ERDEMİR GROUP ERDEMİR GROUP COMPANIES. ERDEMİR Flat Steel. İSDEMİR Long & Flat Steel 95.07% 100% ERDEMİR MADEN Iron Ore and Pellet 90%

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1 PROFILE 2016

2 ERDEMİR IN BRIEF The Erdemir Group has been producing steel and contributing to the development and employment of Turkish industry while investing in the future of our country for more than 50 years. Erdemir Group, which has been the leading producer of Turkish steel industry for many years, is increasingly adding value to Turkish economy with its deeply rooted brand, high production capacity, wide product range and strong financial structure. Erdemir Group has been under the OYAK roof since Erdemir Group, which is among the largest groups in Turkey in terms of total assets and the employment that it provides, operates in the fields of flat and long steel production, steel service center, mining, engineering and project management. Erdemir Group includes İsdemir, the producer of flat and long steel; Erdemir Maden which has mining fields in Sivas and Malatya; Erdemir Romania which produces silicon flat steel in Romania; Erdemir Mühendislik which provides engineering and project management services to Group companies; the Erdemir Steel Service Center which meets the sector s need of sized flat steel; and Erdemir Asia Pacific Pte. Ltd. which conducts the Group s operations in the Asia-Pacific Region. Erdemir Group supplies raw materials to almost every branch of industry such as automotive, white goods, general machinery, pipe profile, packaging, shipbuilding and construction. It is the sole domestic producer of packaging steel and heavy plate in our country. Erdemir Group attaches great importance to R&D and aims to meet the present and future needs of Turkish industry to the highest level by investing in the production of high value added products. Erdemir Shares (EREGL) have been traded on Borsa Istanbul since the establishment of the stock exchange in 1986 and are listed in the BIST 30 Index as leader shares. Besides, the shares of İskenderun Demir ve Çelik A.Ş., our Group company, have been publicly traded on the Pre-Market Trading Platform with transaction code ISDMR since 28 March 2016.

3 ERDEMİR GROUP COMPANIES ERSEM Steel Service Center ERDEMİR Flat Steel İSDEMİR Long & Flat Steel 95.07% ERDEMİR GROUP ERDEMİR MADEN Iron Ore and Pellet 90% Commencing ore production in Sivas-Divriği in 1938, the company continued operations under the business name Demir Madenleri İşletmesi from 1940 and joined Erdemir Group in The company s nine iron and one manganese sites undertake 37% of all iron ore production in Turkey and meet 15% of the country s iron ore needs. Erdemir Çelik Servis Merkezi San. ve Tic. A.Ş. (Ersem), which provides high-standard services for companies active in many fields of industry such as general machinery and production, heat industry, electrics & electronics, particularly automotive and white goods, was established in In 2015, in addition to its existing facilities, Ersem put into service a new steel service center in Manisa with a cold slicing capacity of 150,000 tons per year. ERDEMİR - ROMANIA Silicon Flat Steel ERDEMİR ASIA PASIFIC PTE LTD Trading ERDEMİR ENGINEERING Engineering and Project Management Erdemir Mühendislik Yönetim ve Danışmanlık Hizmetleri A.Ş. offers Erdemir and it s subsidaries a wide range of engineering and project management services, from planning to application, in their capital investments undertaken to attain their profitability, product diversity and high-quality product manufacturing goals. Erdemir Romania, which was founded in the city of Targoviste in Romania, joined the Erdemir Group in Erdemir Romania produces electrical steel (silicon flat steel), which is a key input in the electric motors, transformers and generators. Erdemir Romania is in an important position in Europe in terms of electrical steel production, with 10% of its protection used in the Romanian domestic market, with the remaining 90% exported to various countries, mainly in Europe. Ereğli Demir ve Çelik Fabrikaları T.A.Ş. (Erdemir) was established in 1960 pursuant to special legislation in order to produce flat steel desperately needed by Turkish industry but which the country was unable to manufacture at the time. The Company commenced operation in Karadeniz Ereğli in 1965 and has created value ever since for both the domestic and global economy by manufacturing high-quality, Turkish steel. Established in 1970 in Hatay s İskenderun district, İskenderun Demir ve Çelik A.Ş. (İsdemir) is an integrated iron and steel factory with the largest liquid steel production capacity in Turkey. It was transferred to Erdemir in 2002 on the condition that İsdemir would initiate production of flat products. İsdemir also began manufacturing flat products in 2008 with the Modernization and Transformation Capital Investments undertaken after İsdemir s acquisition by Erdemir that year. This largest single investment in the history of the Republic of Turkey served to mitigate the imbalance between long and flat steel production in the country. Erdemir Asia Pacific PTE LTD Erdemir Asia Pacific Private Limited (EAPPL), a wholly-owned Erdemir subsidiary, was founded on 4 July 2014 in Singapore with a share capital of USD 250,000 in order to carry out Erdemir Group s commercial activities in the Far East.

