4769738

Enka Insaat ve Sanayi Anonim Sirketi

Consolidated Financial Statements Together With

Report of Independent Auditors December 31, 2002

Brought to you by Global Reports

ENKA INSAAT VE SANAYI ANONIM SIRKETI

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 REPORT OF INDEPENDENT AUDITORS

TABLE OF CONTENTS

Page -------

Report of Independent Auditors 1 Consolidated Balance Sheet 2 - 3 Consolidated Statement of Income 4 Consolidated Statement of Changes in Equity 5 Consolidated Statement of Cash Flows 6 Notes to Consolidated Financial Statements 7 - 50



CONSOLIDATED BALANCE SHEET As at December 31, 2002 (Currency -- U.S. Dollars)

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ASSET S

Notes

2002 (Restated)

2001

Non-current assets Property, plant and equipment Company 4 206,101,113 131,572,174 Companys share in joint ventures 7 35,494,011 37,809,783 Intangible assets 5 17,689,200 17,518,834 Investment properties 6 469,599,064 419,194,147 Investments in associates 8 223,806,514 194,094,069 Investments in subsidiaries 9 1,858,738 2,622,393 Investments available-for-sale 10 4,587,419 4,647,556 Accounts receivable 13 25,233,922 31,824,356 Companys share in non-current assets of joint ventures 7 8,376,965 39,337 Other non-current assets 15 22,304,952 11,051,137

Total non-current assets 1,015,051,898 850,373,786

Current assets Inventories 14 45,900,120 37,733,840 Accounts receivable 13 84,985,563 97,960,632 Other current assets 15 38,481,029 17,192,327 Investments in securities 12 215,766,870 152,716,197 Cash and cash equivalents 11 150,966,714 180,743,886 Companys share in current assets of joint ventures 7 70,223,992 95,017,311 Costs and estimated earnings in excess of billings on uncompleted contracts

16

1,865,013

2,317,486

Total current assets 608,189,301 583,681,679

Total assets 1,623,241,199 1,434,055,465

The accompanying policies and explanatory notes on pages 7 through 50 form an integral part of the consolidated financial statements.



CONSOLIDATED BALANCE SHEET As at December 31, 2002 (Currency -- U.S. Dollars)

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EQUITY AND LIABILITIES

Notes

2002 (Restated)

2001

Equity Share capital 17 56,263,395 43,355,043 Revaluation surplus 4 12,679,206 12,782,175 Legal reserves and accumulated profit 18 815,919,214 681,954,934

Total equity 884,861,815 738,092,152

Minority interests 171,693,487 133,936,084

Non-current liabilities Long-term bank borrowings 20 152,004,286 128,587,283 Accounts payable 21 12,605,074 15,574,541 Employee termination benefit 22 5,562,098 6,619,343 Deferred tax liability 24 128,138,710 121,202,873 Other non-current liabilities and accrued expenses 23 2,755,518 148,552 Company's share in non-current liabilities of joint ventures 7 14,891,500 43,602,379

Total non-current liabilities 315,957,186 315,734,971

Current liabilities Short-term bank borrowings 20 33,603,343 17,856,567 Current portion of long-term bank borrowings 20 26,143,162 19,636,143 Accounts payable 21 84,705,597 78,603,721 Other current liabilities and accrued expenses 23 54,242,330 42,929,393 Taxation on income 24 6,980,843 5,220,072 Companys share in current liabilities of joint ventur es 7 42,146,644 72,005,976 Billings in excess of costs and estimated earnings on uncompleted contracts

16

2,906,792

10,040,386

Total current liabilities 250,728,711 246,292,258

Total equity and liabilities 1,623,241,199 1,434,055,465




CONSOLIDATED STATEMENT OF INCOME For the year ended December 31, 2002 (Currency -- U.S. Dollars)

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Notes

2002 (Restated)

2001

Revenues 3 1,007,764,429 957,058,686 Cost of revenues 3 (735,794,136) (652,426,547)

Gross profit 271,970,293 304,632,139

Selling and administrative expenses (99,734,189) (89,383,839) Other operating income 26 35,392,003 18,422,982 Other operating expense 26 (37,852,253) (72,577,074)

Profit from operations 169,775,854 161,094,208

Financial income 26 42,272,125 31,337,021 Financial expenses 26 (21,904,629) (27,541,009) Income from associates 728,150 323,687

Profit from operations before taxes, minority interests and net translation gain 190,871,500 165,213,907

Taxation charge Current 24 (31,794,709) (26,684,341) Deferred 24 3,598,676 9,773,829

(28,196,033) (16,910,512)

Profit before minority interests and net translation gain 162,675,467 148,303,395

Minority interests (26,185,747) (27,653,236)

Profit before net translation gain 136,489,720 120,650,159

Translation gain 7,917,287 3,012,423

Net profit 144,407,007 123,662,582

Weighted average number of shares 19 50,355,593 50,355,593

Basic / diluted earnings per share - U.S. Dollar 19 2,87 2,46

The accompanying policies and explanatory notes on pages 7 through 50 form an integral part of the consolidated financial statement



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended December 31, 2002 (Currency -- U.S. Dollars)

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Share Capital

Revaluation Surplus

Legal Reserves and Accumulated

Profit

Total Equity

Balances, January 1, 2001 (as previously reported) 28,167,615 67,319,164 438,831,662 534,318,441 Pooling of interest with Enka Holding Yatirim A.S. 14,847,522 10,282,842 67,644,053 92,774,417 Balances, January 1, 2001, as restated 43,015,137 77,602,006 506,475,715 627,092,858 Change in scope of equity participation - - 1,218,712 1,218,712 Effect of adopting of IAS 39 - - 3,189,128 3,189,128 Effect of adopting of IAS 40 - (64,444,474) 86,718,471 22,273,997 Effect of change in tax rate (Note 24) - - (26,649,813) (26,649,813) Share capital increase from general reserve 339,906 - (339,906) - Current year depreciation charge net of deferred tax - (375,357) - (375,357) Dividends paid - - (12,319,955) (12,319,955) Net profit - - 123,662,582 123,662,582

Balances, December 31, 2001 43,355,043 12,782,175 681,954,934 738,092,152

Exchange and remeasurement adjustment - 279,671 11,681,032 11,960,703 Share capital increase from general reserve 12,908,352 - (12,908,352) - Current year depreciation charge net of deferred tax - (382,640) - (382,640) Dividends paid - - (9,215,407) (9,215,407) Net profit - - 144,407,007 144,407,007

Balances, December 31, 2002 56,263,395 12,679,206 815,919,214 884,861,815




CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31, 2002 (Currency -- U.S. Dollars)

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2002 (Restated)

2001

Cash flows from operating activities Net profit 144,407,007 123,662,582 Adjustments to reconcile net profit to net cash provided by operating activities : Change in minority interests 37,757,403 37,031,842 Depreciation and amortization 17,990,249 28,957,729 Reversal of employee termination benefit (1,057,245) (3,149,388) Provision for Iraq losses 20,293,191 15,000,000 Increase in deferred tax liability 6,935,837 12,733,422 Provision for doubtful receivables 5,700,375 10,122,052 Fair value adjustment on investment properties (28,478,023) (55,176,219) Provision for inventory obsolescence 450,106 687,623 Loss from sale of investment in associates and in subsidiaries - 1,040,067 Write off of investment 53,480 1,548,632

