KÜRÜM HOLDİNG Growing with new and powerful steps · use In scrap processIng, we aIm to decrease...

ANNUAL REPORT 2011

KÜRÜM HOLDİNG ANNUAL REPORT 2011

Growing with new and powerful steps

www.kurum.com.tr

Kürüm HoldinG A.Ş.Tatlı Su Mahallesi. Nurettin Duman SokakÇetin Caddesi. No: 9 PK 34774 Ümraniye/ISTANBUL/TURKEYTel : (+90 216) 250 40 00Fax : (+90 216) 250 40 01

Kürüm demir SAnAyi ve dıŞ TicAreT A.Ş. Production FacilityBarış Mahallesi Anibal CaddesiNo: 13 PK 41400 Gebze/Kocaeli/TURKEYTel : (+90 262) 677 69 00Fax : (+90 262) 643 30 25 – 643 45 66

Kürüm ınTernATıonAl SH.A.HeadquartersBulevardi Deshmoret e Kombit Twin TowersNo: 2 Kat: 10 A1-A2 PK 1001 Tirana/ALBANIATel : (+335) 428 01 77Fax : (+355) 428 01 85

Production FacilityKombinati Metalurgjik PK 3001Elbasan/ALBANIATel : (+355) 542 565 00 Fax : (+355) 545 78 44

Kürüm lıme ProducTıonFAcılıTyKombinati Metalurgjik PK 3001Elbasan/ALBANIA Tel : (+355) 542 565 00Fax : (+355) 545 78 44

durreS Kürüm SHıPPınG SH.AKantjeri Detar, Port of Durres/ALBANIA Tel : (+355) 522 222 49 Fax : (+355) 522 223 35

Kürüm ınduSTrıAl GASeS SH.A.Kombinati Metalurgjik PK 3001Elbasan/ALBANIA Tel : (+355) 542 565 00Fax : (+355) 545 78 44

KoSovA e reKS ‘Kosova e ReLagjja Kalabria nr5Blloku B1 Priştine 10000 KOSOVOTel : (+386) 437 70 777Fax : (+386) 437 70 888

e-mail: [email protected]: www.kurum.com.tr

contents

10 fiNANciAL ıNDicATORs12 OPERATiONAL ıNDicATORs14 KÜRÜM HOLDiNG iN bRiEf15 OPERATiONAL MAP16 MiLEsTONEs18 visiON, MissiON, vALUEs, cORPORATE sTRATEGy AND TARGETs19 ORGANizATiONAL cHART20 MEssAGE fROM THE cHAiRMAN22 ExEcUTivE cOMMiTTEE24 MEssAGE fROM THE cEO26 EcONOMicAL DEvELOPMENTs iN THE wORLD AND TURKEy iN 201128 ıRON AND sTEEL ıNDUsTRiEs AROUND THE wORLD AND TURKEy30 AcTiviTiEs iN 2011 44 ıNvEsTMENTs iN 2011 AND OUTLOOK46 cORPORATE MANAGEMENT49 fiNANciAL AssEssMENT Of THE MANAGEMENT51 ıNDEPENDENT AUDiTOR’s REPORT

HAviNG AccUMULATED A wEALTH Of MANAGERiAL AND TEcHNicAL KNOw-HOw iN THE iRON AND sTEEL iNDUsTRy, As wELL As iN OTHER sEcTORs, fOR OvER 30 yEARs KÜRÜM HOLDiNG PROUDLy PROviDEs sERvicEs AT iNTERNATiONAL qUALiTy sTANDARDs TO iTs sHAREHOLDERs, cUsTOMERs, EMPLOyEEs AND ALL sTAKEHOLDERs by cREATiNG vALUE AT bOTH LOcAL AND GLObAL LEvELs.

2 kürüm holdıng annual report 2011

a year ın whıch we tested our strength and capabilities.In 2011, we achIeved a sIgnIfIcant mIlestone by IncreasIng our total productIon to 725,000 tons. by testIng our know-how, technIcal Infrastructure and our human capItal durIng thIs challengIng yet successful perIod, we once agaIn demonstrated the greatness of our potentIal.

3

a year ın whıch we tested our strength and capabilities.


we mobilized our resources to work more efficiently. durIng a perIod when we reached maxImum productIon capacIty, we developed new strategIes to Increase our productIvIty and to maIntaIn our competItIve advantage. we Implemented an optImIzatIon project In order to render electrIc energy more effectIvely at our facIlItIes In albanIa. wIth our chemIcal energy InItIatIve, whIch we wIll use In scrap processIng, we aIm to decrease electrIcIty consumptIon to a mInImum level, and as a result realIze a huge Increase In productIvIty and effIcIency.

5


we took solid steps toward realizing new investments.we completed the prelImInary work for the Iron and steel facIlIty we are plannIng to buIld In georgIa, wIth a lIquId steel capacIty of 700,000 tons. we aIm to fInalIze the dIscussIons related to fInancIng of thIs facIlIty wIthIn the shortest tıme. constructIon Is scheduled to begIn by the second half of 2012 so that the facIlIty can commence operatIng In 2014.

7


we devised new ways to maintain our competitive advantage.we belIeve that maIntaInIng a competItIve advantage In the Iron and steel Industry, ın whıch IncreasIng productIon capacIty Involves hIgh costs, lIes In ImprovIng product qualIty and reducIng costs. thanks to our efforts In optImIzIng productIon and energy savIngs In 2011, we wIll better compete In the global arena In 2012.

9


€ Millions 2009 2010 2011 Change %

ToTal asseTs 200.8 257.1 266.2 4

CurrenT asseTs 122.3 174.7 180.6 3

Fixed asseTs 78.4 82.5 85.7 4

shorT-Term liabiliTies 66.7 87.5 97.6 12

long-Term liabiliTies 40.0 58.1 53.8 (7)

equiTy 94.1 111.5 114.8 3

neT sales (exCluding insuranCe Premium) 279.6 393.5 554.9 41

neT sales 284.6 397.5 560.4 41

CosT oF sales (exCluding insuranCe Premium)

249.5 359.7 523.0 45

CosT oF sales 251.1 361.1 525.7 46

earnings beFore Tax 19.0 17.8 11.2 (37)

neT ProFiT 16.1 15.1 9.6 (37)

ebiTda 28.1 29.5 28.0 (5)

Trade reCeivables 23.7 32.7 66.1 102

invenTory 57.6 90.3 70.8 (22)

Trade Payables 25.3 41.0 24.8 (39)

PrinCiPal ratios

gross ProFiT margin (%) 11.8 9.2 6.2

equiTy / ToTal asseTs (%) 46.9 43.4 43.1

reTurn on asseTs (%) 8.0 5.9 3.6

reTurn on equiTy (%) 17.1 13.5 8.4

CurrenT raTio 1.84 2.00 1.85

aCCounTs reCeivable Turnover (days) 30.4 30.1 43.0

aCCounTs Payable Turnover (days) 36.8 41.4 17.2

invenTory Turnover (days) 83.7 91.3 49.1

financial indicators

11

total assets(€ millions)

equity(€ millions)

2011

266.

2

2010

257.1

2009

200.

8

114.

8

111.5

94.1

2011

2010

2009

2011

2010

2009

net sales(€ millions) 20

11

2010

2009

560.

4

397.5

284.

6

fixed assets(€ millions)

85.7

82.5

78.4


ProduCtion (tons) 2009 2010 2011 Change %

Kürüm demİr

hoT-rolled sTeel re-bar 297,445 385,739 429,777 11

Kürüm inTernaTional

hoT-rolled sTeel re-bar 308,141 235,882 295,333 25

billeT 220,541 390,503 463,620 19

ConsolidaTed sTeel ProduCTion 605,585 621,622 725,111 17

FragmenTed lime 25,950 46,039 43,620 (5)

Kürüm gases

oxygen & niTrogen 22,845 31,777 41,444 30

sales (tons)

Kürüm demİr 424,921 449,907 643,090 43

ProduCT 308,458 376,363 433,301 15

CommodiTy 116,464 73,544 209,789 185

Kürüm inTernaTional 319,122 325,029 328,877 1

re-bar ProduCT 283,086 270,229 285,620 6

CommodiTy 36,036 54,800 43,257 (21)

ConsolidaTed sTeel sales 744,044 774,936 971,967 25

FragmenTed lime 8,992 14,466 10,948 (24)

Kürüm gases

oxygen & niTrogen 246 212 97 (54)

number oF emPloyees 1,116 1,096 1,038 (5)

operational ındicators

13

consolidated steel production (tons)

billet production (tons)

consolidated steel sales (tons)20

1172

5,11

1

2010

621,6

22

2009

605,

585

463,

620

390,

503

220,

541

2011

2010

2009

2011

2010

2009

971,9

67

774,

936

744,

044


as one of the leading iron and steel manufacturers in Turkey and southeastern europe, Kürüm holding has for decades created value in the iron and steel industry, its main area of activity, as well as in other sectors both at local and global levels thanks to its corporate know-how spanning over 30 years. Kürüm holding was founded in 1975 under the trade name Kürüm demir a.Ş., with the production and trade of iron and steel as its core business; since then, it has developed steadily, and can be described as a true success story. as a result of its long-standing experience, the holding has become one of the leading players of the iron and steel industry in Turkey and the balkans. in line with its strategic growth and investment targets and pursuant to its mission and vision, Kürüm holding pursued steady corporate development and reinforced its market position as a regional industrial player by adding such sectors as lime and pure oxygen production, loading, unloading, storage, shipping brokerage and logistics operations, insurance services and foreign trade to its portfolio of operations.

To align the expanded business volume with their common targets and strategies, the Kürüm group of Companies were restructured and have been grouped under a holding Company in 2006. Today, with 1,038 employees at its facilities in Turkey and southeastern europe, Kürüm holding moves forward with confidence and is considered a benchmark setter in its sectors of activity. Kürüm demir a.Ş., Kürüm holding’s flagship company, is one of the region’s most important manufacturers of hot-rolled, finely calibrated and reinforced construction bars, with ongoing investments at its facilities in gebze. The Company successfully transferred its know-how and experience in Turkey to international markets and played a leading role in the holding’s transformation to a regional powerhouse.

operating Kürüm holding’s investment and production efforts in the balkans, Kürüm international sh. a. is a market leader that adds more value to the holding each year. in addition to iron and steel production, Kürüm international is also involved in lime and oxygen production (Kürüm industrial gases sh. a.), as well as loading, unloading, storage, shipping brokerage and logistics operations (durres-Kürüm shipping sh. a.).

Kürüm international imports most of the raw materials for production from ukraine, the russian Federation and countries in southeastern europe, Central asia, the mediterranean and the middle east. raw material supplies have strategic importance in the sector and Kürüm international conducts its business relationships on an ongoing basis as permanent and sustainable partnerships. domestic and international banks and other financial institutions also have a high level of confidence in Kürüm holding. due to the trust it inspires across the market, the Company secures loans for investments, business operations and pre- and post-financing of raw materials from these institutions under favorable terms.

in addition to albania, Kürüm holding also focuses on the Kosovo market. operating in the insurance sector in this region via its subsidiary Kosovo e re, Kürüm holding ranks among the most important players of this sector in Kosovo.

having achieved steady growth since 1975, Kürüm holding has a strong international reputation and has received recognition in its sectors of operation. To bolster its already strong market position, the holding made significant investments in 2010 and 2011. in this case, it not only increased its market share and turnover but also created additional value for its shareholders. The most recent boost to Kürüm holding’s pursuit of steady growth is the iron and steel facility in georgia. in 2011, the Company initiated its investment in the facility, which will have a capacity of 700,000 tons.

kürüm holding in brief

the most recent boost to kürüm holdIng’s pursuIt of steady growth Is the planned Iron and steel facIlIty In georgIa. ın 2011, the company InItIated Its Investment In the facIlIty, whIch wIll have a capacIty of 700,000 tons.

15

SERBIA

serbia

kosovoprishtineprizrenFerizajgjakovemitrovicepejagjilan

MACEDONIA

macedoniagostivarkalkandelenkumanovamanastırohridstrugaskopje

GREECE

greecethessaloniki

TURKEY

albaniaelbasandurres gjirokastra kavajekorce kruje lushnjesarandashkodra tiranvlore

operational map

turkeyadanaadapazarıadıyamanaFyonankaraantalyabalıkesirbartınbilecikbolubursaÇanakkaleÇankırıÇorludüzceedirneelazığeskişehirgaziantepispartaistanbulizmirkahramanmaraşkarabükkırklarelikocaelikütahyamalatyamersinmuğlanevşehirsamsuntekirdağzonguldak

ALBANIA

KOSOVO

ITALY

italysouthern cities

15


milestones

1975The foundations of the Kürüm group were laid with the establishment of Kürüm demir a.Ş. in 1975.

1994 The founder and majority shareholder of the group, haşmet bedii Kürüm, entered the sector by purchasing a rolling mill in gebze, Kocaeli and starting production of hot-rolled steel re-bar, the core business of the group.

1998in view of global economic developments, the balkans were singled out as the growth area for the group. as per investment decisions, the largest integrated iron and steel complex in the balkans lined up for privatization in albania was made operational.

2001 Kürüm demir was ranked 495th in the “Top 500 industrial Corporations” list by the istanbul Chamber of industry, based on the strength of its production sales figures.

2002With a view to expand operations in albania, oxygen and lime facilities went on line alongside iron and steel facilities. The Kürüm group collaborated with the Kosovo government for a new overseas investment project and founded Kosova e re (Kosova insurance group s.a.). shortly thereafter, all company shares were transferred to Kürüm upon the request of the Kosovo government. Kürüm demir climbed to 372nd place in the “Top 500 industrial Corporations” list of the istanbul Chamber of industry.

2003 Kürüm durres, comprising a shipyard and port management complex, was acquired as the second major strategic enterprise in albania. Kürüm demir moved up to 285th place in the “Top 500 industrial Corporations” list.

2004Kürüm demir rose to 233rd place in the “Top 500 industrial Corporations” list.

2005 Kürüm yapı was established for construction operations in order to utilize the group synergy and experience in the sector.

havIng achIeved steady growth sInce 1975, kürüm holdIng has a strong InternatIonal reputatIon and has receIved recognItIon In Its sectors of operatIon.

17

2011 Kürüm demir and Kürüm international realized significant increases both in production and turnover compared to prior years. The scrap processing facility, which will contribute significantly to productivity and energy savings at Kürüm international’s elbasan facility, became operational at the end of 2011.

2010The rolling mill under Kürüm international was completely upgraded and the annual production capacity was increased to 450,000 tons. as such, the plant’s total annual rolling capacity reached 700,000 tons. in addition, a scrap processing plant was transferred from germany to increase the productivity and energy efficiency of Kürüm international’s albania steel Production Facilities. Kürüm demir expanded its production volume by 30%.

2006Work to strengthen the corporate structure was accelerated and all operations were consolidated under the Kürüm holding umbrella. Profiled iron production commenced under Kürüm international in albania. bims block production facilities, established by Kürüm yapı in diyarbakır, started production. Kürüm demir’s ranking climbed to 208th place in “Top 500 industrial Corporations” list.

2007 Following capacity enhancements, the production capacities of Kürüm demir and Kürüm international rose to 444,600 and 550,000 tons, respectively.

2008Kürüm gelqere started its operations under Kürüm international. investment efforts were undertaken to boost steel production to 420,000 tons per year. Kürüm demir was ranked 151st in the “Top 500 industrial Corporations” list.