4 SHAREHOLDER STRUCTURE AND DEVELOPMENTS IN ERDEMİR SHARES Ataer Holding SELECTED FINANCIALS (MILLION USD) * Held by public 47.63% 49.29% Erdemir shares (EREGL) are listed on the BIST 30 index and the majority of Erdemir s shares, which is one of the publicly traded companies that has the widest base with a 47.63% free float rate, are held by corporate investors. Ereğli shares traded at a price of TL 3.04 per share at the opening on the first transaction day of 2016, and ended the year at a price of TL BIST 100 index had posted an increase of 9% during the 2016 full year. Meanwhile, Ereğli shares impacted positively by its operational&financial success, and the high dividend payment marked an increase of 69%. Ataer Holding %49,29 Erdemir achieved a remarkable achievement in 2016, by raising its rank from the 15th most valuable company on the Borsa İstanbul at the end of 2015 with a market value of TL 10,640 million to 9th at the end of 2016 with a market value of TL 17,990 million. Erdemir achieved the highest increase in value of any listed company in The extent which Erdemir shares outperformed the index resulted in an increase in shareholder satisfaction and commitment. Held by Public %47,63 Erdemir s own shares 3.08% ERDEMİR (EREGL) vs. BIST 100 INDEX ( =100) BIST 100 EREGL Stock Net Sales Revenue Net Operating Profit EBITDA Net Profit Total Assets Equity Attributable to Equity Holders of the Parent SELECTED FINANCIAL RATIOS (MILLION USD) * 3, ,721 Profit Margin EBITDA Margin Return on Assets Return on Equity * As of 31 December ,321 ABOUT ERDEMİR STOCK EREGL (MILLION USD) * 2016 Market Capitalization (End of Year) 5, Foreign Transactions 4,668 Free Float Rate 47.63% 13.0% 23.2% 6.0% 11.1%

