EBITDA 740 3,799 3,396 5,882 8,908

Net Debt 3,857 6,892 6,084 6,249 11,967

Return on Equity (ROE) % 26 35 22 41 37

Debt Leverage Ratio % 38 45 43 38 55

Net Working Capital -677 -53 286 713 953

Investment Expenditures (USD million)**

959 344 213 184 138

Financial Indicators(TLmillion)

Net Sales (TLmillion)

2016

2015

2014

88,552

53,948

34,855

36,893

39,723

2017

2018

Investment Expenditures (USDmillion)

2016

2015

2014

138

184

213

344

959

2017

2018

Operating Profit(TLmillion)

2016

2015

2014

5,736

4,857

2,357

2,752

436

2017

2018

*Netprofitattributabletotheequityholdersoftheparent**Tüpraşunconsolidated

+24%In2018,Tüpraşhadanetsalesrevenueof$ 18.3billionwithasalesvolumeof29.8million,a24%increasecomparedto2017.


Profit After Tax* (TLmillion)

2016

2015

2014

3,761

3,841

1,8132,

564

1,470

2017

2018

37

Return on Equity(ROE)%

2016

2015

2014

41

22

35

26

2017

2018

Earnings per Share(TL)

2016

2015

2014

14.83

15.22

7.16

10.18

5.83

2017

2018

Production(milliontons)

2016

2015

2014

25.728

.9

27.9

27.3

20.1

2017

2018

2014 2015 2016 2017 2018

Processed Crude Oil 20,044 27,559 28,348 28,502 24,540

Production 20,101 27,268 27,928 28,883 25,695

Sales 22,194 28,739 30,255 31,493 29,830

Product Export 5,333 6,494 5,491 5,804 4,191

Product Import 2,920 2,999 3,749 4,388 6,252

Operational Indicators - Refining(thousandtons)



GENERAL ASSEMBLY AGENDA

AGENDA FOR ORDINARY GENERAL ASSEMBLY MEETING OF TURKISH PETROL REFINERIES CORPORATION TO BE HELD ON 20 MARCH 2019

1. OpeningandelectionoftheChairmanforthemeeting,

2. Review,discussionandapprovaloftheAnnualReportoftheCompanyforthefiscalyear2018aspreparedbytheBoardofDirectors,

3. PresentationofthesummaryofIndependentAuditReportfortheyear2018,

4. Review,discussionandapprovalofthe2018FinancialStatements,

5. ApprovalofthechangesinmembersoftheBoardofDirectorsduringtheyearaspertheArticle363oftheTurkishCommercialCode.

6. ReleaseofeachmemberoftheBoardofDirectorsfromliabilityfortheaffairsoftheCompanyfortheyear2018,

7. WithintheframeworkoftheCompany’sdividendpolicy,approval,approvalwithamendmentordisapprovaloftheBoardofDirectors’proposalonprofitdistributionoftheyear2018andthedateofdividenddistribution,

8. DeterminationofthenumberofBoardMembers,theirtermsofoffice,electionoftheMembersinaccordancewiththenumberdeterminedandelectionofIndependentBoardMembers,

9. InaccordancewiththeCorporateGovernancePrinciples,presentationofthe“RemunerationPolicy”totheshareholdersandGeneralAssemblyforthemembersoftheBoardofDirectorsandtheSeniorExecutives,andalsoapprovalofthepaymentsmadeonthatbasis,

10. ResolutionofannualgrosssalariesforthemembersoftheBoardofDirectors,

11. ApprovaloftheIndependentAuditFirmselectedbytheBoardofDirectorsinaccordancewiththeprovisionsoftheTurkishCommercialCodeandtheCapitalMarketsBoardregulations,

12. PresentationofthedonationsmadebytheCompanyin2018totheshareholdersanddeterminationofanupperlimitfordonationstobemadein2019,

13. InaccordancewiththeCapitalMarketsBoardregulations,shareholders’acknowledgmentonthesecurities,pledgesandmortgagesgrantedinfavorofthethirdpartiesintheyear2018andofanybenefitsorincomethereof,

14. Authorizationoftheshareholderswithmanagementcontrol,membersoftheBoardofDirectors,seniorexecutivesandtheirspousesandrelativesrelatedbybloodoraffinityuptotheseconddegreeaspertheprovisionsofArticles395and396oftheTurkishCommercialCodeandpresentationofthetransactionscarriedoutthereofintheyear2018pursuanttotheCorporateGovernanceCommuniquéoftheCapitalMarketsBoard,

15. Wishesandopinions.


INDEPENDENT AUDITOR’S REPORT ON THE ANNUAL REPORT

CONVENIENCETRANSLATIONINTOENGLISHOFINDEPENDENTAUDITOR’SREPORTONTHEBOARDOFDIRECTORS’ANNUALREPORTORIGINALLYISSUEDINTURKISH

To the General Assembly of Türkiye Petrol Rafinerileri A.Ş.

1. OpinionWehaveauditedtheannualreportofTürkiyePetrolRafinerileriA.Ş.(the“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”)forthe1January-31December2018period.

Inouropinion,thefinancialinformationandtheanalysismadebytheBoardofDirectorsbyusingtheinformationincludedintheauditedfinancialstatementsregardingtheGroup’spositionintheBoardofDirectors’AnnualReportareconsistentandpresentedfairly,inallmaterialrespects,withtheauditedfullsetconsolidatedfinancialstatementsandwiththeinformationobtainedinthecourseofindependentaudit.

2. Basis for Opinion OurindependentauditwasconductedinaccordancewiththeIndependentStandardsonAuditingthatarepartoftheTurkishStandardsonAuditing(the“TSA”)issuedbythePublicOversightAccountingandAuditingStandardsAuthority(“POA”).OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sResponsibilitiesintheAuditoftheBoardofDirectors’AnnualReportsectionofourreport.WeherebydeclarethatweareindependentoftheGroupinaccordancewiththeEthicalRulesforIndependentAuditors(the“EthicalRules”)andtheethicalrequirementsregardingindependentauditinregulationsissuedbyPOAthatarerelevanttoourauditoftheconsolidatedfinancialstatements.WehavealsofulfilledourotherethicalresponsibilitiesinaccordancewiththeEthicalRulesandregulations.Webelievethattheauditevidencewehaveobtainedduringtheindependentauditprovidesasufficientandappropriatebasisforouropinion.

3. Our Audit Opinion on the Full Set Consolidated Financial StatementsWeexpressedanunqualifiedopinionintheauditor’sreportdated13February2019onthefullsetconsolidatedfinancialstatementsforthe1January-31December2018period.

4. Board of Director’s Responsibility for the Annual ReportTheGroupmanagement’sresponsibilitiesrelatedtotheannualreportaccordingtoArticles514and516ofTurkishCommercialCode(“TCC”)No.6102andCapitalMarketsBoard’s(“CMB”)CommuniquéSerialII,No:14.1,“PrinciplesofFinancialReportinginCapitalMarkets”(the“Communiqué”)areasfollows:

a) topreparetheannualreportwithinthefirstthreemonthsfollowingthebalancesheetdateandpresentittothegeneralassembly;

b)topreparetheannualreporttoreflecttheGroup’soperationsinthatyearandthefinancialpositioninatrue,complete,straightforward,fairandpropermannerinallrespects.Inthisreportfinancialpositionisassessedinaccordancewiththefinancialstatements.Alsointhereport,developmentsandpossibleriskswhichtheGroupmayencounterareclearlyindicated.TheassessmentsoftheBoardofDirectorsinregardstothesemattersarealsoincludedinthereport.

c) toincludethemattersbelowintheannualreport:

-eventsofparticularimportancethatoccurredintheCompanyaftertheoperatingyear,

-theCompany’sresearchanddevelopmentactivities,

-financialbenefitssuchassalaries,bonuses,premiumsandallowances,travel,accommodationandrepresentationexpenses,benefitsincashandinkind,insuranceandsimilarguaranteespaidtomembersoftheBoardofDirectorsandseniormanagement.

Whenpreparingtheannualreport,theBoardofDirectorsconsiderssecondarylegislationarrangementsenactedbytheMinistryofCustomsandTradeandotherrelevantinstitutions.

5. Independent Auditor’s Responsibility in the Audit of the Annual ReportOuraimistoexpressanopinionandissueareportcomprisingouropinionwithintheframeworkofTCCandCommuniquéprovisionsregardingwhetherornotthefinancialinformationandtheanalysismadebytheBoardofDirectorsbyusingtheinformationincludedintheauditedfinancialstatementsintheannualreportareconsistentandpresentedfairlywiththeauditedconsolidatedfinancialstatementsoftheGroupandwiththeinformationweobtainedinthecourseofindependentaudit.

OurauditwasconductedinaccordancewiththeTSAs.ThesestandardsrequirethatethicalrequirementsarecompliedwithandthattheindependentauditisplannedandperformedinawaytoobtainreasonableassuranceofwhetherornotthefinancialinformationandtheanalysismadebytheBoardofDirectorsbyusingtheinformationincludedintheauditedfinancialstatementsintheannualreportareconsistentandpresentedfairlywiththeauditedconsolidatedfinancialstatementsandwiththeinformationobtainedinthecourseofaudit.

İstanbul,22February2019 Tüpraş 2018ANNUALREPORT|15


MESSAGE FROM THE CHAIRMAN

TÜPRAŞ SUCCESSFULLY MANAGED ITS OPERATIONS WITHIN THE FRAMEWORK OF STRONG RISK POLICIES IN 2018 AND MAINTAINED ITS WORKING CAPITAL AND STRONG BALANCE SHEET, RECORDING A NET PROFIT OF TL 3.8 BILLION.


EsteemedShareholders,

IwouldliketostartmyspeechwishingthatwehaveasuccessfulandproductiveAnnualGeneralAssemblyMeeting.

Despitepositiveindicatorsindevelopingcountries,wehaveleftbehindayearinwhichlong-termgrowthinAsia,whichisprovenverycrucialinsupportingglobalgrowth,hassloweddown,whileindicatorsindevelopedcountrieshavebeentowardsthepullbackoffiscalexpansionarypolicies,diminishedriskappetitefordevelopingcountriesandamoreapparentdivergencebetweencountries.Whileeconomicactivityremainedbuoyantinadvancedeconomies,especiallyintheUSA,withthesupportofexpansionaryfiscalpolicies,therisksinherentinanumberofothercountries,alongwithgeopoliticaldevelopments,mountingindebtednessandatighteningingloballiquidityconditionshaveprecipitatedsignificantdevaluationsindevelopingcountries,includingTurkey,settingthestageforaslowdowningrowth.

Theworldeconomyisestimatedtohavegrownby3.7%during2018,whiletherateofgrowthintheEuropeanUnion–ourbiggesteconomicpartner–estimatedtohaveslowedby0.6%comparedto2017andresultedas1.8%,withafurtherslowdownin2019,to1.6%.

GrowthintheUSeconomywasestimatedtohavebeen2.9%in2018,withrecordlowlevelsofunemploymentandcontinuedstronggrowth,andthisgrowthissettocontinuein2019.However,thecourseoftradewarsthatpunctuatedthelastquarterof2018willsurelydeterminetheglobaleconomicoutlookin2019.AccordingtotheIMF’slatestforecasts,theslowdownstartedinthesecondhalfof2018willalsoaffect2019,inwhichglobalgrowthexpectedtoslowto3.5%.

Inourcountry’seconomy,growthisexpectedtohavefallenbelowlastyear’sperformanceto2%duetothelossofmomentumandthecontractioninthesecondhalfof2018,buttherearepromisingsignsthatgrowthwillreboundto2.3%againin2019,thankstothemeasurestakeninlinewiththeneweconomicprogram.

Thepriceofcrudeoil,oneofthekeyparametersforoursector,soughtdirectionfollowinganumberoffactorssuchascompliancelevelofOPECcountriesandRussiawiththeproductioncutagreement,geopoliticaldevelopmentsandcrudeinventorylevelsthroughouttheyear.Crudeoilprices,whichfollowedafluctuatingcourseduring2018,startedtheyearatUSD66.60/barrelandrosetoUSD86.20/barrelduetothecontinuingpositivetrendinglobalcrudeoildemand,thecomplianceofOPECcountries

toproductioncutsandthesanctionsimposedagainstIran.However,oilpricesthenenteredadownwardtrendduetothetradewarswhichhadamarkedimpactontheeconomyinthelastquarter,concernsoverglobaleconomicgrowthandtheannouncementofexemptionsfromIraniansanctions,andclosedtheyearatUSD50.20/barrel.

THERE ARE PROMISING SIGNS THAT GROWTH WILL REBOUND TO 2.3% AGAIN IN 2019, THANKS TO THE MEASURES TAKEN IN LINE WITH THE NEW ECONOMIC PROGRAM.



2018wasanaverageyearintermsofrefiningprofitabilityduetothenewrefinerycapacitiesoverglobaldemandandhighcapacityutilization.In2018,theweightoflightUSshaleoilandcondensateintheglobalrefineryfeedstockincreased.Thischangeinthefeedstockhaseffectivelyreduceddieselyieldwhileincreasinggasolineyield.Onthedemandside,demandcontractedinlinewithrisingpricesinthelastquarterreducinggasolinemarginstotheirlowesteverlevels,whichsuppressedprofitabilityintherefiningsector.Whilethestrengthoftheglobalaviationsectorhadapositiveimpactonjetfuelmargins,demandfordieselcontinuedtogrowdespitealossofmomentumthankstotheongoinggrowthandinfrastructureprojects;whichsupportedtherefiningsector.

Ourcountrysufferedoneofthesharpestdevaluationsseeninthedevelopingcountrycurrenciesin2018,whichcausedarapidriseinproductprices.Thedeclineintheconsumptionofgasoline,dieselandauto-LPGwaslimitedviathedownwardadjustmentinconsumptiontaxesinresponsetopricehikesfollowingtheintroductionofanewregulation,andconsumptionofpetroleumproductsinourcountryincreasedby3.6%byYoY,basedonthedataforthefirst11monthsoftheyear.

Tüpraşhascontinuedtoperformitsoperationsinlinewithallglobalandlocaldevelopmentsthataffectoursector.Backedbyitscapabilitytoprocessheavyandhigh-sulfurcrudeoilandtheever-expandingcrudeoilsupplypool,20differentvarietiesofcrudeoilwerepurchasedfrom12countriestoachievethemostoptimalchargecomposition.Tüpraşrealized25.7milliontonsofproductionin2018witha95.9%capacityutilizationrate,despitethemodernizationworkbeingcarriedoutinİzmirRefinerycrudeoilunitandtheimportantplannedmaintenancestoppagesinİzmitandKırıkkalerefineries.

Tüpraşrecordeddomesticsalesof25.6milliontonsandtotalsalesof29.8milliontons,withtotalturnoverreachingTL88.6billionparticularlyasaresultofstrongdemandandtherecordsalesvolumesachievedindieselandjetfuelproducts.

Despitebeingaperiodmarkedbysignificantoperationalandfinancialrisks,Tüpraşsuccessfullymanageditsoperationswithintheframeworkofstrongriskpoliciesin2018andmaintaineditsworkingcapitalandstrongbalancesheet,recordinganetprofitofTL3.8billion.

TÜPRAŞ CONTINUED TO INVEST IN SUSTAINABILITY IN 2018, WITH ITS TOTAL INVESTMENTS IN REFINING EXCEEDING USD 6 BILLION OVER THE LAST 13 YEARS.

TL billion

88.6Tüpraşrecordeddomesticsalesof25.6milliontonsandtotalsalesof29.8milliontons,withtotalturnoverreachingTL88.6billion.

MESSAGE FROM THE CHAIRMAN


Tüpraşcontinuedtoinvestinsustainabilityin2018,withitstotalinvestmentsinrefiningexceedingUSD6billionoverthelast13years.TüpraşopenedaLondonTradingOfficein2018tostrengthenitsoperationaleffectivenessthroughinternationalintegration.

Inlinewiththeworkonthedigitaltransformationinitiatedlastyear,TüpraşstartedtoimplementIndustry4.0projectsthatsignificantlyimprovedtherefineryprocesses.OurDataAnalyticsCenters,openedin2018attheMETUandITUTechnocities,havestartedtoprovideanalyticalservicestoothercompanieswiththeexperienceandknowledgegainedinthiscontext.

In2018,Tüpraşcontinuedtocreateeconomicvalueaddedthroughitsproduction,whileatthesametimecontinuingtocarryoutsocialprojectsinthefieldsofculture,theartsandeducationtomeettheneedsofourcountry.Tüpraş,asupporteroftheHeforShemovementundertheleadershipofourGroup,conductstrainingandsponsorshipactivitiesinordertoraiseawarenessofwomen’sempowermentbothintheworkplaceandinsociety.

Themainpriorityinalloftheoperationalandfinancialachievementswehavereached,andoneonwhichweshallnevercompromise,isoccupationalsafetyandtechnicalsafety,asguidedbythewisewordsofthelateVehbiKoç,thefounderoftheKoçGroup,whostated“Ourmostimportantcapitalisourhumanresources”.Byreviewingallofourprocessesthroughthisawareness,ourhighestresponsibilityistoensurethatourworkprocessesbecomeeversaferwitheachpassingday.

OurValuedStakeholders,

Despitethedifficultiesexperienced,wecompleted2018withasuccessfulsetofbusinessresults.Intheviewofthedeclineinglobaltrade,thedifficultiesposedbythefinancialconditionsaroundtheworldandthemountinguncertaintiesinthecommoditymarkets,itisclearthat2019willbeachallengingyear,especiallyfordevelopingcountries.Thankstoouroperationalefficiencyandstrongfinancialstructure,IhavetheutmostconfidencethatTüpraşwillachievesuccessfulbusinessresultsnextyearaswell.

Wewouldliketothankallofourstakeholders–especiallyouremployees,suppliersandbusinesspartners–fortheirvaluablecontributionstooursuccess,aswellastheconfidenceandloyaltytheyhaveplacedinTüpraş.

ÖmerM.KoçChairman



INDEPENDENT AUDITOR’S REPORT (OPINION)

*Thefullreportisavailableonpage161.

Opinion*

WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofTürkiyePetrolRafinerileriA.Ş.(the“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”),whichcomprisetheconsolidatedstatementoffinancialpositionasat31December2018andtheconsolidatedstatementofprofitorlossandothercomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheyearthenendedandthenotestotheconsolidatedfinancialstatementsandasummaryofsignificantaccountingpoliciesandconsolidatedfinancialstatementnotes.

Inouropinion, theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheGroupasat31December2018,anditsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyearthenendedinaccordancewithTurkishFinancialReportingStan-dards(“TFRS”).


CONSOLIDATED BALANCE SHEET/CONSOLIDATED INCOME STATEMENT

(TL thousand) 2018 2017

TotalCurrentAssets 20,962,205 20,366,024

TotalNon-CurrentAssets 19,073,522 17,796,955

Total Assets 40,035,727 38,162,979

TotalShortTermLiabilities 15,949,538 17,675,669

TotalLongTermLiabilities 14,140,360 10,009,649

Total Liabilities 30,089,898 27,685,318

Total Equity 9,945,829 10,477,661

(TL thousand) 2018 2017

Revenues 88,552,170 53,948,110

CostsofGoodsSold -79,327,847 -47,734,212

GrossProfit 9,224,323 6,213,898

OperatingProfit 5,736,300 4,857,459

ProfitBeforeTax 3,724,380 4,474,038

Taxes 37,065 -633,482

NetProfitforthePeriod 3,761,445 3,840,556

EquityHoldersoftheParent 3,712,789 3,811,546

EarningsperShare(TL) 14.83 15.22

Consolidated Balance Sheet

Consolidated Income Statement



BOARD OF DIRECTORS

Rahmi M. KoçMember

Ömer M. KoçChairman

Ali Y. KoçViceChairman

Semahat S. ArselMember

Temel K. AtayMember

O. Turgay Durak Member

Erol Memioğlu Member

Dr. Bülent BulgurluMember

Levent ÇakıroğluMember


Yağız Eyüboğlu Member

Muharrem Hilmi Kayhan IndependentMember

Kamil Ömer BozerIndependentMember

Ömer SertbaşIndependentMemberandPrivatizationAdministrationRepresentative

Ahmet Turul IndependentMember

Ayşe Canan EdiboğluIndependentMember



BOARD OF DIRECTORS’ RESUMES

Ömer M. KoçChairman

HereceivedhisB.A.degreefromColumbiaUniversityin1985.HeworkedatKofisaTradingforoneyearandcompletedhisMBAatColumbiaUniversityin1989.AfterworkingatRamericaInternationalInc.,hejoinedtheKoçGroupin1990.HeheldvariousseniorpositionsatKoçHoldingincludingFinanceCoordinator,VicePresidentandPresidentoftheEnergyGroup.HebecameMemberoftheBoardofDirectorsin2004andViceChairmaninMay2008.InFebruary2016,hewasappointedastheChairmanoftheBoardofDirectorsofKoçHolding.HeservesastheVicePresidentofTÜSİADHighAdvisoryCouncil,ChairmanofTofaş,TüpraşandYapıKrediKültürSanatYayıncılıkBoardofDirectorsandMemberoftheBoardofDirectorsatotherKoçGroupcompanies.HeisalsotheChairmanofTurkishEducationalFoundationBoardofTrusteesandChairmanoftheBoardofDirectorsofGeyreFoundation.

ÖmerM.KoçhasbeenservingastheChairmanofTüpraşBoardofDirectorssince2008.

Ali Y. KoçVice Chairman

Hereceivedhisbachelor’sdegreefromtheManagementFacultyofRiceUniversityandMBAfromHarvardBusinessSchool.HestartedhiscareeratAmericanExpressBankasaManagementTraineeandcontinuedasanInvestmentAnalystatMorganStanleyInvestmentBank.AliY.KoçjoinedKoçHoldingin1997andheldsenior-levelpositionsuntil2010includingnewbusinessdevelopmentandinformationTechnologiesaswellasPresidentofCorporateCommunicationsandITGroup.AfterservingasMemberoftheBoardofDirectorsatKoçHoldingforover8years,hewaselectedasViceChairmaninFebruary2016.SinceApril2016,AliY.KoçalsoservesasChairmanoftheBoardofDirectorsofKoçFinancialServices,YapıKrediBank,FordOtosan,OtokaraswellasseveralotherKoçGroupcompanies.InadditiontobeingChairmanandViceChairmanatTurkey’slargestcompaniesandfinancialinstitutions,AliY.Koçalsocontributestothecountry’ssocialandeconomicdevelopmentandcurrentlyisthePresidentofFenerbahçeSportsClubandtheNationalCompetition

ResearchAssociation(URAK),MemberattheForeignEconomicRelationsBoard(DEİK),MemberoftheGlobalAdvisoryCouncilofBankofAmerica,HarvardUniversityandCouncilonForeignRelations.HeisalsoaMemberofthePanelofSeniorAdvisersatChathamHouseandrecentlyjoinedtheTradeandInvestmentCouncilattheConfederationofBritishIndustry.

Appointedin2008asamemberofTüpraşBoardofDirectors,AliY.KoçhasbeenservingastheViceChairmanoftheCompanysinceApril2016.


Rahmi M. KoçMember

AgraduateofJohnsHopkinsUniversityinBusinessAdministration,hejoinedtheKoçGroupin1958atOtokoç.HebecameChairmanoftheManagementCommitteein1980andwasnamedChairmanoftheBoardofDirectorsofKoçHoldingin1984,aposthehelduntil2003whenhebecametheHonoraryChairman.ApartfromKoçHolding,healsoservesasaMember/ChairmanoftheBoardofDirectorsofotherKoçGroupcompanies.Inaddition,RahmiM.Koçisorhasbeenaffiliatedwithphilanthropic,socialandprofessionalorganizationsincluding:• TheMetropolitanMuseumofArt,New

YorkCity,HonoraryTrustee• Co-ChairmanoftheBusinessAdvisory

CouncilforSouthEastEurope(BACSEE)

• ViceChairmanoftheBoardofTrusteesofVehbiKoçFoundation

• HonoraryChairmanoftheBoardofTrusteesofKoçUniversity

• FounderandChairmanoftheBoardofDirectorsoftheRahmiM.KoçMuseumandCulturalFoundation

• ChairmanoftheBoardofDirectorsoftheVehbiKoçFoundationAmericanHospital

• HonoraryChairmanandFoundingMemberofTURMEPA,TheTurkishMarineandEnvironmentProtectionAssociation

• HonoraryChairmanoftheAdvisoryBoardoftheTurkishIndustrialandBusinessAssociation(TÜSİAD)

• MemberoftheAdvisoryBoardoftheTurkishEmployersAssociation

• FoundingChairmanoftheGlobalRelationsForum

• FormerPresidentoftheInternationalChamberofCommerce(1.1.1995-31.12.1996)

• FormerPresidentoftheTurkishGreekBusinessCouncil(1992-1999)

• FormerMemberoftheAllianzAktiengesellschaftInternationalAdvisoryBoard

• FormerMemberoftheJPMorganInternationalCouncil

• FormerMemberoftheInternationalAdvisoryBoardoftheUSCouncilonForeignRelations

RahmiM.Koçhasbeenawardedwiththefollowingmeritsanddegrees:• “HonoraryDoctorate”degreesby

JohnsHopkinsUniversity(Baltimore-Maryland),EskişehirAnadoluUniversity,İzmirEgeUniversity,AnkaraBilkentUniversity,OvidiusUniversityofConstanzaandAydınAdnanMenderesUniversity

• “OutstandingServiceAward”bythePresidentoftheTurkishRepublic

• GermanGovernment’s“GrossesVerdienstKreutz”

• “OrderofHighMeritoftheItalianRepublic”

• “OrderofMeritoftheAustrianGovernment”

• “(Honorary)CommanderoftheMostExcellentOrderoftheBritishEmpire(CBE)”

• “Officierdansl’OrdreNationaldelaLégiond’Honneur”,thehighestmedalawardedbytheFrenchgovernment

• “ResponsibleCapitalismLifetimeAchievementAward”fromFIRST,aleadingmultidisciplinaryinternationalaffairsorganization

• “HadrianAward”bytheWorldMonumentsFundtotheKoçFamily

• “CarnegieMedalofPhilanthropy”(NewYork)totheKoçFamily

• “BNPParibasPhilanthropyAward”(Paris)totheKoçFamily

RahmiM.KoçhasbeenservingasaMemberoftheBoardofDirectorsofTüpraşsince2008.

Semahat S. ArselMember

Shebeganhercareerin1964asaMemberoftheBoardofDirectorsofKoçHolding,apositionshecontinuestohold.Inaddition,sheisChairmanoftheBoardofDirectorsofVehbiKoçFoundationandtheDivanGroup,PresidentoftheSemahatS.ArselNursingEducationandResearchCenterandFounderoftheKoçUniversitySchoolofNursing.ShealsoservesasMemberoftheBoardofDirectorsofotherKoçGroupcompanies.SheisSecondChairmanoftheFlorenceNightingaleFoundationaswellasMemberoftheBoardofTrusteesoftheEducationalVolunteersFoundationofTurkey(TEGV).SemahatS.Arselhasreceivedan“HonoraryDoctorate”degreefromİstanbulUniversity.

SemahatS.ArselhasbeenamemberofTüpraşBoardofDirectorssince2009.




Temel Kamil AtayMember

AgraduateofMechanicalEngineeringfromİstanbulTechnicalUniversity,heholdsanMBAdegreefromWayneStateUniversity.HejoinedtheKoçGroupin1966andlaterservedastheGeneralManagerofOtoyolSanayiA.Ş.andTofaşTürkOtomobilFabrikasıA.Ş.AfterworkinginvariousseniormanagementpostsatKoçHolding,heservedastheCEObetween2000and2001.HeisaMemberoftheBoardofDirectorsofTofaş,RMKMarine,OtokoçOtomotiv,DivanandSetur;ViceChairmanofVKVAmericanHospital,ChairmanofMedAmericanAmbulatoryCareSurgeryCenterandBodrumAmericanHospital.Inaddition,heisaMemberoftheBoardofDirectorsofVehbiKoçFoundationandChairmanoftheTurkishFamilyHealthandPlanningFoundation(TAPV).HeisaMemberofGlobalRelationsForum(GRF),GalatasaraySportsClubandTURMEPA.HehasbeenaMemberofKoçHoldingBoardofDirectorssince1996.andaMemberofTüpraşBoardofDirectorssince2006.

Dr. Bülent BulgurluMember

HegraduatedfromAnkaraEngineeringandArchitecturalFacultyandearnedhisPh.D.fromNorwegianUniversityofScienceandTechnology(NTNU).Hestartedhiscareerin1972asaConstructionEngineeratElliotStrömmeA/SinOslo.HejoinedGarantiİnşaatin1977asConstructionEngineerandworkedasPlanningandConstructionManager,SiteCoordinationandConstructionManager,AssistantGeneralManager,GeneralManagerandExecutiveDirectoratGaranti-Koza.HehasworkedatKoçHoldingsince1996asPresidentoftheTourismandServicesGroup,PresidentoftheTourismandConstructionGroupandPresidentoftheConsumerDurablesandConstructionGroup.HewasKoçHolding’sCEObetweenMay2007andApril2010.HehasbeenaMemberofKoçHoldingBoardofDirectorssinceMay2007.HealsoservesasMemberoftheBoardofDirectorsofotherKoçGroupcompanies.HeisalsoaMemberofTÜSİADandTURMEPA.

Dr.BülentBulgurluhasbeenamemberofTüpraşBoardofDirectorsfirstbetween2007-2012andthensince2014.

Levent ÇakıroğluMember

LeventÇakıroğlugraduatedfromAnkaraUniversityFacultyofPoliticalSciences,BusinessAdministrationDepartmentandreceivedhismaster’sdegreefromUniversityofIllinois.HestartedhiscareerasanAssistantAuditorattheMinistryofFinancein1988,whereheworkedasaSeniorAuditorbetween1991and1997.HewasappointedasAssistantManagerofFinancialCrimesInvestigationBoardbetween1997and1998,meanwhilehetaughtasaPartTimeInstructoratBilkentUniversity.LeventÇakıroğlujoinedKoçGroupin1998asKoçHoldingFinancialGroupCoordinator.HewastheGeneralManagerofKoçtaşbetween2002and2007andtheCEOofMigrosbetween2007and2008.HewasassignedastheCEOofArçelikin2008andalsobecamePresidentoftheDurableGoodsGroupofKoçHoldinginApril2010.ÇakıroğluhasbeenappointedastheCEOofKoçHoldinginApril2015.HecurrentlyservesastheCEOandhasalsobeenMemberoftheBoardofDirectorsofKoçHoldingsinceApril2016.LeventÇakıroğluisalsoChairmanoftheBoardofDirectorsofArçelik-LGandTürkTraktöraswellastheViceChairmanofOtokarandMemberoftheBoardofDirectorsatvariousKoçHoldingcompanies.

LeventÇakıroğluhasbeenamemberofTüpraşBoardofDirectorssince30March2015.


O. Turgay Durak Member

O.TurgayDurakcompletedhisundergraduatestudiesinMechanicalEngineeringatNorthwesternUniversityintheUSandhisMAfromthesameuniversity.HestartedhisprofessionalcareerasApplicationEngineeratOtosanandwassubsequentlyappointedProjectCoordinationManagerin1982andProjectCoordinationDepartmentDirectorin1984.In1986,hebecameAssistantGeneralManager-Marketing,in1987AssistantGeneralManager-Procurementandin2000ChiefAssistantGeneralManageratFordOtomotivSanayiA.Ş.From2002until2007,heservedasGeneralManagerofFordOtomotivSanayiA.Ş.andthenasPresidentoftheAutomotiveGroupofKoçHoldingbetween2007and2009;asViceCEOatKoçHoldingA.Ş.between2009and2010.HeservedasCEObetween2010and2015.

O.TurgayDurakhasbeenamemberofTüpraşBoardofDirectorssince5April2010.

Erol MemioğluMember

ErolMemioğluisagraduateoftheMiddleEastTechnicalUniversity’sPetroleumEngineeringDepartment.Hestartedhisbusinesscareerin1979asSeniorEngineerattheTurkishPetroleumCorporation(TPAO)andlaterbecameProductionManagerandPresidentoftheOverseasProjectsGroup.HewasappointedVicePresidentattheKoçHoldingA.Ş.EnergyGroupin1999,laterservedasanExecutiveBoardMemberatKoçHoldingEnergyGroupfrom2003to2004;hehasservedasPresidentofthesameGroupbetweenMay2004andApril2016.

ErolMemioğluhasbeenamemberofTüpraşBoardofDirectorssince2006.

Yağız Eyüboğlu Member

YağızEyüboğlugraduatedfromBoğaziçiUniversity,DepartmentofEconomicsin1991;subsequently,heearnedhisMBAfromKoçUniversityin1996.HebeganhisprofessionalcareerasaManagementTraineeatArçelikA.Ş.in1991.Startingin1993,heworkedatKoçHoldingformorethan10years,asSeniorInternalAuditor,AssistantFinancialCoordinatorandFinancialCoordinator,respectively.Between2004and2009,YağızEyüboğluassumedseveralroleswithintheKoçGroup,includingCFOofArçelikA.Ş.,CEOandBoardMemberofBekoElektronikA.Ş.,AssistanttothePresidentofKoçHoldingForeignTradeandTourismGroup,andHumanResourcesDirectorofKoçHolding.From2009toOctober2015,hewastheGeneralManagerofAygaz.InOctober2015,hewasappointedDeputyPresidentoftheEnergyGroupatKoçHoldingandsinceApril2016hehasbeenservingasPresidentofEnergyGroup.HecurrentlyservesasaBoardMemberbothinseveralKoçHoldingcompaniesandsectoralnon-governmentalorganizations.

YağızEyüboğluhasbeenamemberofTüpraşBoardofDirectorssince4April2016.




Ömer SertbaşIndependent Member and Privatization Administration Representative

Hewasbornin18March1959inErzincan.Heattendedtheprimary,secondaryschoolsincludinghighschoolinErzincan.HestudiedinIndustrialEngineeringDepartmentofİstanbulTechnicalUniversity.From1983to1986,heservedincapacityofPlanningandProgrammingDepartmentHeadwiththerankofAirEngineerLieutenantatKayseri2ndMilitaryAirliftCommand.From1986to1994,hecontinuedtobeemployedastheHeadofParachuteWorkshopsGroupwiththeranksEngineerFirstLieutenantandEngineerCaptainatthe2ndMilitaryAirliftCommand.HavingpromotedfromtherankofCaptaintotherankofMajor,ÖmerSertbaşofficiatedasGroundSystemsManagerbetween1994and2002.HeperformeddutyincapacityofManufacturingManagerwiththerankofAirEngineerMajoratthe2ndAirliftCommandbetween2002and2003.AfterhavingcompletedhisdutyofManufacturingManageratAnkara3rdAirliftCommandbetween2003and2008,heheldofficeofPlantManagerwiththerankofAirEngineerSeniorColonelbetween2008and2009.ÖmerSertbaşwasretiredwhenhewasemployedinAirForcesCommandin2009andthenheservedasAdvisorforBinaliYıldırım,theex-MinisterofTurkishMinistryofTransport,MaritimeandTransportationsbetween2009and2016,asPrimeMinistryChiefAdvisorbetween2016and2018,andasChiefAdvisortotheParliamentarySpeaker’sOfficebetween2018-2019.

ÖmerSertbaşhasbeenanIndependentMemberofTüpraşBoardofDirectorssince30May2018.

Ahmet TurulIndependent Member

BorninVanin1959,AhmetTurulgraduatedfromAnkaraUniversity,DepartmentofPoliticalSciencein1980.Between1980and1988,heworkedasAssistantPublicAccountantandlaterasPublicAccountantattheMinistryofFinance.From1988to1999,heservedasAssistantCoordinatorofFinancialAffairs,andFinancialAffairsCoordinatoratKoçHolding,andfrom1999to2002,hewastheVicePresidentofFinancialAffairsatKoçTüketiciFinansmanıA.Ş.Ahmet.TurulservedasVicePresidentofFinancialAffairsatAllianzSigortaA.Ş.andAllianzHayatveEmeklilikA.Ş.between2002and2010.Since2010,hehasbeenaBoardMemberofAllianzSigortaA.Ş.andAllianzHayatveEmeklilikA.Ş.,andaBoardMemberofAllianzYaşamveEmeklilikA.Ş.since2013.Additionally,heservesasBoardMemberandMemberoftheNon-LifeExecutiveBoardattheInsuranceAssociationofTurkey(TSB);BoardMemberatthePensionMonitoringCenter;andMemberoftheTaxCouncilonbehalfofTSB.

AhmetTurulhasbeenanIndependentBoardMemberatTüpraşsince31March2014.

Muharrem Hilmi Kayhan Independent Member

MuharremKayhanreceivededucationatSt.JosephFrenchSchoolandRobertCollegeofİstanbul.HegothisEngineeringDegreeinTextilesin1976fromtheUniversityofManchesterinEngland.HereceivedhisMBAfromCornellUniversityin1978.MuharremKayhanispresentlyChairmanoftheboardsofSöktaşanditssubsidiaries.HehasrepresentedtheinterestsoftheTurkishtextileindustryinvariousEuropeanUnionplatformswhileservingontheboardsoftheAegeanChamberofIndustry,theExporters’Union,andtheTurkishTextileEmployers’Union.HeservedastheChairmanofTÜSİADbetween1997and1999,andisnowanHonoraryChairman.MuharremKayhanservesontheBoardofTrusteesofRobertCollegetheİzmirCulture,ArtandEducationFoundation,andBizimOkulFoundation.HehasrepresentedSpainasHonoraryConsulinİzmirsince2003.HeistherecipientoftheTurkishNationalAssemblyDistinguishedServiceAward(2009).

MuharremHilmiKayhanhasbeenanIndependentMemberofTüpraşBoardofDirectorssinceMarch2018.


Ayşe Canan EdiboğluIndependent Member

AftercompletingherhighschooleducationatAncasterHouseSchool,shegotherbachelor’sdegreeineconomicsandhermaster’sdegreeinfinancialmanagementandcontrolfromtheUniversityofSouthampton,U.K.AfterworkingasaresearchassistantatthesameUniversity,shecontinuedhercareerasaPlanningManageratShellin1980.SheheldvariouspositionsatShellTurkey,beforebeingappointedasitsGeneralManagerin2002andShellTurkeyNationalManagerin2006.ShesatasamemberontheBoardofDirectorsofShell-TurcasPetrolA.Ş.AyşeCananEdiboğluservedasanIndependentMemberofAygazBoradofDirectorsbetween2012-2018.

AyşeCananEdipoğluhasbeenanIndependentMemberofTüpraşBoardofDirectorssinceMarch2018.

Kamil Ömer BozerIndependent Member

AfterreceivinghisdegreeinbusinessadministrationfromtheMiddleEastTechnicalUniversity,KamilÖmerBozercompletedamaster’sdegreeatGeorgiaStateUniversityinU.S.A.HebeganhiscareerasamanagementtraineeatKoçHoldingA.Ş.in1985.AfterservingasDeputyChiefExecutiveofMaretA.Ş.from1990andasGeneralManagerofDüzeyA.Ş.from1995,hebecameGeneralManagerofMigrosTürkT.A.Ş.in2002.HewasappointedPresidentofFood,RetailingandTourismGroupin2005.HeservedasPresidentofFoodandRetailingGroupbetween2006and2008,andonceagainasPresidentofTourism,FoodandRetailingGroupfrom2009toApril2011.KamilÖmerBozercurrentlyservesasaBoardMemberatCocaColaİçecek,AdelKalemcilikTicaretveSanayiA.Ş.,McDonaldsTürkiyeHamburgerİşletmeleriA.Ş.andKamilYazıcıYönetimveDanışmaA.Ş.,andasanIndependentBoardMemberatBoynerPerakendeA.Ş.,SöktaşTekstilA.Ş.andArçelikA.Ş.

KamilÖmerBozer,hasbeenanIndependentMemberofTüpraşBoardofDirectorssinceMarch2018.



PROFIT DISTRIBUTION POLICY

PROFIT DISTRIBUTION PROPOSAL

OurCompanydistributesdividendsincompliancewiththeProvisionsofTurkishCommercialCode,theCapitalMarketsRegulations,theTaxRegulationsandotherrelatedregulationsandtherelatedprovisionsofourCompany’sArticlesofAssociationregardingdividenddistribution.

Inthedividenddistribution,incompliancewiththeCorporateGovernancePrinciples,abalancedandconsistentpolicyispursuedbetweentheshareholdersandtheCompanybenefits.Inprinciple;asfarastherelatedregulations,investmentneedsandfinancialsituationallow,theentireamountofthe“netdistributable

profitfortheperiod”,calculatedwithintheframeoftheCapitalMarketsRegulations,isdistributedincash-takingintoconsiderationthemarketexpectations,longtermcompanystrategies,investmentandfinancingpolicies,profitabilityandcashposition-aslongasitiscoveredfromtheexistingresourcesinourlegalrecords.

TheGeneralAssemblyortheBoardofDirectors,ifauthorized,maydecidetodistributedividendswithinstallmentsincompliancewiththeregulationsoftheCapitalMarkets.ThereisnoprivilegeintheArticlesofAssociationregardingtheparticipationtodividenddistribution.

TheaimistomakethedividenddistributionwithinonemonthatthelatestaftertheGeneralAssemblymeeting.DividenddistributiondateisdecidedbytheGeneralAssembly.AspertheCompany’sArticlesofAssociation;incompliancewiththeRegulationsoftheCapitalMarkets,theBoardofDirectorsmaydistributeadvancedividendprovidedthattheauthorizationisgrantedbytheGeneralAssembly.ProfitdistributionpolicyandprofitdistributionproposalareincludedintheannualreportandpresentedtotheapprovalofshareholdersattheGeneralAssembly.

Financialstatementsfortheaccountingperiod1January-31December2018,incompliancewiththeTAS/TFRS,preparedbythemanagementofTurkishPetroleumRefineriesCorporation,andauditedbyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.havebeenreviewedandapprovedbytheBoardofDirectorsattheirmeetingheldon13February2019tobepresentedtotheGeneralAssembly.

AsaresultofthereviewoftheaforementionedfinancialstatementsandtherecordsofTurkishPetroleumRefineriesCorporationinaccordancewithTurkishProceduralLaw,netprofitofTL3,712,789,000.00perthefinancialstatementsinaccordancewithTAS/TFRSandnetprofitof3,700,951,260.62aspertherecordsinaccordancewiththeTaxProceduralLawhavebeennotedand;profitdistributionproposalispreparedaccordinglyasexplainedbelow:

a. PursuanttoArticle519oftheTurkishCommercialCode,5%LegalReservethatneedstobesetasidehasnotbeensetasidein2018sincethecapitalreservesalreadyexceeded20%ofequityasof31December2018.

AccordingtothefinancialstatementspreparedinaccordancewithTFRS/

TAS,netincomeattributabletoequityholdersoftheparentcompanyisintheamountofTL3,712,789,000.00.WhendonationsofTL40,062,607.81tocharitableorganizationsareadded,thefirstassessmentbasefordividendisTL3,752,851,607.81.

Accordingtothestatutoryrecords,netdistributableprofitofTL3,700,951,260.62hasbeenrealized.

b. InaccordancewiththeCapitalMarketBoardRegulations,Article18oftheCompany’sArticlesofAssociationandtheDividendDistributionPolicyapprovedbytheshareholdersattheGeneralAssemblydated31March2014,thefollowingprofitdistributionisproposed;

• TL 3,363,416,736.94tobedistributedasfirstdividendtoshareholders

• TL430,434,143.06tobedistributedtoshareholdersfromotherreservesavailablefordistributionand

• TL378,132,992.00tobesetasideasotherlegalreserves.

c. ThetotalamountofdividendTL3,793,850,880.00istobepaidincashtoshareholdersi

d. Iftheabovementioneddividenddistributionproposalisapprovedbythegeneralassembly,onthebasisofstatutory

accounts,theamounttobedistributedtoshareholdersisTL3,793,850,880.00,ofwhichTL3,363,416,736.94isfromearningsofthecurrentperiodandremainingTL430,434,143.06isfromotherreservesavailablefordistribution.GenerallegalreservesisTL378,132,992.00;ofwhichTL335,089,577.69willbefundedfromcurrentyearearningsandremainingTL43,043,414.31willbefundedfromotherreservesavailablefordistribution.

e. Onthisbasis,acashdividendofgross=netTL15.15istobepaidforonenominalstockworthTL1.00atarateof1,515.00%toourlegallyobligatedcorporatetaxpayershareholdersandlimitedcorporatetaxpayershareholdersearningdividendsthroughaTurkey-basedbusinessorpermanentrepresentationoffice.Othershareholdersaregoingtobepaidagrossrateof1,515.00%,acashdividendofgrossTL15.15,andnetrateof1,287.75%,acashdividendofnetTL12.8775foronenominalstockworthTL1.00.

f. Thedividenddistributionissuggestedtobeginon28March2019.

Thedividenddistributionproposalwillbesubmittedtoourshareholders’approvalintheGeneralAssemblythatwillbeheldon20March2019.


DIVIDEND DISTRIBUTION TABLE

TÜRKİYE PETROL RAFİNERİLERİ A.Ş. 2018 Dividend Distribution Table (TL)1. Paid in Capital/Issued Capital 250,419,200.002. Total Legal Reserves (According to Statutory Income Statements) 597,085,809.18Information on privileges in profit distribution if any in the Articles of Association

According to CMBAccording to Statutory

Records3. Current Period Profit 3,675,724,000.00 3,908,386,463.044. Taxes Payable (-) -37,065,000.00 207,435,202.425. Net Profit (=) 3,712,789,000.00 3,700,951,260.626. Previous Years Losses (-) 0.007. General Legal reserves (-) 8. DISTRIBUTABLE NET PROFIT FOR THE

PERIOD (=) 3,712,789,000.00 3,700,951,260.62

9. Donationsmadeduringtheyear(+) 40,062,607.81 10. Net Distributable Profit Added Donations 3,752,851,607.81 11. First Dividend to Shareholders

-Cash 3,363,416,736.94 12,520,960.00-Bonus - Total 3,363,416,736.94 12,520,960.00

12. Dividendtoprivilegedshareholders 13. Distributed Other Dividend 0.00 0.00

-DividendtotheBoardMembers -DividendtotheEmployees -Other

14. Dividendtoredeemedshareholders 15. Secondarydividendstoshareholders 3,350,895,776.9416. Generallegalreserves 335,089,577.69 335,089,577.6917. Statutoryreserves 18. Specialreserves 19. EXTRAORDINARY RESERVES 14,282,685.37 2,444,945.9920. Other Resources to be Distributed 430,434,143.06 430,434,143.06

-Previousyear’sprofit -Extraordinaryreserves -OtherdistributablereservesasperthelawandtheArticlesofAssociation

430,434,143.06 430,434,143.06

21. AllocatedLegalReservestobedistributedfromothersources 43,043,414.31 43,043,414.31

DIVIDEND RATIO TABLE*

GROUP

TOTAL AMOUNT OF DIVIDEND DISTRIBUTED

TOTAL DISTRIBUTED DIVIDEND/NET

DISTRIBUTED PROFIT

* DIVIDEND PER SHARE WITH NOMINAL VALUE OF TL 1

AMOUNT (TL) BONUS (TL) RATIO (%) AMOUNT (TL) RATIO (%)

NETA 3,515,002,840.69 94.67 12.8775 1,287.75C 0.15 0.00 12.8775 1,287.75TOTAL 3,515,002,840.84 0.00 94.67

(*)Accordingtothecalculationofnetdividenddistribution,the51%ofsharesownedbycorporatetaxpayersandnotpubliclytradedarenotsubjecttowithholdingtax,whilstthe49%ofsharesthatarepubliclytradedaresubjecttoa15%withholdingtaxontheassumptionthatthebeneficialownersareindividualtaxpayers.



Ömer M. Koç

Ali Y. Koç

Rahmi M. Koç

Semahat Sevim Arsel

Levent Çakıroğlu

Yağız Eyüboğlu

Erol Memioğlu

Muharrem Hilmi Kayhan(IndependentMembershipCandidate)

Ayşe Canan Ediboğlu(IndependentMembershipCandidate)

Kamil Ömer Bozer(IndependentMembershipCandidate)

PrivatizationAdministrationCGroupShareRepresentative*(IndependentMembershipCandidate)

* Asofthedatethisreportispublished,noassignmenthasbeenmadefortheCgroupsharerepresentativebythePrivatizationAdministration.

2019 BOARD OF DIRECTORS CANDIDATES


REMUNERATION POLICY FOR BOARD MEMBERS AND SENIOR EXECUTIVES

ThispolicydeterminestheremunerationsystemfortheBoardofDirectorsandseniorexecutiveswithinthescopeofthedefinitionofpersonsdischargingmanagerialresponsibilitiesunderCapitalMarketsBoardregulations.

AfixedremunerationisdeterminedforallmembersoftheBoardattheÜnnualGeneralAssemblyMeetingoftheCompany.

AdditionalpaymentismadetotheexecutivemembersoftheBoardinaccordancewiththepolicyestablishedforseniorexecutives.

TotheChairmanandmembersoftheExecutiveCommitteeoftheBoardwhichsupportstheBoardinthepropermanagementoftheCompanyinallrespects,additionalcompensationdeterminedbytheBoardofDirectorsinconsultationwiththeNominationandRemunerationCommitteebytakingintoaccountsuchCommitteeMembers’contributions,attendanceatthemeetings,functions,etc.canbegranted.PaymentsmadethereoftoExecutiveCommitteememberswithintheyeararetobedeductedfromtheamountdeterminedattheendoftheyear.

InrespectofremunerationoftheindependentmembersoftheBoardofDirectors,apaymentplanbasedontheperformanceoftheCompanycannotbeused.

ProratapaymentismadetothemembersoftheBoardofDirectorsbytakingintoaccountthetimetheycarriedouttheirdutybetweenthedateofappointmentandthedateofresignation.ExpensesincurredbythemembersoftheBoardofDirectorsonaccountofmakingcontributionstothecompany(suchastransportation,telephone,insurance,etc.)maybepaidbytheCompany.

Theremunerationofseniorexecutivesconsistsoftwocomponents,whicharefixedandperformancebased.

Fixedsalariesofseniorexecutivesaredeterminedinaccordancewithinternationalstandardsandlegalobligationsbytakingintoaccounttheprevailingmacroeconomicdatainthemarket,thesalarypoliciesprevailinginthemarket,thesizeandlong-termtargetsoftheCompanyandthepositionsofthepersons.

Bonusesforseniorexecutivesarecalculatedaccordingtothebonusbase,theperformanceoftheCompanyandtheindividualperformance.Asummaryofthecriteriaisasfollows:

• BonusBase:Bonusbasesareupdatedatthebeginningofeachyear.Theyvarydependingontheworkvolumeoftheexecutives’positions.Whenupdatingthebonusbases,seniorexecutivebonuspoliciesinthemarketaretakenintoaccount.

• CompanyPerformance:TheperformanceoftheCompanyisdeterminedattheendoftheyearbymeasuringthefinancialandoperationaltargets(marketshare,exports,overseasoperations,productivity,etc.)assignedtotheCompanyatthebeginningofeachyear.IndeterminationoftheCompany’stargets,thesustainabilityofsuccessandthedegreetowhichitincorporatesimprovementsoverpreviousyearsaretheprinciplestakenintoaccount.

• IndividualPerformance:Inthedeterminationofindividualperformance,alongwiththetargetsoftheCompany,thoserelatedtotheemployee,customer,process,technologyandlong-termstrategyaretakenintoaccount.Inthemeasurementofindividualperformance,inlinewiththeperformanceofthecompany,theprincipleofachievinglongtermsustainableimprovementinareasapartfromthefinancialdimensionisobserved.

Severancepaymentsmaybegrantedtotheseniorexecutivesbytakingintoaccounttotaltermofservice,termofserviceasanexecutive,aswellascontributionsmadetotheCompany,therecentbonusbase,andthesalariesandbonusespaidinthelastyearofservice.

TotalamountsdeterminedbytheaboveprinciplesandpaidtothemembersoftheBoardofDirectorsduringtheyeararesubmittedforshareholders’approvalinthenextgeneralassemblymeeting.



MESSAGE FROM THE GENERAL MANAGER

WE ARE LEAVING BEHIND A YEAR THAT HAS BEEN DOMINATED BY GLOBAL UNCERTAINTIES, THE ECONOMIC SLOWDOWN IN EMERGING ECONOMIES ALONG WITH SHARP FALLS IN THEIR VALUE OF CURRENCIES AND SECTORAL VOLATILITIES.


DearStakeholders,

Weareleavingbehindayearthathasbeendominatedbyglobaluncertainties,theeconomicslowdowninemergingeconomiesalongwithsharpfallsintheirvalueofcurrenciesandsectoralvolatilities.Theyear2018wasayearmarkedbyrisingcrudeoilprices,mainlyduetosupply-drivenfactorsandbuoyantglobaldemandinthefirsthalfoftheyear,addingtheimpactofthedepreciationofcurrenciesindevelopingcountries.

Profitability of oil products is significantly impacted by shifts in crude oil supply in 2018In2018,theincreaseintheshareoflightcrudeoilwithhighgasolineyield,risingproductionintheUSalongwiththeintroductionofnewrefiningcapacity,andthesignificantincreaseinChineseexportsallhadadecisiveroleontheglobalrefiningsector.Positivesentimentintheglobaleconomycontinueduntilthelastquarteroftheyeardespitethelossofmomentum,andsupportedtheaviationsectorand,inparticular,middledistillateproducts.Ontheotherhand,marginsofalllightdistillates,includinggasoline,slumpedtorecordlowlevelsinthelastquarterasaresultofChinaandtheUScontinuingtostrengthentheirpositionasnetexportersofgasoline,theincreaseinethanolusageduetohighgasolineprices,thepressurebroughtaboutbyethane-basedcapacityandlowLPGpricesonnaphthamargins.Asaconsequenceofthesefactors,theMediterraneanrefining

margin,whichhadstoodatUSD5.34/barrelin2017,declinedbyUSD0.78/barreltoUSD4.56/barrelin2018.

Continued growth in gas and diesel consumption in our countryIncommonwiththemeasuresbroughtinplaceinsomeotherdevelopingcountries,theamountofconsumptiontaxonpetroleumproductswasreducedtooffsettheincreaseinprices.Asaresult,thedeclineinconsumptionofgasoline,dieselandauto-LPGwasrelativelylimited.However,despitetheseprecautions,therewasadeclineintheconsumptionofpetroleumproductsduetotheslowdownineconomicgrowthsinceAugust.Theannualaveragegrowthofgasolineanddieselconsumption,whichhadstoodat4.5%and9.0%respectivelyinthelastfive-yearperiodwas3.7%and7.8%inthefirstsixmonthsof2018.HoweverastheeconomicslowdownbeganstartingfromAugust,thegrowthratesinconsumptionofgasolineanddieselforthefirst11monthsoftheyearhadbeenscaledbackto1.7%and4.2%,respectively.

Tüpraş procured 24.5 million tons of crude oil from 12 countriesIn2018,ourcompanyprocuredatotalof24.5milliontonsofcrudeoil,in20differenttypes,from12countries–includingdomesticcrudeoil–tocreatethemostcost-effectivefeedstockcomposition.Despitetheperiodicplannedmaintenanceandinvestmentshutdownsinour3largerefineries,27.0

milliontonsofrawmaterialswereputintochargein2018withanoptimalcapacityutilization;77.4%ofwhiteproductyieldwasachievedwith25.7milliontonsofproduction.Withthesupportofcommercialsales,atotalof29.8milliontonsofproductsales,ofwhich25.6milliontonsisdomesticsales,wasrealizedin2018.

Making a difference with our financial managementTheyear2018,whichwasmarkedbyaveryvolatilecourseincrudeoilprices,wasnotaparticularlypositiveyearforthesectorduetothedeclineinrefiningprofitability.Ontheotherhand,theunpredictableandsharpfluctuationsinexchangeratesrendereditverydifficulttomanagestockandexchangeraterisksin2018.

27.0 MILLION TONS OF RAW MATERIALS WERE PUT INTO CHARGE IN 2018 WITH AN OPTIMAL CAPACITY UTILIZATION; 77.4% OF WHITE PRODUCT YIELD WAS ACHIEVED WITH 25.7 MILLION TONS OF PRODUCTION.



MESSAGE FROM THE GENERAL MANAGER

Adoptingaforwardlookingapproach,TüpraşrenewedaUSD700millionEurobondissuanceattheendof2017atveryreasonablecosts(beforethematurityofits2018term)againsttheriskofacontractioninfundinflowstoemergingmarkets.ThisEurobondissuancehelpedusemergethroughthischallengingyearwithastrongdebtstructureandbalancesheet.Wemanagedouroperationalandfinancialriskssuccessfullybyusingallkindsoffinancialinstruments.TüpraşwroteanetprofitofTL3.8billionin2018,achievedasaresultofitssuccessinmanagingrisks,itsexperienceincrudeoilprocurement,itsstrongproductionpoweranditseffectivefinancialmanagement.

Our investments are the key to our strong and sustainable growth.AtTüpraş,weviewourinvestmentsasthekeytoourstrongandsustainableperformance.Withthisapproach,despitethedifficultinvestmentenvironmentandthecrisesof2018,werealizedUSD138millionofinvestmentinourrefiningactivities.

In2018,withourinvestmentprojectsaimedatenergysavingsandreductionsinemissions,weachieved865thousandGcalofenergysavingsandreducedCO2 emissionsby247thousandtons.

OursubsidiaryDitaş,whichcontinuestooperatewith11tankersandatotalcarryingcapacityofapproximately

622thousandDWT,startedtoinvestinscrubbersin2018tocomplywiththeupcomingregulationsof2020InternationalMaritimeOrganization.Thescrubberswillbeinstalledto4tankerswithatotalcarryingcapacityof330thousandDWT.

Inaddition,KörfezUlaştırmaA.Ş.,thefirstprivaterailwayoperatorinTurkeyinwhichweholdafullshareofthecapital,startedoperationsin2018andcarried1.8milliontonsofproducts.

A world first with the “Online Spalling” projectIn2018,Tüpraşbegantousedigitaltechnologiesanddataanalyticsmoreintensivelyinrefineryoperations.Tothisend,wehaveimplementedaprojectthatincludesend-to-endmaintenancemanagementinordertoplan,optimizeandfollow-upallmaintenanceactivitiesinthefieldandwestartedtoimplementedwirelesstechnologiesintherefineryarea.Withthestrategyoftransformingallkindsofdataintovalue,TüpraşestablishedtheAnalyticalCentersworkingforawiderangeofprojectsinMETUandITUin2018.Weachievedaglobalfirstbyestablishingasystemthatpredictsthemaintenancetimeoffurnaces,withtheOnlineSpallingprojectsupportedbymachinelearning.

TÜPRAŞ TOOK CONCRETE STRATEGIC STEPS IN 2018 AS PART OF ITS BUSINESS DIVERSIFICATION STRATEGY IN THE SECTOR, BY CLOSELY FOLLOWING THE POTENTIAL INVESTMENT OPPORTUNITIES IN DOMESTIC AND FOREIGN AREAS.

Trading OfficeOurLondonoffice,theorganizationalstructureofwhichhasbeencompleted,starteditsoperationsbytheendof2018.


Our London office opens for businessWhilecontinuingtofocusonrefiningactivities,Tüpraştookconcretestrategicstepsin2018aspartofitsbusinessdiversificationstrategyinthesector,bycloselyfollowingthepotentialinvestmentopportunitiesindomesticandforeignareas.Asaresultoftheevaluationofsimilarpracticesinthesector,a“tradingoffice”wasopenedinLondoninordertofollowtheinternationalmarketopportunitiescloselyandsupportourimportandexportoperations,whileseekingtocaptureadditionalvaluefromthesupplyandsaleschain.OurLondonoffice,theorganizationalstructureofwhichhasbeencompleted,starteditsoperationsbytheendof2018.

Working to the priority of “my future my safety” in all business processesAsacompanythatplaceshumanandoccupationalsafetyattheheartofwhatitdoes,wecontinueouractivitiesinlinewithourgoalofdefiningandeliminatingrisksinallofouroperationsandreducingthemtoacceptablelevelswithintheframeworkofnationalandinternationalstandards.Inthiscontext,weexpectoursolutionpartnerstofollowtheHealth,Safety,Environment(SEC)ProcessSafetyStandardstogetherwithallouremployees

withoutcompromise.Westartedtoimplementawiderangeofprojectsonthissubjectthisyear.Wehavedeterminedawayofworkingthatcomplieswithourresponsibilityofensuringallourworkersreturntotheirlovedonessafeandsoundattheendofeachday,asourgoal.

“Our Energy for Equality Never Ends”Asourcountry’slargestindustrialcompany,wealsobeartheresponsibilityofprovidingleadershipinchangeandtransformationinthecommunity.Inthiscontext,wehaverealizedanarrayofprojectsinawiderangeofareasfromeducation,health,cultureandtheartstosportsandwewillcontinuetodoso.Since2015,wehavebeenfocusingongenderequality.Westrivetoraiseawarenesswithinthescopeofthe“ISupportSocialGenderEqualityforMyCountry”projectbeingundertakenbytheKoçGroupweareaffiliatedwith.BysigningtheUnitedNationsWomen’sEmpowermentPrinciplesin2017,wehaveannouncedourgoaltobecomeaninclusiveworkplace.AsasupporteroftheHeForShemovementcarriedoutbytheUnitedNationsWomen’sUnit(UNWomen),wesignedaglobalcooperationagreementwiththeUNWomenandFenerbahçeattheendof2018toraise

awarenessonbehalfofequalityinabroaderfield.Assuch,asweseektobringgenderequalitytotheagendaofsociety,wereiteratethat“OurEnergyforEqualityNeverEnds”.

Tüpraşwillmaintainitsworkaimedatproducingthegreatestaddedvalueforitspartners,stakeholdersandTurkey’seconomywithdetermination,inthefutureasitdidinthepast.

Iwouldliketothankallofourcolleagueswhocontributedtoour2018performance,andallofourstakeholdersfortheirencouragement.

Sincerely,

İbrahimYelmenoğluGeneralManager



SENIOR MANAGEMENT

İbrahim YelmenoğluGeneral Manager

İbrahimYelmenoğlugraduatedfromtheFacultyofPoliticalSciencesatAnkaraUniversityin1991andreceivedhisMAfromtheUniversityofIllinoisin2003.

Startinghiscareerin1987attheMinistryofFinance,heworkedontheBoardofPublicAuditorsin1992.In2004,hestartedworkattheKoçHoldingAuditorsGroupandservedasKoçHoldingA.Ş.AuditorsGroupCoordinatoruntil2006.Followingthetransferof51%ofTüpraş’ssharestoKoçHoldingon27January2006,İbrahimYelmenoğluwasassignedasAssistantGeneralManagerforFinancialAffairs.HewasappointedasGeneralManagerasof1January2016.

Doğan KorkmazAssistant General Manager (Financial)

HestartedhisprofessionallifewithKoçHoldingMTprogramin1996andstartedworkinginArçelikA.Ş.InvestmentFinancedepartmentatthesametime.HeheldCorporateFinanceandFinancialMarketsStrategistpositionsinArçelikuntil2007.In2007,hebecameTreasuryandCapitalMarketsManagerofArçelik.In2009,hebecameFinanceDirectoratBekoplc,Arçelik’sUKsubsidiary.In2012,hebecametheFinanceDirectorofArçelik.DoğanKorkmazgraduatedfromDepartmentofBusinessAdministrationatDEUin1996.HehasalsocompletedhisMBAprograminKoçUniversityin2007andDiplomainGlobalBusinessatOxfordUniversityin2013.Asof1January2016,DoğanKorkmazwasappointedasChiefFinancialOfficerofTüpraş.

Levent ZağraAssistant General Manager (Investments & Planning)

LeventZağragraduatedfromWorcesterPolytechnicInstitute,DepartmentofMechanicalEngineering,andearnedhisMBAandMSinManufacturingSystemsEngineeringfromCornellUniversity.

HebeganhisprofessionalcareeratKoçHoldingintheStrategicPlanningDepartmentin1996.In2002,hewasappointedasGeneralManagerofPromenaElectronicCommerce.Between2009and2016,heservedastheEnergyGroupCoordinatoratKoçHolding.LeventZağrawasappointedasAssistantGeneralManagerforInvestmentsandPlanningatTüpraşinApril2016.


Özgür KahramanzadeAssistant General Manager (Sales & Marketing)

ÖzgürKahramanzadeholdsaBachelor’sdegreeinMechanicalEngineeringfromBoğaziçiUniversity.HereceivedhisMaster’sdegreeinManagementfromPurdueUniversity,KrannertBusinessSchool.

ÖzgürKahramanzadebeganhisprofessionalcareerasaManagementTraineeatBekoElektronikin1994;in1997,hebeganworkingasaProjectEngineeratKoçHolding.HejoinedZinerjiA.Ş.asProjectOfficerin2000;in2001,hestartedworkasaProjectManageratKoçHolding.In2005,hewasappointedasDirectorofMarketing,InvestmentsandGroupCompaniesatOpetPetrolcülük,andlaterasSupplyandTechnicalAssistantGeneralManageratthesamecompanyin2006.BetweenDecember2010andApril2016,heservedasGeneralManagerofEntekElektrikÜretimA.Ş.InApril2016,ÖzgürKahramanzadewasappointedasAssistantGeneralManagerresponsibleforSalesandMarketingatTüpraş.