Changes in assets and liabilities Increase in time deposits with maturities more than 3 months (20,192,221) (1,607,779) (Increase) decrease in accounts receivable (6,428,063) 66,215,086 (Increase) decrease in inventories (8,616,386) 1,766,376 Decrease in costs and estimated earnings in excess of billings on uncompleted contracts 452,473 4,307,911 Decrease in Company's share in assets of joint ventures 16,455,691 11,723,769 (Increase) decrease in other assets (32,542,517) 8,572,216 Increase (decrease) in accounts payables 3,132,409 (38,078,447) (Increase) decrease in taxation on income 1,760,771 (2,268,643) (Decrease) increase in billings in excess of costs and estimated earnings on uncom pleted contracts (7,133,594) 9,526,979 (Decrease) increase in Company's share in liabilities of joint ventures (58,570,211) 14,476,013 Increase (decrease) in other liabilities and accrued expenses 13,919,903 (3,438,935)

Net cash provided by operating activities 106,290,635 243,652,888

Cash flows from investing activities Increase in investments in securities (63,050,673) (51,442,978) Increase in investments in subsidiaries, investments in associates and investments available for sale (29,267,476) (38,860,954) Cash received for the sale of investment in subsidiaries 325,343 - Proceeds from sale of property, plant and equipment and intangible assets 1,019,741 - Purchases of property, plant and equipment and intangible assets (113,703,057) (24,532,979)

Net cash used in investing activities (204,676,122) (114,836,911)

Cash flows from financing activities Increase (decrease) in long- term bank borrowings 29,924,022 (23,504,295) Increase (decrease) in short-term bank borrowings 15,746,776 (20,407,297) Dividends paid (9,215,407) (12,319,955)

Net cash provided by (used in) financing activities 36,455,391 (56,231,547)

Effect of adopting IAS 39 - 3,189,128 Effect of change in tax rate - (26,649,813) Change in scope of c onsolidation - 1,218,712 Adoption of IAS 40 - 22,273,997 Exchange and remeasurement adjustment 11,960,703 -

Net (decrease) increase in cash and cash equivalents (49,969,393) 72,616,454

Cash and cash equivalents at beginning of year 179,136,107 106,519,653

Cash and cash equivalents at end of year 129,166,714 179,136,107

Supplemental disclosure of cash flows information a)The cash paid by the Company for interest 11,298,258 19,645,556 b)The cash received by the Company for interest 31,111,519 34,785,138 c)Income taxes paid 28,661,897 24,307,444

For the purpose of the statement of cash flows, the Company considers cash on hand and in banks as short -term deposits with on original maturity of three months or less as cash and cash equivalents. Accordingly, time deposits as of December 31, 2002 and 2001 amounting to U.S. Dollars 21,800,000 and U.S. Dollars 1,607,779 respectively, are excluded from cash and cash equivalents.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2002 (Cur rency -- U.S. Dollars unless otherwise indicated)

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1. ORGANIZATION AND NATURE OF ACTIVITIES

General

Enka Insaat ve Sanayi Anonim Sirketi (Enka Insaat) was established on December 4, 1967 and registered in Istanbul, Turkey, under the Turkish Commercial Code. The address of the headquarters and registered office of Enka Insaat is Balmumcu Bestekar Sevki Bey Sokak, 34349 Enka Binasi Besiktas, Istanbul, Turkey.

As of June 30, 2002 Enka Insaat merged legally with its major shareholder, Enka Holding Yatirim Anonim Sirketi (Enka Holding), whose shares were publicly traded in Istanbul Stock Exchange. Enka Holding was established on December 29, 1972 and registered in Istanbul, Turkey, under the Turkish Commercial Code. Enka Holding was a holding company having investments in subsidiaries, associated companies and foreign entities which were mainly involved in construction and trading activities; engineering and consulting services; operating and leasing out of offices, trade centers and residential buildings. The merger is registered and announced in Turkish Trade Registry Gazette on June 28, 2002. Enka Insaat and Enka Holding was under the common control of Tara Holding Anonim Sirketi (Tara Holding) and Tara and Glelik families through direct/indirect shareholdings held by Tara Holding. Therefore, such legal merger was merely a restructuring and accordingly it was not within the scope of International Accounting Standard 22-Business Combinations and no adjustment was made to the carrying amounts of assets and liabilities under merger accounting applied. The financial statements presented herein, are restated retroactively to include the assets, liabilities and income statement items of all these two companies as if they were one single entity as of the balance sheet dates.

The consolidated financial statements of Enka Insaat are authorised for issue by the management on April 25, 2003.

Nature of the Activities

Enka Insaat operates in four major geographical areas, which are as follows:

Turkey: engaged in diverse types of construction activities including construction of industrial and social buildings, motorways and natural gas fired electrical energy generation facilities.

Commonwealth of Independent States (CIS): engaged in construction activities in Russia, Kazakhstan and Azerbaijan, and also engaged in the development and management of real estate properties, which are leased to tenants in Moscow, Russia, as well as run a network of hyperstores and shopping malls in Moscow, and also plans to construct further hyperstores and smaller shopping centers.

North Africa: engaged in construction activities mainly in Libya and Algeria.

Europe : engaged in construction and trading activities in Croatia, Germany and Holland.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2002 (Currency -- U.S. Dollars unless otherwise indicated)

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1. ORGANIZATION AND NATURE OF ACTIVITIES (continued)

Enka Insaat has the following subsidiaries, whose business and country of incorporation are provided below:

Name of Subsidiary

Nature of Business Activities

Country of Incorporation Year of

Incorporation

imtas elik Imalat Montaj ve Tesisat Anonim Sirketi (imtas)

Engaged in fabrication and erection of structural steelworks and installation of related technical equipment.

Turkey 1973

Pimas Plastik Insaat Malzemeleri Anonim Sirketi (Pimas)

Engaged in manufacturing and marketing of PVC window and door systems.

Turkey 1963

Enmar Closed Joint-Stock Company (Enmar)

Engaged in the production of ready mix concrete.

Russia 1994

Enka Pazarlama Ihracat Ithalat Anonim Sirketi (Enka Pazarlama)

Engaged in marketing of construction machines, trucks and heavy trucks, industrial products, spare parts and in providing after-sale services.

Turkey 1972

Entas Nakliyat ve Turizm Anonim Sirketi (Entas)

Engaged in organization of domestic and foreign congress, seminar, tour reservation and ticket sales.

Turkey 1976

Kasktas Kayar Kalip Altyapi Sondaj Kazik ve Tecrit Anonim Sirketi (Kasktas)

Engaged in diverse construction projects including industrial and social buildings, shopping centers, motorways, railways, and waste water treatment facilities.

Turkey 1975

Altas El Aletleri Dvme elik Sanayi ve Ticaret Anonim Sirketi (Altas)

Engaged in trading of hand tools and forged metal of various types and sizes, and conveyor chains.

Turkey 1969

Titas Toprak Insaat ve Taahht Anonim Sirketi (Titas)

Engaged in infrastructure works, road construction and all types of excavation.

Turkey 1974

Entrade GmbH (Entrade) Engaged in procuring of raw materials, supplies and rendering various services for Enka Insaat and its subsidiaries

Germany 1984

Ramenka Limited Liability Company (Ramenka)

Engaged in retail business through supermarkets and provides rental floor space of the shopping malls to other trading companies.

