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Tüpraş 2017 Annual Report

Contents

1 TüpraşinBrief2 TüpraşataGlance4 KeyIndicators

GENERALASSEMBLY8 GeneralAssemblyAgenda9 IndependentAuditor’sReportontheAnnualReport10 MessagefromtheChairman14 IndependentAuditor’sReport(Opinion)15 ConsolidatedBalanceSheet/ConsolidatedIncomeStatement16 BoardofDirectors18 BoardofDirectos’Resumes24 ProfitDistributionPolicy25 ProfitDistributionProposal26 DividendDistributionTable27 RemunerationPolicy

TÜPRAŞINBRIEF30 MessagefromtheGeneralManager34 SeniorManagement36 Strategy38 2017Developments40 MilestonesinTüpraşHistory44 InvestorRelations50 HumanResources56 AwardsandAchievements

2017PERFORMANCE60 Sector62 ProductionandSales68 İzmitRefinery70 İzmirRefinery72 KırıkkaleRefinery74 BatmanRefinery76 Distribution(Opet)78 MarineTransportation(Ditaş)81 RailwayTransportation(KörfezUlaştırma)82 Investments84 R&D88 Innovation89 DigitalTransformationandCyberSecurity

SUSTAINABILITY94 HealthandSafetyPractices96 QualityManagementSystems98 EnvironmentManagement100 EnergyEfficiency102 PerformanceIndicators106 CorporateSocialResponsibilityProjects

CORPORATEGOVERNANCE115 CorporateGovernancePrinciplesComplianceReport130 RiskManagementandtheActivitiesoftheRiskManagement

Committee136 AboutEarlyDetectionofRiskSystemandCommittee137 EvaluationofOperatingPrinciplesandEffectivenessofBoard

Committees139 Policies144 AuditCommitteeReport(RelatedtoFinancialStatements)145 StatementofResponsibility(RelatedtoApprovalofFinancial

Statements)146 AuditCommitteeReport(RelatedtoAnnualReport)147 StatementofResponsibility(RelatedtoApprovalofAnnualReport)148 DeclarationforIndependencyofBoardMembers153 ResumesofCandidatesfor2018BoardofDirectors155 AffiliatedCompaniesReport

FINANCIALSTATEMENTSANDINDEPENDENTAUDITOR’SREPORT157 IndependentAuditor’sReport162 ConsolidatedFinancialStatements

226 GLOSSARY229 CONTACT

Tüpraş in Brief

Tüpraş is the largest industrial company in Turkey based on the added value it creates and its turnover.

TherefiningstorythatstartedwiththeprocessingofdomesticcrudeoilinBatmanin1955continuesuntiltoday,withtheactivitiescarriedoutundertheroofofTüpraşthroughatotalrefiningcapacityof28.1milliontonsfromitsfourrefineriesinKocaeli,İzmir,KırıkkaleandBatmansince1983.

TüpraşisthelargestindustrialcompanyinTurkeybasedontheaddedvalueitcreatesanditsturnover.BeingEurope’s7thlargestrefinery,TüpraşisoneofthefewhighcomplexMediterraneanrefineries,withanaverageNelsoncomplexityindexof9.5.

TüpraşcloselyfollowsuppotentialbusinessandinvestmentopportunitiesbothinTurkeyandabroad.Inlinewithitsstrategyofdiversifyingitsbusiness,theCompanyinvestsinsectoralintegration,alternativesourcesofenergyandnewstart-upbusinesses.Inthefieldofrenewableenergy,Tüpraşaimstoloweritsenergycostsandminimizeitscarbonfootprintbyprioritizingtheenergyneedsofitsownrefineries.


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Tüpraş at a Glance

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

İZMİT REFINERYCapacity: 11milliontons/year

Nelson Complexity: 14.5Storage Capacity:3.0millionm3

KÖRFEZ OPET TERMINALStorage Capacity: 45,450m3

DİTAŞ3 Crude Oil Tankers: 479,765DWT

1 Crude Oil/Product Tanker:51,532DWT7 Product Tankers:90,534DWT

KÖRFEZ ULAŞTIRMA A.Ş.549 Wagons

5 Locomotives

MARMARA OPET TERMINALStorage Capacity:721,000m3

İZMİR REFINERYCapacity:11milliontons/year

Nelson Complexity:7.66Storage Capacity:2.5millionm3

KIRIKKALE REFINERYCapacity: 5milliontons/year

Nelson Complexity:6.32Storage Capacity:1.3millionm3

ANTALYA OPET

TERMINALStorage Capacity:

19,392m3

MERSİN OPET TERMINAL

Storage Capacity: 240,000m3

Fuel market

5

43

12

5

3

4

1

2


2

Total annual crude oil processing capacity of Tüpraş’s four refineries established in Kocaeli, İzmir, Kırıkkale and Batman is 28.1 million tons.

100%Tüpraş accounts for 100% of Turkey’s current refining capacity.

BATMAN REFINERYCapacity:1.1milliontons/year

Nelson Complexity:1.83Storage Capacity:268thousandm3

GİRESUN OPET TERMINAL

Storage Capacity: 43,130m3

DitaşRefining capacity

Opet

Körfez Ulaştırma A.Ş.

Tüpraşholds79.98%ofDitaş’sshares

3 Crude Oil Tankers:479,765DWT1 Crude Oil/Product Tanker:51,532DWT7 Product Tankers:90,534DWT

Tüpraşholds40%ofOpet’sshares

Filling Stations: 1,560Storage Capacity:1.1millionm3

Trading,lubricants,bunkerfuel,jetfueloperations,storageactivities

Tüpraşholds100%ofKörfezUlaştırma’sshares

Number of Wagons: 549Number of Locomotives: 5

79.98%

40%


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Key Indicators

2013 2014 2015 2016 2017

Net Sales 21,595 18,165 13,571 11,547 14,801Operating Profit 22 199 1,012 781 1,333Profit Before Tax 7 84 819 644 1,227Profit After Tax* 629 667 938 594 1,046EBITDA 560 338 1,397 1,125 1,614Net Debt 1,340 1,663 2,370 1,729 1,657Return on Equity (ROE) % 24 26 35 22 41Debt Leverage Ratio % 36 38 45 43 38Net Working Capital (296) (677) (53) 286 713Investment Expenditures** 1,213 959 344 213 184

*Netprofitattributabletotheequityholdersoftheparent**Tüpraşsolo

2013 2014 2015 2016 2017

Processed Crude Oil 21,568 20,044 27,559 28,348 28,502Production 21,175 20,101 27,268 27,928 28,883Sales 24,083 22,194 28,739 30,255 31,493Product Export 4,844 5,333 6,494 5,491 5,804Product Import 3,805 2,920 2,999 3,749 4,388

Financial Indicators - (USDmillion)

Operational Indicators - Refining (thousandtons)

Shareholder Structure

KoçHoldingAygazOpet

51%

77%

20%3%

49%

EnerjiYatırımlarıA.Ş.FreeFloat


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14,801Tüpraş’s 2017 net sales increased to USD 14,801 million with 28.2% rise vs. 2016

Production (millionton)

20172016

28.927.927.3

20.121.2

201520142013

Operating Profit (USDmillion) Return on Equity (ROE)(%)

2017 20172016 2016

1,333 41

78122

1,01235

199

26

22

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2015 20152014 20142013 2013

Net Sales (USDmillion) Investment Expenditures* (USDmillion)

2017 20172016 2016

14,801

184

11,547

213

13,571

344

18,165 959

21,595 1,213

2015 20152014 20142013 2013

Earnings per Share (TL)

20172016

15.22

7.16

10.2

5.84.8

201520142013

Profit After Tax* (USDmillion)

20172016

1,046

594

938

667629

201520142013

Operating at full capacity, Tüpraş broke a new production record with 28.9 million tons and reached 31.5 million tons of sales volume in 2017.

*Tüpraşsolo

*Netprofitattributabletotheequityholdersoftheparent


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Generating record-high sales of 31.5 million tons of products and recording a pre-tax profit of TL 4.5 billion in 2017, Tüpraş reached results beyond its operational and profitability targets.

High profitability

113%In 2017, Tüpraş’s earnings per share increased by 113% compared to the previous year, from TL 7.16 per share to TL 15.22 per share.


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General Assembly Agenda

AGENDA FOR ORDINARY GENERAL ASSEMBLY MEETING OF TURKISH PETROL REFINERIES CORPORATION TO BE HELD ON 21 MARCH 2018

1. OpeningandelectionoftheChairmanforthemeeting,2. Review,discussionandapprovaloftheAnnualReportoftheCompanyforthefiscalyear2017aspreparedbytheBoardof

Directors,3. PresentationofthesummaryofIndependentAuditReportfortheyear2017,4. Review,discussionandapprovalofthe2017FinancialStatements,5. ReleaseofeachmemberoftheBoardofDirectorsfromliabilityfortheaffairsoftheCompanyfortheyear2017,6. WithintheframeworkoftheCompany’sdividendpolicy,approval,approvalwithamendmentordisapprovaloftheBoardof

Directors’proposalonprofitdistributionoftheyear2017andthedateofdividenddistribution,7. DeterminationofthenumberofBoardMembers,theirtermsofoffice,electionoftheMembersinaccordancewiththenumber

determinedandelectionofIndependentBoardMembers,8. InaccordancewiththeCorporateGovernancePrinciples,presentationofthe“RemunerationPolicy”totheshareholdersand

GeneralAssemblyforthemembersoftheBoardofDirectorsandtheSeniorExecutives,andalsoapprovalofthepaymentsmadeonthatbasis,

9. ResolutionofannualgrosssalariesforthemembersoftheBoardofDirectors,10. ApprovaloftheIndependentAuditFirmselectedbytheBoardofDirectorsinaccordancewiththeprovisionsoftheTurkish

CommercialCodeandtheCapitalMarketsBoardregulations,11. PresentationofthedonationsmadebytheCompanyin2017totheshareholdersanddeterminationofanupperlimitfor

donationstobemadein2018,12. InaccordancewiththeCapitalMarketsBoardregulations,shareholders’acknowledgementonthesecurities,pledgesand

mortgagesgrantedinfavorofthethirdpartiesintheyear2017andofanybenefitsorincomethereof,13. Authorizationoftheshareholderswithmanagementcontrol,membersoftheBoardofDirectors,seniorexecutivesandtheir

spousesandrelativesrelatedbybloodoraffinityuptotheseconddegreeaspertheprovisionsofarticles395and396oftheTurkishCommercialCodeandpresentationofthetransactionscarriedoutthereofintheyear2017pursuanttotheCorporateGovernanceCommuniquéoftheCapitalMarketsBoard,

14. Wishesandopinions.


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Independent Auditor’s Report on the Annual Report

CONVENIENCETRANSLATIONINTOENGLISHOFINDEPENDENTAUDITOR’SREPORTONTHEBOARDOFDIRECTORS’ANNUALREPORTORIGINALLYISSUEDINTURKISH

TotheGeneralAssemblyofTürkiyePetrolRafinerileriA.Ş.

1. OpinionWehaveauditedtheannualreportofTürkiyePetrolRafinerileriA.Ş.(the“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”)forthe1January-31December2017period.

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’sreportdated14February2018onthefullsetconsolidatedfinancialstatementsforthe1January-31December2017period.

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.

PwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.

EdizGünsel,SMMMPartner

İstanbul,26February2018


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Message from the Chairman

We, as Tüpraş, are happy to achieve our objectives in 2017, when an overall margin recovery is observed in the refining sector.

Ömer M. KoçChairman


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EsteemedShareholders,

IwouldliketostartmywordswishingthatweenjoyasuccessfulandproductiveAnnualGeneralMeeting.Theworldeconomyhasexceededexpectationsdespitedeepeninggeopolitical,political,economicandsocialfractures,aswellasincreasingpolarization.Wehavealsoleftbehindayearinwhichourcountry’seconomyperformedbetterthanexpected.

Theworldeconomyisestimatedtohavegrownby3.6%during2017,andwewelcomethefactthattherevivalintheeconomystemmedfrombothdevelopedanddevelopingcountries.

TheUSeconomygrewbycirca2.3%in2017,withconsumerconfidencereachingtoa17-yearrecordlevel,despitetheUSD150billiondamagecausedbythehurricanesthatbatteredtheUSAoneaftertheother.Asimilargrowthrateisexpectedin2018.DespitethepoliticalrisksandcrisesinEurope,ourlargesteconomicpartner,thepositivefiguresandestimatesregardingtheEuroZoneeconomyarewelcomedbyus.GrowthinEuropeisexpectedtoberealizedat2,5%,beingthehighestlevelforthe

lastsevenyears,andispredictedtobearound2.3%in2018.

Whilethisisthegeneralsnapshotindevelopedcountries,wealsoobservedthatdevelopingcountriesgrewmorestronglythananticipatedin2017.Theaccelerationofeconomicactivityinmajorcountries,notablyTurkey,BrazilandRussia,canbeconsideredasanimportantfactorbehindthisresult.AlthougheconomicgrowthinIndialaggedbehindexpectations,theIMFestimatesthatdevelopingcountriesgrewby4.7%in2017.Again,accordingtotheIMF’slatestprojections,globalgrowthwillreachto3.7%in2018,itshighestratesince2011.

Amideconomicenvironmentintheworld,ourcountry’seconomyalsosteeredapositivecoursein2017,exceedingexpectations.Turkey’seconomyisestimatedtohaveclosed2017withagrowthrateintheorderof6.5-7.0%.

Thepriceofcrudeoil,oneofthemostimportantparameterstoourindustry,triedtofinddirectionbyfollowingchangesindemandaswellastheextentofcompliancewithagreementtocutproductionandgeopoliticaldevelopmentsthroughouttheyear.

6.5%Tüpraş maintained the steady growth in its domestic sales during 2017, when consumption of petroleum products in Turkey increased by 6.5% YoY.


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MessagefromtheChairman

Withthealignmentofnon-OPECproducers,especiallyRussia,totheproductioncut-offs,oilpricesresultedatUSD55/bblasof2016yearend,beforefallingbackbelowUSD45/bbllevelsinJune.CrudeoilpricesthenbegantofollowavolatilebutupwardtrendduetotightercompliancebyOPECandRussiatothecut-offagreementandwiththesupportoftherecoveryindemandfromChina,IndiaandtheUSA.AmidmountinggeopoliticaltensionsintheGulfregionandthedecisiontoextendthecut-offagreementuntiltheendof2018,oilpricesclosedtheyearatUSD66.54/bbl,roundingoffanincreaseof21.3%.

Theyear2017wasagoodyearfortherefiningsector,markedbyageneralrecoveryinmargins.Despitethehighglobalcapacityutilization,anexpandingpersonalvehiclepark-especiallyinAsia-continuedtosupportglobalgasolinedemanddespitethetrendtowardsmoreefficientengines.Robustdemandforpetrochemicalsgenerallykeptlightdistillatemarginsatacertainlevel.Inaddition,manufacturingactivitygrewonthebackofstrongerglobaleconomicactivity,especiallyinChinaandIndia,andtheeffectofEuroZonegrowthon

demandalsohelpeddieselmarginsrecover.Arapidlygrowingaviationsectoralsosupportedjetfuelmargins.Besidesin2017,fueloilmarginsreachedtheirhighestlevelsinrecentyearsthankstoacombinationofgrowthinglobaltradevolumes,increaseddemandforbunkerfuelandusageoffueloilinelectricitygeneration.Suchincreasingdemandallowedevenmoresimplerefineriestoachievehighcapacityutilization.Itisagainstthisbackdropthatwe,atTüpraş,arehappytoleavebehindasuccessfulyear,inwhichwerealizedourobjectives.

Inadditiontoourflexibilityinprocessingheavyandhighsulphurcrudeoilsasprovidedbythefueloilconversionunit,weprocured27.7milliontonsofcrudeoilin2017withacrudeslatewhichwouldcreateanoptimalproductmix,gainedwiththeadvantageofourconstantlyexpandingcrudeoilsupplypool.DespitemaintenancehaltscarriedouttoprepareTüpraşforthehighseason,Tüpraşrealized28.9milliontonsofproduction,markinganincreaseof3.4%YoYandbyprocessing28.9milliontonsofcrudeoilalongwith1.9milliontonsofsemi-finishedproducts.

By the end of 2017, our total product sales reached to 31.5 million tons recording an increase of 4.1%, and our total turnover stood at TL 53.9 billion.


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Tüpraşmaintainedthesteadygrowthinitsdomesticsalesduring2017,whenconsumptionofpetroleumproductsinTurkeyincreasedby6.5%YoY.Bytheyear-end,ourtotalproductsalesamountedto31.5milliontons,withanincreaseof4.1%,andourtotalturnoverstoodatTL53.9billion.

Tüpraşrecordedapre-taxprofitofTL4.5billionin2017,130%abovepreviousyear,achievingresultswhichwentbeyonditsoperationalandprofitabilitytargets.Meanwhile,inaperiodofslowingportfolioinflowstoTurkey,ourCompanysuccessfullycompletedaUSD700millionEurobondissuanceatveryfavorableconditions.

Tüpraşalsocontinueditsinvestmentsforsustainabilityin2017,withitstotalinvestmentexpendituresreachingUSD5.9billionoverthelast12years.Inlinewithitsbusinessdiversificationstrategy,Tüpraşprioritizessectoralintegrationandinvestmentsinnewinitiativesinadditiontomeetingtheenergyneedsofitsownrefineriesinthefieldofrenewableenergy.TheCompanyaimstoreduceitsenergycostsandminimizeitscarbonfootprint.Moreover,withinthescopeoftheDigital

TransformationProject,anareawhereconcretestepsweretakenwithintheKoçGroupduring2017,Tüpraşstartedtoopendataanalysiscentersatuniversitiesinordertoprepareitselfforthenewworld.TheprojectscarriedoutbyTüpraş,whichdevelopscollaborationswithuniversitiesineveryfield,includeawiderangeoftechnologiesfromdigitaltransformationapplicationsthatwilltransformbusinesslifetotheIndustrial4.0approach,whichwillaffectrefineryprocesses.Someoftheseprojectsincludethemonitoringofactivitiesattherefinerysitethroughwirelesstechnologies,theDigitalRefineryTwin,PredictiveMaintenancethroughAdvancedAnalyticsandthecreationofProductionParameterswithArtificialIntelligencealgorithms.

Beyondallthisprogressinourwork,ourtoppriorityisoccupationalandtechnicalsafety,whichwillensureoursuccess.InlightofthedeclarationbyVehbiKoç,thefounderoftheKoçGroup,ofwhichweareallmembers,“Ourmostimportantcapitalisourhumanresource.”,anditiswiththisethosthatourhighestpriority,andoneonwhichweshallnotcompromise,isoccupationalsafety.Byreviewingallofourprocessesthrough

thisawareness,ourhighestresponsibilityisensuringthatourworkprocessesaresafer.Whilewecontinuetocreatevalueforourshareholdersandourcountry,wearecommittedtoprovideflawlessworksafetywiththehighestefficiencyandanobjectiveof“zerofault-zeroaccident”throughthepartnershipsandprojectswecarryout.

OurValuedStakeholders,

Closingasuccessfulyear,ourbusinessresultsprovideduswiththeopportunitytodistributethehighestdividendinTüpraş’shistory.

Wewouldliketothankallofourstakeholders,suppliersandbusinesspartnersfortheirvaluablecontributions,trustandloyaltytheyhaveshowntoTüpraş,andouremployeeswhohavecontributedtooursuccessfulresults.



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Independent Auditor’s Report (Opinion)

TheopinionoftheIndependentAuditoraboutconsolidatedstatementsisgivenbelow.ForthefullReport,gotopage157.

WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofTürkiyePetrolRafinerileriA.Ş.(the“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”),whichcomprisetheconsolidatedstatementoffinancialpositionasat31December2017andtheconsolidatedstatementofprofitorlossandothercomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheyearthenendedandthenotestotheconsolidatedfinancialstatementsandasummaryofsignificantaccountingpoliciesandconsolidatedfinancialstatementnotes.

Inouropinion, theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheGroupasat31December2017,anditsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyearthenendedinaccordancewithTurkishAccountingStandards(“TAS”).

PwCBağımsızDenetimve SerbestMuhasebeciMaliMüşavirlikA.Ş.

EdizGünsel,SMMM Partner



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Consolidated Balance Sheet/Consolidated Income Statement

TL thousand 2016 2017

TotalCurrentAssets 13,667,060 20,366,024

TotalNon-CurrentAssets 17,551,120 17,796,955

Total Assets 31,218,180 38,162,979

TotalShortTermLiabilities 12,660,262 17,675,669

TotalLongTermLiabilities 10,390,885 10,009,649

Total Liabilities 23,051,147 27,685,318

Total Equity 8,167,033 10,477,661

TL thousand 2016 2017

Revenues 34,854,851 53,948,110

CostsofGoodsSold (31,205,624) (47,734,212)

GrossProfit 3,649,227 6,213,898

OperatingProfit 2,357,289 4,857,459

ProfitBeforeTax 1,944,022 4,474,038

Taxes (131,232) (633,482)

ProfitforthePeriod 1,812,790 3,840,556

EquityHoldersoftheParent 1,793,267 3,811,546

EarningsperShare(TL) 7.16 15.22

Consolidated Balance Sheet

Consolidated Income Statement


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Board of Directors

Rahmi M. KoçMember


Ali Y. KoçViceChairman

Semahat S. ArselMember

Temel K. AtayMember

O. Turgay Durak Member

Erol Memioğlu Member

Dr. Bülent BulgurluMember

Levent ÇakıroğluMember


16

Yağız Eyüboğlu Member

Gökçe Bayındır IndependentMember

Osman Mete Altan IndependentMember

Süleyman Karaman IndependentMemberandPrivatizationAdministrationRepresentative

Ahmet Turul IndependentMember

Kutsan ÇelebicanIndependentMember


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Board of Directors’ Resumes


HereceivedhisB.A.degreefromColumbiaUniversityin1985.HeworkedatKofisaTradingforoneyear.HecompletedhisMBAatColumbiaUniversityin1989.AfterworkingatRamericaInternationalInc.,hejoinedKoçGroupin1990.HeheldvariousseniorpositionsatKoçHoldingincludingFinanceCoordinator,VicePresidentandPresidentofEnergyGroup.HebecamememberofBoardofDirectorsin2004andViceChairmaninMay2008.On22February2016,hewasappointedastheChairmanofKoçHolding.HeisalsoChairmanofTurkishEducationalFoundationBoardofTrustees,ChairmanofKoçUniversityBoardofTrustees,PresidentofGeyreFoundationandChairmanofYapıKrediKültürSanatYayıncılıkandTofaşBoardofDirectors.

Appointedin2006asamemberofTüpraşBoardofDirectors,ÖmerM.KoçhasbeenservingastheChairmanoftheCompanysince2008.

Ali Y. KoçVice Chairman

HegraduatedfromRiceUniversityinBusinessAdministrationandcompletedhisMBAdegreeatHarvardBusinessSchool.HeattendedtheAmericanExpressBankManagementTraineeprogrambetween1990and1991andworkedasananalystatMorganStanleyInvestmentBankbetween1992and1994.HeheldvariousseniorpositionsatKoçHoldingsuchastheNewBusinessDevelopmentCoordinatorandPresidentoftheInformationTechnologyGroupbetween1997and2006.HewasthePresidentoftheCorporateCommunicationsandInformationTechnologyGroupbetween2006and2010.HehasbeenamemberofKoçHoldingBoardofDirectorssince30January2008andwasnamedViceChairmanonFebruary22,2016.

AliY.KoçisalsotheChairmanatvariousKoçGroupcompanies.AliY.Koçalsocontributestothecountry’ssocialandeconomicdevelopmentatURAK(InternationalCompetitionResearchAssociation)asPresident,EndeavorAssociationandDEİK(ForeignEconomicRelationsBoard)asBoardMember.HeisalsotheViceChairmanofTÜSİAD-TurkishIndustryandBusinessAssociationandMemberoftheGlobalAdvisoryCouncilofBankofAmerica,HarvardUniversityandCFR.

Appointedin2008asamemberofTüpraşBoardofDirectors,AliY.KoçhasbeenservingastheViceChairmanoftheCompanysinceApril2016.


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Rahmi M. KoçMember

RahmiM.KoçgraduatedfromtheIndustrialManagementDepartmentofJohnsHopkinsUniversity(USA)andstartedhisprofessionalcareerin1958attheOtokoçCompanyoftheKoçGroup.HehasheldseniorpositionsatKoçHolding.HebecameChairmanoftheManagementCommitteein1980andwasnamedChairmanoftheBoardofDirectorsofKoçHoldingin1984,aposthehelduntil2003.Currently,heistheHonoraryChairmanofKoçHolding.In1961,Mr.KoçbecameaBoardMemberatFordOtosanandthentheChairmanin1972.HehasbeentheHonoraryChairmanofFordOtosansince10December2012.Between1995-1996,heservedastheChairmanoftheInternationalChamberofCommerce.HecurrentlyholdspositionssuchastheDeputyChairmanoftheBoardofTrusteesoftheVehbiKoçFoundation,ChairmanoftheBoardofTrusteesofKoçUniversity,FounderandChairmanoftheBoardofDirectorsofRahmiM.KoçMuseumandCultureFoundation,ChairmanoftheBoardofDirectorsofVKVAmericanHospital,FoundingMemberandHonoraryChairmanoftheCleanSeasAssociation(TURMEPA),HonoraryChairmanoftheHighAdvisoryCounciloftheTurkishIndustryand

BusinessAssociation(TÜSİAD),MemberoftheAdvisoryCounciloftheTurkishConfederationofEmployers’Unions(TİSK).,HonoraryMemberoftheForeignPolicyAssociation,HonoraryTrusteeoftheMetropolitanMuseumofArt,NewYorkCityandFoundingChairmanoftheGlobalRelationsForum.Mr.KoçwasawardedhonorarydoctoratesbyJohnsHopkinsUniversity,EskişehirAnadoluUniversity,İzmirEgeUniversity,AnkaraBilkentUniversity,OvidiusUniversityofConstanzaandAydınAdnanMenderesUniversity.Healsoreceivedan“OutstandingServiceAward”bythePresidentofTurkishRepublic,GermanGovernment’s“GrossesVerdienstKreutz”,“OrderofHighMeritoftheItalianRepublic”,“OrderofMeritoftheAustrianGovernment”,“(Honorary)CommanderoftheMostExcellentOrderoftheBritishEmpire(CBE)”,and“Officierdansl’OrdreNationaldelaLegionD’Honneur”,thehighestmedalawardedbytheFrenchgovernment

Mr.KoçhasservedasaMemberoftheBoardofDirectorsofTüpraşsince2008.

Semahat S. Arsel Member

Shebeganhercareerin1964asamemberofKoçHoldingBoardofDirectors,apositionshecontinuestohold.Inaddition,sheistheChairmanoftheBoardofDirectorsofVehbiKoçFoundation,ChairmanoftheDivanGroupBoardofDirectors,ChairmanofSemahatArselNursingEducationandResearchCenterandSecondChairmanofFlorenceNightingaleFoundation.SheisalsothefounderofKoçUniversitySchoolofNursing.

Mrs.SemahatS.ArselhasbeenamemberofTüpraşBoardofDirectorssince2009.


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BoardofDirectors’Resumes

Temel Kamil AtayMember

AgraduateofMechanicalEngineeringfromİstanbulTechnicalUniversity,heholdsanMBAdegreefromWayneStateUniversity.HejoinedKoçGroupin1966andlaterservedastheGeneralManagerofOtoyolSanayiA.Ş.andTofaşTürkOtomobilFabrikasıA.Ş.AfterworkinginvariousseniormanagementpostsatKoçHolding,heservedastheCEObetween2000and2001.TemelKamilAtayhasbeenamemberofKoçHoldingBoardofDirectorssince1996andamemberofTüpraşBoardofDirectorssince2006.

Dr. Bülent BulgurluMember

HegraduatedfromAnkaraEngineeringandArchitecturalFacultyandearnedhisPh.D.fromNorwegianUniversityofScienceandTechnology(NTNU).Hestartedhiscareerin1972asaConstructionEngineeratElliotStrömmeA/SinOslo.HejoinedGarantiİnşaatin1977asConstructionEngineerandworkedasPlanningandConstructionManager,SiteCoordinationandConstructionManager,AssistantGeneralManager,GeneralManagerandExecutiveDirectoratGaranti-Koza.HehasworkedatKoçHoldingsince1996asPresidentoftheTourismandServicesGroup,PresidentoftheTourismandConstructionGroupandPresidentoftheConsumerDurablesandConstructionGroup.HewasKoçHoldingCEObetweenMay2007andApril2010.HehasbeenaMemberofKoçHoldingBoardofDirectorssinceMay2007.HeisalsoamemberofTÜSİADandTURMEPA.

Dr.BülentBulgurluhasbeenamemberofTüpraşBoardofDirectorsfirstbetween2007-2012andthensince2014.

Levent ÇakıroğluMember

LeventÇakıroğlugraduatedfromAnkaraUniversity,FacultyofPoliticalSciences,DepartmentofBusinessAdministration.HeearnedaMaster’sdegreeattheUniversityofIllinois.Mr.ÇakıroğlubeganhisprofessionalcareerasanAuditorattheMinistryofFinancein1988.From1997to1998,hetaughtasapart-timeinstructoratBilkentUniversity,andservedasVicePresidentoftheFinancialCrimesInvestigationBoardattheMinistryofFinance.HejoinedKoçHoldingin1998asFinancialCoordinator.Subsequently,heservedastheGeneralManagerofKoçtaş(2002-2007),GeneralManagerofMigros(2007-2008),GeneralManagerofArçelik(2008-2015),andPresidentoftheConsumerDurablesGroupatKoçHolding(2010-2015).InFebruary2015,Mr.ÇakıroğluwasappointedDeputyChiefExecutiveOfficerofKoçHolding,andhehasbeentheChiefExecutiveOfficerofKoçHoldingsinceApril2015.

Mr.LeventÇakıroğluhasbeenamemberofTüpraşBoardofDirectorssinceMarch30,2015.


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O. Turgay Durak Member

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

Mr.DurakhasbeenamemberofTüpraşBoardofDirectorssinceApril5,2010.

Erol MemioğluMember

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

Mr.MemioğluhasbeenamemberofTüpraşBoardofDirectorssince2006.

Yağız EyüboğluMember

Mr.YağızEyüboğlugraduatedfromBoğaziçiUniversity,DepartmentofEconomicsin1991;subsequently,heearnedhisMBAfromKoçUniversityin1996.Mr.EyüboğlubeganhisprofessionalcareerasaManagementTraineeatArçelikA.Ş.in1991.Startingin1993,heworkedatKoçHoldingformorethan10years,asSeniorInternalAuditor,AssistantFinancialCoordinatorandFinancialCoordinator,respectively.Between2004and2009,Mr.EyüboğluassumedseveralroleswithintheKoçGroup,includingCFOofArçelikA.Ş.,CEOandBoardMemberofBekoElektronikA.Ş.,AssistanttothePresidentofKoçHoldingForeignTradeandTourismGroup,andHumanResourcesDirectorofKoçHolding.From2009toOctober2015,hewastheGeneralManagerofAygaz.InOctober2015,hewasappointedDeputyPresidentoftheEnergyGroupatKoçHoldingandsinceApril2016hehasbeenservingasPresidentofEnergyGroup.Mr.EyüboğlucurrentlyservesasaBoardMemberbothinseveralKoçHoldingcompaniesandsectoralnon-governmentalorganizations.

Mr.EyüboğluhasbeenamemberofTüpraşBoardofDirectorssinceApril4,2016.


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BoardofDirectors’Resumes

Süleyman KaramanIndependent Member and Privatization Administration Representative

AftergraduatingfromİstanbulPertevniyalHighSchool,hereceivedhisdegreeinmechanicalengineeringfromİstanbulTechnicalUniversityin1978.Helaterearnedhismaster’sdegreeinthesamefieldwithhighhonorfromthesameuniversity,wherehewentontoworkontheprototypesofengines,tractorsandagriculturalmachinerybetween1979and1981.From1984until1994,heworkedintheautomotivesideindustryasOperationsManager,AssistantGeneralManagerandBoardMember.In1994,hewasappointedAssistantGeneralManagerofIETT,PublicTransportCompanyofİstanbul,andservedatİSBALT,İSBAK,İSTON,İSMERandBELTUR,allofwhichareenterprisesofİstanbulMetropolitanMunicipality.On31December2002,hebecametheDirectorGeneralandChairmanofTCDD(TurkishStateRailways).Duringhistermintheoffice,hecontributedtotherealizationofmorethan100railwayprojects,mostremarkablytheHighSpeedTrainproject.HereceivedtheInnovationAwardfromthePresidentoftheRepublicofTurkeyinrecognitionofhiseffortsattheDirectorateGeneralofTCDD.HeservedontheBoardsofDirectorsofTürkTelekom,TTNETandTÜRKSAT.In2015,heresignedfromhispositionatTCDDandranfornominationasamemberoftheParliamentfromErzincanforAKParty.Hecurrentlyholdsanindependentmember’sseatontheBoardofDirectorsofTÜRKSAT.

SüleymanKaramanismarriedandhas3children.HespeaksEnglish.

Mr.SüleymanKaramanhasbeenanindependentBoardMemberatTüpraşsinceMart29,2017.

Ahmet Turul Independent Member

BorninVanin1959,AhmetTurulgraduatedfromAnkaraUniversity,DepartmentofPoliticalSciencein1980.

Between1980and1988,heworkedasAssistantPublicAccountantandlaterasPublicAccountantattheMinistryofFinance.From1988to1999,heservedasAssistantCoordinatorofFinancialAffairs,andFinancialAffairsCoordinatoratKoçHolding,andfrom1999to2002,hewastheVicePresidentofFinancialAffairsatKoçTüketiciFinansmanıA.Ş.Mr.TurulservedasVicePresidentofFinancialAffairsatAllianzSigortaA.Ş.andAllianzHayatveEmeklilikA.Ş.between2002and2010.Since2010,hehasbeenaBoardMemberofAllianzSigortaA.Ş.andAllianzHayatveEmeklilikA.Ş.,andaBoardMemberofAllianzYaşamveEmeklilikA.Ş.since2013.Additionally,Mr.TurulservesasBoardMemberandMemberoftheNon-LifeExecutiveBoardattheInsuranceAssociationofTurkey(TSB);BoardMemberatthePensionMonitoringCenter;andMemberoftheTaxCouncilonbehalfofTSB.

Mr.AhmetTurulhasbeenanIndependentBoardMemberatTüpraşsinceMarch31,2014.

Gökçe BayındırIndependent Member

Borninİstanbulin1939,GökçeBayındırgraduatedfromRobertCollege,andthenfromBoğaziçiUniversity,DepartmentofBusinessAdministrationin1965;subsequently,hereceivedhisMBAfromthesameinstitution.Aftercompletinghismilitaryservice,Mr.Bayındırstartedhisprofessionalcareerin1967.HejoinedTofaşOtoTicaretA.Ş.in1971wherehefirstworkedasMarketingManagerbeforerisingtoAssistantGeneralManager;in1979,hebeganservingasGeneralManageratTofaş.In1987,hewasappointedTofaşGroupVicePresidentatKoçHolding,andlaterheldthepositionofTofaşGroupPresidentbeforeretiringfromKoçGroupin2000.

DuringhistimeatKoçGroup,Mr.BayındırservedasaBoardMemberatvariousGroupcompanies,primarilyTofaşOtoTicaretA.Ş.andTofaşTürkOtomobilFabrikasıA.Ş.Mr.BayındırhasbeenanIndependentBoardMemberatTüpraşsinceApril4,2012.


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Kutsan ÇelebicanIndependent Member

HegraduatedfromAnkaraUniversity,SchoolofPoliticalScience.HebeganhiscareerattheMinistryofFinanceTaxAuditorsBoardin1969,servedasDeputyGeneralDirectorattheGeneralDirectorateofTreasuryoftheMinistryofFinancebetween1979and1982,andwasappointedasAssistanttoExecutiveDirectorintheWorldBank(IBRD).HejoinedKoçGroupin1987andservedasFinanceCoordinator,VicePresidentandPresidentoftheFinanceGroup.HeretiredfromKoçGroupasofDecember2001.Hemanagedhisownfinancialconsultingcompanyforawhile.

KutsanÇelebicanhasbeenanindependentmemberofTüpraşBoardofDirectorssinceApril4,2012.

Osman Mete AltanIndependent Member

OsmanMeteAltangraduatedfromYıldızTechnicalUniversity,DepartmentofMechanicalEngineeringin1965andcompletedhisMAatthesameuniversityandlaterearnedanMBAfromUludağUniversity.Between1966and1968,Mr.AltanworkedfortheAmericancompanyTUMPANECo.Inc.;uponcompletinghismilitaryservicein1970,heworkedattheTofaşAutomobileFactory,wherehebecameWorkshopEngineer,ProductionEngineerandAssistantGeneralManager-Production.In1995,hewasappointedGeneralManagerofOtoyolA.Ş.andservedinthispositionuntilhisretirementinJuly2003.

Mr.AltanhasbeenanindependentmemberofTüpraşBoardofDirectorssinceApril4,2012.


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Profit Distribution Policy

OurCompanydistributesdividendsincompliancewiththeProvisionsofTurkishCommercialCode,theCapitalMarketsRegulations,theTaxRegulationsandotherrelatedregulationsandtherelatedprovisionsofourCompany’sArticlesofAssociationregardingdividenddistribution.

Inthedividenddistribution,incompliancewiththeCorporateGovernancePrinciples,abalancedandconsistentpolicyispursuedbetweentheshareholdersandtheCompanybenefits.Inprinciple;asfarastherelatedregulations,investmentneedsandfinancialsituationallow,theentireamountofthe“netdistributableprofitfortheperiod”,calculatedwithintheframeoftheCapitalMarketsRegulations,isdistributedincash-takingintoconsiderationthemarketexpectations,longtermcompanystrategies,investmentandfinancingpolicies,profitabilityandcashposition-aslongasitiscoveredfromtheexistingresourcesinourlegalrecords.

TheGeneralAssemblyortheBoardofDirectors,ifauthorized,maydecidetodistributedividendswithinstallmentsincompliancewiththeregulationsoftheCapitalMarkets.ThereisnoprivilegeintheArticlesofAssociationregardingtheparticipationtodividenddistribution.

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


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Profit Distribution Proposal

Accordingtotheencloseddividenddistributiontablebasedonthefinancialstatementsfortheaccountingperiod1January-31December2017,incompliancewiththeTAS/TFRSandstatutoryresults,preparedbyTurkishPetroleumRefineriesCorporation,andauditedbyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.ourproposalforprofitdistributionisexplainedbelow:

a.PursuanttoArticle519oftheTurkishCommercialCode,5%LegalReservetobesetaside.Howeversincethecapitalreservesalreadyexceeded20%ofequityasof31December2017,5%LegalReservehasnotbeensetasidein2017.

AccordingtotheCapitalMarketsLawandCapitalMarketsBoardRegulations,consolidatednetincomeattributabletoequityholdersoftheparentcompanyisintheamountofTL3,811,546,000.00.WhendonationsofTL27,406,755.38tocharitableorganizationsareadded,thefirstassessmentbasefordividendisTL3,838,952,755.38.Accordingtothestatutoryrecords,itwasrealizedthatTL3,715,044,558.44ofnetdistributableprofitexists.

b.InaccordancewiththeCapitalMarketLaw,CapitalMarketBoardRegulations,Company’sArticlesofAssociationandDividendDistributionPolicy,asperencloseddividenddistributiontable,thefollowingprofitdistributionisproposed;

TL3,406,452,377.60tobedistributedasfirstdividendtoshareholdersTL339,393,141.76tobeputasideassecondarydividendstoshareholders,

c.ThetotalamountofdividendtobepaidincashisTL3,406,452,377.60.

d.Iftheabovementioneddividenddistributionproposalisapprovedbythegeneralassembly,onthebasisofstatutoryaccounts,theamounttobedistributedisTL3,406,452,377.60ascash,ofwhichTL3,378,451,504.04isfromotherearningsofthecurrentperiodandTL28,000,873.56isfromdistributableotherreserves.Secondarylegalreserveswithavalueof339,393,141.76ofwhich336,593,054.40willbefundedfromcurrentyearearningsandremainingTL2,800,087.36willbefundedfromdistributableotherreserves.

e.Onthisbasis,acashdividendofgross=netTL13,603istobepaidforonenominalstockworthTL1.00atarateof1,360.3%toourlegallyobligatedcorporatetaxpayershareholdersandlimitedcorporatetaxpayershareholdersearningdividendsthroughaTurkey-basedbusinessorpermanentrepresentationoffice.Othershareholdersaregoingtobepaidagrossrateof1,360.3%,acashdividendofgrossTL13,603,andnetrateof1,156.255%,acashdividendofnetTL11.56255foronenominalstockworthTL1.00.

ThedividenddistributionissuggestedtobeginonMarch29,2018.

ThedividenddistributionproposalwillbesubmittedtoGeneralAssemblythatwillbeheldinMarch21,2018.


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Dividend Distribution Table

1. Paid in Capital/Issued Capital 250,419,200.00 2. Total Legal Reserves (According to Statutory Income Statements) 279,668,162.56Information on privileges in profit distribution if any in the Articles of Association

AccordingtoCMBAccordingtoStatutory

Records3. Current Period Profit 4,445,028,000.00 4,178,243,263.464. Taxes Payable (-) 633,482,000.00 463,198,705.025. Net Profit (=) 3,811,546,000.00 3,715,044,558.446. Previous Years Losses (-) 0.007. General Legal reserves (-) 8. DISTRIBUTABLE NET PROFIT FOR THE PERIOD (=) 3,811,546,000.00 3,715,044,558.449. Donationsmadeduringtheyear(+) 27,406,755.38 10. Net Distributable Profit Added Donations 3,838,952,755.38

11.

First Dividend to Shareholders -Cash 3,406,452,377.60 12,520,960.00-Bonus - Total 3,406,452,377.60 12,520,960.00

12. Dividendtoprivilegedshareholders 13. Distributed Other Dividend 0.00 0.00 -DividendtotheBoardMembers -DividendtotheEmployees -Other 14. Dividendtoredeemedshareholders 15. Secondarydividendstoshareholders 3,365,930,544.0416. Generallegalreserves 339,393,141.76 336,593,054.4017. Statutoryreserves 18. Specialreserves 19. EXTRAORDINARY RESERVES 65,700,480.64 0.00

20.

Other Resources to be Distributed 0.00 28,000,873.56-Previousyear’sprofit -Extraordinaryreserves 0.00-OtherdistributablereservesasperthelawandtheArticlesofAssociation 0.00 28,000,873.56

21. AllocatedLegalReservestobedistributedfromothersources 2,800,087.36

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 (TL)NET* A 3,156,078,128.19 82.80 11.5626 1,156.2550 C 0.14 0.00 11.5626 1,156.2550 TOTAL 3,156,078,128.33 0.00 82.80

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

TURKISH PETROLEUM REFINERIES CORPORATION Dividend Distribution Table (TL)


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Remuneration Policy

ThispolicydeterminestheremunerationsystemfortheBoardofDirectorsandseniorexecutiveswithinthescopeofthedefinitionofpersonsdischargingmanagerialresponsibilitiesunderCapitalMarketsBoardregulations.

AfixedremunerationisdeterminedforallmembersoftheBoardattheannualgeneralmeetingoftheCompany.

AdditionalpaymentismadetotheexecutivemembersoftheBoardinaccordancewiththepolicyestablishedforseniorexecutives.

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

InrespectofremunerationoftheindependentmembersoftheBoardofDirectors,apaymentplanbasedontheperformanceoftheCompanymaynotbeused.

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

Theremunerationofseniorexecutivesistoconsistoftwocomponents,whicharefixedandperformancebased.

Fixedsalariesofseniorexecutivesaredeterminedinaccordancewithinternationalstandardsandlegalobligationsbytakingintoaccounttheprevailingmacroeconomicdatainthemarket,thesalarypoliciesprevailinginthemarket,thesizeandlong-termtargetsoftheCompanyandthepositionsofthepersons.

Bonusesforseniorexecutivesarecalculatedaccordingtothebonusbase,theperformanceoftheCompanyandtheindividualperformance.Asummaryofthecriteriaisasfollows:

• Bonus Base:Bonusbasesareupdatedatthebeginningofeachyear.Theyvarydependingontheworkvolumeoftheexecutives’positions.Whenupdatingthebonusbases,seniorexecutivebonuspoliciesinthemarketaretakenintoaccount.

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

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

Severancepaymentsmaybegrantedtotheseniorexecutivesbytakingintoaccounttotaltermofservice,termofserviceasanexecutive,aswellascontributionsmadetotheCompany,therecentbonusbase,andthesalariesandbonusespaidinthelastyearofservice.

TotalamountsdeterminedbytheaboveprinciplesandpaidtothemembersoftheBoardofDirectorsduringtheyeararesubmittedforshareholderapprovalatthenextgeneralmeeting.


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Tüpraş undertakes investments with the aim of achieving a high return on equity.

Strong investments

USD 5.9 billionTüpraş realized USD 5.9 billion in investment expenditures over the twelve year period from 2006 and 2017.


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Message from the General Manager

İbrahim YelmenoğluGenelMüdür

Increased product mobility among regions due to the uplift in supply resulting from high capacity utilization rates globally, has further intensified competition in the sector.


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DearStakeholders,

Theglobaleconomicrecovery,whichbeganinthesecondhalfof2016andgainedmomentumin2017,increaseddemandforpetroleumproductsnotonlyindevelopingcountriesbutalsoindevelopedcountries.Thissituationsupportedsectoralprofitabilityandincreasedproductmobilitybetweenregionsduetotheincreasedsupplyresultingfromglobalhighcapacityutilizationrates,whichfurtherintensifiedcompetitioninthesector.

Thepriceofcrudeoil,whichstarted2017atUSD55/barrel,declinedtoUSD44/barrelbyJuneduetotheweakdemandgrowthinthefirsthalfoftheyear,inadditiontothelowcomplianceofOPECmemberswiththecut-offagreement,increasedproductionfromLibyaandNigeriaandthecontinuousincreaseinUSproduction.

However,oilpriceschangeddirectioninthesecondhalfoftheyear,whentherewasanupwardtrendinpricesasOPECmembersfullycompliedwiththeagreementtolowerproduction,besidesrecoveringdemandfromChina,IndiaandtheUnitedStates.Oilpricesclosedtheyear2017atUSD66.54/barrel,markinganincreaseof21.3%duetorisinggeopoliticaltensionsintheGulfRegionandthedecisiontoextendtheagreementtocutoilproductionuntiltheendof2018.

Whilethesupplyglutresultingfromincreasingrefineryproductionin2017wasbalancedbyunplannedoutagesandaccidents,periodicalsupplylossesduetohurricanesintheUSArefineryregion,andcontinuingproductdeficitsintheWestAfricaandSouthAmericaregionsonceagainsupportedrefiningmargins,astheydidinthelastyear.Asaresultofalltheseinteractions,theMediterraneanrefinerymargin,whichaveragedUSD3.97/barrelin2016,increasedbyUSD1.37/barreltoreachUSD5.34/barrelin2017.

Theupwardtrendinconsumptionofpetroleumproductsinourcountryalsocontinuedin2017.AccordingtoEMRAfigures,consumptionofdieselinTurkeygrewby8.3%YoY,consumptionofgasolinegrewby3.1%YoYandtheconsumptionoftotalpetroleumproductsgrewby6.5%in2017.Increaseinthedemandissupportedbyeconomicgrowth,thankstothesupportmeasuresandincentives,andisestimatedtoberealizedat6.5-7%attheyearend.Thecontinuinginfrastructureinvestments,theongoingsteadygrowthinthevehicleparkandtheairtransportationdemandwhichhasbeguntogrowagainwiththerevivalofthetourismsectorespeciallyafterMay,canbecountedasthemainfactorsbehindthehigherrateofeconomicgrowth.

21.3%Oil prices closed 2017 at USD 66.54/barrel, marking an increase of 21.3%.


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AtTüpraş,wearedelightedtohaveroundedoffayearinwhichweachievedresultsexceedingouroperationalandfinancialtargetsandwehavesetthebarhigherincreatingvalueforourstakeholdersandourcountryaftertheinspiringresultsthatbuildourconfidence.

OurCompanyprocured27.7milliontonsofcrudeoilfrom25differentsourcesin2017inamannertocreatethemostcosteffectivecrudeslatecomposition.Inaddition,withthecontributionoftheFuelOilConversionFacility,werealizedalevelofproductionwhichexceededitspreviousyear’slevelbyachievingfullcapacityutilization.

OurCompanysuccessfullyincreaseditsdomesticandinternationalsalesvolumetoanall-timehighlevelin2017bysupportingitsproductioncloutwithlogisticalandcommercialoperations.Whilethedomesticsalesrecordwasadvancedforward,atotalof5.8milliontonsofproductswereexportedto27countriesacrosstheworld.

Tüpraş’stotalsalesstoodat31.5milliontonsin2017,exceedingtheprevioussalesrecordachievedin2016by1.2milliontons.Thestrengthderivedfromourproductioncapability,whichwehavecontinuouslydevelopedandimprovedupon,aswellasourcommercialcompetenciesthathavestoodusingood

steadandasfundamentaldeterminantsinachievingtheseoutstandingresults.

ThankstotheproximityoftheTüpraşrefineriestothecentersofconsumption,itsexperienceinprocuringcrudeoilanditsextensiveproductionpower,TüpraşmanagedtoincreaseitsoperatingprofittoTL4.86billionin2017.TüpraşwroteanetprofitofTL3.81billionin2017withthesupportofitssuccessfulmanagementofexchangeratevolatilityandthefluctuationsincrudeoilprices,aswellasthecorrectexecutionofitsriskmanagementstrategies.

AsTüpraş,weviewourinvestmentsasvitalinachievingasustainablehighperformance.WeinvestedUSD183.8millioninrefiningin2017andUSD117.5millionthroughDitaş,ourmaritimetransportationsubsidiary.Thisyear,ourfleetcapacitydoubledto622thousandDWTwiththeadditionoftwonewSuezmakstankers.Wearestrengtheningthelogisticsinfrastructure,whichaccountsforasignificantshareofTüpraş’scosts,throughrailwaytransportation,whichweattachgreatimportanceto,inadditiontoseatransportation.Withatotalof549wagonsand5diesellocomotivesleasedfromtheTCDD(TurkishStateRailways),westartedourCompany’srailwayoperationsinearlyDecember.Weaimtoundertake10%ofthetotalrailwaytransportationinTurkey

Supporting its production strength with logistic and commercial operations, our company achieved its highest sales volume of all time in 2017.


