REPORT 2017 Contents

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REPORT 2017 Contents ANNUAL REPORT 2017 Contents Presentation 44 Real Estate Sector in 2017 Corporate Governance 3 İş REIC in Brief 48 Board of Directors Activities in 2017 89 Independent Auditor’s Report on the Annual Report of the Board of 3 Vision, Mission, Objectives 54 Activities of the Investor Relations Department Directors 4 Capital and Shareholder Structure 56 Activities of the Audit Group 90 Ordinary General Assembly Meeting 8 Key Financial Highlights of Shareholders Agenda 56 Risk Management 10 Targets - Achievements 91 Summary Activity Report of the 57 Human Resources Board of Directors’ 12 Stock Performance 60 Corporate Social Responsibility 92 Dividend Policy 14 Milestones in İş REIC’s History 62 Additional Information Required by 93 Profit Distribution Proposal by the 18 Message from the Chairman CMB Regulations Board of Directors 22 Message from the CEO 63 Changes in Legislation during the 94 Corporate Governance Principles 26 Board of Directors Reporting Period Compliance Report 35 Declaration of Interest by 63 Main Service Providers Financial Information Independent Board Members 64 Portfolio Information 110 Financial Statements as of and for 38 Senior Management the Year Ended December 31, 2017 with Independent Auditors’ Report Thereon 180 Appendix: Summary Appraisal Reports Presentation İş REIC Corporate Governance Annual Report 2017 Financial Information 1 Boasting a solid market Diversifying its portfolio Sustainable growth and prestige and experience by investing in office increasing added value for in the sector, İş REIC spaces, tourism and retail all stakeholders enabled by a develops select projects in sectors and real estate well-balanced portfolio mix line with its mission spelled projects, İş REIC’s strategy out as creating desirable is set as capitalizing on spaces for contemporary investment opportunities people and contemporary arising in areas that will cities, and preserves its further increase its ongoing healthy growth trend ever revenues and profitability since its incorporation. while also generating maximum benefit for its shareholders. İstanbul Ankara İzmir Nevşehir Muğla Using its solid shareholders’ equity, funding facilities and sustainable sources generated on regular rental income derived on its high quality portfolio to finance its new investments, İş REIC takes sure-footed steps based on its determination to strengthen its position in the sector. İş REIC Presentation Annual Report 2017 Corporate Governance 2 Financial Information Presentation İş REIC Corporate Governance Annual Report 2017 Financial Information 3 İş REIC in Brief İş Gayrimenkul Yatırım Ortaklığı A.Ş. vision, İş REIC develops distinguished derived on its high quality portfolio to (İş REIC) was founded through the projects and maintains a healthy growth finance its new investments, İş REIC takeover of Merkez Gayrimenkul process since the day it was founded. takes sure-footed steps based on its Yatırım ve Proje Değerlendirme A.Ş. determination to strengthen its position in by İş Gayrimenkul Yatırım ve Proje One of the sector’s prominent companies the sector. Değerlendirme A.Ş. on 6 August 1999, with its diversified and well-balanced which was then transformed into a real portfolio and robust financial structure, İş REIC, which invests in real estate estate investment trust. İş REIC focuses on providing its investors properties and real estate projects, with an optimal possible risk-return carry out its activities in compliance Blending its market prestige backed by trade-off. with the requirements of the Capital the deep-rooted corporate principles Markets Board of Turkey (CMB) laws and and financial strength of its parent İşbank Using its solid shareholders’ equity, regulations. Group with its sectoral experience and funding facilities and sustainable sources generated on regular rental income Vision Mission Objectives To set a global corporate example not To create desirable spaces for To closely monitor opportunities for only by the projects it undertakes, but contemporary people and contemporary generating the highest possible returns for also with the way it conducts business, cities. the shareholders. by its organizational structure, corporate values and management approach. To maximize the collective value of the To maintain and strengthen the leading portfolio for the shareholders through position in the market. sustainable growth and high profitability by utilizing our investments and resources effectively. BIST Indices: Date / Price of IPO: BIST Date of Trading Registered Capital: BIST 100 / BIST Dividend 25 / 1-3 December 1999 - Trading Symbol: (BIST): BIST All / BIST Dividend / BIST REIC TL 2 billion TL 1.4 ISGYO 9 December 1999 / BIST Financial / BIST Corporate Governance / BIST 100-30 Tax Office / No: MERSİS Issued Capital: İstanbul - Trade Registry Office / No: Registered e-Mail: (Central Registry System): TL 913,750,000 Large-Size Taxpayers İstanbul / 402908 [email protected] 0481013771500018 4810137715 İş REIC Presentation Annual Report 2017 Corporate Governance 4 Financial Information Capital and Shareholder Structure Capital Structure By its letter dated 27 December 2016, the CMB approved the extension of the İş REIC’s issued capital amounts to permission for the Company’s authorized STRONG CAPITAL TL 913,750,000, 44.11% of which is held capital in the amount of TL 2 billion for a by T. İş Bankası A.