A. Ahmet Kocabıyık

Chairman of the Board

Valued shareholders, investors and business colleagues,

It gives me great pleasure to share with you a review of what has transpired in the Borusan Holding companies as well as in Turkey during 2008, followed by our agenda for 2009, including our plans and expectations. First of all, I will briefly summarize developments here at home and around the world, then inform you more about the activities of our Company.

1- Developments in Turkey and around the globe

I must begin by stating unequivocally that 2008 marked the end of a very successful economic term and the beginning a very critical period for all business institutions. Although we started 2008 with cautious optimism, conditions quickly turned out to be much worse than all our expectations. We witnessed government takeovers and forced bankruptcies of many global giants as they were not able to adapt to this transition.

Beginning early last year the only item on the agenda for many of the important players in the global economy was how to deal with the approaching financial crisis. The only unanswered questions during those days were concerning how much worse the crisis was going to get, how far would it spread and where it was going to bottom out.

The true nature of the mortgage crisis, which quickly spread its toxic assets across global financial systems, became fully apparent during the fall of 2008. First it was the major US financial institutions which came to the brink of bankruptcy, followed shortly thereafter by many European banks. All global markets reacted instinctively by showings signs of contraction. With the reduction of demand on the one hand and difficulties in financing opportunities on the other the crisis soon spread to the business sector as well.

During the first months of 2009 the back to back announcements of nearly one trillion dollars in bailout packages and measures taken to support the business economy created some breathing room. So now there is much more optimism around the globe concerning the future than there was a few months ago. Nevertheless, despite these preventive and support measures the turbulence that has characterized the financial sector and the business economy has not fully subsided.

Positive and negative aspects concerning Turkey…

Although this crisis, which was much powerful than the famous 1929 economic collapse, impinged on Turkey, our nation had one important advantage compared to other countries. We had the benefit of the experience gained from the economic crisis of 2001 and the ongoing economic restructuring efforts that have been taking place since then.

The completely reorganized and strengthened Turkish financial system provided the appropriate conditions to overcome the effects of the 2008-2009 global financial crisis with the least amount of damage. The management experience gained during the 2001 crisis and the efficiency measures that were implemented played an important role in limiting the negative effects that were taking place elsewhere around the world. Many of the leading players in the Turkish economy, including Borusan Holding, quickly managed to adjust to the harmful conditions. All the necessary cost cutting measures were implemented and new production and stock plans were activated. Also, an efficient receivables system was initiated.

Despite all this, the effects of the global crisis on Turkey during 2008 and 2009 have reached astonishing proportions. During the first quarter of 2009 industrial production decreased by 20 % while the shrinkage of the economy in general was close to 8%. Given current projections, the global economy is estimated to contract by as much as 1.4%, while the Turkish economy is likely to contract by as much as 5%. Even the most optimistic projections are not forecasting any meaningful signs of economic recovery until the third quarter of 2010. While the Turkish economy did experience some minimal though sustained growth in 2008, this must be put in proper perspective. Even though the first half of 2008 was marked by accelerated growth and record exports, as well as ongoing national and international investment, everything came to a screeching halt during the second half of the year.

Although the economy had been growing at a steady annual rate of 5% the year before, it experienced an overwhelming contraction during the second half of the year, the force of which sent shock waves through the business community similar to that of a vehicle travelling at a high rate of speed striking a wall. Therefore, in order to minimize the long term effects of such violent financial turbulence, sound management strategies, characterized by the ability to anticipate the situation and plan three to four moves ahead, are needed.

During 2008 and 2009, players in the world economy, as well as in Turkey, including such established industrial companies like Borusan, have been forced to renew their strategies.

2009-a unique opportunity to find solutions to structural problems

The pre-emptive measures taken during the first months of the year were very appropriate in terms of the global crisis and its impact on Turkey. Such procedures included the reduction of the value added tax and private consumption tax in various sectors, support programs and measures to reduce unemployment and create jobs. These actions acted as a life preserver to help save the economy.

However, it has become abundantly clear that these measures are only temporary solutions to meet the urgent requirements to stabilize the economic. Beyond that, strategies must be implemented that address important structural problems in the system which have become more obvious as a consequence of the crisis. Properly done, this will create opportunities to enable Turkey to leap forward by three to four steps.

The first of these is the unemployment situation, which has hovered for many years around the 8 to 10 %level. A major structural challenge is the need to create new jobs. With the onset of the crisis unemployment rose to the 15 to 16% range during the first quarter of 2009 and, given current projections, it is likely to reach 20% by the end of the year. Keeping in mind that the battle against joblessness was never very effective even during the period of rapid economic growth, it is becoming quite obvious that in the midterm unemployment is going to become a major problem for Turkey unless permanent measures are put in place.

In order to combat this jobless rate it has become necessary to come up with policies designed to create an active labor force instead of merely focusing on macroeconomic procedures. In addition to this, the strategic importance of other initiatives is becoming overwhelmingly apparent, namely the taxation of employment, procedures pertaining to regional labor movement, flexible labor force regulations and qualified labor force training programs.

Another structural aspect that was overlooked because of the 2008-2009 global crises pertains to Turkey’s vision. In the early years of this new century our nation enthusiastically embraced the vision of becoming a full member of the European Union. This initiative, which has been the locomotive behind the rapid industrial growth since that time, once again needs to be swiftly and thoroughly fulfilled. From the beginning of 2009 there have been signs of slow but steady recovery from the global economic crisis and a revival of Turkey’s campaign for accession into the EU would provide the appropriate atmosphere needed for an economic resurgence, especially as we move towards 2010.

