annual report 2014 · 2015. 9. 29. · market, the u.s. based manheim. 2012 borusan holding founder...

ANNUALREPORT2014

Printed on 100% recycled paper

ANNUAL REPORT2014

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Financial Highlights

70 Years of Borusan

Chairman’s Message

Review of 2014 Operations

Borusan World

Borusan Kocabıyık Foundation

Borusan Group

Steel/Pipe

Steel/Flat Steel

Distributorship/Automotive

Distributorship/Earth Moving Equipment and Power Systems

Logistics

Energy

Independent Auditor’s Report

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December 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 December 31, 2014

Sales 3.503 4.266 3.976 4.141 4.499

Exports 844 1.100 1.144 983 1.103

EBITDA 245 326 277 341 328

Working Capital 875 1.003 1.110 1.091 1.198

CAPEX 166 296 352 304 323

Net Financial Debt 612 866 1.031 1.058 1.164

Total Assets 2.591 3.029 3.310 3.390 3.880

Financial Highlights

(USD million)

hroughout my life, I believed that people come first and companies exist to serve them.

Asım KocabıyıkBorusan Holding Founder and Honorary Chairman1924-2012

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e have been working for Turkey for 70 years, taking our place in every area of life and adding value. We are enormously proud of serving society for 70 years. Our pipes bring life-giving water to fields and transform houses into warm homes with natural gas.

Every day, our products are vital for innumerable journeys, delivering power to automobile engines. We provide the raw materials that are essential for industry and development. We produce environmentally-friendly energy and use it in production. Our construction machinery builds roads, dams, and cities, and our generators ensure life continues uninterrupted. For 70 years, we have worked with our stakeholders to add value to life.

Our customers are our stakeholders - we share their goals and aspirations. We stand by them and are driven by their needs. Together, we initiate projects that improve the quality of life. We are celebrating our 70th anniversary as a global group operating in world markets due to the high business standards to which we adhere, the result of the trust we have built with our stakeholders and the support and strength they give us.

This trust has been unwavering for 70 years. The entire family of Borusan will continue to produce value as we strive to improve the well-being of society.

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1977Borusan Yatırım was founded. The Company joined the major Borusan companies which have been operating in steel, distribution and integrated logistics industries up to the present.

1972Borusan Holding was founded and all Borusan companies were merged under the name of Holding.

We have been a leading actor in the national economy for 70 years. Our products and services have touched the lives of millions. We have made countless friendships. We have exceeded limitations through our enthusiasm for producing and sharing, and we have added value to every area of life. Our intrinsic values will continue to illuminate our path.

Borusan Group’s first company İstikbal Ticaret, started its activites in the iron-steel trade and exporting of agricultural products.

1944The first industrial investment was intilated as Borusan Boru Industry LTD was founded.

1958Kerim Çelik started operating as Borusan’s initial investment into the steel industry.

1960Borusan Boru’s 4.000 square meter plant at Sefaköy was relocated to the new 58.000 square meter modern facility at Halkalı.

1968

Originally founded to be active in interstate transport Boru Nakliyat, also began to offer customs, port operations and storage services as of 1983.

19731969Borusan Boru had its first $100.000 export order to Syria. Turkey’s leading heavy industry machinery manufacturer Borusan Engineering was founded.

1970Supsan was founded in Sefaköy, İstanbul to manifacture valves and valve accessories for internal combustion engines.

1974Supsan started production with a license from the U.S. based company Eaton S.r.L.

1984Borusan Oto became the Turkish distributor of BMW AG.

1989Bortrans, which primarily engages in ship rental, port operations, marine transport, and various businesses, was also founded.

1975Borusan established its first facility in Gemlik.

1983Borusan established its first port in Gemlik.

1990Turkish private sector’s first cold flat steel manufacturer Borçelik was founded and operations commenced in 1994.

1992The Asım Kocabıyık Culture and Education Foundation was founded by Asım Kocabıyık and his family.

1993Borusan Chamber Orchestra was founded.

1994Borusan Makina commenced operations.

1996Borusan Yatırım went public.

1997Borusan Makina became representative of Caterpillar in Azerbaijan, Georgia, Turkmenistan, and Kazakhstan.Borusan Culture and Arts Center was founded.

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Borusan started a corporate social responsibility project titled as “My Mom’s Job is My Future”, in order to support women employment in Turkey in cooperation with Ministry of Family and Social Policies and Ministry of Science, Industry and Technology.

Gemlik Borusan Microfinance Branch was opened in order to support women entrepreneurship.

2010Borusan Holding joined the “World Business Council for Sustainable Development” as the second member from Turkey.

2013

1998Borusan Oto, became the Turkish distributor for Land Rover. Within the framework of the partnership agreement signed with Mannesmannröhen Werke AG merged its operations with Borusan Boru under the name of Borusan Mannesmann Boru.

1999Borusan Chamber Orchestra was reorganized as a philharmonic orchestra.

2000Borusan Lojistik was founded. The company put into service its second port in Gemlik with an investment of 18 million dollars.

2001Borusan Mannesmann Boru bought the Italian based Structo Vobarno factory. With the signing up for a $140 milllion investment with its French partner Arcelor, Borçelik initiated a capacity expansion and a galvanized flat steel investment project.

2006Borçelik’s second hot dipped galvanizing production line GALVA 2 was bought online as a part of the modernization investment.

Borusan Holding signed the United Nations (UN) Global Compact, consisting of 10 articles on human rights, working standards, environmental protection and anti-corruption.

2007Borusan Holding entered into the energy sector by purchasing 70% of the controlling shares belonging to Maya Energy.

2008Otomax, joined forces with the global sector leader of the second-hand automotive market, the U.S. based Manheim.

2012

Borusan Holding Founder and Honorary Chairman Mr. Asım Kocabıyık passed away.

2012Borusan Lojistik acquired Balnak Lojistik and became the leader in its sector.

The pipe manufacturing facility with an annual capacity of 250 thousand tons that was established by Borusan Mannesmann in Gemlik, started operations. The Company made a decision to establish a pipe manufacturing facility with an annual capacity of 300 thousand tons in USA by investing 150 million dollars.Borusan Holding signed the United Nations Women Empowerment Principles and therefore pledged to support women’s empowerment.

2011Borusan Holding’s Head Office in Rumeli Hisarı, Perili Köşk was converted into an office-museum. It became the first office-museum of contemporary art in Turkey with the name “Borusan Contemporary”.

Borusan Holding and Germany’s third largest energy company EnBW AG decided to form an equal partnership. Borusan Holding became one of the first three companies from Turkey who has signed the Cancun Declaration against global warming. In order to encourage women’s entrepreneurship, Afyonkarahisar Asım Kocabıyık Microfinance Branch was opened.

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Chairman’s Message

he world economy was beset by levels of geopolitical risks and international uncertainties in 2014 that we have not witnessed for many years. However, Turkey produced relatively stable economic performance despite two difficult nationwide elections and the shadow of regional geopolitical risks.

Against this background, we made significant advances towards becoming a global corporation in 2014. Coinciding with our 70th anniversary, these developments strengthened our commitment to becoming a Turkey based multicultural corporation active on five continents within ten years.

Developments Overshadowing the World Economy

Four important developments marked the world economy in 2014. First, the US distanced itself from the economies of other developed countries in terms of employment and inflation. This gave the Federal Reserve room to prepare to raise interest rates, which is the next step towards normalization of US monetary policy. Second, the decision of Greece to go to early elections, together with an already weak economic outlook and the necessity to impose new austerity measures, made the associated risk a major concern for Europe once again. Third, long simmering geopolitical risks in our region exploded and grew. Fourth, changing petroleum supply balances caused a rapid, sustained drop in crude oil prices.

The US economy returned to sustainable growth after a long hiatus. While contracting 2.1% in the first quarter of 2014 due to extraordinary winter conditions, the US economy grew by a phenomenal 4.6% in the second quarter, and 5% in the third and ended the year with an annual growth rate 2.4%. The IMF projects that the US economy will consolidate its existing performance to grow by 3.6% in 2015. Adding to these positive developments in economic growth and the rapid recovery in employment and wages, 2014 saw the return towards normalization of US monetary policy. Following all these events, even if the FED takes only minimal actions in 2015, it has indicated that it will raise interest rates and that the future could see further significant changes in the financial context.

In contrast to events unfolding in the US economy, the EU economy continues to suffer. While Euro Zone economies grew in 2014, albeit weakly, they had to contend with deflation. Unfortunately, the measures taken to address the situation have

Dear Shareholders,

A. AHMET KOCABIYIK

A. Ahmet KocabıyıkChairman of the Board

Borusan Holding

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been inadequate and undermined confidence in the possibility for growth. To deal with the threat of entrenched deflation, the EU had to consider unprecedented measures, such as negative interest rates and US-style quantitative easing programs. Meanwhile, early elections in Greece, sparked by a political impasse in the presidential elections and the major electoral gains of separatist parties, exposed and magnified the risks for the political and economic future of the European Union.

Moreover, Japan, the third largest developed economy, had to contend with economic issues similar to those of the EU. The country technically entered recession in 2014 and it responded with expansionist policies in 2015 to stimulate the economy while targeting an inflation rate of 2%. Hence, 2015 marked the end of US monetary expansion while expansionist measures in Europe and Japan were accepted as options to fill the void.

Developing countries attained economic growth but at lower levels than in previous years. Alongside Turkey, most notable in this regard were India and China, while the Russian Federation was an exception.

Geopolitical risks had a major impact on the world economy in 2014. The conflict in Ukraine and the consequent issues between the Russian Federation and Western countries, the enduring civil war in Syria and its spread to northern Iraq through the Islamic State, and the persistent conflict in Libya, present significant issues for 2015 with any one of these geopolitical risks holding the potential to amplify economic uncertainties.

Falling crude oil prices is the last important development of 2014. Crude oil prices fell from $103 a barrel in June 2014 to under $60 by the end of the year as a result of the US becoming a net oil exporter through the exploitation of its oil shale gas reserves and the rapid growth in demand for non-OPEC oil supplies, primarily from Libya, which overcame its production problems. The IMF estimates that crude oil will hold at $57 a barrel in 2015, which means a cheap oil climate bringing with it a new normal that will change balances for exporting and importing countries.

Turkey’s growth rate beneath expectations

In this context, the Turkish economy opened 2014 with strong first-quarter growth of 4.8%. However, economic growth slowed to 2.3% in Q2, 1.9% in Q3 and 2.6% in Q4. With overall growth of 2.9%, the Turkish economy did not meet expectations and failed to live up to its potential.

urkey held two tense and politically risky elections in 2014. Moreover, tightening monetary conditions caused by uncertainty attendant to international geopolitical events, led to a pronounced decline in domestic demand. While investments and capital flows decreased significantly, growth continued in

large measure due to exports.

Despite weak domestic demand, inflation rose significantly in 2014. Consumer inflation, which reached 9.66% at one point during the year, retreated to 8.17% by the year’s end, which was considerably higher than the Turkish Central Bank’s 5% goal. High inflation restricts the option of stimulating domestic demand. Therefore, Turkey goes forward in 2015 with this challenging issue.

Nevertheless, the current account deficit, a chronic structural issue for Turkey, contracted by 30% in 2014 to end the year at $45.86 billion. This significant improvement, largely the result of weak domestic demand and devaluation of the Turkish Lira, is expected to continue because of falling oil prices.

The Prime Minister, Prof. Ahmet Davutoğlu, who formed a new cabinet in July 2014, announced two Primary Transformation Programs of important structural measures as part of the 2014-2018, 10th Development Plan. Turkey, which will assume the G-20 presidency in 2015, must strive to make further structural transformations soon.

The Medium-Term Economic Program announced in 2014 foresees growth of 4% in 2015, while IMF projections calculate it at 3.4%.

Borusan’s 70th Anniversary

In 2014, we celebrated the 70th anniversary of Borusan’s founding. The company sprang from a small pipe-making workshop in Halkalı district of Istanbul and now it has revenues of $4.5 billion, 7,000 employees, and it operates in global markets.

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CHAIRMAN’S MESSAGE

This plan will make our group companies leaders in their markets of operation, transform each of them into regional actors, and set the scene for Borusan to double in size within ten years.

Borusan enters the US

We reached another major turning point in our 70-year history. Borusan Mannesmann established a factory in Baytown, Houston, Texas to make pipes for shale gas drilling and energy lines in the US, the world’s largest shale gas market. The US$150 million factory was completed and started production in April 2013.

At full capacity, the plant will manufacture 300,000 tons of pipes annually and employ 300 people. I am confident that Borusan Mannesmann will attain its goal of being in the top five of the ten manufacturers in the US market.

5 Year Strategic Plan

Borusan Group prepared its 5-year strategic plan in 2014. This plan is a road map for the third generation of the Borusan employees who will take over from the second generation that is currently running our Group. This plan will make our group companies leaders in their markets of operation, transform each of them into regional actors, and set the scene for Borusan to double in size within ten years.

In 2014, Borusan’s total revenues grew by 10% compared to that of the previous year, to reach US$4.5 billion. While maintaining sustainable profitability, the company invested nearly US$400 million.

Most of our 2014 investments were, again, in the energy sector. With our foreign partner, EnBW, Germany’s third-largest energy company, our company, Borusan EnBW Enerji, launched a $320 million investment in wind power plants in Turkey’s Mersin, Izmir, Bursa and Çanakkale provinces. These will generate 207 MW of energy for the country. In addition, our other companies turned in performances at home and abroad worthy of our 70th anniversary despite difficult market conditions, thereby contributing to our collective success as a group.

Our Corporate Responsibility Activities

2014 was a very productive year for our corporate responsibility. I would like to highlight a few highly noteworthy projects.

The My Mom’s Job is My Future project began to bear fruit. We launched this project in 2013 in

collaboration with the Ministry of Family & Social Policies and the Ministry of Industry & Technology for women who cannot find work because of the absence of childcare.

Under this project, we opened the first of our nursery schools and daycare centers, Borusan Joy Factories, in the cities of Adıyaman in July and in Afyonkarahisar in November 2014. The project garnered the Comprehensiveness Award at the Turkish Confederation of Employer Associations’ 2014 Corporate Responsibility Awards.

Similarly, our Group – a signatory of the United Nations Women’s Empowerment Principles and a role model for social responsibility projects in the Turkish business world – became the first Turkish company invited to join the UN Women’s Empowerment Principles Leadership Group.

The Borusan family established Borusan Soma Solidarity Fund, with donations from our companies and our employees in response to the devastating mining disaster in Soma in May 2014 as a social responsibility movement. The donations allowed us to become the leading sponsor of the Psychosocial Services Association’s Soma Solidarity Network, which provides post-trauma psychological and social support to more than 4,000 people.

The BBC Proms’ invitation to the Borusan Istanbul Philharmonic Orchestra (BIPO) was the most important culture and the arts development for us. The BIPO’s concert at The Proms, one of the world’s most prestigious classical music festivals, received a standing ovation from an audience of 6,000 in London’s world-renowned Royal Albert Hall. BIPO released its third CD to mark this occasion.

Exhibitions at Turkey’s first office museum, the Borusan Contemporary, which is personally close to my heart, continued throughout the year to present contemporary artworks for the delectation of art aficionados. The Asım Kocabıyık: 88 &∞ Remembrance Room, established to perpetuate the memory of Asım Kocabıyık, my father, our Founder and our Honorary Chairman, opened on 28 December 2014, the second anniversary of his death.

An essential part of life for 70 years

Dear Shareholders,

Looking back at 2014, we see that, in a world filled with uncertainty, our Group has availed itself of unique opportunities and challenges facing Turkey. In our 70th anniversary year, while retaining our founder’s values, we moved the corporation forward on the world stage. With its 7,000 employees, Borusan is expanding its horizons globally. From construction equipment that builds cities to the pipes that heat our homes and irrigate our fields, from the vehicles to which we entrust our lives to the energy that powers modern life, Borusan will continue to be involved in a variety of essential sectors including white goods and transportation.

With best regards,

A. Ahmet KocabıyıkChairman of the BoardBorusan Holding

Borusan Holding

Board of DirectorsA. AHMET KOCABIYIKChairmanBÜLENT DEMİRCİOĞLUVice ChairmanFRANCIS PAUL MERMemberZEYNEP HAMEDİMemberNÜKHET ÖZMENMemberSTEFANO PROVERBIOMemberAGAH UĞURExecutive Board Member and Group CEO

AGAH UĞURGroup CEOMEHMET BETİLMember

Executive Committee

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2014 was a very hectic year for both the world economy and Turkey. In October, the United States, having distinguished itself from other countries by its performance, suspended the bond purchasing program it had enacted after the crisis broke in 2008, and expectations of interest rate rises emerged.

Moreover, while the pressure on developing countries’ economies are increasing, in Europe, low growth and low inflation ratios continued in 2014. Driven by a decelerating global economy and expanding oil supply, the decline of oil prices to their lowest level since the 2008 crisis was one of the most important developments in 2014. While, in the short term, this drop in oil prices would benefit the trade balances of highly energy-dependent countries like Turkey, overall it created global economic uncertainty.

The 2014 conflicts between Russia and Ukraine and in Syria and Iraq brought to the fore problems inherent in Turkey’s geopolitical position and negatively affected the economy, which grew by only 2.9%. Despite enormous fluctuations in Turkish Lira rates and the increase in geopolitical and macroeconomic risks in 2014, Borusan Group’s consolidated revenues grew by 9% to US$4.5 billion. With the strategic target of becoming a strong regional player, Borusan Group has obtained 25% of our consolidated revenues from international sales. Despite negative developments in our markets of operation, we succeeded not only in maintaining our gross profitability at 2013, but also in making crucial strategic investments as one of Turkey’s leading companies. We had an operating profit of US$328 million in 2014.

The Turkish steel sector performed lower than expected in 2014. Turkey’s total crude steel production fell in 2014 by 1.8% as a result of general stagnation in world markets, the increasing Chinese activity, and the drop in iron ore prices. However, Borusan Group’s steel companies, with the help of the increase in export sales, grew by 5% and accounted for 42% of the Group’s consolidated revenues and 39% of its operating profit.

Our flat steel companies, Borçelik and Kerim Çelik, maintained their 2013

performance against a 4% decrease in steel prices in 2014 and closed the year with revenues of US$1.1 billion. Borçelik, which has Turkey’s largest galvanized flat steel production capacity, retained its market leadership in 2014.

Borusan Mannesmann has continually consolidated its presence in export markets by investing in high value-added products and undertaking international projects. As a result, its export sales reached 65% of total prime quality sales. The shale gas drilling pipe plant, the foundations of which were laid in 2013 in Texas (USA), began operations April 2014, thus making the company a US domestic producer. Constantly expanding its activities in the US, our Company won a US$130 million public tender for a 449-km liquefied natural gas (NGL) pipeline to be built in Texas, the delivery will be completed in 2015. The Company reinforced its leadership position in the Turkish market by winning important contracts.

Dear Investors, Shareholders and

Employees,

Borusan 2014 Review of Operations

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Trio-consortium of Borusan Mannesmann, Erciyas Boru and Noksel Boru, with the leadership of Borusan Mannesmann Boru, won a tender for a US$420 million natural gas pipeline project. The project consists of supplying 30% of the pipes for the 1,900 km Trans Anatolia Natural Gas Pipeline project (TANAP), which is to carry gas extracted from the Caspian Region to Europe through Turkey. Delivery of these pipes will begin in 2015. Borusan Mannesmann Boru’s revenues rose by 20% in 2014 to US$ 716 million.

Continuing the growth they achieved in previous years, our distributorship companies increased sales revenues by 14% in 2014. Our luxury automobile, construction equipment and power systems distributor companies accounted for 47% of the Group’s consolidated sales and 56% of its

operating profit.

While Turkey’s passenger car market shrank by 12% in 2014, the luxury segment grew by 19% with the help of increasing share of small-engined models. Borusan Otomotiv, the market leader for several years, broke a retail record, selling over 26,000 BMWs in 2014, and by far its nearest competitor and consolidated its position in the market. With sales of over 1,000 MINIs and over 1,200 Land Rovers, Borusan Otomotiv Group’s total retail automobile sales reached nearly 28,500 units. Borusan Otomotiv also achieved a 94% customer satisfaction rating for all brands through its entire sales network. In 2014, it became the Jaguar representative for Turkey, and it had sizeable revenues of nearly US$1.3 billion.

The fleet size of Borusan Otomotiv Premium Araç Kiralama, which runs the rental operations of brands Borusan Otomotiv represents as BMW, MINI and Land Rover, grew by 28%, thereby doubling its market penetration. In 2014, its revenues jumped 55% to US$71 million.

2014 got off to a rough start with economic and political uncertainties causing exchange rate instability in the first half of the year. This led to a postponement of major investments, and caused a 21% shrinkage in Turkey’s construction equipment market. However, Borusan Makina ve Güç Sistemleri, distributor of

Caterpillar, a leading global brand in its sector, won the public tender to supply machinery for the construction of Istanbul’s 3rd airport. This €10 billion worth project will be the third largest project ever undertaken in Turkey and the fifth largest airport in Europe. The Company will meet a major portion of the construction equipment requirement and provide after-sales services for the project, which will be completed in 2017.

With construction equipment sales of nearly 1,400 units, Borusan Makina ve Güç Sistemleri retained its leadership position of the Turkish market in terms of turnover. In Kazakhstan, where we have a Caterpillar distributorship, a 20% devaluation of the Tenge and a drop in commodity prices led to an economically stagnant year.

However, our representative there dominated the mining market and achieved a record market share. Our Kazakhstan operations were selected as one of the best Caterpillar representations in a global field of 186 representatives. Borusan Makina ve Güç Sistemleri expanded by 34% in the Azerbaijan construction equipment market, again becoming market leader. Despite contractions and negative developments in its domestic and international markets of operation, the Company maintained consolidated revenues of approximately US$ 900 million.

Despite enormous fluctuations in Turkish Lira rates and the increase in geopolitical and macroeconomic risks in 2014, Borusan Group’s consolidated revenues grew by 9% to US$4.5 billion.

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IN 2014, Borusan Lojistik embarked upon the goal of acquiring greater proximity and speed in customer services, with lean and efficient processes; meanwhile, it started focusing on innovative projects and offering customers more flexible solutions. Technology investments at our

port in Gemlik, which can accommodate container ships of up to 13,000 TEUs and has a 400,000 TEU-container and 250,000 vehicle-freight handling capacity, have enabled us to create value for our customers by increasing promptness, efficiency and operational capacity in services. In the international shipping under the Balnak brand, we have over 100 agents in Europe, which provides us with a significant global transaction volume. We have acquired greater international penetration through the addition of CIS and Middle East lines.

In 2012, we established an online platform bringing SMEs and shippers together under the Borusan Lojistik guarantee. This platform, the ETA (Electronic Shipping Network), provided an innovative approach to the land shipping sector by offering reliable and fast service at optimal cost. In 2014, membership in the online platform grew with the addition of 1,000 freight owners and 2,000 trucking industry service providers.

Manheim (US), one of the world’s leading specialists in public auctions, with its partner Borusan Manheim, increased its dealer membership by 30% to 3,500 members. Having expanded its total customer base by 29% and its business volume by 14%, Manheim founded Otomax.com to accelerate sales by broadening its second-hand car portfolio.

Supsan, Turkey’s largest manufacturer of valves and valve supplier to major automobile brands, had sales volume of 4.9 million and revenues of US$23 million in 2014. Our company has also begun exporting to Russia and added Daimler CNG engines and Volvo trucks to our customer portfolio.

orking towards its vision of achieving a 2,000MW portfolio by 2020, Borusan EnBW Enerji continued its investments through 2014. The foundations of the Balabanlı Wind Power Plant (Tekirdağ, 50MW) project, which was put on the investment schedule in 2012,

and was started construction in 2013, reached full capacity two months earlier than planned. Investments of wind power plant package projects (which include the Fuatres, Harmanlık, Mut and Koru Wind Energy Power Plant projects, and the capacity expansion of the Bandırma Wind Energy Power Plant), which were decided upon in 2013 as being the Europe’s largest terrestrial wind power investment, have begun in the 207 MW. As a result of TÜV NORD Teknik Kontrol ve Belgelendirme Company inspections, Borusan EnBW Enerji gained “Voluntary Green Energy Power” certification in July and became the first Turkish energy company certified as supplying 100% green energy.

Developing new products, services and business models is a major focus of Borusan Group. In the scope of these devoted activities, we evaluated 35 business opportunities in 2014. Most of these opportunities, for which we budgeted US$ 5 million, have been transformed into operational business

models and commercialized. As a result of our focused efforts, we have brought seven projects to the incubation stage and, as of the end of the year, we had over 50 new product, service and business model projects underway in seven companies.

R&D is crucial to accelerating the development of new products, services and business models. Therefore, we are establishing a joint and competent R&D Center under the Holding company to contribute to the Group’s competitive advantage as we move forward. We have completed the joint R&D Center’s roadmap and infrastructure, it will become operational in 2015. We have also taken steps to increase cooperation with universities; to be closer to university resources, data banks and academicians, we have joined ITU’s Arı Teknokent.

Our profit did not reach a satisfactory level as we planned for 2014. While our consolidated revenues rose by 9%, our operational profit mirrored that of 2013. This was because of the negative developments in our business sectors, such as the fall in steel prices, the shrinkage in Turkish and foreign construction equipment markets, and the increasingly restrained profitability levels in the logistics sector.

BORUSAN 2014REVIEW OF OPERATIONS

In 2014, while celebrating our 70th anniversary, we established our targets for 2019 under the 5-year strategic plan.

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Our indebtedness grew by 10% in 2014. This is partly due to our shale gas drilling pipe plant investment, which will begin production this year in Texas. It is also the result of our investments in energy business and rental fleet for our distributorship businesses, which we made with

compatible ratios in the market, requiring less capital and greater bank borrowing. However, we managed our foreign exchange risks successfully despite devaluations in two important countries where we operate.

While we maintained accustomed growth tempo in 2015, we still aim to significantly increase our profitability. We plan to achieve this through structural changes to our business processes, which we initiated in 2014, and by employing new strategies to increase customer centricity, especially in our logistics and construction equipment distributorship businesses, and by developing new approaches to meeting customer needs in all of our businesses.

In 2014, while celebrating our 70th anniversary, we established our targets for 2019 under the 5-year strategic plan we apply to build our future.

e created Borusan’s portfolio vision and strategy by considering those customer segments and types of business that offer an attractiveness to us, while unaffiliated with the sectors our Group companies are currently doing business in. Accordingly, we

shall place even greater importance and emphasis than usual on expanding the businesses that have come to stand out and attained success in two of the following basic categories in our Group portfolio. The first encompasses businesses that offer integrated, intellectually driven and engineering based products, services and solutions. The second involves businesses that create “market platforms” in which business communities’ needs are served in a fast, simple and low cost basis via the use of technology and market optimization.

In recent years, Borusan Group has started prioritizing actions that ensure progress in this direction in nearly all of business units. In addition to our strategic investments and the fast and decisive steps on new product development and innovation that we have taken since 2012, we have begun to act on organizational development. This is a most fundamental priority for creating a corporate climate that is more customer-oriented, leaner and more agile as we approach 2019.

In order to create a successful and responsible conglomerate with growing, highly profitable and innovative businesses that dominate their markets, and a culture where the best talent can excel by 2024, Borusan Group’s 80th anniversary, we will maintain our efforts in 2015, the first year of this new era, with the contribution of all of our stakeholders.

I extend my sincere appreciation to all our shareholders, customers and employees, who have made us what we are today.

Sincerely,

Agah UğurGroup CEO Borusan Holding

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USA Algeria Italy Turkey

N. CyprusNetherlandsGeorgia

Kazakhstan

AdanaAnkaraAntalyaBursaBalıkesirDiyarbakırErzurumGaziantepİstanbul

Kyrgyzstan

Azerbaijan

Oman

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AMERICA EUROPE / AFRICA MIDDLE EAST/ ASIA

İzmirKocaeliManisaMersinMuğlaTekirdağTrabzonZonguldak

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Directors

USA Algeria Italy Turkey

N. CyprusNetherlandsGeorgia

Kazakhstan

AdanaAnkaraAntalyaBursaBalıkesirDiyarbakırErzurumGaziantepİstanbul

Kyrgyzstan

Azerbaijan

Oman

UAE

AMERICA EUROPE / AFRICA MIDDLE EAST/ ASIA

İzmirKocaeliManisaMersinMuğlaTekirdağTrabzonZonguldak

powerful industrial group with roots stretching back 70 years, Borusan continues its consistently growth in the sectors of operation - steel, distributorship, logistics and energy. Borusan Group’s strategy rests on being a beneficial conglomerate with the focus on innovative products and services development and the aspiration for growth in global markets

while creating value for the Turkish economy.