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withthetransportationofapproximately2.5milliontonsofpetroleumproductsannually,andtobecomethelargestrailwaycarrierinthesectorthroughKörfezUlaştırmaA.Ş.,whichiswhollyestablishedwithTüpraş’sowncapital.

Beingawarethatthemostimportantsourceofenergyisefficiency,Tüpraşrapidlycompleteditsinvestmentswiththegoalofbeingincludedinthefirstquartileintermsofefficiencyandreduceditsenergyintensityindexvalueby1.2pointsto102.2,whilealsoachievedareductionof46thousandtonsinitsCO2emissionsthroughthe15energysavingprojectsimplemented.

Tüpraşcloselymonitorspotentialbusinessandinvestmentopportunitiesinboththedomesticandinternationalarenainadditiontoitsinvestmentsaimedatlogisticsinfrastructureandoperationalexcellence.TheCompanyestablishedabusinessdiversificationstrategytodealwiththetransformationandchangeintheenergysector.Withinthisframework,weaimtoinvestinsectoralintegrationandstart-ups,whilecontinuingtokeeprefiningatthecoreofouractivities.Wewillthusbringanewstructureintooperationin2018,whichwillenhanceourvisibilityandourcommercialeffectivenessininternationalarenas.Ontheotherhand,withrenewableenergybecoming

morecompetitive,weanticipatefurtherreductionsincarbonemissions,whilefirstmeetingtheenergyneedsofourownrefineries.

Aspartofourin-houseentrepreneurshipandopeninnovationstudies,Tüpraşdetermineditsinnovationstrategyinordertocreatevaluethroughnewproducts,services,processesandworkmodelswithaperspectivefocusedonthefuture.TheInnovativeIdeasPortal,whereinnovativeideascanbeshared,wascommissioned,andthein-houseentrepreneurshipteamhasbeenworkingontheprioritizedideas.

Anotherareaofcontinuousimprovementisoccupationalsafety.Withacomprehensivereviewofallofourprocesses,wehaveincreasedoureffortstoinstillourpointofview,whichplacespeopleandoccupationalsafetyattheheartofouroperationsandintoeveryareaofourorganization.

Havinggainedpaceonaglobalscale,thedigitaltransformationchangespeoples’livesandalsoaffectshowtheydobusinessinindustry.AsTurkey’slargestprivatesectorcompany,wehavealreadydeterminedourstrategyandexecutionstepsinthisfield.Tüpraşbuiltitsdigitalstrategyonthemainthemeofadoptingtechnologieswhichsupport

processesandproductionandwhichdonotdeviatefromoccupationalsafetyandcybersecurity.Inthiscontext,wehaveconcentratedontheworkinthefieldsofDataAnalyticsandinProductionandFieldActivitieswithOptimizationbycomingtogetherwithouremployeesandstakeholderstochoosethesefieldsasthefocalpointsintheapplicationsofDigitalizationandIndustry4.0.

Ourbasicmotivationinallouractivitiesthatwecarryoutistocreatevalueforourcountryandallourstakeholders.OftheBİST,Tüpraşiscurrentlyoneofthecompaniesthatdistributethehighestprofitshare.Weareproudtocontinuetoprovidetheutmostbenefittoourinvestors.

Tüpraşwillmaintainitsworkaimingtoproducethehighestaddedvalueforitspartners,stakeholdersandTurkey’seconomywithdeterminationalsointhefutureasithasbeentodate.

Iwouldliketothankallofthecolleagueswhocontributedtoour2017performance,andallofthestakeholdersfortheirencouragement.

İbrahim YelmenoğluGeneralManager


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Senior Management

İbrahim YelmenoğluGeneral Manager

İbrahimYelmenoğlugraduatedfromtheFacultyofPoliticalSciencesatAnkaraUniversityin1991andreceivedhisMAfromtheUniversityofIllinoisin2003.

Startinghiscareerin1987attheMinistryofFinance,Mr.YelmenoğluworkedontheBoardofPublicAuditorsin1992.In2004,hestartedworkattheKoçHoldingAuditorsGroupandservedasKoçHoldingA.Ş.AuditorsGroupCoordinatoruntil2006.Followingthetransferof51%ofTüpraş’ssharestoKoçHoldingonJanuary27,2006,Mr.YelmenoğluwasassignedasAssistantGeneralManagerforFinancialAffairs.HewasappointedasGeneralManagerasofJanuary1,2016.

Doğan KorkmazAssistant General Manager (Financial)

HestartedhisprofessionallifewithKoçHoldingMTprogramin1996andstartedworkinginArçelikA.Ş.InvestmentFinancedepartmentatthesametime.HeheldCorporateFinanceandFinancialMarketsStrategistpositionsinArçelikuntil2007.In2007,hebecameTreasuryandCapitalMarketsManagerofArçelik.In2009,hebecameFinanceDirectoratBekoplc,Arçelik’sUKsubsidiary.In2012,hebecametheFinanceDirectorofArçelik.Mr.KorkmazgraduatedfromDepartmentofBusinessAdministrationatDEUin1996.HehasalsocompletedhisMBAprograminKoçUniversityin2007andDiplomainGlobalBusinessatOxfordUniversityin2013.AsofJanuary1,2016,hewasappointedasChiefFinancialOfficerofTüpraş.Hewasborninİstanbulin1974,marriedwithtwochildrenandspeaksEnglish.

Levent ZağraAssistant General Manager (Investments & Planning)

LeventZağragraduatedfromWorcesterPolytechnicInstitute,DepartmentofMechanicalEngineering,andearnedhisMBAandMSinManufacturingSystemsEngineeringfromCornellUniversity.

Mr.ZağrabeganhisprofessionalcareeratKoçHoldingintheStrategicPlanningDepartmentin1996.In2002,hewasappointedasGeneralManagerofPromenaElectronicCommerce.Between2009and2016,heservedastheEnergyGroupCoordinatoratKoçHolding.HewasappointedasAssistantGeneralManagerforInvestmentsandPlanningatTüpraşinApril2016.


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Özgür KahramanzadeAssistant General Manager (Sales & Marketing)

ÖzgürKahramanzadeholdsaBachelor’sdegreeinMechanicalEngineeringfromBoğaziçiUniversity.HereceivedhisMaster’sdegreeinManagementfromPurdueUniversity,KrannertBusinessSchool.

ÖzgürKahramanzadebeganhisprofessionalcareerasaManagementTraineeatBekoElektronikin1994;in1997,hebeganworkingasaProjectEngineeratKoçHolding.HejoinedZinerjiA.Ş.asProjectOfficerin2000;in2001,hestartedworkasaProjectManageratKoçHolding.In2005,hewasappointedasDirectorofMarketing,InvestmentsandGroupCompaniesatOPETPetrolcülük,andlaterasSupplyandTechnicalAssistantGeneralManageratthesamecompanyin2006.BetweenDecember2010andApril2016,Mr.KahramanzadeservedasGeneralManagerofEntekElektrikÜretimA.Ş.InApril2016,hewasappointedasAssistantGeneralManagerresponsibleforSalesandMarketingatTüpraş.

İhsan Serdar KemaloğluAssistant General Manager (Technical)

SerdarKemaloğlugraduatedfromMiddleEastTechnicalUniversity,DepartmentofChemicalEngineeringin1991.

Hebeganhisprofessionalcareerin1993asPlantEngineeratTüpraşİzmitRefinery,whereheassumedvariousrolesincludingSupervisorandChiefEngineerattheRefinery’sFCC,CrudeOil,Vacuum,DesulphurizationandHydrocrackerUnits.Mr.KemaloğluparticipatedineffortstocommissiontheIsomerizationUnitin2002.AstheChiefProcessControlEngineeratİzmitRefinery,hewasactivelyinvolvedintheimplementationofAdvancedProcessControls(APC),launchedin2008.AfterservingasProductionManageratİzmirRefinery,hewasappointedasBatmanRefineryManagerinJune2013;andbetweenOctober2015andFebruary2017,heservedasKırıkkaleRefineryManager.Mr.KemaloğluwasappointedasTechnicalAssistantGeneralManageronFebruary1,2017.

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

AtillaUlusugraduatedfromLycéeSaintJosephİstanbulin1994andthenBilkentUniversityPoliticalScienceandPublicAdministrationin1999.

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


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Strategy

Tüpraş aims to transfer its leading refinery experience to trade, logistics and other sectors with its fast, flexible, innovative and customer-oriented approach.

100%The Fuel Oil Conversion Unit enabled a 100% rate of capacity utilization by producing a higher rate of white products from all of Tüpraş’s refineries.

Tüpraş takes determined steps to improve its competitive structure while increasing efficiency and reducing costs in every field.Turkey’senergyneedsareincreasinginparallelwithitsdevelopmentandgrowth.Accordingly,establishinginfrastructurewhichpavesthewaysustainablegrowthsothatincreasedenergyneedscanbeprovidedsafelyshouldbetheprimarygoalanygovernment.

Withitsdemographicadvantage,Turkeysustainsitstrendofeconomicgrowth,despitethevolatilityexperiencedinglobalmarkets.Thevehiclepark,whichisgrowingsteadilyinthedevelopingeconomy,alsoposesanincreasedneedforpetroleumproducts.

AnimportantpartofTüpraş’sstrategyistodirectthesectorwithinnovativepracticesandtoensurethehighestlevelofcustomersatisfactionwhilemeetingthiscountry’sneeds.

Establishingbusinessplanstoleadthenewindustrialrevolutioninitsfieldsofactivity,Tüpraşaimstotransferitsleadingrefineryexperiencetotrade,logisticsandothersectorswithitsfast,flexible,innovativeandcustomer-orientedapproach.

Tüpraşisawarethatitisoperatinginasectorwherecompetitionisconstantlyincreasing.WithnewrefineriesbeingcommissionedinChinaandtheMiddleEast-thedrivingforcesofglobaldemandgrowth-inadditiontonewrefineriesinotherregions,particularlytheUSA,which


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operatewithlowcrudeoilandenergyinputcosts,theprocessofconsolidationinthesectorisboundtogainpace.Takingthisintoaccount,theCompanyisdeterminedtotakestepstoimproveitsenergyefficiencyandcompetitivestructure.

Tüpraş has achieved many operational and financial breakthroughs since it was transferred to the Koç Group.Significantstepshavebeentakentoimprovetheoperationalinfrastructureaswellastoincreaseprofitabilityandtheaddedvaluethatiscreated,suchasthroughthepurchaseofa40%stakeinOpetPetrolcülükA.Ş.andtherenewaloftheDitaşfleet.

TheFuelOilConversionProject,oneofthemostimportantstrategicprojectstobeimplementedinthemediumterm,wascompletedandenteredoperationon15December2014.Thehighstandardofproducts,producedinplaceofthefueloilwhichwassurplustodemand,enabledbythecommissioningofthisprojecthasraisedTüpraş’scompetitivecloutandprofitabilitytohigherlevels,whilecontributingtothecountry’ssupplysecurity.TheFuelOilConversionUnit,whichwascommissionedatfullcapacityinMay2015,enableda100%rateofcapacityutilizationbyproducingahigherrateofwhiteproductsfromallofTüpraş’srefineries.

Setting itself apart in the sector by implementing “Best Available Technologies” (BAT) in the operational developmentRecognizingthegreattransformationintheenergysector,theCompanyisquicklycompletingitsinvestmentsinlinewithitsgoaloftakingaseatatthetableofthe

keyenergyplayersofthefuture,withouttakingitseyeofftheballtoday.

Closelyfollowingpotentialbusinessandinvestmentopportunitiesbothinthecountryandabroad,Tüpraşaimstoinvestinsectoralintegration,alternativeenergysourcesandstart-ups,primarilytomeettheenergyneedsofitsownrefineriesinthefieldofrenewableenergy,toreduceitsenergycostsandminimizeitscarbonfootprint,inlinewithitsdiversificationstrategy.

TüpraşispreparingitselffortherapidlydevelopingnewworldbyincreasingitsefficiencyandworksafetywiththeDigitalTransformationproject,andtookconcretestepsinthisdirectionin2017.Withinthescopeoftheproject,thatincludestheopeningofanalyticalcentersatuniversities,TüpraşfirstsignedaprotocolwiththeODTÜTeknokentinNovember2017.Theprojectincludesawiderangeoftechnologiesrangingfromdigitaltransformationapplications,whichwilltransformbusinesslife,totheIndustrial4.0concept,whichwillaffectrefineryprocesses,andtotechnologiessuchaswirelesscommunication,mobiletechnologies,dataanalyticsandartificialintelligenceapplications,virtualrealityandtheIoT(InternetofThings).

Undertaking investments with the aim of achieving a high Return on EquityTüpraşrealizedUSD5.9billionininvestmentexpendituresoverthetwelveyearperiodfrom2006and2017,withUSD1.0billionininvestmentallocatedforthenextfiveyears.TüpraşaimstoachieveahighreturnonequitybyeffectivelymanagingitsrisksbyapplyingAdvancedProcessControl(APC)ateverypointofitsproduction,inlinewithitsdefinedstrategies.

Europe’sseventhlargestrefinerintermsofitsrefiningcapacity,Tüpraşwasrankedthirdinthe“Refining&Marketing”sectorinEasternEurope,theMiddleEastandAfricaaccordingtoanassessmentconductedbyPlatts,whichwascarriedoutbytakingits2017profitability,assetsandturnoverasabasis.

Tüpraş’s goal is to be a pioneering company that respects the environment and life values, whose performance attracts admiration in the petroleum sector.Tüpraşisawarethattheabilitytoadapttomountingglobalcompetitiondependsonrapidlyadaptingtochangingmarketconditions.Inthiscontext,settingoutfromthenecessityofincreasingitscompetitivecloutbydevelopingtheproductyieldandprovidingcontinuousimprovementincoststructure,Tüpraşexpectstoachievefurtherstridestowardsimprovingitsabilitytoadaptrapidlytomarketconditions.

“Best Available Technologies” Tüpraş sets itself apart in the sector by implementing “Best Available Technologies” (BAT) in the operational development.


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Developments in 2017

Obtaining the “License of Authorization for Railway Train Operation” on June and Turkey’s first “Safety Management Certificate”, Tüpraş accordingly became Turkey’s first private rail operator.

56 USDmillionThe İzmir Refinery Crude Oil Distillation Unit Revamp Project with a cost of USD 56 million, is planned to go operational in the first quarter of 2018.

Tüpraş becomes Turkey’s first private railway operatorTüpraşenteredtherailwaytransportationsectorwithintheframeworkofKörfezUlaştırmaA.Ş.,awhollyownedsubsidiary,withtheaimofincreasingefficiencyinworkprocessesaftertheliberalizationofrailwaytransportationinourcountry.

Tüpraşobtainedthe“LicenseofAuthorizationforRailwayTrainOperation”onJune16,2017andobtainedTurkey’sfirst“SafetyManagementCertificate”onSeptember20,2017,andaccordinglybecameTurkey’sfirstprivaterailoperator.

TheCompanyactuallystartedrailwaytransportationatthebeginningofDecember2017,with441Tüpraşwagons,48Opetwagons,60TCDDwagonsand5diesellocomotivesleasedfromtheTCDD(TurkishStateRailways).

Withthisinitiative,Tüpraşplanstowidenitsuseofrailwaytransportationinthecomingyears,whilegeneratinghigher

addedvaluefortheKoçGroup,ofwhichitisamember,andforourcountry.

WhollyestablishedwithTüpraş’scapital,KörfezUlaştırmaA.Ş.aimstosingle-handedlyundertake10%ofallrailtransportationinTurkey,carryingapproximately2.5milliontonsoffuelandaimingtobecomethelargestfuelcarrier.

Developed by the Tüpraş R&D Directorate, field performance tests of high quality modified bitumen got underway.A320meterlong,7meterwidetestingroadwaslaidwithinthescopeofthe“DevelopmentofQualityBitumen/AsphaltbyusingRefineryby-products”project,carriedoutbytheR&DDirectorateProductDevelopmentTeamandwiththesupportofTÜBİTAK

Theconstructionofroadswhichareresistanttochallengingenvironmentalconditionswhichoffervaryingcharacteristicsdependingonincreasing


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trafficvolumesandregions,anddoingthiswithdomesticknow-howisoftremendousimportanceinourcountry’ssocio-economicdevelopment.Modifiedbitumenischosenforitslonglifeinregionsofhightrafficdensityandwhicharesubjectedtowidetemperaturevariations.CurrentlyinTurkey,importedadditivesareusedinthemodificationsmadetoimprovebitumenproperties,whichiscostly.

Withthisproject,aproductwithlowercostandahigheraddedvaluewasobtainedbyusingrefineryby-products.High-qualitybitumenhasbeendevelopedandappliedtoroadsonalarge-scale.Asaresultofthecommercializationoftheproduct,itwillbepossibletoreducethevolumeofimportedchemicalsusedintheproductionofhighqualitymodifiedbitumen,thusreducingourcountry’sdependenceonimports.Thiswilltriggeranincreaseinhighperformance,long-lastingroadapplications.

Afterasix-yearstudy,thesuitabilityofformulationsforlargescaleproductionwasensuredbydevelopinglaboratoryandpilotscaleproduct/productiontechnologies.Carryingoutroadlayingactivitiesandthedeterminationoffieldperformancesunderheavyloadsandclimaticextremeswasanimportantstepinthesuccessfulimplementationofprojectoutcomesasthefinalstageoftheproductdevelopmentpriortoitscommercialization.

Two new Suezmaks crude oil tankers joined the fleet.TheconstructionoftheT.Sadberk,oneoftwonew157,453DWTSuezmakscrudeoiltankers,hasbeenstartedinFebruary2016andiscompletedAugust2017,whiletheT.SemahatwasreceivedinOctober2017.DitaşincreaseditsfleetofSuezmakstankerstothree,anddoubleditscrudeoilcarryingcapacity,advancingitspositionintheTurkishFlagTankerfleetranking.

Eurobond issuance carried out for investors who are resident abroad.AUSD700million,7yearmaturityEurobondissuewascarriedoutforinvestorsthatareresidentabroadonOctober18,2017.TheEurobond,whichcarriedafixedcouponof4.5%,waslistedontheLondonStockExchange.TheyieldsintheissuanceofTreasurybills,forwhichtheincomingdemandamountedtoUSD3.8billion,stood20basispointslowerthanthesimilarTurkeyTreasuryyield.

First Catalyzer Pilot Plant established in Turkey.FieldacceptancetestsofthePilotFacilityfortheresearchanddevelopmentofthecatalyzersattheİzmitRefineryhydrocrackeranddesulfurizationunitswereperformedin2017,whichwasestablishedintheTüpraşR&DCentrePilotFacilitiesbuilding.Operationsarecarriedoutwithoutinterruptionona24/7basisatthefacility,whichisthefirstcatalyzertestsystemtobeintegratedwithauxiliarysystemsonapilotscaleinTurkey.Theperformanceofcatalyzersatthehydrocrackeranddesulfurizationunitsisalsotestedinthefacility.

Theperformancetestsperformedatthepilotfacilitywillenablethedevelopmentofcatalyzersthatallowmid-distillatestobeobtained,andthemostefficientuseofexistingcatalyzersattherefinery.

İzmir Refinery Crude Oil Distillation Unit Revamp Project was commissioned.TheCrudeOilDistillationUnitRevampProjectinvolvestherenovationoftheunit’sfurnacesandequipmentinordertoachieveanincreaseinproduction,fortheunittoworkatamaximumsustainablecapacitywithdifferentvarietiesofcrudeoilwithawiderangeofAPIs,andtoincreasetheenergyefficiencyoftheunitbyreducingtheEIIvalueby5points.TheUSD56millionprojectwascommissionedinthefirstquarterof2018aftertheshutdown.

TheElectricitySystemModernizationprojectoftheCrudeOilDistillationUnit,carriedoutatacostofUSD9.5million,involvedtheupgradingoftheelectricalinfrastructureoftheunittoensurecompliancewithnewrequirementsandregulations.

New F-1101 furnace was commissioned at the Batman Refinery.Inordertosaveenergyandincreaseefficiency,renewalworkontheF-1101furnacewhichwasstartedin2015inIndia,iscompletedinJune2017.TheF1101furnaceinthePlant1100crudeoilunit,whichwasworkingatayieldof56%,achievedtoayieldof91%followingtheinvestment.

Nitrogen production unit installed.AnitrogenproductionunitwasinstalledintheİzmitRefineryBregionwiththeLindeCompany.CommissionedonOctober20,2017,thefacilityiscapableofproducing99.9%purenitrogenatacapacityof2,700Nm3/hour.ThefacilitywillprovideannualsavingsofUSD1.5millionintherefinery’snitrogensupplycost,whichismetbypurchasingbulkliquidnitrogen.

A protocol was signed under the Tüpraş and METU cooperation on the opening of Data Analytics Centre at the METU TEKNOKENT.AprotocolwassignedbetweenTüpraş,METU(MiddleEastTechnicalUniversity)andMETUTEKNOKENTonNovember6,2017toconductjointstudiesunderauniversity-industrycooperation.

ThesignedprotocolincludesaccesstoacademicknowledgerelatedtotheoperationsofTüpraş,whichcurrentlycooperateswiththeMETUChemicalEngineeringDepartment,andthejointstudiestobecarriedoutwithotherrelevantdepartmentsatMETU.


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Milestones in Tüpraş History

1950s1955 • Turkey’sfirstoilrefinery,BatmanRefinery,wascommissioned.

1960’S

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 • TheİzmitRefinery’sSecondExpansionProjectwascompleted,withthecrudeoilprocessingcapacityrisingto11.5milliontons/year.

1983 • İpraşandthethreeotherrefinerieswereunitedunderTüpraş.

· İpraş’s29%shareinDitaşwasacquiredbyTüpraş.

1986• The5milliontons/yearcapacityKırıkkaleRefinerywascommissioned.

1987• TheİzmirRefineryExpansionProjectwascompleted,withtherefiningcapacityrisingto10milliontons/year.

1989-2003• TheLongTermInvestmentPlanwaslaunched.

1990s

1990• TüpraşwashandedovertothePrivatizationAdministration.

•Managementplanningembracedthesimulationapproach.

• Productionplanningstartedtofollowtheoptimizationmodel.

1991• Some2.5%ofTüpraşshareswereofferedtothepublicandbegantradingontheISE.

1993• TheHydrocrackerComplexwascommissionedattheKırıkkaleRefinery.

• TheHydrocrackerComplexwascommissionedattheİzmirRefinery.

1997• TheHydrocrackerandCCRcomplexeswerecommissionedattheİzmitRefinery.

1998• AutomaticPricingMechanismcommenced.

1999• Freefloatroseto3.58%.•MarmaraearthquakecausedafireatTüpraşonAugust17th.

The only producer of Turkey’s refinery sector, Tüpraş is the largest industrial company in Turkey based on the added value it creates and its turnover.


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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.

• Some40%ofOpet’sshareswereacquiredfromAygazA.Ş.

• TheOperationalExcellenceProgramwaslaunched.

• Newlogoandcorporateidentitystudywasconcluded.

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.

•Workingenvironmentswereimproved.• Customerordersstartedbeingreceivedviatheportal.

• Contractormanagementsystemwasactivated.

• CustomerRelationshipManagementSystemwaslaunched.

•Winterdieselproductionwasinitiated.2010• R&DCenterwasopened.• Ethicalvalueswererevised.•Master’sdegreeprogramswerelaunchedjointlywithuniversities.

• TüpraşwasregisteredtotheREACHstatute.

• CECertificationwasobtainedforbitumenproducts.

• Theworld’sfirstCrackingCatalystintheDesulphurizationUnit’sreactorwasimplemented.

• BatmanRefineryearnedafirstprizewhiletheİzmirrefineryreceivedthirdprizeintheIndustrialEnergyEfficiencycompetitions.

• RefinerieslaunchedtheWasteManagementProgramviaSAP.


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MilestonesinTüpraşHistory

2011• TheloanagreementwassignedfortheFuelOilResiduumUpgradingProject.

• İzmirandİzmitkerosenesweeteningunitswerecommissioned.

• İzmirandBatmanRefineriesweregrantedfirstprizesintheIndustrialEnergyEfficiencycompetitions.

• Tüpraş’seducationalfilmonoccupationalhealthandsafetycameinsecondinaworldwidecompetition.

• TheCorporateGovernanceRatingwasupdatedas8.62.

2012 • Tüpraşissued5.5-yearbondsworthUSD700millionontheinternationalmarket.

• İzmitRefinerycommissioneditsC3/C4SplitterandSelectiveHydrogenerationunits.

• ThetankerT.SunajoinedthefleetonNovember23,2012.

• ThetankerT.LeylabegantransportinginDecember2012.

• BatmanRefineryplacedfirstatthecompetitionforIndustrialEnergyEfficiency.

• TheCorporateGovernanceRatingwasupgradedto9.10.

• İzmirRefinerycommissioneditsCausticNeutralizationUnit.

• İzmirRefineryinauguratedtheU-920GasTurbineandWasteHeatBoiler.

• KırıkkaleRefinerycommissionednewbitumentanks.

• BatmanRefineryreneweditsbitumentanks.

2013• BatmanRefinerywonfirstprizeintheIndustrialEnergyEfficiencycompetition.

• Tüpraş’sCorporateGovernanceRatingwasupgradedto9.34.

• İSO50001:2011EnergyManagementSystemCertificationwasobtained.

• İSO/IEC27001:2005InformationSecurityManagementSystemsCertificationwasobtained.

• NewbitumentankswerecommissionedattheİzmitandBatmanrefineries.

• TheAegeanRegionChamberofIndustrypresentedthe“EnvironmentalBestPracticeAward”toİzmirRefineryfortheBaseOilComplexBurnerModernizationProject.

• TheheatintegrationprojectwascommissionedattheCCRandBenfreeUnitsofKırıkkaleRefinery.

2014• İzmitRefinery’sRUPFacilitywascompleted.

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

• TheBatmanRefinerywonfirstprizeinthecategoryofEnergyEfficientIndustrialFacilityattheIndustrialEnergyEfficiencyCompetition.

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

• AsaresultoftheassessmentcarriedoutinaccordancewiththenewmethodologyissuedbytheCapitalMarketsBoardinJanuary2014,Tüpraş’sCorporateGovernanceScorewasgradedas9.31.

• Tüpraşrankedamongthetop15companiesontheBISTSustainabilityIndex,whichwaslaunchedonNovember4,2014.

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

Tüpraş is constantly renewing itself through projects aiming to sustainably continue and develop its successes.


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

• InauguratedonJune24,2014,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.

• TheHexMonbrandreceiveddesignmarkregistrationfromtheTurkishPatentInstitute.

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

• ConstructionofKırıkkaleRefinery’sWagonMaintenanceandRepairWorkshop,themostcomprehensiveworkshopofitskindinTurkey,wascompletedandcommencedoperationsafterreceivingEntityinChargeofMaintenance-ECMcertificationonSeptember29,2016.

• TheEasternMarmaraRegionalDirectorateofCustomsandTradegrantedthefirstAuthorizedEconomicOperatorcertificatetoTüpraşinKocaeli.

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

• TüpraşwebsiterenewedandtheTüpraşSupplierPortalwaslaunched.

• Tüpraş’sthirdprojectinHorizon2020programwasacceptedprogramwitharecordhighscore.

• TheEuropeanBankforReconstructionandDevelopment(EBRD)extendedaUSD150millionloantoTüpraştosupporttheCompany’senergyandwaterefficiencyefforts.

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

2017• TüpraşbecomesTurkey’sfirstprivaterailwayoperator.

• DevelopedbyR&DDirectorate,fieldperformancetestsofhighqualitymodifiedbitumengotunderway.

• NewF-1101furnacesarecommissionedattheBatmanRefinery.

• TüpraşR&DCenter’sFirstCatalyzerPilotPlantestablished.

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

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

1955-2017Reaching from Batman, Turkey’s first refinery, to the Europe’s 7th and world’s 26th largest refining capacity


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Investor Relations

The diversity and richness of Tüpraş’s investor portfolio is considered as an important indicator of trust and stability from investors’ perspective.

82.48%The proportion of publicly traded shares of Tüpraş held by international institutional investment banks, funds and foreign institutions stood at 82.48%.

InlinewiththeCMB’sPrinciplesonCorporateGovernance,Tüpraşaimstoprovidetimely,accurateandcompleteinformation,providedthatitdoesnotincludetradesecrets.TheCompanyensuresthattheprinciplesofequality,transparency,accountabilityandaccountabilityarerespectedwhendistributingsuchinformation.

Corporateinformation,reports,historicalandrelatedperiodfinancialstatementsandactivities,andspecialcasedisclosuresareavailableontheCompany’sofficialwebsiteatwww.tupras.com.tr.

Annual General MeetingTheAnnualGeneralMeetingofTüpraşfortheyear2017willbeheldonWednesday,March21,2018at10:00amattheaddressofGüneyMahallesi,PetrolCaddesiNo:25Körfez/Kocaeli.

TheAnnualGeneralMeetingsetsoutthefollowingagenda;thepresentationoffinancialstatementsforthe2017yearofoperation,theIndependentAuditReport,theproposalfordividenddistribution,theAnnualReportanditsannex,theReportonCompliancewiththePrinciplesofCorporateGovernanceandthe

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

Providing Information Fourteenconferencesandroadshowshavebeenattendedin2017,one-to-oneinterviewswereheldwithabout400fundmanagersandanalysts.Inadditiontothemeetings,questionsreceivedfromtheshareholdersandanalysts,eitherinwritingorverbally,wereresponded.ThroughthequarterlyteleconferencesorganizedwiththeparticipationoftheCFO,thecompanyensuredthatinvestorswereinformedaboutTüpraşandthesectoraldevelopments.In2017,allrequestsreceivedfromshareholderswererespondedtoandnecessaryinformativeactivitiescontinued.

Group Name of Shareholder Value (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

CÖzelleştirmeİdaresiBşk.(PrivatizationAdministration)

0.01 Registered 1

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

Capital Structure TheregisteredcapitalofTüpraşisTL500million,whileitsissuedcapitalisTL250.4million.


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As a result of the outperformance of Tüpraş with respect to the market, the market value of the Company increased by 72% in dollar terms.

KoçHolding77%

DİTAŞ79.98%

Opet40%

FreeFloat49%

KörfezUlaştırmaA.Ş.100%

Aygaz20%

EnerjiYatırımlarıA.Ş.51%

Opet3%

Tüpraş Stock Price Trend(TL/Share)

150

130

110

90

70

50

30

10

-102010

Highest LowestAverage

28

23

18

2011 2012 2013 2014 2015 2016 2017

39 42 47 51

72 77

144

6456

46

64 66

102

32

43

33

41

2833

23

30

Stock Price Trend (USD)

45

40

35

30

25

20

15

10

5

02010

Highest LowestAverage

12

2011 2012 2013 2014 2015 2016 2017

25 2427

2325 27

38

171918

22 22

28

14

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16

21

15

18

13

18

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InvestorRelations

Share Price PerformanceTheTüpraşsharepriceoutperformedtheBIST30indexby36%in2017,increasingby85%fromTL65.82toTL121.50duringthecourseoftheyear.

Market Value GrowthAsaresultofthestockmarketrallyin2017andtheoutperformanceofTüpraşwithrespecttothemarket,themarketvalueoftheCompanyincreasedby72%indollartermscomparedtotheendof2016,fromUSD4.7billionatthebeginningof2017toUSD8.1billionby

theend.

Tüpraş and BIST-30 Relative Share Performance in 2017

Dec16

240

Tüpraş BİST-30

210

180

150

120

90Jan17 Mar17 May17 Jun17 Jul17 Aug17 Sep17 Oct17 Nov17 Dec17Apr 17

36%

Analyst AdvicesBasedonthelatestreportspublishedin2017by29investmentcorporationsactivelyreportingonTüpraş,it’sseenthatinvestmentadviceisgivenas18Buyand11Hold.

Analist Advices

Buy:1862%Hold:1138%

The Composition of the Investors in Tüpraş Shares49%ofTüpraş’ssharesaretradedontheİstanbulStockExchange(BIST).Thediversityandrichnessoftheinvestorportfolioisconsideredanimportantindicatoroftrustandstabilityfrominvestors’perspective.Asanindicationofthis,theproportionofpubliclytradedsharesheldbyinternationalinstitutionalinvestmentbanks,fundsandforeigninstitutionsstoodat82%asoftheendof2017.

Distribution of Domestic/Foreign Ownership of Tüpraş Shares

ForeignOwnership82%DomesticOwnership18%

Feb17


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Profit per Share In2017,Tüpraş’sEarningsperShareincreasedby113%comparedtothepreviousyear,fromTL7.16persharein2016toTL15.22persharein2017.

Corporate Governance IndexTüpraşcarriesitsperformanceofcompliancewiththeprinciplesofcorporategovernancetohigherlevelseachyear.TheCorporateGovernanceRatingscore,whichwasdeterminedas7.91forthefirsttimeonOctober8,2007,roseto9.47onthebackoftheimprovementscarriedout.

IntheCorporateGovernanceRatingreport,thereasonsforTüpraş’sinclusionintheBİSTCorporateGovernanceIndexwithascoreof9.47,attoplevel,wereasfollows:

• AhighlevelofcompliancewiththeCMBPrinciplesofCorporateGovernance,

• Puttingallpoliciesandmeasuresintopractice,

• Effectivelyformingmanagementandinternalcontrolmechanisms,

• Identificationofallcorporategovernancerisksandtheactivemanagementofthem,

•Observingtherightsofshareholdersandstakeholdersinthefairestmanner,

• Publicdisclosureandtransparencyactivitiesatthehighestlevel,andthestructureandfunctioningoftheboardofdirectorstobeamongthebestpracticecategories.

AccordingtotheWorldCorporateGovernanceIndex(WCGI),publishedbySAHAKurumsalYönetimveKrediDerecelendirmeHizmetleriA.Ş.(CorporateGovernanceandCreditRatingServices)onJuly21,2017,Tüpraşwasplacedinthefirstgroup.

Breakdown of Tüpraş’s Corporate Governance Rating Score(%)

Shareholders 95.51

PublicDisclosureandTransparency 94.00

Stakeholders 98.59

BoardofDirectors 92.86

Average 94.67

The BIST Sustainability IndexTheBISTSustainabilityIndex(XUSRD),whichwascreatedbytheİstanbulStockExchangeinNovember2014andwhichincludescompanieswithahighlevelofcorporatesustainability,providescompanieswiththeopportunitytoimprovetheircorporatetransparencyandaccountabilityaswellastheirriskmanagementskillswithregardtosustainabilityissues,inadditiontoassessingthecompanies’economic,environmentalandsocialperformances.

TüpraşwasincorporatedintheBİSTSustainabilityIndexin2014whentheindex,whichassessesBIST-listedcompaniesonthebasisoftheircompliancewithinternationalsustainabilitycriteria,wascreated.

Changes in Market Capitalization Excluding Gross Dividends (USDbillion)

20172016

8.1

4.75.15.1

4.1

201520142013

Earnings per Share(TL)

20172016

15.2

7.2

10.2

5.84.8

201520142013


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As energy sector’s closely monitored organization which adopts the vision of being respectful to environment and life values, Tüpraş undertakes its largest investment in human resources in line with this approach.

Qualified human resources

5,185The number of total employees under Tüpraş payroll is 5,185 as of 2017 year end.


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Human Resources

Tüpraş implements human resources practices enhancing employee satisfaction and commitment.

360°The 360° Competency Assessment Module was put into practice in the middle of 2017 and competency reports were created for all employees receiving monthly salary.

Tüpraş supports the professional and personal development of its employees, ensures that they enjoy a good standard of living and organises working environments and business processes which will help employees become healthier and more efficient.

AstheleadingorganizationinTurkey’senergysectoradoptingthevisionofbeingaworld-classrefiningcompany,Tüpraşundertakesitslargestinvestmentinhumanresourcesinlinewiththisapproach.

Tüpraş’sapproachtoHumanResourcesisdefinedbyconstantlyimprovingitshumanresourcesandensuringthatitshumanresourcesrepresentapermanentadvantageintheglobalcompetitiveenvironmentbyadheringtothefollowingprinciples.

• TheRightPersonfortheRightJob,• RemunerationDependentonPerformanceandCompetencies,

• AssessmentBasedonAchievement,• EqualOpportunityforAll


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Tüpraş implements human resources practices aimed at enhancing the satisfaction of its employees and increasing their commitment.Thepillarofqualified,experiencedandtrainedemployees,thetraininganddevelopmentofwhommaytakebetweenfiveandtenyearsintherefiningsector,isoftremendousimportanceintheprofitable,efficientandsafeoperationofrefineries.

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

Placing importance on activities to promote the development of its employeesAimingtomakeuseofthequalifiedemployeesinthemosteffectiveandproductivewaybyincludingtheminitsworkforce,Tüpraşattachesgreatimportanceontrainingprogramsanddevelopmentactivities,whichareaimedtoimprovetheprofessionalknowledgeandskillsofemployees,aswellastheirpersonalabilities.

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

A successful and wide reaching internal training system ByusingTüpraş’sinternalresources,trainingprogramsaredevelopedthatarefocusedonsupportingoccupationaldevelopmentonthebasisofdepartmentsandwhicharefocusedonenhancingtheknowledge,skillsandcompetencyoftheworkforce.WorkondevelopingtrainingprojectscontinuesintheProduction,Maintenance,OperationalReliabilityandQualitySystemsDepartments.Inaddition,developmentisensuredbystartingtrainingpracticesinthedepartmentswherethetrainingprogramwascompleted.Trainingsummitsareorganizedeachyearinordertomaintainthedevelopmentofthetrainerswhotakepartinthecompany’sinternaltrainingsystem.In2017,atotal200internaltrainerscametogetherandtheirdevelopmentwassupportedthroughfourdifferentseminars.

Tüpraş attaches great importance on training programs and development activities, which are aimed to improve the professional knowledge and skills of employees, as well as their personal abilities.

233 thousandIn 2017, Tüpraş provided 233 thousand hours of employee training.


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HumanResources

The other following activities were carried out in scope of training in 2017: • IncentiveprogramswerecarriedoutatTüpraşaimedathelpingemployeesparticipateingraduateprogramstodeveloptheirknowledgeandskills,toincreasetheircompetencyandtoenrichtheirsectoralstudieswithacademicknowledge.

• In2017,workcontinuedontalentmanagementbywideningitsapplication.Criticalpositionsandback-upplanswerecreatedwiththecommissionedmodulesoftheSuccessFactorssoftware,andthepotentialpoolofTüpraşwasdetermined.In2017,department-specificmeetingswereheldbyensuringtheparticipationofallmanagersregardingtalentmanagement,andassessmentswerecompletedforallemployeesreceivingasalary.

• Amid-levelassessmentcentrewasestablishedbyusingthe“BeingpartofTüpraş”leadershipcompetencyset,andthepracticewasimplementedinthespringof2017.

• The360°CompetencyAssessmentModulewasputintopracticeinthemiddleof2017byapplyingthe“BeingpartofTüpraş”leadershipcompetencyset,andcompetencereportswerecreatedforallemployeesreceivingasalary.

• Developmentplanningmoduleinstallationeffortscontinueinordertostrengthenthedevelopmentplansforemployees.Themoduleisintendedtobecommissionedin2018.

• Inadditiontotheorientationprocessappliedfornewlyrecruitedemployees,theadaptationprocessmodulewasimplementedtoacceleratetheadaptationprocess.

Strong employee loyalty TheEmployeeLoyaltySurvey,whichhasbeencarriedoutbyanindependentorganizationformanyyears,producedaresultof61pointsin2017,markinganincreaseof15%whencomparedtothepreviousyear.

Thestaffturnoverrate(unwantedlosses),whichisoneofthemainindicatorsofemployeeloyalty,standsatjust1.8%inTüpraş.Thisratestandsastestamenttothesuccessofthecompany’shumanresourcespracticeswhencomparedwithaveragesinthesector,thecountryandtheworld.

Employee Distribution (person)

İzmitRefinery1,991İzmirRefinery1,391KırıkkaleRefinery904BatmanRefinery501HeadOffice398

Distribution of Employees by Hourly/Monthly Wages (person)

HourlyWaged4,042MonthlyWaged1,143


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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.

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

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

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

• Flextra Package:Withthisflexibleadditionalfringebenefitapplication,whichoffersoptionssuchaslifeinsurance,giftanddiscountvouchers,individualpensionschemesareofferedtoemployeesdependingontheirlifestylesandvariousneeds.

Training for Employees

Education Level of White Collar Employees (person)

Doctorate7Master’sDegree307UniversityDegree(Technical)505UniversityDegree(Administrative)196AssociateDegree25IndustrialHighSchool62HighSchool37Other4

Number of Employees Total Hours of Training

Average Hours of Training

Monthly Waged 1,143 103,864 91Hourly Waged 4,042 129,170 32Total 5,185 233,034 45


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Structure of Board of Directors

ChairmanÖmerM.Koç

Board of Directors SecretariatDoğanKorkmaz(CFO)

Vice Chairman AliY.Koç

Members

Corporate Governance Committee

KutsanÇelebicanYağızEyüboğluDoğanKorkmaz

Ethics CommitteeİbrahimYelmenoğluDoğanKorkmazNezihAkçınarFatmaDevrim

Risk Management Committee

GökçeBayındırTemelKamilAtay

Audit CommitteeKutsanÇelebicanOsmanMeteAltan

Executive CommitteeRahmiM.Koç

SemahatS.ArselÖmerM.KoçAliY.Koç

TemelKamilAtayBülentBulgurlu

RahmiM.KoçSemahatS.ArselTemelKamilAtayBülentBulgurluLeventÇakıroğluO.TurgayDurakErolMemioğluYağızEyüboğlu

SüleymanKaramanAhmetTurul

GökçeBayındırKutsanÇelebicanOsmanMeteAltan

Independent Auditor - PwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.

In2017,BoardofDirectorsconvenedthreetimesonApril12th,July25thandDecember20th.


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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)


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Achievements and Awards

Tüpraş was ranked at the top of the industry according to the results of the “Top 500 Industrial Enterprises in Turkey-2016” survey of the İstanbul Chamber of Industry.

#5Tüpraş ranked at fifth place in the overall ranking of “Top 1,000 Export Companies” list announced by the Turkey Exporters Assembly.

The Tüpraş R&D Centre was selected as the “Best R&D Centre” in the petroleum and petroleum products sector.Tüpraşwonthe“BestR&DCentre”awardinitssectorinthePrivateSectorR&DandDesignCentersSummitheldforthe6th timebytheMinistryofScience,IndustryandTechnologybetweenDecember20thand21st.

The İSO (İstanbul Chamber of Industry) 500 Tüpraşwasplacedatthetopoftheindustry,withproductionsalesamountingtoTL32,594millionaccordingtotheresultsofthe“TurkeyTop500IndustrialEnterprises-2016”survey,conductedbytheİstanbulChamberofIndustry.


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First in the Fortune 500 TurkeyTüpraşwasTurkey’slargestcompanyintheFortune500TurkeyrankingwithnetsalesrevenuesofTL34.8billion.Ithasbeenplacedatthetopofthelistninetimessince2007.

CAPITAL 500Tüpraşwasrankedasthemostprofitablecompanyin“Turkey’sTop500PrivateCompanies”survey,carriedoutforthe20thtimethisyear.

Export Award from Turkey Exporters Assembly Tüpraşrankedfirstinthechemicalsubstancesandproductssectorinthe“Top1000ExportCompanies”listannouncedbytheTurkeyExportersAssembly,withexportsofUSD2.1billion,andwasinfifthplaceintheoverallranking.

Platin Global 100 awards Tüpraşwasidentifiedastheleaderoftheenergy-oilsectorinthePlatinumGlobal100survey,whileitachievedsecondrankingintheGlobal100generalindex.

ICCI Efficiency Award for the Batman Refinery The6th“EnergyAwards”competitionwasheldwiththesupportoftheMinistryofEnergyandNaturalResourcesandtheEMRA(EnergyMarketRegulatoryAuthority).TheBatmanRefinery,whichparticipatedinthecompetitionwithits“RenewaloftheHotOilSystem”projectintheEfficiencyProjectcategory,wonfirstprize.

Award for İzmit and Kırıkkale refineries in the “Energy Efficiency in the Industry Project” competitionWithinthescopeofthe8thEnergyEfficiencyForum,theEnergyEfficiencyintheIndustryProjectCompetition(EEI)washeldbytheMinistryofEnergyandNaturalResources.TheİzmitRefineryachieved2ndplaceinthecompetitionwiththe“CommissioningoftheEnergyNetworkOptimizationProgram”ProjectintheSEVAP-3category.TheKırıkkaleRefinerywasranked3rdwiththe“Plant-1650DHPUnitE-1652A-BChemicalCleaningStudy”intheSEVAP-3category.

Tüpraşachievedannualenergysavingsof18.962TOE(TonsofOilEquivalent)throughthetenenergysavingprojectsitcompeted,andannualreductionsingreenhousegasemissionsamountingto45,018tonsofCO2.Theseresultswouldcorrespondtotheplanting135thousandtreesperyear.

Award for Tüpraş from the Kocaeli Chamber of IndustryThe“SectoralPerformanceAppraisal”washeldbytheKocaeliChamberofIndustryforthe9thtimethisyear,torewardsuccessfulindustrialestablishments.Tüpraşwasawardedinthepetroleumandpetroleumproductsindustrysector.

Aegean Region Chamber of Industry (ARCI) Successful Industrial Organizations AwardTheAegeanRegionChamberofIndustryannouncedthe100largestcompaniesaccordingtothesalesfromproductioncriterionin2016.Tüpraştookfirstplaceonthelistofsalesfromproductionandexportcategories.

ARCI AwardsTüpraşparticipatedintheEnvironmentalAwardcompetitionorganizedbytheAegeanRegionChamberofIndustrywithtwoprojects,andtheTüpraşİzmirRefinerywasawardedwithsecondplaceinthecompetition.


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Tüpraş achieved record diesel and bitumen sales in domestic sales and for gasoline, diesel and bitumen in total sales.

Record-high sales in 2017

76.3%In 2017, when international refining profitability rates increased, Tüpraş achieved 28.9 million tons of production and a white product yield of 76.3% with full capacity utilization.


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Sector

8.3% increaseTurkey Diesel Consumption

3.1% increaseTurkey Gasoline Consumption

Withglobaldemandforpetroleumproductsincreasingbyapproximately1.5millionbarrels/day,theyear2017canberegardedasapositiveyearforthesectorinspiteofperiodicalfluctuations.MarginscameundersomepressureinthefirstquarterasaresultoffeebledemandgrowthinChinaandtheUSA,India’sreduceddieselconsumptionandweakgasolinedemandgrowthduetodemonetization.Insubsequentquarters,though,therecoveryinglobaleconomicactivity,whichgotunderwayfromthesecondquarter,hadapositiveimpactondemandforpetroleumproducts,especiallymid-distillates.Throughouttheyear,productdeficitsinSouthAmericaandWestAfrica,lossesduetobreakdownhaltsandnaturaldisasterssuchashurricanesstoodoutasfactorswhichreducedtheexcesssupplyintherefiningsector.

Despitecontinuedimprovementsintheefficiencyofcarengines,thesustainedgrowthinthepersonalcarparkcontinuedtocontributepositivelytotheincreaseinglobalgasolinedemand.Strongdemandforpetrochemicalssupportedmarginsofgasolineanditsderivatives.

Therecoveryinglobaleconomicactivitygenerallyhadapositiveimpactondemandfordieselthroughouttheyear.WhilethedemandinAsiawassupportedbythegrowthofHeavyGoodsVehicleparkstoalargeextent,theincreaseinindustrialproductionandoilextractionintheUSA,increaseddemandandthecontinuingeconomicrecoveryintheEUwereotherfactors.Inaddition,in2017,stronggrowthintheaviationsectorsupportedmid-distillateprofitability.

Oneofthemostprominentdevelopmentsin2017wastheimprovementinfueloilmargins.Fueloilcrackmarginsreached10yearhighs,enablinghighcapacity

In 2017, the sustained growth in the personal car park continued to contribute positively to the increase in global gasoline demand and strong demand for petrochemicals supported margins of gasoline and its derivatives.


60

The Dated Brent crude oil price started the year 2017 at USD 54.86/bbl and declined to USD 44/bbl in June.

utilizationratesatsimplerefineries.China’sexportsincreasedasaresultofcrudeoilimportpermitsbeingissuedtoindependent“teapot”refineries.WiththesupportofthefavorableWTIpricing(WestTexasIntermediate)andtheadvantageoflowernaturalgascosts,capacityutilizationratesoftheUSArefineriesrosetotheirhighestlevelsinhistory,placingtheUSasanetexporterofgasoline,aswellastheworld’slargestexporterofdiesel.

TheDatedBrentcrudeoilpricestartedtheyear2017atUSD54.86/bbl,butdeclinedtoUSD44/bblinJuneduetoproductionincreasesintheUSA,LibyaandNigeriadespiteweakdemandgrowthinChina,IndiaandtheUSA,alongwiththeimpactofrisinginventoriesintheUSAandreducedcompliancefromOPECmemberswiththedecisiontocutproduction.

However,crudeoilpricesclimbedinthesecondhalfoftheyear,toclosetheyearatUSD66.54/bblduetotherecoveryinglobaldemandandadeclineininventories,higherlevelsofcompliancefromOPECmembersandRussiawiththeircommitmentstolowerproduction,andtheextensionoftheagreementuntil2018,inadditiontorisinggeopoliticaltensionsonthebackofdevelopmentssuchasthereferenduminNorthernIraqandthetensionsinSaudiArabiain2017.

Turkey’seconomypostedgrowthofaround6.5-7%in2017.Intermsofpetroleumproductsconsumption,theuseofstandardandunregisteredproductsdecreasedinresponsetothemeasurestaken.

Totaldieselconsumption,whichiscorrelatedwithGDP,maintaineditsgrowthtrendwiththepositivesupportofthemegaprojectssuchastheİzmir-İstanbulhighwayprojectandurbantransformationprogram,andended2017

withtotalconsumptionof24.2milliontons,increasingby8.3%YoY.