The target of full acceptance into the EU by 2014 is a vision that Turkey cannot give up. We should remember that if the 2014 opportunity is missed the next possibility for full membership will not present itself until the EU financial term of 2021, meaning that Turkey would end up losing seven more important years.

My final comments concerning the turbulent 2008-2009 economic crisis relates to the countless speculation surrounding when it will bottom out. The most important matter to remember at this point is to look beyond merely finding solutions for urgent agenda items. As in the game of chess, we must be focused on making strategic decisions that demonstrate the ability to think three or four moves ahead. Every leader in the economy needs the composure and foresight of a chess master when determining and implementing these strategic moves.

2- Agenda of Borusan Holding and our Companies

In looking at the main distinctives of the current economic situation that our companies are facing the following becomes obvious:

During 2007 Borusan managed to attain a 30% growth in profitability and turnover, a momentum that was carried over into the beginning of 2008. In line with our 2010 strategic plan, we successfully continued to increase our offshore sales and completed investments in our ongoing projects. More importantly we decided on a significant investment which is projected to multiply the turnover in our new business area of energy.

The global economic crisis did not really affect the essence of the course Borusan has embarked upon. However, in line with rapidly changing conditions we had to alternate the order of our moves. By analyzing the global trends in our business areas, we redefined the ones which need to be given priority in terms of our short term investments.

The most important factor during this redefining process was related to global developments which took place in our primary business area of steel. By the end of 2007 the pressure created by increasing raw material and energy prices, as well as the decreasing trend in Chinese exports, led to a heretofore unseen rise in steel prices. After showing unprecedented growth up until the midway point of the year prices began to drop sharply beginning in September of 2008. The conspicuous changes in steel prices had an adverse affect on all iron steel manufacturers, wholesalers and end users.

There is a serious contraction today evident in all the markets in which we are active. We may be forced to operate under these difficult conditions not only in 2009, but perhaps in 2010 as well.

At this point we have established control over all expenses and commenced strict cost cutting measures. We have obtained a greater degree of control over our stock problems which used to be one of the major areas of concern.

As a result of precautions taken during the crisis were able to reduce our stock levels by as much as 50% during the last quarter of 2008. Through efficient receivables management we managed to obtain a higher degree of liquidity in our operating capital and created all the primary actions necessary to obtain a balance in the budget. The market price balances were eventually reached as a result of the rapid drop in the value of reserve stocks and in 2009 our activities returned once again to normal, sustainable and profitable levels. The fact that no cash based losses were reported in 2008, and that we started 2009 with a more simplified budget and balanced profits from activities, also proved to be vital components for the sustainability of improvements that were attained.

The strict management discipline embodied by the Borusan Group builds in sustainability throughout our 5 year strategic growth plans, value based management and Simple 6 Sigma excellence model. At the start of the third quarter of 2008 this discipline enabled us to develop a new game plan which is compatible with the rapidly changing balance of the global economies. The net profitability levels for the first nine months of 2008 were so high that regardless of the significant losses that occurred during the last three or four months of the year, especially due to the sharp drop in prices in the steel sector, the Group still managed to close 2008 with a profit. At the end of 2008 Borusan’s consolidated turnover stood at $ 3.4 billion while our profitability was as high as $ 11.9 million.

2009 and Beyond: a new game involving innovative and distinguishing moves

We began 2009 by maintaining our confidence and optimism about the future of all our business activities. The Borusan vision embraces the philosophy of remaining one step ahead of our competitors. One of the primary reasons for our positive spirit today lies in the fact that we can actually say we have started to bring the effects of the impact of the crisis on Borusan under control, because we are indeed one step ahead of many other companies. Even before the effects of the crisis could be fully felt the employees of Borusan displayed their wisdom, ability and flexibility to adjust to rapidly changing conditions.

Given today’s conditions, we made a strategic decision to give priority to sales. All of our companies began to implement measures to perfect processes related to this matter.

We intend to complete the investments we initiated in the energy and logistics sectors. During the third quarter of 2009 we plan to focus on the huge steel investment we have made with our partner ArcelorMittal. Depending on the conditions we also anticipate taking other precautions as needed.

Since the crisis of 2001 Borusan has manage to grow at a rate that was five to six times higher than the average for Turkey. Once the global economic crisis gives way to another period of growth, we fully intend to demonstrate the same type of performance.

Our activities stemming from the recently initiated investments in the energy sector will be one of the key factors in achieving this goal. We have a long-term perspective with relation to our energy related activities, in which we aim to become one of the top 10 producers in our country. With this in mind, we intend to initially complete all the investments necessary for the 1000 MW license we currently possess. Beyond that, we intend to follow through with a $ 2.5 billion investment plan with EnBW AG, our partner in the energy sector and the third largest energy company in Germany. And, in line with our strategic plans, we anticipate increasing our production capacity to 2000 MW by 2020.

For many years the Borusan Group has maintained successful partnerships with competent and globally powerful companies in their respective areas, including ArcelorMittal, Mannesmann, BMW, Land Rover, Caterpillar, Eaton and Manheim. We believe that this valuable business culture will give us an immense advantage in our partnership with EnBW AG.

Borusan is a modern group which has grown while maintaining profitability. It is well on its way to becoming a global player. The adverse affects of the global economic crisis are now diminishing. In the days ahead Borusan will continue to be one of the leading companies in the rapidly developing markets of Turkey.

With warmest regards,