Borusan has over 7,000 employees and operates in 11 countries on three continents – North America, Asia and Europe. The Group companies create added value in manufacturing, services and industry, together with their international partners, each of which is a leader in its field.

Borusan Group has a strong corporate business culture proven through the Group’s successful expansion. Central governance of the Group is conducted by Borusan Holding and Borusan Danışmanlık.

Borusan Holding is responsible for raising shareholder value by providing strategic leadership. Accordingly, Borusan Holding defines the strategic direction, values, and business organization of the Borusan Group. It provides support and control by concentrating on portfolio and risk management, strategy, business development, human resources, money, innovation and reputation.

Borusan Holding is in charge of the Group’s investment strategy and management. In exercising this responsibility, it charts a roadmap for transforming “innovative competition” into an essential component of business culture and organizational climate, and it ensures the spread of this approach to doing business.

Borusan Holding has a major leadership role in managing relations between subsidiaries and other social shareholders, and it ensures the effective use of resources.

Borusan Danışmanlık retains all the other complementary functional and service areas of the corporate headquarters. Borusan Danışmanlık’s purpose is to create synergy and to manage common service procedures, thereby generating significant economic advantage and productivity at the Group level.

Within this framework, Borusan Danışmanlık provides specialists in areas such as information technologies, central purchasing, corporate risk management, law and corporate governance, in support of the Group’s strategic goals and its business outcomes. It is also in charge of optimizing costs and maximum efficiency management. Its priorities, in addition to the creation of economic value, are effective risk management, ensuring compliance with legislative amendments, obtaining necessary certifications, and performing other similar complementary activities.

Along with providing services to the Group, Borusan Danışmanlık also undertakes the Holding’s financial and administrative operations and those of its subsidiaries. Moreover, it manages key initiatives throughout the Group, such as the Lean 6 Sigma, sustainability and corporate social responsibility projects.

Borusan World

BARIŞ KÖKOĞLUBorusan Holding, CFOLALE ERGİNBorusan Holding, Strategy, Business Development, Innovation DirectorSEMRA AKMANBorusan Holding, Human Resources DirectorCANAN ERCAN CELİKBorusan Danışmanlık, ChairmanALİ FUAT ÇÖTELİOĞLUBorusan Danışmanlık, CIO

A

22

Celebrating its 70th anniversary in 2014, our Group was founded and has come to be what it is today under the leadership of our founder and honorary

chairman, the late Asım Kocabıyık. Today our primary goal is to lead in the sectors we operate and to be a global corporation active in world markets. In striving to achieve this goal, we have drawn vital inspiration from the words of our founder: “I owe a debt of gratitude to this country. I have worked my whole life to repay it.” This maxim is the basis of Borusan Holding’s social responsibility activities.Borusan Holding’s social responsibility activities focus on education, culture

and the arts, and the empowerment of women. The Borusan Kocabıyık Foundation (BKF), founded in 1962, operates to ensure the effectiveness and sustainability of these activities.Borusan Holding initially concentrated its social responsibility activities on education and then expanded into culture and the arts, particularly through the Borusan Istanbul Philharmonic Orchestra, cultural publications and a contemporary art museum, Borusan Contemporary. Most recently, its key priority has been the empowerment of women and equality of opportunity for men and women. Another major, and unique, social responsibility project is the Borusan Ocean Volunteers Platform, a voluntary initiative of Borusan employees established in 2008.


“We are repayinga debt of gratitudeto the country”

23


he BKF’s mission is to contribute to Turkey’s development and to step in where the state’s resources

are insufficient. BKF’s social responsibility projects focus on education, culture and the arts, and the empowerment of women. It spent US$15 million on social responsibility projects in 2014.

Education

Over the years, Borusan Holding has built many schools addressing different age

groups, such as Borusan Otomotiv Zehra Nurhan Kocabıyık Primary School, Gemlik Borusan Primary School, Borusan Asım Kocabıyık Industrial Vocational High School, Kocaeli University Asım Kocabıyık Vocational College, and Uludağ University Asım Kocabıyık Vocational College. It continues to support some of these schools directly and others through public contracts.Moreover, in 2014, BKF provided scholarships to 131 students to study in Turkey or abroad.

BORUSAN KOCABIYIK FOUNDATION

T

24

Borusan Sanat is the governing body of the Borusan Istanbul Philharmonic Orchestra (BIPO) which was founded in 1999 under the leadership of Gürer Aykal and with its dynamic ensemble comprising some of the best classical musicians in Turkey is working to become one of the leading symphonic ensembles

in Europe, as well as the Borusan Quartet, the Borusan Children’s Chorus, and Borusan Klasik, which is the first classical radio in Turkey that broadcasts over the Internet.Borusan Sanat represents Turkey at the International Society for Contemporary Music, which has over 50 members. Borusan Sanat is also an official member of the European Music Council, the European Group of the International Music Council, UNESCO’s advisory body on music with over 60 national committee members.

BIPO, Turkey’s first private symphony orchestra, celebrated its 15th anniversary in 2014 and was invited to the BBC Proms, one of the world’s largest and most respected classical music festivals. The orchestra gave a concert under the direction of its artistic director and principal conductor Sascha Goetzel, for which it received a standing ovation from an audience of 6,000 at the world-renowned Royal Albert Hall. The orchestra’s much-anticipated third CD, Rimsky-Korsakov, Balakirev, Erkin, Ippolitov-Ivanov, was released the same time as the concert to positive reviews, as did its earlier recordings.

The BIPO reaches nearly 25,000 concert-goers a year with its monthly concerts. In 2014, it held a special four-concert classical music event entitled “Music for Peace with the BIPO.” The proceeds from this event, held between 13–19 December

in collaboration with Borusan Sanat and the Music for Peace Foundation, went directly to the Music for Peace Foundation, which aims to provide children with classical music education and to encourage peace through music.

The guest conductor at BIPO’s 2014 special concert was once again the famous movie and theater actor, writer and director Ali Poyrazoğlu. An established tradition since their inception in 2006, the special concerts have over the years made it possible for 19 young musicians to have postgraduate education in prestigious institutions in the world with the funds provided from the proceeds of these concerts.

Borusan Sanat also coordinates Ertuğ & Kocabıyık Publications noted for its books of exquisite quality and content focusing primarily on the Ottoman, Byzantine, Roman and Hellenistic eras. The publication of these books, which contain scholarly articles and stunning photographs, is the joint

project of Ahmet Kocabıyık, Chairman of Borusan Holding, and architect-photographer Ahmet Ertuğ.

Ertuğ & Kocabıyık Publications presented its latest book “Ancient Theaters of Anatolia” in 2014. Penned by R.R.R Smith, Lincoln Professor of Classical Archaeology and Art at Oxford University, and Director of the Aphrodisias Excavations in Turkey, the book features stunning photographs of Ahmet Ertuğ. Many of the extraordinary images show these well-preserved theaters in exceptional detail.

Borusan Sanat

25

Six Exhibitions from Borusan Contemporary In commemoration of its 100th birthday, the Yusuf Ziya Pasha Mansion became the Borusan Contemporary, a venue for exhibitions of contemporary art. Also known as Perili Köşk (Haunted Mansion), the building, in Istanbul’s

Rumelihisari neighborhood, serves as Borusan Holding’s headquarters during the week and is open to public during the weekend as a venue for art aficionados’ enjoyment of Borusan Contemporary’s innovative art exhibitions.

Borusan Contemporary’s 2014 program continued to present selections from its collection, alongside exhibitions with various media and conceptual content.

Borusan Contemporary hosted an exhibition of John Gerrard’s dynamic works entitled “Exercise”, from 1 March to 1 June 2014. The pieces are remarkable for using the very software that enables the operations of entertainment, industry and warfare. Another exhibition, “Megaplex Trilogy,” ran parallel with “Exercise.” Curated by Kathleen Forde, the exhibition contained 3D film collages by Marco Brambilla: Creation (Megaplex) (2012), Evolution (Megaplex) (2010) and Civilization (Megaplex) (2008).“Common Ground: Earth” (1 March–16 November) was the first in the 2014–2015 exhibition series “Common Ground: Earth, Water, Air” that presents works from the Borusan Contemporary Art Collection.

“West Coat Visions” (14 June–16 November) showcased works from the collection of San Francisco Museum of Modern Art (SFMOMA), one of the world’s most important media art collections, providing a rare opportunity to view some unique works which are not easy to come by out of San Francisco. Curated by SFMOMA’s Media Arts Curator Rudolf Frieling, the exhibition featured works of Jeremy Blake, Bill Fontana, Doug Hall, Steina and Bill Viola.

Borusan Contemporary hosted workshops parallel the exhibitions, which ran throughout the year, bringing children and adults together through art.

Borusan Contemporary


26

Research shows that an important obstacle to women’s employment in Turkey is childcare. The long-term “My Mom’s Job is My Future” project addresses this issue. The goal of this project, launched in partnership with the Ministry of Family and Social Policies and the Ministry of Science, Industry and

Technology, is to build early childcare and education centers, called Borusan Joy Factories, for children between the ages of 0 and 6 in ten organized industrial zones (OIZ) in ten provinces of Turkey. These centers not only facilitate employment of women in companies operating in these OIZs, but also provide their children with an opportunity to receive a modern education.

Another aim of the “My Mom’s Job is My Future” project is to set an example to the business world as to what can be done towards this purpose and to create greater public awareness of the issue.

Empowerment of Women

Borusan Holding believes that women should have the same rights as men in the social and economic arenas. Women comprise only seven million of the 37 million people working in Turkey and one out of five lives in poverty. As part of its contribution to solving this social problem, Borusan Holding supports

its women workforce as a company policy and provides the infrastructure and financial support for women in other regions to participate in professional life.

Despite operating mostly in heavy industry sector, as of 2014, 15% of Borusan Group’s managerial positions are held by women. Moreover, Borusan has signed many protocols and commitments, first and foremost being the UN Women’s Empowerment Principles.

My Mom’s Job is My Future

27

sım Kocabıyık, founder and honorary chairman of Borusan Holding, personally established the

first microfinance branch in his place of birth, Afyonkarahisar, to expressly support women entrepreneurs. The second microfinance branch was opened in 2013 in Gemlik, near Bursa, where Borusan Holding has an extensive industrial site and port.

Together, these microfinance branches have provided 1,300 women entrepreneurs with approximately 3 million Turkish Liras in credit support to start or expand their businesses. In 2014 alone, 603 women entrepreneurs received microcredit support.

The day after the mining disaster in Soma, western Turkey, Borusan employees launched a donation campaign, the Borusan Soma Solidarity Fund, for the families of the victims. The donations collected from Borusan Holding and the group companies were used to underwrite the Soma Solidarity Network (SOMADA) project, developed by the Union of Psychosocial Services in Disasters. The aim of SOMADA is to provide social and psychosocial support to families which lost husbands or fathers, children being the main focus. The Borusan Soma Solidarity Fund met the costs of establishing and running the first psycho social support center in Soma and provided vehicles for two mobile teams.

Borusan Ocean Volunteers Platform was founded in 2008 to enable Borusan employees to use their

knowledge and skills in social responsibility projects in the fields of education, culture and the arts, the environment and human rights.

Borusan Ocean Volunteers Platform clocked 2,861 hours of voluntary work, involving 630 volunteers. A total of 52 events were organized in cooperation with 26 NGOs.

Borusan Group companies and their employees unceasingly work toward repaying the “debt of gratitude to the country.”

Gemlik Borusan and Afyonkarahisar AsımKocabıyık Microfinance Branches

Borusan Soma Solidarity Fund

A Corporate Voluntary Initiative: Ocean Volunteers

The project unfolded in 2014 with two Borusan Joy Factories opening their doors: the first started to operate in Adıyaman in July and the other was in Afyonkarahisar in November. These childcare facilities made it possible for 150 children to receive preschool education and their mothers to return to their jobs with their minds at ease.

The “My Mother’s Job is My Future” project also won the Comprehensiveness Award at the Corporate Social Responsibility Awards Contest held by the Turkish Confederation of Employer Associations and Borusan Holding became the first Turkish company invited to join the United Nations Women’s Empowerment Principles Leadership Group. A


STEEL

LOGISTICS ENERGY

DISTRIBUTORSHIPPIPE MACHINERY AND POWER SYSTEMS

FLAT STEEL

AUTOMOTIVE

• Borusan Lojistik• Borusan Logistics International

• Borusan EnBW Enerji

• Borusan Mannesmann Boru Yatırım Holding• Borusan Mannesmann• BM Vobarno

• Borusan Mühendislik• Borusan İstikbal Ticaret

• Borusan Makina ve Güç Sistemleri• Borusan Makina Kazakhstan

• Borçelik• Kerim Çelik

• Borusan Otomotiv • Borusan Oto • Borusan Otomotiv Premium Kiralama

• Supsan• Manheim Türkiye

Borusan Group

31

BORUSAN MANNESMANN

Turkish market leader in high value-added products and one of Europe’s leading steel pipe manufacturers.

Global company with a strategy to maintain profitable growth through investing in high value-added products in the right geographical locations.

Competitive ability gained in international level by targeting approximately 65% of sales to export markets.

Aiming to be one of the top five players in the North American OCTG market.

Domestic market leader in special pipes for the automotive sector; aiming to be a key player in export markets.

Targeting high value-added new markets for spiral pipe sales. Pursuing a rapid and profitable growth strategy through

investing and inventing high value-added new products.

STRATEGIC POSITIONING

STEEL / PIPE

SEMİH ÖZMEN Executive Committee ChairmanZAFER ATABEYExecutive Committee Member, Projects Segment and Special Pipes Sales and Procurement DirectorKAĞAN ARI Executive Committee Member, Finance & Strategy, IT DirectorTAYLAN KARAGÜL Executive Committee Member, Commercial Pipes Sales and Procurement DirectorHAKAN DUMANOperations Director, Gemlik FacilitiesBUDDY BREWER General Manager, BM Pipe USEROL AKGÜLLÜ Investments Director, BM Pipe US

Directors

Our pipes bring life-giving water to fields and transform houses into warm homes with natural gas.

32

STEEL

Achieved 20% growth in prime product sales, reaching 699.000 tons, while consolidated turnover increased 20% to $716 million.

Consolidated export sales decline in 2013, due to the structural change of OCTG sales through our US subsidiary rather than a 3rd party distributor company, has largely recouped in 2014.

With a focus on rapid export growth, Borusan Mannesmann directed approximately 65% of total prime sales to export markets. Tons exported soared 43% while the turnover generated from these pipes expanded by 44%.

Achieved company’s highest level of profitability in automotive pipes and maintained the record sales tonnage levels achieved in the previous year.

Standard pipe sales increased 29% and much of the increase came from high value-added steel pipes.

Borusan Mannesmann Pipe US. Inc., a $150 million USD investment to serve the U.S. OCTG market with 300,000 tons capacity, has started production.

The trio-consortium under the leadership of Borusan Mannesmann, (Borusan Mannesmann, Erciyas Boru and Noksel Boru) awarded to supply approximately 30% of the total steel pipe demand for the Trans Anatolian Natural Gas Pipeline (TANAP). The total contract value of the consortium is $420 million and the shipment of steel pipes is expected to start in 2015.

Awarded a $130 million contract, devoted to one of our key strategic growth areas, to supply large diameter line pipes for a 449 km pipeline construction in Texas. The project will be the longest pipeline project in Borusan Mannesmann’s history with the supply of steel pipes length of 24.5 meters after the completion of H2S investment. Shipment of these pipes is expected to be completed in 2015.

High value-added new product sales increased to 17% of prime sales turnover from 6% in previous year, in response to day by day increasing weight of developing of new products in line with company’s vision.

2014 HIGHLIGHTS OPERATIONAL INFORMATION

BORUSAN MANNESMANN

Prime Product Sales (K Tons)

Domestic Exports

2010100

200

300358

284 270 272 255

444

311

583

699745

700677 475

416319

400

500

600

700

800

900

1000

2011 2012 2013* 2014

Investments (million USD)

201020

40

60

80

100

120

140

2011 2012 2013 2014

36

83

138

57

30

*Our consolidated export figures dropped in 2013 compared to those for 2012 because the pipes used in the OCTG segment began to be sold through our partner BM Pipe US beginning in 2013. This decline, however, was largely recouped in 2014.

33

“The first thing that comes to mind when I hear ‘Borusan’ is reliability.”

TİRYAKİLER GROUPMEHMET TİRYAKİ

Chairman of the Board

Tiryakiler Group has been operating in the automotive supply industry for 40 years. When Turkey was not even making screws, Borusan’s founder, Asım Kocabıyık, and our founder, İsmail Tiryaki, saw that our country’s future was in industry and they had the courage and vision to act on that. If Turkey had 10-20 entrepreneurs like Kocabıyık, many of Turkey’s problems, like unemployment, would have been solved.

We first started making spare parts for Borusan Group in the 1970s. During those years, we were also working with Supsan Engine Parts. We began working with Borusan Mannesmann in 1988.

The first thing that comes to mind when I hear

“Borusan” is reliability. What I mean by reliability is to date, Borusan Group

has fulfilled every one of its promises. They have only promised what they could do and then fulfilled it. This is very important. We collaborate technologically. For example, when we say that we need piping with technical features that makes it lighter, Borusan acts and works with us to address this need. Our R&D Department and Borusan engineers work together to develop that product.

Borusan is much more than a supplier for us; we have been working with Borusan for nearly 30 years. Borusan instills in us the feeling that we are at home and always welcome. It has fulfilled every promise it has made to us for 30 years. This induces confidence.

A FELLOWSHIP OF 70 YEARS

STEEL / PIPE

34

CORPORATE INFORMATION

PARTNER

Borusan Mannesmann

Field of Activity Production and sale of steel pipes targeting domestic and international markets.

Production Product range of over 4,000 types of pipe, ranging in outer

diameters from 4.6 mm to 3,048 mm and wall thickness between 0.7 mm and 25.4 mm.

Product range includes water pipes, general purpose pipes, natural gas and petroleum line pipes, industrial pipes and profiles, structural pipes, casing and tubing pipes, boiler tubes, and spirally welded pipes.

Europe’s only manufacturer of large diameter pipes for petroleum and natural gas lines.

Spirally welded line pipes ranging between 508 mm and 3,048 mm for oil, gas and water line pipes, and piling applications.

Coating facilities of PE, FBE, PP, epoxy and cement to serve specific customer specifications.

Production Capacity An annual production capacity of over one million tons

comprised of 800,000 tons of longitudinally welded pipes and 250,000 tons of spirally welded pipes.

Sectors Served Borusan Mannesmann is a diversified producer of tube and

pipe products serving the construction, energy and automotive markets with a wide range of longitudinally welded steel pipes.

Borusan Mannesmann also serves water, oil, gas pipeline projects in domestic and export markets with its spirally welded pipes.

Service Locations Bursa-Gemlik and Istanbul-Halkalı production plants. 100 distributors.

BM Pipe US

Production Capacity 300,000 tons OCTG production and processing capacity. Operational area of 500.000 square meters.

Sectors Served North American OCTG and line pipe markets.

Service Location Manufacturing plant in Houston, Texas, United States

BM Vobarno

Production Capacity Annual production capacity of 28,000 tons of cold-drawn

special pipes. Operational area of 29,000 square meters. Special value-added steel pipes with outer diameters ranging

from 20 mm to 140 mm.

Sectors Served European manufacturing industries, primarily the

automotive sector.

Service Location Manufacturing plant in Vobarno, Italy

Borusan İstikbal Ticaret

The oldest member of the Borusan Group. Handles the Borusan Group’s flat steel and pipe exports. Incorporated under Turkish law as a foreign trade company.

STEEL

BORUSAN MANNESMANN

35

Peri is a casting and scaffolding company and we are the global market leader in our sector. We have subsidiaries in 62 countries in addition to our headquarters in Germany.

Maintaining our position requires that we provide innovative and technically unrivaled products. It is impossible for us to source raw materials from just any supplier; we have strict raw material standards. We are not concerned simply with the diameter and thickness of pipe; we delve into everything about the constitution of pipes, including, for instance, the amount of silicon and magnesium they contain.

We choose Borusan Mannesmann because the company provides us the raw material we need under the conditions we prefer. For example, we are currently collaborating with Borusan on an important project. We stated our product need to Borusan and how important this project was for the future of our company. In response, Borusan

confirmed that they can produce this raw material within the next 1-2 months. Peri Türkiye is not a large buyer, but the experience Borusan gains from working with us will help them as a global player, too. We have formed a win-win

relationship.

I think that Borusan is integrated globally with respect to such matters as market domination, R&D, quality control and production processes. It is becoming a global player, which is a situation it

manages well. Being able to open a plant in the US confirms this.

Our first impression of Borusan has not changed. From the start, we sensed that the company was ours and we trusted it. We get the product we want to the standard we need by the deadline we set. Borusan people respond quickly to any product-related problems and they take the initiative to solve them. This is a result of the culture Borusan’s founder, Asım Bey, instilled in the company.

A FELLOWSHIP OF 70 YEARS PERİ KALIP

AZIZ AYHAN AKPINARManaging Director

“Nearly 90% of the products we get from Borusan are tailor-made for us.”

STEEL / PIPE

36

BORÇELİK

Turkey’s first private flat steel producer The most sophisticated technology and largest production

capacity of any galvanized flat steel producer in Turkey Main supplier for largest industrial companies A total capacity of 1,5 million tons Market leader in Turkish Hot Dipped Galvanize industry Strategic partnership with ArcelorMittal, world leader in the

steel sector.


STEEL

Directors

ERKAN KAFADARManaging DirectorMESUT GÜNEYProduction and Investments DirectorOKAN AYDINGÜNFinance and IT DirectorGÜVENÇ TEMİZELSupply Chain and Innovation DirectorSİNAN SÖZENCommercial Director

We attest the life by taking place at houses, offices and streets with goods produced with our flat steel.

STEEL / FLAT STEEL

38

BORÇELİK

OPERATIONAL INFORMATION

Came first place in the metal sector at the Bursa Chamber of Commerce and Industry (BCCI), 2014 Those Who Add Value to the Economy awards.

Opened the Borçelik Technical Academy in May 2014 with 18 instructors. Provided 87 training sessions in eight months in 12 training areas to 609 employees, with 67 personnel receiving certificates. Launched the Vocational High School Teacher Training project with the Bursa District Office of the Ministry of Education.

Strengthened our focus on developing new products, services and business models. Identified an innovative project out of 25 possibilities and this gained acceptance under TUBITAK’s Industrial R&D Project Grant Program 15501. Other project applications are under evaluation.

Borçelik remains as main supplier for the Automotive, White Goods and Radiator Industries

Borçelik performs around 40% of Turkey’s cold-rolled sheet and galvanized sheet exportation

Regarding visible surface productions for the top-quality expectation of the automotive sector, we performed investments at our galvanized and surface inspection lines; in compliance with our focus on zero-defect production and zero problem at the customers.

Our furnace investments, planned to be fully operational in May 2015, are in progress that will provide energy efficiency and a higher product quality.

We started to be active in new export markets during 2014. According to ISO500 results, Borçelik is the 4th largest

industrial company in Bursa and the 28th in Turkey. During 2014, we conducted 2,250 customer visits and

technical trainings combined for our customers.

2014 HIGHLIGHTS

STEEL

HDG CR OTHER PO FH

Total Sales (K Tons)

720690702670 691

445

141

34

10

442470473467

137178175174

47201620

60,4314

1,3521,3581,3691,345 1,321

2013201220112010 2014

MIDDLE EAST EU CIS FAR EAST OTHER

Export (K Tons)

211223206253 169

2013201220112010 2014

70103119

147

50

47

28 28

15

60

556267

54

35

1214

2424

11

21

3434

39

Borçelik is a successful supplier with high performance, quality and service. While Borçelik understands our needs and offer solutions accordingly, it also challenges us to meet the demands of this competitive industry.

Borçelik is very important to our companies’ success and we have developed a great partnership over the past years. Although Tata Steel and Borçelik at corporate level could be considered competitors, we have a sound cooperation. Both of us offer services to highly demanding customers and do that with a passion for high quality, great service and reliability. Borçelik as a supplier of us is therefore makes a huge contribution to this supply chain in providing outstanding products to our customers.

We trust Borçelik and collaborate freely. We work together in many different areas. We have a strong partnership in which both companies are always ready to help each other to grow and improve. In nature they call this symbiosis. I think in real life we call this “friendship”.

We much appreciate the business we have developed together and hope to continue our friendship for many years to come.


Production Hot-dipped galvanized steel, cold-rolled annealed steel and

pickled and oiled hot-rolled steel, which are the inputs for the industry.

Range of steel products consisting of commercial, drawing, deep drawing, extra-deep drawing, bake-hardening, re-phosphorized, HSLA (high strength low alloy), enameling and dual phase.

Production Capacity Total 1.5 million tons Capacity distribution

600,000 tons cold-rolled steel 900,000 tons hot-dipped galvanized steel

Sectors Served Borçelik’s domestic major customer groups include producers

of household appliances, automotive main and subcontractor industries, panel radiators, construction, color coating, pipes and profiles, packaging, metal goods sectors and steel service centers.

Location Gemlik


TATA STEEL İSTANBUL METAL SANAYİ VE TİCARET A.Ş.

STEPHAN FLAPPERManaging Director

In nature they call this symbiosis. I think in real life we call this “friends”.

PARTNER

STEEL / FLAT STEEL

40

KERİM ÇELİK

Turkey’s largest steel service center in terms of processed material volume.

The flat steel supplier of preference in Turkey for its customer-specific supply solutions and services.

Strategic partnership with ArcelorMittal, world leader in the steel sector.


STEEL

Istanbul and Bursa production plants were merged under the Bursa branch in 2014 to improve efficiency.

41% growth in sales tonnage volume at the Adana branch. 2,832 visits to customers.

2014 HIGHLIGHTS

Business AreaKerim Çelik became the first domestic company to provide world-class service to the Turkish steel industry when it launched its steel service center.

Products and ServicesProduct range: coils, hot rolled steel, pickled and oiled hot rolled steel, cold-rolled steel, hot dipped galvanized steel, pre-painted steel, electrical steel and special coated steel in slitted coils and sheets.

Production Capacity Production capacity of 500,000 tonsCapacity distribution

Manisa plant: 130,000 tons Bursa plant: 340,000 tons Adana plant: 30,000 tons

Sectors Served

White goods main & subcontractors, automotive subcontractors, construction, machinery and spare parts industries, radiator, lighting, heating and ventilation, furniture accessory manufacturers, cable channels & fittings, pipe profile and other industries.

Service LocationsHeadquarters: Istanbul.Production plants: Manisa, Bursa and Adana.Regional sales representatives: Ankara and Antalya.


100

200

300

400

500

600

2010 2011 2012 2013 2014

380

416 438

371 367


Sales by Year (K Tons)

Directors

A. KEREM ÇAKIRManaging DirectorH. BURÇIN FALAYSupport Functions Director

41

Istanbul and Bursa production plants were merged under the Bursa branch in 2014 to improve efficiency.

PARTNER

STEEL / FLAT STEEL

Siemens and Borusan have similar corporate cultures and values. The similarities include long-term thinking, and concern for quality, technology, innovation, productivity and sustainability. I have always felt these similarities in our corporate cultures and in our companies’ directors. Therefore, I have never felt like an outsider when working with Borusan.

Borusan Group aims to grow and its basic principles are sensitivity to the environment, contributing to society, and respecting human rights. One of Turkey’s largest business groups, it achieves its goal of increasing added value for the country through its international investments while making profit.

Borusan’s greatest asset is its managerial staff, which is open to change and forms long-term goals. The staff makes the principles of Borusan Group’s founders compatible with the requirements of the day and takes the company to even greater heights. In this way, as Borusan expands, it paves the way for the growth and development of its business partners.

Siemens’s success depends on customer satisfaction. Our customers’ satisfaction rises when we deliver the highest quality product, at the most reasonable cost and on time. Borusan is the main supplier at our plant in Gebze, which exports to 80 countries. Any technical breakdown, delay or quality problem impacts Siemens customers in 80 countries. By forming a business partnership with Borusan, we are sharing a responsibility for ensuring the satisfaction of our customers.

We solve whatever issues arise when working with Borusan through the Borusan team’s professionalism, proactiveness and open communication. Siemens and Siemens customers rely on Borusan’s ability to create solutions and this is one of Borusan’s most important attributes.