Thepositiveeffectofincreasedefficiencyingasolineenginesandthegrowthinthecarparkledtoa3.1%increaseingasolineconsumptionto2.3milliontonsin2017.BackedbythecompetitiveadvantageofTüpraş’sstorageandterminalinfrastructure,TüpraşwasabletomeetTurkey’sentireneedforgasoline.

ThebaseeffectcausedbytheterrorincidentsaffectingairtransportandthereflectionoftherecoveryobservedinthetourismsectorsinceMaycontinuedtoaffectYoYgrowthinjetfuelconsumptionthroughouttheyear.Airtrafficgrewby3.2%YoYin2017,withatotalofapproximately193millionpassengersusingTurkey’sairports,anincreaseof11.1%(19.3millionpassengers)whencomparedtothepreviousyear.Inthisvein,Tüpraş’scivilianjetfuelsalesgrewby2%YoY,oranincreaseof84thousandtonsovertheirpreviousyear’slevel.

In2017,Tüpraş’sbitumensalesstoodat3.5milliontons,increasingby160thousandtons(5%YoY)duetotheupliftinthevolumeofasphaltbeingusedininfrastructureinvestments.

InaccordancewiththecommuniquéissuedbyEMRAinSeptember2011,atleast2%ofbioethanolderivedfromdomesticagriculturalproductshasstartedtobeaddedtogasolineproductssince1January2013;thebioethanoladditionratewasincreasedto3%atthebeginningof2014.

SinceJanuary2018,anobligationtoblendatleast0.5%biodiesel,whichisproducedfromdomesticagriculturalproductsand/orvegetablewasteoils,intoalldieselsuppliedfromrefineries,wasintroduced.

Breakdown of Turkey’s Storage Capacity

66%

Tüpraş(IncludingOpet)Others


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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.

Tüpraş strives to maximize customer satisfaction by meeting the nation’s needs for petroleum products entirely, directing the sector with innovative applications and offering the market clean and reliable products at competitive prices.

Tüpraş’smainactivityistheprocurementandrefiningofcrudeoilthatisnecessarytomeetthecountry’sdemandforpetroleumproducts,andcarryingoutdomesticandforeignsalesanddistributionofthepetroleumproductsthatitproduces.Throughitsrefiningactivities,thecompanyproducesawiderangeofpetroleumproductsincludingLPG,gasolineandnaphtha,jetfuel,kerosene,diesel,fueloil,bitumenandlubricatingoils.

Optimization of crude oil purchasing operationsTüpraşisoptimizinganddiversifyingitsresourcesinitscrudeoilpurchasingoperationsinordertospreadtherisksinthesupplychainandtosecurepriceandfreightadvantages.Asignificantproportionofcrudeoilpurchasesarecarriedoutthroughannualagreementsenteredintowiththecountries’nationaloilcompanies.Inadditiontothis,purchasesarealsoundertakentoprovidesupplyflexibilityandintroduceadditionaloptionsforcrudeoiltypeswiththepropertiesrequiredbyproductorders.

In2017,Tüpraşpurchased25differenttypesofcrudeoilfrom14countries,includingdomestic,ingravitiesrangingfrom18APIsto47APIs.Totalimports


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stoodatUSD11.3billion,withUSD9.3billionofthatamountconsistingof25.1milliontonsofcrudeoilsuppliedduringtheyear.

Tüpraşimported4.4milliontonsoffinishedandsemi-finishedproductsinordertomeetproductdeficitsandperiodicincreasesinthedomesticmarket.

Meeting Turkey’s needs for petroleum products to the maximum levelIn2017,whenTüpraşincreaseditsinternationalrefiningprofitability,itdeliveredatotalof30.4milliontonstoitsunits,including28.5milliontonsofcrudeoiland1.9milliontonsofsemi-finishedproducts.Withfullcapacityutilization,Tüpraşachieved28.9milliontonsofproductionandawhiteproductyieldof76.3%.

Inthedomesticmarket,wherethereisnorestrictiononimports,pricesofpetroleumproductsaredeterminedundertheconditionsoffullcompetition.Inthiscontext,theoperationalprofitabilityoftherefineriesdependsonthegrossrefiningmargin,definedasthedifferencebetweenthecrudeoilpriceandproductpricesdeterminedininternationalmarkets.Tüpraş’spetroleumproductspricesinthe

domesticmarketaredirectlybasedontheCIFGenoaMediterraneanPlattsprice,whichrepresentsthenearestmarkettobetakenasareferenceasmentionedinthePetroleumMarketLaw.

In2017,Tüpraş’snetrefiningmargin,excludingoperatingexpenses,stoodatUSD8.1/bbl.

Crude Oil Supply (milliontons)

20172016

25.1

2.6

25.2

2.6

24.8

2.6

17.9

2.4

18.7

2.4

201520142013

DomesticImports

Crude Oil Supply(USDbillion)

20172016

9.3

0.9

7.7

0.7

8.7

0.912.1

1.514.6

1.7

201520142013

DomesticImports

Product Import

20172016

1,978

4.4

1,293

3.7

1,291

3.0

2,280

2.93,381

3.8

201520142013

Value(USDmillion)Quantity(milliontons)

Tüpraş Refining Production(thousandtons)

Products 2016 2017 Change %

LPG 976 1,024 4.9Gasoline/Naphtha 6.078 6,148 1.2Jet Fuel/Kerosene 4,565 4,860 6.5Diesel 9,361 9,584 2.4Fuel Oils 1,979 2,103 6.3Bitumen 3,436 3,496 1.7Base Oils 126 199 58.1Coke 682 868 27.2Others 724 600 -17,2Total 27,928 28,883 3.4


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ProductionandSales

Production (milliontons)

Jet Fuel (milliontons)

White Product Yields (%)

Diesel(milliontons)

Gasoline and Naphtha(milliontons)

Fuel Oil (milliontons)

2017

2017

2017

2017

2017

2017

2016

2016

2016

2016

2016

2016

28.9

4.9

76.3

9.6

6.1

2.1

27.9

4.6

76.6

9.4

6.1

2.0

27.3

5.1

75.4

8.2

5.8

2.9

20.1

3.6

72.2

5.3

4.4

3.5

21.2

3.6

72.4

5.6

4.7

2.7

2015

2015

2015

2015

2015

2015

2014

2014

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013


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Product Yields

76.6%

LightDistillate6,148

MiddleDistillate14,444

76.3%

Black6,499

Bitumen3,496 Gasoline/Naphtha6,148

JetFuel4,860

ASRFO+Vacuum32

FuelOil2,103

Coke868

Others1,640

Diesel9,584

Others1,640

2017

LightDistillate6,078

MiddleDistillate13,927

Black6,172

Bitumen3,436 Gasoline/Naphtha6,078

JetFuel4,565

ASRFO+Vacuum75

FuelOil1,979

Coke682

Others1,455

Diesel9,361

Others1,455

2016


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ProductionandSales

Structural superiority of Tüpraş’s refineries brings a competitive advantage.Tüpraşenjoysacompetitiveadvantagewithitsfourrefineriesthatallowproductionandsalesoptimizationandarelocatedclosetolargecentersofconsumptionthroughoutthecountrywiththeirexistingwarehousesandterminals.ThecompanyreinforcesthisadvantagebyprovidinganuninterruptedsupplythroughKörfezUlaştırmaA.S.,arailwaytransportationcompanycarryingoutfueloiltransportationbetweentherefineries,andDİTAŞ,asubsidiaryofTüpraşcarryingoutthetransportationofcrudeoilandpetroleumproductsinlinewithTüpraş’sneeds.

Tüpraş’srefineriesofferstructuralsuperioritycomparedtootherregionalrefineries:

• Itsrefineriesarelocatedinlargecentersofconsumption,

• Therefineriesweredesignedinsuchawayastohandleheavyandhigh-sulphurcrudes,

• Itcanbenefitfrompriceadvantagesinbulkcrudeoilandproductpurchases,

• Theabilitytosupplyavarietyofcrudesatareasonablecost,thankstoitsproximitytokeycrudeoilsuppliers,

• Turkeyisanetimporterofmanyproducts,

• Stronginfrastructureandfacilitiesforcrudeoilstrongproductimportandsaleschannels,

• Directpipelinestodomesticcustomers,• Highexportcapability.

Procuring and directly selling 37 varieties of petroleum products throughout Turkey TheCompanydirectlysellsitsproductstothefollowingcustomers:fuel,LPG,bunkerfuel,jetfuelandmineraloildistributioncompanieslicensedbytheEnergyMarketRegulatoryAuthority(EMRA)ofTurkey,petrochemicalandpaintcompanies,whichmainlyusepetroleumproducts,TheGeneralDirectorateofHighways,municipalitiesandthecontractorsapprovedbytheseinstitutions,theMinistryofDefenseonbehalfoftheTurkishArmedForces.

2017 Capacity Utilization

Capacity Utilization Rate (%) Crude Oil Semi-finished Products

Total

1st Quarter 99.9 6.5 106.42nd Quarter 108.9 7.6 116.53rd Quarter 107.2 7.6 114.84th Quarter 89.7 4.8 94.6

Tüpraş exports high quality products which are surplus to the national demand.

2.8USDbillionIn 2017, Tüpraş exported products with a total value of USD 2.8 billion.


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Withthecontributionoffullcapacityutilizationandsuccessfulsalesstrategiesimplementedin2017,Tüpraşachievedsoldatotalof31.5milliontonsofproducts,including25.7milliontonsdomesticallyand5.8milliontonsofexports.Thissalesvolumeis1.2milliontons(4%)higherthaninthepreviousyear.

TheCompanymaximizeditsgasoline,dieselandbitumenproductioninparallelwiththeoptimizationcarriedoutbytakingproductcrackmarginsanddemandintoconsideration.Itachievedrecorddieselandbitumensalesindomesticsalesandforgasoline,dieselandbitumenintotalsales.

InparallelwiththeincreaseindieselproductionwiththecontributionofTüpraşFuelOilTransformationProject,Tüpraşmet46%ofthecountry’sdemandfordieselbyincreasingitsdomesticsalesby472thousandtons(4.4%)whencomparedtothepreviousyear.Civiljetfuelsalesincreasedby84thousandtons(2%)whilesalesofBitumenroseto3.5milliontons,anincreaseof160thousand

tons(5%)duetotheaccelerationinasphaltingworkduetoinfrastructureinvestments.

5.8 million tons of products exported in 2017.Exportinghighqualityproductswhicharesurplustothenationaldemand,in2017Tüpraşagainexportedsurplusproductionthatemergedduringperiodsofcontractioninthedomesticmarket,inlinewithmarketconditionsandchangesintheconjuncture.Whilethishelpedlowerproductionandinventorycosts,italsocreatedanaturalprotectionmechanismagainstexchangeraterisk.

Tüpraşexported5.8milliontonsofproductswithatotalvalueofUSD2.8billion.Theexportsconsistedof3.2milliontonsofbenzene,1.6milliontonsoffueloil,316thousandtonsofjetfuel,454thousandtonsofreformate,228thousandtonsofdiesel,33thousandtonsofLPG,41thousandtonsofnaphthaand9thousandtonsofotherproducts.

Sales of Tüpraş Refineries (thousandtons)

Products 2016 2017 Change %

LPG 1,126 1,117 -0.8Naphtha 219 245 11.8Gasoline 2,155 2,205 2.3Jet Fuel/Kerosene 4,529 4,530 0.0Diesel 10,820 11,292 4.4Fuel Oil 1,343 1,263 -6.0Bitumen 3,367 3,527 4.8Base Oils 129 177 37.4Coke 728 961 32.1Others 348 373 7.1Total Domestic Sales 24,764 25,689 3.7Exports 5,491 5,804 5.7Total Sales 30,255 31,493 4.1

Domestic Sales (milliontons)

Exports(milliontons)

Exports(USDmillion)

2017

2017

2017

2016

2016

2016

25.7

5.8

2,786

24.8

5.5

2,090

22.2

6.5

2,879

16.9

5.3

3,725

19.6

4.8

4,119

2015

2015

2015

2014

2014

2014

2013

2013

2013


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İzmit Refinery

11.0million tonsRefinery Capacity

3.0 million m3

Storage Capacity

1,991Number of Employees (year-end)

14.5Nelson Complexity


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The İzmit Refinery now has one of the highest conversion ratios in the world, with a Nelson Complexity of 14.5.

TheİzmitRefinerybeganproductionin1961withacapacitytoprocessof1milliontons/yearofcrudeoil.Asaresultofsignificantcapacityincreasesandtheconversionunitinvestmentsovertheyears,theRefinery’sdesigncapacitywasregisteredat11.0milliontons/year.

ProducingtoEuroVstandards,theİzmitRefineryistrulylocatedinaconsumptioncentre,accountingfor33%ofTurkey’sconsumptionofpetroleumproducts.

TheRUPFacilityattheİzmitRefinerywasmechanicallycompletedattheendof2014.Theunitconverts4.2milliontonesofblackproductsintoapproximately3.5milliontonsofhigh-value,environmentfriendlywhiteproductswhichmeetEUstandards,mostlydiesel,gasolineandLPG.OncetheFuelOilConversionFacilitywascommissioned,theİzmitRefineryhadoneofthehighestconversionratiosintheworld,withaNelsonComplexityvalueof14.5.

Atotalof12.8milliontonsofmaterial,including11.4milliontonsofcrudeoiland1.4milliontonsofsemi-finishedproducts,wereprocessedattheRUPFacilityin2017,whichoperatedatmaximumcapacityintheİzmitRefinery.Asoftheendof2017,theRefinery’stotalproductsalesamountedto15.6milliontons,ofwhich12.9milliontonsweredomesticsales.

Major projects completed during the year:•Optimizationapplicationsatthepowerplants

• Thepropanetanksplants• 7K-201off-gasrecoverycompressor

plant• TheGasTurbinealternativeliquidfuelproject

• Oxygenenrichmentsysteminsulphurunit

Ongoing projects:• FCCunitmodernization,fluegastreatmentandenergyrecovery

• Thehydrocrackerthermalintegrationproject

• Thehydrocrackerunitconversionrateincrease

• ThePlt-33isomerizationunitcapacityincrease

• Thevacuumunitsoff-gasrecovery• Thenewsulphurunit

İzmit Refinery Sales(millionton)

20172016

15.614.8

13.6

9.610.7

201520142013


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İzmir Refinery

11.0million tonsRefinery Capacity

2.5 million m3

Storage Capacity

1.391Number of Employees (year-end)



70

The İzmir Refinery is the only refinery with a lubricating oil production complex in Turkey, having an annual capacity of 400 thousand tons.

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

TheİzmirRefineryhasaNelsonComplexityof7.66.In2017atotalof11.7milliontonsofrawmaterials,including10.7milliontonsofcrudeoilandtheremainderbeingsemi-finishedproductswasprocessedintheİzmirRefinery.

Therefinery’sproductionofmainmarketablepetroleumproducts-consistingofLPG,naphtha,gasoline,jetfuel,diesel,baseoil,heatingoil,fueloil,bitumen,wax,extractsandotherproducts-reachedto10.6milliontons.İzmirRefineryhasa400thousandtonsofcapacitybaseoilproductionunit,theonlyoneofitskindinTurkey.

In2017,theİzmirRefineryachievedsalesof10.7milliontons,ofwhich7.6milliontonsweresolddomestically.

Major projects completed during the year: • Newblackproductandoilsalesterminal

• Thesupplyandinstallationof300-400Units’compressors

• Strengtheningofthefillingplatformandincreaseinfillingcapacityatthequays

Ongoing projects: •ModernizationoftheU-7000crudeoildistillationunitandrenewaloftheelectricalsystem

• RevampofFCCunit,fluegastreatmentandenergyrecovery

• CapacityincreaseoftheCCRplatformerunit

• Vacuumunitsoff-gasrecovery

İzmir Refinery Sales(millionton)

20172016

10.710.410.4

8.58.8

201520142013


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Kırıkkale Refinery

5.0 million tonsRefinery Capacity

1.3 million m3

Storage Capacity

904Number of Employees (year-end)

6,32Nelson Complexity


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The Kırıkkale Refinery processed a total of 5.4 million tons of crude oil, reaching full capacity utilization.

TheKırıkkaleRefinerywasestablishedin1986tomeetthedemandforpetroleumproductsintheAnkara,CentralAnatolia,EasternMediterraneanandEasternBlackSearegions.

Overtheyears,theRefineryhasdevelopedtheconfigurationofferingamid-levelcomplexitybyMediterraneanstandardswiththeadditionofahydrocracker,isomerization,dieseldesulphurizationandCCRreformerunits.

ThecrudeoilsupplyoftheRefinery,whichhasanameplateannualcrudeoilprocessingcapacityof5milliontons,isprovidedfromtheBotaşCeyhanTerminal,usingtheCeyhan-Kırıkkalepipeline.

WithaNelsoncomplexityof6.32,theKırıkkaleRefineryhasTurkey’slargestroadtankerfillingcapacity.

OnceproductiongotunderwayattheİzmitRefineryFuelOilConversionFacility,itwasensuredthattheKırıkkaleRefinery-whichsendssemi-finishedproductstothisunittobefedtothecharger-achieveditstargetedoperationalperformance.In2017,theRefineryprocessedatotalof5.4milliontons,including5.3million

tonsofcrudeoilandwithsemi-finishedproducts,andfullcapacityutilizationwasachieved.

In2017,5.2milliontonsofpetroleumproductswereproduced-includingthemainproductsofLPG,gasoline,jetfuel,kerosene,diesel,fueloilandbitumen-inadditiontotheproductsprocessedattheRUPfacility.Togetherwithrefinerytransfers,atotalof4.4milliontonsofproductsweresoldduringtheyear.

Major projects completed during the year: • Commissioningofnewpowerplantandgasturbine

• SteamTurbineandDeaeratorSystem

Kırıkkale Refinery Sales(millionton)

20172016

4.44.44.0

3.63.8

201520142013


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Batman Refinery

1.1 million tonsRefinery Capacity

268 thousand m3

Storage Capacity

501Number of Employees (year-end)



74

In 2017, the Batman Refinery achieved its highest ever crude oil refining volume, at 1.1 million tons in the bitumen mode.

Commissionedin1955withacrudeoilprocessingcapacityof330thousandtons,theBatmanRefinerywasthefirstrefinerytobefoundedinTurkey.

Followingthecommissioningofanewcrudeoilprocessingunitin1972,theBatmanRefinery’sannualcrudeoilprocessingcapacityreachedto1.1milliontons.

WiththeadvantageofitsgeographicalproximitytoTurkey’sowndomesticheavycrudeoilresources,theBatmanRefineryisstructuredinasimpleconfigurationtoprocessthiscrudeoil.TheRefineryhasaNelsonComplexityIndexof1.83.

TheBatmanRefineryrecordeditshighestevercrudeoilprocessingvolumein2017,at1.1milliontons,inthebitumenmode.Inparallelwiththeincreaseindemandforbitumen,salesofbitumenreachedanotherrecordhigh,with653thousandtons.

Semi-finishedproductsproducedattheBatmanRefineryandthedieselandgasolineproductsfromtheKırıkkaleandİzmirrefineriesaretransportedbyrailway.

AttheBatmanRefinery,thesaleof870thousandtonsofproducts,whichwereinaccordancewithEUspecifications,wascarriedoutwithproductstransportedfromtheKırıkkaleandİzmirRefineries.

Batman Refinery Sales(thousandtons)

20172016

870

758745

429

808

201520142013


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Distribution (Opet)

2nd

2ndinwhiteproductsmarketwith17.8%marketshare2ndinblackproductsmarketwith24.2%marketshare

TL 28,391 millionTotal Revenues

TL 774 millionOperating Profit

TL 741 millionProfit Before Tax

TL 612 millionNet Profit2

TL 3,429 millionInternational Revenues

Domestic Market Position


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EstablishedbytheÖztürkFamilyin1992,OpethasbeenjointlymanagedbytheÖztürkGroupandtheKoçGroupsince2002.TheCompanyoperatesinthefueloildistributionsectorviaretailsales,commercialandindustrialfueloilsales,storageandinternationalproducttradewithmorethan800employees,1,560stationsincludingtheSunpetbrandand1.1millionm3ofstoragecapacity,OpetmanagesanextensiveservicenetworkthroughoutTurkeywith5terminalsandprovideshigh-qualityproductsandservicestoitscustomers.

OpetalsomanufacturesandmarketslubricantsthroughitssubsidiaryOpet-Fuchs,a50-50%partnershipwiththeGermanlubricantcompany,Fuchs.ItsuppliesandsellsjetfueloilviaTHY-Opet,a50-50%partnershipwithTurkishAirlines.

Opet increased its market share in 2017.In2017,Opetrecordedabovemarketgrowthinitssalesthankstoitswell-establisheddealernetwork.TheCompanystrengtheneditssecondplacepositionbyincreasingitsmarketshareinwhiteproductsto17.8%andinblackproductsto24.2%inthefueldistributionsector,whichgrewbyaround7%in2017.

Opetgeneratedstrongfinancialresultsutilizingitseffectiveriskpoliciesagainstexchangerateandpricefluctuations.

THY-Opet,Opet’ssubsidiaryservingnumerousdomesticandforeignairlinesatallairportsinTurkey,maintaineditslastyear’sjetfuelsalesvolumeof3.7millionm³in2017,despitethecyclicalconditions.

AimingtobethefirstchoiceofcustomersinthesectorbydeliveringtheExcellentCustomerService””Opetimplementsnewprojectsinmanyfieldsinordertorealizethisgoal.

Setting itself apart in its sector with its approach to social responsibilityInadditiontofinancialsuccesses,Opetaimstogenerateaddedvalueforallofitsstakeholdersandsocietyandminimizeitsenvironmentalimpact.TheCompanydevelopedandimplementedanumbersuccessfulsocialresponsibilityprojectssuchas“HonoringHistory”,“GreenRoad”,“ModelVillage”,“CleanToilets”and“TrafficDetectives”,inlinewiththisobjective.

Awards • TheONEAwards:IntegratedMarketingAwards-“MostSuccessfulBrandoftheYear”awardintheFuelSector

• CapitalMagazine -“MostAdmiredCompany”awardintheFuelSector

• IPSOS(IpsosGroupS.A.isaglobalmarketresearchandaconsultingfirm)andKalDer(TurkeyQualityAssociation)-Brandwithhighestcustomerloyalty

• OrangeAwards-“MostPreferredBrand”awardintheFuelStationCategory

• 6thTurkeyReputationIndex(TRI)-“BrandwithHighestReputation”awardintheFuelSector

Future expectationsOpetaimstogrowabovethesectoraveragewithoutcompromisingprofitabilitywhilemaintainingitspriorityofcustomersatisfaction.2018isexpectedtobeayearofinvestmentsinlinewiththeseobjectives.TheCompanyalsoaimstotakedecisivestepsintheareaofdigitaltransformationtoremainaheadofitscompetitors.


40% Tüpraş10% OtherKoç50% ÖztürkGroup


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Marine Transportation (Ditaş)

Ditaş transported 17.3 million tons of crude oil and 6.0 million tons of petroleum products in 2017.

Backed by more than 40 years of experience, Ditaş continues to provide Tüpraş with an operational and financial advantage.

TheDitaşMarineOperationsandTankerManagementCo.(“Ditaş”)wasfoundedonMarch16,1974bytheTurkishPetroleumCorporation(“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.

6.0milliontonsAmount of Petroleum Products Transported

253.7USDmillionNet Sales

17,3milliontonsAmount of Crude Oil Transported


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In 2017, Ditaş transported a total of 23.3 million tons of crude oil and petroleum products.ProvidingoperationalandcostadvantagestoTüpraşwithmorethan40yearsofexperience,Ditaştransported17.3milliontonsofcrudeoiland6.0milliontonsofpetroleumproductsin2017.100%ofcrudeoilshipmentsand44.1%ofpetroleumproductshipmentsduringtheyearconductedinlinewiththeneedsofTüpraşrefineries.In2017,DitaşalsoprovidedproducttransportationservicesforTHYOpet(41.3%ofalloperations)andotherdistributioncompanies(14.6%ofalloperations).

Ditaş also provides port and marine agency services.Ditaşchartersdomesticandforeigntankerstointermediatebetweenshipownersandtheexportersandimportersofcrudeoilandpetroleumproducts.Ditaşalsoprovidesagencyservicesinportsandstraits.

TheCompanydeliverstuggingandmooringservicesatTüpraş’sİzmitandAliağaportswith11tugboats,eightmooringboats,twoserviceboats,andonepilotvesselinitsfleet.

Two new Suezmaks tankers added to the Ditaş fleet in 2017.TheconstructionoftheSuezmakstankersstartedinFebruary2016.ThefirstofthetwoSuezmakstankers,the157,453DWT(deadweighttonnage)T.SadberkwasdeliveredonAugust22,2017,anditwasfollowedbytheT.Semahat,alsoof157,453DWT,whichwasdeliveredon

October23,2017.Withtheseadditions,DitaşincreasedthenumberofSuezmakstankersinitsfleettothree,andraiseditsrankingintheTurkishFlagTankerfleet.

Ditaşoperatesthree479,765DWTcrudeoiltankers,a51,532DWTcrudeoil/producttanker,sevenproductcarrierswithacombinedcapacityof90,534DWT,11tugboats,eightmooringboats,twoserviceboatsandonepilotvessel.

Works are underway to expand the fleet.Thehullofthe15,000DWTasphalttanker,constructionofwhichstartedin2016,waslaidinJune2017,andhullofthe16,000DWTchemicaltankerwaslaidinNovember2017.Thetankerswillbereceivedin2019andwilljointhefleet.

Ditaş is the first company that holds ISPO certificate in Turkey.DitaşwasgrantedtheInternationalSafetyManagement(ISM)Code,theISPSCode(InternationalShipandPortFacilitySecurityCode),andtheMLC(MaritimeLaborConvention)compliancecertificationsforitsvessels.

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

EffortsareunderwaytoimplementtheTankerManagementandSelf-AssessmentScheme3(TMSA3),amajorcredential


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


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MarineTransportation(Ditaş)

fortankermanagementoperationsthatpetroleumcompaniesareexpectedtoimplement.ThevesselsoperatedbyDitaşcomplywiththeOCIMFSIRE(ShipInspectionReportProgram),andareregularlyinspectedbyOCIMFmembers.Embracingitsresponsibilitiesasagoodcorporatecitizen,DitaşisalsoamemberofKalDer(TurkishQualityAssociation)andTURMEPA(TurkishMarineEnvironmentProtectionAssociation).

Ditaşcloselyfollowsallapplicabledomesticandinternationallaws,rulesandregulations,andfulfillsallcompliancerequirementsinatimelymannerinordertodeliverhighquality,safeandeco-friendlyservices.Additionally,theCompanyprovidesalltrainingprogramsrequiredbyLawNo:6331onOccupationalHealthandSafetyand

applicableregulations.TheCompany’soccupationalsafetyspecialistandon-sitephysiciansfulfilllegalrequirementssuchasriskassessment,emergencyactionplansandperiodichealthchecks.

115 ships inspected in 2017.Since2009,DitaşhasprovidedloadingmasterservicestoshipsarrivinginTüpraş’smarineterminalsinordertoenhancesafety.In2010,Ditaşalsostartedtocheckandreportincomingships’compliancewithdomesticandinternationalregulations,aswellwithasTüpraşstandards.

Ditaşinspected115shipsandprovidedloadingmasterservicesto134vesselsattheİzmitandİzmirTerminalsin2017.

In 2017, Ditaş conducted 44.1% of petroleum product shipments for Tüpraş, 41.3% for THY Opet, and 14.6% for other distribution companies.

Financial Indicators (USDmillion)

2013 2014 2015 2016 2017

Net Sales 103.1 101.7 113.6 151.3 253.7

Operating Profit 25.2 27.3 37.1 40.5 49.6

Net Profit 4.7 24.6 25.0 32.0 39.7

Crude Oil and Petroleum Products Transported(thousandtons)

2013 2014 2015 2016 2017

Crude Oil 6,435 4,825 6,606 9,332 17,338

Petroleum Products 3,126 3,526 5,209 5,869 5,976


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Railway Transportation (Körfez Ulaştırma)

Established with 100% Tüpraş capital, Körfez Ulaştırma A.Ş. began its operations as Turkey’s first private railway operator.

Railway Transportation (Körfez Ulaştırma)

Körfez Ulaştırma aims to carry out all fuel transportation between Tüpraş Refineries by railway.

TüpraşdecidedtocarryouttherailwaytransportationwithinKörfezUlaştırmaA.Ş.,a100%subsidiary,inordertoincreaseefficiencyinitsprocesses,followingtheliberalizationofrailwaytransportationinTurkey.Establishedwith100%Tüpraşcapital,KörfezUlaştırmaA.Ş.beganitsoperationsasTurkey’sfirstprivaterailwayoperator.

KörfezUlaştırmareceivedthe“LicenseofAuthorizationforRailwayTrainOperation”onJune16,2017,andthefirst“SafetyManagementCertificate”onSeptember

20,2017tobevalidonallnationallines.TheCompanystartedcarryingoutrailwayfreightoperationson10December2017.

KörfezUlaştırmacarriesoutitsrailwaytransportationoperationswith441Tüpraşwagons,48Opetwagons,60TCDD(TurkishStateRailways)wagonsandfiveDE36000typediesellocomotivesleasedfromtheTCDD.

Withthisinitiative,whileKörfezUlaştırmageneratesmoreaddedvaluebothforTurkeyandtheCompany’sinvestors,itaimstodiversifymeansoftransportationbetweenrefineries,andcarryoutahigherrateofrailtransportationinthecomingyears.

TheCompanyaimstosingle-handedlyundertake10%ofrailtransportationinTurkeywithapproximately2.5milliontonsoffueltransportationperyearandtobecomethelargestfueltransporterinTurkey.

ECM (Entities in Charge of Maintenance) StationTheECMstationisthemostcomprehensiverepairandmaintenanceworkshopinTurkey,meetingECMstandards.Theworkshop,whichhasanindoorareaof2,800m2inKırıkkaleandbears3paralleltracks,startedoperatinginNovember2016.

TheECMStationhasthecapacitytorefurbish240wagonsandmaintainandrepair900wagonsperyear.


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Investments

128 new investment projects were undertaken in 2017 to provide significant contributions to productivity and profitability of Tüpraş as well as sustainability.

Besides key investments for new units and process improvements, Tüpraş also carries out investments focusing on operational excellence, efficiency, environment, and workplace safety.

Continuingtoundertakeinvestmentsinlinewithadvancesintechnology,industrydevelopmentsanddemands,Tüpraş,Turkey’sleadingindustrialcompany,madeinvestmentspendingsofUSD184millionin2017.

AlongwiththeprimaryinvestmentsintendedtoimproveproductqualitywhichbeganafterTüpraş’sacquirementbyKoçGroup,theCompanyalsomadeanumberofstrategicinvestmentdecisionsfocusingonimproving,changing,andtransformingitstechnologicalcapabilitiesintheareasofoperationalexcellence,efficiency,theenvironment,andworkplacesafety.Tüpraş’sinvestmentsduringthelasttwelveyearshavereachedUSD5.9billioninvalue.

Ongoingmodernizationprojectsatthecompany’sİzmit,İzmir,Kırıkkale,andBatmanrefinerieshavequalifiedforinvestmentincentivesthatareworthatotalofTL403millionunderthegovernment’sRegionalIncentivesProgram.Atend-2017,the“LargeScale&StrategicInvestmentIncentive”certificatesthathadbeenreceivedforthecompany’sResiduumUpgradeProject(RUP)wereclosedandtheinvestmentwasformallysignedoffascompleted.

AsaresultofitsinvestmentinKörfezUlaştırmaAŞ,awholly-ownedTüpraşsubsidiarysetuptoengageinrailwaytransport,Tüpraşbecamethefirstprivately-ownedtrainoperatorinTurkey.ThecompanycommencedoperatingitsfirsttrainsinDecember2017.

KörfezUlaştırmawillconductitsoperationsin2018with549tankwagonspulledbyfivediesellocomotives,thelatterofwhicharebeingleasedfromTCDD,thestate-ownedrailwaycompany.

157Ongoing Investment Projects

128New Investment Projects

184USDmillion2017 Investment Expenditures


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Mainofthe128newand157ongoinginvestmentprojectsin2017,whichareundertakentocontributetoTüpraş’soperations,productivity,andprofitability,arepresentedbelow:

Off-gas recovery projects at vacuum units of refineriesTheaimoftheseprojectsistoremovehydrogensulfidefromgasescomingoffthevacuumcolumnsattheİzmit,İzmir,andKırıkkalerefineriesbymeansofamine-scrubbingandtoinjectthetreatedgasintorefineries’furnaceburnersystemsasfuel.ThisestimatedUSD49-millionenergy-savingprojecthasreachedthedetailedengineeringstage.

İzmit Refinery

Hydrocracker heat integrationIn2017detailedengineeringworkwascompletedfortheprojectinitiatedtodealwithseverecorrosion-relatedproblemsinthePLT-47hydrocrackerunit’saircoolersandequipmentorderswereplaced.On-siteconstructionandinstallationworksarecurrentlyinprogressonthisUSD10.7millionproject,whichisscheduledforcompletionin2018.

FCC unit revamp, flue gas treatment, and energy recoveryDetailedengineeringworkcontinuedin2017onthisprojectthatisbeingcarriedoutatİzmitRefinerytoimproveenergy-recoveryandreactorefficiencyattherefinery’sFCCunit.ThetenderingofthisUSD57-millionproject’sconstructionandinstallationworkshasbegun.Itisplannedtocarryoutinstallationworkandtocompletetheproject,whichwillinvolveashutdownoftheunit,in2018.

İzmir Refinery

U-7000 Crude Oil Unit revamp projectTheaimsofthisprojectaretoraisetheexistingcrudeoilunit’soperatingcapacityto1,000m3/hourandtoimproveenergy

efficiency.Theprojectinvolvesreplacingtheunit’sfurnacesandsomeofitsequipment.Detailedengineeringworkhasbeencompletedandequipmentordershavebeenplaced.Constructionandinstallationworksbeganin2017andthelatterarecurrentlyinprogress.ThisUSD56-millionprojectisscheduledforcompletioninthefirstquarterof2018.

CCR platforming unit capacity increaseTheaimofthisprojectistoraisetheU-9200platformingunit’scapacityfrom160m3/hourto225m3/hoursothatallheavystraight-runnaphthacanbeprocessedinordertoincreaseplatformate,hydrogen,andsimilarhigh-added-valueproductyields.ThebasicengineeringworkonthisUSD20-millionprojectwascompletedin2017anddetailedengineeringworkisinprogressatthistime.

FCC unit revamp, flue gas treatment, and energy recoveryThisprojectcallsforimprovingenergy-recoveryandreactorefficiencyattherefinery’sFCCunit.BasicengineeringworkonthisUSD52-millionprojectwascompletedin2017anddetailedengineeringworkisinprogressatthistime.

New black product and base oil sales terminalThisprojectcallsfortheconstructionofanewblackproductterminalinordertoreducecosts,allowfillingtotakeplacemoresafelyandfaster,andtoreduceoiltankertrafficflowswithintherefinerygroundsbyrelocatingtherefinery’sfillingoperations,whicharepresentlybeingcarriedoutatfourdifferentplaces,intoasinglearea.Withthecompletionofthisproject,whosetotalinvestmentcostisUSD24.4million,salesoffueloil,heatingoil,spindleoil,lightneutral,heavyneutralandbrightstockbaseoilswillbehandledbythenewterminal.Detailedengineering

workhasbeencompletedandinstallationiscurrentlyinprogress.

Kırıkkale Refinery

New power plantThisprojectcallsfortheconstructionofanewpowerplanttomeettherefinery’ssteamandelectricityrequirements.Thisplantwillemploynewertechnologiesandbemoreeconomicalandsaferthantheexistingone,whichhasbecomequiteoutdated.TheequipmentandsystemsofthenewUSD115.5-millionpowerplanthavebeencommissioned.Workiscurrentlyinprogressasplannedtoremoveandrelocatetheoldplant’ssteamturbinesandpumps,whichwillbeusedasbackups.

New laboratory buildingThisprojectcallsfortheconstructionofanewexperimentallaboratorybuildingataninvestmentcostofUSD6.5million.Thenewlaboratorywillhaveimprovedventilationsystems,willprovideformoreefficienttemperature,humidity,andsimilarambientoperatingcontrols,andwillbeabletobetteraccommodatetherefinery’sincreasedworkloads.Theproject’sbuildingconstructionandinstallationworksarecontinuingatthistime.

Batman Refinery

Crude oil furnace revampThisprojectcallsforarevampoftherefinery’sF-1101furnacewiththeaimsofincreasingefficiency,installingemergencyshut-down/burnermanagementsystems,andmakingtheunitcompatibleforconversiontonaturalgasoperation.TheUSD6.8-millionproject’sinstallationworkswerecompletedlastyearandthenewfurnacewascommissionedon13June2017.


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R&D

R&D projects in Tüpraş are carried out by 9 teams working in line with common goals, in cooperation with all refinery teams.

Tüpraş R&D Center conducts its operations with aims of implementing innovative technologies, practices, and solutions, of developing new products that will meet customers’ needs, and of increasing refinery efficiencies.

Intheconductofitsoperations,theTüpraşR&DCenterseekstoensureboththecompany’scompliancewithchangesinthelegalframeworkgoverningtheoil-refiningindustryaswellasitsownsustainableprofitability.Tothisend,thecentercontinuedtocarryoutambitious

projectsin2017capableofimplementinginnovativetechnologies,practices,andsolutions,ofdevelopingnewproductsthatwillmeetcustomers’needs,andofincreasingrefiningefficiency.

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

Equippedwithmorethan150itemsofequipment,87ofthemintendedforanalysis,thelaboratoryisabletoemploymorethan180analysismethods.

79Total Number of Patent Applications

193R&D Center’s Publications Number

12,950 m2

Area of R&D Center


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R&DprojectsatTüpraşarecarriedoutbynineteamswhichallsharecommongoalsandwhichalsocollaboratewithallotherrefineryteams:

• ProjectManagement• ProductDevelopment•Modeling&Control• ProcessDevelopment&Optimization•MaterialsEngineering&Reaction•Modeling&Characterization• Laboratory&PilotPlantFacility• CatalystManagement&Development• IntellectualPropertyRights

AspartofitsR&Dactivitiesin2017,TüpraşcarriedouteightprojectsthathadpreviouslybeenapprovedbytheTechnologyandInnovationFundingProgramsDirectorate(TEYDEB).Thecompanyalsosubmittedapplicationsforfournewprojectsdealingwithsuchissuesasdevelopinganinnovativemethodtoincreasetheefficiencyofthedelayedcokerunit,developingdifferentandhighqualityfuelproducts,andthemolecular-levelmodelinganddigitizationofrefineryprocesses.AllfourprojectshavebeenapprovedbyTEYDEB.Tüpraşalsomakesuseofitsownresourcesinordertocarryoutprojectsandtocomeupwithnewprojectideasthatareconsistentwiththecompany’sgoalofdevelopingitsowntechnology.

European Union projects

TheEuropeanUnion’sHorizon2020program,whichwaslaunchedtoharmonizeEuropeanscienceandtechnology-relatedpoliciesandpractices,isbeingcarriedoutinordertoencouragecollaborationwhendealingwithdifferent

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

A.SPIREisaplatformofleadingcompaniesandresearchorganizationsthatprovidesguidanceforHorizon2020projects.TüpraşhasbeenamemberofA.SPIREeversincejoiningtheassociationin2016.

MembershipinA.SPIREallowsTüpraştokeepaclosewatchontheHorizon2020Program’spreparationsandbudgetsandtoshapeitsownstrategiesaccordingly.CurrentlyinvolvedinfiveHorizon2020projects,TüpraşhasbecomeoneofthemostactiveTurkishfirmstakingpartinEUprojects.

TheHorizon2020projectsinwhichTüpraştakespartarediscussedbrieflybelow.

Indus3EsIndus3Es(IndustrialEnergyandEnvironmentEfficiency)isaHorizon2020projectlookingintowaystorecoverandexploitlow-qualitywasteheatthatisgeneratedbyindustrialprocesses.TüpraşjoinedIndus3Esbecausesolutionstotheproblemofrecoveringlow-qualitywasteheatareapriorityfocusofthecompany’sR&Defforts.

Indus3E’sgoalistodevelopaninnovative,compact,andeconomically-viableabsorptionheattransformerthatcanbeadaptedwhenconditionschange.Theprojectisintheprototypedevelopmentstage.Inparallelwiththis,engineering

workhasbeeninitiatedtocreateademonstrationsystemthatistobesetupattheTüpraşİzmitRefinery.

SafeASTSafeAST(ContinuousStructuralConditionTankIntegrityMonitoringofAboveGroundStorageTanks)isaHorizon2020projectthatisbeingcarriedoutbyfiveparticipantsfromthreecountries.Thegoalofthisprojectistodevelopanewsystemthatusestheguidedwavemethodinordertomeasurethebottom-platethicknessesofstoragetankswhiletheyareinservice.FieldtrialsofsuchasystemwereconductedattheTüpraşİzmitRefinery’stankfarmwiththesupportofOperationalSafetyDepartmenttechnicalcontrolteams.

INTEGROILINTEGROIL(DemonstrationofaDecision-SupportSystemforaNovelIntegratedSolutionAimedatWaterReuseintheOilandGasIndustry)isaprojectwhosegoalistomakeuseofadvancedwastewatertreatmenttechnologiesintheoilandgasindustryaswell.Theprojectcallsforthedesignofaninnovativetreatmentsystemcapableofhandlingwastewatergeneratedbyoil-drillingandrefiningoperationswhichnotonlymeetstheindustry’sneedsbutwhichalsocontributestotheadvancementofcircular-economyconcepts.

Sofarunderthisproject,end-userrequirementshavebeenidentifiedandtheinstallationofanINTEGROILdemonstrationunitdesignedaccordingtothoseparametershasbeensuccessfullycompleted.


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R&D

Tüpraş R&D Center continued to develop competent and innovative projects in 2017.

Onceoil-drillingwastewatertreatmenttrialshavebeencarriedout,theprojectwillcontinuewithademonstrationshowinghowwastewaterfromoil-refiningoperationsistobetreated.

FUDIPOTheFUDIPO(FutureDirectionsofProductionPlanningandOptimizedEnergyandProcessIndustries)projectisinvestigatingtheoptimumoperatingconditionsofaunitthatwasselectedforthispurposeattheTüpraşİzmitRefinery.Underthisproject,physicalanddata-basedmodelswillbedesignedforthisparticularunitandthesemodelswillbeusedtoidentifyerrorsintheunit’scontrolcycles.Theprojectalsocallsforthedesignofaforwardcontrolloopthatwillallowproductqualitytobebettercontrolledwhilealsoworkingincoordinationwithothermodelssuchasmayalsobedeveloped.Thecontrolplatformthatemergesasaresultofthisprojectwillallowmodelstobemodifiedandthereforebecapableofbeingappliedtootherunitsaswell.

iPERMTheiPERM(GuidedWaveMonitoringTool)projectcallsforthedevelopmentofaninnovativemonitoringsystemthatmakesuseofguidedwavetechnologytocarryouttechnicalcontrolsonpipelines

inareaswherephysicalaccesstothemisdifficult.ThegoalofiPERMistoachievequantifiableimprovementsintheidentification,assessment,andmonitoringofproblemsthatoccurinpipelineswhilealsoreducingthescaffoldingcostsandminimizingthesafetyrisksassociatedwithconventionaltechnicalcontrolmethods.FieldtrialsofthesystemareexpectedtobeginattheTüpraşİzmitRefineryin2018.

New ITEA ProjectPIANiSM(PredictiveandPrescriptiveAutomationinSmartManufacturing)isaprojectwhichistobeconductedunderthecoordinationofKoçSistemandinwhichTüpraşwillbeinvolvedbothastechnology-developerandend-user.Thisundertakinghasreachedthe“projectdraft”stageaspartoftheITEA-3clusteroftheEuropeanUnion’sEurekaProgram.Thiswillbefollowedbythe“fullprojectproposal”stage.Theproject’sgoalistocontributetoprocessefficiencyandoperationalsafetythroughthedevelopmentofwaysinwhichadvanceddataanalysismethodsmaybeusedtomakepredictionsaboutprocessesandthenusethosepredictionsinordertoautomatethesameprocesses.PIANiSMwillalsoserveasanexampleofIndustry4.0practicesthataretobeintroducedatTüpraş.


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A first in Turkey: Catalyst pilot plantTrialswerecarriedoutonacatalystpilotplantsetupattheTüpraşR&DCenter’spilot-testingfacilityin2017.ThefirstcatalystsystemintegratedwithauxiliarysystemseverundertakenasapilotprojectandtestedinTurkey,thesystemiscurrentlyundergoingcatalystperformancetrialsinhydrocrackeranddesulfurizationunitsona24/7basis.TheresultsfromtheseperformancetrialsattheTüpraşR&DCenter’spilot-testingfacilityareexpectedtomakeitpossibletodevelopcatalyststhatwillallowtheproductionofmiddledistillateswhilealsoexploringthemostproductivewaystouseexistingcatalystsinrefineries.

“Best R&D in the Industry” awardAtthesixth“PrivateSectorR&D&DesignCentersSummit”organizedbytheMinistryofScience,IndustryandTechnologyon20-21December2017,theTüpraşR&DCenterreceivedanawardrecognizingitasthebestR&Dfacilityinitsindustry.TheTüpraşcenterplacedfirstamongthesixR&DcenterscurrentlyoperatinginTurkey’spetroleumandpetroleumproductssector.

Collaborating with universitiesRecognizinguniversity-industrycooperationasawaytokeepitsfingeronthepulseoftechnologicaldevelopmentsandtocreateaddedvalueforthe

countryineveryway,Tüpraşgivesgreatimportancetosuchcollaborativeefforts.Thebestevidenceofthisattitudeistobeseeninthe“R&DCentersPerformanceIndex”whichtheMinistryofScience,IndustryandTechnologypublisheseveryyear.Sinceitsveryfirstdayinoperation,theTüpraşR&DCenterhasenabledTüpraştorankamongthecompanieswhoarethemostactiveinworkingwithuniversities.

AnotherconcreteexampleofTüpraş’sproactiveapproachtouniversity-industrycooperationistheKoçUniversityTüpraşEnergyCenter(KÜTEM).ThankstoTüpraş’ssupport,KÜTEMhasbecomethemostimportantscientificresearchcenteratKoçUniversity.Italsohasthedistinctionofbeingthefirstcenterfocusingonenergy-relatedissuestobesetupbytheprivatesectorinTurkey.

Inordertodealwithitsdelayedcokerunit“hotspot”problemandtoimproveproductselectivity,TüpraşhasjoinedtheTulsaUniversityDelayedCokerProjectthatTulsaUniversityhasbeencoordinatingforthelasteighteenyears.Otherprojectmembersincludedsuchoil&gasindustryleadersasFosterWheeler,Shell,ExxonMobil,SaudiAramco,Albemarle,andNalco.

Patents and scientific publicationsInkeepingwithitsongoingeffortstoprotectitsintellectualpropertyrights,Tüpraşfiledthreenationalandthreeinternationalpatentapplicationsin2017.Thesefilingsbringthetotalnumberofsuchapplicationssubmittedbythecentersinceitcommencedoperationsto79,ofwhich55werenationaland24wereinternationalapplications.

Lastyearsawanothereightofthecompany’spatentapplicationsregistered:twoofthemEuropeanandsixoftheminTurkey.Thisbroughtthetotalnumberofpatentsawardedtothecompanytonineteen,ofwhichfifteenhavebeengrantedinTurkeyandtwoinEurope.ThecompanyalsoholdsonepatentintheUnitedStatesandoneinCanada.

In2017TüpraşsubmittedtwoPatentCooperationTreaty(PCT)applicationstotheEuropeanPatentOfficeforpatentspursuanttothattreaty.ItalsofiledtwonationalapplicationsforoneofitsPCTapplications.

LastyeartheTüpraşR&DCenterpublishedtwentynationalandinternationalscientificpublications,therebybringingthetotalnumberofsuchpublicationssinceitcommencedoperationto193.


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Innovation

An “Innovation Catalysts Team” was formed and its members were given specialized training to help with the fostering of a culture of innovation at Tüpraş.

In recognition of its responsibilities as a leading company in its industry and also because of its forward-looking attitude, Tüpraş encourages both in-house entrepreneurship and open innovation among its employees in order to create value through new projects, services, processes, and business models.

TüpraşjoinedtheKoçInnovationProgramin2017.Asafirststepinthis,thecompanyformulatedaninnovationstrategyandidentifiedandpublishedprocessesassociatedwithit.Italsoconductedentrepreneurshipandprocess-relatedmeetingswithinterestedpartiesbeforestartingtosolicitideasfromemployees.

Duringthisperiod,professionaltrainerswerealsocalledinfromoutsidethecompanytotakepartintheproceedingsandwidely-attendedseminarswiththemwerelikewiseheld.

In2017an“IdeaUnit”onlineportalwaslaunched.Thisisaninteractiveplatformthroughwhichinnovativeideasmaybesharedandinformationaboutworldwide

trends,technologicalandsectoraldevelopments,andinnovationmaybedisseminated.

An“InnovationCatalystsTeam”wasformedanditsmembersweregivenspecializedtrainingtohelpwiththefosteringofacultureofinnovationatTüpraş.

Followingthecompletionofthesepreliminaries,thefirstin-houseEntrepreneurshipTeamwassetupatTüpraş.Withamembershipconsistingof30employeesselectedfrom23departments,thisteamischargedwithlookingintoideasreceivedduringthesuggestion-solicitationprocessthataredeemedtomeritfurtherconsideration.Projectteamsarecontinuingtheiractivitieswiththesupportof“leaninitiative”,“marketresearch”,and“negotiationskills”trainingaswellasofmentorsrecruitedfrombothwithinandoutsidethecompany.

Thegoalin2018willbetofurtheraccelerateactivitiesfocusingonbothin-houseentrepreneurshipandopeninnovation.

Idea UnitThe Idea Unit portal, where innovative ideas are shared within the company, was launched in 2017.


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Digital Transformation and Cyber Security

The aim of the Digital Transformation Program that Tüpraş initiated in 2017 is to ready itself for all aspects of the energy sector.