Russia 1997

Moskva Krosnye Holmy (MKH) Engaged in the construction, development and management of real estate properties.

Russia 1995

Closed Joint-Stock Company Mosenka (Mosenka)

Engaged in the construction, development and management of real estate properties.

Russia 1991

Air Enka Hava Tasimaciligi A.S. (Air Enka) Engaged in airflight services Turkey 2001

Kelebek Mobilya ve Kontrplak Sanayi Anonim Sirketi (Kelebek Mobilya)

Engaged in the production, wholesale and retail sale, import and export of furniture.

Turkey 1935

Enka Teknik Genel Mteahhitlik, Bakim, Isletme, Sevk ve Idare Anonim Sirketi (Enka Teknik)

Engaged in the construction of building, infrastructures of electricity and control systems

Turkey 1981




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1. ORGANIZATION AND NATURE OF ACTIVITIES (continued)

The construction contracts are undertaken by Enka Insaat alone or together with its affiliated companies or, in partnerships with other contractors through joint ventures. The works are performed under modified fixed price contracts and cost plus fee contracts, all often with economic price adjustments.

For the purpose of the consolidated financial statements, Enka Insaat and its consolidated subsidiaries are referred as the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards and Standing Interpretations Committee interpretations approved by the IASC that remain in effect. The consolidated financial statements have been prepared on an historical cost convention, except for the measurement at fair value of investment properties, land and buildings, and available-for-sale financial assets.

Enka Insaat and its subsidiaries which are incorporated in Turkey, maintain their books of accounts and prepare their statutory financial statements in Turki sh Lira in accordance with the regulations on accounting and reporting framework and accounting standards promulgated by the Turkish Capital Market Board (TCMB), (for publicly traded companies) and Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. The foreign subsidiaries maintain their books of accounts in accordance with the laws and regulations in force in the countries where they are registered. The consolidated financial statements in U.S. Dollars are based on the statutory records with adjustments and reclassifications for the purpose of fair presentation in accordance with IFRS.

The Company also reported separately for the consolidated and unconsolidated financial statements for the same period prepared in accordance with accounting principles promulgated by TCMB.

The significant differences between the consolidated financial statements prepared in accordance with the accounting policies promulgated by TCMB and consolidated IFRS financial statements can be summarized as follows :

- foreign currency translation - accounting for construction contracts - recognition of deferred tax effects of taxable temporary differences - recognition and measurement of financial instruments - accounting f or investment property - revaluation of property, plant and equipment with market values

Changes in Accounting Policies

The Company adopted International Accounting Standard 39 - Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard 40 - "Investment Property" (IAS 40) in 2001. The financial effects of adopting IAS 39 and IAS 40 were reported in previous years consolidated financial statements.




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Measurement Currency, Reporting Currency and Translation Methodology

The consolidated financial statements have been drawn up in U.S. Dollar to deal with the initial recording and remeasurement of transactions denominated in Turkish Lira and other currencies in accordance with International Accounting Standard (IAS) 21 - The Effects of Changes in Foreign Exchange Rates, as described below. As significant amount of construction and real estate operations of Enka Insaat, its consolidated subsidiaries and its joint ventures which form main part of the operations of the Company are carried out in U.S. Dollar or indexed to U.S. Dollar, this currency is selected as the measurement and the reporting currency of the Company in line with the Interpretation issued by Standing Interpretations Committee (SIC) 19- Reporting Currency - Measurement and Presentation of Financial Statements under IAS 21 and IAS 29. The financial statements of the consolidated subsidiaries Enka Pazarlama, Kelebek Mobilya and Entas as well as Wall Sehir Dizayni ve Ticaret Limited Sirketi (Wall Sehir), which is accounted under the equity method of accounting, for which measurement currency is Turkish Lira and, Ramenka and MKH for which the measurement currency is Russian Rouble (RR), are restated under the provision of IAS 29- Financial Reporting in Hyperinflationary Economies before being translated into U.S. Dollar. For other Turkish subsidiaries of Enka Insaat, the effects of inflation on the consolidated financial statements have in practice been dealt with by selecting the U.S. Dollar as the reporting currency and thus devaluation of the Turkish Lira against the U.S. Dollar has been used as a proxy for a general price index. The comparative rates of currency devaluation against the U.S. Dollar and of general price index as of last three years in Turkey and in Russia are set out below:

2002 2001 2000

Currency devaluation of Turkish Lira against U.S. Dollar 13.5% 114.3% 24.3% Annual inflation rate 30.8% 88.6% 32.7%

Currency devaluation of RR against U.S. Dollar 5.4% 7.0% 4.3% Annual inflation rate 15.0% 18.8% 20.2%

The main guidelines for the translation within the context of IAS 21 are as follows:

Monetary assets and liabilities are translated from Turkish Lira and other currencies into U.S. Dollar at exchange rates prevailing at the respective balance sheet dates. Non-monetary assets and liabilities are translated at historical exchange rates prevailing at the transaction dates and revenues and costs are translated either at historical rates or monthly average exchange rates.

Exchange gains and losses arising from remeasurement of monetary assets and liabilities that are not denominated in U.S. Dollar are credited or charged to consolidated statement of income as net translation gain or loss.

For the consolidated financial statements of Enka Pazarlama and for the financial statements of Entas, Kelebek Mobilya, Ramenka and MKH, the direct translation to U.S. Dollar is made with current rates after their financial statements are restated in accordance with IAS 29.

Within Turkey, official exchange rates of the Turkish Lira (TL) are determined by the Central Bank of Turkey (CBT) and are generally considered to be a reasonable approximation of market rates. Within the Russian Federation, official exchange rates are determined daily by the Central Bank of the Russian Federation (CBRF), which is also a reasonable approximation of market rates.




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The rates used as of December 31, 2002 and 2001 and the rate as of our report date for one U.S. Dollar can be summarized as below:

As of report date 2002 2001

U.S. Dollar 1,586,475 TL 1,634,501 TL 1,439,567 TL 31.10 RR 31.78 RR 30.14 RR 0.91 EURO 0.96 EURO 1.14 EURO

The translation of assets and liabilities denominated in Turkish Lira and various other local currencies into U.S. Dollar for the purpose of the consolidated financial statements does not necessarily mean that the Company could realize or settle in U.S. Dollar the same values of the assets and liabilities as indicated in the consolidated balance sheets. Similarly, it does not necessarily mean that the Company could return or realize the same U.S. Dollar value of capital and general reserve to its shareholders.