As Borusan expands, it paves the way for the growth and development of its business partners.

SIEMENS HÜSEYİN GELİŞ

CEO and President in Siemens

We accompany you on this never-ending journey, ensuring the joy and passion continues.

43

DISTRIBUTORSHIP AUTOMOTIVE

BORUSAN OTOMOTİV &BORUSAN OTO & BORUSAN OTOMOTİV PREMIUM KİRALAMA


Borusan Otomotiv is the Distributor of the premium brands BMW, MINI, Land Rover, Jaguar and BMW motorcycles and is positioned to; - remain the first choice for automobile and motorcycle enthusiasts. - offer unrivalled products and services that provide driving pleasure and joyful moments. - invest in our present Sales and Aftersales networks and to expand them into additional provinces with new service points. - ensure that each brand maintains its leadership of its respective segment by emphasizing customer satisfaction and loyalty, with a focus on new products and services.

Borusan Otomotiv owns a substantial part of the retail functions under the name of Borusan Oto who has more than 50% share of the sales and aftersales services.

Borusan Otomotiv Premium Rent is a leading player in premium car rental segment possitioned to; - provide quality driven operational leasing services, - establish a loyal and satisfied premium car lessee community by tailor made services.

Directors

EŞREF BİRYILDIZ, Chairman of the Executive CommitteeALİ VAHABZADEH, Board Member Vice Chairman of the Executive CommitteeAYHAN ÖLÇER, Executive Committee Member, BMW Group Sales & Marketing DirectorM. KERİM KAZGANExecutive Committee Member, Finance & Administrations DirectorSİMAY ALSANAftersales and Logistics DirectorUĞUR SAKARYABorusan Oto Managing DirectorKAĞAN DAĞTEKİNBorusan Otomotiv Premium Kiralama Managing Director

44

DISTRIBUTORSHIP

BORUSAN OTOMOTİV & BORUSAN OTO &BORUSAN OTOMOTİV PREMIUM KİRALAMA

Across the whole of its range of automobile brands, the Borusan Otomotiv Group sold 28,452 automobiles and 598 BMW motorcycles.

BMW automobile retail sales reached its highest level in 31 years. With sales of 26,174 units, BMW retained its leadership of the premium segment. Thus Borusan Otomotiv has dominated the segment for 27 out of 31 years, including four consecutive years to date.

Turkey was, again, BMW’s largest single market worldwide. Land Rover maintained leadership in the 1.6-liter-plus premium

SUV segment with sales of 1,207 units. Sales of MINI reached 1,071 units. 598 BMW motorcycles were sold. New investments boosted sales in the used car division by

77.5% to 6,094 automobiles. Customer Satisfaction and Loyalty ratings across all brands

and authorized dealers on sales were 93.8% and 87.14%, respectively, and on after-sales 89.19% and 77.1%, respectively

Borusan Otomotiv Services’ retail parts sales and labor turnover for all brands reached €117.16 million.

In the Top Gear Awards competition, in the UK and Turkey, the BMW i8 won the global Car of The Year award, the BMW 220d won Coupe Automobile of the Year, and the BMW 218i Active Tourer won Family Automobile of the Year.

At the A.L.F.A. Awards for complaint management,

Borusan Otomotiv won the Best Automobile category with its BMW brand.

40% of 2014 sales were financed through Premium Finance - a 5% increase in individual loans over the previous year.

Sales of the BMW Service Inclusive after-sales service package approached 20.5% of new automobile sales; sales of car insurance equaled 32% of Borusan Otomotiv sales.

Borusan Otomotiv Premium Kiralama expanded its fleet with 1,433 new cars in 2014, marking a 28% increase in its vehicle fleet leased on a one-year basis and bringing its total to 2,517 vehicles. In addition to selling 855 vehicles, it successfully launched Rent•Ease, a product that allows shorter term, personal leasing. As a result, 20% of total business was carried out through showrooms. Annual revenues, €25 million of which were derived from leasing and €29 million from used car sales, reached €54 million, a 56% increase over that of the previous year.

Borusan Oto completed and opened Borusan Oto Ataşehir, its first showroom on Istanbul’s Asian side.

Borusan Oto Avcılar MINI and Used Car showrooms moved to new locations in the expanded Avcılar facilities.

Borusan Oto Avcılar Used Car has a 100-vehicle covered showroom, making it Turkey’s largest BMW Premium Selection sales point.

2014 HIGHLIGHTS

45

100

200

300

400

500

600

700

BMW Motorcycle Wholesale Sales (units)

2010 2011 2012 2013 2014

348

453 441458

598

100

200

300

400

500

600

700

800

900

1000

Borusan Otomotiv Sales Turnover (million €)

2010 2011 2012 2013 2014

598

548,1

661,1630,4

741,3

939,1


3000

6000

9000

12000

15000

18000

21000

24000

27000

30000

Borusan Otomotiv Wholesale Sales (units)

2010 2011 2012 2013 2014

15,349

18,727 18,457

23,180

28,761

3000

6000

9000

12000

15000

18000

21000

24000

27000

30000

Borusan Otomotiv Retail Sales (units)

2010 2011 2012 2013 2014

15,057

18,892 18,595

23,585

28,452


46


Having confidence in your partners is crucial in the business world.Under today’s conditions, meeting customer expectations rapidly and being solution-focused adds value to our business, speeds up our processes and, as a result, reinforces our confidence. At the end of the day, the most important advantages of working with Borusan - the confidence we have in them, the quality of their service and their innovative approaches – boost our competitive advantage.

The value they create for our business is another crucial factor. Themajor reason we choose Borusan is that they accurately perceiveand analyze customer needs and expectations, and they areprofessional. They are readily available, respond rapidly to requests,and they are innovative, all of which have a favorable impact on ourbusiness.

Borusan is a successful business partner with a strong professionalattitude. It is open to improvement and innovation, and it adds valueto our businesses.

DERİNDEREAYTEKİNHAN YILDIRICICEO

Borusan’s investment in people and technology, and their desire to do the best job possible inculcates enormous respect.

I have followed Borusan’s industrial and non-industrial development throughout my 45 years of business life. Borusan’s investment in people and technology, in particular, inculcates enormous respect. We also greatly admire Borusan’s investment in social responsibility projects.

Borusan is a model company in my estimation. I learn from what valuable companies like Borusan do and I apply the lessons to my own business. Borusan is clearly a model company that takes exemplary industrial and technological steps in all its areas of business, not only in the automotive sector. Therefore, I am sure that we are not alone in reaping benefits by working with Borusan; so will anyone doing business with the company. I monitor Borusan’s improvements to process

management and results. While the importance of 6 Sigma projects has yet to be fully recognized in Turkey, Borusan has set up project teams and taken steps to perfect company operations. This is vision. A company carrying out 6 Sigma projects naturally has advanced technologically, too. We can see this in Borusan. They have been able to achieve successful results by keeping up with technology.

How does a company in business for 70 years continue to thrive and, what’s more, retain respect? In 70 years in Turkey, policies have changed, governments have come and gone, yet Borusan has continued to prosper while remaining committed to its own way. I believe that underlying this is long-term planning and an emphasis on professionalism.

SABANCI HOLDINGZAFER KURTULBoard Member and CEO

Borusan is a successful business partner with a strong professional attitude. It is open to improvement and innovation, and it adds value to our business.


DISTRIBUTORSHIP

BORUSAN OTOMOTİV & BORUSAN OTO &BORUSAN OTOMOTİV PREMIUM KİRALAMA

47

1984 becomes BMW’s Turkey distributor 1985 becomes BMW motorcycle’s Turkey distributor 1998 starts Land Rover sales and aftersales services 2001 becomes MINI’s Turkey distributor 2008 founded Borusan Oto Kıbrıs Ltd. Land Rover 2010 last quarter became Aston Martin’s Turkey distributor 2014 last quarter became Jaguar’s Turkey distributor Today, distributor of BMW, BMW motorcycle, MINI, Land

Rover, and Jaguar.

Products and Services Passenger cars and 4x4 vehicle sales, premium selection

used cars, motorcycles, parts, after-sales services, and long-term automobile leasing and diplomatic car sales.

Dealer Network Borusan Otomotiv has 21 authorized dealers and 30

authorized service centers across all seven of Turkey’s geographical regions to provide sales and after-sales services for its products

Functioning as a Borusan Otomotiv dealer, Borusan Oto has sales and service centers in the Avcılar, İstinye and Dolmabahçe districts in Istanbul, as well as operations in the Esenboğa, Çankaya, Birlik and Balgat districts of Ankara, plus one each in Adana-Mersin area and in Gaziantep.

CORPORATE INFORMATION A FELLOWSHIP OF 70 YEARS

PARTNER

Giwa Holding GmbH % 50 - % 50 Equal Joint Venture

ING Bank collaborates with Borusan to maintain its fleet of automobiles. Our fleet consists of vehicles distributed by Borusan Oto. Borusan’s commitment to high service quality makes our job significantly easier. This commitment to service quality goes beyond the positive and constructive stance Borusan takes during the sales process to include their after-sales service. This gives us the confidence to count on them to meet whatever needs might arise.

The service we receive during periodic maintenance and repairs is crucial to our good customer experience. The rapid, results-oriented attention we obtain from authorized service centers adds value for us. When we get rapid service, our business continues problem-free with no loss of time.

Borusan’s capacity to provide rapid solutions is only one reason we work with them. Borusan also helps us to avoid problems by giving prior notice of our vehciles’ maintenance schedule and offering us rapid solutions. They are particularly good at anticipating the problems that can arise during seasonal changes and informing us. We would like to see this valuable approach in all of our business partners.

Borusan is a competent business partner with a corporate attitude that instills confidence. It is always ready to help when the need arises.

“Borusan’s commitment to high service quality makes our job significantly easier.”

ING BANKSEÇIL REFIKAssistant Managing Director for Human Resources andCommunications


48

SUPSAN

Leader of the domestic OEM and aftermarket segments.

Turkey’s biggest engine valve manufacturer. A provider of integrated solutions with new

products in the aftermarket segment.


Director

SALİH ALSON Managing Director

We provide power and performance to the vehicles which connect people and the engines plowing the field, with our engine valves and parts.

DISTRIBUTORSHIP

DISTRIBUTORSHIP OTHER AUTOMOTIVE

50


SUPSAN

Capacity and Production (million units)

2010 2011 20132012 2014

10

9

8

7

6

5

4

3

2

1

7,1

10,0

5,0

10,0

5,3

10,0

Capacity Production

Yearly Valve Sales (million units)

8

7

6

5

4

3

2

1

Manufactured 4.98 million units and sold 4.93 million units. Sold 1.37 million units in the domestic aftermarket. Established a partnership in the independent OEM segment

with YaMZ, a major Russian engine manufacturer. With this new customer, achieved record exports of 430,000 units to independent OEM and aftermarket segments.

Initiated valve sales for Daimler CNG and Volvo truck engines through Eaton distribution channels.

Achieved a 96.6% rating in Eaton shipping performance. BMW, Fiat and YaMZ audits were succesfully completed. Raised customer satisfaction index from 76% to 83% and

customer loyalty index from 76% to 82%. Began to produce the turbo product (part of the innovation

project) and launched sales. Invested in the camshaft production line for production to start in 2015.

Started aftermarket sales of products 113 new valves and 131 new non-valve references.

Achieved record sales of US$ 3.33 million in non-valve sales. Exceeded previous year’s sales of camshafts, gaskets, engine

bearing, valve lifters and cylinder heads. Succesfull launch year for timing chain set.

Held 45 small training meetings and 36 apprentice training meetings as part of the domestic marketing strategy, with 2,500 people attending these meetings.

Excellent purchasing performance. Reached the highest quality performance criteria values within

last years, in parallel with the rate of progress on Lean Six Sigma and TPM. Under existing conditions, the productivity is so high as to dampen the costs.

2014 HIGHLIGHTS

DISTRIBUTORSHIP

2011

7,3

2010

6,4

2012

7,0

2014

4,9

2013

5,3

6,4

10,0

7,5

10,0

51

Eaton has been doing business with Supsan since the 70s. Supsan is a supplier of engine valves to Eaton, manufactured and supplied under an Eaton license agreement since 1970, making Supsan a partner in the production and supply of low to medium volumes business.

Through our licensing agreement, Supsan plays an important role in ensuring that Eaton can meet the customer’s needs in many markets. Likewise, the license agreement grants Supsan technology and support and allows them to develop their business beyond Eaton.

Supsan is one of the top 20 supplier to Eaton VG EMEA.Despite the license arrangement Supsan is managed as any other supplier, with the same expectations for quality, delivery and cost competitiveness. Together, we have faced business challenges through which I have appreciated their commitment to finding solutions and maintaining our long standing professional relationship.


EATONCARLO GHIRARDOVice President and General Manager,Engine Air Management Product Group, Eaton Vehicle Group

Original Equipment

5

4

3

2

1

Sales (million units)

2,22,0

1,6

0,90,7

Spare Parts

1,31,6 1,6

1,4 1,4

Export

2,8

3,7 3,8

2,9 2,9

2010 2011 20132012 2014

Value Export Distrubution by Country

81%

3%2%2%3%9%

ITALY GERMANY FRANCE ROMANIA USA RUSSIA

“Together we have faced business challenges through which I have valued their commitment to finding solutions and maintaining our long standing professional relationship.”


52

SUPSAN

DISTRIBUTORSHIP

Business Area International expertise in engine part production and aftersales

services for original equipment and aftermarket. Valve production for internal combustion engines under license

from Eaton SrL, the leading global manufacturer.

Production Capacity 10 million valves per year. 4 million-unit capacity in stellite valves and a 5.5 million-unit

capacity in two-piece valves. Sectors Served

Domestic and international original equipment manufacturers and aftermarket customers.

Service Points Headquarters: Halkalı Plant. Domestic OEM: Ford Otosan, Oyak-Renault, Türk Traktör,

Tümosan, Başak Traktör, Yavuz Mühendislik, Anadolu Motor. Domestic OES: Ford Otosan, Renault-Mais, Tofaş-Fiat, New

Holland Trakmak, Iveco, Anadolu-Isuzu, Otokar, Temsa, Karsan, DAF – Tırsan

Independent Aftermarket: 100 dealers. International OEM and OES: Fiat, Peugeot-Citroen,

Renault, Ford, Ferrari, Porsche, Bentley, Aston Martin, Nissan, Volkswagen, Audi, DAF, Volvo, Volvo Penta, Iveco, Isotta Fraschini, Mercedes - Benz, VM Motori, General Motors, Daimler Chrysler, John Deere, Detroit Diesel, YaMZ.


53


FORD OTOSANVEDAT OKYAR

Truck Business Unit Purchasing Group

Manager


Ford Otosan not only purchases engine valves from Borusan but also works with the company on logistics services, port management and flat steel supply. We greatly admire and respect Borusan Group. My professional relationship with Borusan is about the valve business. Ford Otosan purchases engine valves, from Supsan, which are consumed in its engine assembly line. We believe that Borusan is a reliable and supportive Holding.

In matters of purchasing, reliability is one of the most important criteria. One vehicle is produced in every 1.5 minutes; a 1.5 minute interruption means the loss of one vehicle. Therefore, one-day delay of the shipments from the supplier means the loss of around 1,000 vehicles. It’s not easy to recover this loss. Hence, it is very crucial for us to trust the supplier which we work with. Borusan is well known as a highly reputable

and trustworthy group. As being business professionals who are in contact with Borusan, we see just how true this is. We know that if we have a problem, Borusan team is there to help. This has nothing to do with quality; we’ve never had this problem with Borusan. For instance, when our production program changes, despite the fact that producing a valve takes a long time, they are able to come up with what we need for our engine assembly line.

Borusan and Koç are both professionally managed holdings. Ford is the same as well. Sharing the same management principles, we work in harmony. We also purchase different parts from the leading suppliers of the world outside of Turkey and don’t see any difference between their sales teams and Borusan’s. Borusan has a contemporary and modern management.

We believe that Borusan is a reliable and supportive Holding.

55

MANHEIM

Maintaining steady growth as a customer and technology-oriented company that provides our clients with innovative physical and online solutions in the used-car auction business.

Creating pioneering purchasing models and business lines in the automotive sector.


DISTRIBUTORSHIPOTHER AUTOMOTIVE

Director

ZAFER TERZİOĞLUManaging Director

We bring people together on a common platform to compound the strength.

56

MANHEIM



1000

2000

3000

4000

Member Dealer Number

2010

1,335

2014

3,550

DISTRIBUTORSHIP

Throughout the last ten years I have worked at Otokoç in leasing I’ve been collaborating with Borusan. On every visit to Borusan, I see a cheerful face focused on providing the customer with the best service. I like to say, I see the entire team as if it were dancing on the job. From the security guard to the after-sales representative, it’s a company that carves its vision into the industry with the quality of its service and the brands it represents. I think that this must be the result of its 70 years of experience.

Our relationship with Borusan consists of more than just car leasing. It became apparent once we began doing business together that our cultures were converging. The trust and friendship we developed has grown. We lease other product brands besides BMW obtained from Borusan Holding. What’s more, we have expanded beyond Turkey. Whatever new country we invest in, our first call is Borusan. Actually, this is collaboration, not trade. Therefore, we discuss ways of adding value to each other. Creating value through long-term collaboration is a key point. We have been fortunate to achieve this with Borusan.

The benefits of assimilating two cultures are enormous. The value both our companies place on the arts, social responsibility, respect for employees, and concern for the environment is similar.

The company has achieved technological excellence in all it does. Its organizational structure focuses on technology and it draws maximum benefits from this. I sincerely believe that Borusan, as a company that adds value to people in general and its customers in particular, will succeed for another 70 years.

Whatever new country we invest in, our first call is Borusan. Actually, this is collaboration, not trade.

OTOKOÇ OTOMOTİVİNAN EKİCİDeputy General ManagerCar Rental

Grew sales 14% from 15,360 to 17,446 units. Boosted cash profit 26% from $1.9 million $2.4 million. Established Otomax.com, direct purchase system of used

cars from end users. Established a pricing system that is 95% automatic and 98%

error free. Grew customer volume 29%. Added 209 selling customers to the supply channel. Held highly successfully heavy construction equipment

auctions that were much celebrated in the sector. Expanded physical capacity at the Tuzla headquarters. Raised sales volume in the dealer segment by 49% from 3,500

to 5,200 units. Boosted sales volume in the corporate fleet segment by 81%

from 1,600 to 2,900 units.

2014 HIGHLIGHTS

2013

2,756

2012

2,376

2011

1,835

57

ASIM OTOMOTİV ASIM BEKDEMİRBusiness Owner

I have been working with Borusan Manheim for seven years without a hitch. It’s a major company that instills confidence. It meets all our needs easily. We sell our vehicles fast and we buy cars for sale elsewhere. Therefore, we do business exclusively with Borusan and this is an excellent arrangement for us.

We have a strong, problem-free relationship with Borusan Manheim. The people who work there – from the service personnel to the general manager – are carefully selected, high-quality people who know their jobs. The company’s family atmosphere is reflected on its staff. All employees work with the awareness that they are part of this respected family and they make us feel this, too.

Borusan Manheim continuously strives to improve and develop. I believe this has a major impact on the increase in demand, sales figures and speed in recent years.

For example, cars can be auctioned over the Internet. When there are public auctions in cities like Antalya, Izmir and Ankara, that we cannot physically attend, we participate online. This system facilitates buying and selling cars throughout Turkey. People from all over Turkey can buy cars online by first looking at inspection and checking lists. They can then have them delivered. This is a service that boosts and expands the used-car business.

Because Borusan Manheim can readily and rapidly meet all my needs and I am satisfied with their services, I work exclusively with Borusan Manheim.



Products and Services: Private Auction Inspection and pricing of domestic and imported second-

hand motor vehicles, logistic support for vehicle transportation to special auction sessions, and facilitation of all buying and selling transactions by handling documentation and financial transfers

Sales of all automobile brandsWeekly private auctions for member dealers from many cities at Manheim Türkiye’s Tuzla and Ankara facilities

Direct purchase platform from end-users (Otomax.com) Online Sales Systems

Simulcast CyberStock CyberAuction Mobile Auction

Service Locations: Headquarters: Istanbul-Tuzla (Manheim and Otomax.com

service location) Branch: Ankara-Esenboğa (Manheim and Otomax.com service

location) Istanbul Seyrantepe (Otomax.com service location) Istanbul Yenibosna (Otomax.com service location)

PARTNER

Borusan Manheim is a powerful, confidence-instilling company.


20000

18000

16000

14000

12000

10000

8000

6000

4000

2000

Auction Sales (units)

2014

17,446

2013

15,360

2012

10,640

2011

12,745

2010

11,031

58

BORUSAN MAKİNA ve GÜÇ SİSTEMLERİ

Leadership in heavy machinery and power systems in Turkey and Central Asian countries since its establishment

A solution partner to customers with the RUN Concept, which provides different options for new and used machine or rental operations

A business partner who provides solutions and creates value with different products in customer support functions, along with its unique customer support set-up in after sales services

Became one of the most important players in the mining sector with the broadest product range after Caterpillar’s acquisition of Bucyrus

Fully integrated, comprehensive Connected Site Solutions for construction industry and heavy construction machinery fleets, with SITECH Eurasia company

The most preferred supplier, offering extended package solutions and alternatives oriented towards customers’ needs, with the new engine products (EMD, CAT Propulsion) added in its product range

Turn-key contracting solutions (EPC): electrical & automation system integration, mechanical packaging, added value engineering services, and a solutions partner with specialized electro-mechanical EPC contracting capabilities. Offers comprehensive solutions from a single point with supplementary products offered under the umbrella of the registered trademark BESys


DISTRIBUTORSHIP

Directors

ERCÜMENT İNANÇExecutive Committee ChairmanMURAT ERKMEN Executive Committee Member, Turkey Managing DirectorÖZGÜR GÜNAYDINExecutive Committee Member, International Business and Mining Managing DirectorÖMER LÜTFÜ METİExecutive Committee Member, Investments and Development DirectorASLAN HİÇSOLMAZExecutive Committee Member, Finance Directorİ. TOLGA AKARExecutive Committee Member, Power Systems and BESys Managing DirectorT. SERKAN BAYRAMOĞLU Executive Committee Member, Human Resources Director

Our machines build the bridges, roads and cities through which the life flows .

DISTRIBUTORSHIP MACHINERY and POWER SYSTEMS

60

DISTRIBUTORSHIP

BORUSAN MAKİNA VE GÜÇ SİSTEMLERİ

Achieved revenue of €202 million on the sale of 1344 units of new machinery. Delivered 211 machines for the Third Airport Project, Istanbul.

Kazakhstan operations reached revenues of US$105 million; market leadership in Customer Support was also achieved.

Remained the most preferred company in the rental business with a revenue of €9.7 million; increased fleet value by 20% to €51 million.

Sold 505 units of used equipment, generating revenue of €29 million, a performance that exceeded expectations in terms of units and of revenue; making a major contribution to the expansion of the new machinery market. Held Turkey’s first used-machinery public auction at the Used Machinery Sales and Rentals Center in collaboration with Manheim. Gained Five-Star certification in the Caterpillar Used Operation Certificate review - a rare achievement for dealers in the Europe, Africa, Middle East region.

SITECH Eurasia achieved 2014 revenues of US$1.5 million in Turkey, Kazakhstan and overseas projects, providing machine control and guidance systems and technology solutions to project sites of the contractor customers.

Sold a 17.2 MW cogeneration power system, the highest output level ever, and a 67.5 MVA diesel energy power plant as a turn-key delivery project. Nearly 20 power system units were rebuilt at the BP Sangachal terminal in Azerbaijan; also leasing for 4-5 months at the same location.

Sold 480 retail generators, a record in power systems operations and twice the number sold in 2013; Kazakhstan operations were chosen as one of the best CAT representatives out of 186 dealers in the world.

Turkey Customer Support sales reached €67 million. In the area of Equipment Management, 2,968 machines had active maintenance agreements while 950 of machines had condition monitoring agreements; the number of machines monitored through Product Link reached 4,767.

The Turkey and Kazakhstan service operations achieved the Service Gold Level for the fourth consecutive year in the Caterpillar Service Excellence evaluation. Achieved five-star level workshop contamination control at its Azerbaijan operation.

Borusan received four Best Application awards for its Component Rebuild Center (CRC) in Kazakhstan, the first and only of its kind in Eurasia. The first CAT-Certified Machines were rebuilt at the Karaganda CRC plant.

2014 HIGHLIGHTS

61



Domestic Heavy Machinery Market (Units)

1

2

3

4

5

6

7

8

9

10

11

12

6,560

10,070

10,785

11,437

9,044

CAT Group Sales (US$ million)

1

2

3

4

5

6

7

8

9

10

20112011 20102010 20122012 20132013 20142014

863

802799

605

866

20112010 2012 2013 2014

Machinery Group Sales-Turkey (€ million)

50

100

150

200

250

300

350

305298

327

232

310

CAT Group Sales (€ million)

1

2

3

4

5

6

7

20112010 2012 2013 2014

651624

574

430

654

62


DISTRIBUTORSHIP


Machinery Group Sales Volume (units)

Central Asia (Machinery and Agricultural Equipment)

Turkey (Machinery) Turkey Kazakhstan Other

Group Sales by Regions (%)

62%

32%

6%

Power Systems Group Sales All Countries (€ million)

25

50

75

100

125

150

175

20112010 2012 2013 2014

145

818181

157

25

50

125

75

150

100

175

2010 20122011 2013 2014

155

172

Machinery

9080

After Sales Services

137

114111

92

124

160

Power Systems

282425

5

40

Group Sales Central Asia (US$ million)

Agricultural Equipment

682 4 1

2013201220112010 2014

540448

249

1,5211,5481,669

953

470

1,344

622

63


Field of Activity Dealer for Caterpillar in Turkey since 1994. Caterpillar’s sole representative in Azerbaijan, Georgia,

Kazakhstan and Kyrgyzstan, as well as in Turkey. The sole representative in Turkey of Metso Nordberg, the

World leader in mobile crushers and screener units; Mecalac, the firm offering innovative, compact solutions for heavy duty machinery; Mantsinen port cranes; Genie brand personnel lift platforms; and Exxon Mobil products.

The representative of heavy fuel oil MaK marine engines with medium range revolution, EMD engines

Olympian diesel and gas generator sets and SPX ClydeUnion pump brands.

Electro-mechanical contracting solutions in energy and industry facilities.

The representative of the SEM brand in all locations. SITECH is the distribution channel of Trimble Navigation’s for

Heavy and Highway Construction Site Technologies Solutions. SITECH is serving contractors holding from single unit to large mix fleet of various OEM branded earth moving equipment.


BOGATYR KOMIR LLPUSIK SERGEY

GRIGORIEVICH

We started to work with Borusan in 2004 when top-management realized our need to upgrade our coal mining technology. This meant replacing machinery and our first choice was Caterpillar.

Borusan Makina Kazakhstan gave us excellent support, especially when it comes to service maintenance and implementing the technology in the production process. Thanks to Component Rebuild Centre (CRC), we don’t waste money on new spare parts more often than it is necessary. The equipment operates reliably after such restorations.

We have established a successful level of cooperation over these 10 years. Our relations extend beyond spare parts supply, services, and repairs, to a wider relationship. For example Borusan joins us for our professional celebration – Miners’ Day. I would like to express my special gratitude for this.

We attended lectures on 6 Sigma Methodology at Borusan Makina’s Istanbul headquarters and decided to implement this methodology in our production process. Bogatyr Komir LLP is satisfied with this decision because it has brought tangible results in the form of cost savings.

Often our subcontractors lapse into a relaxed attitude or increase prices to levels that hinders future work together. Borusan Makina Kazakhstan surprised me by keeping and even improving the skills of its employees. Meanwhile, the qualifications of the people we work with keeps getting better.


“Borusan Makina Kazakhstan surprised me by keeping and even improving the skills of its employees.”

We provide the power to ensure uninterrupted dynamism.

64

DISTRIBUTORSHIP


Sectors Served General and heavy construction, mining, agricultural and

industrial sectors. Textiles, steel, chemical, medical, ceramics, wood industry,

automotive, plastics and food sectors. The energy sector, including business centers, hotels,

hospitals, airports, universities and public housing. Municipalities, provincial, special administrations, as well as all

other public institutions via the State Supply Office. Marine sector-related solutions offered to builders of tugboats,

mega yachts, motor yachts, cargo ships and sea busses. Transportation projects in the construction sector such as

highways, railroads and airports, utilizing the products and services provided by SITECH Eurasia, as well as corporate, industrial and housing projects.