Thenewdigitaltrendsthataretransformingpeople’slivesarealsohavinganimpactonbusinessmethodsandindustry.Thisisachallengethatonlythosewhocankeeppacewithrapidchangecanhopetosurvive.Seekingtorisetothischallengewithoutsacrificingbusinessorprocesssecurity,in2017TüpraşinitiateditsDigitalTransformationprograminasubstantialefforttoincreasebothitsefficiencyanditsbusinesssecuritysoastobereadyforwhateverchangestheenergysectormaydemandofit.

ByembarkinguponthisjourneywithavisionbothofinstillinginitscorporatecultureadigitalmindsetthatcreatesaddedvalueforallstakeholdersthroughinnovativepracticesandofreadyingitselffortheimpendingIndustry4.0era,theCompany’sgoalistosupportitsactivitiesandtoensureitsdevelopmenttakingcurrentcircumstancesintoaccountthroughinnovativeapproachesintheareasofstakeholders,fieldapplications,processes,andproducts.Abroadspectrumofprojectsrangingfromdigitaltransformationconceptswhichalterhowprojectsareundertaken

andbusinessisdoneontheonehandtoIndustry4.0conceptswhichhaveanimpactonrefineryprocessesontheotherembracessuchissuesaswirelesscommunication,mobiletechnologies,dataanalyticsandartificialintelligence,virtualreality,cloudcomputing,andtheinternetofthings.

Focusedonminimizingtheimpactofdestructivetechnologieswhilealsoturningrisksintoopportunities,Tüpraşhasformulatedadigitalstrategythatisbasedontheprincipleofmobilizingtechnologiesthatsupportprocessesandproductionwhileneversacrificingoperationalsafetyorcybersecurityratherthansimplylatchingontowhateverdigitaltechnologycomesalong.Thispolicyfocusesonfourissues.

• Digitization that benefits employees and other stakeholders:UnderthisheadingaredigitaltransformationprojectswhichmaketheconductofofficeoperationseasierforTüpraşemployeesandincreasetheirproductivityandprojectswhichautomateTüpraş’scommunicationwithallofitsstakeholders.

• Industry 4.0 applications - data analysis & optimization:Underthisheadingareprojectsthatareconcernedwithusingthehugeamountsofdatathatarecollectedfromrefineries’operationsbothtooptimizeproductionandtoincreaseproductivitythroughpredictivemaintenanceandadvancedanalyticsontheonehandandtobettermanageoperationalsecuritythroughheatmapsetcontheother.

• Industry 4.0 applications - production & field operations: Underthisheadingareprojectsthatareconcernedwithmaintenance,repair,projectmanagement,andtaskmonitoringandapprovalsaswellasallfieldoperationsthatarenotdirectlyrelatedtoproduction.

• Business practices:Underthisheadingareprojectsthatareconcernedwithimprovementsinshipping,procurement,warehousemanagement,legalaffairs,humanresources,andsimilarpracticeswhichaffectmainlyofficepersonnelandwhicharenotassociatedwithrefinery/fieldproduction.


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DigitalTransformationandCyberSecurity

With a vision of preparing itself for the impending Industry 4.0 era, Tüpraş applies innovative approaches.

Whileallprojectsaddressingthesefourissuesareformulatedtakingintoaccounttechnologiesthatwillproperlysupportbusinesssecurityandcontinuity,theyarealsoconsideredandshapedinlightoftheirfeasibility,whichistosayintermsoftheirassociatedbenefitsandadvantages,aswellasofgeneralcybersecurityrequirements.

Asitsetsoutonwhatisplannedtobealong-termjourneyusingitsownin-houseresourcestomakeitsdigitaltransformationasuccess,Tüpraşisalsoawarethatoutsideeffortstoimprovetechnologiesareimportanttoo.Forthisreason,thecompanyworkswithtechnocitiesandwithentrepreneurialplatformsthatdealwithsuchmatters.

Inaddition,a“NextGenerationRefinery”initiativehasbeenlaunchedinordertogivetechnologieswhichhavenotyetproventhemselvesachancetodosoandtodemonstratetheirindustrialpracticabilitysothattheymaybesystematicallyincorporatedmorequickly.

Tosupportthistransformationandchange,itisplannedtoopenanalyticalcentersatKoçUniversity,MiddleEastTechnicalUniversity,andİstanbulTechnicalUniversity.Thegoalofthisisnotonlytoincreaseindustry-universitycollaborationbutalsotomarshaltheuniversities’academicstrengthsandyouthfuldynamismandinvolveitinthetransformationprocessaswell.

Digital Projects

Monitoring field activities through mobile tracking and heat mapsFortheconductofmaintenanceandnewinvestmentswithintherefinery,amobileapphasbeendevelopedthatallowstheonlinequeryingofsuchissuesasobtainingworkauthorizationsaccordingtothetasktobeperformed,assessingthecompetenciesofpersonneltobeemployedandassociatedrisks,andtakingnecessaryprecautions.

Aprojectthatgreatlyspeedsupandstreamlineswork-authorizationprocessesbypermittingworkorderstobepreparedimmediatelyuponthecompletionoffieldcontrolshasmadeitpossiblefortheseactivitiestobemonitoredcentrally.Inaddition,fieldoperationscannowbepinpointedonarefineryschematicalongwithheatmapsthatshowwhereoperationalandsafety-relatedincidentspreviouslyoccurred,therebyprovidingabasisforassessingrisks.Itisnowpossibletocentrallykeeptrackofandreportonallactivitiestakingplacewithintherefinery.Thishasadirectimpactnotonlyonemployeehealthandsafetybutalsoontheeffectivenessandvalidityofanalyses.

Industry 4.0Digital transformation projects include Industry 4.0 concepts which have an impact on refinery processes.


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Forsubsequentstagesofthisproject,considerationisbeinggiventotheincorporationofvariousfieldsensorsandwearabletechnologiesthatwillsupporthealthandsafety.ThefirstphaseofthisundertakinghasbeeninitiatedattheKırıkkalerefineryandtheplanistointroduceitintheotherrefineriesaswell.

Big data platformEverydaysome200millionlinesofdatafrommorethan100thousandsensorsarecollectedandstoredinrealtimeatTüpraş.In2017a“big-data”platformwascreatedthatallowsthisdatatobegatheredandminedforinformation.

Asasourceofprocessdataaboutalloperations,thisplatformismorethantentimesfasterthanatraditionaldatabase.Thisdataisalreadybeingusedinmanagementreportingandengineeringanalyses;theintentionhoweveristocreateandmanageadatastackthatwillserveasthebasisforsuchtechnologiesasartificialintelligence,machinelearning,anddeeplearning.

Determining production parameters by means of machine-learning algorithmsProductionoperationsatrefineriesareoptimizedaccordingtothespecificcharacteristicsofthecrudeoilbeingprocessed.Hithertothisinvolvedthecreationofmodelsbasedonbothlaboratoryanalysisresultsandavarietyofstraightforwardcalculations.Underanewsystemwhichisbeingworkedonandwhichhasalreadyreachedthepilot-projectstage,moreadvancedtechniquessuchasmachinelearninganddeeplearningareemployedtoperformthecalculationsthatwillserveasthebasisforproductionoperations.Thegoalofthisistoincreaseprofitabilitybyreducing

themarginoferrorwhendeterminingproductionparameters.

Refinery 3D digital twinThisprojectcallsforthecreationofa3Dmapofarefineryonacomputerfrom3Dlaserscansoftherefinery’sbuildingsandproductionfacilities.Suchamapwillmakeitpossibleforinvestmentstobeplannedmoreexactlyandtoalsohaveimmediateaccesstosuchplansforuseinvariousotheractivities.Thisprojecthasalreadyincreasedtheintegrationofthepipingandinstrumentationdiagrams,isometrics,electricalcircuits,andinstrumentationschematicsetcofthecompletedrefineryunitsandisalsoprovidingthefoundationforavirtualrealitysystem.ThevirtualrealitysimulationsresultingfromthisprojectwillbeusedasthebasisforevenmoreadvancedtechnologiessuchasVRtrainingandwearableaugmentedreality.

Process optimization through advanced process controlAnothercruciallyimportantissueonwhichthecompanyisworkingisthatofadvancedprocesscontrolandproductionoptimization.Thegoalofthisdigitalprojectistousecomputer-aidedpredictiontodesigncontrolsthatwillallowproductiontobeoptimizedwithoutexceedingqualitylimits.Thisnewsystemautomaticallychecksandcorrectsitsownperformance:inotherwordsitlearns.Algorithmsdesignedonthebasisofthousandsofdata-pointshavealreadygeneratedsignificantcostadvantagesbynarrowingthedeviationfromproductionstandardsfrom3%to1%andreducingtheneedforhumaninterventionby40%.ThechangeovertothisnewsystemwillcontinueuntilitisoperatinginallTüpraşrefineries.

Unit-based productivity-monitoring through advanced analytics Intheunit-basedproductivity-monitoringproject,advancedanalytictechniquesareusedtokeeptrackofoperatingexpenses,productattributes,profitability,andsimilarinformationwithmaximumprecisionandtoreporttheparametersthatresultfromthisinrealtime.

360o cybersecurityThisprojectisconcernedwiththemeasuresthatneedtobetakeninordertocontendwiththerisksposedbycyber-basedthreatsthatarebeingexacerbatedbytheproliferationofdigitization.Thesemeasuresincludeproactivelytrackingproductionsystemsandofficeenvironmentssoastoprotectthemagainstcyberattacksandanomalies,providingwarningswhenbreachesoccurorareattempted,andmonitoringtheentiredigitalinfrastructure.

Inadditiontotheprocess-relatedandtechnicalinvestmentsbeingmadeunderthisproject,employee-awarenesstrainingprogramsandexercisesareconductedbothtotestsystemfunctionalityandtoprovidethebasisfortheformulationofbusinesscontinuityplans.In2017aCyberRiskPolicywasalsopublishedaspartoftheefforttohelpmitigatethepotentialimpactofcyberrisks.


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Tüpraş identifies risk levels in all its operations and aims to eliminate or reduce risks to a level acceptable within internationally accepted standards.

International standards and applications

299In 2017, Tüpraş developed 10 new internal standards in order to improve and standardize business processes between the refineries and the total number of standards rose to 299.


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Health and Safety Practices

The aim of the Occupational Health and Safety (OHS) System is to prevent occupational accidents and diseases by adopting a proactive approach.

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

Tüpraşidentifiesrisklevelsinallitsoperationsandaimstoeliminateorreduceriskstoalevelacceptablewithininternationallyacceptedstandards.Tothisend,allemployeesoftheCompanyaswellassolutionpartnersareexpectedtostrictlyadheretoHealth,SafetyandEnvironment(HSE)standards.

UndertheProcessSafetyManagementSystemandCulturalChangeproject),teamworkhasbeencompletedonawiderangeoftopics.Theseincludedprocesssafetyleadership,processsafetyinformationsystem,processhazardanalysis,mechanicalintegrityandqualityassurance,high-riskbusinessprocedures,

permittowork(PTW)systems,contractormanagement,changemanagement,accidentinvestigations,operatingprocedures,securitymanagementauditsystem,motivationandawareness.TheapplicationsinitiatedattheİzmitRefineryasapilotstudycontinuetoberolledoutinotherrefineries.

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

Behavior-basedsafetytoursareheldattherefineriestoencouragepositiveconduct,raisegeneralsafetyawareness

HRAHealth-Risk Assessment (HRA) studies are carried out in all of Tüpraş refineries


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andmonitorcompliancewithsafetystandards.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.

Firedrills,catastrophedrills,hydrocarboncloud/toxicgasdispersiondrillsandspilldrillsareperformedattherefineriesinordertoreduceandrespondtorisksinemergencysituations.

ThesafetyreportrequiredbytheSevesoIIDirectiveonthe“PreventionofMajorIndustrialAccidentsandMitigatingTheirEffects”wascompleted,andsubmittedtotheMinistryofLaborandSocialSecurity.

HazardandOperability(HAZOP)studieswerecarriedoutandscenarioswerepreparedinordertoidentifyhazardsandmajoroperationalproblemsintheexistingunits,todeterminehowanydeviationsfromnormalworkingconditionsandtheintendeddesignmayoccurandtosystematicallyrevieweachpartoftheprocess.

WithinthescopeoftheScenarioBasedEmergencyActionPlanscreatedforcriticalequipmentwithinthescopeoftheSeveso-IIDirective,preparationswereundertakenforpossibleemergenciesbycarryingoutdeskstudiesandfielddrillswiththerelevantunitandtechnicalsafetypersonnel.

TheOccupationalHealthandSafety(OHS)Systemaimstopreventoccupationalaccidentsanddiseasesbyadoptingaproactiveapproach.In2017,sub-ratioswereaddedtothe14KeyPerformanceIndicators(KPIs)andthetotalnumberofKPIsunderclosefollow-upwasincreasedto21inordertocontinuouslyimprovetheOHSperformanceandensureperformancefollow-up.

Inaddition,inthe“HazardandEffectManagementProcess”(HEMP),whichwascarriedoutinaccordancewiththelegislationalsoin2017,withinthescopeofpreparationofriskanalyses,prioritywasplacedonidentificationandmanagementofrisks,carryingouthealth-riskassessmentstudiesandallocationofresourcestocriticalactivities.

Accident Frequency Rate*

Accident Severity Rate*

2017

2017

2016

2016

2.7

1,132

1.9

354

2.5

315

1.6

308

1.1

26

*numberofaccidentsx1,000,000/peoplexhours

*workdayslostx1,000,000/peoplexhours

2015

2015

2014

2014

2013

2013


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Quality Management Systems

At Tüpraş, all processes are managed by focusing on environmental and HR policies under the Integrated Management System.

Tüpraş’s Integrated Management System is audited every year by international organizations.

AtTüpraş,allprocessesaremanagedbyfocusingonenvironmentalandHRpoliciesundertheIntegratedManagementSystem,whichisbasedonİSO9001QualityManagementSystem,İSO14001EnvironmentalManagementSystem,OHSAS18001OccupationalHealthandSafetyManagementSystem,andİSO50001EnergyManagementSystemstandards.

In2017,employeesselectedfromeachrefineryandvariousdepartmentsoftheCompany’sHeadOfficeperformedinternalauditsontheIntegratedManagementSystemandreportedtheir

findingsrelatedtoareasforimprovement.Todeterminetheexactsolutionofthefindings,theirrootcauseswereevaluatedandthedeterminedactionswereundertakentoalargeextent.

In2017,nomajorfindingswerereportedintheexternalauditsoftheIntegratedManagementSystemconductedbytheBSI(BritishStandardsInstitute)ortheİSO27001InformationSecurityManagementSystemconductedbyBureauVeritasattheİzmirRefinery,KırıkkaleRefineryandtheGeneralDirectorate,andallcertificatesremainedvalid.

Tüpraş’sİzmit,İzmir,KırıkkaleandBatmanLaboratoriessuccessfullypassedtheTSENIEC/İSO17025audit,theinternationallyrecognizedquality

299Total Number of Standards

10Number of New Standards


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In 2017, Tüpraş’s İzmit, İzmir, Kırıkkale and Batman Laboratories successfully passed the audits of the Turkish Accreditation Institution.

managementsystemstandardforlaboratoryaccreditation.Furthermore,thevalidityperiodofthecertificateswasextended.

CEMarkingAuditsonEN12591(pavinggrade)andEN15322(cut-back)bitumenswereconductedatİzmitandKırıkkalerefineries,andthetermofcertificationwasextendedtoMarch10,2018.

In2017,Tüpraşdeveloped10newinternalstandardsinordertoimproveandstandardizebusinessprocessesbetweentherefineries.Asaresult,thetotalnumberofCompanystandardsroseto299.

Asaresultoftheimportanceitplacesonstakeholdersatisfaction,Tüpraşcontinuedtheefficientandcomprehensivecomplaintmanagementsystem.AllfeedbackfromstakeholdersconcerningtheCompany’soperations(complaints,satisfaction,wishes,anddemands)wasevaluatedandthesolutionstotheseissueswerereportedbacktothestakeholdersviathisnewsystem.

ThecertificateswereobtainedfollowingtheİSO10002CustomerSatisfactionManagementSystemcertificationworkcarriedoutbytheBSIon28December2016.Withtheauditcarriedoutin2017,thevalidityperiodofthecertificatewasextendeduntiltheendof2018.


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Environment

Carrying out all its production and services with the principle of sensitivity to the environment, Tüpraş aims to minimize the environmental impact of its operations.

Thanks to the investments undertaken in units which can carry out production with reduced environmental impacts through highly advanced technologies, Tüpraş offers environmentally friendly products that are in compliance with EU specifications to the market.

Carryingoutallitsproductionandserviceswiththeprincipleofsensitivitytotheenvironment,Tüpraşcontinuesitsactivitieswithanapproachthatplaceshumanhealth,occupationalsafety,protectionoftheenvironmentandthebenefitofsocietyattheheartofwhatitdoesatalltimes.

TheCompanyinvestsinfacilitiesthatuseadvancedtechnologiesforproducingeco-friendlyproductsthathaveasmaller

impactontheenvironmentandarecompliantwithEUspecifications.

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

Workshops & Studies Related with GHGE missionTüpraşclosedfollowedinternationaldevelopmentsbyparticipatinginthe23rdConferenceofthePartiestotheClimateChangeconvention(COP23)held

45.9thousandtons Tüpraş’s 2017 Greenhouse Gas Emissions Reductions are 45.9 thousand tons.


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inBonn,Germany.Inaddition,Tüpraşconveyedthecompany’sgoodpracticesanditsexperienceinthemonitoring,reportingandverificationofgreenhousegasemissionsattheTurkeypavilion.

WithinthescopeofthePMR(PartnershipforCarbonMarketReadiness)projectimplementedbytheMinistryoftheEnvironmentandUrbanization,Tüpraşcontributedtotheworkwithreportsentitled“ConformityAssessmentoftheEmissionTradingSysteminTurkey”and“AssessmentofMarketBasedEmissionReductionPolicyOptionsforTurkey”,componentsofthe“CarryingoutModelandSimulationStudiesoftheSelectedMechanisms”andpreparatoryworkforthe“TÜSIADPositionPaperinthefieldofCombatingClimateChange”carriedoutbyTÜSİAD(TurkishIndustryandBusinessAssociation).

Greenhousegasemissionreportsofallrefineriesforthe2015and2016yearswerepreparedandverifiedwithinthescopeoftheRegulationonMonitoringofGreenhouseGasEmissions.

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

Activities within the scope of Water and Wastewater Recovery WiththeNewWastewaterRecovery/WaterTreatmentUnitcommissionedin2016attheİzmirRefinerywiththeaimof

reducingtheuseofrawwater,reducingconsumptionofnaturalresources,promotingsustainableuseofnaturalresources,conservingbiologicaldiversityandobtainingeconomicbenefits,a63%recoveryintherefinerywastewaterwasachievedin2017.

WiththeİzmitRefineryMunicipalUrbanWastewaterRecoveryProject,recoveredwatermetapproximately97%oftheİzmitRefinery’swaterneeds,excludingutilitywater,in2017.

AtenderwasopenedfortheBatmanRefineryWastewaterRecoveryProject,andthetechnicalevaluationworkwascompletedduringtheyear.

ThebaseprocessspecificationwaspreparedfortenderintheKırıkkaleRefineryWastewaterRecoveryProject.

Withinthescopeofthe“IdentificationofWaterRisksProject”,the“KoçGroupWaterRisksReport”waspreparedin2017.Thereport,preparedtoestablishthesystemfortheidentificationofwaterrisks,assessedtherisksthatdifferentGroupcompanieslocatedinthesamebasinmayencounter,onthebasisofquantityandqualityofwaterresources,andonthebasisof“basin”.AqueductmapswereusedinthestudytodeterminethestatusoftheGroupbasinsintermsofphysicalrisks.

Whilebasinbasedriskswereassessed,aninvestigationwascarriedoutintotheeffectsoflegalregulationsinourcountryonphysicalrisks.Thereportsetoutsuggestionsforadditionalworkstepsthatcouldbecarriedoutonthesubject,anddiscussedtheareasofworkthatcouldbeundertakenbythecompanyorjointlyinthefuture.

Recycled Water (millionm3)

Greenhouse Gas Emissions Reductions (thousandtonsCO2e)

2017

2017

2016

2016

25.7

46

20.0

78

17.2

72

12.0

126

11.0

186

2015

2015

2014

2014

2013

2013

Recycled Water/Total Water Consumption (%)

20172016

81.9

64.167.067.4

56.9

201520142013


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Energy Efficiency

Within the scope of the energy efficiency activities carried out in four refineries, the 15 energy saving projects brought in a financial gain of USD 4.9 million.

Tüpraş believes that energy efficiency is of critical importance for the future of its activities and the future of our world, and it continues its work in this field with the greatest of determination.

Tüpraşhasbeenparticipatinginbenchmarkingstudiesformanyyears,wheretheperformanceofalloftheworld’srefineriesisassessedbytheSolomonCompany.Asaresultoftheenergysavingprojectsandmodernizationstudiescarriedout,thecompany’sEII®(EnergyIntensiveIndustries)valuestoodat102.2pointsin2017,comparedto119.1in2008.

The 2017 Energy Efficiency ProjectsWithintheframeworkoflongtermplans,in2017Tüpraşcontinuedtoapplysometheworld’smoststate-of-the-arttechnologyandenergysavingprograms.Withinthescopeoftheenergyefficiencyactivitiescarriedoutinitsfourrefineries,the15energysavingprojectsbroughtinafinancialgainofUSD4.9million,cuttingCO2emissionsby45,945tons.

45,945 Greenhouse Gas Emissions Reductions (tons CO2e)

4.9 USDmillionEnergy Savings


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Examples of energy efficiency projects implemented in 2017

Heat Exchanger Clean-up Work in the Plt-5 Crude Oil Unit at the İzmit RefineryHeatexchangersweremechanicallycleaned,furnaceinlettemperatureswereimprovedandfuelconsumptionwasreduced. Afterthecleaning,energysavingsamountingto44,900GcalandreductionsinCO2emissionsof10,400tonswereachieved.

Optimization Applications in İzmit Refinery Power PlantsWithinthescopeoftheoptimizationwork,aboilerandturboalternatorweredeactivatedinthe“Aregion”powerplants,bringingsavingsintermsoffuelconsumption.In2017,atotalof41,800Gcalinenergysavingswereachieved,alongwithareductionof9,682tonsinCO2emissions.

Fuel Oil Saving Activities in İzmit Refinery FurnacesThemechanicalclean-upcarriedoutinthe63F-1furnacepavedthewayefficiencyimprovementsandeconomicalgainsbyallowingmoreeconomicalfuelgastobeburned,insteadoffueloil.Atotalof29,400Gcalinenergysavingsandareductionof6,810tonsinCO2 emissionswereachieved.

Furnace Change in Batman Refinery F-1101 ThePlt-1100unitfurnacewasrenewed.AfterthenewfurnacewascommissionedinJune2017,energysavingsamountingto22,900Gcalandareductionof5,300tonsinCO2emissionswasachieved.

Online Furnace Cleaning in Kırıkkale Refinery Anonlinechemicalcleaningapplicationwasdevelopedforthecrudeoilunit,thevacuumunitandthehydrocrackerunitfurnaces.

Afteritsapplication,furnaceyieldswereincreasedbyenablingadecreaseinthefluegastemperatures.Atotalof19,327Gcalinenergysavingswereachievedalongwithareductionof4,477tonsinCO2emissions.

Energy Savings(USDmillion)

20172016

4.9

9.19.6

21.8

30.5

201520142013

Energy Efficiency Projects and CO2 Savings in 2017

Number of Projects Energy Gcal/year CO2 ton

İzmit 4 123,630 28,637İzmir 6 17,417 4,034Kırıkkale 3 27,157 6,290Batman 2 30,152 6,984Total 15 198,356 45,945


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Performance Indicators

Economic and Administrative Performance

2013 2014 2015 2016 2017

Net Sales(USDmillion) 21,595 18,165 13,571 11,547 14,801

Operating Profit(USDmillion) 22 199 1,012 781 1,333

Profit Before Tax (USDmillion) 7 84 819 644 1,227

Profit After Tax (USDmillion)* 629 667 938 594 1,046

EBITDA (USDmillion) 560 338 1,397 1,125 1,614

Net Debt (Cash) (USDmillion) 1,340 1,663 2,370 1,729 1,657

Return on Equity (ROE) (%) 24.1 25.9 35.0 21.9 41

Debt Leverage Ratio(%) 36 38 45 43 38

Net Working Capital (USDmillion) -296 -677 -53 43 713

Investment Expenditures (USDmillion) 1,201 959 344 213 184

Earnings per Share (TL) 4.78 5.83 10.18 7.16 15.22

Gross Dividend per Share (TL) 1.58 - 6.5 6.22 13.60

Net Dividend per Share (TL) 1.34 - 5.53 5.29 11.56

Taxes and Other Liabilities (TLmillion) 28,607 23,433 31,916 37,548 42,430

Corporate Governance Rating Note 9.34 9.31 9.44 9.42 9.47

Fitch Ratings Long-term Foreign Currency Rating Note

BBB- BBB- BBB- BBB- BBB-

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

Supply Operations (TLmillion) 386 769 1,573 1,921 1,692

Domestic 214 305 1,122 1,200 1,217

Custom Manufacturing 14 20 12 5 4

Foreign 158 444 439 716 471

Local Procurement Ratio (%) 59.05 42.21 72.10 62.72 72.16

Total Number of Suppliers 1,595 2,016 2,238 2,266 2,120

*Netprofitattributabletotheequityholdersoftheparent


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Tüpraş places emphasis on efforts aimed at eliminating social, economic and environmental problems that may arise due to its activities, and which are aimed at contributing to the economic and socio-cultural development of the geographical region in which it operates.

Operational Performance

2013 2014 2015 2016 2017

Processed Crude Oil (thousandtons) 21,568 20,044 27,559 28,348 28,502

Refining Production (thousandtons) 21,175 20,101 27,268 27,928 28,883

Sales (thousandtons) 24,083 22,194 28,739 30,255 31,493

Export of Products (thousandtons) 4,844 5,333 6,494 5,491 5,804

Import of Products (thousandtons) 3,805 2,920 2,999 3,749 4,388

Total White Product Ratio (%) 72.4 72.2 75.4 76.6 76.3

Capacity Utilization Rate of Crude Oil (%) 76.8 71.3 98.1 100.9 101.4

Capacity Utilization Rate Including Semi Product (%) 79.1 74.9 102.5 105.3 108.1


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PerformanceIndicators

Environmental Performance

2013 2014 2015 2016 2017

Direct Energy Consumption (TJ) 68,752 66,529 90,313 101,639 104,749

Natural Gas 32,863 32,906 36,005 39,085 47,306

Fuel Oil 10,966 8,811 13,184 15,487 8,581

Fuel Gas 22,285 22,770 38,512 44,265 46,164

Coke 2,638 2,042 2,612 2,802 2,698

Indirect Energy Consumption - Electricity(TJ) 395 505 483 518 1,102

Total Energy Consumption (TJ) 69,147 67,034 90,796 102,156 105,851

Change in Energy Consumption (%) 2.73 3.06 -35.45 -12.51 -3.62

Energy Consumption Per Crude Oil (GJ/Ton) 3,.21 3.34 3,29 3.60 3.71

Solomon Energy Intensity Index, EII 102.3 107.6 102,3 103,4 102,2

Number of Energy Efficiency Projects 40 22 21 18 15

Total Energy Efficiency Savings(TJ) 2,841 1,772 1,031 1,054 830

Total Energy Efficiency Savings (USDmillion) 30.5 21.8 9.6 9.1 4.9Greenhouse Gas Emissions Reductions through Energy Efficiency Projects (tonsCO2e)

186,019 126,442 71,744 77,666 45,945

Total Grey Water Consumption (millionm3) 19.4 17.7 20.1 17.5 15.7

Total Water Consumption (millionm3) 19.4 17.8 25.7 31.2 31.4

Change in Water Consumption (%) -6.7 -8.4 13.0 -10.1 -5.7

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

Total Recovered Water (millionm3) 11.0 12.0 17.2 20.0 25.7

Total Recovered Water to Total Consumption Ratio(%) 36.3 40.7 40.1 39.1 45.0Total Recovered Water to Total Water Consumption Ratio (%)

56.9 67.4 67.0 64.1 81.9

Total Waste Water Discharge (millionm3) 11.6 10.2 11.3 17.1 14.9

Total Amount of Solid Waste (tons) 27,450 112,664 25,538 41,506 31,392

Hazardous Wastes (tons) 19,411 94,974 14,192 30,971 17,811

Non-Hazardous Wastes (tons) 8,039 17,690 11,346 10,534 13,581

Solid Wastes According to Disposal Method

Recycling (tons) 21,045 39,724 17,812 27,746 22,618

Disposal (tons) 6,405 72,940 7,726 13,759 8,774

Solid Waste Recovery Rate (%) 76.7 35.3 69.7 66.8 72.1Total Spending on Environmental Investments and Operating Expenses (TLmillion)

197 179 208 346 390

Environmental Training (peoplexhours) 46,418 15,512 17,787 17,331 16,012

Tüpraş Employees 23,751 3,302 7,438 4,310 4,010

Contractors’ Employees 19,727 8,385 10,121 13,021 11,971

Community 2,940 3,825 228 - 31


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Social Performance

2013 2014 2015 2016 2017

Total Amount of Training (peoplexhours) 167,961 388,696 234,311 284,878 233,034

Female 19,562 31,172 31,140 21,827 35,601

Male 148,399 357,524 203,171 263,051 197,434

Monthly Waged 68,240 92,571 98,314 68,836 103,864

Hourly Waged 99,721 296,125 135,997 216,042 129,170

Total Amount of Training (averagehoursoftrainingperemployee) 36 82 49 59 45

Female 49 80 79 55 79

Male 34 83 46 59 42

Monthly Waged 65 89 93 65 91

Hourly Waged 27 81 36 57 32

Total Hours of OHS Training (peoplexhours) 82,533 94,036 104,091 135,951 141,729

Tüpraş Employees 44,775 74,556 63,596 85,609 83,381

Employees of Business Partners 37,758 19,480 40,495 50,342 58,348

Accident Frequency Rate(numberofaccidentsx1,000,000/peoplexhours) 1.1 1.6 2.5 1.9 2.7

Accident Severity Rate (workdayslostx1,000,000/peoplexhours) 26 308 315 354 1,132

Employee Satisfaction(%) 60.0 56.0 50.0 53.0 61.0

Customer Satisfaction (%) 98.0 98.0 88.8 89.0 88.2

Supplier Satisfaction (%) 97.3 92.9 95.8 88.8 86.9

Contractor Satisfaction (%) 82.1 80.4 84.8 78.1

Pension Fund Liabilities (TLmillion) 48.2 54.9 63.9 77.4 89.0

Donations and Sponsorships (TLmillion) 25.6 8.9 17.3 24.4 27.4

Total Number of Trainees 1,625 798 1,009 935 1,063

Minimum Starting Salary to Minimum Wage Ratio

Monthly Waged 2.6 2.6 2.6 2.0 2.2

Hourly Waged 4.4 4.2 4.1 3.3 3.3


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Corporate Social Responsibility Projects

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

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

Education

April 23rd National Sovereignty and Children’s Holiday was observed by Tüpraş Batman Ninth Children’s Festival.9thtraditionalApril23rdBatmanChildren’sFestivaltookplaceonApril28,2017.StudentsfromBatmancentralschoolsandchildrenofTüpraşemployeesattendedthecelebrationswhichwereorganizedbytheGovernor’sOfficeofBatman,ProvincialDirectorateofNationalEducationandTüpraşvolunteers.Asinthepreviousyears,April23rd

Children’sFestivalwasmadepossiblewiththeeffortsofvolunteers.30Tüpraşemployees,25studentsfromBatmanUniversitySchoolofPhysicalEducationandSports,16volunteersfromDicleYouthCenterofCommunityVolunteersFoundation(TOG)and60volunteerteachersguidedthefestivalwhichturnedouttobeadayfullofentertainmentfor1.500children.

Withtheobjectiveofmakingacontributiontosustainabledevelopmentintheregionswhereitoperates,withtheprincipleofbeingacorporatecitizen,BatmanRefineryHumanResourcesDirectorateplansandmanagestheApril23rdChildren’sFestivalconsistentlyforthelastnineyears.Sofar19,750childrenhavebeenentertainedinthesefestivals.

1.5001,500 children were entertained in April 23rd Batman Children’s Festival.


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HavinganawardofMostSuccessfulKoçMembers(EBK)asasocialdevelopmentproject,thefestivalistheproductofastrongcollaborationbringingtogetherBatmanGovernor’sOffice,theProvincialDirectorateofNationalEducation,managersandteachersfromtheregionalschools,civilsocietyorganizations,Tüpraşemployeesandtheirfamilies.

April 23rd celebrations took place at İzmir, İzmit and Kırklareli refineries April23rdNationalSovereigntyandChildren’sHolidaywasobservedwiththeattendanceofspousesandchildrenoftheemployees.Thedaywasdesignedtoincludeactivitiessuchasrefineryinformationandsafetypresentations,planttourandnostalgicgames.ChildrenattendingtheeventpostedtheirwisheswiththeirlittleheartstotheApril23rdwishboard,havetheirphotographstakenwithAtatürkandwiththeirworkclothes.

327childrenfromKırıkkaleRefineryand250childrenfromİzmitRefineryattendedtheactivitieswhichwereorganizedbyvolunteers.

Fireflies met with students from 6 cities in 2017.TheFireflyMobileEducationUnitsoftheTurkishEducationVolunteersFoundation(TEGV),whicharesponsoredbyTüpraşmetwiththousandsofstudentsin6citiesin2017.TEGVreachestheregionswhereactivitycentersarenotavailableviaTEGVFireflyMobileEducationUnits.

FireflyMobileEducationUnitsaimstotrainthechildrenforlifelonglearningandtosupporttheiremotionalandmentaldevelopment.Theyprovideaneducationprogramwhichincludesactivitiesoninformationtechnology,mathematics,science,readingandarts.

Thechildrenreceive12hoursoftrainingintheFirefliesEducationProgram.6hoursofthistimeisspentin“AlgoDigital”wheretheyimprovetheiralgorithmicthinking,problemsolving,digitalcitizenship,digitalliteracy,andinformationtechnologyskills.Theother6hoursconsistofactivitiessuchasMathematics-ScienceLearningthroughEntertainment,IReadIPlay,DramaWorkshop,andHaveFunandLearnHygiene.

FireflyMobileEducationUnitsreached10,304childrenin2017inAfyonkarahisar,Bilecik,Hatay,Van,KarsandŞanlıurfa. SEK Club Activities were organized to support civil society organizations. One-actplay“HouseofLunatics”(DelilerEvi),writtenbyKeremKobanbay,directedbyAydınSigalıanddramadirectorshipperformedbyHalukAcarwasstagedon9January2017forthebenefitofTurkeyEducationVolunteersFoundation(TEGV).

Tüpraşhasestablished“OurEnergyNeverEndsScholarshipFund”incollaborationwithTurkishEducationFoundation(TEV)inthepreviousyear.TheobjectiveoftheFundistoprovideequalopportunityforgirlsbydrawingattentiontothetopicof“educationandwomen”whichisanegativeindicatorofsocialgenderinequality.In2017,SEKMusic,GourmetTravelandPhotographyclubscontinuedtheirsupporttothisFundbyorganizingvariousactivities.TheclubsalsoprovidedfundstootherfoundationssuchasUNICEFTurkeyandTurkeyFreedomtoChildrenFoundation(TCYOV).

Vocational High School Coaches Project in collaboration with “Private Sector Volunteers Association (ÖSGD)” is conducted for MEGEP Technical Education Students.ÖSGDVocationalHighSchoolCoachesProjectisthecoachinglegofKoçHolding’s“VocationalHighSchools:AMatterofCountry”projectwhichstartedin2007.ThisprojectkickedoffwhenitwastransferredtoÖSGDinJune2012withapressconferenceandaprotocolwassignedwithMinistryofNationalEducationinMarch2013.Withinthescopeoftheproject,companiesarematchedwithvocationalhighschoolsbasedontheirlocationsandbranches.Followingtheapplicationofstudents,groupsof10-12studentsarebeingformedandtheycometogetherwiththeirvolunteercoachesfortheireducationmodulesforaperiodof2years.

Inthiscontext,seventeen12thgradestudentsstudyingatKörfezTechnicalIndustrialVocationalHighSchoolintheMachineryMaintenanceDepartmentcontinuedtheirinternshipprogramsatİzmitRefinery.Seventeen11thgradersoccasionallyvisittheRefinerytolearnaboutthefieldapplicationsofMachineryMaintenanceandRefineryOperationsinlinewiththeircurrentstudies.

Whenthese11thgradersstartedthesemesterwiththeirvolunteercoaches,anintroductioneventwasorganizedwiththeattendanceofstudentsandteachersresponsiblefortheprojectandpersonaldevelopmenttrainingswerecompletedwiththeguidanceofthevolunteercoachesintheÖSGDproject.ThestudentsalsoattendedİznikCulturalTourandKoçMuseumTripwiththeircoaches.Inadditiontothat,8studentsweresupportedbyKırklareliRefineryvolunteerswithinthescopeofMEGEPproject.


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CorporateSocialResponsibilityProjects

Tüpraş continues its support for the Anatolian Scholars Program that was initiated by Koç University.

Tüpraş continues to support April 23rd International Children and Science Festival held by Metropolitan Municipality of Kocaeli for the ninth time.Tüpraşsponsoredthe“Soft-boiledCrewMusical”playattheApril23rdInternationalChildrenandScienceFestivalheldbyMetropolitanMunicipalityofKocaelifortheninthtime.

Guestsfrom33differentcountriesparticipatedthefestivalwheremanyentertainingworkshops,scienceactivitiesandstageperformancestookplace. Tüpraş continues its support for Koç University Social Sciences Merit-based Scholarship Program.“KoçUniversitySocialSciencesMerit-basedScholarshipProgram”whichiscarriedonbyKoçUniversityandsupportedbyTüpraşsince2011aimstoimprovesocialsciencesinTurkey.

Theprocesshasstartedwhen2studentswerefundedin2011,andthenumberofstudentsincreasedto8in2015.In2017,2studentsinArchaeologyandHistoryofArt,1studentinSociologyand1doctoratestudentinEconomicsarebeingsupportedbythescholarshipofTüpraş.

AnatolianScholarsProgramwhichhasstartedin2011-2012academicyear

providesequalopportunityineducationbysupportingsuccessfulstudentswhoneedfinancialaid.In2017,Tüpraşhasprovidedscholarshipsto2morestudentsinthisprogram.

Tothisdate,Tüpraşhassupported12studentsinthisprogramandoneofthegraduatesofthisprogramhasstartedtoworkforKırıkkaleRefinerythisyear.Atthesametime,anothergraduateofFacultyofEconomicsandAdministrativeSciencesfromthisprogramwhowassupportedbyEti,worksatBatmanRefinery.

Tüpraş became the project partner of High-schoolers Innovation Competition organized by Turkey Exporters Assembly (TIM) and Young Guru Academy. YoungGuruAcademy(YGA)whichisaninternationalnonprofitorganizationfoundedin2000aimstoprovideabetterfuturefornextgenerations.Theytrytorealizetheirgoalthroughidentifyinganddevelopingtheleadersoffuture.

Thisyear,TüpraşbecametheprojectsponsorofHigh-schoolersInnovationCompetitionorganizedbyTIMandYGA.Theobjectiveofthecompetition,whichwillreachatotalof5millionhigh-schoolersinaperiodof1.5years,istomakehighschoolstudentsgetfamiliarizedwithinnovationandtodevelop


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innovativeyoungstersofthefuture.Highschoolstudentsmayapplytothecompetitionindividuallyoringroupsbydevelopingtheirprojectswhichconformtothatyear’stopics.ApplicationsarereviewedbyYGAgraduatesandthefirst3projectsselectedwillreceiveSocialInnovationawardatTIM’sinnovationweek.Inadditiontothose,10projectswillbedisplayedattheinnovationweek.

StudentswillexperienceaprocesswhichconsistofstepssuchasInnovationPlatform,PrototypeDevelopment,InnovationCampandYGAGraduateAdvisorywheretheywilldeveloptheirvisionsandbenefitfromtheexperiencesofYGADreamPartners.

Arts and Culture

Young Musicians on the World’s Stages Since2013,TüpraşhasprovidedsupporttotheYoungMusiciansontheWorld’sStagesinitiative,whichwaslaunchedbytheworld-renownedpianistsisters,GüherandSüherPekinel.Theeffortaimstoselecttalentedyoungmusiciansfromconservatoriesacrossthecountryandintroducethemtotheworld’sstages.Withinthescopeoftheprogram,VerikoTchumburidze,DoğaAltınok,CanÇakmur,TolgaAtalayÜn,GörkemÇiçek,ErenAydoğanveAlicanSünercontinuestheireducation.Theprogramcoversthestudents’lifescholarships,

theirattendancetomostsignificantcoursesandcompetitions,leasingoftheirinstrumentsandPRactivitiesoftheproject.IKSV 21st İstanbul Theatre Festival21stİstanbulTheatreFestivalwhichisorganizedbyİstanbulFoundationforCultureandArts(IKSV)tookplacebetween13-26November2017withthesupportofKoçHoldingEnergyGroupcompanies,Aygaz,OpetandTüpraş.Thefestivalwhichisfollowedbynearly18thousandtheatreloversincluded55performancesof18theatre,danceandperformancegroupsbothfromTurkeyandabroad.

6th book of the Anatolian Civilizations series: PersiansPersians,thesixthbookoftheAnatolianCivilizationsseries,followingUrartu,Phrygians,Hittites,PergamonandLiciawaspublishedasanotherbuildingblock

oftheculturaltreasurewhichhasbeenprotectedforthousandsofyears.

Withtheobligationtoleavepermanentworkstofuturegenerations,“Persians:PowerandMagnificenceinAnatolia”whichwaspublishedincollaborationwithYapıKrediPublishinghasbeenanindicatoroftheemphasistheCompanyplacesoncommonculturalheritageofthehumankind.


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“Recycling of Wastes, Increasing the Consciousness on Environment and Health Trainings” were provided to 525 children.

Publication Sponsorship for Aktüel Archaeology MagazineLaunchedin2007andsupportedbyTüpraşsince2010,AktüelArchaeologyMagazinestrivesforAnatolia,whichhostedhundredsofcivilizationsforcenturiesandcarrieswealthytracesfromthesecivilizations,tohavetheplaceitdeservesintheworld’sculturalheritage.Withthemottoof“LeavingtheFutureinAnatolia”themagazineistheonlynationalarchaeologymagazinetellingthehistoryofAnatoliatothepeopleofAnatolia.

Environment

Chamber of Shipping (DTO) Fethiye Waste Collection Boat is cruising. TURMEPAwhichaimstoprotecttheseas,shoresandwaterlinesofTurkeyisanonprofitorganizationworkingforthepreventionofpollutionofourseasandshores,motivate,developandencourageparticipationofsocietytofightagainstpollutionandleavingahealthyenvironmenttofuturegenerations.TüpraşhascollaboratedwithTURMEPAtwoyearsagotooperateDTOFethiyeWasteCollectionBoat.Theboatcollected779thousandlitersofgreyandblackwaterand1,147litersofbilgefrom1,154boatsin2017.

Totalwastewaterhasbeen1millionliterswhichequals55thousand5-gallonbottles.Wastewatercollectedhelpedto

protect8.4millionlitersofseawaterfrombeingpolluted.

İzmir Refinery’s “Happy Wastes Kite Festival”VolunteeremployeesfromİzmirRefinerylaunchedthe“HappyWastes”effortin2010toseparateandrecyclepackagingwaste.Theeightheditionofthe“HappyWastesKiteFestival”,nowanannualtradition,washeldonMay19th,theCommemorationofAtatürkYouthandSportsDay,inAliağaAvcıRamadanParkas3,000colorfulkitescreatedforthepeopleofAliağafilledthesky.

Volunteer employees from Batman Refinery reached 525 children with their training programs on “Waste Recycling, Health, and Environmental Awareness”. “RecyclingofWastes,IncreasingtheConsciousnessonEnvironmentandHealthTrainings”continuedin2017atBatmanschoolsand1,050manhouroftrainingsfor525studentswereprovided.Alongwiththeawarenessthesetrainingshavecreated,wastebatteries,wasteoilsandplasticcapswerecollected.

“We Collect Waste Vegetable Oil” to remove all obstaclesThecampaignthatwasinitiatedbyvolunteeremployeesfromBatmanRefinerycontinuedin2017.Underthecampaigncollectedwastevegetableoilis


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senttoalicensedcontractorforrecycling.Therevenuegeneratedfromrecyclingisusedtopurchasehearingaiddevices,wheelchairsandotherapparatusestosupportpeoplewithdisabilities.

In2017,about180litersofwastevegetableoilwascollectedandsenttothelicensedcontractorforrecycling.Amongthis,80litershavebeencollectedwiththesupportofGültepeAnatolianHighSchoolstudents.

Living Environment, Colorful City“WorldEnvironmentDay”isobservedeachyearonJune5thwithvariousactivitiestomakeourcloseenvironmentandourplanetmorelivableandtocreateawareness.Thisyear,withinthescopeofWorldEnvironmentDayactivities,aseriesofeventshavebeenorganizedtocreateenvironmentalawarenessamongchildrenandtosupportaestheticsofthecityofBatmanwiththecollaborationofTüpraş,ProvincialDirectorateforEnvironmentandUrbanizationandProvincialDirectorateforNationalEducation.

BoundarywallsofProvincialDirectorateforEnvironmentandUrbanizationbuildinglocatedonabusyboulevardhavebeenpaintedunderthethemeof“cleanindustryandsustainability”whichhelpedimprovetheaestheticsofthecity,whilecreatinganareawheretheCompany’simageandstatementshavebeenvisuallyexpressed.Thisactivitywasperformedtoimprovetheawarenessonnatureandenvironmentalmattersofstudentsinprimaryschools.25childrenfrom5primaryschoolsgainedenvironmentalconsciousnesswhilebeinginformedaboutstreetart.

Sports

Batman Sports Club for the Disabled defies disabilities. Foundedin2006,BatmanSportsClubfortheDisabledhascompetedintheTurkishWheelchairBasketball2nd Leaguesincethe2007-2008season.Sinceitsestablishment,theClubhasgivenhundredsofdisabledcitizenstheopportunitytoengageinsports.Currently,BatmanSportsClubhas60athletes,27ofwhomarelicensed;theinstitutioniswell-regardedinBatmanforitsnumerousachievements.WiththegoalofqualifyingfortheWheelchairBasketball1stLeague,theclubcontinuestopracticeandmanagedtobethe2016-2017regionalchampionsandwasplacedinthecompetitioninthePlayOffs.

Batman Tüpraşspor Football Club steers young people towards sports.EstablishedasanindependentinitiativeofagroupofBatmanRefineryemployeesin1995,TüpraşsporFootballClubservesasaplatformforlocalyouthwhoseektopracticesportsinahealthy,organizedwayandtobecomeprominentfootballplayersinthefuture.TheClubwassetupwiththeawarenessthatsportsactivitiessupportphysicalandmentaldevelopmentwhilealsopreventingyouthfromdevelopingunhealthyhabits.VolunteeremployeeseffectivelymanagerelationswiththeProvincialDirectorateofYouthandSports,FederationofBatmanAmateurSportsClubs,TurkishFootballFederationandothersportsclubs.

In2017,TüpraşsporFootballClubhad51licensedathletesbetweentheagesof10and18years.TheClub’sathleteshavewonseveralawardsatregional

andnationalcompetitionsorganizedforthe8-13andU-19agegroups.Duringtheyear,about100studentsactivelytrainedattheClub;ofthese,onefootballplayerwastransferredtotheNationalTeamwhileothersjoinedamateurandprofessionalclubs.

TüpraşsporFootballClubwonatotalof19championshipsin4branchessince2001,10atU-19youthcategory,2atU-17youthcategory,2atU-14youthcategoryand5atamateurcategory.TheClubwasthechampionofamateur,U17andU19categoriesin2017.

Health

TAPV “Safe Moms, Happy Babies”TurkishFamilyHealthandPlanningFoundation(TAPV)isanonprofitorganizationconductingactivitiestoempowerwomeninthelightofinternationalstandardsandtoreachsocialgenderequality.Tüpraşsupportedthe“SafeMoms,HappyBabies”programwhichisajointprojectof“KoçHoldingISupportSocialGenderEqualityforMyCountry”andTAPVwhichcarriesonactivitiesforthehealthandeducationofwomenandchildren.

Withinthescopeofthisprogram,morethan5thousandhousevisitswereperformedand1,164womenandchildrenweresupportedwiththeparticipationof37trainersfrom26MultipurposeCommunityCentersinAdıyaman,Gaziantep,Batman,Diyarbakır,Kilis,MardinandŞanlıurfa.

SafeMotherhoodProgramsareintendedtodecreasethenumberofmotherand


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Tüpraş supported the “Safe Moms, Happy Babies” program of TAPV.

childrendeathsandprovidewomenthehealthandcareservicestheyneedduringtheirpregnancy,birthandnursingperiods.Pregnantandnursingmothersarevisitedandprovidedwithinformationonwomenhealth,safemotherhoodandsocialgenders.Supportpackagespreparedfortheneedofmotherandbabyandtrainingmaterialsarepresentedduringthesevisits.ThesesupportpackagesarepreparedusingthematerialsproducedbythedisadvantagedwomenwhoarebeingtrainedintheworkshopsunderthemanagementofGAPAdministration.

Blood Donation from Batman, İzmir and Kırıkkale RefineriesTüpraşvolunteerswhohearKızılay’scall“Let’sDonateBloodonaRegularBasisandStandbytheOnesWhoisinNeed”andwhoknowdonatingbloodmeanssavinglivescontinuedtheirblooddonationsthisyear.218unitsofbloodfromBatmanRefinery,50fromİzmirRefineryand48fromKırıkkaleRefineryweredonatedtoKızılay.