İhsan Serdar KemaloğluAssistant General Manager (Technical)

SerdarKemaloğlugraduatedfromMiddleEastTechnicalUniversity,DepartmentofChemicalEngineeringin1991.

Hebeganhisprofessionalcareerin1993asPlantEngineeratTüpraşİzmitRefinery,whereheassumedvariousrolesincludingSupervisorandChiefEngineerattheRefinery’sFCC,CrudeOil,Vacuum,DesulphurizationandHydrocrackerUnits.SerdarKemaloğluparticipatedineffortstocommissiontheIsomerizationUnitin2002.AstheChiefProcessControlEngineeratİzmitRefinery,hewasactivelyinvolvedintheimplementationofAdvancedProcessControls(APC),launchedin2008.AfterservingasProductionManageratİzmirRefinery,hewasappointedasBatmanRefineryManagerinJune2013;andbetweenOctober2015andFebruary2017,heservedasKırıkkaleRefineryManager.SerdarKemaloğluwasappointedasTechnicalAssistantGeneralManageron1February2017.

Atilla UlusuAssistant General Manager (Crude Oil Supply & Foreign Trade)

AtillaUlusugraduatedfromLycéeSaintJosephİstanbulin1994andthenBilkentUniversityPoliticalScienceandPublicAdministrationin1999.

Hestartedhisprofessionallifein2000asRamAlgeriaRegionalSalesRepresentativeandhebecameRegionalDirectorinthesamecountryasof2002.In2003,hewasappointedasLPGTrading&PlanningResponsibleinAygazA.Ş.Followingthisposition,hebecameOverseasLPGSalesResponsiblemainlyforLPGexportstoIraqandotherEastMediterraneanCountries.HebecameCrudeOilSupplyCoordinatorinTüpraşin2017;CrudeOilSupplyManagerin2013andCrudeOilSupplyandProductionPlanningDirectorin2015.Asof5May2017,AtillaUlusuwasappointedasAssistantGeneralManagerresponsibleforCrudeOilSupplyandForeignTrade.



STRATEGY

WITH THE PRIMARY AIM OF UNINTERRUPTEDLY MEETING TURKEY’S NEED FOR OIL PRODUCTS, TÜPRAŞ AIMS TO GROW AS AN INNOVATIVE AND PEOPLE-ORIENTED ENERGY COMPANY.

innovationTheevaluationofemergingnewtechnologiesandbusinessmodelsintheworldandprovidingvaluebycreatinganapplicationfieldfortheseinnovationsinitsownoperationsrepresentsanimportantpartoftheinnovationprogramthatTüpraşhasrecentlybroughtintooperation.

Sector evaluationWithitsdemographicadvantage,Turkeyretainsitsstrongeconomicfoundationsdespitethevolatilityexperiencedinglobalmarkets.SafelymeetingtheincreasingenergyneedsofTurkey,acountrywhichisdevelopingandgrowing,andcreatinginfrastructuretoensuringsustainablegrowthareamongtheprioritizedgoalsofTüpraşmanagement.

2018wasayearmarkedbymoreintensivecompetitionandgeopoliticaldevelopmentshavingasignificantimpactonthedynamicsofrefiningsector.CrudeoilpricesfollowedavolatilecoursethroughouttheyearamiddevelopmentssuchasthesanctionsimposedagainstIranalongwiththeannouncementsofcertainexemptionsbytheUSA,crudeoilsupplyconcerns,concernsoverthehealthoftheglobaleconomy,recordincreasesinoilproductionofRussia,theUSAandOPECcountries,andthechangesintheOPECcrudeoilproductionpolicyIn2018,whenglobal

refiningcapacityutilizationratesincreasedcomparedtotheirpreviousyear,thesectorwassupportedbyrobustdemandformiddledistillates.Inthiscompetitiveenvironment,Tüpraşcontinuedtotakestepstobolsterenergyefficiency,increasetheavailabilityoftheplantsandcontinuouslyprovideoperationaloptimization.

Tüpraş opened Data Analytics Centers at ITU and METU.Followingtheemergenceofnewinvestmentopportunitiesbothdomesticallyandabroad,Tüpraşhasbeentargetingbusinesslinesandrenewableenergyresourceswhichcanbeintegratedwithitsrefineriesinlinewithitsstrategyofdiversifyingitsareasofgrowthandoperation.Therenewableenergyinvestmentsareprimarilygearedtowardsmeetingtheenergyneedsoftherefineries,andtherebyreducingenergycoststhroughthesemeanswhileloweringcarbonemissions.


TheevaluationofemergingnewtechnologiesandbusinessmodelsintheworldandprovidingvaluebycreatinganapplicationfieldfortheseinnovationsinitsownoperationsrepresentsanimportantpartoftheinnovationprogramthatTüpraşhasrecentlybroughtintooperation.

In2018,whentheresultsofthestepsthathadbeenpreviouslytakenintheDigitalTransformationandIndustry4.0projectsarestartedtobeseen,TüpraşopenedDataAnalyticsCentersintheITUandMETUTechno-Cities.Thecompanyimplementedprojectsinthefieldofefficiencyandprofitabilitybystartingtouseartificialintelligenceprojectsdevelopedbymachinelearninginthemaintenance,productionandplanningprocesses.

WiththewirelesstechnologiesthatstartedtobeusedintheTüpraşrefineryfield,processeswassteppedupin2018andtheytherebybecamemeasurableandmonitorableinrealtime.Tüpraşwillcontinuetoprogressinthedigitalroadmapin2019withprojectssuchasroboticsautomationinworkprocesses,3DmappinganddigitaltwinningwithLIDARtechnology,andreal-timedatavisualization.

TheLondonTradeOffice-Tüpraş’sfirstforeignoperation-wasestablishedin2018.Theoffice,whichwilloperateinLondon-beingoneoftheworld’sleadingoiltradingcenters-,aimstosupportTüpraş’sexistingforeigntradeoperationsbycloselymonitoringinternationalmarketopportunitiesaswellascreatingadditionaladdedvaluefromthesupplyandsaleschains.TheLondonTradeOfficemarksanimportantstepintheintegrationofTüpraşintotheworldenergysector.

Turkey’ssecondlargestfueldistributioncompany,Opet–withwhichTüpraşisapartnerwitha40%stake–increaseditsnumberofstationsto1,615in2018.DitaşDenizcilik,asubsidiaryofTüpraş,

continuestotakestepstostrengthenitsfleetthroughrenewals.Establishedwith100%Tüpraşcapitalattheendof2017,Turkey’sfirstprivaterailwayoperatorKörfezUlaştırma,increasedTüpraş’sshareofrailwaytransportsignificantlyinthefirstyearofitsestablishment.Duringtheyear,thecompanybrokeanewgroundintheprivatesectorwiththepurchaseoflocomotives.

Technology Roadmap, R&D processesTüpraşundertakesinvestmentsaimingtoachieveahighreturnonequity.

Inthethirteen-yearperiodbetween2006and2018,atotalofUSD6.0billioncapitalexpenditurehasbeenrealizedinrefining

In2018,TüpraşpreparedtheTechnologyRoadmap,inwhichitwillplananddevelopitstechnologicalcapabilitiesinordertoachievethestrategicandoperationalgoalsithasdefinedbymanagingriskatthehighestlevel.Theroadmapsetsoutaimsoffollowingnewtechnologies,analyzingthreatsandopportunitiesandestablishingaproduct-marketrelationship.

TüpraşworksoninnovativetechnologiesinlinewiththeTechnologyRoadmap,whiledevelopingprojectsfortheoperationofitsrefinerieswiththeR&Dcenters.TüpraşbecameapioneerindustrialcompanyinTurkeyin2018withitscontributiontoEuropeanUnionprojectsandthesupportitreceived.

ThemostsuccessfulexamplesofthecollaborationbetweenindustryandacademiaareexhibitedinTurkeythroughtheworkcarriedoutwithKÜTEM(theKoçUniversity-TüpraşEnergyCenter),whichwasthefirstprivatesectorsupportedenergycenterestablishedinthefieldofenergyinTurkey.Thecatalystprocurementprocessesaresupportedbyourcountry’sfirstandonlycatalystpilotplantofsuchascale,whichwascommissionedattheTüpraşR&Dcenter

in2018.Furthermore,performanceoptimizationtestsofthecatalystusedarecarriedoutusinginternalresourceswiththecompetenciesgained.

Tüpraş is working to the vision of becoming a pioneering company that respects the environment and life values, with a performance that is looked up to in the oil sector.Tüpraşactswiththeawarenessthatadaptationtorisingglobalcompetitionisachievedbybeingabletorapidlyadapttochangingmarketconditions.Managedinlinewiththeprinciplesofbeingfinanciallysoundandsustainable,Tüpraşprovedtheeffectivenessofthisstrategywithitsperformancedisplayedin2018,despitethefluctuationsexperiencedininternationalandnationalmarkets.

Inlinewithitsprioritizedbusinessstrategy,Tüpraşbelievesintheneedtoincreaseitscompetitivecloutbymanagingallbusinessprocesseswiththepriorityofsafety,byminimizingtheenvironmentalimpacts,improvingproductefficiencyandensuringacontinuousimprovementinthecoststructure.Thecompanyaimstogomuchfurthertobuildonitsabilitytoadapttomarketconditions.

Europe’s seventh largest refinerEurope’sseventhlargestrefinerintermsofitsrefiningcapacity,TüpraşwasrankedthirdinEasternEurope,theMiddleEastandAfricaaccordingtothe“2018Top250GlobalEnergy”assessmentconductedbyPlatts,whichwascarriedoutbytakingitsprofitability,assetsandturnoverasabasis.



2018 DEVELOPMENTS

IN 2018, TÜPRAŞ DECIDED TO ESTABLISH A TRADING OFFICE IN LONDON WITH THE GOAL OF CLOSELY MONITORING OPPORTUNITIES IN THE GLOBAL MARKETS AND FURTHER STRENGTHENING ITS OPERATIONAL EFFECTIVENESS THROUGH INTERNATIONAL INTEGRATION.

Integroil TheIntegroilProject,whichreceivedatotalbudgetofEUR5.8millionfromtheEU,isoneofthemostimportantinternationallysupportedHorizon2020projects,

Renewal of the U-7000 Crude Oil Unit at the İzmir RefineryTheprojectaimedtoincreasetheexistingcapacityoftheU-7000crudeoilunitinİzmirRefineryby1,000m3/hourtoprocesscrudeoilsofvariousgradesatthemaximumsustainablecapacityandtoincreaseenergyefficiency.Thefurnaceandsomeotherequipmentsintheunitwererenewedwithinthescopeoftheproject.TheUSD56millionprojectwascompletedandtheunitwascommissionedin2018.

New Power Plant at the Kırıkkale RefineryThenewpowerplant,whichmeetsthesteamandelectricityneedsofKırıkkaleRefinery,wascompletedwithaninvestmentcostofUSD115.5million.Thenewplant,whichhelpsreducecostswithitsstructurebasedonstate-of-the-arttechnology,hasalsoimprovedthesecurityofsupply.Followingthecommissioningoftheequipmentandsystemsbelongingtothenewpowerplantduringtheyear,thesteamturbineandpumps,whichwereplannedtobetransportedfromtheoldpowerplant,weremovedtothenew

powerplant.Thenewpowerplantbecameoperationalatfullcapacityin2018.

Investments to Expand the Ditaş Fleet Ditaşreachedacarryingcapacityofapproximately622,000DWTwith11tankersduringtherestructuringandgrowthprocessthatDitaşhasundergonesince2006.Inadditiontothetankerfleet,thecompanycontinuesitsoperationswith11tugs,8mooringvessels,2servicevesselsandapilotboat.

InordertocomplywithupcomingIMOregulations,whichwillbeeffectivein2020,hybridscrubberswillbeinstalledtotheT.Sadberk,T.Semahat,T.AdalynandT.Elinortankersin2019,whichhaveatotalcapacityof330,000DWT.

TheconstructionofT.Adalyntankerwith15,000DWTcapacity,whichwaslaunchedin2018,isplannedtobecompletedandcommissionedinMay2019.Theconstructionprocessofthe16,000DWtonT.ElinortankeriscontinuingandisplannedtobecommissionedinOctober2019.Twotugswith2x70BPpower,whichwereorderedin2018,aretobedeliveredinthefirstquarterof2020.


Testing of the “Pilot Scale Waste Water Treatment Plant” takes place at İzmit Refinery, following Integroil R&D Project carried out within the scope of Horizon2020.Testingactivitiesforthe“PilotScaleWasteWaterTreatmentPlant”undertheIntegroilR&DProjectstartedon1June2016.Workontheproject,whichwasfundedwithinthescopeofHorizon2020-thelargestR&DandinnovationsupportprogramintheEU,continuedinİzmitRefinery.TheIntegroilProject,whichreceivedatotalbudgetofEUR5.8millionfromtheEUandwasapprovedbyTÜBİTAKasanR&Dandinnovationproject,isoneofthemostimportantinternationallysupportedHorizon2020projects,inwhichtheindustrialcompaniesinTurkeytakepartintheenvironmentalfield.

Intheproject,threedifferentscenariosweredevelopedforobtainingfirewater,coolingwateranddemineralizedwaterbydeterminingtherequirementsforthedesignofthepilotplant.Followingthelaboratoryscaleandprototypedesignstudies,thepilotplantwascompletedin2017andthefieldtrialswerecarriedoutwithsyntheticwastewater.Oncetheinfrastructureworkwascompleted,theplant,whichwasbroughtfromSpaininAugustandSeptember2018,wascommissionedattheİzmitRefineryPlant19/21Unit.

Thepilotplant,whichwascommissionedatthesametimeasthewastewatertreatmentplantlocatedintheİzmitRefineryPlant19/21,alsoincludesCatalyticWetOxidation(CWAO),AdvancedOxidation(AOP)andmembranebioreactor(MBR)processes,whichwerenotincludedintheexistingtreatmentplant.Astheonlyrefinerypartnerintheproject,Tüpraşwasthefirstcompanytotestthetechnologydevelopedatthesametime.Incasethenewlydevelopedtechnologiesarefeasibleandeconomical,therewillbetheopportunitytointegratethesetechnologiesintotherefineriesonanindustrialscalewithreasonableagreementconditions.

Opening of Hydro Processing Pilot PlantThepilotplant,whichislocatedinthehydroprocessingunitsofsimilarleading

refineriesthroughouttheworldandwhichisusedtotesttheperformanceofthecatalyststhatenabletheproductionofmiddistillate,especiallydiesel,enteredoperationandwillworkcontinuouslyona24/7basis.

Thepilotplantofferstheopportunitytocomparedataobtainedfromthecatalystperformancetestsduringthecatalystpurchasingprocesseswiththecompanydataonanequalbasis.Atthepilotplant,theeffectofdifferentoperatingconditions,chargesandreactorfillingsonthecatalystperformanceisdeterminedandthere-useoftheregeneratedcatalystsisexamined.Thecatalystperformancestudiestobeperformedwillpavethewayforsignificantgainsintermsofthecostofcatalysts,whichisoneofthemostimportantexpensesfacingrefineries.

HPNA Analysis Method Developed at Our R&D CenterInlinewithTüpraş’svisionofoperationalexcellence,studiesarebeingcarriedoutinthehydrocrackerunitsinordertodeterminethecauseofchargerelatedproblemsandtomanagethemoperationally.WithinthescopeofthestudiescarriedoutbytheR&DCenter,alow-costandreliablemethodspecifictoTüpraşwasdevelopedinordertomonitortheappearanceofundesiredstructurescalledHeavyPolyNuclearAromatics(HPNA)inHVGO(HeavyVacuumGasOil)andhydrocrackerbottom(UCO)productthatareprocessedinthehydrocrackerunits.

Themostimportantfeatureofthemethodisthatitcanbeappliedtoanycurrent.AnanalysissystemwasestablishedtoprovideinformationonthepercentagebywhichtheimportedHVGOcanbeprocessedinthesingle-stagehydrocrackerunits,beforethechargeisdeliveredtotheunit.Thesestudies,involvingthemanagementofHPNAareplannedtoberaisedtothenextlevelwiththearomaticmanagement.

In2019,HVGOwillbeprovidedtobedividedintoitschemicalgroupswiththecomprehensiveHPLCdevicetobeinstalledintheR&Dlaboratory,anddetailedinformationonhydrocrackerchargingqualityandworkabilitywill

beobtained.ChargerelatedproblemsinthehydrocrackerunitsisaimedtobeeliminatedviaHPNAandaromaticmanagement.

Körfez Ulaştırma increased railway transportation by 30% Turkey’sfirstprivaterailwayoperatoranda100%subsidiaryofTüpraş,KörfezUlaştırmaA.Ş.(KörfezUlaştırma)generatesaddedvalueforthecompany.Inadditiontothediversificationofresourcesinthetransportationbetweenrefineries,KörfezUlaştırmaprovidesTüpraşwithflexibilityandconvenienceinitsoperations.

Inadditiontothe439wagonsownedbyTüpraşin2018,KörfezUlaştırmaincreaseditsrailwaytransportationby30%YoYwiththeuseof26Opetwagonsandbetween100-200oftheTCDD(TurkishStateRailways)tankwagons.

ThewagonmaintenanceworkshoplocatedinKırıkkaleRefineryisTurkey’smostcomprehensivewagonrepairandmaintenanceworkshoptomeetECMstandards.Asaresultoftheworkcarriedoutattheworkshop,wagonscanbeoperatedatmaximumefficiency.

KörfezUlaştırmaorderedfivenewdiesellocomotivesinJuly2018.LocomotivesareatproductionstageinTülomsaşfactory,asubsidiaryofTCDD,inEskişehir.Thelocomotivesareplannedtobedeliveredinthesecondquarterof2019.

Establishment of the London Trading OfficeIn2018,TüpraşdecidedtoestablishatradingofficeinLondonwiththegoalofcloselymonitoringopportunitiesintheglobalmarketsandfurtherstrengtheningitsoperationaleffectivenessthroughinternationalintegration.Withthistangiblestrategicsteptaken,Tüpraşenvisagedachievingadditionaladdedvaluefromthesupplyandsaleschain.TheLondonTradingOffice,whichhasbeenstructuredwithahumanresourceincludingsomeimportantkeyplayersofthesector,hasopenedattheendof2018.Activeoperationswillgetunderwayin2019



MILESTONES IN TÜPRAŞ HISTORY

1950s1955 • Turkey’sfirstoilrefinery,BatmanRefinery,wascommissioned.

1960s 1961• İzmitRefinery(İpraş),witha1milliontons/yearcapacity,wascommissioned.

1970s 1971• İzmitRefinery’sFirstExpansionProjectwascompletedanditscrudeoilprocessingcapacityroseto5.5milliontons/year.

1972• İzmirRefinery,witha3milliontons/yearrefiningcapacity,wascommissioned.

1974• Turkey’sonlybaseoilproductionfacilitywascommissionedaspartofİzmirRefinery.

• DenizİşletmeciliğiveTankerciliğiA.Ş.(DİTAŞ)wasestablishedinMarch1974.

1980s1982 • İzmitRefinery’sSecondExpansionProjectwascompleted,withthecrudeoilprocessingcapacityrisingto11.5milliontons/year.

1983 • İpraşandthethreeotherrefinerieswereunitedunderTüpraş.

• İpraş’s29%shareinDitaşwasacquiredbyTüpraş.

1986• The5milliontons/yearcapacityKırıkkaleRefinerywascommissioned.

1987• İzmirRefineryExpansionProjectwascompleted,increasingtherefiningcapacityto10milliontons/year.

1989-2003• TheLongTermInvestmentPlanwaslaunched.

1990s 1990• TüpraşwashandedovertothePrivatizationAdministration.

• Managementplanningembracedthesimulationapproach.

• Productionplanningstartedtofollowtheoptimizationmodel.

1991

• Some2.5%ofTüpraşshareswereofferedtothepublicandbegantradingontheISE.

1993• TheHydrocrackerComplexwascommissionedattheKırıkkaleRefinery.

• TheHydrocrackerComplexwascommissionedattheİzmirRefinery.

1997• TheHydrocrackerandCCRcomplexeswerecommissionedattheİzmitRefinery.

1998• AutomaticPricingMechanismcommenced.

1999• Freefloatroseto3.58%.

OPERATING SINCE 1955, TÜPRAŞ IS THE LARGEST INDUSTRIAL COMPANY IN TURKEY BASED ON THE ADDED VALUE IT CREATES AND ITS TURNOVER.


2000s2000• Followingthesecondinternationalpublicoffering,34%ofTüpraşsharesbegantradingontheİstanbulandLondonStockExchanges.

2001• ThePetkimYarımcaComplexwasacquiredbyTüpraş.

• TheİzmirRefinery’sCCRReformerandIsomerizationunitswerecommissioned.

2002

• TheİzmitRefinery’sIsomerizationUnitwascommissioned.

• InOctober2002,79.98%ofDitaşshareswerepurchasedforUSD16.5million.

2003• SupplyOptionStudywaslaunched.

2004• Allrefineriesobtainedqualityandenvironmentcertifications.

2005• ThePetroleumMarketLawbecameeffective.

• Freefloatroseto49%.

• TheKoç-ShellJointVentureGroupwonthetenderfortheblocksaleof51%ofthestate-ownedTüpraşshares.

• TheİzmirRefinery’sDieselDesulphurizationUnitwascommissioned.

• 100%importliberalizationbegan.

• Laboratoryaccreditationwasobtained.

• Refinerylicenseswererenewed.

2006

•OnJanuary26th,sharesweretransferredtoKoçHoldingA.Ş.

• 40%ofOpet’sshareswereacquiredfromAygazA.Ş.

• TheOperationalExcellenceProgramwaslaunched.

• Newlogohasbeendesignedandcorporateidentitystudywasconcluded.

2007• TheİzmitRefinery’sCCRReformerandDieselDesulphurizationUnitwerecommissioned.

• IntranetPortalwaslaunched.

• NationalMarkerApplicationwaslaunched.

• RUPinvestmentdecisionwasmade.

• SAPSystemwasinitiated.TheCompanyreleaseditscorporateresponsibilityreport(GRI)incompliancewithinternationalstandards.

• Installationoffluegasmeasurementdevices(CEMS)wascompleted.

• Energymanagementunitswereestablished.

• Tüpraş’sCorporateGovernanceRatingwassetat7.91.

• AtransportationagreementwassignedwithTurkishRailways(TCDD).

• TheHealthSafetyandEnvironmentPolicywerereleasedandthemanagementdeclareditscommitment.

• TheTüpraşRecognition,AppreciationandAwardschemewaslaunched.

2008• TheKırıkkaleRefinery’sDieselDesulphurizationandCCRReformerunitswerecommissioned.

• TheİzmirRefinery’sGasolineSpecificationsImprovementInvestmentwascommissioned.

• AllrefineriesbecamereadytoselldieselatEuroVstandards.

• ThetankerT.SevgijoinedtheDitaşfleet.

• RailwayTransportationhasbeencarriedout.

• ProductionatthePetrochemicalPlantwasterminatedandResiduumUpgradingProjectwasinitiated.

• AdvancedProcessControlapplicationswerestarted.

• OSAR-RiskAssessmentTablewaslaunched.

2009• TheİzmitRefinery’sGasolineSpecificationsImprovementInvestmentwascommissioned.

• ThetankerT.GönüljoinedtheDitaşfleet.

• AllgasolineproductsmarketedinTurkeywereimprovedinlinewithEuroVspecifications.

• Contractormanagementsystemwasactivated.

• CustomerRelationshipManagementSystemwaslaunched.

•Winterdieselproductionwasinitiated

2010• R&DCenterwasopened.

• Ethicalvalueswererevised.

•Master’sdegreeprogramswerelaunchedjointlywithuniversities.

• TüpraşwasregisteredtotheREACHstatute.

• CECertificationwasobtainedforbitumenproducts.

• Theworld’sfirstCrackingCatalystintheDesulphurizationUnit’sreactorwasimplemented.

• BatmanRefineryearnedafirstprizewhiletheİzmirrefineryreceivedthirdprizeintheIndustrialEnergyEfficiencycompetitions.

• RefinerieslaunchedtheWasteManagementProgramviaSAP.



MILESTONES IN TÜPRAŞ HISTORY

2011• TheloanagreementwassignedfortheFuelOilResiduumUpgradingProject.

• İzmirandİzmitkerosenesweeteningunitswerecommissioned.

• İzmirandBatmanRefineriesweregrantedfirstprizesintheIndustrialEnergyEfficiencycompetitions.

• TheCorporateGovernanceRatingwasupdatedas8.62.

2012 • Tüpraşissued5.5-yearbondsworthUSD700millionontheinternationalmarket.

• İzmitRefinerycommissioneditsC3/C4SplitterandSelectiveHydrogenerationunits.

• ThetankerT.Sunajoinedthefleeton23November2012.

• ThetankerT.LeylabegantransportinginDecember2012.

• BatmanRefineryplacedfirstatthecompetitionforIndustrialEnergyEfficiency.

• TheCorporateGovernanceRatingwasupgradedto9.10.

• İzmirRefinerycommissioneditsCausticNeutralizationUnit.

• İzmirRefineryinauguratedtheU-920GasTurbineandWasteHeatBoiler.

• KırıkkaleRefineryandBatmanRefinerycommissionednewbitumentanks.

2013• BatmanRefinerywonfirstprizeintheIndustrialEnergyEfficiencycompetition.

• Tüpraş’sCorporateGovernanceRatingwasupgradedto9.34.

• ISO50001:2011EnergyManagementSystemCertificationwasobtained.

• ISO/IEC27001:2005InformationSecurityManagementSystemsCertificationwasobtained.

• NewbitumentankswerecommissionedattheİzmitandBatmanrefineries.

• TheAegeanRegionChamberofIndustrypresentedthe“EnvironmentalBestPracticeAward”toİzmirRefineryfortheBaseOilComplexBurnerModernizationProject.

• TheheatintegrationprojectwascommissionedattheCCRandBenfreeUnitsofKırıkkaleRefinery.

2014• İzmitRefinery’sRUPFacilitywascompleted.

• T.Esra,designedtocarryheavypetroleumproductssuchasbitumenbeingoneoftheworld’stwolargesttankersofitskind,wasinauguratedon24January2014andjoinedthefleet.ConstructionoftheT.Aylintanker,inauguratedon24June2014,reacheditsfinalphase.

• TheBatmanRefinerywonfirstprizeinthecategoryofEnergyEfficientIndustrialFacilityattheIndustrialEnergyEfficiencyCompetition.

• Thesimulationprogram,developedaftertheR&Dprojecttitled“Monitoring,Modeling,SimulationandOptimumMaintenancePlanningofExchangerPollutiontoMinimizeEnergyWasteattheRefinery”,wasregisteredasaEuropeanUnionTrademark(CTM)underthename“HexMon”.

• AsaresultoftheassessmentcarriedoutinaccordancewiththenewmethodologyissuedbytheCapitalMarketsBoardinJanuary2014,Tüpraş’sCorporateGovernanceScorewasgradedas9.31.

• Tüpraşrankedamongthetop15companiesontheBISTSustainabilityIndex,whichwaslaunchedon4November2014.

• TheR&DCenterCampus,covering12,950m2andcomprisingaDesignBuilding,aLaboratoryBuildingandaPilotFacilityTestingBuilding,commencedoperations.

THE LONDON TRADE OFFICE MARKS AN IMPORTANT STEP IN THE INTEGRATION OF TÜPRAŞ INTO THE WORLD ENERGY SECTOR.


2015• TüpraşwonfirstprizeundertheEuropeanBusinessAwardsfortheEnvironment(EBAE)’sTurkishNationalSchemeforitsproject“UsingMembraneDeaeratedColdBoilerFeedWaterforEnergyRecovery”.

• Inauguratedon24June2014,theT.AylintankerwasputintoserviceinFebruary2015andcompleteditsfirstvoyageinMarch.

• Tüpraş’sCorporateGovernanceScoreroseto9.44.

• Tüpraşrankedamongthetop29companiesincludedinBorsaİstanbul’sSustainabilityIndexin2015,whenBIST-50componentcompanieswereassessed;BIST-30componentcompanieswereassessedin2014.

• Tüpraşhadfirst3ranksinthe“SENVER-2”categoryattheIndustrialEnergyEfficiencyCompetition,withKırıkkaleRefinerywinningthefirstprize,İzmitRefinerywinningthesecondandİzmirRefinerywinningthethirdprize.BatmanRefinerywontheSpecialJuryPrizeinthe“SENVER-3”categoryatthesomecompetition.

• Inresponsetothepatentapplicationfor“DieselProductionMethodandSystem”,theTurkishPatentInstituteissuedapatentwithexaminationtoTüpraş,providingprotectionfora20-yearperiod.

• Thegroundbreakingceremonyforthegasturbineconstruction,thefirstphaseoftheNewPowerPlantoftheKırıkkaleRefinery,washeldon3July2015

• TheHexMonbrandreceiveddesignmarkregistrationfromtheTurkishPatentInstitute.

2016• İzmitRefinery’sPLT-62GreywaterTreatmentUnit,whichtreatsdischargewaterfromİSUKörfezWastewaterTreatmentPlantforindustrialreuse,startedupoperations.

• ConstructionofKırıkkaleRefinery’sWagonMaintenanceandRepairWorkshop,themostcomprehensiveworkshopofitskindinTurkey,wascompletedandcommencedoperationsafterreceivingEntityinChargeofMaintenance-ECMcertificationon29September2016.

• TheEasternMarmaraRegionalDirectorateofCustomsandTradegrantedthefirstAuthorizedEconomicOperatorcertificatetoTüpraşinKocaeli.

• AttheIndustrialEnergyEfficiencyProjectCompetition(SEVAP),BatmanRefinerywonfirstprizeintheSEVAP-2category;meanwhile,KırıkkaleandİzmitRefinerieswonsecondandthirdplaceprizes,respectively,intheSEVAP-3category.

• TüpraşwebsiterenewedandtheTüpraşSupplierPortalwaslaunched.

• Tüpraş’sthirdprojectinHorizon2020programwasacceptedprogramwitharecordhighscore.

• TheProjectforMethodDevelopmentforCompatibilityandStabilityMeasurementsofCrudeOilwasapprovedbyTÜBİTAK-TEYDEBasaqualifiedR&Dproject.

• TheEuropeanBankforReconstructionandDevelopment(EBRD)extendedaUSD150millionloantoTüpraştosupporttheCompany’senergyandwaterefficiencyefforts.

• Twonewproducttankers,T.CarolineandT.Nevbahar,wereaddedtoDitaş’sfleet.

2017•WiththeestablishmentofKörfezUlaştırmaA.Ş.,TüpraşbecomesTurkey’sfirstprivaterailwayoperator.

• DevelopedbyR&DDirectorate,fieldperformancetestsofhighqualitymodifiedbitumengotunderway.

• NewF-1101furnacesarecommissionedattheBatmanRefinery.

• TüpraşR&DCenter’sFirstCatalyzerPilotPlantestablished.

• Twonewproducttankers,T.SemahatandT.Sadberk,wereaddedtoDitaş’sfleet.

• AUSD700million,7yearmaturityEurobondissuewascarriedoutforforeigninvestorsinOctober2017.TheEurobond,whichcarriedafixedcouponof4.5%,waslistedontheLondonStockExchange.

2018• İzmir Refinery 7000 Unit

modernization project was completed.

• Kırıkkale Refinery New Power Plant was commissioned.

• London Trading Office was opened.

• The Hydro processing Pilot Plant was opened.

• Kırıkkale Refinery ranked first in the SEVAP-3 category for Energy Efficiency in the Industry Project Competition, and the İzmit Refinery was ranked second. The Batman Refinery won third prize in the SEVAP-2 category.

• R&D Center developed the HPNA Analysis Method.

• Corporate Governance Rating has increased to 9.48.



INVESTOR RELATIONS

TÜPRAŞ AIMS TO PROVIDE TIMELY, ACCURATE, COMPLETE CLEAR AND EASILY REACHABLE INFORMATION, PROVIDED THAT IT DOES NOT INCLUDE TRADE SECRETS.

84.04%TheproportionofpubliclytradedsharesofTüpraşheldbyinternationalinstitutionalinvestmentbanks,fundsandforeigninstitutionsstoodat84.04%.

InlinewiththeCMB’sPrinciplesonCorporateGovernance,Tüpraşaimstoprovidetimely,accurate,completeclearandeasilyreachableinformation,providedthatitdoesnotincludetradesecrets.TheCompanyensuresthattheprinciplesofequality,transparency,accountabilityandresponsibilityarerespectedwhendistributingsuchinformation.

Corporateinformation,reports,historicalandrelatedperiodfinancialstatementsandactivitiesandmaterialeventdisclosuresrequiredbyinvestorscanbeaccessedthroughtheInvestorRelationssectionoftheCompany’scorporatewebsite(www.tupras.com.tr).

Annual General Assembly MeetingTheAnnualGeneralAssemblyMeetingofTüpraşfortheyear2018willbeheldonWednesday,20March2019at10:00amattheaddressofGüneyMahallesi,PetrolCaddesiNo:25Körfez/Kocaeli.

TheAnnualGeneralAssemblyMeetingsetsouttheagenda;thepresentationoffinancialstatementsforthe2018yearofoperation,theIndependentAuditReport,theproposalfordividenddistribution,theAnnualReportanditsannex,theReportonCompliancewiththePrinciples

ofCorporateGovernanceandtheInformationNotecontainingnecessaryexplanationsregardingcompliancewithCapitalMarketsBoardregulations.Alldocumentswillbemadeavailablethreeweekspriortothemeetinginlinewithstatutoryrequirements,attheCompany’sheadquarters,onthecompany’scorporatewebsite,www.tupras.com.tr,onthePublicDisclosurePlatform(PDP),onthee-governanceplatform,thee-companyplatformandtheElectronicGeneralAssemblySystemoftheCentralRegistryAgency.

Providing Information Eightconferencesandroadshowshavebeenattendedin2018,whileone-to-oneinterviewswereheldwithabout400fundmanagersandanalysts.Inadditiontothemeetings,questionsreceivedfromtheshareholdersandanalysts,eitherinwritingorverbally,wereresponded.ThroughthequarterlyteleconferencesorganizedwiththeparticipationoftheCFO,thecompanyensuredthatinvestorswereinformedaboutTüpraşandthesectoraldevelopments.In2018,allrequestsreceivedfromshareholderswererespondedtoandnecessaryinformativeactivitiescontinued.


TÜPRAŞ’S MARKET VALUE INCREASED BY 8% IN TL TERMS WHEN COMPARED TO THE END OF 2017, FROM TL 27.0 BILLION TO TL 29.2 BILLION, AS A RESULT OF ITS OUTPERFORMANCE OF THE MARKET.

Tüpraş Stock Price Trend(TL/Share)*

150

130

110

90

70

50

30

10

-10

Highest LowestAverage

2015

59

38

50

2016

63

47

54

2017

127

57

91

2018

143

96

114

2014

42

27

36

Tüpraş Stock Price Trend(USD/Share)*

45

40

35

30

25

20

15

10

5

0

Highest LowestAverage

2015

21

14

18

2016

22

1618

2017

33

15

25

2018

29

17

24

2014

19

12

16

*Excludingdividends



INVESTOR RELATIONS

The Composition of the Investors in Tüpraş Shares49%ofTüpraş’ssharesaretradedonBorsaİstanbul(BIST).Thediversityandrichnessoftheinvestorportfolioisconsideredanimportantindicatoroftrustandstabilityfrominvestors’perspective.Asanindicationofthis,theproportionofpubliclytradedsharesheldbyinternationalinstitutionalinvestmentbanks,fundsandforeigninstitutionsstoodat84.04%asoftheendof2018.

Share Price PerformanceThesharepricerosefromTL107.9toTL114.8duringthecourseof2018,endingtheyear8%higherthanattheendof2017andthestockoutperformedtheBIST30indexby28%.

Market Value DevelopmentDespitethevolatilityexperiencedinthestockmarketsin2018,Tüpraş’smarketvalueincreasedby8%inTLtermswhencomparedtotheendof2017,fromTL27.0billiontoTL29.2billion,asaresultofitsoutperformanceofthemarket.

Corporate Governance at TüpraşTheCorporateGovernanceRatingofTüpraşontheCorporateGovernanceRatingIndex,inwhichTüpraşwasincludedin2007withadeterminedratingof7.91asofOctober2007,wasraisedto9.48in2018inparallelwiththeimprovementsachieved.

Distribution of Domestic/Foreign Ownership of Tüpraş Shares

ForeignOwnership84.04%DomesticOwnership16.05%

Tüpraş and BIST-30 Relative Share Performance in 2018

140

130

120

110

100

90

80

70

Tüpraş BIST30

Jan 18 Mar 18Feb18 May 18 Jun 18 Jul 18 Aug18 Sep18 Eki18 Nov18 Dec18Apr 18

28%


IntheCorporateGovernanceRatingreport,thereasonsforTüpraş’sinclusionintheBISTCorporateGovernanceIndexwithascoreof9.48,attoplevel,wereasfollows:

• AhighlevelofcompliancewiththeCMBPrinciplesofCorporateGovernance,

• Puttingallpoliciesandmeasuresintopractice,

• Effectivelyformingmanagementandinternalcontrolmechanisms,

• Identificationofallcorporategovernancerisksandtheactivemanagementofthem,

• Observingtherightsofshareholdersandstakeholdersinthefairestmanner,

• Publicdisclosureandtransparencyactivitiesatthehighestlevel,andthestructureandfunctioningoftheboardofdirectorstobeamongthebestpracticecategories.

AccordingtotheWorldCorporateGovernanceIndex(WCGI),publishedbySAHAKurumsalYönetimveKrediDerecelendirmeHizmetleriA.Ş.(CorporateGovernanceandCreditRatingServices)on21July2017,Tüpraşwasplacedinthefirstgroup.

Corporate Governance Rating Composition (%)

Shareholders 95.51

PublicDisclosureandTransparency 94.02

Stakeholders 99.51

BoardofDirectors 92.86

Average 94.81

The BIST Sustainability IndexTheBISTSustainabilityIndex(XUSRD),whichwascreatedbyBorsaİstanbulinNovember2014andwhichincludescompanieswithahighlevelofcorporatesustainability,providescompanieswiththeopportunitytoimprovetheircorporatetransparencyandaccountabilityaswellastheirriskmanagementskillswithregardtosustainabilityissues,inadditiontoassessingthecompanies’economic,environmentalandsocialperformances.

TüpraşwasincorporatedintheBISTSustainabilityIndexin2014whentheindex,whichassessesBIST-listedcompaniesonthebasisoftheircompliancewithinternationalsustainabilitycriteria,wascreated.

Changes in Market Capitalization (TLbillion)*

Earnings per Share (TL)

2016

2015

2014

29.2

27.0

14.6

13.2

10.5

2017

2018

2016

2015

2014

14.8315.2

7.2

10.2

5.8

2017

2018

*ExcludingGrossDividends



HUMAN RESOURCES

TÜPRAŞ UNDERTAKES ITS LARGEST INVESTMENT IN HUMAN RESOURCES.

AstheleadingorganizationinTurkey’senergysectoradoptingthevisionofbeingaworld-classrefiningcompany,Tüpraşundertakesitslargestinvestmentinhumanresourcesinlinewiththisapproach.

Intheoilrefiningsector,qualified,experiencedandcompetenthumanresources,whichrequirefivetotenyearsofon-the-jobtraining,bearkeyimportanceforthesafeandefficientoperationoftherefineries.

Tüpraş’sapproachtoHumanResourcesisdefinedbyconstantlyimprovingitshumanresourcesandensuringthatitshumanresourcesrepresentapermanentadvantageintheglobalcompetitiveenvironmentbyadheringtothefollowingprinciples.

• TheRightPersonfortheRightJob,• RemunerationDependenton

PerformanceandCompetencies,• AssessmentBasedonAchievement,• EqualOpportunityforAll.

incentive programsIncentiveprogramscarriedoutatTüpraşaimedathelpingemployeesparticipateingraduateprograms.


Tüpraşsetoutitslong-termhumanresourcesplansinlinewiththeobjectivesofinclusionofemployeeswhowillbestaccomplishtheCompany’sgoals,increasingtheirleadershipcapabilities,developingtheirscientificandoperationalcompetenciesthroughcontinuoustraining,andmakingtherightcareerplans.ThehumanresourcesprocessescreatedwithinthisscopearemanagedwithgreatcareinlinewithTüpraş’scorporategoals.

Development at TüpraşWithintheframeworkoftheimprovementandstructuralchangeactivitiesinhumanresources,whichstartedwithitsprivatization,Tüpraşhasattachedtremendousimportancetotraininganddevelopmentactivitiesaimedatthedevelopmentofboththeprofessionalknowledgeandskillsandthepersonalabilitiesofitsemployees,whileattractingaqualifiedworkforceanddeployingtheminthemostefficientandproductivemanner.

Withinthescopeofthe“MosaicCulturalDevelopmentProject”,the“BeingpartofTüpraş”trainingprogram,offeredtoallemployees,waslaunchedinNovember2015toensureemployeeswouldunderstandandadoptTüpraş’svaluesandworkingcultureprinciples,whichweredeterminedwiththeparticipationofemployees.Thetrainingofthemanagers,

monthlywagedandhourlywagedemployeescontinuedin2018.

Inordertoincreasetheknowledge,skillsandcompetenciesoftheworkforcewithTüpraş’sinternalresources,trainingprogramsweredevelopedtosupportprofessionaldevelopmentonthebasisoftheneedsofeachdepartment.TrainingprojectsarecontinuingtobedrawnupinthedepartmentsoftheProduction,Maintenance,OperationalReliabilityandQualitySystemsDirectorates.Inaddition,thecontinuityofdevelopmentisensuredbyinitiatingtheimplementationofthetrainingprogramsofthedepartmentswherethetrainingprogramshavebeencompleted.

IncentiveprogramscarriedoutatTüpraşaimedathelpingemployeesparticipateingraduateprogramstodeveloptheirknowledgeandskills,toincreasetheircompetencyandtoenrichtheirsectoralstudieswithacademicknowledge.

Trainingrequirementsaredeterminedbyassigningthepersonnelresponsiblefortrainingtoeachunit.Specialtrainingprogramsarebeingorganizedfortheunitsinlinewiththeirneeds.TheTrainingandPersonalDevelopmentCataloguefortheSalariedEmployeespreparedforTüpraşemployeeswaspublishedandthedemandsforthetrainingprogramswerecollectedviatheEnerjİKsystem.

THE BASIC PRINCIPLES IN THE COMPANY HAVE BEEN SHAPED THROUGH THE QUESTION “HOW?”. THESE PRINCIPLES SUPPORT THE TÜPRAŞ CULTURE AND PAVE THE WAY FOR THE MOST SUSTAINABLE TRANSFORMATION.

384thousand hours

In2018,384thousandhoursoftrainingwasconductedatTüpraş.



HUMAN RESOURCES

TheNationalVocationalStandardandtheNationalQualificationPreparationFormweresubmittedforapplicationtotheVocationalQualificationsAuthorityandNationalVocationalStandardsoftwarestartedtobewritten.Inthiscontext,thefollowingstandardswerepreparedandsubmittedforapprovalbytheVocationalQualificationsAuthority.

• OilRefiningOperatorLevel3• OilRefineryControlOperatorLevel4• OilanditsProductsHandlingOperator

Level3• OilRefineryPowerPlantOperator

Level3.

Employee LoyaltyAccordingtotheresultsoftheEmployeeLoyaltySurvey,whichhasbeencarriedoutforanumberofyearsbyanindependentorganization,employeeloyaltyatTüpraşstoodat57.2%in2018,markinga3.2percentagepointdecreasecomparedtothepreviousyear.Theresultsaremeticulouslyevaluatedacrossthecompanyanddetailedactionplansaredrawnup.Bydevelopinginnovativeprojectsandsolutionsuggestionsthatofferenrichmentfromdifferentperspectives,Tüpraşaimstopositionitselfatthehighestlevelsintherankingoffavoritecompanieswherepeoplemostwanttowork.

Thepersonnelturnoverrate(unwantedlosses)-whichisanimportantindicatorofemployeeloyalty–stoodat3%.Thisrateiswithinacceptablelimitsonasector-andcountry-basisandbyglobalstandards.

Employee Distribution (person)

İzmitRefinery2,100İzmirRefinery1,437KırıkkaleRefinery969BatmanRefinery510HeadOffice442

Distribution of Employees by Hourly/Monthly Wages (person)

HourlyWaged4,199MonthlyWaged1,259

Trainings for Employees

Number of Employees

Total Hours of Training

Average Hours of Training

Monthly Waged 1,259 103,165 82Hourly Waged 4,199 281,241 67Total 5,458 384,406 70


Employee Support Practices

• Employee Support Program: ThisisaprofessionalsupportprogramthatservesthelifestylesandindividualneedsoftheTüpraşemployeesandtheirfamilies.Theprogramincludesfinancial,legalandpsychologicalcounselingprovidedbyspecialistsintheirfieldsandquicksolutionsareofferedfordailyspecialneeds.Withasupportlinethatcanbereachedona24/7basis,theperformanceoftheofferedprogramismonitoredcontinuouslythroughvariousmeasurements.

• Support Program at Work: Theprogram,whichwasinitiatedin2016andincludesscreening,trainingandindividualpsychologicalsupportworkcarriedoutbyindustrialpsychologistsatallrefineries,isongoing.

• Extended Health Insurance Program:Allemployeesarecoveredbycomplementaryhealthinsurance,andmaybenefitfromprivatehealthcoverageatpreferentialratesforthemselvesandtheirfamilies.

• Flexible Working Hours: AtTüpraş,employeesreceivingasalaryhavetheopportunitytoorganizethetimestheystartandendtheirshiftsonadailyandweeklybasisinaccordancewiththeirpersonalneedsandpreferences,providedthemanagementisawareandwithincertainlimits.

• Nursery Fringe Benefit Package: TheNurseryFringeBenefitPackagewaslaunchedwithsupportingthework-leisurebalanceinparticular,andthecareerdevelopmentoffemaleemployees.

• Adaptation Process Guidance Program: TohelpnewlyrecruitedTüpraşemployeesadapttothecorporatecultureandensurethattheystartworkquickly,a“GuidanceSupportProgram”practiceisofferedinthefirst3monthorientationperiod.

• Flextra Package:Inthisflexibleadditionalfringebenefitapplication,optionssuchaslifeinsurance,giftanddiscountvouchers,individualpensionschemesareofferedtoemployeesdependingontheirlifestylesandvariousneedswiththecompanycontribution.

• Appreciation and Reward Systems: TheInstantAwardandthe“HSE(Health,SafetyandEnvironment)Award”practiceswereupdated,ensuringthatemployees’achievementswouldbequicklyrewardedandappreciated.

Education Level of White Collar Employees (person)

Doctorate8Master’sDegree339UniversityDegree(Technical)575UniversityDegree(Administrative)203AssociateDegree36IndustrialHighSchool58HighSchool36Other4

Gender Breakdown of Employees (person)

Female500Male 4,958



Structure of Board of Directors

HUMAN RESOURCES

ChairmanÖmerM.Koç

Board of Directors SecretariatDoğanKorkmaz(CFO)

Vice ChairmanAliY.Koç

Members

Corporate Governance Committee

MuharremHilmiKayhanYağızEyüboğluDoğanKorkmaz

Ethics CommitteeİbrahimYelmenoğluDoğanKorkmazAhmetAksoyCanAkçaoğluÇilerTeber

Risk Management Committee

AyşeCananEdiboğluTemelKamilAtay

Audit CommitteeMuharremHilmiKayhan

KamilÖmerBozer

Executive CommitteeRahmiM.Koç

SemahatS.ArselÖmerM.KoçAliY.Koç

TemelKamilAtayBülentBulgurlu

RahmiM.KoçSemahatS.ArselTemelKamilAtayBülentBulgurluLeventÇakıroğluO. TurgayDurakErolMemioğluYağızEyüboğluÖmerSertbaşAhmetTurul

MuharremHilmiKayhanAyşeCananEdiboğluKamilÖmerBozer

Independent Auditor - PwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.

In2017,BoardofDirectorsconvenedthreetimesonApril9th,July12thandNovember26th.ThemajorityofmeetingswithwasmadewiththepersonalattendanceoftheBoardMembers.


Tüpraş Organizational Structure

General Manager

ChiefLegalAdvisor AuditandRiskManagement

CorporateCommunicationsManagement

TechnicalSafetyDirectorate

HumanResourcesDirectorate

AssistantGeneralManager(Financial)

AssistantGeneralManager(SalesandMarketing)

AssistantGeneralManager(InvestmentandPlanning)

AssistantGeneralManager(Technical)

İzmitRefineryManagement

İzmirRefineryManagement

KırıkkaleRefineryManagement

BatmanRefineryManagement

AssistantGeneralManager(CrudeOilSupplyand

ForeignTrade)

LondonTradingOffice



ACHIEVEMENTS AND AWARDS

TÜPRAŞ WAS RANKED AS BEING THE INDUSTRY LEADER IN THE RESULTS OF THE “TURKEY’S TOP 500 INDUSTRY ORGANIZATIONS-2017 SURVEY” CONDUCTED BY THE ISTANBUL CHAMBER OF INDUSTRY.

Fortune 500 #1 in TurkeyWiththenetsalesrevenuesofTL53.9billionin2017,TüpraşbecameTurkey’slargestcompanyontheFortune500Turkeyranking.

Tüpraş ranked first in Fortune 500 TurkeyWiththenetsalesrevenuesofTL53.9billionin2017,TüpraşbecameTurkey’slargestcompanyontheFortune500Turkeyranking.Tüpraşhasrankedfirstonthelisttentimessince2007.

Tüpraş wins First Prize in the 10th Value for People (İnsana Değer) Awards held by PERYÖNThepsychologicalandsocialSupportProject,“SupportatWork”(İŞ’TEDestek),whichiscarriedoutunderprotectivementalhealth,wasselectedasthebestprojectinthecategoryof“EmployeeHealthandSafety,theHRProjectsthatMakeaDifference”,winningtheAchievementAwardinthe10thValueforPeople(İnsanaDeğer)AwardsorganizedthroughoutTurkeybyPERYÖN,whichaimstointroduceinnovativepracticestothefieldofhumanresourcesmanagement,bringexemplaryworkintothesectorandtosupportit.Atotalof22companiescompetedin9differentcategoriesintheAwards.


ISO 500 Tüpraşwasrankedasbeingtheindustryleaderintheresultsofthe“Turkey’sTop500IndustryOrganizations-2017survey”conductedbytheİstanbulChamberofIndustry,withsalesfromproductionamountingtoTL51.1billion.

Ranked 5th in Top 1000 Exporters by the Turkey Exporters Assembly (TEA)Tüpraşwasranked5thintheoverallrankingoftheTop1,000ExportersannouncedbytheTurkeyExportersAssembly(TEA),withexportsof5.8milliontonsofproductsamountingtoUSD2.8billion.

Successful Industry Organizations Award in Aegean Region Chamber of Industry (ARCI)Tüpraş,whichisamongthe100largestcompanieswhicharemembersoftheAegeanRegionChamberofIndustry,wasrankedfirstinthe2017salesfromproductioncategory.

Kırıkkale, İzmit and Batman refineries are awarded for Energy Efficiency in the Industry CompetitionWithinthescopeofthe9thEnergyEfficiencyForumorganizedbytheMinistryofEnergyandNaturalResources,theKırıkkaleRefinerywonfirstprizeintheSEVAP-3categoryforEnergyEfficiencyintheIndustryProjectCompetition(SENVER),withtheBurnerRevisionintheReactorFurnacesoftheCCRUnit,andtheİzmitRefinerywonthe2ndAwardwiththePlant33UnitNaphthaCycleproject.TheBatmanRefinerywon3rdprizeintheSEVAP-2categorywithitsThermalIntegrationproject.

Withthe7energysavingprojects,Tüpraşachievedanannualdecreaseof11,640toe*/yearinenergyconsumptionandreduceditsCO2greenhousegasemissionsby36,577tonsperyear.Theseresultscorrespondtoplantingof110,000trees.

*tonsofoilequivalent



ACHIEVEMENTS AND AWARDS

Capital 500IntheTurkey’sTop500PrivateCompaniessurveyorganizedforthe21st timethisyear,TüpraşwasrankedfirstwithaturnoverofTL53.9billionin2017.

Platin Global 100 awardsInthePlatinumGlobal100surveyconductedunderthethemeofIndustry4.0,Tüpraşwasawardedthetitleofleaderintheoilandenergysector.

Winner of Sustainable Business Awards TüpraşwonfirstprizeintheWaterManagementcategoryintheSustainableBusinessAwardsheldforthe5thtimethisyearbytheSustainabilityAcademy,withitsRecoveryofMunicipalUrbanWastewatertobeusedinIndustryasProcessWater.

Capital 500#1 in TurkeyIntheTurkey’sTop500PrivateCompaniessurveyTüpraşwasrankedfirstwithaturnoverofTL53.9billion.


Second Prize for Tüpraş in the ISO Environmental AwardsInthe2018EnvironmentalAwards,whichhavebeenorganizedbytheİstanbulChamberofIndustrysince1995,TüpraşwonsecondprizeinthecategoryoftheLargeScaleEnterpriseEnvironmentallyFriendlyApplicationProjectwiththeRecoveryofMunicipalUrbanWastewaterstobeusedintheIndustryasaProcessWaterattheİzmitRefinery.

The Second Prize from TIRAThe2018SummitbytheTurkeyInvestorRelationsAssociation,Tüpraşwonthe2ndprizeinthecategoryofthe“CompanyreceivingthemostinvestmentfromSustainabilityFunds”.

Special Award on Performance by KSO Atthe11thSectoralPerformanceAwardsorganizationbyKocaeliChamberofIndustry(KSO),TüpraşwasthereceipentoftheJury’sSpecialAwardatLargeScaleEnterprisesCategoryonaccountofitscontributionstoTurkisheconomy.

AKİB First 500 Exporters Award WithexportsofUSD2.7billion,TüpraşwasrankedfirstattheresearchofFirst500ExportersconductedbytheMediterraneanExporters’Association(AKİB).



SECTOR

In2018,ayearwhenglobaldemandforpetroleumproductsincreasedbyapproximately1.3millionbarrels/dayandoilpricesexhibitedafluctuatingupwardtrend,significantdecreasesinvalueofcurrenciesindevelopingcountrieswererecorded.Theyearwasafairyearintermsofrefiningprofitability,althoughonekeydevelopmentwastheincreaseintheshareoflightcrudeoil,condensateandconsequentlywhiteproductyieldonthechargemixoftheworldrefineries.AnotherremarkabledevelopmentwasChina’semergenceasoneofthemostimportantplayersinthesectoraftertheUS,withitsrapidlyincreasingexports.

Despitesomeperiodiclossofmomentumduringtheyear,theglobaleconomycontinuedtogrowonthebackofthecontributionofthemeasurestakenbyvariouscountriesandthepositiverepercussionsofthebuoyantaviationsectorondemandforpetroleum

products,supportedtheprofitabilityoftheproducts,especiallythemiddledistillates.ProductshortagesinSouthAmericaandtheproblemsinitsrefiningsectorrestrictingtheentryofU.S.cargoesintoourregionalsoproppedupdieselprofitmargins.

Worldrefineriesstartedtoprocessmorelightcrudeoilwithhighgasolineyieldandcondensates,increasingthesupplyofgasoline,whilerisingpricessuppresseddemandintheUSanddevelopingcountries,whereproductpriceincreaseswerereflecteddirectlytotheendconsumer.Inadditiontothis,duetoChina’sincentivepackagessupportingalternativefueledvehiclesandthedifficultiesingasoline-poweredvehiclepurchases,demandgrowthingasolineremainedbelowexpectations.Duetotheincreasedsupplyofgasolineandstocklevelscausedbythestrongmid-distillatemargins,allowinghighglobalcapacity

4.2%increase

inTurkeyDieselConsumption

1.7%increase

inTurkeyGasolineConsumption


utilization,thelastquarterof2018wasachallengingoneforlightdistillatemargins,especiallyforgasolinewherelowestmarginsinhistorywererecorded.

Oneofthenotabledevelopmentsin2018wastheimprovementinfueloilrefiningmargins,especiallyinthelastquarter.Fueloilcrackmarginsreacheda10yearhigh,enablinghighcapacityutilizationratesinsimplerefineries.China’sexportsincreasedasaresultofcrudeoilimportpermitsbeingissuedtoindependent“teapot”refineries.WiththesupportofthefavorableWTIpricing(WestTexasIntermediate)andtheadvantageoflowernaturalgascosts,capacityutilizationratesinUSrefineriesrosetotheirrecordhighlevels,placingtheUSasanetexporterofgasoline,aswellastheworld’slargestexporterofdiesel.

TheDatedBrentcrudeoilprice,whichstarted2018atUSD66.6/barrel,rosetoUSD86.2/barrelonthebackofarisingtrendincrudeoildemanduntilthelastquarteroftheyear,ahighlevelofcompliancefromOPECcountrieswiththedecisiontocutproduction,andtherigidstancetakenbytheUSonitssanctionsagainstIran.However,inthelastquarter,demandforecastswerereviseddownwardduetothedecisionbytheUnitedStatestolatersoftenitspositiononsanctionsandgrant8countriesaperiodofexemption,alongwiththeincreaseinproductioninLibya,SaudiArabiaandRussia,andthemountingconcernsovertheglobaleconomy.Supplyconcernswerereplaced

bydemand-drivenconcernsandarapiddownwardtrendincrudeoilpriceswasobserved.Crudeoilprices,insearchofastablelevelofUSD60/barrelwiththedealbyOPECandRussiatocutproductionby1.2millionbarrels/day,closedtheyearatUSD50.21/barrelduetoemergingconcernsoverglobaleconomicoutlookregardingtheslowdownindevelopingmarkets,ChinaandEurope.TheaveragefortheyearhasbeenUSD71.04/barrel.

In2018,oneofthemostsignificantdevaluationsexperiencedamongdevelopingcountrieshasbeeninourcountry’scurrency.Theincreaseintheexchangerateledtoaspikeintheoilpriceinlocalcurrencytermsandasubsequentriseinfinalproductprices.Althoughtheriseinend-priceswaslimitedbytheSCTregulation,whicheaseddutiesandlimitedthedeclineindemand,demandforgasoline,withitshighpricesensitivity,remainedunderpressure.Theeconomicslowdownfromthe3rdquarteroftheyearcausedacontractionindemandfordieselandTurkey’sdemandforoilproductsgrewonlyby3.6%despitethestrong10.7%growthrecordedinthefirstsixmonthsoftheyear(*).Totaldieselconsumption,whichiscorrelatedwithGDP,maintaineditsgrowthtrendwiththepositivesupportofthemegaprojectsandurbantransformationworks,andgrewby11.7%inthefirstsixmonths.Withthelossofmomentumandadeclineinthesecondhalfoftheyear,dieselconsumptionendedtheyearwithoverallgrowthof4.2%YoYat23.1milliontons.Likewise,gasolineconsumption

increasedby5.1%inthefirstsixmonthsoftheyear,anddespitesomelossofmomentum,endedtheyearwithgrowthof1.7%YoYatalevelof2.2milliontons.BackedbythecompetitiveadvantageofferedbyTüpraş’sstorageandterminalinfrastructure,TüpraşwasabletomeetTurkey’sentireneedsforgasoline.

Despitethedeclineindomesticflightsinthelastquarter,strongdemandforjetfuelinairlinetransportationcontinuedthroughouttheyearwiththesupportofthedynamismintheforeigntourismsector.Airtrafficgrewby2.8%in2018,withatotalofapproximately210millionpassengers,anincreaseof8.8%YoY.Accordingly,Tüpraş’scivilianjetfuelsalesgrewby7.9%YoY,oranincreaseof344thousandtonsovertheirpreviousyear’slevelof4.7milliontons.

In2018,Tüpraş’sbitumensalesstoodat2.9milliontons,decreasingby589thousandtons(17%YoY)duetoeconomicslowdownstartinginAugust2018.

InaccordancewiththecommuniquéissuedbyEMRAinSeptember2011,atleast2%ofbioethanolderivedfromdomesticagriculturalproductshasbeenaddedtogasolineproductssince1January2013;thebioethanoladditionratewasincreasedto3%atthebeginningof2014.SinceJanuary2018,anobligationtoblendatleast0.5%biodieselproducedfromdomesticagriculturalproductsand/orvegetablewasteoilsintoalldieselsuppliedfromrefinerieswasintroduced.

(*)AccordingtoEMRA’s11-monthdata



PRODUCTION AND SALES

TÜPRAŞ IS OPTIMIZING AND DIVERSIFYING ITS RESOURCES IN ITS CRUDE OIL PURCHASING OPERATIONS IN ORDER TO SPREAD THE RISKS IN THE SUPPLY CHAIN AND TO SECURE PRICE AND FREIGHT ADVANTAGES.

Tüpraşstrivestomaximizecustomersatisfactionby• meetingthenation’sneedsforpetroleumproductsentirely,

• directingthesectorwithinnovativeapplicationsand

• offeringthemarketcleanandreliableproductsatcompetitiveprices.

The common focus in all of Tüpraş’s activities is to meet Turkey’s need for petroleum products.Tüpraş’smainactivityistheprocurementandrefiningofcrudeoilthatisnecessarytomeetthecountry’sdemandforpetroleumproducts,andcarryingoutdomesticandforeignsalesanddistributionofthepetroleumproductsthatitproduces.Throughitsrefiningactivities,thecompanyproducesawiderangeofpetroleumproductsincludingLPG,gasolineandnaphtha,jetfuel,kerosene,diesel,fueloil,bitumenandlubricatingoils.

Tüpraşisoptimizinganddiversifyingitsresourcesinitscrudeoilpurchasingoperationsinordertospreadtherisksinthesupplychainandtosecurepriceandfreightadvantages.Asignificantproportionofcrudeoilpurchasesarecarriedoutthroughannualagreementsenteredintowiththecountries’nationaloilcompanies.Inadditiontothis,purchases

Breakdown of Crude Oil Procured

Low-SulphureCrudeOil9.3%Medium-SulphureCrudeOil31.4%High-SulphureCrudeOil59.3%


2016

2015

2014

2.9

2017

2018

arealsoundertakentoprovidesupplyflexibilityandintroduceadditionaloptionsforcrudeoiltypeswiththepropertiesrequiredbyproductorders.

Twenty varieties of crude oil purchasedIn2018,Tüpraşpurchased20differenttypesofcrudeoilfrom12countries,includingdomestic,ingravitiesrangingfrom19APIsto47APIs.

TotalimportsstoodatUSD14.4billion,withUSD10.8billionofthatamountconsistingof21.8milliontonsofcrudeoilsuppliedduringtheyear.

In2018,Tüpraşimportedatotalof6.3milliontonsofsemi-finishedproductsandfinalproducts,including3.8milliontons

offinalproducts,inordertomeetthecountry’sdemand.Thiswasinadditiontothe2.5milliontonsofsemi-finishedproductsimportedtobechargedduringthemajorityofplannedmaintenancedowntimes.

White product yield reaches 77.4% with 25.7 million tons of productionAsaresultofmodernizationworkcarriedoutin7000crudeoilunitinİzmirRefinery,plannedmaintenanceinİzmitRefinerycrudeoilunitandbatteryshutdownforthepurposeofmaintenanceinKırıkkaleRefineryduringtheyear,Tüpraşfedatotalof27milliontonsofoilandproductstoitsunits,including24.5milliontonsofcrudeoiland2.4milliontonsofsemi-finishedproducts,representingaslightdecreasefrom2017.Withitsfullcapacityutilization,

itachievedawhiteproductyieldof77.4%with25.7milliontonsofproduction.

Inthedomesticmarket,wherethereisnorestrictiononimports,pricesofpetroleumproductsaredeterminedundertheconditionsoffullcompetition.Inthiscontext,theoperationalprofitabilityoftherefineriesdependsonthegrossrefiningmargin,definedasthedifferencebetweenthecrudeoilpriceandproductpricesdeterminedininternationalmarkets.Tüpraş’spetroleumproductspricesinthedomesticmarketaredirectlybasedontheCIFGenoaMediterraneanPlattsprice,whichrepresentsthenearestmarkettobetakenasareferenceasmentionedinthePetroleumMarketLaw.

Net refining margin of USD 9.3 / barrel In2018,Tüpraş’snetrefiningmargin,afteroperatingexpenses,stoodatUSD9.3/bbl.

DomesticImports

DomesticImports

Value(USDmillion)Quantity(milliontons)

Tüpraş Refining Production (thousandtons)

Products 2017 2018 Change %

LPG 1,024 916 -10.6Gasoline/Naphtha 6,148 5,341 -13.1Jet Fuel/Kerosene 4,860 4,792 -1.4Diesel 9,584 8,510 -11.2Fuel Oils 2,103 1,693 -19.5Bitumen 3,496 2,975 -14.9Base Oils 199 150 -24.9Coke 868 802 -7.6Others 600 516 -13.9Total 28,883 25,695 -11.0

Crude Oil Supply (milliontons) Crude Oil Supply (USDbillion) Product Import20

16

2015

2014

17.9

2017

2018

2.4

2.6 2.6 2.6

2.7

24.8 25.2 25.1

21.8

2016

2015

2014

12.1

2017

2018

1.5

8.77.7

9.310.80.9

0.9

1.3

0.7

3.03.7

4.4

6.3

2,280

1,291 1,293

1,978

3,600




Total Production (milliontons) White Product Yields (%) Gasoline and Naphtha (milliontons)

2016

2015

2014

25.728

.9

27.9

27.3

20.1

2017

2018

2016

2015

2014

77.4

76.3

76.6

75.4

72.2

2017

2018

2016

2015

2014

5.3

6.1

6.1

5.8

4.4

2017

2018

Jet Fuel (milliontons) Diesel (milliontons) Fuel Oil (milliontons)

2016

2015

2014

4.84.9

4.65.