Service Locations Borusan Makina ve Güç Sistemleri is headquartered in

Istanbul, with regional offices in Adana, Ankara, Istanbul and Izmir managing branches offering sales and technical services in Antalya, Bursa, Diyarbakır, Trabzon and Trakya.

There are 45 service locations in Turkey and another 20 in Kazakhstan, Kyrgyzstan, Azerbaijan and Georgia.

SITECH Eurasia is based in Istanbul.

Products and Services Machinery sales and after sales support services Provides customers with low-cost and increased efficiency

through new machines and those less than two years old, plus components, under rental arrangements

The “Certified Used Concept” supplies a unique warranty service for used equipment in Turkey

Energy systems applications such as diesel and gas motor-cogeneration, mechanical power applications (pump stations, compressor systems, etc.) and emergency generators and power systems

Biogas and landfill turn-key energy plants Marine systems for main and auxiliary engines Used and rental generator business Static and dynamic UPS Electrical systems and automation systems integration in

energy and industrial contract projects with BESys brand, supplementary products and services within the scope of mechanical packaging

SITECH Eurasia machine dispatch and control systems, which are compatible with all kinds of machine brands in the construction industry


65

Rönesans has operated in the construction sector for 22 years. In the last eight yearsthat I have been at Rönesans, we have actively worked with Borusan Makina and Güç Sistemleri on nearly 90% of our projects. There are many reasons why we prefer Borusan for our projects, the most important one is that they are solution provider. Borusan provides us engineering support atevery point. We can work jointly at all stages on a project design. They conductanalysis and offer solutions, depending on the project. Then, at the purchasing stage,they provide us more reasonable proposals based on their special pricing policies.

It is also worth to talk about their after sales operations. At this stage, they quickly respond to our requests and make us feel like they are always there for us. When we have a problem, they solve it quickly and effectively. These are the prior reasonswhy we prefer Borusan. We haven’t experienced yet a problem related to the electricity cut that is another important factor. Looking at error/claim records, we are happy to see that we haven’t got a malfunction to date. We are pleased to work with Borusan and will continue to work with them solong as they meet our demands with their sincerity, effectiveness and speed.

“Borusan quickly responds to our requests and they are always there for us.”

RÖNESANSOKAN BAĞ Electrical Projects Manager, Turkey

The mining sector needs numerous kinds of heavy machinery – like quarry trucks, bulldozers and graders. Spare parts and technical support are required to keep this machinery up and running and these services must be provided on time to avoid lowering operating performance and compromising work safety. Borusan Makina ve Güç Sistemleri meets these needs. I thank Borusan for the performance they have attained to date.

Borusan provides rapid and precise ways of making mining operations easier and, therefore, it makes a major contribution to our business. Borusan places greater importance on finding the right solution for us than it does on sales and this is reassuring. It is an extremely valuable business partner, not only because of the performance of its machinery and its technical reliability, but also because the company is attuned to what we need and it is aware of the importance of mutual dialogue.

For example, we needed spare parts and service support quickly for the proactive solution we planned to introduce to the TA2 workshop application. We consulted with Borusan on this and they gave us their complete backing. They were incredibly helpful in planning technical service workers and spare parts and minimizing down time.

The performance of heavy machinery is critical for us and Borusan is always there. Borusan is what has made the difference in keeping our machinery up and running 98% of the time over 43,000 hours.

“Borusan places greater importance on finding the right solution for us than it does on sales. This is reassuring.”

TÜPRAGRIDVAN VEZİROĞLUMobile Equipment MaintenanceManager SERKAN YÜKSEL Kışladağ Gold Mine Manager




67

BORUSANLOJİSTİK

One of Borusan Group’s strategic businesses since 2000 Leader of the logistics sector in Turkey; an important player in

global markets, particularly in Europe, the Middle East and the CIS countries.

A fast growing business model that ensures sustainability through productive and innovative projects

Ownership of a port, providing a significant competitive edge through its strategic position

A Borusan Group company that creates synergy and drives dynamism and growth.


LOGISTICS

Directors

KAAN GÜRGENÇManaging Director SERDAR ERÇALTurkey Logistics Director İBRAHİM DÖLENPort and International Transportation Director MUSTAFA ÖÇALIRForeign Countries Director TUĞBA PAŞALI KARACAN Organizational Development and Support Functions DirectorMETE KALAYCIFinance DirectorHAMDİ ERÇELİKETA Managing Director

We cross seas and travel highways to deliver items of labor and value to the right place at the right time.

68

LOGISTICS


BORUSAN LOJİSTİK

Our wide range of services and expanding geographical coverage has catapulted us to industry leadership in terms of sales numbers. Concurrent with this leap, Borusan Lojistik has maintained the value it created for customers with projects designed to improve innovation and productivity.

We effectively used our extensive service network in Europe in 2014.

We attained even greater access to the CIS and the Middle East by consolidating lines there and connecting them to a forwarding network.

By focusing on immediate and expeditious targets and employing the segmented customer services approach, we continued to raise the bar for service quality and customer satisfaction.

Through the “supply chain solution partner” approach, we added yet another innovation to our long line of services Borusan Lojistik provides and we began to provide a logistics consultancy service. With our new service, we are redesigning processes by developing unique solutions for Borusan Lojistik customers.

Despite Turkey’s exchange rate fluctuations, on the basis of the functional exchange rate for 2014 as a whole, the Company achieved an 11.5% growth in sales in domestic logistics services.

Our high operational business volume meant we carried out 3,000 loads a day, which made us the unrivaled leader in land transportation. We developed solutions that provided our customers flexibility and competitive advantage.

We differentiated our logistics practices and repositioned ourselves by taking our services to chain stores, shopping centers and SMEs, and we achieved success in these areas.

Based on the functional exchange rate, we had a growth in sales of 80% in vehicle logistics center services. Today, Borusan Lojistik handles one out of every three vehicles sold in Turkey.

We created a pioneering platform for SMEs through ETA, our innovative brand which we launched in 2013, and continued to provide services. We improved ETA visibility and consolidated its place in the sector.

We came up with a product that would create a difference for our e-commerce customers and we completed the infrastructural preparations for a new innovation project designed to improve our capabilities.

We engaged in effective resource and cost management to ensure our sustainable success.

We acquired new customers from rapidly growing sectors through our innovative and creative services.

We included SMEs to our target sectors and undertook important projects with them.

We improved customer satisfaction and loyalty through customer management segmentation on the basis of service units.

2014 HIGHLIGHTS

600

500

400

300

200

100

Annual Logistics Sales by Service Line (US$ million)

UT Sales 3PL Sales Port Sales

Group/Non-Group Sales (US$ million)

Group Sales Non-Group Sales

600

500

400

300

200

100

50

25

2014

541

79

462

2014

51

289

201

2013

539

88

451

2012

341

99

242

2011

299

90

209

2010

264

94

170

2012

43201

97

2013

48

285

205

2011

46

186

68

2010

43167

54

69

MEHMET MEHMETOĞLUİcra Kurulu Başkanı

Ford Otosan and Borusan began working together 10-12 years ago. We were looking for a port to handle large steel rolls from Europe and Borusan Gemlik Port is capable of doing just that.

Since 2014, Borusan has been running our port, covering everything from A to Z. So, we have a business relationship that is constantly growing.

Managing a plant-integrated port is not an easy matter. It requires conducting a difficult operation that races with time and must keep up the pace so as not to interrupt production. One of the major reasons we chose Borusan is its technology, and in particularly its IT infrastructure. All our plant’s manufacturing, port operations, and forwarding must be interconnected with Ford’s European production systems. Borusan’s IT structure instills

confidence in us. They recommended using RFID technology. This was a great leap for us which raised our system to a higher technological level. There is no other port in Turkey using this technology – we are the first and only one.

The experience Borusan has acquired from its Gemlik operations and the freight handling it does for many brands in Köseköy is another important factor. We work interactively with them and engage in a mutual exchange of ideas, which indicates their flexibility.

If any Turkish logistics companies emerge to challenge the world’s logistics giants, Borusan Lojistik will be one of them. Given the quality of its operations and service, I see Borusan as a company that advances the entire sector.


“Given the quality of its operations and service, I see Borusan as a company that advances the entire sector.”

FORD OTOSANRECAİ IŞIKTAŞLogistics Director

LOGISTICS

70

LOGISTICS

OPERATIONAL INFORMATIONA FELLOWSHIP OF 70 YEARS

We have been with Borusan for the last ten of its 70 years. We are Turkey’s best-selling small home electric appliance company. We deliver nearly four million products from Çankırı, Izmir and Kayseri in Turkey, and from China, in the Far East, throughout Turkey, and we export to Europe, Asia, the Middle East and Australia. Logistics is crucial to our organization because if we fail to deliver our product to the consumer on time, we would be replaced by a rival company.

After-sales is also an important performance indicator for our business. Replacement parts must reach our nearly 300 service locations in time so that a mother whose mixer has malfunctioned can make a banana milkshake for her child the next day. This is where Borusan Lojistik is vital. Delivering that spare part on time is essential to get our product functioning once again. Because of the technological infrastructure the company provides, for instance, I can immediately tell a dealer calling me today from Ankara then and there where his product is. It puts us in a very strong logistics position in the eyes of the dealer.

Borusan is a visionary company that operates systematically. It thinks about not only the shipments I need the next morning or in three weeks’ time, but also the ones that I will need in three years.

I believe that brands leave an impression in people’s hearts and minds. Borusan is a brand that creates value in the heart first and then the brain because it is a strong, principled and dependable company. Managing such a perception is the most difficult job a brand has. Working with Borusan enhances the reputation of our brand as well. I thank Borusan, from its founders to its employees for this reputation.

ARZUMT.MURAT KOLBAŞI

Chairman

Borusan is a visionary company that operates systematically. It thinks about not only the shipments I need the next morning or in three weeks’ time, but also the ones that I will need in three years.

20112010 2012 2013 2014

Port Container (TEU)

0

50000

100000

150000

200000

250000

300000

195,194193,320189,099

218,399 227,064

20112010 2012 2013 2014

Port Vehicle Park (units)

0

50000

100000

150000

200000

250000

300000

164,250142,064 154,891

200,936

253,523

BORUSAN LOJİSTİK

71


Services Borusan Lojistik focuses on the operational areas of port

services, international transportation services, and domestic and international logistics services. It manages all these services over a large geographical area thanks to its expertise and an approach based on productivity and the creation of synergy among all its services.

A new company in Oman was added to the group of 100% Borusan Lojistik-funded companies that have been active since 2006 in the United States, Europe, North Africa, the Middle East and the CIS countries.

Created as a result of the importance Borusan Lojistik places on innovation, ETA is the first and only brand of its kind in Turkey. ETA has an innovative business model through which it has moved transportation services to an online platform and provides services for SMEs.

Through its innovative approach, Borusan Lojistik has made it services available through a new business model it has developed for e-commerce. It plans to launch this new business model sometime in 2015.

Industries Borusan Lojistik Services The industries Borusan Lojistik provides services to include those in the iron, steel, automotive and automotive supply, consumer durables, fast moving consumer goods, chemical, advanced technology, construction and container line sectors.

Points of Service Head Office in the Kozyatağı district of Istanbul Port in Gemlik Offices in Güneşli, Tepeören, Kıraç, Gebze, Çatalca, Izmir,

Bursa, Ankara, Mersin A 214,000 m² Vehicle Logistics Center in Köseköy, Izmit 77 land transportation offices, 15 transfer centers and a total

of 400,000 m² of storage space in Turkey.


Borusan Lojistik has quickly risen to prominence, working with BSH to monitor and analyze industry developments by using various tools and techniques. Therefore, they understand and think like us and find solutions to our needs.

When I examined the “Code Name: L6 Sigma” book that Borusan sent me at the launch of 6 Sigma studies at BSH, I saw that we were undergoing the same processes in the same way.

For us, Borusan is a member of the BSH Family just like our dealers and service providers. Borusan distributes our products to our dealers, even our customers, in many provinces. In other words, it represents BSH. Therefore, every successful delivery our business partner makes reflects positively on us in the eyes of our customers. Borusan’s success impacts our entire performance by being the final link in the chain connecting the quality we establish, the advanced technology we use and the customer satisfaction we achieve. It is a great pleasure for us to have maintained our joint venture thus far.

Borusan’s corporate approach, honesty and professionalism expands and develops our business. We have confidence in Borusan.

BSH TÜRKİYE NORBERT KLEINCEO and T-MEA-CIS Regional Chairman

Every successful delivery our business partner makes reflects positively on us in the eyes of our customers.

LOGISTICS

72

BORUSAN EnBW ENERJİ

ENERGY


Aiming to become Turkey’s leading wind energy company. Working towards an investment target of $3.5 billion by 2020. Striving to be one of Turkey’s lowest cost electricity generators by

-Investing in the most efficient projects -Establishing a flexible and reliable portfolio -Employing cost-cutting technologies and methods in investment and operation

Focusing completely on renewable resources. Creating a flexible portfolio of a variety of energy sources. Taking an active role in the electricity generation and

sale sectors. Playing a leading role in electricity trading. Increasing total portfolio to 2,000 MW by 2020.

Directors

MEHMET ACARLAManaging Director MEHTAP ANIK ZORBOZANFinance DirectorENIS AMASYALIInvestments Director

Our sources of renewable energy is the light unto today and tomorrow.

ENERGY

74

BORUSAN EnBW ENERGY

Conducted the required positioning and design studies for portfolio projects.

Completed the construction and assembly work for the Balabanlı WEPP (Tekirdağ, 50 MW) and opened the plant for operation on 11 July 2014. Held the official opening ceremony of the Balabanlı WEPP on 11 September 2014.

Held groundbreaking ceremonies for the Fuatres WEPP, Harmanlık WEPP, Mut WEPP and Koru WEPP projects (also on 11 September 2014), and expanded capacity at the currently operating Bandırma WEPP – all under a 207 MW-wind energy expansion investment plan formulated in 2013. Started construction of all these projects. Laid foundations for the capacity extension of the Bandırma WEPP and the erection of the Harmanlık WEPP, Mut WEPP and Koru WEPP turbines.

Completed the application process for provisional approval for the first eight of the nine turbines of the 27 MW-capacity increase in the 60 MW Bandırma WEPP. Thus, the initial portion of the Wind Bundle and the Bandırma WEPP Capacity Extension projects became commercially operational. Raised Bandırma WEPP’s capacity to 86.4 MW; raised our wind energy installed capacity to 136.4 MW, and increased our total installed capacity to 186.4 MW.

Conducted financial negotiations for the Wind Bundle projects. Hidiv Elektrik Toptan Satış A.Ş. supplied Borusan Group

Companies with electricity in 2014. It continued supplying electricity to Coca-Cola İçecek A.Ş., its first non-group customer. Added Borçelik to the Borusan Group sales portfolio.

2014 HIGHLIGHTS

Sectors servedBalancing Power Market Eligible consumers (industrial and commercial customers that consume 4,500 kWh/year or more)


Hydro

Wind

Existing Portfolio (743 MW)

Target Portfolio (2.000 MW)

39%

10%

14%

76%

61%


PARTNER

Hydro

Wind

Other

ENERGY

ENERGY

BORUSAN HOLDİNG ANONİM ŞİRKETİAND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTSAS OF 31 DECEMBER 2014 ANDINDEPENDENT AUDITORS' REPORT

Page

BORUSAN HOLDİNG ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

TABLE OF CONTENTS

Independent Auditor’s Report .......................................................................................................... 81Consolidated Statement of Financial Position ............................................................................82-83Consolidated Statement of Profit or Loss and Other Comprehensive Income ................................ 84Consolidated Statement of Changes in Equity ............................................................................... 85Consolidated Statement of Cash Flows ......................................................................................86-87Notes to the Consolidated Financial Statements ........................................................... 88-152

81

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors ofBorusan Holding Anonim ŞirketiIstanbul

We have audited the accompanying consolidated financial statements of Borusan Holding A.Ş. and its subsidiaries (Borusan Holding and its Subsidiaries - together the “Group”), which comprise the consolidated statement of financial position as at 31 December 2014, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended, and a summary of significant accounting policies and other explanatory information.

Group Management’s Responsibility for the Financial Statements

Group Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Group Management as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of Borusan Holding A.Ş. and its Subsidiaries as of 31 December 2014 and of their consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.Member of DELOITTE TOUCHE TOHMATSU LIMITED

Istanbul, 4 March 2015

The accompanying policies and explanatory notes on pages 88 through 152 form an integral part of the consolidated financial statements.

BORUSAN HOLDING A.Ş. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2014(Currency - US Dollars (“USD”) unless otherwise indicated)

ASSETS

Notes 31 December 2014 31 December 2013

Current assets Cash and cash equivalents 6 445,437,890 344,024,875 Trade receivables 7 521,577,173 402,445,906 Inventories 8 676,124,366 688,896,907 Other receivables and assets 9 154,146,336 113,720,431

1,797,285,765 1,549,088,119

Assets classified as held for sale 21 54,477,993 63,937,993

Total current assets 1,851,763,758 1,613,026,112

Non-current assets Trade receivables 7 3,012,604 3,183,336 Available for sale financial assets 4,160,262 4,393,238 Property, plant and equipment 11 1,719,776,859 1,481,201,042 "Advances given for property, plant and equipment" 1,307,332 1,693,453 Intangible assets 12 64,009,182 67,848,884 Goodwill 10 47,519,907 47,519,907 Investment in a joint venture 30 118,254,241 96,401,767 Deferred tax assets 17 4,224,019 1,059,146 Other receivables and assets 9 66,053,891 74,144,144

Total non-current assets 2,028,318,297 1,777,444,917

Total assets 3,880,082,055 3,390,471,029

83

LIABILITIES AND EQUITY

Notes 31 December 2014 31 December 2013

Current liabilities Trade payables 13 699,031,742 637,144,170 Short-term borrowings 14 594,792,928 543,766,379 Current portion of long-term borrowings 15 196,305,723 126,371,732 Income tax payable 17 9,424,480 11,660,912 Other payables and expense accruals 16 150,550,703 143,862,209

Total current liabilities 1,650,105,576 1,462,805,402

Non-current liabilities Trade payables 13 53,943,534 68,210,651 Long-term borrowings 15 818,280,462 731,776,364 Employee benefits obligation 18 24,141,357 25,048,231 Deferred tax liabilities 17 113,808,244 91,717,120 Other payables, provisions and expense accruals 16 1,435,992 2,222,632

Total non-current liabilities 1,011,609,589 918,974,998

Total liabilities 2,661,715,165 2,381,780,400

Equity Paid-in share capital 19 46,044,080 46,044,080 Currency translation reserve (12,703,969) 7,837,158 Revaluation reserve, net 11 243,057,014 144,399,338 Cash flow hedge reserve (128,547) (484,799)Actuarial gain / (loss) from employee benefits 18 (1,515,389) (1,602,320)Legal reserves and retained earnings 336,820,710 303,211,614

Equity attributable to equity holders of the parent 611,573,899 499,405,071 Non-controlling interests 606,792,991 509,285,558

Total equity 1,218,366,890 1,008,690,629

Total liabilities and equity 3,880,082,055 3,390,471,029


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2014 (Currency - US Dollars (“USD”) unless otherwise indicated)


Page

1 January- 1 January- Notes 31 December 2014 31 December 2013

Net sales 22 4,498,949,731 4,141,239,966 Cost of goods sold and services provided 23 (3,978,090,357) (3,641,025,134)

Gross profit 520,859,374 500,214,832 Selling, general and administrative expenses 24 (298,591,319) (286,293,404)Other operating (expense)/income, net 27 7,068,228 45,770,271 Financial income 28 18,525,845 16,860,586 Financial expense 28 (100,619,502) (85,955,553)Share of loss of a joint venture 30 (13,647,526) (20,125,604)Translation gain/(loss) (1,312,973) (4,297,528) Profit before tax 132,282,127 166,173,600 Taxation on income (34,194,216) (61,125,288) - Current (statutory) 17 (38,960,729) (31,822,746) - Deferred 17 4,766,513 (29,302,542) Profit for the year from continuing operations 98,087,911 105,048,312 Loss for the year from discontinued operations 21 - - Net profit for the year 98,087,911 105,048,312 Other comprehensive income : Items that will not be reclassified subsequently to profit or loss: - Gain on revaluation of property, plant and equipment net-off tax 200,793,342 13,120,876 - Actuarial gain/(loss) net off tax 234,740 (1,068,270) Items that may be reclassified subsequently to profit or loss: - Loss/(gain) on cash flow hedge instruments net-off tax 692,809 1,133,025 - Currency translation reserve (33,276,969) 3,834,621 Total comprehensive income for the year 266,531,833 122,068,564 Net profit for the year Attributable to non-controlling interests 64,975,929 51,377,334Attributable to equity holders of parent 33,111,982 53,670,978 98,087,911 105,048,312Total comprehensive income for the year Attributable to non-controlling interests 151,912,603 64,147,373Attributable to equity holders of parent 114,619,230 57,921,191 266,531,833 122,068,564


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2014 (Currency - US Dollars (“USD”) unless otherwise indicated)


85

Balance at 31 December 2012 46,044,080 (1,022,922) 143,429,138 7,703,395 (1,264,943) 282,696,883 477,585,631 503,784,021 981,369,652

Total comprehensive income - (579,398) 3,915,640 133,763 780,144 53,671,042 57,921,191 64,147,373 122,068,564 Non-controlling interests contribution tocapital increase in subsidiary - - - - - - - 2,375,197 2,375,197 Effect of acquisition of subsidiary shares - - (2,945,440) - - (14,277,573) (17,223,013) (6,463,942) (23,686,955)

Dividends paid - - - - - (18,878,738) (18,878,738) (54,557,091) (73,435,829)

Balance at 31 December 2013 46,044,080 (1,602,320) 144,399,338 7,837,158 (484,799) 303,211,614 499,405,071 509,285,558 1,008,690,629

Total comprehensive income - 86,931 97,989,670 (20,541,127) 356,252 36,727,504 114,619,230 151,912,603 266,531,833 Effect of acquisition and disposalof subsidiary shares - - 668,006 - - 7,279,094 7,947,100 (12,402,765) (4,455,665)Dividends paid - - - - - (10,397,502) (10,397,502) (42,002,405) (52,399,907)

Balance at 31 December 2014 46,044,080 (1,515,389) 243,057,014 (12,703,969) (128,547) 336,820,710 611,573,899 606,792,991 1,218,366,890


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 (Currency - US Dollars (“USD”) unless otherwise indicated)

Paid-in share

capital

Currency translation

reserveActuarial

gain / (loss)Revaluation

reserve

Cashflow

hedge reserve

Legal reserves

and retained earnings

Equity attributable

to equity holders' of the parent

Non-controlling

interestsTotal

equity

Items that may not bereclassified subsequently

to profit or loss

Items that may bereclassified subsequently

to profit or loss



CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014(Currency - US Dollars (“USD”) unless otherwise indicated)


Cash flows provided from operating activities: Profit before taxation on income, non-controlling interest and discontinued operations 132,282,127 166,173,600 Adjustments to reconcile profit before taxation to net cash provided by operating activities: Depreciation 26 101,432,541 91,015,775 Amortization of intangible assets 26 11,181,980 10,379,564 Interest income 28 (2,873,545) (8,339,076)Due date income, net 28 (12,917,242) (6,725,580)Interest expense 28 89,542,801 76,118,363 Impairment on inventory recognised in profit or loss 8 5,000,401 8,585,017 Reversal of prior year impairment on inventory 8 (5,155,981) (3,116,284)Provision for reserve for employee benefit obligations 18 6,272,898 4,559,396 Gain/(loss) on sale of property, plant and equipment and intangibles 27 (1,290,870) (19,394,446)Net change in currency translation reserve (47,137,250) (18,271,600)Provision for doubtful receivables 7 5,574,142 4,016,482 Shares of profit loss of a joint venture 30 13,647,526 20,125,604 Gain on sale of subsidiary 29 (6,920,319) -

Operating profit before working capital changes 288,639,209 325,126,815 Working capital changes Trade receivables (122,781,711) 71,282,472 Inventories 14,312,930 (61,371,202)Other current assets and liabilities – net (44,671,796) 43,542,558 Trade payables 47,620,455 100,095,972 Other non-current assets and liabilities – net 8,153,842 (45,607,502)Employee benefit obligations paid 18 (4,761,500) (6,014,123)Taxes paid 17 (41,591,814) (43,105,909)

Net cash provided by operating activities 144,919,615 383,949,081


87


CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014(Currency - US Dollars (“USD”) unless otherwise indicated)

(*) Decrease in “advances given for property, plant and equipment” amounting to USD 386,121 is net-off with “purchase of property, plant and equipment” for the year ended 31 December 2014 (31 December 2013: Decrease USD 14,863,209 is included).


Investing activities: Purchase of property, plant and equipment (*) (246,183,821) (311,761,372)Purchase of intangible assets 12 (8,395,568) (24,268,405)Purchase of shares of subsidiaries (4,455,665) (23,686,955)Proceeds from sale of property, plant and equipment and intangibles 92,727,848 127,437,112 Interest received 15,790,787 15,064,656 Increase in share capital of subsidiary - 2,375,197 Proceeds from disposal of subsidiary 29 7,100,000 - Increase in share capital of joint venture 30 (35,500,000) (24,665,637)

Net cash used in investing activities of continuing operations (178,916,419) (239,505,404)

Net cash provided by investing activities of discontinued operations 4,370,107 -

Net cash used in investing activities (174,546,312) (239,505,404)

Financing activities: Redemption of borrowings (7,124,858,419) (3,151,283,506)Proceeds from borrowings 7,327,092,017 3,131,897,554 Change in financial receivables from non-consolidated related parties 16,616,307 (20,490,000)Dividends paid (including dividends of non-controlling interests) (52,399,907) (73,435,829)Interest paid (35,410,286) (84,180,960)

Net cash provided by / (used in) financing activities of continuing operations 131,039,712 (197,492,741)

Net cash provided by financing activities of discontinued operations - -

Net cash provided by / (used in) financing activities 131,039,712 (197,492,741)

Net increase / (decrease) in cash and cash equivalents 101,413,015 (53,049,064)Cash and cash equivalents at the beginning of the year 344,024,875 397,073,939

Cash and cash equivalents at the end of the year 6 445,437,890 344,024,875



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Currency - US Dollars (“USD”) unless otherwise indicated)

1. CORPORATE INFORMATION

General

Borusan Holding A.Ş. and its Subsidiaries (hereafter referred to as the “Borusan Group” or the “Group”) commenced operations in 1944 as Borusan İstikbal Ticaret T.A.Ş., a company, trading steel products and exporting dried fruit.

Borusan Holding A.Ş. (“Borusan Holding” or the “Holding”) was established in December 1972 as a corporation to coordinate the activities of and liaise between companies operating in different fields including steel business (pipe and flat steel production), distributorship of leading brands (BMW, Mini, Jaguar Land Rover and Caterpillar) and integrated logistics. Borusan Holding is registered in Turkey and owned by members of the Kocabıyık Family (see Note 19). The registered address of the Holding is as follows:

Meclis-i Mebusan Caddesi No: 35-37Fındıklı - Istanbul – Turkey

Nature of Activities of the Group

The principal activities of Borusan Group comprise the following: • manufacturing of steel pipes longitudinally and spirally welded for sale in domestic and foreign markets;• manufacturing of cold rolled coils, galvanized coils and metal sheets for sale in domestic and foreign markets;• exclusive sales and after sales services of BMW, MINI, Land Rover and Jaguar vehicles and car rental services in Turkey;• exclusive sales and after sales services of Caterpillar, earthmoving equipment and power systems, in Turkey and Central Asia;• providing integrated logistic services, shipping, port activities, warehousing and customs clearance services;• manufacturing of engine valves for the automotive industry for sale in domestic and foreign markets;• generation and wholesaling of electricity.

Since September 1998, Borusan Holding has a controlling interest in a sub-holding company, Borusan Mannesmann Boru Yatırım Holding A.Ş., which was established to coordinate the activities of Borusan Mannesmann Boru Sanayi ve Ticaret A.Ş., a listed company in the Istanbul Stock Exchange (the “ISE”). In addition, Borusan Holding controls three investment companies; Borusan Yatırım ve Pazarlama A.Ş., a listed company in the ISE, Borusan İstikbal Ticaret T.A.Ş. and Borusan Teknolojik Yatırımlar Holding A.Ş.