Tüpraş’s Support to Koç Holding’s “I Support Social Gender Equality for My Country” Project“ForMyCountry”servesasanumbrellaprojecttospreadtheconceptofsocialresponsibilityamongKoçGroupcompanies,employees,dealersandsuppliers;encouragethemtodemonstrateaparticipatoryattitude

towardsocialissues;supportlocaldevelopment;andtoimplementinitiativesthathelpimprovequalityoflife.Theconceptforthe2015-2017periodwassetas“GenderEquality”andtheobjectiveistoraisepublicawarenessabouttherootcausesandeffectsofgenderinequality,andtoserveasarolemodelbyadoptingamoreegalitarianattitudeinbusinessandsociallife.

Withinthescopeoftheproject1,362employeesand890stakeholderswerereachedthrough“InformationMillSeminars”in2017.Asof31December2017totalnumberofemployeesreachedwas4.546andtotalnumberofstakeholdersreached,withmajoritybeingstudents,was1,555.“InformationMillSeminars”havebeenincludedinorientationprocesses.

Company-wideawarenessseminarshavebeencarriedonwhilevariousactivitieshavebeenorganizedbySocialActivityClubstodrawattentiontothetopic.

SEKKırıkkaleTheatreteamperformedaplaycalled“BeingaGirlaroundHere”whichwaswrittenanddirectedbyMehmetYılmazsoyforthebenefitofTAPV.SEKİzmirTheatreClubperformedanotherplay“WeDidnotCook,WeWillbeBeaten”writtenanddirectedbyDemetSakaforthebenefitofTurkishEducationFoundation.


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“WeDidnotCook,WeWillbeBeaten”playwasalsoperformedatİzmirclosedpenitentiaryinstitution,İzmiropenpenitentiaryinstitutionand3rd T typepenitentiaryinstitutiontosupporttheprisonersondevelopingsociallyacceptablethoughtandbehaviormodels.

Thesameplaywasawardedunderthe“CorporateTheatre”categoryatthe17th DireklerarasıAudienceAwardshostedbytheCityTheatreoftheMetropolitanMunicipalityofManisaonMay9th,2017.Companieswhoprovideconfidence,cooperationandmotivationamongemployeesthroughtheatreactivitiesandthedirectorsoftheplaysareevaluatedunderthiscategory.

“EqualityStartswithTales”projectdesignedbythevolunteersofİzmirRefineryhascometoanend.Oneofthemostimportantfactorsaffectingtheformationofsocialgenderperceptionofpre-schoolandschoolchildren,otherthantheirfamiliesandschools,isthesocialmessagestheyareexposedto.Sincechildrenreceivemostmesaggesthroughwhattheywatchorwhattheylistento,talesforchildrenisthemostimportantsocialenhancer.

Theobjectiveoftheprojectistosupportthedevelopmentofchildrenwithinthetargetedagegroupbyprovidingthem

withinformationregardinginequalityandimbalancebetweenroleswhichhavebeencodedtotheirconsciousnessandatthesametimehelpthembecomeindividualswhoarehighlysensitiveonsocialgenderequalitymattersthroughinformativeandbehaviororientedapplications.Withinthescopeoftheproject,taleswhichdonotincludeanystressingareasongenderinequalitywerepartiallywrittenbyateamofvolunteersandtheywerecompletedbythechildren.22studentswhowere8-9yearsoldataselectedpilotschoolhavebeentrainedonsocialgendermattersbyTAPVtrainersandtheywereaskedtocompletethetaleswiththeperceptionthatcolors,strength,occupationorgamesdonotconstitutesharplinesthatseparateboysandgirls.


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CORPORATE GOVERNANCE

Corporate Governance Principles Compliance Report

Risk Management and the Activities of the Risk Management Committee

About Early Detection of Risk 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

CV’s of Candidates for 2018 Board of Directors

Affiliated Companies Report


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Corporate Governance Principles Compliance Report

Türkiye Petrol Rafinerileri A.Ş. Corporate Management CommitteeMeeting Date:05.02.2018Subject:CorporateGovernancePrinciplesComplianceReport

SECTION I: DECLARATION OF CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

Tüpraş(“Company”)paysutmostattentiontocomplywiththecorporategovernanceprinciplesissuedbytheCapitalMarketsBoardinfourmaintopics.Beingawareoftheimportanceofconfidenceandconsistencydemonstrartedtoitsshareholdersandinvestorsinparticular,TüpraşisoneofthefirstcompaniesincludedintheBISTCorporateIndexasofOctober8,2007.Accordingly,Tüpraşhasadoptedtheconceptsofequality,transparency,accountabilityandresponsibilitythatarestipulatedintheCorporateGovernancePrinciplesissuedbytheCapitalMarketsBoard.

AsaresultoftheevaluationdonebytheinternationalratingcompanySAHAKurumsalYönetimveDerecelendirmeHizmetleriA.Ş.(SAHACorporateGovernanceandRatingServicesInc.),whichhaslicensetomakeratinginTurkeyinaccordancewiththeCapitalMarketsBoard’sCorporateGovernancePrinciples,Tüpraş’sratingisrevisedfrom94,15inOctober2016to94.67inOctober2017.Thedetailsofthecorporategovernanceratingareasfollows:

Main Topics Weight October 2017 RatingShareholders 0.25 95.51PublicDisclosureandTransparency 0.25 94.00Stakeholders 0.15 98.59BoardofDirectors 0.35 92.86Total 1.00 94.67

CorporateGovernanceRatingReportisavailableontheCompanywebsitewww.tupras.com.tr.

AllactivitiesofourCompanyarecarriedoutincompliancewiththelegalregulationsandthe“CorporateGovernancePrinciples”issuedbytheCapitalMarketsBoard.

Activities Carried Out within the Period for Complying with the Principles In2017,fullcompliancewasachievedwithgreatmajorityofthecompulsoryprinciplesstipulatedwithinthescopeoftheCorporateGovernanceCommuniqué(no.II-17.1)inforcewhilecompliancewasalsoachievedwithmostofthenon-compulsoryprinciples.Althoughtheaimistofullycomplywiththenon-compulsoryCorporateGovernancePrinciplesaswell,fullcompliancehasnotyetbeenachievedduetovariousreasonssuchas;difficultiesinpracticingsomeoftheprinciples,ongoingdiscussionsoncomplyingwithsomeoftheprinciplesbothinourcountryandoninternationalplatforms,andincompatibilityofsomeoftheprincipleswiththecurrentstructureofthemarketandtheCompany.Actionistakenregardingtheprinciplesthatarenotyetputintopracticewhiletheplanistoputtheseprinciplesintopracticeaftercompletingtheadministrative,legalandtechnicalinfrastructureproceduresinamannerthatwillcontributetoeffectivemanagementofourCompany.

In2017;compliancewiththeCapitalMarketsBoard’sCorporateGovernancePrinciplesandtheCapitalMarketsLawandcommuniquésissuedbasedonthisLawwasatthetopofthelistofactivitiescarriedoutinthefieldofcorporategovernance.AttheOrdinaryGeneralAssemblyheldin2017,theprocessofdeterminingandpubliclydisclosingtheIndependentMembercandidateswasfinalizedwhiletheelectionwascompletedinaccordancewiththeregulations.OurBoardofDirectorsandtheCommitteesofourBoardofDirectorswereestablishedinaccordancewithCorporateGovernanceCommuniquéregulations.TheCommitteesestablishedundertheBoardofDirectorscontinuetheiractivitieseffectively.WiththeinformationdocumentissuedfortheGeneralAssembly,theissuesthatmustbepubliclydisclosedaspertheCorporateGovernancePrinciplessuchas;privilegedshares,votingrights,résumésofthecandidatemembersoftheBoardofDirectors’,RemunerationPolicyfortheBoardofDirectorsandExecutives,necessaryreportsthatmustbeissuedregardingtherelatedpartytransactions,andotherinformationthatmustbedisclosed,werepresentedtothe


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CorporateGovernancePrinciplesComplianceReport

informationoftheinvestors3weeksbeforetheGeneralAssembly.Furthermore,thecorporatewebsitewasrenewed,andtheAnnualReportformatwasreviewed.Asaconsequence,necessaryrevisionsweremadeintermsoffullycomplyingwiththeprinciples.

FiveindependentmembersservingontheBoardofDirectorssatisfytheindependencecriteriastipulatedbytheCorporateGovernanceCommuniqué(no.II-17.1).

Reasons for Not Practicing Corporate Governance PrinciplesWithintheactivityperiodbetween1January2017and31December2017,ourCompanyhascompliedwiththe“CorporateGovernancePrinciples”,byfullycomplyingthecompulsoryprinciplesandhighlycomplyingthenon-compulsoryones,exceptforasetofprinciplesspecifiedbelow.Therearenoconflictsofinterestarisingfrombelowlistedissuesthatcannotbepracticed.TheCorporateGovernanceCommitteeoftheCompanycontinuesitsactivitiesofdevelopingcorporategovernancepractices.

• Regardingthevotingrightprivilegestipulatedinprinciplen.1.4.2;theregulationsspecifiedintheArticlesofAssociationaregiveninsectionn.2.4.below.

• Regardingtheprinciplen.1.5.2,minorityrightsarenotgiventopersonswhohavelessthanonetwentiethofthecapitalaspertheArticlesofAssociationwhilerightsaregiventosuchpersonswithintheframeworkofthegeneralregulationsinthelegislation.

• Regardingtheprinciplen.4.3.9;ourCompanyhasnotyetdeterminedatargetratioandtimeframeforfemalemembersintheBoardofDirectors.Assessmentsonthisissuecontinue.Detailedinformationonthisissueisavailableinsectionn.5.1.below.

• Regardingtheprinciplen.4.4.7;membersoftheBoardofDirectorsarenotrestrictedtoassumeothertasks/rolesoutsidetheCompanyasexplainedinsectionn.5.1.below.

• Regardingtheprinciplen.4.5.5;membersareappointedtothecommitteeswithintheframeworkoftherelevantregulationsconsideringtheknowhowandexperienceofthemembersofourBoardofDirectorswhilstsomemembersofourBoardofDirectorsareappointedtomorethanonecommittee.Memberswhoareappointedtomorethanonecommittee,enablecommunicationbetweenthecommitteesworkinginrelatedissuesandincreasethepossibilitiesofcooperation.

• Regardingtheprinciplen.4.6.5;paymentsmadetothemembersoftheBoardofDirectorsandexecutivesarepubliclydisclosedontotalbasisinparalleltothegeneralpractices.Company’sRemunerationPolicywasprintedonpaper,andpresentedtotheshareholders’informationasaseparateagendaitemattheGeneralAssemblymeetingwhileshareholders’opinionswerereceivedonthisissue.AsspecifiedintheRemunerationPolicy;PaymentplansbasedontheperformanceoftheCompanyisnotbeingusedinremunerationoftheIndependentMembersoftheBoardofDirectors.

OurCorporateGovernancePrinciplesComplianceReportcovering2017activityperiod,underfourmaintopics;“Shareholders”,“PublicDisclosureandTransparency”,“Stakeholders”and“TheBoardofDirectors”,isavailablebelowforyourinformation,includingthepracticableandimpracticableaspectsofthementionedprinciples.

Kutsan Çelebican Yağız Eyüboğlu Doğan Korkmaz Chairman Member Member


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SECTION II: SHAREHOLDERS

2.1. Investor Relations DepartmentInvestorRelationsDepartmentwasestablishedin2000inordertooverseetheprocessofpublicofferingoftheCompanysharesandprivatizationofgovernment’sshares.InvestorRelationsDepartmentcarriesoutactivitiesinordertoprovidecurrentandpotentialinvestorswithcorrect,prompt,andconsistentinformationabouttheCompany,toincreasetheCompany’sbrand-awarenessandcredibility,tomakesurethatCorporateGovernancePrinciplesarepracticedandtoprovidebilateralcommunicationbetweentheBoardofDirectorsandCapitalMarketParticipants.

Withinthisframework,InvestorRelationsDepartmentpresentsareporttotheCorporateGovernanceCommitteeatleastonceayear-tobesubmittedtotheBoardofDirectors-abouttheactivitiesitcarriesout.Thereportregarding2016activitieswassubmittedbytheCorporateGovernanceCommitteetotheBoardofDirectorsonthe1stofMarch2017,andwasassessedbytheBoardofDirectorsonthe7thofMarch2017.

In2017,morethan400meetingswereheldwithnationalandinternational,corporateandindividualinvestors,shareholdersandanalystsabouttheCompany’sactivityresults,performanceandotherdevelopmentswithintheperiod.Furthermore,representativesofourCompanyattended14conferenceswithinthescopeofconferencesandothermeetingsheldinandoutsidethecountrytoprovideinformationtoshareholdersandinvestors.

Teleconferencewasorganizedonthedateofannouncingtheresultsregardingthequarterlyfinancialreports,andmoreover,financialreportingandpublicdisclosuresrequiredbythelegislationregardingtheCompanywereissuedinDisclosureofMaterialMattersformat,andannouncedviaPublicDisclosurePlatform(www.kap.com.tr).GeneralAssemblymeetingswereheldinconformitywiththelegislation,theArticlesofAssociationandotherinternaldirectivesoftheCompanywhiledocumentswereissuedforshareholderstomakeuseofattheGeneralAssemblymeetings.Furthermore,thesedocumentsweremadeavailableontheCompanywebsiteforinvestors’informationthreeweekspriortotheGeneralAssembly.

ViaTüpraşwebsite,whereutmostattentionispaidtocoverallup-to-dateinformationabouttheCompany,essentialinformationhasbeenprovidedtothepublicandtheshareholdersastherelationswiththeratingcompanieswerecoordinated.Moreover,atthemeetingsmadethroughouttheyear,theBoardofDirectorswasinformedabouttherelativestockperformance,benchmarkingdata,ratioanalysesandanalystcomments.

Employeeswhoareresponsibleforstakeholderrelationsarelistedbelow:

Name/Surname Title E-mail Address PhoneDoğanKorkmaz CFO [email protected] (90262)3163109AslıGülçur Director [email protected] (90262)3163087MerveSavaşlıoğluKan Coordinator [email protected] (90262)3163270ÇetinKaraca Chief [email protected] (90262)3163274

InvestorRelationsDepartmentreportstoourCFODoğanKorkmaz,whohasCapitalMarketActivitiesAdvancedLevelLicenseandCorporateGovernanceRatingSpecialistsLicense.

2.2. Shareholders’ Right to InformationNodistinctionismadebetweenshareholders,potentialinvestorsandanalystsregardingtotheirrighttoaccess,andinspecttheinformationabouttheCompanyandallnecessaryinformationissharedwiththerelatedpartiesexceptthoseinvolvingcommercialsecrets.InaccordancewiththecommuniquéoftheCapitalMarketsBoard,theDisclosuresofMaterialEvents(DME)madetoPublicDisclosurePlatform,financialstatementsandotherinformationabouttheCompanyisconveyedinelectronicmedium,withelectronicsignatures.

AllquestionsaddressedtotheInvestorRelationsDepartmenthavebeenanswered(exceptconfidentialinformationandtradesecrets)eitherverballyorinwritingafterdiscussingtheissueaddressedinthequestionwiththerelatedexecutiveperson.

AppointingaprivateauditorisanindividualrightspecifiedintheTüpraşArticlesofAssociation.However,asperthe438thArticleoftheTurkishCodeofCommerce,everyshareholdermayrequesttheGeneralAssemblytoclarifycertaincasesthroughprivateauditincasethisisnecessaryforusingshareholders’rights,eveniftherighttoinformationorreviewisusedbefore,andevenifitisnotontheagenda.ShareholdershavenotcommunicatedsuchrequeststotheCompanysofar.InadditiontotheinternalauditsmadeattheCompany,2017activitiesareauditedbyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikAnonimŞirketi,theIndependentExternalAuditCompanythatisapprovedbytheGeneralAssembly.


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2.3. General MeetingsGeneralMeetingsareorganizedtoprovidesufficientinformationtoshareholdersandensuretheirattendance,asperTurkishCommercialCode,CapitalMarketsLaw,GeneralAssemblyInternalDirectiveandCorporateGovernancePrinciples.

TheOrdinaryGeneralMeetingsareheldattheendofeveryfiscalperiod,assoonaspossible,withinamaximumperiodofthreemonths.TheCompanyheldits57thOrdinaryGeneralMeetingon29March2017fortheyear2016.Shareholdersrepresenting81.71%ofallsharesattendedthemeeting.DuringtheGeneralMeeting,theshareholdersusedtheirrighttoposequestionsandapartfromtheitemsontheagenda,nootheradditionalproposalsweremade.

SupervisedbyaGovernmentInspectorauthorizedbytheMinistryofCustomsandTrade,GeneralMeetingsessionsareopentopublic.PursuanttotheprovisioncontainedinourArticlesofAssociation,meetingscanbeobservedonlinebystakeholders,membersofthemediaandelectronicparticipants.

InvitationstotheGeneralMeetingareissuedbytheBoardofDirectors,accordingtotheTurkishCommercialCode,CapitalMarketsLawandArticlesofAssociation.Meetingdate,placeandtheagendaitemsinlinewiththedecisiontakenbytheBoardofDirectorstoorganizeaGeneralAssemblyareannouncedtotheshareholdersviaDisclosureofMaterialMattersmade,inconformitywiththeprocedureswithintheframeworkofthegeneralprovisions,onthePublicDisclosurePlatform,andviaElectronicGeneralAssemblySystem(EGKS).

GeneralMeetingannouncementsaremadeatleast21daysinadvanceviathewebsiteatwww.tupras.com.trsoastoreachthemaximumnumberofshareholderspossible,aswellasbyfollowingtheproceduresstipulatedbylegislation;inaddition,announcementsarealsopublishedintheTurkishTradeRegistryGazetteandinthenationaleditionofadailynewspaperwithahighcirculation.

BeforetheGeneralMeeting,aninformationsheetispreparedlistingalltheitemsontheagenda;itisissuedtothepubliccomplyingwithlegalprocessesandlegislation.InlinewithagendaitemsfortheGeneralMeeting,financialstatementsandreportsincludingtheannualreportwiththeauditedfigures,corporategovernancecompliancereport,profitdistributionproposal,independentexternalauditingreportsandlegalauditor’sreport,informationsheetfortheGeneralMeetingagendaitemsandotherdocumentsprovidingthebasisfortheagenda,thefinalversionofArticlesofAssociationandanyamendmentstotheArticlesofAssociation,InformationPolicy,RemunerationPolicy,ProfitDistributionPolicy,alltheCVsoftheBoardofDirectorsincludingindependentmembers,andotherdocumentsprovidingthebasisfortheagendaaremadeavailabletoshareholdersattheHeadOfficeandbranchesandviathecorporatewebsite,afterthepublicationofthenoticefortheGeneralMeeting,beforethreeweekstotheGeneralMeeting.WhiledeterminingtheagendaoftheOrdinaryGeneralAssemblymeeting,shareholdershavenotcommunicatedanyissuestotheCompany’sInvestorRelationsDepartmentinwriting,andhavenotrequestedanyissuestobeincludedontheagenda.

Inordertofacilitatetheattendancetothemeetings,ourGeneralAssemblymeetingsareheldattheCompanyHeadquartersandintheElectronicGeneralAssemblySystem.ThelocationoftheGeneralMeetingischosensoastoenabletheparticipationofallshareholders.TheagendaitemsoftheGeneralMeetingarewritteninaclearandunequivocalwayandallowsforthediscussionofeachproposalunderaseparatesection.AtthelatestGeneralMeeting,shareholdersmadenodemandsconcerningtheagenda.DuringtheGeneralMeeting,theagendaitemsareconveyedtoshareholdersinanimpartial,detailed,clearandcomprehensiblefashion,shareholdersaregiventhechancetoexpresstheiropinionsandposequestionsunderequaltermsQuestionsaskedbytheshareholdersandtheaudienceandmembersofthepressattendingtheGeneralAssemblyMeeting,areevaluatedandnecessaryexplanationsaremadebyourMembersoftheBoardofDirectorsandtopexecutiveswithintheframeworkoftheproceduresandprinciplesstipulatedintheTurkishCodeofCommerce.Questionsthatareirrelevanttotheagendaorrequireacomprehensiveresponse,whichcannotbeprovidedimmediately,areansweredinwritingbytheInvestorRelationsDepartmentwithin15daysatthelatest.AllquestionssubmittedduringtheGeneralAssemblymeetingandtheanswerstothesequestionsarepostedonthewebsitewithin30daysafterthedateoftheGeneralAssembly.QuestionsaskedbythosewhoattendedtheGeneralAssemblyRegarding2016,wereansweredwithinthisscope.


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IntheGeneralMeeting,atleastoneBoardmember,oneauditor,oneoftheofficersresponsibleforthepreparationofthefinancialstatements,aswellasoneofficerinformedabouttheagendaitemsandreadytomakeexplanationsispresent.Incaseoftheabsenceofanyoneofthesepeople,theirexcuseforabsenceispresentedtotheGeneralMeeting.

Forthosewhowillberepresentedbyproxy;powerofattorneysamplesarepublishedfortheuseoftheshareholdersvianewspaperadsandonthewebsitebeforetheGeneralAssemblymeeting.Votingmethods/proceduresthatwillbeappliedinthemeetingaresubmittedtotheinformationoftheshareholdersvianewspaperadsandonthewebsite.Duringthevotingoftheagendaitems,openballotvotingisusedin“showofhandsmethod”atourGeneralAssemblymeetings.

AftertheGeneralAssemblymeeting,minutestothemeetingarekeptintheCompany’sminutebookandafterbeingtranslatedtoEnglish,areuploadedontheCompany’swebsitebothinTurkishandEnglish.MinutestothemeetingarepubliclyannouncedviaPublicDisclosurePlatform(KAP)andpublishedintheTradeRegistryGazette.MinutesandthelistofattendantsareavailableonKAP,EGKSandTüpraşwebsite.MinutestotheGeneralAssembly,attendancelist,agendaandadsaresimultaneouslysubmittedtotheevaluationofthedomesticandforeigninvestorswithane-mail.

IntheOrdinaryGeneralAssemblymeetingheldin2017,withaseparateagendaitem,informationaboutthedonationsandcharitymadein2016wasgivenintheGeneralAssemblythetotallimitforthedonationsthatwillbemadein2017inlinewiththedonationpolicywasdeterminedasTL27.5million.In2017,charitabledonationstotaledTL27.4million.

Someoftheshareholderswhocontrolthemanagement,membersoftheBoardofDirectors,executiveswhohaveadministrativeresponsibilitiesandtheirspousesandseconddegreerelativesbybloodorbymarriage,assumerolesasmembersoftheBoardofDirectorsinourCompanyandinsomeoftheotherKoçGroupcompanies.In2017,therewasnotransactionthathadtobedeclaredwithinthescopeofthePrinciplen.1.3.6.oftheCorporateGovernanceCommuniqué.

The58thOrdinaryGeneralMeetingfor2017willbeheldonMarch21,2018,attheCompany’sHeadOffice.

2.4. Voting Rights and Minority RightsThevotingprocedureisannouncedtotheshareholdersatthebeginningoftheGeneralMeeting.TheCompanyavoidspracticesthatwouldmakeitdifficulttoexercisevotingrights.

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

ShareholderspresentinOrdinaryandExtraordinaryGeneralAssemblyMeetingsexercisetheirrightstovoteinproportiontothenominalvalueoftheirtotalshares.VotesarecastopenlyintheGeneralAssemblyMeetings.However,secretvotingshallbeexercisedupontherequestoftheshareholderswhohaveminimumonetwentiethofthesharesrepresentedinthemeeting.

AsstipulatedintheArticlesofAssociation,materialdecisionsconcerningspin-offsorsales,acquisitionsorleaseofassetswithsignificantvaluecanonlybetakenwiththepositivevoteofGroupC(preferential)shares,representedbythePrivatizationAdministration.Inthiscontext,attheGeneralMeetingfordecidingonissuesthatmightrestrictorhinderthesupplyofpetroleumtotheTurkishArmedForces,suchasclosureorsaleofoneoftherefineries,limitationofactivitiesthroughestablishmentofrestraintoranyreductioncorrespondingtomorethan10%ofthecapacity,orspin-offormergerand/orliquidationoftheCompanyapositivevotersneeded.Inmattersotherthanthosementionedabove,decisionsaremadebybringingissuesdebatedbytheBoardofDirectorstotheGeneralMeetingfordiscussionandresolution.

ClassCsharesdonotholdanyotherprivilegesconcerningvotingrights,apartfromthoseindicatedabove.

AspertheTurkishCommercialCodeandCMBregulations,theCompanyshowsmaximumcaretoensuretheexerciseofminorityrights.ShareholdersrepresentingminorityrightsconstitutetheManagementwiththemajorityshareholders,throughtheirattendanceattheGeneralMeeting.NocriticismorcomplaintaboutthisissuewasreceivedbyourCompanyin2017.

Allshareholdersincludingminorityorforeignshareholdersaretreatedequally.BoardMembers,managers,ultimatecontrollingshareholdersandindividualswithaccesstoinsiderinformationdisclosetothepublic,ontheirownbehalf,theworktheycarryoutwithinthescopeofthefieldofactivityoftheCompany.


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2.5. Dividend RightsTheprofitdistributionpolicyofourCompanywassetwithintheframeworkoftheCapitalMarketsRegulationsandtheprovisionsofourArticlesofAssociationattheGeneralAssemblyheldonthe31stofMarch2014.ThereisnoprivilegeindividenddistributionforGroupAandGroupCshareholdersrepresentingthecapital.

ProfitdistributionpolicyandtheannualprofitdistributionproposalareincludedtotheAnnualReportandsubmittedtotheapprovaloftheshareholdersattheGeneralAssembly.

Profit Distribution PolicyOurCompanydistributesdividendsincompliancewiththeProvisionsofTurkishCommercialCode,theCapitalMarketsRegulations,theTaxRegulationsandotherrelatedregulationsandtherelatedprovisionsofourCompany’sArticlesofAssociationregardingdividenddistribution.Inthedividenddistribution,incompliancewiththeCorporateGovernancePrinciples,abalancedandconsistentpolicyispursuedbetweentheshareholdersandtheCompanybenefits.

Inprinciple;asfarastherelatedregulations,investmentneedsandfinancialsituationallow,theentireamountofthe“netdistributableprofitfortheperiod”,calculatedwithintheframeoftheCapitalMarketsRegulations,isdistributedincash-takingintoconsiderationthemarketexpectations,longtermcompanystrategies,investmentandfinancingpolicies,profitabilityandcashposition-aslongasitiscoveredfromtheexistingresourcesinourlegalrecords.TheGeneralAssemblyortheBoardofDirectors,ifauthorized,maydecidetodistributedividendswithinstallmentsincompliancewiththeregulationsoftheCapitalMarkets.

ThereisnoprivilegeintheArticlesofAssociationregardingtheparticipationtodividenddistribution.

TheaimistomakethedividenddistributionwithinonemonthatthelatestaftertheGeneralAssemblymeeting.DividenddistributiondateisdecidedbytheGeneralAssembly.

AspertheCompanyArticlesofAssociation;incompliancewiththeRegulationsoftheCapitalMarkets,theBoardofDirectorsmaydistributeadvancedividendprovidedthattheauthorizationisgrantedbytheGeneralAssembly.

2.6. Transfer of SharesTheprinciplesregardingtheTransferofSharesarespecifiedinthe7thArticleofourArticlesofAssociation.TheArticlesofAssociationdoesnotincludeanypracticesorprovisionthatwouldimpedeorrestrictshareholderswhoholdpubliclytradedGroupAsharesintransferringtheirshares.

RegisteredGroupCsharescanbetransferredwiththepowersvestedbyLawn.4046totheTurkishPrimeMinistryPrivatizationAuthority,toanothergovernment-ownedcorporationinTurkeyvestedwiththesamepowersinprinciple.ThistransferwillnotbesubjecttotheapprovaloftheBoardofDirectors.

SECTION III: PUBLIC DISCLOSURE AND TRANSPARENCY

3.1. Corporate Website and Its Content TheaddressoftheCompany’scorporatewebsiteiswww.tupras.com.tr.Company’scorporatewebsiteiscreatedbothinTurkishandinEnglishinordertoprovideinformationtointernationalinvestors.Company’swebsiteisactivelyusedinpublicdisclosure.Furthermore,theinformationgivenonthewebsiteisconstantlyupdated.Thereisaseparateinvestorrelationssectiononthewebsiteinordertoprovidemoreinclusivedataflowtoinvestorsandintermediaries.Thus,allinformationspecifiedinArticle2.1.ofSectionIIoftheCorporateGovernancePrinciplesoftheCapitalMarketsBoardareavailableonthewebsite.PrinciplesregardingwebsitemanagementareincludedinourInformationPolicy.Furthermore,thewebsiteaddressisalsoavailableontheheadedpapersoftheCompany.


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3.2. Annual Report TüpraşannualreportispreparedandissuedinsuchdetailthatwillprovidefullandaccurateinformationtopublicabouttheactivitiesoftheCompany.InadditiontotheissuesstipulatedintheCapitalMarketsBoardlegislationandothersectionsoftheCapitalMarketsBoard’sCorporateGovernancePrinciples,theannualreportisissuedincludingtheinformationspecifiedinArticle2.2.2ofSectionIIoftheCorporateGovernancePrinciples.

Aftertheannualreportisprepared,itispresentedtotheapprovaloftheBoardofDirectors,andpubliclyannouncedonthewebsitebothinTurkishandinEnglish,aswellasthee-managepageoftheCentralRegistryAgency.Furthermore,printedcopiesareavailableatTüpraşFinancialPlanningandReportingDirectorate.

SECTION IV: STAKEHOLDERS

4.1. Informing StakeholdersCompany’scorporategovernanceapplicationsandcodesofconductguaranteethestakeholders’rightsthatareregulatedbylegislationsandmutuallysignedcontracts.StakeholdersarecontinuouslyinformedwithintheframeworkoftheinformationpolicycreatedbytheCompanyinaccordancewiththeexistinglegislationsandcodesofconduct.

WiththeGeneralAssemblyMeetingsopenforallstakeholders,andthedetailedinformationmadeavailableonourwebsite,aswellastheinclusiveAnnualReports,pressannouncements,andourpracticeswithinthescopeofourInformationPolicybasedontransparency;theaimistoprovideinformationnotjustforourshareholdersbutforallstakeholders.Arrangingmeetingsatthehighestpossiblelevels,theCompanyendeavorstorespondtotherequestsformeetingsbytheshareholders.

Companypersonnelaregivenaccesstocircularsandannouncementsviatheintranetportalandimportantannouncementsarecommunicatedtoallemployeesviaelectronicmail.TheCompanyjournal,Rafine,isissuedwiththeaimofreinforcingcorporatecommunicationbetweenemployeesatdifferentgeographicallocations.EmployeesandseniormanagementexecutivesatTüpraşcometogetheronceayeartoevaluatethegoalsandprogressachievedinthecourseoftheyearandtoexchangeideas.

AnystakeholderactionsthatgoagainstthelegislationarepresentedtotheAuditGroupforsubmissiontotheAuditCommitteeandtheEthicsCommitteeisnotifiedofanyunethicaltransactions.Viathecorporatewebsite,stakeholderscanaccesstherecentlyestablishedStakeholderManagementSystemandsubmittheirqueries,propositionsandcomplaintsthroughthismedium.Ajointworkinggrouphasbeencreatedamongvariousofficerstorespondtoqueriesmadethroughthissystem.

Anefficientandcontinuesindemnificationisprovidedincaseofbreachofstakeholders’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.MainactivitiesofCustomerRelationsManagementarecarriedoutunderthe“TüpraşCustomerRelationsPolicy”.Keygoalsofthisunitincludeenhancingcustomersatisfactionandmeetingcustomerexpectationsatthemaximumlevel.

AsperİSO10002CustomerSatisfactionandComplaintManagementcertificate,whichwasincludedintheTüpraşQualityManagementprocessin2016inadditiontotheTüpraşCustomerRelationsPolicy,allcustomertouchpointprocessesundergoconstantimprovementandallcustomernotificationsarerecorded.CertificationrenewalaudithasbeensuccessfullypassedinDecember2017.

Ontheotherhand,CustomerSatisfactionQuestionnaireshavebeenalsoconductedin2017forallproductsandallcustomergroups,and2018CustomerRelationsManagementstrategieshavebeendefinedbasedontheimprovementareasidentifiedthereby.

Furthermore,communicationmeetingswereorganizedtoenablethesustainabilityofthelonglastingcommercialrelations,tocreateanopportunityofface-to-faceconversationwithpersonswhoareusuallycontactedonthephone,andtodevelopsolutionsbylisteningtoindividualrequests.Withinthisscope14thFuelDistributionCorporationsCommunicationMeetingand1stLPGDistributionCorporationsCommunicationMeetingwereheldon24thOctober2017and2ndNovember2017,respectively.


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Inadditiontotheabove,TüpraşCustomerCareLine(4441230)andcustomercorporatewebsiteprojectsarecontinuedduring2017f(musteri.tupras.com.tr)aimingtoprovideeasyaccessforallexistingandpotentialcustomersthroughallavailablecommunicationchannelsandtoestablishcommunicationatenhancedservicequality.Thementionedcommunicationchannelsareslatedforintroductionin2018.

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 PolicySameastheotherCompanieswithintheKoçGroup,theessenceofthehumanresourcespolicyatTürkiyePetrolRafinerileriA.Ş.isembodiedinthemaxim“themostvaluableassetareourhumanresources”.CriteriarelatedtohumanresourcesarestipulatedinwritingandareincompliancewiththecriterialistedinthesubparagraphsofArticle3.3oftheCommuniquéonCorporateGovernancePrinciples.

Theprinciplesofthehumanresourcespolicyare:• Jobdescriptions,theirdelegationandappliedperformancecriteriaaredefinedandcommunicatedtotheemployeesbytheCompany.

• Recruitmentcriteriaarelaidoutandcommunicatedinwriting;thesecriteriaareutilizedatrecruitment.• Decisionsfortraining,appointmentsandpromotionsaretakendiligentlybyconsultingobjectivedataandconsideringcorporateinterests.

• Thereisgreatemphasisonprovidingtrainingtodevelopprofessionalknowledge,capabilitiesandpersonaltalentsofourstaff.• Asafeworkingenvironmentalongwithcorrectworkingconditionsareprovidedforourstaffandconstanteffortsaremadetoimprovethem.

• Eventsrelatedtoordecisionsconcerningouremployeesarecommunicatedtoouremployees.• Rewardsarepresentedtoemployeesuponcompletionoffiveyearsofservicethusencouragingqualified,trainedandexperiencedstaffforcontinuedservice.

• ThereisnodiscriminationbetweentheemployeesofourCompanyinanymanner.TherehavebeennocomplaintsbroughtbyTüpraşemployeestoseniormanagementconcerningdiscrimination.

• Thereisnopracticeofassigningrepresentativesforliaisingwithouremployees.

4.4. Code of Ethics and Social ResponsibilityTheCodeofEthicalBusinessinvolvesthefundamentalprinciplesofconduct.

EmployeesoftheCompanyareexpectedtocomplywiththeBusinessEthicsPrinciplesandCommonValuesoftheKoçGroupwhenperformingtheirjobs.Inrecognitionthatbusinessprocedures,standards,lawsandregulationscannotprovideguidanceforallconductandactions,weutilizetheCodeofEthicsbuiltoncorporatevaluesandtheEthicsCommittee.


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TheCodeofEthicsadoptedbytheBoardofDirectorshasbeenapprovedduringtheGeneralMeetingonApril2011andsignedstatementsofcompliancefromallemployeeshavebeenobtained.

Withitsaccumulatedknowledgeintherefiningsector,Tüpraşisorientedtowardsocialratherthanindividualinterests.Thankstoitsinstitutionalizedstructureandsociallyresponsibleemployees,Tüpraşinitiatesandsupportsvariousprojectsincitieswhereitsrefineriesarelocatedsoastocontributetotheculturalandsocialdevelopmentofournation.

TüpraşhasfurtherdevelopeditscorporateandethicalmanagementphilosophyandstandardsbyissuingitsfirstCorporateSocialResponsibilityReportin2008andtheseventhreportwascompletedin2016.InitsCorporateSocialResponsibilityReport,TüpraşadoptedtheGlobalReportingInitiative’s(GRI)G3ReportingPrinciples.

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

In2017,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.

FourindependentmembernomineesweresubmittedtotheCorporateGovernanceCommitteein2017.ThenominationdeclarationsandrésumésofthesepersonswereevaluatedinthemeetingoftheCorporateGovernanceCommitteedated25January2017andinthemeetingoftheBoardofDirectorsdated26January2017.

PursuanttolegalobligationsandArticle10ofourArticlesofAssociation,onememberofourBoardofDirectorsiselectedfromamongindividualsnominatedbythePrivatizationAdministration,ourGroupCShareholder.OurCompanyhasbeeninformedthatnominationofMr.SüleymanKaramanhasbeendeemedappropriateforthementionedBoardofDirectorsmembershipseattorepresentGroupCshareheldbythePrivatizationAdministration.BoardmembershipofMr.SüleymanKaramanhasbeenapprovedbyshareholdersattheOrdinaryGeneralMeetingconvenedon29March2017.

Currently,fiveindependentmembersservingontheBoardofDirectorssatisfytheindependencecriteriastipulatedbytheCorporateGovernanceCommuniqué(no.II-17.1).During2017operatingperiod,noeventstookplacethatwouldprejudicetheindependenceofindependentBoardmembers.

OurCompanybelievesthatensuringdiversityintermsofknowhow,experience,andpointofviewintheBoardofDirectorswillpositivelycontributetotheactivitiesoftheCompanyandtotheefficientperformanceoftheBoardofDirectors.WecontinueourevaluationstodetermineatargetratioforfemalemembersoftheBoardofDirectorswhohavearoleinensuringtherepresentationofdifferentopinionsintheBoardofDirectors.Currently,thereisonefemalememberinourBoardofDirectors.

TheMembersoftheBoardofDirectors;i)whoareallnon-executiveinaccordancewiththedefinitionstipulatedinCapitalMarketsBoard’sCorporateGovernancePrinciplesii)whowereelectedattheCompanyGeneralAssemblyheldon29March2017,toserveuntiltheGeneralAssemblymeetingwheretheactivitiesof2017willbediscussed,andtheirqualificationsaregiveninthetablebelowwhilsttheirrésumésareavailableonthewebsiteandintheAnnualReport.


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TheBoardofDirectorsconsistsofatleastfivemembers,electedintheGeneralMeeting.IntheselectionoftheBoardofDirectors,onememberhastobeappointedbytheClassCshareholders.TheClassAshareholders,inordertodeterminetheirrepresentatives,votesamongthemselvesintheGeneralMeeting.ThosereceivingthehighestnumberofvotesbecomemembersoftheBoard.ThenumberandqualificationsoftheindependentmemberswhowilljointheBoardofDirectorsaredeterminedaspertheCMB’sregulationsoncorporategovernance.

TheBoardofDirectorsisauthorizedindeterminingthenumberofitsmembersandelectionofthemembers.WithoutprejudicetothestipulationsprovidedundertheregulationsoftheCapitalMarketBoardconcerningtheCorporateGovernancePrinciples,themembersoftheBoardofDirectorsmayalwaysbereplacedbytheGeneralAssemblyifdeemednecessaryunderthearticle364oftheTurkishCommercialCodetakingtheprovisionsofthisArticlesofAssociationintoaccount.

IncaseofanyvacancyintheBoardofDirectorsforanyreasonoriftheIndependentBoardMemberlosesitsindependency,orresignsorbecomesincapableofexecutingitsduties,theBoardofDirectorselectsthenomineenominatedbythegroupofshareholders,whichhadnominatedthepreviousmemberoftheBoardtemporarilyinconformitywiththeproceduressetoutintheprovisionsoftheTurkishCommercialCodeandCapitalMarketBoardregulationsandsubmitstotheapprovaloftheGeneralAssemblyinthenextmeeting.

Board Members

Name/SurnameIndependent/ Dependent

Date of Appointment

Duties on the Board and in Other Committees

Duties Outside the Company

ÖmerM.Koç Dependent 29.03.2017ChairmanoftheBoardofDirectors;

ExecutiveCommitteeMemberoftheBoardofDirectorsofKoç

HoldingCompanies

AliY.Koç Dependent 29.03.2017ViceChairmanoftheBoardofDirectors;


HoldingCompanies

RahmiM.Koç Dependent 29.03.2017MemberoftheBoardofDirectors;


HoldingCompanies

SemahatS.Arsel Dependent 29.03.2017MemberoftheBoardofDirectors;


HoldingCompanies

TemelKamilAtay Dependent 29.03.2017MemberoftheBoardofDirectors;RiskManagementCommittee

ExecutiveCommittee

MemberoftheBoardofDirectorsofKoçHoldingCompanies

Dr.BülentBulgurlu Dependent 29.03.2017MemberoftheBoardofDirectors


HoldingCompanies

O.TurgayDurak Dependent 29.03.2017 MemberoftheBoardofDirectorsMemberoftheBoardofDirectorsofKoç

HoldingCompanies

LeventÇakıroğlu Dependent 29.03.2017MemberoftheBoardofDirectors MemberoftheBoardofDirectorsofKoç

HoldingCompanies;KoçHoldingCEO

ErolMemioğlu Dependent 29.03.2017MemberoftheBoardofDirectors MemberoftheBoardofDirectorsofKoç

HoldingCompanies

YağızEyüboğlu Dependent 29.03.2017MemberoftheBoardofDirectors;CorporateGovernanceCommittee

MemberoftheBoardofDirectorsofKoçHoldingCompanies;

EnergyGroupPresident

SüleymanKaraman Independent 29.03.2017IndependentMember;(PARepresentative)

TÜRKSATViceChairmanoftheBoardofDirectors;

AhmetTurul Independent 29.03.2017 IndependentMemberMemberoftheBoardofDirectorsofAllianz

Companies;

GökçeBayındır Independent 29.03.2017IndependentMember;

RiskManagementCommitteeIndependentMemberoftheBoardofDirectorsofKoçHoldingCompanies

KutsanÇelebican Independent 29.03.2017IndependentMember;

CorporateGovernanceCommitteeAuditCommittee

IndependentMemberoftheBoardofDirectorsofKoçHoldingCompanies

OsmanMeteAltan Independent 29.03.2017IndependentMember;AuditCommittee

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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,dutiesandauthoritiesaredeterminedinlinewiththeTurkishCommercialCodeandCapitalMarketsBoardregulations.

AtBoardofDirectorsmeetings,allaffirmative/negativevotesontheissuesathand,votesandmeetingminutesarekeptintheofficialrecords.TheagendaoftheregularmeetingsispreparedbythesecretariatoftheBoardofDirectorsinconsultationwiththemembers,bytakingintoconsiderationdecisionspreviouslytakenortheissuesthatneedtobesettled.Theagendaofothermeetingsconsistofissuesthatneedtobesettledaccordingtolegalobligations.TheCFOisinchargeofthesecretariatoftheBoardofDirectors.

In2017,BoardofDirectorsconvenedthreetimeswithfullattendanceonApril12th,June25thandDecember20th.NoneoftherelatedpartytransactionsorsignificanttransactionsbroughttotheattentionoftheindependentBoardmembersweredisapprovedorsubmittedforapprovaltotheGeneralMeeting.

TheArticlesofAssociationdoesnotprovideaprivilegedvoteorvetorighttoBoardmembers.IntheArticlesofAssociation,themembersoftheBoardofDirectorsarenotgivenweightedvotingrightorvetopower(excepttheaffirmativevotesoftheGroupCprivilegedsharesinordertotakeadecisionintheBoardofDirectorsontheissuesspecifiedinthevotingright).

TheGeneralMeetingmaygrantBoardmembersbusinessleaveforthecasesoutlinedintheArticles395and396oftheTurkishCommercialCode.

ThelocationformeetingsistheCompanyheadquarters.MeetingsmaybeheldatanothervenuewiththedecisionoftheBoardofDirectors.MatterstobediscussedatBoardMeetingsmustbepre-determinedonanagendathatiscommunicatedtotheBoardbeforethedateofthemeeting.Invitationstothesemeetingsmustbemadeatleastthreedaysbeforetheactualdateofmeeting.

TheCompanyhasaninsurancecoverageuptoEUR50millionregardingthecompensationforthedamagesinparallelwiththeliabilitiesforwhichthedirectorsandthemembersoftheBoardofDirectorscanindividuallybeheldresponsiblewithinthescopeoftheirduties.

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

5.3. Number, Organization and Independence of Board CommitteesTheCompanyhasestablishedanumberofcommitteestoensurethattheBoardperformsitsdutiesandresponsibilitiescorrectly;thesecommitteesperformtheiractivitiesinaccordancewithcertainprocedures.Thecommittees’operatingprocedures,meetingfrequencyandreportsontheircurrentactivitiesareavailableattheCompany’swebsite.TheCorporateGovernanceCommittee,RiskManagement,Audit,ExecutiveandEthicsCommitteesoperateinaccordancewiththefollowingprinciples:


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BoardofDirectorsmonitorsfinancialcontrolandauditactivitiesviatheAuditCommittee.Whilefulfillingthisfunction,theAuditCommitteeanalyzesandassessesthereportsfromtheFinancialAuditDepartmentestablishedtoevaluate,auditandreportontheefficiencyofCompanyprocessesfromafinancialperspective.TheAuditCommitteethengivesthenecessaryinstructionstotheCompanymanagementandwhendeemednecessary,submitsthesetotheattentionorapprovaloftheBoardofDirectors.Inthisregard,theBoardofDirectorsiscoordinatedinitsactionsbytheAuditCommittee.

TheFinancialAuditDepartmentassessestheCompany’sentirebusinessprocessfromafinancialperspective,teststheadequacy,efficiencyandimplementationoftherelevantauditmechanismsanddeterminesincoordinationwiththeoperationalunitsthemeasurestobetakentomendsanydeficienciesandreportstheresultsofitsactivitiestotheAuditCommittee.

Corporate Governance CommitteeTheCorporateGovernanceCommitteewasestablishedwiththeBoardofDirectorsdecisiondated20November2007;tomonitortheCompany’scompliancewiththecorporategovernanceprinciples,andtoassessthereasonsofnotbeingimplementedregardingtheprincipleswhichhavenotbeenimplementedyet,andtogiveremedialadvicetotheBoardofDirectors.

InthecurrentsituationtherearethreemembersoneofwhichistheChairman.In2017,theCommitteeconvenedfivetimes.

ThedutiesoftheNominationCommitteeandRemunerationCommitteeoutlinedintheCMB’sCorporateGovernancePrinciplesarecurrentlyperformedbytheCorporateGovernanceCommittee.

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

KutsanÇelebican MemberoftheBoardofDirectors(Non-Executive) Independent YesYağızEyüboğlu MemberoftheBoardofDirectors(Non-Executive) Dependent NoDoğanKorkmaz CFO(Executive) Dependent Yes

Risk Management CommitteeTheRiskManagementCommitteewasestablishedwiththeBoardofDirectorsdecisiondated28July2010.TheaimofthecommitteeistocounseltheBoardofDirectorsaboutthefollowingissues;earlydetectionandassessmentofallkindsofstrategic,operational,financial,legalandotherrisksthatmayendangertheCompany’sexistence,developmentandcontinuation,estimatingtheimpactsandprobabilitiesoftheserisks,managingandreportingtheserisksinaccordancewiththeCompany’scorporaterisktakingprofile,carryingoutthenecessarymeasuresregardingthedetectedrisks,takingtheserisksintoconsiderationindecisionmechanismsandestablishingandintegratinginternalcontrolsystemsinthisaspect.TheCommitteeconvenedsixtimesin2017.TheexperienceofthememberoftheBoardofDirectorsrequiredhimtoassumedutiesinmorethanonecommittee.


GökçeBayındır MemberoftheBoardofDirectors(Non-Executive) Independent NoTemelKamilAtay MemberoftheBoardofDirectors(Non-Executive) Dependent Yes


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Audit CommitteeEstablishedwiththeBoardofDirectorsdecisiondated26December2003,theCommitteeisresponsiblefortheAuditprocessinordertooverseethecomplianceoftheaccountingandreportingsystemswiththerelevantlawsandregulations;publicdisclosureofthefinancialinformationandperformanceandeffectivenessoftheindependentauditandinternalcontrolsystem.

TheAuditCommitteecollectstheopinionsofexecutivesandindependentauditorsontheannualandinterimfinancialstatementstobedisclosedtothepublic,asregardstheirtruthfulness,accuracyandcompliancewiththeCompany’saccountingprinciplesandpresentsthesetotheBoardofDirectorsinwrittenformtogetherwithitsownassessments.TheAuditCommitteeconvenesatleastfourtimeseveryyearandmorefrequentlywhendeemednecessary.TheCommitteeconvenedseventimesduringtheyear.TheChairmanandmembersoftheCommitteeareelectedamongtheindependentmembersoftheBoardofDirectors.ThefinancialexperienceoftheindependentmemberoftheBoardofDirectorsrequiredhimtoassumedutiesinmorethanonecommittee.

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

BasicfinancialandprocessauditsthroughouttheactivityunitsofTüpraşareperformedtwiceayear,whilethematicauditsforacertainworkingperiodisconductedatleastonceayear.

In2017therefinerieswerevisitedbytheRiskManagementandAuditOffice20times,involvingatotalof188person-day.

Atthebeginningofeachyear,theaudittopicsaredeterminedandsharedwiththerelevantunitsoftheCompany,andwithinthisscopeannualriskbasedauditplansaremade.AuditresultsareannouncedwithintheCompanywithoutlosingtime,andnecessarycorrectivemeasuresaretaken.Resultsareregularlyreviewed,andimprovementsintheactivitiesaremonitored.

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


KutsanÇelebican MemberoftheBoardofDirectors(Non-Executive) Independent YesOsmanMeteAltan MemberoftheBoardofDirectors(Non-Executive) Independent No

Executive CommitteeTheSteeringCommitteewasestablishedon4May2012inordertocounseltheBoardofDirectorswiththeaimofincreasingtheeffectivenessoftheBoardofDirectorsbyensuringthecoordinationbetweentheBoardofDirectorsandtheadministrativestructure;ensuringtheenhancementofinvestmentandbusinessdevelopmentinareasthatcomplywithitsstrategictargets.

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

• FollowsthedevelopmentsinthesectorinordertocreatetheappropriatestrategiesfortheCompanyandtoensuretheeffectivenessoftheactivities;andgivesadvice.