1

3.6

2017

2018

2016

2015

2014

8.59.

6

9.4

8.2

5.3

2017

2018

2016

2015

2014

1.7

2.1

2.0

2.9

3.5

2017

2018


Product Yields

LightDistillate6,148

MiddleDistillate14,444

76.3%WhiteProductYield

Black6,499

Bitumen3,496 Gasoline/Naphtha6,148

JetFuel4,860

ASRFO+Vacuum32

FuelOil2,103

Petrocoke868

Others1,640

Diesel9,584

Others1,640

2017

Bitumen2,975 Gasoline/Naphtha5,341

JetFuel4,792

FuelOil1,693

Petrocoke802

Others1,356

Diesel8,510

77.4%WhiteProductYield

LightDistillate5,341

MiddleDistillate13,302

Black 5,470

Others1,356

2018



Integrated structure offers a competitive advantage Tüpraşenjoysacompetitiveadvantagewithitsfourrefineriesthatallowproductionandsalesoptimizationandarelocatedclosetolargecentersofconsumptionthroughoutthecountrywiththeirexistingwarehousesandterminals.ThecompanyreinforcesthisadvantagebyprovidinganuninterruptedsupplythroughKörfezUlaştırmaA.S.,arailwaytransportationcompanycarryingoutfueloiltransportationbetweentherefineries,andDitaş,asubsidiaryofTüpraşcarryingoutthetransportationofcrudeoilandpetroleumproductsinlinewithTüpraş’sneeds.

• Tüpraşrefineriesofferstructuralsuperioritycomparedtootherregionalrefineries:

• Itsrefineriesarelocatedinlargecentersofconsumption,

• Therefineriesweredesignedinsuchawayastohandleheavyandhigh-sulphurcrudes,

• Itcanbenefitfrompriceadvantagesinbulkcrudeoilandproductpurchases,

• Ithastheabilitytosupplyavarietyofcrudesatareasonablecost,thankstoitsproximitytokeycrudeoilsuppliers,

• Turkeyisanetimporterofmanyproducts,

• Itenjoysastronginfrastructureandfacilitiesforcrudeoilstrongproductimportandsaleschannels,

• Thecompanycommandslogisticaladvantagesinmarineandrailwaytransportationwithitssubsidiaries,DitaşandKörfezUlaştırma.

• Ithasdirectpipelinestodomesticcustomers,

• Ithashighexportcapability.

Carrying out the supply and direct sale of around 45 types of petroleum productsTüpraşisTurkey’sfirstandthelargestrefiner.Itsupplies45typesofpetroleumproductsthroughfourrefineriesutilizingleasedterminalsthroughoutTurkeyandmeetsasignificantproportionofthecountry’senergyneeds.

Thecustomersthatthecompanysellsdirectlyto,andsellswholesaleproductsto,includecompaniesdistributingfueloil,LPG,bunkerfuel,jetfuelandmineraloil,whicharelicensedbytheEnergyMarketRegulatoryAuthority(EMRA);industrial,petrochemicalandpaintcompanieswhichintensivelyusepetroleumproducts

2018 Capacity Utilization

Capacity Utilization Rate (%) Crude Oil Semi-product Total

1st Quarter 67.3 10.7 78.02nd Quarter 85.4 7.1 92.53rd Quarter 107.2 7.3 114.54th Quarter 89.4 9.3 98.7

TÜPRAŞ REFINERIES HAVE REMARKABLE STRUCTURAL ADVANTAGES OVER OTHER REGIONAL REFINERIES

4.2billion tons Tüpraşrealizedexportsalesof4.2milliontonswithanamountofUSD2.5billion.



in2018,ofwhich25.6milliontonsweredomesticsaleswith4.2milliontonsofexports.

Inparallelwiththechangesinproductcrackmarginsandtheincreasingdemandinthedomesticmarket,thecompanymaximizedtheproductionofjetfuelanddiesel,andachievedrecorddomesticsaleslevelsinthoseproducts.

Exportinghighqualityproductswhicharesurplustothenationaldemand,in2018Tüpraşexportedsurplusproductionthatemergedduringperiodsofcontractioninthedomesticmarket,inlinewithmarketconditionsandchangesintheconjuncture.Whilethishelpedlowerproductionandinventorycosts,italsocreatedanaturalprotectionmechanismagainstexchangeraterisk.

In2018,Tüpraşexported4.2milliontonsofproductswithatotalvalueofUSD2.5billion.Theexportsconsistedof2.4milliontonsofgasoline,1.1milliontonsoffueloil,109thousandtonsofjetfuel,346thousandtonsofreformate,117thousandtonsofdiesel,18thousandtonsofLPG,36thousandtonsofnaphthaand13thousandtonsofotherproducts.

inindustry;theGeneralDirectorateofHighways,Municipalities,otherofficialinstitutionsandthecontractorsapprovedbytheseinstitutions,privateconstructionorcontractingcompanies,cementmanufacturers,tradingcompaniesandtheMinistryofNationalDefenceonbehalfoftheTurkishArmedForces.

Inordertodevelopitscustomer-focusedsalesapproachesinrapidlychangingmarketconditions,entiresales,delivery,after-salesserviceandmarketingprocessesarecontinuouslyreviewed,andcustomerdemandsandexpectationsaremetrapidlyatthehighestlevel.Asaresult,in2019,highquality,plannedandsystematicserviceswillcontinuetobeprovidedforthecustomerstakeholder,whichisoneofthemostimportantstakeholdersofTüpraş,withinthescopeoftheCustomerRelationsPolicy.

29.8 million tons of products sold Productionvolumesdeclinedby11%in2018whencomparedto2017duetoperiodicmaintenanceandmodernizationinvestmentdowntimesincrudeoilunits.Thiswassupportedbycommercialsales;therefore,Tüpraşdidnotexperienceanydeclineindomesticsales.Tüpraşsoldatotalof29.8milliontonsofproducts

Sales of Tüpraş Refineries (thousandtons)

Products 2017 2018 Change %

LPG 1,117 956 -14.4Naphtha 245 241 -1.9Gasoline 2,205 2,244 1.8JetFuel/Kerosene 4,530 4,867 7.4Motorin 11,292 11,885 5.3FuelOil 1,263 1,145 -9.3Bitumen 3,527 2,939 -16.7BaseOils 177 147 -17.1Coke 961 869 -9.6Others 373 346 -7.2Total Domestic Sales 25,689 25,638 -0.2Exports 5,804 4,191 -27.8Total Sales 31,493 29,830 -5.3

Exports (milliontons)

Exports (USDmillion)

Domestic Sales (milliontons)20

16

2015

2014

25.6

25.7

24.8

22.2

16.9

2017

2018

2016

2015

2014

4.2

5.8

5.5

6.5

5.3

2017

2018

2016

2015

2014

2,4692,786

2,090

2,879

3,725

2017

2018



İZMIT REFINERY

ONE OF THE HIGHEST CONVERSION RATES IN THE WORLD

11.0 million tons

refinerycapacity

3.0 million m3 storagecapacity

2,100numberofemployees(year-end)

14.5 Nelsoncomplexity


İzmitRefinerybeganproductionin1961withacapacitytoprocess1milliontons/yearofcrudeoil.Asaresultofsignificantcapacityincreasesandtheconversionunitinvestmentsovertheyears,theRefinery’sdesigncapacitywasregisteredat11.0milliontons/year.

ProducingtoEuroVstandards,İzmitRefineryistrulylocatedinaconsumptioncenter,accountingfor33%ofTurkey’sconsumptionofpetroleumproducts.

TheRUPFacilityinİzmitRefinerywasmechanicallycompletedattheendof2014.Theunitconverts4.2milliontonsofblackproductsintoapproximately3.5milliontonsofhigh-value,environmentfriendlywhiteproductswhichmeet

EUstandards,mostlydiesel,gasolineandLPG.AftertheFuelOilConversionFacilitywascommissioned,İzmitRefineryreachedoneofthehighestconversionratesintheworld,withaNelsonComplexityvalueof14.5.

Atotalof11.9milliontonsofmaterial,including9.8milliontonsofcrudeoiland2.0milliontonsofsemi-finishedproducts,wereprocessedattheRUPFacilityin2018,whichoperatedatmaximumcapacityinİzmitRefinery.

Asoftheendof2018,theRefinery’stotalproductsalesamountedto14.9milliontons,ofwhich12.9milliontonsweredomesticsales.

Major projects completed during the year• TheHydrocrackerThermalIntegration

Project• EstablishmentofHopperforthe

SulphurTruckFilling• PLT-148SRUOxygenEnrichment• Plant-68OxygenEnrichment

Ongoing projects• FCCUnitModernization,FlueGas

TreatmentandEnergyRecovery• VacuumUnitsOff-GasRecovery• Thenewsulphurunit• InstallationofChargeNozzleatthe

EntranceoftheDCUCokeDrums• ModernizationofPetroleumcoke

WarehouseLoadingOperations

AS OF THE END OF 2018, İZMİT REFINERY’S TOTAL PRODUCT SALES AMOUNTED TO 14.9 MILLION TONS, OF WHICH 12.9 MILLION TONS WERE DOMESTIC SALES.

Sales (milliontons)20

16

2015

2014

14.915.6

14.8

13.6

9.6

2017

2018



İZMİR REFINERY

THE ONLY REFINERY WITH A LUBRICANTS PRODUCTION COMPLEX IN TURKEY

11.0 million tons

refinerycapacity


1,437numberofemployees(year-end)



WiththeaimofmeetingTurkey’sgrowingrequirementforpetroleumproducts,İzmirRefinerywasbroughtintooperationin1972.Therefinery,whichstartedproductionwithanannualcrudeoilprocessingcapacityof3milliontons,isnowregisteredashavinganannualrefiningcapacityof11milliontonsfollowingsignificantcapacityincreasesandunitmodernizationscarriedoutovertheyears.

İzmirRefineryhasaNelsonComplexityof7.66.In2018atotalof9.7milliontonsofrawmaterials,including9.4milliontonsofcrudeoilandtheremainderbeingsemi-finishedproductswasprocessedinİzmirRefinery.

Therefinery’sproductionofmainmarketablepetroleumproducts-consistingofLPG,naphtha,gasoline,jetfuel,diesel,baseoil,heatingoil,fueloil,bitumen,wax,extractsandotherproducts-reachedto9.4milliontonsin2018.İzmirRefineryhas400thousandtonsofcapacitybaseoilproductionunit,theonlyoneofitskindinTurkey.

In2018,İzmirRefineryachievedsalesof10.1milliontons,ofwhich7.9milliontonsweresolddomestically.

Major projects completed during the year• ModernizationoftheU-7000crude

oildistillationunitandrenewaloftheelectricalsystem

• InstallationoftheNewCustomsLegislationCounterSystem

• ProcessUnitsFireFightingSystemsModernizationProject

Ongoing projects• FCCUnitRenewal,FlueGas

PurificationandEnergyRecovery• CCRPlatformerUnitCapacityIncrease• VacuumUnitsOff-GasRecovery• Thenewsulphurunit

IN 2018, İZMİR REFINERY ACHIEVED SALES OF 10.1 MILLION TONS, OF WHICH 7.9 MILLION TONS WERE SOLD DOMESTICALLY.


16

2015

2014

10.110.7

10.4

10.4

8.5

2017

2018



KIRIKKALE REFINERY

TURKEY’S LARGEST ROAD TANKER FILLING CAPACITY

5.0 million tons

refinerycapacity


969numberofemployees(year-end)



KırıkkaleRefinerywasestablishedin1986tomeetthedemandforpetroleumproductsintheAnkara,CentralAnatolia,EasternMediterraneanandEasternBlackSearegions.

Overtheyears,theRefineryhasdevelopedtheconfigurationofferingamid-levelcomplexitybyMediterraneanstandardswiththeadditionofahydrocracker,isomerization,dieseldesulphurizationandCCRreformerunits.WithaNelsoncomplexityof6.32,KırıkkaleRefineryhasTurkey’slargestroadtankerfillingcapacity.

ThecrudeoilsupplyoftheRefinery,whichhasanameplateannualcrudeoilprocessingcapacityof5milliontons,isprovidedfromtheBotaşCeyhanTerminal,usingtheCeyhan-Kırıkkalepipeline.

OnceproductiongotunderwayattheİzmitRefineryFuelOilConversionFacility,itwasensuredthattheKırıkkale

Refinery-whichsendssemi-finishedproductstothisunittobefedtothecharger-achieveditstargetedoperationalperformance.In2018,theactivitiesinallrefineryunitsweresuspendedandplannedmaintenanceworkwascarriedout.In2018,theRefineryprocessedatotalof4.4milliontons,including4.5milliontonsofcrudeoilandwithsemi-finishedproducts,and83%capacityutilizationwasachieved.

In2018,theRefineryprocessedatotalof4.4milliontons,including4.5milliontonsofcrudeoilandwithsemi-finishedproducts,and83%capacityutilizationwasachieved.

In2018,4.4milliontonsofpetroleumproductswereproduced-includingthemainproductsofLPG,gasoline,jetfuel,kerosene,diesel,fueloilandbitumen-inadditiontotheproductsprocessedattheRUPfacility.Atotalof4.1milliontonsofproductsweresoldduringtheyear.

Major projects completed during the year• Newpowerplant• InstallationoftheESDSystemin

HydrocrackerUnit• WagonWashingSystem• RenewalofCoolingWaterLines

Ongoing projects• TheVacuumUnitsOff-GasRecovery• Thenewsulphurunit• NewLaboratoryBuilding

TOGETHER WITH REFINERY TRANSFERS, A TOTAL OF 4.4 MILLION TONS OF PRODUCTS WERE SOLD IN 2018 IN KIRIKKALE REFINERY.


16

2015

2014

4.14.4

4.4

4.0

3.6

2017

2018



BATMAN REFINERY

THE FIRST REFINERY IN TURKEY

1.1 million tons

milliontonsrefinerycapacity

268 thousand m3 storagecapacity

510numberofemployees(year-end)

1.83Nelsoncomplexity


Commissionedin1955withacrudeoilprocessingcapacityof330thousandtons,BatmanRefinerywasthefirstrefinerytobefoundedinTurkey.Followingthecommissioningofanewcrudeoilprocessingunitin1972,BatmanRefinery’sannualcrudeoilprocessingcapacityreachedto1.1milliontons.

WiththeadvantageofitsgeographicalproximitytoTurkey’sowndomesticheavycrudeoilresources,BatmanRefineryisstructuredinasimpleconfigurationtoprocessthiscrudeoil.TheRefineryhasaNelsonComplexityIndexof1.83.

In2018,theBatmanRefineryprocessed943thousandtonsofcrudeoilinthebitumenmodeandsold533thousandtonsbitumen.

Semi-finishedproductsproducedinBatmanRefineryandthedieselandgasolineproductsfromKırıkkaleandİzmirrefineriesaretransportedbyrailway.

AttheBatmanRefinery,thesaleof723thousandtonsofproducts,whichwereinaccordancewithEUspecifications,wascarriedoutwithproductstransportedfromKırıkkaleandİzmirRefineries.

Major projects completed during the year• ImprovementstoLaboratorySpaces• ModernizationofTransformersand

ElectricalSystemsofDesalters

Ongoing projects• InstallationofNewBitumenTank• Newsolarpowerplant

IN BATMAN REFINERY, 723 THOUSAND TONS OF PRODUCTS WERE SOLD IN 2018.

Sales (bintons)20

16

2015

2014

723

870

758

745

429

2017

2018



DISTRIBUTION

2ND IN WHITE PRODUCT SALES WITH 17.8% MARKET SHARE1ST IN BLACK PRODUCT SALES WITH 36.2% MARKET SHARE

1.1 million m3

storagecapacity

1,615

stations(includingSunpet)

42,997 TL million

totalrevenues


EstablishedbyÖztürkFamilyin1992,OpethasbeenjointlymanagedbyÖztürkGroupandtheKoçGroupsince2002.TheCompanyoperatesinthefueloildistributionsectorviaretailsales,commercialandindustrialfueloilsales,storageandinternationalproducttrade.Withnearly900employees,1,615stationsincludingtheSunpetbrandand1.1millionm3ofstoragecapacity,OpetmanagesanextensiveservicenetworkthroughoutTurkeywith5terminalsandprovideshigh-qualityproductsandservicestoitscustomers.

OpetmanufacturesandmarketsmineraloilthroughitssubsidiaryOpet-Fuchs,a50-50%partnershipwiththeGermanmineraloilcompany,Fuchs.ItalsosuppliesandsellsjetfueloilviaTHY-Opet,a50-50%partnershipwithTurkishAirlines.

Opet maintained its 2nd position in the market in 2018.Opetachievedsalesgrowthinlinewiththemarketduring2018thankstoitswell-establisheddealernetwork.TheCompanymaintaineditsnumber2positioninthe

marketwitha17.8%marketshareinwhiteproducts,whilerisingtothe1st positioninblackproductswith36.2%marketshare.

Opetgeneratedstrongfinancialresultsutilizingitseffectiveriskpoliciesagainstexchangerateandpricefluctuations.

ServingnumerousdomesticandforeignairlinesatallairportsinTurkey,THY-Opetincreaseditsjetfuelsalesvolumeto3.9millionm³in2018comparedto3.7millionm³in2017.

Opetimplementsnumerousnewprojectsinmanyfieldsalignedwithitsaimofbeingthefirstchoiceofcustomerswithits“PerfectServiceUnderstanding”.

Opet sets itself apart in its sector with its approach to social responsibility.Inadditiontofinancialsuccess,Opetaimstogenerateaddedvalueforallofitsstakeholdersandsocietywhileminimizingitsenvironmentalimpact.TheCompanydevelopedandimplementedanumberofsuccessfulsocialresponsibilityprojectssuchas“CleanToilets”,“The

GreenRoad”,“AnExemplaryTown”,“RespectingHistory”and“TrafficDetectives”inlinewiththisobjective.In2018,the“RespectingHistory/TroyProject”aswellasthe“WomenForceProject”toimprovewomenemploymentinstationswerealsoinitiated.

Forward-looking expectationsOpet’smainpriorityistomaintaincustomersatisfactionwhilegrowingabovethesectorwithoutcompromisingprofitability.2019isexpectedtobeayearofinvestmentsinlinewiththeseobjectives.TheCompanystartedamassiverestructuringtochangetheexistingstandardsinthesectorbyconvertingitsstationmarketsthroughoutTurkeyto“Ultramarkets”andincorporatingleadingbrands.Themarketswillbetransformedintolivingspaceswherecustomerscanmeetalloftheirneedsatanytimeoftheday.TheCompanyalsoaimstotakedecisivestepstoremainonestepaheadofitscompetitorsintheareaofdigitaltransformation.

OPET MAINTAINED ITS 2ND POSITION IN THE MARKET WITH A 17.8% MARKET SHARE IN WHITE PRODUCTS, WHILE RISING TO THE 1ST POSITION IN BLACK PRODUCTS WITH 36.2% MARKET SHARE.

Shareholder Structure

40% Tüpraş10% OtherKoç50% ÖztürkGroup



MARINE TRANSPORTATION

DITAŞ TRANSPORTED 18.4 MILLION TONS OF CRUDE OIL IN 2018.

A subsidiary providing Tüpraş with an operational and financial advantage.TheDitaşMarineOperationsandTankerManagementCo.(“Ditaş”)wasfoundedon16March1974bytheTurkishPetroleumCorporation(“TPAO”),İpraşandtheTurkishNavalFoundationtopurchase,buildorchartermarinetankersandusethemforthemarinetransportationofcrudeoilandpetroleumproducts.

A29%stakeinDitaş,heldbyİpraş,wastransferredtoTüpraşin1983,theyeartheCompanywasestablished.InOctober2002,Tüpraşpurchased50.98%ofDitaşsharesheldbytheDirectorateofPrivatizationAdministration,whereuponitheld79.98%ofthesharesinDitaşintotal.

Ditaşenteredaprocessofrestructuringandgrowthafter2006.Withintheframeworkofthisprocess,14companieswereestablished,with100%ofthecapitalbelongingtoDitaş.

TheCompanyprovidesshippinglineoperation,brokerage/shipleasing,guidance,tugoperation,inspectionandagencyservices.DitaşcarriesoutcrudeoiltransportationinlinewiththeneedsofTüpraş,anddoespetroleumproductstransportationbytakingtheneedsofTüpraşandothersuppliersintoconsideration.Ditaşcarriesouttheseserviceswithitsowntankersaswellastankersleasedonatimeandexpeditionbasis.

ProvidingoperationalandcostadvantagestoTüpraşwithmorethan40yearsofexperience,Ditaştransported11.6milliontonsofcrudeoiland6.8milliontonsofpetroleumproductsin2017.92.4%ofcrudeoilshipmentsand41.2%ofpetroleumproductshipmentsduringtheyearconductedinlinewiththeneedsofTüpraşrefineries.In2018,DitaşalsoprovidedproducttransportationservicesforTHYOpet(38.2%ofalloperations)andotherdistributioncompanies(20.6%ofalloperations).

IMOInordertocomplywithIMO*regulations,whichwillenterintoeffectin2020,scrubberswillbeinstalledintheT.Sadberk,T.Semahat,T.AdalynandT.Elinortankersin2019.

*InternationalMarineOrganization


Port and marine agency servicesDitaşchartersdomesticandforeigntankerstointermediatebetweenshipownersandtheexportersandimportersofcrudeoilandpetroleumproducts.Ditaşalsoprovidesagencyservicesinportsandstraits.

TheCompanydeliverstuggingandmooringservicesatTüpraş’sİzmitandAliağaportswith11tugboats,eightmooringboats,twoserviceboats,andonepilotvesselinitsfleet.

Ditaşoperatesthree479,765DWTcrudeoiltankers,a51,532DWTcrudeoil/producttanker,sevenproductcarrierswithacombinedcapacityof90,535DWT,11tugboats,eightmooringboats,twoserviceboatsandonepilotvessel.

InlinewiththeBareboatleasecontractsignedwithKuzeyTankercilik(TankerTransportation)andGüneyTankercilik,whichwerebothestablishedbyTHYOpet,THYOpet’stransportationoperationscontinuedtobecarriedoutwiththeElifTuba,KayaTunaandKuzeyEkimtankers,whichareownedbythesecompanies.

InordertocomplywithIMOregulations,whichwillenterintoeffectin2020,scrubberswillbeinstalledintheT.Sadberk,T.Semahat,T.AdalynandT.Elinortankersin2019.Thecontractsrelatedtotheinvestmentwerecompleted.

Work to expand the fleetTheT.Adalyntanker,withadeadweightof15,000tons,waslaunchedin2018.TheworkonthetankerisplannedbecompletedinMay2019,whenitisexpectedtosetsail.WorkontheconstructionoftheT.Elinortanker,with16,000DWTcapacity,iscontinuingandisplannedtoenteroperationinOctober2019.

Itisplannedtobejoinedby2tugs,with2x70BPpower,whichwereorderedin2018,inthefirstquarterof2020.

The first company that holds ISPO certificate in TurkeyDitaşwasgrantedtheInternationalSafetyManagement(ISM)Code,theISPSCode(InternationalShipandPortFacilitySecurityCode),andtheMLC(MaritimeLaborConvention)compliancecertificationsforitsvessels.

Inaddition,thecompanyholdstheISO9001:2015QualityManagementSystemandISO14001:2015EnvironmentalManagementSystemcertificatesforthecompany’soffices,shipsandterminals.

TheCompany’sİzmirTerminalwasawardedtheISPO(InternationalStandardforPilotOrganizations)certificationforpilotage,mooringandtugservices;DitaşthusbecamethefirstcompanyinTurkeyandthe11thcompanyintheworldtoholdthiscoveteddesignation.

EffortsareunderwaytoimplementtheTankerManagementandSelf-AssessmentScheme3(TMSA3),amajorcredentialfortankermanagementoperationsthatpetroleumcompaniesareexpectedtoimplement.ThevesselsoperatedbyDitaşcomplywiththeOCIMFSIRE(ShipInspectionReportProgram),andareregularlyinspectedbyOCIMFmembers.Embracingitsresponsibilitiesasagoodcorporatecitizen,DitaşisalsoamemberofKalDer(TurkishQualityAssociation)andTURMEPA(TurkishMarineEnvironmentProtectionAssociation).

Targeting full compliance with the regulationsDitaşcloselyfollowsallapplicabledomesticandinternationallaws,rulesandregulations,andfulfillsallcompliancerequirementsinatimelymannerinordertodeliverhighquality,safeandeco-friendlyservices.Additionally,theCompanyprovidesalltrainingprogramsrequiredbyLawNo:6331onOccupationalHealthandSafetyandapplicableregulations.TheCompany’soccupationalsafetyspecialistandon-sitephysiciansfulfilllegalrequirementssuchasriskassessment,emergencyactionplansandperiodichealthchecks.

Since2009,DitaşhasprovidedloadingmasterservicestoshipsarrivinginTüpraş’smarineterminalsinordertoenhancesafety.In2010,Ditaşalsostartedtocheckandreportincomingships’compliancewithdomesticandinternationalregulations,aswellwithasTüpraşstandards.

Ditaşinspected123shipsandprovidedloadingmasterservicesto125vesselsattheİzmitandİzmirTerminalsin2018.

Shareholder Structure

79.98%Tüpraş20.00%TurkishArmedForcesFoundation0.02%Aygaz-Akpa-DemirExport




Ditaş-Owned Tankers

M/T CumhuriyetTankerType CrudeOilBuiltin 2001DWT 164,859tonsLength 274.18m

M/T T. SevgiTankerType OilProduct/ChemicalBuiltin 2008DWT 10,983tonsLength 131.85m

M/T T. GönülTankerType OilProduct/ChemicalBuiltin 2009DWT 10,873tonsLength 131.85m

M/T T. CarolineTankerType OilProduct/ChemicalBuiltin 2009DWT 10,901tonsLength 131.85m

M/T T. NevbaharTankerType OilProduct/ChemicalBuiltin 2009DWT 11,544tonsLength 130.12m

M/T T. LeylaTankerType OilProduct/ChemicalBuiltin 2011DWT 6,297tonsLength 121.62m

M/T T. SunaTankerType Oil/ChemicalBuiltin 2012DWT 51,532tonsLength 183.31m

M/T T. EsraTankerType Asphalt/ChemicalBuiltin 2014DWT 19,968tonsLength 156.50m


Ditaş-Operated Bareboat Charter Tankers

Ditaş Tankers Under Construction

M/T AdalynTankerType Asphalt/ChemicalBuiltin 2019DWT 15,000tonsLength 153.9m

M/T ElinorTankerType OilProduct/ChemicalBuiltin 2019DWT 16,000tonsLength 153.63m

M/T T. AylinTankerType Asphalt/ChemicalBuiltin 2015DWT 19,968tons

Length 156.50m

M/T T. SadberkTankerType CrudeOilBuiltin 2017DWT 157,453tonsLength 277.17m

M/T T. SemahatTankerType CrudeOilBuiltin 2017DWT 157,453tonsLength 277.17m

M/T Elif TubaTankerType OilProduct/ChemicalBuiltin 2007DWT 13,011tonsLength 128.6m

M/T Kaya TunaTankerType OilProduct/ChemicalBuiltin 2007DWT 13,027tonsLength 128.6m

M/T Kuzey EkimTankerType OilProduct/ChemicalBuiltin 2009DWT 19,993tonsLength 149.6m




Financial Indicators(USDmillion)

Affiliates of Ditaş Deniz İşletmeciliği ve Tankerciliği A.Ş.

2014 2015 2016 2017 2018

Net Sales 101.7 113.6 151.3 253.7 213.5

Operating Profit 27.3 37.1 40.5 49.6 70.3

Net Profit 24.6 25.0 32.0 39.7 52.3

Crude Oil and Petroleum Products Transported (thousandtons)

2014 2015 2016 2017 2018

Crude Oil 4,825 6,606 9,332 17,338 11,628

Petroleum Products

3,526 5,209 5,869 5,976 6,811

6.8million tonsPetroleumProductsTransported

USD million

213.5NetSales

11.6million tonsCrudeOilTransported

Company Vessel Owned

Üsküdar Tankercilik A.Ş. T. Sevgi Tanker

Kadıköy Tankercilik A.Ş. T. Gönül Tanker

Beykoz Tankercilik A.Ş. Cumhuriyet and T. Sadberk

T. Damla Denizcilik A.Ş. Tugboats and Mooring boats

Sarıyer Tankercilik A.Ş. T. Suna Tanker

Karşıyaka Tankercilik A.Ş. T. Leyla Tanker

Kartal Tankercilik A.Ş. T. Esra Tanker

Maltepe Tankercilik A.Ş. T. AylinTanker

Karaköy Tankercilik A.Ş T. Caroline Tanker

Çengelköy Tankercilik A.Ş T. Nevbahar Tanker

Bakırköy Tankercilik A.Ş T. Semahat Tanker

Pendik Tankercilik A.ŞNew Asphalt Tanker under Construction (RMK Marine) (to be operational in 2019)

Tuzla Tankercilik A.ŞNew Product Tanker under Construction (RMK Marine) (to be operational in 2019)

Company Charter Vessels

Salacak Tankercilik A.Ş (*)

Elif Tuba Tanker

Kaya Tuna Tanker

Kuzey Ekim Tanker(*)ThetransportationoperationsofthetankersthataretheassetsofKuzeyTankercilikA.ŞandGüneyTankercilikA.ŞestablishedbyTHYOpetareconductedbySalacakTankercilikA.Şunderabareboatleasecontract.


RAILWAY TRANSPORTATION (KÖRFEZ ULAŞTIRMA)

ESTABLISHED WITH 100% TÜPRAŞ CAPITAL, KÖRFEZ ULAŞTIRMA OPERATES AS TURKEY’S FIRST PRIVATE RAILWAY OPERATOR.

Turkey’s first private railway operator, providing flexibility and convenience for TüpraşWhollyownedbyTüpraş,KörfezUlaştırmaA.Ş.wasestablishedin2009.

Asarailwaytrainoperator,KörfezUlaştırmatransportspetroleumproductsstartinginDecember2017andthroughout2018,withfivelocomotivesleasedfromTCDDintrainsusedintwo-waybetweenKırıkkaleandİzmitRefineries.

Inadditiontobeingarailwaytrainoperator,theCompanycarriedoutothertransportationonİzmit-KırıkkalelineandtransportationonKırıkkale-Mersin-BatmanlineasanoperatorwiththeTCDDlocomotives.TheCompanyistheoperatorofthisparticulartraintransportation.

KörfezUlaştırmatransported1.77milliontonsofproductsandintermediateproductsin2018,realizing27%ofthistransportationwithitsowntrains.AsofNovember2018,KörfezUlaştırmastartedtocarryouttransportationbetweenKırıkkalerefineryandMersinOpetTerminalasanoperator.

In2018,inadditiontothe439wagonsownedbyTüpraş,26Opetwagonsand100-200TCDDtankwagonswereusedinthetransportation.

ThewagonmaintenanceworkshoplocatedatKırıkkaleRefineryisthemostcomprehensivewagonrepairandmaintenanceworkshopinTurkeyaccordingtoECMstandards.

Thehighperformanceoftheworkshopallowsthewagonstooperateatmaximumefficiency.

In2018,34machinistswithpreviousexperienceintheTCDDworkedontheKörfezUlaştırmatrains.Thetrainingof30newmachinistsiscurrentlycontinuingatthecompany.Oncethetrainingiscompletedinthefirstquarterof2019,thetotalnumberofmachinistswillreach64.Asoftheendof2018,therewerealso14personnelworkingintheCompany’sİstanbulHQandAnkaraoffices.

Tüpraş’a esneklik ve kolaylık sağlayan Türkiye’nin ilk özel demiryolu işletmecisi HisselerinintamamıTüpraş’aaitolanKörfezUlaştırmaA.Ş.2009yılındakurulmuştur.

KörfezUlaştırma,demiryolutrenişletmecisi(DTİ)olarak,Aralık2017’denbaşlayarak2018yılıboyuncaTCDD’denkiraladığı5adetlokomotifleKırıkkale-İzmitRafinerileriarasındakarşılıklı1’ertrenleakaryakıttaşımaktadır.

Demiryolutrenişletmecisiolmasınınyanısıra,Şirket,İzmit-KırıkkalehattındakalandiğertaşımalarıveKırıkkale-Mersin-BatmanhattındakitaşımalarıdaorganizatörsıfatıylaveTCDDlokomotifleriylegerçekleştirmiştir.

2018yılında1,77milyontonürün/araürüntaşıyanKörfezUlaştırma,bumiktarın%27’sinikenditrenleriilegerçekleştirmiştir.KörfezUlaştırma,Kasım2018itibarıyla,organizatörolarakKırıkkale-MersinOpetTerminaliarasındataşımalaradabaşlamıştır.



WITH THE PERFORMANCE OF KÖRFEZ ULAŞTIRMA IN 2018, THE VOLUME OF RAILWAY TRANSPORTATIONS UNDERTAKEN BY TÜPRAŞ INCREASED BY 30% (TO 420 THOUSAND TONS) WHILE THE VOLUME OF ROAD TRANSPORTATION WAS REDUCED BY 50%.

30% increase in railway transportation undertaken by TüpraşWiththeperformanceofKörfezUlaştırmain2018,thevolumeofrailwaytransportationsundertakenbyTüpraşincreasedby30%(to420thousandtons)whilethevolumeofroadtransportationwasreducedby50%.Inadditiontotheeconomicbenefitsprovided,socialbenefitswerealsoachieved,suchaslowertankertrafficonhighways.

The target of capturing 10% of Turkey’s total railway freight transportation by itselfInJuly2018,KörfezUlaştırmaorderedfivediesellocomotiveswiththeGeneralElectriclicense.TheproductionofthelocomotivescontinuesattheplantownedbyTülomsaş,asubsidiaryoftheTCDD,inEskişehir.Thelocomotivesareplannedtobedeliveredinthesecondquarterof2019.

TheprocessforthepurchaseofadditionaltankwagonsandsecondbatchoflocomotivesisstillcontinuinginorderforKörfezUlaştırmatocarryouttheentiretransportationrequirementasatrainoperator.

KörfezUlaştırmaaimstoachievethefollowingbycompletingtheaforementionedlocomotiveandwagoninvestments.

• Toincreasethirdpartytransportationinadditiontocarryingouttheentiretransportationof2.3milliontonsofproductsforTüpraş

• Torealize10%ofTurkey’srailwayfreighttransportationallbyitselfinthenearfuture

• Tobethelargestpetroleumproductstransporter

RAILWAY TRANSPORTATION (KÖRFEZ ULAŞTIRMA)

10%KörfezUlaştırmaaimstorealize10%ofTurkey’srailwayfreighttransportationallbyitselfinthenearfuture.


INVESTMENTS

IN 2018, TÜPRAŞ, TURKEY’S LEADING INDUSTRIAL COMPANY, CONTINUED TO UNDERTAKE INVESTMENTS IN LINE WITH ADVANCES IN TECHNOLOGY, INDUSTRY DEVELOPMENTS CHANGES IN DEMAND.

USD 6 billion of investment in refining over 13 years Besideskeyinvestmentsfornewunitsandprocessimprovements,Tüpraşalsocarriesoutinvestmentsfocusingonoperationalexcellence,efficiency,environment,andworkplacesafety.

Continuingtoundertakeinvestmentsinlinewithadvancesintechnology,industrydevelopmentsandchangesindemand,in2018Tüpraş,Turkey’sleadingindustrialcompany,madeinvestmentspendingsofUSD138millioninrefiningandatotalofUSD199millionincludingDitaşandKörfezUlaştırma.

Alongwiththeprimaryinvestmentsintendedtoimproveproductquality,whichbeganafterTüpraş’sacquirementbyKoçGroup,theCompanyalsomadeanumberofstrategicinvestmentdecisionsfocusingonimproving,changingandtransformingitstechnologicalcapabilitiesintheareasofoperationalexcellenceandefficiency,the

environmental,regulatoryandworkplacesafety.Tüpraş’sinvestmentsduringthelastthirteenyearsexceededUSD6.5billion,ofwhichUSD6billionwasspentforrefining.

Ongoingmodernizationprojectsatthecompany’sİzmit,İzmir,Kırıkkale,andBatmanrefinerieshavequalifiedforinvestmentincentivesthatareworthatotalofTL1.6billionunderthegovernment’sRegionalIncentivesProgram.

AsaresultofitsinvestmentinKörfezUlaştırmaA.Ş.,awholly-ownedTüpraşsubsidiarysetuptoengageinrailwaytransport,Tüpraşbecamethefirstprivately-ownedtrainoperatorinTurkey.ThecompanycommencedoperatingitsfirsttrainsinDecember2017.KörfezUlaştırmacontinuedtocarryoutitsoperationsin2018with465tankwagonsownedbyTüpraşandOpet,100-200tankwagonsandfivediesellocomotivesleasedfromTCDD,thestate-ownedrailway

134OngoingInvestmentProjects

88NewInvestmentProjects

USD million

1382018InvestmentExpenditures(Tüpraş-only)



INVESTMENTS

company.

Maintopicsofthe88newand134ongoinginvestmentprojectsin2018,whichareundertakentocontributetoTüpraş’soperations,productivity,andprofitability,arepresentedbelow:

İzmit, İzmir and Kırıkkale Refineries

Off-gas recovery projects at vacuum units of refineriesTheaimoftheseprojectsistoremovehydrogensulfidefromgasescomingoffthevacuumcolumnsattheİzmit,İzmir,andKırıkkalerefineriesbymeansofamine-scrubbingandtoinjectthetreatedgasintorefineries’furnaceburnersystemsasfuel.Withinthescopeoftheenergysavingproject,whichwillhaveacostofapproximatelyUSD51.2million,detailedengineeringphasehasbeenreached.

İzmit Refinery

Hydrocracker heat integrationIn2017detailedengineeringworkwascompletedfortheprojectinitiatedtodealwithcorrosion-relatedproblemsinthePLT-47hydrocrackerunit’saircoolersandequipmentorderswereplaced.In2018,constructionandinstallationworkwascompletedinthefield,andtheprojectwascommissioned.TotalinvestmentexpendituresofUSD10.7millionwerespentontheproject.

FCC unit revamp, flue gas treatment, and energy recoveryIntheprojectcarriedoutwithinthescopeoftheenergyrecoveryandreactorefficiencyimprovementworkattheİzmitRefineryFCCUnit,detailedengineeringstudiesandequipmentorderscontinuedduring2018.Thetenderforthe

constructionandinstallationoftheunitprogressedtothesigningthecontract.TheUSD71.9millionprojectisplannedtobecompletedin2019withtheinstallationworkandastoppageoftheunit.

Installation of Retractable Center Feed Device at Entrance of Delayed Coker Unit Coke Drums InordertooperatethePlt-177DelayedCokerunitinamoreefficientandmorereliablemanner,aRetractableCenterFeedDeviceisplannedtobeinstalledattheentranceofthecokedrum.Accordingly,duringthechargingandquenchingphase,waterwillbedistributedmorehomogeneouslywithinthecokedrum.Theprojectisenvisionedtoprolongthelifeofthecokedrumwhilereducingequipmentmaintenanceandprocessingofheaviercrudeoil.ThepreliminaryanddetailedengineeringworksandthemanufacturingofRetractableCenterFeedDeviceequipmentwascarriedonfortheUSD11.5millionprojectduring2018.Theprojectwillbecompletedduringtheunit’splannedstoppage.

İzmir Refinery

U-7000 Crude Oil Unit revamp projectWithintheframeworkoftheproject,whichaimstoincreasethecapacityoftheexistingCrudeOilUnitto1,000m3 /handensureenergyefficiency,thefurnacesandsomeequipmentsintheunitwererenewed.TheUSD56millionprojectwascompletedandtheunitwascommissionedinApril2018.

CCR platforming unit capacity increaseTheaimofthisprojectistoraisetheU-9200platformingunit’scapacityfrom160m3/hourto225m3/hoursothatallheavystraight-runnaphthacanbe

processedinordertoincreaseplatformate,hydrogen,andsimilarhigh-added-valueproductyields.Followingthecompletionofpreliminaryengineeringstudies,detailedengineeringstudiescontinuedin2018intheUSD25millionproject.Followingthecompletionofthedetailedengineeringstudies,theunitisplannedtobecommissionedaccordingtothestoppageprogramfollowingtheconstructionandinstallationworks.

FCC unit revamp, flue gas treatment, and energy recoveryThisprojectcallsforimprovingenergy-recoveryandreactorefficiencyattherefinery’sFCCunit.AfterpreliminaryengineeringstudieswerecompletedintheUSD69millionproject,detailedengineeringstudiescontinuedin2018.Followingthecompletionofthedetailedengineeringstudies,theunitisplannedtobecommissionedinlinewiththestoppageprogramfollowingthecompletionoftheconstructionandinstallationwork.

New black product and base oil sales terminalThisprojectcallsfortheconstructionofanewblackproductterminalinordertoreducecosts,allowfillingtotakeplacemoresafelyandfaster,andtoreduceoiltankertrafficflowswithintherefinerygroundsbyrelocatingtherefinery’sfillingoperations,whicharepresentlybeingcarriedoutatfourdifferentplaces,intoasinglearea.Tothisend,salesoffueloil,heatingoil,spindleoil,lightneutral,heavyneutralandbrightstockoilwillbecarriedoutfromthenewfillingterminal.DetailedengineeringstudieswerecompletedintheUSD24.4millionprojectandinstallationworkcontinuedin2018.


222 NEW INVESTMENT PROJECTS WERE UNDERTAKEN IN 2018 TO PROVIDE SIGNIFICANT CONTRIBUTIONS TO PRODUCTIVITY AND PROFITABILITY OF TÜPRAŞ AS WELL AS SUSTAINABILITY.

Installation of Wind TurbinesThecurrentelectricitydemandatİzmirRefineryPowerPlantismetbyGasTurbinesandCondenserSteamTurbines.Withtheincreaseintherefinery’scapacity,theneedforelectricityhasincreasedandisexpectedtoincreasefurtherwiththeintroductionofnewprojects.

TheincreasingelectricitydemandismetbyTEİAŞ(theTurkishElectricityTransmissionCompany)aswellascondensersteamturbines.Theprojectisaimedatmeetingtheincreasingdemandforelectricitybyinstallingnewwindturbineswhichwillgenerateelectricityfromrenewablesources,withoutcausingemissionsandachievingareductioninenergycosts.DetailedfeasibilitystudieswerecompletedaspartoftheUSD16millionprojectandengineeringstudieswillgetunderway.

Kırıkkale Refinery

New power plantThisUSD115.5millionprojectisaimedatbuildingalesscostlyandmorereliablepowerplantbasedonnewtechnologytoreplacetheoldtechnologyPowerPlantwhichhadmetthesteamandelectricityneedsofKırıkkaleRefinery.Theinstallationoftheequipmentandsystemsatthenewpowerplantwascompletedduring2018.Subsequently,theexistingsteamturbineandpumps,whichwereplannedtobetransportedfromtheoldpowerplant,weremovedtothenewunitandthenewpowerplantwasbroughtintooperationatfullcapacity.

New laboratory buildingThisprojectcallsfortheconstructionofanewexperimentallaboratorybuildingataninvestmentcostofUSD6.5million.Thenewlaboratorywillhaveimprovedventilationsystems,willprovideformore

efficienttemperature,humidity,andsimilarambientoperatingcontrols,andwillbeabletobetteraccommodatetherefinery’sincreasedworkloads.Theproject’sbuildingconstructionandinstallationworkscontinuedin2018.

Batman Refinery

Installation of New Bitumen Tank Aftertherenewalworkcarriedoutintheprocessunits,therewasarequirementtostoretheincreasedbitumenproductionwhichresultedfromtheincreaseinthecrudeoilprocessingcapacityoftheRefinery.

Theplannednewbitumentank,whichhasacapacityof30,000tons,isaimedateliminatingunitdowntimesand/orchargereductions.DetailedengineeringworkrelatedtotheUSD4millionprojectwascompletedin2018andconstructionandinstallationworkcontinued.



R&D

Qualified projects to provide environment friendly, innovative and economic solutionsTheTüpraşR&DCentercarriesoutprojectsaimedatimplementinginnovativetechnologiesandsolutionsinlinewiththeneedsoftherefineries,andcarriesoutstudiestodeveloptheprocessesandnewproductsthatwillmeettheneedsofthesector.

TheTüpraşR&DCenterattachesimportancetothechanginglegalregulationsandsustainabilityinthesectorwhileconductingitsR&Dactivities.In2018,theneedsoftherefineriesandsectoraltrendsweredeterminedasthefocalpoint,andqualityprojectscontinuedtobedevelopedwhichwillprovideenvironmentallyfriendly,innovativeandeconomicsolutions.

TüpraşR&DCenterlandsonanareaof12,950m2andconsistsofthreebuildings:designbuilding,laboratorybuilding,andpilot-testingfacility.

Equippedwithmorethan150itemsofequipment,87ofthemintendedforanalysis,thelaboratoryisabletoemploymorethan180analysismethods.

R&DprojectsatTüpraşarecarriedoutbyeleventeamswhichallsharecommongoalsandwhichalsocollaboratewithallotherrefineryteams:

• ProjectManagement• ProductDevelopment• Modeling&ProcessControl• AlgorithmandSoftwareSolution

Development• ProcessDevelopment&Optimization• ProcessAnalyticsandTechnology

Applications• MaterialsEngineering&Reaction• Modeling&Characterization• Laboratory&PilotPlantFacility• CatalystManagement&Development• IntellectualPropertyRights

Management

85PatentApplications

231R&DCenter’sPublications

22PatentsAwarded

ONE OF THE MOST IMPORTANT FACTORS IN THE CREATION OF R&D PROJECTS IS TO TAKE FIRM STEPS AND INCREASE THE APPLICABILITY OF R&D STUDIES IN LINE WITH TÜPRAŞ’S FUTURE VISION.


Technology Road Map OneofthemostimportantfactorsinthecreationofR&DprojectsistotakefirmstepsandincreasetheapplicabilityofR&DstudiesinlinewithTüpraş’sfuturevision.

Inthiscontext,theTüpraşTechnologyRoadmapstudieswerestartedin2017inordertouseresourcesmoreefficientlyandreflectTüpraş’sstrategymoreeffectivelytotheprojects.ThefirstversionoftheTüpraşTechnologyRoadmapwascompletedwiththeparticipationofallrelevantunitsatTüpraş.Thisstudy,whichprovidestransparencyininformationanddecisionmakingprocessbyincreasingin-houseintegrationandcommunication,formsthebasisofourR&Dactivityfields.

WithinthescopeofR&DactivitiesatTüpraş,studiescontinuedinsixTÜBİTAKTEYDEBprojectsin2018.Twooftheseprojectsweresuccessfullycompletedandworkononeoftheprojectshasjustgotunderway.

Inaddition,16R&Dprojectswerecarriedoutin2018withshareholders’equity,inordertodevelopTüpraş’sowntechnology.Workonfouroftheseprojectsstartedin2018,andfiveofthemweresuccessfullycompletedintheyear.

European Union Projects

Effective collaboration with 8 Horizon2020 projectsTheEuropeanUnion’sHorizon2020program,whichwaslaunchedtoharmonizeEuropeanscienceandtechnology-relatedpoliciesandpractices,isbeingcarriedoutinordertoencouragecollaborationwhendealingwithdifferent

aspectsofsuchissuesamongEU-memberandassociatecountries.Underthisprogram,supportisprovidedforallstagesofinnovative,market-focusedprojectsfromresearchtosales.

A.SPIREisaplatformofleadingcompaniesandresearchorganizationsthatprovidesguidanceforHorizon2020projects.TüpraşhasbeenamemberofA.SPIREeversincejoiningtheassociationin2016.

CloselyfollowingthepreparationandbudgetnegotiationsoftheHorizon2020Programanddeterminingitsownstrategyinthisdirection,TüpraşwasrecognizedasoneofthemostsuccessfulTurkishcompaniesintheEUwithfiveongoingHorizon2020projectsaswellastheBAMBOOproject,whichgotunderwayin2018.Moreover,twoHorizon2020projects,inwhichTüpraşisapartner,wereeligibleforsupportin2018andtheprocessofagreeingagrantgotunderway.

Sinceitsestablishment,theTüpraşR&DCenterwillhavetakenpartinatotalof8Horizon2020projects,whichareexpectedtostartinthefirstquarterof2019.

ThedetailsoftheotherEuropeanUnionfundedprojectsinwhichTüpraşisparticipatingaresummarizedbelow.

BAMBOOTheBAMBOO(BoostingnewApproachesforflexibilityManagementbyOptimizingprocessOff-gasandwasteuse)projectisaHorizon2020projectcarriedoutwith19differentpartnersfrom9countries.

ThemainobjectiveoftheBAMBOOprojectistoensurethecommercializationofrelevantprocessesandsystemsbyperformingthefieldapplicationsoftheinnovativetechnologiesthatwillprovideresourceandenergyefficiencyinenergyintensiveindustries.Demonstrationstudieswillbecarriedoutinfourdifferentenergyintensiveindustriessuchassteel,refining,paperandmineralswithinthescopeoftheproject.TÜPRAŞ,whichistheleaderofrefiningdemonstration,aimstodeployinnovativewasteheatexchangersandtheenergyproductionsystem,whichwillbedesignedwithinthescopeoftheproject,inbenefitingfromlowandmediumtemperaturewasteheat.

Theenergygenerationplant,whichwillbedesignedbyusingOrganicRankineCycle(ORC)technologyforenergygenerationfromwasteheat,isplannedtobeestablishedinİzmirRefinery.

Indus3EsOneofthepriorityissueswhichTüpraşintendstoresolvethroughR&Dstudiesisthelowqualityofthewasteheatrecovery.TheIndus3Es(IndustrialEnergyandEnvironmentEfficiency)Horizon2020project,whichTüpraşjoinedinthiscontext,isaimedattherecoveryandreuseoflowqualitywasteheatgeneratedbyindustrialprocesses.Forthispurpose,theprojectenvisagesthedevelopmentofaninnovative,compactandeconomicallycompetitiveabsorptionheatexchangerthatcanbeadaptedtochangingconditions.Withinthescopeoftheproject,thepilot-scaleabsorptionheatexchangersystem,whichwillachievewastesteamrecovery,wasdevelopedandthefieldapplicationwillbecarriedoutattheTüpraşİzmitRefineryin2019.



TÜPRAŞ R&D CENTER CONTINUED TO DEVELOP COMPETENT AND INNOVATIVE PROJECTS IN 2018.

INTEGROIL ThemainobjectiveofINTEGROIL(DemonstrationofaDecisionSupportSystemforaNovelIntegratedSolutionAimedatWaterReuseintheOilandGasIndustry)Horizon2020projectistoinvestigatemeansofobtaininghighqualityprocesswaterbyapplyingadvancedwastewatertreatmenttechnologies,whosecommercializationprocessisongoing,indifferentindustries.TheINTEGROILprojectisaimedatthedesignofaninnovativetreatmentsystemthatwillmeettheneedsofbothsectorsinordertotreatthewastewaterreleasedduringtheoildrillingandoilprocessingprocesses,therebycontributingtothecirculareconomy.ThefieldstudiesofthedesignedINTEGROILpilotunitareongoingattheTüpraşİzmitRefinerywastewatertreatmentplant,whichisoperatedinparallelwiththeexistingwastewatertreatmentsystem.

FUDIPO TheFUDIPO(FutureDirectionsofProductionPlanningandOptimizedEnergyandProcessIndustries)project,workonwhichstartedon1October2016andisplannedtocontinuefor48months,issupportedthroughtheHorizon2020program.Intheproject,whichiscarriedoutbyR&DCenterpersonnel,thedigitaltwinoftheMQDunit-whichislocatedintheTüpraşİzmitRefineryandaimstomaximizedieselproduction-willbecreated.Whiletheprojectensuresthatproductqualityiskeptatthedesiredlevel,itisaimedtodeterminetheoptimumworkingconditionsforincreasingenergyefficiencyandprofitability.Forthis

purpose,thankstotheonlineNIRanalyzertobeinstalledinthefield,theunitchargewillbemeasuredandcharacterizedinrealtime.Thephysicalanddata-basedmodelsoftheunitdevelopedwillbeintegratedwiththefeedforwardcontrolloopandadecision-supportsystemplatformwillbecreatedthatwillprovideoptimalworkingconditionsintheunit.Thecontrolplatformthatwillemergeattheendoftheprojectwillallowmodelmodificationandcanbeappliedtootherunits.

iPermThepurposeoftheiPerm(GuidedWaveMonitoringTool)Horizon2020project,whichstartedinOctober2016andisexecutedwith5partnersfromfivedifferentcountries,istodevelopaninnovativemonitoringsystemthatallowstechnicalcontroltobeperformedinareaswhereaccessisdifficultusingGuidedWavetechnology.Theprojectwillminimizescaffoldingcostsrequiredbytraditionalmethodsandreduceoccupationalsafetyrisksthatmayarise.Theprojectdurationis30months.Tüpraşisparticipatinginthisprojectwiththeroleofend-user.Theinstallationoftheproduct,whichwasdevelopedbytheprojectpartners,wascarriedoutattheTüpraşİzmitRefineryin2018anddatastartedtobecollectedfromthefield.

PIANiSM ThePredictiveandPrescriptiveMaintenanceAutomationinSmartManufacturing(PIANiSM)project,inwhichTüpraşwillparticipateatechnologydeveloperandend-user,willberealized

R&D


withthepartnershipof15organizationsfromfourcountries.TheprojectobtainedthetagofITEAprojectundertheEUEurekaProgramITEA-3cluster.Theproject’sapplication,submittedwithinthescopeoftheTÜBİTAK1509InternationalJointSupportProgram,wasalsoaccepted.Theproject’sgoalistocontributetoprocessefficiencyandoperationalsafetythroughthedevelopmentofwaysinwhichadvanceddataanalysismethodsmaybeusedtomakepredictionsaboutprocessesandthenusethosepredictionsinordertoautomatethesameprocesses.PIANiSMwillalsoserveasanexampleofIndustry4.0practicesthataretobeintroducedatTüpraş.Theprojectwillgetunderwayatthebeginningof2019.

A first in Turkey: Catalyst pilot plantTheofficialopeningoftheCatalystPilotPlant,whichwasestablishedintheTüpraşR&DCenterPilotPlantsbuilding,washeldin2018.Atthepilotplant,whichwasthefirstcatalysttestingsystemtobeintegratedwithitsauxiliarysystemsonapilotscaleinTurkey,performancetestsofthecatalystsinthehydrocrackeranddesulphurizationunitsiscarriedoutwithoutinterruptionona24/7basis.Withtheresultsoftheperformancetests,developmentofcatalyststhatallowmiddistillatetobeobtainedwhileensuringthemostefficientuseofexistingcatalystsintherefinerywillcontributesignificantlytotheprofitabilityofourrefineries.

Collaboration between Tüpraş and universities KÜTEM(TheKoçUniversity-TüpraşEnergyCenter),oneofthebestexamplesofthecollaborationbetweenindustryandacademia,isthefirstenergycentertohavebeenestablishedwiththeparticipationoftheprivatesectorinTurkey.IntheprojectscarriedoutinpartnershipwithKÜTEMandtheKoçUniversity,pioneeringworktomeettheneedsoftheoilsectorandthesustainableenergypoliciesareundertakentogether.

12projectswerecarriedoutaspartofthecollaborationbetweenindustryandacademiaattheTüpraşR&DCenterin2018.DoctoratestudiesoftheR&DCenterpersonnelcontinuedwithinthescopeofthreeoftheseprojects.

In2018,threeapplicationsforTÜBİTAKARDEBprojectsweresubmittedaspartofthecollaborationbetweenindustryanduniversities,withTüpraş’sinvolvement.TherelatedprojectapplicationswererealizedunderthecoordinationoftheKoçUniversity,theBoğaziçiUniversityandtheİzmirInstituteofTechnology.

ThemembershipoftheTulsaUniversityDelayedCokerProject,whichhasbeencarriedoutfor18yearsunderthecoordinationoftheTulsaUniversity(USA)inrelationtotheDelayedcokerunitcontinues.WiththemembershipoftheTulsaUniversityDelayedCokerProject,around18yearsofknow-howoftheprojectwasexaminedandprojectsweredevelopedforapplicationareasspecifictoTüpraş.

Patents and scientific publicationsInkeepingwithitsongoingeffortstoprotectitsintellectualpropertyrights,Tüpraşfiled• Fournational(2patents/2utility

models),• Twointernationalpatentapplicationsin2018.

Thesefilingsbringthetotalnumberofsuchapplicationssubmittedbythecentersinceitcommencedoperationsto85,ofwhich59werenationaland26wereinternationalapplications.

Lastyearsawanotherthreeofthecompany’spatentapplicationsregistered:oneofthemEuropeanandtwooftheminTurkey.Thisbroughtthetotalnumberofpatentsawardedtothecompanytotwenty-two,ofwhichsixteenhavebeengrantedinTurkey,threeinEurope.ThecompanyalsoholdsthreepatentsintheUnitedStatesandoneinCanada.

In2018TüpraşsubmittedsixPatentCooperationTreaty(PCT)applicationstotheEuropeanPatentOfficeforpatentspursuanttothattreaty.

LastyeartheTüpraşR&DCenterpublished38nationalandinternationalscientificpublications,therebybringingthetotalnumberofsuchpublicationssinceitcommencedoperationto231.



INNOVATION

TÜPRAŞ CARRIES OUT EXTENSIVE COMMUNICATION AND TRAINING ACTIVITIES TO EXPAND AND INTERNALIZE ITS INNOVATION STRATEGY.

Withtheresponsibilityofbeingaleadingcompanyandhavingaperspectivelookingtothefuture,Tüpraşcarriesoutitsactivitiesinthefieldsofin-houseentrepreneurshipandopeninnovation(entrepreneurshipecosystemintegrationstudies)inordertocreatevaluethroughnewproducts,services,processesandbusinessmodels.

In-house Entrepreneurial ActivitiesTüpraşhasbeeninvolvedintheKoçInnovationProgramsince2017.Tothisend,afterhavingidentifiedtheinnovationstrategyandpublishingtheprocessesforthewholeCompany,communicationandtrainingactivitieswerecarriedoutinordertosupporttheculturaltransformationandtoraiseawareness.

In-house Entrepreneurial ProjectsThein-houseentrepreneurialprojectsarecarriedoutwithintheframeworkofthelong-termandshort-termtargetstobeachievedinaccordancewith

thefocusareas,andtheCompany’sstrategiesidentifiedinthestrategyworkshopsinvolvingupperandmiddlelevelparticipants.Workwascarriedoutonthebusinessmodelinnovation-focusedideasintheareaspublishedbytheCompany.Thein-houseprogramsareaimedatsecuringtheuseofexistingresourcesindifferentbusinessareas,whichcancreatenewincomeareasinlinewiththefocusarea.Supportisextendedtoinnovativebusinessideas,whichwillallowtheCompanytotakeadvantageoftheopportunitiesofferedbynewbusinessmodelsandwhichwillsupporteffortstofindnewgrowthareas.

Tüpraşsupportsin-houseentrepreneurs,whoconveytheirideaswiththemottoof“LetyourIdeabeFree”throughtheIdeaUnit’sportal,helpingthemimplementinnovativebusinessmodelsideas.Withinthescopeofthein-houseentrepreneurshipprograms,morethan60in-houseentrepreneurshavehad


theopportunitytoadvancetheirideasaimedatinnovationstrategyandtheareasoffocuswiththemethods,inamannersimilartostart-ups’workingmethods.Thein-houseentrepreneurs,whoareincludedintheprogram,receivetrainingwhichismostlyfocusedonentrepreneurialmethodologiesandentrepreneurialmentoringsupport.Atthesametime,duringthestageofprojectmaturity,entrepreneurialprojectsarefollowedcloselybytheupperandmiddlemanagementandsponsorshipsupportisprovided.

Entrepreneurial Activities and InformationThe“InnovationandEntrepreneurshipSeminar”onsubjectsofcreativityandentrepreneurshipattractedwideparticipationinallrefineries,whereTüpraşinnovationapproachwasshared.With“InnovationandEntrepreneurshipMeetings”,alldirectoratesatalllocationswerecontactedonebyoneandaninformationexchangeonthestrategies,processesandinnovationstudieswascarriedout.The“EntrepreneurshipStories:Try,Transform,Achieve”activitystartedtobeimplementedduring2018inordertoconveytheconceptsofuncertaintyintheinnovationprocessandthemethodstoovercometheseuncertainties,learningfromfailuresandsmarterror.

Innovationandentrepreneurshipnewsfromaroundthecountryandintheworld,innovativeapplicationsandtheTüpraşinnovationstudiesandin-houseentrepreneurshipprojectactivitiesareregularlysharedthroughtheInowhatifE-Bulletin,whichispreparedbytheInnovationDirectoratewithintheCompany.

TheIdeaUnitportal,whichwascommissionedin2017,hasbeenatooltospreadthecultureofinnovationaswellasbeingaplatformwhereemployeeswithinnovativeideascansharetheirideaswiththemottoof“ThePlatformwhereRawIdeasareTurnedintoValue”.

Throughthisportal,employeesareabletoaccesspublicationsoninnovationandentrepreneurship,learnabouttrends,technologicalandsectoraldevelopments,andinteractivelyshareexperienceinentrepreneurshipandinnovation.

Committees and TeamsTheInnovationCommitteeisacommitteeconsistingofhigh-levelparticipants,whofollowandsupportallinnovationandin-houseentrepreneurshipprocessesandtakepartintheworkshopsfordeterminingtheinnovationstrategyandfocusareas.Inaddition,theInnovationCatalystsTeam,consistingofmid-levelmanagerswhosupportthespreadofinnovationcultureandthein-houseentrepreneurshipperspective,andtheInnovationVolunteersteamsconsistingofemployeesofdifferentlevelswereformedwithintheCompany.Specialtrainingoninnovation,openinnovationandinstitutionalentrepreneurshipareprovidedfortheseteamsandworkprogramsareorganizedinthiscontext.Allemployeeswhowishtosupportthestudiesoninnovationandtotakepartinthein-houseentrepreneurialprojectteamsmaybecomeanInnovationVolunteerthroughtheIdeaUnitportal.Thein-houseentrepreneurshipprojectsarecarriedoutbythein-houseprojectteamswhoreceivesupportthroughspecialeducationandmentoring.

Open Innovation StudiesTüpraşcarriesoutstudiesintointegrationwiththeentrepreneurshipecosystem,especiallyforstart-ups,aspartofitsopeninnovationstudies.Itinteractswithstart-upsforthefocusareasidentifiedinlinewiththeroadmapestablishedwiththeupperandmiddlelevelparticipantsduringtheopeninnovationstrategy-settingworkshopsandidentifiespotentialcollaborations,andconductsstudiesonhowtomakeuseofthesecollaborations.Inthiscontext,theneedsofallbusinessunitsarecollectedbytheInnovationDirectorateandthesolutionsproposeddomestic/foreignstart-upecosystemarebroughttogetherwiththerelevantunitsoftheCompany.TheInnovationDirectorateparticipatesinmanyeventsaimedatearlyandadvancedstagestart-ups,supportsentrepreneursandprovidesmentoringsupport.

Aspartofthesestudies,TüpraşfollowsentrepreneurialactivitiesintheworldandinTurkey;theaccelerationprogramsaimedatearlyandadvancedstagestart-ups,whichareinthefieldsoftechnology,and/ortheaccelerationprogramsaimedatallsectors,primarilyfortheenergyandtheoilsectors;innovationcompetitionsandincubationcenters.TheinformationontheeventsissharedthroughtheIdeaUnitandtheInowhatifE-Bulletin.

UnderTüpraş’sopeninnovationstrategy,itcollaborateswithstart-upswhichdevelopinnovativetechnologiesandsolutionssuchaswastewatertreatmentandadvancedmaterialssolutionsforthepreventionofhydrocarbonleakages,occupationalhealthandsafetyandprocesssafetysolutions,dataanalytics,cybersecurity,wearabletechnologies,innovativereportingsystems,digitalsolutionssuchasdigitaleducationsystems,innovativeenergyefficiencysolutionssuchaswasteheatrecovery,andnon-destructiveinspectionapplications.



Platforms

Tüpraşparticipatesinawiderangeofplatformswiththeaimofintegratingwiththeentrepreneurshipecosystemanddevelopingtheecosystem.

The TÜSİAD Entrepreneurial Ecosystem Working Group: TüpraştakespartintheTÜSİADEntrepreneurialEcosystemWorkingGroup,whichwasestablishedwiththeaimofdevelopingtheentrepreneurialecosysteminTurkey,andsucceededinplacingacityfromTurkeyontheentrepreneurialecosystemranking.

The Turkey Entrepreneurial Institutions Platform: TüpraşwasincludedinTheTurkeyEntrepreneurInstitutionsPlatformthatwasestablishedwiththeaimofdevelopinglearningbetweeninstitutions,raisingawarenessoverbestpracticesandspreadingthesystematicapplicationsofin-houseentrepreneurshipin2018.

