47 Years Later

Since 1961, when OYAK was founded, its members have aspired to buy a home and a car in their retirement with their earned retirement savings from OYAK. 2008 was a milestone in OYAK's history in this context, and the 47 years old dream came true.

Detailed studies we have conducted found that a colonel or a sergeant with 31 years of service, could easily purchase a 3 room flat with an area of 100 m2 in an apartment block built within the last 10 years in the up market districts of Göztepe in Istanbul, Çayyolu in Ankara or Karşıyaka in Izmir, with the retirement payouts which they will receive from OYAK. Furthermore, our members in this category are also able to buy a small or mid-size car manufactured by our Group, and in some cases, would even have some cash "left over". Obviously, each of our members would have to perform the evaluations personally within the framework of their own conditions and preferences.

OYAK's long years of sustainable growth and development have ensured our members can now expect, upon retirement, the levels of prosperity they have desired for the last 47 years. Detailed information on this issue was presented for the evaluation of our members at OYAK's Annual General Assembly meeting in May, 2009.

OYAK's achievement in reaching such a basic “objective”, so long aspired to and which became a symbol, has brought much deserved pride and pleasure to our entire community. I would like to thank all OYAK employees who have been steadfast in their efforts in the achievement of this result and to our members who have stood with us. With this result, OYAK has once again demonstrated that it is a model of success for both Turkey and the world.

Even under the unusually challenging and volatile market conditions of 2008, OYAK continued to successfully fulfill its fundamental function in line with its broader mission. As old established global banks and institutions, some of which had become household names, went out of existence, OYAK managed to add a net actuarial profit of TRY 1,911 million to its members' savings. The income, and the rate of return, were realized as TRY 1,911 million and 26.3%, respectively.

This rate of return amounted to 3.2 times the rate of PPI inflation (8.1%) and 2.6 times the rate of CPI inflation (10.1%) in 2008. In the same period, the reserves of OYAK members almost reached TRY 10 billion.

Another very important matter which I would like to stress at this stage is the relationship between the attained level of members' assets and the income and rate of return. Since the rate of return simply refers to the rate of profit generated during the current year with respect to the cumulative value of members’ assets, ensuring a steadily increasing rate of return as our member assets grow each year, requires that we attain an ever increasing level of profits with each passing year. In other words, if we were to merely generate the same level of profits each year, our rate of return would continuously fall over the years. Therefore, OYAK will continue to focus on generating a rising level of profit each passing year, thus providing the highest possible rate of return to its members given increasing asset levels over the years.

Beyond setting forth our unrivalled strength in providing real returns, our financial results for 2008 have once again revealed that OYAK boasts a successful and sustainable strategy which generates added value even under the most difficult market conditions.

OYAK's management identified the initial warning signs of the crisis back in 2005 and 2006, and started to take the necessary radical measures to cope with it. As explicitly outlined in previous annual reports, OYAK forecasted the impending global volatility and took some significant decisions which were immediately put in practice.

In line with the strategic decision we took in this direction, OYAK announced the sale of its banking subsidiary in the middle of 2007, and closed the deal before the year end. OYAK entered 2008 with a strong liquidity position. The final step of our strategic decision to exit the financial services sector was the sale, in 2008, our shares in AXA OYAK insurance and OYAK Emeklilik (Private Pensions).

With its strategy of seeking out the best way to exploit the investment opportunities presented by market conditions, OYAK has concentrated on utilizing the liquid assets under its management. While keeping a view of the markets in 2008 we also chose essentially to remain liquid. Our permanent priority has been to manage our assets in the most proper way in these historically exceptional circumstances and to act with a policy which is more risk-sensitive than ever.

The global crisis set the stage for dramatic falls in asset prices the world over. We think this period of volatility and balancing will stay with us until at least the beginning of 2011 or longer. Our view is that this process will continue to impact asset prices throughout the world. Our projections in this direction played a considerable role for us in defining the year 2008 as a period in which we monitor, examine and keep a watch of the markets, instead of taking quick action.

I would admit that the impacts and the intensity of the global crisis in 2008, particularly in the last quarter of the year, went beyond our estimates. The fact remains that some of our subsidiaries were unable to demonstrate high levels of performance despite our aspirations. The contraction in global manufacturing and trade has inevitably exacted a toll on the performance of some of our subsidiaries.

Our steel making subsidiary, ERDEMİR, completed the biggest investment in the history of our Republic, spending about USD 2.5 billion, and closed 2008 with a profit which was just one third of its 2007 bottom line. However, considering the volume of the investment, as well as the rapid worsening in the global iron and steel industry, the importance of this result should not be understated.

In a period when the world's automotive giants have been plunged into bankruptcy, our automotive group managed to generate a profit in 2008. Our subsidiaries in the cement sector completed the year with sound profitability, yet short of their potential. While our other subsidiaries essentially preserved their successful trends, OYAK succeeded in increasing the value of its members' assets, while generating a substantial profit in a year when pension funds in the global league announced massive losses.

The year 2009 and the years to follow look set to be a period full of volatility and challenges for the global economy as well as the Turkish economy. Forecasts for global economic growth have been revised downwards with developed countries' economies set to remain in recession for some time, while developing economies will suffer a significant slowdown in their economic growth and in their manufacturing sectors. Although the Turkish economy had been in a reasonably robust position when the crisis struck, the fallout of the global economic malaise rapidly began to spread and impact the real sector at home, and economic recession became inevitable. Effects of the crisis included rising unemployment, bottlenecks in the disbursement of loans, weakness in consumer confidence and declining industrial manufacturing, all crying out for solutions.

Expecting more negative circumstances for 2009, OYAK aims to achieve about half of the rate of return it generated in 2008. While we obviously aim to exceed these targets and produce more, we also seek to be realistic and act accordingly.

Presently, OYAK boasts a very high level of liquidity. We have ensured that our institution is well equipped and strong enough to overcome the challenges from the markets. We never compromised the hard earned rights of our members. Besides, the acquisitions that we have entered into during the recent period and the cash level we have reached are sufficiently strong that we are likely to be in a position to strengthen our member assets, even in the toughest periods ahead. OYAK is a pension fund which is strong, well-equipped and actuarially balanced to ensure the prosperity of its members who will retire in the middle- and the long-term.

OYAK continues to press ahead with its long-term strategies by maintaining its unique structure. By virtue of the nature of our business and the responsibilities we have to our members, we are required to think and act long-term. OYAK is determined to manage the problems in the markets in the most proper way, and to best exploit any opportunities that may appear.

I would like to extend my sincerest gratitude to our valued members who have played such an important role in our success through their lifelong trust and support for us in ensuring that the year 2008 was one of the most meaningful years of our 47-year history I also would like to thank our General Assembly which has placed their trust in us and offered their unstinting support, as well as our Board of Directors and Board of Auditors who expertly guided us in one of the most challenging global crises in history. I would also like to thank our management staff and employees who helped us reach our targets, while also offering my sincerest best wishes to our clients and all OYAK friends.

Şerif Coşkun ULUSOY, Ph.D.
Chief Executive Officer