Dear Shareholders,

The economic crisis, arisen as of the bankruptcy of Lehman Brothers in 2008, was spread to the other developed and developing countries in 2009. Turkey, being an integrated part of the global trade, and the petroleum sector were naturally affected by this adverse event. Decreased demand and price-cap implementation put into effect in the fuel oil distribution sector, which constitutes main subject of activity of our Company, adversely affected the profitability of the petroleum companies, even if temporarily. Total fuel-oil consumption of Turkey decreased down to 17.7 million m3 by a rate of 8%.

Although the global economy closed the year with a shrinkage of 5% and despite all the troubles in the world economies, Turcas achieved Net Profit of TL 27.6 million in 2009 fiscal year. The Net Profit decreased by 39% compared to the same period of the last year. The main reason for such shrinkage is the accounting loss of TL 37.5 million, belonging to Turcas’ share of capital increase from TL 50 million up to TL 200 million of SOCAR & Turcas Enerji A.Ş., being an affiliate of Turcas with 25% share and investing in petrochemicals and refining sectors. Net Cash Amount in Turcas’ balance sheet recessed to TL 62.6 million as of 2009 based on this capital increase. Total assets are recorded as TL 517.1 million as the same as the last year. Additionally, our affiliate RWE & Turcas Güney Elektrik Üretim A.Ş., with 30% share, engaged in energy investments was consolidated by way of equity pick-up method in Turcas’ balance sheet as of December 31, 2009.

Shell & Turcas Petrol A.Ş. (STAŞ) our 30% affiliate and the flagship of our group, which is active in the fuel-oil sector, has continued to be the leader with its 29% market share in gasoline sales, 27% market share in Eurodiesel sales (including lower sulphur diesel) and 27% market share in lubricant oil sales. The adverse effect on the profitability of STAŞ was eliminated upon revocation of price-cap implementation put into force by the Energy Market Regulatory Authority in September. In 2009, Net Sales of STAŞ were recorded as TL 7.9 billion and Net Profit as TL 178 million. Operating Profit was recorded as TL 222.4 million by a margin of 2.8%. Despite the increase of 18% in the Net Sales, the Net Profit increased by 1% compared to the same period of the last year. EBITDA Margin reached TL 350 million with an increase from 4% last year to 4.5%. Liquid Assets in the balance sheet of STAŞ decreased down to TL 17.7 million and Total Assets were kept at the level of TL 2.1 billion. Compared to December 31, 2008, despite the challenging market conditions, STAŞ decreased its Short Term Financial Liabilities down to TL 366 million by TL 143.9 million.

Target of STAŞ, setting out to be a leader in the fuel oil and lubricants sector, has indisputably been a leader of these markets in Turkey as the most popular and preferred brand both for the sector and the consumers. Great achievements, began in the second half of 2006 and within the subsequent three years indicate that the first portion of this target has been achieved. As of the end of 2009, the number of Shell branded gas stations in the body of STAŞ increased to 1211.

STAŞ was elected as the “The Most Popular Company of Turkey” in the Fuel Oil Distribution and Lubricants Sector in 2009 as it was in 2008 according to the research of Capital Magazine. Additionally, in 2009, STAŞ was rewarded and elected as the “Most Widely Known Brandname in the Sector” by Nielsen, Turkey; as “The Company Marking on the Sector” by Dünya Newspaper and as “The Third Biggest Company of Turkey” by Fortune Magazine.

I previously disclosed that we guaranteed to be ready for the future with technological superiorities, to gain more customers thanks to the new products; and basically to increase our competitiveness. STAŞ introduced to the market 2 new products in 2009, in line with the developing market conditions and saving need of the consumers. Whereas V-Power + GTL, launched in June increases the performance of the diesel automobiles, “FuelSave”, introduced into the market with the Slogan “More Performance with each drop”, ensures oil-saving in 95 Octane Unleaded Gas.