• BenchmarkstheCompany’sstrengthsandweaknessesthroughanalysismadewithinthecountry,andopportunitiesandthreatsthroughanalysismadecomparativelywiththeinternationalcompaniesthatithasselectedinthesameindustry;andensuresthatnecessarymeasuresaretaken.

• AuditsthecomplianceoftheStrategicWorkPlan-preparedannuallybytheCompanyManagementinsuchwaythatitcoversatleastfiveyears-withtheresultsoftheanalyses,andmakessurethatthenecessaryrevisionsaremade.

• Auditsthecomplianceoftheannualworkplans(budget)preparedbytheCompanyManagementwiththeStrategicWorkPlan;andanalyzesthesignificantdifferences(ifany)andmakessurethattheyarefullyreflectedintothebudget,


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• EnsuresthatnecessarytasksareperformedinordertocarryouttheactivitiesincompliancewiththeannualworkplansandthedecisionsoftheBoardofDirectors;andmakesnecessarysupervisionafterthemonthly,quarterly,semi-annuallymadeanalysesforthedifferences.

•MonitorsthefunctionalityofthesystemsinwhichtheCompanyworkplansarepreparedandnecessaryrevisionsaremadeaccordingtotheinternationaldevelopmentsandusedastheperformancecriteria.

• Ensuresthattheanalysesandassessmentofthematterssuchas;theimpactsontheactivities,thefinancialaspect,thelegalsituation,andcompliancewiththestrategicprioritiesregardingtheimportantissueswhichwillberesolvedbytheBoardofDirectorsarecompleted

•Makessurethatsubwork/advisorygroupsarecomposedofpersonsfromamongitsmembersandwhennecessarycomposedofpersonswithsufficientexperienceandknowhowfromoutsidetheCompanyduringthepreparationandcontrolphaseoftheshortandlongtermworkplansoftheCompany.

ExecutiveCommitteeiscomposedofaChairmanandanumberofmembersthatwillbenolessthan1/3oftheBoardofDirectors.ExecutiveCommitteemadetwelvemeetingwithintheyear.


RahmiM.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent NoÖmerM.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent NoSemahatS.Arsel MemberoftheBoardofDirectors(Non-Executive) Dependent NoAliY.Koç MemberoftheBoardofDirectors(Non-Executive) Dependent NoTemelKamilAtay MemberoftheBoardofDirectors(Non-Executive) Dependent YesBülentBulgurlu MemberoftheBoardofDirectors(Non-Executive) Dependent No

Ethics CommitteeEthicCommitteetheCodeofEthicalBusinessinvolvesthefundamentalprinciplesofconductoftheCompany.TüpraşhasreneweditsCodeofEthicalBusinesstowardcompliancewiththeGlobalCompactsignedbyKoçHolding,inadditiontothechangesinlegal,socialandeconomiccircumstancesandwasapprovedbytheGeneralAssemblyonApril2011.

EmployeesoftheCompanyareexpectedtocomplywiththeBusinessEthicsPrinciplesandCommonValuesoftheKoçGroupwhenperformingtheirjobs.Inrecognitionthatbusinessprocedures,standards,lawsandregulationscannotprovideguidanceforallconductandactions,theCompanyhaspublisheditsCodeofEthicsandestablishedtheEthicsCommittee.


İbrahimYelmenoğlu GeneralManager(Executive) Dependent NoDoğanKorkmaz CFO(Executive) Dependent YesNezihAkçınar HumanResourcesDirector(Executive) Dependent NoFatmaDevrim CompetitionSpecialist(Executive) Dependent No


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5.4. Risk Management and Internal Control MechanismRiskManagementCommitteewasfoundedonJuly28,2010inTüpraşpursuanttoCorporateGovernancePrinciplesannouncedbyCapitalMarketsBoard.TüpraşRiskManagementCommitteefunctions;inordertoensurerisksthatmaythreatenexistence,developmentandcontinuityofthecompany,arediagnosed,measuresareimplementedontimeandrisksareefficientlymanaged;sothatcompliancewithArticle378ofTurkishCommercialCodeNo.6102,whichhasenteredforceonJuly1,2012,canbemaintained.ServicePolicywhichmadeforthistarget;withthe“InformationDocument”publishedthreeweeksinpriortotheOrdinaryGeneralAssembly;itwassubmittedfortheinformationofourshareholdersonourcorporatewebsiteandwasputintopracticeaftertheGeneralAssembly.Thecommitteeconductedsixmeetingsin2016,whereTüpraşRiskManagementSystemwasevaluatedandriskreportingprinciplesweredetermined.ReportsandcommitteeevaluationsareperiodicallysubmittedtoBoardofDirectorsinaccordancewiththeprinciplesdetermined.

In2016,TüpraşestablishedaCorporateRiskManagementDirectoratetocreateanewCorporateRiskManagementSystem.Theoverallaimistoensureoperationalandbusinesscontinuity,tackletheunderlyingcausesofuncertainty,manageextraordinarysituationssuccessfully,andtoprotecttheCompany’sreputation.TüpraşalsohasCorporateRiskManagementguidelinesandpoliciesinplace.

TüpraşdevelopedtheCorporateRiskManagementSystemtosafeguardtheexistingassetsoftheCompany,createmoreshareholdervalueandmanageopportunities.ThesystemalsoservestocommunicaterisksthathavebeenidentifiedinallfunctionsinlinewiththeriskappetiteacceptabletotheBoardofDirectorsandtheSeniorManagementacrossallprocesses.

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

5.6. Financial RightsPrinciplesoftheremunerationoftheMembersoftheBoardofDirectorsandExecutives(topmanagement)wereprintedandsubmittedasaseparateitemfortheinformationoftheshareholdersattheGeneralAssemblymeetingwhileshareholdersweregiventheopportunitytopresenttheiropinionsonthisissue.Theremunerationpolicystructuredwiththispurpose,wasannouncedonourcorporatewebsitewiththe“InformationDocument”publishedforourshareholders’reviewthreeweeksinpriortotheOrdinaryGeneralAssemblyheldonthe29March2017andwasputintopracticeaftertheGeneralAssembly.Furthermore;paymentsmadetotheexecutivesarepubliclydisclosedinthefinancialstatementfootnotes.AseparateRemunerationCommitteewasnotestablishedamongtheBoardofDirectorsCommittees.Thus,RemunerationCommittee’stasksdeterminedwithinthescopeoftheCMBCorporateGovernancePrinciplesarecarriedoutbytheCorporateGovernanceCommitteeinconformitywiththeCMBPrinciples.

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

TheChairmanorthemembersoftheBoardofDirectorsarenotgivenanydirectorindirectdebt,extendedanyloansandnotgrantedcollaterals,soastoavoidanyconflictsofinterest.

EveryyearintheOrdinaryGeneralAssemblymeeting,fixedwageisdeterminedwhichwillbevalidforallthemembersoftheBoardofDirectors.AttheOrdinaryGeneralAssemblyMeetingheldinMarch2017regarding2016;adecisionwastakenbymajorityvotetopayaremunerationofTL357,000peryeartoeachoftheMembersoftheBoardofDirectors,andtostartmakingthesepaymentsinthemonthaftertheGeneralAssemblyMeeting,andcontinuemakingpaymentsuntilthenextGeneralAssemblyonamonthlyproratabasis.


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Risk Management and the Activities of the Risk Management Committee

A. CORPORATE RISK MANAGEMENT Thestartingpointofcorporateriskmanagementistherequirementforeverycorporationtomanagethefactorsthatcreateuncertaintyonthewaytoachievingtheirtargets.

Contemporarymanagementapproachisbasedontheconceptofcorporategovernance.Thefundamentalcomponentofcorporategovernanceprocessiscorporateriskmanagement.

WiththeaimofbuildinganewCorporateRiskManagementSystemin2016,CorporateRiskManagementDirectoratehasbeenestablishedinTüpraş,inordertoenablesustainableactivityandbusinesscontinuity,fightthefactorsthatcreateuncertainty,successfullymanagethedevelopments,andprotecttheCompany’sreputation.Inadditiontothis,TüpraşhaspoliciessetinlinewiththeCorporateRiskManagementguide.

Bymanagingthepossibledeviationsinplannedstrategicandfinancialtargets,TÜPRAŞaimstomaximizethelevelofthevalueitwillcreateforitsshareholders.

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

B. EARLY RISK DETECTION COMMITTEEInorderto;i)complywiththe378thArticleoftheTurkishCodeofCommercen.6102thatenteredintoforceonthe1stofJuly2012,andtheCapitalMarketsBoard’sCorporateGovernanceCommuniqué,ii)makesurethatthecommitteesundertheBoardofDirectorsfunctioneffectively,decisionwastakenatTüpraş’sBoardofDirectorsmeetingheldonthe28thofJuly2010,andEarlyRiskDetectionCommitteewasestablishedwiththeaimofi)earlydetectingtherisksthatcanendangertheCompany’sexistence,developmentandcontinuity,ii)implementingthenecessarymeasuresrelatedtotheidentifiedrisks,andiii)performingtaskstomanagetherisks.

CommitteechairmanistheIndependentMemberoftheBoardofDirectorsMr.GökçeBayındır.OthermemberoftheCommitteeistheMemberoftheBoardofDirectorsMr.TemelKamilAtay.Havingheld6meetingsin2017,theCommitteeevaluatesTürkiyePetrolRafinerileriA.Ş.RiskManagementSystemandRiskReportingprinciples,andreviewstheRiskReportsissuedperiodicallywithinthisscope,andpresentsitsopinionsonthemeasurestobetakenforissuesthatdonotcomplywiththespecifiedlimitsdeterminedintheRiskManagementSystem.ReportingactivitiesandcommitteeevaluationsaresubmittedtotheBoardofDirectors’information.

C. RISK MONITORING COMMITTEE MonitoringCommitteefunctionsundertheGeneralManagerwhomonitorstheCorporateRiskManagementpractices.CommitteemembersaretheGeneralManager,AssistantGeneralManagers,CorporateRiskManagementDirectorandRiskManagementandAuditManager.TheaimoftheCommitteeis;earlydetectionofallrisksthatcanendangertheCompany’sexistenceandsustainability,takingnecessarymeasuresregardingthedeterminedrisks,developingpoliciesandpracticesnecessarytoeffectivelycarryoutcorporateriskmanagementprocesses,andmonitoringrisk-relatedactionplansandrisktrendsperiodicallyviakeyriskindicators.

D. INFORMATION SECURITY COMMITTEE AsTüpraş,wepledgetosafeguardtheconfidentiality,integrityandavailabilityofallphysicalandelectronicinformationassetsforthepurposesofmaintainingtheCompany’sregulatorycompliance,andprotectingitscommercialandcorporateimage.

Inordertopracticeinformationsafetyproperlyandtoincreaseinformationsafetyawareness,theInformationSafetyCommitteewasestablishedaspertheArticlen.5.3.“CorporateRoles,ResponsibilitiesandPowers”oftheİSO27001Standard.HeadoftheCommitteeistheAssistantGeneralManager(CFO)inchargeofFinancialAffairs,andCommitteeExecutiveistheInformationTechnologiesDirector.CommitteemembersareallDirectoratesandrelevantDepartments.


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Whennecessary,theCommitteemeetsevery6monthsaslongasthereisanagenda,withabsolutemajorityoftheattendingpersonsortheirauthorizedrepresentatives.FrequencyandconditionsofthemeetingsisdeterminedbytheHeadoftheCommittee.

E. TÜPRAŞ RISK INVENTORY MajorrisksTüpraşisexposedtoaremonitoredunderthe7maintopicsgivenbelow;1- HazardsandEnvironmentalRisks2- FinancialRisks3- CommercialRisks4- OperationalRisks5- StrategicRisks6- ComplianceandLegalRisks7- ReputationRisk

1- Hazards and Environmental RisksTüpraşcontinuesitsdevelopmentinlinewithitsgoalofeliminatingtheriskofaccidentandhazardbyidentifyingallrisklevelsinallitsoperationalactivities.

Allemployeesandtheemployeesofthecontractorsareexpectedtodecisively,meticulouslyanduncompromisinglycomplywiththeHealth,Safety,Environmentstandardsestablishedwithinthisscope.

WithinthescopeofourProcessSafetyManagementSystemandCulturalExchangeproject,teamshavecompletedtheirworkinrelationtoprocesssafetyleadershipprogram,processsafetyinformationsystem,processhazardanalysis,mechanicalintegrityandqualityassurance,high-riskbusinessprocedures,workauthorizationsystem,contractormanagement,changemanagement,accidentinvestigations,operationalprocedures,safetymanagementauditsystem,motivationandawareness.

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

TheCompanypreparedthesafetyreportrequiredbytheSevesoIIDirectiveonthePreventionofMajorIndustrialAccidentsandMitigatingTheirEffects,andsubmittedthereporttotheMinistryofLaborandSocialSecurity.Aspartofthisstudy,allrefineryequipmentwasinspectedindetail;anyequipmentthatmightleadtomajoraccidentswasidentifiedonaunitbasisusingtheDowFire&ExplosionIndex.Additionally,HazardandOperabilityStudies(HAZOP)areconductedtoidentifyhazardsandlarge-scaleoperationproblemsincurrentunits;determinethecausesofdeviationfromnormalworkingconditionsanddesignateddesigns;andtosystematicallymonitoreverystageoftheprocess.InHAZOPstudies,processhazardswereanalyzedindetailtolayoutallthepossiblescenarios,suchasfire,explosion,vaporclouddispersionandcontentloss.

WithinthescopeofScenario-basedEmergencyResponsePlansdevelopedforcriticalequipmentundertheSeveso-IIDirective,deskdrillsandfielddrillswerecarriedoutwithrelevantUnitandTechnicalSafetyPersonnel,andpreparationsweremadeagainstpossibleemergencies.

FormoldingProcessSafety,OHSandTechnicalSafetypracticeswithintheframeofOneTüpraşconceptanddeploymentofcommonpractices,internalcommunicationmeetingswereheldninetimesduring2017,securingtheparticipationofprocesssafetyteamsfromallrefineries.

ThemainpurposeofOccupationalHealthandSafety(OHS)Systemistopreventworkplaceaccidentsandoccupationalillnessesthroughproactiveapproaches.WiththeaimofconstantlyimprovingOHSperformanceandensuringperformancemonitoring,sub-elementswereaddedto14KeyPerformanceIndicators(KPI),thusincreasingthetotalnumberofKPIsunderclosewatchto21in2017.Inadditiontothese,alsoin2017,“HazardandImpactManagement”allowedforgivingprioritytoidentificationandmanagementofrisks,performanceofHealthRiskassessments,andallocationofresourcestocriticalissueswithinthescopeofriskanalysespreparationundertheapplicablelegislation.

Accidents/near-missesexperiencedatTüpraşoraroundtheworldarecovered,andgeneralinformationonhealthandsafetyisprovidedwithintheframeofWeeklyAccidentDiscussionimplementationaimedatimprovingOHSandProcessSafetyCommunication,informationprovisiononincidentsinotherrefineriesandweeklyimportantmatters,“Couldwehavepreventedtheseaccidents?”meetings,andweekly“SafetyTalks”.


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RiskManagementandtheActivitiesoftheRiskManagementCommittee

Inabidtoensurecontinuityof,andparticipationin,OHStrainingprograms,whichTüpraşisstrictlycommittedto,improvementsweremadetoannualtrainingprograms,andthemigrationofexamsgivenuponcompletionofperiodictrainingtotheelectronicenvironmentwasbroughttocompletion,thustakinganotherstepinlinewithourdigitalizationgoals.

WithrespecttoMechanicalandElectricalInsulationpractices,trainingwasgivenin2017toMaintenanceandProductionDepartmentemployees,whomakeupthetargetaudience,forremedyingidentifiedandrecurrentirregularitiesandfortellingthemaboutthenoveltiesinprocesses.

Behavior-basedsafetytoursareorganizedattherefineriestoencouragepositiveconduct,raisegeneralsafetyawareness,andfollowupfieldimplementationofsafetyguidelines.Tüpraşexecutivesalsoparticipateinthesetoursaspartofthe“VisibleLeadership”practice.

Inordertoidentifyhealthhazardsintheworkenvironmentandtoassessanyrelevanthealthrisks,HealthRiskAssessment(HRA)studieswerecarriedoutatalloftherefineries.

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.

Bymakingcashsalesorveryshorttermsales,tradereceivablesinfuelproductsarekeptundercontrol,andproductsaredeliveredtocustomerswithincertaincreditlimits.Ontheotherhand,riskanalysisreportsarepreparedindailyandmonthlyperiodsfortradereceivableswhileactionplans/measuresareputintopracticeasaresultoftheratingreportsissuedforthecustomers.


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3- Commercial RisksCommodity Prices RiskTherearesignificantamountsofcrudeoilandproductstocksintheinventoryofourCompanyasrequiredbyitsactivities.StocksareincludedinassetsastheyarevaluedaccordingtoBrentcrudeoilandMediterraneanproductpricesdeterminedininternationalmarkets.Theprofitabilityofthecompanyisheavilyinfluencedbyfluctuationsinproductpricesandrawmaterialprices.

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

Inaccordancewith2017circumstances,Tüpraşupdatedthe“HedgingtheRiskofDecliningValueofInventoriesPolicyofTüpraş”.Financialcommodityagreementshavebeensignedinlightofthepreparedpolicy.Inaddition,Tüpraşmaintainstheminimumamountofstockrequiredforrefiningactivitiesinordertoavoidtheriskofdecliningvalueofinventories.Financialinstrumentsaswellasoperationalhedgingmeasureshavebeenusedfortheportionofstockssubjecttopricerisk.

4- Operational RisksOperationalrisksaredefinedasthepossibilityoflossordamagethatmayarisefrom:i)thecompanymanagementandpersonnel’sfailuretoactinaccordancewiththetimeandconditions,iii)faultsinthemanagementofthecompany,iv)faultsandfailuresininformationtechnologysystems,andv)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),whichareacceptablebyportsashavingİSO9001andclasscertificatesandcomplyingwithISPS(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.


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RiskManagementandtheActivitiesoftheRiskManagementCommittee

Theselaboratoriesmakethenecessarymeasurementsineachphaseofproductionandsales,andeliminatetheriskofproducingandsellingdefectiveproduct.

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

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

Inadditiontothetechnicalmeasurestaken,businessunitsincludedintheInformationSafetyManagementSystem(BGYS)andcurrentriskswerereviewedandupdated.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 Risks Structuralrisksthatmaypreventacompanyfromreachingitstargetssetinshort,mediumorlongtermcanbeclassifiedwithinthescopeofthistopic.Riskssuchasplanning,businessmodel,businessportfolio,corporategovernance,marketanalysisaretypicalexamplesofstrategicrisks.Ontheotherhand,thecountry’sriskandalternativeenergysourcesareatthetopofthelistofTüpraş’sstrategicriskswhichitmaybeexposedto.Inaddition,ourCompanykeepstrackoftheinternationalsectoralexpectationsforelectricvehicles,aswellastheinnovationsanddevelopmentsinthesector.

Internationalstandardsarebeingfollowedinordertopreventthenegativeimpactsofcustomerpreferences.NecessaryinvestmentshavebeenmadetomeetthehighlyenvironmentalfriendlyproductcriteriasuchasEuroV.WiththeFuelOilConversionUnitsbuiltintheİzmitRefineryZoneA,highervalue-addedproductexportshavebeenmadeinsteadofexportingfueloil.Atthesametime,dieselimportshavebeenreduced.Inthisregard,Tüpraşhasmadesignificantcontributionbothtothecountry’seconomyandtoemployment.

6- Compliance and Legal Risks Thepossibilityofrightstobelowerthanexpectedandtheliabilitiestobehigherthanexpectedasaconsequenceof:• risksarisingfrom;i)legaldisputescausedbyinadequateorincorrectinformationanddocumentation,ii)uncertaintyaboutfulfillingtheobligations,iii)misinterpretationoftheregulations,oriv)personnelnotfulfillingtheseobligationsontime;


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• riskscreatedbyaregulationchangethatimpactstheactivities,and• transactionsthatmaybeperformedbytheCompanybasedoninsufficientorincorrectlegalinformationanddocuments.

Inordertokeeptrackofthelegalrisks,ourCompanyfollowsthechangesinthelegislation,andinformstherelevantdepartments.In2017,withintheframeworkoftheCompetitionLawcomplianceprogram,actionplansandstrategiesweredevelopedaboutthemeasuresthatcanbetakeninordertoeliminatepotentialrisks.Moreover,CompetitionLawtrainingwasgiven.

Whilekeepingtrackofthelegalrisks;earlywarningsystemsandonlinedatabasesareusedtoidentifyandmonitorparticularlytheinternationalcounterpartsthataresubjecttoanysanction.

7- Reputational Risks ReputationalRisksarethedecliningdemandforproductsandservicesoftheCompany,andlossofcustomer,profitandcompetitivepowerdueto;i)decliningvalueoftheCompanyasaresultofeventsthatcannotbeeffectivelymanagedregardingtheCompany’snameandproductionorii)lossofreputationcausedbyvariousevents.Reputationriskcanbedefinedasthepotentialnegativereputationaboutthebusinesspracticesofcorporations.

Tüpraşhasestablishedvariouspoliciesinordertomaintainitscorporatereputationstrongatalltimes,andhasestablishedacrisismanagementprocesswithintheframeworkofthesepolicies.

F. INTERNAL CONTROL SYSTEM AND INTERNAL AUDIT AuditsinTüpraşareconductedbythespecializedteamoftheTüpraşRiskManagementandAuditUnit,usingaproactivemethodologybasedontheInternationalInternalAuditStandardsandTüpraşCodeofEthics,intermsoftheheadings:financial,operational,risk,process,legalcompliance,businessethics,andmisconduct.

BasicfinancialandprocessauditsthroughouttheactivityunitsofTüpraşareperformedtwiceayear,whilethematicauditsforacertainworkingperiodisconductedatleastonceayear.

TheAuditCommitteeconvenesatleastfourtimeseveryyearandmorefrequentlywhendeemednecessary.TheCommitteeconvenedseventimesduringtheyear.

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

In2017therefinerieswerevisitedbytheRiskManagementandAuditOffice20times,involvingatotalof188person-day.

ThedeterminedaudititemsaresharedwiththeCompany’srelevantunitsatthebeginningofeveryyeartodeveloptheannualrisk-basedauditplans.TheauditfindingsarepublishedwithintheCompanywithoutdelay,andtherequiredcorrectiveactionsaretaken.Thesefindingsarereviewedonaregularbasistofollowuptheimprovementsinactivities.

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

Thesaidpolicyappliestoallouremployees,unitmanagers,subsidiariesofTüpraşandalloftheiremployeesanddirectors,andthirdpartiesdoingbusinessonbehalfofTüpraş.ItshouldbespecificallynotedthatthispolicyisimplementedsoastocoverallCompanyemployeesanddirectors,irrespectiveoftheirpositionwithintheCompanyhierarchy.

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


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About Early Detection of Risk System and Committee

CONVENIENCETRANSLATIONINTOENGLISHOFINDEPENDENTAUDITOR’SREPORTONTHEEARLYRISKIDENTIFICATIONSYSTEMANDCOMMITTEEORIGINALLYISSUEDINTURKISH

TotheBoardofDirectorsofTürkiyePetrolRafinerileriA.Ş.

1.WehaveauditedtheearlyriskidentificationsystemandcommitteeestablishedbyTürkiyePetrolRafinerileriA.Ş.(the“Company”).

Board of Directors’ Responsibility

2.Pursuanttosubparagraph1ofArticle378ofTurkishCommercialCode(“TCC”)No.6102;BoardofDirectorsisrequiredtoformanexpertcommittee,andtorunandtodevelopthenecessarysystemforthepurposesofearlyidentificationofcausesthatjeopardizetheexistence,developmentandcontinuityofthecompany;applyingthenecessarymeasuresandremediesinthisregard;andmanagingtherelatedrisks.

Auditor’s responsibility

3.Ourresponsibilityistoreachaconclusionontheearlyriskidentificationsystemandcommitteebasedonouraudit.OurauditwasconductedinaccordancewithTCCand“PrinciplesonIndependentAuditor’sReportontheEarlyRiskIdentificationSystemandCommittee”issuedbythePublicOversightAccountingandAuditingStandardsAuthority.ThoseprinciplesrequireustoidentifywhethertheCompanyestablishedtheearlyriskidentificationsystemandcommitteeornotand,ifestablishedrequiresustoassesswhetherthesystemandcommitteeisoperatingornotwithintheframeworkofArticle378ofTCC.OurauditdoesnotincludeevaluatingtheadequacyoftheoperationscarriedoutbythemanagementoftheCompanyinordertomanagetheserisks.

Information on the Early Risk Identification System and Committee

4.TheCompanyestablishedtheearlyriskidentificationsystemandcommitteeanditiscomprisedof2members.TheCommitteehassubmittedtherelevantreportsfortheperiod1January-31December2017totheBoardofDirectorsthathadbeenpreparedforthepurposeofearlyidentificationofrisksthatjeopardizetheexistenceoftheCompanyanditsdevelopment,applyingnecessarymeasuresandremediesinthisregard,andmanagingtherisks.

Conclusion

5.Basedonouraudit,ithasbeenconcludedthatTürkiyePetrolRafinerileriA.Ş.’searlyriskidentificationsystemandcommitteeissufficient,inallmaterialrespects,inaccordancewithArticle378ofTCC.

PwCBağımsızDenetimve

SerbestMuhasebeciMaliMüşavirlikA.Ş.

EdizGünsel,SMMM

Partner



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Evaluation of Operating Principles and Effectiveness of Board Committees

RegardingthestructureofthecommitteesestablishedwithintheframeworkoftheprovisionsstipulatedintheCapitalMarketsBoard’sCorporateGovernanceCommuniquén.II-17.1issuedon3January2014,decisionn.2017/09wastakenbytheBoardofDirectorson31 March2017to;

• StructuretheAuditCommitteewith2membersandappointMr.KutsanÇelebicanastheCommitteeChairman,andMr.OsmanMeteAltanasaMember;

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

• StructuretheRiskManagementCommitteewith2membersandappointMr.GökçeBayındırastheCommitteeChairman,andMr.TemelKamilAtayasaMember,

• StructuretheExecutiveCommitteewith6members,andappointMr.MustafaRahmiKoçastheCommitteeChairman,andMs.SemahatSevimArsel,Mr.MehmetÖmerKoç,Mr.YıldırımAliKoç,Mr.TemelKamilAtayandMr.BülentBulgurluasMembers,

• StructuretheEthicCommitteewith4members,andappointMr.İbrahimYelmenoğlu(CEO)astheCommitteeChairman,andMr.DoğanKorkmaz(AssistantGeneralManager),Mr.NezihAkçınar(HumanResourcesDirector),Ms.FatmaDevrim(CompetitionExpert)asMembers.

AspertheCorporateGovernancePrinciples,itisobligatorytohavetheInvestorRelationsDepartmentfunctiondirectlyundertheGeneralManagerortheAssistantGeneralManagerandtoappointthisexecutiveasCorporateGovernanceCommitteeMember.

Thus,attheBoardofDirectorsmeetingheldon30December2015,adecisionwastakentocarryoutthetasksstipulatedinthe11thArticleoftheCapitalMarketsBoard’sCorporateGovernanceCommuniquén.II-17.1.underthemanagementofMr.DoğanKorkmaz,theAssistantGeneralManagerinchargeofFinancialAffairsmanagement,andtoappointMr.DoğanKorkmazasCorporateGovernanceCommitteeMember.

ThebylawsgoverningtheoperatingprinciplesandareasoftheaforementionedcommitteeswerereviewedandamendedbytheBoardofDirectorsonMay4,2012,anddisclosedtothepublicviathecorporatewebsite,www.tupras.com.tr.

In2017,allBoardCommitteesfulfilledtheirdutiesandresponsibilitiesinaccordancewiththeCorporateGovernancePrinciplesandtheirrespectivebylaws.TheCommitteesconvenedaccordingtotheannualmeetingprogram,asfollows:

• In2017,theAuditCommitteeheldatotalofsevenmeetingsonFebruary13th,March7th,May3rd,August2nd,November7thandDecember20th.

• In2017,theCorporateGovernanceCommitteeheldatotaloffivemeetingsonJanuary25th,March1st,April7th,October4thandDecember29th.

• In2017,theRiskCommitteeheldatotalofsixmeetingsonJanuary30th,April3rd,July27th,September26th,October2ndandDecember19th.

• In2017,theExecutiveCommitteeheldatotaloftwelvemeetingsonJanuary18th,February20th,March17th,April10th,May3rd,June20th,July13th,August11th,September25th,October16th,November21standDecember15th.


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EvaluationofOperatingPrinciplesandEffectivenessofBoardCommittees

Accordingly:• The“AuditCommittee,”whichisresponsibleforensuringthattheaccountingandreportingsystemsrunincompliancewithapplicablelawsandregulations,aswellasthepublicdisclosureoffinancialinformationandeffectiveexecutionofindependentauditsandtheinternalcontrolsystem,submitteditsopinionsandrecommendationsrelatedtotheseareastotheBoardofDirectors.

• The“CorporateGovernanceCommittee,”establishedtooverseeandimprovetheCompany’scompliancewithCorporateGovernancePrinciplesandmakerecommendationstotheBoardofDirectorsonfurtherimprovingthecorporategovernancepractices,oversawwhethertheCompanyfullycompliedwithCorporateGovernancePrinciplesand,ifnot,detectedthereasonsfornoncomplianceandtheconflictsofinterestarisingfromsuchnoncompliance.Inaddition,theCommitteesubmitteditsrecommendationsonhowtoimprovecorporategovernancepracticestotheBoardofDirectors,reviewedthe“CorporateGovernanceComplianceReport”beforepublicdisclosuretoensurethattheinformationcontainedinthereportwasaccurateandconsistentwiththeinformationknowntotheCommitteemembers,andoversawtheactivitiesoftheInvestorRelationsDepartment.

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


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Policies

Profit Distribution PolicySeePage24

Remuneration PolicySeePage27

Disclosure Policy

OBJECTIVEWithintheframeoftheapplicablelegislationandCapitalMarketsBoard(CMB)CorporateGovernancePrinciples,TurkishPetroleumRefineriesCorp.(Tüpraş)followsanactiveinformationpolicyensuringthatitsshareholdersaresimultaneously,completely,transparentlyandaccuratelyinformed.

ThepurposeininformationpolicyistosharethroughanactiveandopencommunicationtheCompany’spastperformance,futureexpectations,strategies,visionandobjectivesthatarenotconsideredastradesecretswiththepublic,relatedauthorizedbodies,presentandpotentialinvestorsandstakeholders.

Inallapplicationsconcerningpublicdisclosure,TüpraşcomplieswiththeCapitalMarketsBoard(CMB)LegislationandİstanbulStockExchange(ISE)regulations,andaimstoimplementthemosteffective,true,fairandsimultaneouslycomprehendiblecommunicationpolicywithintheframeofCMBCorporateGovernancePrinciples.

RESPONSIBILITYTheBoardofDirectorsisresponsibleforpreparing,overseeingandupdatingtheDisclosurePolicy.TheDisclosurePolicyapprovedbytheBoardofDirectorsisdisclosedtopubliconourwebsiteandonPublicDisclosurePlatform(PDP).AnychangestotheDisclosurePolicywillbeadoptedbytheBoardofDirectorsandmadeavailableonourwebsiteandonPDP. TOOLS USED IN COMMUNICATING WITH INVESTORS

Methods and ToolsWithintheframeworkofCMBandBISTRegulationsandprovisionsoftheTurkishCommercialCode,TüpraşusesthefollowingmethodsandtoolsforinformingthepublicinaccordancewithitsDisclosurePolicy:•MaterialeventdisclosuresandCorporateGeneralInformationFormavailableonPDP,• PeriodicfinancialstatementsandannualandinterimactivityreportsavailableonPDP,• Corporatewebsite(www.tupras.com.tr),• Informatorydocumentsandpresentationspreparedfortheinvestors,• Investormeetings,• Prospectuses,circulars,announcementsandanyotherdocumentsthatshallbepreparedinaccordancewithCMBRegulations,• Pressreleasesintheprintedorvisualmedia,• AnnouncementsandnoticesthatarepublishedintheTurkishCommercialRegistryGazetteanddailynewspapers.


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Spokespersons Inprinciple,withtheexceptionoftheforms,declarationsandreportssignedinaccordancewiththesignaturecircular,theannouncementsanddisclosuresonbehalfofTüpraşusingtheabovestatedmethodsandtoolscanbemadebytheMembersoftheBoardofDirectors,CEO,CFOortheCorporateCommunicationsManager.

Inaddition,theInvestorRelationsUnit,affiliatedtotheCFO,cancommunicateonbehalfofTüpraşinpromotingTüpraşvis-à-viscurrentandpotentialindividualandinstitutionalinvestorsandintermediaryinstitutionsbothinTurkeyandabroad;respondingtoinformationrequestscomingfromanalystandresearchstaffandansweringquestionsreceivedwithinthescopeofinvestorrelations.

Information Documents Prepared for the InvestorsTheinvestorrelationsactivitiesstatedintheCorporateGovernanceStatementinTüpraşareexecutedbytheStrategicPlanningDepartmentandtheFinancialPlanning&ReportingDepartment,bothofwhichareaffiliatedtotheCFO.InvestorRelationsUnit,affiliatedtotheStrategicPlanningDepartment,hasbeenestablishedtomanagetherelationswithbothcurrentandpotentialinvestorsandanalysts,respondtoinvestorinquiriesinthemostefficientmannerandcarryoutactivitiestoreachthefairvalue.TheInvestorRelationsofficersmeetfrequentlywithintermediaryinstitutions,analystsandinvestorstopromoteTüpraş’soperationalandfinancialperformance;vision,strategyandgoalsandthevalueTüpraşcreatesforitsinvestors,inthebestpossiblemanner. StrategicPlanningDepartmentandFinancialPlanning&ReportingDepartmentaimtoinforminvestorsinthebestpossiblewaythroughinvestortoolssuchaspresentations,investorbulletins,Q&Adocuments,companywebsite,annualreports,teleconferencesandweb-casts,investormeetings,etc.andensuresthatallsuchtoolsareprepared,publishedandupdatedincompliancewiththelegislation. InvestorRelationsofficersendeavortofacilitateallmeetingrequestsreceivedduringtheyear,regularlyattendconferencesorganizedinTurkeyandabroadandholdone-on-onemeetingswithinvestors.ThesemeetingsarealsoattendedbytheCEOandCFOperiodically,enhancingthecommunicationbetweenshareholdersandpotentialinvestorsandourExecutiveManagement.Inordertoensureeffectivefinancialcommunication,presentationsarepreparedonaquarterlybasisonthefinancialresultsandanalystmeetingsorteleconferencesandweb-castsareorganized.

TheCompanywebsite,whichisupdatedregularly,andtheinformativedocumentssharedwiththestakeholdersthroughthewebsiteaimtofacilitateeasyaccesstoinvestorrelationstoolsandtheclosemonitoringofthedevelopmentsinTüpraşbythestakeholdersandtheanalysts.Detailedinformationhasbeenprovidedbelowontheannualreportsandthewebsitecontents. Fromtimetotime,analystreportsaresharedonthewebsite,withthepriorconsentoftherelevantanalyst,toprovideinvestorswithadifferentviewpoint.Tüpraşisnotinapositiontoreview,verifyorapproveanalystreportsormodels.However,ifrequested,inordertoavoidmisinformingthepublic,Tüpraşcancontroltheanalystreportsbeforetheyarepublishedtoensurethathistoricalandpublicinformationusedinthereportsarecorrect. TheforemostobjectiveoftheInvestorRelationsUnitistocarryoutthemutualrelationshipbetweenthecompanyandstakeholdersinthemostefficientmanner.Withinthiscontext,theInvestorRelationsUnitassumesabridgefunctionbetweentheExecutiveManagementandstakeholders.TheUnitconveysTüpraş’sinvestmentmessagestotheinvestorswhileprovidingperiodicreportingtotheExecutiveManagementontheevaluationsandfeedbackreceivedfromthestakeholders.


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POLICIES PERTAINING TO MATERIAL EVENT DISCLOSURESResponsibilityTheCFOisresponsibleforensuringTüpraş’smaterialdisclosurerequirementsarefulfilled.ThisdutyisachievedbytheFinancialPlanning&ReportingDepartmentandtheStrategicPlanningDepartment,whichareaffiliatedtotheCFO,bycoordinatingwiththeotherrelevantdepartments.ApprovedmaterialdisclosuretextispublishedthroughPublicDisclosurePlatformwiththeelectronicsignaturesoftheCEOandtheCFO.However,iftheelectronicsignatureoftheCEOortheCFOcannotbeusedforanyreason,electronicsignaturesofotherdirectorscanbeused.

ThematerialdisclosuresarealsopublishedontheCompanywebsiteinTurkishandEnglish.

List of Individuals with Administrative ResponsibilityMembersofTüpraş’sBoardofDirectors;individualswhoaredirectlyorindirectlyinapositiontohaveregularaccesstoinsiderinformationonTüpraşandwho,atthesametime,havetheauthoritytomakeadministrativedecisionsonTüpraş’sfuturedevelopmentandcommercialobjectivesareonthelistofindividualswithadministrativeresponsibility.Individualswhohaveregularaccesstoinsiderinformationandwho,atthesametime,areauthorizedtomakeadministrativedecisionsarethemembersoftheBoardofDirectors,TüpraşCEO,Presidents,Directors,ChiefLegalAdvisorandtheGeneralSecretary.Up-to-dateinformationontheseindividualsisprovidedonTüpraş’swebsite. Procedure to be Followed in the Case of Press NewsTracking MechanismTüpraştracksnewspublishedaboutTüpraşinimportantnationalmediathroughamediatrackingagency.Withinthiscontext,thenewsisdistributedtoTüpraş’sseniormanagementanddisplayedonthecompanyintranetbytheCorporateCommunicationsDepartment.Inaddition,newspublishedonTüpraşinReutersismonitored. Performing the Liability to ValidateInthecaseofnewsorrumorsaboutTüpraşthatmaypotentiallyaffecttheinvestmentdecisionsorthepriceofthecapitalmarketinstruments,appearinginpressoranyotherformsofmediaforthefirsttimeorincludinginformationdifferentfromthealreadypubliclydisclosedinformation,anannouncementismadeastowhetherthisinformationiscorrectorsufficient.

Asageneralpolicy,Tüpraşappliesthefollowingprinciplesinperformingitsliabilitytovalidate:

• Ifthenewsdoesnothavesignificanceintermsofinsiderinformation,inprinciplenoannouncementisissued.However,CorporateCommunicationsDepartmentevaluateswhetherthereisvalueaddedinmakinganannouncementonsuchasubject,whichdoesnotrequiretheissuanceofamaterialeventdisclosureasperCMBregulations.

• IfamaterialeventdisclosureoranyothermeansofdisclosureinaccordancewithCMBregulationshasalreadybeenmadeaboutthenews,nofurtheractionistaken.

• Inprinciple,TüpraşdoesnotcommentonnewsthatclearlyappearnottobesourcedfromTüpraş,orthatclearlyappeartobegossip,rumorandunfounded.However,ifdeemednecessary,Tüpraşmaydecidetomakeamaterialeventdisclosureaboutsuchunfoundednewsinordertoprotecttheinterestoftheshareholdersandthecompany.Apartfromthematerialeventdisclosure,CorporateCommunicationsDepartmentmayissueapressreleaseonsuchnews,ifdeemednecessary.

• Incaseofinaccuratenewsthatmayberegardedasmaterialinformationorthatmaypotentiallyaffecttheinvestmentdecisionsorthepriceofthecapitalmarketinstruments,amaterialeventdisclosureismade.

• Ifthenewscontainaccurateinformationonmaterialdetailsaboutthepostponedannouncementsandiscompanysourced,thegroundsforpostponingtheannouncementisnolongervalidandamaterialeventdisclosureismade.

• Ifthenewscontaininaccurateinformationaboutthepostponedannouncements,thenastheconfidentialityisstillachieved,materialeventdisclosuremaynotbemade.However,ifdeemednecessary,Tüpraşmaydecidetomakeamaterialeventdisclosureaboutsuchunfoundednewsinordertoprotecttheinterestoftheshareholdersandthecompany.

• Thecirculationrateand/orpublicityofthemediaaretakenintoaccountinevaluatingtheliabilitytovalidate.


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Measures to Protect Insider Information until Public AnnouncementTüpraşemployeeswhoareinapositiontohaveinsiderinformationandotherrelevantpartiesareinformedabouttheirliabilitytoensureconfidentialityofinsiderinformationbetweenthetimewhentheinformationsubjecttoamaterialeventdisclosuredevelopsuntilitisannouncedtopubliconPDP. Asageneralprinciple,TüpraşandthepersonswhoworkinthenameandonaccountofTüpraşcannot,byanymeans,shareinformationthatisnotpubliclyavailableandthatmayqualifyforamaterialeventdisclosure,withthirdparties.Ifitisdeterminedthatinsiderinformationhasunintentionallybeensharedbythesepeoplewiththirdparties,incaseitisconcludedthattheconfidentialityoftheinformationcannotbeprotectedwithinthescopeofCMBlegislations,amaterialeventdisclosureismade. Ifpublicdisclosureofsuchinformationispostponed,personswithaccesstothesubjectinformationatthetimeofpostponementareinformedabouttheirobligationsandsanctionsapplicablethereof.Confidentialityclausesareaddedtoagreementswiththirdpartieswhohaveaccesstothesubjectinformationinordertoensurethatreasonableprecautionstoensureconfidentialityareimplementedbysuchpersons. POLICY ON PUBLIC DISCLOSURE OF FINANCIAL INFORMATIONTüpraş’sfinancialstatementsarepreparedinaccordancewithTurkishAccounting/FinancialReportingStandardswithinthescopeofCMBregulations.Annualfinancialstatementsdisclosedareauditedandsemi-annualfinancialstatementsarereviewedbyindependentauditors. Priortopublicdisclosure,financialstatementsandfootnotes,preparedaccordingtoCMBregulationsareapprovedbytheAuditCommitteeandsubmittedtotheBoardofDirectorsforapproval.AftertheResponsibilityStatementhasbeensigned,thefinancialstatements,footnotesandtheindependentauditor’sreportaremadepubliconPDP.HistoricfinancialstatementsandfootnotesareavailableonTüpraşInvestorRelationswebsite.Inaddition,theInvestorRelationsUnitperiodicallypreparespresentationsonfinancials,refinerymargins,productionandsalesvolumes,capitalexpendituresandsectordatainordertobetterexplainthefinances,anddistributesthemelectronicallyandpublishesthemonthewebsite. ANNUAL AND INTERIM REPORTSThecontentsoftheannualandinterimreportsarepreparedasperinternationalstandards,CMBregulationsandCMBcorporategovernanceprinciples.FollowingpreparationbytheFinancialPlanning&ReportingDepartment,thereportsaresubmittedtotheBoardofDirectorsforapprovalandpubliclydisclosedonthewebsitetogetherwiththefinancialstatements.TheannualreportisavailableonthewebsiteinTurkishandEnglish.PrintedcopiesmayalsobeobtainedfromtheFinancialPlanning&ReportingDepartment. Inaddition,thequarterlyinterimreportsandfinancialsarepubliclydisclosedviaPDPandsharedwiththeinvestorsontheCompanywebsite.

CORPORATE WEBSITETüpraşcorporatewebsiteattheaddressofwww.tupras.com.trisactivelyusedforpublicdisclosureasrecommendedbyCMBCorporateGovernancePrinciples.DisclosurestakingplaceinTüpraşcorporatewebsitedonotsupersedetheannouncementsorspecialoccurrencenotificationsthatarerequiredtobemadepursuanttotheprovisionsoftheCapitalMarketsLegislation.ThewebsiteispreparedinTurkishandEnglish,andwiththeformandcontentstipulatedbytheCMBCorporateGovernancePrinciples.


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Notable topics that can be followed from the website are summarized below. • Detailedinformationoncorporateidentity,• Visionandmainstrategies,• InformationonthemembersoftheBoardofDirectorsandcompanyseniormanagement,• Organizationandpartnershipstructureofthecompany,• Articlesofincorporation,• Traderegistryinformation,• Financialinformation,indicatorsandanalysisreports,• Pressreleases,•MaterialDisclosures,• Information,graphsandmaterialsonstockcertificatesandperformance,• Presentationsmadetotheinvestors,• Informationontheanalystsassessingthecompanyandanalystreports,• Creditratingscore,• GeneralAssemblydate,agendaandexplanationsontheitemsintheagenda,• GeneralAssemblyinformationdocument,• GeneralAssemblyminutesandlistofparticipants,• Proxysample,• Corporategovernanceapplicationsandconformityreport,• Dividendpolicy,historyandcapitalincreases,• Informationpolicy,• Frequentlyaskedquestionssection,• Detailedinformationconcerningcorporatesocialresponsibility.

ANNOUNCEMENTS PERTAINING TO THE EXERCISE OF SHAREHOLDER RIGHTSWithinthescopeofCMBregulations,shareholdersareinformedaboutthegeneralassemblymeetings,capitalincreases,dividendpayments,mergersandsplit-offsthroughtheuseofprospectusandannouncementsdisclosedonPDP.ThesubjectdocumentsarepublishedonTüpraşwebsite,inadditiontothemediaforeseenintheregulations,tofacilitateeasyaccesstoinvestors.

FORWARD LOOKING STATEMENTSTüpraşdisclosesForwardLookingStatementsinlinewiththefollowingprinciples:

• Forwardlookingstatementsalongwiththeirmainunderlyingassumptionsshallbedisclosedmaximumfourtimeswithinayear,inprinciplefollowingthedisclosureofquarterlyfinancialstatements.

• ThedisclosureshallbedisseminatedthroughinvestorpresentationsorquarterlyactivityreportsbothofwhicharepublishedonPDPandonthecompanywebsiteorbymeansofamaterialeventdisclosureifdeemednecessary.

• Incasethedisclosedexpectationschangematerially,inotherwordstheexpectationsandassumptionsexpressedintheforward-lookingstatementsdisclosedtothepublicarenotrealizedorturnouttobeimpossibletoberealized,therevisedexpectationsaredisseminatedtothepublicthroughmaterialeventdisclosureswithoutanylimitationintermsofthenumberofthedisclosure.

• Incasematerialdiscrepanciesarisebetweentheexpectationsdisclosedandtherealizations,thereasonsofthosediscrepanciesarealsoexplainedintheforwardlookingstatements.

• Forwardlookingstatementsmayinclude,butarenotlimitedto,Mediterraneanrefiningmargin,refinerycapacityutilization,productionandsales,cost/properties/benefitsofinvestmentsandprojectdetails.


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Audit Committee Report Related to Financial Statements

Decision Date: 14.02.2018Decision No: 2018/2Subject: ConsolidatedFinancialStatementsdated31.12.2017

To the Board of Directors of Tüpraş

WeconvenetoreviewandgiveouropiniononthefinancialstatementsofTÜPRAŞfortheperiodof1January-31December2017andalsotoreviewtheindependentauditreportofPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.TheconsolidatedfinancialstatementsofTÜPRAŞhavebeenpreparedbythecompanymanagementinaccordancewiththeCMBFinancialReportingCommuniquénumberedasII.14.1.AccordingtotherelatedCommuniqué,entitiesshallpreparetheirfinancialstatementsinaccordancewithTurkishAccountingPrinciples/TurkishFinancialReportingStandards(“TAP/TFRS)andinlinewiththerecommendedformatsoftheCMB.

Duringthisreview,thefairpresentationandaccuracyofthefinancialstatementsreferredtoaboveinconformitywiththeaccountingpoliciesofthecompanyhavebeenelaborated.Independentauditors’andcompanymanagement’sopinionswererequestedasdeemednecessary.

Afterthereviewandevaluationswemadebasedontheinformationprovidedtous;wehaveconcludedthattheconsolidatedfinancialstatementsreferredtoabovearefairlyandaccuratelypresentedandareinlinewiththeaccountingpoliciesofthecompany.Therefore,wewouldliketosubmittheaforementionedfinancialstatementstotheapprovaloftheBoardofDirectors.

Sincerely,

Kutsan Çelebican Osman Mete AltanChairmanoftheAuditCommittee MemberoftheAuditCommittee


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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

Regarding the Approval of Financial Statements by the Board of DirectorsDecision Date:14.02.2018Resolution No:2018/6

Weherebyacceptourresponsibilityforthestatementmadeandthuspresentthat:

The“FinancialStatements”-issuedasperthe9tharticleoftheCapitalMarketsBoard’s(CMB)“CommuniquéII-14.1.(Communiqué)ontheprinciplesoffinancialreportingincapitalmarkets”inconformitywiththeTurkishAccountingStandards/TurkishFinancialReportingStandards(“TAS/TFRS”)andwiththeformatsstipulatedbytheCMB-fortheaccountingperiodbetween01.01.2017-31.12.2017,includingthefootnotes,consolidatedfinancialsituationstatement,comprehensiveincomestatement,cashflowstatementandstatementofchangesinequitypreparedbyourCompanyandauditedindependentlybyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.;

• werereviewedbyourCompany,• withintheframeworkoftheinformationwehaveobtainedinourareaofdutyandresponsibilityatourCompany-donotincludeanystatementsontheimportantissuescontrarytofactsanddonothaveanyimperfectionsthatcouldbemisleadingasofthedatethestatementwasmade,

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

inaccordancewiththeCMBregulations.

Sincerely,

Kutsan Çelebican Osman Mete Altan Doğan KorkmazChairmanofAuditCommittee MemberofAuditCommittee AssistantGeneralManager


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Audit Committee Report Related to Annual Report

TURKISH PETROLEUM REFINERIES CORPORATIONAUDIT COMMITTEE REPORT

Decision Date: 26.02.2018Decision No: 2018/3Subject: AnnualReportdated31.12.2017

To the Board of Directors of Tüpraş

WearegatheredtoexamineandexpressanopinionontheindependentauditreportpreparedbyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.fortheannualreportfortheperiod1January-31December2017bythemanagementofTüpraşcompatiblewiththeformatsdeterminedbyCMBandTurkeyAccountingStandards/TurkeyFinancialReportingStandards(TMS/TFRS)inaccordancewiththeii-14.1.PrinciplesofFinancialReportinginCapitalMarketsCommuniquébyCapitalMarketsBoardandtheTurkishCommercialCode.