5 DID YOU KNOW? İsdemir agreed with Linde Gas Turkey, which is Turkey affiliate of Linde AG, to establish a partnership that would contribute towards achieving İsdemir s objective of meeting the additional industrial gas needs and reduce the costs of the existing industrial gas system. This stateof-the-art plant, whose design and construction work will be carried out by the Linde Engineering unit, will enter operation in. The plant will increase İsdemir s oxygen production capacity by 14% and its nitrogen production capacity by 45%. In the survey of Turkey s Top 500 Industrial Establishments conducted by the Istanbul Chamber of Industry (ISO) ever year, İsdemir was ranked 10th, Erdemir was ranked 11th, Ersem was ranked 86th, and Erdemir Maden was ranked 320th based on 2016 figures. AWARDS Erdemir s score rose from 8.83 (88.3%) to 9.02(90.2%) in the 2016 Corporate Governance Compliance Rating Report. İsdemir broke a record in both liquid iron and liquid steel production, exceeding 5 million tons of production in both of it. We have transferred our operations specific to iron and steel to a wider and more integrated scope and are organizing our activities under the roof of the OYAK Mining and Metallurgical Group. The European Bank for Reconstruction and Development (EBRD) provided EUR 75 million in loans to Erdemir and İsdemir. This loan, which financed a comprehensive investment program that will assist in the efficient use of resources in the production processes of Erdemir and İsdemir, was used to invest in the Top Pressure Recovery Turbines in blast furnaces. WHAT ANALYSTS SAY ABOUT ERDEMİR? At the 2016 Stars of Steel Exports Awards ceremony, a total of 48 awards were handed out to 39 companies that had achieved the highest exports in all products in 16 different product categories. A total of 154 certificates were awarded to the top 10 companies in each category. The Erdemir Steel Service Center was awarded third prize in the category of cold/coated flat exports and İsdemir was awarded second prize in the hot flat exports category. Golden Gloves award for Erdemir The Turkish Metal Industries Union (MESS) organized the Golden Gloves and Gold Proposal OHS Competition for the second time in 2016 with the aim of spreading the culture of occupational safety. The good practice carried out by the employees of Erdemir Assistant Operators Directorate received a prize in the MESS Gold Proposal contest. Erdemir Group 2016 Annual Report, themed as Towards Future with Steel, was ranked 75th in the list of the world s top 100 reports at the LACP Vision Awards, which has been held annually since 2001 and is considered the most prestigious award for annual reports. It ranked 26th among the top 50 annual reports in Europe, Middle East and Africa (EMEA) Region and was given Gold Award at the metals category. The report was also ranked as one of the top 20 Turkish annual reports. Within the scope of the Projects for Increasing Energy Efficiency in the Industry (SEVAP) contest organized by the Republic of Turkey Ministry of Energy and Natural Resources for the 17th time in 2016, İsdemir won first prize in the SEVAP-3 category with its project to generate electricity from the Top Pressure Turbine in Blast Furnaces No. 3 and 4. Ata Invest: One of the strongest balance sheets not only in Turkish industrial universe but also in global steel industry. Thanks to its strong balance sheet and strong cash flow, we expect Erdemir to remain a high cash-dividend payer next year while ramping up its investments in E. Şeker Invest: Triumphant operating profitability leading to a much better than expected bottom line performance in 1Q17. We continue to appreciate Erdemir s strong balance sheet and, on balance, healthy profitability prospect for FYE, despite the current downward leaning trend in steel prices. eker Yat Şeker Halk Invest: Erdemir is Turkey s first and the only integrated flat steel manufacturer, which gives the company a strong pricing advantage particularly in value added product lines. Turkey still has significant excess demand for flat steel products where Erdemir generates larger portion of its margins.

6 SUSTAINABILITY Adopting the OYAK Group s sustainability approach, Erdemir Group adopts as a principle itself on end-to-end sustainability in its operations. It carries out activities to create and spread an awareness of sustainability in the community and employees. The Erdemir Group continues to create more value with less resources to protect the environment in order to leave a habitable world for present and future generations, and to make a contribution to social development. In our world where the need for steel steadily increases, Erdemir Group determined its vision on the basis that environmental, social and financial capital work within the framework of a sustainable business model, the expectations of community are met at the highest level and the culture of innovation. As a result of the Group s successful performance in management of sustainability, Erdemir was one of only a few companies to be included in the Borsa İstanbul Sustainability Index in 2016, as it was in Establishment of Total Quality Executive Committe, Redesigning of Process Management Model Erdemir Sustainability Steel Report Improving the efficiency of Erdemir Suggestion System, Deployment of Erdemir improvement Teams, Erdemir wins 1 st prize in EU Environmenttal Awards 2008 Environmental Perforamance index started to be calculated 2011 TS EN Energy Management System Accreditation 2012 RIO +20 Sustainable Development in Turkey and the Best Application in the field of Green Economy The R&D Centre was established Design of Experiment Project First Wave Knowledge Management System Project 2014 Design of Experiment Project Second Wave Commissoning of New ERÖS Software Document integration Project Erdemir Biodiversity Policy Employees started to be given Ethical Rules training 2015 Life Cycle Assessment 1995 Establishment of Erdemir Suggestion System (ERÖS) Commissioning the Calibration Laboratory 1997 ISO 9002 Quality Accreditation Conferences on What the 3rd Millenium will Bring, Corporate Membership to EFQM, Business Excellence Trainings, First Self Assessment 1999 Erdemir Performance, Process Management Model, Process Improvement Methodolgy, Erdemir Strategic Management Model, Erdemir Improvement Teams, Starting the Environmental Studies 2001 National quality award finalist 2004 EFQM Europen Quality Award Recognition for Excellence, National Quality Award, large Scale Company Achievement Prize, Commisioning of e-isoft Quality Management Software, TS EN ISO Environmental Accreditation, TS Occupational Health and Safety, Accreditation 2007 ISO TS Quality for Automotive Industry Accreditation 2009 İsdemir wins 1 st prize in 9 th Energy Efficiency in the Industry Project Competition 2010 İsdemir wins 1 st prize in 10 th Energy Efficiency in the Industry Project Competition Transition to TS EN Energy Statistical Data Analyses TrainingsAlınması ISO/TS Surveillance Examination Sustainability Report 2016 Water footprint studies initiated İsdemir wins 1 st prize in 16 th Energy Efficiency in the industry Project Competition