Ş. (İşbank). İşbank, the period of five years from 2017 through Company’s shareholder, has management 2021 and the amendment of “Article In 2017, İş REIC’s issued control over the Company; there are no 7 – Capital and Share Certificates” of non-corporate shareholders holding more the Articles of Association to that end. capital was raised than 5% in the capital of the shareholder Within the frame of the said approval, from TL 850 million to that has management control over the an application was filed with the T.R. Company. Ministry of Customs and Trade, and TL 913.75 million. necessary permissions were received on The Company’s issued capital is divided 24 January 2017. The extension of the into 913,750,000 shares, each with authorized capital permission term to a nominal value of TL 1; out of these cover the years from 2017 through 2021 shares, the portion corresponding to was ratified at the 2016 Annual General TL 1,305,357.11 make up Group A Meeting. shares and the portion corresponding to TL 912,444,642.89 make up Group During the reporting period, the Company B shares. Group A shares are entitled to did not carry out a capital increase specific preferential rights with respect through rights issues. to their representation on the Company’s Board of Directors: only one seat on the Under the current Turkish Commercial board is filled from among candidates Code (TCC) and Capital Markets Board designated by Group B shareholders (CMB) rules and regulations, companies while all the remaining seats are filled from are allowed to acquire shareholding among candidates designated by Group interests in themselves. During the 2017 A shareholders. reporting period, İş REIC did not buy back any of its own shares. The shares issued for raising the Company’s issued capital by Article 14 of the CMB Communiqué TL 63,750,000 to TL 913,750,000 so as (III-48.1) on the Principles Regarding Real to remain within the registered capital of Estate Investment Companies sets out TL 2 billion, which incremental amount that real estate investment trusts may will be covered from 2016 profit share issue shares that incorporate the privilege as per the Board of Directors’ decision to nominate candidates for election of dated 31 March 2017, have been board of directors members. REICs are registered with the CMB, and the process not allowed to issue any instrument that for the exercise of rights in relation to incorporates any preferential right other the issued shares have been completed than shares that allow their holders to on 2 May 2017. Following the capital designate candidates for seats on their increase, the CMB approved the new boards of directors. In such cases, the version of “Article 7 - Capital and Share majority shareholder makes suggestions Certificates” of the Company’s articles of regarding Board Member nominees and association that shows the issued capital the Members of the Board of Directors after the capital increase. The new capital are elected by the General Assembly of that has been registered by İstanbul Shareholders. The Company’s articles Trade Registry on 10 May 2017 has been of association contain no provisions promulgated in the Turkish Trade Registry pertaining to special voting rights. Gazette issue 9327 dated 16 May 2017. Presentation İş REIC Corporate Governance Annual Report 2017 Financial Information 5 Shareholder Structure There were no significant changes in the Company’s shareholder structure during the PUBLICLY-TRADED reporting period. According to MKK’s 30 December 2017 report, the nominal value of the Company’s SHARES publicly-traded shares was TL 432.5 million, which corresponds to 47% of the Company’s capital. According to year-end settlement data, foreign investors represent about 14% of the Company’s capital. As at 2017 year-end, the Shareholder Structure TL Share (%) nominal value of the İş REIC’s Türkiye İş Bankası A.Ş. 403,081,752.3 44.11 publicly-traded shares was Anadolu Hayat Emeklilik A.Ş. 64,952,937.61 7.11 TL 432.5 million, which Other 445,715,310.09 48.78 corresponds to 47% of the Total 913,750,000.00 100.00 *MKK data as of 30 December 2017 Company’s capital. Shareholder Structure (%) 44.11% Türkiye İş Bankası A.Ş. Anadolu Hayat Emeklilik A.Ş. Other 48.78% 7.11% Subsidiaries Currently, the Company has only one subsidiary: Kanyon Yönetim İşletim ve Pazarlama A.Ş. Kanyon Yönetim İşletim ve Pazarlama A.Ş. (Kanyon) Kanyon, set up on 6 October 2004 in which İş REIC and Eczacıbaşı Holding each controlled a 50% stake, was created primarily to engage in the management, operation and marketing activities of the residence, store, commercial or office buildings.
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