The Group is organized mainly in Turkey into four main business segments:• Steel segment• Distributorship segment• Energy segment• Logistics segment

Other operations of the Group mainly comprise valves production.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014(Currency - US Dollars (“USD”) unless otherwise indicated)

1. CORPORATE INFORMATION (continued)

(1) This entity was sold on 30 June 2014.(2) Güney Rüzgarı and Eskoda have merged under Fuatres as of 30 November 2014.(3) This subsidiary is liquidated in 24 April 2014.(4) Balnak and BLG Lojistik have merged under BLG Lojistik on 31 July 2014.

Borusan Holding has the following subsidiaries (“the Subsidiaries”). Business segments and the locations of Subsidiaries are as follows:

Business Segment Subsidiary Location/ Incorporated in

Flat Steel Borçelik Çelik Sanayi Ticaret A.Ş. ("Borçelik") Gemlik – Turkey Kerim Çelik Mamulleri İmalat ve Ticaret A.Ş. ("Kerim Çelik") Istanbul – Turkey Bortrade Uluslararası Tic. A.Ş. ("Bortrade") Gebze-TurkeySteel Pipe Borusan Mannesmann Boru Sanayi ve Ticaret Anonim Şirketi ("Borusan Boru") Istanbul – Turkey Borusan Mannesmann Pipe US Inc USA Borusan Mannesmann Boru Yatırım Holding A.Ş. ("BMBYH") Istanbul – Turkey BM Vobarno Tubi SPA ("Vobarno") Italy Borusan Mühendislik İnşaat ve Sanayi Makinaları İmalat A.Ş. ("Mühendislik") Gemlik – Turkey Borusan İstikbal Ticaret T.A.Ş. ("İstikbal") Istanbul – Turkey Borusan Ankara İnşaat Malzemeleri Pazarlama A.Ş. ("Borusan Ankara")(3) Ankara – TurkeyDistributorship Borusan Makina ve Güç Sistemleri Sanayi ve Ticaret A.Ş. ("BMGS") Istanbul – Turkey Machinery Intertrade Limited ("UK") United Kingdom MIT Machine International Trade Limited ("MIT Machine") Malta MIT Machine Holding Limited ("MIT Machine Holding") Malta Machinery International Trade B.V. ("Machinery International") Netherlands Borusan Makina Kazakhstan LLP ("Kazakhstan") Kazakhstan BGS Freezone Istanbul – Turkey Niocorp AB Sweden Construction Equipment Trade Limited Malta Sitech Eurasia Teknoloji Servis ve Tic. A.Ş. ("Sitech") Istanbul – Turkey Borusan Endüstriyel Sistemler A.Ş. Istanbul – Turkey Borusan İş Makinaları Kiralama Sanayi ve Tic. A.Ş. ("İş Makinaları Kiralama") Istanbul – Turkey Borusan Oto Servis ve Ticaret A.Ş. ("Borusan Oto") Istanbul – Turkey Borusan Otomotiv İthalat ve Dağıtım A.Ş ("Borusan Otomotiv") Istanbul – Turkey Borusan Oto Kıbrıs Limited ("Oto Kıbrıs") Northern Cyprus Borusan Otomotiv Pazarlama ve Ticaret A.Ş. Istanbul – Turkey Borusan Otomotiv Premium Kiralama ve Ticaret A.Ş. ("BOPAK") Istanbul – TurkeyEnergy Maya Enerji Yatırımları A.Ş. ("Maya Enerji") Istanbul – Turkey Yedigöl Hidroelektrik Üretim Ve Tic. A.Ş. ("Yedigöl") Istanbul – Turkey Turkuaz Elektrik Üretim A.Ş. ("Turkuaz") Istanbul – Turkey Hazal Hidroelektrik Üretim A.Ş. ("Hazal") Istanbul – Turkey Esentepe Enerji Yatırımları Üretim Ve Tic.A.Ş. ("Esentepe") Istanbul – Turkey Hidiv Elektrik Enerjisi Toptan Satış A.Ş. ("Hidiv") Istanbul – Turkey Borusan Enerji Yatırımları Ve Üretim A.Ş. ("Borusan Enerji") Istanbul – Turkey Güney Rüzgarı Elektrik Üretim Ve Ticaret A.Ş. ("Güney Rüzgarı") (2) Istanbul – Turkey Kuzey Rüzgarı Enerji Üretim Ve Ticaret A.Ş. ("Kuzey Rüzgarı") Istanbul – Turkey Eskoda Enerji Üretim Pazarlama İthalat ve İhracat A.Ş ("Eskoda") (2) Istanbul – Turkey Baltalimanı Enerji Yatırımları Üretim ve Ticaret A.Ş. ("Baltalimanı") Istanbul – Turkey Beylerbeyi Enerji Yatırımları Üretim ve Tic. A.Ş. ("Beylerbeyi") Istanbul – Turkey Balabanlı Rüzgar Enerjisinden Elektrik Üretim A.Ş. (Balabanlı) Istanbul – Turkey Maray Enerji Sanayi ve Ticaret Ltd.Şti. ("Maray") Istanbul – Turkey Başkent Gölbaşı Maden Kömür Elektrik Üretim ve Tic.Ltd.Şti ("Başkent") (1) Istanbul – Turkey Bandırma Enerji ve Kimya Sanayi Ticaret A.Ş. ("Bandırma") Istanbul – Turkey Boylam Enerji Yatırımları Üretim ve Tic. A.Ş. ("Boylam") Istanbul – Turkey Fuatres Elektrik Üretim A.Ş. ("Fuatres") (2) Istanbul – Turkey Borusan Ezine Elektrik Üretim San. Tic. A.Ş. ("Ezine") Istanbul – Turkey Sincan Elektrik Üretim San. Tic. A.Ş. ("Sincan") Istanbul – Turkey Borusan Trakya Elektrik Üretim San. Tic. A.Ş. ("Trakya") Istanbul – Turkey Dardanos B.V Netherlands Bendis B.V Netherlands Tarhunt B.V Netherlands CFI International B.V Netherlands SFI International B.V Netherlands TFI International B.V NetherlandsLogistics Borusan Lojistik Dağıtım Depolama Taşımacılık ve Ticaret A.Ş. ("Borusan Lojistik") Istanbul – Turkey Borusan Logistics International Algeria SPA Algeria Borusan International Gulf FZE Dubai / United Arab Emirates Borusan Logistics International Netherlands BV Netherlands Borusan Logistics International USA Inc USA Borusan Logistics International Oman Inc Oman BLG Lojistik Hizmetler ve Ticaret A.Ş. (4) Istanbul – Turkey Borusan Logistics International Kazakhstan Limited Liability Partnership Kazakhstan Balnak Nakliyat ve Lojistik Hizmetleri A.Ş. (4) Istanbul – Turkey Eta Elektronik Taşımacılık Ağı Taşımacılık ve Tic A.Ş Istanbul – TurkeyOther Borusan Elektronik Ticaret, İletişim ve Bilgi Hizmetleri A.Ş.("Otomax") Istanbul – Turkey Borusan Manheim Açık Arttırma ve Araç Pazarlama ve Tic. Ltd. Şti. ("Borusan Manheim") Istanbul – Turkey Supsan Motor Supapları Sanayi ve Ticaret A.Ş.("Supsan") Istanbul – Turkey Borusan Teknolojik Yatırımlar Holding A.Ş. ("Borusan Teknoloji") Istanbul – Turkey Borusan Danışmanlık ve Ortak Hizmetler A.Ş. ("Borusan Danışmanlık") Istanbul – Turkey Birlik Yönetim Danışmanlığı ve Yatırım Ltd Şti Istanbul – Turkey Borusan Yönetim Danışmanlığı ve Yatırım Ltd Şti. Istanbul – Turkey Borusan Yatırım ve Pazarlama A.Ş. ("Borusan Yatırım") Istanbul – Turkey Borusan Arge ve İnovasyon A.Ş. Istanbul – Turkey



2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

2.1 Amendments to IFRSs affecting amounts reported and/or disclosures in the financial statements None.

2.2 New and Revised IFRSs applied with no material effect on the consolidated financial statements

Amendments to IFRS 10, 11, IAS 27 Investment Entities 1

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities 1

Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets 1

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting 1

IFRIC 21 Levies 1

1 Effective for annual periods beginning on or after 1 January 2014.

Amendments to IFRS 10, 11, IAS 27 Investment Entities

This amendment with the additional provisions of IFRS 10 provide 'investment entities' (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss.

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities

The amendments to IAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and settlement’.

Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets

As a consequence of IFRS 13 Fair Value Measurements, there are amendments in the explanations about the measurement of the recoverable amount of an impaired asset. This amendment is limited to non-financial assets and paragraphs 130 and 134 of IAS 36 has been changed.

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

This amendment to IAS 39 makes it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met.

IFRIC 21 Levies

IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation.

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2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (continued)

2.3 New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 Financial Instruments 5

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1

Annual Improvements to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16 and IAS 38, IAS 24 1

2010-2012 Cycle Annual Improvements to IFRS 1, IFRS 3, IFRS 13, IAS 40 1

2011-2013 Cycle IFRS 14 Regulatory Deferral Accounts 2

Amendments to IFRS 11 Accounting for Acquisition of Interests in Joint operations 2

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 2

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants 2

IFRS 15 Revenue from Contracts with Customers 4

Amendments to IAS 27 Equity Method in Separate Financial Statements 2

Amendments to IAS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 2

Annual Improvements to IFRS 5, IFRS 7, IAS 9, IAS 34 3

2012-2014 Cycle Amendments to IAS 1 Disclosure Initiative 2

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception 2

1 Effective for annual periods beginning on or after 1 July 2014.2 Effective for annual periods beginning on or after 1 January 2016.3 Effective for annual periods beginning on or after 1 July 2016.4 Effective for annual periods beginning on or after 1 January 2017.5 Effective for annual periods beginning on or after 1 January 2018.

IFRS 9 Financial Instruments

IFRS 9, issued in November 2009, introduces new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a “fair value through other comprehensive income (FVTOCI) measurement category for certain simple debt instruments.

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

This amendment clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered.


2.3 New and revised IFRSs in issue but not yet effective (continued)

Annual Improvements to 2010-2012 Cycle

IFRS 2: Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition'

IFRS 3: Require contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date.

IFRS 8: Requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly.

IFRS 13: Clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only).

IAS 16 and IAS 38: Clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount.

IAS 24: Clarify how payments to entities providing management services are to be disclosed.

Annual Improvements to 2011-2013 Cycle

IFRS 1: Clarify which versions of IFRSs can be used on initial adoption (amends basis for conclusions only).

IFRS 3: Clarify that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.

IFRS 13: Clarify the scope of the portfolio exception in paragraph 52.

IAS 40: Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 Regulatory Deferral Accounts permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements.

IFRS 14 was issued by the IASB on 30 January 2014 and is applies to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2016.

Amendments to IFRS 11 Accounting for Acquisition of Interests in Joint operations

This amendment requires an acquirer of an interest in a joint operation in which the activity constitutes a business to:

• apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11

• disclose the information required by IFRS 3 and other IFRSs for business combinations.



93



Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

This amendment clarifies that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment, and introduces a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. The amendment also adds guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

This amendment include “bearer plants” within the scope of IAS 16 rather than IAS 41, allowing such assets to be accounted for a property, plant and equipment and measured after initial recognition on a cost or revaluation basis in accordance with IAS 16. The amendment also introduces a definition of 'bearer plants' as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales, and clarifies that produce growing on bearer plants remains within the scope of IAS 41.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.

The five steps in the model are as follows:• Identify the contract with the customer• Identify the performance obligations in the contract• Determine the transaction price• Allocate the transaction price to the performance obligations in the contracts• Recognise revenue when the entity satisfies a performance obligation.

Amendments to IAS 27 Equity Method in Separate Financial Statements

This amendment permits investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements.

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

This amendment clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture.





Annual Improvements 2012-2014 Cycle

IFRS 5: Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.

IFRS 7: Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset, and clarification on offsetting disclosures in condensed interim financial statements

IAS 9: Clarify that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid

IAS 34: Clarify the meaning of 'elsewhere in the interim report' and require a cross-reference

Amendments to IAS 1 Disclosure Initiative

This amendment addresses perceived impediments to preparers exercising their judgement in presenting their financial reports.

Amendments to IFRS 10, 11, IAS 28 Investment Entities: Applying the Consolidation Exception

This amendment addresses issues that have arisen in the context of applying the consolidation exception for investment entities by clarifying the following points:

• The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.

• A subsidiary that provides services related to the parent’s investment activities should not be consolidated if the subsidiary itself is an investment entity.

• When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.

• An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by IFRS 12.

The Group evaluates the effects of these standards on the consolidated financial statements.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Statement of Compliance

The consolidated financial statements of Borusan Holding A.Ş. and its Subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

3.2 Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except for land, buildings, flat steel and steel pipe machinery are carried at revalued amounts (Note 11); and certain financial instruments and derivative financial instruments which are carried at fair values.

3.3 Basis of Consolidation

The consolidated financial statements comprise the financial statements of Borusan Holding A.Ş. and its Subsidiaries as at 31 December 2014 on the basis set out below:

Subsidiaries in which the Holding, directly or indirectly, has power to exercise control over their operations, have been consolidated. Control is evidenced when the Holding owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity.

Control also exists when the Holding owns half or less of the voting power of an entity when there is:

a) Power to govern the financial and operating policies of the entity under an agreement; or,

b) Power to appoint or remove the majority of the members of the board of the directors or equivalent governing body; or,

c) Power to cast the majority of votes at meetings of the board of directors or equivalent governing body.

Comparative Information and Restatement to Previous Year Consolidated Financial Statements

The consolidated financial statements of the Group are prepared comparatively with the previous period to identify the financial position and performance trends. In order to maintain consistency, with current period consolidated financial statements, comparative information is reclassified and significant changes are disclosed if necessary.

Changes in accounting policies arising from the first time adaptation of a new IAS/IFRS are applied retrospectively or prospectively in accordance with the respective IASs/IFRSs transition requirements, if any. Where there are no transition requirements for any changes or optional significant changes in accounting policies and identified accounting errors, those are applied retrospectively and prior period financial statements are restated accordingly.





3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.3 Basis of Consolidation (continued)

The principles of consolidation followed in the preparation of the consolidated financial statements are as follows:

(i) The statement of financial position and statements of comprehensive income of the Subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by the Group is eliminated against the related equity accounts. Intercompany transactions and balances between the Group companies and unrealised gains or losses on transactions between the Group companies are eliminated. The investment cost and the dividends obtained from subsidiaries are eliminated from equity and income for the year, respectively.

(ii) Subsidiaries are fully consolidated from the date, being the date on which the Group obtains control and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

(iii) Non-controlling interests’ share in the net assets of the consolidated subsidiaries is separately classified in the consolidated equity and statements of comprehensive income as non-controlling interests. Kocabıyık Family members having interests in the share capital of the subsidiaries are treated as non-controlling interests and excluded from the Group’s interests.

Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. Changes in the Group’s ownership interests in subsidiaries, without a loss of control, are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group losses control of a subsidiary, the profit or loss on disposal is calculated as the difference between;

(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and,

(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

When assets of the subsidiary are carried at revalued amounts or fair values and the cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets. The fair value of any investment retained in the former subsidiary at the date when the control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

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3.3 Basis of Consolidation (continued)

The following is a list of the operating subsidiaries as of 31 December 2014 and 2013 detailing the Group's controlling interest by direct voting power and the Group’s ultimate effective shareholding in such Subsidiaries' equity at those dates:

(1) These subsidiaries are consolidated on the basis set below: a) power to govern the financial and operating policies of the entity under an agreement; or, b) power to appoint or remove the majority of the members of the board of the directors or equivalent governing body; or, c) power to cast the majority of votes at meetings of the board of directors or equivalent governing body.(2) This subsidiary is liquidated in 24 April 2014.(3) All energy investments and Borusan Manheim are a joint-ventures of the group.(4) Güney Rüzgarı and Eskoda have merged under Fuatres as of 30 November 2014.(5) This entity was sold on 30 June 2014.(6) Balnak and BLG Lojistik have merged under BLG Lojistik on 31 July 2014.

Effective Shareholding by Borusan Holding

Direct Shareholding By Borusan Holding

2014 (%) 2013 (%) 2014 (%) 2013 (%) 2014 (%) 2013 (%) Borçelik (1) 20.77 20.77 38.76 38.72 line by line line by line Borusan Boru - - 53.19 53.16 line by line line by line Kerim Çelik (1) 0.01 0.01 38.71 38.72 line by line line by line Borusan Ankara (2) - - 58.69 58.69 line by line line by line BMBYH 64.64 64.64 72.38 72.35 line by line line by line İstikbal 82.68 82.68 82.70 82.70 line by line line by line Vobarno - - 53.19 53.16 line by line line by line Bortrade 70.00 70.00 70.00 70.00 line by line line by line Borusan Mühendislik - - 51.56 51.53 line by line line by line Borusan Mannesmann Pipe US Inc - - 53.19 53.16 line by line line by line BMGS 70.16 70.11 81.93 81.83 line by line line by line Machinery Intertrade Limited ("UK") - - 81.93 81.83 line by line line by line MIT Machine International Trade Limited ("MIT Machine") - - 81.93 81.83 line by line line by line MIT Machine Holding Limited ("MIT Machine Holding") - - 81.93 81.83 line by line line by line Machinery International Trade B.V. ("Machinery International") - - 81.93 81.83 line by line line by line Borusan Makina Kazakhstan LLP ("Kazakhstan") - - 81.93 81.83 line by line line by line BGS Freezone - - 81.93 81.83 line by line line by line Niocorp AB - - 81.93 81.83 line by line line by line Construction Equipment Trade Limited - - 81.93 81.83 line by line line by line Sitech Eurasia Teknoloji Servis ve Tic. A.Ş. ("Sitech") - - 81.93 81.83 line by line line by line Borusan Endüstriyel Sistemler A.Ş. - - 81.88 - line by line -Borusan İş Makinaları Kiralama Sanayi ve Tic. A.Ş. - - 81.88 - line by line -Borusan Oto (1) 29.05 28.60 41.58 41.07 line by line line by line Borusan Otomotiv (1) 21.25 21.00 39.16 38.83 line by line line by line Borusan Oto Kıbrıs (1) - - 40.37 39.95 line by line line by line Borusan Otomotiv Pazarlama (1) 21.25 21.00 39.16 38.83 line by line line by line Borusan Otomotiv Premium Kiralama (1) 21.25 21.00 40.90 40.90 line by line line by line Maya Enerji (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Yedigöl (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Turkuaz (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Hazal (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Esentepe (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Hidiv (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Borusan Enerji (3) 49.00 49.00 49.85 49.85 equity pick up equity pick up Güney Rüzgarı (3-4) - 0.01 - 49.85 - equity pick up Kuzey Rüzgarı (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Eskoda (3-4) - 0.01 - 49.85 - equity pick up Baltalimanı (3) 0.01 0.01 49.85 49.85 equity pick up equity pick up Beylerbeyi (3) - - 49.85 49.85 equity pick up equity pick up Balabanlı (3) - - 49.85 49.85 equity pick up equity pick up Maray (3) 0.05 0.05 49.85 49.85 equity pick up equity pick up Başkent Gölbaşı (5) - 99.91 - 100.00 - line by line Bandırma (3) - - 49.85 49.85 equity pick up equity pick up Boylam (3) - - 49.85 49.85 equity pick up equity pick up Fuatres (3-4) - - 49.85 49.85 equity pick up equity pick up Ezine - 99.80 100.00 100.00 line by line line by line Trakya 50.00 99.80 100.00 100.00 line by line line by line Sincan - 69.80 94.80 94.80 line by line line by line Dardanos B.V - - 100.00 - line by line -Bendis B.V - - 100.00 - line by line -Tarhunt B.V - - 94.80 - line by line -CFI International B.V 100.00 - 100.00 - line by line -SFI International B.V 70.00 - 94.80 - line by line -TFI International B.V 100.00 - 100.00 - line by line -Borusan Lojistik 57.75 57.59 79.39 79.19 line by line line by line Balnak (6) - 57.59 - 79.19 line by line line by line BLG Lojistik - - 79.39 79.19 line by line line by line Eta Elektronik - - 79.39 - line by line -Borusan Logistics International Algeria SPA - - 79.39 79.19 line by line line by line Borusan International Gulf FZE - - 79.39 79.19 line by line line by line Borusan Logistics International Netherlands BV - - 79.39 79.19 line by line line by line Borusan Logistics International USA Inc - - 79.39 79.19 line by line line by line Borusan Logistics International Oman Inc - - 79.39 79.19 line by line line by line Borusan Logistics International Kazakhstan Limited Liability Partnership - - 79.39 79.19 line by line line by line Borusan Manheim (3) 40.50 40.50 46.45 46.42 equity pick up equity pick up Otomax - - 80.62 80.56 line by line line by line Supsan 7.96 1.96 47.30 41.27 line by line line by line Borusan Teknoloji 83.09 83.09 93.86 93.81 line by line line by line Borusan Danışmanlık ve Ortak Hizmetler A.Ş. ("Borusan Danışmanlık") 93.78 93.78 93.78 93.80 line by line line by line Borusan Yatırım 36.29 36.01 62.64 62.40 line by line line by line Borusan Arge ve İnovasyon A.Ş. 100.00 - 100.00 - line by line -Borusan Yönetim Danışmanlığı ve Yatırım Ltd Şti. 99.90 99.90 100 100 line by line line by line Birlik Yönetim Danışmanlığı ve Yatırım Ltd Şti. 99.90 99.90 100 100 line by line line by line

Consolidation Method




3.4 Foreign Currency Translation

The consolidated financial statements are presented in USD, which is also the Holding’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The USD is used to a significant extent, or has a significant impact on the operations of the Group and reflects the economic substance of the underlying events and circumstances relevant to the Group. Therefore, the Group companies mainly use USD as functional currency. All currencies other than the functional currency selected for measuring items in the financial statements are treated as foreign currencies.

Based on the economic substance of the underlying events and circumstances relevant to the Group, the functional currency of certain subsidiaries of the Group has been determined to be USD as defined by IAS 21, The Effects of Changes in Foreign Exchange Rates due to the following reasons:

• The purchase and sales prices of the Group companies and the main services and products are mainly quoted in USD,

• A significant part of the financing and related finance costs of the Group is denominated in USD.

Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to translation gain / (loss) in the consolidated income statement. Non-monetary items and equity balances (excluding profit or loss) that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

As at the reporting date, the assets and liabilities of subsidiaries are translated into the presentation currency of Borusan Holding A.Ş. (USD) at the rate of exchange ruling at the balance sheet date and their income statements are translated at the average exchange rates for the year.

The exchange differences arising on the translation are taken directly to a separate component of other comprehensive income as currency translation reserve. On disposal of such subsidiaries, the deferred cumulative amount recognised in other comprehensive income relating to that particular subsidiary is recognised in the statement of comprehensive income.

The Turkish countrywide producer price index (PPI) published by Turkish Statistical Institute and TL exchange rates for the purchases of USD announced by the Central Bank of the Republic of Turkey for the last three years were as follows:

3.5 Business combinations

The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.

Year

2011201220132014

Year End TL/USD Exchange Rates

1.88891.78262.13432.3189

TL/USD Rate Annual Change Inflation Rates (PPI)

22.18(5.63)19.738.65

%

13.336.167.4

8.17



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3.5 Business combinations (continued)

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:

• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.




3.5 Business combinations (continued)

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

3.6 Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of profit or loss and other comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

3.7 Cash and Cash Equivalents

Cash and cash equivalents in the statement of financial position comprise of cash at banks and in hand, short-term deposits, reverse repurchase agreements and other liquid assets. Other liquid assets mainly comprise of checks and notes maturing before balance sheet date. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, with an original maturity of three months or less.

3.8 Trade and Other Receivables

Trade receivables which generally have approximately 21 day terms (2013 - 29 day terms) are carried at amortized cost less an allowance for any uncollectible amounts. Provision is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.



101


3.9 Related Parties

Parties are considered related to the Group if;

(a) directly, or indirectly through one or more intermediaries, the party

(i) controls, is controlled by, or is under common control with the Group (this includes parent, subsidiaries and fellow subsidiaries); (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;

(b) the party is an associate of the Group;

(c) the party is a joint venture in which the Group is a venturer;

(d) the party is member of the key management personnel of the Group as its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e);

A related party transaction is a transfer of resources, services or obligation between related parties, regardless of whether a price is charged.

Disclosures regarding related party transactions and outstanding balances are given in Note 34.

3.10 Inventories

Inventories are valued at the lower of cost or net realizable value (“NRV”) after provision for obsolete items. Cost is determined using the monthly weighted average method or specific identification method depending on nature of production or actual cost for trading goods. Cost of work in progress and finished goods inventories include materials, direct labor and an appropriate portion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Unrealizable inventory has been fully written off. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the original write-down.

3.11 Property, Plant and Equipment

Property, plant and equipment (“PP&E”) is initially stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment in value. Such costs which are initially recognized include the cost of replacing part of such property, plant and equipment when that cost is incurred if the recognition criteria are met. Following initial recognition at cost, land, buildings, flat steel and steel pipe machinery are carried at revalued amounts, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.




3.11 Property, Plant and Equipment (continued)

The carrying values of property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the consolidated statement of comprehensive income. However, the decrease in the carrying value of an asset is debited to the equity to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. The fair value less cost to sell is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit. Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or has decreased. The reversal is recorded in consolidated statement of comprehensive income.

For items of property, plant and equipment carried at revalued amount, valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

Any revaluation surplus is credited to the asset revaluation reserve included in the statement of comprehensive income.

An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred directly to retained earnings.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised.

The cost or revalued amount of depreciable assets is depreciated at rates based on the estimated useful lives of assets. The estimated useful lives and the methods of depreciation are as follows:

Years Method

Buildings 6 - 50 Straight-lineMachinery and equipment 5 - 40 Straight-lineFurniture and fixtures 3 - 5 Straight-lineMotor vehicles 3 - 8 Straight-lineOther tangible assets 5 - 10 Straight-lineLeasehold improvements over the lease period Straight-line



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3.12 Intangible Assets

Intangible assets, which mainly comprise computer software, energy licenses and license applications, are measured initially at cost. Intangible assets are recognized, if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and the cost of the asset can be measured reliably. Following initial recognition, intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets excluding development costs created within the business are not capitalized and expenditure is charged against profits in the year in which it is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized on a straight line basis over the best estimate of their useful lives (3-15 years). Energy licenses are amortized between 10-49 years. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible asset.

Intangible asset with indefinite useful lives are not amortised, but are tested for impairment annually either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of comprehensive income when the asset is derecognized.

3.13 Non-current Assets Held For Sale and Discontinued Operations

Non-current assets and disposal groups are classified as held for sale and measured at the lower of carrying value and fair value less costs to sell if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sales, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

In the consolidated statement of comprehensive income of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non- controlling interests in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the statement of comprehensive income.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.




3.14 Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflect current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognized in the statement of income in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognized in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Goodwill and intangible assests with indefined useful life

Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

3.15 Investments and Other Financial Assets

Investments are recognized and derecognized on a trade date where the purchase or sale of an investment under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets within the scope of IAS 39 are classified as ‘financial assets at fair value through profit or loss’ (“FVTPL”), ‘held-to-maturity investments’, ‘available-for-sale (“AFS”) financial assets’ or ‘loans and receivables’. The Group determines the classification of its financial assets at initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are carried at amortized cost using the effective interest method. Gains and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.



105


3.15 Investments and Other Financial Assets (continued)

Available-for-sale financial assets

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.

The Group’s AFS investments are unquoted equity investments that are not traded in an active market and stated at cost at the end of each reporting period since their value can’t be reliably measured. Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

The fair value of available-for-sale monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and losses that are recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income.

AFS equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.

Financial Assets at Fair Value through Profit or Loss

Financial assets at fair value through profit or loss are financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

3.16 Interest-Bearing Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognised in net profit or loss when the liabilities are derecognised, as well as through the amortization process.




3.17 Derecognition of Financial Assets and Liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where:

• the rights to receive cash flows from the asset have expired;

• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

3.18 Impairment of Financial Assets

The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

Assets carried at amortized cost

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversed date.



107


3.18 Impairment of Financial Assets (continued)

Assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Available-for-sale financial assets

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the income statement. Reversals in respect of equity instruments classified as available-for-sale are not recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

3.19 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Group as a lessee

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charge and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term.

3.20 Trade Payables

Trade payables which generally have an average of 73 days (2013 – 88 days) term are carried at amortized cost by using effective interest method which is the fair value of consideration to be paid in the future for goods and services received, whether or not billed to the Group.