7 TURKISH STEEL SECTOR IN BRIEF Turkey s crude steel production stood at 33 million tons in 2016, marking an increase of 5.3% YoY. This increase in crude steel production brought Turkey back to 8th place in the world rankings. The Turkish steel industry, which reached a record-high 36.9 million tons of finished steel production in 2015, maintained this level in 2016 as well. After growing by 12% in 2015, Turkey s steel consumption increased by 6% in the first half of Turkey s steel consumption, which has a strong connection with the manufacturing and construction industries in particular, declined due to a weakening of economic indicators in the second half of the year. By the end of the year, Turkey s steel consumption had declined by 1% YoY to 34 million tons in total, including 17.5 million tons of long steel and 16.5 million tons of flat steel. Turkey s finished steel product imports amounted to approximately 15 million tons, similar to their 2015 level. Imports of slab, which increased in 2015, stood at 1.6 million tons, a decrease of 46% due to the increase in production from arc furnace plants in The year 2016, was a strong year for Turkey s steel exports. Flat steel exports increased by 21% YoY to 3.1 million tons. Despite the decline in demand in our country and in the world, Turkey s long steel product exports maintained their 2015 level to exceed 10 million tons. DEVELOPMENTS IN GLOBAL STEEL SECTOR Global crude steel production stood at 1.63 billion tons in 2016, marking an increase of 0.8% YoY. Despite a slight increase in the global capacity utilization rate when compared to the previous year to 69%, it remained well below the sustainable level of 75%. Also, worldsteel expects that the global steel demand to increase in and by 1.3% and 0.9% respectively. Steel Demand Expectations (Finished Steel) Mt: Million Ton %: Yearly growth PUBLICLY TRADED STEEL MANUFACTURERS BY ASSET SIZE (AS OF 31 DECEMBER 2016) Million USD 7,000 EU-28 MIDDLE EAST 54.8Mt +3.1% 4,000 3,000 CENTRAL & SOUTH AMERICA 2, Mt +3.5% 42.7 Mt +4.7% 56.8 Mt +3.7% AFRICA 38.4 Mt +1.5% 40 Mt +4.1% WORLD 1,535.2 Mt 1,548.5 Mt +1.3% +0.9% 0 İSDEMİR 51.9 Mt +3.4% Mt Mt +0.5% +1.4% 5,000 1, Mt +3.2% 43.2 Mt +3.5% NAFTA MT MT +2.2% +2.4% 6,000 İZDEMİR KARDEMİR Source: Public Disclosure Platform CIS OTHER EUROPE 41.7 Mt +2.6% ERDEMİR Source: worldsteel ASIA & OCENIA 1,016.0 Mt 1,015.0 Mt +1.0% -0.1%