Our Antalya facility, preparation works of which are continued so as to be activated in 2010, has the storage capacity of 33,000 m3. Upon commissioning of this facility, the products such as Diesel Extra, V-Power Diesel, FuelSave Unleaded Gas, V-Power Diesel + GTL and Jet A-1 might be stored and sold.

The investments of STAŞ in the fields of storage/logistics are increasingly continued. Samsun SADAŞ Terminal, constructed by Total Oil Turkey (Total) in 1994, was upgraded to have a new capacity of 38,360 m3 that is double the former capacity before STAŞ-Total partnership, upon construction of 8 new tanks after conclusion of an agreement between STAŞ and Total. The Terminal was launched with its upgraded capacity, which is more appropriate for national and imported product storage, for use by STAŞ as of January 1, 2010. Accordingly, STAŞ is now able to supply from a single terminal its own products to its Dealers in the Black Sea Region, which it has before distributed from several terminals in the region. These products would also include the diversified products, which the Dealers of STAŞ in the Black Sea Region have no chance to buy before.

We, as the shareholders, ceased the refinery activities of ATAŞ Anadolu Tasfiyehanesi A.Ş in 2004, the first private sector petrol refining company, which is another affiliate of Turcas and was activated in 1962. ATAŞ has turned out to be one of the biggest oil terminals of the Mediterranean Region with its fuel oil storage capacity of 570,000 m3 based on the investments made thereafter. The storage capacity, corresponding to the shares of Turcas and Shell in ATAŞ is today being used by STAŞ under the agreement entered with Shell and this plays an important role to satisfy the storage and supply needs of the Company in the Mediterranean.

As you will remember, our partnership SOCAR & Turcas, focused on petrochemicals production and new refinery investment, acquired Petkim Petrokimya Holding A.Ş. (Petkim), the only petrochemicals producer of Turkey on May 30, 2008. SOCAR & Turcas ensured that Petkim has made important dispositions within a very short period of time and started to get satisfactory results based on multidimensional and effective studies, although Petkim disclosed loss at the end of 2008 due to global crisis and lower product prices. In 2009, Petkim made considerable performance and disclosed a Net Profit of TL 114 million. Whereas the Net Sales of the Company reached TL 2.1 billion, Gross Profit Margin was recorded as 5.5%. Fundamental engineering and feasibility studies were initiated in order to guarantee 10-13% capacity increase in several main products such as Ethylene in accordance with the short term growth plans. Additionally, the share of alternative and cost-effective resources is increased in order to ensure raw material diversity and flexibility, and the share of LPG in the total was lifted to 10%.

Refinery project, planned in Ceyhan by SOCAR & Turcas was transferred to Petkim area in İzmir Aliağa due to advantage of proximity to the market, ready infrastructure possibilities, cost items and raw material needs of Petkim; and SOCAR & Turcas Rafineri A.Ş. (Joint Stock Company) was incorporated to be active in this field. Positive Environmental Impact Assessment Report (EIA Report), necessary for the refinery was obtained from the Ministry of Environment within the last quarter of 2009. SOCAR & Turcas Rafineri A.Ş. completed the necessary tenders at the beginning of 2010 and executed Detailed Engineering Agreement with Foster Wheeler Italiana (FEED) and License and Fundamental Engineering Package Agreement regarding the different units of the refinery with the leading specialist companies of the world. We expect to obtain the Refinery License for our Project in 2010.

"I strongly believe that we will continue to create value for our shareholders in the coming years."

In 2009, the most significant progress of Turcas in electricity generation sector, the future of which Turcas believes in, was the Electricity Generation License obtained in May for Denizli Natural Gas Combined-Cycle Gas Tribune Project with the installed capacity of 800 MW, operated with our partner RWE. Subsequently, a Turn Key EPC (Engineering, Purchase, Construction) Agreement was signed with METKA Company in October. We target to start the power plant construction within no later than the third quarter of 2010 under the Construction Permit obtained in April 2010 and to commence the commercial enterprise at the end of 2012.