Etohum (E-seed): TüpraşaimstoachieveearlyaccesstodigitaltechnologiesthroughEtohummembership.Thechannel,whichwasestablishedthroughEtohumtoallowentrepreneurstoconveytheirinnovativeideasinspecificfocusareastoTüpraş,wascommissionedin2018.

Tüpraş’swebpage:https://etohum.com/tupras

A.SPIRE: A.SPIREisanon-profitinternationalassociation,whichrepresentstheprivatesectorasapartnerundertheSPIREPublic-PrivatePartnershipPPPandwhichwasestablishedaspartoftheHorizon2020FrameProgram.TüpraşisthefirstTurkishcompanytohavejoinedtheA.SPIREplatform.Theplatform,whichdirectsEUpoliciesandprojectsandisdirectlyaddressedbytheEuropeanCommissionastherepresentativeoftheprivatesector,supportsopeninnovationstudies.RepresentativesfromtheTüpraşInnovationandR&Ddepartmentsjointhemeetings.

New Ideas New Work (NINW): TüpraşbecameastrategicpartnerintheNINWAccelerationProgramin2018inordertosupporttheentrepreneurialecosystemandinnovativeideaswithinthescopeofopeninnovationstudies.Tüpraşaimstobenefittheprogramwithitsexperiencewiththeaimofsupportingearlystageentrepreneursandcontributingtothedevelopmentoftheecosystem.Withinthescopeofourstrategicpartnership,weparticipatedintrainingprogramstogetherwithentrepreneurs,followinguptheprocessesoftransformationofideasintoaninitiative,andmentoringsupportwasprovidedtoentrepreneurs.TheTüpraşSpecialAwardswerepresentedtotheSensgreenteamsworkingontheenergyefficiencyinbuildingsandthecomfortofpeoplewithHERAthatworkonthepersonalityanalysisapplicationthatisbasedonvirtualreality.

INNOVATION

TÜPRAŞ CARRIES OUT “INTEGRATION STUDIES” WITH THE ENTREPRENEURSHIP ECOSYSTEM, ESPECIALLY FOR START-UPS, AS PART OF ITS OPEN INNOVATION STUDIES.


DIGITAL TRANSFORMATION AND CYBER SECURITY

2018 WAS A YEAR WHEN DIGITAL TECHNOLOGIES, AN AREA WHICH STARTED TO BE HEARD ABOUT A LOT IN 2017, TO MATURE AND STARTED TO BE IMPLEMENTED.

A year of solid results from the projectsWithitsrecentlycommissionedIndustry4.0andDigitalTransformationProgram,Tüpraşaimedtocreatevaluefromnewtechnologiesanddata,whilealsoreflectingthechangeandefficiencybroughtaboutbytechnologytotheprocessessuchastechnicalsafety,maintenanceandfinancialmanagement.

2018wasayearwhendigitaltechnologies,anareawhichstartedtobeheardaboutalotandwasgeneratingexpectationsin2017,startedtomatureandstartedtobeimplemented.Withinthescopeofitsroadmap,Tüpraşcontinuedprojectswhichithaddeterminedinthefollowingareasin2018andstartedtoachieveconcreteresults.

• DigitalizationwithEmployeesandStakeholders,

• Industry4.0Applications,DataAnalyticsandOptimization,

• Industry4.0Applications,ProductionandFieldActivities,

• BusinessApplications

Digitalization with employees gains importance.Nowadays,employeesdemandthattheyarerecognizedasindividualsinalltheservicestheyreceiveandthattheirneedsarecustomizedinalmostallareas.Theexpectationoftheemployeesisnodifferentinworklife.Anotherexpectationisthattheycanaccessinformationfromanylocation,whereprocessescanbemanagedatanytimeandthatcommunicationisindependentofthelocation.Theseexpectations,whichplayadecisiveroleintheemployment,haveadirectimpactonemployeeloyaltyandin-housecommunication,andaffectlifeatwork.



DIGITAL TRANSFORMATION AND CYBER SECURITY

ThesetrendswerekeyreasonsforTüpraş’sacceptanceofEmployeeDigitalizationasafocalpoint.Allapplicationsdevelopedin2018weredevelopedwiththetechnologiesthataremobilecompatibleandsupportsecureremoteconnection.Systemsthatsupportcommunicationandcollaboration,aswellasvideoconferencingandvideotelephonesystems,werespreadthroughouttheorganizationwiththesupportofmobiletechnologies.Thus,accesstoinformationcouldbeprovidedindependentofthetimeorplace.Inaddition,DigitalTransformationandAnalyticsWorkshopswereheldinallrefineriesinordertodevelopandexpandthedigitalculturewithintheorganization.Theideasformedherewereincludedintheroadmapandthespreadofthedigitalculturewithinthecompanyculturewassupported.

Industry 4.0 technologies started to be used at the refineryDigitaltechnologiesthataffectthelivesofindividualsalsofoundtheirequivalentinbusinesslife.2018wasayearwhentheIndustry4.0technologiesbegantoberolledoutintherefinery.

IntheSmartHelmetproject,whichusesARtechnology,employeesworkingonmaintenanceworkcouldmonitorandapprovebothmaintenancestepsaswellasreceivevideosupportfromaremoteexpertwhennecessary,andthefirstapplicationwasdeployedinthefield.Inaddition,aprojectincludingend-to-endmaintenancemanagementwasimplementedinordertoplanandoptimizeallmaintenanceactivitiesandmonitortheworkbeingcarriedoutinthefield.

Inordertomonitorprojectsandinvestmentsundertakenattherefinerymoresystematically,anonlineprojectmanagementsystemincludingprogresspaymentsandprojectmanagement,whichestablishedtherelationshipbetweenthecontractorandTüpraş,startedtobedesigned.Tüpraşbegantodeploywirelesstechnologiesintherefineryfieldwithalloftheseprojectsduring2018.

TüpraşisnotonlyTurkey’slargestindustrialcompanyintermsofitsturnover,productioncapacityandsales,itisalsoTurkey’slargestcompanyintermsoftheamountofdataitgenerateseachday.TheMETUandITUAnalyticsCenterswereestablishedin2018withthestrategyofconvertingmorethan300millionpiecesofdataobtaineddailyfrommorethan100,000sensorsintoinformation,andthustovalue.SpecialistengineersattheAnalyticsCenterstakepartinawiderangeofprojectssuchaspredictivemaintenance,priceandmarketprediction,profitabilityoptimization,salesvaluation,equipmentfailureestimationinordertoaddvaluetothedatacollectedbyartificialintelligence-machinelearningalgorithmsandadvancedanalyticalmethods.Inadditiontothisextensiveexperienceandknowledge,analyticalservicesalsostartedtobeofferedtoexternalcompanies.TüpraşestablishedasystemthatpredictsthemaintenancetimeofthefurnacesusedinproductionwiththehelpoftheOnlineSpallingproject,whichissupportedbythemachinelearningsystemimplementedin2018.Thus,itnotchedupakeysuccessinbeingthefirsttosetupthissystemintheworld.

2018 WAS A YEAR WHEN THE INDUSTRY 4.0 TECHNOLOGIES BEGAN TO BE ROLLED OUT IN THE REFINERY.

>300million pieces of dataTheMETUandITUAnalyticsCenterswereestablishedin2018withthestrategyofconvertingmorethan300millionpiecesofdataobtaineddailyfrommorethan100,000sensorsintoinformation,andthustovalue.


Activities carried out for digitalization in work applicationsVariousprojectswerecarriedoutin2018withintheframeworkofthedigitalizationinworkprocesses,inadditiontodigitalizationwithemployees,theIndustry4.0productionsiteprojectsandadvancedanalyticalapplications.TheRPA(RoboticProcessAutomation)technologyisintendedtobedeployedwiththeaimofsavingtimeandlaborbyhavingdefinedprocesses,whichareroutinelycarriedoutbyworkunits,executedbyvirtualrobotsonthecomputer.RPAtechnologystartedtobedeployedinthepurchasingandaccountingprocesses.Inaddition,simulation/optimizationprojectswhichwillprovidecostsavingsweredevelopedtooptimizeprocessessuchaslogistics,procurementandsupply.

The 360 Cyber Security ProgramOccupationalsafetyandtechnicalsafety,whichisoneofTüpraş’smainstrategies,isoneofthemostimportantissuesforTüpraşinthedigitalworld,asitisineveryprocess.UndertheTüpraşCyberSecurityCommittee,TüpraşmanagesInformationSecurityandOperationalTechnologiessecurityinanintegratedmanner,andaimstoincreaseitsimmunityagainstexternalandinternalthreatsthroughongoingcybersecurityprojects.AcomprehensiveroadmapwaspreparedonthesubjectoftheOperationalTechnologiessecurityfortheyear2018.Tüpraşaimstoincreasetheleveloftechnologyandprocessmaturityinthe360CyberSecurityProgram,whichincludesofficesandproductionsites.

Tüpraş,whichmanagescyberrisksalongwithcompanyrisks,reviewedthebusinesscontinuityplansaimedatuninterruptedproductionwiththedrillscarriedoutandconfirmedthattheseplanswereworking.

TÜPRAŞ, MANAGING CYBER RISKS ALONG WITH COMPANY RISKS, REVIEWED THE BUSINESS CONTINUITY PLANS AIMED AT UNINTERRUPTED PRODUCTION WITH THE DRILLS CARRIED OUT AND CONFIRMED THAT THESE PLANS WERE WORKING.



HEALTH AND SAFETY PRACTICES

THE AIM OF THESE PRACTICES IS TO PRE-EMPTIVELY TAKE MEASURES BEFORE ACCIDENTS OCCUR BY FOLLOWING PRELIMINARY AND POST BASIC PERFORMANCE INDICATORS, AND TO PREVENT ACCIDENTS FROM REPEATING BY LEARNING LESSONS. Tüpraş identifies risks in all its

operations and aims to eliminate or reduce risks to a level acceptable within locally and internationally accepted standards. To this end, all employees of the Company as well as solution partners are expected to strictly adhere to Health, Safety and Environment (HSE) and Process Safety standards.

UndertheProcessSafetyManagementSystemandCulturalChangeproject),teamworkhasbeencompletedonawiderangeoftopics.Theseincludedprocesssafetyleadership,processsafetyinformationsystem,processhazardanalysis,mechanicalintegrityandqualityassurance,high-riskbusinessprocedures,permittowork(PTW)systems,contractormanagement,changemanagement,

accidentinvestigations,operatingprocedures,securitymanagementauditsystem,capabilityandawareness.

16ProcessSafetypreliminaryandafter-basicperformanceindicators,whicharepreparedinaccordancewithinternationalstandardsandapplications(API754,CCPSetc.),aremonitoredonamonthlybasis.Theaimistotakemeasuresbeforeaccidentsoccurbyfollowingpreliminaryandafter-basicperformanceindicators,andtopreventarepeatofaccidentsbylearninglessonsfromtheaccidentsthathavehappened.

InordertocreateaproductivesafetycultureatTüpraş,Behavior-basedsafetytoursareheldattherefineriestoencouragepositiveconduct,raisegeneralsafetyawarenessandmonitorcompliance

21In2018,sub-indicatorswereaddedtothe14mainKeyPerformanceIndicators(KPIs)andthetotalnumberofKPIsunderclosefollow-upincreasedto21.TüpraşexpectsallofitssolutionpartnersaswellasitsemployeestounwaveringlycomplywiththeHealth,Safety,Environment(HSE)standards.


withsafetystandards.Tüpraşexecutivesalsoparticipateinthesetoursaspartofthe“VisibleLeadership”practice.Insafetytours,theprincipleof“visibleleadership”isdemonstratedwiththeactiveparticipationofthemanagement,wherepositivesafetybehaviorreceivesappreciationandisencouraged,risksinthebehaviorofpeopleandworkingconditionsareidentifiedandcorrected,communicationanddialoguearestrengthenedtoensureasafeworkingenvironment,awarenessisdeveloped,andanenvironmentinwhichemployeescansharetheiropinionsandobservationsonsafetyiscreated.

HealthRiskAssessment(HRA)studiesarecarriedoutinalloftherefineries.AspartoftheHRAstudies,allarea-specific(units,workshops,laboratories,warehouses)riskfactors,includingchemical,physical,biological,ergonomicandpsychological,areevaluatedindetail.

TüpraşintroducedtheEventCommandSystemwhichisaninternationalapplicationinordertoensureaneffectiveresponsetoemergencysituations.Fire,disasterplan,hydrocarboncloud/toxicgasemissionandenvironmentalspilldrillsarecarriedoutatallrefineriesinordertominimizerisksthatmayoccurinemergencysituationsandtorespondwithmethodsthatwillreachthetarget.Neighboringfacilities,togetherwithpublicinstitutionsandorganizations,participateinthesedrillsasastakeholderwiththeirteamsandequipment.

Inordertoidentifyhazardsandmajoroperationalproblemsinexistingunits,todeterminedeviationsfromnormalworkingconditionsandtheintendeddesign,andtosystematicallyrevieweachpartoftheprocess,HazardandOperability(HAZOP)studiesarecarriedoutregularlyandpossiblescenariosthatmayoccurareidentifiedandupdatedcontinuously.

TheOccupationalHealthandSafety(OHS)Systemaimstopreventoccupationalaccidentsanddiseasesbyadoptingaproactiveapproach.In2018,sub-indicatorswereaddedtothe14mainKeyPerformanceIndicators(KPIs)andthetotalnumberofKPIsunderclosefollow-upwasincreasedto21inordertocontinuouslyimprovetheOHSperformanceandensureperformancefollow-up.

Inaddition,inthe“HazardandEffectManagementProcess”(HEMP),whichwascarriedoutinaccordancewiththelegislationalsoin2018,withinthescopeofpreparationofriskanalyses,prioritywasplacedonidentificationandmanagementofrisks,carryingouthealth-riskassessmentstudiesandallocationofresourcestocriticalactivities.

Tüpraşsharesitsgains,experienceandbestpracticesinthefieldsofOHS,processsafetyandemergencyresponseincongressesandsymposiumswithitsreliableandleadingcorporateidentityintheenergyindustry.

Accident Severity Rate*

*(numberofaccidentsx1,000,000)/(peoplexhours)

*(workdayslostx1,000,000)/(peoplexhours)

Accident Frequency Rate*20

16

2015

2014

3.2

2.7

1.9

2.5

1.6

2017

2018

2016

2015

2014

292

1,132

354

315

308

2017

2018



QUALITY MANAGEMENT SYSTEMS

TÜPRAŞ CARRIES OUT ALL OF ITS ACTIVITIES WITHIN THE FRAMEWORK OF THE INTEGRATED MANAGEMENT SYSTEM.

TüpraşcarriesoutallofitsactivitieswithintheframeworkoftheIntegratedManagementSystem,consistingoftheISO9001QualityManagementSystem,theISO14001EnvironmentalManagementSystem,theOHSAS18001OccupationalHealthandSafetyManagementSystemandtheISO50001EnergyManagementSystem.

IntegratedManagementSystemInternalAuditswereperformedattheHeadOfficeandtherefineriesin2018.

In2018,nomajorfindingswerereportedintheIntegratedManagementSystemexternalauditsconductedbyBSIattheGeneralDirectorate,theİzmitRefineryandtheBatmanRefinery.ThevalidityoftheISO9001:2015,ISO14001:2015andOHSAS18001:2007certificateswereextendeduntil5October2021.

WithinthescopeoftheISO27001InformationSecurityManagementSystemexternalaudit,inNovember2018,afollow-upauditwascarriedoutattheGeneralDirectorate,theKırıkkaleRefineryandtheBatmanRefinery.

Tüpraş’sİzmit,İzmir,KırıkkaleandBatmanRefineryLaboratoriessuccessfullypassedtheTSENIEC/İSO17025audit,theinternationallyrecognizedqualitymanagementsystemstandardforlaboratoryaccreditation.

325TotalNumberofStandards

26NumberofNewStandards


IN 2018, İZMİT, İZMİR, KIRIKKALE AND BATMAN LABORATORIES SUCCESSFULLY PASSED THE AUDITS OF THE TURKISH ACCREDITATION INSTITUTION.

TheCEcertificationexternalauditsofthebitumensthataresubjectedtoEN12591standards(coveringbitumenandbituminousbindersandincludingspecificationsforpavinggradebitumens)andEN15322(coveringbitumenandbituminousbinderswiththeframeworkforspecifyingcut-backandfluxedbituminousbinders)wereperformedattheİzmirandBatmanRefineriesandthevalidityofthecertificateswereextendedupuntil10March2019.

In2018,Tüpraşdeveloped26newinternalstandardsinordertoimproveandstandardizebusinessprocessesbetweentherefineries.Asaresult,thetotalnumberofCompanystandardsroseto325.

In2018,togetherwiththeICCCompany,newprocessmapswerecreatedandprocessperformanceindicatorsweredeterminedbyconductingstudiesontheprocessesoftheQualitySystemsDirectorate,theTechnicalSafetyDirectorateandtheInformationTechnologiesDirectorate.

AftertheISO10002CustomerSatisfactionManagementSystemcertificationauditconductedbytheBSIinDecember2018,thevalidityofthecertificatewasextendeduntiltheendof2019.



ENVIRONMENTAL MANAGEMENT

TÜPRAŞ PLACES HUMAN HEALTH, OCCUPATIONAL SAFETY, PROTECTION OF THE ENVIRONMENT AND THE BENEFIT OF SOCIETY AT THE HEART OF WHAT IT DOES AT ALL TIMES.

Tüpraşfulfillsallnationalrequirementswithasenseofresponsibilityfortheenvironmentandsociety,andcontinuesitsactivitiesofcompliancebycloselyfollowingdevelopmentsinthesectorandintheworld.TüpraşestablishesinfrastructuretoexamineitsinvestmentsandprocesseswithintheframeworkoftheLifeCycleAnalysis(LCA).

Thankstotheinvestmentsundertakeninunitswhichcancarryoutproductionwithreducedenvironmentalimpactsthroughhighlyadvancedtechnologies,TüpraşoffersenvironmentfriendlyproductsthatareincompliancewithEUspecificationstothemarket.

Carryingoutallitsproductionandserviceswiththeprincipleofsensitivitytotheenvironment,Tüpraşcontinuesitsactivitieswithanapproachthatplaceshumanhealth,occupationalsafety,protectionoftheenvironmentandthebenefitofsocietyattheheartofwhatitdoesatalltimes.

Tüpraşaimstominimizetheenvironmentalimpactofitsoperationsandavoidcausingharmtoitsemployees,contractors,clients,thewidersociety,andanyoneaffectedbyitsbusinessactivities.Operatingatworldstandardsofenvironmentalprotection,Tüpraşrecognizestheimportanceofimprovingthenaturalhabitataswellaspreservingit.TheCompanycontinuestodevelopandsupportvariousprojectstothisend.

TüpraşestablishesinfrastructuretoexamineitsinvestmentsandprocesseswithintheframeworkoftheLCA.

Atrefineries,fluegasemissionsfrom31fluesaremonitoredonlinebytheMinistryandallnationalrequirementsweremet.Attherefinery,studiesarecarriedouttoensurecomplianceoffluegasemissionswithEuropeanUnionlegislation.

Activities carried out within the scope of efforts to tackle climate change Tüpraşparticipatedinthe24thConferenceofthePartiestotheUnitedNations

FrameworkConventiononClimateChange-COP24heldinKatowice,Poland.Tüpraşshareditsexperienceundertheheadingof“theBenefitsofMonitoring,ReportingandVerifyingofGreenhouseGasEmissionsinLowCarbonDevelopment”atasessionheldintheTurkeyPavilion.Inaddition,Tüpraşhadtheopportunitytocloselyfollowinternationalandsectoraldevelopmentsrelatedtoclimatespecifically.

UnderthePMR(PartnershipforCarbonMarketReadiness)projectconductedbytheMinistryoftheEnvironmentandUrbanDevelopment,componentsentitled“EvaluationofAppropriatenessoftheEmissionsTradingSysteminTurkey“,“EvaluationofMarket-BasedEmissionReductionPolicyOptions,”“ConductingModelingandSimulationstudiesoftheselectedMechanisms”and“AssessmentofCarbonLeakageRisk”contributedtothe“ClimateChange”studiesconductedbyTÜSİAD.


Recycled Water (millionm3)

Recycled Water/Total Water Consumption (%)

Greenhouse Gas Emissions Reductions(thousandtonsCO2e)

2016

2015

2014

20.8

25.7

20.0

17.2

12.0

2017

2018

2016

2015

2014

69.581

.9

64.1

67.0

67.4

2017

2018

2016

2015

2014

244

467872

126

2017

2018

The2015,2016and2017greenhousegasemissionreportsforallrefinerieswerepreparedandverifiedinaccordancewiththeRegulationontheMonitoringofGreenhouseGasEmissions.ThesavingsinTüpraş’sgreenhousegasemissionsfor2018stoodat244thousandtons.

R&D ActivitiesTüpraş’sİzmitRefineryistheimplementationpartnerintheIntegroil-Horizon2020project,anR&DprojectsupportedbyEuropeanUnionfunding.Withinthescopeoftheproject,inwhichawaterrecoverysystemhasbeendevelopedfortheoildrillingandrefiningsectors,adetailedcharacterizationofthewastewaterwascarriedoutandtechnicalandadministrativemeetingswereheldwiththeprojectpartners.

Activities within the scope of Water Management and Wastewater Recovery WiththeNewWastewaterRecovery/WaterTreatmentUnitcommissionedin2016attheİzmirRefinerywiththeaimofreducingtheuseofrawwater,reducingconsumptionofnaturalresources,promotingsustainableuseofnaturalresources,conservingbiologicaldiversityandobtainingeconomicbenefits,a66%recoveryintherefinerywastewaterwasachievedin2018.

WiththeİzmitRefineryMunicipalUrbanWastewaterRecoveryProject,recoveredwatermetapproximately98%oftheİzmitRefinery’swaterneeds,excludingutilitywater,in2018.

TheengineeringtenderfortheKırıkkaleRefineryWasteWaterRecyclingProjectwasopenedandtechnicalevaluationstudiesareinprogress.

TheWater-WastewaterMasterPlanstudywascarriedoutattheİzmitRefineryundertheconsultancyofShell.Theaimofthestudyistodeterminethesavingsandimprovementpotentialofthewaterconsumptionandwastewatertreatment/recyclingprocessesattherefinery.

TheLean6SigmaprojectwasimplementedattheBatmanRefineryinordertoachievesavingsatthenon-processwaterconsumptionpoints.Approximately290,000m3ofwaterwassavedin2018.

TüpraşparticipatedintheWorldWaterWeek-2018eventorganizedbytheStockholmInternationalWaterInstitute(SIWI).Thethemeoftheeventwas“Water,EcosystemandHumanDevelopments”.

AchievementsIn 2018• Tüpraşreachedthefinalstageof

theSustainableBusinessAwardsinthecategoryofCarbonandEnergyManagement,withtheTüpraşRefineriesCarbonFootprintReduction(EnergyEfficiencyProjects)project.

• TüpraşreachedthefinalstageoftheSustainableBusinessAwardsinthecategoryofWasteManagement,with“theİzmitRefinery-IndustrialSymbiosisApplication”project.

• Tüpraşwasawardedsecondprizeinthecategoryof“Large-scaleEnterpriseEnvironmentalFriendlyApplicationProject”,attheEnvironmentalAwardsorganizedbytheİstanbulChamberofIndustry.

TheTüpraşİzmitRefinerywonfirstprizeintheWaterManagementcategorywiththeRecoveryofMunicipalUrbanWastewatertobeusedintheIndustryasProcessWaterprojectintheSustainableBusinessAwards.



ENERGY EFFICIENCY

IN 2018, TÜPRAŞ ADDED NEW PROJECTS TO ITS RAFT OF ONGOING PROJECTS AIMED AT ENERGY SAVINGS AND EMISSION REDUCTIONS.

Energy intensity index of 99.1TüpraşhasbeenparticipatinginbenchmarkingstudiesinwhichtheperformanceofallrefineriesaroundtheworldareevaluatedbytheSolomonCompany.

Asaresultoftheenergysavingprojectsandmodernizationworkcarriedoutattherefineries,Tüpraş’sEII®(EnergyIntensityIndex)value,whichwas102.2in2017,stoodat99.1pointsin2018.

Benefits of energy efficiency studiesIn2018,Tüpraşaddednewprojectstoitsraftofongoingprojectsaimedatenergysavingsandemissionreductions.BelievingintheimportanceofenergyefficiencyforTurkeyandtheworld,Tüpraşachieved865,238Gcalofenergysavingsthroughtheprojectsimplementedatitsfourrefineries.Inadditiontoachieving244thousandtonsofCO2einemissionreductions,italsochalkedupfinancialgainsfromtheprojects,amountingtoTL174.4million.

Highlights of Energy Efficiency Projects in 2018

New Power Plant ProjectThedecisionwastakentoestablishanewcogenerationplantattherefinerywhichwouldbelesscostlyandmorereliable,byusingnewtechnologiesinsteadofold-generationtechnologicalequipment(suchascondenserturbines,etc.),thatwillmeettheelectricityandsteamproductionneedsrequiredwithinthescopeoftheoperationscarriedoutinTüpraşKırıkkaleRefinery.Theprojectpavedthewayforareductioninenergycostsandincreaseinoperationalreliability.Anaveragesavingof63.7Gcal/hwasachievedoncetheprojectwascommissioned.

The U-7000 Crude Oil Unit Revamp ProjectInadditiontoincreasingthecapacityoftheexistingcrudeoilunitto1,000m3/hwiththerevampprojectimplementedinthecrudeoilunit,inefficientfurnaceswerereplacedwithhigh-efficiencyfurnaces,airpreheaterswereaddedtotheunit

244thousand tonsDecreaseinCo2Emission

TL million

174.4 EnergySavings


andheatexchangerswerealsoinstalledintheunitwithinthescopeofthermalintegration.Theprojectreducedannualenergyconsumptionby33.3Gcal/h.

Unit Burner and Hot Charging MaximizationWithinthescopeoftheburnermodernizationproject(H-8101)inthevacuumunitchargingfurnace,burnertypesoperatingwithmoderntechnologywereswitchedtoensuremoreefficientandsaferoperation,andthefurnacerefractorieswererenewed.Theprojectreducedannualenergyconsumptionby11.5Gcal/h.

Plt-47 Hydrocracker Unit Thermal Integration ProjectWithinthescopeofthePlant-47thermalintegrationproject,energysavingswereachievedatdifferentpointsintheunitbyplacingnewheatexchangerswithhighcorrosionresistanceattheintegrationpoints(suchasthefrontofchargingfurnaces)thataffectenergyconsumptionoftheprocessingunitintwostages.Theprojectreducedenergyconsumptionby11.9Gcal/h.

Crude Oil and Vacuum Units Furnaces Efficiency Improvement Work at the Kırıkkale RefineryCleaning,burnerchanges,refractoryrenewal,APHanddampermaintenancewerecarriedoutwithinthescopeofthework.

Cleaning of Plant-5 Unit Preheater Heat Exchangers at the İzmit RefineryProblemsrelatedwithincreaseinpressuredropsduetopollutionofpreheaterheatexchangersandtopcondensershavebeenencounteredinİzmitRefineryPlant-5crudeoilandVacuumDistillationUnit.Aftercleaningtheheatexchangers,annualreductionof5.6Gcal/hhasbeenrealizedintheunit’senergyconsumption.

Installation of Boiler-8 Economizer at the İzmir RefineryNewtypefinshavingasurfaceareasimilartotheexistingeconomizerwereappliedattheİzmirrefinerypowerplantboilereconomizerinordertoensureamaximumlevelofheatexchangeofthefluegaswithboilerfeedwater,andtoincreasetheefficiencyoftheboiler.Withtheproject,annualenergysavingsof8Gcal/hwereachievedintheboilerenergyconsumption.

Other Activities, Achievements and Awards within the Scope of Energy Efficiency in 2018Tüpraşparticipatedinthe2018EnergyEfficiencyIndustryProjectCompetition(SENVER2018)with10projects.TheBurnerRevisioninKırıkkaleRefineryCCRUnitReactorFurnaceswon1stprizeintheSEVAP-3Category,theİzmitRefineryPlant-33UnitNaftaCycleProjectwon2ndprizeintheSEVAP-3CategoryandtheBatmanRefineryThermalIntegrationProjectwon3rdprizeintheSEVAP-2Category.

Energy Efficiency Projects and CO2 Savings in 2018

Number of Projects Energy Gcal/year CO2 tons TL million

İzmit 11 115,389 26,823 18.0

İzmir 5 320,010 93,316 65.1

Kırıkkale 2 423,401 121,947 90.5

Batman 3 6,438 1,581 0.8

Total 21 865,238 243,666 174.4

Energy Savings (USDmillion)20

16

2015

2014

36.0

4.99.19.6

21.8

2017

2018



PERFORMANCE INDICATORS

Economic and Administrative Performance

2014 2015 2016 2017 2018

Net Sales(USDmillion) 18,165 13,571 11,547 14,801 18,349

Operating Profit (USDmillion) 199 1,012 781 1,333 1,189

Profit Before Tax (USDmillion) 84 819 644 1,227 772

Profit After Tax (USDmillion)* 667 938 594 1,046 769

EBITDA (USDmillion) 338 1,397 1,125 1,614 1,846

Net Debt (Cash)(USDmillion) 1,663 2,370 1,729 1,657 2,275

Return on Equity (ROE) (%) 26 35 22 41 37

Debt Leverage Ratio (%) 38 45 43 38 55

Net Working Capital (USDmillion) -677 -53 286 713 953

Investment Expenditures (USDmillion) 959 344 213 184 138

Earnings per Share(TL) 5.83 10.18 7.16 15.22 14.83

Gross Dividend per Share (TL) - 6.5 6.22 13.60 15.15

Net Dividend per Share (TL) - 5.53 5.29 11.56 12.88

Taxes and Other Liabilities (TLmillion) 23,433 31,916 37,548 42,430 21,536

Corporate Governance Rating Note 9.31 9.44 9.42 9.47 9.48

Fitch Ratings Long-term Foreign Currency Rating Note BBB- BBB- BBB- BBB- BB-

Fitch Ratings Long-term Local Currency (TL) Note BBB- BBB- BBB- BBB- BB-

Supply Operations (TLmillion) 769 1,573 1,921 1,692 1,911

Domestic 305 1,122 1,200 1,217 1,164

Custom Manufacturing 20 12 5 4 13

Foreign 444 439 716 471 734

Local Procurement Ratio (%) 42.21 72.10 62.72 72.16 61.60

Total Number of Suppliers 2,016 2,238 2,266 2,120 2,164

*Netprofitattributabletotheequityholdersoftheparent

**Tüpraşunconsolidated


TÜPRAŞ PLACES EMPHASIS ON EFFORTS TARGETING THE ELIMINATION OF SOCIAL, ECONOMIC AND ENVIRONMENTAL PROBLEMS THAT MAY ARISE DUE TO ITS ACTIVITIES, WHICH ARE AIMED AT CONTRIBUTING TO THE ECONOMIC AND SOCIO-CULTURAL DEVELOPMENT OF THE GEOGRAPHICAL REGION IN WHICH IT OPERATES.

Operational Performance

2014 2015 2016 2017 2018

Processed Crude Oil (thousandtons) 20,044 27,559 28,348 28,502 24,540

Refining Production(thousandtons) 20,101 27,268 27,928 28,883 25,695

Sales (thousandtons) 22,194 28,739 30,255 31,493 29,830

Export of Products(thousandtons) 5,333 6,494 5,491 5,804 4,191

Import of Products(thousandtons) 2,920 2,999 3,749 4,388 6,252

Total White Product Ratio(%) 72.2 75.4 76.6 76.3 77.4

Capacity Utilization Rate of Crude Oil (%) 71.3 98.1 100.9 101.4 87.3

Capacity Utilization Rate Including Semi Product (%) 74.9 102.5 105.3 108.1 95.9



PERFORMANCE INDICATORS

Environmental Performance

2014 2015 2016 2017 2018

Direct Energy Consumption(TJ) 66,529 90,313 101,639 104,749 91,752

Natural Gas 32,906 36,005 39,085 47,306 45,342

Fuel Oil 8,811 13,184 15,487 8,581 3,481

Fuel Gas 22,770 38,512 44,265 46,164 40,562

Coke 2,042 2,612 2,802 2,698 2,367

Indirect Energy Consumption - Electricity (TJ) 505 483 518 315 172

Total Energy Consumption(TJ) 67,034 90,796 102,156 105,851 91,924

Change in Energy Consumption (%) 3.06 -35.45 -12.51 -3.62 13.16

Energy Consumption Per Crude Oil (GJ/Ton) 3.34 3.29 3.60 3.71 3.75

Solomon Energy Intensity Index, EII 107.6 102.3 103.4 102.2 99.1

Number of Energy Efficiency Projects 22 21 18 15 21

Total Energy Efficiency Savings (TJ) 1,772 1,031 1,054 830 3,620

Total Energy Efficiency Savings (USDmillion) 21.8 9.6 9.1 4.9 36.0

Greenhouse Gas Emissions Reductions through Energy Efficiency Projects (tonsCO2e)

126,442 71,744 77,666 45,945 243,666

Total Grey Water Consumption (millionm3) 17.7 20.1 17.5 15.7 18.2

Total Water Consumption (millionm3) 17.8 25.7 31.2 31.4 29.9

Change in Grey Water Consumption to Total Water Consumption (%) -8.4 13.0 -10.1 -5.7 8.2

Water Consumption per Product (m3/ton) 0.9 0.7 0.6 0.5 0.7

Total Recovered Water (millionm3) 12.0 17.2 20.0 25.7 20.8

Total Recovered Water to Total Consumption Ratio (%) 40.7 40.1 39.1 45.0 41.0

Total Recovered Water to Total Water Consumption Ratio (%) 67.4 67.0 64.1 81.9 69.5

Total Waste Water Discharge (millionm3) 10.2 11.3 17.1 14.9 14.3

Total Amount of Solid Waste (tons) 112,664 25,538 41,506 31,392 32,646

Hazardous Wastes (tons) 94,974 14,192 30,971 17,811 23,617

Non-Hazardous Wastes (tons) 17,690 11,346 10,534 13,581 9,029

Solid Wastes According to Disposal Method

Recycling (tons) 39,724 17,812 27,746 22,618 28,934

Disposal (tons) 72,940 7,726 13,759 8,774 3,712

Solid Waste Recovery Rate (%) 35.3 69.7 66.8 72.1 88.6

Total Spending on Environmental Investments and Operating Expenses (TLmillion)

179 208 346 390 150

Environmental Training (peoplexhours) 15,512 17,787 17,331 16,012 10,391

Tüpraş Employees 3,302 7,438 4,310 4,010 4,168

Contractors’ Employees 8,385 10,121 13,021 11,971 6,223

Community 3,825 228 - 31 -


Social Performance

2014 2015 2016 2017 2018

Total Amount of Training (peoplexhours) 388,696 234,311 284,878 233,034 384,405

Female 31,172 31,140 21,827 35,601 34,968

Male 357,524 203,171 263,051 197,434 349,437

Monthly Waged 92,571 98,314 68,836 103,864 103,165

Hourly Waged 296,125 135,997 216,042 129,170 281,241

Total Amount of Training (averagehoursoftrainingperemployee) 82 49 59 45 70

Female 80 79 55 79 70

Male 83 46 59 42 71

Monthly Waged 89 93 65 91 82

Hourly Waged 81 36 57 32 67

Total Hours of OHS Training (peoplexhours) 94,036 104,091 135,951 141,729 165,038

Tüpraş Employees 74,556 63,596 85,609 83,381 87,805

Employees of Business Partners 19,480 40,495 50,342 58,348 77,233

Accident Frequency Rate (numberofaccidentsx1,000,000/peoplexhours)

1.6 2.5 1.9 2.7 3.2

Accident Severity Rate(workdayslostx1,000,000/peoplexhours)

308 315 354 1132 292

Employee Satisfaction (%) 56.0 50.0 53.0 61.0 57.2

Customer Satisfaction (%) 98.0 88.8 89.0 88.2 88.8

Supplier Satisfaction(%) 92.9 95.8 88.8 86.9 88.1

Contractor Satisfaction (%) 82.1 80.4 84.8 78.1 80.6

Pension Fund Liabilities (TLmillion) 54.9 63.9 77.4 89.0 103.9

Donations and Sponsorships(TLmillion) 8.9 17.3 24.4 30.0 40.6

Total Number of Trainees 798 1,009 935 1,063 1,020

Minimum Starting Salary to Minimum Wage Ratio

Monthly Waged 4.2 4.1 3.3 3.3 3.2

Hourly Waged 2.6 2.6 2.0 2.2 2.2



CORPORATE RESPONSIBILITY PROJECTS

TÜPRAŞ CREATES ADDED VALUE BY TRANSFERRING ITS STRENGTH, LEADERSHIP AND ENERGY DEMONSTRATED IN ITS INDUSTRY TO THE PROJECTS THAT WILL SUPPORT SOCIAL DEVELOPMENT.

InadditiontoitsresponsibilityinmeetingTurkey’senergyneeds,Tüpraşcaresaboutcontributingtosocialdevelopmentmulti-directionallywiththeawarenessofbeingacorporatecitizen.

Tüpraş’scorporateresponsibilityactivitiesarecarriedoutunderthefollowingheadings.

• education,• cultureandthearts,• theenvironment• sports

Tüpraşcreatesaddedvaluebytransferringitsstrength,leadershipandenergyintheindustrytotheprojectsthatwillsupportsocialdevelopment.

Education

Activities in the Refineries

10th Anniversary Celebrations in the April 23 Batman Children’s Festival TheApril23 BatmanChildren’sFestival,whichhasbecomeatraditionalevent

since2008,hosted1,500childreninits10thyear.StudentsfromBatmancitycenterschoolsandthechildrenofpersonnelworkingintherefineryattendedthefestivalorganizedbytheTüpraşvolunteersincooperationwiththeBatmanGovernorateandtheProvincialDirectorateofNationalEducation.

Duringtheevent,avolunteerteamconsistingof30Tüpraşemployeeswasaccompaniedby50-peopleteamconsistingoftheBatmanandDicleCommunityVolunteersFoundationandtheBatmanEducationVolunteersFoundationofTurkey,aswellas70teachers.TheApril23rdBatmanChildren’sFestival,whichisoneofthesocialdevelopmentprojectstobecarriedoutbytheTüpraşBatmanRefineryvolunteersforthelast10years,hashosted21,250childrensofar.

262,627studentsTheTEGVFireflyMobileLearningUnitsreachedatotalof262,627studentsduringthe10-yearperiodwiththesupportofTüpraş.


International Children’s Day Celebrations at the İzmir, İzmit and Kırıkkale RefineriesTheNationalSovereigntyandChildren’sDaywasmarkedbycelebrationsonApril23inİzmirRefineryandwasattendedbythespousesandchildrenoftheemployees.Childrenweregiventheopportunitytoenjoyafun-packeddaywithlecturesabouttherefinery,asafetypresentation,afieldtrip,nostalgicgamesandoutdooractivitiesduringtheevent.Thechildren,whoputtheirwishesinlittleheartsontheApril23rd wishboard,completedtheirdaywithasouvenirphotowithAtatürkandthephotoshootswithworkclothes.Atotalof200childrentookpartintheeventheldattheİzmirRefinery.

ActivitieswerealsoorganizedinKırıkkaleandİzmitRefineries,welcomingthechildrenoftheemployees.Atotalof280childrenwerehostedattheeventwhichwasheldinKırıkkaleRefineryand350childrenwerewelcomedattheeventorganizedinİzmitRefinery.

Refinery Technical TripsTechnicalvisitstoourrefineriescontinuedin2018inordertosupportthevocationaldevelopmentofuniversityandhighschoolstudentsandtoprovidethemwithinformationabouttherefiningsector.

Atotalof112studentsfromtheİnönüUniversity,theİskitlerVocationalandTechnicalAnatolianHighSchool,theÇankırıKaratekinUniversityandGaziUniversityhadthechancetolearndetailedinformationabouttheoperationoftherefineries,bytakingpartintechnicaltripsorganizedinKırıkkaleRefinery.

Agroupof232studentsconsistingofstudentsfromKocaeliUniversity,BoğaziçiUniversity,SakaryaUniversity,OkanUniversity,YeditepeUniversityandtheMEGEPvisitedİzmitRefinery.

Collaborations

TEGV Fireflies reach 7,397 Students in 2018 TüpraşhasbeencarryingouttheoperationsponsorshipoftheEducationVolunteersFoundationofTurkey(TEGV)FireflyMobileLearningUnitsforthelast10years.

SupportingeffortstoraiseprimaryschoolstudentsintoindividualswhoareloyaltotheRepublic’sbasicprinciplesandvalues,whoareagainstdiscrimination,whorespectallkindsofbeliefsandthoughts,whoarepeacefulandwhohavecommonsense,TEGVprovideseducationservicesfromthestationaryandtravelingFireflyMobileLearningUnitsthroughoutTurkeyforthispurpose.

IntheFireflyMobileLearningUnits,a12-houreducationprogramisapplied.Theprogramconsistsof6hoursofAlgoDigitaland6hoursofactivitiesconsistingofMathswithFun,SciencewithFun,I’mReading,I’mPlaying,aDramaWorkshop,andLearningFunHygiene.

TheTEGVFireflyMobileLearningUnitsreached7,397studentsinAfyon,Bilecik,Hatay,Iğdır,Kars,ŞanlıurfaandDiyarbakırin2018withatotalof262,627studentsreachedduringthe10-yearperiodwiththesupportofTüpraş.

The Scholarship Fund of “Our Energy Never Ends for Equality” by TEV (the Turkish Education Foundation) In2016,TüpraşestablishedtheScholarshipFundforthe“OurEnergyNeverEndsforEquality”incollaborationwiththeTurkishEducationFoundationinordertoprovideequalopportunitiesforgirlsineducation.Atotalof30studentsreceivedscholarshipfundsupportinthe2017-2018academicyear.

TEV Soma Scholarship Students MeetingTheTurkishEducationFoundationorganizestheBacktoSchoolGatheringeveryyearwiththeaimofincreasingthemotivationofstudentswholosttheirfathersintheSomaminedisasterin2014,inadditiontothescholarshipitprovides.Thisyear,theeventwasheldon14September2018withthevoluntaryparticipationofTüpraşemployeesworkingattheİzmirRefinery.Some20studentsfromthe6-14agegroupcametotheeventwiththeirfamilies,andthestudentswerepresentedwithsciencesetsonbehalfofTüpraş.

Tüpraş took to the stage for the TEV and TEGV Social Activity Clubs.TheplaynamedPublicOpinion(Kamuoyu)writtenbyAurelBarangaanddirectedbyAydınSigalıwasstagedbytheSEKİzmitTheaterClubplayersontheeveningof15JanuarywiththeproceedsdonatedtotheEducationVolunteersFoundationofTurkey(TEGV).Withthisperformance,theİzmitSEKTheaterClubwasawardedwiththe18thDireklerarasıAudienceAwardstheInstitutionTheatresAwards.

TheInstitutionTheaterAwardsarehandedoutbytheinstitutionsthatprovidethisproject,andthedirectorsoftheplaysafterassessingtheproductionsthatarestagedwiththeaimofengenderingasenseoftrust,solidarityandmotivationamongemployeesthroughtheatricalactivities.

On30January,theSEKİzmitTurkishArtMusicalChoirheldaconcertcalledtheRepublicComposersforthebenefitoftheTurkishEducationFoundation.




Project to Strengthen the MEGEP Vocational Education and Training System TheProjectforStrengtheningtheVocationalEducationandTrainingSystem,initiatedwiththeprotocolsignedwiththeMinistryofEducationin2007,continues.Theprojectaimstoraisetechnical,wellequippedworkerswhoareawareofnewtechnologies,asneededbytheChemicalsindustryintherefiningandpetrochemicalservices.Theprojectisaimedatdevelopingtherefining-petrochemicalsbranchinindustrialtechnicaleducationschools.

Inthiscontext,atotalofeighteen12thyearstudentsfromtheMachineMaintenanceRepairbranchattheKörfezTechnicalIndustrialVocationalHighSchoolcompletedtheirinternshipinİzmitRefineryin2018,whileeighteen11thgradestudentscametotherefineryfourtimesduringtheyear,inaccordancewiththemoduletheyhadstudiedintheirschools,andreceivedtrainingontheMachineMaintenanceandRefineryOperationsubjectasaccompaniedbyourheadengineerandengineers.Theyhadtheopportunitytoturnthetheoreticalknowledgetheyhadgainedatschoolintoone-to-onepracticeattherefinery.Withinthescopeoftheproject,thepersonaldevelopmentofeighteen11thgradeMEGEPstudentswassupportedthroughtheorganizationoftheintroductioneventatthebeginningofthetermthroughvoluntarycoaches.ThestudentsparticipatedintheIznikCultureTrip,theKoçMuseumEvent,thebookreadingproject,theRefineryGeneralInformation

andtheRefinerytechnicaltripstogetherwiththeircoaches.

Inadditiontotheeducationofthestudents,theprojectalsoaimstosupportyoungpeople’scareerplanningandtoofferguidancefortheirfutures.

Tüpraş Continues to support for the Kocaeli Metropolitan Municipality April 23 International Children and Science Festival.TüpraşsponsoredtheAslanMusicalChildren’sPlaytogetherwithKoçHoldingEnergyGroupCompaniesOpetandAygazattheApril23InternationalChildren’sEducationandEntertainmentFair,aneventthathasbeenheldforthelast10yearsbytheKocaeliMetropolitanMunicipality,andwhichtookplacethisyearbetween21-23April.

Theactivities,whichattracted230,000visitors,startedwithacortegeof1,000gueststudentsfrom41countriesandwereroundedoffwithchildren’splays,musicals,puppetshows,funworkshopsandsportingcompetitions.

The Koç University Anatolian Scholarship Students ProgramTüpraşcontinuestosupporttheAnatolianScholarshipStudentsProgram,whichwaslaunchedbyKoçUniversityin2011withtheaimofprovidingequalopportunitiesineducationtosuccessfulyoungpeopleandthoseinneed.Atotalofnumber14studentshavereceivedscholarshipsupporttodatewiththeparticipationoftwoscholarshipstudents,whostartedtheircoursesinthe

TÜPRAŞ CONTINUES TO SUPPORT THE ANATOLIAN SCHOLARSHIP STUDENTS PROGRAM, WHICH WAS LAUNCHED BY KOÇ UNIVERSITY IN 2011 WITH THE AIM OF PROVIDING EQUAL OPPORTUNITIES IN EDUCATION TO SUCCESSFUL YOUNG PEOPLE AND THOSE IN NEED.


departmentsofElectricalandElectronicsEngineeringandComputerEngineering,whowereincludedinthescopeoftheprogramthisyear.Thistookthenumberofscholarshipstudentstohavereceivedsupportfromtheprogramto500,whilethenumberofdonorsexceeded220.

Culture and the Arts

Young Musicians on World StagesTheYoungMusiciansonWorldStagesprojecthasbeenrealizedwiththeaimoftransferring40yearsofexperienceandknowledgeofourworld-renownedpianistsGüherandSüherPekineltoyoungpeople.IntheYoungMusiciansonWorldStagesproject,whichstartedin2010andhasbeencarriedoutunderthesponsorshipofTüpraşsince2013,twentyhighlygiftedstudentsweregiventheopportunityforspecialistcoachingwhile10studentsarestillcontinuingtheireducationundertheproject.

Thegiftedyoungpeopleagedfrom12to23,whowerehand-pickedbythePekinelduofromtheconservatoriesinvariousregionsofAnatoliacontinuetheirdevelopmentandeducationinsomeoftheworld’smostprestigiousmusicalschoolswiththefinestmusicalinstrumentsprovidedunderthescholarshipasaccompaniedbyexpertinstructorsintheirfields.

CanÇakmur,whoisoneofthescholarshipstudents,fascinatedcriticsasthefirstTurkishcontestanttoparticipateintheHamamatsuInternationalPianoCompetitionthatwasorganizedforthe

10thtimethisyearinJapan.Çakmurwon1stprizebyreceivingfullmarksfromthejurywiththeLisztperformanceinthiscompetition,whichisoneofthemostimportantcompetitionsintheworld.

The 22nd İstanbul Theater Festival staged by İKSV (the İstanbul Foundation for Culture and Arts)The22ndİstanbulTheaterFestival,whichwasheldbytheİstanbulFoundationforCultureandArtsbetween17Novemberand4December2018,wasrealizedthisyearwiththesupportofKoçHoldingEnergyGroupCompanies-Tüpraş,AygazandOpet.

Thefestivalbroughttogether56performancesof24theatrical,danceandperformanceensembles,12ofwhicharefromabroad,toalmost25,000connoisseursofart.

Inordertoagainincreasestudents’accesstothefestivalthisyear,the22nd İstanbulTheaterFestivalStudentProjectwasimplementedwiththesponsorship

ofAygaz,OpetandTüpraş,and6,000studentsreceivedsupporttoattendthefestival.

Assyrians Leaving a Trail on Ancient LandsSince2009,TüpraşhascarriedtheworldofancientcivilizationsthathavelefttheirmarkontheancientlandsofAnatoliatofuturegenerationsthroughanepicseriesofbooksonAnatolianCivilizations.

IncooperationwithYapıKrediCultureandArtPublishing,theworksofUrartu,changeintheEast;thePhrygians;intheShadowoftheMonumentsintheLandofMidas;theHittites,theAnatolianEmpire;thePergamon,theHellenicCapitalinAnatolia;SarpedonfromLukkatoLyciaandtheCountryofSt.Nicholas;thePersians;MightandSplendorinAnatoliawereofferedtoreaders.

Theseventhbookofthelong-runningseries,whichisanotherbuildingblockofAnatolia’scommontreasure,waspublishedunderthenameofthe




Assyrians–FromDicletotheTaurusMountainsastheKingdomofGodAssur.Thebook,whichdetailsthe1,400-year-oldadventureoftheAssyrians,waswrittenbyscientists,eachofwhomareexpertsintheirfields.

Support for the Aktüel Archaeology Magazine TheAktüelArchaeologyMagazine,whichstartedtorolloffthepressinJuly2007,hasbeenofferedtoitsreaderssince2010withthesupportofTüpraş.Themagazinecontinuestobeproducedwiththemottoof“leavinganAnatoliatothefuture”inordertoconveyanAnatoliawhichhashostedcountlesscivilizationsoverthecenturiesandbearsthetracesoftheseexperiencesinitslands,tothepresenthostsor,inotherwords,tous.

Environment

DTO Fethiye Waste Collection Boat visits Göcek BayTheDenizTemiz(CleanSea)Association/(TURMEPA),whichprovidesmobileservicesinthebaysthatarefrequentedbyyachtsandtouristicboatsthroughwastecollectionboatsunderthesustainableseatourism,contributestoreducingtheenvironmentalfootprintofmarinetourismbycollectingthousandsoftonsofliquidwaste.

TheDTOFETHİYEliquidwastecollectionboat,whichhasbeensponsoredbyTüpraşsince2016,continuesitsoperationsintheGöcekGulf.

TheDTOFETHİYEcollected410,550litersofwastewaterfrom579boatsbetweenJuneandSeptember2018,anamountequivalenttothewastewaterproducedby6,842people.Blackandgreywater,withavolumeequaltoapproximately21,607carboys,waspreventedfrommixingintothesea,thusensuringthat3,284,400litersofseawaterremainedclean.

TheservicesprovidedbyTURMEPAwithwastecollectionvesselsalsoprovideasignificantcontributiontotheregenerationofdiversityofmarinelife,aswellastheprotectionofecologicallyimportantregions.WiththeDTOFETHİYEvessel,wastewatercollectedfromyachtsandtouristboatsispreventedfromenteringthemarineenvironment,thusopeningupahealthylivingspaceforseacreaturesandpreventingdisruptiontothemarinehabitat.Accordingtoscientificresearchstudies,50-70%oftheoxygenneededbyhumanbeingsisproducedfromthesea.Forthisreason,thecollectionofliquidwasteisofvitalimportancenotonlyformarinelife,butalsoforthecontinuationoflifeonland.Thewastecollectionvesselspreventmarinepollutionandprotectbiodiversity.Fueloilwhichspentbyeachboatbygoingtothewastewatercollectionstationsisalsopreventedfromcausingfurthergreenhousegasemissions.

TÜPRAŞ CONTINUES ITS SUPPORT FOR THE BATMAN DISABLED SPORTS CLUB ASSOCIATION.

3.3million litersTheDTOFETHİYEliquidwastecollectionboat,whichhasbeensponsoredbyTüpraşensuredthat3,284,400litersofseawaterremainedcleanduringbetweenJuneandSeptember2018.


The Happy Wastes Festival on May 19 in İzmir RefineryCelebratingMay19,inhonoroftheAtatürk,YouthandSportsDaysince2010withtheaccompanimentofkitessince2010,Tüpraşcoloredtheskyforrefineryemployees,theirchildrenandthepeopleofAliağainthe9thHappyWastesKiteFestivalheldinAliağaAvcıRamadanParkagainthisyear.TheHappyWastesKiteFestival,inwhichthejoyofthefestivalwasjoinedwiththesheerpleasureofflyingakite,isorganizedwithinthescopeofthe“HappyWastesMovementofSeparatingPackagingWastesinAliağa”,asocialresponsibilityprojectvoluntarilycarriedoutbyemployeesoftheTüpraşİzmirRefinery.

Underthe“HappyWastesMovementofSeparatingPackagingWastesinAliağa”project,400treeshavesofarbeensavedfrombeingfelledand752,000litersofwaterand41,200litersoffueloilhavealsobeensaved.Inaddition,energysavingsamountingto96,500kWhperyearhavebeenachieved,equivalenttotheamountofelectricityconsumedby25familiesovera20monthperiod,and23.5tonsofpackagingwastewascollected.

Duringthecampaign,incooperationwitheightprimaryandsecondaryschools,almost700pupilswereprovidedwithtrainingontheimportanceofrecyclingandseparationofwastesintheprotectionofenvironmentandnaturalresources.

Training on recycling of waste and efforts to raise environmental and health awareness in Batman Refinery.In2018,trainingcontinuedundertheproject,whichwasinitiatedbytheBatmanRefineryvolunteersin2013inorderto

raiseawarenessamongprimaryandhighschoolstudentsonwasterecyclingandtheenvironment.

We collect Waste Vegetable Oil to remove obstaclesThewastevegetableoilcollectioncampaignthatstartedinBatmanRefineryin2014continuedin2018.Withinthescopeofthecampaign,vegetableoilsweresenttolicensedrecyclingcompanies.Revenuesobtainedfromrecyclingwereusedinthesupplyofhearingaids,wheelchairsandvariousapparatusfordisabledpeople.

The İzmit Refinery, “One Sapling, a Thousand Lives” Project.Agroupofabout350peopleparticipatedintheactivityofplantingsaplingsthatwascarriedoutbytheİzmitSEKNatureClubwiththecooperationofTEVandTEMAatİlimtepeon15April2018.Intheevent,whichwascarriedoutwiththeaimofinstillingaloveofnatureamongtheparticipants,informationwasprovidedabouttheplantingofsaplingsaswellasenvironmentalcleaning.

Sports

No obstacles for the Tüpraş Batman Disabled Sports Club.TüpraşcontinuesitssupportfortheBatmanDisabledSportsClubAssociation,establishedin2006,whichhasbeencompetinginthe2ndLeagueofTurkey’sPhysicallyDisabledWheelchairBasketballleaguesincethe2007-2008season.Theclub,whichhas42playersand35ofwhomarelicensed,hasgivenhundredsofdisabledyoungpeopletheopportunitytoengageinsportsinthelast12years.Theclub,whichwas

rankedinfourthplaceinthe2ndLeaguein2018,continuesitseffortswiththeaimofreachingthe1stLeagueofWheelchairBasketball.

Batman Tüpraşspor Football Club bringing young people into sportsEstablishedin1995,theTüpraşsporFootballCluboffersaplatformfortalentedyoungpeoplelivingneartheBatmanRefinerytoenjoysportswithanawarenessinahealthyenvironment,thusgivingthemthechancetosucceed.ManagedsuccessfullybytheTüpraşvolunteersincooperationwiththeProvincialDirectorateofYouthandSports,theBatmanAmateurSportsClubsFederation,theTurkeyFootballFederationandotherclubs,theTüpraşsporFootballClubhasatotalof89players,34ofwhomarelicensedand55ofwhomareunlicensed,betweentheagesof10and18.

Theteam,whichwonaqualificationinnationalandregionalcompetitionsinthe8-13agegroup,wonthe2018cupintheU-19agegroupandwasabletoparticipateintheAdanaregion.Theclub,whichbenefits89youngpeople,haswonthechampionshiptitle10timesintheU-19Juniorcategory,threetimesintheU-17JuniorcategoryandtwiceintheU-14Juniorcategorysince2001.IntheAmateurCategory,theteamhasatotalof18championships,including4inthebranchesand6timesinthecategory.




Health

Safe Moms - Happy Babies with the Turkey Family Health and Planning Foundation (TAPV) Withthesupportgiventothe“SafeMoms,HappyBabies”projectcarriedoutbytheTurkeyFamilyHealthandPlanningFoundation(TAPV),visitswereconductedto5,297households.UnderthesafemotherhoodprogramsimplementedwithintheTAPV,sexualhealthprograms,awomen’shealtheducationprogram,adolescentandyouthactivities,asafemotherhoodservice,safeandhealthycareservicesneededbywomenduringtheirpregnancy,childbirthandpostnatalperiodswerecarriedout.

TAPVcontinuesitsactivitiesinordertotacklemotherandchildmortality,improvematernalhealth,increasesocialsensitivityandawarenessofsafemotherhoodandstrengthenthesafemotherhoodeducationandcounselingcomponentinhealthservices.

TheprogramscarriedoutbytheFoundationaimtoimproveawarenessandself-careskillsforwomenwithlowlevelsofeducation,alimitedparticipationinworkinglifeandhighfertility,especiallythoseofmediumtolowincomelevelsandwhousepublichealthservicesregardingpregnancy.

Blood Donation CampaignsInordertodrawattentiontotheimportanceofregularblooddonationsandtoencouragetheTüpraşemployeesinthisdirection,atotalof142employeesdonatedbloodin2018undertheslogan

of“ADrop,AHope”atdonationpointsestablishedwiththecooperationofKızılay(theRedCrescent)attheİzmirRefinery.240employeesdonatedbloodwiththesloganof“Beinghelpfulisinourblood”inBatmanRefinery.100employeesdonatedbloodinKırıkkaleRefineryand47employeesdonatedbloodinİzmitRefinery.

Let’s Add Kindness to Life Activity in İzmir Refinery OrganizedbytheİzmirRefineryvolunteerswiththesloganof“Let’saddKindnesstoLife”onthe3rdDecemberWorldDisabledDayinordertoraiseawarenessofautismandtosupporttheeducationofautisticchildren,moneyraisedfromtheeventwasdonatedtotheTohumAutismFoundation.

Autismisdefinedasapervasivedevelopmentaldisordercharacterizedbyrepetitivebehaviorsthatmanifestthemselveswithcommunicationandinteractionproblemsandlastalifetime.Accordingto2017figures,itisestimatedthataround550,000individualsinTurkeysufferfromautism,ofwhicharound150,000arethoughtbechildrenundertheageof15..

Social Gender Equality

Global cooperation in social gender equality by UN Women, Fenerbahçe Sports Club and TüpraşTüpraşsignedtheUnitedNationsWomen’sEmpowermentPrinciplesin2017andcontinuesitseffortsinthedirectionofbecominganinclusiveworkplace.

ORGANIZED IN ORDER TO RAISE AWARENESS OF AUTISM AND TO SUPPORT THE EDUCATION OF AUTISTIC CHILDREN, FUNDS RAISED FROM THE EVENT WAS DONATED TO THE TOHUM AUTISM FOUNDATION.

HeForSheIn2018,viatheHeForShemovementcarriedoutbyTüpraş-FenerbahçeSportsClubandtheUnitedNationsWomen’sUnit(UNWomen),aglobalcooperativeagreementforsocialgenderequalitywassigned.


In2018,togetherwiththeHeForShemovementcarriedoutbyTüpraş-FenerbahçeSportsClubandtheUnitedNationsWomen’sUnit(UNWomen),aglobalcooperativeagreementforsocialgenderequalitywassigned.

Undertheawarenessmovementlaunchedon11November2018withthemottosof“WeAreEqualTogether”and“OurEnergyNeverEndsforEquality”,theFenerbahçeAFootballTeamstartedtocarrytheHeForShelogoontherightarmoftheiruniforms.Thiscooperationistheonlylarge-scaleundertakinginthefieldofsportforsocialgenderequalitytodate.

TheHeForSheMovementinvitesmenallaroundtheworldtobecomeadvocatesofsocialgenderequality,standingshouldertoshoulderwithwomen.Italsoaimstocreaterolemodelstomobilizeagenerationwhowilldefendtherightofallgenderstobeequal.Since2014,themovementhasbeenworkingtospreadtheideathatmencanplayanimportantroleinensuringsocialgenderequality.HeForShetoucheseveryaspectoflife,includingsport,withthegoalofreachingover1billionsupporters.

Tüpraş’s Contribution to Koç Holding’s “I Support Social Gender Equality for My Country” Project The“ISupportSocialGenderEqualityforMyCountry”ProjectformsanumbrellaforprojectsthatKoçGroupemployeesanddealersimplementthroughoutourcountrybyfocusingonasingleissue.Wehave

beenpartofthesolutioninmanyareasthroughthecollaborationsdevelopedwithNGOsinthe“forMyCountry”projects,whicharesolutionfocusedonourcountry’sproblems,whichaimtoraiseawareness,aresustainable,canberepeated,haveamultipliereffectandthatcanbeappliedinalltheKoçGroupcompaniesanddealers,whichcanbespreadalloverTurkeyandwhichbenefitsocialdevelopment.

Theactivitiescarriedoutwithinthescopeofthe“ISupportSocialGenderEquality”themedeterminedin2015continuedin2018aswell.Atotalof233employeesand293stakeholderswerereachedthroughtheInformationMillSeminars.

Father Support Program started in Batman Refinery Underthe“ForMyCountry”roofproject,Tüpraşcarriesoutsocialresponsibilityactivitiesthatsupporttherefineries.

EmployeesfromTüpraşBatmanRefinerywereincludedintheFatherSupportProgramprovidedbytheMotherChildEducationFoundation(AÇEV).Atotalof126Tüpraşemployees,twoofthemwiththeirspouses,tookpartintheactivitythatwascarriedoutinordertoensurethatfatherstookresponsibilityfortheirchildcareandestablishedahealthyrelationshipwiththeirchildren,andtosupporttheirdevelopmenteffectively.The1ststageofthe10-weekprogramwasrealizedbetween14-15November.UndertheFatherSupportProgram,AÇEVhasbeenprovidingawarenesscoachingforfatherstotakeresponsibilityinchildcaresince1996.



CORPORATE GOVERNANCE

Legal Disclosures

Corporate Governance Principles Compliance Report

Risk Management and the Activities of the Risk Management Committee

Report on the Early Risk Identification System and Committee

Evaluation of Operating Principles and Effectiveness of Board Committees Policies

Audit Committee Report Related to Financial Statements

Statement of Responsibility Related to Approval of Financial Statements

Audit Committee Report Related to Annual Report

Statement of Responsibility Related to Approval of Annual Report

Declaration for Independency


LEGAL DISCLOSURES

Capital StructureTheCompany’ssharesaredividedintotwogroups,AandC,allofwhichareregisteredshares.TheCompany’sissuedcapitalisTL250,419,200,andisfullypaid-upfreefromanycollusion.

ShareholdersattendingOrdinaryandExtraordinaryGeneralAssemblymeetingsexercisetheirvotingrightsproratathenominalvalueoftotalsharestheyhold.

Shareholder StructureTheCompanyisregisteredwiththeCapitalMarketsBoard(“CMB”)ofTurkeyanditssharesarequotedonBorsaİstanbulA.Ş.(“BIST”)since1991.TheCompany’ssharesquotedontheBISTconstitute49%ofthetotalshares.TheCompany’sshareholdersandshareholdingratesareasfollows:

Thesharesoftheparentcompany,EnerjiYatırımlarıA.Ş.,arecontrolledbyKoçHoldingA.Ş.,theKoçFamilyandtheCompaniesownedbythem.

KoçHolding77%

DİTAŞ79.98%

Opet40%

FreeFloat49%

KörfezUlaştırmaA.Ş.100%

Aygaz20%

EnerjiYatırımlarıA.Ş.51%

Opet3%

Group Shareholder Share Amount (TL) Type Number of Shares

A EnerjiYatırımlarıA.Ş 127,713,792.22 Registered 12,771,379,222

A Other(FreeFloat) 122,705,407.77 Registered 12,270,540,777

C PrivatizationAdministration 0.01 Registered 1

Total 250,419,200.00 25,041,920,000



Information about significant changes in Tüpraş’s ownership of financial assets held in 2018NochangesthatreachorfallbelowthelimitssetbytheTurkishCommercialCodeoccurredin2018intheownershipoffinancialassetsthatTüpraşdirectlyparticipatesin.

Extraordinary General Assembly Meeting held during the year, if any TherewasnoExtraordinaryGeneralAssemblymeetingheldduringtheyear.

Organizational changes within the yearBasedontheBoardofDirectorsdecisiondated25July2018,ithasbeendecidedtosetupaTradingOfficeinLondonuponevaluationofsimilarpracticesintheindustry,whichofficewillbeengagedintradingwiththepurposeofcloselymonitoringtheopportunitiesintheinternationalmarkets,tosupportexportandimportoperations,andtogenerateaddedvalueonsupplyandsaleschain.TheLondonOfficewasinauguratedbytheendof2018andwillcommenceactivitiesduring2019.