2009 Kürüm yapı was sold; Kürüm demir increased production by 2% to reach an annual output of 297,445 tons. Kosova e re celebrated its 40th anniversary in the insurance industry. on the tenth anniversary of its inception, Kürüm international acquired ownership of the elbasan steel Production Facilities from the albanian ministry of Privatization. The outstanding minority rights at Kürüm durres were purchased; it is the only shipyard in albania.


corporate strategy and targetsdistributing risk in various areas to achieve growth in line with our vision and to increase the in-house synergy to continue regional expansion,

giving precedence to operational areas and products generating satisfactory growth, profitability and added value,

developing a common philosophy, code of conduct and corporate culture as well as the organizational and managerial structures for institutionalization,

improving production quality and undertaking technological investments to facilitate fulfillment of customer demands effectively,

ensuring that all resources are used reasonably and efficiently to reduce consumption of raw material, energy and water per unit of production,

making arrangements to procure quality products and services at more favorable prices by harnessing the synergies and scale economies of Kürüm holding subsidiaries,

establishing lasting and long-term business relationships with customers of high payment and purchase capacities to increase asset quality and profitability while maintaining our high-quality service approach.

our vision to become a leadIng, global company In the countrIes we operate In vIa qualIty and competItIveness.

our mission to contrIbute to the development of countrIes wIth challengIng economIc condItIons by beIng a leader In the Iron and steel Industry and other strategIcally Important areas.

our valuesCOURAGEOUS We take calculated and prudent risks. We are determined, persevering, bold and innovative.

TRUSTwORThY AND fAIR We safeguard the best interests of our stakeholders. We are true to our word, reliable and consistent.

INNOVATIVENESS We evaluate new ideas, monitor new developments, encourage and implement innovative thinking and solutions.

TEAMwORK We support collaboration, listen to different opinions and give precedence to team interests over individual interests.

CONSTANT IMpROVEMENT We aim for the development and satisfaction of our employees; create favorable opportunities and conditions for their development; strive to improve performance; work to enhance our business methods and undertake investments to reach these goals.

Kürüm Demir General manaGer deniz topkara

STeel GrOUP eXeCUTIVe OFFICerdoğan kenet

Kürüm InTernaTIOnal TeChnICal DePUTy General manaGer

Kürüm InTernaTIOnal DePUTy General manaGer koray zeytinoğlu

PrOCUremenT manaGerhüseyin Çakır

FOreIGn TraDe manaGer

BUDGeT anD rePOrTInG manaGer aslı esen dokur

aCCOUnTInG manaGerakın aktaş

Kürüm Demir aCCOUnTInG manaGermustaFa koşar

FInanCe manaGerÖmer bayrakÇeken

Kürüm InTernaTIOnal aCCOUnTInG manaGermelih güven

Kürüm InTernaTIOnal FInanCe manaGeroktay keleş

TreaSUry manaGerayhan abalı

InFOrmaTIOn TeChnOlOGIeS

heaD OF IT SerVICeStayyar aydın

hUman reSOUrCeS manaGerturgay buğdacıgil

aDVISOr TO The ChaIrman OF The BOarD anD CeO talat pekelman

eXeCUTIVe COmmITTee memBerselin kürüm

CeO – ChIeF eXeCUTIVe OFFICerahmet Fuat erkal

COnSTrUCTIOn – InVeSTmenT GrOUP eXeCUTIVe OFFICer ogan karatuna

COUnTry DIreCTOr FOr alBanIazeki kaya

CFO - ChIeF FInanCIal OFFICersamim hünakıncı

DIreCTOr OF PrOjeCTS anD TraDe murat talu

DIreCTOr OF STraTeGIC BUSIneSS DeVelOPmenT nejat n. bocnak

leGal COUnSelaFşin yılmaz

leGal COUnSel anD InTernal aUDITOrahmet kurşun

organizational chart

19

QUalITy manaGemenT rePreSenTaTIVe serdar yücel

FOreIGn TraDe anD lOGISTICS OFFICer bahadır tuncer


message from the chairman

wIth Its well-qualIfIed human resources and hIghly effectIve organIzatIonal structure, kürüm holdIng holds sIgnIfIcant competItIve advantages compared to Its rIvals. In 2011, the holdIng further strengthened Its corporate reputatIon wIth ratIonal, prudent and creatIve solutIons and sound busIness practIces.

21

esteemed Customers and associates,

despite the fluctuations in the global financial markets, the Turkish economy continued to offer reassurance to domestic and foreign investors in 2011. Thanks to the positive effects of the favorable macroeconomic environment, Kürüm holding achieved many successes in 2011 and significantly increased its productivity levels in its operations in Turkey and albania.

Turkey has displayed a strong economic performance thanks to the implementation of macroeconomic stability programs based on the strict monetary policy and financial discipline it has adopted since the early 2000s. as a result, Turkey’s gdP grew by 8.5% in 2011 and the Country continued to standout in the global economy. at a time when eurozone countries faced recession risk due to the public debt crisis there, the fact that Turkey’s domestic demand remained robust makes this success all the more important.

The price volatility of raw materials and end-products in the global iron and steel markets since 2008, continued into 2011. however, drawing strength from its long-standing industry know-how and expertise, and thanks to sound and well-established relationships with domestic suppliers, Kürüm holding continued to procure raw materials in the reporting year without any problems and at optimal prices.

The achievements in the iron and steel sector, which provides inputs to various sectors of the real economy including automotive, construction, durable goods and machinery, are strategically important to the steady development of the Turkish economy. Kürüm holding, widely known as a model in the sector in efficient use of resources and cost optimization, continued to create added value for Turkey in 2011, thanks to its financial and operational successes.

With its well-qualified human resources and highly effective organizational structure, kürüm holding holds significant competitive advantages compared to its rivals. in 2011, the holding further strengthened its corporate reputation with rational, prudent and creative solutions and sound business practices. Kürüm holding increasingly works to reinforce its corporate presence abroad in countries such as albania, macedonia, Kosovo and serbia, which have not yet completely integrated with world markets and, as a result, are relatively insulated from the repercussions of the global economic crisis. The holding ranks among the few real sector players established with 100% Turkish share capital and that have a strong international reputation and brand recognition in the sector. With this awareness, Kürüm holding took the strategic step in 2011 to reinforce its regional strength by building an iron and steel facility with a capacity of 700,000 tons in georgia.

in addition to the effective risk management policies it has implemented in response to market fluctuations, Kürüm holding also continued to develop in the areas of production quality, operational efficiency and environmental friendliness in 2011. The fact that improvement processes in these areas has maintained the same momentum both in Turkey and abroad indicates the corporate effectiveness of our holding.

drawing strength from its long-standing corporate experience and know-how, Kürüm holding plans to pursue aggressive financial and operational targets in the coming period. i would like to express my gratitude to our business partners, suppliers, employees, customers and all stakeholders, who have supported us in our 2011 operations in Turkey and southeastern europe. We hope to share the gains and the happiness of many successful new projects to come.

respectfully yours,

haşmet Bedii KürümChairman of the board

700thousand tonskürüm holdIng plans

to buIld an Iron and steel facIlIty wIth a capacIty of

700,000 tons In georgIa.


executive committee

haşMet Bedii KürüM (1)Chairman of the Boardborn in 1960, haşmet bedii Kürüm is the majority shareholder and the Chairman of the board of directors. he began his professional life with the marketing of iron and steel products in the 1970s. in 1995, he took his first steps into the industry by turning to manufacturing. since then, he has carried out significant investments in albania and Kosovo. haşmet bedii Kürüm is fluent in english.

ahMet Fuat erKal (2)Ceoborn in 1948, ahmet Fuat erkal earned graduate and post-graduate degrees from middle east Technical university, department of metallurgy. he assumed various positions at Kardemir, izmir demirçelik, Çemtaş and meptaş Cerçelik and spent 34 years of his 41-year career in the iron and steel industry as a senior manager. ahmet Fuat erkal is fluent in english.

ZeKi Kaya (3)Country direCtor for alBania, born in 1959, Zeki Kaya received his ba from ankara university and mba from the university of nebraska-lincoln and his m.Phil and Phd in economics from the university of Tirana. he was assigned to short-term diplomatic posts in sofia, london, berlin, Prague, budapest, Warsaw and brussels and long-term posts in Tripoli, Tel-aviv, Jerusalem and Tirana. Zeki Kaya speaks english, italian, hebrew, arabic and albanian.

doğan Kenet (4)Steel GrouP eXeCutiVe offiCer born in 1955 in istanbul, doğan Kenet graduated from istanbul Technical university, department of metallurgical and materials engineering in 1978. he then assumed managerial positions at Çolakoğlu metalürji, İÇdaŞ, and mmK metalürji, respectively. doğan Kenet is fluent in english.

Murat talu (5)direCtor of ProjeCtS and trade born in 1959, murat Talu received his bsc from middle east Technical university, department of metallurgy and his msc from istanbul Technical university, in metallurgical and materials engineering. murat Talu has served at ToPraK holding and Cer Çelik as senior manager, and he is fluent in english.

deniZ toPKara (6)Kürüm demir General manaGer, born in 1948, deniz Topkara began his career at İktisadi sınai demir-Çelik Fabrikası. having worked there for 15 years, he joined hisar demir-Çelik, where he has served as general manager for the next five years.

Koray Zeytinoğlu (7)Kürüm international dePuty General manaGer in CharGe of adminiStration and trade born in 1977, Koray Zeytinoğlu graduated from Çukurova university, department of Civil engineering. From 1999 to 2001, he worked at alarko and nCKy as a field engineer and worksite supervisor. Koray Zeytinoğlu is fluent in albanian and english.

(1) (2) (3) (4) (5) (6) (7)

23

selin KürüM (8)eXeCutiVe Committee memBerborn in 1988, selin Kürüm received her bsc in business studies from City university london, Cass business school and her msc in development studies from london school of economics. she then completed internships in the accounting department at Turkish bank london and in the mergers and acquisitions department of rothschild Paris. she joined Kürüm holding in 2011. selin Kürüm is fluent in english and French.

nejat naMiK BoCnaK (9)direCtor of StrateGiC BuSineSS deVeloPment born in 1965, nejat namık bocnak received his ba from istanbul university, department of economics; subsequently, he studied design and programming languages at Toronto school of business. he has assumed senior management positions in the finance, human resources and administration departments at dominion spring, osmanlı bank, Tekstilbank, iCi, Zeneca Turkey, syngenta and iTd. nejat namık bocnak is fluent in english.

saMiM hünaKinCi (10)Cfo - Chief finanCial offiCerborn in 1956 in ankara, samim hünakıncı graduated from middle east Technical university, department of business administration. he has held senior management positions in the finance

departments at henkel, Polat holding, vestel group of Companies, Zorlu holding and garanti Koza İnşaat. samim hünakıncı is fluent in english.

talat PeKelMan (11)adViSor to the Chairman of the Board,born in 1964, Talat Pekelman received his bsc from the department of electrical engineering at istanbul Technical university and his msc degree in biomedical engineering at boğaziçi university. he worked as a research assistant at boğaziçi university and served in management capacities at the multi-Care Corporation and the methodist hospital in the united states and later took office as the general manager of american hospital in istanbul. Talat Pekelman is fluent in english.

a. aFşin yilMaZ (12)leGal CounSel born in 1975, afşin yılmaz is a graduate of selçuk university, department of law. he served as legal counsel at Türk büro-sen headquarters and as attorney for İskenderun demir Çelik a.Ş. afşin yılmaz is fluent in english.

ahMet Kurşun (13)leGal CounSel and internal auditorborn in 1980 in istanbul, ahmet Kurşun graduated from robert College and later received his bachelor’s and master’s degrees from istanbul university, Faculty of law. he is currently pursuing

his doctoral degree in finance law. mr. Kurşun began his professional career in 1999. From 2000 to 2004, he worked at robert College and from 2004 until 2011 he worked at an international law firm. ahmet Kurşun is fluent in english.

ogan Karatuna (14)ConStruCtion – inVeStment GrouP eXeCutiVe offiCerborn in 1942, ogan Karatuna received his ma in architecture at the state Fine arts academy. he undertook various projects as a contractor through his own company and other companies in which he was a partner. Karatuna served as a board member at osmanlı, garanti and doğuş ge real estate investment Companies. he then served as Chairman, general manager and in other senior management roles at İnteko, betonyap, Tan, aka and saraçoğlu holding.

turgay BuğdaCigil (15)human reSourCeS manaGerborn in 1956 in antakya, Turgay buğdacıgil received his ba and ma from middle east Technical university, department of Public administration. he began his professional career as a manager in the logistics and production departments of Coca-Cola ankara. he then held management positions in the human resources departments of söktaş, abn amro bank, Kerevitaş, hüppe Turkey and the automotive group of Koç holding, respectively. Turgay buğdacıgil is fluent in english.

(8) (9) (10) (11) (12) (13) (14) (15)


standIng out wIth Its sustaInable corporate structure, kürüm holdIng’s asset sIze expanded 4% In 2011 over the prevIous year, to reach €266.2 mIllIon.

message from the ceo

25

41%our net consolIdated

sales clImbed to €560.4 mIllIon In 2011, realIzIng

growth of 41%.

esteemed Customers and associates,

The global economic recovery in 2010 gave way to uncertainties starting in the first quarter of 2011, due to the public debt sustainability problems spreading in the eurozone as well as the ongoing structural issues in the world economy. Turkey, on the other hand, continued its growth momentum from the previous year into 2011, recording economic growth of 8.5%. as a result, Turkey encouraged real sector players in terms of investments and expansion plans, thanks to its stable economic environment.

The transformation process in the global economy, ongoing since the early 2000s, made it possible for developing countries, mainly China but also Turkey, to become major players in the iron and steel industry. Turkey was the 10th largest iron and steel producing country in 2011 as in the previous year. We are also confident that Turkey will climb higher in the global rankings in the coming period, thanks to its rapidly developing production infrastructure and well-trained workforce. The fact that developing countries, again led by China, have started to gain more market share in the global iron and steel industry led to unused production capacity worldwide and caused global price competition to intensify. due to economic uncertainties, the global iron and steel industry started to contract beginning in the second half of 2011, while competition increased worldwide. in this market environment, domestic iron and steel manufacturers are forced to focus on products that have higher added value, so that they can increase their competitive advantages.

in addition to iron and steel production, Kürüm holding is engaged in a wide range of activities including lime and pure oxygen production, container port operations, insurance and foreign trade. in 2011, the holding achieved significant progress in line with its investment and growth targets as well as its corporate strategies by effectively using its existing human resources and

production capacity. as a result, our holding, which carries out production and marketing efforts in southeastern europe and Turkey, has assessed its risks and the opportunities in the best possible way and, has developed a highly profitable and productive business.

standing out with its sustainable corporate structure, our holding’s asset size expanded 4% in 2011 over the previous year, to reach €266.2 million. our net consolidated sales rose a brisk 41% in 2011 to €560.4 million up from €397.5 million a year earlier. structured as a regional holding company, Kürüm holding generated 77% of its income from sales from domestic operations in 2011, while 23% was realized via foreign operations. as a result of our effective sales and marketing efforts, combined with our high quality production, our net profit reached €9.6 million in 2011.

in 2011, Kürüm holding implemented significant investments and modernization initiatives that will strengthen its financial position and operational efficiency in line with its strategy and targets. after having completed the feasibility studies, we plan to start the installation of the facility in georgia, which will have a liquid steel capacity of 700,000 tons, in 2012. We expect that this investment will further reinforce Kürüm holding’s strong regional position in the iron and steel sector. in addition to this investment, in 2011 we also carried out significant efforts related to energy savings and productivity at Kürüm international, located in albania, as well as at Kürüm demir facilities in gebze. Thanks to these modernization investments that totaled €11.4 million, we estimate that the added value in our business processes will greatly increase in the coming period. our logistics operations, Kürüm holding’s second largest investment in albania, also progressed throughout the year. our holding will continue its container port operations in this location. in 2011, we also maintained our profitable position in the brokerage operations we are undertaking in the basic insurance segment in Kosovo.

since its establishment in 1975, Kürüm holding has conducted its operations in line with the principle of continuous development and has become a regional powerhouse in the iron and steel industry, as well as in other sectors. drawing strength from the expertise and experience of its employees and also from its innovative corporate governance practices, Kürüm holding plans to continue its focus on profitable and productive business processes in the coming period. i would like to extend my gratitude to our business partners, employees, customers, and all social stakeholders who have always stood by our side. our greatest wish is to extend our track record of success into the coming period...

respectfully yours,

Ahmet fuat ErkalCeo


ThE wORLD ECONOMY since developed economies have not been able to attain the target growth rates and, therefore, necessary monetary policies could not be implemented, concerns over liquidity further increased in 2011. additionally, economic growth expectations in continental europe for 2012 and beyond were lowered due to the banking crisis that emerged in the eurozone and the capital of many banks operating in the region remaining below desired levels. in 2010, which was a year of growth in the aftermath of the global financial crisis, the world economy grew 5.1% thanks to expansionary policies. however, the global growth rate fell to 4% in 2011. according to imF forecasts, the growth in the world economy will be even lower in the coming year. one of the outcomes of the global financial crisis and the following period was the divergence in developing and developed countries in terms of economic growth. according to imF data, developed economies contracted by 3.7% in 2009 when the crisis hit its depths; in 2010, they expanded by 3.1%. developing economies, on the other hand, expanded by 2.8% and 7.3% in 2009 and 2010, respectively, and as a result played a key role in leading the global economy out of the crisis. as developing economies expanded by 6.4% in 2011, and developed economies grew by a much slower 1.6%, it is expected that developing countries will continue to gain more share in the global economy in the coming period. one of the main indicators that support this forecast is that the public finance balance in developing economies is much more robust compared with that of developed countries. The problems that had arisen from the high growth rates in developing economies and expansionary monetary policies, has made it necessary for these countries to implement new policies to prevent cash inflow, starting from 2010.