Turcas Rüzgar (Wind), 100% Affiliate of Turcas, targeting to have a diversified generation portfolio in the electricity sector and planning to make investments in the renewable resources for this reason, filed a license application with the Energy Regulatory Market Authority for its 6 different projects in November 2007. The process of examination and licensing has been longer than expected due to higher number of applications filed on the same date. Turcas initiated wind measuring activities in all the relevant areas within this period and postponed the project development as of the end of 2009. We anticipate that the licensing for these projects would be completed in 2010 and our related investments would start in 2011.

Our fully owned subsidiary Turcas Gas, which started operations in 2007, recorded 100 million m3 of sales in 2009. The Turkish natural gas market, which has been liberalized since 2001 has reached a turning point in 2009, where the share of private vendors reached 10% of the import market with the introduction of 3 players. Moreover, the liberalization of LNG imports and the introduction of a new company to the market is expected to increase the share of private companies even higher. This is not enough, however. We expect the permissions to be given to all companies and the liberalization of pipeline delivered LNG in order to foster a more competitive environment. We anticipate a legislation change in 2010 to this end, and Turcas Gas will be able to import from its direct sources and increase its market share accordingly.

Dear Shareholders,

We believe that the economic crisis, still effective also in 2009, would be replaced by positive growth in the next year. We are of the opinion that we have evaluated in the best manner the opportunities for making our Company stronger than ever by keeping our long term point of view.

Operations and new projects, which we run together with our global partners, highlights Turcas as the only Integrated Energy Company of Turkey. Each of our affiliates is an independent and viable organization and creates synergies for the other affiliates; and these synergies are realized as a part of connecting and partnership role of Turcas.

The CEO of Shell Global, Mr. Peter Voser stated in a press release that the partnership model with Turcas in their Turkey operation was unique and a first for Shell. He also explained that after observing the success of this partnership model, they have decided to implement it in their future endeavors. Besides honoring us, this announcement also confirms the validity of our strategy to grow with strong partnerships.

We’ve augmented the ongoing performance of our top management with regards to investor relations by establishing a new Investor Relations and Strategic Planning Department. Turcas received a note of 7.52 after the audit of a CMB licensed Corporate Governance Rating Firm. This grade affirms that Turcas has complied with CMB’s Corporate Governance Principles and deserves to be included in the Good Corporate Governance index of ISE. I firmly believe that in the future, we will better our compliance to the corporate governance principles and deserve better grades after further audits.

Distinguished Shareholders and Business Partners,

We always tried to think of crisis as opportunity. The most important opportunity this crisis has provided us was the easier access to top quality manpower. As a result, we’ve strengthened both Turcas’ and subsidiaries’ workforce with top quality personnel and improved our base for further expansion in our areas of focus.

Our company continues to invest in profitable projects that create value for our shareholders while distributing profits at the same time. In line with our increasing investments, our respectability and brand name also flourished and helped drive Turcas’ share price higher.

As part of our corporate and social responsibility, we’ve decided to promote and support renown Turkish artists in our Annual Report in 2009 and introduced Huseyin Avni Lifij and his paintings, a prominent figure in Modern Turkish Painting. Avni Lifij is one of the most talented painters of the 1914 Era (also called “Çallı” period). Born on 1886 in Samsun, Lifij founded the “Ornamental Arts Department” for the Academy of Fine Arts in İstanbul on 1924, after a brief art education in Paris. According to art scholars, Lifij’s knowledge of design and structure was way ahead of his peers and was considered a genius who reflects his individuality to his paintings. By way of submitting his paintings from our personal collection via the Annual Report to our customers, stakeholders, partners and shareholders, we had a chance to commemorate him and introduce his works to a larger audience. We will continue to support Turkish Art and artists in the future.


I would like to thank you for your trust and support. I strongly believe that we will continue to create value for our shareholders in the coming years.

Sincerely yours,