Associated Company Report PursuanttoArticle199oftheTurkishCommercialCodeNo.6102,whichcameintoeffecton1July2012,theBoardofDirectorsofTürkiyePetrolRafinerileriA.Ş.isobligedtoprepare,withinthefirstthreemonthsoftheoperatingyear,areportontheCompany’srelationswithitscontrollingshareholder,ultimatecontrollingshareholderandtheirassociatedcompaniesforthepreviousoperatingyear,andtoincludetheconclusionsectionofthisreportintheannualreport.DescriptionsofthetransactionsTürkiyePetrolRafinerileriA.Ş.carriedoutwithrelatedpartiesandthegroundsthereforareprovidedinthefinancialreportnote31.

TürkiyePetrolRafinerileriA.Ş.BoardofDirectorsreportof13February2019readsasfollows:“IthasbeenconcludedthatinallthetransactionsTürkiyePetrolRafinerileriA.Ş.conductedin2018withitscontrollingshareholder,ultimatecontrollingshareholderandtheirassociatedcompanies,accordingtothecircumstancesandeventsknowntous,anappropriatecounter-performancehasbeenprovidedineachtransactionatthetimethetransaction/actionwasconducted/takenoravoidedandthattherewerenoactionstakenoravoidedthatcausedlosstotheCompany,andaccordingly,thattherewerenotransactionsoractionsrequiringequalization.”

Information about changes to the legislation that might materially impact the Company’s activitiesNone.

Lawsuits against Tüpraş and any probable outcomes that could impact the Company’s financial situation and operationsTherewerenolawsuitsinitiatedorconcludedin2018againsttheCompanysignificantenoughtohaveamaterialimpactonitsfinancialsituationoroperations.

Information about administrative or judicial sanctions imposed on the Company and its management due to practices in violation of regulationsTherewerenoadministrativeorjudicialsanctionsimposedontheCompanyorthemembersofitsmanagementduetoregulatoryviolationsin2018.

Information about conflicts of interest between the Company and its service providers such as investment advisory and rating and measures taken to preclude the sameTherearenosuchconflictsofinterest.

Information about changes to the Articles of Association during the reporting periodNochangesweremadetotheArticlesofAssociationduring2018.

LEGAL DISCLOSURES


CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

TürkiyePetrolRafinerileriA.Ş.CorporateManagementCommittee

MeetingDate: 14.02.2019Subject: GovernancePrinciplesComplianceReport

SECTION I: DECLARATION OF CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

Tüpraş(“Company”)paysutmostattentiontocomplywiththeCorporateGovernancePrinciplesissuedbytheCapitalMarketsBoardinfourmaintopics.Beingawareoftheimportanceofconfidenceandconsistencydemonstratedtoitsshareholdersandinvestorsinparticular,TüpraşisincludedintheBISTCorporateIndexand,accordingly,hasadoptedtheconceptsofequality,transparency,accountabilityandresponsibilitythatarestipulatedintheCorporateGovernancePrinciplesissuedbytheCapitalMarketsBoard.

AsaresultoftheevaluationdonebytheinternationalratingcompanySAHAKurumsalYönetimveDerecelendirmeHizmetleriA.Ş.(SAHACorporateGovernanceandRatingServicesInc.),whichhaslicenseforratingactivitiesinTurkeyinaccordancewiththeCapitalMarketsBoard’sCorporateGovernancePrinciples,Tüpraş’sratingisrevisedas94.81inOctober2018.Thedetailsofthecorporategovernanceratingareasfollows:

Main Topics Weight October 2018 Rating

Shareholders 0.25 95.51

PublicDisclosureandTransparency 0.25 94.02

Stakeholders 0.15 99.51

BoardofDirectors 0.35 92.86

Total 1.00 94.81

CorporateGovernanceRatingReportisavailableontheCompanywebsitewww.tupras.com.tr.

AllactivitiesofourCompanyarecarriedoutincompliancewiththelegalregulationsandthe“CorporateGovernancePrinciples”issuedbytheCapitalMarketsBoard.

Activities Carried Out within the Period for Complying with the Principles

In 2018, full compliance was achieved with great majority of the compulsory principles stipulated within the scope of the Corporate Governance Communiqué (no.II-17.1) (the Communiqué) in force while compliance was also achieved with most of the non-compulsory principles. Although the aim is to fully comply with the non-compulsory Corporate Governance Principles as well, full compliance has not yet been achieved due to various reasons such as; difficulties in practicing some of the principles, ongoing discussions on complying with some of the principles both in our country and on international platforms, and incompatibility of some of the principles with the current structure of the market and the Company. Action is taken regarding the principles that are not yet put into practice while the plan is to put these principles into practice after completing the administrative, legal and technical infrastructure procedures in a manner that will contribute to effective management of our Company.

The comprehensive activities carried out at our Company within the frame of Corporate Governance Principles are described below. The principles with which compliance has not been achieved as yet, and conflicts of interest arising therefrom, if any, are also explained in related sections.

In 2018, activities related to Corporate Governance were carried out in accordance with the Capital Market Law covering the CMB’s requirements about Corporate Governance Principles and the communiqués issued based thereupon. At the Ordinary General Assembly Meeting convened in 2018, our Board of Directors and Board Committees were formed in line with the requirements set out in the Communiqué. Pursuant to legal obligations and Article 10 of our Articles of Association, one member of our Board of Directors is elected from among individuals nominated by the Privatization Administration, our Group C Shareholder. Under the authority covered in Article 6 (2) of the Communiqué, principle no. 4.3.7 does not apply to the said Board of Directors Member nominated by the Privatization Administration of our Company, whose principal field of activity consists of the utilization of



a license or privilege granted by public agencies or institutions for a definite period of time or indefinitely to offer public service or in which public agencies or institutions hold preference shares.

Prior to the General Assembly Meeting, the process for designation and publicly disclosing the independent member nominees was finalized and the election was completed in accordance with the regulations. The Board of Directors Committees established carry on with their activities effectively. With the General Assembly Meeting information document prepared, General Assembly Meeting-information that must be publicly disclosed as per the Principles such as preference shares, voting rights, organizational changes; résumés of the Board of Directors member nominees, Remuneration Policy for the Board of Directors and Executive Management, and other information that must be disclosed were made available for the information of our investors three weeks before the General Assembly Meeting. Furthermore, the Company website and annual report were reviewed and revised as necessary for achieving full compliance with the Principles. Necessary actions will be taken also in the period ahead for alignment with the Principles, taking into consideration the developments in legislation and other related practices.

While our Company achieved full compliance with the compulsory principles in the operating period from 1 January 2018 to 31 December 2018, the major non-compulsory principles under the Regulation that our Company has not yet achieved full compliance with are stated below. Relevant additional explanations are also provided in the related sections of the report. Our Company was not exposed to any conflicts of interest by reason of not achieving full compliance with non-compulsory principles.

• Regardingprinciplen.1.4.2;theprivilegesaddressedinSection2.4hereinbelowarestipulatedinourArticlesofAssociation.• Regardingprinciplen.1.5.2,theArticlesofAssociationdonotgrantminorityrightstothosewhoholdlessthanonetwentiethofthe

capital,andinparalleltothecommonpractices,rightsaregrantedtotheminoritywithinthegenerallegislativeframework.• Regardingprinciplen.4.3.9;ourCompanyhasnotyetdeterminedatargetratioandtimeframeforfemalemembersintheBoardof

Directors.Assessmentsonthisissuecontinue.• Regardingprinciplen.4.4.5;theCompanyhasinplacelong-standingandconsistentlyimplementedprocessesrelatedtohowthe

BoardofDirectorsmeetingswillbeheld;however,thereisnointernalwrittenregulationspecifictothismatter.• Regardingprinciplen.4.4.7;MembersoftheBoardofDirectorsarenotrestrictedtoassumeothertasks/rolesoutsidetheCompany

asexplainedinsectionn.5.1.below.• Regardingprinciplen.4.5.5;theknowledgeandexperiencesoftheMembersofourBoardofDirectorsaretakenintoconsideration

whenappointingmemberstothecommitteesinlinewiththerelevantregulations.SomeoftheBoardMemberscanbeassignedtomorethanonecommittee.However,memberswhoassumedutiesinmorethanonecommitteeenablecommunicationamongthecommitteesthatcarryoutactivitiesinconnectedsubjectsandincreasetheopportunityofcollaboration.

• Regardingprinciplen.4.6.1;therehasbeennospecificinitiativeaimedatperformanceevaluationattheBoardofDirectorslevel.• Regardingprinciplen.4.6.5:remunerationoftheMembersoftheBoardofDirectorsandmanagerswhohaveadministrative

responsibilitiesisdisclosedcollectivelyinparalleltothecommonpracticeinthefootnotesofourfinancialstatementsandattheGeneralAssemblymeetings.

• 2018CorporateGovernanceComplianceReport(CRF)andCorporateGovernanceInformationForm(CGIF)ofTüpraş,whichwillbepreparedaccordingtothenewreportingformatsaspertheCMBdecisionn.2/49dated10January2019willalsobeseparatelydisclosedonthePublicDisclosurePlatform(KAP)withinduetimedeemedappropriatebytheCMB.

OurCorporateGovernancePrinciplesComplianceReportcovering2018activityperiod,underfourmaintopics;“Shareholders”,“PublicDisclosureandTransparency”,“Stakeholders”and“TheBoardofDirectors”,isavailablebelowforyourinformation,includingthepracticableandimpracticableaspectsofthementionedprinciples.

MuharremHilmiKayhan YağızEyüboğlu DoğanKorkmazChairman Member Member



SECTION II: SHAREHOLDERS

2.1. Investor Relations DepartmentInvestorRelationsDepartmentwasestablishedin2000inordertooverseetheprocessofpublicofferingoftheCompanysharesandprivatizationofgovernment’sshares.TheInvestorRelationsUnit,whichoperatesundertheStrategicPlanningDivisionandcollaborateswithrelatedunits,isresponsibleforhandlingallrelationsbetweenTüpraşandshareholders.TheInvestorRelationsUnitisinchargeofinformingshareholdersandpotentialinvestorsabouttheCompany’sactivities,financialpositionandstrategies,savefortradesecretsandconfidentialinformation,obtainingotherunits’inputsasandwhennecessaryandinamannerthatwillnotleadtoinformationasymmetry.TheUnitalsomanagesthebi-directionalcommunicationbetweenshareholdersandCompanyexecutives.

PartoftheactivitiesstipulatedbytheCommuniquéiscarriedoutbytheFinancialPlanningandReportingDivision.Theseactivitiesinclude,amongothers,ensuringthatGeneralAssemblyMeetingsareconvenedinaccordancewiththeregulationsinforce,thearticlesofassociationandinternalguidelines;preparationoftheAnnualReportandotherdocumentsthatwillbeusefulforshareholdersfortheGeneralAssemblyMeetings,andfinancialreportingrequiredbythelegislation.

TheresponsibilityforallsortsofpublicdisclosureobligationssuchaspublicdisclosureofmaterialeventsrequiredbytheregulatoryframeworkisfulfilledbytheFinancialPlanningandReportingDivisionandStrategicPlanningDivision.

InvestorRelationsDepartmentpresentsareporttotheCorporateGovernanceCommitteeatleastonceayear-tobesubmittedtotheBoardofDirectors-abouttheactivitiesitcarriesout.Thereportregarding2017activitieswassubmittedbytheCorporateGovernanceCommitteetotheBoardofDirectorson5February2018,andwasassessedbytheBoardofDirectorson26February2018.

In2018,one-on-onemeetingswereheldwithnearly400fundmanagersandanalystsabouttheCompany’soperatingresults,performanceandotherdevelopmentsduringthereportingperiod,and8conferencesandroadshowswereattended.TheInvestorRelationsUnitrespondedtoallquestionsreceivedfromanalysts,existingandpotentialinvestorsabouttheCompany’sfinancialreportsanddevelopmentsinbusinesslineswithinthescopeofinformationopentothepublic.

ThroughquarterlywebcastsheldfourtimesayearonthedatesfinancialreportsareannouncedandfeaturingalsotheAssistantGeneralManagerresponsibleforFinancialAffairs,investorsandanalystsarekeptinformedabouttheactivitiesofTüpraşandthedevelopmentsinthesector,andtheyareprovidedwiththeopportunitytofollowthepresentationandposetheirquestionsinwritingororallybyphoneorovertheInternet.In2018,shareholders’requestswererespondedtoandnecessaryinformationprovisioncontinued.Forthoseanalystsandinvestorswhowereunabletojointhewebcastatthespecifieddateandtime,theinvestorpresentationusedinthewebcastandtheaudiorecordingofthewebcastarepostedontheTüpraşwebsite.

DisclosuresthataresignificantforinvestorsandtheirtranslationsintoEnglishhavebeenpublishedontheCompanywebsiteaftertheywereannouncedonthePublicDisclosurePlatform(KAP).

Utmostcareistakentoensureregulatorycomplianceinthefulfillmentofinvestorrequests;therewerenocomplaints,noranyadministrativeorlegalproceedingsinitiatedagainstourCompany,regardingtheexerciseofshareholderrightsinthereportingperiod.



TheindividualsresponsibleforInvestorRelationswithinthescopeoftheCommuniquéarenamedbelow:

Name Position E-mail address Phone No.DoğanKorkmaz ChiefFinancialOfficer [email protected] (262)3163109AslıGülçur StrategicPlanningDirector [email protected] (262)3163087TurgutTuncayÖnbilgin FinancialPlanningandReportingDirector [email protected] (262)3163085LeventBayar InvestorRelationsManager [email protected] (262)3163088MerveSavaşlıoğluKan InvestorRelationsCoordinator [email protected] (262)3163270ÇetinKaraca InvestorRelationsSupervisor [email protected] (262)3163274

Strategic Planning Director and Financial Planning and Reporting Director report to Doğan Korkmaz, Chief Financial Officer. The Assistant General Manager, Financial Planning and Reporting Director, and Investor Relations Manager hold Capital Market Activities Advanced Level and Corporate Governance Rating Specialist Licenses.

2.2. Shareholders’ Right to Obtain InformationShareholdersarenotdiscriminatedwithrespecttotheexerciseoftheirrighttoobtainandreviewinformation;allinformationapartfromtradesecretsaremadeavailabletoshareholders.Saveforthoserelatedtotradesecretsandconfidentialinformation,allquestionsdirectedtotheInvestorRelationsUnitarerespondedtoinwritingoronthephone,afterdiscussingtheissueaddressedinthequestionwiththerelatedexecutiveperson.AsexplainedinSection3.1ofthisReport,allkindsofinformationandexplanationsthatmightimpacttheexerciseofshareholderrightsaremadeavailableonthewebsite.

AppointingaprivateauditorisnotanindividualrightspecifiedintheTüpraşArticlesofAssociation.However,asperthe438thArticleoftheTurkishCodeofCommerce,everyshareholdermayrequesttheGeneralAssemblytoclarifycertaincasesthroughprivateauditincasethisisnecessaryforusingshareholders’rights,eveniftherighttoinformationorreviewisusedbefore,andevenifitisnotontheagenda.ShareholdershavenotcommunicatedsuchrequeststotheCompanysofar.Moreover,theCompany’sactivitiesareperiodicallyauditedbytheIndependentAuditorapprovedbytheGeneralAssembly.

2.3. General Assembly MeetingsGeneralAssemblyMeetingsareorganizedtoprovidesufficientinformationtoshareholdersandensuretheirattendance,asperTurkishCommercialCode,CapitalMarketsLaw,GeneralAssemblyInternalDirectiveandCorporateGovernancePrinciples.

TheOrdinaryGeneralAssemblyMeetingsareheldattheendofeveryfiscalperiod,assoonaspossible,withinamaximumperiodofthreemonths.TheCompanyheldits58thOrdinaryGeneralAssemblyMeetingon21March2018fortheyear2017.Shareholdersrepresenting80.1%ofallsharesattendedthemeeting.ThenecessarymeansaremadeavailabletoenableshareholdersattendingthemeetingineitherwaytoposetheirquestionsduringtheGeneralAssemblyMeeting.Apartfromtheitemsontheagenda,nootheradditionalproposalsweremade.

SupervisedbyaGovernmentInspectorauthorizedbytheMinistryofCustomsandTrade,GeneralAssemblyMeetingsessionsareopentopublic.PursuanttotheprovisioncontainedinourArticlesofAssociation,meetingscanbeobservedbystakeholders,membersofthemediaandelectronicparticipants.

InvitationstotheGeneralAssemblyMeetingareissuedbytheBoardofDirectors,accordingtotheTurkishCommercialCode,CapitalMarketsLawandArticlesofAssociation.Meetingdate,placeandtheagendaitemsinlinewiththedecisiontakenbytheBoardofDirectorstoorganizeaGeneralAssemblyareannouncedtotheshareholdersviaDisclosureofMaterialMattersmade,inconformitywiththeprocedureswithintheframeworkofthegeneralprovisions,onthePublicDisclosurePlatform,andviaElectronicGeneralAssemblySystem(e-GEM).

GeneralAssemblyMeetingannouncementsaremadeatleast21daysinadvanceviathewebsiteatwww.tupras.com.trsoasto



reachthemaximumnumberofshareholderspossible,aswellasbyfollowingtheproceduresstipulatedbylegislation;inaddition,announcementsarealsopublishedintheTurkishTradeRegistryGazette.

BeforetheGeneralAssemblyMeeting,aninformationsheetaboutagendaitemsispreparedandpubliclydisclosed;compliancewithalllegalprocessesandlegislationisensuredinalldisclosures.InlinewiththeagendaitemsfortheGeneralAssemblyMeeting,auditedannualreport,financialstatementsandreports,CorporateGovernancePrinciplescompliancereport,profitdistributionproposal,independentauditreport,theamendmenttexttotheArticlesofAssociation,ifapplicable,andgroundsforsuchamendment,InformationPolicy,RemunerationPolicy,DividendPolicy,résumésofallBoardofDirectorsMembersnomineesincludingindependentmembers,andallnecessaryinformationanddocumentsprovidingthebasisfortheagendaitemsaremadeavailableforreviewbyshareholdersthreeweeksinadvanceoftheGeneralAssemblyMeetingdateattheCompanyheadquartersandonthecompanywebsitesoastoprovidetheeasiestaccesstotheshareholders.

Inordertofacilitateattendancetothemeetings,GeneralAssemblyMeetingsareheldattheCompanyHeadquarters;participationinthemeetingviae-GEMisalsopossible.ThelocationoftheGeneralAssemblyMeetingischosensoastoenabletheparticipationofallshareholders.TheagendaitemsoftheGeneralAssemblyMeetingarewritteninaclearandunequivocalwayandallowsforthediscussionofeachproposalunderaseparatesection.AtthelatestGeneralAssemblyMeeting,shareholdersmadenodemandsconcerningtheagenda.DuringtheGeneralAssemblyMeeting,theagendaitemsareconveyedtoshareholdersinanimpartial,detailed,clearandcomprehensiblefashion,shareholdersaregiventhechancetoexpresstheiropinionsandposequestionsunderequalterms.QuestionsaskedbytheshareholdersandstakeholdersattendingtheGeneralAssemblyMeeting,areevaluatedandnecessaryexplanationsaremadebyourMembersoftheBoardofDirectorsandtopexecutiveswithintheframeworkoftheproceduresandprinciplesstipulatedintheTurkishCodeofCommerce.DuringtheGeneralAssemblyMeetingheldon21March2018,allquestionsdirectedbyourshareholdershavebeenansweredduringthemeeting.NoquestionsinwritingwereaddressedtotheInvestorRelationsUnitbyreasonofbeingleftunansweredduringtheGeneralAssemblyMeeting.

IntheGeneralAssemblyMeeting,atleastoneBoardmember,oneauditor,oneoftheofficersresponsibleforthepreparationofthefinancialstatements,aswellasoneofficerinformedabouttheagendaitemsandreadytomakeexplanationsispresent.Incaseoftheabsenceofanyoneofthesepeople,theirexcuseforabsenceispresentedtotheGeneralAssemblyMeeting.

Forthosewhowillberepresentedbyproxy;powerofattorneysamplesarepublishedfortheuseoftheshareholdersvianewspaperadsandonthewebsitebeforetheGeneralAssemblyMeeting.Votingmethods/proceduresthatwillbeappliedinthemeetingaresubmittedtotheinformationoftheshareholdersvianewspaperadsandonthewebsite.Duringthevotingoftheagendaitems,openballotvotingisusedin“showofhandsmethod”atourGeneralAssemblyMeetings.

MeetingminutescanbeaccessedviaKAP,e-GEM,e-CompanyportalandTüpraşwebsiteattheaddresswww.tupras.com.tr.Inaddition,theminutesareavailableforreviewingbyourshareholdersandfurnishedtothemuponrequest.

IntheOrdinaryGeneralAssemblyMeetingheldin2018,informationaboutthedonationsandaidsmadein2017wasgivenunderadedicatedagendaitem,andtheupperlimitfordonationsthatcanbemadein2018wasdeterminedas0.2%oftheproceedingsgeneratedinthepreviousyearinlinewiththeDonationsandAidPolicy.NochangesweremadetotheDonationsandAidPolicy.In2018,charitabledonationstotaledTL45.6million.

Someoftheshareholderswhocontrolthemanagement,membersoftheBoardofDirectors,executiveswhohaveadministrativeresponsibilitiesandtheirspousesandseconddegreerelativesbybloodorbymarriage,assumerolesasmembersoftheBoardofDirectorsinourCompanyandinsomeoftheotherKoçGroupcompanies.During2018,therewerenotransactionssignificantenoughtoleadtoaconflictofinterestbetweenthesaidindividualsandpubliclyheldcompanyoritssubsidiaries.

TheCompany’s59thOrdinaryGeneralAssemblyMeetingfor2018willbeheldattheCompanyHeadquarterson20March2019.

2.4. Voting Rights and Minority Rights



ThevotingprocedureisannouncedtotheshareholdersatthebeginningoftheGeneralAssemblyMeeting.TheCompanyavoidspracticesthatwouldmakeitdifficulttoexercisevotingrights.

Noupperlimitshavebeenintroducedforthevotingrightsofanyshareholdersandeachshareholderisgiventheopportunitytoexercisehis/hervotingrightintheeasiestandmostconvenientmanner.Shareholders,whoareeligibletoparticipateintheCompany’sGeneralAssemblymeetings,canattendthesemeetingsbyelectronicmeans,asperArticle1527oftheTurkishCommercialCode.Theshareholderswhoareentitledtovotecanvoteinperson,orexercisetheirvotingrightviaathirdpartywhomayormaynotbeashareholder.

ShareholderspresentinOrdinaryandExtraordinaryGeneralAssemblyMeetingsexercisetheirrightstovoteinproportiontothenominalvalueoftheirtotalshares.VotesarecastopenlyintheGeneralAssemblyMeetings.However,secretvotingshallbeexercisedupontherequestoftheshareholderswhohaveminimumonetwentiethofthesharesrepresentedinthemeeting.

AsstipulatedintheArticlesofAssociation,materialdecisionsconcerningspin-offsorsales,acquisitionsorleaseofassetswithsignificantvaluecanonlybetakenwiththepositivevoteofGroupC(preferential)shares,representedbythePrivatizationAdministration.Inthiscontext,attheGeneralAssemblyMeetingfordecidingonissuesthatmightrestrictorhinderthesupplyofpetroleumtotheTurkishArmedForces,suchasclosureorsaleofoneoftherefineries,limitationofactivitiesthroughestablishmentofrestraintoranyreductioncorrespondingtomorethan10%ofthecapacity,orspin-offormergerand/orliquidationoftheCompanyapositivevotersneeded.ClassCsharesdonotholdanyotherprivilegesconcerningvotingrights,apartfromthoseindicatedabove.

OurArticlesofAssociationdonotcontainanyprovisionsprescribingorcomplicatingtherepresentationofminorityinthemanagement,nordeterminingminorityaslessthanonetwentiethofthecapital.

AspertheTurkishCommercialCodeandCMBregulations,theCompanyshowsmaximumcaretoensuretheexerciseofminorityrights.ShareholdersrepresentingminorityrightsconstitutetheManagementwiththemajorityshareholders,throughtheirattendanceattheGeneralAssemblyMeeting.NocriticismorcomplaintaboutthisissuewasreceivedbyourCompanyin2018.

2.5. Dividend Rights

TheProfitDistributionPolicyofourCompanywassetwithintheframeworkoftheCapitalMarketsRegulationsandtheprovisionsofourArticlesofAssociationattheGeneralAssemblyheldon31March2014.ThereisnoprivilegeindividenddistributionforGroupAandGroupCshareholdersrepresentingthecapital.

ProfitDistributionPolicyandtheAnnualProfitDistributionProposalareincludedtotheAnnualReportandsubmittedtotheapprovaloftheshareholdersattheGeneralAssembly.

Profit Distribution Policy

OurCompanydistributesdividendsincompliancewiththeProvisionsofTurkishCommercialCode,theCapitalMarketsRegulations,theTaxRegulationsandotherrelatedregulationsandtherelatedprovisionsofourCompany’sArticlesofAssociationregardingdividenddistribution.Inthedividenddistribution,incompliancewiththeCorporateGovernancePrinciples,abalancedandconsistentpolicyispursuedbetweentheshareholdersandtheCompanybenefits.

Inprinciple;asfarastherelatedregulations,investmentneedsandfinancialsituationallow,theentireamountofthe“netdistributableprofitfortheperiod”,calculatedwithintheframeoftheCapitalMarketsRegulations,isdistributedincash-takingintoconsideration



themarketexpectations,longtermcompanystrategies,investmentandfinancingpolicies,profitabilityandcashposition-aslongasitiscoveredfromtheexistingresourcesinourlegalrecords.TheGeneralAssemblyortheBoardofDirectors,ifauthorized,maydecidetodistributedividendswithinstallmentsincompliancewiththeregulationsoftheCapitalMarkets.ThereisnoprivilegeintheArticlesofAssociationregardingtheparticipationtodividenddistribution.

TheaimistomakethedividenddistributionwithinonemonthatthelatestaftertheGeneralAssemblymeeting.DividenddistributiondateisdecidedbytheGeneralAssembly.

AspertheCompanyArticlesofAssociation;incompliancewiththeRegulationsoftheCapitalMarkets,theBoardofDirectorsmaydistributeadvancedividendprovidedthattheauthorizationisgrantedbytheGeneralAssembly.

2.6. Transfer of Shares

TheprinciplesregardingtheTransferofSharesarespecifiedinthe7thArticleofourArticlesofAssociation.TheArticlesofAssociationdoesnotincludeanypracticesorprovisionthatwouldimpedeorrestrictshareholderswhoholdpubliclytradedGroupAsharesintransferringtheirshares.

RegisteredGroupCsharescanbetransferredwiththepowersvestedbyLawn.4046totheTurkishPrimeMinistryPrivatizationAuthority,toanothergovernment-ownedcorporationinTurkeyvestedwiththesamepowersinprinciple.ThistransferwillnotbesubjecttotheapprovaloftheBoardofDirectors.

SECTION III: PUBLIC DISCLOSURE AND TRANSPARENCY

3.1. Corporate Website and Its Content

TheaddressoftheCompany’scorporatewebsiteiswww.tupras.com.trCompany’scorporatewebsiteiscreatedbothinTurkishandinEnglishinordertoprovideinformationtointernationalinvestors.Company’swebsiteisactivelyusedinpublicdisclosure.Furthermore,theinformationgivenonthewebsiteisconstantlyupdated.Thereisaseparateinvestorrelationssectiononthewebsiteinordertoprovidemoreinclusivedataflowtoinvestorsandintermediaries.Thus,allinformationspecifiedinArticle2.1.ofSectionIIoftheCorporateGovernancePrinciplesoftheCapitalMarketsBoardareavailableonthewebsite.PrinciplesregardingwebsitemanagementareincludedinourInformationPolicy.Furthermore,thewebsiteaddressisalsoavailableontheheadedpapersoftheCompany.

3.2. Annual Report

TüpraşAnnualReportispreparedinsuchdetailthatwillprovidecompleteandaccurateinformationtopublicabouttheactivitiesoftheCompanyandsoastocovertheinformationprescribedbytheCMB’sCorporateGovernancePrinciples.

Aftertheannualreportisprepared,itispresentedtotheapprovaloftheBoardofDirectors,andpubliclyannouncedonthewebsitebothinTurkishandinEnglish,aswellasthee-managepageoftheCentralRegistryAgency.PrintedcopiesareavailableatTüpraşFinancialPlanningandReportingDirectorate.

SECTION IV: STAKEHOLDERS

4.1. Informing Stakeholders

Company’scorporategovernanceapplicationsandcodesofconductguaranteethestakeholders’rightsthatareregulatedbylegislationsandmutuallysignedcontracts.StakeholdersarecontinuouslyinformedwithintheframeworkoftheInformationPolicycreatedbytheCompanyinaccordancewiththeexistinglegislationsandcodesofconduct.

WiththeGeneralAssemblyMeetingsopenforallstakeholders,andthedetailedinformationmadeavailableonourwebsite,as



wellastheinclusiveAnnualReports,pressannouncements,andourpracticeswithinthescopeofourInformationPolicybasedontransparency;theaimistoprovideinformationnotjustforourshareholdersbutforallstakeholders.

Companypersonnelaregivenaccesstocircularsandannouncementsviatheintranetportalandimportantannouncementsarecommunicatedtoallemployeesviaelectronicmail.TheCompanyjournal,Rafine,isissuedwiththeaimofreinforcingcorporatecommunicationbetweenemployeesatdifferentgeographicallocations.EmployeesandseniormanagementexecutivesatTüpraşcometogetheronceayeartoevaluatethegoalsandprogressachievedinthecourseoftheyearandtoexchangeideas.Continuous

StakeholdersareabletoreportanyillegalorunethicaltransactionsthroughtheStakeholderCommunicationManagementontheCompanyinternetandintranetsitestotheAuditGroupforreferraltotheAuditCommittee.Anefficientandcontinuousindemnificationisprovidedincaseofbreachofstakeholders’rightsthatareprotectedbylegislationsandcontracts.“IndemnificationPolicy”publishedwithintheCompanyisavailableontheCompany’swebsite.Necessaryexceptionswithrespecttothescopeornatureofthejobsaresharedwiththeemployeesintheemploymentcontractsignedwiththeemployees.

4.2. Stakeholders Participation to the Management Modelsthatwillsupportthestakeholdersand,inparticular,CompanyemployeestoparticipatetotheCompanymanagementaredevelopedinamannerthatwillnothindercompanyactivities.Summaryoftheactivitiescarriedoutareexplainedbelow.Inordertoawardtheemployees’actionsandeffortsthatsupportbusinessvaluesandobjectives,“RefinedSuggestions”systemisimplementedtosupportandencourageindividualandoriginalideasonprocessimprovement,energysaving,resourceefficiency,productivityinproduction,environmentalprotectionandoccupationalsafetythroughthe“TüpraşAppreciationRecognitionandRewarding”system.Furthermore,employees’evaluationsonthepractices,andtheirloyaltyandsatisfactionaremeasuredwiththeEmployeeCommitmentsurveys.Theresultsofthesurveyareconsideredincompanyactivities,andtheimprovementtargetsareaddedtotheperformancecardsoftheCompany’sTopManagement.

Behavior-basedsafetytours,inwhichTüpraşexecutivesalsoparticipate,areheldatTüpraşaspartofthe“VisibleLeadership”practice.Insafetytours,“visibleleadership”isdemonstratedwiththeactiveparticipationofthemanagement,wherepositivesafetybehaviorreceivesappreciationandisencouraged,risksinthebehaviorofpeopleandworkingconditionsareidentifiedandcorrected,communicationanddialoguearestrengthenedtoensureasafeworkingenvironment,awarenessisdeveloped,andanenvironmentinwhichemployeescansharetheiropinionsandobservationsonsafetyiscreated.

Anotherpracticeforinvolvingemployeesindecisionsistherighttospeakgrantedtotworepresentativesfromthelaborunionindisciplinarycommitteedecisionsconcerningemployeesworkingonhourlybasis,pursuanttothecollectiveagreement.

ThebasicactivitiesofCustomerRelationsManagementandothermarketingfunctionsarehandledunderthe“TüpraşCustomerRelationsPolicy”,withtheprimarygoalsofenhancingcustomersatisfaction,improvingcustomerrelationsandfulfillingcustomerdemandsandexpectationsoptimallyandinthefastestmannerpossible.

AsperISO10002CustomerSatisfactionandComplaintsHandlingcertificate,whichwasincludedintheTüpraşQualityManagementprocessin2016inadditiontotheTüpraşCustomerRelationsPolicy,allcustomertouchpointprocessesundergoconstantimprovementandallcustomernotificationsarerecorded.Inaddition,theCompanysuccessfullypassedtherecertificationauditinDecember2018,andISO10002CustomerSatisfactionandComplaintsHandlingQualityCertificatehasbeenextendeduntilJanuary2020.Withinthescopeofthesameprocess,workinggroupsweresetuptodealwiththecomplainthandlingsoftwareupdateandnecessaryeffortswereinitiatedinrelationtoimprovementareassuchasvestingtheprocessinamoretraceableformatbycustomers.

Inaddition,CustomerSatisfactionQuestionnaireswereadministeredforalldeliverypoints,allcustomersegmentsandallproductsalso



in2018,andservicehasbeenprocuredfromanexpertcompanyinitssector.TheconclusionreportfromtheCustomerSatisfactionQuestionnairehasbeenevaluatedopenlywiththeparticipationofSeniorExecutivesaswell,theimprovementareasidentifiedbasedontheevaluationwereusedtosetouttheCustomerRelationsManagementstrategiesfor2019.

Ontheotherhand,communicationmeetingscontinuedtobeorganizedtoensuresustainabilityofthelong-lastingcommercialrelations,tocreateanopportunityforface-to-faceconversationwithpersonswhoareusuallycontactedonthephone,andtodevelopsolutionsbylisteningtoindividualrequests.Withinthisscope,the15thFuelDistributionCorporationsCommunicationMeetingandthe1stBaseOilDistributionCorporationsCommunicationMeetingwereheldon22October2018and1November2018,respectively,bothofwhichwerehostedatİzmirRefinery.

Inadditiontotheabove,TüpraşCustomerCareLine(4441230)wentliveinJanuary2018,whichisaimedatofferingeasyaccessforallexistingandpotentialcustomersthroughallavailablecommunicationchannelsandforprovidingcommunicationandserviceatanenhancedlevel.

TüpraşSupplierPortal,TüpraşSupplierCodeofConductandSupplierManagementPolicywerelaunchedtoestablishsustainablesupplychainmanagementpractices.Inordertoprovideaneasy,fastandeffectivecommunicationenvironmentbetweenoursuppliersandourCompany,TüpraşSupplierPortalisdesignedasasourceforobtaininginformation,makingapplication,communicating,measuringandreporting.OursuppliersmaketheirapplicationsbycompletingTüpraşSupplierEvaluationSurveyandTüpraşHealthSafetyEnvironmentSurveyonthesupplierportal.TheperformanceofoursuppliersismonitoredthroughtheSAPsystem,andtheevaluationsinourworkplacevisitsaremadebymakingreferencetoTüpraşSupplierCodeofConductaswellastechnicalcriteria.

Furthermore,“TüpraşSupplierSatisfactionSurvey”and“TüpraşContractorSatisfactionSurvey”aredoneeveryyearinordertoconstantlymaintainthesustainabilityofoursupplychainmanagementatthehighestlevel,todetectchanginganddevelopingdemandsandtostrengthenourrelationswithoursuppliersevenfurther.

Targetstoimprovecustomersatisfaction,suppliersatisfaction,andemployeesatisfaction,arereflectedintheCompanymanagementgoals.

4.3. Human Resources PolicyThemotto“OurMostImportantAssetisourPeople”istheessenceoftheHumanResourcesPolicyatTüpraş,asitisinalltheotherKoçGroupcompanies.Accordingly,beingacompanypossessingcreative,dynamic,knowledgeable,highly-motivated,efficientandproductivehumanresource,TüpraşaimstofurtherstrengthenitsteambythedaybycontinuingtoattractthesuccessfulprofessionalsinthesectorandtoremainasthepreferredemployerinthesectorbeingTurkey’slargestindustrialcompany.ThecriteriarelatedtohumanresourcesaredescribedinwritingandareincompliancewiththecriterialistedinthesubparagraphsofArticle3.3oftheCommuniqué.

TheheadlinesoftheCompany’smainpracticeswithintheframeofitsHumanResourcesPoliciesaresummarizedbelow:• Recruitmentcriteriaarelaiddownandcommunicatedinwriting;thesecriteriaareadheredtoinrecruitment.Theaimistoattract

highlyqualifiedandhigh-potentialcandidateswhowilldriveTüpraşforward.• Jobdescriptions,distributionoftasks,andperformancecriteriahavebeendefinedbytheCompanymanagementand

communicatedtotheemployees.• Careistakentomakeuseofobjectivedataindecisionsrelatedtotraining,appointmentsandpromotions.• Greatemphasisisplacedonconductingtrainingprogramsdesignedtodevelopprofessionalknowledge,capabilitiesandpersonal

skillsofemployees.• Asafeworkingenvironmentisprovidedforouremployeesandeffortsarespentfortheirconstantimprovement.• Decisionsordevelopmentsthatareofconcerntotheemployeesarecommunicatedtothem.• EmployeesareinformedabouttheCompany’sfinancialposition,remuneration,careers,training,healthandothermattersthat

concernthem.• Recognitionandrewardingsystemsareinplacethatsupportshortandlong-termsuccessesofallemployees,andthatensure

awarenessofperformancesandthevaluecreated.• Thereisnodiscriminationbetweentheemployeesinwhatsoevermanner;theCompanypursuesafair,objectiveandtransparent



HumanResourcesPolicy.• AnindirectrepresentativeapartfromtheHumanResourcesUnithasnotbeenassignedtohandlerelationswiththeemployees.

AllemployeesareinformedindetailandinatransparentmanneraboutallHumanResourcesprocessesfromthemomentofhiringthroughemploymentcontractsandthePersonnelCodethatdescribesthemutualresponsibilitiesoftheCompanyandemployeesandworkingstandards.Employeerightsaremanagedwithinthescopeofhumanrightsprinciples,applicablelegislation,personnelguidelinesandcodeofethics.

WithintheframeworkofHumanResourcesPolicies,theHRUnitensuresthatcandidatespossessingthequalificationsrequiredbythepositionaredetermined,employeecompetenciesaretakenintoconsideration,evaluationsaremadeemployingsuitableassessmenttoolswithoutdiscrimination,andafterbeinghired,employeesbenefitfromequalopportunitiesthroughouttheiremployment.

CriteriainrelationtotheRecruitmentPolicyofTüpraşareputinwriting.TüpraşaimstousecontemporaryandintegratedsystemsthatdeliverbusinessresultsinallHRprocessesfromrecruitmenttoperformancemanagementsystem,fromdevelopmenttoremunerationandresignation.

Announcementofjobadvertisementsforsalariedemployeesandemployeesworkingonhourlybasisonvariousplatforms(theCompanywebsite,onlinecareersites,TurkishEmploymentAgency,etc.)andgrantingequalopportunitiestoindividualspossessingequalqualificationsduringrecruitmentaretwoofthepillarsoftheHRPolicyofTüpraş.Jobdescriptionsforallnewvacantpositionsandqualificationstoberequiredofindividualstobeappointedto/recruitedinthesepositionsaredefinedinadvancebytherelateddepartmentandHumanResources,andcandidatesearchisshapedaccordingly.Aspartofcareerplanning,employeesareabletoapplyforvacatedpositionswithinKoçHoldinguponinformingtheHRunitandtheirlinemanagers,andtheserequestsaresupportedinlinewiththeneedsthatarise.Rotationandcross-promotionpracticesareapplicablebetweendifferentdepartmentsatKoçHoldingandTüpraş.Successionplanningiscarriedoutforkeypositions.NewlyestablishedoropenpositionsattheCompanyarefirstcommunicatedtotheHumanResourcesDepartmentbytherelatedManagerorDirector,andtherecruitmentprocessprogressesfollowingbudgetapprovals.Therecruitmentperformanceisconstantlymonitoredasperformancecriteria.A“TrialPeriodEvaluationForm”isusedtoassessthenewhires’performanceduringthetwo-monthperiod,whichalsomeasurestherecruitmentsuccess.

Inordertostrengthenemployeeexperience,HRprocessesarefolloweduponplatformsbuiltontechnologicalinfrastructure.

JobdescriptionsanddistributionoftasksforCompanyemployees,andperformanceandrewardingcriteriaareannouncedtotheemployees.JobdescriptionsarepostedonthesharedQDMSsystem,whichisopentocomputerizedaccessofallouremployees.

TheCompanypaysattentiontoproductivityindeterminingthesalariesandotherbenefitsprovidedtoemployees.Employeeperformanceisevaluated,competenciesaremeasured,anddevelopmentandcareerplansareprepared.Tasksperformedareassessedwithintheframeofaspecificsystemandthemagnitudesoftasksaredetermined.

Allrightsandfringebenefitsgrantedtoatitleorpositionarepre-definedandidenticalforeveryone.TheCompanyworkswithinternationallyrecognizedresearchcompaniesforcomparingthesalariesavailableinthemarket,andremunerationmanagementpoliciesarefollowedupinanup-to-datemannerthroughsalarystructures,marketpositioningandregularsector-specificsalaryinvestigations.Atransparentremunerationsystemisimplementedwhichfocusesonthecontributionmadetotheachievementofcorporategoalsaccordingtoresponsibilitylevels.Theremunerationandfringebenefitsmodelisobjective,transparentandbuiltonjob-basedremunerationandtheprincipleoffairnessandequality,andreflectstherealityofthenationalandinternationalbusiness.

PerformancemanagementbyobjectivessystemisbeingimplementedatTüpraş,whichisalsoimplementedatKoçHolding.The



systemisintendedtoimpartiallymanagetheobjectivessetinlinewithTüpraş’sbusinessstrategiesandtheindividualperformancesofemployeesusingcommonprinciples,andtocapturethehighestperformance.Thestrategicperformancemanagementsystemalsoformsthebasisofremunerationmanagement,rewarding,personalcareerandtrainingopportunities.

WithintheframeofequalopportunitiesatTüpraş,employeeswithhighdevelopmentpotentialaredeterminedbasedontheirperformancesandresultsofcompetence-basedassessmentforpositionsatdifferentlevelsandtheirdevelopmentismonitoredclosely.Inaddition,theemployees’potentialforseniormanagementleadershiprolesareevaluatedinafairmannerusingtheAssessmentCentertools;andemployeeswiththepotentialtofulfilltheseniormanagementpositionsinthefutureareidentifiedbasedonobjectivecriteria.TheresultsoftheassessmentarereviewedduringtheannualStrategicalHumanResourcesPlanningMeetingswhereinformationaboutallemployeesisexchanged.Successionplansarealsodiscussedinthesemeetings.

IncaseswhereitispredictedthatchangesinexecutivepositionsmightleadtohitchesintheCompany’smanagement,careermapsarepreparedfordeterminingtheexecutivestobeassigned.

TheemployeesareinstantlyinformedaboutvarioustopicsincludingtheCompany’sfinancialposition,remuneration,career,trainingandhealththroughintranetannouncementsande-mails.TheCompanyimplementsacommunicationmanagementsystemthatcaresforthepeople,andencouragescreativity,communicationandemployeeinvolvement.TheCompanyrecognizesthatitisofparamountimportancetocreateanopen,closeanduninterruptedcommunicationenvironmentbetweenthemanagementandtheemployeeswithrespecttoemployeemotivationandproductivity.

Inmattersconcerningemployeesworkingonanhourlybasis,employeerepresentatives’opinionsandassessmentsareobtainedandhence,theyareinvolvedintheformulationofprocedures.

AspecialTalentManagementProgramisconductedattheCompanytoidentifytalentedleaderstodrivetheirdevelopment.Undertheprogram,ouremployeesbenefitfromvariousdevelopmentopportunitiesincludingparticipationinprojects,receivingcorporatecoaching,familiarizingwithdifferentfunctionsandpositions,andsharingtheirexpertise,inadditiontotrainingprograms.

Trainingprogramsareconducted,whicharedesignedtobuildontheemployees’knowledge,skillsandpersonaldevelopment,andtrainingpoliciesarebeingestablished.BasedontheCompany’snotionsofcontinuouslearning,development,anddeliveringbusinessresults,itistargetedtoorganizedevelopmentprogramsregardingCompanygoals,knowledge,skills,experienceareasandcompetenciesforemployees,whilecareistakentoallocateresourcesforprogramsthatwillsupportdevelopmentinsocialandculturalareasatthesametime.Indevelopmentplanning,traininganddevelopmentsolutionsappropriatetothecurrentsituationareofferedinviewoftheCompany’sandemployee’sneeds.

AtTüpraş,whichisboundbyacollectiveagreementandinwhichaunionisorganized,thereareworkplacerepresentativesoftheunioninthenumberasstipulatedbytheregulatoryframework.

Constantimprovementanddevelopmenteffortsarecarriedouttoprovideasafeworkingenvironmentandsafeworkingconditionsforemployees.Totaloccupationalhealthandsafetyistargetedtobesecuredintheworkplaceandonthejobinourrefineries.Forthispurpose,employeesareinformedaboutrulesandguidelines,andtheyactandtakenecessaryprecautionsaccordingly.Intheoccupationalhealthplatform,inwhichtheHRmanagementtakespartandthecompanymanagementparticipatesonamonthlybasis,topicssuchasoccupationalhealthandworkingconditionsarediscussed,suggestionsaretakenintoconsiderationuponwhichnecessaryactionsaretaken.Trainingprogramsaregiventoemployeesinourworkplacesregularly,andtrainingcontentsarereviewedaccordingtopracticesanddevelopments.Inadditiontothose,riskassessmentsatourrefineriesarecompletedontimeinaccordancewithlegalregulations.Eachyear,workplaceaccidentsaremonitoredandreportedonaconsolidatedbasis.



Tüpraşimplements“openoffice”concepttosupportandthrivethecommunicationprocessbetweenthemanagementandemployeesacrosstheCompany.Throughopenofficecommunication,allcomplaints,opinionsandsuggestionsareshared.TheHRstructuringhasbeenreviewedandrevisedtomakesurethattheHumanResourcesisaccessible,andtomaintainaclimatefacilitatingfreecommunicationoffeelings,thoughtsandproblemsbyemployees.RelationswithemployeesarehandledbytheHumanResourcesDepartmentandHumanResourcesProfessionalsintheDepartmentwhohavespecificresponsibilities.Atthesametime,ithasbeenresolvedthatemployeesshouldcontacttheHRDepartmentwhentheyhaveanyproblemsinrelationtothemanagement,andthesaiddecisionhasbeencommunicatedtoemployees.The“EthicsCommittee”mechanisminvolvingLegal,CorporateCommunicationsandHRdepartmentshasbeensetupandoperatesactively.Likenumerousexamplesinthepast,theCompanyemployeesareabletoconveyalltheiropinionsandcomplaintstotheCorporateCommunicationandHRdepartment;ithasbeenobservedthatnecessaryactionsandmeasuresweretakenaccordingly.

Throughregularannualquestionnairesconductedbyindependentexpertagencies,ouremployees’engagementandsatisfactionarebeingmeasuredandthefactorsaffectingengagementarestudied.Thesequestionnairesalsoservetocollectingtheemployees’opinionsregardingHRpracticesandmanagementofemployees.Alongthisline,goalstoenhanceemployeeengagementareset,improvementactivitiesaremonitoredclosely,andemployeeparticipationinmanagementissupported.

TüpraşCodeofEthicsispubliclydisclosedonthecompanywebsite.Intheperformanceofroles,powersandresponsibilitiesdefinedattheCompany,itistargetedtoactinaccordancewiththeCompany’sArticlesofAssociation,PersonnelCode,TurkishCodeofObligations,TüpraşValuesandWorkingCulturePrinciples,theLaborLawregulatingworklife,andapplicableinternationalregulatoryframeworkinforce.

Also,ethicalrulesthatemployeesarerequiredtocomplywithattheCompanyandimportantconsiderationsforcommunicatingamongthemselvesarealsosetout.Thesetopicsareaddressedin“TüpraşCodeofEthicsandImplementationPrinciples”,“JobDescriptions”and“PersonnelRegulation”andallemployeesarefamiliarwiththesame.

Jobadvertisements,jobapplicationformsandjobinterviewsdonotincludequestionsaboutone’sreligion,languageand/orrace.Inlinewiththeprincipleof“employeebefittingtherequirementsoftheposition”,discriminationisnotexercisedinrecruitment.Measuresaretakentopreventdiscriminationbetweenemployeesonthebasisofrace,religion,languageandsex,andtoprotectemployeesagainstphysical,psychologicalandemotionalabuse.Employeesareinformedaboutthesesubjectsbywayofpersonaldevelopmentandcommunicationtrainingprograms.

TheCompanydoesnotinstituteanyobstaclesagainsteffectiverecognitionoftherighttoorganizeandcollectivebargaining.Currently,theCompanyhasinplaceacollectivebargainingagreement.

4.4. Code of Ethics and Social ResponsibilityTheCodeofEthicalBusinessinvolvesthefundamentalprinciplesofconduct.

EmployeesoftheCompanyareexpectedtocomplywiththeBusinessEthicsPrinciplesandCommonValuesoftheKoçGroupwhenperformingtheirjobs.Inrecognitionthatbusinessprocedures,standards,lawsandregulationscannotprovideguidanceforallconductandactions,weutilizetheCodeofEthicsbuiltoncorporatevaluesandtheEthicsCommittee.

TheCodeofEthicsadoptedbytheBoardofDirectorshasbeenapprovedduringtheGeneralAssemblyMeetinginApril2011andsignedstatementsofcompliancefromallemployeeshavebeenobtained.

Withitsaccumulatedknowledgeintherefiningsector,Tüpraşisorientedtowardsocialratherthanindividualinterests.Thankstoitsinstitutionalizedstructureandsociallyresponsibleemployees,Tüpraşinitiatesandsupportsvariousprojectsincitieswhereitsrefineries



arelocatedsoastocontributetotheculturalandsocialdevelopmentofournation.

TüpraşhasfurtherdevelopeditscorporateandethicalmanagementphilosophyandstandardsbyissuingitsfirstCorporateSocialResponsibilityReportin2008andtheeighthreportwascompletedin2017.InitsCorporateSocialResponsibilityReport,TüpraşadoptedtheGlobalReportingInitiative’s(GRI)G3ReportingPrinciples.

AsthelargestindustrialenterpriseinTurkey,Tüpraşplaceshumanhealth,workplacesafety,environmentalprotectionandpublicinterestattheforefrontofitsactivitiesinpursuitofitsgoals.Apartfromcontinuouslydevelopingproductsandservicesthatprotectpeopleandtheenvironment,Tüpraşcomplieswithenvironmentalstandardsconcerningthefuelusedinallitsrefineries-includingtheBatmanRefinery-forproductionpurposes,regardlessofregionaldifferences.Operatingonworldstandardsconcerningenvironmentalprotection,Tüpraşrecognizestheimportanceofimprovingthenaturalhabitataswellaspreservingitandworkstowardthecreationofnewnaturalconservationareas.

In2018,TüpraşconductednumerouseventsaspartofitsCorporateSocialResponsibilityactivities,inareassuchaseducation,cultureandarts,health,sports,environmentallyfriendlyactionsandemployeerights;thedetailsofwhicharepresentedundertheheadingCorporateSocialResponsibilitysectionoftheannualreport.

SECTION V: BOARD OF DIRECTORS

5.1. Structure and Formation of the Board of DirectorsThequalificationsthattheCompanyseeksforBoardmembersareincompliancewiththoseoutlinedintheCMB’sCorporateGovernancePrinciples.ThedutiesoftheChairmanoftheBoardofDirectorsandtheGeneralManagerareperformedbydifferentpersons.SpecialattentionispaidontheissuethatthemembersoftheBoardofDirectorsspareplentyoftimefortheCompanytasks.However,thereisnorestrictionabouthavingotherduty/dutiesoutsidetheCompanyespecially,duetothesignificantcontributionoftheprofessionalandsectoralexperiencesoftheindependentmemberstotheBoardofDirectors.BeforetheGeneralAssembly,togetherwiththerésuméofthemember,dutiesassumedoutsidetheCompanyaresubmittedfortheinformationoftheshareholders.

AtourCompany,thedutiesoftheNominationCommitteeareperformedbytheCorporateGovernanceCommittee.FiveindependentmembernomineesweresubmittedtotheCorporateGovernanceCommitteein2018.ThenominationdeclarationsandrésumésoftheseindividualswereevaluatedintheCorporateGovernanceCommitteeandBoardofDirectorsmeetingheldon18January2018,andithasbeenresolvedtonominatethesefivenomineesforindependentmembership.PursuanttolegalobligationsandArticle10ofourArticlesofAssociation,onememberofourBoardofDirectorsiselectedfromamongstindividualsnominatedbythePrivatizationAdministration,ourGroupCShareholder.OurCompanyhasbeennotifiedbythePrivatizationAdministrationthatMr.ÖmerSertbaşhasbeenappointedtotheseatvacatedon29May2018duetotheresignationofMr.SüleymanKaramanwhowasservingintheaforementionedBoardofDirectorsmembership.On30May2018,theBoardofDirectorsresolvedtoappointMr.ÖmerSertbaşasamemberoftheBoardofDirectors,subjecttotheapprovalofthenextGeneralAssemblyMeetingandtocompletetheremainingtermofofficeofhispredecessor.Currently,fiveindependentmembersservingontheBoardofDirectorssatisfytheindependencecriteriastipulatedbytheCommuniqué.During2018operatingperiod,noeventstookplacethatwouldprejudicetheindependenceofindependentBoardmembers.

Itisconsideredthatensuringdiversityintermsofknowledge,experience,andpointofviewintheBoardofDirectorswillpositivelycontributetotheactivitiesoftheCompanyandtoefficientperformanceoftheBoardofDirectors;currentlythereisnopolicyaddressingwomenBoardofDirectorsmembers.Atpresent,therearetwowomenmembersontheBoardofDirectors,andtheratioofwomenmembersis13%.ThetablebelowliststheMembersoftheBoardofDirectors,whoareallnon-executiveinaccordancewiththedefinitionstipulatedinCMB’sCorporateGovernancePrinciplesandwhowereelectedattheCompany’sGeneralAssemblyheldon21March2018toserveuntiltheGeneralAssemblymeetingwhere2018activitieswillbediscussed,andtheirqualifications,whiletheirrésumésareavailableonthewebsiteandintheAnnualReport.



Name/Surname DutyIndependent/ Dependent

Date of Appointment

Term of Duty

Duties on the Board and in Other Committees

Duties Outside the Company

ÖmerM.KoçChairmanoftheBoardofDirectors

Dependent 26.01.2006 1YearMemberoftheExecutive

CommitteeMemberoftheBoardofDirectors

ofKoçHoldingCompanies

AliY.Koç ViceChairman Dependent 27.03.2009 1YearMemberoftheExecutive



RahmiM.Koç Member Dependent 04.06.2008 1YearMemberoftheExecutive

Committee,MemberoftheRiskManagementCommittee

MemberoftheBoardofDirectorsofKoçHoldingCompanies

SemahatS.Arsel Member Dependent 27.03.2009 1YearMemberoftheExecutive



TemelKamilAtay Member Dependent 26.01.2006 1YearMemberoftheExecutive

Committee,MemberoftheRiskManagementCommittee

MemberoftheBoardofDirectorsofKoçHoldingCompanies

Dr.BülentBulgurlu Member Dependent

30.04.2007-04.04.2012

31.03.2014

1YearMemberoftheExecutive

Committee

MemberoftheBoardofDirectorsofKoçHoldingCompaniesKoç

HoldingCEO

O.TurgayDurak Member Dependent 05.04.2010 1Year -MemberoftheBoardofDirectors


LeventÇakıroğlu Member Dependent 30.03.2015 1Year -MemberoftheBoardofDirectors

ofKoçHoldingCompanies;EnergyGroupPresident

ErolMemioğlu Member Dependent 26.01.2006 1Year -ChiefAdvisortotheSpeakerof

theParliament

YağızEyüboğlu Member Dependent 04.04.2016 1YearMemberoftheCorporateGovernanceCommittee

MemberoftheBoardofDirectorsofKoçHoldingCompanies;EnergyGroupPresident

ÖmerSertbaşIndependent Member;(PARepresentative)

Independent 30.05.2018 1Year -ChiefAdvisortotheSpeaker

oftheParliament

AhmetTurulIndependent Member

Independent 31.03.2014 1Year -MemberoftheBoardofDirectors

ofAllianzCompanies

MuharremHilmiKayhanIndependent Member

Independent 21.03.2018 1YearChairmanoftheCorporate

GovernanceCommittee,ChairmanoftheAuditCommittee

SöktaşA.Ş.ChairmanandMemberofthe

BoardofDirectors

AyşeCananEdiboğluIndependent Member

Independent 21.03.2018 1YearChairmanoftheRiskManagement

Committee

IndependentMemberoftheBoardofDirectorsofKoçHolding

Companies

KamilÖmerBozerIndependent Member

Independent 21.03.2018 1Year MemberoftheAuditCommitteeIndependentMemberofthe

BoardofDirectorsofKoçHoldingCompanies

TheBoardofDirectorsconsistsofatleastfivemembers,electedintheGeneralAssemblyMeeting.IntheselectionoftheBoardofDirectors,onememberhastobeappointedbytheClassCshareholders.TheClassAshareholders,inordertodeterminetheirrepresentatives,votesamongthemselvesintheGeneralAssemblyMeeting.ThosereceivingthehighestnumberofvotesbecomemembersoftheBoard.ThenumberandqualificationsoftheindependentmemberswhowilljointheBoardofDirectorsaredeterminedaspertheCMB’sregulationsoncorporategovernance.

TheBoardofDirectorsisauthorizedindeterminingthenumberofitsmembersandelectionofthemembers.WithoutprejudicetothestipulationsprovidedundertheregulationsoftheCMBconcerningtheCorporateGovernancePrinciples,themembersoftheBoardofDirectorsmayalwaysbereplacedbytheGeneralAssemblyifdeemednecessaryunderthearticle364oftheTurkishCommercialCodetakingtheprovisionsofthisArticlesofAssociationintoaccount.



IncaseofanyvacancyintheBoardofDirectorsforanyreasonoriftheIndependentBoardMemberlosesitsindependency,orresignsorbecomesincapableofexecutingitsduties,theBoardofDirectorselectsthenomineenominatedbythegroupofshareholders,whichhadnominatedthepreviousmemberoftheBoardtemporarilyinconformitywiththeproceduressetoutintheprovisionsoftheTurkishCommercialCodeandCMBregulationsandsubmitstotheapprovaloftheGeneralAssemblyinthenextmeeting.

5.2. Operating Principles of the Board of DirectorsTüpraş’sBoardofDirectorsoperatesinatransparent,accountable,equitableandresponsiblemanner.ThedutiesandresponsibilitiesoftheBoardofDirectorsareoutlinedintheArticlesofAssociation.DistributionoftasksanddutiesamongtheMembersoftheBoardofDirectorsandtheirdutiesandpowersareexplainedintheannualreport.

TheBoardofDirectorsconveneswheneverthebusinessoftheCompanyrequires.TheBoardofDirectorsmustconvenewhendemandedbytheChairmanortwoofitsmembers.ThemeetingscanbeheldintheCompany’sheadquartersoranyotherlocationasdeterminedbyamajorityoftheBoardmembers.Inadditiontoitsregularmeetings,theBoardofDirectorscanbeconvenedbyanabsolutemajorityofitsmemberstoreachdecisionsonspecialissuesdeemedimportantorcantakedecisionswithoutactuallyconvening,asperArticle390/4ofTurkishCommercialCode.

AccordingtotheArticle367oftheTurkishCommercialCode,theBoardofDirectorscandelegatesomeorallofitsadministrativeandrepresentativeauthoritiestooneormoreofitsmembers,toaBoardMemberandnonmemberssuchastheGeneralManageroroneormoredirectorsanditcanalsoformexecutivecommitteesfromamongmembersornon-memberstoexercisethesedutiesandauthorities.

TheBoardofDirectors’meetingprocedure,meetingquorum,decisionquorum,votingmethodology,dutiesandauthoritiesaredeterminedinlinewiththeTurkishCommercialCodeandCMBregulations.

TheagendaofBoardofDirectorsmeetingsispreparedbythesecretariatoftheBoardofDirectorsinviewofthedecisionspreviouslytakenortheissuesthatneedtobedecided.Theagendaofothermeetingsisdeterminedbyissuesthatneedtobedecidedasperlegalobligations.TheCFOfulfillsthesecretariatfunctionfortheBoardofDirectors.

TheBoardofDirectorsmetthreetimesin2018,onApril9th,July12thandNovember26th.AllBoardmembersphysicallyattendedmostoftheBoardmeetings.Duringthereportingperiod,atotalof29decisionswerepassed.Atleastthreeindependentmemberswerepresentatthetimethedecisionsweremade.EachmemberhasonevoteinBoardmeetings;inBoardofDirectorsmeetingsheldin2018,nodissentingvoteswerecastornoopposingopinionswereputforth.NoneoftherelatedpartytransactionsormaterialtransactionsthatwereputtothevoteofindependentBoardmemberswerelaiddownfortheapprovaloftheGeneralAssemblyonaccountofhavingbeenrejectedattheBoardofDirectors.

TheArticlesofAssociationdoesnotprovideaprivilegedvoteorvetorighttoBoardmembers.IntheArticlesofAssociation,themembersoftheBoardofDirectorsarenotgivenweightedvotingrightorvetopower(excepttheaffirmativevotesoftheGroupCprivilegedsharesinordertotakeadecisionintheBoardofDirectorsontheissuesspecifiedinthevotingright).

TheGeneralAssemblyMeetingmaygrantBoardmembersbusinessleaveforthecasesoutlinedintheArticles395and396oftheTurkishCommercialCode.

ThelocationformeetingsistheCompanyheadquarters.MeetingsmaybeheldatanothervenuewiththedecisionoftheBoardofDirectors.MatterstobediscussedatBoardMeetingsmustbepre-determinedonanagendathatiscommunicatedtotheBoardbeforethedateofthemeeting.Invitationstothesemeetingsmustbemadeatleastoneweekbeforetheactualdateofmeeting.

TheCompanyhasaDirectors’andOfficers’LiabilityinsurancewithacoverageofuptoEUR25million(inexcessof25%oftheCompany’scapital)againsttheliabilitiesthatthedirectorsandtheMembersoftheBoardofDirectorscanbepersonallyheldresponsiblewithinthescopeoftheirduties.



WhilepursuingtheCompanyactivities,theBoardofDirectorsevaluatesthepossibilityofconflictofinterest,andtheconsequencesofsuchconflictofinterest(ifany)forthecompany.Furthermore,theBoardofDirectorstakesnecessarydecisionstoensuremostsuitableactionforCompanyinterestsistaken.Besidescomplyingwiththeregulationswithinthescopeofrelatedpartytransactions,theBoardofDirectorsalsoevaluatespotentialmisconductrisksandrelatedpartytransactionswithscrutiny.

5.3. Number, Organization and Independence of Board CommitteesTheCompanyhasestablishedanumberofcommitteestoensurethattheBoardperformsitsdutiesandresponsibilitiescorrectly;thesecommitteesperformtheiractivitiesinaccordancewithcertainprocedures.TheCorporateGovernanceCommittee,RiskManagementCommittee,AuditCommitteeandExecutiveCommitteeworkinlinewiththeprinciplesmentionedbelow.ThesaidprinciplesarealsopostedontheCompanywebsite.

Corporate Governance CommitteeTheCorporateGovernanceCommitteewasestablishedwiththeBoardofDirectorsdecisiondated20November2007;tomonitortheCompany’scompliancewiththecorporategovernanceprinciples,andtoassessthereasonsofnotbeingimplementedregardingtheprincipleswhichhavenotbeenimplementedyet,andtogiveremedialadvicetotheBoardofDirectors.InthecurrentsituationtherearethreemembersoneofwhichistheChairman.In2018,theCommitteeconvenedfivetimes.ThedutiesoftheNominationCommitteeandRemunerationCommitteeoutlinedintheCMB’sCorporateGovernancePrinciplesarecurrentlyperformedbytheCorporateGovernanceCommittee.

Name/Surname Relation to CompanyIndependent/Dependent

Duties in Other Committees

MuharremHilmiKayhan MemberoftheBoardofDirectors(Non-Executive) Independent Yes

YağızEyüboğlu MemberoftheBoardofDirectors(Non-Executive) Dependent No

DoğanKorkmaz CFO(Executive) Dependent Yes

TheRiskManagementCommitteewasestablishedwiththeBoardofDirectorsdecisiondated28July2010.TheaimofthecommitteeistocounseltheBoardofDirectorsaboutthefollowingissues;earlydetectionandassessmentofallkindsofstrategic,operational,financial,legalandotherrisksthatmayendangertheCompany’sexistence,developmentandcontinuation,estimatingtheimpactsandprobabilitiesoftheserisks,managingandreportingtheserisksinaccordancewiththeCompany’scorporaterisktakingprofile,carryingoutthenecessarymeasuresregardingthedetectedrisks,takingtheserisksintoconsiderationindecisionmechanismsandestablishingandintegratinginternalcontrolsystemsinthisaspect.TheCommitteeconvenedsixtimesin2018.TheexperienceofthememberoftheBoardofDirectorsrequiredhimtoassumedutiesinmorethanonecommittee.