TURKISh ECONOMYThanks to the financial discipline in the public sector and robust domestic demand, Turkey has recorded high rates of economic growth in recent years and has attained a leading position among developing economies. maintaining the momentum of its record gdP growth rate of 9% in 2010, Turkey realized growth of 8.5% by end-2011. according to the forecasts of the imF and other global economic institutions, Turkey is expected to post growth of between 2.2% and 4% in 2012. The reason behind the decreasing growth forecasts is closely related to the slowdown in europe, Turkey’s biggest export market. additionally, it is expected that european banks that provide

economical developments in the world and turkey in 2011

due to the slowdown In global markets, turkey Is expected to record economIc growth rangıng between 2.2% to 4% In 2012.

27

served to restrict the money supply and increase borrowing costs. during this process, the sharp increase in reserve requirements ended the fall in loan interest rates. despite these measures, Turkey’s current account deficit, which stood at us$ 47 billion at 2010 year-end, climbed to us$ 77 billion by end-2011. even though the inflation rate was projected to be 5.5% in 2011, it ended the year at 10.45%. in addition, the inflation rate expectation for 2012 is 5%, and yet the expectations in the markets indicate a level of over 7%, creating the necessity to be cautious about price stability. one of the main reasons why the inflation rate exceeded expectations was the increase in foreign exchange rates.

syndicated loans to Turkey will focus on meeting domestic demand in their respective markets in the coming period. in light of these developments, the Central bank of the republic of Turkey (CbrT) aimed to implement policies to effect a controlled devaluation of Tl and subsequently to reduce the current account deficit, while precluding speculative hot money flows. accordingly, the CbrT reduced the policy interest rate, which raised the uncertainty of the country’s monetary policy and as a result decreased the appeal of the Tl for hot money.

in order to compensate for the expansionary effect of lower interest rates especially on domestic demand, the CbrT increased reserve requirements for banks. This action

The strict monetary policies implemented by the CbrT caused the interest rates of short-term bonds to rise above those of long-term bonds and also led to an increase in the interest rates of deposit accounts and loans. These tightening measures aimed to curb inflation and they caused a further slowing of loan supply growth. due to the uncertainties in the global economy coupled with the continuing problem of public debt sustainability in the eurozone, developed economies such as the us, the eu and Japan, started to implement expansionary monetary policies. With all these developments, Turkey is expected to implement tightening monetary policies during the coming period, even if a recovery is experienced in the eurozone.


entering a gradual recovery period in 2010, global iron and steel markets once again faced demand shrinking and decreases in price starting in mid-2011 and onwards, due to the fluctuations in the global economy. The political turmoil unfolding in the middle east and north africa combined with the earthquake and tsunami disaster, which deeply shook the Japanese economy, led to significant decreases in production, capacity utilization and employment figures in the sector. it is estimated that global raw steel production increased 6.8% by end-2011, reaching a volume of 1,527 million tons.

as in the previous year, China, Japan and the us held the top three places in terms of raw steel production volumes in 2011. Turkey, however, ranked among the top three countries, together with south Korea and Taiwan, with the fastest growing production figures. in 2011, Turkey realized a 17% increase in iron and steel production over the previous year, reaching a volume of 34.1 million tons. during post-crisis period, Turkey started to focus on neighboring countries and alternative markets such as latin america, due to the contraction in demand and price decreases in global markets. as a result, Turkey’s total export volume of iron and steel products increased 5.3% in 2011, reaching a level of 18.5 million tons.

owing to efforts to increase the production capacity of flat products, the iron and steel industry has fared much better in exports as opposed to imports; in fact, export volumes have increased significantly. in 2011, the total export volume of the steel industry reached 18.5 million tons while imports totaled 10.7 million tons. The total export volume of flat products and hot-rolled flat products increased 51.2% and 77%, respectively, during the reporting year.

The iron and steel industry in Turkey presents great potential for the future due to its significant competitive advantages such as geographic location, superior production standards, experienced workforce and a continuously developing production infrastructure. Turkey is among the 10 top countries with the highest iron and steel production volume and it is expected to gain more share in global markets in the period ahead, provided that the industry expands its infrastructure for manufacturing flat products and the government increases its support in r&d and investments.

iron and steel industries around the world and turkey

In 2011, the declIne In demand and decrease In prIce level had an adverse Impact on the Iron and steel Industry In turkey.

29


in 2011, Kürüm holding continued to increase its market share and sales volume in Turkey and the balkans. The holding also implemented key initiatives to help it attain a leading position in the region in the period ahead. The most important factor underlying Kürüm holding’s success is its capability to plan investments in a flexible manner and to bolster its market position with technological advances. The holding continued to expand its shipment and logistics activities, beyond albania, Kosovo, serbia and macedonia, where it already has operations, to italy, greece and montenegro. With these initiatives and investments, the holding once again proved its capability of rapidly adapting to evolving market conditions and obtaining maximum benefit from a changing environment.

Kürüm demir, the flagship of Kürüm holding, pursued a proactive strategy and cemented strong relationships with its domestic and overseas suppliers. The Company reinforced its ever-strengthening position in the sector by achieving an 11% increase in production and a 43% rise in sales in 2011.

in line with its long-term targets and strategies, Kürüm holding made important investments in southeast europe in 2011. The relatively limited integration of the albanian economy with the global economy helped the Company to increase the effectiveness of its risk management policies. some 68% of Kürüm international’s sales are made to albania while 32% originate in neighboring countries such as serbia, Kosovo and macedonia. Kürüm international bolstered its market position with effective marketing strategies and concluded a successful year with a 21% increase in its sales volume. an important factor underlying Kürüm international’s success was its capability to continue its planned investments to boost productivity in a determined manner, despite crisis conditions.

activities in 2011

In 2011, addItIon to succesful domestIc operatIons, kürüm holdIng made sIgnIfIcant progress In expandIng Its global market share.

31

KOSOVO

ALBANIA

KOCAELI

kürüm oxygenWith 97% oF its production designated For the associated meltshop, kürüm oxygen met the mill’s entire demand in 2011 and FulFilled its Function Within kürüm holding.

kürüm durresthe company, Which became a Fully-oWned subsidiary oF kürüm holding in 2009, successFully restructured the durres port, located at one oF the most strategic points on the balkan peninsula. the company’s turnover totaled € 473,000 in 2011. expanding its operations to corridor viii countries, the company oFFers brokerage, loading, unloading and storage services as Well as other logistics services related to commodity transport in the region.

kürüm international elbasanhaving acquired oWnership oF the Facilities From the albanian ministry oF privatization in 2009, kürüm international became one oF the sector’s leading players in southeastern europe. in 2011, the company’s steel bar production increased by 25%, reaching 295,333 tons and billet production rose by 19%, to 463,630 tons.

another successFul hub oF production in 2011 Was the lime plant operating under kürüm international, the only hydrated lime production center in albania employing state-oF-the-art technology.

kürüm demİrin 2011, the company boosted its production by 11% and increased sales 43%; by year-end, total sales reached €345 million.

kosova e rekosova e re, the longest-running insurance company in kosovo and the region made signiFicant advances toWard its objective oF increasing its market share to 20% in tWo years.


Founded in 1975, Kürüm demir has played an important role in the corporate development of Kürüm holding. With industry experience and expertise spanning over 30 years, the Company has played a major role in the development of the iron and steel industry in Turkey.

The Company headquarters and steel works are located in gebze, Kocaeli, 50 kilometers from istanbul. Kürüm demir has an annual production capacity of 444,600 tons. in 2011, the Company produced 429,777 tons of output and enjoyed a strong market position with sales of 643,090 tons.

reaching wholesalers and end-users through direct sales, Kürüm demir’s facilities are at convenient geographic locations for its customers resulting in increased service quality and accelerated service provision. deliveries are two-pronged, from the Company’s İkitelli-Küçükçekmece warehouse to the Thrace region and from the factory site to anatolia.

Kürüm demir’s business processes are in full compliance with international standards including iso 9001:2008 quality management system, iso 14001:2004 environmental management system, ohsas 18001: occupational health and safety management system; in addition, the Company has received Tse 708 Product Compliance Certification.

as a result of the audit carried out in the Company in december 2011, compliance with these management systems were certified and registered. Kürüm demir also places importance on productivity-oriented continuous technological investments. To this end and as part of quality enhancing investment initiative at the gebze rolling mill, the company acquired a new spectrometer, a marking and ribforming machine and metallographic analysis equipment.

in steel re-bar production, Kürüm demir reserves 80% of its capacity for products that are difficult to process in ton-per-meter terms. The Company manufactures 8 mm–10 mm plain and reinforcing steel bars, once folded re-bar and 12-meter hot-rolled steel bars. Kürüm demir has created a niche market for itself in the Turkish industry, focusing on the production of 8-millimeter thin products, which are hard to process in ton-per-meter terms.

kürüm demİr

In 2011, kürüm demir’s total sales ıncreased 43% over the prevIous year, to 643 thousand tons.

33

country of operation turkey

turkey

field of operationproductIon of hot-rolled

steel re-bar

ımport and export of steel products

number and profile of employees

20435% blue collar

65% whIte collar

capacity 445 thousand

tons/yearkürüm demir has created a

nIche market for Itself In the turkIsh Industry, focusIng on

the productIon of 8-mIllImeter thIn products, whIch are

dIffIcult to process In ton-per-meter terms.

production in 2011 430 thousand tons

kürüm demir dIstrIbutes Its products all across turkey,

quIckly.

sales in 2011 643 thousand tons

products 67% commodIty 33%

turnover in 2011 345 € mıllıon


kürüm demİr

Kürüm demir distributes its products all across Turkey. The Company stands out in the sector with its high levels of customer satisfaction and service quality. Kürüm demir delivers its products directly to the destinations with its own fleet of vehicles; in addition, the Company has differentiated itself as the most sought-after and preferred provider in the sector by correctly determining customer requirements and heavily investing in delivery services.

The main factors that differentiate Kürüm demir from its competitors in the industry include:

• Focusing on sought-after and ready to sell small size products; • Responding quickly to customer demands and expectations that complement the customer-oriented, high quality and continuous service approach; • Maintaining deep, long-term customer relationships;

kürüm demir delIvers Its products dIrectly to the destInatIons wIth Its own fleet of vehIcles; In addItIon, the company has dIfferentIated Itself as the most sought-after and preferred provIder In the sector by correctly determınıng customer requIrements and heavIly InvestIng In delIvery servIces.

• Having a wide distribution network and logistics capability;• Employing a highly experienced sales team;• Offering competitive prices.

in 2010, approximately 83% of Kürüm demir’s sales were generated within the domestic market while 17% originated from exports; in 2011, the Company’s domestic-foreign sales distribution was 87% and 13%, respectively.

SaleS manaGer Fehmi şengün

PrODUCTIOn manaGer seÇkin arslan

aCCOUnTInG manaGer mustaFa koşar

FInanCe manaGer Ömer bayrakÇeken

STeel GrOUP eXeCUTIVe OFFICer doğan kenet

Kürüm Demir General manaGer deniz topkara

35


Kürüm international’s facility occupies an area of more than 219,410 square meters and is equipped with cutting-edge technology. The Company is the sole iron and steel manufacturer in albania and ranks among the most prominent corporations in the country. Through world-class production quality and a reliable brand image, Kürüm international strengthens its market position year after year not only in albania, but also throughout southeastern europe. The Company sells approximately 68% of its products to albania and the remaining 32% to the neighboring countries, serbia, Kosovo and macedonia.

The close proximity of Kürüm international facilities to its market and the resulting logistical advantages provide the Company with numerous opportunities to expand its production capacity, market share and service network to the surrounding region. The high cost of imports for iron and steel products and certain advantages obtained in input costs are among the key factors that make albania an essential country to invest in from the perspective of Kürüm holding subsidiaries.

Kürüm holding’s growth and development strategy in the albanian market is based on the following three concepts: • Reducing input costs; • Improving and diversifying the quality of products and services; and• Developing sustainable and lasting business partnerships in the region.

Kürüm international has largely consolidated its position in the market through a consistent pricing strategy, strong cooperation forged with retailers and an effective premium-based marketing and sales strategy.

Kürüm international has widely penetrated the serbian market by both selling its products and buying scrap, the most important raw material input. in 2011, the Company continued to pursue its growth strategy in the region, operating from albania. The Company increased its revenue from exports by 21% in tonnage.

KüRüM IN ALBANIAThe strategic and commercial importance of albania, Kürüm holding’s hub for foreign investment and expansion plans, continues to grow in southeastern europe. The holding also places great importance on this country with regards to future development. in addition to producing iron and steel products, Kürüm international also produces lime and industrial oxygen in albania.

besides the above referenced production facilities, the Company significantly expanded its service network in albania with Kürüm durres, which became a fully owned Kürüm holding subsidiary in 2009. Kürüm holding plans to continue its operations with the same forward momentum in albania, which has attracted increasing attention from a number of countries due to large-scale investment projects and high growth potential. While enhancing its sector dominance in the region’s economy, Kürüm holding is also entering into new sectors; in fact, the holding is set to become one of the leading industrial powers in the southeast european market.

KüRüM INTERNATIONALestablished to conduct Kürüm holding’s operations in albania, Kürüm international signed a Contract of Concession related to privatizations with the country’s ministry of Public economy and Privatizations. after operating the elbasan steel Production Facilities on the basis on this agreement, Kürüm international acquired full ownership of the facilities from the albanian ministry of Privatization in 2009, taking an important step in terms of its corporate development. With this strategically important acquisition, Kürüm international became a 100% Turkish company operating in the iron and steel sector abroad and the largest Turkish industrial investor in the balkans. This initiative is clear proof of the Company’s ability to turn the economic crisis into a market opportunity.

Comprised of one meltshop and three rolling mills and located on a parcel of 219,410 square meters, of which 88,410 square meters are covered, the elbasan steel Production Facilities have an annual capacity of 700,000 tons of hot-rolled steel re-bar and 510,000 tons of liquid steel. The facility has the capability to meet albania’s total long-term product requirements.

operating in the area of steel re-bar production at high quality standards for over a decade, the Company made significant investments to increase product diversification and quality. To this end, a scrap processing unit was transferred from germany to Kürüm international elbasan steel Facilities in order to clean scrap of non-metallic contamination; to increase its density; and to effect energy savings while raising productivity. The unit became operational at the end of 2011, after the completion of all testing procedures.

kürüm ınternatıonal

In 2011, kürüm InternatIonal, based In albanIa, successfully Implemented Its growth strategy In the regIon; the company’s revenue from exports Increased by 21% In tonnage.