Inthisreview,assessmentshavebeenmaderegardingtheaccuracyandreliabilityofthementionedannualreportrelatedto1January-31December2017periodwithaccountingpoliciesoftheCompanyandwithfacts.Ifnecessary,opinionsoftheindependentauditoroftheauditingcompanyandresponsiblemanagersoftheCompanyweretaken.

Weherebydecidedpositivelyfortheaccuracyandconvenienceoftheannualreportfromtheperiod1January-31December2017withtheprinciplesofaccountingandweshallsubmittheAnnualReportontheapprovaloftheBoardofDirectors.

Sincerely,

Kutsan Çelebican Osman Mete AltanChairmanoftheAuditCommittee MemberoftheAuditCommittee


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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

Regardıng the Approval Of The Annual Report By The Board Of Dırectors

Decision Date: 26.02.2018Resolution No: 2018/10

Our2017annualreportpreparedbyourCompanyandauditedindependentlybyPwCBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.andwhichhasbeenpreparedinaccordancewiththeII-14.1.PrinciplesofFinancialReportinginCapitalMarketsCommuniquébyCapitalMarketsBoardandtheTurkishCommercialCodeispresentedasattachment.

Wedeclareittoyourinformationandacceptthatweareresponsibleforthestatement,thattheannualreportpreparedbyourCompanyhasbeenexamined• inaccordancewiththeregulationsofCMB,• Itdoesnotcontainanygapsthatcouldresultinmisleadingstatementsasofthedateofannouncementorfalsestatementsaboutimportantmattersintheframeworkofourareasofdutiesandresponsibilitiesinourcompany,

• TheannualreportwhichhasbeenpreparedinaccordancewiththeCommuniquéreflectstheperformanceanddevelopmentofbusinessandthefinancialstateofthecompanytogetherwiththosefactorsunderconsolidationanduncertaintiesandrisksclearly.

Sincerely,

Kutsan Çelebican Osman Mete Altan Doğan KorkmazChairmanofAuditCommittee MemberofAuditCommittee AssistantGeneralManager


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I hereby declare that I am candidate for independent board membership on the Board of Directors of Türkiye Petrol Rafinerileri A.Ş. (“Company”) under related regulations, Articles of Association of the Company and the criteria stated in the Capital Markets Board’s Communiqué on Corporate Governance. In that regard I also confirm that;

a) In the last five years, I, my spouse or my up to the second degree blood or affinity relatives is not or has not been; employed by as a key management personnel; has not had shareholding exceeding 5% directly or indirectly; or has not been involved in any material business dealings with the Company, its subsidiaries and affiliates, or shareholders controlling the Company or having material effect over the Company and all entities controlled by those shareholders,

b) In the last five years, I am not or have not been employed by as an executive having significant duties and responsibilities or have not been a member of the board or did not have shareholding exceeding 5% of an entity which has had a contractual relationship with the Company for a material business transaction including audit (including tax audit, legal audit, and internal audit) rating or consulting services during the terms in which the goods or services were provided,

c) My CV indicates that I have skills, knowledge and expertise relevant to the Company’s business and extensive experience to fulfill my duties as an independent board member,

d) After my election I will not work full time in a Turkish governmental or public institution, except for the faculty membership under relevant regulations,

e) I am deemed to be resident in Turkey according to Revenue Tax Law No. 193 dated 31.12.1960,

f) I am capable to contribute positively to the operations of the Company, to maintain my objectivity in conflicts of interests between the Company and the shareholders, to have strong ethical standards, professional reputation and experience to freely take decisions by considering the rights of the stakeholders,

g) I will dedicate enough time to follow up the activities of the Company and for the duly fulfillment of my responsibilities,

h) I have not been on the board of the Company for more than six years within last ten years,

i) I am not serving as an independent board member in neither more than 3 corporations controlled by the company or its controlling shareholders nor in total more than 5 corporations listed in Borsa İstanbul,

j) I am not registered in the name of any legal entity elected as a board member.

Muharrem Hilmi Kayhan

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Ayşe Canan Ediboğlu

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Kamil Ömer Bozer

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Ahmet Turul

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Süleyman Karaman

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Muharrem Hilmi KayhanIndependent Member

Muharrem Kayhan received education at St. Joseph French School and Robert College of Istanbul. He got his Engineering Degree in Textiles in 1976 from the University of Manchester in England. He received his MBA from Cornell University in 1978. Muharrem Kayhan is presently Chairman of the boards of Söktaş and its subsidiaries. He has represented the interests of the Turkish textile industry in various European Union platforms while serving on the boards of the Aegean Chamber of Industry, the Exporters’ Union, and the Turkish Textile Employers’ Union. He served as the Chairman of TÜSİAD between 1997 and 1999, and is now an Honorary Chairman. Muharrem Kayhan serves on the Board of Trustees of Robert College the Izmir Culture, Art and Education Foundation, and Bizim Okul Foundation. He has represented Spain as Honorary Consul in İzmir since 2003. He is the recipient of the Turkish National Assembly Distinguished Service Award (2009). Muharrem Hilmi Kayhan is a member of Koç Holding’s independent Board of Directors between the accounting periods of 2012-2017.

Muharrem Hilmi Kayhan has not held any positions at Tüpraş or its subsidiaries in the past five years. He is not associated with the senior executives of Tüpraş in whatsoever manner. He does not hold, directly or indirectly, 5% or more share in the capital of Tüpraş, nor is he an employee representative or has any relationship of a commercial nature with Tüpraş.

Ayşe Canan EdiboğluIndependent Member

After completing her high school education at Ancaster House School, she got her bachelor’s degree in economics and her master’s degree in financial management and control from the University of Southampton, U.K. After working as a research assistant at the same University, she continued her career as a Planning Manager at Shell in 1980.

She held various positions at Shell Turkey, before being appointed as its General Manager in 2002 and Shell Turkey National Manager in 2006. She sat as a member on the Board of Directors of Shell-Turcas Petrol A.Ş. Ms. Ediboğlu is a member of Aygaz’s independent Board of Directors between the accounting periods of 2012-2017.

Ayşe Canan Ediboğlu has not held any positions at Tüpraş or its subsidiaries in the past five years. She is not associated with the senior executives of Tüpraş in whatsoever manner. She does not hold, directly or indirectly, 5% or more share in the capital of Tüpraş, nor is she an employee representative or has any relationship of a commercial nature with Tüpraş.

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Kamil Ömer BozerIndependent Member

After receiving his degree in business administration from the Middle East Technical University, Kamil Ömer Bozer completed a master’s degree at Georgia State University in U.S.A. He began his career as a management trainee at Koç Holding A.Ş. in 1985. After serving as Deputy Chief Executive of Maret A.Ş. from 1990 and as General Manager of Düzey A.Ş. from 1995, he became General Manager of Migros Türk T.A.Ş. in 2002. He was appointed President of Food, Retailing and Tourism Group in 2005. He served as President of Food and Retailing Group between 2006 and 2008, and once again as President of Tourism, Food and Retailing Group from 2009 to April 2011.

From 2012 until the dates of their respective General Assembly Meetings in 2018, Mr. Bozer sat as an independent member on the Boards of Directors of Anadolu Efes Sanayii A.Ş., Anadolu Isuzu Otomotiv Sanayi ve Ticaret A.Ş., Adel Kalemcilik Ticaret ve Sanayi A.Ş. He is also an independent Board member at Boyner Perakende A.Ş. and Söktaş Tekstil A.Ş., in which positions he still serves. Additionally, he was a member on the Boards of Directors of Carrefoursa A.Ş. and Teknosa Ticaret A.Ş. from 2016 until the beginning of 2018.

Kamil Ömer Bozer has not held any positions at Tüpraş or its subsidiaries in the past five years. He is not associated with the senior executives of Tüpraş in whatsoever manner. He does not hold, directly or indirectly, 5% or more share in the capital of Tüpraş, nor is he an employee representative or has any relationship of a commercial nature with Tüpraş.

154


Affiliated Companies Report

AFFILIATED COMPANIES REPORT PREPARED UNDER ARTICLE 199 OF THE TURKISH COMMERCIAL CODE

In accordance with Article 199 of the Turkish Commercial Code No. 6102 which entered into force on 1 July 2012, The Board of Directors of Turkey Petroleum Refineries Corporation is obligated to prepare a report about the relations of the Company with its controlling shareholder and affiliated companies within first three months of the year of operation and to include the result of the report in the activity report. Necessary explanations about the transactions of Turkey Petroleum Refineries Corporation with related parties are located in the footnote of the financial report No. 31.

In the Report dated February 14, 2018 prepared by Turkey Petroleum Refineries Corporation, it is said that “In all transactions of Turkey Petroleum Refineries Corporation with its controlling shareholder and its subsidiaries in 2017, the conclusion has been reached that a suitable counter action was provided in all transactions and there is no measure taken or ignored which can harm the corporation and there is no need for an action or measure for equalization in this framework considering the states and conditions known by us at the moment of transaction or when the measure is taken or ignored.”

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Türkiye Petrol Rafinerileri A.Ş.

(Para birimi aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak belirtilmiştir.)

31 Aralık 2016 Tarihinde Sona Eren Yıla Ait KonsolideFinansal Tablolara Ait Açıklayıcı Notlar


1 JANUARY - 31 DECEMBER 2017

CONSOLIDATED FINANCIAL STATEMENTS

AND THE INDEPENDENT AUDITOR’S REPORT

(Convenience Translation of Consolidated Financial Statements Originally Issued in Turkish)

156


Independent Auditor’s Report

CONVENIENCE TRANSLATION INTO ENGLISH OFINDEPENDENT AUDITOR’S REPORTORIGINALLY ISSUED IN TURKISH

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors 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 2017 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 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Turkish Accounting Standards (“TAS”).

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.

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.


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3. Key Audit Matters (Continued)

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 USD1,254,421 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 TL1,477,564 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 2017.

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 judgments and estimates, such as future exchange rates, crude oil/product prices and export sales tonnages.

· Since realization of such key management judgments 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 analyzing past performances and review of sensitivity analysis.

We evaluated the appropriateness of cash flow hedge accounting documentation and the reasonableness of the key management assumptions used in the effectiveness tests with the support of our specialists. We compared the key management assumptions (such as crude oil/product prices, export sales tonnages and exchange rate estimations) used in the effectiveness tests against 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 TAS.

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 2017 the Group’s consolidated financial statements include net deferred tax assets amounting to TRY3,067,871 thousand.

The Group’s accounting policies and other related disclosures on deferred tax assets and liabilities are disclosed in Note 2.3.13 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 realization 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 TAS and the related tax legislations, (ii) to assess its recoverability and (iii) to test its mathematical accuracy. In that context the following summarized 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 utilization of investment incentives.

· We evaluated the deferred tax assets and liabilities disclosures’ compliance with TAS.

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


158

4. Other Matter

The consolidated financial statements of the Group as of 31 December 2016 and for the year then ended were audited by another audit firm, whose audit report dated 2 August 2017 expressed an unqualified opinion.

5. 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 TAS, 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.

6. 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 skepticism 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.


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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 2017 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 14 February 2018.

İstanbul, 14 February 2018



160


PAGE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 162

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 164

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 166

CONSOLIDATED STATEMENTS OF CASH FLOWS 168

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 169 - 224

NOTE 1 Organization and nature of operations of the group 169

NOTE 2 Basis of presentation of consolidated financial statements 171

NOTE 3 Business combinations 183

NOTE 4 Cash and cash equıvalents 184

NOTE 5 Financial liabilities 185

NOTE 6 Trade receivables and payables 188

NOTE 7 Other receivables and payables 190

NOTE 8 Inventories 190

NOTE 9 Financial investments 190

NOTE 10 Investments accounted for using the equity method 191

NOTE 11 Investment property 192

NOTE 12 Property, plant and equipment 193

NOTE 13 Intangible assets 195

NOTE 14 Prepaid expenses 196

NOTE 15 Other assets and liabilities 196

NOTE 16 Deferred income 198

NOTE 17 Provisions 198

NOTE 18 Liabilities for employee benefits 201

NOTE 19 Other payables 201

NOTE 20 Derivative instruments 201

NOTE 21 Government grants 202

NOTE 22 Commitments and contingent assets and liabilities 203

NOTE 23 Equity 205

NOTE 24 Revenue and cost of sales 206

NOTE 25 General administrative expenses, marketing expenses and research and development expenses 207

NOTE 26 Other operating income/(expenses) 208

NOTE 27 Income/(expense) from investment activities 208

NOTE 28 Financial income/(expenses) 208

NOTE 29 Tax assets and liabilities 209

NOTE 30 Earnings per share 211

NOTE 31 Related party transactions 211

NOTE 32 Financial instruments and financial risk management 215

NOTE 33 Subsequent events 224

Table of Contents

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(Amounts expressed in thousands of Turkish Lira (“TRY”), unless otherwise indicated)

NotesAudited

31 December 2017Audited

31 December 2016

ASSETS

Current assets 20,366,024 13,667,060

Cash and cash equivalents 4 8,802,069 6,050,721Trade receivables 6 5,027,033 3,180,282

Due from related parties 6, 31 1,399,601 751,824Trade receivables from third parties 3,627,432 2,428,458

Other receivables 7 84,267 25,626Other receivables from third parties 84,267 25,626

Derivative instruments 20 346,909 34,731Inventories 8 5,291,090 3,608,439Prepaid expenses 14 62,397 97,903Current income tax assets 29 - 95,928Other current assets 15 752,259 573,430

Non-current assets 17,796,955 17,551,120

Financial investments 9 9,000 4,000Investments accounted for using the equity method 10 1,134,364 923,994Investment properties 11 4,621 4,621Property, plant and equipment 12 12,303,437 11,741,476Intangible assets 13 65,187 55,106

Other intangible assets 65,187 55,106Derivative instruments 20 100,560 368,882Prepaid expenses 14 99,276 238,352Deferred tax assets 29 3,067,871 3,227,031Other non-current assets 15 1,012,639 987,658

Total assets 38,162,979 31,218,180

These consolidated financial statements as of and for the year ended 31 December 2017 has been approved for issue by the Board of Directors (“BOD”) on 14 February 2018. These consolidated financial statements will be finalised following their approval in the General Assembly.

Consolidated Statements of Financial Position as at 31 December 2017

The accompanying notes, form an integral part of these consolidated financial statements.

162




NotesAudited

31 December 2017Audited

31 December 2016

LIABILITIES

Current liabilities 17,675,669 12,660,262

Short-term financial liabilities 5 340,875 385,524Current portion of long term financial liabilities 5 4,932,839 1,572,434Trade payables 6 8,213,166 6,987,843

Due to related parties 6, 31 115,456 88,017Trade payables, third parties 8,097,710 6,899,826

Liabilities for employee benefits 18 119,833 92,442Other payables 19 36,797 27,953

Due to related parties 19, 31 23,463 18,546Other payables to third parties 13,334 9,407

Derivative instruments 20 177,137 29,454Deferred income 16 20,428 15,417Current income tax liabilities 29 21,296 141,217Provisions 17 89,924 65,056

Provisions for employee benefits 12,629 13,571Other provisions 77,295 51,485

Other current liabilities 15 3,723,374 3,342,922

Non-current liabilities 10,009,649 10,390,885

Long-term financial liabilities 5 9,777,270 10,176,307Provisions 17 223,734 207,415

Provisions for employee benefits 223,734 207,415Deferred income 16 4,112 3,992Derivative instruments 20 3,364 1,782Other non-current liabilities 15 1,169 1,389

Non-current liabilities 27,685,318 23,051,147

Equity 10,477,661 8,167,033

Share capital 23 250,419 250,419Adjustment to share capital 23 1,344,243 1,344,243Share premiums/discounts - 172Accumulated other comprehensive income/(expense)not to be reclassified to profit or loss (3,361) (7,986)

Gains/ losses on revaluation and remeasurement (2,211) (6,124)Actuarial gain/(loss) arising from defined benefit plans (2,211) (6,124)

Share of other comprehensive income of investments accounted for using equity method that will not be reclassified to profit or loss (1,150) (1,862)

Accumulated other comprehensive income/(expense) to be reclassified to profit or loss (960,973) (986,870)Hedging gains/(losses) (1,141,847) (1,132,725)

Cash flow hedge gains/(losses) (1,141,847) (1,132,725)Share of other comprehensive income of investments accounted for using equity method that will be reclassified to profit or loss 180,874 145,855Restricted reserves 23 279,668 331,337Retained earnings 5,651,805 5,363,804Net income 3,811,546 1,793,267

Total equity attributable to equity holders of the parent 10,373,347 8,088,386

Non-controlling interests 104,314 78,647

Total equity and liabilities 38,162,979 31,218,180

Consolidated Statements of Financial Position as at 31 December 2017


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Notes

Audited1 January -

31 December 2017

Audited1 January -

31 December 2016

Revenue 24 53,948,110 34,854,851Cost of sales 24 (47,734,212) (31,205,624)

Gross profit 6,213,898 3,649,227

General administrative expenses 25 (865,401) (748,280)Marketing expenses 25 (268,889) (221,602)Research and development expenses 25 (15,950) (25,565)Other operating income 26 261,261 184,751Other operating expenses 26 (467,460) (481,242)

Operating profit/(loss) 4,857,459 2,357,289

Income from investment activities 27 - 161Expense from investment activities 27 (10,199) -Income/(loss) from investments accounted by equity method 10 244,639 158,750

Operating profit before financial income/(expense) 5,091,899 2,516,200

Financial income 28 1,162,799 1,173,872Financial expense 28 (1,780,660) (1,746,050)

Profit before tax from continued operations 4,474,038 1,944,022

Tax income/(expense) (633,482) (131,232)Taxes on income (464,902) (91,633)Deferred tax income/ (expense) 29 (168,580) (39,599)

Net income from continued operations 3,840,556 1,812,790

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2017

164





Notes

Audited1 January -

31 December 2017

Audited1 January -

31 December 2016

Other comprehensive income:Items not to be reclassified to profit or loss 4,668 (4,433)Actuarial gain/(loss) arising from defined benefit plans 4,941 (4,249)Share of other comprehensive income accounted for investment using equity method that will be not reclassified to profit or loss 712 (1,011)

Actuarial gain/(loss) arising from defined benefit plans accounted for investment using equity method 712 (1,011)

Tax effect of other comprehensive income/(loss) not to be reclassified to profit or loss (985) 827

Deferred tax income/(expense) (985) 827

Items to be reclassified to profit or loss 22,511 (580,386)Share of other comprehensive income accounted for investmentusing equity method that will be reclassified to profit or loss 35,019 46,038

Actuarial gain/(loss) of revaluation or classification of investments using equity method 32,218 40,402Gain/(loss) from translation of foreign currency of investments using equity method 2,801 5,636

Income/(expense) relating to avoidance of risk of cash flow (22,913) (777,964)Income/(loss) of avoidance of risk cash flow (22,913) (777,964)

Tax effect of other comprehensive income/(loss) to be reclassified to profit or loss 10,405 151,540Deferred tax income/(expense) 10,405 151,540

Other comprehensive income/(expense) 27,179 (584,819)

Total comprehensive income 3,867,735 1,227,971

Distribution of income for the period:Non-controlling interests 29,010 19,523Attributable to equity holders of the parent 3,811,546 1,793,267

Distribution of total comprehensive incomeNon-controlling interests 25,667 15,307Attributable to equity holders of the parent 3,842,068 1,212,664

Earnings (loss) per share from continued operationsEarnings per share with nominal value Kr1 each (Kr) 15.22 7.16

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2017

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Accumulated other Comprehensive income/

(expense) not to be reclassified to profit or

loss

Accumulated other Comprehensive income/(expense) to be reclassified

to profit or lossGains/(losses) on revaluation andremeasurement

Hedge gains/

(losses) Retained earnings

Sharecapital

Adjustmentto share

capital

Sharepremiums

(discounts)

Actuarial gains/(losses) arising

from definedbenefit plans

Cash flowhedgegains/

(losses)

Currencytranslation

differences

Share of othercomprehensive

income ofinvestments

accountedusing equity method

which will beto profit loss

Restrictedreserves

Retainedearnings

NetIncome/expense

Equityholders

of theparent

Non-controlling

interestTotal

equity

1 January 2016 250,419 1,344,243 172 (2,771) (851) (510,448) 99,817 163,401 4,410,959 2,550,168 8,305,109 63,340 8,368,449

Adjustments to previous period effects - - - - - - - - 198,338 - 198,338 - 198,338Transfers - - - - - - - 167,936 2,382,232 (2,550,168) - - -Dividends paid - - - - - - - - (1,627,725) - (1,627,725) - (1,627,725)

- Net profit for period - - - - - - - - - 1,793,267 1,793,267 19,523 1,812,790- Other comprehensive income - - - (3,353) (1,011) (622,277) 46,038 - - - (580,603) (4,216) (584,819)

Total comprehensive income - - - (3,353) (1,011) (622,277) 46,038 - - 1,793,267 1,212,664 15,307 1,227,971

31 December 2016 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

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


Consolidated Statement of Changes in Equity For the Year Ended 31 December 2017

166


Accumulated other Comprehensive income/

(expense) not to be reclassified to profit or

loss

Accumulated other Comprehensive income/(expense) to be reclassified

to profit or lossGains/(losses) on revaluation andremeasurement

Hedge gains/

(losses) Retained earnings

Sharecapital

Adjustmentto share

capital

Sharepremiums

(discounts)

Actuarial gains/(losses) arising

from definedbenefit plans

Cash flowhedgegains/

(losses)

Currencytranslation

differences

Share of othercomprehensive

income ofinvestments

accountedusing equity method

which will beto profit loss

Restrictedreserves

Retainedearnings

NetIncome/expense

Equityholders

of theparent

Non-controlling

interestTotal

equity

1 January 2016 250,419 1,344,243 172 (2,771) (851) (510,448) 99,817 163,401 4,410,959 2,550,168 8,305,109 63,340 8,368,449

Adjustments to previous period effects - - - - - - - - 198,338 - 198,338 - 198,338Transfers - - - - - - - 167,936 2,382,232 (2,550,168) - - -Dividends paid - - - - - - - - (1,627,725) - (1,627,725) - (1,627,725)

- Net profit for period - - - - - - - - - 1,793,267 1,793,267 19,523 1,812,790- Other comprehensive income - - - (3,353) (1,011) (622,277) 46,038 - - - (580,603) (4,216) (584,819)

Total comprehensive income - - - (3,353) (1,011) (622,277) 46,038 - - 1,793,267 1,212,664 15,307 1,227,971

31 December 2016 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

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

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Notes

Audited1 January -

31 December 2017

Audited1 January -

31 December 2016

Cash flows from operating activities 2.917.438 4.705.447 Profit/(loss) 3,840,556 1,812,790Adjustment for reconciliation of profit/(loss) 1,782,086 1,114,178Adjustment for depreciation and amortisation expense 12, 13 573,640 541,003Adjustments for stock impairment(cancelation) 1,246 (102,114)- Adjustments for stock impairment 8 1,246 (102,114)- Adjustment for provisions 17 110,197 57,558- Adjustment for interest (income) and expense 28 160,195 388.846- Adjustment for unrealized foreign currency translation differences 28 (461,105) (709,477)- Adjustment for fair value (gain) or loss (92.662) (2.179)- Adjustment for income of investments accounted by equity method 10 (244,639) (158,750)- Adjustment for tax expenses(income) 633,482 131,232- Adjustment for (gain)/loss on sales of property, plant and equipment 27 10,199 (161)- Adjustment for other items related with cash flow of investment or financial activities 28 1,033,591 976.068- Other adjustments for reconciliation of profit/(loss) 57,942 (7.848)

Changes in working capital (2,152,135) 1.723.058Adjustment for decrease/(increase) in trade receivables (1,873,499) (638,101)Adjustment for decrease/(increase) in other receivables related with operations (148,602) 177,405Adjustment for decrease/(increase) derivative assets (43,856) -Adjustment for decrease/(increase) in inventories (1,683,897) (1,404,164)Adjustment for increase/(decrease) in trade payables 1,222,948 3,136,433Adjustment for increase/(decrease) in other payables related with operations 225,506 451,485Adjustment for decrease/(increase) derivative liabilities 149,265 -

Cash flows from operating activities 3,470,507 4.650.026Tax returns/(payments) (488,895) (136,717)Other cash inflow/(outflow) (64,175) 192,138

Cash flows from investing activities (1,030,148) (841.751) Cash outflows in subsidiaries regarding additional share purchases 9 (5,000) -Cash inflows from the sales of property, plant and equipment and intangible assets 4,802 1,650Cash outflows from the purchase of property, plant and equipment and intangible assets (1,099,950) (885,401)Dividends received 10 70,000 42,000

Cash flows from financing activities 221.938 (1.749.939) Cash inflows from financial liabilities 5 43,859,854 36,558,822Cash outflows from financial liabilities 5 (42,051,025) (36.280.598)Cash inflows from derivative instruments 180,446 -Cash outflows from derivative instruments (93.501) -Dividends paid (1,557,107) (1,627,725)Interest paid (673,139) (698.377)Interest received 556,410 297,939

Net increase/(decrease) in cash and cash equivalents before the effect of foreign currency translation differences 2,109,228 2,113,757 Impact of foreign currency translation differences on cash and cash equivalents 461,105 709,477 Net increase/(decrease) in cash and cash equivalents 2,570,333 2,823,234 Cash and cash equivalents at beginning of period 5,022,402 2,199,168 Cash and cash equivalents at end of period 4 7,592,735 5,022,402


Consolidated Statement of Cash Flows For the Year Ended 31 December 2017

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Türkiye Petrol Rafinerileri A.Ş.Notes to the Consolidated Financial Statements For the Year Ended 31 December 2017(Amounts expressed in thousands of Turkish Lira (“TRY”), unless otherwise indicated)

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 crude oil, to import and export petroleum products when necessary, 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”) (previously known as Istanbul Stock Exchange (“ISE”)) since 1991. As at 31 December 2017, the shares quoted on the BIST are 49% of the total shares. As of 31 December 2017, 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

Parent of the Company is controlled by Koç Holding A.Ş., Koç Family and the companies owned by Koç Family.

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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:

Subsidiaries Country 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 Crude oil and petroleum products transportationKadıköy 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 carriage and transportation

(*) Körfez, a subsidiary of the Group, has not been included in the scope of consolidation in the consolidated financial statements for the period ended 31 December 2017 on the grounds of materiality of its stand-alone and total financial statements as to amount and composition, and accounted for as financial asset available-for-sale. As of 31 December 2017 total assets of Körfez is TRY11,921 thousand and net period loss of Körfez is TRY4,743 thousand.

Joint ventures Country of 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 total number of employees of the Group as at 31 December 2017 is 5,499 (31 December 2016: 5,296).

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

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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 Accounting Standards/Turkish Financial Reporting Standards and interpretations regarding these standards as published by the Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”).

With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for listed companies in Turkey. The Group’s financial statements have been prepared in accordance with this decision.

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 2017 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 2017:

• Amendments to TAS 7, ‘Statement of cash flows’; on disclosure initiative effective from annual periods beginning on or after 1 January 2017. These amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.

• Amendments TAS 12, ‘Income Taxes’; effective from annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. It also clarifies certain other aspects of accounting for deferred tax assets.

• Annual improvements 2014-2016, effective from annual periods beginning on or after 1 January 2017:

• TFRS 12, ‘Disclosure of interests in other entities’; regarding clarification of the scope of the standard. These amendments should be applied retrospectively for annual periods beginning on or after 1 January 2017. This amendment clarifies that the disclosures requirement of TFRS 12 are applicable to interest in entities classified as held for sale except for summarized financial information.

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2. Basis of presentation of consolidated financial statements (Continued)

2.1. Basis of presentation (Continued)

b) Standards, amendments and interpretations effective after 1 January 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.

• 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 top line in financial statements globally.

• 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 licenses 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 IASB has also included additional practical expedients related to transition to the new revenue standard.

• 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.

• 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.

• Annual improvements 2014-2016; effective from annual periods beginning on or after 1 January 2018. These amendments impact 2 standards:

• 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,

• TAS 28, ‘Investments in associates and joint venture’ regarding measuring an associate or joint venture at fair value.

• 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.

• 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 TAS 39.

• 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.

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• TFRS 16, ‘Leases’; effective from annual periods beginning on or after 1 January 2019, this standard replaces the current guidance in TAS 17 and is a farreaching change in accounting by lessees in particular. Under TAS 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.

• IFRIC 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 TAS 12 ‘Income taxes’, are applied where there is uncertainty over income tax treatments. The TFRS IC had clarified previously that TAS 12, not TAS 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.

• TFRS 17, ‘Insurance contracts’; effective from annual periods beginning on or after 1 January 2021. This standard replaces TFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. TFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.

• The possible effects regarding the amendments in TFRS 15, TFRS 9, TFRS 16 on the consolidated financial statements has been evaluated by the Group management. According to the evaluations made throughout the period, considering agreements made with customers and related costs, it is anticipated that subjects such as sales guarantees, combined goods and services sales to be assessed under TFRS 15, will not have a significant impact on the consolidated financial statements of the Group. The Group management will reevaluate the effects of TFRS 15 considering possible future developments. According to TFRS 16, total amount of leased assets under operational lease is determined as of the balance sheet date and the evaluation of assets planned to be acquired in the future by operational lease has been performed. Group. Evaluations of the Group management are ongoing regarding the possible effects of these respective alteriation. TFRS 9 includes requirements for measurement and classification of financial assets and liabilities, and also involves expected credit risk model, which will replace impairment loss model. As of 31 December 2017, considering the insignificant amount of doubtful receivables in the total amount of trade receivables, it is predicted that the expected credit risk model will not have any significant effect on the consolidated financial statements of the Group. Evaluations of the Group management are ongoing regarding the possible effects of these new standards.

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 “Income/(loss) from translation of foreign currency of investments using equity method” under the other comprehensive income statement and shareholders’ equity.

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2.1.4 Principles of consolidation

a) The consolidated financial statements for the year ended 31 December 2017 have been prepared in accordance with principles stated on the consolidated financial statements for the year ended 31 December 2016 and include financial statements of Tüpraş, and its Subsidiaries.

b) At 31 December 2017, 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 2016.

31 December 2017 31 December 2016Direct and indirect voting

rights possessed by the Company (%)

Proportion of effective

interest (%)

Direct and indirect voting rights possessed by the

Company (%)


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 79.98

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.

c) 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.

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The table below shows the total interest of the Group in its joint ventures accounted by equity method as at 31 December 2017 and 31 December 2016:

31 December 2017 31 December 2016Direct and indirect

voting rightspossessed by the

Company (%)

Proportion of effective interest

(%)

Direct and indirect voting rights

possessed by the Company (%)


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.

d) 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).

e) 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 2017 comparatively with the consolidated statement of financial position as of 31 December 2016. 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 2017 are presented comparatively with the consolidated financial statements for the year ended 31 December 2016.

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.

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2.3. Summary of significant accounting policies

The significant accounting policies followed in the preparation of the consolidated financial statements are summarized below:

2.3.1 Cash and cash equivalents

The cash and cash equivalents are carried at cost in the consolidated balance sheet at cost. Cash and cash equivalents consist of cash on hand, deposits at banks and highly liquid investments with maturity periods of three months or less (Note 4).

2.3.2 Trade receivables and provision for impairment

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).

2.3.3 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).

2.3.4 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).

2.3.5 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).

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2.3. Summary of significant accounting policies (Continued)

2.3.6 Financial investments

All investment securities are recognized at cost including acquisition charges associated with the investment. Investment securities intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in macro-economic environment are classified as “available-for-sale investments”. These investments are included in non-current assets unless management has not indented to realize gain from asset in short term or unless they will need to be sold to raise operating capital, in which case they are included in current assets. The Group management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such classification on a regular basis.

At every balance sheet date, the Group assesses whether there is objective evidence that a financial asset on a group of financial assets is impaired. For financial instruments classified as available for sale a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator of impairment. If such evidence exists for an available for sale financial asset, cumulative net loss recorded by decreasing the fair value gain on the financial asset previously recorded as “financial asset fair value reserve” within equity. The amount of impairment exceeding the fair value reserve is recorded as expense in the statement of comprehensive income for the year.

The unrealised gains and losses arising from changes in the fair value of available-for-sale securities are deferred in the equity under “financial assets fair value reserve” until the financial asset is sold, collected or otherwise disposed of. When available-for-sale securities are sold, collected or otherwise disposed of, related deferred gains and losses in equity are released to the statement of comprehensive income.

When the financial asset is not traded in an active market and fair value of the asset cannot be measured reliably, the fair value of the financial asset is identified by using valuation techniques. These valuation techniques include the use of recent transactions under market conditions or by considering other similar investment instruments and discounted cash flows performed by considering the specific conditions of the company invested in.

Other financial assets in which the Group has an interest below 20%, that do not have a quoted market price in active markets and whose fair value cannot be measured reliably, are carried at cost, if applicable, less any provision for diminution in value. Available-for-sale investments that have a quoted market price in active markets and whose fair values can be measured reliably are carried at fair value (Note 9).

2.3.7 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 life

Land and land improvements 3-50 yearsBuildings 5-50 yearsMachinery and equipment 3-50 yearsMotor vehicles 4-25 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.

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2.3.8 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 Note 2.3.24.

2.3.9 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).

2.3.10 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.

2.3.11 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.

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2.3.12 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.

2.3.13 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).

2.3.14 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.

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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).

2.3.15 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 capitalised (Note 2.3.11).

2.3.16 Revenue recognition

Revenue is based on the invoiced amount of products sold and services given. Revenues are recognised on an accrual basis at the time deliveries or acceptances are made, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group, at the fair value of consideration received or receivable. Risks and rewards are transferred to customers, when the transfer of ownership has realised. Net sales represent the invoiced value of goods sold less sales returns and commission and exclude related taxes. Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset.

When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised as interest income on a time proportion basis that takes into account the effective yield on the asset.

2.3.17 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.

2.3.18 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).

2.3.19 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.

2.3.20 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.

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2.3.21 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.

2.3.22 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.

2.3.23 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.

2.3.24 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” (Not 2.3.13).

2.3.25 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.

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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 2016 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.

2.3.26 Derivative financial instruments and hedging activities

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. The derivative instruments of the Group mainly consist of foreign exchange forward contracts, commodity derivate and interest rate swap and cross currency swap instruments. These derivative transactions, even though providing effective economic hedges under the Group risk management position, do not generally qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for trading in the consolidated financial statements. The fair value changes for these derivatives are recognised in the consolidated income statement.

Fair value of forward exchange contracts evaluated by fair value and correlated with income statement is determined by compare of original forward rate calculation with market interest rate which is prevalent for remainder part of contract and prevalent forward rate at period ends. Derivative financial instruments are booked according to their fair value is positive or negative, respectively asset and liability (Note 20).

Classified as asset/liability correlated with income statement and evaluating by fair value of financial derivative instruments’ differences are reflected to income statement.

The hedging transactions of the Group that qualify for hedge accounting are accounted for as follows:

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.

Fair value of interest rate swap contracts evaluated by fair value and correlated with equity is determined by compare of original interest rate calculation with market interest rate which is prevalent for remainder part of contract and prevalent forward interest rate at period ends. Derivative financial instruments are booked according to their fair value is positive or negative, respectively asset and liability (Note 20).

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.

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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 USD1.254.421 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, sales prices and foreign exchange rates. Based on the sensitivity 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 2.3.7 and Note 2.3.8.

e) Goodwill impairment tests:

As explained in Note 2.3.10, 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 2017 and 2016, 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).

3. Business combinations

No business combinations occurred during the period 31 December 2017.

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4. Cash and cash equıvalents

31 December 2017 31 December 2016Cash at banks

Revenue share (blocked) 1,198,211 1,002,012Time deposits 7,568,764 5,016,257

Demand deposits 23,971 6,145

Time deposit interest accruals 11,123 26,307

Total 8,802,069 6,050,721

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 2017 and 31 December 2016 (Note 15).

Time deposits and other cash and cash equivalents

As at 31 December 2017 and 31 December 2016, the maturity and the currency information of the time deposits, is as follows:

31 December 2017Effective rate of

interest (%)Less than

1 month1-3

months Total

TRY 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

31 December 2016Effective rate of

interest (%)Less than

1 month1-3

months Total

TRY 11.40 945,212 - 945,212USD 3.63 2,884,335 181,826 3,066,161EUR 1.98 1,003,834 557 1,004,391GBP 1.30 493 - 493

Time deposit 4,833,874 182,383 5,016,257

Cash and cash equivalents included in the consolidated statements of cash flows for the periods ended 31 December 2017 and 31 December 2016 are as follows:

31 December 2017 31 December 2016

Cash and cash equivalents 8,802,069 6,050,721Less: Blocked deposits (Revenue share) (1,198,211) (1,002,012)Less: Time deposit interest accruals (11,123) (26,307)

Cash and cash equivalents 7,592,735 5,022,402

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5. Financial liabilities


Short-term financial liabilities

Short-term bank borrowings 340,875 385,162Interest accruals of bank borrowings - 362

Total 340,875 385,524

Short-term portion of long-term bank borrowings:

Short-term portion of long-term bank borrowings 2,156,144 1,265,535Bonds issued 2,640,330 200,000Interest accruals of bank borrowings 93,429 81,435Interest accruals of bonds issued 42,936 25,464

Total 4,932,839 1,572,434

Long-term financial liabilities:

Long-term bank borrowings 7,136,940 7,712,045Bonds issued 2,640,330 2,463,440Interest accruals of bank borrowings - 822

Total 9,777,270 10,176,307

Total financial liabilities 15,050,984 12,134,265

Tüpraş issued bonds to listed on London stock exchange and release of these bonds were realized on 12 October 2012. Total amount of these issued bonds 700 million USD, with a maturity of 7 years, coupon payment every 6 months and paying principal and coupon at the end of the maturity, with an annual interest rate of 4,125%

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 year maturity with 3 years grace period.

Tüpraş issued bonds to investors and a nominal amount of TRY200 million with 728 days maturity and a fixed coupon paid per six months, respectively, was completed on 19 January 2015. The related bond was amortized as of 16 January 2017.

Tüpraş issued bonds to foreign investors and release of these bonds were realized on 2 November 2012. Total amount of these issued bonds is USD700 million with an interest rate of 4,125% and maturity of 5.5 years.

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5. Financial liabilities (Continued)

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 2017 the outstanding amount of the loans is USD1,239 million (31 December 2016: USD1,555 million).

Foreign currency balances and effective interest rates for the short and long-term financial liabilities as at 31 December 2017 and 31 December 2016 are as follows:

31 December 2017 Effective interest Original Thousand

Short-term financial liabilities:

USD borrowing 1.45 3,500,000 13,202TRY borrowings (*) - 327,673,483 327,673

Interest accruals -

Total short-term financial liabilities 340,875

Short-term portion of long-term financial liabilities:

USD borrowings 3.58 316,227,073 1,192,776USD bonds issued 4.17 700,000,000 2,640,330EUR borrowings 3.26 9,220,636 41,636TRY borrowings 12.48 921,732,026 921,732

4,796,474

Interest accruals 136,365

Total short-term portion of long-term financial liabilities 4,932,839

Long-term financial liabilities:USD borrowings 3.38 1,460,677,340 5,509,529USD bonds issued 4.55 700,000,000 2,640,330EUR borrowings 2.06 291,146,521 1,314,672TRY borrowings 13.43 312,738,562 312,739

9,777,270

Interest accruals -

Total long-term financial liabilities 9,777,270

(*) Banks provide interest-free loans to the Group for the payment of SCT, Customs and Social Security debts amounting to TRY327,673 thousand as of 31 December 2017 (31 December 2016: TRY190,645 thousand).

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31 December 2016 Effective interest Original Thousand

Short-term financial liabilities:EUR borrowing 2.89 7,000,000 25,970TRY borrowings 8.80 359,191,765 359,192

Interest accruals 362

Total short-term financial liabilities 385,524

Short-term portion of long-term financial liabilities:USD borrowings 3.34 314,914,269 1,108,246EUR borrowings 3.21 9,584,273 35,557TRY borrowings 12.65 121,732,026 121,732TRY bonds issued 8.97 200,000,000 200,000

1,465,535

Interest accruals 106,899

Total short-term portion of long-term financial liabilities 1,572,434

Long-term financial liabilities:USD borrowings 3.11 1,613,833,466 5,679,403USD bonds issued 4.17 700,000,000 2,463,440EUR borrowings 2.08 296,011,204 1,098,171TRY borrowings 12.58 934,470,588 934,471

10,175,485

Interest accruals 822

Total long-term financial liabilities 10,176,307

As at 31 December 2017 and 31 December 2016, the redemption schedule of long-term bank borrowings is as follows:


2018 - 4,544,0962019 1,867,259 1,358,3332020 1,683,158 1,443,3512021 1,373,304 1,092,2872022 and after 4,853,549 1,738,240

Total 9,777,270 10,176,307

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The movement of borrowings as of 31 December 2017 and 31 December 2016 is as follows:

2017 2016

1 January 12,134,265 9,919,420

New financial borrowings 43,859,854 36,558,822Principal payments (42,051,025) (36,280,598)Changes in interest accruals 28,282 14,807Changes in foreign exchange rates 1,079,608 1,921,814

31 December 15,050,984 12,134,265

The redemption schedule of borrowings according to their contractual repricing dates is as follows:


1-90 days 3,294,726 2,779,36191-365 days 7,784,235 4,780,4591-5 years 1,162,249 4,264,306Over 5 years 2,809,774 310,139

Total 15,050,984 12,134,265

6. Trade receivables and payables

Short-term trade receivables:


Trade receivables 3,658,736 2,433,602 Due from related parties (Note 31) 1,399,601 751,824 Doubtful trade receivables 3,184 2,676 Other trade receivables 16 9

Less: Unearned credit finance income (31,320) (5,153)Less: Provision for doubtful receivables (3,184) (2,676)

Total short-term trade receivables (net) 5,027,033 3,180,282

Tüpraş discounts the domestic receivables by using domestic government bonds and foreign receivables by using six months libor rates.

As at 31 December 2017, Tüpraş has offsetted TRY860,788 thousand (31 December 2016: TRY1,625,766 thousand) from trade receivables that are collected from factoring companies as part of the irrevocable factoring.

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6. Trade receivables and payables (Continued)

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 renegotiated under four groups. The details of credit quality of such trade receivables as at 31 December 2017 and 31 December 2016 are as follows:


Group 1 8,505 1,783Group 2 762,329 3,063Group 3 4,152,610 2,070,505Group 4 65,184 1,040,014

Total 4,988,628 3,115,365

Group 1 - New customers (less than three months)Group 2 - State owned enterprisesGroup 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)

Aging analysis for trade receivables that are past due but not impaired

Aging of overdue receivables that are past due but not impaired as at 31 December 2017 and 31 December 2016 is as follows:


Up to 3 months 37,224 62,386 3 to 12 months 1,181 2,531

Total 38,405 64,917

The Group has guarantees received amounting to TRY28,587 (31 December 2016: TRY51,479) 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.

Movement of the provision for doubtful receivables for the years ended 31 December 2016 and 2017 is as follows:

2017 2016

1 January 2,676 2,593Charge for the period 581 98Payments during the period (73) (15)

31 December 3,184 2,676

Short-term trade payables:


Trade payables 8,106,081 6,910,572 Due to related parties (Note 31) 115,456 88,017 Less: Unrealised credit finance charges trade payables (8,371) (10,746)

Total short-term trade payables (net) 8,213,166 6,987,843

Tüpraş discounts short-term trade payables by using six-month libor rates.

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7. Other receıvables and payables

Other short-term receivables:


Advances and guarantees given 66,887 10,280 Receivable from personnel 9,141 7,723 Receivable from insurance recoveries 8,239 7,623 Other doubtful receivables 360 304 Less: Provision for other doubtful receivables (360) (304)

Total 84,267 25,626

8. Inventorıes


Raw materials and supplies 1,901,787 1,084,842 Work-in-progress 1,278,257 795,792 Finished goods 1,401,057 919,756 Trade goods 195,767 50,669 Goods in transit 487,155 743,851 Other 28,313 13,529

5,292,336 3,608,439

Provision for doubtful receivables (1,246) -

Total 5,291,090 3,608,439

Movement of the provision for inventories for the years ended 31 December 2017 and 2016 is as follows:

2017 2016

1 January - 102,114Charge for the period 1,246 -Cancellations within the period - (102,114)

31 December 1,246 -

9. Financial ınvestments

Financial investments available-for-sale

31 December 2017 31 December 2016Participation

share (%) AmountParticipation

share (%)AmountAmount

Körfez Ulaştırma A.Ş. 100.00 9,000 100.00 4,000

9,000 4,000

At the General Assembly dated 29 March 2017 of Körfez Transportation A.Ş, has been decided to increase the capital from TRY4.000 thousand to TRY10.000 thousand and has been paid TRY5.000 thousand as of 31 December 2017.

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10. Investments accounted for using the equity method

31 December 2017 31 December 2016Participation

share (%) AmountParticipation

share (%)AmountAmount

OPET Petrolcülük A.Ş. 40.00 1,134,364 40.00 923,994

1,134,364 923,994

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 2017 and 2016 is as follows:

2017 2016

1 January 923,994 762,217

Investments accounted for using the equity method; Shares in current year profit 244,639 158,750Dividend payment (70,000) (42,000)Defined benefit plans remeasurement gains/(losses) 712 (1,011)Other comprehensive income accounted for investment using equity method that will be reclassified to profit or loss 32,218 40,402Currency translation differences 2,801 5,636

31 December 1,134,364 923,994

Consolidated summary financial statements of investments accounted for using the equity method (before Group’s effective interest) are as follows:


Current assets 3,783,607 3,039,266Non-current assets 2,662,261 2,301,201

Total assets 6,445,868 5,340,467

Short term liabilities 2,724,380 2,399,461Long term liabilities 1,358,260 1,103,703Equity 2,363,228 1,837,303

Total liabilities 6,445,868 5,340,467

1 January - 1 January - 31 December 2017 31 December 2016

Sales (net) 28,391,084 20,533,669Gross profit 1,499,111 1,274,948Operating profit 702,728 611,266Net income for period 611,597 396,874

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10. Investments accounted for using the equity method (Continued)

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 2017, fair value of Opet is above 46% of the value carried in including goodwill.

Other key assumptions used in the fair value calculation model are stated below:

Gross margin 4,3% - 4,9%Discount rate 11,2%

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 is over 27% and 68%, respectively.as at 31 December 2017.

As a result of the tests performed by using the assumptions above, no impairment on goodwill has been identified as at 31 December 2017. 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.

11. Investment Property

As of 31 December 2017, investment property represents the land amounting to TRY4,621 thousand (31 December 2016: TRY 4,621 thousand). The fair value of the investment property has been determined as TRY38,117 thousand as a result of fair value assessments (31 December 2016: TRY38,117 thousand).

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12. Property, plant and equipment

The movements of property, plant and equipment and related accumulated amortisation for the period ended 31 December 2017 and 2016 is as follows:

1 January 2017 Additions Transfers Disposals 31 December 2017

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)Other tangible assets (1,365) (78) - - (1,443)

(5,675,313) (554,602) - 207,774 (6,022,141)

Net book value 11,741,476 12,303,437

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12. Property, plant and equipment (Continued)


Cost: Land 48,844 - - - 48,844Land improvements 3,525,298 - 162,946 (487) 3,687,757Buildings 695,372 - 49,222 (2) 744,592Machinery and equipment 11,149,479 84 280,086 (9,365) 11,420,284Motor vehicles 619,383 129,499 1,432 (835) 749,479Furniture and fixtures 105,955 1,350 11,336 (4,244) 114,397Construction in progress 499,904 668,988 (518,944) - 649,948Other tangible assets 1,488 - - - 1,488

16,645,723 799,921 (13,922) (14,933) 17,416,789

Accumulated depreciation: Land improvements (1,129,120) (143,589) - 465 (1,272,244)Buildings (174,083) (14,889) - 2 (188,970)Machinery and equipment (3,664,377) (316,517) - 8,326 (3,972,568)Motor vehicles (139,883) (32,580) - 598 (171,865)Furniture and fixtures (57,230) (15,124) - 4,053 (68,301)Other tangible assets (1,286) (79) - - (1,365)

(5,165,979) (522,778) - 13,444 (5,675,313)

Net book value 11,479,744 11,741,476

Total depreciation expense amounting to TRY554,602 thousand (31 December 2016: TRY522,778 thousand) in the consolidated statement of comprehensive income for the period ended 31 December 2017 has been allocated to cost of goods sold amounting to TRY527,359 thousand (31 December 2016: TRY483,776 thousand), to marketing, sales and distribution expenses amounting to TRY3 thousand (31 December 2016: TRY3 thousand), to general administration expenses amounting to TRY27,240 thousand (31 December 2016 : TRY38,999 thousand).

As of 31 December 2017, there are no mortgage on property, plant and equipment (31 December 2016 - None).

As of 31 December 2017, Tüpraş has capitalized the borrowing cost of TRY69,535 thousand on its financial statements (31 December 2016 – TRY 53,042 thousand).

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13. Intangible assets

Other intangible assets:

The movements of intangible assets and related accumulated amortisation for the period ended 31 December 2017 and 2016 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


Cost:Rights and software 57,087 - 7,500 (257) 64,330Development expenses 61,981 - 6,422 - 68,403

119,068 - 13,922 (257) 132,733

Accumulated amortisation:Rights and software (30,418) (6,288) - 257 (36,449)Development expenses (29,241) (11,937) - - (41,178)

(59,659) (18,225) - 257 (77,627)

Net book value 59,409 55,106

Total amortisation expenses amounting to TRY19,038 thousand (31 December 2016: TRY18,225 thousand) in the consolidated statement of comprehensive income for the period ended 31 December 2017 have been allocated to the cost of goods sold amounting to TRY8 thousand (31 December 2016: TRY13 thousand), and to general administration expenses amounting to TRY19,030 thousand (31 December 2016: TRY18,212 thousand).

