Dear Shareholders,

2007 was a year when politics stood center stage in Turkey, first due to the early parliamentary elections and afterwards the presidential election. As a result, fiscal discipline took a backseat. Critical micro-economic reforms could not be enacted and the EU process came to a standstill. In general, macro targets could not be reached.

The turbulence in our geographical region, the continuing political unrest and misfortunes in Iraq took their toll on our country, as the enflamed security issue, particularly in the South East, dominated the agenda in the second half of the year.

The rising problems in US subprime mortgages led to deterioration in global credit markets and despite successive interest rate cuts by the US Federal Reserve, the impact of the crisis on financial markets lingers. There was a jump in food and energy prices. Thus, expectations of growth were reversed, the American Dollar depreciated, and the world entered a phase of moderate stagnation. While the US economy was the main source of this stagnation, the Euro zone, the UK, and Japan were also hurt, largely by this contagion. On the contrary, despite a relative slow down, a vigorous trend of growth prevailed in emerging economies led by China, Russia, and India.

The growth performance of the Turkish economy has been robust in recent years. However in 2007, growth slackened in the automotive, durable consumption goods, retail electronics, and construction sectors, and there have even been seasonal downturns. In contrast, the rise in energy prices resumed. Drought curtailed agricultural production and as a ramification of all these factors, the rate of economic growth decelerated to 4.5%. Although a strict monetary policy was followed, the prolonged process of elections slackened fiscal discipline and the ratio of the budget deficit to the GDP soared from 0.6% to 2.2%. In this environment, inflation remained at single digit levels at 8.39%, though short of the target of 4%. In spite of these weaknesses, the Turkish currency appreciated due to the inflow of foreign funds and US$ 20 billion of net foreign direct investment. Such appreciation did not stop exports from breaking a new record of US$ 107 billion. On the other hand, the simultaneous surge in imports triggered a high level of current account deficit, which was 5.8% of GDP.

In the face of these arguably negative developments across the world and in our country, Sabancı Group fulfilled its 2007 targets successfully. We are pleased to report the following results in 2007:

• Consolidated revenues of US$ 14.9 billion, with a 23% increase,
• Consolidated EBITDA of US$ 2.3 billion, with a 22% increase,
• Consolidated total assets of US$ 68.1 billion, and
• Total Group exports of US$ 1,333 million.

In line with our strategies, while exiting some of our businesses; reducing the number of strategic business units from 7 to 5; we invested US$ 900 million in our core business units. Within this context, we are proud to announce the following strategic, corporate and social/cultural developments:

• Sale of 20% of Akbank shares to Citigroup for US$ 3.1 billion was finalized in January 2007. This transaction further strengthened Akbank's position as Turkey's leading bank as its asset size grew to US$ 62 billion.
  
  
• Akemeklilik, our life and pension subsidiary, and Aviva's Turkish life and pensions business, Aviva Hayat ve Emeklilik merged as a 50/50 joint venture in October 2007, creating Avivasa as the market leader in Turkey with 25% market share.
  
  
• In May 2007, Akçansa, our joint venture with Heidelberg Cement, acquired Ladik Çimento in the Black Sea region for US$ 158 million, opening a whole new promising geography for the Company. The ongoing capacity expansion investment of US$ 135 million in Akçansa's Çanakkale Plant will be finalized in March 2008, increasing the Company's total clinker capacity by 2 million tons/year to 6.4 million tons/year.
  
  
• In May 2007, we purchased Oyak Group's 41.09% stake in Oysa, our joint venture with Oyak in cement business, for US$ 71 million. Oysa was subsequently merged into Çimsa in November 2007. Çimsa's ongoing capacity expansion and modernization investments of US$ 95 million in its Eskişehir Plant was finalized at the end of 2007, increasing the Company's total clinker capacity by 900,000 tons/year to 4.8 million tons/year.
  
  
• In May 2007, we initiated our 50/50 joint venture at Enerjisa with Verbund of Austria in electricity generation business. In line with our objective to reach a 10% market share in the electricity sector in Turkey, Enerjisa executed the following transactions:
  
  
  • In May 2007, Enerjisa acquired Ere Holding and KEAŞ increasing its potential hydroelectric generation capacity to 1,030 MW of which 85 MW is operational.
    
    
  • In June 2007, Enerjisa purchased property in Bandırma to build a natural gas power station with a capacity of 920 MW and secured the necessary licenses.
    
    
  • At the end of 2007, the total electricity generation licenses of the Company reached almost at 3,000 MW, including the operational assets with 456 MW capacity and new sites for coal, hydroelectric, wind and natural gas. Our target is to reach 5,000 MW operational capacity by 2015.
    
    
• Teknosa, our electronics retail subsidiary, further strengthened its leadership position despite increasing competition and the entry of new players into the market. The number of Teknosa stores reached 233 and the total selling space grew from 34,000 m2 to 56,000 m2; 65% increase in 2007.
  
  
• Temsa, our commercial vehicles subsidiary started construction of a new coach production facility in Egypt in February 2007, targeting North African, Gulf and Middle Eastern markets. This facility will become operational in April 2008, with a 1,000 vehicle/year capacity.
  
  
• The partnership agreement at Toyotasa, our passenger cars distribution joint venture with Toyota, was extended for 5 more years.
  
  
• We sold our 51.23% stake in Pilsa to Wavin, the world leader for plastic pipes, for US$ 41.4 million to be finalized in January 2008.
  
  
• In August 2007, we announced the sale of our 99.65% stake in Gıdasa, our food subsidiary, to be finalized in March 2008.
  
  
• We recently announced the sale of our 50% stake in Beksa, our joint venture in the steel cord business, to our partner Bekaert for EUR 40.3 million; the transaction will be completed by the second quarter of 2008.
  
  
• In 2007, we continued to develop Sabancı Management Platforms such as Sabancı Business Excellence (SABE) where the 6 Sigma improvement and sharing/learning activities concerning were further advanced, and Sabancı Information Technology (SAPOINT) where we received the ISO 27001 certificate on Information Security, the first of its kind in Turkey. The projects developed by our companies within the working platform of Sabancı Innovation began implementation.
  
  
• We initiated the Integrated Human Resources implementation for our employees. The 2nd step of the Sabancı Leadership Team was completed and a corporate audit team for SA-Etik (Sabancı Code of Business Ethics) was established.
  
  
• The Sabancı Foundation accelerated restructuring activities by Search Conferences attended by 119 people, organized to review its vision, mission and areas of interest. As usual, the foundation granted scholarships to 1,200 students in 2007.
  
  
• In 2007, our companies again invested US$ 10 million towards environmental causes as part of our social responsibility. These investments will be reinforced by our activities on renewable energy in our energy business unit.

We will continue to focus on our high growth core businesses such as financial services, retail, cement, automotive, nylon and tire cord and energy. We believe that, with our strong management team, our successful business track record for more than half of a century, our strong financial structure, and the Sabancı brand and reputation that now extend beyond Turkey, we will continue to create value for our shareholders. We are confident that our initiatives to attain higher growth within a well-balanced business portfolio can be achieved. By focusing on higher growth areas that will further strengthen our leadership position, the Sabancı Group will stay in the forefront of Turkey's business community in the coming years.

We are grateful to our managerial staff, business partners, customers and shareholders for their faith in our vision.

Best regards,