Basis of Consolidation

The consolidated financial statements include the accounts of Enka Insaat and its joint ventures and its subsidiaries presented as a single economic entity. The subsidiaries are companies in which Enka Insaat, directly or indirectly, has an interest of mor e than half of the voting rights or otherwise has power to govern their financials and operating policies so as to obtain benefits from their activities

The subsidiaries included in consolidation and their shareholding percentages at December 31, 2002 and 2001 is as follows:

Direct / Indirect Ownership Company Name 2002 2001

Enmar 100.00% 100.00% Entrade 100.00% 100.00% Enka Pazarlama 99.97% 99.97% Air Enka 99.92% 99.92% Entas 99.93% 99.93% imtas 95.05% 95.05% Titas 90.71% 90.71% Pimas 87.25% 87.25% Altas 86.12% 86.12% Kasktas 77.32% 77.32% Enka Teknik 69.86% 69.86% Kelebek Mobilya 63.08% 63.08% Mosenka 55.00% 55.00% MKH 52.00% 52.00% Ramenka 50.00% 50.00%

T he financial statements of Enka Pazarlama is also prepared on a consolidated basis which includes the accounts of Burtrak Burdur Traktr ve nykleyici Sanayi Ticaret Anonim Sirketi (Burtrak) and Metra Akdeniz Dis Ticaret Anonim Sirketi (Metra). Burtrak, which is owned at 90.50%, was established in December 1975 in Turkey and engaged in the production of tractors and pre-loaders. However, the operations of Burtrak are ceased since July 1985. Metra, which is owned at 99.99% by Enka Pazarlama, was established in October 1988 in Turkey and is engaged in trading of industrial, textile and food products. The financial statements of imtas is also prepared on a consolidated basis which includes the accounts of Cimtas Boru Imalatlari ve Ticaret Limited Sirketi (imtas Boru), which is owned at 50% by imtas. Cimtas Boru was established in January 2002 and engaged in the production of pipes.




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As fully explained in Note 9 certain investments of the Company in which the participation percentages are more than 50%, are carried at cost due to their amounts being considered as immaterial.

All significant intercompany transactions and balances between Enka Insaat and its consolidated subsidiaries are eliminated. Minority interest in the equity and results of the consolidated subsidiaries are shown as a separate item in the consolidated financial statements.

As of December 31, 2002 and 2001, the Company's participation in Wall Sehir is accounted under the equity method.

As fully explained in Note 8 certain associated companies are carried at cost due to the immaterial operating results.

Foreign Currency Translation

Transactions in foreign currencies (i.e any currency other than U.S. Dollar) are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Interests in Joint Ventures

The Companys interest in the jointly controlled entities is accounted for by proportionate consolidation which involves recognizing a proportionate share of the joint ventures assets and liabilities, income and expenses with similar items in the consolidated financial statements on a line by line basis.

Investments in Associates

Investments in associates over which the Company has significant influence and the voting power between 20%-50% are accounted for under the equity basis of accounting, except certain associates that are listed in Note 8, and which are carried in the balance sheet at cost plus post - acquisition changes in the Company's share of net assets of the associate, less any impairment in value. The consolidated statement of income reflects the Company's share of the current year results of operations of its associates accounted under the equity basis accounting.

Associates, for which equity method of accounting has not been applied for due to their operations being immaterial, are stated at cost. Provision is made for diminution in value if there is a permanent impairment.

Investments in Subsidiaries

Investments in subsidiaries, which are excluded from the consolidation due to their immaterial operating results or due to an intention to liquidate such subsidiaries, are stated at cost. Provision is made for diminution in value if there is a permanent impairment. Non-consolidated investments in subsidiaries are disclosed in Note 9.

Investments Available-for-Sale

All investments are initially recognized at cost, being the fair value of the consideration given and including acquisition charges associated with the investment. After initial recognition, investments which are classified as "available-for-sale" are measured at fair value with unrealized gains and losses reported in the consolidated statement of income.




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For investments actively traded in Istanbul Stock Exchange (ISE), fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date.

Investments that do not have a quoted market price in an active market and, for which other methods of reasonably estimating fair values are clearly inappropriate or unworkable, are stated at cost, less any impairment in value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation except for certain properties which are owner occupied and carried at market values.

Depreciation is provided on all property, plant and equipment by the straight -line method on pro-rata basis at the rates which approximate estimated useful lives of the related assets as follows:

Land improvements 5-50 years Buildings and barracks 5-50 years Machinery and equipment 4-10 years Motor vehicles 3-10 years Furniture and fixtures 4-10 years Scaffolding and formworks 5 years Others 4-10 years

The carrying values of property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an objective evidence that the asset is impaired, then the estimated recoverable amount of related asset is determined and any impairment loss recognized for the difference between the recoverable amount and the carrying amount is accounted for as an allowance on the balance sheet and the amount of the loss is included in the consolidated statement of income of the year.

Leases

Finance leases

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

Operating Lease

Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognized as an expense on a straight -line basis (except for prepayments) over the lease term. The aggregate benefit of incentives provided by the lessor is recognized as a reduction of rental expense over the lease term on a straight -line basis.

Prepayment for Land Leases

Prepayments for operational leases of land plots on which hyper stores are constructed are expensed over the life of the respective lease which in general equals to 49 years.




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Intangible Assets

Intangible assets represent the land lease right and other intangible assets which represent various softwares that are amortized over 2 to 5 years. Land lease rights were amortized over 49 years as to the term of the land agreement.

Investment Properties

Investment properties are mainly comprised of the real estates of the foreign operations of Enka Insaat as well as the investment properties owned through its subsidiaries, Ramenka, Mosenka and MKH. Investment property is treated as a long-term investment and is carried at fair value. Gains or losses arising from changes in the fair values of investment properties are included in the consolidated statement of income in the period in which they arise.

Investments in Securities

The Company maintains its securities portfolio, as available for sale.

All securities are initially recognised at cost, being the fair value of the consideration given including acquisition charges associated with the investment. After initial recognition, securities are measured at fair value, unless fair value can not be reliably measured. Any gain or loss arising from a change in fair value of such securities is included in the consolidated statement of income in the period in which it arises.

For securities traded in organized financial markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without deduction for transaction costs necessary to realize the asset. For securities where there is no quoted market price or quoted market price is not indicative of the fair value of the instrument, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument which is substantially the same, or is based on the expected cash flows or the underlying net asset base of the securities.

All "regular way" purchases and sales of financial assets are recognized on the trade date, in other words, the date the Company commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

Inventories

Inventories are stated at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and condition, are accounted for as follows:

- Raw materials, spare parts, merchandise and construction materials - purchase cost on moving weighted average basis.

- Goods for resale purchase cost on first-in, first -out (FIFO) method

- Finished goods - cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity.

The Company also provides an allowance for the slow moving items.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.




(15)


Accounts Receivables

Trade receivables of the Company are recognized at original invoice and carried at amortised cost less an allowance for any uncollectible amounts. Average term of current portion of the trade receivable is varying between 30-180 day terms and the collection term of the long-term trade receivables could extend up to the year of 2004 depending upon the agreement.

Collection terms of contract receivables vary depending upon the agreement which is generally 30 days.

Post-dated checks which are classified within accounts receivables and notes which are held to maturity are measured at amortized cost using the effective interest rate method.

The allowance for doubtful receivables is established through a provision charged to expense. The allowance is an estimated amount that management believes will be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables.

Cash and Cash Equivalents

For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. The amounts paid under the reverse purchase agreements are included in the cash and cash equivalents.

Turkish Lira government bonds purchased with a corresponding commitment to resell at a specified future date (reverse repurchase agreements) are not recognized in the balance sheet, as the Company does not obtain control over the assets. The difference between purchase and resale price is treated as interest income and accrued over the life of the reverse repurchase agreements.

Borrowings

All borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, borrowings, are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gains and losses are recognised in net profit or loss when the liabilities are derecognised, as well as through the amortisation process.

Borrowing Costs

Interest costs on borrowings to finance the construction of investment property are capitalized during the period of time that is required to complete and prepare the asset for its intended use. All other borrowings costs are recognised as an expense in the period in which they are incurred.

Accounts Payable

Liabilities for accounts payable which are settled with changing terms up to two years are carried at amortised cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.