37

country of operation

field of operationproductIon of hot-rolled

steel re-bars and lIme (fragmented-hydrated)

number and profile of employees

66588% blue collar 12% white collar

turnover ın 2011 256 (€ mıllıon)

capacity700 thousand tons

steel re-bar

510 thousand tons bıllet

production in 2011 464 thousand tons

steel re-bar

295 thousand tons bıllet

albanıa

sales in 2011

329 thousand tonssteel re-bar 87%

commodıty 13%


kürüm ınternatıonal

in 2010, the rolling mill at Kürüm international’s albanian steel facilities was completely renovated to reach an annual production capacity of 450,000 tons of exportable goods. as the temper furnace of this rolling mill was heated with fuel oil, the Company obtained the necessary permits to make the system compatible with lPg/natural gas. subsequently, lPg tanks were constructed and installed while all testing procedures were completed.

kürüm InternatIonal’s rollIng mIll facIlItIes produced a total of 295,333 tons In 2011, up from 235,882 tons a year earlIer.

another important initiative undertaken to increase the capacity of Kürüm international’s elbasan steel Production Facilities was the improvement of the Continuous Casting machine. With this project, production of 150-mm billets has already commenced; in addition, production of 130-mm billets is also possible should there be demand.

making ambitious investments to expand its product range and further increase production quality, Kürüm international sharpened its competitive edge in 2011. The Company has additional improvement plans for 2012. in parallel with the expected recovery of the real economy in 2012, Kürüm international plans to transfer its infrastructure and technology superiority to its growth and expansion strategy.

STeel GrOUP eXeCUTIVe OFFICer doğan kenet

TeChnICal DePUTy General manaGer

General manaGer

QUalITy COnTrOl anD PrODUCTIOn PlannInG manaGer deniz düztepe

melTShOP manaGer bünyamin diricanlı

rOllInG mIll manaGer metin karahan

SeCUrITy SUPerVISOrorhan aral OXyGen FaCIlITIeS SCraP PreParaTIOn

SUPerVISOr

lIme FaCIlITIeS PrODUCTIOn SUPerVISOr

WaTer FaCIlITIeS COnSTrUCTIOn maChIneS SUPerVISOr

PrODUCTIOn anD COnSTrUCTIOn WOrKS

maChInery maInTenanCe SUPerVISOr

DUST reTenTIOn eleCTrIC maInTenanCe SUPerVISOr

ShIPmenT SUPerVISOr

PrODUCTIOn SUPerVISOr

maChInery maInTenanCe SUPerVISOr

eleCTrIC maInTenanCe SUPerVISOr

39

aDmInISTraTIVe anD COmmerCIal DePUTy General manaGerkoray zeytinoğlu

FInanCe manaGer oktay keleş

aCCOUnTInG manaGer melih güven

PrOCUremenT manaGer yücel aksu

hUman reSOUrCeS manaGer gjergjı mucaj

IT SUPerVISOr PrODUCT WarehOUSe SUPerVISOr SaleS SUPerVISOr

maranglen mema

PrODUCT WarehOUSe SUPerVISOrişık kÖroğlu

leGal COUnSelerıola sera

CUSTOmS OPeraTIOnS

Kürüm international is comprised of one meltshop and three rolling mills. The Company converts billets produced in its meltshop into construction bars at its rolling mills located on the premises. While most of the raw materials required for the meltshop are supplied by the domestic market, the Company also sources raw materials from montenegro, macedonia, serbia, Kosovo, and other countries. Kürüm international’s rolling mill facilities increased its production to 295,333 tons in 2011, up from 235,882 a year earlier. additionally, billet production increased by 19% compared to the previous year, to reach 463,620 tons.

Kürüm international realizes 48% of its total sales, including billets, in albania. as a result, the Company supplies 80% of the country’s total market demand. The Company’s exemplary performance in the albanian market is a result of its ability to offer Kürüm holding’s quality excellence in all areas and regions.

at Kürüm international, production operations are in compliance with en 10080 (b500C-europe), din 488 (b500a-germany), d.m. 14.01.2008 (b450C-italy) and asTm a615a (g60-us) international product standards; in addition, the Company holds iso 9001: 2008 quality management system, iso 14001 environmental management system and ohsas 18001 occupational health and safety management system certifications. in the coming period, by further strengthening its proactive marketing policies, Kürüm international plans to extend its successes in the albanian market to other countries in the region.

LIME pRODUCTION fACILITYKürüm international owns the only slaked (hydrated) lime production center in albania that employs state-of-the-art technology. With a production capacity of 72,000 tons per year, the lime-processing facilities provide 70% of the country’s demand for lime.

The raw materials needed for production at the facilities are sourced entirely from the local market, providing the Company with a significant competitive advantage.

The environmentally friendly de-dusting unit and auxiliary equipment were put into service in 2011. With the completion of this initiative, the plant became compliant with eu emission standards requirements.

Kürüm international’s lime products is produced at a quality level exceeding eu standards and in 2011 continued to be used in larger volumes in the electro-metallurgy industry.


Kürüm oxygen is the second company acquired by Kürüm holding in albania through privatization/concession agreements. since 2004, Kürüm oxygen has met the oxygen demand of Kürüm international’s iron and steel facilities at elbasan. The facility has reached an annual production capacity of 6,400 nm3/h.

Kürüm industrial gases sh. a. serves various corporations in albania as well as the group’s subsidiaries. The Company not only generates profit by fulfilling Kürüm holding’s input requirements but also adds significant value to the albanian economy.

Kürüm oxygen expanded its product range with offerings targeted at healthcare as well as the iron and steel industry. in addition to liquid oxygen, nitrogen, and industrial oxygen cylinders, the facility also produces oxygen cylinders for the healthcare industry.

With 97% of its production designated for the meltshop, Kürüm oxygen is capable of meeting the mill’s total demand. in the coming period, Kürüm oxygen will pursue further investments to boost capacity, as well as efficiency in light of the demand from the meltshop and other facilities.

kürüm oxygen (kürüm industrial gases sh. a.)

kürüm oxygen not only generates profIt by fulfIllIng kürüm InternatIonal’s Input requIrements but also adds sIgnIfIcant value to the albanIan economy.

41

country of operatıon

albanıa

fıeld of operatıonproductIon of oxygen and nItrogen (lIquId and gas)

number and profıle of employees

3297% blue collar 3% whıte collar

capacıty6,400 nm3/h

sales ın 2011 30 (€ thousand)


kürüm durres (durres-kürüm shipping sh. a.)

together wIth kürüm InternatIonal, kürüm durres Is the most Important enterprIse of kürüm holdIng In albanIa. In 2011, the company contInued Its operatIons that Include brokerage, loadIng-unloadIng, storage and logIstIcs servIces.


albanıa

fıeld of operatıonloadIng, unloadIng,

storage, shIppIng brokerage and logIstIcs

operatIons


5981% blue collar

19% whıte collar

sales turnover ın 2011

473 € thousand

operating on an area of approximately 120,000 square meters, Kürüm-durres shipyard is located at the heart of durres Port, the outset of the east-West Trans-balkan and Corridor viii transport routes. With its strategic location, Kürüm durres has significant potential to strengthen economic co-operation between southeast european states via successful logistics operations.

at its very strategic location on the balkan peninsula route, Kürüm durres has been fully acquired from the albanian ministry of Transport in 2009. Following this acquisition, the Company initiated capacity increase and renewal activities in 2010. as a result, the Company continued to meet the marine transport and logistics requirements of the region.

COUnTry DIreCTOr FOr alBanIa zeki kaya

Kürüm DUrreS General manaGerskol planı

43

KüRüM IN KOSOVOKosovo is the second largest market for Kürüm holding in southeastern europe. With a population of 2 million, Kosovo has major commercial potential; Kürüm holding offers insurance services via its subsidiary, Kosova e re. operating through seven regional directorates and over 100 agencies besides its headquarters in the capital Pristina, Kosova e re has steadily increased its market share in the country.

KOSOVA E REKürüm holding acquired Kosova e re in april 2002 under the trade name of Kosova e re insurance Company s.a. in the same year, Kürüm holding purchased all outstanding shares within the framework of the agreement signed with the Kosovo government.

in 2011, Kosova e re maintained its 12% market share from the previous year. The Company also opened a new office in the Pristina city center in order to conduct its activities in a more institutional and efficient manner, enabling Kosova e re to be closer to existing and potential customers. The Company’s overall premium production increased by 36% in 2011 over the previous year, and reached €5.5 million.

Kosova e re is the longest-operating insurance company in the country and it is specialized in general insurance (non-life). Kosova e re’s mission is to introduce every innovation emerging in the world insurance sector to the people of Kosovo and to become the market leader. To this end, the Company sees its robust capital structure, well-qualified human resources and high quality services as its most important competitive advantages. Furthermore, Kosova e re’s relations with international players, the new products it introduces to the market and its pricing strategies all provide the Company a significant advantage over its competitors.

With the exception of life and health, Kosova e re offers all types of insurance products including fire, motor, compulsory liability, traffic and transport insurance. The Company has a robust financial structure thanks to its close collaboration with global reassurance

kosova e re

wIth the exceptIon of lIfe and health, kosova e re offers all types of Insurance products IncludIng fIre, motor, lIabIlIty, traffIc and transport Insurance. the company has a robust fInancIal structure thanks to Its close collaboratIon wIth global reassurance companIes.

STraTeGIC BUSIneSS DeVelOPmenT DIreCTOr nejat bocnak

KOSOVa InSUranCe General manaGer muhamet gjurgjealo

KOSOVa InSUranCe DePUTy General manaGer ahmet mithat milli


fıeld of operatıonınsurance


6382% hıgh school graduates 18% unıversıty graduates

premıum productıon

5.5 € mıllıon

kosovo

companies. Kosova e re insures approximately 30,000 motor vehicles in Kosovo every year.

Kosova e re has made rapid and significant progress towards its principal objective of becoming the leading player in Kosovo’s insurance sector. To achieve this goal, the Company aims to increase its market share gradually over the next two years up to 18% and 20%, respectively, and to maintain and reinforce its market dominance. To this end, the Company plans to reorganize management, launch new agencies and penetrate the life and health insurance segments following the completion of necessary feasibility studies.


The main investments undertaken by Kürüm holding in 2011 include: • Kürüm Holding moved into its new

headquarters within the framework of its centralized corporate management initiative.

• To prevent the adverse environmental effects of emissions that increase in parallel to the expanding steel production capacity, the meltshop was equipped with a booster fan (direct dust absorption capacity), gas cooling pipes, and additional filter bags.

• To extend the life cycle of the refractory, vertical and horizontal ladle heating stations were reconfigured.

• To provide an alternative to the electric energy consumed by the arc furnace, and to increase production, new fuel burner systems were installed.

• A lime dosing and injection system was set up.

• New scrap baskets and cars were integrated into the production system.

• The construction of the scrap processing plant was completed and the condirator facility (2,000 hp), together with scrap shear machinery (with shearing capacity of 1,250 and 500 tons), became operational. in addition, new radiation detectors, steelyards and new machinery, which are also components of this system, were put into service.

• As an alternative fuel, an LPG system was installed at the temper furnaces of the rolling mill, ending the emission problem.

• A chimney dust collection system was installed at the lime facility.

• The arc furnace transformer at the meltshop was improved.

investments in 2011 and outlook

wIthIn the framework of Its forward lookIng corporate development and growth strategIes, kürüm holdIng moved Into Its new headquarters In 2011.

Construction of the greenfield steelshop in georgia commenced in 2011 and constituted Kürüm holding’s most important investment last year. The holding plans to carry out investments in the iron and steel industry, and other foreign investments in the areas of hydroelectricity, port management, and mining, based on the progress of this key investment.

Kürüm holding conducts its financial and operational processes within the framework of sustainability; the Company always takes into consideration the environmental impacts of its operations while pursuing its investment and growth plans. Therefore, in all its domestic and overseas facilities, the holding engages in production in line with international environmental standards and evaluates all new investment decisions with an environmentally friendly approach.

Kürüm holding’s expectations and targets for 2012 include:

• The Holding will focus on input costs to increase efficiency in production.

• In new investments, state-of-the-art technology will be prioritized to ensure that profitability and investments are sustainable.

• The technical infrastructure of the Georgia project will be completed.

• Environmental standards will be further improved in pursuant to new technological developments.

• The Holding will focus on increasing its exports and continue to seek alternative markets.

• New overseas markets will be explored in order to market Kürüm holding’s products in an even more efficient manner.

45


in accordance with its mission “to become a global brand”, the holding integrates technological advancements in the sector and the latest management best practices into its corporate structure in a fast and effective manner. Kürüm holding’s corporate mission, vision and core values provide the basis for its ongoing achievements; these are regularly reviewed and updated by the senior management in line with the holding’s future growth plans. additionally, Kürüm holding’s human resources policy aims to create a corporate structure in which the core personnel, who create high added value for sustainable growth, and who are self-disciplined, take part; which all stakeholders are proud to be part of; and which is preferred by professionals in the holding’s operating regions.

as a result of these efforts, Kürüm holding looks to the future with increased confidence and continues to draw closer to achieving its targets with consistent and solid steps.

at Kürüm holding, conducting business through full compliance with the laws and values of the foreign countries is an indispensable component of the corporate culture.

corporate management

complyIng fully wIth the prIncIples of contInuous development and corporate management In all of Its actIvItIes, kürüm holdIng carrIes out all fInancIal and operatIonal processes In a transparent and accountable manner.

The main corporate management endeavors carried out by the holding in 2011 include:

• The Holding’s corporate website was updated to better reflect the principles of openness and transparency to the public.

• A comprehensive reporting system was established in parallel with iT infrastructure upgrades. The speed and flexibility of the reporting system improved both for in-house applications and for data transfer to relevant departments.

• The procurement module, enabling the holding to monitor all stages of the process and to easily access historical data, was made fully functional.

• Through systematic reporting throughout the holding, executives are now able to closely monitor all details related with cost. This initiative encourages all executives in charge of production processes to act in a more cost-oriented manner. by expanding corporate procurement planning activities, the standards of Company-wide reporting were supported via a platform that enables sharing and it is thereby accountable.

47

KüRüM hOLDING’S ORGANIzATIONAL STRUCTUREWithin the framework of corporate restructuring efforts, Kürüm holding redesigned and implemented its senior management organizational chart.

effective as of 2007, this organizational chart includes two main title categories:

• Executive Officers in charge of executives at the general manager level, and • Directors in charge of managers.

Kürüm holding also has certain departments that are not run by a director at present, but rather have managers in charge. executive officers and directors report to the Ceo; the Ceo and these senior executives comprise the executive Committee.

The holding is organized under main departments with subordinate units to create an effective and efficient working environment.

hUMAN RESOURCES AND TRAINING Kürüm holding sees its human resources as its most valuable asset. Founded on this key principle, the holding views the continual advancement and development of its human resources as an integral component of its corporate goals and vision. Kürüm holding’s human resources department was created to maintain the Company’s workforce, one of the primary sources of growth and development, with an effective, efficient and long-term approach.

The Company’s main human resources policies, developed in tandem with Kürüm holding’s main corporate policies and strategies, are presented below.

Kürüm holding:• Respects labor, knowledge, and skills;• Values each employee as an individual;• Ensures that working conditions comply

with universal human rights and laws of the countries concerned, while generating maximum benefit and satisfaction for the employees;

• Does not under any circumstances allow discrimination based on religion, language, race, gender, or ethnic background;

• Strives to provide support and create opportunities for the career development of its employees;

• Tries to create an atmosphere of trust and accord;

• Rewards conduct, talent, high performance and accomplishment in line with the core values it embraces;

• Believes in teamwork and acts with a collective consciousness.

The following activities are conducted in accordance with the above referenced human resources policies:• Planning staff requirements;• Sourcing and recruitment;• Analysis and implementation of training

requirements;• Performance management;• Career planning;• Ensuring employee satisfaction.

human resources efforts at Kürüm holding begin with the establishment of hr systems and definition of competencies. First, the recruitment process is defined and the function of administrative affairs is organized. Then, job definitions and position-based evaluations are made to generate the compensation system based on results. last, the training plan is specified.