Name/Surname Relation to Company Independent/DependentDuties in Other Committees

AyşeCananEdiboğlu MemberoftheBoardofDirectors(Non-Executive) Independent No

TemelKamilAtay MemberoftheBoardofDirectors(Non-Executive) Dependent Yes

Audit Committee EstablishedwiththeBoardofDirectorsdecisiondated26December2003,theCommitteeisresponsiblefortheAuditprocessinordertooverseethecomplianceoftheaccountingandreportingsystemswiththerelevantlawsandregulations;publicdisclosureofthefinancialinformationandperformanceandeffectivenessoftheindependentauditandinternalcontrolsystem.

BoardofDirectorsmonitorsfinancialcontrolandauditactivitiesviatheAuditCommittee.Whilefulfillingthisfunction,theAuditCommitteeanalyzesandassessesthereportsfromtheFinancialAuditDepartmentestablishedtoevaluate,auditandreportonthe



efficiencyofCompanyprocessesfromafinancialperspective.TheAuditCommitteethengivesthenecessaryinstructionstotheCompanymanagementandwhendeemednecessary,submitsthesetotheattentionorapprovaloftheBoardofDirectors.Inthisregard,theBoardofDirectorsiscoordinatedinitsactionsbytheAuditCommittee.

TheFinancialAuditDepartmentassessestheCompany’sentirebusinessprocessfromafinancialperspective,teststheadequacy,efficiencyandimplementationoftherelevantauditmechanismsanddeterminesincoordinationwiththeoperationalunitsthemeasurestobetakentomendsanydeficienciesandreportstheresultsofitsactivitiestotheAuditCommittee.

TheAuditCommitteecollectstheopinionsofexecutivesandindependentauditorsontheannualandinterimfinancialstatementstobedisclosedtothepublic,asregardstheirtruthfulness,accuracyandcompliancewiththeCompany’saccountingprinciplesandpresentsthesetotheBoardofDirectorsinwrittenformtogetherwithitsownassessments.TheAuditCommitteeconvenesatleastfourtimeseveryyearandmorefrequentlywhendeemednecessary.In2018,theAuditCommitteepassedsevendecisionsintotalwithintheframeofwhichithasprovideditsopinionsinwritingtotheBoardofDirectors.TheChairmanandmembersoftheCommitteeareelectedamongtheindependentmembersoftheBoardofDirectors.ThefinancialexperienceoftheindependentmemberoftheBoardofDirectorsrequiredhimtoassumedutiesinmorethanonecommittee.

Name/Surname Relation to Company Independent/Dependent Duties in Other Committees

MuharremHilmiKayhan MemberoftheBoardofDirectors(Non-Executive) Independent Yes

KamilÖmerBozer MemberoftheBoardofDirectors(Non-Executive) Independent No

Steering CommitteeTheSteeringCommitteewasestablishedon4May2012inordertocounseltheBoardofDirectorswiththeaimofincreasingtheeffectivenessoftheBoardofDirectorsbyensuringthecoordinationbetweentheBoardofDirectorsandtheadministrativestructure;ensuringtheenhancementofinvestmentandbusinessdevelopmentinareasthatcomplywithitsstrategictargets.

TheSteeringCommitteeensuresthattheanalysisandassessmentofthematterssuchas;impactsontheactivities;financialaspects;legalsituation;compliancewiththestrategicprioritiesregardingtheimportantissueswhichwillberesolvedbytheBoardofDirectorsiscompletedbytheBoardofDirectors.TheSteeringCommitteeaimstosetthestrategiesthatwillincreasethecompetitivepoweroftheCompanybymonitoringandanalyzingtheimpactsofthedevelopmentsintheeconomic,socialandpoliticalenvironmentofthesectorinwhichtheCompanyhasbeencarryingoutitsactivities.Thecommitteeaimstomakesurethattheopportunitiesareuncoveredthroughmonitoringthesectordynamicsinaccordancewiththedeterminedstrategies.Withthisobjective,theSteeringCommitteecarriesoutthefollowingtasksandcounselstheCompanyManagementandtheBoardofDirectors.

ExecutiveCommitteeiscomposedofaChairmanandanumberofmembersthatwillbenolessthan1/3oftheBoardofDirectors.ExecutiveCommitteemadetwelvemeetingwithintheyear.

Name/Surname Relation to Company Independent/Dependent Duties in Other Committees

RahmiM.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent No

ÖmerM.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent No

SemahatS.Arsel MemberoftheBoardofDirectors(Non-Executive) Dependent No

AliY.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent No

TemelKamilAtay MemberoftheBoardofDirectors(Non-Executive) Dependent Yes

BülentBulgurlu MemberoftheBoardofDirectors(Non-Executive) Dependent No



Ethics CommitteeEthicCommitteetheCodeofEthicalBusinessinvolvesthefundamentalprinciplesofconductoftheCompany.TüpraşhasreneweditsCodeofEthicalBusinesstowardcompliancewiththeGlobalCompactsignedbyKoçHolding,inadditiontothechangesinlegal,socialandeconomiccircumstancesandwasapprovedbytheGeneralAssemblyinApril2011.

EmployeesoftheCompanyareexpectedtocomplywiththeBusinessEthicsPrinciplesandCommonValuesoftheKoçGroupwhenperformingtheirjobs.Inrecognitionthatbusinessprocedures,standards,lawsandregulationscannotprovideguidanceforallconductandactions,theCompanyhaspublisheditsCodeofEthicsandestablishedtheEthicsCommittee.

Name/Surname Relation to Company Independent/Dependent

Duties in Other Committees

İbrahimYelmenoğlu GeneralManager(Executive) Dependent NoDoğanKorkmaz CFO(Executive) Dependent YesAhmetAksoy HumanResourcesDirector(Executive) Dependent NoCanAkçaoğlu ChiefLegalAdvisor(Executive) Dependent NoÇilerTeber CorporateCommunicationsManager(Executive) Dependent No

5.4. Risk Management and Internal Control MechanismTüpraşhasinplacepoliciesthataredevisedinlinewiththeCompany’sEnterpriseRiskManagementGuidewiththeaimofensuringsustainabilityofoperationalandbusinesscontinuityandfightingagainstfactorscreatinguncertainty,andforprotectingtheCompany’sreputationbysuccessfullymanagingextraordinaryevents.

AtTüpraş,thereisaMonitoringCommitteethatreportstotheGeneralManagerandthatoverseesEnterpriseRiskManagementpractices.TheMonitoringCommitteeisformedoftheGeneralManager,AssistantGeneralManagersandRiskManagementandAuditManager.ThepurposeoftheCommitteeistodetectallrisksthatmaythreatentheCompany’sexistenceandcontinuityinadvance,takenecessarymeasuresinrelationtoidentifiedrisks,developnecessarypoliciesandpracticesforeffectiveoperationofenterpriseriskmanagementprocesses,andperiodicallyfollowupactionplansconcerningrisks,aswellasrisktrends,usingkeyriskindicators.

5.5. Company’s Strategic TargetsTheBoardofDirectorsmanagesandmaintainstherisk-returntrade-offofTüpraş,safeguardingitssustainableprofitabilityandlong-termintereststoproceedtowardsstrategictargets.ItensuresthattheCompany’sstrategictargetsaresetwiththesupportoftheExecutiveCommitteeandothersub-workinggroups.TheBoardofDirectors,whichisresponsibleforsetting,implementingandsupervisingtheCompany’sstrategictargets,shallcarryoutthefollowingactivities.

WhileTüpraşBoardofDirectorsoverseestheCompany’squarterlyfinancialperformanceincomparisonwiththeCompany’sbudgeting,theBoardalsoreceivesinformationaboutthesector-specificandstrategicdevelopments,andmaymakeinvestmentdecisionspayingregardalsotothesuggestionsoftheadministrativebody.



5.6. Financial RightsTheCompany’s“RemunerationPolicyfortheBoardofDirectorsMembersandExecutiveManagement”,whichcoversallrights,benefitsandremunerationsprovidedtothemembersoftheBoardofDirectorsandExecutiveManagement,aswellasthecriteriaemployedfordeterminingthesame,andbasesforremunerationwasfirstmadeavailableonthecorporatewebsiteforreviewingbyourshareholdersthroughthe“InformationDocument”publishedthreeweeksbeforeourGeneralAssemblyMeetingconvenedon4April2012,andwasimplementedaftertheGeneralAssemblyMeeting.ThispolicythatwasincludedintheagendaoftheOrdinaryGeneralAssemblyMeetingwhere2017activitieswerediscussedandthatwaspubliclydisclosedviatheCompany’swebsiteandannualreportwasalsoincorporatedintheagendafortheOrdinaryGeneralAssemblyMeetingdated20March2019where2018activitieswillbediscussed,andwherethepolicywillbelaiddownfortheapprovalofshareholders.ThetotalpaymentsmadewithintheframeoftheRemunerationPolicyfortheBoardofDirectorsMembersandExecutiveManagementareassessedeveryyearbytheCorporateGovernanceCommitteeandtheBoardofDirectors.Inlinewiththecommonpractice,thepaymentsmadetotheBoardofDirectorsMembersandExecutiveManagementarepubliclydisclosedcumulativelyinthefootnotesofourfinancialstatements.TherearenotransactionsthatmightleadtoconflictsofinterestsuchastheCompany’slendingmoneyorextendingloanstoourBoardofDirectorsMembersorexecutives,orfurnishingguaranteeintheirfavor.

Takingtheircontributions,theirparticipationsinthemeetings,andtheirfunctionsintoconsideration;abonuspaymentdeterminedbytheBoardofDirectorswithintheframeworkoftheCorporateGovernanceCommittee’sopinioncanbemadeattheyear-endstothemembersoftheBoardofDirectorswhowillbeassignedinthecommitteesthatwillbecreatedbytheCompany’sBoardofDirectors.IntheremunerationoftheindependentmembersoftheBoardofDirectors,stockoptionsorpaymentplansdependingontheCompany’sperformancearenotused.



RISK MANAGEMENT AND THE ACTIVITIES OF THE RISK MANAGEMENT COMMITTEE

A. CORPORATE RISK MANAGEMENT

Thestartingpointofcorporateriskmanagementistherequirementforeverycorporationtomanagethefactorsthatcreateuncertaintyonthewaytoachievingtheirtargets.

Contemporarymanagementapproachisbasedontheconceptofcorporategovernance.Thefundamentalcomponentofcorporategovernanceprocessiscorporateriskmanagement.

TüpraşhaspoliciessetinlinewiththeCorporateRiskManagementguideinordertoenablesustainableactivityandbusinesscontinuity,fightthefactorsthatcreateuncertainty,successfullymanagethedevelopments,andprotecttheCompany’sreputation.

Bymanagingthepossibledeviationsinplannedstrategicandfinancialtargets,Tüpraşaimstomaximizethelevelofthevalueitwillcreateforitsshareholders.

CorporateRiskManagementprocessisdevelopedto;i)protecttheexistingvaluesoftheCompanyandcreatenewvaluesfortheshareholders,ii)managetheopportunities,iii)enablethecommunicationbetweentheprocessesregardingtherisksidentifiedinallfunctionsinaccordancewithriskappetiteacceptedbytheBoardofDirectorsandtheTopManagementoftheCompany.

B. RISK MANAGEMENT COMMITTEE

Inorderto;i)complywiththe378thArticleoftheTurkishCodeofCommercen.6102thatenteredintoforceon1July2012,andtheCapitalMarketsBoard’sCorporateGovernanceCommuniqué,ii)makesurethatthecommitteesundertheBoardofDirectorsfunctioneffectively,decisionwastakenatTüpraş’sBoardofDirectorsmeetingheldon28July2010,andRiskManagementCommitteewasestablishedwiththeaimofi)earlydetectingtherisksthatcanendangertheCompany’sexistence,developmentandcontinuity,ii)implementingthenecessarymeasuresrelatedtotheidentifiedrisks,andiii)performingtaskstomanagetherisks.

CommitteechairmanistheIndependentMemberoftheBoardofDirectorsMs.AyşeCananEdiboğlu.OthermemberoftheCommitteeistheMemberoftheBoardofDirectorsMr.TemelKamilAtay.Havingheld6meetingsin2018,theCommitteeevaluatesTürkiyePetrolRafinerileriA.Ş.RiskManagementSystemandRiskReportingprinciples,andreviewstheRiskReportsissuedperiodicallywithinthisscope,andpresentsitsopinionsonthemeasurestobetakenforissuesthatdonotcomplywiththespecifiedlimitsdeterminedintheRiskManagementSystem.ReportingactivitiesandcommitteeevaluationsaresubmittedtotheBoardofDirectors’information.

C. RISK MONITORING COMMITTEE

MonitoringCommitteefunctionsundertheGeneralManagerwhomonitorstheCorporateRiskManagementpractices.CommitteemembersaretheGeneralManager,AssistantGeneralManagersandRiskManagementandAuditManager.TheaimoftheCommitteeis;earlydetectionofallrisksthatcanendangertheCompany’sexistenceandsustainability,takingnecessarymeasuresregardingthedeterminedrisks,developingpoliciesandpracticesnecessarytoeffectivelycarryoutcorporateriskmanagementprocesses,andmonitoringrisk-relatedactionplansandrisktrendsperiodicallyviakeyriskindicators.


D. INFORMATION SECURITY COMMITTEE

AsTüpraş,wepledgetosafeguardtheconfidentiality,integrityandavailabilityofallphysicalandelectronicinformationassetsforthepurposesofmaintainingtheCompany’sregulatorycompliance,andprotectingitscommercialandcorporateimage.

Inordertopracticeinformationsafetyproperlyandtoincreaseinformationsafetyawareness,theInformationSafetyCommitteewasestablishedaspertheArticlen.5.3.“CorporateRoles,ResponsibilitiesandPowers”oftheISO27001Standard.TheHeadoftheCommitteeistheAssistantGeneralManager(CFO)inchargeofFinancialAffairs,andCommitteeExecutiveistheInformationTechnologiesDirector.TheInformationSecuritySystemManagement(ISMS)officeractsastheITRiskandComplianceCoordinator,whereascommitteemembersconsistofDirectoratesandrelevantDepartments.

Whennecessary,theCommitteemeetsevery6monthsaslongasthereisanagenda,withabsolutemajorityoftheattendingpersonsortheirauthorizedrepresentatives.FrequencyandconditionsofthemeetingsisdeterminedbytheHeadoftheCommittee.

E. OPERATIONAL TECHNOLOGIES CYBER SECURITY COMMITTEE

Formerlyrunninginclosedcircuit,Operational/IndustrialTechnologies(OT)becameaccessibleasaresultoftheconvergenceofInformationTechnology(IT)andOT,bringingalongcyberrisksbesidesinfiniteopportunities.Accordingly,OTCyberSecurityTransformationProjectwaslaunchedbyearly2018,thefirststepofwhichcoveredthecybersecuritymaturityassessmentoftheexistingOTinfrastructureandprocessesbyaconsultancyfirmwithinternationalexperience.

RecommendationsandreportoutputsresultingfromtheassessmentwerediscussedintheInformationSecurityCommitteemeetingon01August2018,andadecisionwasadoptedforassigningtheOTCyberSecurityCommitteeundertheInformationSecurityCommittee.Thesaidcommittee’sactivitiesareaimedatthemanagingexacerbatedcybersecurityrisksaroundfieldequipmentandpractices,upgradingtheOTsecuritystructureatTüpraş,effectiveimplementationofOTsecuritycontrolswithininfrastructure/operation/maintenance/projectandsuppliermanagementprocesses,developingnecessaryproceduresandprocessestoensureuninterruptedprocesscontinuitywhileprotectinghumanhealth,andultimately,upgradingOTcybersecuritymaturityleveltoamoremanageablepointonthebasisofprocesses.OTCyberSecurityCommitteewasformedundertheleadershipofITRiskandCompliance,anditconsistsofIndustrialInformationServices,DataCenterandInfrastructureServices,Operation,Maintenance,ProcessAutomation,ProcessSafetyandProjectteams.

F. TÜPRAŞ RISK INVENTORY

MajorrisksTüpraşisexposedtoaremonitoredunderthe7maintopicsgivenbelow;

1-HazardsandEnvironmentalRisks2-FinancialRisks3-CommercialRisks4-OperationalRisks5-StrategicRisks6-ComplianceandLegalRisks7-ReputationalRisk




1. HAZARDS AND ENVIRONMENTAL RISKS ThemainobjectiveofOccupationalHealthandSafety(OHS)/ProcessSafetyandEmergencyResponseSystemistopreventworkplaceaccidentsandoccupationalillnessesbasedonproactiveapproaches.TüpraşurgesstrictadherencetoitsHealth,Safety,Environment(HSE)ProcessSafetystandardsbyitssolutionpartners,aswellasallemployees.

Tüpraşcontinuesitsdevelopmentinlinewithitsgoalofdefiningandeliminatingrisksandreducingthemtoacceptablelevelswithintheframeofnationalandinternationalnormsinallitsoperationalactivities.Besidesallemployees,solutionpartnersofTüpraşareexpectedtostrictlycomplywiththeHealth,Safety,Environment(HSE),ProcessSafetystandardsestablishedwithinthisscope.

WithinthescopeofProcessSafetyManagementSystemandCulturalExchangeproject,teameffortshavebeenbroughttocompletioninrelationtoprocesssafetyleadershipprogram,processsafetyinformationsystem,processhazardanalysis,mechanicalintegrityandqualityassurance,high-riskbusinessprocedures,workauthorizationsystem,contractormanagement,changemanagement,accidentinvestigations,operationalprocedures,safetymanagementauditsystem,competenceandawareness.

ProcessSafetyKeyPerformanceIndicators(KPIs)wereidentifiedinaccordancewithinternationalstandardsandpractices(e.g.API754,CCPS).Underthe16KPIsidentified,precursorsandpost-indicatorsaremonitoredmonthlyinordertopreventaccidentsbeforetheyhappenandalsotolearnfrompastincidentstopreventrecurrence.

WiththepurposeofestablishingaproductivesafetycultureatTüpraş,encouragingpositivesafetyconduct,enhancegeneralsafetyawareness,andmonitorthefieldimplementationofsafetystandards,behavior-basedsafetytoursparticipatedalsobyTüpraşexecutivesareconductedwithinthescopeof“visibleleadership”practice.Insafetytours,theprincipleof“visibleleadership”isdemonstratedwiththeactiveparticipationofthemanagement,positivesafetybehaviorisencouragedthroughrewards,risksinthebehaviorofpeopleandworkingconditionsareidentifiedandcorrected,communicationanddialoguearestrengthenedtoensureasafeworkingenvironment,awarenessisraised,andanenvironmentiscreatedwhereemployeescansharetheiropinionsandobservationsonsafety.

HealthRiskAssessment(HRA)studiesarecarriedoutinalloftherefineries.AspartoftheHRAstudies,allarea-specific(units,workshops,laboratories,warehouses,etc.)riskfactors,includingchemical,physical,biological,ergonomicandpsychological,areevaluatedindetail.

TheinternationalIncidentCommandSystem(ICS)hasbeensetuptoensureeffectiveresponsetoemergencies.Firedrills,catastrophedrills,hydrocarboncloud/toxicgasdispersiondrillsandspilldrillsareperformedattherefineriesinordertominimizeandrespondtorisksinemergencysituations.Neighboringfacilities,alongwithpublicagenciesandorganizations,takepartinthesedrillswiththeirteamsandequipmentinthecapacityofstakeholders.

HazardandOperability(HAZOP)studiesareregularlyconductedandpotentialscenariosareidentifiedandupdatedconstantlyinordertoidentifyhazardsandmajoroperationalproblemsintheexistingunits,todeterminehowanydeviationsfromnormalworkingconditionsandtheintendeddesignmayoccur,andtosystematicallyrevieweachpartoftheprocess.

ThemainpurposeofOccupationalHealthandSafety(OHS)Systemistopreventworkplaceaccidentsandoccupationalillnessesthroughproactiveapproaches.WiththeaimofconstantlyimprovingOHSperformanceandensuringperformancemonitoring,sub-indicatorswereaddedto14KeyPerformanceIndicators(KPI),thusincreasingthetotalnumberofKPIsunderclosewatchto21in2018.


Inadditiontothese,alsoin2018,“HazardandImpactManagement”allowedforgivingprioritytoidentificationandmanagementofrisks,performanceofHealthRiskassessments,andallocationofresourcestocriticalissueswithinthescopeofriskanalysespreparationundertheapplicablelegislation.

DuetorecognitionofTüpraşasareliableandleaderenterpriseintheoilandgassector,theCompany’sgains,experiencesandgoodpracticesinOHS,ProcessSafety,andEmergencyResponsearesharedincongressesandsymposia.

2- FINANCIAL RISKSRisksarisingasaresultoftheCompany’sfinancialpositionandpreferencesaredefinedasfinancialrisks.Riskssuchascurrency,liquidity,counterparty,financialmarketriskareamongthefinancialrisks.

FX Risk (Foreign Exchange Risk) Duetothestructureoftheindustrywhereitcarriesoutactivities,majorityofTüpraş’sbusinessisinforeigncurrency,particularlyinprocuringgoodsandservices.ForeigncurrencypositionsthatmayarisefromthesetransactionsarecontinuouslymonitoredbytheFinanceDepartment.TheCompanyhassufficientlevelofforeigncurrencyassets,consideringthefactthatexistingstocksarepricedinforeigncurrency.Thus,anaturalhedgeiscreatedwhileanopenforeignexchangepositionismaintainedatanacceptablelevel.

Apartfromthecommercialactivities,FXriskcanbearesultof,theFXindexedborrowinginstrumentsobtainedforfinancinginvestmentsorforliquiditypurposes.Derivativefinancialinstrumentsarefrequentlyusedwithinthescopeofriskhedgingactivities.TheCompanykeepsitsforeignexchangepositionaroundzero,providedthatitiswithincertainlimitscomparedtoequity.

Liquidity RiskRisksaremonitoredoverliquidityratiosastargetsaresetandmanaged.Thus,theaimistomakesurethattheCompanyhasenoughliquiditytofulfillitsobligations,andthatthecurrentassetsareequaltotheshorttermdebts.Inaddition,averagedebtordaysandsalesofinventorydaysarekeptasshortaspossibleduetoTüpraşpoliciesandeconomicconjuncture.Withthesepractices,theneedforworkingcapitalandtheriskofliquidityareminimized.

Counterparty RiskWhilethereceivablesfromthepubliccorporationsdonotcarrytheriskofcollection,asignificantportionofthereceivablesfromthesalesmadetotheprivatesectorcustomersaresecuredforeliminatingthecollectionrisk.Inordertocreatebusinessvolumebeyondtheexistingguaranteesandtopreventpossiblefuturerisksthatmayariseininternationalcustomerswhoarenotsubjecttoguarantees,the“ReceivableInsurance”solutionisintroduced.Inadditiontothis,ourriskismanagedbythecounterpartycompliancepolicywhichincludesequalandobjectivecriteriaforallbanks.Ourdepositiskept,withincertainlimits,bybanksthatcomplywiththecriteriadeterminedinourpolicysuchasrating,capitalandetc.Furthermore,counter-partyriskmanagementissignificantlyprovidedasourcollectionsaredirectedtothebanks.

Tradereceivablesinfuelandnon-fuelproductsarekeptundercontrolbymakingcashsalesorveryshort-termsales,andproductsaredeliveredtocustomerswithincertaincreditlinesdefinedagainstlettersofguaranteeand/orDDS.Ontheotherhand,riskanalysisreportsarepreparedindaily,weeklyandmonthlyperiodsfortradereceivableswhileactionplans/measuresareputintopracticeasaresultoftheratingreportsissuedforthecustomersbasedonaproactiveapproach.




3- COMMERCIAL RISKSCommodity Prices RiskTherearesignificantamountsofcrudeoilandproductstocksintheinventoryofourCompanyasrequiredbyitsactivities.StocksareincludedinassetsastheyarevaluedaccordingtoBrentcrudeoilandMediterraneanproductpricesdeterminedininternationalmarkets.Theprofitabilityofthecompanyisheavilyinfluencedbyfluctuationsinproductpricesandrawmaterialprices.

Whilevariousderivativeinstrumentsareusedagainstthisfluctuationrisk,measuresaretakenagainstproductprofitmargin(crack)andstockpriceriskinshortandlongterm.Forthisreason,inordertoprotecttheprofitabilityofacertainratioofthetotalsalesvolume,aprotectionpolicywassetasprofitmargin(crack)levelsweredeterminedbyconsideringthebudgetdataforecastedforfutureperiodsviapreviouspricelevels.Inaddition,thereisastockpriceriskpolicydesignedtoprotectagainststockpricerisk.

Inaccordancewith2018circumstances,Tüpraşupdatedthe“HedgingtheRiskofDecliningValueofInventoriesPolicyofTüpraş”.Financialcommodityagreementshavebeensignedinlightofthepreparedpolicy.Inaddition,Tüpraşmaintainstheminimumamountofstockrequiredforrefiningactivitiesinordertoavoidtheriskofdecliningvalueofinventories.Financialinstrumentsaswellasoperationalhedgingmeasureshavebeenusedfortheportionofstockssubjecttopricerisk.

4- OPERATIONAL RISKSOperationalrisksaredefinedasthepossibilityoflossordamagethatmayarisefrom:i)thecompanymanagementandpersonnel’sfailuretoactinaccordancewiththetimeandconditions,ii)faultsinthemanagementofthecompany,iii)faultsandfailuresininformationtechnologysystems,andiv)disasterssuchasearthquake,fire,floodandetc.

Supply/TransportationTheentiresupplyprocessinTüpraşconsistsofrawpetroleum,semi-product,finalproductandmaterialsupplyoperations.Asbeingusedforproductionofotherproducts;rawmaterialisthemajorsupplyitem.Continuityoftheproductionismaintainedpartiallybyusingdomesticallysuppliedandpredominantlyimportedrawmaterials.Purchaseoperationsofrawmaterialshavebeenoptimized;inordertodiversifysupplysources,distributeriskinsupplychain,provideadvantageinpriceandfreightcosts;andtoincreaseoperationalcapabilityofthecompany.

Oneofthemostcriticalphasesofsuchoperationsisthephysicalsupplyofrawmaterialsandproducts.Therearemanyitemsamongthesuppliedproducts,whichmaybeharmfultoenvironmentandhumanhealthduetoproblems,whichmaypossiblyoccurduringtheirtransportation.Inordertoeliminatesuchrisksduringtransportationoftheseproducts;itisexpectedthatmeasuresandworkingconditionsspecificallydeterminedforrelatedproductstobecompletelyprovidedbysuppliers.

Therefore;toensuresupplysafety,suppliersareexpectedtomaintainspecificstandardsfor(vesseltankers)tobeusedfortransportation.Especiallyforimportofrawmaterials,suppliershastouse(vesseltankers),whichareacceptablebyportsashavingISO9001andclasscertificatesandcomplyingwithISPS(InternationalShipandPortfacilitySecurityCode)requirements;sothattherisksthatmayoccurduringtransportationcanbeeliminated.Inaddition;requiredequipmentiskeptreadyforuseandregularexercisesaredonetofightagainstanykindsofaccidentsorleakageincidents,whichmayoccurdespiteallaforementionedmeasures.Withallsuchmeasurestaken;safety,environmentandhumanhealththreateningrisksareminimized.

Toensuresafetyofproductsupplybetweenrefineriesandtocustomers;transportationisdiversifiedamongdeliveryviasea-land-railwaysandpipelines.Thisway;financialriskdistributionamongtransportationoperationsisprovidedaswellasenhancementinoperationcapability.


Besidesrawmaterialandproducts;hundredsofmaterialsaresuppliedeveryyearinTüpraş.

Alltheseoperationsareactualizedaccordingtospecificationsentirelypreparedbyexpertpersonnel.Itisstronglyexpectedthatsuppliersshowperformanceincompliancewithtermsspecificallybasedonproductfeaturesandexplicitlydefinedinpurchasespecificationtogetherwithminimumstandardsrequiredinaspectsoffeatures,productionanddeliveryconditionsofsuchproduct.Environmentalimpactsoftheproductstobepurchasedarealsoinvolvedinaforementionedspecification.Eachpartyofproductisexaminedbyvarioustestsdoneinlaboratoriesinthecompanyandotherinstitutions.Purchaseofanyproductfailinganyofthesetestsisaborted.

Product FeaturesLaboratoriesoperatedbytheTurkishAccreditationAgencycarryoutactivitiesinTüpraşrefineries.Thescopeoftheaccreditationcoverallanalysisincludedinthespecificationsoftheproductsforsale.

Theselaboratoriesmakethenecessarymeasurementsineachphaseofproductionandsales,andeliminatetheriskofproducingandsellingdefectiveproduct.

Information Technologies Risks PracticesregardingthemanagementofpossiblerisksthatmayariseinthefieldofInformationTechnologiesaredefinedintheStandardforInformationAssetsandITRiskManagement.ThisriskmanagemententailsriskspertainingbothtoInformationTechnologyandOperationalTechnologyatTüpraş.InformationTechnology(IT)tierandOperationalTechnology(OT)tierareisolatedfromoneanotherusingadvancedsafetytoolsinordertominimizealloutsidethreatsandrisks.

Newthreatsandattackstakingplaceatanymomentaroundtheworldaremonitoredonthebasisofinstantintelligencereceivedfromglobalnetworks,requiredupdatesaremadeinlinewithoperationalprocesses,andnecessaryactionsandcountermeasuresareincorporatedinthesystemsimmediately.Inaddition,alltiersaremonitored24/7byacentralizedandspecializedsafetyteam,andnecessaryactionsaretakenincaseofunexpectedactionsoractivities.

Inadditiontothetechnicalmeasurestaken,businessunitsincludedintheInformationSafetyManagementSystem(BGYS)andcurrentrisksareregularlyreviewedandupdatedeveryyear.InthelightofourCorporateRiskManagementmethodology,theeffectivenessofexistingcontrolsonrisksthatexceedtheCompanyriskacceptancecriteriawasevaluatedwithinthescopeofidentifiedrisks.Moreover,appropriaterisk-managementmethodsweredetermined.

Thus;additionalcontrolsaredesignedfortherisksthatwillbereducedandcontinuousimprovementsaremaderegardingsuchrisks.Moreover,suggestionsandfindingsfromexternalBGYSaudits,auditsperformedbyindependentcompanies,onlineand/oronsiteauditsconductedbyinstitutionssuchastheEnergyMarketRegulatoryAuthority(EPDK),InformationandCommunicationTechnologiesAuthority(BTK),andperiodictestsandexaminationsthatuseautomatictoolsandmanualmethodsalsocontributetoidentificationofITrisks.Ontheotherhand,businesscontinuityactivitieswerecarriedoutonthebasisofdepartments,andinternalauditmechanismswerecreatedforsuccessfulidentification,analysisandmonitoringofrisks.

Inourday,businessesareexposedtothreatscausedbycybersecurityrisksthatgrowatanever-increasingpaceinTurkey,asisthecaseinotherpartsoftheworld.Hence,inordertoprotectagainstcyberrisksatTüpraş,wehavepurchaseda“CyberRiskPolicy”in2017,whichoffersoptimumcoveragestructure.




5- STRATEGIC RISKSStructuralrisksthatmaypreventacompanyfromreachingitstargetssetforshort-,medium-orlong-termcanbeclassifiedwithinthescopeofthisheading.Typicalexamplesofstrategicrisksincludeglobalrefinerycapacityincreases,localandglobalregulationsbearingimpactonrefineryproductionandproductdemand,localmarketstructureandincreasedcompetition,andmarketcompatibilityofthebusinessmodel.PossiblestrategicrisksthatTüpraşmaybeexposedtoalsoincludecountryriskandalternativeenergysources.Inaddition,innovationsanddevelopmentsinthetransportationsector,includingelectricvehicles,aremonitoredwithinthisprocess.

Internationalstandardsarebeingfollowedupinordertopreventthenegativeimpactsofcustomerpreferences.Tüpraşcarriesonwithitsinvestmentsinordertoachievecompliancewiththespecsintroducedbyinternationalstandardsandtoproducemoreenvironment-friendlyfueloil.WiththeFuelOilConversionUnitsbuiltintheİzmitRefineryZoneB,highervalue-addedproductexportshavebeenmadeinsteadofexportingfueloil,whichalsoservedtoreduceTurkey’sdieselimports.Furthermore,Tüpraşhasconsolidateditspositionwithrespecttothenewfuelregulationstandard(IMO2020)thatwillenterintoforceinthewholeworldin2020inordertoreduceemissionsinthemaritimeindustry.Tüpraşhasmadesignificantcontributionbothtothecountry’seconomyandtoemployment.

6- COMPLIANCE AND LEGAL RISKS Thepossibilityofrightstobelowerthanexpectedandtheliabilitiestobehigherthanexpectedasaconsequenceof:

risksarisingfrom;i)legaldisputescausedbyinadequateorincorrectinformationanddocumentation,ii)uncertaintyaboutfulfillingtheobligations,iii)misinterpretationoftheregulations,oriv)personnelnotfulfillingtheseobligationsontime;

riskscreatedbyaregulationchangethatimpactstheactivities,and

transactionsthatmaybeperformedbytheCompanybasedoninsufficientorincorrectlegalinformationanddocuments.

Inordertokeeptrackofthelegalrisks,ourCompanyfollowsthechangesinthelegislation,andinformstherelevantdepartments.

In2018,withintheframeworkoftheCompetitionLawcomplianceprogram,actionplansandstrategiesweredevelopedaboutthemeasuresthatcanbetakeninordertoeliminatepotentialrisks.Moreover,CompetitionLawtrainingwasgiven.

AspartoftheeffortstoachievealignmentwiththePersonalDataProtectionLaw,personaldataprocessingoperationscarriedoutundertheCompany’sactivitiesweredeterminedandreviewed,relevanttrainingprogramswereorganizedandworkwascarriedoutinrelationtocontractamendments.

Onlinesoftwareprogramsareemployedforidentifyingcompliancerisks,inparticularthecounterpartiesthataresubjecttointernationalsanctions.Viatheseprograms,ourCompanyreceivesalertsincaseofachangeinthesanctionedpersonstatusofanycounterparty;thepositionsofallcounterpartieswithrespecttosanctionlegislationaremonitoredinthiswaythroughoutthedurationofthebusinessrelationship.

7- REPUTATIONAL RISKS ReputationalRisksarethedecliningdemandforproductsandservicesoftheCompany,andlossofcustomer,profitandcompetitivepowerdueto;i)decliningvalueoftheCompanyasaresultofeventsthatcannotbeeffectivelymanagedregardingtheCompany’snameandproductionorii)lossofreputationcausedbyvariousevents.Reputationriskcanbedefinedasthepotentialnegativereputationaboutthebusinesspracticesofcorporations.

Tüpraşhasestablishedvariouspoliciesinordertomaintainitscorporatereputationstrongatalltimes,andhasestablishedacrisismanagementprocesswithintheframeworkofthesepolicies.


G. INTERNAL CONTROL SYSTEM AND INTERNAL AUDIT

AuditsinTüpraşareconductedbythespecializedteamoftheTüpraşRiskManagementandAuditUnit,usingaproactivemethodologybasedontheInternationalInternalAuditStandardsandTüpraşCodeofEthics,intermsoftheheadings:financial,operational,risk,process,legalcompliance,businessethics,andmisconduct.

BasicfinancialandprocessauditsthroughouttheactivityunitsofTüpraşareperformedtwiceayear,andpredefinedprocessauditsareconductedforagivenworkingperiod.

TheAuditCommitteeconvenesatleastfourtimeseveryyearandmorefrequentlywhendeemednecessary.TheCommitteeconvenedseventimesduringtheyear.

Anyfactsfoundsduringinternalauditsregularlyconductedforensuringeffective,reliableandpermanentoperationofTüpraşactivitiesandforcompleteness,consistency,reliability,timelyavailability,andsafetyofinformationreceivedfromtheaccountingandfinancialreportingsystemofTüpraş,shallbesharedwiththeCompany’smanagementtoaccompanyitinimprovingtheprocesses.

In2018therefinerieswerevisitedbytheRiskManagementandAuditOffice21times,involvingatotalof258person-day.

ThedeterminedaudititemsaresharedwiththeCompany’srelevantunitsatthebeginningofeveryyeartodeveloptheannualrisk-basedauditplans.TheauditfindingsarepublishedwithintheCompanywithoutdelay,andtherequiredcorrectiveactionsaretaken.Furthermore,mattersthatrequireactionstepsareenteredintoTüpraşRiskandActionPortallaunchedin2018,andtheprocessisalsotrackedviathesaidplatform.Theplatformthatwentliveenablesmoresystematicfollow-upofactionsaccordingtotheirdegreeofimportance.

H. COMPLIANCE

DevelopedinaccordancewithourCodeofEthicsforsustainingtheexistence,operationsandbusinesscontinuityofourCompanyandforsafeguardingourprestige,TüpraşAnti-CorruptionPolicyanditsannexes“Anti-CorruptionGuidelines”and“ForeignTradeControlImplementationGuidelines”cameintoforceinJuly2017.Allemployeesareliabletoreadandunderstandthispolicyandactinaccordancetherewith.

Thementionedpolicyappliestoallouremployees,unitmanagers,subsidiariesofTüpraşandalloftheiremployeesanddirectors,andthirdpartiesdoingbusinessonbehalfofTüpraş.ItshouldbespecificallynotedthatthispolicyisimplementedsoastocoverallCompanyemployeesanddirectors,irrespectiveoftheirpositionwithintheCompanyhierarchy.

ItisthecommonresponsibilityofusalltoknowourAnti-CorruptionPolicy,toespouseandcarefullyimplementit,andtomakesurethatethicalvaluesofourCompanyaresafeguarded.Inthiscontext,trainingwillbegivenonAnti-CorruptionPolicytoallCompanyemployees.



ENGLISH TRANSLATION OF INDEPENDENT AUDITOR’S EARLY RISK DETECTION SYSTEM AND COMMITTEE REPORT

To the Board of Directors of Türkiye Petrol Rafinerileri A.Ş.1.WehaveauditedtheearlyriskidentificationsystemandcommitteeestablishedbyTürkiyePetrolRafinerileriA.Ş.(the“Company”).

Board of Directors’ Responsibility 2. Pursuanttosubparagraph1ofArticle378ofTurkishCommercialCode(“TCC”)No.6102;BoardofDirectorsisrequiredtoforman

expertcommittee,andtorunandtodevelopthenecessarysystemforthepurposesofearlyidentificationofcausesthatjeopardizetheexistence,developmentandcontinuityofthecompany;applyingthenecessarymeasuresandremediesinthisregard;andmanagingtherelatedrisks.

Auditor’s responsibility3.Ourresponsibilityistoreachaconclusionontheearlyriskidentificationsystemandcommitteebasedonouraudit.Ourauditwas

conductedinaccordancewithTCCand“PrinciplesonIndependentAuditor’sReportontheEarlyRiskIdentificationSystemandCommittee”issuedbythePublicOversightAccountingandAuditingStandardsAuthority.ThoseprinciplesrequireustoidentifywhethertheCompanyestablishedtheearlyriskidentificationsystemandcommitteeornotand,ifestablishedrequiresustoassesswhetherthesystemandcommitteeisoperatingornotwithintheframeworkofArticle378ofTCC.OurauditdoesnotincludeevaluatingtheadequacyoftheoperationscarriedoutbythemanagementoftheCompanyinordertomanagetheserisks.

Information on the Early Risk Identification System and Committee4. TheCompanyestablishedtheearlyriskidentificationsystemandcommitteeanditiscomprisedof2members.TheCommitteehas

submittedtherelevantreportsfortheperiod

1January-31December2018totheBoardofDirectorsthathadbeenpreparedforthepurposeofearlyidentificationofrisksthatjeopardizetheexistenceoftheCompanyanditsdevelopment,applyingnecessarymeasuresandremediesinthisregard,andmanagingtherisks.

Conclusion5.Basedonouraudit,ithasbeenconcludedthatTürkiyePetrolRafinerileriA.Ş.’searlyriskidentificationsystemandcommitteeis

sufficient,inallmaterialrespects,inaccordancewithArticle378ofTCC.

İstanbul,13February2019


EVALUATION OF OPERATING PRINCIPLES AND EFFECTIVENESS OF BOARD COMMITTEES

RegardingthestructureofthecommitteesestablishedwithintheframeworkoftheprovisionsstipulatedintheCapitalMarketsBoard’sCorporateGovernanceCommuniquén.II-17.1issuedon3January2014,decisionn.2018/12wastakenbytheBoardofDirectorson23March2018to;

• StructuretheAuditCommitteewith2membersandappointMr.MuharremHilmiKayhanastheCommitteeChairman,andMr.KamilÖmerBozerasaMember;

• StructuretheCorporateGovernanceCommitteewith3membersandappointMr.MuharremHilmiKayhanastheCommitteeChairman,andMr.YağızEyüboğluandMr.DoğanKorkmazasmembers,and;authorizetheCorporateGovernanceCommitteetocarryoutthetasksoftheNominationCommitteeandRemunerationCommitteeinaccordancewiththeCommuniqué,

• StructuretheRiskManagementCommitteewith2membersandappointMs.AyşeCananEdiboğluastheCommitteeChairman,andMr.TemelKamilAtayasaMember,

• StructuretheExecutiveCommitteewith6members,andappointMr.ÖmerMehmetKoçastheCommitteeChairman,Mr.YıldırımAliKoçastheCommitteeViceChairmanandMs.SemahatSevimArsel,Mr.TemelKamilAtayandDr.BülentBulgurluasMembers,

In2018,allBoardCommitteesfulfilledtheirdutiesandresponsibilitiesinaccordancewiththeCorporateGovernancePrinciplesandtheirworkingprinciples.TheCommitteesconvenedaccordingtotheannualmeetingprogram,asfollows:

• TheAuditCommitteeheldatotalofsevenmeetingson22January2018,14February2018,26February2018,9May2018,28June2018,9August2018and07November2018.

• TheCorporateGovernanceCommitteeheldatotaloffivemeetingson8January2018,5February2018,30May2018,29August2018and31December2018.

• TheRiskCommitteeheldatotalofsixmeetingson06February2018,22February2018,01June2018,24September2018,31October2018and06December2018.

• TheExecutiveCommitteeheldatotaloftwelvemeetingson24January2018,20February2018,16March2018,20April2018,21May2018,18June2018,10July2018,17August2018,20September2018,25October2018,20November2018and12December2018.

TheBoardofDirectorsisoftheopinionthattheactivitiesoftheBoardofDirectorsCommitteeshavegeneratedtheexpectedbenefits.

Operating Principles and Activities of the Audit Committee

TheoperatingprinciplesoftheAuditCommitteearepostedonthecorporatewebsite.

The“AuditCommittee,”whichisresponsibleforensuringthattheaccountingandreportingsystemsrunincompliancewithapplicablelawsandregulations,aswellasthepublicdisclosureoffinancialinformationandeffectiveexecutionofindependentauditsandtheinternalcontrolsystem,submitteditsopinionsandrecommendationsrelatedtotheseareastotheBoardofDirectors.

Besidesitsmeetingswhereaudit-relatedactivitieswereaddressedin2018,theAuditCommitteepassedatotalofsevendecisionsinwhichtheCommitteereporteditsopinionsinwritingtotheBoardofDirectors,regardingthetruthfulnessandaccuracyofannualandinterimfinancialstatementsthatwillbepubliclydisclosed,aswellastheirconformitytoaccountingprinciplesespousedbytheCompany.



EVALUATION OF OPERATING PRINCIPLES AND EFFECTIVENESS OF BOARD COMMITTEES

Operating Principles and Activities of the Corporate Governance CommitteeTheoperatingprinciplesoftheCorporateGovernanceCommitteearepostedonthecorporatewebsite.

EstablishedtooverseeandimprovetheCompany’scompliancewithCorporateGovernancePrinciplesandmakerecommendationstotheBoardofDirectorsonfurtherimprovingthecorporategovernancepractices,theCorporateGovernanceCommitteeestablisheswhethertheCompanyachievesfullcompliancewiththeCorporateGovernancePrinciples,determinesthereasonsfornoncompliance,ifapplicable,andtheconflictsofinterestarisingfromfailuretoachievefullcompliance.Inaddition,theCommitteepresentsrecommendedimprovementstotheBoardofDirectors.UndertheprovisionsoftheCorporateGovernancePrinciplespublishedbytheCapitalMarketsBoardofTurkey,theCorporateGovernanceCommitteealsofulfillsthefunctionsofnominatingmemberstotheBoardofDirectors,developingcorporategovernancepracticesinrelationtotheremunerationoftheBoardofDirectorsmembersandseniorexecutives,andpresentingsuggestionsandrecommendationstotheBoardofDirectorsregardingthesame.

In2018,theCorporateGovernanceCommitteereviewedthe“CorporateGovernanceComplianceReport”thatwouldbepubliclydisclosed,andprovidedinformationabouttheactivitiesoftheInvestorRelationsDepartmenttotheBoardofDirectors.TheCommitteealsoworkedonidentifyingindependentBoardmemberstobenominatedandonbenefitsprovidedtotheBoardofDirectorsmembersandseniorexecutives.TheCommitteemeetsatthefrequencyasnecessitatedbythedutiesimposedthereupon.

Operating Principles and Activities of the Risk Management CommitteeTheoperatingprinciplesoftheRiskManagementCommitteearepostedonthecorporatewebsite.

The“RiskManagementCommittee,”whichaimstocounseltheBoardofDirectorsregardingtheearlydetectionandassessmentofallkindsofstrategic,operational,financial,legalandotherrisksthatmayendangertheCompany’sexistence,developmentandcontinuation;estimatestheimpactsandprobabilitiesoftheserisks;andmanagestheserisksinaccordancewiththeCompany’scorporaterisk-takingprofile,oversawtheCompany’sriskmanagementsystems.


AUDIT COMMITTEE REPORT RELATED TO FINANCIAL STATEMENTS

TÜRKİYE PETROL RAFİNERİLERİ A.Ş.AUDIT COMMITTEE REPORT RELATED TO FINANCIAL STATEMENTSDecision Date: :13.02.2019Decision No :2019/2Subject :ConsolidatedFinancialStatementsdated31.12.2018

TotheBoardofDirectorsofTüpraş

WeconvenetoreviewandgiveouropiniononthefinancialstatementsofTürkiyePetrolRafinerileriA.Ş.fortheperiodof1January-31December2018andalsotoreviewtheindependentauditreportofPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.TheconsolidatedfinancialstatementsofTürkiyePetrolRafinerileriA.Ş.havebeenpreparedbythecompanymanagementinaccordancewiththeCMBFinancialReportingCommuniquénumberedasII.14.1.AccordingtotherelatedCommuniqué,entitiesshallpreparetheirfinancialstatementsinaccordancewithTurkishAccountingPrinciples/TurkishFinancialReportingStandards(“TAP/TFRS)andinlinewiththerecommendedformatsoftheCMB.

Duringthisreview,thefairpresentationandaccuracyofthefinancialstatementsreferredtoaboveinconformitywiththeaccountingpoliciesofthecompanyhavebeenelaborated.Independentauditors’andcompanymanagement’sopinionswererequestedasdeemednecessary.

Afterthereviewandevaluationswemadebasedontheinformationprovidedtous;wehaveconcludedthattheconsolidatedfinancialstatementsreferredtoabovearefairlyandaccuratelypresentedandareinlinewiththeaccountingpoliciesofthecompany.Therefore,wewouldliketosubmittheaforementionedfinancialstatementstotheapprovaloftheBoardofDirectors.

Sincerely,

Muharrem Hilmi Kayhan Chairman of the Audit Committee

Kamil Ömer Bozer Member of the Audit Committee



STATEMENT OF RESPONSIBILITY RELATED TO APPROVAL OF FINANCIAL STATEMENTS

STATEMENT OF RESPONSIBILITY PREPARED IN ACCORDANCE WITH ARTICLE 9 OF THE II-14.1 PRINCIPLES OF FINANCIAL REPORTING IN CAPITAL MARKETS COMMUNIQUE BY THE CAPITAL MARKETS BOARD

REGARDINGTHEAPPROVALOFFINANCIALSTATEMENTSBYTHEBOARDOFDIRECTORSDecision Date:13.02.2019Resolution No:2019/4

Weherebyacceptourresponsibilityforthestatementmadeandthuspresentthat:

The“FinancialStatements”-issuedasperthe9tharticleoftheCapitalMarketsBoard’s(CMB)“CommuniquéII-14.1.(Communiqué)ontheprinciplesoffinancialreportingincapitalmarkets”inconformitywiththeTurkishAccountingStandards/TurkishFinancialReportingStandards(“TAS/TFRS”)andwiththeformatsstipulatedbytheCMB-fortheaccountingperiodbetween01.01.2018-31.12.2018,includingthefootnotes,consolidatedfinancialsituationstatement,incomestatement,comprehensiveincomestatement,cashflowstatementandstatementofchangesinequitypreparedbyourCompanyandauditedindependentlybyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.;

• werereviewedbyourCompany,

• withintheframeworkoftheinformationwehaveobtainedinourareaofdutyandresponsibilityatourCompany-donotincludeanystatementsontheimportantissuescontrarytofactsanddonothaveanyimperfectionsthatcouldbemisleadingasofthedatethestatementwasmade,

• andthatthefinancialstatements,togetherwiththeconsolidatedstatements,issuedaspertheCommuniquéwithintheframeworkoftheinformationwehaveobtainedinourareaofdutyandresponsibilityatourCompany-trulyreflectthefactsabouttheCompany’sassets,liabilities,financialsituation,andprofitandloss,

inaccordancewiththeCMBregulations.

Sincerely,

Muharrem Hilmi KayhanChairman of Audit Committee

Kamil Ömer BozerMember of Audit Committee

Doğan KorkmazAssistant General Manager - Financial Affairs

(CFO)


AUDIT COMMITTEE REPORT RELATED TO ANNUAL REPORT

TÜRKİYE PETROL RAFİNERİLERİ A.Ş.AUDIT COMMITTEE REPORTDecision Date :22.02.2019 Decision No :2019/3 Subject :AnnualReportdated31.12.2018

TotheBoardofDirectorsofTüpraş

WearegatheredtoexamineandexpressanopinionontheindependentauditreportpreparedbyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.fortheannualreportfortheperiod1January-31December2018bythemanagementofTüpraşcompatiblewiththeformatsdeterminedbyCMBandTurkeyAccountingStandards/TurkeyFinancialReportingStandards(TMS/TFRS)inaccordancewiththeii-14.1.PrinciplesofFinancialReportinginCapitalMarketsCommuniquébyCapitalMarketsBoardandtheTurkishCommercialCode.

Inthisreview,assessmentshavebeenmaderegardingtheaccuracyandreliabilityofthementionedannualreportrelatedto1January-31December2018periodwithaccountingpoliciesoftheCompanyandwithfacts.Ifnecessary,opinionsoftheindependentauditoroftheauditingcompanyandresponsiblemanagersoftheCompanyweretaken.

Weherebydecidedpositivelyfortheaccuracyandconvenienceoftheannualreportfromtheperiod1January-31December2018withtheprinciplesofaccountingandweshallsubmittheAnnualReportontheapprovaloftheBoardofDirectors.

Sincerely,

Muharrem Hilmi Kayhan Chairman of Audit Committee

Kamil Ömer Bozer Chairman of Audit Committee



STATEMENT OF RESPONSIBILITY RELATED TO APPROVAL OF ANNUAL REPORT

STATEMENT OF RESPONSIBILITY PREPARED IN ACCORDANCE WITH ARTICLE 9 OF THE II- 14.1. PRINCIPLES OF FINANCIAL REPORTING IN CAPITAL MARKETS COMMUNIQUÉ BY THE CAPITAL MARKETS BOARD

RegardıngtheApprovalOfTheAnnualReportByTheBoardOfDırectorsDecision Date:22.02.2019Resolution No:2019/08

Our2018annualreportpreparedbyourCompanyandauditedindependentlybyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.andwhichhasbeenpreparedinaccordancewiththeII-14.1.PrinciplesofFinancialReportinginCapitalMarketsCommuniquébyCapitalMarketsBoardandtheTurkishCommercialCodeispresentedasattachment.

Wedeclareittoyourinformationandacceptthatweareresponsibleforthestatement,thattheannualreportpreparedbyourCompanyhasbeenexamined

• inaccordancewiththeregulationsofCMB,

• Itdoesnotcontainanygapsthatcouldresultinmisleadingstatementsasofthedateofannouncementorfalsestatementsaboutimportantmattersintheframeworkofourareasofdutiesandresponsibilitiesinourcompany,

• TheannualreportwhichhasbeenpreparedinaccordancewiththeCommuniquéreflectstheperformanceanddevelopmentofbusinessandthefinancialstateofthecompanytogetherwiththosefactorsunderconsolidationanduncertaintiesandrisksclearly.

Sincerely,

Muharrem Hilmi KayhanChairman of Audit Committee

Kamil Ömer BozerMember of Audit Committee

Doğan KorkmazAssistant General Manager -

Financial Affairs (CFO)


DECLARATION FOR INDEPENDENCY

IherebydeclarethatIamcandidateforindependentboardmembershipontheBoardofDirectorsofTürkiyePetrolRafinerileriA.Ş.(“Company”)underrelatedregulations,ArticlesofAssociationoftheCompanyandthecriteriastatedintheCapitalMarketsBoard’sCommuniquéonCorporateGovernance.InthatregardIalsoconfirmthat;

a)Inthelastfiveyears,I,myspouseormyuptotheseconddegreebloodoraffinityrelativesisnotorhasnotbeen;employedbyasakeymanagementpersonnel;hasnothadshareholdingexceeding5%directlyorindirectly;orhasnotbeeninvolvedinanymaterialbusinessdealingswiththeCompany,itssubsidiariesandaffiliates,orshareholderscontrollingtheCompanyorhavingmaterialeffectovertheCompanyandallentitiescontrolledbythoseshareholders,

b)Inthelastfiveyears,Iamnotorhavenotbeenemployedbyasanexecutivehavingsignificantdutiesandresponsibilitiesorhavenotbeenamemberoftheboardordidnothaveshareholdingexceeding5%ofanentitywhichhashadacontractualrelationshipwiththeCompanyforamaterialbusinesstransactionincludingaudit(includingtaxaudit,legalaudit,andinternalaudit)ratingorconsultingservicesduringthetermsinwhichthegoodsorserviceswereprovided,

c)MyCVindicatesthatIhaveskills,knowledgeandexpertiserelevanttotheCompany’sbusinessandextensiveexperiencetofulfillmydutiesasanindependentboardmember,

d)AftermyelectionIwillnotworkfulltimeinaTurkishgovernmentalorpublicinstitution,exceptforthefacultymembershipunderrelevantregulations,

e)IamdeemedtoberesidentinTurkeyaccordingtoRevenueTaxLawNo.193dated31.12.1960,

f) IamcapabletocontributepositivelytotheoperationsoftheCompany,tomaintainmyobjectivityinconflictsofinterestsbetweentheCompanyandtheshareholders,tohavestrongethicalstandards,professionalreputationandexperiencetofreelytakedecisionsbyconsideringtherightsofthestakeholders,

g)IwilldedicateenoughtimetofollowuptheactivitiesoftheCompanyandforthedulyfulfillmentofmyresponsibilities,

h)IhavenotbeenontheboardoftheCompanyformorethansixyearswithinlasttenyears,

i) Iamnotservingasanindependentboardmemberinneithermorethan3corporationscontrolledbythecompanyoritscontrollingshareholdersnorintotalmorethan5corporationslistedinBorsaİstanbul,

j) Iamnotregisteredinthenameofanylegalentityelectedasaboardmember.

Kamil Ömer Bozer















Ayşe Canan Ediboğlu














Muharrem Hilmi Kayhan



Türkiye Petrol Rafinerileri A.Ş. Convenience Translation of Consolidated Financial Statements Originally Issued in Turkish

1 January - 31 December 2018 Consolidated Financial Statements Together with The Independent Auditor’s Report

160 | Tüpraş 2018 ANNUAL REPORT

CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ORIGINALLY ISSUED IN TURKISH

To the General Assembly of Türkiye Petrol Rafinerileri A.Ş.

A. Audit of the Consolidated Financial Statements

1. Opinion

We have audited the accompanying consolidated financial statements of Türkiye Petrol Rafinerileri A.Ş. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statement of financial position as at 31 December 2018 and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and the notes to the consolidated financial statements and a summary of significant accounting policies and consolidated financial statement notes.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Turkish Financial Reporting Standards (“TFRS”).

2. Basis for Opinion

Our audit was conducted in accordance with the Standards on Independent Auditing (the “SIA”) that are part of Turkish Standards on Auditing issued by the Public Oversight Accounting and Auditing Standards Authority (the “POA”). Our responsibilities under these standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We hereby declare that we are independent of the Group in accordance with the Ethical Rules for Independent Auditors (the “Ethical Rules”) and the ethical requirements regarding independent audit in regulations issued by POA that are relevant to our audit of the consolidated financial statements. We have also fulfilled our other ethical responsibilities in accordance with the Ethical Rules and regulations. We believe that the audit evidence we have obtained during the independent audit provides a sufficient and appropriate basis for our opinion.

Independent Auditor’s Report

Tüpraş 2018 ANNUAL REPORT | 161


3. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. Key audit matters were addressed in the context of our independent audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters How the subject was handled during the auditCash flow hedge transactions

The Group is exposed to foreign exchange risk due to its industry dynamics. As explained in Note 32, the Group uses its investment loans amounting to USD982,082 thousand as hedging instruments against USD/TL spot exchange rate exposure resulting from highly probable future export sales and applies cash flow hedge accounting as a result of the effectiveness tests. Therefore the Group has accounted for TL2,575,965 thousand of foreign exchange losses resulted from related investment loans under the “cash flow hedge gains/losses” account in its consolidated equity as of 31 December 2018.

We focused on this matter in our audit due to the following reasons:

• Fluctuations in foreign exchange rates due to the macroeconomic conditions may have a material impact on cash flow hedge transactions and the exchange rate risk in the Group’s consolidated financial statements.

• The calculations in the effectiveness testing of cash flow hedge transactions include key management judgements and estimates, such as future exchange rates, crude oil/product prices and export sales tonnages.

• Since realisation of such key management judgements and estimates in the future include inherent uncertainties and the related effectiveness tests require specialist involvement, we determined ‘cash flow hedge transactions’ as a key audit matter.

In summary, the audit procedures we carried out for cash flow hedge transactions include; (i) understanding the accounting process for such transactions, (ii) confirming the related investment loans with financial institutions, (iii) evaluating the effectiveness tests performed by management, including detail testing on its completeness and accuracy and (iv) evaluating key management estimates and assumptions used in the related calculations with the support of our specialists.

We evaluated the effectiveness tests through analysing past performances and review of sensitivity analysis.

We evaluated the appropriateness of cash flow hedge accounting documentation with the support of our specialists. Besides the reasonableness of the key management assumptions (such as crude oil/product prices and export sales tonnages) used in the effectiveness tests are evaluated with the support of our specialists, through comparing with prior period performance and independent data sources.

We confirmed the related investment loans with the financial institutions, recalculated the year end interest expense accruals and foreign exchange valuations in line with the loan agreements and tested them for mathematical accuracy.

We evaluated the cash flow hedge transactions disclosures’ compliance with TFRS.

Based on the above procedures performed we had no material finding on the cash flow hedge transactions.

Recoverability of deferred tax assets

As of 31 December 2018 the Group’s consolidated financial statements include net deferred tax assets amounting to TRY3,566,132 thousand.

The Group’s accounting policies and other related disclosures on deferred tax assets and liabilities are disclosed in Note 2.3 and Note 29 to the accompanying consolidated financial statements.

The business model and future taxable profit projections used in assessing the recoverability of deferred tax assets are based on critical management estimates. Considering the inherent uncertainties as to the realisation of such management estimates in the future, the necessity for specialist involvement in the assessment of the recoverability of deferred tax assets on investment incentives, as well as the materiality of such assets in the Group’s consolidated financial statements, ‘recoverability deferred tax assets’ is determined as a key audit matter.

The audit procedures are designed; (i) to assess the compliance of deferred tax assets’ recognition to TFRS and the related tax legislations, (ii) to assess its recoverability and (iii) to test its mathematical accuracy. In that context the following summarised audit procedures are performed:

• We held meetings with the Group management in order to understand the nature of related temporary differences and the investment incentives which form the basis to the deferred tax assets.

• We evaluated the corporate tax calculation and investment incentive practices with the support of our tax specialists.

• We reviewed the business model used in assessing the recoverability of deferred tax assets from such investment incentives and the critical management estimates through following procedures:

• We tested the mathematical accuracy of the business model.

• We compared the sales tonnage and price estimations used in the model against prior periods’ actuals and other independent data sources.

• We compared the future foreign exchange rate estimations used in the business model against the exchange rate estimations in the approved Group’s budget/long term plans and independent data sources.

• We tested the management’s sensitivity analysis for key assumptions for the future utilisation of investment incentives.

• We evaluated the deferred tax assets and liabilities disclosures’ compliance with TFRS.

Based on the above procedures performed we had no material finding on the recoverability of deferred tax assets.



4. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

The Group management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with TFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

5. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Responsibilities of independent auditors in an independent audit are as follows:

Our aim is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an independent auditor’s report that includes our opinion. Reasonable assurance expressed as a result of an independent audit conducted in accordance with SIA is a high level of assurance but does not guarantee that a material misstatement will always be detected. Misstatements can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an independent audit conducted in accordance with SIA, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Assess the internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our independent auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence. We also communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.



From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

B. Other Responsibilities Arising From Regulatory Requirements

1. No matter has come to our attention that is significant according to subparagraph 4 of Article 402 of Turkish Commercial Code (“TCC”) No. 6102 and that causes us to believe that the Company’s bookkeeping activities concerning the period from 1 January to 31 December 2018 period are not in compliance with the TCC and provisions of the Company’s articles of association related to financial reporting.

2. In accordance with subparagraph 4 of Article 402 of the TCC, the Board of Directors submitted the necessary explanations to us and provided the documents required within the context of our audit.

3. In accordance with subparagraph 4 of Article 398 of the TCC, the auditor’s report on the early risk identification system and committee was submitted to the Company’s Board of Directors on 13 February 2019.

PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.

Ediz Günsel, SMMM Partner

İstanbul, 13 February 2019



TABLE OF CONTENTS PAGE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 166

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME 168

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 170

CONSOLIDATED STATEMENTS OF CASH FLOWS 172

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 173-228

NOTE 1 - Organization and nature of operations of the group 173

NOTE 2 - Basis of presentation of consolidated financial statements 174

NOTE 3 - Business combinations 188

NOTE 4 - Cash and cash equıvalents 189

NOTE 5 - Financial liabilities 190

NOTE 6 - Trade receivables and payables 193

NOTE 7 - Other receivables and payables 194

NOTE 8 - Inventories 194

NOTE 9 - Financial ınvestments 195

NOTE 10 - Investments accounted for using the equity method 195

NOTE 11 - Investment property 197

NOTE 12 - Property, plant and equipment 197

NOTE 13 - Intangible assets 199

NOTE 14 - Prepaid expenses 199

NOTE 15 - Other assets and liabilities 200

NOTE 16 - Deferred income 202

NOTE 17 - Provisions 202

NOTE 18 - Liabilities for employee benefits 204

NOTE 19 - Other payables 205

NOTE 20 - Derivative instruments 205

NOTE 21 - Government grants 206

NOTE 22 - Commitments and contingent assets and liabilities 208

NOTE 23 - Equity 209

NOTE 24 - Revenue and cost of sales 211

NOTE 25 - General administrative expenses, marketing expenses and research and development expenses 211

NOTE 26 - Other operating income/(expenses) 212

NOTE 27 - Income/(expense) from investment activities 213

NOTE 28 - Financial income/(expenses) 213

NOTE 29 - Tax assets and liabilities 213

NOTE 30 - Earnings per share 215

NOTE 31 - Related party transactions 215

NOTE 32 - Financial instruments and financial risk management 218

NOTE 33 - Subsequent events 228

Contents



Audited AuditedASSETS Notes 31 December 2018 31 December 2017 Current Assets 20,962,205 20,366,024 Cash and cash equivalents 4 5,982,828 8,802,069Trade receivables 6 5,428,738 5,027,033Due from related parties 6, 31 1,132,117 1,399,601Trade receivables from third parties 4,296,621 3,627,432Other receivables 7 29,048 84,267Other receivables from third parties 29,048 84,267Derivative instruments 20 175,532 346,909Inventories 8 6,764,745 5,291,090Prepaid expenses 14 108,689 62,397Other current assets 15 2,472,625 752,259 Non-current assets 19,073,522 17,796,955 Financial investments 9 - 9,000Investments accounted for using the equity method 10 1,266,334 1,134,364Investment properties 11 4,621 4,621Property, plant and equipment 12 12,339,167 12,303,437Intangible assets 13 58,185 65,187Other intangible assets 58,185 65,187Derivative instruments 20 168,266 100,560Prepaid expenses 14 378,000 99,276Deferred tax assets 29 3,566,132 3,067,871Other non-current assets 15 1,292,817 1,012,639 Total assets 40,035,727 38,162,979

Türkiye Petrol Rafinerileri A.Ş.