(16)


Employee Termination Benefits

For Enka Insaat and its Turkish subsidiaries provision was made for maximum amounts payable to employees, based on their accumulated periods of service at the balance sheet dates.

In the normal course of business, foreign subsidiaries and joint ventures contributes to the related government body for the pension scheme of its employees, in the country they are domiciled. Mandatory contributions to the governmental pension scheme are expensed when incurred.

Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are evaluated and re-estimated annually, and are included in the financial statements at their expected net present values using discount rates appropriate to the Company in the economic environment in Turkey and other countries, in which the Company operates, at each balance sheet date.

Income Tax

Tax expense / (income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax.

Deferred income 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 income tax liabilities are recognised for all taxable temporary differences.

Deferred income tax assets are recognised 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.

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 dates.

Revenue and Cost Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measu red. Revenues are stated net of discounts, returns and value added taxes. The following specific recognition criteria must also be met before revenue is recognized:

Construction contract activities

Contract revenue and costs are recognized as revenue and expenses, respectively, when the outcome of a construction contract can be estimated reliably. The percentage of completion method is used to recognize revenue on a contract as work progresses by matching contract revenue with contract costs incurred based on the proportion of work completed which is determined by the ratio of costs incurred through the end of the current year divided by the total estimated costs of the project.

Revenue arising from cost plus fee contracts is recognized on the basis of costs incurred plus a percentage of the contract fee earned during the year.

Contracts to manage, supervise or coordinate the construction activity of others are recognized only to the extent of the fee revenue.




(17)


Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Selling, general and administrative expenses are charged to the consolidated statement of income as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured.

Costs and estimated earnings in excess of billings on uncompleted contracts represent revenues recognised in excess of amounts billed. Billings in excess of costs and estimated earnings on uncompleted contracts represent billings in excess of revenues recognised.

Trading activities

Revenue from trading activities which consist of sales of goods is recognised when significant risks and rewards of ownership of the goods have been transferred to the buyer. Net sales represent the invoiced value of goods, net of sales returns and discounts.

Rental activities

Rental activities which consist of rental income from premises leased to tenants is recognised as earned on a monthly basis. Rental income collected in advance is treated as deferred income and is amortised on a monthly basis during the lease period.

Rendering of services

Revenue is recognized by reference to the stage of completion.

Interest revenue

Revenue is recognized as the interest accrues unless collectibility is in doubt.

Recognition and Derecognition of Financial Instruments

The Company recognizes a financial asset or financial liability in its balance sheet when and only when it becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset. The Company derecognizes a financial liability when and only when a liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expires.

Offsetting

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.




(18)


Uses of Estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet. Actual results may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. The most significant areas requiring the use of management estimates are related to the unaccrued interest on Irak related Eximbank borrowings (see Note 20) and possible outcome of outstanding litigations (see Note 27).

3. S EGMENT INFORMATION

The Companys operating businesses are organiz ed and managed separately according to the nature of services and products provided.

The segmental information of the Company is based on two formats. The primary format represents revenue and profit information regarding business segments: construction, trading, manufacturing and real estate operations. The secondary format represents revenue and expense information regarding four geographical segments for the year ended December 31, 2002 and 2001

(a) Business Segments :

2002

Contracting

Rental

Retail Trade and

Manufacturing

Eliminations

Consolidated

Revenues earned 588,193,244 98,689,693 218,224,844 143,093,839 (40,437,191) 1,007,764,429 Cost of revenues (449,010,441) (6,850,000) (180,178,131) (123,794,411) 24,038,847 (735,794,136)

Gross profit 139,182,803 91,839,693 38,046,713 19,299,428 (16,398,344) 271,970,293

Selling and administrative expense (40,292,048) (7,073,063) (35,413,825) (23,562,393) 6,607,140 (99,734,189) Other operating income and expense, net (6,322,077) (12,774,000) 24,064,864 (1,777,791) (5,651,246) (2,460,250)

Profit from operations 92,568,678 71,992,630 26,697,752 (6,040,756) (15,442,450) 169,775,854

Financial income and expense, net 30,674,320 (188,999) (2,595,420) (7,522,405) - 20,367,496 Income from associates - - - 728,150 - 728,150

Profit from operations before taxes, minorityinterests, and net translation gain

123,242,998

71,803,631

24,102,332

(12,835,011)

(15,442,450)

190,871,500

Taxation charge Current (18,487,280) (7,886,000) (5,134,078) (287,351) - (31,794,709) Deferred 10,083,139 1,830,000 (7,818,087) (496,376) - 3,598,676

Net income before minority interests and net translation gain

114,838,857

65,747,631

11,150,167

(13,618,738)

(15,442,450)

162,675,467

Minority interests (26,185,747)

Net profit before net translation gain 136,489,720

Translation gain 7,917,287

Net profit 144,407,007




(19)

3. S EGMENT IN FORMATION (continued)

2001

Contracting

Rental

Retail Trade and

Manufacturing

Eliminations

Consolidated

Revenues earned 634,333,076 89,684,316 167,527,306 96,785,621 (31,271,633) 957,058,686 Cost of revenues (449,995,541) (13,738,323) (138,774,486) (83,863,668) 33,945,471 (652,426,547)

Gross profit 184,337,535 75,945,993 28,752,820 12,921,953 2,673,838 304,632,139

Selling and administrative expenses (39,143,788) (6,253,774) (20,725,667) (24,103,288) 842,678 (89,383,839) Other operating income and expense, net (37,613,730) (12,206,669) - (4,262,002) (71,691) (54,154,092)

Profit from operations 107,580,017 57,485,550 8,027,153 (15,443,337) 3,444,825 161,094,208

Financial income and expense, net 22,533,557 (1,973,097) (4,437,624) (12,326,824) - 3,796,012 Income from associates 323,687 - - - - 323,687

Profit from operations before taxes, minority interests, and net translation gain 130,437,261 55,512,453 3,589,529 (27,770,161)

3,444,825

165,213,907

Taxation charge Current (21,809,731) (491,236) (3,544,033) (839,341) - (26,684,341) Deferred 9,956,393 (1,332,097) 2,153,875 (1,004,342) - 9,773,829

Net income before minority interests and net translation gain 118,583,923 53,689,120 2,199,371 (29,613,844)

3,444,825

148,303,395








(20)

3. S EGMENT INFORMATION (continued)

(b) Geographical Segments:

2002

Turkey Commonwealth of Independent States

North Africa

Europe

Eliminations

Consolidated

Revenues earned 375,867,041 499,018,369 9,877,384 163,438,826 (40,437,191) 1,007,764,429 Cost of revenues (293,836,094) (312,403,493) (4,883,972) (148,709,424) 24,038,847 (735,794,136)

Gross profit 82,030,947 186,614,876 4,993,412 14,729,402 (16,398,344) 271,970,293

Selling and administrative expense (43,652,074) (48,119,389) (3,734,110) (10,835,756) 6,607,140 (99,734,189) Other operating income and expense, net 4,142,366 11,314,974 6,745,832 (19,012,176) (5,651,246) (2,460,250)

Profit from operations 42,521,239 149,810,461 8,005,134 (15,118,530) (15,442,450) 169,775,854

Financial income and expense, net 1,889,270 (2,736,245) - 21,214,471 - 20,367,496 Income from associates 728,150 - - - - 728,150