3.21 Offsetting

Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

3.22 Research and Development Costs

Research costs are expensed as incurred and development costs recognized as assets are amortized over their estimated useful lives.




3.23 Taxation and Deferred Income Taxes

Income tax represents the sum of the tax currently payable and deferred taxes.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Holding and its Subsidiaries’ liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company and its Subsidiaries’ expect, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to other comprehensive income, in which case the tax is also recognised directly in other comprehensive income, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.



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3.24 Employee Benefits

(a) Defined Benefit Plan:

In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee whose employment is terminated due to retirement or for reasons other than resignation or misconduct and who has completed at least one year of service with the Group companies.

Such defined benefit plan is unfunded. The cost of providing benefits under the defined benefit is determined using the “Projected Unit Credit Method” based upon estimates of the Group’s obligations to personnel terminating their services and being eligible to receive such benefits, discounting using the current market yield at the balance sheet date on government bonds. All actuarial gains and losses are recognized in the other comprehensive income as incurred.

(b) Defined Contribution Plan:

The Group pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

3.25 Revenue Recognition

Revenue

Revenue is measured at the fair value of the consideration received or receivable. Sales are recognized upon delivery of products and customer acceptance, if any, or on the performance of services. Revenue is reduced for estimated customer returns, rebates, and other similar allowances.

Sale of goods

Revenue from sale of goods is recognized when all the following conditions are satisfied:

• The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to the Group; and

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of Services

Revenue from rendering of services is recognized by reference to the stage of completion when it can be measured reliably. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable.




3.25 Revenue Recognition (continued)

Interest revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Rental income

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

3.26 Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in the statement of income/ (loss) in the period in which they are incurred.

3.27 Contingent Assets and Liabilities

Contingent liabilities are not recognised but disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of economic benefits is probable.

3.28 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the income statement, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

3.29 Subsequent Events

Post year-end events that provide additional information about the Group’s position at the date of the statement of financial position (adjusting events), are reflected in the financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material.

3.30 Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.



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3.30 Investments in associates and joint ventures (continued)

The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in associate or a joint venture is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate or a joint venture. When the Group's share of losses of an associate or a joint venture exceeds the Group's interest in that associate or a joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or a joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or a joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.




3.31 Interests in joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation:

• Its assets, including its share of any assets held jointly.

• Its liabilities, including its share of any liabilities incurred jointly.

• Its revenue from the sale of its share of the output arising from the joint operation.

• Its share of the revenue from the sale of the output by the joint operation.

• Its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’ interests in the joint operation.

When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party.

When a group entity transacts with its jointly controlled entity, profits and losses resulting from the transactions with the jointly controlled entity are recognized in the Group's consolidated financial statements only to the extent of interests in the jointly controlled entity that are not related to the Group.

3.32 Derivative Financial Instruments

The Group uses derivative financial instrument such as forward currency contracts to hedge its risks associated with foreign currency fluctuations and interest rate swaps to manage its exposure to interest rate risk.

The Group is exposed to foreign currency rate risk on purchases and borrowings that are denominated in a currency other than the USD. The Group is also exposed to interest rate risk due to bank loans.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).



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3.32 Derivative Financial Instruments (continued)

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

3.33 Significant Accounting Judgments and Estimates

The preparation of the financial statements in accordance with IFRS requires the Group Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the periods in which they become known. The significant management estimates are as follows:

Doubtful receivables:

The Group recognizes a provision for receivables which are overdue and probable to create collection problems in the future. The provision is recognized by considering guarantees received for these receivables.

Impairment of inventory:

When the net realizable value of inventory is less than its cost, the inventory is written down to the net realizable value and the expense is included in the statement of income / (loss) in the period the write-down or loss occurred. When the circumstances that previously caused inventories to be written down below its cost no longer exist or when there is clear evidence of an increase in the net realizable value due to change in the economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the original write-down.

Useful lives of property, plant and equipment:

Tangible and intangible assets are depreciated and amortized over the useful lives determined by the Group Management (Note 3.11). The Group periodically reviews its useful live estimates to ensure that they reflect the actual use and expected remaining future benefits to be derived from the use of these property, plant and equipment.

Revaluation of property, plant and equipment:

The Group Management periodically performs independent valuation for land, buildings and flat steel, steel pipe machinery asset groups. These valuations are performed frequently enough to ensure that the fair value of the revalued assets does not differ materially from its carrying amount. If the Group Management believes that the carrying amount of the revalued assets does not differ significantly from its fair value, they do not perform a new revaluation exercise. As at the balance sheet date the Group Management has performed a comprehensive valuation exercise that resulted in approximately USD 98 million increase in revaluation reserve.

Deferred tax assets:

Deferred tax assets are recorded using substantially enacted tax rates for the effect of temporary differences between book and tax bases of assets and liabilities. Currently, there are deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences, all of which could reduce taxable income in the future. Based on available evidence, both positive and negative, it is determined whether it is probable that all or a portion of the deferred tax assets will be realised. The main factors taken into consideration include future earnings potential; cumulative losses in recent years; history of loss carry-forwards and other tax assets expiring; the carry-forward period associated with the deferred tax assets; future reversals of existing taxable temporary differences; tax-planning strategies that would, if necessary, be implemented, and the nature of the income that can be used to realise the deferred tax asset. If based on the weight of all available evidence, it is the Group’s belief that taxable profit will not be available sufficient to utilise some portion of these deferred tax assets, therefore some portion of or all of the deferred tax assets are not recognised. The Group has not recognized deferred tax assets in certain entities because it is not probable that sufficient taxable profit will be available to recognise deferred tax assets in those entities. If market conditions improve and future results of operations exceed the Group’s current expectations, the existing unrecognised deferred tax assets may be recognised, resulting in future tax benefits.




3.33 Significant Accounting Judgments and Estimates (continued)

Derivatives

The fair value of forward exchange contracts and option contracts are based on their listed market price, if available. If a listed market price is not available, then fair values are derived from inputs other than quoted prices that are observable for the asset or liability or are derived by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models.

Impairment of goodwill and intangible assets of indefinite useful lives

The Group tests annually whether goodwill and intangible assests of indefinite useful lives have suffered any impairment, in accordance with the accounting policy stated in Note 3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.

Valuation of licenses, license applications and goodwill recognized on business combination

Valuation of the Group’s licenses and license applications was based on discounted cash flows of each projects to determine the fair value of licenses and license applications. Valuation of the Group’s licenses and license applications was conducted to serve as a basis for allocation of the purchase price to the various classes of assets acquired in accordance with IFRS 3 Business Combinations. For IFRS 3 purposes, fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties. In determining the fair value of the licenses and license applications, the Group adopted a "risk-weighted discounted cash flow" methodology whereby the discounted cash flows of each project, are adjusted by a risk factor. The risk factors are determined by the Group Management following the due diligence conducted for each project, and take into account various criteria, including the status of the project, licensing status as well as perceived regulatory, environmental and feasibility risks.

4. CHANGES IN GROUP’S ORGANIZATION

The following transactions took place during 2014, which resulted in changes in Group’s organization:

Throughout the year 2014, Borusan Holding purchased additional shares of Borusan Yatırım for USD 507,122 from Istanbul Stock Exchange increasing its direct shareholding to 36.29% from 36.01%. The Group purchased shares of some of group companies from its shareholders in the current year. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. The difference between the carrying amount and the consideration paid is recognized directly in equity as it is a change in ownership interest and does not result in a change in control.

5. DIVIDENDS

In 2014, a dividend of USD 1,855 (2013: USD 3,368) per thousand share (total USD 10,397,502) (2013: USD 18,878,738) was paid to shareholders.



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6. CASH AND CASH EQUIVALENTS

Effective interest rate of time deposits as of 31 December 2014 is between 3% - 13% (2013: 2% - 10%) per annum for TL deposits and between 1% - 3% (2013: 1% - 4%) per annum for the currencies other than TL deposits.

As of 31 December 2014, there is no repurchase agreement (2013: effective interest rate of repurchase agreement is 6.50% per annum for TL agreements and 2.90% for USD agreements).

Maturities of these time deposits range from 1 day to 35 days (2013: 1 day to 31 days).

As of 31 December 2014, current value of total assets provided under custodian accounts for the management of portfolio management companies amounts to USD 9,605,717 (2013: USD 3,428,624).

Currency breakdown of cash and cash equivalents is as follows:

31 December 2014 31 December 2013

Banks -time deposits 364,367,322 282,629,287 -demand deposits 70,589,690 57,447,983 -repurchase agreements with banks - 315,091 Cash on hand 152,713 169,004 Mutual funds 9,605,717 3,428,624 Other cash and cash equivalents 722,448 34,886 445,437,890 344,024,875


Currency Currency Amount USD Equivalent Currency Amount USD Equivalent

USD 303,031,725 303,031,725 234,842,570 234,842,570

EUR 65,415,624 79,571,284 55,901,989 76,913,363

GBP 374,133 581,222 246,446 406,141

SFR 500 504 499 560

TENGE 318,648,565 1,743,631 157,771,133 1,022,496

TL 140,094,145 60,414,052 60,389,632 28,294,819

DZD 8,375,090 95,472 198,625,112 2,544,926

445,437,890 344,024,875



As of 31 December 2014, trade receivables of USD 417,889,345 (2013: USD 302,952,139) were neither past due nor impaired. The average credit period on sales of goods and services provided is 21 days (2013: 29 days). Interest rates applied for amortized cost computation varies between 9.8% - 17% for TL (2013: 8.3% - 13%), 0.10% - 8% for EUR and 0.20% - 0.30% for USD (2013: 0.10% - 0.50% for EUR and 0.20% - 0.20% for USD) denominated receivables.

The Group has offset USD 151,169,530 (31 December 2013: USD 228,229,359) from its trade receivables that are collected from factoring companies as a part of irrevocable factoring agreements as of 31 December 2014.

Collateral received in relation to trade receivables that are neither past due nor impaired is as follows:

As of 31 December 2014, trade receivables of USD 103,687,828 (2013: USD 99,493,767) were past due but not impaired. Trade receivables disclosed below include amounts that are past due at the end of the reporting period for which the Group has not recognized an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The aging analysis of these trade receivables is as follows:


Letter of guarantee 62,108,090 73,319,360 Mortgages 2,585,237 516,775 Guarantee through direct debiting system 55,882,892 56,654,913 Letter of credit related to export receivables 10,083,405 2,231,312 Insured receivables 2,074,403 1,278,193 Other 7,779,825 4,201,053

140,513,852 138,201,606


Up to 15 days 22,528,429 10,462,416 15 to 30 days 45,836,718 36,139,620 30 to 90 days 21,480,083 32,970,547 90 to 180 days 8,389,602 10,132,668 Over 180 days 5,452,996 9,788,516

103,687,828 99,493,767

7. TRADE RECEIVABLES, net


Current trade receivables

Trade receivables 542,502,291 421,800,479

Trade receivables from related parties (Note 34) 351,268 378,463

Less : Allowance for doubtful receivables (-) (21,276,386) (19,733,036)

521,577,173 402,445,906



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As at 31 December 2014, there is no trade receivables that would otherwise be past due or impaired whose terms have been renegotiated (2013: None).

The provision for trade receivables is provided based on estimated irrecoverable amounts from the sales of goods and services provided, determined by reference to past default experience. As at 31 December 2014, USD 21,276,386 (2013: USD 19,733,036) were impaired and provided for. The aging of these receivables is as follows:


Up to 90 days 1,010,254 654,938 90 to 180 days 735,736 557,398 Over 180 days 19,530,396 18,520,700

21,276,386 19,733,036


Letter of guarantee 2,837,665 1,394,665 Mortgages 490,995 552,651 Guarantee through direct debiting system 3,504 285,010 Letter of credit related to export receivables 2,271,873 743,448 Insured receivables 522,023 720,893 Other 326,684 1,170,121

6,452,744 4,866,788

7. TRADE RECEIVABLES, net (continued)

Collaterals held for trade receivables that are past due but not impaired at the balance sheet date are as follows:

Movement of allowance of trade receivables is as follows:

As of 31 December 2014, non-current trade receivables were neither past due nor impaired.

1 January - 1 January - 31 December 2014 31 December 2013

At the beginning of the year 19,733,036 23,755,629 Allowance provided during the year 5,574,142 4,016,482 Amounts written-off as uncollectable (329,910) (341,679)Amounts recovered during the year (1,947,916) (4,453,617)Currency translation reserve (1,752,966) (3,243,779)

At the end of the year 21,276,386 19,733,036


Non - current trade receivable Other trade receivables 3,012,604 3,183,336

3,012,604 3,183,336



7. TRADE RECEIVABLES, net (continued)

Currency breakdown of current and non-current trade receivables is as follows:


Currency Currency Amount USD Equivalent Currency Amount USD Equivalent

USD 157,799,677 157,799,677 187,077,962 187,077,962EUR 234,482,598 285,223,937 97,965,880 134,790,699GBP 1,566,181 2,433,091 246,807 406,736TENGE 4,965,507,377 27,171,039 4,046,228,188 26,223,125TL 120,034,858 51,763,706 119,580,323 56,027,888DZD 17,397,839 198,327 86,073,124 1,102,832

524,589,777 405,629,242

8. INVENTORIES, net

Movement of allowance for NRV is as follows:

Provision released during the year represents reversal of NRV impairment, due to the fact that the impaired inventory is sold during the year. Net realizable value of the inventories exposed to allowance is USD 278,834,768 in 2014 (2013: USD 276,314,606).


Merchandise inventories (trade goods) 288,526,604 285,606,551 Goods in transit 65,915,144 54,411,116 Raw materials 138,029,974 132,629,762 Finished goods 97,730,425 116,322,741 Spare parts and operating supplies 63,760,032 88,130,292 Work in process (WIP) 32,595,302 23,769,949 Less : Allowance for NRV of trade goods (10,433,115) (11,973,504)

676,124,366 688,896,907


At the beginning of the year 11,973,504 6,066,932 Charge for the year 5,000,401 8,585,017 Provision released (5,155,981) (3,116,284)Currency translation reserve (1,384,809) 437,839




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9. OTHER RECEIVABLES AND ASSETS


Current asset Prepaid taxes, funds and receivables 10,378,743 7,909,400 Value added tax (VAT) receivable 56,487,526 40,264,831 Other receivables from non-consolidated related companies (Note 34) 30,076,307 13,460,000 Prepaid expenses 10,380,845 9,509,261 Income accruals 9,276,263 14,895,892 Due from personnel (Note 34) 1,627,807 972,818 Advances given 16,465,518 12,135,102 Other 19,453,327 14,573,127

154,146,336 113,720,431


Non-current assets Other receivables from non consolidated related parties (Note 34) 49,968,663 54,952,064 Deposits and advances given 7,844,410 8,872,785 Prepaid expenses 2,002,676 4,417,349 Other 6,238,142 5,901,946

66,053,891 74,144,144

10. GOODWILL

The Group assesses goodwill for impairment annually. Recoverable amount is determined by calculating the value in use. Principal estimates such as discount rate, growth rate, sale prices and direct costs are taken into account in assessing the value in use. As of 31 December 2014, the Group assessed the recoverable amount of goodwill and determined that goodwill associated with the Group’s operations was not impaired.

31 December 31 DecemberCost 2014 2013

Goodwill 47,519,907 47,519,907



11. PROPERTY, PLANT AND EQUIPMENT

Movement of property, plant and equipment, related accumulated depreciation and provision for impairment for the year ended 31 December 2014 is as follows:

(*) As of 31 December 2014, USD 79,772 of transfer to rights.

The amount of borrowing costs capitalized during the year is USD 2,342,162 (2013: USD 887,548).The rate used to determine the amount of borrowing costs eligible for capitalization was between Libor+3.14% and Libor+4%, which is the effective interest rate of the related borrowings (2013: Libor+3.14% and Libor+4%).

Accumulated Currency 31 December Additions Disposals Transfers (*) Revaluation depreciation net off of translation 31 December 2013 increase valued fixed assets reserve 2014

CostLand and buildings 657,724,113 3,129,431 (1,342,371) 81,941,704 169,928,537 (96,064,988) (29,511,640) 785,804,786Machinery and equipment 668,055,719 50,645,716 (26,047,131) 130,009,451 56,507,098 (176,634,198) (10,984,375) 691,552,280Motor vehicles 204,866,085 89,878,033 (65,538,302) 490,780 - - (15,074,360) 214,622,236Furniture and fixtures 130,423,431 6,871,400 (1,991,285) 5,265,020 - - (7,674,128) 132,894,438Leasehold improvements 127,483,644 3,240,747 (6,567,225) 295,529 - - (2,787,938) 121,664,757Other tangible assets 1,331,667 - - (491,628) - - (15,655) 824,384Construction in progress 180,867,500 95,146,777 (12,224,020) (217,590,628) - - (3,173,335) 43,026,294

1,970,752,159 248,912,104 (113,710,334) (79,772) 226,435,635 (272,699,186) (69,221,431) 1,990,389,175

Less: Accumulated Depreciation Buildings (62,765,380) (36,898,943) 122,595 - - 96,064,988 3,476,740 -Machinery and equipment (224,265,593) (42,560,530) 3,491,797 - - 176,634,198 13,974,757 (72,725,371)Motor vehicles (77,864,235) (15,528,919) 16,837,591 - - - 3,694,423 (72,861,140)Furniture and fixtures (90,665,915) (7,667,402) 669,056 - - - 6,430,557 (91,233,704)Leasehold improvements (33,727,978) (2,108,585) 1,152,317 - - - 5,265,451 (29,418,795)Other tangible assets (262,016) (4,124,942) - - - - 13,652 (4,373,306)

(489,551,117) (108,889,321) 22,273,356 - - 272,699,186 32,855,580 (270,612,316)

Net book value 1,481,201,042 140,022,783 (91,436,978) (79,772) 226,435,635 - (36,365,851) 1,719,776,859



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11. PROPERTY, PLANT AND EQUIPMENT (continued)

Movement of property, plant and equipment, related accumulated depreciation and provision for impairment for the year ended 31 December 2013 is as follows:

(*) As of 31 December 2013, USD 110,264 of transfer made from intangible assets to machinery and equipment and furniture and fixtures. USD 53,963 of transfer made from tangible assets to rights. USD 73,157,274 of transfer is made from construction in progress to assets classified as held for sale.

31 December Additions Disposals Transfers (*) Currency Revaluation 31 December 2012 translation reserve increase 2013

Cost Land and buildings 655,189,886 24,281,240 (6,179,055) (46,741,758) 7,215,253 23,958,547 657,724,113 Machinery and equipment 637,923,353 90,962,056 (51,891,102) (12,951,488) 4,012,900 - 668,055,719 Motor vehicles 194,010,564 72,799,687 (65,350,470) 6,887 3,399,417 - 204,866,085 Furniture and fixtures 121,195,991 8,003,486 (1,142,945) 610,341 1,756,558 - 130,423,431 Leasehold improvements 116,857,293 2,395,716 (758,146) 8,247,843 740,938 - 127,483,644 Other tangible assets 832,821 493,844 - - 5,002 - 1,331,667 Construction in progress 90,207,130 128,576,101 (9,976,640) (32,997,161) 2,431,477 2,626,593 180,867,500

1,816,217,038 327,512,130 (135,298,358) (83,825,336) 19,561,545 26,585,140 1,970,752,159

Less: Accumulated Depreciation Buildings (52,636,370) (12,774,703) 826,550 2,577,268 (758,125) - (62,765,380)Machinery and equipment (190,720,969) (49,147,503) 9,526,419 8,003,885 (1,927,425) - (224,265,593)Motor vehicles (78,565,133) (14,182,804) 15,830,660 131,239 (1,078,197) - (77,864,235)Furniture and fixtures (81,429,893) (8,269,605) 717,292 (22,933) (1,660,776) - (90,665,915)Leasehold improvements (27,500,525) (6,284,420) 450,725 34,905 (428,663) - (33,727,978)Other tangible assets (255,032) (2,308) - - (4,676) - (262,016)

(431,107,922) (90,661,343) 27,351,646 10,724,364 (5,857,862) - (489,551,117)

Net book value 1,385,109,116 236,850,787 (107,946,712) (73,100,972) 13,703,683 26,585,140 1,481,201,042



On disposal of revalued assets, amounts in revaluation reserves relating to that asset are transferred to retained earnings. Further, the depreciation difference realized from the revaluation surplus is transferred to retained earnings on annual basis as the asset is used by the Group.

Had the revalued assets been carried at cost less any accumulated depreciation and any accumulated impairment losses, the carrying amounts of land, buildings, machinery and equipment that would have been included in the consolidated financial statements as of 31 December 2014 and 2013.

Movements in revaluation surplus of land, buildings, machinery and equipment before allocation of non-controlling interest are as follows:


Market Valuation (fair value assessment)

Land, buildings, flat steel and steel pipe machinery of the Group are revalued in December 2014 by independent professional appraiser, Standart Gayrimenkul Değerleme Uygulamaları A.Ş., of which the effective date is 31 December 2014. Valuations for those assets were made on the basis of the market value. Initially, the book values of such assets were adjusted to the revalued amounts and the resultant initial surplus (reserve) net of deferred taxes was credited to revaluation reserve in equity. Accumulated depreciation of the revalued buildings and machinery and equipment have been eliminated against the gross carrying amounts of related assets as at 31 December 2014 and the net amount is restated to the revalued amount. The Group Management believes that the carrying amount of the revalued assets does not differ significantly from its fair values hence they have not performed a new revaluation exercise as at the balance sheet date.

Details of the Group’s fair value hierarchy as at 31 December 2014 and 2013 are as follows:

Fair value as at 31 December 2014

Level 1 Level 2 Level 3 Total

-Lands & Buildings - 785,804,786 - 785,804,786

Fair value as at 31 December 2013

Level 1 Level 2 Level 3

-Lands & Buildings - 594,958,733 - 594,958,733


At the beginning of the year 320,827,431 315,455,367 Disposal from revaluation reserve (486,567) (2,513,304)Current year addition revaluation adjustment 200,793,342 23,912,000 Current year decrease revaluation adjustment - (8,277,820)Transfer of depreciation difference (net of deferred tax) between the revalued and original value of assets realized from revaluation reserve into retained earnings pursuant to IAS 16 (5,476,449) (7,748,812)




123


Revaluation reserve included in the consolidated financial statements comprises the following:

Mortgages and Pledges on Assets

As of 31 December 2014, mortgages on property, plant and equipment amounting to EUR 20,000,000 (equivalent of USD 24,330,900) (2013: EUR 20,000,000 - equivalent of USD 27,517,219).

Finance (Capital) Leases

The Group recognised finance (capital) leases as assets and liabilities in the consolidated statement of financial position at amounts equal at the inception of the lease to the fair value of the leased property or, if lower, at the present value of minimum lease payments.

The respective carrying value (net book values) of the leased assets, as reflected in the consolidated statement of financial position is USD 2,158,815 (2013: USD 3,128,907).


Revaluation reserve attributable to equity holders of the parent 243,057,014 144,399,338

Revaluation reserve attributable to non-controlling interest 272,600,743 176,428,093

515,657,757 320,827,431



12. INTANGIBLE ASSETS, net

Movement of intangible assets during the year ended 31 December 2014 is as follows:

Movement of intangible assets during the year ended 31 December 2013 is as follows:

Other Customer Rights Intangibles List Total

Cost at 1 January 2014 66,926,283 35,115,271 32,285,000 134,326,554

Additions 2,897,193 5,498,375 - 8,395,568

Transfers 79,772 - - 79,772

Currency translation reserve (288,965) (1,840,072) - (2,129,037)

Cost at 31 December 2014 69,614,283 38,773,574 32,285,000 140,672,857

Accumulated amortization at 1 January 2014 (40,271,689) (22,977,481) (3,228,500) (66,477,670)

Charge for the year (3,205,366) (4,885,764) (3,228,500) (11,319,630)

Currency translation reserve 217,621 916,004 - 1,133,625

Accumulated amortization at 31 December 2014 (43,259,434) (26,947,241) (6,457,000) (76,663,675)

Net book value at 31 December 2014 26,354,849 11,826,333 25,828,000 64,009,182

Other Customer Rights Intangibles List Total

Cost at 1 January 2013 53,488,006 23,729,584 32,285,000 109,502,590 Additions 13,460,146 10,808,259 - 24,268,405 Disposals (87,526) (52,907) - (140,433)Transfers (125,398) - - (125,398)Currency translation reserve 191,055 630,335 - 821,390

Cost at 31 December 2013 66,926,283 35,115,271 32,285,000 134,326,554

Accumulated amortization at 1 January 2013 (36,514,378) (18,986,720) - (55,501,098)Charge for the year (3,796,556) (3,760,178) (3,228,500) (10,785,234)Disposals 41,851 2,628 - 44,479 Currency translation reserve (71,703) (233,211) - (304,914)Transfer 69,097 - - 69,097

Accumulated amortization at 31 December 2013 (40,271,689) (22,977,481) (3,228,500) (66,477,670)

Net book value at 31 December 2013 26,654,594 12,137,790 29,056,500 67,848,884



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13. TRADE PAYABLES, net

The average maturity of the trade payables is 73 days and average interest rate applied for TL payables is 10% and for USD payables is 3.47% (2013: interest rate applied for TL is 8% and for USD is 3.08%, maturity 88 days).

(*) BMGS has obtained USD 12,871,984 (EUR 10,582,070) in short term and USD 54,011,246 (EUR 44,402,694 ) in long term of vendor financing from CAT Financial Services Limited in 2014. The maturities of the finance agreements are in 2017. The interest is fixed at 5,33%. Additionally, BMGS has obtained short-term vendor financing from Societe Generale and ING Belgium NV/SA amounting USD 111,147,538 (2013: USD 111,048,118) with an average interest rate of Euribor+ 0.85% (2013: Euribor+0.85%). The maturity of the financing agreement is in 2015 (2013: in 2014).

Currency breakdown of current and non - current trade payables is as follows:


Current trade payables Trade payables (*) 698,740,643 636,976,936 Due to related parties (Note 34) 291,099 167,234

699,031,742 637,144,170


Non current trade payables Non-current trade payables (*) 53,943,534 68,210,651

53,943,534 68,210,651

14. SHORT-TERM BORROWINGS

The interest rates for TL borrowings are 10.17% (2013: 8.75%). Variable interest rates for EUR borrowings vary between Libor+1.60% - Libor+2.00% (2013: Cof+0.85% - Libor+2.70%). Fixed interest rates for EUR borrowings vary between 0.92% - 7.15%. (2013: 0.98% - 6.75%). For USD denominated borrowings, variable interest rates vary between Libor+1.20% - Libor+4.75% (2013:Libor+0.75% - Libor+5.50%). For USD denominated borrowings, fixed interest rates vary between 0.71% - 6.05% (2013: 0.71% - 7.15%)

There are no secured short term borrowings as of 31 December 2014 and 2013.

31 December 2014 31 Dcember 2013

Unsecured borrowings 589,637,501 543,358,451

Finance lease obligations 4,450,567 -

Other financial liabilities 704,860 407,928

594,792,928 543,766,379

Currency USD Currency USDCurrency Amount Equivalent Amount Equivalent

USD 280,906,351 280,906,351 385,248,987 385,248,987 EUR 247,635,314 301,222,861 196,093,748 269,804,276 GBP 179,419 278,731 127,767 210,559 TENGE 248,979,331 1,362,404 103,402,139 670,137 TL 391,878,028 168,993,069 104,902,132 49,150,603 DZD 18,584,995 211,860 21,093,039 270,259

752,975,276 705,354,821




14. SHORT-TERM BORROWINGS (continued)

15 . LONG-TERM BORROWINGS

Currency breakdown of short-term borrowings is as follows:

There is no secured long term borrowing as of 31 December 2014 (2013: EUR 6,000,000).