(Amounts expressed in thousands of Turkish Lira (“TRY”) unless otherwise indicated.)

Consolidated Statements of Financial Position as at 31 December 2018

The accompanying notes form an integral part of these consolidated financial statements


Audited AuditedASSETS Notes 31 December 2018 31 December 2017 LIABILITIES Current liabilities 15,949,538 17,675,669 Short-term financial liabilities 5 1,141,869 340,875Current portion of long term financial liabilities 5 2,971,529 4,932,839Trade payables 6 7,496,141 8,213,166Due to related parties 6, 31 77,096 115,456Trade payables, third parties 7,419,045 8,097,710Liabilities for employee benefits 18 127,500 119,833Other payables 19 39,300 36,797Due to related parties 19, 31 24,279 23,463Other payables to third parties 15,021 13,334Derivative instruments 20 236,050 177,137Deferred income 16 4,878 20,428Current income tax liabilities 29 98,749 21,296Provisions 17 80,345 89,924Provisions for employee benefits 8,863 12,629Other provisions 71,482 77,295Other current liabilities 15 3,753,177 3,723,374 Non-current liabilities 14,140,360 10,009,649 Long-term financial liabilities 5 13,836,142 9,777,270Provisions 17 257,392 223,734Provisions for employee benefits 257,392 223,734Deferred income 16 3,638 4,112Derivative Instruments 20 42,237 3,364Other non-current liabilities 15 951 1,169 Non-current liabilities 30,089,898 27,685,318 Equity 9,945,829 10,477,661 Share capital 23 250,419 250,419Adjustment to share capital 23 1,344,243 1,344,243Accumulated other comprehensive income/(expense) not to be reclassified to profit or loss 3,478 (3,361)

Gains/ losses on revaluation and remeasurement 5,021 (2,211)Actuarial gain/(loss) arising from defined benefit plans 5,021 (2,211)Share of other comprehensive income of investments accounted for using equity method that will not be reclassified to profit or loss (1,543) (1,150)

Accumulated other comprehensive income/(expense) to be reclassified to profit or loss (1,822,867) (960,973)

Hedging gains/(losses) (2,094,224) (1,141,847)Cash flow hedge gains/(losses) (2,094,224) (1,141,847)Share of other comprehensive income of investments accounted for using equity method that will be reclassified to profit or loss 271,357 180,874

Restricted reserves 23 597,086 279,668Retained earnings 5,739,481 5,651,805Net income 3,712,789 3,811,546 Total equity attributable to equity holders of the parent 9,824,629 10,373,347 Non-controlling interests 121,200 104,314 Total equity and liabilities 40,035,727 38,162,979

These consolidated financial statements as of and for the year ended 31 December 2018 has been approved for issue by the Board of Directors (“BOD”) on 13 February 2019. These consolidated financial statements will be finalised following their approval in the General Assembly.



Consolidated Statements of Financial Position as at 31 December 2018




Audited Audited 1 January - 1 January - Notes 31 December 2018 31 December 2017 Revenue 24 88,552,170 53,948,110Cost of sales 24 (79,327,847) (47,734,212) Gross profit 9,224,323 6,213,898 General administrative expenses 25 (1,001,517) (865,401)Marketing expenses 25 (284,806) (268,889)Research and development expenses 25 (21,061) (15,950)Other operating income 26 930,619 261,261Other operating expenses 26 (3,111,258) (467,460) Operating profit/(loss) 5,736,300 4,857,459 Income from investment activities 27 - -Expense from investment activities 27 (9,378) (10,199)Income/(loss) from investments accounted by equity method 10 265,880 244,639

Operating profit before financial income/(expense) 5,992,802 5,091,899

Financial income 28 3,286,945 1,162,799Financial expense 28 (5,555,367) (1,780,660) Profit before tax from continued operations 3,724,380 4,474,038

Tax income/(expense) 37,065 (633,482)

Taxes on income 29 (218,388) (464,902)Deferred tax income/(expense) 29 255,453 (168,580)

Net income from continued operations 3,761,445 3,840,556



Consolidated Statement of Profit or Loss and Other ComprehensiveIncome for the Year Ended 31 December 2018



Audited Audited 1 January - 1 January - Notes 31 December 2018 31 December 2017 Other comprehensive income: Items not to be reclassified to profit or loss 6,917 4,668Actuarial gain/(loss) arising from defined benefit plans 9,273 4,941Share of other comprehensive income accounted for investmentusing equity method that will be not reclassified to profit or loss (393) 712

Actuarial gain/(loss) arising from defined benefit plans accountedfor investment using equity method (393) 712

Tax effect of other comprehensive income/(loss)not to be reclassified to profit or loss (1,963) (985)

Deferred tax income/(expense) (1,963) (985) Items to be reclassified to profit or loss (893,742) 22,511Share of other comprehensive income accounted for investmentusing equity method that will be reclassified to profit or loss 90,483 35,019

Actuarial gain/(loss) of revaluation or classification ofinvestments using equity method 72,644 32,218Gain/(loss) from translation of foreign currency of investments using equity method 17,839 2,801

Income/(expense) relating to avoidance of risk of cash flow (1,228,996) (22,913)Income/(loss) of avoidance of risk cash flow (1,228,996) (22,913)

Tax effect of other comprehensive income/(loss) to be reclassified to profit or loss 244,771 10,405

Deferred tax income/(expense) 244,771 10,405 Other comprehensive income/(expense) (886,825) 27,179 Total comprehensive income/(expense) 2,874,620 3,867,735 Distribution of income for the period: Non-controlling interests 48,656 29,010Attributable to equity holders of the parent 3,712,789 3,811,546 Distribution of total comprehensive income Non-controlling interests 16,886 25,667Attributable to equity holders of the parent 2,857,734 3,842,068 Earnings (loss) per share from continued operations Earnings per share with nominal value Kr1 each (Kr) 30 14.83 15.22



Consolidated Statement of Profit or Loss and Other ComprehensiveIncome for the Year Ended 31 December 2018




Accumulated other comprehensive income/(expense)

not to be reclassified to profit or loss


not to be reclassified to profit or lossGain/(losses) on

valuationand remeasurement

Hedge gains/losses Retained earnings

Share

capital

Adjustmentto share

capital

Sharepremiums

(discounts)

Actuarial gains/(losses)

arising from definedbenefit plans

Share of other comprehensive

income of invesments accounted

using equity method that will be

not reclassified to profit or loss

Cash flowhedge

Gains/(losses)


income of investments

accounted using equity

method that will bereclassified to profit

or lossRestricted

reservesRetainedearnings

NetIncome/expense

Equityholders

ofparent

Non-controlling

interest Total equity

Audited

1 January 2017 250,419 1,344,243 172 (6,124) (1,862) (1,132,725) 145,855 331,337 5,363,804 1,793,267 8,088,386 78,647 8,167,033

Transfers - - - - - - - - 1,793,267 (1,793,267) - - -Dividends paid - - (172) - - - - (51,669) (1,505,266) - (1,557,107) - (1,557,107)

- Net profit for period - - - - - - - - - 3,811,546 3,811,546 29,010 3,840,556- Other comprehensive income - - - 3,913 712 (9,122) 35,019 - - - 30,522 (3,343) 27,179

Total comprehensive income - - - 3,913 712 (9,122) 35,019 - - 3,811,546 3,842,068 25,667 3,867,735

31 December 2017 250,419 1,344,243 - (2,211) (1,150) (1,141,847) 180,874 279,668 5,651,805 3,811,546 10,373,347 104,314 10,477,661

Audited

1 January 2018 250,419 1,344,243 - (2,211) (1,150) (1,141,847) 180,874 279,668 5,651,805 3,811,546 10,373,347 104,314 10,477,661

Transfers - - - - - - - 339,393 3,472,153 (3,811,546) - - -Dividends paid - - - - - - - (21,975) (3,384,477) - (3,406,452) - (3,406,452)

- Net profit for period - - - - - - - - - 3,712,789 3,712,789 48,656 3,761,445- Other comprehensive income - - - 7,232 (393) (952,377) 90,483 - - - (855,055) (31,770) (886,825)

Total comprehensive income - - - 7,232 (393) (952,377) 90,483 - - 3,712,789 2,857,734 16,886 2,874,620

31 December 2018 250,419 1,344,243 - 5,021 (1,543) (2,094,224) 271,357 597,086 5,739,481 3,712,789 9,824,629 121,200 9,945,829


(Amounts expressed in thousands of Turkish Lira (“TRY”), unless otherwise indicated)

Consolidated Statements of Changes in Equity for the Year Ended 31 December 2018




not to be reclassified to profit or loss


not to be reclassified to profit or lossGain/(losses) on

valuationand remeasurement

Hedge gains/losses Retained earnings

Share

capital

Adjustmentto share

capital

Sharepremiums

(discounts)

Actuarial gains/(losses)

arising from definedbenefit plans


income of invesments accounted

using equity method that will be

not reclassified to profit or loss

Cash flowhedge

Gains/(losses)


income of investments

accounted using equity

method that will bereclassified to profit

or lossRestricted

reservesRetainedearnings

NetIncome/expense

Equityholders

ofparent

Non-controlling

interest Total equity

Audited

1 January 2017 250,419 1,344,243 172 (6,124) (1,862) (1,132,725) 145,855 331,337 5,363,804 1,793,267 8,088,386 78,647 8,167,033

Transfers - - - - - - - - 1,793,267 (1,793,267) - - -Dividends paid - - (172) - - - - (51,669) (1,505,266) - (1,557,107) - (1,557,107)

- Net profit for period - - - - - - - - - 3,811,546 3,811,546 29,010 3,840,556- Other comprehensive income - - - 3,913 712 (9,122) 35,019 - - - 30,522 (3,343) 27,179

Total comprehensive income - - - 3,913 712 (9,122) 35,019 - - 3,811,546 3,842,068 25,667 3,867,735

31 December 2017 250,419 1,344,243 - (2,211) (1,150) (1,141,847) 180,874 279,668 5,651,805 3,811,546 10,373,347 104,314 10,477,661

Audited

1 January 2018 250,419 1,344,243 - (2,211) (1,150) (1,141,847) 180,874 279,668 5,651,805 3,811,546 10,373,347 104,314 10,477,661

Transfers - - - - - - - 339,393 3,472,153 (3,811,546) - - -Dividends paid - - - - - - - (21,975) (3,384,477) - (3,406,452) - (3,406,452)

- Net profit for period - - - - - - - - - 3,712,789 3,712,789 48,656 3,761,445- Other comprehensive income - - - 7,232 (393) (952,377) 90,483 - - - (855,055) (31,770) (886,825)

Total comprehensive income - - - 7,232 (393) (952,377) 90,483 - - 3,712,789 2,857,734 16,886 2,874,620

31 December 2018 250,419 1,344,243 - 5,021 (1,543) (2,094,224) 271,357 597,086 5,739,481 3,712,789 9,824,629 121,200 9,945,829



Audited Audited 1 January - 1 January - 31 December 2018 31 December 2017Cash flows from operating activities Notes 1,351,978 2,917,438 Profit/(loss) 3,761,445 3,840,556Adjustment for reconciliation of profit/(loss) 2,491,882 1,782,086Adjustment for depreciation and amortisation expense 12, 13 622,494 573,640Adjustments for stock impairment(cancelation) 86,609 1,246Adjustments for stock impairment 8 86,609 1,246Adjustment for provisions 17 117,957 110,197Adjustment for interest (income) and expense 28 940,320 160,195Adjustment for unrealized foreign currency translation differences 28 (2,918,108) (461,105)Adjustment for fair value (gain) or loss 130,739 (92,662)Adjustment for income of investments accounted by equity method 10 (265,880) (244,639)Adjustment for tax expenses(income) 29 (37,065) 633,482Adjustment for (gain)/loss on sales of property, plant and equipment 27 9,378 10,199Adjustment for other items related with cash flow of investment or financial activities 28 3,777,952 1,033,591Other adjustments for reconciliation of profit/(loss) 27,486 57,942Changes in working capital (4,675,072) (2,152,135)Adjustment for decrease/(increase) in trade receivables (403,568) (1,873,499)Adjustment for decrease/(increase) in other receivables related with operations (1,990,959) (148,602)Adjustment for decrease/(increase) in derivative assets 103,671 (43,856)Adjustment for decrease/(increase) in inventories (1,560,264) (1,683,897)Adjustment for increase/(decrease) in trade payables (719,275) 1,222,948Adjustment for increase/(decrease) in other payables related with operations (202,463) 225,506Adjustment for decrease/(increase) in derivative liabilities 97,786 149,265Cash flows from operating activities 1,578,255 3,470,507Tax returns/(payments) (140,935) (488,895)Other cash inflow/(outflow) (85,342) (64,174) Cash flows from investing activities (715,982) (1,030,148) Cash outflows in subsidiaries regarding additional share purchases - (5,000)Cash inflows from the sales of property, plant and equipment and intangible assets 1,081 4,802Cash outflows from the purchase of property, plant and equipment and intangible assets (941,063) (1,099,950)Dividends received 10 224,000 70,000 Cash flows from financing activities (6,593,759) 221,938 Cash inflows from financial liabilities 5 38,952,115 43,859,854Cash outflows from financial liabilities 5 (41,005,302) (42,051,025)Cash inflows from derivative instruments 405,021 180,446Cash outflows from derivative instruments (666,358) (93,501)Dividends paid (3,406,452) (1,557,107)Interest paid (1,248,137) (673,139)Interest received 375,354 556,410 Net increase/(decrease) in cash and cash equivalents before the effect of foreign currency translation differences (5,957,763) 2,109,228 Impact of foreign currency translation differences on cash and cash equivalents 2,918,108 461,105 Net increase/(decrease) in cash and cash equivalents (3,039,655) 2,570,333 Cash and cash equivalents at the beginning of the period 7,592,735 5,022,402 Cash and cash equivalents at the end of the period 4 4,553,080 7,592,735


(Amounts expressed in thousands of Turkish Lira (“TRY”), unless otherwise indicated.)

Notes to the Consolidated Financial Statements for the Year Ended 31 December 2018



NOTE 1 - Organization and nature of operations of the group

Türkiye Petrol Rafinerileri A.Ş. (“Tüpraş” or the “Company”) was established on 16 November 1983. The Company is mainly engaged in the following fields:

· To provide and refine all kinds of crude oil, petroleum and chemical products, to sustain all kinds of commercial operations of produced and imported crude oil, petroleum and chemical products including export along with the storage and transportation activities during production and selling stages and to establish and operate domestic and foreign refineries for this purpose.

· To establish and operate factories and facilities in petrochemical and other related industries,

· To provide the necessary raw and supplementary materials and process, produce or trade these materials in order to obtain petrochemical and other related products,

· To package the products produced during various phases of production and to establish a packaging industry for this purpose, to evaluate and/or to sell waste, by products and substandard products, to establish and operate the necessary facilities for the destruction of the waste products,

· To establish and operate facilities and plants related with all kinds of energy and energy related industries within the framework of the laws and regulations. To obtain, use and trade all kinds of equipment, materials and chemical substances for this purpose,

· To purchase, sell, import, export, store, market all kinds of petroleum products, LPG and natural gas, to establish marketing and distributing companies or similar partnerships with legal entities or real persons or to acquire, transfer or sell the shares of partnerships, when necessary.

The main operations of Tüpraş and its subsidiaries (collectively referred as “the Group”) are in Turkey and the Group’s business segment has been identified as refining.

The Company is registered at the Capital Markets Board (“CMB”) of Turkey and its shares have been quoted at Borsa İstanbul A.Ş. (“BIST”) since 1991. As at 31 December 2018, the shares quoted on the BIST are 49% of the total shares. As of 31 December 2018, the principal shareholders and their respective shareholdings in the Company are as follows (Note 23):

(%)

Enerji Yatırımları A.Ş. 51.00Publicly held 49.00

100.00

Enerji Yatırımları A.Ş., the parent of the Company is controlled by Koç Holding A.Ş., Koç Family and the companies owned by Koç Family.






NOTE 1 - Organization and nature of operations of the Group (Continued)

The nature of the business of the subsidiaries and joint ventures of the Group is as follows:

SubsidiariesCountry of

incorporation Nature of business

Ditaş Deniz İşletmeciliği ve Tankerciliği A.Ş. (“Ditaş”) Turkey Crude oil and petroleum products transportationÜsküdar Tankercilik A.Ş. (“Üsküdar”) Turkey Crude oil and petroleum products transportationT Damla Denizcilik A.Ş. (“Damla”) Turkey Mooring and tug serviceKadıköy Tankercilik A.Ş. (“Kadıköy”) Turkey Crude oil and petroleum products transportationBeykoz Tankercilik A.Ş. (“Beykoz”) Turkey Crude oil and petroleum products transportationSarıyer Tankercilik A.Ş. (“Sarıyer”) Turkey Crude oil and petroleum products transportationKartal Tankercilik A.Ş. (“Kartal”) Turkey Crude oil and petroleum products transportationMaltepe Tankercilik A.Ş. (“Maltepe”) Turkey Crude oil and petroleum products transportationSalacak Tankercilik A.Ş. (“Salacak”) Turkey Crude oil and petroleum products transportationKarşıyaka Tankercilik A.Ş. (“Karşıyaka”) Turkey Crude oil and petroleum products transportationBakırköy Tankercilik A.Ş. (“Bakırköy”) Turkey Crude oil and petroleum products transportationKaraköy Tankercilik A.Ş. (“Karaköy”) Turkey Crude oil and petroleum products transportationÇengelköy Tankercilik A.Ş. (“Çengelköy”) Turkey Crude oil and petroleum products transportationPendik Tankercilik A.Ş. (“Pendik”) Turkey Crude oil and petroleum products transportationTuzla Tankercilik A.Ş. (“Tuzla”) Turkey Crude oil and petroleum products transportationKörfez Ulaştırma A.Ş. (“Körfez”) Turkey Air, maritime, road and railtransportation

Country ofJoint ventures Incorporation Nature of business

OPET Petrolcülük A.Ş. (“Opet”) Turkey Petroleum products retail distributionTHY Opet Havacılık Yakıtları A.Ş. Turkey Jet fuel supply servicesOpet International Limited United Kingdom Petroleum products tradingOpet Trade B.V. Netherlands Petroleum products tradingOpet Trade Singapore (In liquidation) (*) Singapore Petroleum products tradingOpet Fuchs Madeni Yağ San. ve Tic. A.Ş. Turkey Lube oil tradingOp Ay Akaryakıt Ticaret Ltd. Şti. Turkey Petroleum products tradingAkdeniz Akaryakıt Depolama Nakliyat ve Tic. A.Ş. Turkey Petroleum products tradingNemrut Liman ve Boru İşl. Nak. İç ve Dış Tic. Ltd. Şti. Turkey Marine servicesOpet Aygaz Gayrimenkul A.Ş. Turkey Real estate

(*) The company discontinued its activities as of 15 July 2015.

The average number of employees of the Group as at 31 December 2018 is 5,952 (31 December 2017 – 5,499).

The address of the registered office of the Company is as follows:

Türkiye Petrol Rafinerileri A.Ş.Güney Mahallesi Petrol Caddesi No:25 41790Körfez, Kocaeli NOTE 2 - Basis of presentation of consolidated financial statements

2.1. Basis of presentation

2.1.1 Financial reporting standards

The consolidated financial statements and disclosures have been prepared in accordance with the communiqué numbered II-14,1 “Communiqué on the Principles of Financial Reporting In Capital Markets” (the Communiqué) announced by the Capital Markets Board (“CMB”) on 13 June 2013 which is published on Official Gazette numbered 28676. In accordance with article 5th of the Communique, companies should apply Turkish Financial Reporting Standards (“TFRS”) and interpretations regarding these standards as published by the Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”).





NOTE 2 - Basis of presentation of consolidated financial statements (Continued)

2.1. Basis of presentation (Continued)

2.1.1 Financial reporting standards (Continued)

The consolidated financial statements are presented in accordance with “Announcement regarding with TAS Taxonomy” which was published on 2 June 2016 by POA and the format and mandatory information recommended by CMB.

The Group and the group companies established in Turkey maintain their books of account and prepare their statutory financial statements (“Statutory Financial Statements”) in accordance with rules and principles published by POA, the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. These consolidated financial statements have been prepared under the historical cost convention except for derivative instruments that are carried at fair value. These consolidated financial statements are based on the statutory records with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the Turkish Financial Reporting Standards.

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in TRY, which is the functional currency of Tüpraş and the presentation currency of the Group.

2.1.2 Amendments in Turkish Financial Reporting Standards (TFRS)

The new standards, amendments and interpretations

The accounting policies adopted in preparation of the consolidated financial statements as at 31 December 2018 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and IFRIC interpretations effective as of 1 January 2018. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs.

a. Standards, amendments and interpretations applicable as at 31 December 2018 :

· TFRS 9, “Financial Instruments”; effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. The amendments do not have a significant impact in the Group’s consolidated financial statement.

· TFRS 15, “Revenue from contracts with customers”; effective from annual periods beginning on or after 1 January 2018. TFRS 15, ‘Revenue from contracts with customers’ is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the total income of the financial statements on a wordwide basis.

· Amendment to TFRS 15, ‘Revenue from contracts with customers’; effective from annual periods beginning on or after 1 January 2018. These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The TASB has also included additional practical expedients related to transition to the new revenue standard. The amendments do not have a significant impact in the Group’s consolidated financial statement.

· Amendment to TAS 40, ‘Investment property’ relating to transfers of investment property’; effective from annual periods beginning on or after 1 January 2018. These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. The amendments do not have a significant impact in the Group’s consolidated financial statement and performance.

· Amendments to TFRS 2, ‘Share based payments’; on clarifying how to account for certain types of share-based payment transactions; effective from annual periods beginning on or after 1 January 2018. This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles in TFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority. The amendments do not have a significant impact in the Group’s consolidated financial statement and performance.








2.1.2 Amendments in Turkish Financial Reporting Standards (TFRS) (Continued)

· Annual improvements 2014-2016; effective from annual periods beginning on or after 1 January 2018.

· TFRS 1, ‘First time adoption of TFRS’; regarding the deletion of short-term exemptions for first-time adopters regarding TFRS 7, TAS 19 and TFRS 10. The amendments do not have a significant impact in the group’s consolidated financial statement and performance.

· TAS 28, ‘Investments in associates and joint venture’; regarding measuring an associate or joint venture at fair value. The amendments do not have a significant impact in the group’s consolidated financial statement and performance.

· IFRIC 22, ‘Foreign currency transactions and advance consideration’; effective from annual periods beginning on or after 1 January 2018. This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. The amendments do not have a significant impact in the Group’s consolidated financial statement and performance.

b. Standards, amendments and interpretations effective after 31 December 2018:

· Amendment to TFRS 9, ‘Financial instruments’; effective from annual periods beginning on or after 1 January 2019. This amendment confirm that when a financial liability measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised immediately in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. This means that the difference cannot be spread over the remaining life of the instrument which may be a change in practice from IAS 39. The impact of the amendments on The Group’s financial position and performance has been assessed.

· Amendment to TAS 28, ‘Investments in associates and joint venture’; effective from annual periods beginning on or after 1 January 2019. These amendments clarify that companies account for long-term interests in associate or joint venture to which the equity method is not applied using TFRS 9.

· TFRS 16, “Leases’’; effective from annual periods beginning on or after 1 January 2019. It is permitted early application with TFRS 15 ‘revenue from customer contracts’ standard. This standard replaces the current guidance in IAS 17 and is a farreaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). TFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right of use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under TFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group plans to use a simplified transitional implementation of the standard. As of the report date, the Group is in the process of assessing the impact of TFRS 16 on financial statements of the Group. The amendments are managed to include all of the Group’s subsidiaries. The Group’s activities as lessor are not significant.

· TFRIC 23, ‘Uncertainty over income tax treatments’; effective from annual periods beginning on or after 1 January 2019. This IFRIC clarifies how the recognition and measurement requirements of IAS 12 ‘Income taxes’, are applied where there is uncertainty over income tax treatments. The IFRS IC had clarified previously that IAS 12, not IAS 37 ‘Provisions, contingent liabilities and contingent assets’, applies to accounting for uncertain income tax treatments. IFRIC 23 explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment.

· An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. For example, a decision to claim a deduction for a specific expense or not to include a specific item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under tax law. IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. The impact of the amendments on The Group’s financial position and performance has been assessed.







2.1.2 Amendments in Turkish Financial Reporting Standards (TFRS) (Continued)

Annual improvements 2015 - 2017; effective from annual periods beginning on or after 1 January 2019. These amendments include minor changes to:

· TFRS 3 ‘Business combinations’; - a company remeasures its previously held interest in a joint operation when it obtains control of the business.

· TFRS 11 ‘Joint arrangements’; - a company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

· TMS 12 ‘Income taxes’; a company accounts for all income tax consequences of dividend payments in the same way.

· TMS 23 ‘Borrowing costs’; - a company treats as part of general borrowings any borrowing originally made to develop an asset is ready for its intended use or sale.

Amendments to TAS 19, ‘Employee benefits’ on plan amendment, curtailment or settlement; effective from annual periods beginning on or after 1 January 2019. These amendments require an entity to:

· Use updated assumptions to determine current service cost and interest for the reminder of the period after a plan amendment, curtailment or settlement;

· Recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.

Amendments to TAS 1 and TAS 8 on the definition of material; Effective from Annual periods beginning on or after 1 January 2020. These amendments to IAS 1, ‘Presentation of financial statements’ and IAS 8, ‘Accounting policies, changes in accounting estimates and errors’, and consequential amendments to other IFRSs:

i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting

ii) clarify the explanation of the definition of material; and

iii) incorporate some of the guidance in IAS 1 about immaterial information

The Group is in the process of assessing the impact of the amendments on financial position and performance.

Amendments to TFRS 3 – definition of a business; Effective from Annual periods beginning on or after 1 January 2020. This amendment revises the definition of a business. According to feedback received by the IASB, application of the current guidance is commonly. The Group is in the process of assessing the impact of the amendments on financial position and performance.

2.1.3 Financial statements of joint ventures operating in foreign countries

Financial statements of joint ventures operating in foreign countries are prepared according to the legislation of the country in which they operate, and adjusted to the Turkish Financial Reporting Standards to reflect the proper presentation and content. Foreign joint ventures’ assets and liabilities are translated into TRY with the foreign exchange rate at the balance sheet date. Exchange differences arising from the retranslation of the opening net assets of foreign undertakings and differences between the average and balance sheet date rates are included in the “Gain/(loss) from translation of foreign currency of investments using equity method” under the other comprehensive income statement and shareholders’ equity.








2.1.4 Principles of consolidation

· The consolidated financial statements for the year ended 31 December 2018 have been prepared in accordance with principles stated on the consolidated financial statements for the year ended 31 December 2017 and include financial statements of Tüpraş, and its Subsidiaries.

· At 31 December 2018, there are no changes in voting rights or proportion of effective interest on subsidiaries and joint ventures that are subject to consolidation from the information stated on consolidated financial statements for the year ended 31 December 2017.

31 December 2018 31 December 2017Direct and indirect

Voting rights possessed by

the Company (%)

Proportion ofeffective

interest (%)

Direct and indirectVoting rights

possessed bythe Company (%)

Proportion ofeffective

interest (%)

SubsidiaryDitaş 79.98 79.98 79.98 79.98Üsküdar 79.98 79.98 79.98 79.98Damla 79.98 79.98 79.98 79.98Beykoz 79.98 79.98 79.98 79.98Kadıköy 79.98 79.98 79.98 79.98Sarıyer 79.98 79.98 79.98 79.98Kartal 79.98 79.98 79.98 79.98Maltepe 79.98 79.98 79.98 79.98Salacak 79.98 79.98 79.98 79.98Karşıyaka 79.98 79.98 79.98 79.98Bakırköy 79.98 79.98 79.98 79.98Karaköy 79.98 79.98 79.98 79.98Çengelköy 79.98 79.98 79.98 79.98Pendik 79.98 79.98 79.98 79.98Tuzla 79.98 79.98 79.98 79.98Körfez (*) 100.00 100.00 100.00 100.00

(*) Körfez has been included in the scope of full consolidation as of 1 January 2018 (Note 9).

· The statement of financial position and statement of comprehensive income of the subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by the Company is eliminated against the related equity. Intercompany transactions and balances between the Company and its subsidiary are eliminated on consolidation. The cost of and the dividends arising from, shares held by the Company in its subsidiary are eliminated from equity and income for the year, respectively.

· Joint ventures are companies in which the Group has joint control. Joint control is the contractually agreed sharing of control. The control, exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group’s interest in joint ventures is accounted for with equity method. Investments accounted by equity method are presented in consolidated statement of financial position with additions or deductions of changes on share of the Group on net assets of the affiliate and with deduction of provisions for the decline in the value. The changes of the amount, not reflected on income or loss of the joint venture, on the equity of the joint venture can requisite an adjustment on the net book value of the joint venture in proportion of the Group’s share.







2.1.4 Principles of consolidation (Continued)

The table below shows the total interest of the Group in its joint ventures accounted by equity method as at 31 December 2018 and 31 December 2017:

31 December 2018 31 December 2017

Direct and indirect Voting rights

Possessed by The Company (%)

Proportion ofinterest (%)

Direct and indirectVoting rights

possessed by the Company

(%)

Proportionof

interest (%)

Joint ventures accounted by equity methodOpet 50.00 40.00 50.00 40.00Opet International Limited (*) 50.00 40.00 50.00 40.00Opet Trade B.V.(*) 50.00 40.00 50.00 40.00Opet Trade Singapore (In liquidation) (*) (**) 50.00 40.00 50.00 40.00THY Opet Havacılık Yakıtları A.Ş.(*) 25.00 20.00 25.00 20.00Opet Fuchs Madeni Yağ San. ve Tic. A.Ş.(*) 25.00 20.00 25.00 20.00Op Ay Akaryakıt Ticaret Ltd. Şti.(*) 25.00 20.00 25.00 20.00Akdeniz Akaryakıt Depolama Nakliyat ve Tic. A.Ş.(*) 16.65 13.32 16.65 13.32Nemrut Liman ve Boru İşl. Nak. İç ve Dış Tic. Ltd. Şti.(*) 12.50 10.00 12.50 10.00Opet Aygaz Gayrimenkul A.Ş.(*) 25.00 20.00 25.00 20.00

(*) Related companies are consolidated or accounted by equity method in Opet’s financial statements.

(**) The company discontinued its activities as of 15 July 2015.

· Other investments in which the Group has interest below 20%, or over which the Group does not exercise a significant influence, or which are immaterial, are classified as available-for-sale. Available-for-sale investments that do not have a quoted market price in active markets and whose fair value cannot be measured reliably are carried at cost less any provision for diminution in value (Note 9).

· The non-controlling shareholders’ share of the net assets and results for the period for the subsidiaries are classified separately in the consolidated statement of financial position and statements of comprehensive income as non-controlling interest.

2.2. Changes in accounting policies

2.2.1 Comparative information

In order to allow for the determination of the financial situation and performance trends, the Group’s consolidated financial statements have been presented comparatively with the previous year.

The Group presented the consolidated statement of financial position as of 31 December 2018 comparatively with the consolidated statement of financial position as of 31 December 2017. Also the consolidated statement of profit or loss and other comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year ended 31 December 2018 are presented comparatively with the consolidated financial statements for the year ended 31 December 2017.

2.2.2 Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.2.3 Seasonality of operations

There is no seasonality effect depending on the dynamics of petroleum sector that the Group operates in which could affect the financial statements.







2.3. Summary of significant accounting policies

The significant accounting policies followed in the preparation of the consolidated financial statements are summarized below:

Financial Assets and Liabilities

Classification and measurement

The company classifies the financial assets as three groups such as subsequently measured at amortised cost,fair value through profit or loss anad fair value through other comprehensive income. The classification is made on the basis of the entity’s business model for managing the financial assets/liabilities and contractual cash flow characteristics of the financial asset/liability. The group classifies its financial assets and liabilities at the date which they are purchased.

The changes in the classification of financial assets and liabilities in accordance with TFRS 9 is explained below. Those reclassification differences do not have any impact of the measurement of financial instruments asset for financial assets.

Financial assets Classification in accordance with TAS 39 New classification in accordance with TFRS 9Cash and cash equivalents Loans and receivables Amortized costTrade receivables Loans and receivables Amortized costDerivative instruments Fair value through profit or loss Fair value through profit or lossDerivative instruments Fair value through other comprehensive income Fair value through other comprehensive income

Financial liabilities Classification in accordance with TAS 39 New classification in accordance with TFRS 9Derivative instruments Fair value through statement of profit or loss Fair value through statement of profit or lossDerivative instruments Fair value through other comprehensive income Fair value through other comprehensive incomeBorrowings Amortized cost Amortized costTrade payables Amortized cost Amortized cost

Financial assets and liabilities measured at amortised cost

“Financial assets measured at amortised cost”, are the financial assets held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount standing, not have an active market and non-derivatives financial assets. “Cash and cash equivalents”, “Trade receivables” are classified as financial assets measured at amortised cost using the effective interest method. Gains and losses recognised as a result of the fair value adjustments of financial assets amortised at cost and non-derivative financial assets are included in the consolidated income statement

· Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, deposits at banks, highly liquid investments with maturity periods of three months or less and the revenue share collected is held at banks by the Petroleum Market Licence Regulation (Note 4). Cash and cash equivalents used in consolidated cash flow statement comprise cash and cash equivalents with short term maturities of less than 3 months, excluding accrued interest income and blocked deposits (Revenue share). The Group’s cash and cash equivalents are evaluated within credit risk model, since there is no credit risk expected, they are carried at cost in the consolidated balance sheet.






2.3. Summary of significant accounting policies (Continued)

· Trade receivables

Trade receivables that are created by the Group by way of providing goods or services directly to a debtor are carried at amortised cost. A credit risk provision for trade receivables is established when there is objective evidence that the Group is not able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income (Note 6).

The Group has chosen “simplified approach” explained in TFRS 9 for the calculation of impairment of trade receivables (with maturities less than one year) that do contain a significant financing component and accounted at amortised cost. In accordance with the simplified approach, Group measures the loss allowances regarding its trade receivables at an amount equal to “lifetime expected credit losses” except incurred credit losses in which trade receivables are already impaired for a specific reason date. The Group uses a provision matrix in the calculation of expected credit losses. Provision rate is calculated based on the overdue days of trade receivables and the rates are revised each reporting period if necessary. Since the change in expected credit loss provisions is not material, it is not accounted in consolidated income statement. For each reporting period, the recalculation is made and revaluated.

The Group collects some of its receivables via factoring. The receivables subject to factoring transaction which risk of collection is undertaken by factoring company are deducted from the related receivable accounts. Since the time between the factoring dates and maturities of trade receivables subject to factoring transactions is not significant, the business model of the Group related with trade receivables has not been changed and has been accounted at the amortized cost.

· Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

Financial assets and liabilities at fair value through profit or loss

The financial assests of the Group which are carried at fair value include derivative instruments that are not subject to hedge accounting. Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Gains or losses arising from the valuation of these kinds of assets are recognized in the consolidated statement of income. Derivative instruments which are carried at fair value through profit or loss include forward foreign exchange and commodity purchase and sale transactions. Derivative instruments are recognized as asset when the fair value of the instrument is positive, as liability when the fair value of the instrument is negative (Note 20).

Financial assets and liabilities at fair value through other comprehensive income

The financial assets of the Group which are carried at fair value include derivative instruments that are subject to hedge accounting. Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Gains and losses arising from the valuation of these kinds of assets are accounted as other comprehensive income/expense in the consolidated statement of comprehensive income related to cash flow hedge. Derivative instruments which are accounted in other comprehensive income include commodity purchase and sales transactions, interest rate swap transactions and cross currency swap transactions. Derivative instruments are recognized as asset when the fair value of the instrument is positive, as liability when the fair value of the instrument is negative (Note 20).

- Cash flow hedge

Hedges of exposures to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit and loss are designated as cash flow hedges by the Group.

Changes in the fair value of derivatives, designated as cash flow hedges and qualified as effective, are recognised in equity as “hedge reserves”. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously recognised under equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Otherwise, amounts recognised under equity are transferred to the consolidated income statement in the period in which the hedged firm commitment or forecasted transaction affects the consolidated income statement.








If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or losses previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Recognition and de-recognition of financial instruments

All purchases and sales of financial assets are recognized on the trade date i.e. the date that the Group commits to purchase or to sell the asset. These purchases or sales are purchases or sales generally require delivery of assets within the time frame generally established by regulation or convention in the market place. A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where:

• the rights to receive cash flows from the asset have expired

• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the consolidated financial statements.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired.

Related parties

For the purpose of these consolidated financial statements, shareholders, key management personnel, Board of Directors members and Koç Group companies including their family members and companies controlled by or affiliated with them are considered and referred to as related parties (Note 31).

Inventories

Inventories are valued at the lower of acquisition cost or net realisable value. The cost components of inventories include materials, conversion costs and other costs that are necessary to bring the inventories to their present location and condition. The cost of inventories is determined on the weighted average cost basis. As during the production process more than one product is produced from single raw material inputted, the costs of conversion of each product are not separately identifiable. In order to allocate the costs of conversion between the products on a rational and consistent basis, the approach used by the Company for the allocation is based on the relative sales prices of each product. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses (Note 8).

Spare parts and material stocks

Spare parts and material stocks are valued at the lower of cost or net realisable value. The cost elements of spare parts and material stocks include materials and other costs that are necessary to bring them to their present location and condition. The cost of spare parts and material stocks is determined on the weighted average cost basis. The Group has provided provision for the slow-moving spare parts (Note 15).

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Historical costs include the costs directly related to the acquisition of property plant and equipment. Costs incurred after the acquisition can be added to the net book value of the assets or can be booked as another asset if and only if it is probable that the future economic benefits will flow to the Group and cost of the asset can be measured reliably. All other repair and maintenance costs are expensed in the consolidated statement of comprehensive income for the period. Depreciation is provided using the straight line method based on the estimated useful lives of gross book value of assets (Note 12).







The depreciation periods for property, plant and equipment, which approximate the economic useful lives of such assets, are as follows:

Useful lifeLand and land improvements 3-50 yearsBuildings 5-50 yearsMachinery and equipment 3-35 yearsMotor vehicles 4-20 yearsFurniture and fixtures 2-50 years

Land is not depreciated as it is deemed to have an indefinite useful life.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Recoverable amount is the higher of asset net selling price or value in use. Net selling price is calculated by deducting the selling costs from the fair value of the asset. Value in use is calculated as the discounted value of the estimated future cash flows the entity expects to derive from the asset. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount.

Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their restated carrying amounts and are included in the related income and expense accounts, as appropriate.

Intangible assets

Intangible assets include rights and software and development costs (Note 13).

a) Rights and software

Rights and software are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the estimated useful lives of such assets not exceeding 5 years.

b) Development costs

The accounting policy of development costs are explained in Research and Development Expenses.

Investment property

Lands held for the purposes of long-term rental yields, for capital appreciation or both rather than land held in the production or supply of goods or services, for administrative purposes and for sale in the ordinary course of business, are classified as “investment property”. Investment properties are carried at cost and any accumulated impairment losses. Investment properties are depreciated with the straight-line depreciation method over their useful lives.

Investment properties are reviewed for possible impairment losses and where the carrying amount of the investment property is greater than the estimated recoverable amount, it is written down to its recoverable amount. The recoverable amount of the investment property is the higher of future net cash flows from the utilisation of this investment property or fair value less costs to sell (Note 11).

Impairment of assets

The Group reviews all tangible and intangible assets except goodwill for indicators of impairment at every balance sheet date. If any indication of impairment exists, carrying value of the asset is compared with its recoverable amount which is the higher of value in use or fair value less costs to sell. Impairment exists when carrying value of the asset or cash generating unit that the asset belongs to is higher than the recoverable amount. An impairment loss is recognised immediately in the consolidated statement of comprehensive income.

An impairment loss recognised in prior periods for an asset is reversed if the subsequent increase in the asset’s recoverable amount is caused by a specific event since the last impairment loss was recognised. Such a reversal amount cannot be higher than the previously recognised impairment and is recognized as income in the consolidated financial statements. The reversal of the impairment is recognized in the comprehensive income statement. Net book value of goodwill is evaluated annually and impairment is recorded when necessary considering a significant on prolonged decline.








Borrowing costs

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings.

Borrowing costs, which can be related to its purchase, construction or production when it comes to assets requiring a significant period of time to be ready for use and sales, are included in cost of asset until the related asset is made available for use or sales.

Other borrowing costs are charged to the consolidated statement of comprehensive income when they are incurred.

Operating leases

The Group as the lessee

Operational leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.

The Group as the lessor

Operational leases

Assets leased out under operating leases are classified under property, plant and equipment in the consolidated balance sheet and rental income is recognized on a straight-line basis over the lease term.

Deferred taxes

Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to consolidated statement of income, except when it relates to items charged or credited directly to the equity in which case the deferred tax is also dealt within the equity.

Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised.

Government incentives enabling reduced corporate tax payments are considered within the scope TAS-12 “Income Taxes” and the deferred tax asset is recognized at the rate of the earned tax benefit under the condition that benefitting from this advantage by earning taxable income in the future is highly probable.

Provided that deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority and it is legally eligible, they may be offset against one another. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities in the consolidated financial statements (Note 29).

Provision for employment termination benefits:

Employment termination benefits

a) Provision for employment termination benefits:

The provision for employment termination benefits, as required by Turkish Labour Law represents the present value of the future probable obligation of the Group arising from the retirement of its employees based on the actuarial projections.

TAS 19 “Employee Benefits” requires actuarial assumptions (net discount rate, turnover rate to estimate the probability of retirement etc.) to estimate the entity’s obligation for employment termination benefits. The effects of differences between the actuarial assumptions and the actual outcome together with the effects of changes in actuarial assumptions compose the actuarial gains / losses.







In accordance with TAS 19 “Employee Benefits” effective before 1 January 2013, the actuarial gains / losses were recognised in the statement of income whereas the amendment, effective as of 1 January 2013, requires the actuarial gains / losses to be recognised under other comprehensive income.

b) Defined benefit plans

The Group has to pay contributions to the Social Security Institution on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. These contributions are recognised as an employee benefit expense when they are accrued.

c) Unused vacation rights

Liabilities arising from unused vacations of the employees are accrued in the period when the unused vacations are qualified.

d) Seniority incentive bonus provision

The Group has an employee benefit plan called “Seniority Incentive Bonus” (“Bonus”) which is paid to employees with a certain level of seniority. Seniority incentive bonus provision represents the present value at the date of the consolidated balance sheet of the estimated total reserve of the probable future obligations (Note 17).

Transactions in foreign currency

Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Turkish Lira at the exchange rates prevailing at the balance sheet dates. Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of monetary assets and liabilities are recognised in the consolidated statement of comprehensive income except the ones that are capitalized.

Revenue recognition

The Group adopted TFRS 15 “Revenue From Contracts with Customers” which proposes a five step model framework mentioned below for recognizing the revenue.

· Identify the contact with customers

· Identify seperate performance obligations in the contract

· Determine the transaction price in contract

· Allocate the transaction price to the performance obligations in the contract

· Recognise revenue

The Group assess the goods or services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer.

For each performance obligation identified, the entity determine at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. If the Group transfers control of a good or service over time and therefore satisfies a performance obligation and recognises revenue over time.

The Group recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to the customer. An asset is transferred when the customer obtains control of that asset or service.








Revenue recognition (Continued)

The Group considers the following in the assessment of transfer of control of goods sold and services,

a) The entity has a right to payment for the goods or service,

b) The customer has legal title to the goods or service,

c) The entity has transferred physical possession of the asset,

d) The customer has the significant risks and rewards related to the ownership of the goods or services,

e) The customer has accepted the goods or services.

The Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. If the financing component is significant in revenue, future collections are discounted by the interest rate in financing component. The difference is recognised as income from operating activities in current period.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions, as of the balance sheet date, are recorded with the best estimate of management in order to provide for the estimated obligation and are discounted, if they are material for the consolidated financial statements.

Commitments, contingent assets and liabilities

Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are not included in the consolidated financial statements and are disclosed as contingent assets or liabilities (Note 22).

Dividends

Dividend income is recognised by the Group at the date the right to collect the dividend is realised. Dividend payables are recognised as liability in the consolidated financial statements in the period they are declared as a part of profit distribution.

Earnings per share

Earnings per share for each class of shares disclosed in the consolidated statement of comprehensive income is determined by dividing the consolidated net income for the year attributable to that class of shares by the weighted average number of shares of that class that have been outstanding during the year concerned.

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonus shares”) to existing shareholders from retained earnings and inflation adjustment to shareholders’ equity. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the period has been adjusted in respect of bonus shares issued without a corresponding change in resources by giving them retroactive effect for the period in which they were issued and for each earlier period.

Segment reporting

According to TFRS 11 ‘’ Joint Arrangements’’ standard, accounting for joint ventures in the consolidated financial statements by the equity method is mandatory. The amendment has been implemented retrospectively by the Group. Opet Petrolcülük A.Ş. is accounted by the equity method and petroleum distribution division is excluded from segment reporting scope. Since only refining segment remained within the consolidation scope, segment reporting is not presented effective 1 January 2013.

Statement of cash flow

Cash flows during the period are classified and reported by operating, investing and financing activities in the cash flow statements.







Cash flows from operating activities represent the cash flows generated from the Group’s activities.

Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (tangible and intangible assets and financial assets).

Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

Research and development costs

Research expenditures are recognized as an expense when they are incurred.

Intangible assets arising from in-house development activities (or the improvement phase of an intergroup project) are recognized when all of the following conditions are met:

• existence of the technical feasibility of completing the intangible asset so that it will be available for use or sale,

• existence of the intention to complete the intangible asset and use or sell it,

• existence of the ability to use or sell the intangible asset,

• reliability of how the intangible asset will generate probable future economic benefits,

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset,

• existence of the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Other development expenditures are recognized as an expense as incurred. Development costs previously recognized as an expense are not capitalized as an asset in a subsequent period.

Government grants

Government grants, Investment and research and development incentives are accounted at the fair values on accrual basis when the Group’s incentive applications are approved by related authorities.

Government incentives enabling reduced corporate tax payments are considered within the scope TAS-12 “Income Taxes”

Business combinations and goodwill

Business combinations are accounted for using the acquisition method in accordance with TFRS 3. The cost of a business combination, before 1 January 2011, is allocated by recognising the acquiree’s identifiable assets, liabilities and contingent liabilities at the date of acquisition. Any excess of the acquirer’s interest over the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination cost is accounted for as goodwill. In business combinations, the acquirer recognizes identifiable assets, intangible assets (such as trademarks) and/or contingent liabilities which are not included in the acquiree’s financial statements and which can be separated from goodwill, at their fair values in the consolidated financial statements. Goodwill recognised in business combinations is tested for impairment annually or more often under when circumstances indicating impairment risk.

The excess of the Group’s share in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is accounted for as income in the related period.

Revised TFRS 3 “Business Combinations” effective as at 1 January 2011 has been applied to business combinations occurring after 1 January 2011. The main difference of revised TFRS 3 is to account for transaction costs of a purchase in comprehensive income statement. There has been no business combination in 2018 which requires the application of revised TFRS 3.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that is expected to benefit from the synergies of combination. The Group considered the significant position of Opet in the domestic market and the synergy expected from its cooperation with Tüpraş as the main reason leading to generation of goodwill related to the Opet acquisition dated 28 December 2006. Therefore, the Group management evaluated Opet, its subsidiaries and its joint ventures as one cash-generating unit.







2.4. Changes in accounting policies, accounting estimates and errors

Significant changes in accounting policies based on new application of TAS/TFRS are applied retrospectively or prospectively based on the transition clauses. If there are no transition clauses, the changes in accounting policies, optional changes in accounting policies and correction of significant accounting errors are applied retrospectively and prior period financial statements are restated.

2.5. Significant accounting evaluations, assumptions and estimates

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below:

a) Deferred tax asset:

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available. If it is probable that future taxable profit will be available, deferred tax assets are accounted for over the deductible temporary differences and tax advantages resulted from investment incentives that enables the Company pay lower corporate tax.

The Company assess the recoverability of deferred tax assets based on business models that contain management estimations related to taxable profit for future periods. The models include key management estimations such as sales quantities, sales prices and foreign exchange rates. Based on the sensitivity analysis performed, it is concluded that 10% increase/decrease in related estimations does not have any effect on the assessment of recoverability of deferred tax assets (Note 29).

b) Cash flow hedge:

As explained in Note 32 the Company uses investment credit amounting to USD982,082 thousand as a hedging instrument against the USD spot exchange rate risk the Company is exposed to due to highly probable export sales income, and applies cash flow hedge accounting as a result of the effectiveness tests performed. The estimations in budgets for export income used for effectiveness test include estimations such as sales quantities and sales prices. Based on the sensivitiy analysis performed for the estimations used in effectiveness tests, the Company concluded that 10% increase/decrease in estimations do not have any significant effect on the assessment of effectiveness tests.

c) Provision for employment termination benefits:

To calculate the employee benefit provision actuarial assumptions relating to turnover ratio, discount rate and salary increase are used. Calculation details are given in Employee benefits disclosure (Note 17).

d) Economic useful lives:

Tangible assets, investment property and intangible assets, except for goodwill, have been depreciated and amortized by using estimated useful lives. Estimated useful lives determined by management have been disclosed in Note 2.3.

e) Goodwill impairment tests:

As explained in Note 2.3, the Group performs impairment tests on goodwill annually, or more often under circumstances indicating impairment risk. The recoverable amount of the cash generating unit has been determined based on the fair value less costs to sell calculations. Those calculations are based on specific expectations and assumptions. The Group has not identified any impairment on the goodwill amount as at 31 December 2018 and 2017, as a result of these tests. The goodwill arising from the purchase of Opet shares were classified on the investment account in the financial statements (Note 10).

NOTE 3 - Business combinations

No business combinations occurred during the period 31 December 2018.





NOTE 4 - Cash and cash equıvalents


Cash at banksRevenue share (blocked) 1,425,142 1,198,211Time deposits 4,551,877 7,568,764Demand deposits 1,203 23,971

Time deposit interest accruals 4,606 11,123

Total 5,982,828 8,802,069

Revenue Share (blocked)

As required by the Petroleum Market License Regulation, the revenue share collected from the customers by the Group is held at banks and considered as blocked deposit in the Company’s books. The revenue share was invested as demand deposits with government debt securities interest rate and overnight interest rate as at 31 December 2018 and 31 December 2017 (Note 15).

Time deposits and other cash and cash equivalents

As at 31 December 2018 and 31 December 2017, the maturity and the currency information of the time deposits, is as follows:

31 December 2018

Effective rate of interest (%)

Less than 1 month 1 - 3 months Total

TL 23.91 149,375 - 149,375

USD 4.68 2,635,014 107,196 2,742,210

EUR 2.71 1,653,547 6,631 1,660,178

GBP 1.40 114 - 114

Time deposit 4,438,050 113,827 4,551,877

31 December 2017

Effective rate of

interest (%) Less than 1 month 1 - 3 months Total

TL 13.94 74,655 1,917 76,572USD 4.37 6,944,727 17,917 6,962,644EUR 2.13 499,531 29,463 528,994GBP 1.40 554 - 554

Time deposit 7,519,467 49,297 7,568,764

Cash and cash equivalents included in the consolidated statements of cash flows for the periods ended 31 December 2018 and 31 December 2017 are as follows:


Cash and cash equivalents 5,982,828 8,802,069Less: Blocked deposits (Revenue share) (1,425,142) (1,198,211)Less: Time deposit interest accruals (4,606) (11,123)

Cash and cash equivalents 4,553,080 7,592,735






NOTE 5 - Financial liabilities


Short-term borrowings:

Short-term bank borrowings 1,139,773 340,875Interest accruals of bank borrowings 2,096 -

Total 1,141,869 340,875

Short-term portion of long-term borrowings:

Short-term portion of long-term bank borrowings 2,780,773 2,156,144Bonds issued - 2,640,330Interest accruals of bank borrowings 156,611 93,429Interest accruals of bonds issued 34,145 42,936

Total 2,971,529 4,932,839

Long-term borrowings:

Long-term bank borrowings 10,148,979 7,136,940Bonds issued 3,682,630 2,640,330Interest accruals of bank borrowings 4,533 -

Total 13,836,142 9,777,270 Total borrowings 17,949,540 15,050,984

Tüpraş has issued a bond with a nominal value of USD700 million, with a maturity of 7 years, coupon payment every 6 months and repayment of principal and coupon at maturity, with an annual interest rate of 4.5%, on the London Stock Exchange on October 12, 2017.

As explained in material disclosure, Tüpraş signed a long term loan facility agreement with a group of lenders, consisting of HSBC (Coordinator), ING (Facility Agent), The Bank of Tokyo-Mitsubishi UFJ, Ltd., Citibank N.A, Intesa Sanpaolo and JPMorgan Chase Bank, N.A. London Branch, to meet the working capital requirements for forthcoming period and extent the weighted-average of debt maturities. The loans amounting to USD157.5 million and EUR261.5 million were utilized on 29 March 2016 and the loans have semi-annual interest payments, 5 years maturity with 3 years grace period.

On 30 April 2018, Tüpraş paid a bond with a nominal value of USD700 million, with a maturity of 5.5 years, a coupon payment of 6 months and a principal and coupon payment at maturity, with an annual interest rate of 4.125%, quoted on the London Stock Exchange on 2 November 2012.

In 2011, Tüpraş has signed three loan agreements in order to finance Residuum Upgrading Project (“RUP”) and further to the agreements the loans amounting to USD1,998 million were utilized between 2011 and 2015 for credit insurance payments and capital expenditures. According to financing package loan was insured by SACE and CESCE have 12 years to maturity also there will be no principal and interest payment in first 4 years. The third loan has 7 years to maturity and there will be no principal payment in the first four years. The repayment of the loans has started in 2015 and as at 31 December 2018 the outstanding amount of the loans is USD954 million (31 December 2017 - USD1,239 million).





NOTE 5 - Financial liabilities (Continued)

Foreign currency balances and effective interest rates for the short and long-term financial liabilities as at 31 December 2018 and 31 December 2017 are as follows:

31 December 2018 Effective interest Original Thousand rate (%) currency TRY

Short-term borrowings:

USD bank borrowing 3.83 160,000,000 841,745TRY bank borrowings (*) 24.25 298,027,981 298,028

Interest accruals 2,096

Total short-term financial liabilities 1,141,869

Short-term portion of long-term borrowings:

USD bank borrowings 4.34 303,932,787 1,598,959EUR bank borrowings 2.07 117,138,055 706,108TRY bank borrowings 18.80 475,705,563 475,706

2.780.773

Interest accruals 190.756

Total short-term portion of long-term borrowings 2.971.529


USD bank borrowings 4.36 1,194,244,687 6,282,802USD bonds issued 4.55 700,000,000 3,682,630EUR bank borrowings 2.05 174,435,583 1,051,498TRY bank borrowings 24.11 2,814,678,778 2,814,679

13,831,609


Total long-term borrowings 13,836,142

(*) Banks provide interest-free loans to the Group for the payment of SCT, Customs and Social Security debts amounting to TRY 245,028 thousand as of 31 December 2018 (31 December 2017 - TRY327,673

thousand).







31 December 2017 Effective interest rate Original Thousand (%) currency TRY

Short term borrowings:

USD bank borrowings 1.45 3,500,000 13,202TRY bank borrowings (*) - 327,673,483 327,673

Interest accruals -

Total short-term borrowings 340,875

Short-term portion of long-termborrowings:

USD bank borrowings 3.58 316,227,073 1,192,776USD bonds issued 4.17 700,000,000 2,640,330EUR bank borrowings 3.26 9,220,636 41,636TRY bank borrowings 12.48 921,732,026 921,732

4,796,474


Short-term portion of total long-term borrowings 4,932,839


USD bank borrowings 3.38 1,460,677,340 5,509,529USD bonds issued 4.55 700,000,000 2,640,330EUR bank borrowings 2.06 291,146,521 1,314,672TRY bank borrowings 13.43 312,738,562 312,739

9,777,270

Interest accruals -

Total long-term borrowings 9,777,270

As at 31 December 2018 and 31 December 2017, the redemption schedule of long-term bank borrowings is as follows:


1-2 years 4,188,207 1,867,2592-3 years 2,860,518 1,683,1583-4 years 1,349,307 1,373,3044-5 years 1,347,878 960,727Over 5 years 4,090,232 3,892,822

Total 13,836,142 9,777,270






The movement of borrowings as of 31 December 2018 and 31 December 2017 is as follows:

2018 2017

1 January 15,050,984 12,134,265New financial borrowings 38,952,115 43,859,854Principal payments (41,005,302) (42,051,025)Changes in interest accruals 61,020 28,282Changes in foreign exchange rates 4,890,723 1,079,608

31 December 17,949,540 15,050,984

The redemption schedule of borrowings according to their contractual repricing dates is as follows:

31 December 2018 31 December 2017 1-90 days 5,576,072 3,294,72691-365 days 4,910,633 7,784,2351-5 years 3,772,017 1,162,249Over 5 years 3,690,818 2,809,774 Total 17,949,540 15,050,984

NOTE 6 - Trade receivables and payables

Short-term trade receivables:


Trade receivables 4,327,765 3,658,736Due from related parties (Note 31) 1,132,117 1,399,601Doubtful trade receivables 4,740 3,184Other trade receivables 21 16

Less: Unearned credit finance income (31,165) (31,320)Less: Provision for doubtful receivables (4,740) (3,184)

Total short-term trade receivables (net) 5,428,738 5,027,033

Tüpraş discounts the domestic receivables by using domestic government bonds and foreign receivables by using monthly libor rates.

As at 31 December 2018, Tüpraş has offsetted TRY2,332,000 thousand (31 December 2017 - TRY860,788 thousand) from trade receivables that are collected from factoring companies as part of the irrevocable factoring.

Movement of the provision for doubtful receivables for the years ended 31 December 2018 and 2017 is as follows:

2018 2017

1 January 3,184 2,676Charge for the period 2,018 581Payments during the period (462) (73)

31 December 4,740 3,184






NOTE 6 - Trade receivables and payables (Continued)

Short-term trade payables:


Trade payables 7,425,166 8,106,081Due to related parties (Note 31) 77,096 115,456Less: Unrealised credit finance chargesTrade payables (6,121) (8,371)

Total short term trade payables (net) 7,496,141 8,213,166

Tüpraş discounts short-term trade payables by using monthly libor rates

NOTE 7 - Other receivables and payables

Other short-term receivables:


Advances and guarantees given 8,088 66,887Receivable from personnel 12,809 9,141Receivable from insurance recoveries 8,151 8,239Other doubtful receivables 324 360Less: Provision for other doubtful receivables (324) (360)

Total 29,048 84,267

NOTE 8 - Inventories


Raw materials and supplies 1,117,820 1,901,787Work-in-progress 1,799,367 1,278,257Finished goods 2,122,910 1,401,057Trade goods 76,043 195,767Goods in transit 1,705,496 487,155Other 30,964 28,313

6,852,600 5,292,336

Provision for impairment of inventory (-) (87,855) (1,246)

Total 6,764,745 5,291,090

Movement of the provision for inventories for the years ended 31 December 2018 and 2017 is as follows:

2018 2017

1 January 1,246 -Charge for the period 87,855 1,246Provisions no longer required (1,246) -

31 December 87,855 1,246





NOTE 9 - Financial ınvestments

Financial investments available-for-sale:


Participation

share (%) AmountParticipation

share(%) Amount

Körfez Ulaştırma A.Ş. - - 100.00 9,000

- 9,000

Körfez has been included in the scope of full consolidation as of 1 January 2018.

NOTE 10 - Investments accounted for using the equity method


Participation

share (%) AmountParticipation share

(%) Amount

OPET Petrolcülük A.Ş. 40.00 1,266,334 40.00 1,134,364

1,266,334 1,134,364

The goodwill amounting to TRY189,073 thousand arising from the purchase of Opet shares on 28 December 2006 were classified on the investments accounted for using the equity method in the financial statements.

The movement in the investments accounted for using the equity method during the period ended 31 December 2018 and 2017 is as follows:

2018 2017

1 January 1,134,364 923,994

Investments accounted for using the equity method;

Shares in current year profit 265,880 244,639Dividend payment (224,000) (70,000)Actuarial gain/(loss) arising from defined benefit plans (393) 712Gain/(loss) on revaluation and remeasurement 72,644 32,218Currency translation differences 17,839 2,801

31 December 1,266,334 1,134,364






NOTE 10 - Investments accounted for using the equity method (Continued)

Consolidated summary financial statements of investments accounted for using the equity method (before Group’s effective interest) are as follows:


Current assets 4,948,159 3,783,607Non-current assets 2,963,133 2,662,261

Total assets 7,911,292 6,445,868

Short term liabilities 3,282,386 2,724,380Long term liabilities 1,935,753 1,358,260Equity 2,693,153 2,363,228

Total liabilities 7,911,292 6,445,868

1 January -

31 December 20181 January -

31 December 2017

Sales (net) 42,997,122 28,391,084Gross profit 1,878,634 1,449,111Operating profit 982,049 702,728Net income for the period 664,700 611,597

Goodwill impairment test

The Group considers the significant position of Opet in the domestic market and the synergy expected from its cooperation with Tüpraş and Opet as the main source of generation of goodwill. Therefore, the Group management evaluated Opet, its subsidiaries and its joint ventures as a single cash generating unit and goodwill is allocated on Opet.

The cash-generating unit’s fair value calculations include post-tax cash flow projections, which are based on US dollars and are based on ten-year plans approved by Opet management. The Group considers analysis covering a period longer than five years is more appropriate as to evaluation of operating results and prospective assumptions in the sector and therefore impairment test is based on ten years budget. As of 31 December 2018, fair value of Opet is above 20% of the value carried in including goodwill.

Other key assumptions used in the fair value calculation model are stated below:

Gross margin 3.2% - 4.0%Discount rate 20.3%

The budgeted gross margin has been determined by Opet management based on past performance of the company and expected market growth rate. The discount rate used is the post-tax discount rate and includes company specific risks. An increase/decrease of 1% on the post-tax discount rate used in the discounted cash flow calculations, Opet’s carrying value of goodwill would be 6% lower and 52% higher, respectively.as at 31 December 2018.

As a result of the tests performed by using the assumptions above, no impairment on goodwill has been identified as at 31 December 2018. Since the asset’s fair value less cost to sell is higher than its carrying amount, the Group management did not calculate the asset’s value-in-use.





NOTE 10 - Investments accounted for using the equity method (Continued)

Competition Authority investigation:

With the decision of the Competition Authority dated 27.08.2018 and numbered 18-29 / 484-M; in order to determine whether there is a violation of Article 4 of the Act On The Protection of Competition No. 4054, it has been decided that an investigation is opened to Opet, business partner of the Group and Opet has been asked for defense. Opet communicated its first written defense to the Competition Authority, the investigation process is continuing.

NOTE 11 - Investment property

As of 31 December 2018, investment property consists of the land amounting to TRY4,621 thousand (31 December 2017: TRY4,621 thousand). At the year end, the fair value of the investment property has been determined as TRY156,767 thousand as a result of fair value assessments.

NOTE 12 - Property, plant and equipment

The movements of property, plant and equipment and related accumulated amortisation for the period ended 31 December 2018 and 2017 is as follows:

1 January 2018 Additions Transfers Disposals 31 December 2018

Cost:Land 48,814 - 16,138 (2,791) 62,161Land improvements 3,645,079 40 76,667 (14) 3,721,772Buildings 771,147 - 17,926 - 789,073Machinery and equipment 12,001,323 90 669,851 (14,033) 12,657,231Motor vehicles 1,221,669 12,055 16,110 (471) 1,249,363Furniture and fixtures 134,130 1,752 (5,724) (1,599) 128,559Construction in progress 500,802 646,079 (806,962) - 339,919Special costs - - 1,070 - 1,070Other tangible assets 2,614 1,443 - - 4,057

18,325,578 661,459 (14,924) (18,908) 18,953,205

Accumulated depreciation:Land improvements (1,304,166) (152,103) - 13 (1,456,256)Buildings (193,944) (16,744) - - (210,688)Machinery and equipment (4,235,088) (382,664) - 6,677 (4,611,075)Motor vehicles (206,631) (45,970) - 266 (252,335)Furniture and fixtures (80,869) (2,476) - 1,493 (81,852)Construction in progress - (44) - - (44)Special costs (1,443) (345) - - (1,788)

(6,022,141) (600,346) - 8,449 (6,614,038)

Net book value 12,303,437 12,339,167






NOTE 12 - Property, plant and equipment (Continued)


Cost:Land 48,844 - - (30) 48,814Land improvements 3,687,757 - 78,694 (121,372) 3,645,079Buildings 744,592 - 37,325 (10,770) 771,147Machinery and equipment 11,420,284 353 666,623 (85,937) 12,001,323Motor vehicles 749,479 470,979 2,208 (997) 1,221,669Furniture and fixtures 114,397 1,046 22,356 (3,669) 134,130Construction in progress 649,948 686,922 (836,068) - 500,802Other tangible assets 1,488 1,126 - - 2,614

17,416,789 1,160,426 (28,862) (222,775) 18,325,578

Accumulated depreciation:Land improvements (1,272,244) (150,700) - 118,778 (1,304,166)Buildings (188,970) (15,723) - 10,749 (193,944)Machinery and equipment (3,972,568) (336,629) - 74,109 (4,235,088)Motor vehicles (171,865) (35,403) - 637 (206,631)Furniture and fixtures (68,301) (16,069) - 3,501 (80,869)Construction in progress (1,365) (78) - - (1,443)

(5,675,313) (554,602) - 207,774 (6,022,141)

Net book value 11,741,476 12,303,437

Total depreciation expense amounting to TRY600,346 thousand (31 December 2017: TRY554,602 thousand) in the consolidated statement of comprehensive income for the period ended 31 December 2018 has been allocated to cost of goods sold amounting to TRY568,863 thousand (31 December 2017: TRY527,359 thousand), to marketing, sales and distribution expenses amounting to TRY4 thousand (31 December 2017: TRY3 thousand), to general administration expenses amounting to TRY27,240 thousand (31 December 2017: TRY27,240 thousand).