Training holds an important position in Kürüm holding’s human resources policy. The Company is fully aware that the development of its employees is a prerequisite for its own development. as a result, Kürüm holding offers its personnel training opportunities to advance their knowledge and skills, to enhance their performance and to assist with their career development.

at Kürüm holding, on-the-job training is a dual process. in addition to the various trainings programmes provided to personnel, each holding employee is expected to take responsibility for their own self-development. employees who receive training or who obtain knowledge, skills or experience are encouraged to share these by conducting in-house training to other employees; in turn, they contribute to the training endeavors within the holding.


Kürüm holding’s main priorities in risk management include:

Key Financial Principles:• To have a sustainable and robust capital

structure and an optimal debt/equity balance based on reliable sources,

• To protect and develop the Holding’s assets, funds and liabilities effectively against all types of risks through a dynamic risk management system,

• To form long-term, lasting financial relationships with banks that enjoy high credibility and a robust partnership structure in Turkey and abroad offering high-quality, good-value services. Providing customers with a high-quality, broad product and service range at competitive prices through resources secured with such relationships.

kürüm holdIng develops hIghly effectIve solutIons In response to fluctuatIons In global and domestIc markets In lIne wIth the rIsk management polIcIes It has establIshed by adoptIng the prIncIples of growth, profItabIlIty and effIcIency.

risk management

Kürüm holding:• Views financial institutions as its strategic

partners.• Strives to form mutually beneficial,

long-term relationships with its strategic partners (shareholders, banks, customers, suppliers and employees, etc.). it conducts these relations in an ethical and collaborative manner based on mutual trust and transparency while remaining steadfastly committed to its principles under all circumstances.

• Prefers to do business with financial institutions that provide high-quality, full services.

• Complies with all written or oral commitments undertaken toward third parties, especially financial institutions.

The risk management strategy of Kürüm holding is:a) an integral part of its corporate strategy and policies, b) dynamic andc) the fundamental source of the Company’s daily business culture.

Kürüm holding is well aware that it is crucial for enterprises today to set realistic targets in the face of global economic risk and even to revise traditional profitability targets under certain conditions. in this respect, the holding prefers categorizing the risk it has to manage. The fundamental aim is to protect existing facilities against all kinds of risk to achieve optimal profitability through sustainable growth and to steadily enhance the market value of each of its subsidiaries. harnessing the economies of scale and the synergy between subsidiaries and shareholders, Kürüm conducts business with a focus on customer, quality and competitiveness and achieves sustainable success in reaching its targets.

The group identified the following as the fundamental means to reach this goal:

Corporate governance: To achieve its fundamental vision, Kürüm holding views corporate governance as an integral and indispensable part of its dynamic corporate management approach and culture and strictly abides by this principle in all its endeavors.

investment in human resources: Kürüm holding considers human resources as its most significant asset and focuses on the recruitment, training, performance assessment and career planning of a qualified workforce based on a medium-term plan.

investment in technology and systems: all kinds of technology, including production and mrP and erP automation systems constitute the cornerstone of the group’s competitive and prudent policy.

establishment of a group-wide risk Management system: dynamic risk management is an essential and integral part of Kürüm holding’s strategic and routine governance system.

Kürüm holding’s risk management system is based on the following key principles: a) determinationb) Continuity and dynamismc) Centralismd) scalabilitye) Controllabilityf) Compensabilityg) Cost awareness

internal auditing department: reporting directly to the Chairman of the board of directors, the department inspects and reports on the compliance of group subsidiaries and their departments with the relevant regulations, corporate principles and decisions; the effectiveness and the functioning of the Company’s risk management system; and the conduct of daily operations.

49

The financial applications carried out by Kürüm holding during the year were determined in line with the following principles:

• Establishing a robust financial structure and a sustainable, optimal balance of equity and external finance,

• Safeguarding the Group’s equities/assets and “borrowed funds” secured from financial institutions against all risk and utilizes them optimally by means of the “dynamic risk management system,”

• Working with financial institutions operating in Turkey and abroad with strong financial structures and credibility due to wide-ranging and high-quality services and the ability to offer competitive prices,

• Concluding package deals with financial institutions that the group views as strategic partners within the framework of mutually beneficial, long-term relationships based on trust in an open, transparent and collaborative manner, to cover all the group’s subsidiaries and involve all kinds of financial services and

• Working with financial institutions on a contractual basis and complying with all commitments undertaken.

Thanks to the effective risk management policies implemented during and after the global financial crisis that emerged in 2009, Kürüm holding minimized the adverse effects of the downturn on the Company.

kürüm holdIng achIeved strong fInancIal and operatIonal results In 2011, pursuant to Its long-term strategIc plans and targets.

Within the framework of these implementations, the matters prioritized by the holding are outlined under the following topics:

increasing credit limits: The holding has developed collaborative relationships with banks based on transparency and openness such robust partnerships are formed with credible banks that operate both in Turkey and abroad know for their high-quality and financial structures.

Kürüm holding designated the operational stages of its risk management and financial strategy by taking into account current economic developments, and devised an implementation plan according to its priorities. in 2011, the holding continued its stable growth and achieved significant increases in its consolidated sales figures, operating profit, net period profit and total assets.

The holding recorded a total turnover of € 560 million in 2011.

Kürüm holding had a gross sales profit of €35 million and operational profit of € 22 million in 2011; in addition, the Company’s profit after tax totaled € 9.6 million for the year, while the gross profit margin was 6%.

in 2011, Kürüm holding’s equity rose to €115 million, while total assets amounted to € 266 million.

financial assessment of the management


KÜRÜM GROUP OF COMPANIES COMBINED fınancıal statements

together wıth ındependent audıtors’ report

as of 31 december 2011

KÜRÜM GROUP OF COMPANIES INDEPENDENT AUDITOR’S REPORT

AS OF 31 DECEMBER 2011

To the Shareholders and the Board of Directors of

Kürüm Group of Companies

Istanbul

1. We have audited the accompanying combined financial statements of Kürüm Group of Companies (“The Group”) which comprise the combined balance

sheet as at 31 December 2011 and the combined statements of income, changes in equity and cash flow for the year then ended, and a summary of significant

accounting policies and other notes to the combined financial statements.

Management’s Responsibility for the Financial Statements

2. Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with International Financial

Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of

financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

3. Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected

depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the 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 entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

6. In our opinion, the financial statements present fairly, in all material respects, the combined financial position of Kürüm Group of Companies as of 31 December

2011 and its combined financial performance and its combined cash flows for the year then ended in accordance with International Financial Reporting Standards.

EREN Bağımsız Denetim ve Yeminli Mali Müşavirlik A.Ş.

Member Firm of Grant Thornton International

Nazım Hikmet, YMM, FCCA

Partner

Istanbul, 20 April 2012

54 kürüm holding 2011 annual report

kürüm group of companıescombıned balance sheets as of 31.12.2011 and 2010 (currency - euro)

ASSETS Note 31.12.2011 31.12.2010

CURRENTCash and Cash Equivalents 4 17.501.494 30.573.158

Trade Receivables,net 5 66.081.545 32.730.519

Inventories 6 70.768.838 90.280.269

Other Current Assets 7 26.198.574 21.105.466

Total Current Assets 180.550.451 174.689.412

NON - CURRENT Trade Receivables 5 190 6.280

Investments 8 64.682 68.282

Property, Plant and Equipment 9 85.125.798 81.879.510

Intangible Assets 295.095 269.998

Other Non-Current Assets 7 5.366 39.053

Deferred Tax Asset 15 181.621 192.453

Total Non-Current Assets 85.672.752 82.455.576

TOTAL ASSETS 266.223.203 257.144.988

The accompanying notes are an integral part of these combined financial statements.

55

kürüm group of companıescombıned balance sheets as of 31.12.2011 and 2010(currency - euro)

LIABILITIES Note 31.12.2011 31.12.2010

CURRENTFinancial Liabilities 10 61.654.249 28.989.344

Trade Payables 11 24.807.003 40.960.896

Reserve for Unearned Premium 2.563.000 1.507.000

Losses and Loss Adjustment Expenses 14 1.835.000 2.343.000

Taxation on Income 15 1.750.472 2.592.804

Other Liabilities 13 5.037.422 11.125.318

Total Short Term Liabilities 97.647.146 87.518.362

NON - CURRENTFinancial Liabilities 10 52.605.512 56.967.182

Reserve for Employee Termination Benefits 16 1.175.457 1.135.877

Deferred Tax Liability 15 5.967 11.207

Total Long Term Liabilities 53.786.936 58.114.266

SHAREHOLDERS' EQUITYShare Capital 17 37.353.287 40.481.362

General Reserves 18 67.884.460 55.961.837

Net Profit for the Year 9.551.374 15.069.161

Total Shareholders' Equity 114.789.121 111.512.360

Commitments and Contingencies 12 - -

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 266.223.203 257.144.988



kürüm group of companıescombıned statements of ıncomefor the years ended 31.12.2011 and 2010(currency - euro)

INCOME STATEMENT Note 01.01-31.12.2011 01.01-31.12.2010

Net Sales 19 554.919.169 393.477.504

Gross Premium Written 19 5.518.000 4.030.000

Cost of Sales 20 (523.037.851) (359.698.653)

Claims Incurred (1.371.000) (1.649.000)

Outwards Reinsurance Expense (191.000) (88.000)

Net Change in Reserves for Unearned Premiums (1.056.000) 349.000

GROSS PROFIT 34.781.318 36.420.851

Operating Expenses 21 (12.283.067) (12.666.885)

BASIC OPERATING PROFIT 22.498.251 23.753.966

Other Income / (Expenses), net (2.438.518) 324.739

Financing Income / (Expense), net 22 (8.862.439) (6.264.911)

PROFIT BEFORE TAX FOR THE YEAR 11.197.294 17.813.794

Tax 15 (1.741.878) (2.664.058)

Deferred tax income / (charge) 15 (5.592) 31.271

PROFIT AFTER TAX FOR THE YEAR 9.449.824 15.181.007

Translation Gain/(Loss) 101.550 (111.846)

NET PROFIT FOR THE YEAR 9.551.374 15.069.161

Earnings before interest, tax, depreciation and amortisation (EBITDA) 3 27.964.854 29.499.249


57

kürüm group of companıescombıned statements of changes ın shareholders’ equıty for the years ended 31.12.2011 and 2010(currency - euro)

Share Capital General Reserves Net Profit for the Year Total Equity

Balance, 31.12.2009 24.901.765 53.076.746 16.123.941 94.102.452

Share capital increase -general reserves 14.705.197 (14.705.197) -

Tax paid for money incoming from abroad in accordance with Law 5811 (note 2) - 191.234 191.234

Revaluation of building (Kosova Ere) - 998.000 998.000

Translation difference (note 2) 874.400 277.113 - 1.151.513

Transfer to general reserves - 16.123.941 (16.123.941) -

Net profit for the year - - 15.069.161 15.069.161

Balance, 31.12.2010 40.481.362 55.961.837 15.069.161 111.512.360

Translation difference (note 2) (3.128.075) (3.146.538) - (6.274.613)

Transfer to general reserves - 15.069.161 (15.069.161) -

Net profit for the year - - 9.551.374 9.551.374

Balance, 31.12.2011 37.353.287 67.884.460 9.551.374 114.789.121



kürüm group of companıescombıned statements of cash flowfor the years ended 31.12.2011 and 2010(currency - euro)

CASH FLOWS FROM OPERATING ACTIVITIES 01.01-31.12.2011 01.01-31.12.2010Profit before tax for the period 11.197.294 17.813.794

Adjustment to reconcile net profit to net cash:Depreciation and amortization expenses 5.466.603 5.745.283

Depreciation written off due to sale of assets (983.769) (750.482)

Provision for employment termination benefits 39.580 238.894

Provision for doubtful receivables 24.961 9.185

Unearned interest on receivables and payables, net 12.328 (23.744)

Unrealised foreign exchange (gains) / losses on long term financial liabilities 993.855 (305.672)

Losses and loss adjustment expenses (508.000) 856.000

Translation gain/(loss), net 101.550 (111.846)

Operating cash flows provided before changes in working capital 16.344.402 23.471.412

Changes in operating assets and liabilities:Trade receivables (33.356.030) (7.849.475)

Inventories 19.511.431 (32.701.704)

Other assets (5.059.421) (1.967.001)

Trade payables (16.180.088) 15.676.834

Other liabilities (6.079.301) 6.413.016

Reserve for unearned premium 1.056.000 (398.000)

Tax paid (2.592.804) (2.591.588)

Net Cash Flows Generated From / (Used in) Operating Activities (26.355.811) 53.494

CASH FLOWS FROM FINANCING ACTIVITIESIncrease / decrease in short term financial liabilities 32.664.905 (1.742.127)

Increase / decrease in long term financial liabilities (5.355.525) 18.181.248

Translation differences from Shareholders' Equity (6.274.613) 1.151.513

Money incoming from abroad in accordance with Law 5811 (note 2) - 191.234

Net Cash Flows Generated From Financing Activities 21.034.767 17.781.868

CASH FLOWS FROM INVESTMENT ACTIVITIESInvestments (including translation differences), net 3.600 (21.689)

Acquisitions of tangible fixed assets(including translation differences),net (9.713.320) (9.775.300)

Acquisitions of intangible fixed assets (including translation differences), net (103.433) (258.778)

Proceeds from sales of tangible assets 2.062.533 853.348

Net Cash Flows Used in Investment Activities (7.750.620) (9.202.419)

Net Increase/(Decrease) in Cash and Cash Equivalents (13.071.664) 8.632.943

Cash and Cash Equivalents at Beginning of Period 30.573.158 21.940.215

Cash and Cash Equivalents at the End of Period 17.501.494 30.573.158


59

kürüm group of companıesnotes to the combıned fınancıal statementsas of 31 december 2011 and 2010(currency amounts are expressed ın euro unless otherwıse stated)

1. General

The combined entities comprised the following:

-Kürüm Holding A.Ş.-Kürüm Demir Sanayi Dış Ticaret A.Ş.-Kürüm International SH.A-Kürüm-Durres Shipping SH.A-New Kosova Insurance Company

The operations of the combined entities are summarized below:

Kürüm Holding A.Ş.

Kürüm Holding A.Ş. (“Kürüm Holding”) was established to invest in Kürüm Group companies and to participate in their management with the aim of solving finance and organization problems before they arise and coordinating the Group’s trade activities.

The Company’s registered office address is Küçük Organize Sanayi Bölgesi Turgut Özal Caddesi, 1. Yol. No:1 İkitelli / Küçükçekmece, Istanbul.

The number of personnel employed at 31 December 2011 was 15 (31 December 2010: 14).

Kürüm Demir Sanayi Dış Ticaret A.Ş.

Kürüm Demir Sanayi Dış Ticaret Anonim Şirketi (“Kürüm Demir”) was founded in 2006. Kürüm Demir is one of Turkey’s leading hot rolled construction iron producer. The main office and its mill are in Gebze, Kocaeli. The factory occupies 36,500 square meters, of which a total of 14,500 m² is in closed area, with the remaining 22,000 m² in an open area. The annual production capacity of the facilities totals 444,600 tones. Kürüm Demir produces and sells Ø8 mm - Ø40 mm plain bar and rolled construction iron and once-folded rebar, as well as 12 m rods.

Kürüm Demir’s registered office address is Küçük Organize San. Turgut Özal Cad. 1. Yol No:1 Ikitelli Küçükçekmece, Istanbul.


Kürüm International SH.A

Kürüm International SH.A (the Company) was established in 1999 in Albania. Initially, Haşmet Bedii Kürüm acquired the operational right of the melt shop and hot rolled deformed steel bars production plant from the Albania Ministry of Public Economy and Privatization (note 10). In September 2009, Kürüm International SH.A purchased the land over which the production plant is located, from the Albania Ministry of Public Economy and Privatization. The production plant occupies 219,410 m² open area including 88,410 m² closed area which is the largest production facility of its kind in the Balkans with an annual production capacity of 700,000 tones of steel bars.

Kürüm Gelqere SH. A. (Kürüm Lime) was established in 2002 in Albania to produce lime. The Lime factory started its operations in the end of the year 2002. The factory is the only lime production facility that uses modern equipments and technology in Albania. The lime processing facility has the capacity of 72,000 tons/year. Kürüm Gelqere SH. A. has the capacity to meet 70% of Albania’s lime needs.