Effective interest rates p.a. (%) USD EUR

Fixed / Variable Min Max Min Max

Long - term Borrowings 1,013,605,923 Variable Libor+3,00% Libor+5,5% Libor+3,7%

Finance lease obligations 980,262 Fixed 0,71% 5,72% 2,75% 5,80%

Total loans 1,014,586,185

Less: Current portion of long-term borrowings

(including interest accruals for long-term borrowings) (196,305,723)

Total long-term borrowings, net of current portion 818,280,462

Effective interest rates p.a. (%) USD EUR

Fixed / Variable Min Max Min Max

Long - term Borrowings 858,148,096 Variable Libor+2,10% Libor+5,50% Cof+0,85% Libor+3,75%

Finance lease obligations - Fixed 0,71% 5,72% 3,00% 7,15

Total loans 858,148,096

Less: Current portion of long-term borrowings(including interest accruals for long-term borrowings) (126,371,732)

Total long-term borrowings, net of current portion 731,776,364

31 December 2014

31 December 2013


USD 396,804,923 396,804,923 321,015,060 321,015,060 EUR 82,626,097 100,506,139 88,636,086 121,953,888 GBP 584 908 795,241 1,310,548 TL 125,743,452 54,225,474 171,033,048 80,135,430 TENGE 7,467,207,526 40,860,233 2,568,646,110 16,647,091 DZD 210,118,603 2,395,251 211,068,693 2,704,362

594,792,928 543,766,379




127

15. LONG-TERM BORROWINGS (continued)The redemption schedules of long-term borrowings and long-term financial lease obligations as at 31 December 2014 and 2013 are as follows:

16. OTHER PAYABLES PROVISIONS AND EXPENSE ACCRUALS


Current payables and expenses accruals Accrued expenses 46,849,027 49,398,760 Advances received 41,495,884 26,791,995 Taxes and dues payable 23,379,945 26,011,621 Provision for litigation 5,617,872 5,240,556 Accruals for personnel and board of directors (BOD) premiums 18,814,465 16,029,407 Deferred income 6,778,725 13,585,761 Due to personnel (Note 34) 6,013,714 2,465,870 Due to related parties (Note 34) 9,256 678,766 Derivative financial instruments 616,534 2,736,550 Other 975,281 922,923

150,550,703 143,862,209


Non - current payables and expense accruals Other long-term payables 500,003 1,273,544Deferred income 935,989 949,088

1,435,992 2,222,632


Between 1-2 years 330,133,425 313,178,206 Between 2-3 years 316,220,496 281,347,863 Between 3-4 years 94,105,897 43,816,381 Between 4-5 years 47,051,411 47,280,067 More than 5 years 30,769,233 46,153,847

818,280,462 731,776,364

Currency breakdown of long-term and current portion of long-term borrowings are as follows:


USD 755,938,970 755,938,970 555,102,329 555,102,329 EUR 201,562,362 245,179,591 128,237,564 176,441,338 TENGE 661,449,371 3,619,422 1,416,292,389 9,178,823 GBP - - 179,166 295,264 TL 22,836,996 9,848,202 249,991,289 117,130,342

1,014,586,185 858,148,096




17. TAXES ON INCOME

a) Current Statutory Taxes

The Holding and the subsidiaries which are incorporated in Turkey are subject to taxation in accordance with the tax procedures and the legislation effective in Turkey.

In Turkey, the corporation tax rate for the fiscal year ended 31 December 2014 is 20% (2013: 20%). Corporate tax returns are required to be filed until the twenty fifth of the fourth month following the balance sheet date and paid in one installment until the end of the fourth month. The tax legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset against the final corporate tax liability for the year.

Corporate tax losses can be carried forward for a maximum period of five years following the year in which the losses were incurred. The tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years.

Undistributed dividends incorporated in share capital are not subject to income withholding taxes. Withholding tax at the rate of 19.8% is still applied to investment allowances relating to investment incentive certificates obtained prior to 24 April 2003. Subsequent to this date, the investments without investment incentive certificates do not qualify for tax allowance.

Income Withholding Tax

In addition to corporate taxes, companies should also calculate income withholding taxes and funds surcharge on any dividends distributed, except for companies receiving dividends who are Turkish residents and Turkish branches of foreign companies. Income withholding tax applied in between 24 April 2003 – 22 July 2006 is 10% and commencing from 23 July 2006, this rate has been changed to 15% upon the Council of Ministers’ Resolution No: 2006/10731. Undistributed dividends incorporated in share capital are not subject to income withholding tax.

Current statutory income tax payable for the years ended 31 December 2014 and 2013 are summarized as follows:


Provision for current taxes as per statements of income - Turkey tax charge 32,347,558 27,476,585 - Kazakhstan tax charge 4,336,136 1,340,423 - Malta tax charge 8,064,632 10,308,385 - Effect of tax recoverable (Malta) (*) (5,861,603) (7,302,647)- Italy tax charge 74,006 -

Total statutory income tax charge for the year 38,960,729 31,822,746 Prepaid taxes (29,930,902) (26,375,172)Currency translation reserve (5,466,950) (1,089,309)Tax receivable (Malta)(*) 5,861,603 7,302,647

Income tax payable 9,424,480 11,660,912

(*) MIT Holding has a tax receivable amounting to USD 5,861,603 classified under current assets. (2013: USD 7,302,647)



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17. TAXES ON INCOME (continued)

b) Deferred Taxes

Deferred tax assets and liabilities are based on temporary differences arising between the financial statements as reported for IFRS purposes and the statutory tax financial statements. Such temporary differences usually result in the recognition of income and expenses in different reporting periods for IFRS and tax purposes. Deferred taxes reflected in the consolidated statement of financial positions are summarized as follows:

Deferred tax assets are recognized for the carry forward of unused tax losses and unused tax credits to the extent that is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. The breakdown of deferred tax assets/ (liabilities) as of 31 December 2014 and 2013 using the current effective tax rates, are as follows:


Deferred tax assets 4,224,019 1,059,146

Deferred tax liabilities (113,808,244) (91,717,120)

Deferred tax asset (liability), net (109,584,225) (90,657,974)

(*) Deferred tax asset allowance is provided for specific subsidiaries since sufficient taxable profits will not be available in the foreseeable future. Allowance on deferred tax asset mainly arises due to tax losses amounting to USD 2,153,679 (2013: USD 1,348,730).


Net difference between the tax base and the carrying value of inventories (2,893,681) (2,931,306)Provision for employee benefits obligation 4,828,271 5,009,646 Tax losses carried forward 6,736,901 7,484,219 Other provisions and accruals 4,609,801 2,048,344 Net difference between the tax base and the carrying value of property, plant and equipment mainly arising from remeasurement pursuant to IAS 21 (119,869,468) (96,439,731)Other temporary differences (718,150) (3,755,841)

Total (107,306,326) (88,584,669)Less: Valuation allowance for deferred tax assets (*) (2,277,899) (2,073,305)

Deferred tax liability (109,584,225) (90,657,974)



17.TAXES ON INCOME (continued)

b) Deferred Taxes (continued)

Expiration schedule of carry forward tax losses is as follows:

Movements of deferred tax balances during the years ended 31 December 2014 and 2013 are as follows:

(*) USD (41,243) (2013: USD 296,698) charge to equity is related to cash flow hedge, USD 58,685 (2013: USD 550,019) charge to equity is related to actuarial losses from Employee Benefits Obligation and USD (25,642,293) (2013: USD (2,673,140)) charge to equity is related to revaluation of properties.

Reconciliation of taxes by applying the effective tax rates to profit before tax provision as reflected in the statement of comprehensive income for the years ended 31 December 2014 and 2013 is as follows:


Expiring in 2014 - 39,128Expiring in 2015 193,993 210,773Expiring in 2016 2,727,195 2,171,595Expiring in 2017 5,862,061 4,816,041Expiring in 2018 21,611,014 30,183,558Expiring in 2019 3,290,242 -

33,684,505 37,421,095


Net income from ordinary activities before income tax 132,282,127 166,173,600

At statutory income tax rate at 20% (2013 – 20%) (26,456,425) (33,234,720)Effect of: Disallowable expenses (4,958,553) (5,318,063)Tax exempt income 7,878,739 1,825,737 Non tax deductible translation gain arising from remeasurement (3,488,988) (9,951,663)Unused tax losses and tax offsets not recognised as deferred tax assets (7,128,070) (14,500,334)Impairment provided for deferred tax asset (40,919) 53,755

(34,194,216) (61,125,288)

2014 2013

Beginning balance (90,657,974) (60,311,035)

Tax charge recognized in the statement of income 4,766,513 (29,302,542)

Tax credited/(charged) to equity (*) (25,624,851) (1,826,423)

Currency translation reserve 1,932,087 782,026

(109,584,225) (90,657,974)



131

18. EMPLOYEE BENEFITS OBLIGATION

Under the Turkish Labor Law, the Group is required to pay termination benefits to each employee whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women), achieves the retirement age (58 for women and 60 for men) if the employee has completed one year of service. The amount payable consists of one month’s salary limited to a maximum for each year of service as of 31 December 2014 of TL 3,438.22 (USD 1,482.69) (2013: TL: 3,254.44 USD 1,524.83).

The maximum payment for retirement payment liability per year of employment is increased to TL 3,541.37 (USD 1,527.17) as of 1 January 2014.

International Accounting Standard No. 19 (“IAS 19”) “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. As detailed in Note 18, such actuarial gains/losses are recognized within other comprehensive income starting from 31 December 2012.

IFRS requires actuarial valuation methods to be developed to estimate the Group’s obligation under defined benefit plans. The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. Accordingly, as of 31 December 2014 and 2013, the following actuarial assumptions were used in the calculation of the liability:


Interest rate 9.7% - 10.2% 9.7 % - 10.2 %Expected rates of salary/limit increases 6.00% 6.00%Turnover rate 2% 2%



Movements of the provision for employee benefits obligation during the years ended 31 December 2014 and 2013 are as follows:

18. EMPLOYEE BENEFITS OBLIGATION (continued)

2014 2013

Beginning of the year 25,048,231 28,427,376 Actuarial (gain) / loss (293,425) 1,335,338 Interest expense 1,078,625 1,255,459 Current service cost 5,194,273 3,303,937 Payments (4,761,500) (6,014,123)Currency translation reserve (2,124,847) (3,259,756)

End of the year 24,141,357 25,048,231

2014 2013

Actuarial (gain)/ loss 3,144,192 3,437,617 Deferred tax (628,839) (687,524)Actuarial (gain)/ loss (Net) 2,515,353 2,750,093

Non controlling interest (999,964) (1,147,773)

Actuarial (gain)/ loss attributable to equity holders' of the parent 1,515,389 1,602,320

Equity reconciliation of actuarial gains and losses from employee benefits obligation is as follows:

Of the total charge of provision for employee benefits obligations, USD 2,362,927 is charged to cost of sales, (2013: USD 809,237 is credited) and USD 3,909,971 (2013: USD 4,289,103) is charged to marketing and general administrative expenses.

Average number of personnel for the year ended 31 December 2014 was 6,706 (2013: 6,321). During the year ended 31 December 2014, the average number of personnel working abroad was 1,100 (2013: 955), of which 786 (2013: 760) are located in Middle East and Central Asia, 2 (2013: 2) in the United Kingdom, 90 (2013: 90) in Italy, 35 (2013: 34) in North Africa, 20 (2013: 27) in Malta, 11 (2013: 12) in Cyprus, 156 (2013: 30) in USA.



133

1. Voting right.2. Nomination of majority of board members.3. Board membership nomination.

Group Voting Rights TL Share % TL Share %

Yeni Nesil Yönetim ve Danışmanlık A,Ş, A 1,2,3 16,815,998 30,00% 16,815,998 30,00%Ali Ahmet Kocabıyık B 1,3 10,650,122 19,00% 10,650,122 19,00%Ayşe Nükhet Özmen B 1,3 10,509,988 18,75% 10,509,988 18,75%Fatma Zeynep Hamedi B 1,3 10,509,988 18,75% 10,509,988 18,75%Zehra Nurhan Kocabıyık B 1,3 4,904,656 8,75% 4,904,656 8,75%İsmail Sefa Batıbayı B 1,3 2,634,506 4,70% 2,634,506 4,70%Cemil Bülent Demircioğlu B 1,3 28,027 0,05% 28,027 0,05%Borusan İstikbal Ticaret T,A,Ş, B 1,3 40 0,00% 40 0,00%

56,053,325 100,00% 56,053,325 100,00%

USD equivalent 46,044,080 46,044,080

2014 2013

19. SHARE CAPITAL

Holding’s historical statutory share capital (authorized) consists of 5,605,332,500 shares with a par value of TL 0.01 each as of 31 December 2014 and 2013. The share groups and privileges assigned to each share group are as follows:

At 1 January 5,605,333 56,053,325 5,605,333 56,053,325

31 December 5,605,333 56,053,325 5,605,333 56,053,325

Shares Amount Shares AmountCommon shares (thousand) (TL) (thousand) (TL)

2014 2013



20. RETAINED EARNINGS AND LEGAL RESERVES

Under Turkish Tax Law and Turkish Commercial Code (“TCC”), consolidated reporting for tax and statutory purposes is not recognised. Each company within the Group is treated as an individual tax paying and statutory entity. The ability of an individual company to distribute dividends to its direct shareholders is dependent on its statutory profits.

Retained earnings as per the statutory financial statements, other than legal reserves, are available for distribution subject to the legal reserve requirement referred to below:

The statutory legal reserves consist of first and second reserves, appropriated in accordance with TCC. TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the entity’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital. Dividend distributions are made in TL in accordance with its Articles of Association, after deducting taxes and setting aside the legal reserves as discussed above.

Revaluation fund from participations and special funds cannot be distributed to the shareholders, but can be added to the share capital.

As of 31 December 2014 and 2013, general and legal reserves including inflation corrections (as per statutory financial statements of the Holding) are as follows (TL):


Legal reserves 56,148,916 49,333,728 Revaluation fund from participations 13,783,557 13,874,872 Retained earnings 166,148,389 127,812,008 Special funds 14,516,111 14,516,111 Inflation adjustment on capital 47,501,810 47,501,810 Gain on sale of investment to be added onto capital 16,237,255 16,237,255

Retained earnings and legal reserves 314,336,038 269,275,784



135

For the year ended 31 December 2014, there is no profit or loss from discontinuing operations (2013: None)


Property, plant and equipment, and intangible assets, net 53,904,794 63,364,794

Other assets 573,199 573,199

Assets classified as held for sale 54,477,993 63,937,993

Borrowings - -

Liabilities associated with assets classified as held for sale - -

21. ASSETS CLASSIFIED AS HELD FOR SALE

As at 31 December 2014 assets classified as held for sale and liabilities associated with assets classified as held for sale is related with İzmit Plant of Borusan Mannesmann Boru.

Spiral welded pipe production facility with a capacity of 250,000 tons/ year which its investments started in Gemlik, has been put into use in 2012, completed its trial productions successfully and has already started its commercial operations. It is aimed that taking advantage with the facility that costs a total of 110 million investments, in large diameter pipes used in petroleum and natural gas pipelines’ markets in the way of waterfront strategic location, production elasticity, layout, production capacity and the technology is used.

The production activities in spiral welded pipe facility which was established in Yenidoğan neighborhood near Seka state hospital İzmit / Kocaeli was stopped as a result of newly activated spiral welded production facility, Sekapark and the urban regeneration projects which are conducted by Kocaeli Metropolitan Municipality. In this direction, Gemlik facilities which have new production opportunities became active and large diameter pipes which are strategically important for the Group are started to be manufactured.

The details of assets classified as held for sale, liabilities and expenses associated with assets classified as held for sale are as follows:



22. NET SALES

1 January - 31 December 2014

Domestic Sales Exports Total

Steel Segment Steel pipes 253,032,923 543,978,008 797,010,931 Cold rolled coils 290,335,618 48,750,331 339,085,949 Galvanized sheets 436,917,389 80,217,683 517,135,072 Steel servicing 227,764,171 614,635 228,378,806

1,208,050,101 673,560,657 1,881,610,758

Distributorship Segment Motor vehicles 1,114,268,352 - 1,114,268,352 Auto spare parts and services 141,858,923 - 141,858,923 Earth moving equipment (EME) 321,041,073 152,815,971 473,857,044 Power systems (PS) 102,085,088 54,783,811 156,868,899 EME and PS spare parts and services 111,158,622 128,269,473 239,428,095

1,790,412,058 335,869,255 2,126,281,313

Other Segment Logistic services 381,193,894 80,389,034 461,582,928 Valves 11,203,784 10,279,846 21,483,630 Miscellaneous 4,993,953 2,997,149 7,991,102

397,391,631 93,666,029 491,057,660

3,395,853,790 1,103,095,941 4,498,949,731

1 January - 31 December 2013

Domestic Sales Exports Total

Steel Segment Steel pipes 356,314,442 318,716,819 675,031,261 Cold rolled coils 278,564,086 111,225,392 389,789,478 Galvanized sheets 381,639,397 95,116,780 476,756,177 Steel servicing 248,141,553 801,269 248,942,822

1,264,659,478 525,860,260 1,790,519,738

Distributorship Segment Motor vehicles 880,811,177 - 880,811,177 Auto spare parts and services 126,725,305 - 126,725,305 Earth moving equipment (EME) 309,725,044 163,184,291 472,909,335 Power systems (PS) 86,950,847 58,423,680 145,374,527 EME and PS spare parts and services 111,034,022 137,353,789 248,387,811

1,515,246,395 358,961,760 1,874,208,155

Other Segment Logistic services 367,205,445 85,641,933 452,847,378 Valves 6,512,643 9,788,104 16,300,747 Miscellaneous 4,524,717 2,839,231 7,363,948

378,242,805 98,269,268 476,512,073

3,158,148,678 983,091,288 4,141,239,966



137

23. COST OF GOODS SOLD AND SERVICES PROVIDED

24. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


Direct raw materials 1,361,995,619 1,302,396,462Labor 104,917,721 100,159,665Depreciation and amortization expenses 89,827,249 80,459,489Other production overheads including utilities, repair, maintenance 102,756,205 112,811,873Net changes in finished goods 18,592,316 (22,067,873)Net changes in WIP inventories (8,825,353) 1,964,795Cost of merchandise inventories sold 1,789,674,672 1,518,638,557Cost of services 490,593,331 457,930,539Other cost of sales 28,558,597 88,731,627

3,978,090,357 3,641,025,134


Personnel expenses 131,805,589 112,993,045 Depreciation and amortization expenses 22,787,272 20,935,850 Consulting, audit and legal fees 21,063,453 21,379,826 Advertising expenses 14,861,707 14,935,965 Board of directors and personnel premium 10,445,898 19,609,533 Travel expenses 8,757,275 8,905,253 Rent expenses 7,884,458 8,641,184 Donations sponsorship 7,800,361 6,957,136 Outsourcing expenses 7,187,884 6,289,828 Insurance 6,120,223 6,261,198 Car rentals and other car expense 5,891,325 6,784,019 Sales distribution expenses 5,254,738 5,445,241 Taxes 4,377,387 4,314,147 Entertainment 4,047,835 3,329,163 Provision for doubtful receivable, net of recoveries 3,626,226 (437,135)Repair and maintenance expenses 3,306,029 4,185,428 Representation and meeting 2,573,696 2,850,232 Energy 2,566,204 3,590,050 Training 2,547,599 2,814,939 Communication 2,432,920 3,193,532 Food expenses 1,576,215 2,196,595 Provision for lawsuit expenses 1,399,556 984,595 Stationary 931,014 1,078,092 Other 19,346,455 19,055,688

298,591,319 286,293,404



25. PERSONNEL EXPENSES

26. DEPRECIATION AND AMORTIZATION EXPENSES

27. OTHER OPERATING (EXPENSE) / INCOME, net


Gain on sale of a subsidiary, net (Note 29) 6,920,319 -Commission expense (4,219,762) (4,164,716)Commission income 3,000,116 2,596,177Scrap sales 1,385,054 983,271Gain on sale of property, plant and equipment 1,290,870 19,394,446Warranty income 885,220 575,066Rent income 2,165,195 1,317,049Income from wind project - 28,330,752Other, net (4,358,784) (3,261,774)

7,068,228 45,770,271


Wages, salaries and other social expenses 210,907,664 178,554,215 Cost of defined contribution plan (employer’s share of social security premiums) 19,542,748 29,500,155 Termination benefits 6,272,898 5,098,340

236,723,310 213,152,710

2014 2013

Personnel expenses 131,805,589 112,993,045

Labor 104,917,721 100,159,665

Total 236,723,310 213,152,710


Cost of production 88,075,513 75,779,514 Selling, general and administrative expenses 13,357,028 15,236,261

Total depreciation charge 101,432,541 91,015,775

Currency translation reserve 7,456,780 (354,432)Total depreciation 108,889,321 90,661,343

Cost of production 1,751,736 4,679,975 Selling, general and administrative expenses 9,430,244 5,699,589

Total amortization charge 11,181,980 10,379,564

Currency translation reserve 137,650 405,670

Total amortization 11,319,630 10,785,234

Total depreciation and amortization expenses 120,208,951 101,446,577



139

28. FINANCIAL (EXPENSE) / INCOME, net

29. ACQUISTION / DISPOSAL OF SUBSIDIARY

As of 30 June 2014, the Group disposed 100% of the shares of Başkent.

(*) Other financial expense mainly comprises foreign exchange losses on loans, factoring expenses, letter of guarantee expenses, bank and credit card commissions, certain bank expenses paid for the loans obtained and other bank expenses.

30 June 2014Book value of net assets disposed

Current assets Other current assets 702,587 Non-current assets Property, plant and equipment 2,367,861 Intangible asset 1,299,037

Previously recognised impairment reserve (4,189,804)

Net assets disposed 179,681 Consideration received in cash and cash equivalents 7,100,000

Gain on disposal (Note 27) 6,920,319


Financial income: Interest income 7,236,761 8,339,076 Due date income, net 8,554,026 6,725,580 Other financial income 2,735,058 1,795,930

Total financial income 18,525,845 16,860,586

Financial expense: Interest expense (89,542,801) (76,118,363)Other financial expense (*) (11,076,701) (9,837,190)

Total financial expense (100,619,502) (85,955,553)

Financial expense, net (82,093,657) (69,094,967)



30. JOINT VENTURES

Summarized financial information in respect of the Group’s material joint ventures is set out below. The summarized financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance with IFRS.

Borusan Enerji Borusan ManheimCurrent assets 14,291,184 1,976,663Non-current assets 279,780,233 2,570,093Current liabilities (23,609,069) (2,376,793)Non-current liabilities (154,352,435) (25,635)

Total 116,109,913 2,144,328The above amounts of assets and liabilities include the following:Cash and cash equivalents 10,534,932 1,716,466Current financial liabilities(excluding trade and other payables and provisions) (14,809,486) (1,023,587)Non-current financial liabilities (151,089,739) -(excluding trade and other payables and provisions)

31 December 2014

Borusan Enerji Borusan ManheimCurrent assets 28,015,488 2,089,587Non-current assets 210,090,739 2,281,421Current liabilities (69,279,169) (3,214,002)Non-current liabilities (73,556,662) (25,635)

Total 95,270,396 1,131,371The above amounts of assets and liabilities include the following:Cash and cash equivalents 25,404,322 1,985,738Current financial liabilities(excluding trade and other payables and provisions) (56,267,059) (1,712,619)Non-current financial liabilities (70,320,198) -(excluding trade and other payables and provisions)

31 December 2013

Borusan Enerji Borusan ManheimNet assets of the joint venture 232,220,126 5,404,918Proportion of the Group’s ownership interest in the joint venture 50.00% 46.20%Goodwill 1,022,898 -

Carrying amount of the Group’s interest in the joint venture 116,110,063 2,497,072

Borusan Enerji Borusan ManheimNet assets of the joint venture 190,540,792 2,448,855Proportion of the Group’s ownership interest in the joint venture 50% 46.2%Goodwill 1,022,898 -

Carrying amount of the Group’s interest in the joint venture 95,270,396 1,131,371

31 December 2014

31 December 2013



141

30. JOINT VENTURES (continued)

1 January- 1 January- 31 December 2014 31 December 2013

The movement of Joint Ventures is as follows: Beginning of the period - 1 January 96,401,767 91,861,734

Shares of profit/(loss) (13,647,526) (20,125,604)

Contribution to capital increase in Joint Ventures 35,500,000 24,665,637

End of the period - 31 December 118,254,241 96,401,767

Borusan Enerji Borusan ManheimRevenue 20,571,895 3,823,832Profit or loss from continuing operations (14,667,360) 1,019,986Post-tax profit (loss) from discontinued operations - -Profit or loss for the year (14,667,360) 1,019,986Other comprehensive income for the year - -Total comprehensive income for the year (14,667,360) 1,019,986Dividends received from the joint venture during the year - -The above profit (loss) for the year include the following: - -Selling, general and administrative expenses (6,348,633) (2,593,699)Other operating (expense)/income, net (81,702) 66,654Financial (expense)/income,net (8,424,327) 145,907

Borusan Enerji Borusan ManheimRevenue 15,264,576 3,442,435Profit or loss from continuing operations (20,890,755) 765,151Post-tax profit (loss) from discontinued operations - -Profit or loss for the year (20,890,755) 765,151Other comprehensive income for the year - -Total comprehensive income for the year (20,890,755) 765,151Dividends received from the joint venture during the year - -The above profit (loss) for the year include the following: Selling, general and administrative expenses (10,405,381) (2,172,001)Other operating (expense)/income, net (1,198,582) 2,297Financial income /(expense),net (6,803,722) 2,218

1 January-31 December 2014

1 January-31 December 2013



31. FINANCIAL RISK MANAGEMENT

(a) Capital risk management

Capital risk management of the Group aims to maximize the profitability through the optimization of the debt and equity balance, while maintaining the continuity of its business operations. The capital structure of the Group includes of issued capital, reserves and equity items consisting of retained earnings disclosed in Notes 19 and 20, respectively.

The Group’s cost of capital and capital risks associated with each capital item are assessed by the Board of Directors and the Management of the Holding. Decisions on the dividend payments or capital increase are made based on those assessments and the Holding aims at balancing its capital structure by borrowing loans or settling its debt amounts.

The Group’s overall strategy is determined in accordance with the financial risk management application framework issued on 22 October 2010.

(b) Significant accounting policies

The details of the Group’s significant accounting policies in respect of financial instruments are disclosed in Note 3 “Summary of significant accounting policies” to the financial statements.

The carrying value of the financial instruments listed above approximates their fair values as of 31 December 2014.

Categories of financial instruments

Financial AssetsCash and cash equivalents 445,437,890 - - - 445,437,890 6Trade receivables 524,589,777 - - - 524,589,777 7Other assets 154,146,336 - - - 154,146,336 9Available for sale investments - 4,160,262 - - 4,160,262 1,124,174,003 4,160,262 - - 1,128,334,265Financial LiabilitiesBorrowings - - 1,609,379,113 - 1,609,379,113 14, 15Trade payables - - 752,975,276 - 752,975,276 13Other payables - - 6,022,970 - 6,022,970 16Derivative financial liabilities - - - 616,534 616,534 16 - - 2,368,377,359 616,534 2,368,993,893

Note

31 December 2014

Balance Sheet

Loans and receivables (including cash and

cash equivalents)Available for

sale investmentsFinancial liabilities at

amortized costDerivative financial

instruments Total



143

31. FINANCIAL RISK MANAGEMENT (continued)

Categories of financial instruments (continued)

The carrying value of the financial instruments listed above approximates their fair values as of 31 December 2013.

Note

Loans and receivables

(including cash and cash

equivalents)

Available for sale

investments

Financial liabilities at

amortized cost

Derivative financial

instruments TotalFinancial AssetsCash and cash equivalents 344,024,875 - - - 344,024,875 6Trade receivables 405,629,242 - - - 405,629,242 7Other assets 113,720,431 - - - 113,720,431 9Available for sale investments - 4,393,238 - - 4,393,238 863,374,548 4,393,238 - - 867,767,786 Financial LiabilitiesBorrowings - - 1,401,914,475 - 1,401,914,475 14, 15Trade payables - - 705,354,821 - 705,354,821 13Other payables - - 3,144,636 - 3,144,636 16Derivative financial liabilities - - - 2,736,550 2,736,550 16 - - 2,110,413,932 2,736,550 2,113,150,482

31 December 2013

Balance Sheet




(d) Objectives of financial risk management

The Group’s treasury is managed by finance departments of subsidiaries and the Holding’s finance department, which is responsible for the control and coordination and the Group’s finance functions are responsible for determining, assessing and managing the financial risks that the Group companies are exposed to using a proactive approach. This responsibility includes maintaining a systematical access to international and local markets as well as monitoring and managing the Group’s risk exposure using the in-house reports which analyze the level and extent of risks. Such risks consist of market risk (including currency risk, interest rate risk and price risk), cash flow risk, maturity risk and liquidity risk.

Risks that are attributable to the Group companies are managed by using the Value-at Risk (VaR) method and policies that are approved by the Board of Directors of each company. Such policies prescribe the written procedures on the currency risk, interest risk and the use of derivative or non-derivative financial instruments and investments in excess of liquidity. Compliance with the policies and risk limits are monitored by the Holding’s Finance Function on a daily basis. Idle liquidity is used to utilize alternative earnings via financial instruments within the limits specified by the BOD.