As of 31 December 2018, there are no mortgage on property, plant and equipment (31 December 2017 : None).

As of 31 December 2018, Tüpraş has capitalized the borrowing cost of TRY64,838 thousand on its financial statements (31 December 2017 : TRY69,535 thousand).





NOTE 13 - Intangible assets

Other intangible assets:

The movement of intangible assets and related accumulated amortisation for the period ended 31 December 2018 is as follows:


Cost:Rights and software 81,464 222 9,556 - 91,242Development expenses 80,039 - 5,368 - 85,407

161,503 222 14,924 - 176,649

Accumulated amortisation:Rights and software (43,060) (11,235) - - (54,295)Development expenses (53,256) (10,913) - - (64,169)

(96,316) (22,148) - - (118,464)

Net book value 65,187 58,185

The movement of intangible assets and related accumulated amortisation for the period ended 31 December 2017 is as follows:


Cost:Rights and software 64,330 257 17,226 (349) 81,464Development expenses 68,403 - 11,636 - 80,039

132,733 257 28,862 (349) 161,503

Accumulated amortisation:Rights and software (36,449) (6,960) - 349 (43,060)Development expenses (41,178) (12,078) - - (53,256)

(77,627) (19,038) - 349 (96,316)

Net book value 55,106 65,187

Total amortisation expenses amounting to TRY22,148 thousand (31 December 2017: TRY19,038 thousand) in the consolidated statement of comprehensive income for the period ended 31 December 2018 have been allocated to the general administration expenses (31 December 2017: TRY19,030 thousand in General administration expenses, TRY8 thousands in cost of goods sold).

NOTE 14 - Prepaid expenses

Short term prepaid expenses:


Insurance and other expenses 81,320 49,102Advances given 27,369 13,295

Total 108,689 62,397






NOTE 14 - Prepaid expenses (Continued)

Long term prepaid expenses:


Advances given to related parties for property, plant and equipment (Note 31) 252,101 69,191Advances given to third parties for property, plant and equipment 124,885 28,413Prepaid other expenses 1,014 1,672

Total 378,000 99,276

NOTE 15 - Other assets and liabilities

Other current assets:


Deferred Value Added Tax (“VAT”) 843,703 423,200Income accruals from commodity hedge 761,184 -VAT Receivable 622,111 -Taxes and funds to be offsetted 57,120 85,251Deferred Special Consumption Tax (“SCT”) 67,912 91,647Spare parts and material stocks 67,081 57,566Income accruals 16,141 37,675Deferred VAT 2,579 47,969Other current assets 34,794 8,951

Total 2,472,625 752,259

As of 31 December 2018, expense accruals consists of commodity derivatives transactions for inventory of Tüpraş which are exposed to commodity price risk (swap transactions and zero-cost transactions). Weighted average price of outstanding commodity derivatives transactions is USD71.43/barrel for 5,625 thousand crude oil barrel. Weighted average buying price of zero cost derivatives transactions is USD69.37 /barrel for 5,625 thousand crude oil barrel inventory weighted average selling price of zero cost derivatives transactions is USD74.21 /barrel. The expense accruals recognition made as of 31 December 2018 is recognized under cost of goods sold and paid as of 8 January 2019.

Other long-term liabilities:


Spare parts and materials 1,284,892 1,030,649Other 7,925 1,146Provision for spare parts and materials - (19,156)

Total 1,292,817 1,012,639

The movements in the provision for impairment of spare parts during the years ended 31 December 2018 and 2017 are as follows:

2018 2017

1 January 19,156 22,455Provisions no longer required (19,156) (3,299)

31 December - 19,156





NOTE 15 - Other assets and liabilities (Continued)

Other non-current assets:


Revenue share 1,430,111 1,202,668SCT payable 1,254,611 1,397,584Deferred VAT 843,703 423,200Deferred SCT 67,912 91,647Other taxes and liabilities 66,127 53,741VAT payable 11,873 145,109Expense accrual on commodity hedge - 383,058Other 78,840 26,367

Total 3,753,177 3,723,374

As of 31 December, 2017, expense accruals consists of commodity derivatives transactions for inventory of Tüpraş which are exposed to commodity price risk (swap transactions and zero-cost transactions). Weighted average price of outstanding commodity derivatives transactions is USD54,53/barrel for 5,700 thousand barrels of crude oil. Weighted average buying price of zero cost derivatives transactions is USD50,60 /barrel, weighted average selling price of zero cost derivatives transactions is USD55,78 /barrel. The expense accruals as of 31 December 2017 is recognized under cost of goods sold and paid as of 8 January 2018.

Deferred VAT and SCT include VAT and SCT amounts related to export committed sales and are classified within “Other current assets” under assets and within “Other current liabilities” under liabilities. Such SCT and VAT amounts are offset when the export transaction is certified and the related taxes are cancelled by the tax office..

According to the Petroleum Market Law, financing needs of refinery owners to maintain the National Petroleum Stock are supplied by the revenue share, which is a surplus added to the sales price, limited to a ceiling of USD 10/ton as determined by Energy Market Regulatory Authority (“EMRA”). In the case of importation of petroleum products, the revenue share is to be paid to the refinery owner by the importer.

The Group has been collecting the revenue share over the sales of petroleum products and non-refinery imports of petroleum products since 1 January 2005, the date the relevant article of the regulation came into force.

The Group has been collecting revenue share for LPG sales since 16 September 2005 in addition to the revenue share collected for petroleum products, in accordance with the Liquefied Petroleum Gas (“LPG”) Market Regulation.

It has been decided by the National Petroleum Reserves Commission that the investment management of the revenue share collected will be conducted by the General Directorate of Tüpraş, and the collected amount will be invested in overnight reverse repurchase agreements.

As a result of these regulations, the revenue share amounting to TRY1,430,111 thousand accumulated as at 31 December 2018 (31 December 2017: TRY1,202,668 thousand) which is not recognized in the comprehensive income statement, has been classified as “Revenue Share” within “Other short-term liabilities”. TRY1,425,142 thousand is (31 December 2017: TRY1,198,211 thousand) blocked in banks as demand deposits with government debt securities interest rate and overnight interest rate related to the calculated revenue share has been classified as Revenue share “Blocked” within “Cash and cash equivalents”(Note 4).

Other long-term liabilities:


Participation share 951 1,169

Total 951 1,169






NOTE 16 - Deferred income

Short-term deferred income:


Deferred income 2,915 18,479Advances taken 1,963 1,949

Total 4,878 20,428

Long-term deferred income:


Deferred income 3,638 4,112

Total 3,638 4,112

NOTE 17 - Provisions

Provision for employee benefits:

Short-term provision for employee benefits:


Seniority incentive bonus provision 3,521 8,024Personnel bonus accruals 5,342 4,605

Total 8,863 12,629

Long-term employee benefits:


Provision for employment termination benefits 186,525 167,907Provision for unused vacation 59,787 50,655Seniority incentive bonus provision 11,080 5,172

Total 257,392 223,734

Seniority incentive bonus provision:

The Group has an employee benefit plan called “Seniority Incentive Bonus”, which is paid to the employees with a certain level of seniority.

Seniority incentive bonus is paid to personnel together with their monthly salary when certain seniority levels are reached. The bonus amounts to 45 days of salary for 5 years of seniority level, 55 days of salary for 10 years of seniority level, 70 days of salary for 15 years of seniority level, 80 days of salary for 20 years of seniority level, 90 days of salary for 25 years of seniority level and 100 days of salary for 30 years of seniority level, paid once for each seniority level.





NOTE 17 - Provisions (Continued)

Seniority incentive bonus provision (Continued)

The movements in the provision for seniority incentive bonus during the period are as follows:

2018 2017

1 January 13,196 13,161Charge for the period 11,535 11,399Payments during the period (10,130) (11,364)

31 December 14,601 13,196

Provision for employment termination benefits:

Under the Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002, there are certain transitional provisions relating to length of service prior to retirement.

The liability is not funded, as there is no funding requirement.

The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees.

TAS 19 requires that actuarial valuation methods to be developed to estimate the Group’s employment termination benefit provision. The following actuarial assumptions have been used in the calculation of the total provision:


Discount rate (%) 5.65% 4.95%Turnover rate to estimate probability of retirement (%) 99.39% 99.46%

The principal assumption is that maximum liability of employment termination benefits for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Employment termination benefits of the joint ventures of the Group, which are registered in Turkey are calculated from tha maximum amount of TRY6,017.60 which is effective as at 1 January 2019 (31 December 2017: TRY5,001.76).

The movement in the provision for employment termination benefits during the period is as follows:

2018 2017

1 January 167,907 159,190Interest expense 28,108 18,737Actuarial (gain)/loss (9,273) (4,941)Increase during the period 24,432 20,795Payments during the period (24,649) (25,874)

31 December 186,525 167,907

31 December 2018 31 December 2017Net discount rate Net discount rate

Sensitivity analysis 100 Base 100 Base 100 Base 100 BaseIncrease Decrease Increase Decrease

Rate 6.65% 4.65% 5.95% 3.50%Provision for employee termination benefit adjustment 10,621 (12,775) 10,590 (12,728)






NOTE 17 - Provisions (Continued)

Provision for unused vacation:

The movement in the provision for unused vacation during the period is as follows:

2018 2017

1 January 50,655 44,137Increase during the period 15,247 12,938Payments during the period (6,115) (6,420)

31 December 59,787 50,655

Other short term provisions:


Provisions for pending claims and law suits 19,038 16,209EMRA participation share 33,473 23,823Provision for demurrage 18,108 11,484Other 863 25,779

Total 71,482 77,295

Movement of the short-term provisions for the period ended 31 December 2018 and 2017 are as follow:

Provision for EMRA pending claims participation Provision for

and lawsuits share demurrage Other Total

1 January 2018 16,209 23,823 11,484 25,779 77,295

Changes for the period, net 3,544 47,588 12,419 (24,916) 38,635Payments during the period, net (715) (37,938) (5,795) - (44,448)

31 December 2018 19,038 33,473 18,108 863 71,4821 January 2017 12,523 20,159 13,787 5,016 51,485

Changes for the period, net 4,045 23,823 (2,303) 20,763 46,328Payments during the period, net (359) (20,159) - - (20,518)

31 December 2017 16,209 23,823 11,484 25,779 77,295

EMRA participation share is the participation fee that is paid by the refinery license owners in accordance with the Petroleum Market License Regulation, calculated by multiplying net sales with the participation share rate determined by EMRA.

NOTE 18 - Liabilities for employee benefits


Due to the personnel 100,854 80,315Social security withholdings payment 26,646 39,518

Total 127,500 119,833





NOTE 19 - Other payables


Deposits and guarantees received 15,021 13,334Other payables to related parties (Note 31) 24,279 23,463

Total 39,300 36,797

NOTE 20 - Derivative instruments

31 December 2018 31 December 2017 Fair values Fair values

Purchase contract amount

Sales contract amount Assets Liabilities

Purchase contract amount

Sales contract amount Assets Liabilities

Cash flow hedge

Interest rate swap 519,039 519,039 12,607 2,694 328,432 328,432 2,660 690Cross currency swap 463,224 438,266 95,282 42,123 835,180 525,210 339,982 2,206Commodity derivative 2,146,042 2,146,042 66,580 184,388

Derivatives held for trading

Currency forwards 2,156,969 2,177,520 1,063 6,845 3,264,742 3,330,804 1,137 39,295Commodity derivative - - - - 1,229,941 1,361,757 3,130 134,946

Short term derivative financial instruments 175,532 236,050 346,909 177,137

Cash flow hedge

Interest rate swap 2,096,063 2,096,063 21,942 5,648 1,562,179 1,562,179 9,421 777Cross currency swap 884,668 759,476 146,324 36,589 331,155 238,586 91,139 2,587

Long term derivative financial instruments 168,266 42,237 100,560 3,364

Total 343,798 278,287 447,469 180,501

As of 31 December 2018, forward foreign exchange transactions consist of forward transactions which generate a sales obligation of TRY2,177,520 thousand in exchange of USD410,000 thousand and will expire on January 2019. As of 31 December 2018, forward foreign exchange transactions consist of forward transactions which generate a sales obligation of TRY2,600,333 thousand in exchange of USD674,000 thousand and TRY730,474 thousand in exchange of EUR160,000 which has expired on January 2018.

As of 31 December 2018, interest rate swap consists of exchange of floating rate instalment payments of long term borrowings amounting to USD466,637 thousand (31 December 2017: USD458,824 thousand) and EUR26,571 thousand (31 December 2017: EUR35,428) with fixed rate instalment payments for cash flow hedging.






NOTE 20 - Derivative instruments (Continued)

As of 31 December 2018, cross currency swap transactions consist of swaps with fixed interest rate transaction of foreign currency indexed, fixed interest rate long-term bonds amounting to USD216,395 thousand (31 December 2017: USD70,588 thousand) with foreign currency indexed floating interest long-term borrowing of TRY995,177 thousand, EUR13,286 thousand long-term borrowing (31 December 2017: EUR17,714 thousand) foreign currency indexed interet rate swap transactions with TRY currency indexed long term borrowings and fixed interest payments amounting to TRY49,288 thousand (31 December 2017: TRY65,717 thousand) and fixed interest payments with total of USD14,005 thousand (31 December 2017: USD18,674 thousand) with foreign currency indexed fixed interest payments and swap transaction of EUR13,286 thousand (31 December 2017: None) foreign currency indexed interest rate of long-term borrowing and USD15,130 thousand foreign currency indexed fixed interest payments. In addition, as of 31 December 2017, cross currency swap transactions consist of swap transaction of foreign currency indexed, fixed interest rate short-term bonds amounting to USD200,000 thousand with TRY currency indexed, fixed interest payments amounting to TRY463,875 thousand.

Commodity future purchase and sales transactions consist of transactions of product crack margin fixing, swap transactions and zero cost collar transactions as of 31 December 2018. Future sales product crack margin fixing transactions have been made for jet stocks of 4,515 thousand barrels, diesel stocks of 5,580 thousand barrels, fuel oil stocks of 4,371 barrels in first quarter of 2018, gasoline stocks of 315 thousand barrels, jet fuel stocks of 4,188 thousand barrels, diesel stocks of 5,910 thousand barrels and fuel oil of 3,957 thousand barrels for second quarter of 2019, fuel oil stock of 1,650 thousand barrels for third quarter of 2018. The weighted average of the fixed margin of these transactions are USD9,54 for gasoline, USD13,98 for jet fuel, USD15,92 for diesel and USD-10,05 for fuel oil per barrel.

Commodity future purchase and sales transactions consist of transactions of product crack margin fixing and swap transactions as of 31 December 2017. Future sales product crack margin fixing transactions have been made for gasoline stocks of 510 thousand barrels, jet stocks of 3,255 thousand barrels, diesel stocks of 5,250 thousand barrels in first quarter of 2018, gasoline stocks of 1,125 thousand barrels, jet fuel stocks of 3,255 thousand barrels, diesel stocks of 5,250 thousand barrels second quarter of 2019, jet fuel stocks of 3,810 thousand barrels, diesel stocks of 5,022 thousand barrels for third quarter of 2018. The weighted average of the fixed margin of these transactions are USD9,54 for gasoline, USD13,98 for jet fuel, USD15,92 for diesel and USD-10,05 for fuel oil per barrel. The weighted average of the fixed margin of these transactions are USD10,99 for gasoline, USD11,09 for jet fuel, USD11,73 for diesel per barrel. Swap transactions have been made for hedging of price risk between purchase and selling periods by the amount 1,029 thousand barrels of crude oil cargo.

NOTE 21 - Government grants

On 2 August 2010, the Company has obtained the Certificate of Research and Development Center. As a result of the implementation of Technology and Innovation Support Programs Administration Project (“TEYDEB”) and the existence of the Certificate of Research and Development Center, the Company has benefited from a number of government incentives including research and development expense deduction, income tax stoppage incentive, social security premium support and stamp tax exemption in accordance with Law, no 5746, Supporting Research and Development Activities. In this context, as of 31 December 2018, the Company’s total R&D expenditures amounting to TRY6,636 thousand (31 December 2017: TRY7,152 thousand) were recorded as incentive income.

In the first quarter of 2011, within the scope of the decree of the Council of Ministers dated 14 July 2009 and numbered 2009/15199, the Company was granted a Large-Scaled Investment Incentive Certificate for Residuum Upgrading Project (RUP). Investment expenditures made within the scope of this certificate are subject to 30% contribution from the government, where the contribution is provided as a reduction in corporate tax payable by 50%. As of 7 October 2013, Residuum Upgrading Project was granted Strategic Investment Incentive by Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey which became applicable after 19 October 2012. Expenditures made within the scope of Strategic Investment Incentive Certificate are subject to 50% contribution from the government, where the contribution is provided as a reduction in corporate tax payable by 90%. Support elements of this investment are, to benefit from VAT exemption, interest support, customs tax exemption and employer contribution of insurance premium support.

On May 29, 2012, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for storage and warehouse services of Kırıkkale Refinery project. Support elements of this investment is to benefit from are, VAT exemption and customs tax exemption.

The Company received investment incentive on July 24, 2015 from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of Izmir Refinery Project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (50%), rate of contribution to investment (15%) and customs tax exemption.

The Company received investment incentive on October 27, 2015 from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of Kırıkkale Refinery Project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (70%), rate of contribution to investment (30%), customs tax exemption and interest incentive.

On June 13, 2014, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of Batman Refinery project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (90%), rate of contribution to investment (50%), interest incentive and customs tax exemption.





NOTE 21 - Government grants (Continued)

On 8 May 2018, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of Batman Refinery project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (90%), rate of contribution to investment (50%), interest incentive and customs tax exemption.

On 20 September 2018, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of İzmir Refinery project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (50%), rate of contribution to investment (25%), customs tax exemption and incentive for employer insurance premium (2 years).

On December 14, 2016, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for Modernization of Izmir Refinery project. Support elements of this investment is to benefit from are, VAT exemption, tax discount rate (50%), rate of contribution to investment (15%) and customs tax exemption.

On June 26, 2013, the Company received investment incentive from Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey for the purchase of wagons to be used for intercity freight transport by railway. Support elements of this investment is to benefit from are, VAT exemption, interest incentive, customs tax exemption, tax discount rate (80%), rate of contribution to investment (40%), incentive for employer insurance premium(7 years).

The Group has benefited from SGK support for insurance premium employer sentiment.

As of 31 December 2018 and 2017, the revenues (totally recognized in consolidated statements of profit or loss) of the Group from government incentives and grants are as follows:


Social security withholdings incentives 47,434 37,609Research and development incentives 6,636 7,152Interest incentive 63 288

Total 54,133 45,049






NOTE 22 - Commitments and contingent assets and liabilities


Guarantees received: Original currency: TRY amount: Original currency: TRY amount:

Letter of guarantees received 1,369,463 1,143,144- Letter of guarantees in TRY 726,627 726,627 744,646 744,646- Letter of guarantees in USD 99,623 524,106 80,221 302,585- Letter of guarantees in EUR 18,830 113,509 20,368 91,973- Letter of guarantees in other currencies - 5,221 - 3,940Guarantee notes received 1,137 2,205- Guarantee notes in TRY 1,137 1,137 2,205 2,205Guarantee letters received 313,045 238,595- Guarantee letters received in TRY 50,000 50,000 50,000 50,000- Guarantee letters received in USD 50,000 263,045 50,000 188,595Guarantee letters of credit 784,400 - -- Letters of credit in USD 149,100 784,400 - -Direct debiting limits 405,337 266,748- TRY direct debiting limits 405,337 405,337 266,748 266,748

Total guarantees received 2,873,382 1,650,692

Guarantees given:

Letter of credits given 310,392 313,853- Letter of credits in USD 40,260 211,804 78,125 294,679- Letter of credits in EUR 1,309 7,888 4,165 18,807- Letter of credits in other currencies - 90,700 - 367Letter of guarantees given 1,067,670 757,673- Letter of guarantees in TRY 941,808 941,808 681,480 681,480- Letter of guarantees in USD 20,200 106,271 20,200 76,193- Letter of guarantees in EUR 3,250 19,591 - -Letters of guaranteegiven to customs offices 1,399,598 1,644,077- Letter of guarantees in TRY 1,399,598 1,399,598 1,635,046 1,635,046- Letter of guarantees in EUR - - 2,000 9,031Letters of guarantee given to banks 970,480 667,986- Letter of guarantees in USD 139,129 731,946 119,120 449,309- Letter of guarantees in EUR 39,571 238,534 48,428 218,677

Total guarantees given 3,748,140 3,383,589

As at 31 December 2018 and 31 December 2017, letter of guarantees received are composed of guarantees from customers and suppliers. Guarantees given are mainly composed of guarantees given to government entities and customs offices. As at 31 December 2018, letters of guarantee given to banks are given for loans which were used by Companies within scope of consolidation amounting to TRY863,992 thousand(31 December 2017: TRY626,443 thousand) and for derivative financial instruments amounting to TRY106,488 thousand (31 December 2017: TRY41,543 thousand).





NOTE 22 - Commitments and contıngent assets and liabilities (Continued)

Collaterals, pledges, mortgages given by the Group as at 31 December 2018 and 31 December 2017 are as follows:


A. CPMs given for companies in the name of its own legal personality 2,777,660 2,715,603- TRY 2,341,406 2,316,526- USD 318,075 370,872- EUR 27,479 27,838- Other 90,700 367

B. CPMs given on behalf of the fully consolidated companies 970,480 667,986- USD 731,946 449,309- EUR 238,534 218,677

C. CPMs given for continuation of its economicactivities on behalf of third parties - -D. Total amount of other CPMs - -i) Total amount of CPMs given on behalf of the majority shareholder - -ii) Total amount of CPMs given to on behalf of other Groupcompanies which are not in scope of B and C. - -iii) Total amount of CPMs given on behalf of third parties which are not in scope of C.

- -

Total 3,748,140 3,383,589

A commission at an amount of TRY4,100 thousand is recognized as of 31 December 2018 related to letter of guarantees given in favor of partnerships included in full consolidation (31 December 2017 - TRY1,535 thousand).

Environmental pollution liability:

The Group is responsible environmental pollution that could be caused as a result of its operations. The group may be liable for damages due to environmental damages caused. There are no lawsuits against the Group regarding environmental matters as of date of 31 December 2018.

The environmental impact of the storage of chemical materials, environmental air quality and emission, collection and quality of waste water, garbage dump, surface and underground water and overall refinery operations have been analyzed by an expert advisor company of the Group. As a result of the evaluation regarding the expenditures to be made the Group management is of the opinion that necessary expenditures have been completed as at 31 December 2018 and 2017.

Requirement to keep the national petroleum stocks:

The storage of the national petroleum stocks is the responsibility of petroleum products and LPG distributor license owners should hold a minimum of twenty days’ average reserves at their own or other licensed storages, either together or separately. According to Petroleum Market Law, for continuous supply and prevention of risks in extraordinary circumstances, fulfilment of the liabilities related with petroleum reserves during extraordinary situations according to international agreements, the national petroleum reserves are stored with the amount defined as the net imported amount included in the prior year’s average daily usage, with minimum duration of 90 days. Refineries are held responsible for holding the supplementary portion of the national petroleum reserves.

NOTE 23 - Equity

The Company’s shareholders and their shareholding percentages as at 31 December 2018 and 31 December 2017 are as follows:

31 December 2018 Share (%) 31 December 2017 Share (%)

Enerji Yatırımları A.Ş. 127,714 51 127,714 51Publicly Owned 122,705 49 122,705 49

Total 250,419 100 250,419 100

Adjustment to share capital 1,344,243 1,344,243

Total paid-in capital 1,594,662 1,594,662






NOTE 23 - Equity (Continued)

Adjustment to share capital represents the difference between the inflation adjusted amounts of cash and cash equivalents of the paid-in capital and the amounts before the inflation adjustment.

Registered capital of the Company is TRY500,000 thousand and is divided into 50,000,000,000 shares with a registered nominal value of 1 Kuruş (“Kr”) (31 December 2017: 1Kr) each. The authorised and paid-in share capital of the Company comprises 25,041,919,999 Group A shares with a registered nominal value of 1Kr and one Group C share with privileges belonging to the Privatisation Administration

As per the articles of association of the Company, one member of the Board of Directors should be nominated by the Group C shareholders. Board of Directors’ decisions on the supply needs of petroleum products of the Turkish Military Forces requires the consent of the member representing the Group C shareholders.

Retained earnings, as per the statutory financial statements other than legal reserves, are available for distribution, subject to the legal reserve requirement referred to below.

Restricted reserves

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum until the total reserve reaches 20% of the Company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can only be used to offset loss and are not available for any other usage unless the reserve exceeds 50% of paid-in share capital.

In accordance with Turkish Financial Reporting Standards the aforementioned amounts should be classified under “Restricted Reserves”. At 31 December 2018, the restricted reserves of the Company amount to TRY597,086 thousand (31 December 2017 - TRY279,668 thousand).

Dividend distribution

Listed companies distribute dividend in accordance with the Communiqué No. II-19.1 issued by the CMB which is effective from 1 February 2014.

Companies distribute dividends in accordance with their dividend payment policies settled and dividend payment decision taken in general assembly and also in conformity with relevant legislations. The communiqué does not constitute a minimum dividend rate. Companies distribute dividend in accordance with the method defined in their dividend policy or articles of incorporation. In addition, dividend can be distributed by fixed or variable instalments and advance dividend can be paid in accordance with profit on interim financial statements of the Company.

In accordance with the Turkish Commercial Code (TCC), unless the required reserves and the dividend for shareholders as determined in the article of association or in the dividend distribution policy of the company are set aside, no decision may be made to set aside other reserves, to transfer profits to the subsequent year or to distribute dividends to the holders of usufruct right certificates, to the members of the board of directors or to the employees; and no dividend can be distributed to these persons unless the determined dividend for shareholders is paid in cash.

The total amount of net income of the Company in the statutory records and other equity accounts subject to dividend distribution amount to TRY5,891,651 thousand as at 31 December 2018. This amount includes inflation adjustment differences of the equity accounts amounting to TRY1,698,998 thousand and other reserves amounting to TRY9,663 thousand which are subject to corporate taxation when distributed as dividends.

In the period ended as of 31 December 2018, the Company committed to make dividend payment in cash amounting to TRY3,406,452 thousand which is the total amount remained after first and second composition legal reserves deducted from 2017 distributable net profit of the period and a portion of second composition legal reserves. The Company paid a cash dividend at the rate of 1,360.3% which corresponds to TRY13,603 gross and TRY13,603 net cash dividend for the shares with a nominal value of TRY1.00 to institutional shareholders who are full taxpayers or limited liable taxpayers and obtain dividends through a business or permanent representative in Turkey. The Company paid also a cash dividend at the rate of 1,360.3%, which corresponds to TRY13,603 gross and TRY11,563 net cash dividend for the shares with a nominal value of TRY1.00 to other shareholders.

In the period ended as of 31 December 2017, the Company committed to make dividend payment in cash amounting to TRY1,557,107 thousand which is the total amount remained after first and second composition legal reserves deducted from 2016 distributable net profit of the period and a portion of second composition legal reserves. The Company paid a cash dividend at the rate of 621.8% which corresponds to TRY6,218 gross and TRY6,218 net cash dividend for the shares with a nominal value of TRY1.00 to institutional shareholders who are full taxpayers or limited liable taxpayers and obtain dividends through a business or permanent representative in Turkey.





NOTE 24 - Revenue and cost of sales

1 January - 1 January- 31 December 2018 31 December 2017

Domestic revenue 77,547,173 44,627,281Export revenue 12,490,970 10,205,556

Gross revenue 90,038,143 54,832,837

Less: Sales discounts (1,258,595) (808,235)Less: Sales returns (227,378) (76,492)

Sales (net) 88,552,170 53,948,110

Cost of goods sold (79,327,847) (47,734,212)

Gross profit 9,224,323 6,213,898

Cost of sales:

1 January - 1 January - 31 December 2018 31 December 2017

Raw material, manufactured and consumable material 75,263,115 44,490,284Energy expenses 1,664,001 1,123,691Personnel expenses 769,199 615,401Depreciation and amortization (Note 12-13) 568,863 527,367Other production expenses 1,062,669 977,469

Cost of sales 79,327,847 47,734,212

NOTE 25 - General administrative expenses, marketing expenses and research and development expenses

General administrative expenses:


Personnel expenses 410,945 334,889Taxes and duties 118,762 87,161Insurance expenses 109,109 98,274Outsourced services 90,389 84,848Depreciation and amortization (Note 12-13) 53,627 46,270Donations 45,597 26,950Subscription fees 35,903 34,861Office expenses 34,255 38,104Rent expenses 21,680 15,638Lawsuit and consultancy expenses 20,786 27,410Transportation and travel expenses 5,317 4,444Other 55,147 66,552

Total general administrative expenses 1,001,517 865,401






NOTE 25 - General administrative expenses, marketing expenses and research and development expenses (Continued)

Marketing expenses:


Personnel expenses 117,350 97,041Transportation, storage and insurance expenses 67,633 106,523Energy expenses 15,309 11,454Rent expenses 14,049 11,560Outsourced services 8,429 843Advertising expenses 6,358 3,220Depreciation and amortization (Note 12) 4 3Other 55,674 38,245

Total marketing expenses 284,806 268,889

Research and development expenses:


Personnel expenses 11,499 9,789Licence expenses 2,451 1,904Outsourced services 732 1,036Lawsuit and consultancy expenses 549 580Other 5,830 2,641

Total research and development expenses 21,061 15,950

NOTE 26 - Other operating income/(expenses)

1 January - 1 January -Other operating income: 31 December 2018 31 December 2017

Credit finance gains 759,479 228,525Provisions no longer required 57,931 -Foreign exchange gain from trade receivables 50,133 -Rent income 4,127 4,101Other 58,949 28,635

Total other operating income 930,619 261,261





NOTE 26 - Other operating income/(expenses) (Continued)

1 January - 1 January -Other operating expense: 31 December 2018 31 December 2017

Foreign exchange loss from trade payables (2,878,278) (340,898)Credit finance charges (215,034) (90,859)Foreign exchange loss from trade receivables - (2,727)Other (17,946) (32,976)

Total other operating expense (3,111,258) (467,460)

NOTE 27 - Income/(expense) from investment activities


Gain/(loss) on sales of property plant andequipment and intangible assets (9,378) (10,199)

Total income/(expense) from investment activities (9,378) (10,199)

NOTE 28 - Financial income/(expenses)


Financial income:

Foreign exchange gains on deposits 2,918,108 461,105Interest income on deposits 368,837 541,226Foreign exchange gains on derivative instruments - 160,468

Total financial income 3,286,945 1,162,799

Financial expense:

Foreign exchange losses on borrowings (3,777,952) (1,033,591)Interest expenses (1,309,157) (701,421)Foreign exchange losses on derivative instruments (463,266) (41,820)Other (4,992) (3,828)

Total financial expense (5,555,367) (1,780,660)

NOTE 29 - Tax assets and liabilities

i) Corporate tax:


Current period corporate tax provision 218,388 464,902Current year tax assets (119,639) (443,606)

Corporation tax provision 98,749 21,296

Turkish tax legislation does not permit a parent company, its subsidiaries and its joint ventures to file a consolidated tax return. Therefore, provisions for taxes, as reflected in these consolidated financial statements, have been calculated on an individual-entity basis.






NOTE 29 - Tax assets and liabilities (Continued)

The corporation tax rate for the fiscal year 2018 is 22% (2017: 20%). Corporation tax is payable at a rate of 22% on the total income of the companies after adjusting for certain disallowable expenses, corporate income tax exemptions (participation exemption, investment allowance, etc.) and allowances (as research and development expenditures deduction.

In accordance with the regulation numbered 7061, published in Official Gazette on 5 December 2017,”Bazı Vergi Kanunları İle Diğer Bazı Kanunlarda Değişiklik Yapılmasına Dair Kanun”, corporate tax rate for the years 2018, 2019 and 2020 has increased from 20% to 22%. Therefore, deferred tax assets and liabilities as of 31 December 2018 are calculated with 22% tax rate for the temporary differences which will be realized in 2018, 2019 and 2020, and with 20% tax for those which will be realized after 2021 and onwards.

Reconciliation of the income before tax with the calculated corporate tax is as follows:

2018 2017

Profit before taxation 3,724,380 4,474,038

Expected tax expense(*) (819,364) (894,808)

Investment incentive income 729,249 214,184Deductions and exemptions 128,152 48,173Disallowable expenses and differencesNot subject to taxation (972) (1,031)

Taxation on income 37,065 (633,482)

(*) Expected tax expense is calculated with 22% tax rate for 2018 and 20% for 2017.

The analysis of cumulative temporary differences and the related deferred tax assets and liabilities in respect of items for which deferred income tax has been provided as at 31 December 2018 and 31 December 2017 using the enacted tax rates are as follows:

Cumulative temporary differences Deferred tax (liability)/asset 31 December 2018 31 December 2017 31 December 2018 31 December 2017

Fair value difference of derivative instruments 68,004 257,527 (14,961) (56,656)Difference between the carrying values and tax base of property, plant, equipment and intangible assets - 57,569 - (12,665)Prepaid expenses 51,680 72,886 (11,370) (16,035)

Deferred tax liability (26,331) (85,356)

Investment incentive income 10,029,879 8,598,952 3,228,333 3,096,940Difference between the carrying values and tax base of property, plant, equipment and intangible assets 1,210,352 - 266,277 -Employment termination benefits and seniority incentive bonus provision 190,477 166,459 41,905 36,621Provision for unused vacation liability 51,646 43,425 11,362 9,554Provisions for pending claims and lawsuits 18,547 15,227 4,080 3,350Provision for inventory impairment 87,855 1,246 19,328 274Deferred financial income, (net) 25,044 22,949 5,510 5,049Other 71,219 6,543 15,668 1,439

Deferred tax assets 3,592,463 3,153,227

Deferred tax asset - net 3,566,132 3,067,871





NOTE 29 - Tax assets and liabilities (Continued)

In the first quarter of 2011, within the scope of the decree of the Council of Ministers dated 14 July 2009 and numbered 2009/15199, the Company was granted a Large-Scaled Investment Incentive Certificate for Residuum Upgrading Project (RUP). Investment expenditures made within the scope of this certificate are subject to 30% contribution from the government, where the contribution is provided as a reduction in corporate tax payable by 50%. As of 7 October 2013, Residuum Upgrading Project was granted Strategic Investment Incentive by Incentive Implementation and Foreign Investment Department of Ministry of Economy of Republic of Turkey which became applicable after 19 October 2012. Expenditures made within the scope of Strategic Investment Incentive Certificate are subject to 50% contribution from the government, where the contribution is provided as a reduction in corporate tax payable by 90%. The company has performed the revaluation of the unutilized investment incentives for both certificates by using the 23.73% revaluation rate, which was announced for the second provisional tax period of 2018 by the Ministry of Finance. In addition to the government contribution within the scope of Strategic Investment Incentive, the Company benefits from VAT exemption, VAT refund, customs duty exemption, incentive for employer share of insurance premium and interest incentive from this certificate.

The movement of deferred taxes is as follows:

2018 2017

Deferred tax asset/(liability), net

1 January 3,067,871 3,227,031Charge for the period 255,453 (168,580)Charge to equity:- Hedging cash flow gains/(losses) 244,771 10,405- Actuarial gains/(losses) arising from defined benefit plans (1,963) (985)

31 December 3,566,132 3,067,871

NOTE 30 - Earnings per share


Profit fort he year attributable to shareholders of the Company 3,712,789 3,811,546

Weighted average number of Shares with nominal value of Kr1 each 25,041,920,000 25,041,920,000

Basic and diluted earnings per share in Kr 14.83 15.22

NOTE 31 - Related party transactions

Related party transactions were classified according to the following groups and contain all descriptions in this footnote.

(1) Joint ventures

(2) Koç Holding group companies

(3) Parent, ultimate parent

a) Deposits:


Yapı ve Kredi Bankası A.Ş. (2) 2,428,620 4,899,946

Total 2,428,620 4,899,946






NOTE 31 - Related party transactions (Continued)

b) Due from related parties:


Opet Petrolcülük A.Ş. (1) 642,361 899,946THY OPET Havacılık Yakıtları A.Ş. (1) 420,121 404,959Aygaz A.Ş. (2) 64,500 88,381Opet Fuchs Madeni Yağ San. ve Tic. A.Ş. (1) 5,055 6,305Diğer (2) 80 10

Total 1,132,117 1,399,601

As of 31 December 2018, Tüpraş has offset TRY650,000 thousand (31 December 2017: TRY100,000 thousand) from its trade receivables due from related parties that are collected from factoring companies as a part of irrevocable factoring agreements.

c) Trade payables:


Koç Sistem Bilgi ve İletişim A.Ş. (2) 18,343 13,881Zer Merkezi Hizmetler ve Ticaret A.Ş. (2) 15,021 14,066RAM Sigorta Aracılık Hizmetleri A.Ş. (2) 9,348 3,635Aygaz A.Ş. (2) 6,885 12,785Opet Petrolcülük A.Ş. (1) 6,368 8,630Otokoç Otomotiv Tic. ve San. A.Ş. (2) 5,144 1,150Ark İnşaat A.Ş. (2) 5,126 9,023THY OPET Havacılık Yakıtları A.Ş. (1) 4,022 4,923Setur Servis Turistik A.Ş. (2) 1,421 1,614Opet International Limited (1) - 39,259Diğer (2) 5,418 6,490

Total 77,096 115,456

d) Other payables:


Koç Holding A.Ş. (3) 24,279 23,463

Total 24,279 23,463

e) Advances given for property, plant and equipment:


RMK Marine Gemi Yapım Sanayii veDeniz Taşımacılığı İşl. A.Ş. (2) 243,379 67,076Ark İnşaat A.Ş. (2) 8,722 2,115

Total 252,101 69,191






f) Product and service sales:


Opet Petrolcülük A.Ş. (1) 14,593,024 6,758,985THY OPET Havacılık Yakıtları A.Ş. (1) 10,550,334 5,468,078Aygaz A.Ş. (2) 710,537 541,284Opet Fuchs Madeni Yağ San. ve Tic. A.Ş. (1) 39,965 31,703Diğer (2) 5,595 4

Total 25,899,455 12,800,054

g) Product and service purchases:


Aygaz A.Ş. (2) 253,116 438,566Ram Sigorta Aracılık Hizmetleri A.Ş. (2) (**) 120,398 82,734Opet Petrolcülük A.Ş. (1) 89,159 81,498Zer Merkezi Hizmetler ve Ticaret A.Ş. (2) 85,722 69,770THY OPET Havacılık Yakıtları A.Ş. (1) 41,917 28,513Koç Holding A.Ş. (3) (*) 41,493 46,047Koç Sistem Bilgi ve İletişim A.Ş. (2) 24,850 36,461Otokoç Otomotiv Tic. ve San. A.Ş. (2) 15,758 10,377Opet International Limited (1) 12,065 58,388Eltek Elektrik Enerjisi İthalat, İhracat ve Toptan Tic. A.Ş. (2) 858 23,713Diğer (2) 65,334 36,177

Total 750,670 912,244

(*) Consists of the Group’s share of invoices issued by Koç Holding, the ultimate parent of Tüpraş in accordance with the “11-Intra-group Services” of General Communique numbered 1 on Distribution of Hidden Income through Transfer Pricing which represents the services provided for financing, legal, tax and remuneration of senior management by the ultimate parent to its group companies.

(**) Includes paid and accrued insurance premiums in the periods ended 31 December 2018 and 2017 in connection with insurance policies signed with insurance companies through RAM Sigorta Aracılık

Hizmetleri A.Ş acting as an intermediary insurance agent.

h) Fixed asset purchases:


Ark İnşaat A.Ş. (2) 29,216 50,986Aygaz A.Ş. (2) 17,800 -Koç Sistem Bilgi ve İletişim A.Ş. (2) 16,699 7,695Algoritma Sağlık Hizmetleri A.Ş. (2) 6,260 -Diğer (2) 7,793 1,391

Total 77,768 60,072







i) Remuneration of board of directors and executive management:

The senior management of the Company is determined as members and chair of the Board of Directors and General Manager and General Manager Deputies. The total amount of benefits provided to senior management is TRY86,411 thousand as of period ending on 31 December 2018. (31 December 2017: TRY53,843 thousand) and there are no payments made due to redundancy from the work in 2018 (31 December 2017: None).

j) Financial expenses paid to related parties:


Yapı Kredi Faktoring A.Ş. (2) 6,464 3,366Yapı ve Kredi Bankası A.Ş. (2) - 761Yapı Kredi Bank Nederland N.V.(2) 102 116

Total 6,566 4,243

k) Time deposit interest income:


Yapı ve Kredi Bankası A.Ş. (2) 198,197 203,941

Total 198,197 203,941

l) Bank loans:


Yapı ve Kredi Bankası A.Ş. (2) 7,948 -

Total 7,948 -

m) Donations:

As of 31 December 2018, total donation is amounting to TRY36,410 thousand (31 December 2017: TRY24,520 thousand).

NOTE 32 - Financial instruments and financial risk management

The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.

Liquidity risk:

The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of adequate fund providers from high quality lenders.

Prudent liquidity risk management comprises maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out open positions.





NOTE 32 - Financial instruments and financial risk management (Continued)

The table below demonstrates the Group’s future cash outflows due to financial liabilities as at 31 December 2018 and 31 December 2017. The amounts demonstrated are undiscounted cash flows on agreements and the Group manages its liquidity risk by taking into account its expected undiscounted cash flows.

31 December 2018

Carrying value

Contractual cash flows

Up to 3 months

3-12months

1-5years

More than5 yearsContractual maturities

Total liabilities (non derivative) 25,484,981 28,650,792 9,933,830 2,794,743 11,647,564 4,274,655Bank borrowings 14,232,765 16,266,572 2,392,268 2,629,025 10,984,691 260,588Bonds & notes issued 3,716,775 4,842,658 - 165,718 662,873 4,014,067Trade payables 7,496,141 7,502,262 7,502,262 - - -Other liabilities 39,300 39,300 39,3 - - -

3-12months

1-5years


Carrying value


Up to 3 months

Derivative instruments (net) 65,511 (177,007) (121,459) (110,881) 55,527 (194)Derivative cash inflows 343,798 1,791,311 221,052 436,689 1,123,097 10,473Derivative cash outflows 278,287 1,968,318 342,511 547,570 1,067,570 10,667

31 December 2017

Carrying value


Up to3 months

3-12months

1-5years


Total liabilities (non derivative) 23,684,005 25,568,624 9,093,895 5,264,019 7,013,677 4,197,033Bank borrowings 9,727,388 10,760,411 452,503 2,450,417 6,538,418 1,319,073Bonds & notes issued 5,323,596 6,166,821 - 2,813,602 475,259 2,877,960Trade payables 8,213,166 8,221,537 8,221,537 - - -Other liabilities 419,855 419,855 419,855 - - -

Carrying value


Up to3 months

3-12months

1-5years


Derivative instruments (net) 266,968 177,508 (38,838) 162,164 39,051 15,131Derivative cash inflows 447,469 6,001,922 3,563,116 1,995,823 390,325 52,658Derivative cash outflows 180,501 5,824,414 3,601,954 1,833,659 351,274 37,527

Cash outflows will be financed through cash inflows generated from sales or through funding.

Credit risk:

The Group is subject to credit risk arising from trade receivables related to credit sales, deposits at banks. These risks are managed by limiting the aggregate risk from any individual counterparty and obtaining sufficient collateral where necessary and making only cash based sales to customers considered as having a higher risk. Collectability of trade receivables are evaluated by management depending on their past experiences and current economic condition, and are presented in the consolidated financial statements net of adequate doubtful provision.

Major portion of Tüpraş’s customers are composed of financially strong companies or government entities. As at 31 December 2018 and 2017, trade receivables from the top 5 customers of the Group constitute 35% and 63% of total receivables, respectively. When these factors are considered together with the insignificant historical default experience for the Group’s receivables, the Group management considers the credit risk as low. The Group uses the same risk management principles for the management of financial assets. Investments are made to highly liquid instruments and the banks that the Group deposits its cash and cash equivalents in are selected among the financially strong institutions. As the Group did not have any uncollected, past due, impaired or renegotiated bank deposits, the Group believes that it does not have any impairment risk related to bank deposits.







Credit risks of the Group for each financial instrument type as at 31 December 2018 and 2017 are as follows:

31 December 2018

Receivables

Bank deposits

Derivative instruments Other

Trade Receivables Other ReceivablesRelated parties

Other parties

Related parties

Other parties

Maximum exposed credit risk as of reporting date

1,132,117 4,296,621 - 29,048 5,982,828 343,798 -

- Secured portion of the maximum credit risk by guarantees, etc.

- 593,892 - - - - -

A. Net book value of financial asset either are not due or not impaired

1,132,117 4,225,420 - 29,048 5,982,828 343,798 -

B. Net book value of overdue but not impaired financial assets

- 71,201 - - - - -

C. Net book value of the impaired assets - - - - - - -- Overdue (gross book value) - 4,740 - 324 - - -- Impairment (-) - (4,740) - (324) - - -

- Secured portion of the net value by guarantees, etc.

- - - - - - -

- Not due yet (gross book value) - - - - - - -- Impairment (-) - - - - - - -


- - - - - - -

D. Components which are including credit risk except financial statement

- - - - - - -

31 December 2017

Receivables

Bank deposits

Derivative instruments Other

Trade Receivables Other ReceivablesRelated parties

Other parties

Related parties

Other parties

Maximum exposed credit risk as of reporting date

1,399,601 3,627,432 - 84,267 8,802,069 447,469 -

- Secured portion of the maximum credit risk by guarantees, etc.

- 378,280 - - - - -

A. Net book value of financial asset either are not due or not impaired

1,399,601 3,589,027 - 84,267 8,802,069 447,469 -

B. Net book value of overdue but not impaired financial assets

- 38,405 - - - - -

C. Net book value of the impaired assets - - - - - - -- Overdue (gross book value) - 3,184 - 360 - - -- Impairment (-) - (3,184) - (360) - - -


- - - - - - -

- Not due yet (gross book value) - - - - - - -- Impairment (-) - - - - - - -


- - - - - - -

D. Components which are including credit risk except financial statement

- - - - - - -






31 December 2018

Receivables

Bank depositsDerivative

instruments OtherTrade

receivablesOther

ReceivablesOverdue (1-30 days) 44,990 - - - -Overdue (1-3 months) 16,751 - - - -Overdue (3-12 months) 9,459 - - - -Overdue (1-5 years) 1 - - - -Overdue (5+ years) - - - - -

31 December 2017

Receivables

Bank depositsDerivative

instruments OtherTrade

receivablesOther

ReceivablesOverdue (1-30 days) 22,920 - - - -Overdue (1-3 months) 14,304 - - - -Overdue (3-12 months) 1,181 - - - -Overdue (1-5 years) - - - - -Overdue (5+ years) - - - - -

During the impairment test of financial assets, the Group has considered the indicators regarding uncollectibility of receivables that are due. The Group has guarantees received amounting to TRY70,540 thousand (31 December 2017: TRY28,587 thousand) for trade receivables overdue but not impaired. Major part of receivables without guarantees are from government entities which regularly made sales, any collection risk is not projected.

The credit quality of trade receivables that are neither past due nor impaired

The Group categorizes the details of credit quality of trade receivables that are neither past due nor impaired or receivables whose conditions are examined under four groups. The details of credit quality of such trade receivables as at 31 December 2018 and 31 December 2017 are as follows:


Group 1 4,842 8,505Group 2 2,102,638 762,329Group 3 3,137,892 4,152,610Group 4 112,165 65,184

Total 5,357,537 4,988,628

Group 1 - New customers (less than three months)

Group 2 - State owned enterprises

Group 3 - Existing customers with no payment defaults in previous periods (have been customers by more than three months)

Group 4 - Customers with previous record of collection delays but from which all receivables due are collected (Excluding Group 1 and 2)

Market risk:

Tüpraş identifies commodity price, interest rate and currency risk as major components of market risk. Foreign exchange and interest risk are evaluated separately based on portfolio and product.

Commodity price risk

The Company is exposed to effects of fluctuation in oil prices related to its crude oil inventory held for production. For the elimination of commodity price risk, the management regularly reviews the amount of stocks.

Sales prices’ of Tüpraş’s products, are determined based on Mediterranean product prices, which is described as the “closest accessible free market formation in the world” by the Turkish Petroleum Market Law N. 5015, and USD selling rates. Within the framework of legal definitions, changes of prices in Mediterranean petroleum products market and changes in USD exchange rate are assessed daily by the management and the new selling price based on these two factors is updated when it differs significantly upwards or downwards from the current sales price.







Since instability in crude oil prices may cause unwanted and unexpected fluctuations in net profit and cash flows, the Company has consituted hedging policy in order to eliminate this risk. Within this framework, short and long term hedging transactions are made by using various derivative instruments (Note 20).

Product crack risk

Besides the fluctuations in crude oil prices, in order to eliminate fluctuation risk in product prices profit margins of the products (crack) can be fixed by using various derivative instruments (hedging). Therefore, a hedging policy has been created by comparing historical price levels and by hedging a certain percentage of the total sales volume at certain crack levels (Note 20).

The Group is exposed to foreign exchange risk due to operations in foreign currency. These risks are managed by analysis of the foreign currency monetary assets and liabilities in the consolidated financial statements, by a comprehensive risk tracking system which includes natural hedging and similar practices.

The table below summarizes the net balance sheet foreign currency position risk and components that are managed within the risk tracking system of the Group as at 31 December 2018 and 31 December 2017:


Financial instruments with fixed interest rate Financial assets

Time deposits 5,981,625 8,778,098Financial liabilities 9,639,986 8,188,456

Financial instruments with floating interest rate Financial liabilities (*) 8,309,554 6,862,528

(*) As of 31 December 2018, there is interest rate swap and cross currency interest rate swap transactions for loans with floating interest rate amounting to USD683,032 thousand (31 December 2017: USD529,412 thousand) and EUR26,571 thousand (31 December 2017: EUR35,428).

As at 31 December 2018, had the interest rate for borrowings denominated in USD strengthened by 100 base points (1%), with all other variables held constant, profit before tax would be TRY8,558 thousand lower/higher (31 December 2017: TRY9,420 thousand). As at 31 December 2018, had the interest rate for borrowings denominated in EURO strengthened/weakened by 100 base points (1%), with all other variables held constant, profit before tax would be TRY4,554 thousand lower/ higher (31 December 2017: TRY3,387 thousand). As of 31 December 2018 and 2017, there is no interest rate risk for TL bank loans.

Expected repricing and maturity dates do not differ from the contract dates excluding borrowings; therefore no additional table is presented.

The maturity groupings of borrowings at 31 December 2018 and 2017 based on their contractual repricing dates are disclosed in Note 5.

Foreign exchange risk

The Group is exposed to foreign exchange risk due to operations in foreign currency. These risks are managed by analysis of the foreign currency monetary assets and liabilities in the consolidated financial statements, by a comprehensive risk tracking system which includes natural hedging and similar practices.






The table below summarizes the net balance sheet foreign currency position risk and components that are managed within the risk tracking system of the Group as at 31 December 2018 and 31 December 2017:

31 December 2018 31 December 2017 TRY USD(*) TRY USD(*)

Monetary assets 5,288,783 1,005,300 7,648,679 2,027,805Monetary liabilities (20,841,883) (3,961,657) (21,286,304) (5,643,390)

Monetary assets / (liabilities) foreign currency position (15,553,100) (2,956,357) (13,637,625) (3,615,585)

Non-monetary assets 807,947 153,576 11,343 3,007Net foreign currency position of derivative financial instruments 3,302,295 627,705 4,294,924 1,138,663

Net foreign currency asset / (liability) position (11,442,858) (2,175,076) (9,331,358) (2,473,914)

Cash flow hedging (**) 5,166,635 982,082 4,796,118 1,271,539

Net foreign currency position after cash flow hedging (6,276,223) (1,192,994) (4,535,240) (1,202,376)

Inventory in natural hedge scope (***) 6,333,567 1,203,894 5,058,436 1,341,084

Net foreign currency position after cash flow hedging and natural hedge

57,344 10,900 523,196 138,709

(*) Dollar equivalent amounts are determined through dividing total TRY equivalent positions to exchange rate of dollar as at balance sheet date.

(**) The Group uses investment loans amounting to USD982,082 thousand, which is equivalent to TRY5,166,635 thousand (USD1,271,539 thousand / TRY4,796,118 thousand in 31 December 2017) as prevention against USD/TRY spot foreign exchange risk of USD denominated export revenue, which is highly probable to be realized. Based on the outcome of effectiveness test performed on related process, the Group has considered that the process is fully effective and therefore applied cash flow hedge accounting. As of 31 December 2018, TRY2,575,965 thousand of foreign exchange loss that arose from investment loans is classified under equity “Cash flow hedge gains (losses)” which has no effect on current year income statement. As of 31 December 2018, the foreign exchange loss amounting to TRY887,216 thousand corresponding to the export income of investment loans denominated in USD has been transferred to the foreign exchange loss in the income statement from “Cash flow hedge gains (losses)” account under equity. Moreover, as of 31 December 2018, foreign exchange loss f these loans in 2018 amounting to TRY1,958,617 were added to the “Cash flow hedge gains (losses)” account under equity.

(***) The Group manages its foreign currency risk arising from foreign currency denominated financial liabilities and trade payables by regularly considering and reflecting the foreign exchange rate changes in the determination of petroleum product prices. As at 31 December 2018, the Group has crude oil and petroleum products inventories amounting to TRY6,333,567 thousand (31 December 2017: TRY5,058,436 thousand) (Note 8). The Group has started following the US dollar equivalence of these inventories with their historical costs in accordance with risk management policy. The natural hedge balance would be USD4,744 thousand lower in 2017 if related method was applied.







Foreign exchange position table 31 December 2018 31 December 2017

TRY equivalent (In terms of

functional currency) USD EUR GBP Other



Trade receivables 744,813 141,461 57 - 257 102,783 27,226 19 - -Monetary financial assets (including cash, banks) 4,505,691 537,016 278,764 - 114 7,528,924 1,851,164 120,909 - 554Other 807,947 153,492 73 - - 11,343 2,298 590 2 - Current assets 6,058,451 831,969 278,894 - 371 7,643,050 1,880,688 121,518 2 554 Monetary financial assets 38,279 4,171 2,710 - - 16,972 2,498 1,672 - -Other - - - - - - - - - - Non-current assets 38,279 4,171 2,710 - - 16,972 2,498 1,672 - - Total assets 6,096,730 836,140 281,604 - 371 7,660,022 1,883,186 123,190 2 554 Trade payables 6,266,612 1,173,998 12,276 - 16,326 7,297,348 1,916,299 14,705 329 1,191Financial liabilities 3,278,691 486,945 118,932 - - 3,996,781 1,046,575 10,897 - -Other monetary liabilities 260,178 49,313 124 - - 524,280 138,814 153 - - Current liabilities 9,805,481 1,710,256 131,332 - 16,326 11,818,409 3,101,688 25,755 329 1,191 Financial liabilities 11,016,934 1,894,245 174,436 - - 9,464,531 2,160,677 291,146 - -Other monetary liabilities 19,468 3,578 107 - - 3,364 686 172 - - Non-current liabilities 11,036,402 1,897,823 174,543 - - 9,467,895 2,161,363 291,318 - - Total liabilities 20,841,883 3,608,079 305,875 - 16,326 21,286,304 5,263,051 317,073 329 1,191 Net asset/(liability) position of off-balance sheet foreign currency derivatives

3,302,295 597,260 26,571 - - 4,294,924 925,914 177,714 - -

Total amount of off-balance sheet derivative financial assets 3,455,571 626,395 26,571 - - 4,365,360 944,588 177,714 - -Total amount of off-balance sheet derivative financial liabilities (153,276) (29,135) - - - (70,436) (18,674) - - - Net foreign currency asset/(liability) position (11,442,858) (2,174,679) 2,300 - (15,955) (9,331,358) (2,453,951) (16,169) (327) (637) Cash flow hedging 5,166,635 982,082 - - - 4,796,118 1,271,539 - - - Net foreign currency position after cash flow hedging (6,276,223) (1,192,597) 2,300 - (15,955) (4,535,240) (1,182,412) (16,169) (327) (637) Net monetary foreign currency asset/(liability) position (15,553,100) (2,925,431) (24,344) - (15,955) (13,637,625) (3,382,163) (194,473) (329) (637) Fair value of derivative instruments Used for hedging 162,894 24,253 5,856 - - 426,328 113,027 - - -

As at 31 December 2018, the Group has TRY57,344 thousand as net foreign currency surplus after natural hedging (31 December 2017: TRY523,196 thousand net foreign currency surplus.)(Page:63)






Foreign exchange position table 31 December 2018 31 December 2017





Trade receivables 744,813 141,461 57 - 257 102,783 27,226 19 - -Monetary financial assets (including cash, banks) 4,505,691 537,016 278,764 - 114 7,528,924 1,851,164 120,909 - 554Other 807,947 153,492 73 - - 11,343 2,298 590 2 - Current assets 6,058,451 831,969 278,894 - 371 7,643,050 1,880,688 121,518 2 554 Monetary financial assets 38,279 4,171 2,710 - - 16,972 2,498 1,672 - -Other - - - - - - - - - - Non-current assets 38,279 4,171 2,710 - - 16,972 2,498 1,672 - - Total assets 6,096,730 836,140 281,604 - 371 7,660,022 1,883,186 123,190 2 554 Trade payables 6,266,612 1,173,998 12,276 - 16,326 7,297,348 1,916,299 14,705 329 1,191Financial liabilities 3,278,691 486,945 118,932 - - 3,996,781 1,046,575 10,897 - -Other monetary liabilities 260,178 49,313 124 - - 524,280 138,814 153 - - Current liabilities 9,805,481 1,710,256 131,332 - 16,326 11,818,409 3,101,688 25,755 329 1,191 Financial liabilities 11,016,934 1,894,245 174,436 - - 9,464,531 2,160,677 291,146 - -Other monetary liabilities 19,468 3,578 107 - - 3,364 686 172 - - Non-current liabilities 11,036,402 1,897,823 174,543 - - 9,467,895 2,161,363 291,318 - - Total liabilities 20,841,883 3,608,079 305,875 - 16,326 21,286,304 5,263,051 317,073 329 1,191 Net asset/(liability) position of off-balance sheet foreign currency derivatives

3,302,295 597,260 26,571 - - 4,294,924 925,914 177,714 - -

Total amount of off-balance sheet derivative financial assets 3,455,571 626,395 26,571 - - 4,365,360 944,588 177,714 - -Total amount of off-balance sheet derivative financial liabilities (153,276) (29,135) - - - (70,436) (18,674) - - - Net foreign currency asset/(liability) position (11,442,858) (2,174,679) 2,300 - (15,955) (9,331,358) (2,453,951) (16,169) (327) (637) Cash flow hedging 5,166,635 982,082 - - - 4,796,118 1,271,539 - - - Net foreign currency position after cash flow hedging (6,276,223) (1,192,597) 2,300 - (15,955) (4,535,240) (1,182,412) (16,169) (327) (637) Net monetary foreign currency asset/(liability) position (15,553,100) (2,925,431) (24,344) - (15,955) (13,637,625) (3,382,163) (194,473) (329) (637) Fair value of derivative instruments Used for hedging 162,894 24,253 5,856 - - 426,328 113,027 - - -

As at 31 December 2018, the Group has TRY57,344 thousand as net foreign currency surplus after natural hedging (31 December 2017: TRY523,196 thousand net foreign currency surplus.)(Page:63)







The table below summarizes the effect of foreign currency rate changes on net balance sheet foreign currency position of the Group as at 31 December 2018 and 31 December 2017.

Statement of foreign currency risk sensitivity31 December 2018

Profit/Loss Equity

Appreciation of

foreign currencyDepreciation of

foreign currencyAppreciation of


foreign currency

10% change in USD rate:USD net assets/ liabilities (1,539,040) 1,539,040 (516,663) 516,663Amount hedged for USD risk (-) 838,835 (838,835) - - USD net effect (700,205) 700,205 (516,663) 516,663

10% change in EUR rate:Euro net assets/ liabilities (14,675) 14,675 - -Amount hedged for Euro risk (-) 16,017 (16,017) - - EUR net effect 1,342 (1,342) - - TOTAL (698,863) 698,863 (516,663) 516,663

31 December 2017 Profit/Loss Equity

Appreciation of


foreign currencyAppreciation of


foreign currency

10% change in USD rate:USD net assets/ liabilities (1,275,718) 1,275,718 (473,155) 473,155Amount hedged for USD risk (-) 808,651 (808,651) - - USD net effect (467,067) 467,067 (473,155) 473,155

10% change in EUR rate:Euro net assets/ liabilities (87,814) 87,814 - -Amount hedged for Euro risk (-) 80,247 (80,247) - - EUR net effect (7,567) 7,567 - - TOTAL (474,634) 474,634 (473,155) 473,155

The Group accounted investment loans in scope of cash flow hedge accounting and foreign exchange income / expense arising from these loans are recognised in equity. 10% increase and decrease effect of foreign exchange rates are calculated with the same method and the calculated foreign exchange gains / losses are presented as hedged portion in the foreign exchange sensitivity table. Furthermore, the hedged portion of foreign exchange gains / losses via forwards and cross currency swap transactions is classified as the amount hedged against US dollar in the statement of exchange rate sensitivity analysis.






Export and import


ExportUSD (equivalent of thousand TRY) 12,489,247 10,205,556

Total 12,489,247 10,205,556

ImportUSD (equivalent of thousand TRY) 68,677,083 42,552,146

Total 68,677,083 42,552,146

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. The gearing ratios as at 31 December 2018 and 31 December 2017 are as follows:

31 December 2018 31 December 2017 Total financial liabilities (Note 5) 17,949,540 15,050,984Less: Cash and cash equivalents (Note 4) (4,557,686) (7,603,858) Net financial liabilities 13,391,854 7,447,126Total shareholders’ equity 9,945,829 10,477,661 Total capital invested 23,337,683 17,924,787 Gearing ratio 57.38% 41.55%

Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The estimated fair values of financial instruments have been determined by the Group, using available market information and appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange.

Following methods and assumptions were used to estimate the fair value of the financial instruments for which is practicable to estimate fair value:

Financial assets

The carrying amounts of foreign currency denominated monetary assets which are translated at year end exchange rates are considered to approximate their fair values.







The carrying values of cash and cash equivalents are estimated to be their fair values since they are short term.

The carrying values of trade receivables along with the related allowances for uncollectibility are estimated to be their fair values since they are short term.

Financial liabilities

The fair values of short-term financial liabilities and other financial liabilities are estimated to be their fair values since they are short term. The fair values of long-term bank borrowings with variable interest are considered to approximate their respective carrying values, since the initial rates applied to bank borrowings are updated periodically by the lender to reflect active market price quotations.

Fair value hierarchy table:

The Group classifies the fair value measurement of each class of financial instruments according to the source, using the three-level hierarchy, as follows:

Level 1: Market price valuation techniques for the determined financial instruments traded in markets (unadjusted)

Level 2: Other valuation techniques includes direct or indirect observable inputs

Level 3: Valuation techniques does not contains observable market inputs

Fair value hierarchy table as at 31 December 2018 is as follows:

Financial assets at fair value in statement of financial position Level 1 Level 2 Level 3

Derivative financial assets - 343,798 -

Financial liabilities at fair value in statement of financial position

Derivative financial liabilities - 278,287 -

Fair value hierarchy table as at 31 December 2017 is as follows:

Financial assets at fair value in statement of financial position Level 1 Level 2 Level 3

Derivative financial assets - 447,469 -

Financial liabilities at fair value in statement of financial position

Derivative financial liabilities - 180,501 -

NOTE 33 - Subsequent events

None.





CONTACT

HEAD OFFICEGüneyMah.PetrolCad.No:2541790Körfez-KocaeliTelephone:(+90262)3163000Fax:(+90262)3163010-3163011E-mail:[email protected]

İZMİT REFINERY MANAGEMENTGüneyMah.PetrolCad.No:25/141780Körfez-KocaeliTelephone:(+90262)3163030Fax:(+90262)3163724

İZMİR REFINERY MANAGEMENT AtatürkMah.İnönüBulvarıNo:5235800Aliağa-İzmirTelephone:(+90232)4985555Fax:(+90232)4985000-4985001-02

KIRIKKALE REFINERY MANAGEMENTAltınovaMah.AtatürkBulvarıNo:18671001HacılarKasabasıKırıkkaleTelephone:(+90318)2612000Fax:(+90318)2612071-2612072

BATMAN REFINERY MANAGEMENT SiteMah.ÖzgürlükBulvarıNo:15272100BatmanTelephone:(+90488)2172100Fax:(+90488)2172681

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