On 01.08.2008 Kürüm Gelqere SH. A. was merged with Kürüm International SH. A. having the same shareholding structure.

The Company’s registered office address is Blv. “Deshmoret e Kombit”, Twin Towers, Floor: 10 No: 2, Tiran, Albania.




Kürüm-Durres Shipping SH.A

Kürüm Durres is the second investment made in Albania by Kürüm Group. The company was formed to meet the port operations and repair requirements of Albania and the Mediterranean Riviera. Having been added to the ships Group under the name of Durres-Kürüm Shipping SH.A with the acquisition of Durres, the only shipyard in the country, the facility offers considerable options for Kürüm Group in the region.

The number of personnel employed at 31 December 2011 was 59 (31 December 2010:61).

New Kosova Insurance Company

New Kosovo Insurance Company (the “Company”) was established on 25 April 2002, and operates under a license issued by the Central Bank of the Republic of Kosovo (formerly Central Banking Authority of Kosovo (the “CBAK”) to conduct the business of general insurance in the territory of Kosovo.

As of 31 December 2011 New Kosova Insurance Company had 63 employees (31 December 2010: 74).

The main activity of the Company is to engage in the business of Motor Vehicle Third Party Liability Insurance in compliance with UNMIK Regulation No. 2001/25.

The Company also issues policies under the following classes of insurance business, being:

• Property insurance; • Construction All Risk (CAR);• Travel health insurance;• Personal accidents;• Comprehensive motor vehicle insurance. 2. Basis of Presentation of Financial Statements

Kürüm Holding A.Ş. and Kürüm Demir Sanayi Dış Tic. A.Ş.

Kürüm Holding A.Ş. and Kürüm Demir Sanayi Dış Tic. A.Ş. maintains their books of account and prepare their statutory financial statements in Turkish Lira (“TL”) in accordance with Turkish Commercial Code, tax legislation and Uniform Chart of Accounts issued by the Ministry of Finance. The TL financial statements prepared from the statutory records (which are maintained under the historical cost convention) are modified with certain out-of-book adjustments, reclassifications and restatements to comply with International Financial Reporting Standards.

Kürüm International SH.A and Kürüm-Durres Shipping SH.A

Kürüm International SH.A and Kürüm Durres Shipping SH.A maintain their books of account and prepare their statutory financial statements in Lek in accordance with Albanian Commercial Code and tax legislation. The Lek financial statements prepared from the statutory records (which are maintained under the historical cost convention) are modified with certain out-of-book adjustments, reclassifications and translations to comply with International Financial Reporting Standards.

New Kosova Insurance Company

The company maintains its accounting records and prepares its statutory financial statements under the historical cost convention as modified by the revaluation of appropriate financial assets and liabilities, in accordance with the accounting rules and regulations of the Banking and Payments Authority of Kosovo applicable to insurance companies (“CBAK Rules”) and in particular, based on the relevant legal decision defining the mandatory application of International Financial Reporting Standards (“IFRS”), formerly “International Accounting Standards”, in Kosovo. The currency of the accounting records is EURO.

61


Measurement Currency and Reporting Currency

The reporting currency used in the accompanying financial statements is EURO.

The measurement currency of Kürüm Demir and Kürüm Holding which operates in Turkey is TL. The financial statements for the period ended 31 December 2011 of Kürüm Holding and Kürüm Demir were translated from TL to EURO at the buying exchange rate at 31 December 2011.

The measurement currency of Kürüm International SH.A and Kürüm Durres Shipping SH.A which operates in Albania is LEKE. The financial statements for the period ended 31 December 2011 of Kürüm International SH.A and Kürüm Durres Shipping SH.A were translated from LEKE to EURO at the buying exchange rate at 31 December 2011.

The measurement currency of New Kosova Insurance Company which operates in Kosovo is EURO.

Such translations should not be construed as a representation that the TL and LEKE amounts have been or could be converted into EURO at these or any other rates. Translation of financial statements for the years ended 31 December 2011 and 2010 functional currency to reporting currency

Translation of financial statements from functional currency to reporting currency is done as follows:

• Assets and liabilities for each balance sheet presented at 31 December 2011 and 31 December 2010 are translated at respective closing buying rates.

• Income and expenses for each income statement for the period ended 31 December 2011 and 2010 are translated at respective buying closing rates at 31 December and 2010; except for Kürüm International SH.A and Kürüm Durres Shipping SH.A which are translated at respective 2011 annual average rates (LEKE : EURO 140.20) and 2010 (LEKE: EURO 137.65).

• Equity items (including share capital) are translated at the closing buying rate at 31 December 2011.

All resulting exchange differences are recognized as a separate item of translation difference in the “General Reserves” account.

The year end rates used for EURO/Leke, EURO/TL and EURO/USD are shown below:

31.12.2011 31.12.2010TL 2.4438 2.0491

LEK 138.93 138.77

USD 1.2938 1.3254

Adoption of new and revised International Financial Reporting Standards

The Group applied the revised standards and interpretations that are relevant to its operations, published by International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC) and effective from 1 January 2011.

a) Standards, amendments and interpretations effective from 1 January 2011:

- IAS 24 (Revised), “Statements of Related Parties”- IFRS 1 (Amendment), “First Implementation of IFRS”- IAS 32 (Amendment), “Financial Tools: Presentation”- IFRIC 14 (Amendment), “Advance Payment of Minimum Funding Requirement”- IFRIC 19 (Interpretation), “Payment of Financial Debts with Financial Tools Based on Equity Capital”



- The standards within the scope of 2010 Annual Development Project will be valid for financial periods start after January 1st, 2011. The abovementioned project includes the following changes in 6 standards and 1 interpretation:

- IFRS 1 (Improvement), “First Implementation of IFRS”- IFRS 3 (Improvement), “Business Mergers”- IFRS 7 (Improvement), “Financial Tools: Explanations”- IAS 1 (Improvement), “Presentation of Financial Statements”- IAS 27 (Improvement), “Consolidated and Non-consolidated Financial Statements”- IAS 34 (Improvement), “Intermediary Period Financial Reporting”- IFRIC 13 (Improvement), “Customer Loyalty Programs”

b) Standards, amendments and interpretations to existing standards that are not yet effective as of 31 December 2011 and have not been early adopted by the Company:

- IFRS 7 (Amendment), “Financial Tools: Explanations”- IFRS 1 (Amendment), “First Implementation of IFRS”- IAS 12 (Amendment), “Income Taxes”- IAS 19 (Amendment), “Employee Benefits”- IAS 1 (Amendment), “Presentation of Financial Statements”- IFRS 9, “Financial Tools”- IFRS 10, “Consolidated Financial Statements”- IFRS 11, “Common Regulations”- IFRS 12, “Explanations Concerning the Shares in Other Operations”- IFRS 13, “Measurement of Securities”- IAS 27, “Individual Financial Statements”- IAS 28, “Participations and Joint Ventures”

The Group Management thinks that the application of the above Standards and Interpretations shall not make an important effect on the financial statements of the Group in future periods.

3. Principles of Combination and Summary of Significant Accounting Policies

3.1. Principles of Combination:

The combined financial statements comprise the financial statements of Kürüm Holding A.Ş., Kürüm Demir Sanayi Dış Tic. A.Ş., Kürüm International SH.A., Kürüm-Durres Shipping SH.A and New Kosova Insurance Company controlled by the common shareholders of the combined entities.

In preparing the combined financial statements, the financial statements of the combined entities have been combined on a line-by-line basis by adding together like items of assets, liabilities, equity, income and expenses. The carrying amount of the investment and the portion of equity between the combined entities have been eliminated. All significant intra-group balances and intra-group transactions including inter-company profits and unrealized profits and losses have been eliminated in full. Combined financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

3.2. Other Significant Accounting Policies:

The principal accounting policies followed in the preparation of the accompanying combined financial statements are set forth below:

Related partiesFor the purpose of the accompanying financial statements, key personnel in management and board of directors, their family and controlled or dependent companies, participations and subsidiaries of the Group are referred to as related parties.

63


Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand, bank deposits and short-term investments, which can easily be converted into cash for a known amount, has high liquidity with maturities of 3 months or less. The amounts paid under the reverse repurchase agreements are included in the cash and cash equivalents. Recorded value is estimated market value of other cash and bank deposits on the balance.

Trade receivables and allowance for doubtful receivables

Trade receivables and notes receivable are recognized at original invoice amount and discounted to present value less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. In case the provision decreases as a result of an event that occurs after write off, the amount is reflected on the income statement in the current year.

Based on an evaluation of its trade portfolio such as volume, character of outstanding loans, past loan experience and general economic conditions management provides a general reserve that it believes is adequate to cover possible losses and uncollectible amounts in the Group’s receivables, in addition to specific reserves provided for receivables in legal follow-up.

Trade payables

Trade payables are stated at their nominal values, discounted to present value as appropriate.

Inventory

Inventories are valued on the basis of the weighted average cost method by considering the cost or the net realizable value, whichever is the lowest. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. The cost of inventories cover all purchasing costs, conversion costs and other expenses made to bring the inventories into their current state and condition.

Finance leases

Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property after tax advantages or incentives have been deducted, or the present value of the minimum lease payments. Principal lease payments are recorded as a payable and are reduced as paid; the interest element is charged to the statement of income as expense during the lease period. Property, plant and equipment acquired under finance leases are depreciated over the estimated useful life of the asset.

Property, plant and equipment and related depreciation

Property, plant and equipment are carried at acquisition cost, less any accumulated depreciation and any impairment loss. Profit and loss arising out of the sale of property, plant and equipment are included in the other income and expense accounts. In cases when the carrying value of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Repair and maintenance expenditure related to property, plant and equipment is expensed as incurred.



Depreciation is provided on straight-line basis over the useful lives of the assets. The estimated useful lives of property, plant, equipment are as follows:

YearLand and land improvements 50

Machinery and equipment 7-10

Furniture, fixtures and office equipment 5-10

Motor vehicles 5-10

Leasehold improvements 3-5

Intangible assets and related amortization

An intangible asset is recognized if it meets the identifiably criterion of intangibles, control exists over the asset; it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the costs can be measured reliably. Intangible assets are carried at cost less accumulated amortization and impairment. Amortization of intangible assets is allocated on a systematic pro-rata basis using the straight-line method. Intangible assets including acquired rights, information systems and computer software are amortized using the pro-rata method over their estimated useful economic lives of 10 years.

Impairment of assets

Assets that have indefinite useful lives, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Financial Instruments

(i) Financial assets

Investments are recognized and derecognized on trade date where the purchase of sale of an investment is 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, net of transaction costs expect for those financial assets classified as fair value through profit or loss which are initially measured at fair value.

Financial assets are classified into the following specified categories as ‘at fair value through profit or loss’, ‘held to maturity investments’, ‘available for sale financial assets’ and ‘loans and receivables’.

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

Debt instruments that are held to maturity, are available for sale, or are loans and receivables recognize in income on an effective interest rate basis.

65


Effective interest method

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

Financial assets held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity. Investments are classified as held-to-maturity if it is the intention of the Groups’ management to hold them until maturity.

Held-to-maturity investments are subsequently measured at amortized cost using the effective interest method. In addition, if there is objective evidence that the investment has been impaired, the financial asset is measured at the present value of estimated cash flows.

Financial assets available-for-sale

Available-for-sale securities are those that are not (a) held-to-maturity investments, or (b) securities held for trading. Subsequent to acquisition, available for sale securities are valued at their fair value if reliably measurable. Otherwise, they are accounted for at the amortized cost. Unrealized gains or losses arising from changes in the fair value of securities classified as available for sale are deferred in equity until the financial asset is sold, collected or otherwise is disposed of when available for sale securities are sold, collected or otherwise disposed of, related deferred gains and losses in equity are released to the income statement. All investment securities are initially recognized at cost. Transaction costs are included in the initial measurement of debt securities. Available for sale securities are measured at fair value.

Fair value of available for sale monetary assets denominated in foreign currency is determined in that foreign currency and converted using the spot rate at the reporting date. Change in fair value attributable to conversion differences that result from a change in amortized cost of the asset is recognized in profit or loss, and other changes are recognized in equity.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments, originated or acquired, that are not quoted in an active market, not held for trading, and not designated on initial recognition as assets at fair value through profit or loss or as available-for-sale. Loans and receivables are measured at amortized cost using the effective interest method. Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.



With the exception of available for sale equity instruments, 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 recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

In respect of available for sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity.

(ii) Financial liabilities

Financial liabilities and equity instruments issued by the Group are classified according to substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set below.

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are recorded at fair value upon initial measurement and re-measured to fair value at each reporting period. Changes in the fair values are accounted in the income statement. Net gains and losses accounted for in the income statement includes interest paid expense incurred on the financial liability.

Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a considerable 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. Investment income earned by the temporary investment of the part of the borrowing not yet used is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

67


Taxation and deferred income taxes

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

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 Company’s 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 provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax related to the equity items is carried under the equity and not reflected to income statement. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilized. 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 profit will be available to allow all or part of the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities related to income taxes levied by the same taxation authority are offset accordingly.

Employee Benefits / Retirement Pay Provision

Under the Turkish law and union agreements, severance payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No: 19 (revised) “Employee Benefits” (“IAS 19”). The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses.

Operating expenses

Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin.

Revenue recognition

Revenue involves the goods and service sales invoiced value. Revenues are recognized on an accrual basis at the time deliveries of goods and services or acceptances are made, the transfer of risks and benefits related to good are realized, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group, at the fair value of the consideration received or receivable. The significant risks and benefits in sales are transferred when the goods are delivered or legal proprietorship is transferred to the customer. Interest income and expenses are recognized in the income statement on an accrual basis. Net sales represent the invoiced value of goods shipped less sales returns and commission and excluding sales taxes.

Sale of goods: Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.



Rendering of services: Revenue earned from rendering of services is recognized by using a reference to the stage of completion of the contract.

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.

Offsetting

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

Foreign currency transactions

Transactions in foreign currencies during the periods have been translated at the exchange rates prevailing at the dates of these transactions. Balance sheet items denominated in foreign currencies have been translated at the exchange rates prevailing at the balance sheet dates. The foreign exchange gains and losses are recognized in the income statement.

The year/period end rates are as follows:

31.12.2011 31.12.2010USD / TL 1.8889 1.5460

EURO / USD 1.2938 1.3254

EURO / TL 2.4438 2.0491

EURO / LEKE 138.9300 138.7700 Provisions

Provisions are recognized when, and only when the Group has a present obligation as a result of a past event and 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. Provisions are recognized by the amortized amount as of balance sheet date in case that the monetary loss is material. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

Commitments and contingencies

Transactions that may give rise to contingencies and commitments are those where the outcome and the performance of which will be ultimately confirmed only on the occurrence or non-occurrence of certain future events, unless the expected performance is remote. Accordingly, contingent losses are recognized in the financial statements if a reasonable estimate of the amount of the resulting loss can be made. Contingent gains are reflected only if it is probable that the gain will be realized.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect 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 these estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

69


Cash flow statement

Cash and cash equivalents include cash and deposits with banks.

EBITDA

EBITDA is defined as earnings before interest expense, income tax expense (benefit), depreciation and amortization. This information should be read with the statements of cash flow contained in the accompanying financial statements.

4. Cash and Cash Equivalents

31.12.2011 31.12.2010Cash in hand 181,587 252,884

Cash at banks - Demand deposits 4,167,779 16,998,215

- Time deposits 13,152,128 13,321,949

Other liquid assets - 110

17,501,494 30,573,158

As of 31.12.2011, maturity of time deposits varies between 3 to 41 days.

As of balance sheet date average interest rates for time deposits were as follows:

Euro time deposits 2.55% - 6.65%

EURO 3,775,000 of time deposit is blocked by Kosova Laws for the share capital of New Kosova (31.12.2010: EURO 3,000,000).