Profit from operations before taxes, minority interests, and net translation gain

45,138,659

147,074,216

8,005,134

6,095,941

(15,442,450)

190,871,500

Taxation charge Current (10,793,492) (20,613,554) - (387,663) - (31,794,709) Deferred 9,779,750 (4,221,385) - (1,959,689) - 3,598,676


44,124,917

122,239,277

8,005,134

3,748,589

(15,442,450)

162,275,467





2001

Turkey Commonwealth of Independent States

North Africa

Europe

Eliminations

Consolidated

Revenues earned 359,909,440 315,028,472 17,830,104 295,562,303 (31,271,633) 957,058,686 Cost of revenues (279,612,667) (191,090,462) (12,168,309) (203,500,580) 33,945,471 (652,426,547)

Gross profit 80,296,773 123,938,010 5,661,795 92,061,723 2,673,838 304,632,139

Selling and administrative expense (35,401,503) (38,221,918) (7,618,848) (8,984,248) 842,678 (89,383,839) Other operating income and expense, net (6,980,619) (16,609,416) (9,155,777) (21,336,589) (71,691) (54,154,092)

Profit from operations 37,914,651 69,106,676 (11,112,830) 61,740,886 3,444,825 161,094,208

Financial income and expense, net (14,139,546) (6,506,540) (98,986) 24,541,084 - 3,796,012 Income from associates 323,687 - - - - 323,687

Profit from operations before taxes, minority interests, and net translation gain

24,098,792

62,600,136

(11,211,816)

86,281,970

3,444,825

165,213,907

Taxation charge Current (11,056,731) (15,538,257) - (89,353) - (26,684,341) Deferred (11,392,290) 31,246,529 - (10,080,410) - 9,773,829


1,649,771

78,308,408

(11,211,816)

76,112,207

3,444,825

148,303,395






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2 6,

228,

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178,

786,

836

152,

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12,96

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5,67

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3,72

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3,421

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154,

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7,83

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441,

113

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297

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81,44

1 11

2,43

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13,35

3,157

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s 4,

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219

5,46

8,86

5 7,

592,

546

271,

191

2,30

8,56

8 23

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7,82

6 81

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106,1

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4,701

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con

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29,0

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4,87

7,43

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905,

916

-

-

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4,257

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-

At D

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31, 2

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9,42

1,12

8 21

7,36

4,46

0 14

1,11

5,87

6 12

,229,6

01

34,8

01,5

67

3,69

3,56

4 5,

645,

832

35,3

92,8

65

8,14

5,80

9 46

7,810

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At J

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2 1,

595,

431

94,3

25,3

16

131,

907,

461

10,44

0,590

23

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,900

3,

582,

338

3,90

7,78

4 -

2,63

8,71

0 27

1,84

9,530

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59,8

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899,

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2,98

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At D

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1,72

5,96

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3,60

3,70

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3,546

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261,7

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2 4,

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(22)

4. PROPERTY, PLANT AND EQUIPMENT (continued)

The Companys lands and buildings in Turkey have been revalued as a result of appraisal studies carried out in 1998 and in 2000 by international appraisal firms to the extent of a total amount at U.S. Dollars 21,201,351 (2001- U.S.Dollars 20,749,846). The revaluation surplus is included within equity netted off with the related deferred tax and depreciation effects at a total amount of U.S. Dollars 8,522,145 (2001 - U.S. Dollars 7,967,671). Such revaluation surplus are not available for distribution.

Construction in progress account mainly represents activities in Moscow, Russia for a building being constructed as real estate property amounting to U.S. Dollars 22,565,734, a three level underground car parking facility amounting to U.S. Dollars 5,515,000 and a new hyperstore at an amount of U.S. Dollars 6,021,114. Upon completion, these constructions in progress will be transferred mainly to investment property.

Under the terms of the loan agreement signed with the International Finance Corporation (IFC) the property, plant and equipment with a net book value of U.S. Dollars 104,229,764 (2001-U.S. Dollars 61,896,153) are pledged for security. Also the Company has collateralized the plant facilities with an amount of U.S. Dollars 1,923,930 (2001-U. S. Dollars 2,184,453) as guarantee to Ministry of Finance for the possible penalty charges (See Note 27 litigations section). Also certain other property, plant and equipment have been mortgaged to the extent of U.S. Dollars 26,507 (2001 - U.S. Dollars 30,096) as collateral against bank borrowings obtained

Leased assets includes mainly an airplane and they are all pledged as securities for the related finance lease obligations.

5. INTANGIBLE ASSETS

The movement of intangible assets is as follows:

Land Lease Rights

Others Total

At January 1, 2002, net of accumulated amortisation 16,873,182 645,652 17,518,834 Exchange and remeasurement adjustment - 75,387 75,387 Additions - 845,450 845,450 Disposals - (15,349) (15,349) Amortisation charge for the year (395,877) (339,245) (735,122)

At December 31, 2002, net of accumulated amortisation 16,477,305 1,211,895 17,689,200

At December 31, 2001

Cost 19,434,984 987,197 20,422,181 Accumulated amortisation (2,561,802) (341,545) (2,903,347)

Net carrying amount 16,873,182 645,652 17,518,834

At December 31, 2002

Cost 19,434,984 1,919,011 21,353,995 Accumulated amortisation (2,957,679) (707,116) (3,664,795)

Net carrying amount 16,477,305 1,211,895 17,689,200

Land lease rights mainly represents the rights to use 4 land plots in the city of Moscow for the purpose of constructing buildings, for a period of 49 years. These rights are amortised over a 49 year period.

The intangible assets of the Company at the amount of U.S. Dollars 291,001 (2001 - U.S. Dollars 368,613) are pledged as security for IFC loan (see Note 20). No indication of impairment of the intangible assets exists at the reporting date.




(23)

6. INVESTMENT PROPERTIES

The movement of investment properties is as follows :

2002

At January 1, 419,194,147 Exchange and remeasurement adjustment 18,396,076 Transfers from property, plant and equipment and construction in progress 21,926,894 Disposals (804,192) Gain from change in fair value, net 10,886,139

At December 31, 469,599,064

Investment properties include mainly (a) real estate properties in Russia which are leased to tenants (b) buildings in Turkey which is either rented to related parties or held for capital appreciation and (c) a land in Turkey which is kept for investment purposes.

The investment properties owned by MKH, located in central Moscow, Russia on land leased from the Moscow City Authorities under a 49 year operating lease which is renewable at the option of MKH. The property was last valued on December 31, 2002 at fair value by an independent professionally qualified valuer and the fair value has been set as U.S. Dollars 177,000,000 (2001- U.S. Dollars 168,000,000). The basis used for the appraisal was the income capitalization approach and the land which is hold under operating lease has been excluded from the valuation of the property.

The fair value of the investments in leased properties of Mosenka amounting at a total of U.S. Dollars 63,469,000 (2001 - U.S. Dollars 70,217,000) has been determined based on valuations performed by independent professionally qualified valuers on the basis of market value, supported by market evidence, in accordance with International Valuation Standards. Prior to January 1, 2002, investments in real estate properties were stated at depreciated revalued amounts based on an external appraisal, by approximating its fair value using the direct capitalization approach.