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14. Prepaid expenses

Short term prepaid expenses:


Insurance and other expenses 49,102 41,680 Investment loan insurance expenses - 27,811 Advances given 13,295 28,412

Total 62,397 97,903

Long term prepaid expenses:


Advances given to third parties for property, plant and equipment 28,413 120,883Prepaid investment loan insurance expenses - 77,589Advances given to related parties for property, plant and equipment (Note 31) 69,191 37,454Prepaid other expenses 1,672 2,426

Total 99,276 238,352

15. Other assets and liabilities

Other current assets:


Deferred Value Added Tax (“VAT”) 423,200 357,063Deferred Special Consumption Tax (“SCT”) 91,647 79,863Spare parts and material stocks 57,566 69,591Taxes and funds to be offsetted 85,251 44,302Income accruals 37,675 19,348Other current assets 56,920 3,263

Total 752,259 573,430

Other non-current assets:

Spare parts and materials 1,030,649 1,008,993 Other 1,146 1,120 Provision for spare parts and materials (19,156) (22,455)

Total 1,012,639 987,658

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15. Other assets and liabilities (Continued)

The movements in the provision for impairment of spare parts during the years ended 31 December 2017 and 2016 are as follows:

2017 2016

1 January 22,455 27,506 Charges for the period, net (3,299) (5,051)

Total 19,156 22,455

Other non-current assets:


SCT payable 1,397,584 1,371,333Revenue share 1,202,668 1,006,511VAT payable 145,109 226,314Deferred VAT 423,200 357,063Deferred SCT 91,647 79,863Other taxes and liabilities 53,741 43,475Expense accrual on commodity hedge 383,058 246,536Other 26,367 11,827

Total 3,723,374 3,342,922

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 (31 December 2016 - USD47.47/barrel) for 5,700 thousand crude oil barrel (31 December 2016: 7,050 thousand barrels). Weighted average buying price of zero cost derivatives transactions is USD50.60 /barrel for 5,700 thousand crude oil barrel inventory (31 December 2016: 6,950 thousand barrels), weighted average selling price of zero cost derivatives transactions is USD55.78 /barrel (31 December 2016 - USD53.56/barrel). The expense accruals recognition made as of 31 December 2017 is recognized under cost of goods sold and paid as of 8 January 2018 (31 December 2016: 9 January 2017).

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 TRY1,202,668 thousand accumulated as at 31 December 2017 (31 December 2016: TRY1,006,511 thousand) which is not recognized in the comprehensive income statement, has been classified as “Revenue Share” within “Other short-term liabilities”. TRY1,198,211 thousand that is (31 December 2016: TRY1,002,012 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).

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15. Other assets and liabilities (Continued)

Other long-term liabilities:


Participation share 1,169 1,389

Total 1,169 1,389

16. Deferred income

Short-term deferred income


Advances taken 18,479 13,591Deferred income 1,949 1,826

Total 20,428 15,417

Long-term deferred income


Deferred income 4,112 3,992

Total 4,112 3,992

17. Provisions

Provision for employee benefits:

Short term provision for employee benefits:


Seniority incentive bonus provision 8,024 9,073 Personnel bonus accruals 4,605 4,498

Total 12,629 13,571

Long term employee benefits:


Provision for employment termination benefits 167,907 159,190 Provision for unused vacation 50,655 44,137 Seniority incentive bonus provision 5,172 4,088

Total 223,734 207,415

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.

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17. Provisions (Continued)

The movements in the provision for seniority incentive bonus during the period are as follows:

2017 2016

1 January 13,161 12,847

Charge for the period 11,399 7,185Payments during the period (11,364) (6,871)

31 December 13,196 13,161

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 (%) 4.95% 4.50%Turnover rate to estimate probability of retirement (%) 99.46% 99.51%

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. As the maximum liability is revised semi-annually, the maximum amount of TRY5,001.76 which is effective as at 1 January 2017, has been taken into consideration in calculating the provision for employment termination benefits of the joint ventures of the Group, which are registered In Turkey (31 December 2016: TRY4,297.21).

The movement in the provision for employment termination benefits during the period is as follows:

2017 2016

1 January 159,190 144,547Interest expense 18,737 14,961Actuarial (gain)/losses (4,941) 4,249Increase during the period 20,795 18,922Payments during the period (25,874) (23,489)

31 December 167,907 159,190

Sensitivity level31 December 2017 31 December 2016

100 Base Increase 100 Base Decrease 100 Base Increase 100 Base Decrease

Rate 5.95% 3.95% 5.50% 3.50%Provision for employee termination benefit adjustment 10,590 (12,728) 8,245 (10,013)

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17. Provisions (Continued)

Provision for unused vacation:

The movement in the provision for unused vacation during the period is as follows:

2017 2016

1 January 44,137 41,904Increase during the period 12,938 7,785Payments during the period (6,420) (5,552)

31 December 50,655 44,137

Other short term provisions:


Provisions for pending claims and law suits 16,209 12,523EMRA participation share 23,823 20,159Provision for demurrage 11,484 13,787Other 25,779 5,016

Total 77,295 51,485

Movement of the short-term provisions for the period ended 31 December 2017 and 2016 are as follow:

Provision forpending claims

and lawsuits

EMRAparticipation

shareProvision for

demurrage Other Total

1 January 2017 12,523 20,159 13,787 5,016 51,485

Charges for the period, net 4,045 23,823 (2,303) 20,763 46,328Payments during the period (359) (20,159) - - (20,518)

31 December 2017 16,209 23,823 11,484 25,779 77,295

1 January 2016 13,405 17,883 11,032 20,332 62,652

Charges for the period, net (882) 22,148 2,755 (15,316) 8,705Payments during the period - (19,872) - - (19,872)

31 December 2016 12,523 20,159 13,787 5,016 51,485

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.

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18. Liabilities for employee benefits


Due to the personnel 80,315 59,016Social security withholdings payment 39,518 33,426

Total 119,833 92,442

19. Other payables


Deposits and guarantees received 13,334 9,407Other payables to related parties (Note 31) 23,463 18,546

Total 36,797 27,953

20. Derivative instruments

31 December 2017 31 December 2016Fair values Fair values

Purchase contract amount

Sale contract amount Assets Liabilities

Purchase contract amount

Sale contract amount Assets Liabilities

Cash flow hedge

Interest rate swap 328,432 328,432 2,660 690 301,972 301,972 1,841 3,791Cross currency swap 835,180 525,210 339,982 2,206 41,402 27,294 30,797 21,234

Derivatives held for trading

Currency forwards 3,264,742 3,330,804 1,137 39,295 316,728 316,861 2,093 -Commodity derivative 1,229,941 1,361,757 3,130 134,946 82,708 87,174 - 4,429Total 346,909 177,137 34,731 29,454

Short term derivative financial instruments

Cash flow hedge

Interest rate swap 1,562,179 1,562,179 9,421 777 1,746,128 1,746,128 4,745 1,782Cross currency swap 331,155 238,586 91,139 2,587 952,255 627,640 364,137 -

100,560 3,364 368,882 1,782Long term derivative financial instrumentsTotal 447,469 180,501 403,613 31,236

As of 31 December 2017, forward foreign exchange transactions consist of forward transactions signed between Tüpraş and various finance institutions which generate a sales obligation of TRY2,600,333 thousand in exchange of USD 674,000 thousand and will expire on January 2018. As of 31 December 2016, forward foreign exchange transactions consist of forward transactions signed between Tüpraş and various finance institutions which generate a sales obligation of TRY 316,861 thousand in exchange of USD 90,000 thousand and which has expired on 3 January 2017.

As of 31 December 2017, interest rate swap consists of exchange of floating rate instalment payments of Tüpraş’s long term borrowings amounting to USD458,824 thousand (31 December 2016: USD 535,294 thousand) and Ditaş’s long term borrowings amounting to EUR 35,428 thousand (31 December 2016: EUR 44,285) with fixed rate instalment payments for cash flow hedging.

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20. Derivative instruments (Continued)

As of 31 December 2017, cross currency swap transactions consist of swap transaction of foreign currency indexed, fixed interest rate long-term bonds amounting to USD200,000 thousand belonging to Tüpraş with TRY currency indexed, fixed interest payments amounting to TRY463,875 thousand (31 December 2016: USD200,000 thousand), swap transaction of long-term borrowings with floating interest rate amounting to USD70,588 thousand (31 December 2016 USD82,353 thousand) belonging to Tüpraş with payments of fixed interest rate amounting to TRY163,765 thousand, swap transactions of foreign currency indexed long term borrowings belonging to Ditaş amounting to EUR17,714 thousand with TRY currency indexed, fixed interest payments amounting to TRY65,717 thousand and swap transaction of TRY65,717 thousand fixed interest payments with total of USD18,674 thousand with foreign currency indexed fixed interest payments (31 December 2016: None).

Commodity purchase and sales transactions consist of product crack fixing transactions, swap transactions and zero cost collar transactions as of 31 December 2017. Product crack fixing transactions have been made for gasoline stocks of 1,635 thousand barrels, jet stocks of 10,395 thousand barrel and 13,572 thousand barrel and weighted average fixation margin of these transactions are USD10,995, 11,095 and 11,728 per barrel, respectively. Swap transactions have been made for 1,029 thousand barrels of crude oil and weighted average fixation margin of these transactions in USD is 54.13 per barrel. Zero cost collar transaction is made for total of 1,050 thousand barrels of crude oil where weighted average purchase price is 48,7 USD/barrel and weighted average sales price is 55.25 USD/barrel. Commodity purchase and sales transactions consist of product crack fixing transactions as of 31 December 2016. Commodity crack fixing transactions have been made for 1,500 thousand barrels of gasoline stocks and 900 thousand barrels of jet stocks with weighted average fixation margin of 10,704 and USD9,683 per barrel, respectively.

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 2017, the Company’s total R & D expenditures amounting to TRY7,152 thousand (31 December 2016: TRY8,085 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%.

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.

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%), insurance premium employer support (7 years).

The Group has benefited from SGK support for insurance premium employer sentiment.

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21. Government grants (Continued)

The company has benefited from the support provided under the regulation on increasing the efficiency of energy sources and the use of energy.

As of 31 December 2017 and 2016, 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 37,609 30,527Research and development incentives 7,152 8,085Interest incentive 288 8,100

Total 45,049 46,712

22. Commitments and contıngent assets and liabilities


Guarantees received: Original Currency: TRY Amount: Original Currency: TRY Amount:

Letter of guarantees received 1,143,144 1,679,662- Letter of guarantees in TRY 744,646 744,646 1,003,107 1,003,107- Letter of guarantees in USD 80,221 302,585 160,721 565,608- Letter of guarantees in EUR 20,368 91,973 27,113 100,585- Letter of guarantees in other currencies - 3,940 - 10,362

Guarantee notes received 2,205 14,485- Guarantee notes in TRY 2,205 2,205 14,485 14,485

Guarantee letters received 238,595 225,960- Guarantee letters received in TRY 50,000 50,000 50,000 50,000- Guarantee letters received in USD 50,000 188,595 50,000 175,960

Direct debiting limits 266,748 20,000- TRY direct debiting limits 266,748 266,748 20,000 20,000

Total guarantees received 1,650,692 1,940,107

Guarantees given:

Letter of credits given 313,153 672,163- Letter of credits in USD 78,125 294,679 184,253 648,422- Letter of credits in EUR 4,165 18,807 3,921 14,545- Letter of credits in other currencies - 367 - 9,196

Letter of guarantees given 757,673 796,468- Letter of guarantees in TRY 681,480 681,480 607,798 607,798- Letter of guarantees in USD 20,200 76,193 53,612 188,670

Letters of guaranteegiven to customs offices 1,644,077 1,000,185

- Letter of guarantees in TRY 1,635,046 1,635,046 955,666 955,666- Letter of guarantees in EUR 2,000 9,031 12,000 44,519

Letters of guarantee given to banks 667,986 338,033- Letter of guarantees in USD 119,120 449,309 47,577 167,433- Letter of guarantees in EUR 48,428 218,677 45,985 170,600

Total guarantees given 3,383,589 2,806,849

As at 31 December 2017 and 31 December 2016, 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 2017, letters of guarantee given to banks are given for loans which were used by Companies within scope of consolidation amounting to TRY626,443 thousand (31 December 2016: TRY331,726 thousand) and for derivative financial instruments amounting to TRY41,543 thousand (31 December 2016: TRY6,307 thousand).

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22. Commitments and contıngent assets and liabilities (Continued)

Collaterals, pledges, mortgages given by the Group as at 31 December 2017 and 31 December 2016 are as follows:


A. CPMs given for companies in the name of its own legal personality 2,715,603 2,468,816- TRY 2,316,526 1,563,464- USD 370,872 837,092- EUR 27,838 59,064- Other 367 9,196

B. CPMs given on behalf of the fully consolidated companies 667,986 338,033- USD 449,309 167,433- EUR 218,677 170,600

C. CPMs given for continuation of its economic activities 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 Group companies 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 3,383,589 2,806,849

(*) A commission at an amount of TRY1.535 thousand is recognized as of 31 December 2017 related to letter of guarantees given in favor of partnerships included in full consolidation (31 December 2016- TRY 1.117 thousand).

Environmental pollution liability:

The Group is responsible for cleaning environmental pollution that could be caused as a result of its operations. There are no lawsuits against the Group regarding environmental matters as of date of 31 December 2017.

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 2017 and 2016.

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.

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23. Equity

The Company’s shareholders and their shareholding percentages as at 31 December 2017 and 31 December 2016 are as follows:

31 December 2017 Share (%) 31 December 2016 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

Adjustment to share capital represents the restatement effect of cash and cash equivalent contributions to share capital measured in accordance with the Turkish Financial Reporting Standards.

Registered capital ceiling 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 2016: Kr1) 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 Kr1 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 2017, the restricted reserves of the Company amount to TRY279,668 thousand (31 December 2016: TRY331,337 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 installments and advance dividend can be paid in accordance with profit on consolidated 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 TRY5,591,315 thousand as at 31 December 2017. This amount includes inflation adjustment differences of the equity accounts amounting to TRY1,698,998 thousand and other reserves amounting to TRY12,932 thousand which are subject to corporate taxation when distributed as dividends.

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23. Equity (Continued)

Dividend distribution (Continued)

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. The Company paid also a cash dividend at the rate of 621.8%, which corresponds to TRY6,218 gross and TRY5,2853 net cash dividend for the shares with a nominal value of TRY1.00 to other shareholders.

As of 31 December 2016, it is committed to distribute total balance remaining following the allocation of primary and secondary statutory reserves of distributable net profit of period related to 2015 and TRY1,627,725 thousand from secondary reserves as cash dividend and it has been fully paid off. TRY6.5 of net dividend payment and TRY6.5 of gross dividend payment have been made to a stock at a nominal value of TRY 1.00 and at 650% ratio to resident institutions and non-resident partners obtaining premium through a registered office in Turkey or permanent representative and TRY6.5 gross dividend payment and TRY5.5250 net cash dividend payment to a stock at 650% ratio and having a nominal value of TRY1.00 to other shareholders.

24. Revenue and cost of sales

1 January - 1 January -31 December 2017 31 December 2016

Sales from production 41,393,603 25,817,026Export revenue 10,205,556 6,374,481Trade sales 2,965,268 2,965,268Service revenue 268,410 212,994

Gross revenue 54,832,837 35,369,769

Less: Sales discounts (808,235) (496,938)Less: Sales returns (76,492) (17,980)

Sales (net) 53,948,110 34,854,851

Cost of goods sold (44,735,818) (28,873,766)Cost of trade goods sold (2,921,535) (2,261,176)Cost of services (76,859) (70,682)

Gross profit 6,213,898 3,649,227

Cost of sales:


Raw materials 41,568,749 26,369,554Cost of trade goods sold 2,921,535 2,261,176Energy expenses 1,123,691 991,541Personnel expenses 615,401 521,845Depreciation and amortization (Note 12-13) 527,367 483,789Other production expenses 977,469 577,719

Cost of sales 47,734,212 31,205,624

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25. General administrative expenses, marketing expenses and research and development expenses

General administrative expenses:


Personnel expenses 334,889 294,988Taxes and duties 98,274 82,985Outsourced services 87,161 83,951Insurance expenses 84,848 79,203Depreciation and amortization (Note 12-13) 46,270 57,211Office expenses 38,104 35,230Lawsuit and consultancy expenses 34,861 23,353Donation 27,410 20,321Subscription fees 26,950 22,958Rent expenses 15,638 7,835Transportation and travel expenses 4,444 2,702Other 66,552 37,543

Total general administrative expenses 865,401 748,280

Marketing expenses:


Personnel expenses 97,041 78,815Outsourced services 64,695 51,675Carriage, storage and insurance expenses 42,671 43,414Rent expenses 11,560 11,897Energy expenses 11,454 8,157Advertising expenses 3,220 3,441Depreciation and amortization (Note 12-13) 3 3Other 38,245 24,200

Total marketing expenses 268,889 221,602

Research and development expenses:


Personnel expenses 9,789 19,267Lawsuit and consultancy expenses 1,036 1,340Outsourced services 580 140Other 4,545 4,818

Total research and development expenses 15,950 25,565

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26. Other operating income/(expenses)

1 January - 1 January -Other operating income: 31 December 2017 31 December 2016

Credit finance gains 228,525 123,632Rent expenses 4,101 3,497Foreign exchange gain from trade receivables - 9,147Provision no longer required - 16,209Other 28,635 32,266

Total other operating income 261,261 184,751

1 January - 1 January -Other operating expense: 31 December 2017 31 December 2016

Credit finance loss (90,859) (13,398)Foreign exchange loss from trade payables (340,898) (458,668)Foreign exchange loss from trade receivables (2,727) -Other (32,976) (9,176)

Total other operating expense (467,460) (481,242)

27. Income/(expense) from investment activities

1 January - 1 January -Other operating expense: 31 December 2017 31 December 2016

Gain/(loss) on sales of property plant and equipment and intangible assets (10,199) 161

Total income/(expense) from investment activities (10,199) 161

28. Financial income/(expenses)


Financial income:

Interest income on deposits 541,226 319,513Foreign exchange gains on deposits 461,105 709,477Foreign exchange gains on derivative instruments 160,468 144,882

Total financial income 1,162,799 1,173,872

Financial expense:

Interest expenses (701,421) (708,359)Foreign exchange losses on borrowings (1,033,591) (976,068)Foreign exchange losses on derivative instruments (41,820) (55,555)Other (3,828) (6,068)

Total financial expense (1,780,660) (1,746,050)

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29. Tax assets and liabilities

i) Corporation tax:


Current period corporate tax provision 464,902 141,217Prepaid taxes (443,606) (95,928)

Current income tax liabilities 21,296 45,289

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.

The corporation tax rate for the fiscal year 2017 is 20% (2016: 20%). Corporation tax is payable at a rate of 20% 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).

The Law regarding amendments on Certain Tax Laws was approved in the Parliament on 28 November 2017 and the Law was published in the Official Gazette on 5 December 2017. Accordingly, the corporate income tax rate for all companies will be increased from 20% to 22% for the years 2018, 2019 and 2020. Therefore, deferred tax assets and liabilities measured at the tax rate of 22% that are expected to apply to these periods when the assets is realised or the liability is settled, based on the Law that have been enacted. For the periods 2021 and after, the reversals of temporary differences measured by 20% (31 December 2016: 20%).

Reconciliation of the income before tax with the calculated corporate tax is as follows:

2017 2016

Profit before taxation 4,474,038 1,944,022

Expected tax expense (20%) (894,808) (388,804)Investment incentive income 214,184 198,864Deductions and exemptions 48,173 59,044Disallowable expenses and differences not subject to taxation (1,031) (336)

Taxation on income (633,482) (131,232)

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29. Tax assets and liabilities (Continued)

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 2017 and 31 December 2016 using the enacted tax rates are as follows:

Cumulative temporarydifferences Deferred tax2017 2016 2017 2016

Fair value difference of derivative instruments 257,527 383,690 (56,656) (76,738)Difference between the carrying values and tax base of property, plant, equipment and intangible assets 57,569 - (12,665) -Prepaid expenses 72,886 105,400 (16,035) (21,080)Deferred financial income, (net) - 5,594 - (1,119)

Deferred tax liability (85,356) (98,937)

Investment incentive income 8,598,952 8,242,254 3,096,940 3,262,646Difference between the carrying values and tax base of property, plant, equipment and intangible assets - 52,144 - 10,429Employment termination benefits and seniority incentive bonus provision 166,459 168,845 36,621 33,769Provision for unused vacation liability 43,425 42,188 9,554 8,438Provision for impairment on spare parts - 22,455 - 4,491Provisions for pending claims and lawsuits 15,227 12,523 3,350 2,505Financial losses - 9,271 - 1,854Deferred financial income, (net) 22,949 - 5,049 -Provisions for inventories 1,246 - 274Other 6,543 9,178 1,439 1,836

Deferred tax assets 3,153,227 3,325,968

Deferred tax asset, net 3,067,871 3,227,031

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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 after19 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 14.47% revaluation rate, which was announced for the second provisional tax period of 2017 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:

2017 2016

1 January 3,227,031 3,202,503

Charge for the period (168,580) (39,599)Charge to equity:

- Hedging cash flow gains/(losses) 10,405 151,540- Actuarial gains/(losses) arising from defined benefit plans (985) 827

Investment incentive income - (88,240)

31 December 3,067,871 3,227,031

30. Earnings per share


Profit for the year attributable to shareholders of the Company 3,811,546 1,793,267

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 15.22 7.16

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

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31. Related party transactions (Continued)

a) Deposits:


Yapı ve Kredi Bankası A.Ş. (2) 4,899,946 3,118,492

Total 4,899,946 3,118,492

b) Due from related parties:

Opet Petrolcülük A.Ş. (1) 899,946 382,580THY OPET Havacılık Yakıtları A.Ş. (1) 404,959 299,357Aygaz A.Ş. (2) 88,381 65,483Opet Fuchs Madeni Yağ San. ve Tic. A.Ş. (1) 6,305 4,396Other (2) 10 8

Total 1,399,601 751,824

As of 31 December 2017, Tüpraş has offset TRY100,000 thousand (31 December 2016: TRY250,000 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 31 December 2017 31 December 2016

Opet International Limited (1) 39,259 -Zer Merkezi Hizmetler ve Ticaret A.Ş. (2) 14,066 12,800Koç Sistem Bilgi ve İletişim A.Ş. (2) 13,881 10,260Aygaz A.Ş. (2) 12,785 21,635Ark İnşaat A.Ş. (2) 9,023 9,393Opet Petrolcülük A.Ş. (1) 8,630 7,275THY OPET Havacılık Yakıtları A.Ş. (1) 4,923 3,091RAM Sigorta Aracılık Hizmetleri A.Ş. (2) 3,635 11,901Setur Servis Turistik A.Ş. (2) 1,614 276Otokoç Otomotiv Tic. ve San. A.Ş. (2) 1,150 850Eltek Elektrik Enerjisi İthalat, İhracat ve Toptan Tic. A.Ş. (2) 835 2,510Other (2) 5,655 8,026

Total 115,456 88,017

d) Other payables:


Koç Holding A.Ş. (3) 23,463 18,546

Total 23,463 18,546

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e) Advances given for property, plant and equipment:


RMK Marine Gemi Yapım Sanayii ve Deniz Taşımacılığı İşl. A.Ş. (2) 67,076 32,441 Ark İnşaat A.Ş. (2) 2,115 5,013

Total 69,191 37,454

f) Product and service sales:


Opet Petrolcülük A.Ş. (1) 6,758,985 3,766,503THY OPET Havacılık Yakıtları A.Ş. (1) 5,468,078 3,774,871Aygaz A.Ş. (2) 541,284 314,557Opet Fuchs Madeni Yağ San. ve Tic. A.Ş. (1) 31,703 24,532Other (2) 4 4

Total 12,800,054 7,880,467

g) Product and service purchases:


Aygaz A.Ş. (2) 438,566 434,665Ram Sigorta Aracılık Hizmetleri A.Ş. (2) (**) 82,734 80,837Opet Petrolcülük A.Ş. (1) 81,498 69,815Zer Merkezi Hizmetler ve Ticaret A.Ş. (2) 69,770 60,927Opet International Limited (2) 58,388 -Koç Holding A.Ş. (3) (*) 46,047 44,683Koç Sistem Bilgi ve İletişim A.Ş. (2) 36,461 30,779THY OPET Havacılık Yakıtları A.Ş. (1) 28,513 25,748Eltek Elektrik Enerjisi İthalat, İhracat ve Toptan Tic. A.Ş. (2) 23,713 24,560Otokoç Otomotiv Tic. ve San. A.Ş. (2) 10,377 8,458Other (2) 36,177 20,484

Total 912,244 800,956

(*) 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 2017 and 2016 in connection with insurance policies signed with insurance companies through RAM Sigorta Aracılık Hizmetleri A.Ş acting as an intermediary insurance agent.

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h) Fixed asset purchases:


Ark İnşaat A.Ş. (2) 50,986 83,396Koç Sistem Bilgi ve İletişim A.Ş. (2) 7,695 1,837RMK Marine Gemi Yapım Sanayii ve Deniz Taşımacılığı İşl. A.Ş. (2) - 18,000Other (2) 1,391 2,410

Total 60,072 105,643

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 TRY53,843 thousand as of period ending on 31 December 2017. (31 December 2016: TRY61,239 thousand) and there are no payments made due to redundancy from the work in 2017 (31 December 2016: TRY17,200 thousand).

j) Financial expenses paid to related parties:


Yapı Kredi Faktoring A.Ş. (2) 3,366 1,361Yapı ve Kredi Bankası A.Ş. (2) 761 -Yapı Kredi Nederland N.V. (2) 116 -

Total 4,243 1,361

k) Time deposit interest income:


Yapı ve Kredi Bankası A.Ş. (2) 203,941 143,456

Total 203,941 143,456

l) Donations:

As of 31 December 2017, total donation is amounting to TRY24,520 thousand (31 December 2016: TRY15,793 thousand).

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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 minimise 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.

The table below demonstrates the Group’s future cash outflows due to financial liabilities as at 31 December 2017 and 2016. 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 2017

Contractual maturitiesCarrying

valueContractual cash flows

Up to3 months

3-12months

1-5years

More than5 years

Total liabilities (non derivative) 27,145,323 29,029,942 12,554,044 5,264,019 7,014,846 4,197,033Financial liabilities 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 - - -



Up to3 months

3-12months

1-5years

More than5 years

Derivative instruments (net) 266,968 177,508 (38,838) 162,164 39,051 15,131Derivative cash inflows 444,469 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

31 December 2016



Up to3 months

3-12months

1-5years

More than5 years

Total liabilities (non derivative) 22,586,814 23,727,085 11,052,961 1,716,245 9,192,715 1,765,164 Financial liabilities 9,445,361 10,439,150 382,280 1,614,628 6,677,078 1,765,164 Bonds & notes issued 2,688,904 2,824,640 208,775 101,617 2,514,248 -Trade payables 6,987,843 6,998,589 6,998,589 - - -Other liabilities 274,489 274,489 274,489 - - -



Up to3 months

3-12months

1-5years

More than5 years

Derivative instruments (net) 372,377 235,948 402 (28,178) 240,950 22,774 Derivative cash inflows 403,613 1,707,376 353,698 192,153 1,054,956 106,569 Derivative cash outflows 31,236 1,471,428 353,296 220,331 814,006 83,795

Cash outflows will be financed through cash inflows generated from sales or through funding.

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32. Financial instruments and financial risk management (Continued)

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 2017 and 2016, trade receivables from the top 5 customers of the Group constitute 63% and 71% 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 2017 and 2016 are as follows:

31 December 2017

Receivables

Bankdeposits

Derivativeinstruments Other

Trade Receivables Other ReceivablesRelatedparties

Thirdparties

Relatedparties

Thirdparties

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) - - -- Secured portion of the net value by guarantees,

etc. - - - - - - -- Not due yet (gross book value) - - - - - - -

- Impairment (-) - - - - - - -- Secured portion of the net value by guarantees,

etc. - - - - - - -D. Components which are including credit risk except

financial statement - - - - - - -

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31 December 2016

Receivables

Bankdeposits

Derivativeinstruments Other

Trade Receivables Other ReceivablesRelatedparties

Thirdparties

Relatedparties

Thirdparties

Maximum exposed credit risk as of reporting date 751,824 2,428,458 - 25,626 6,050,721 403,613 -- Secured portion of the maximum credit risk by

guarantees, etc. - 651,954 - - - - -

A. Net book value of financial asset either are not due or not impaired 751,854 2,363,541 - 25,626 6,050,721 403,613 -

B. Net book value of overdue but not impaired financial assets - 64,917 - - - - -

C. Net book value of the impaired assets - - - - - - -- Overdue(gross book value) - 2,676 - 304 - - -

- Impairment (-) - (2,676) - (304) - - -- Secured portion of the net value by guarantees,

etc. - - - - - - -- Not due yet (gross book value) - - - - - - -

- Impairment (-) - - - - - - -- Secured portion of the net value by guarantees,

etc. - - - - - - -D. Components which are including credit risk except

financial statement - - - - - - -

ReceivablesTrade Other Bank Derivative

31 December 2017 receivables receivables deposits instruments Other

Overdue (1-30 days) 22,920 - - - -Overdue (1-3 months) 14,304 - - - -Overdue (3-12 months) 1,181 - - - -Overdue (1-5 years) - - - - -Overdue (5+ years) - - - - -

ReceivablesTrade Other Bank Derivative

31 December 2016 receivables receivables deposits instruments Other

Overdue (1-30 days) 36,308 - - - -Overdue (1-3 months) 26,078 - - - -Overdue (3-12 months) 2,531 - - - -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.

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.

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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 constituted 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).

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 2017 and 31 December 2016:

31 December 2017 31 December 2016Financial instruments with fixed interest rateFinancial assets

Time deposits 8,778,098 6,044,576Financial liabilities 8,188,456 5,554,764Financial instruments with floating interest rate Financial liabilities (*) 6,862,528 6,579,501

(*) As of 31 December 2017, there is total interest rate swap amounting and cross currency interest rate swap transaction amounting to USD529,412 thousand classified as hedging entered for borrowings with floating rate for Tupras’ Residuum Upgrading Project (31 December 2016: USD617,647 thousand). Additionally, Ditaş has interest rate swap transaction at an amount of EUR17,714 thousand classified as hedging in scope of floating rate loans received for tankers of Kartal and Maltepe (31 December 2016: EUR44,285 thousand) (Note 20).

As at 31 December 2017, 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 TRY9,420 thousand lower/higher (31 December 2016: TRY7,879 thousand). As at 31 December 2017, 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 TRY3,387 thousand lower/ higher (31 December 2016: TRY2,823 thousand). As of 31 December 2017 and 2016, 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 2017 and 2016 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.

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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 2017 and 31 December 2016:

31 December 2017 31 December 2016 31 December 2017 31 December 2016TRY USD (*) TRY USD (*)

Monetary assets 7,648,679 2,027,805 4,347,693 1,235,421Monetary liabilities (21,286,304) (5,643,390) (14,585,609) (4,144,581)

Monetary assets/(liabilities) foreign currency position (13,637,625) (3,615,585) (10,237,916) (2,909,160)

Non-monetary assets 11,343 3,007 148,748 42,268Net foreign currency position of derivative financial instruments 4,294,924 1,138,663 1,310,386 372,353

Net foreign currency asset/(liability) position (9,331,358) (2,473,914) (8,778,782) (2,494,539)

Cash flow hedging (**) 4,796,118 1,271,539 5,130,371 1,457,823

Net foreign currency position after cash flow hedging (4,535,240) (1,202,376) (3,648,411) (1,036,716)

Inventory in natural hedge scope (***) 5,058,436 1,341,084 3,477,413 988,126

Net foreign currency position after cash flow hedging and natural hedge 523,196 138,709 (170,998) (48,590)

(*) Dollar equivalent amounts are determined through dividing total TRY equivalent positions to exchange rate of dollar as at balance sheet date.(**) The Group has used USD1.254.421 thousand, which is equivalent to TRY4.731.551 thousand as a prevention against USD/TRY spot foreign exchange risk. (USD1.456.823 thousand / TRY5.130.371 thousand in 31 December 2016). And USD 17.118 thousand, which is equivalent to TRY 64.567 thousand of the derivative transactions (December 31, 2016 - None) the USD / TRY spot rate, which is exposed to USD denominated export revenue, which is highly probable to be realized, is used as a protection against exchange rate risk. Based on the outcome of effectiveness test, group considered that the process in subject is fully effective and used for hedging through cash flow risk. As of 31 December 2017, TRY1.477.564 thousand of foreign exchange loss that arose from investment credits is classified under equity (Hedge Accounting) until hedging of cash flow actualizes, which is no effect on current year income statement (Note: 2.3.26). During the year ended 31 December 2017, the foreign exchange loss amounting to TRY 351.148 thousand corresponding to the export income of the mentioned credits denominated in USD has been transferred to the foreign exchange loss in the income statement from the “Hedging gains/(loses)” account under equity. Moreover, as of 31 December 2017, foreign exchange loss amounting to TRY 366.643, which was realized in 2017, were added to the “Hedging gains/(loses)” 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 2017, the Group has crude oil and petroleum products inventories amounting to TRY5,058,436 thousand (31 December 2016: TRY3,477,413 thousand) (Note 8).

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Notes to the Consolidated Financial Statements For the Year Ended 31 December 2017


Foreign exchange position table

31 December 2017 31 December 2016TRY equivalent (In terms of functional

currency) USD EUR GBP OtherTRY equivalent (In terms

of functional currency) USD EUR GBP Other Trade receivables 102,783 27,226 19 - - 257,339 73,124 - - -Monetary financial assets (including cash, banks) 7,528,924 1,851,164 120,909 - 554 4,085,609 875,246 270,883 114 -Other 11,343 2,298 590 2 - 3,780 1,074 - - -Current assets 7,643,050 1,880,688 121,518 2 554 4,346,728 949,444 270,883 114 -Monetary financial assets 16,972 2,498 1,672 - - 4,745 1,348 - - -Other - - - - - 144,968 27,163 13,309 - -Non-current assets 16,972 2,498 1,672 - - 149,713 28,511 13,309 - -Total assets 7,660,022 1,883,186 123,190 2 554 4,496,441 977,955 284,192 114 -Trade payables 7,297,348 1,916,299 14,705 329 1,191 3,841,321 1,056,681 27,213 1,043 17,189Financial liabilities 3,966,781 1,046,575 10,897 - 1,243,661 333,977 18,418 - -Other monetary liabilities 524,280 138,814 153 - 257,008 72,774 243 - -Current liabilities 11,818,409 3,101,688 25,755 329 1,191 5,341,990 1,463,432 45,874 1,043 17,189Financial liabilities 9,464,531 2,160,677 291,146 - - 9,241,837 2,314,067 296,011 - -Other monetary liabilities 3,364 686 172 - - 1,782 - 480 - -Non-current liabilities 9,467,895 2,161,363 291,318 - - 9,243,619 2,314,067 296,491 - -Total liabilities 21,286,304 5,263,051 317,073 329 1,191 14,585,609 3,777,499 342,365 1,043 17,189 Net asset/(liability) position of off-balance sheet foreign currency derivatives 4,294,924 925,914 177,714 - - 1,310,386 372,353 - - -Total amount of off-balance sheet derivative financial assets 4,365,360 944,588 177,714 - - 1,310,386 372,353 - - -Total amount of off-balance sheet derivative financial liabilities (70,436) (18,674) - - - - - - - -Net foreign currency asset/(liability) position (9,331,358) (2,453,951) (16,169) (327) (637) (8,778,782) (2,427,191) (58,173) (929) (17,189)Cash flow hedging 4,796,118 1,271,539 - - - 5,130,371 1,457,823 - - -Net foreign currency position after cash flow hedging (4,535,240) (1,182,412) (16,169) (327) (637) (3,648,411) (969,368) (58,173) (929) (17,189)Net monetary foreign currency asset/(liability) position (13,637,625) (3,382,163) (194,473) (329) (637) (10,237,916) (2,827,781) (71,482) (929) (17,189)Fair value of derivative instruments used for hedging 426,328 113,027 - - - 373,700 106,189 - - -

As at 31 December 2017, the Group has TRY523,196 thousand as net foreign currency surplus after natural hedging (31 December 2016: TRY170,998 thousand net foreign currency deficit) (p. 62).

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Foreign exchange position table

31 December 2017 31 December 2016TRY equivalent (In terms of functional

currency) USD EUR GBP OtherTRY equivalent (In terms

of functional currency) USD EUR GBP Other Trade receivables 102,783 27,226 19 - - 257,339 73,124 - - -Monetary financial assets (including cash, banks) 7,528,924 1,851,164 120,909 - 554 4,085,609 875,246 270,883 114 -Other 11,343 2,298 590 2 - 3,780 1,074 - - -Current assets 7,643,050 1,880,688 121,518 2 554 4,346,728 949,444 270,883 114 -Monetary financial assets 16,972 2,498 1,672 - - 4,745 1,348 - - -Other - - - - - 144,968 27,163 13,309 - -Non-current assets 16,972 2,498 1,672 - - 149,713 28,511 13,309 - -Total assets 7,660,022 1,883,186 123,190 2 554 4,496,441 977,955 284,192 114 -Trade payables 7,297,348 1,916,299 14,705 329 1,191 3,841,321 1,056,681 27,213 1,043 17,189Financial liabilities 3,966,781 1,046,575 10,897 - 1,243,661 333,977 18,418 - -Other monetary liabilities 524,280 138,814 153 - 257,008 72,774 243 - -Current liabilities 11,818,409 3,101,688 25,755 329 1,191 5,341,990 1,463,432 45,874 1,043 17,189Financial liabilities 9,464,531 2,160,677 291,146 - - 9,241,837 2,314,067 296,011 - -Other monetary liabilities 3,364 686 172 - - 1,782 - 480 - -Non-current liabilities 9,467,895 2,161,363 291,318 - - 9,243,619 2,314,067 296,491 - -Total liabilities 21,286,304 5,263,051 317,073 329 1,191 14,585,609 3,777,499 342,365 1,043 17,189 Net asset/(liability) position of off-balance sheet foreign currency derivatives 4,294,924 925,914 177,714 - - 1,310,386 372,353 - - -Total amount of off-balance sheet derivative financial assets 4,365,360 944,588 177,714 - - 1,310,386 372,353 - - -Total amount of off-balance sheet derivative financial liabilities (70,436) (18,674) - - - - - - - -Net foreign currency asset/(liability) position (9,331,358) (2,453,951) (16,169) (327) (637) (8,778,782) (2,427,191) (58,173) (929) (17,189)Cash flow hedging 4,796,118 1,271,539 - - - 5,130,371 1,457,823 - - -Net foreign currency position after cash flow hedging (4,535,240) (1,182,412) (16,169) (327) (637) (3,648,411) (969,368) (58,173) (929) (17,189)Net monetary foreign currency asset/(liability) position (13,637,625) (3,382,163) (194,473) (329) (637) (10,237,916) (2,827,781) (71,482) (929) (17,189)Fair value of derivative instruments used for hedging 426,328 113,027 - - - 373,700 106,189 - - -

As at 31 December 2017, the Group has TRY523,196 thousand as net foreign currency surplus after natural hedging (31 December 2016: TRY170,998 thousand net foreign currency deficit) (p. 62).

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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 2017 and 31 December 2016.

Statement of foreign currency risk sensitivity31 December 2017

Profit/Loss Equity

Appreciation of

foreign currencyDepreciation of

foreign currencyAppreciation of


foreign currency

10% change in USD rate:USD net assets/ liabilities (1,275,718) 1,275,718 473,155 (473,155)Amount 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 (87,665) 87,665 - -Amount hedged for Euro risk (-) 80,247 (80,247) - - EUR net effect (7,418) 7,418 - - TOTAL (474,485) 474,485 473,155 (473,155)

31 December 2016 Profit/Loss Equity

Appreciation of


foreign currencyAppreciation of


foreign currency

10% change in USD rate:USD net assets/ liabilities (995,153) 995,153 (513,037) 513,037Amount hedged for USD risk (-) 644,076 (644,076) - - USD net effect (351,077) 351,077 (513,037) 513,037

10% change in EUR rate:Euro net assets/ liabilities (26,519) 26,519 -Amount hedged for Euro risk (-) - - - - EUR net effect (26,519) 26,519 - - TOTAL (377,596) 377,596 (513,037) 513,037

The Company 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.

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Export and import


ExportUSD (equivalent of thousand TRY) 10,205,556 6,374,428

10,205,556 6,374,428

ImportUSD (equivalent of thousand TRY) 42,552,146 26,456,318

42,552,146 26,456,318

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 2017 and 31 December 2016 are as follows:


Total financial liabilities (Note 5) 15,050,984 12,134,265Less: Cash and cash equivalents (Note 4) (7,603,858) (5,048,709)

Net financial liabilities 7,447,126 7,085,556Total shareholders’ equity 10,477,661 8,167,033

Total capital invested 17,924,787 15,252,589

Gearing ratio 41.55% 46.45%

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.

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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 2017 is as follows:

Financial assets at fair value through profit or loss Level 1 Level 2 Level 3

Derivative financial assets - 447,469 -Financial investments - - -

Financial liabilities at fair value through profit or loss

Derivative financial liabilities - 180,501 -

Fair value hierarchy table as at 31 December 2016 is as follows:

Financial assets at fair value through profit or loss Level 1 Level 2 Level 3

Derivative financial assets - 403,613 -Financial investments - - -

Financial liabilities at fair value through profit or loss

Derivative financial liabilities - 31,236 -

33. Subsequent events

None.

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Glossary

GLOSSARY OF TERMS

TURKISH ENGLISH

APC İleri Proses Kontrolü Advanced Process Control

API

Amerikan Petrol Enstitüsü (API) tarafından çıkarılan ve özgül ağırlığa bağlı API gravite tanımı, petrolün sınıflandırılması için kullanılır.

The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light petroleum liquid is compared to water.

ASRFO Atmosferik Straight Run Fuel Oil Atmospheric Straight Run Fuel Oil

ASTM Uluslararası Standartlar American Society for Testing and Materials

BAT Mevcut teknoloji Best Available Technology

CCR REFORMER Katalist Rejenerasyonlu Reformer Continuous Catalytic Regeneration Reformer

CDU Ham Petrol Distilasyon Ünitesi Crude Distillation Unit

CIF

İthalatta, mal fiyatının üzerine sigorta ve navlun giderlerinin de eklendiği bir alım-satım şekli

Cost, Insurance & Freight

ÇED Çevresel Etki Değerlendirmesi Environmental Impact Assessment

DCS Kontrol Sistemi Distributed Control System

DECOKER Koklaştırma Ünitesi Delayed Coker

DSS Sürdürülebilir Çözümler Dupont Sustainable Solutions

DWT Uluslararası Denizcilik Ticaretinde ve Denizcilik Endüstrisinde kullanılan ağırlık birimi

Deadweight Tonnage

DYS Değişiklik Yönetim Sistemi Change Management System

EBH Kaynayan Yataklı Hidrokraker Ebullated Bed Hydrocraker

EFQM Avrupa Kalite Yönetimi Vakfı European Foundation for Quality Management

EII Enerji Yoğunluğu İndeksi Energy Intensity Index

ENVER Enerji Verimliliği Energy Efficiency

EPDK Enerji Piyasası Düzenleme Kurumu Energy Market Regulatory Authority

ESD Elektrostatik Deşarj Electrostatic Discharge

EUREKA Avrupa Araştırma Koordinasyon Ajansı European Research Coordination Agency

EURO 3 Euro Emisyon Standardı (Maks. Kükürt 350 ppm) Euro Emission Standard (Max. Sulphur 350 ppm)



FAVÖK Faiz, Amortisman Vergi Öncesi Kâr EBITDA

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Glossary

FCC Ağır hidrokarbon petrol fraksiyonlarını benzin, kompenantlarına dönüştüren ünite

Fluid Catalytic Cracking Unit

Fed ABD Merkez Bankası Federal Reserve Bank

FOB Tedarikçinin malzemeyi nakliye yapılacağı geminin güvertesine taşıyana kadar olan sorumluluğu olan mal teslim şekli

Free On Board

FP7 Avrupa Birliği’nde çok uluslu araştırma ve teknoloji geliştirme projelerinin desteklendiği başlıca Topluluk Programları’dır.

The Seventh Framework Program

GDR Küresel Saklama Sertifikası Global Depositary Receipt

GMB Güvenlik Merkezli Bakım Security Centered Maintenance

GTL/CTL Gazdan Sıvı, Kömürden Sıvı Gas to Liquid, Coal to Liquid

HAY Hata Ayıklama Yöntemi Debugging Method

HAZOP Tehlike ve İşletilebilme Çalışması Metodu Hazard and Operatibility Study

HDS Kükürt Giderme Hydro Desulphurisation

HORİZON AB Araştırma ve Yenilikçi Çerçeve Programı EU Research and Innovation Framework Program

HRSG Isı recovery buhar jeneratörü Heat Recovery Steam Generator

HSRN Ağır Nafta Heavy Straight-Run Naphtha

HVGOVakum distilasyon ünitesinden elde edilen HVGO, dönüşüm ünitelerinde daha değerli beyaz ürünlere çevrilir.

Heavy Vacuum Gas Oil

HYDROKRAKER Rafineri Dönüşüm Ünitesi Hydrocracker-Conversion Unit

IEA, UEA Uluslararası Enerji Ajansı International Energy Agency

IOPC Uluslararası Petrol Kirliliği Tazminat Fonu International Oil Pollution Compensation Funds

ISM Uluslararası Emniyetli Yönetim International Safety Management

ISPS Uluslararası Gemi ve Liman Güvenlik Kuralları International Ship and Port Security Rules

İTA İş Tehlike Analizleri Job Hazard Analysis

KBS Kazan Besleme Suyu Boiler Feed Water

KKO Kapasite Kullanım Oranı Capacity Utilization Rate

KOK Kalıcı Organik Kirleticiler Persistent Organic Pollutants

KPI Temel Performans Göstergeleri Key Performance Indicators

LCGO Light Cycle Gas Oil Light Cycle Gas Oil

LCGO/HCGO Hafif/Ağır Dizel Light/Heavy Gas Oil

LSRN Hafif Nafta Light Straight Run Naphtha

ME Mekanik Emre Amadelik Mechanical Availabilities

226


MTBEBenzinin oktanını artırmak ve aromatik miktarını düşürmek amacıyla kullanılan yüksek oktanlı hidrokarbon.

Methyl Tertiary-Butyl Ether

NELSON COMPLEXITY Beyaz Ürün Üretebilme Kapasitesi White Product Yield Ability

OCIMF Petrol Şirketlerinin Uluslararası Denizcilik Forumu The Oil Companies International Marine Forum

OEA Operasyonel Emreamadelik Operational Availabilities

OSAR Olay Sınıflandırma, Araştırma ve Raporlama Event Classification, Research and Reporting

PCT Uluslararası Patent Koruması International Patent Protection

PETDER Petrol Sanayi Derneği Petroleum Industry Association

POX Kısmı Oksidasyon Ünitesi Partial Oxidation

PPM Bir kilogram yakıtta mg cinsinden kükürt miktarını gösterir. Parts Per Million

PT Penetrant Test Penetrant Test

QDMS Tüpraş Kalite Yönetim ve Doküman Sistemi Quality Documentation Management System

RAYEP Rafinerici Yetiştirme Programı Refining Training Program

RBI Risk Tabanlı Teknik Kontrol Technical Risk Control

RDT Risk Değerlendirme Tablosu Risk Evaluation Chart (REC)

RGY Risk ve Güvenirlilik Yönetimi Risk and Reliability Management

RONOktan sayısı, benzinin kalitesini gösteren parametre olup motordaki vuruntunun ölçümü

Research Octane Number

RTK Risk Tabanlı Kontrol Risk-Based Control

RUP Fuel Oil Dönüşüm Ünitesi Residuum Upgrading

SDA Çözücü Yardımıyla Asfalt Ayırma Ünitesi Solvent Deasphalting Unit

SEÇ Sağlık, Emniyet ve Çevre HSE

SEÇ-K Sağlık, Emniyet, Çevre ve Kalite Health, Safety, Environment and Quality

SEVESO-IIBüyük Endüstriyel Kazaların Önlenmesi ve Etkilerinin Azaltılması Hakkında Yönetmelik

Prevention of Major Industrial Accidents and Mitigation of Impacts on Regulation

SMR Hidrojen Üretim Ünitesi Stream Methane Reformer

SRD Sağlık Risk Değerlendirmesi Health Risk Assessment

TAEK Türkiye Atom Enerji Kurumu Turkey Atomic Energy Agency

TEYDEB Teknolojik ve Destek Programları Başkanlığı Technological and Support Programs Department

TEYS Tehlike ve etkilerin yönetim süreci Management Process of the Dangers and Effects

TMSA 2 Petrol Tankeri Yönetimi ve Değerlendirmesi 2 Tanker Management Self Assessment 2

TPE Ton Petrol Eşdeğeri Tons Petroleum Equivalent

TPP Termal Power Plant Thermal Power Plant

TÜRKAK Türk Akreditasyon Kurumu Turkish Accreditation Agency

VAP Verimlilik Artırıcı Proje Efficiency Enhancement Project

VDU Vakum Destilasyon Ünitesi Vacuum Distillation Unit

VGO Vakum Dizel Vacuum Gasoil

VLCC Çok Büyük Ham Petrol Gemisi Very Large Crude Carrier

VOC Uçucu Organik Bileşenler Volatile Organic Compounds

WTI Amerikan Referans Ham Petrolü West Texas Intermediate

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Glossary

GLOSSARY OF UNITS m3 Metreküp Cubic Meter

MW Megavat Megawatt

KG Kilogram Kilogram

GRT Gros tonaj Gross Tonnage

M/T Milyon Tonaj Million Tonnes

KW Kilovat Kilowatt

KWh Kilovatsaat Kilowatt Hour

m2 Metrekare Square Meter

CO2 Karbondioksit Carbon Dioxide

GCAL Giga kalori Gcal

Ton CO2e Ton Karbondioksit Eşleniği Ton Carbon Dioxide Equivalent

TJ Terajoule Terajoule

MJ Megajoule Megajoule

j Joule Joule

Mt Milyon Ton Million Ton

t Ton Ton

bpd Bir Günde Üretilen Petrol Varil Sayısı Barrel per Day

MtOE Milyon Ton Petrol Eşdeğeri Million Ton of Oil Equivalent

mmcf Milyon Küp Feet Milyon Cubic Feet

g/l Gram/Litre Gram/Litre

ppm Milyon Başına Düşen Parça Sayısı Number of Parts per Million

N Newton Newton

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