When appropriate, the Group uses forward agreements as derivative financial instruments to minimize and hedge its risks. The Group has no financial instruments (including derivative financial instruments) used for speculative purposes.

In order to minimize risk exposure, Borusan Holding Finance Department reports to Group’s Management on a monthly basis, and reports to the Board of Directors of the Holding on a quarterly basis.

(*) VaR represents the amount of possible loss in one day, with a confidence level of 99%, considering the market volatility in foreign currency exchange rates, capital markets and interest rates.

(e) Market risk

At the subsidiary level, the Group uses VaR analyses, which is the estimation of maximum loss within a given confidence level (99% probability) over a given period of time.

Risk management is assessed based on the functional currency of each company. The overall Group monitoring is performed in USD which is the functional currency of the Group. Risk reports are reviewed on a daily, weekly and monthly basis in order to perform a proactive and efficient management.

(f) Foreign currency and interest risk management

The Group is exposed to foreign currency risk arising from a limited level of TL based trade receivables, tax and statutory liability payments caused by the operations of the Group companies and foreign currency positions held to benefit from higher yields within the limits determined by the BOD of Holding. The Group’s Treasury Management manages and controls such risk by offsetting the foreign currency assets and liabilities within the Group as well as using forward transactions and options. Fixed/variable costs of current loans are managed using derivative instruments within the VaR limits by monitoring the global market interest movements, for hedging purposes.

According to VaR analysis performed by Group Management; the Group is primarily exposed to TL and EUR foreign currency risks. As a result of open position follow-up, as of 31 December 2014, the Group has short position in TL for a USD equivalent amount of USD 21,001,071 and long position in EUR for a USD equivalent amount of USD 154,159,917 (31 December 2013: the Group has long position in TL for a USD equivalent amount of USD 4,490,133 and long position in EUR for a USD equivalent amount of of USD 98,821,858).

If volatility in capital markets, interest rates and foreign exchange rates is increased by 10% against as of 31 December 2014 keeping all other variables constant, value-at risk amounting to USD 1,446,470 (2013: USD 4,228,535) as of 31 December 2014 would have been higher by USD 1,587,976 (2013: USD 2,519,916).



145


(g) Credit risk management

The Group’s credit risk primarily arises from its trade receivables. Such credit risk is managed by limiting the risk through the collaterals received and insuring the receivables. In managing credit risk, the Group uses instruments such as; Direct Debit System, non-recourse factoring, letters of guarantee, credit insurances and mortgages. The Group monitors its customer risks on a consistent basis and creditworthiness of the customers are systematically assessed based on the financial position, past experience and other factors. Trade receivables are reviewed depending on the Group policies and procedures and they are carried at net amounts in the consolidated statement of financial position subsequent to any provision for doubtful receivables (Note 7). As of 31 December 2014, trade receivables amounting to USD 2,596,426 (2013: USD 1,999,086) have been insured by the Group.

(h) Price risk

The Group is exposed to price risks arising from the impact of the price changes on the steel raw materials and trade inventories. The Group does not use commodity hedge instruments other than zinc swaps. The Group’s Treasury Management uses derivative financial instruments to mitigate the risk of rising of only zinc prices. There are no global derivative instruments to be utilized against the adverse price changes on the sales margins. The Group optimizes inventory turnover rates by reviewing the sale-production-purchase balance on a consistent basis considering the price trend of the steel raw materials and trade goods for future periods and reflects the steel price to the selling prices.

(i) Liquidity risk management

The Group manages its liquidity risk by monitoring its expected and actual cash flows on a consistent basis considering its short, medium and long-time funding and liquidity requirements.

Liquidity risk tables

Conservative liquidity risk management requires maintaining sufficient cash on hand, availability of sufficient loan transactions and fund sources and ability to close market positions.

Funding risk on current and future potential loan requirements is managed by maintaining the availability of sufficient number of creditors with high quality.




The below table shows the contractual maturity analysis of the Group’s non-derivative financial liabilities:

(j) Liquidity risk management (continued)

Liquidity risk tables (continued)

Borrowings 83,640,691 189,181,922 533,082,483 844,455,031 46,724,468 1,697,084,595 1,609,379,113Trade payables 106,019,989 267,753,725 334,351,214 53,943,534 - 762,068,462 752,975,276Other payables 29,393,659 9,256 - - - 29,402,915 29,402,915Derivative Financial Liabilities 469,287 284,135 (136,888) - 616,534 616,534

219,523,626 457,229,038 867,296,809 898,398,565 46,724,468 2,489,172,506 2,392,373,838

31 December 2013 Up to 1 Month 1 Month - 3 Months 3 Months - 1 Year 1 Year - 5 Years More than 5 Years Total Carrying value

Borrowings 89,051,979 79,965,453 455,608,375 644,161,280 218,217,031 1,487,004,118 1,401,914,475

Trade payables 158,293,312 168,282,538 276,517,314 118,755,985 - 721,849,149 705,354,821

Other payables 28,477,491 678,766 - - - 29,156,257 29,156,257

Derivative Financial Liabilities 1,584,545 870,531 281,474 - - 2,736,550 2,736,550

277,407,327 249,797,288 732,407,163 762,917,265 218,217,031 2,240,746,074 2,139,162,103

Up to 1 Month 1 Month - 3 Months 3 Months - 1 Year 1 Year - 5 Years More than 5 Years Total Carrying value31 December 2014



147


Fair value of financial instruments

The fair values of financial assets and financial liabilities are determined and grouped as follows:

•Level 1: the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

•Level 2: the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions; and

• Level 3: the fair value of the financial assets and financial liabilities where there is no observable market data. The fair value of derivative instruments, are calculated using quoted prices. Where such prices are not available, estimate is made based on discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

Based on the fair value hierarchy, the Group’s financial assets and liabilities are categorized as follow:

Financial Assets - Fair Value Measurement

2014 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Investment funds 9,605,717 - - 9,605,717

Derivative transactions (net) - (616,534) - (616,534) 9,605,717 (616,534) - 8,989,183

2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Investment funds 3,428,624 - - 3,428,624

Derivative transactions (net) - (2,736,550) - (2,736,550) 3,428,624 (2,736,550) - 692,074



32. COMMITMENTS AND CONTINGENT LIABILITIES

Guarantee Letters

As at 31 December 2014, the Group is contingently liable for letters of guarantee given mainly to the Government offices, government bids and customers amounting to USD 176,831,963 (2013: USD 139,277,265).

Export Commitments

As at 31 December 2014, total amount of export commitments related to export incentives is USD 429,941,176 and is committed by Borçelik and Borusan Mannesman Boru. (2013: USD 451,003,126) committed by Borçelik and Borusan Mannesman Boru. Legal Proceedings

As of 31 December 2014, Borusan Otomotiv, Borusan Oto and Borusan Pazarlama are defendants in certain cases against automobile and service customers whose monetary claims aggregate approximately to USD 5,238,575 (2013: USD 4,063,653).

Against such claims, reserve amounting to USD 4,726,323 (2013: USD 3,892,310) has been provided in the accompanying consolidated financial statements for Borusan Oto, Borusan Otomotiv and Borusan Otomotiv Pazarlama as of 31 December 2014.

Other commitment and contingencies

As of 31 December 2014 there are no other commitments and contingencies (2013: None).

Purchase Amount Maturities Between Average Rate

Purchase Sell 2014 2013 2014 2013 2014 2013

USD EUR 14,191,200 49,174,616 2 January 2015 - 30 May 2016 2 January 2014 - 26 February 2015 1.2800 1.3466

TL USD 40,567,690 42,712,979 28 January 2015 - 30 June 2015 2 January 2014 - 26 June 2014 2.3100 2.0902

USD TL 29,316,371 - 30 June 2015 - 2.4200 -

USD EUR 257,040 - 30 March 2015 - 1.2600 -

USD GBP 1,100,253 - 1 March 2015 - 1.590 -

33. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 December 2014 and 2013, the summary of nominal amounts of the forward transactions entered into with various local branches of the foreign banks that were outstanding are as follows:

Forward Contracts



149

33. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

Interest Rate Swaps

Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt and the cash flow exposures on the issued variable rate debt. The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows using the curves at the end of the reporting period and the credit risk inherent in the contract, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the reporting period.

The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding at the end of the reporting period.

Average contracted fixed interest rate Notional principal value Fair value assets (liabilities)

2014 2013 2014 2013 2014 2013

% %

Less than 1 year 2.80 - 44,642,857 - 172,076 -

1 to 2 years 2.80 2.75 18,071,429 10,860,000 - (267,502)

2 to 5 years 2.79 - 2,857,143 - - -

65,571,429 10,860,000 172,076 (267,502)



34. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

Balances with related parties

Receivables Payables Current Non Current Current Trade Non Trade Trade Non Trade Trade Non Trade

Borusan Sigorta 3,105 - - - - -

Mitco Singapore PTE, LTD, - - - 12,956,145 - -

Sistem Organizasyon - 25,220,000 - - - -

B&B Havacılık - 4,727,000 - 8,000,000 - -

Borusan Kocabıyık Vakfı Kültür ve Sanat İktisadi İşletmesi 307,660 - - - - -

Due from / due to personnel - 1,627,807 - - - 6,013,714

Other 40,503 129,307 - 29,012,518 291,099 9,256

351,268 31,704,114 - 49,968,663 291,099 6,022,970

31 December 2014

Receivables Payables Current Non Current Current Trade Non Trade Trade Non Trade Trade Non Trade

Borusan Sigorta 2,902 - - - - -

Mitco Singapore PTE, LTD, - - - 6,629,016 - -

Sistem Organizasyon - 6,750,000 - 18,230,000 - -

B&B Havacılık - 6,710,000 - 1,350,000 - -

Borusan Kocabıyık Vakfı Kültür ve Sanat İktisadi İşletmesi 350,815 - - - - -

Due from / due to personnel - 972,818 - - - 2,465,870 Other 24,746 - - 28,743,048 167,234 678,766

378,463 14,432,818 - 54,952,064 167,234 3,144,636

31 December 2013



151

34. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued)

Transactions with related parties

1 January - 31 December 2014 Service obtained from Sales to Other expenses to Finance income from related parties related parties related parties related parties

Borusan Kocabıyık Vakfı Kültür ve Sanat İktisadi İşletmesi 600,000 - - -

Borusan Sigorta 78,540 - - -

Sales to Personnel - 2,528,798 - -

678,540 2,528,798 - -

1 January - 31 December 2013 Service obtained from Sales to Other expenses to Finance income from related parties related parties related parties related parties

Borusan Kocabıyık Vakfı Kültür ve Sanat İktisadi İşletmesi 1,010,774 - - -

Borusan Sigorta 275,358 250,001 644,070 -

Sales to Personnel - 3,225,516 - -

Other 846,551 - - 95,815

2,132,683 3,475,517 644,070 95,815



34. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued)

Compensation of Key Management Personnel

35. SUBSEQUENT EVENTS

None.

2014 2013

Salaries and other short-term benefits 16,258,744 14,477,402

16,258,744 14,477,402



BORÇELİK ÇELİK SANAYİİ TİCARET A.Ş.Borçelik Çelik Sanayii Ticaret A.Ş.Ata Mah. 125 nolu Sokak No: 1 16601 Gemlik - BursaPhone : 0 224 280 40 00Fax : 0 224 519 01 30 - 31www.borcelik.com

BORUSAN HOLDİNG A.Ş.Rumelihisarı, Baltalimanı Hisar Cad. No: 5 34470 Sarıyer - İstanbulPhone : 0 212 393 52 00 Fax : 0 212 393 00 01www.borusan.com

BORUSAN İSTİKBAL TİCARET T.A.S. Meclisi Mebusan Cad. No: 35 34427 Salıpazarı - İstanbulPhone : 0 212 393 52 00Fax : 0 212 249 37 22www.borusan.com

BORUSAN KOCABIYIK VAKFI KÜLTÜR SANAT İKTİSADİ İŞLETMESİİstiklal Cad. No: 213 34433 Tünel - Beyoğlu - İstanbulPhone : 0 212 336 32 80 Fax : 0 212 252 45 91www.borusansanat.com

BORUSAN LOJİSTİK DAĞITIM DEPOLAMA TAŞIMACILIK ve TİCARET A.Ş.Head OfficeHeadquarterBayar Cad. Şehit Mehmet Fatih Öngül Sok. Bağdatlıoğlu Plaza No: 3 - 4 - 5 34742 Kozyatağı - Kadıköy - İstanbulPhone : 0216 571 50 00Fax : 0216 445 77 03-04www.borusanlojistik.comwww.balnak.com.trwww.borusanlimani.comwww.etaşımacılık.com Borusan PortAta Mahallesi 125 Nolu Sok. No: 3 16601 Gemlik - BursaPhone : 0224 270 13 00Fax : 0224 519 01 53

Çatalca OfficeFerhatpaşa Mah. Trakya Serbest Bölgesi Karşısı Çatalca - İstanbulPhone : 0212 473 15 15Fax : 0212 473 15 22 Güneşli OfficeBağlar Mahallesi, Yalçın Koreş Caddesi Erdinç Binaları A Blok No: 22 Kat: 3-4. 34209 Güneşli - İstanbulPhone : 0212 473 15 15Fax : 0212 473 15 25 Kıraç OfficeSan. Bir Bulvarı 6. Cadde 3. Bölge No: 2 Plasmen Ticaret Merkezi Yanı Kıraç - İstanbul Phone : 0212 886 44 40Fax :0212 886 32 40 Tepeören Office1992 Parsel Tepeören Mah. Eski Ankara Yolu Üzeri 34959 Tuzla - İstanbulPhone : 0216 304 07 60Fax :0216 304 07 69-70 Ankara OfficeBirlik Mah. 7. Cad. No: 45 Çankaya - AnkaraPhone : 0312 496 61 66Fax : 0312 496 61 44 Bursa OfficeNilüfer Organize Sanayi Bölgesi Akasya Caddesi No: 7 Nilüfer - BursaPhone : 0224 411 07 85Fax : 0224 411 07 75 İzmir Office1476/1 Sok. No: 3 İsmet Şen İş Merkezi K: 4 - 5 D: 10 - 12 Alsancak -İzmirPhone : 0232 464 23 00Fax : 0232 464 02 52 – 03 Gebze GOSP OfficeGOSB İhsandede Cad. No: 102 41430 Gebze - KocaeliPhone : +90 (262) 751 53 54 Köseköy Vehicle Logistics Center17 Ağustos Mahallesi İrfan Caddesi No: 49 Köseköy - İzmit - KocaeliPhone : +90 262 315 77 20Fax : +90 262 373 61 37 Mersin Officeİsmet İnönü Bulvarı Kurtuluş Meydanı No: 78 Klas Plaza B Blok K: 11 No: 20 33100 MersinPhone : 0324 239 21 75Fax : 0324 239 21 74 Borusan Logistics International USA INC225 Peachtree St., N.E. STE 1100 Atlanta, GA 30303 U.S.A.Phone : (+1 404) 525-2600

Borusan Logistics International NetherlandsP.O. Box 87459, 1080 JL Amsterdam, The NetherlandsPhone : +31 0 20 540 89 89Fax : +31 0 20 540 89 09

Borusan Logistics International Gulf FZEP.O. Box: 261864 LOB 16235, Jebel Ali Free Zone, Dubai, United Arab EmiratesPhone : +971 4 881 89 51Fax : +971 4 881 89 52

Borusan Logistics International Algeria SPACooperative El Rahma No: 122 Dely Brahim – AlgériePhone : +213 21 33 67 42Fax : +213 21 33 67 43 Borusan Logistics International KazakhstanFurmanova Street, 174 B, 3.Floor 050059 Almaty – KazakhstanPhone : +7 727 261 51 22Fax : +7 727 272 84 50 Borusan Logistics International Oman LLCAl Assalah Towers II, Sultan Qaboos Street Office No: 218, Ghubra, Sultanate Of OmanP.O. Box: 171, Bareeq Al Shatti, P.C.: 103Phone : +968 2421 0470-71Fax : +968 2421 0463

BORUSAN MAKİNA ve GÜÇ SİSTEMLERİ SANAYİ ve TİCARET A.Ş.Head OfficeMeclisi Mebusan Cad. No: 35/37 34427 Salıpazarı - İstanbul Phone : 0 212 393 55 00 Fax : 0 212 293 88 82www.bmgs.com.tr

Adana Region (Machinery Business Unit)Zeytinli Mah. Turhan Cemal Beriker Bulvarı No: 790 Seyhan - AdanaPhone : 0 322 455 26 00 Fax : 0 322 441 09 72

Ankara Region (Machinery Business Unit)Central and East Anatolia, Black Sea Region (Power Systems Business Unit) 354 Cadde 1426 Sokak No: 1 PK: 06370 Ostim - Ankara Phone : 0 312 592 92 00Fax : 0 312 386 04 44 (Machinery Business Unit)Fax : 0 312 386 06 32 (Power Systems Business Unit)

İstanbul Region (Machinery Business Unit)Marmara Region (Power Systems Business Unit)Cumhuriyet Mh. Güney Yanyol Cad. No: 26 Gebze - Kocaeli Phone : 0 262 679 56 00 (Machinery Business Unit)Phone : 0 262 653 92 21 (Power Systems Business Unit)Fax : 0 262 653 80 75 (Machinery Business Unit)Fax : 0 262 653 92 16 (Power Systems Business Unit)

İzmir Region (Machinery Business Unit)Eagean and Western Mediterranean Sales and Service Office (Power Systems Business Unit)Ankara Cad. No: 8/1-A/1-B Sütçüler Köyü Kemalpaşa - İzmir Phone : 0 232 397 01 00 Fax : 0 232 877 14 30 (Machinery Business Unit)Fax : 0 232 877 14 29 (Power Systems Business Unit)

Mediterranean and South Eastern Anatolia Sales Office (Power Systems Business Unit)Reşatbey Mah. Stadyum Cad. Ditaş Apt. 20 01120 Seyhan - Adana Phone : 0 322 458 11 20 Fax : 0 322 459 48 46

Antalya BranchYeşilbayır Mah. Akdeniz Bulvarı No: 68 Döşemealtı - AntalyaPhone : 0 242 221 48 20 Fax : 0 242 221 35 33

Bursa BranchGörükle Dumlupınar Mah. Laleli Cad. No: 7/A Nilüfer-BursaPhone : 0 224 441 86 00 Fax : 0 224 441 86 07

Diyarbakır BranchFabrika Mah. Elazığ Bulvarı No: 252/2 Yenişehir - Diyarbakır Phone : 0 412 339 06 00 -01-02-03Fax : 0412 339 06 09 Trabzon BranchAnadolu Cad. Deliklitaş Mevkii No: 153 - Trabzon Phone : 0 462 325 59 29 Fax : 0 462 325 54 78

Trakya BranchAkçaburgaz Mah. Hadımköy Yolu Cad. No: 108 Esenyurt - İstanbulPhone : 0 212 867 15 00Fax : 0 212 867 15 40

Marine OfficeAnkara Asfaltı No: 71 Çayırova Gebze - KocaeliPhone : 0 262 679 56 00 Phone : 0 262 653 92 21Fax : 0 262 653 05 20

KazakhstanAlmaty 050018, Suyunbay Cad. No: 157 B - Kyrgyzstan Phone : +7 727 244 33 77-88 Fax : +7 727 383 18 58

KyrgyzstanBishkek 720040, Erkindik Cad. No: 3/14 - KyrgyzstanPhone : +996 312 30 22 31/ 93 80 25 Fax : +996 312 30 22 28

AzerbaijanBakuSalyan Cad. 13. km. Shikhov Bakü - Azerbaijan Phone : +99 412 480 11 82-83-84 Fax : +99 412 480 11 85

Georgia Chavchavadze 78, 0162 Tblisi - Georgia Phone : +99 532 33 99 01 Fax : +99 532 33 99 04

BORUSAN MANNESMANN BORU SANAYİ VE TİCARET A.Ş.Head OfficeMeclisi Mebusan Cad. No: 35-37 34427 Fındıklı - İstanbulPhone : 0 212 393 58 00Fax : 0 212 293 69 60www.borusanmannesmann.com

Gemlik PlantAta Mah. Sanayi Cad. No: 54/68 16601 Gemlik - BursaPhone : 0 224 270 15 00Fax : 0 224 519 00 14

Halkalı PlantHalkalı Cad. No: 154 34295 Sefaköy - İstanbulPhone : 0 212 411 35 00Fax : 0 212 599 00 15

BM Vobarno Tubi SPAVia G E Falck 43 25079 Vobarno (BS) - ItalyPhone : +390 (365) 592 247Fax : +390 (365) 592 256www.bmvobarno.it

BM Pipe US Houston Plant4949 Borusan Road Baytown, Houston, Texas 77523Phone : +1 (281) 918 07 20

BORUSAN MANNESMANN BORU YATIRIM HOLDİNG A.Ş.Meclisi Mebusan Cad. No: 35-37 34427 Fındıklı - İstanbulPhone : 0 212 393 58 00Fax : 0 212 293 69 60www.borusanmannesmann.com

BORUSAN MÜHENDİSLİK İNŞAAT VE SANAYİ MAKİNALARI İMALAT A.Ş.Head OfficeMeclisi Mebusan Cad. No: 35-37 34427 Fındıklı - İstanbulPhone : 0 212 393 58 00Fax : 0 212 249 19 44

GemlikAta Mah. 146 Nolu Sok. No: 2 16601 Gemlik – Bursa Phone : 0 224 270 16 70-71Fax : 0 224 519 01 92www.borusanmuhendislik.com

Gebze Yatch ProductionGüzeller Organize Sanayi Bölgesi İnönü Mah. Nursultan Nazarbayev Sok. No: 21 Gebze - Kocaeli Phone : 0 262 242 14 16www.borusanmarine.com

BORUSAN OTO SERVİS TİC. A.Ş.Head Office / Avcılar BranchFiruzköy Bulvarı No: 21 34320 Avcılar - İstanbul Phone : 0 212 412 04 12Fax : 0 212 694 34 50

İstinye Branchİstinye Mah. Sarıyer Cad. No: 77 34460 İstinye - SarıyerPhone : 0 212 359 30 30Fax : 0 212 323 32 50

Akyurt BranchEsenboğa Havaalanı Yolu 22. Km 06150 Akyurt - Ankara Phone : 0 312 840 52 52Fax : 0 312 398 05 87

Çankaya BranchUğur Mumcu Cad. No: 8 06700 Gaziosmanpaşa - AnkaraPhone : 0 312 459 80 80Fax : 0 312 437 40 10

Birlik BranchBirlik Mah. 448 Cad. No: 43 06610 Çankaya - AnkaraPhone : 0 312 454 15 15Fax : 0 312 469 35 24

Adana BranchAdana - Mersin E5 Karayolu 21. Km 33800 Yenice - Tarsus - MersinPhone : 0 324 615 06 15Fax : 0 324 651 46 26

Gaziantep ShowroomFevzi Çakmak Bulvarı Stad Apt. No: 153/A GaziantepPhone : 0 342 322 83 83Fax : 0 342 322 83 86

Dolmabahçe BranchAsker Ocağı Cad. No: 6 Süzer Plaza 34367 Şişli - İstanbul Phone: 0212 377 00 10

Balgat BranchMevlana Bulvarı (Konya Yolu) No: 181/A Balgat – AnkaraPhone: 0312 253 33 33

Bodrum BranchAtatürk Bulvarı No: 293/B Bodrum – MuğlaPhone: 0252 311 04 44

Borusan Oto KıbrısSanayi Bölgesi,1. Cadde No.21, Lefkoşa, Cyprus NorthPhone : 0 392 225 27 22 Fax : 0 392 225 27 21

BORTRADE ULUSLARARASI TİCARET A.Ş.CenterPürtelaş Hasan Mahallesi Meclis-i Mebusan Caddesi No: 35/7 Salıpazarı, Beyoğlu - İstanbul

Fabrika ve İdari MerkezÇayırova Mah. İstanbul Cad. No: 69 Gebze - KocaeliPhone: 0 262 654 23 00Fax: 0 262 654 23 15www.borusanpaslanmaz.com

BORUSAN YATIRIM ve PAZARLAMA A.Ş.Head OfficeMeclisi Mebusan Cad. No: 35 - 37 34427 Salıpazarı - İstanbulPhone : 0 212 393 52 00Fax : 0 212 257 16 39www.borusan.com

KERİM ÇELİK MAMULLERİ İMALAT ve TİCARET A.Ş.Head Officeİçerenköy Mah. Çayır Cad. No:1/4 Partaş Center Kat:18 34752 Ataşehir - İstanbulPhone : 0 216 581 30 00Fax : 0 216 395 42 65

Manisa BranchOrganize Sanayi Sitesi 3. Kısım Ahmet Tütüncüoğlu Cad. No: 5 ManisaPhone : 0 236 226 28 50Fax : 0 236 213 06 04

Bursa BranchNilüfer Organize Sanayi BölgesiManolya Caddesi No: 4/A Nilüfer - BursaPhone : 0 224 324 16 01Fax : 0 224 411 09 97

Adana BranchErcan Demir Sanayi Sitesi Ceyhan Yolu 7. km Yeni Mahalle 01340 Sarıçam - AdanaPhone : 0 322 342 14 40Fax : 0 322 306 00 22www.kerimcelik.com

BORUSAN EnBW ENERJİ YATIRIMLARI ve ÜRETİM A.Ş. İstanbul OfficeBüyükdere Cad. Nurol Plaza A-B Blok No: 255-257 Kat: 4 34398 Maslak - İstanbulPhone : 0 212 340 27 60Fax : 0 212 286 39 85

Ankara OfficeAnkara Ticaret Merkezi Kızılırmak Mah. 1450. Sokak No: 3 A Blok Kat: 5 No: 31 Çukurambar - Çankaya - ANKARAPhone : 0 312 459 60 15-17Fax : 0 312 459 60 19

Balabanlı Rüzgar Enerji̇si̇nden Elektri̇k Üreti̇m A.Ş.Çorlu İlçesi Maksutlu Mah. Rüzgarlı Sok. No: 5 Çorlu - TEKİRDAĞ Pk : 59850Phone : 0 282 261 91 49

Bandırma Enerji̇ ve Elektri̇k Üreti̇m Ti̇c. A.Ş.Bayramtepe-Kaltepe-Naldöken-Pınarbayır Tepe Mevkii Bandırma Rüzgar Enerji Santarali Bandırma - BALIKESİRPhone : 0 266 713 10 01 - 0 266 713 10 09Fax : 0 266 713 49 69

Yedigöl Hi̇droelektri̇k Üretim ve Tic. A.Ş.Aksu Köyü Aksu Santral İspir - ERZURUMPhone : 0 442 455 21 85 (Aksu) - 0 442 455 21 42 (Yedigöl)Fax : 0 442 455 21 86

SUPSAN MOTOR SUPAPLARI SANAYİİ ve TİCARETİ A.Ş.Halkalı Cad. No: 158 34295 Sefaköy - İstanbulPhone : 0 212 336 32 00 Fax : 0 212 592 72 68 - 540 34 93www.supsan.com

BORUSAN MANHEIM AÇIK ARTTIRMA ve ARAÇ PAZARLAMA ve TİC. LTD. ŞTİ.Centerİstasyon Mah. Şehitler Cad. No: 80-1 34940 Tuzla - İstanbulPhone : 0 216 560 15 00Fax : 0 216 560 15 05

Ankara BranchSaracalar Mah. Özal Bulvarı No: 350 06150 Akyurt - AnkaraPhone : 0 312 590 33 00Fax : 0 312 590 33 05www.manheimturkiye.com

BORUSAN DANIŞMANLIK ve ORTAK HİZMETLER A.Ş. Head OfficePürtelaş Hasan Mahallesi Meclisi Mebusan Cad. No: 35 Salıpazarı, 34427 Beyoğlu, İSTANBUL

Branch Rumelihisarı Mahallesi Baltalimanı Hisar Caddesi No: 5 34470 Sarıyer, İSTANBUL

Kadıköy Branch Bayar Caddesi, Şehit İlknur Keleş Sokak, 7 No’lu Hüseyin Bağdatlıoğlu İş Merkezi 8. Kat 1-2 No’lu Bağımsız Bölümler 34742 Kozyatağı, Kadıköy, İSTANBUL

Kozyatağı Branch Sahrayıcedit Mah. Halk Sokak No: 40-44 Kat 8 Kadıköy, İSTANBUL

www.borusan.com

annual report 2014 · 2015. 9. 29. · market, the u.s. based manheim. 2012 borusan holding founder...

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