8 Million Tons Despite efforts to restrict capacity in China, where production was not expected to increase at the beginning of the year, there was a 1.2% increase in production in China to 808 million tons. The measures taken related to capacity management in China, which realized its target closing down 45 million tons of capacity, only adversely affected small producers, while production increases of large producers led to total steel production to rise above the previous year. With the impact of the performance in the second half of 2016, consumption of steel in China reached 670 million tons, also similar to its 2015 level, with exports of 109 million tons. With the impact of increased protectionism in the world and strong domestic demand, China s steel exports fell by 3%. Global crude steel production,capacity, and overcapacity ,500 2,000 1,500 1, Source: Production- worldsteel, Capacity- OECD The world s capacity surplus of 700 million tons is expected to continue, as steps to reduce capacity were not taken to an adequate extent in This surplus of capacity led to a glut of low priced exports, led by countries which are in a situation of having to export to sustain their production. These low priced exports fundamentally threatened the steel industries of some countries, which are now taking steps to restrict imports altogether, instead of merely preventing unfair competition. Countries such as China, Russia, Brazil and South Korea have been shut out from many markets due to increasing protectionist measures. The protectionist measures implemented by the EU and USA, in particular, have given rise to a new structure for the steel industry formed by regional market and price dynamics Nominal Capacity Production Overcapacity Sector Figures (Million Mt) Global Crude Steel Production 1,629(*) 1,615 Turkey s Crude Steel Production Source: worldsteel (*) Temporary EXPECTATIONS FOR Global steel consumption is expected to grow to 1.6 billion tons in. Signs of economic recovery are expected to form the backdrop of a rebound in steel demand. Industry backed policies implemented in the USA positively are supporting commodity prices and a revival in domestic demand is strengthening economic confidence and activity throughout the world. The expected growth in the construction sector in, after a sluggish year in 2016 and the expectation of higher automotive production will support steel consumption. A robust performance from Russia, which broke out of economic stagnation due to the rise in prices of Brent petrol and other commodities and from Brazil, also shaped the revival in steel demand. Since the second half of the year in particular, recovering industrial production in the USA, EU and China have all been offering positive signals regarding global steel demand. World economy recovering Signs of a global economic recovery have started to emerge in 2016, accompanied by positive changes in indicators in advanced economies. This recovery is expected to continue into, supported by appropriate fiscal policies and stimulus measures. Protection in the steel industry Various countries tend to take protective measures in response to low-price sales by certain other countries that have to export their output in order continue production. This trend is expected to continue into. Similarly, thanks to the supportive monetary policies in China, the end of the decline in producer prices due to the revival in the construction industry and manufacturing industry should pave the way for a more positive outlook in positive. In addition to these, new promises given about revitalizing infrastructure spending are raising hopes for the future. It is anticipated that the demand for commodities will remain robust until 2020, given the fixed asset investments in the construction, real estate and public-private sector joint projects in China. There are still elements of uncertainty that could put pressure on global steel demand in, such as low fixed capital investment spending, weak global economic growth and trade growth, slowing growth in emerging economies, especially China, geopolitical risks, the Brexit process and elections in Europe, which could all be seen as risks. The trend towards protectionism, which has reached unseen levels, together with the global supply surplus that has affected the sector in the last 2 years, will continue this year. As we enter, steel consumption is expected to increase, even if only moderately in Turkey, handin-hand with the growth in manufacturing industry which is expected on the back of the measures taken to revive the economy. Furthermore, steel exports are expected to increase due to the recovery in global markets. Turkish economy improving The Turkish economy, which was to a certain extent affected by the adverse developments of 2016, exhibited a rapid recovery in the last quarter, closing the year at a growth rate of 2.9%. This growth rate is expected to increase in response to fiscal reforms, growing domestic demand, and investments in infrastructure.

9 For further information please contact Erdemir Investor Relations. Address : Barbaros Mahallesi Ardıç Sok. No: 6 Ataşehir / İstanbul / Turkey Tel : +90 (216) Fax : +90 (216) Company Website : Group Website : investorrelations@erdemir.com.tr Disclaimer: Ereğli Demir Çelik Fabrikaları T.A.Ş. (Erdemir) may, when necessary, make written or verbal announcements about forwardlooking information, expectations, estimates, targets, assessments and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its Disclosure Policy and has shared such policy with the public through the Erdemir website, in accordance with the Capital Markets Board regulations. As stated in related policy, information contained in forwardlooking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that, actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our Company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditionsprevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation. Therefore, it should be noted that, when a party is coming to a judgement based on estimates and forward-looking statements, our Company may not have made a revision at that particular time. Our Company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time.