5. Trade Receivables

Current Trade ReceivablesTrade receivables

- Current accounts 59,145,337 27,970,877

- Post dated checks and notes receivables 1,113,452 3,606,436

Trade receivables from related parties (Note 24)- Current accounts 5,943,956 1,280,172

Unearned interest on receivables (-) (8,709) 23,215

Allowance for doubtful receivables (-) (112,491) (150,181)

66,081,545 32,730,519

Non Current Trade Receivables

Deposits and guarantees given 190 6,280

190 6,280



As of 31 December 2011 and 2010, maturity breakdown of post dated checks and notes receivable were as follows:

31.12.2011 31.12.2010Up to 3 months 1,113,452 2,965,444

Between 3 months and 6 months - 640,992

1,113,452 3,606,436

The movement of the allowance for doubtful receivables is as follows:

Opening balances at 1 January 150,181 191,391

Reversal of provisions during the year (-) (45,791) (58,013)

Increase in provisions 24,961 9,185

Translation difference (16,860) 7,618

Ending balance 112,491 150,181

6. Inventories

Raw materials and supplies 26,590,639 23,811,892

Work in process and semi finished goods 2,767,069 3,429,883

Finished goods 17,983,218 14,092,620

Merchandises 16,897,021 29,392,159

Other inventories 1,887,601 4,471,150

Order advances given 4,643,290 15,082,565

70,768,838 90,280,269 7. Other Assets

Other Current Assets 31.12.2011 31.12.2010

VAT receivables and guarantees given to tax office (*) 20,017,700 14,306,574

Deposits and guarantees given to suppliers and state utility authorities 2,825,608 2,537,360

Prepaid taxes 2,102,565 2,421,908

Prepaid expenses 320,768 1,052,108

Income accruals 340,932 323,042

Deferred acquisition costs 368,000 241,000

Due from related parties (Note 24) 21,429 55,758

Due from shareholders (Note 24) 27,701 -

Advances given for business purposes 42,625 62,717

Due from personnel - 9,275

Advances given to personnel 31,495 3,706

Other 99,751 92,018

26,198,574 21,105,466

(*) As of 31.12.2011 Group’s VAT receivables arise from balances of Kürüm Demir of EURO 1,746,484 and Kürüm International from Albanian Tax Office of EURO 18,271,216 which is also used as guarantee to Albanian Customs for exported goods.

71


Other non current assets 31.12.2011 31.12.2010

Prepaid expenses 2,091 39,053

Deposits and guarantees given 3,275 -

5,366 39,053

8. Investments

31.12.2011 % 31.12.2010 %Sigma I.P.P. Sigorta (Tirana-Albania) (*) 40,510 25 40,556 25

Illirya Resources 5,758 40 5,765 40

Kürüm Sigorta Aracılık Hizmetleri Ltd. Şti. 18,414 90 21,961 90

64,682 68,282

(*) The Group has LEK 5,628,000 (31.12.2011: EUR 40,510; 31.12.2010: EUR 40,556) participation in Sigma I.P.P. Sigorta incorporated in Tirana, Albania for the purpose of managing pension fund.



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73


As of 31.12.2011 the total of EURO 280,000 of New Kosova’s property, plant and equipment has been pledged as a security for bank loan.

Property, plant and equipment have been insured for EUR 89,086,377.

The depreciation (in relation to property, plant and equipment) and amortization (in relation to intangible assets) charges for the years ended 31.12.2011 and 2010 are set out below:

01.01.-31.12.2011 01.01.-31.12.2010Cost of sales 4,832,081 5,180,047

Marketing, selling and distribution expenses 179,463 127,723

General administrative expenses 455,059 437,513

5,466,603 5,745,283

10. Financial Liabilities

31.12.2011 31.12.2010Short-term bank loans 41,505,355 17,411,000

Current portion of long-term bank loans 17,973,864 10,053,757

Finance lease liabilities, net 273,790 195,584

Interest expense accruals 1,901,240 1,329,003

Total short-term bank loans 61,654,249 28,989,344

Long-term bank loans 52,481,302 56,745,494

Finance lease liabilities, net 124,210 221,688

Total long -term bank loans 52,605,512 56,967,182

Total bank loans 114,259,761 85,956,526

Weighted average interest rate (31.12.2011)

TL 10.53%

USD 5.64%

EURO 5.42%

Bank loans are secured by the personal guarantee of Kürüm Demir’s shareholders. Additionally there is a mortgage on the lime factory and a securing charge over the Group’s machineries and equipments of the Mill for investment credits (long term).



Short-term and long-term financial liabilities are summarized below:

31.12.2011 31.12.2010 Foreign Currency EURO Balance Foreign Currency EURO BalanceShort term:USD Loans 16,066,735 12,421,153 - -

EURO Loans - 47,058,066 - 27,464,757

Finance lease payables, net-EURO - 273,790 - 195,584

Interest expense accruals - 1,901,240 - 1,329,003

Total short term financial liabilities 61,654,249 28,989,344

Non-current:-TL Bank Loans 9,700,000 3,969,228 6,000,000 2,928,115

-USD Bank Loans 12,558,265 9,715,360 15,000,000 11,266,803

-EUR Bank Loans - 38,796,714 - 42,550,576

Finance lease liabilities, net-EURO - 124,210 - 221,688

Total long term financial liabilities 52,605,512 56,967,182

Repayment schedule for long term bank loans were as follows:

US$ EURO TL EURO BalancePayable in 1-2 years 7,306,253 22,093,013 6,000,000 30,198,199

Payable in 2-3 years 2,561,808 14,011,669 3,700,000 17,508,695

Payable in 3-4 years 2,690,204 2,351,980 - 4,434,356

Payable in 4 years and after - 340,052 - 340,052

12,558,265 38,796,714 9,700,000 52,481,302 11. Trade Payables

31.12.2011 31.12.2010Trade payables

- Third parties 14,774,902 21,327,166

- Letters of credit 2,496,919 8,951,319

- Checks and notes payables 7,272,400 10,173,407

Trade payables from related parties (Note 24)- Current accounts 50,083 336,404

Deposits and guarantees received 242,536 228,632

Unearned interest on payables (-) (29,837) (56,032)

24,807,003 40,960,896

75


As of 31 December 2011 and 2010, maturity breakdown of post dated checks and notes payable were as follows:

Up to 3 months 7,272,400 10,163,407

Between 3 months and 6 months - 10,000

7,272,400 10,173,407

12. Commitments and Contingencies

Kürüm Holding A.Ş.

a) As of 31.12.2011, based on the representation obtained from the Company’s legal counsel, there are certain lawsuits filed by the Company amounting to TL 10,000 and EUR 55,817 and there are certain lawsuits filed against the Company amounting to TL 100,000 and USD 150,000. These lawsuits have not concluded until the report date hence there is not any correction made.

b) Loans taken by the Company in 2011 of USD 5,000,000 are secured by group companies and Haşmet Bedii Kürüm.

c) As of audit report date, letters of guarantee and other guarantees obtained from several banks to give various institutions are as follows:

Guarantee AmountForeign Currency TL

TL 27,000

US$ 3,900 7,367

EUR 208,400 509,288

543,655 d) Loans of Kürüm Demir Sanayi Dış Ticaret Anonim Şirketi and Kürüm International SH.A are secured by Kürüm Holding A.Ş.

Kürüm Demir Sanayi Dış Ticaret A.Ş.:

a) As of 31.12.2011, based on the representation obtained from the Company’s legal counsel, there are certain lawsuits filed by the Company amounting to TL 44,959 and there are certain lawsuits filed against the Company amounting to TL 76,166. These lawsuits have not concluded until the report date hence there is not any correction made.

b) As of report date, letters of guarantee and other guarantees obtained from several banks to give various institutions are as follows:

Type of guarantee Guarantee amount

TL 18,518,407

c) Loans are secured by Kürüm Holding A.Ş. and personal guarantee of Haşmet Bedii Kürüm.



13. Other Current Liabilities

31.12.2011 31.12.2010Advances received 1,927,589 10,275,168

Other expense accruals - 81,214

Due to shareholders (Note 24)) 1,354,882 -

Due to related parties (Note 24) 254 34,174

Deferred income 4,821 21,552

Taxes payable 823,550 165,008

Due to personnel 314,714 399,435

Social security premiums payable 171,725 119,790

Other 439,887 28,977

5,037,422 11,125,318

14. Losses and Loss Adjustment Expenses

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as below:

For the period ended 31.12.2011 31.12.2010

IAK

operations

GuaranteeFund

operations

Excluding IAK and Guarantee fund

operations Total Total

Balance at the beginning of the year 254,000 503,000 1,586,000 2,343,000 1,848,000Incurred during the year - 50,000 1,319,000 1,369,000 1,649,000Paid during the year - - (1,877,000) (1,877,000) (1,154,000)

Paid during the year 254,000 553,000 1,028,000 1,835,000 2,343,000

Significant delays occur in the notification of claims and a substantial measure of experience and judgment is involved in assessing outstanding liabilities, the ultimate costs of which cannot be known with certainty as of the balance sheet date. The reserves for losses and loss adjustments expenses are determined using applicable CBAK (formerly BPK) rules on the basis of information currently available; however, it is inherent in the nature of the business written that the ultimate liabilities may vary as a result of subsequent developments.

New Kosova Insurance Company has recorded EURO 50,000 as at 31 December 2011 as its share of liabilities for losses and loss adjustment expenses related to Insurance Association of Kosovo (IAK) and Guarantee fund operations, respectively, based on unaudited information received by the Company from respective entities.

15. Taxation on Income

Kürüm Holding A.Ş. and Kürüm Demir Sanayi Dış Tic. A.Ş.

In accordance with amendments made in the Corporation Tax Law was with Law numbered 5520 dated 13.06.2006, several provisions of the new law entered into effect from 01.01.2006. According to the new Corporation Tax Law, the corporation tax rate of the fiscal year 2011 is 20% (2010; 20%). Corporation tax is payable at a rate of 20% on the taxable incomes after making deductions for certain disallowable expenses, exempt income and investment and other allowances (research and development expense deductions). No further tax is payable unless the profit is distributed (except the withholding tax rate at the rate of 19.8% levied on the investment allowance used under Temporary Article No.61 of the Income Tax Law.

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding tax at the rate of 15%. An increase in capital via issuing bonus shares is not considered as a profit distribution and thus does not incur withholding tax.

77


Corporations are required to pay advance corporation tax quarterly at the rate of 20 % (2010: 20%) on their corporate income. Advance tax is payable by the 17th of the second month following each calendar quarter end. Advance tax paid by corporations during the fiscal year is offset against the corporation tax payable reported in the annual tax return. The balance of any advance taxes paid may be refunded or used to set off against other taxes payable to the government. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within the 25th of the fourth month following the close of the financial year to which they relate. Tax returns are open for 5 years from the beginning of the year that follows the date of filing, during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to 5 years. Tax losses cannot be carried back to offset profits from previous periods.

Kurum International SH.A and Kürüm-Durres Shipping SH.A

Kurum International SH.A and Kürüm-Durres Shipping SH.A are subject to Albanian income withholding taxes on its taxable income. The rate is 10%.

New Kosova Insurance Company:

Premium taxes due are calculated in accordance with legislation in the United Nations administered territory of Kosovo (UNMIK). Insurance companies pay a tax of 5% on gross premiums. Premiums returned and retrospective premium adjustments are deducted from gross premiums to arrive at the tax base. Tax on gross premiums written is presented separately as a deduction from gross premiums written.

Premium tax constitutes a part of acquisition costs and is deferred in a way consistent with the method of computation of the unearned premiums provision. Insurance companies are not liable to pay corporate income tax on net profit in Kosovo. Interest income received by the Company is also liable to withholding tax at the rate of 10%. The tax liabilities included in the accompanying financial statements comprised

31.12.2011 31.12.2010Included in the balance sheet:Corporation and income taxes 1,750,472 2,591,588

Prepaid income taxes (2,102,565) (2,827,809)

Tax provision in balance sheet (352,093) (236,221)

Deferred tax asset (181,621) (157,873)

Deferred tax liability 5,967 7,898

01.01-31.12.2011 01.01-31.12.2010

Included in the income statement:Corporation and income taxes (1,741,878) (2,664,058)

Deferred tax income (5,592) 31,271

Taxation in the statement of income (1,747,470) (2,632,787)



The Group recognizes deferred tax assets and liabilities based upon the temporary differences between its financial statements as reported in accordance with IFRS and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for IFRS and tax purposes. The breakdown of cumulative temporary differences and the resulting deferred tax assets / (liabilities) are as follows:

Cumulative temporary difference Deferred tax 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Deferred tax assetCapitalized borrowing expenses 188,237 219,090 37,647 43,817

Retirement pay provision 598,666 616,208 119,734 123,242

Unearned interest on receivables 8,709 22,576 1,742 4,516

Provision for doubtful receivables 112,491 104,390 22,498 20,878

181,621 192,453

Deferred tax liabilityUnearned interest on payables 29,837 56,032 5,967 11,207

5,967 11,207

175,654 181,246

Tax rates used for deferred tax assets and liabilities calculated on temporary differences that are expected to be realized or settled based on the taxable income in coming years under the liability method is 20% (31.12.2010: 20%).

16. Employee Termination Benefits

As described in Note 3, in the accompanying financial statements, the Group reflected a liability for termination benefits. 17. Share Capital

31.12.2011 Share 31.12.2010 Share Amount % Amount %Haşmet Bedii Kürüm 35,839,429 97.03 38,675,903 95.38

Sevim Kürüm 359,130 0.97 428,306 1.52

Selin Kürüm 368,109 1.00 439,014 1.55

Melis Kürüm 307,506 0.83 366,738 1.30

Hatice Melek Kürüm 60,605 0.16 72,278 0.26

Share capital 36,934,779 100.00 39,982,239 100.00

Inflation adjustment to share capital 418,508 499,123

Total 37,353,287 40,481,362

79


18. General Reserves

General reserves comprise statutory reserves and retained earnings.

Statutory reserves, which are appropriated based on statutory profits and dividend distribution, are not available for distribution unless they exceed 50% of share capital. However, they may be used to offset losses in the event that the other reserves are exhausted.

Retained earnings are available for distribution. If this reserve is distributed as dividends, a further statutory reserve is required equal to 10% of dividends declared, less an amount equal to 5% of share capital.

19. Sales

01.01-31.12.2011 01.01-31.12.2010Kürüm Demir 298,620,314 196,516,193

Kürüm International 256,363,840 196,811,411

Kürüm Durres 275,258 360,530

Kürüm Holding 27,075 105,628

555,286,487 393,793,762

Sales discount and returns (-) (367,318) (316,258)

554,919,169 393,477,504

New Kosova Insurance (Gross premium written) 5,518,000 4,030,000

560,437,169 397,507,504

20. Cost of Sales

Direct material cost 320,978,207 245,936,016

Direct labor cost 1,638,131 2,432,469

General production overheads 54,075,040 28,435,650

Depreciation in general overhead 4,802,560 5,177,913

I. Cost of goods sold 381,493,938 281,982,048

II. Cost of services rendered (*) 400,477 894,826

III. Cost of merchandises sold 139,668,483 75,728,411

IV. Cost of other sales 1,474,953 1,093,368

Cost of Sales (I+II+III+IV) 523,037,851 359,698,653

(*) As of 31.12.2011, there is depreciation charge in relation to cost of services rendered amounting to EURO 29,521 (31.12.2010: EURO 2,134).