Part of the premises owned by Ramenka and leased to tenants on a continuing basis are treated as an investment property. The fair value of investment property in Ramenka was estimated using the discounted cash flow projections as at the year end as comparable sale of property transactions are infrequent. As of December 31, 2002, the Company has estimated the fair value of its investment property as U.S Dollars 111,364,604 (2001 U.S. Dollars 66,121,633). The investment property was not valued by an independent valuer. The investment property of Ramenka is shown as a security for the IFC loan.

Investment properties owned by Enka Insaat are stated at fair value which has been determined based on the valuations performed by independent, professionally qualified valuers on the basis of the calculations, considerations and other information obtained in the course of market research.

As of December 31, 2002, the rental income from investment properties is amounting to U.S. Dollars 98,689,693 (2001 U.S. Dollars 89,684,316) and direct operating expenses arising from investment property that generated rental income is U.S. Dollars 12,365,903 (2001 U.S. Dollars 10,809,443).




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7. INTEREST IN JOINT VENTURES

The Company has following amount of interest in the assets and liabilities, of the following joint ventures as listed below:

Joint Venture 2002 2001

Enka-Bechtel Msterek Tesebbs Ortakligi (Turkey) 50 50 Bechtel-Enka Joint Venture (Kazakhstan) 50 50 Bechtel International Incorporation (Croatia) 50 50 Bechtel - Enka Power Projects (Turkey) 50 50 Bechtel -Enka Joint Venture Okioc (Kazakhstan) 50 50 Cadell Construction Company Inc. (Turkey) 50 50 Bechtel-Enka Holland Projects (Holland) 35 - Boskalis Rock Quarry (Kazakhstan) - 50 Bechtel-Enka Joint Venture (Bautino) - 50 Bechtel-Enka Joint Venture Aktau Port Rehabilition (Kazakhstan) - 50 Bechtel-Enka Joint Venture BSB-99 Project (Kazakhstan) - 50 Enka-Bechtel Albania Projects (Albania) - 50 Bur-Enka Joint Venture (Baku) - 50


Enka

Insa

at v

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Ano

nim

Sirk

eti

NO

TES

TO C

ONS

OLI

DATE

D FI

NANC

IAL

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ontin

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Fo

r the

yea

r end

ed D

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1, 2

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(Cur

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indi

cate

d)

(2

5)

7.

INTE

RES

T IN

JO

INT

VENT

URES

(con

tinue

d) Th

e Co

mpa

ny's

shar

e in

the

asse

ts, li

abili

ties a

nd p

rofit

/loss

of t

he jo

int ve

ntures

using

the p

roport

ionate

cons

olida

tion m

etho

d is

as fo

llow

s :

20

02

Bala

nce

Shee

t Co

mpa

nys

Shar

e in

Join

t Ven

ture

's Cu

rren

t Asse

ts

Com

pany

s Sh

are i

n Jo

int

Ven

ture

's Pr

oper

ty, P

lant

an

d Eq

uipm

ent

Com

pany

s Sh

are i

n Jo

int

Vent

ure's

Non

-C

urre

nt

Ass

ets

Com

pany

s Sh

are i

n Jo

int V

entu

re's

Curr

ent L

iabi

lities

Com

pany

s Sh

are i

n Jo

int

Vent

ure's

Non

-Cu

rren

t Lia

bilit

ies

Enka

-Be

chte

l Ms

tere

k Te

sebb

s O

rtakl

igi (T

urkey

) 2,

087,

788

517

108

27,3

36

- Be

chtel

-En

ka Jo

int V

entu

re (K

azakh

stan)

6,

425,

770

2,63

2,17

5 -

1,94

7,99

3 -

Bech

tel I

nter

natio

nal I

ncor

pora

tion

(Croa

tia)

17,2

07,1

42

27,4

75,6

25

- 18

,190

,886

12

,824

,589

Bech

tel - En

ka P

ower

Pro

jects

(Turk

ey)

25,5

97,2

70

1,19

2,53

6 61

,019

9,

780,

176

1,90

2,59

4 Ca

dell

Cons

tructi

on C

ompa

ny In

c. (T

urkey

) 4,

401,

362

102,

625

-

541,

187

164,

317

Bech

tel-En

ka Jo

int V

entu

re O

kioc

(Kaza

khsta

n) 4,

159,

058

4,09

0,53

3

1,72

5,02

3 -

Bech

tel-En

ka H

ollan

d Pr

ojects

10

,345

,602

-

8,31

5,83

8 9,

934,

043

-

70

,223

,992

35

,494

,011

8,

376,

965

42,1

46,6

44

14,8

91,5

00

20

01

Bala

nce

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t Co

mpa

nys

Shar

e in

Join

t Ven

ture

's Cu

rren

t Asse

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pany

s Sh

are i

n Jo

int

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ture

's Pr

oper

ty, P

lant

an

d Eq

uipm

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Com

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s S

hare

in Jo

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ure's

Non

-Cu

rren

t A

sset

s

Com

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s Sh

are i

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lities

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s Sh

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Non

-Cu

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bilit

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Enka

-Be

chte

l Ms

tere

k Te

sebb

s O

rtakl

igi (T

urkey

) 4,

684,

496

-

122

649,

938

623,

175

Bech

tel-En

ka Jo

int V

entu

re (K

azakh

stan)

3,76

5,77

0 1,

612,

275

-

1,57

1,53

3 -

Bech

tel I

nter

natio

nal I

ncor

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tion

(Croa

tia)

15,0

41,6

22

29,1

86,1

39

- 10

,476

,826

32

,315

,263

Bech

tel -

Enka

Pow

er P

rojec

ts (T

urkey

) 61

,431

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3,

427,

085

33,2

71

55,4

31,7

90

8,60

2,46

5 Ca

dell

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tructi

on C

ompa

ny In

c. (T

urkey

) 3,

311,

483

111,

521

5,56

5 2,

059,

974

494,

553

Bech

tel -

Enka

Join

t Ven

ture

Oki

oc (K

azakh

stan)

6,39

2,79

1 3,

463,

472

-

1,59

9,01

1 1,

566,

923

Bech

tel-En

ka

Join

t V

entu

re

Akt

au

Port

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bilit

ion

(Kaza

khsta

n)

-

-

-

392

-

Bur

-En

ka Jo

int V

entu

re (B

aku)

388,

997

9,29

1 37

9 21

6,14

7 -

Bosk

alis R

ock

Quarr

y (Ka

zakhst

an)

-

-

-

365

-

Bech

tel-En

ka Jo

int V

entu

re B

SB-99

Pr

oject

(Kaza

khsta

n) 50

2 -

-

-

-

95

,017

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37

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39

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72

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43

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to y

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Insa

at v

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NO

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DATE

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NANC

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ontin

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Fo

r the

yea

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INTE

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it an

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Enka

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3,634

) 62

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175,

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tel-En

ka Jo

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13

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1,08

9,50

7 63

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6 Be

chte

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erna

tiona

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orpo

ratio

n (C

roatia

) 94

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284)

(1,55

1,885

) 68

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073,3

48)

(777,0

81)

11,39

7,408

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chtel

- En

ka P

ower

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jects

(Turk

ey)

95,2

75,8

00

(81,69

2,602

) 2,

446,

395

296,

969

6,51

2,68

2 25

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6 23

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dell

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tructi

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ompa

ny In

c. (T

urkey

) 11

,685

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(7,

967,7

37)

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34)

-

265,

648

(69,20

7) 3,

782,

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tel-En

ka Jo

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entu

re O

kioc

(Kaza

khsta

n) 26

,877

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(15

,799,1

85)

