In line with our mission
As it is essentially a retirement fund, OYAK's primary duty is to safeguard the value of its members’ accumulated savings.
The actuarial profit (return) that we added to our members' savings in 2005 amounted to YTL 829.2 million. Our rate of return, which is the basic indicator of our success and an expression of the increase in our members' total assets, was 26.8% last year.
This 26.8% rate of return is 3.5 times the 7.72% posted rate of consumer price inflation and 6 times the 4.5% rise in wholesale prices during the same twelve months. In an economic environment where we have come to expect single digit inflation numbers, these results once again confirm the validity of OYAK's strategy of focusing on sustainable and profitable growth.
An active participant in the privatization program
Our equity investment portfolio, which plays an important role in our ability to fulfill our commitments towards our stated goals, gained a new dimension with a number of ventures that we undertook in 2005.
Throughout its history, OYAK has always been quick to take maximum advantage of the business opportunities that markets offer. This approach is an important component of OYAK's portfolio management strategy.
An expected and natural outcome of this strategy was that OYAK had to be an active participant in the privatizations that took place in 2005. OYAK submitted bids in the tenders for ERDEMİR, TÜPRAŞ, and a number of cement factories.
In all the tenders that OYAK took part in last year, it was competing against not just Turkey's leading corporate groups but some of the world's giants. With its professional approach to management and a consistent business strategy that is always mindful of the productive use of resources and a prudent balance of risk vs. return, OYAK carefully chose the tenders in which it participated and abstained or withdrew from those that appeared unlikely to be beneficial.
ERDEMİR joins the OYAK family
The steelmaker ERDEMİR, which has consistently ranked among the top biggest companies in our country, joined the OYAK family last year. In a televised bidding on 4 October 2005, OYAK won the tender for a 46.12% stake in ERDEMİR with a bid of USD 2.77 billion.
ERDEMİR is an important step for OYAK for two reasons. The first is the material dimensions of the investment: ERDEMİR is a holding company with a portfolio of equity stakes of its own and this fact will contribute significantly to the diversification and value of the Fund's overall portfolio.
The other reason is that ERDEMİR has one of the highest rates of public participation in Turkey and its shares are traded on the İstanbul Stock Exchange. OYAK has always favored the inclusion of publicly-held companies in its equity portfolio and with the addition of ERDEMİR, it is ready to put its deep-rooted tradition and experience in the management of such stakes to work in the fulfillment of its corporate governance responsibilities towards an even bigger shareholder base.
We are all very much excited by the addition of ERDEMİR to the OYAK family.
ERDEMİR is an important national asset. Keeping it under the Fund's control and protecting it, further developing its production might, enhancing its competitive strengths, and fortifying its leading position in the worldwide league table of steelmakers will rank high among OYAK's priorities in the years ahead.
Credit ratings: International confirmation of OYAK's strength
For the first time in its history, as well as another “first” in Turkish corporate history, OYAK was rated by the world's leading rating agencies Moody's Investors Services and Standard and Poor's. Each assigned the Fund a rating equal to the agency's sovereign rating for Turkey.
When it raised Turkey's sovereign rating, Moody's Investor Service also raised the B1 long-term foreign currency rating that it initially assigned to OYAK in 2005 to Ba3 as well while also reconfirming the Group's Ba2 long-term local currency rating. The outlooks announced for both ratings were “stable”. In its justifications for these ratings, Moody's pointed to OYAK's well-defined and open corporate governance structure, to its ability to secure real returns year after year for its members, to its successful operational results, and to the reputation that the Group had earned for trustworthiness and transparency. In announcing its credit rating, Moody's also noted the strength of OYAK's financial investments and assets as a pension fund as well as its high liquidity and low indebtedness. In its report Moody's also indicated that if OYAK were to issue a bond denominated in a foreign currency abroad, the bond's rating could potentially be assigned at a higher level than the Republic's own sovereign rating. This statement is an important expression of OYAK's position as a strong player in the international arena.
Standard & Poor's assigned OYAK a “BB- stable outlook” long-term foreign currency abroad rating, which is identical to its sovereign rating for Turkey, as well as a long-term local currency rating of “BB- stable outlook”. In its announcement, S&P noted that OYAK is one of Turkey's biggest industrial and financial corporate groups and as its reasons for assigning this rating it cited the tremendous synergies created by its extensive and diversified portfolio of equity stakes that complemented one another, the profitability that it had succeeded in achieving as a pension fund over the years, and its sound liquidity.
OYAK is the first corporate group in Turkey to have been assigned ratings by both Moody's and S&P. This fact is another indication of the important position that OYAK enjoys in the Turkish economy.
International markets know us and trust us
Over the years, OYAK has developed strong and multidimensional relationships with international financial markets. Nourished by mutual trust, cooperation, and benefit, these relationships constitute some of the Fund's most important assets.
Following up on the success of its first credit syndication in 2004, OYAK again put those relationships to work to obtain funding under the best terms available and has secured a total of USD 2.6 billion in medium and long-term resources in two international credit syndications.
On 22 December 2005, OYAK entered into an agreement with a distinguished group of banks under which it obtained USD 1.6 billion to finance the acquisition of its stake in ERDEMİR. This ten-year loan was entirely underwritten by the participating banks and includes an initial three-year grace period. The loan, which was extended to ATAER Holding, an OYAK subsidiary that was set up in 2005 to own and manage the ERDEMİR stake, is the first long-term acquisition financing deal ever undertaken in Turkey.
In the second syndication, which was concluded on 7 February 2006, OYAK secured USD 1 billion in resources from international markets, USD 500 million of which is repayable in one year and the balance in two.
The confidence that international markets have in OYAK is a manifestation of the Fund's strength. As one of Turkey's biggest corporate groups, OYAK is also a Turkish business partner which is greatly preferred by international investors.
“OYAK belongs to us all”
Another important event last year was the first OYAK Business Partners Meeting. Held in Antalya in September, this meeting gave a large number of managers of OYAK and its subsidiaries a chance to get together with 1,150 participants representing the Group's business partners.
Shaped around the theme “OYAK belongs to us all”, the OYAK Business Partners Meeting provided an excellent opportunity for OYAK to show off its new corporate logo to its business partners, explain many aspects of OYAK that are unfamiliar to them, share with them the progress that has been made in recent years, and most important of all, thank them for the tremendous contributions that they have made towards OYAK's success.
The strong desire and willingness expressed by our business partners to identify with OYAK and take it even further as a national asset played a great role in the meeting's success. The picture that emerged from the meeting was a source of excitement, happiness, and pride for the whole OYAK family.
Healthy and balanced growth
2005 will be remembered as a year in which OYAK undertook new ventures and gained important international recognition for itself. We see 2006 as a year in which we will be pursuing a healthy and balanced growth while consolidating our recent gains.
The historically important ventures that we undertook in 2005 are still more evidence of OYAK's faith in our Country and its future. We believe that Turkey will remain on the path of growth and with this in mind, OYAK is determined to put the great economic strength that it represents to work in the best way possible and to continue to create value as it carries out its mission of contributing to the financial futures of its members.
In closing, I extend my sincere appreciation to everyone, not least to our employees whose efforts contributed so much to our success last year, and to our business partners who believe in OYAK, trust it, and choose it as their partner.
With the continued support of our nearly 230,000 members, OYAK will always belong to all of us.
Coşkun Ulusoy, Ph.D.
Chief Executive Officer