21. Operating Expenses

Breakdown of operating expenses are as follows:

01.01-31.12.2011 01.01-31.12.2010Personnel expenses 3,191,778 3,908,186

Depreciation expenses 634,522 565,236

Motor vehicle expenses 711,297 921,403

Communication expenses 249,693 235,657

Transportation and cargo expenses 3,141,279 2,895,513

Repair and maintenance expenses 32,186 181,911

Rent expenses 404,638 353,542

Severance pay provision expenses 81,983 75,666

Office expenses 313,670 287,940

Taxes and dues 488,876 98,856

Insurance expenses 76,988 84,139

Advertising and representation expenses 235,599 170,980

Advisory and audit fees 343,430 503,397

Traveling expenses 76,785 200,625

Import and export expenses 1,080,303 735,418

CBK and other fees 383,000 463,000

IAK supervision 287,000 277,000

Other technical expenses 314,000 322,000

IT systems expenses 14,958 15,785

Other 221,082 370,631

12,283,067 12,666,885 22. Financing Income / (Expenses), net

01.01-31.12.2011 01.01-31.12.2010Foreign exchange gains / (losses), net (3,489,785) (1,579,284)

Interest income 801,041 829,886

Unearned interest income / (expense), net (6,925) 23,218

Interest expense (5,522,497) (4,961,904)

Letters of guarantee expenses (20,686) (20,957)

Bank commission and other financing expenses (623,587) (555,870)

(8,862,439) (6,264,911)

81


23. The Nature and the Level of Risks Arising From Financial Instruments

Supplementary Disclosures on financial instruments

(a) Capital Management Policies and Procedures

The risk related with each of the capital class and capital cost is considered by the top management of the Group. The primary objective of the Group’s capital management objectives is to ensure that it maintains a healthy capital structure in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions.

To maintain or adjust the capital structure, the Group may obtain new loans, repay existing loans; make cash and non cash (bonus shares) dividend payments to shareholders, issue new shares based on Management’s evaluation. The Group manages the capital structure so as to ensure the Group’s ability to continue as a going concern; and maximize its profitability by maintaining an adequate capital to overall financing structure ratio.

The Group monitors capital using a gearing ratio, which is net financial debt divided by total financing used. The Group includes within net financial debt, borrowings, trade letters of credit, less cash and cash equivalents. Financing used is the sum of total equity and net financial debt.

The following table sets out the gearing ratios as of 31.12.2011 and 2010:

31.12.2011 31.12.2010Total financial liabilities 114,259,761 85,956,526

Less: cash and cash equivalents (17,501,494) (30,573,158)

Net financial debt 96,758,267 55,383,368

Total equity 114,789,121 111,512,360

Total financing used 211,547,388 166,895,728

Gearing Ratio (net financial debt to overall financing used ratio) 45.74% 33.18%

(b) Financial instruments and categories

31.12.2011 31.12.2010Financial assetsCash and cash equivalents 17,501,494 30,573,158

Trade receivables 66,081,735 32,736,799

Financial liabilitiesFinancial payables 114,259,761 85,956,526

Trade payables 24,807,003 40,960,896

(c) Market Risk

The Group is exposed to financial risks arising from changes in currency rate (paragraph d), interest rate (paragraph e) and price risk (paragraph f) which arise directly from its operations.

The market risks that the Group is exposed to are measured on the basis of sensitivity analysis.



(d) Foreign currency risk

The Group may have transactional currency exposure from foreign currency denominated transactions.

The Group is exposed to foreign currency risk arising from the translation of foreign currency denominated assets and liabilities. The foreign currency denominated assets and liabilities mainly include bank deposits, bank borrowings and trade payables and trade receivables.

(e) Interest rate risk management

The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities. Certain parts of the interest rates related to borrowings are based on market interest rates; therefore the Group is exposed to interest rate fluctuations on domestic and international markets. The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s debt obligations.

The majority of the Group’s financial obligations consist of fixed and variable interest rate borrowings.

(f) Price risk

The Group may be exposed to price risk arising from decreases in prices. This is a combination of currency, interest and market risks. However the Group tries to reflect such losses to customers. Accordingly, market risk is closely monitored by the management using the available market information and appropriate valuation methods. (g) Credit risk management

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter-parties and continually assessing the creditworthiness of the counterparties. The Group monitors credit risks by establishing credit limits for each customer who wish to trade on credit terms and obtaining sufficient collateral. Trade receivables are evaluated by management in the light of the Group’s procedure and policies and are carried in the balance sheet net of bad debt provision.

83


(h) Liquidity risk management

Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The Group manages its liquidity needs by regularly planning its cash flows or by maintaining sufficient funds and borrowing sources by matching the maturities of liabilities and assets. Prudent liquidity risk management implies maintaining sufficient cash, securing availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The risk is mitigated by matching the cash in and out flow volume supported by committed lending limits from qualified credit institutions. The Group’s carrying amount of financial instruments is estimated to reflect their fair value.

(i) Fair values

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. The estimated fair values of financial instruments have been determined by the Group using available market information and appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group could realize in a current market exchange. The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimate fair value:

- Financial Assets: The fair values of certain financial assets carried at cost in the combined financial statements, including cash and cash equivalents plus the respective accrued interest and other financial assets are considered to approximate their respective carrying values due to their short-term nature and negligible credit losses. The carrying value of trade receivables along with the related allowance for unearned income and uncollectibility are estimated to be their fair values. The financial assets which are denominated in foreign currencies are evaluated by the foreign exchange rates prevailing on the date of balance sheet which approximate to market rates.

- Financial Liabilities: Trade payables and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. The bank borrowings are stated at their amortized costs and transaction costs are included in the initial measurement of loans and bank borrowings. The fair value of bank borrowings are considered to state their respective carrying values since the interest rate applied to bank loans and borrowings are updated periodically by the lender to reflect active market price quotations. The carrying value of trade payables along with the related allowance for unrealized cost is estimated to be their fair values. The financial liabilities which are denominated in foreign currencies are evaluated by the foreign exchange rates prevailing on the date of balance sheet which approximate to market rates. As of 31 December 2011 the Group does not have off – balance sheet financial derivatives.



24. Related Party Disclosures

31.12.2011 31.12.2010Trade receivables (Note 5):Kürüm Industrial Gases Sh.A 5,931,082 1,276,425

Kürüm Tarım Orman Gıda San. Ve Tic. Ltd. Şti. 12,874 -

Kürüm Energy SH.A - 3,747

5,943,956 1,280,172

Short term non trade receivables (Note 7):Sigma I.P.P. Sigorta 17,350 55,758

Kürüm Sigorta Aracılık Hizmetleri Ltd.Şti. 4,079 -

21,429 55,758

Due from shareholders (Not 7)Haşmet Bedii Kürüm 27,701 -

27,701 -

Trade payables (Note 11):Kürüm Energy SH.A - 252,613

Kurum Trade Import 15,593 15,592

Kürüm Sigorta Aracılık Hizmetleri Ltd. Şti. 34,490 68,199

50,083 336,404

Due to Shareholders (Note 13):Haşmet Bedii Kürüm 1,354,882 -

1,354,882 -

Due to related parties (Note 13):Kürüm Industrial Gases Sh.A 254 1,349

Kürüm Sigorta Aracılık Hizmetleri Ltd. Şti. - 32,825

254 34,174

85

24. Related Party Disclosures

31.12.2011 31.12.2010Trade receivables (Note 5):Kürüm Industrial Gases Sh.A 5,931,082 1,276,425

Kürüm Tarım Orman Gıda San. Ve Tic. Ltd. Şti. 12,874 -

Kürüm Energy SH.A - 3,747

5,943,956 1,280,172

Short term non trade receivables (Note 7):Sigma I.P.P. Sigorta 17,350 55,758

Kürüm Sigorta Aracılık Hizmetleri Ltd.Şti. 4,079 -

21,429 55,758

Due from shareholders (Not 7)Haşmet Bedii Kürüm 27,701 -

27,701 -

Trade payables (Note 11):Kürüm Energy SH.A - 252,613

Kurum Trade Import 15,593 15,592

Kürüm Sigorta Aracılık Hizmetleri Ltd. Şti. 34,490 68,199

50,083 336,404

Due to Shareholders (Note 13):Haşmet Bedii Kürüm 1,354,882 -

1,354,882 -

Due to related parties (Note 13):Kürüm Industrial Gases Sh.A 254 1,349

Kürüm Sigorta Aracılık Hizmetleri Ltd. Şti. - 32,825

254 34,174

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kürüm group of companıescombıned balance sheets as of 31 december 2011(currency - euro)


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725,

019)

24,8

07,0

03R

eser

ve fo

r une

arne

d pr

emiu

m-

--

-2,

563,

000

2,56

3,00

0-

2,56

3,00

0Lo

sses

and

loss

adj

ustm

ent e

xpen

ses

--

--

1,835

,000

1,835

,000

-1,

835,

000

Taxa

tion

on

inco

me

12,4

3057

6,05

7-

933,

985

228,

000

1,750

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-1,

750,

472

Oth

er li

abili

ties

67

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5,71

7,934

298,

165

582,

943

1,419

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8,08

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,609

)5,

037,4

22

Tota

l Sho

rt T

erm

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bilit

ies

4,32

6,41

949

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338,

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63,8

06,6

506,

375,

000

124,

420,

774

(26,

773,

628)

97,6

47,14

6

Non

curr

ent

Fina

ncia

l lia

bilit

ies

-9,

611,4

99-

42,9

94,0

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ve fo

r em

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rmin

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n be

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s24

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574,

174

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1,175

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57De

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ed ta

x lia

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y-

5,96

7-

--

5,96

7-

5,96

7

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rm L

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litie

s24

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10,19

1,64

0-

43,5

70,8

03-

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36

SHAR

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’ EQU

ITY

Shar

e ca

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12,4

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337,4

99,7

7118

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0,00

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,091

(19,

899,

804)

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87Ge

nera

l res

erve

s2,

961,2

3220

,564

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51,7

86)

47,0

96,2

4121

4,00

067

,884

,460

-67

,884

,460

Net

pro

fit/(

loss

) for

the

perio

d3,

739

1,412

,998

(178

,801

)8,

035,

438

278,

000

9,55

1,374

-9,

551,

374

Tota

l Sha

reho

lder

s’ E

quity

19

,095

,412

34,3

77,8

044,

369,

184

73,3

54,5

253,

492,

000

134,

688,

925

(19,

899,

804)

114,

789,

121

TOTA

L LI

ABIL

ITIE

S AN

D SH

AREH

OLDE

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QUIT

Y23

,446

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94,14

3,16

04,

708,

173

180,

731,

978

9,86

7,000

312,

896,

635

(46,

673,

432)

266,

223,

203

kürüm group of companıescombıned balance sheets as of 31 december 2011(currency - euro)

87

Hol

ding

Dem

irDu

rres

Inte

rnat

iona

lKo

sova

Tota

lEl

imin

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port

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3,45

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5,67

4,87

647

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525

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3,84

0-

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455,

314

(48,

536,

145)

554,

919,

169

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n-

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518,

000

5,51

8,00

0-

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8,00

0Co

st o

f sal

es(7

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65)

(334

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)(5

66,8

40)

(237

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078)

-(5

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97,0

57)

49,8

59,2

06(5

23,0

37,8

51)

Clai

ms

incu

rred

--

--

(1,3

71,0

00)

(1,3

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00)

-(1

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utw

ards

rein

sura

nce

expe

nse

--

--

(191

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r une

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--

--

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)

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209,

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11,2

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2,90

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1,32

3,06

134

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rati

ng e

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(388

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)(4

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)(1

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(2,6

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00)

(12,

505,

877)

222,

810

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283,

067)

Ba

sic O

pera

ting

Prof

it /

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s)(1

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89)

6,25

4,48

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29)

14,8

67,7

1526

3,00

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1,54

5,87

122

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Oth

er in

com

e /

(exp

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s), n

et23

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23,12

410

7,607

(1,18

8,15

6)12

4,00

0(9

10,13

6)(1

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,382

)(2

,438

,518

)Fi

nanc

ial i

ncom

e /

(exp

ense

s), n

et17

0,94

3(4

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)(3

1,532

)(4

,792

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)11

9,00

0(8

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)(1

7,489

)(8

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)

Prof

it /

(Los

s) B

efor

e Ta

x Fo

r The

Per

iod

14,6

431,

966,

899

(177

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8,88

6,90

650

6,00

011

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94-

11,19

7,294

Tax

(12,

429)

(576

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)-

(925

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00)

(1,7

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78)

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)De

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x in

com

e /

(cha

rge)

1,525

22,15

6-

--

23,6

81(2

9,27

3)(5

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)

Prof

it /

(Los

s) A

fter

Tax

For

The

Per

iod

3,73

91,4

12,9

98(1

77,15

4)7,9

61,5

1427

8,00

09,

479,

097

(2 9

,273

)9,

449,

824

Tran

slat

ion

gain

/ (l

oss)

--

(1,6

47)

73,9

24-

72,2

7729

,273

101,

550

Net

Pro

fit/(

Loss

) For

The

Per

iod

3,73

91,4

12,9

98(1

78,8

01)

8,03

5,43

827

8,00

09,

551,

374

-9,

551,

374

kürüm group of companıescombıned stataments of ıncome for the year ended 31 december 2011(currency - euro)

Kürüm HoldinG A.Ş.Tatlı Su Mahallesi. Nurettin Duman SokakÇetin Caddesi. No: 9 PK 34774 Ümraniye/ISTANBUL/TURKEYTel : (+90 216) 250 40 00Fax : (+90 216) 250 40 01

Kürüm demir SAnAyi ve dıŞ TicAreT A.Ş. Production FacilityBarış Mahallesi Anibal CaddesiNo: 13 PK 41400 Gebze/Kocaeli/TURKEYTel : (+90 262) 677 69 00Fax : (+90 262) 643 30 25 – 643 45 66

Kürüm ınTernATıonAl SH.A.HeadquartersBulevardi Deshmoret e Kombit Twin TowersNo: 2 Kat: 10 A1-A2 PK 1001 Tirana/ALBANIATel : (+335) 428 01 77Fax : (+355) 428 01 85

Production FacilityKombinati Metalurgjik PK 3001Elbasan/ALBANIATel : (+355) 542 565 00 Fax : (+355) 545 78 44

Kürüm lıme ProducTıonFAcılıTyKombinati Metalurgjik PK 3001Elbasan/ALBANIA Tel : (+355) 542 565 00Fax : (+355) 545 78 44

durreS Kürüm SHıPPınG SH.AKantjeri Detar, Port of Durres/ALBANIA Tel : (+355) 522 222 49 Fax : (+355) 522 223 35

Kürüm ınduSTrıAl GASeS SH.A.Kombinati Metalurgjik PK 3001Elbasan/ALBANIA Tel : (+355) 542 565 00Fax : (+355) 545 78 44

KoSovA e reKS ‘Kosova e ReLagjja Kalabria nr5Blloku B1 Priştine 10000 KOSOVOTel : (+386) 437 70 777Fax : (+386) 437 70 888

e-mail: [email protected]: www.kurum.com.tr

contents

10 fiNANciAL ıNDicATORs12 OPERATiONAL ıNDicATORs14 KÜRÜM HOLDiNG iN bRiEf15 OPERATiONAL MAP16 MiLEsTONEs18 visiON, MissiON, vALUEs, cORPORATE sTRATEGy AND TARGETs19 ORGANizATiONAL cHART20 MEssAGE fROM THE cHAiRMAN22 ExEcUTivE cOMMiTTEE24 MEssAGE fROM THE cEO26 EcONOMicAL DEvELOPMENTs iN THE wORLD AND TURKEy iN 201128 ıRON AND sTEEL ıNDUsTRiEs AROUND THE wORLD AND TURKEy30 AcTiviTiEs iN 2011 44 ıNvEsTMENTs iN 2011 AND OUTLOOK46 cORPORATE MANAGEMENT49 fiNANciAL AssEssMENT Of THE MANAGEMENT51 ıNDEPENDENT AUDiTOR’s REPORT

HAviNG AccUMULATED A wEALTH Of MANAGERiAL AND TEcHNicAL KNOw-HOw iN THE iRON AND sTEEL iNDUsTRy, As wELL As iN OTHER sEcTORs, fOR OvER 30 yEARs KÜRÜM HOLDiNG PROUDLy PROviDEs sERvicEs AT iNTERNATiONAL qUALiTy sTANDARDs TO iTs sHAREHOLDERs, cUsTOMERs, EMPLOyEEs AND ALL sTAKEHOLDERs by cREATiNG vALUE AT bOTH LOcAL AND GLObAL LEvELs.

ANNUAL REPORT 2011

KÜRÜM HOLDİNG ANNUAL REPORT 2011

Growing with new and powerful steps

www.kurum.com.tr

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