(1,45

0,64

0) -

(2,62

2,244

) 24

,014

7,02

9,47

2 Be

chtel

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ka H

ollan

d Pr

ojects

41

,648

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(33

,062,1

64)

- -

-

-

8,58

6,61

3

28

3,624

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(227,5

61,59

2) (40

0,045

) 91

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795,

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) 2,

945,

074

(452,6

56)

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20)

(400,5

44)

(362,5

59)

(140,5

86)

1,33

0,20

9 Be

chtel

-En

ka Jo

int V

entu

re (K

azakh

stan)

11

,880

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(7,

043,3

02)

(1,53

2,69

1) -

1,07

3,97

2 (43

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4,33

5,69

8 Be

chte

l Int

erna

tiona

l Inc

orpo

ratio

n (C

roatia

) 58

,237

,357

(43

,092,

592)

(1,67

0,13

9) -

(3,24

6,178

) (2,

140,7

10)

8,08

7,73

8 Be

chtel

- En

ka P

ower

Pro

jects

(Turk

ey)

337,8

48,06

0 (24

7,669

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(370,2

39)

-

(6,83

4,232

) (40

5,317

) 82

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45

Cade

ll Co

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(Turk

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7,11

0,73

1 (4,

778,2

08)

(89,91

8) -

(465,2

21)

38,92

0 1,

816,

304

Bech

tel-En

ka Jo

int V

entu

re O

kioc

(Kaza

khsta

n) 17

,577

,763

(13

,158,1

35)

688,

187

(95,55

6) (35

9,394

) 35

9 4,

653,

224

Bech

tel-En

ka J

oint

Ven

ture

Akt

au P

ort R

ehab

ilitio

n (K

azakh

stan)

50,0

00

(22,22

5)

1,51

8

-

2,32

6

(127,5

82)

(95,96

3) B

ur

-En

ka Jo

int V

entu

re (B

aku)

206,

279

(664,0

03)

(118,3

10)

-

-

(34,18

4) (61

0,218

) Bo

skali

s Roc

k Qu

arry (

Kazak

hstan

) 6,2

19

(5,35

6) -

(55)

-

55

863

Bech

tel-En

ka

Join

t V

entu

re

BSB-

99

Proje

ct (K

azakh

stan)

43,2

02

(83,92

4)

-

(207)

64,1

24

(5,81

4)

17,3

81

Bech

tel-En

ka Jo

int V

entu

re (B

autin

o)

-

(1,76

5) -

-

-

(18,81

2) (20

,577)

43

5,905

,469

(316,9

71,59

3) (3,

350,

112)

(496,3

62)

(10,12

7,162

) (2,

876,7

36)

102,

083,

504

Bro

ught

to y

ou b

y G

loba

l Rep

orts



(27)

8. INVESTMENTS IN ASSOCIATES

2002 2001 Percentage of

Ownership

Amount Percentage of Ownership

Amount

Power Plant Companies (*) 40.00 219,757,866 40.00 190,942,029 Wall Sehir 40.00 3,229,478 40.00 2,501,147 Pencere ve Kapi Donanimlari Sanayi ve Ticaret .A.S. (PKD ) 34.00 569,363

--

Derince Uluslararasi Konteyner Terminali Isletmeciligi A.S. (Derince)

37.06

208,830

37.06

208,830 Intergen Enka Santral Isletme ve Bakim Hizmetleri A.S.

(Intergen Enka)

29.40

40,977

29.40

40,977 Trans Balkan Sanayi Taahht ve Ticaret A.S. (Trans Balkan) - 24.07 347,606 Dksas Dktil Dkm Sanayi A.S. (Dksas) - - 20.00 53,480

Investments in associates 223,806,514 194,094,069

(*) Including Adapazari Elektrik retim Limited Sirketi (Adapazari Elektrik) Gebze Elektrik retim Limited Sirketi (Gebze Elektrik) and Izmir Elektrik retim Sirketi (Izmir Elektrik).

No equity accounting is applied to the investments in associates, except Wall Sehir. Such investments are stated at cost due to immaterial operating results, except for Power Companies as stated below. During 2002 the shares of Trans Balkan have been sold and investment in Dksas has been written off due to the permanent impairment realized in this company. Because of the sales of the shares of PKD, the participation percentage on this company has decreased from %99.81 to %34. 00.

Adapazari Elektrik, Gebze Elektrik and Izmir Elektrik are established on the basis of Build and Operate Regulation to build natural gas fired electrical energy generation facilities and they will sell the electricity generated to Turkish Electricity Authority (TETAS) under a 16 years power purchase agreement. Equity accounting has not been applied for participations in these power plant companies, since these investments in associates are still in development stage. These companies will begin to operate in full capacity in 2003. The breakdown of the Company's investment cost in these power plant companies is as follows:

2002 2001 Percentage of

Ownership

Amount Percentage of Ownership

Amount

Adapazari Elektrik Ltd. Sti. (Adapazari Elektrik) 40.00 78,023 40.00 78,023 Gebze Elektrik Ltd. Sti. (Gebze Elektrik) 40.00 116,194 40.00 116,194 Izmir Elektrik Ltd. Sti. (Izmir Elektrik) 40.00 116,194 40.00 116,194

310,411 310,411

Additional costs incurred as part of the investment costs in power plant companies

19,764,511

19,764,511 Assets held for equity commitment to power plant companies

- Time deposits 195,805,726 166,489,922 - Due from 3,877,218 4,377,185

Total investment in power plant compa nies 219,757,866 190,942,029




(28)

8. INVESTMENTS IN ASSOCIATES (continued)

Assets held for equity commitment to power plant companies

The Company has outstanding share capital commitment to Adapazari Elektrik, Gebze Elektrik and Izmir Elektrik, to finance the construction cost not funded by the financial institutions, which is approximately 25% of the total construction cost. In 2002, the Company has placed U.S. Dollar s 191,405,742 (2001 - U.S. Dollars 156,807,359) in Hollandische Bank-Unie N.V. as guarantee for the loan obtained by the above mentioned power plant companies. The Company's management stated that this amount will be used in share capital increase of these investees after the completion of power plants' construction. The interest rate of this deposit is Libor+4% (2001- Libor+4%) and shall be repaid in full at the repayment date of loans used. As of December 31, 2002, the interest income accrual over this time deposit amounting to U.S. Dollars 4,399,984 (2001 - U.S. Dollars 9,682,563) is also classified within investments in associates account as this interest will not be collected as cash but will be kept in the bank for the further financing of the power plant companies. Moreover, as of December 31, 2002, the Company has outstanding receivables amount, which consist of the cash given to Adapazari Elektrik, Gebze Elektrik and a related company in the amount of U.S. Dollars 3,877,218 (2001 - U.S. Dollars 4,377,185), as advance for the expenditures to be made related to power plant constructions. The Company management stated that these receivables will be transferred to the share capital of these power plant companies at the end of the completion of power plants' construction. During 2002, the Company has transferred the collections from power plant companies to Hollandische Bank-Unie N.V. as deposit resulting to a decrease in its receivable balances to U.S. Dollars 3,877,218.

Additional costs incurred as part of the

4769738

Documents

total current assets

total noncurrent assets

total noncurrent liabilities

current assets inventories

noncurrent assets property

total assets

liabilities notes

companys share