Distinguished Stakeholders,

In 2019, the trade war between the US and China, protectionist economic policies that were gradually felt more strongly and the uncertainties stemming from the Brexit made a negative impact on global economic performance. During the reporting period, it was observed that political tensions and regional geopolitical risks increased, as well as the volatilities in economic conjuncture.

In this period when protectionist measures led to weakened global demand, and in turn, to weakened global trade, industrial manufacturing declined in parallel with contracted demand, and commodity prices took a downturn. While investor confidence relatively diminished, the investor environment stagnated. As this outlook aggravated the concerns over global growth, it also led the central banks of major developed countries to give up rate hikes and turn to expansionary monetary policies. The US Federal Reserve (the Fed) curbed rates three times during the year, while the European Central Bank (ECB) implemented rate cuts with a new support package.

While the USA had one of its longest-lasting growth periods, the Eurozone failed to attain the expected recovery, and loss of momentum continued in the growth performances of Asian economies, particularly in those of Japanese and Chinese economies.

In the January 2020 update of the IMF World Economic Outlook titled “Tentative Stabilization, Sluggish Recovery?” global economic growth estimate for 2019 was decreased from 3% to 2.9%, while 2020 projection was reduced from 3.4% to 3.3%. It has been stated that the downward revision reflects the adversities in a number of emerging markets, mainly in India.

The World Economic Outlook also stated that the market sentiment was boosted by the agreement reached on the phase one trade deal in the trade war between China and the US, and the elimination of the possibility of a no-deal Brexit, but underlined that the said developments have not yet visibly affected the global macroeconomic data.

The Turkish economy exited technical recession and reentered growth process.

Having embarked upon a new rebalancing process starting from the last quarter of 2018, the Turkish economy returned to growth track after three quarters, and grew by 0.9% in the third quarter of 2019, outperforming the projections.

Dominated by efforts to reestablish the deteriorated macroeconomic balances, weak domestic demand conditions and the relatively stable course of the Turkish currency reflected positively on inflation figures. Annual CPI rate, which was around 20% at the start of 2019, went down to 11.84% at the end of the year. The gradual reduction of the policy rate from 24% to 11.25% by the Central Bank of the Republic of Turkey (CBRT) with the effect of ongoing market dynamics gave a push to economic activity and positively affected growth expectation.

In 2020, the progress to be achieved in the balance of payments, disinflation, budget management and growth indicators in line with the targets in the New Economy Program (NEP) will be the key determinants with respect to economic performance.

A stagnated year for our sector

Amid the conjuncture that spanned from the last quarter of 2018 until the third quarter of 2019, significant rises in construction and financing costs coupled with reduced investment appetite brought along a downsizing in the construction industry and stagnation in the real estate market.

The reductions in housing loan rates led by public banks from August onwards made a positive impact on mortgage sales. The revival in housing sales reflected also on the housing price index and prices adopted a relatively uptrend. A gradual increase is observed also in the construction industry confidence index.

While housing sales showed a limited decline of 1.9% in 2019, housing sales to foreigners maintained its increasing trend due to the advantages granted. In the office and retail market, additions to the stock are ongoing despite the decreased supply of leasable areas. In the sector, prices found a new balance in TL terms.

In 2020, our industry is anticipated to gain a livelier outlook depending on the course of economic recovery.

We aim to add value to the present and the future.

Having attained successful business results in a year characterized by efforts to rebalance the Turkish economy, which proved to be a challenging year also for our industry, İş REIC implemented an effective management plan to preserve its valuable portfolio and robust balance sheet structure.

İş REIC pursues its activities with the objectives of progressing in ongoing investments in line with the projections, and of producing maximum value for its stakeholders by observing income continuity and profitability both in sales and leases.

Also in the period ahead, when we will be acting in line with our main strategy built around optimally balancing revenues and expenses, and establishing the ideal balance between real estate investments generating regular income and those on which development profit will be derived in parallel with the conjuncture, we will continue to manage our real estate portfolio with a dynamic approach. While optimizing financing costs, sustainable profitability and efficient risk management will be among our priorities.

On behalf of our Board of Directors and myself, I would like to thank all our stakeholders, who, I am confident that, will always be with us as we build a more desirable future.

Sincerely,

Chairman