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ECZACIBASI YAPI GERECLERI SAN. VE TIC. A.S.

BOARD OF DIRECTORS ANNUAL REPORT PREPARED PURSUANT TO COMMUNIQUE SERIAL:XI NO:29

I. INTRODUCTION 1. Period Covered by the Report This report covers the activities of Eczacibasi Yapi Gerecleri Sanayi ve Ticaret A.S. between 1 January 2009 and 31 December 2009. 2. Company Name Eczacibasi Yapi Gerecleri Sanayi ve Ticaret A.S. 3. Boards in Charge during the Period Board of Directors Bülent Eczacıbaşı Chairman Erdal Karamercan Vice Chairman Haluk Bayraktar Member-General Manager Hüsamettin Onanç Member Mustafa Sacit Basmacı Member Atalay Muharrem Gümrah Member Ahmet TahsinYamaner Member The Directors were elected at the General Assembly Meeting on 3 April 2009 for a period of one year. Audit Committee Bülent Avcı Auditor Tayfun İçten Auditor The auditors were appointed to serve until the examination of the 2009 accounts at the following Ordinary General Assembly Meeting. 4. Registered and Paid-in Capital of the Company Registered Capital TRY 300,000,000.- Paid-in Capital TRY 112,830,900.- As EYAP is a publicly-traded company, the exact number of its shareholders is not known. The value of EYAP’s shares fluctuated over the year parallel to movements in the composite index of the Istanbul Stock Exchange. The 2009 closing price per share was TRY 2.62. No dividends were distributed during the previous three years. Shareholders owning more than 10% of EYAP’s capital are listed below. Shareholders Share Value (TRY) Share (%) Eczacıbaşı Holding A.Ş. 78,937,180 69.96 Eczacibasi Yatırım Holding Ort. A.S. 8,455,335 7.49 As of 31 December 2009, the value and percentage of shares held by the principal shareholders of publicly-owned shares were as follows. Shareholders Share Value (TRY) Share (%) Eczacıbası Holding A.S. 4,810,227 4.26 Eczacıbaşı Yatırım Holding Ort. A.Ş. 2,799,999 2.49

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5. Main Factors Affecting Performance and Expectations: EYAP’s total sales decreased by 6% in 2009 compared to the same period of the previous year due to the continuing impact of the global economic crisis. Despite the decline in sales, measures taken in previous years to increase productivity and profitability enabled us to transform our operating loss of TRY28,471,991 in 2008 into an operating profit of TRY 3,693,987. On 30 June 2009, we took over Vitra Küvet AŞ through a forward-looking merger transaction. Consequently, our consolidated income statement for the year as a whole includes the operating results of Vitra Kuvet for the July 2009-December 2009 period.

6. Outlook: Our shareholding in our affiliate Burgbad reached 95.02% following the acquisition of 100,000 shares in October 2009. With this purchase, EYAP obtained the position of majority shareholder of Burgbad AG pursuant to the German Joint Stock Company Law, enabling us to purchase the shares held by the minority shareholders of Burgbad AG at a price determined by a court expert. One of the assets we acquired on taking over VitrA Küvet AŞ was a kitchen furniture plant that was being rented to Intema Insaat ve Tesisat Malzemeleri Yatirim ve Pazarlama AŞ, one of our affiliates. Starting on 1 January 2010, we have decided to use the plant ourselves, this way expanding our furniture production to include kitchen as well as bathroom furniture and increasing the productivity of this business. In 2009, we began work on our R&D center in Bozüyük, which we plan to begin operating in 2010. The center will coordinate all of our R&D, innovation, and global collaboration activities so as to position us at the forefront of our sector. 7. Market Position: According to the market share report prepared by the international market research company GFK, EYAP maintains its leadership in the Turkish ceramic sanitary ware, faucet, and concealed cistern markets. 8. Developments in Manufacturing Units, Capacity Usage Rates, Goods and Services Produced, and Comparisons of Quantity, Quality, Demand and Prices with Previous Period Figures: In January 2009, EYAP completed the transportation of its concealed cistern and bathroom accessory production plant in Gebze to Bozüyük, as planned. The move to a single production site has significantly reduced costs and increased productivity. Upon transfer of the complementary products plant in Kartal, İstanbul, to Bozüyük, we expect to reduce costs and increase productivity further in this product group.

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9. Developments in Prices of Goods and Services, Sales Proceeds and Conditions, Output and Productivity, and Reasons Thereof: In 2009, our sales in Turkey decreased by 6% in TRY terms, while our international sales dropped by 17% in Euro terms. The main reasons for these declines were the contraction of the American and European markets caused by the global crisis and our strategic decision to reduce OEM sales. In light of the downturn in sales to North America and Europe, we decided to restructure our sales operations and review our activities in all markets, with the aim of switching our focus to alternative markets with promising growth potential. 10. Measures to Improve our Financial Structure: During the global crisis, we implemented a series of measure aimed at limiting the impact of the crisis on our financial health. We extended the payment terms for domestic purchases, postponed non-essential investments, implemented measures to reduce stocks, and reviewed expense items so as to increase savings. 11. Information on Interests in Enterprises subject to Consolidation in the Parent Company Capital (Cross-Shareholding): As of 31 December 2009, Eczacıbaşı Holding A.Ş. had a 74.22% shareholding in our company, including its shares in the publicly-owned portion of our company. EYAP does not have a cross-shareholding relationship with Eczacıbaşı Holding A.Ş. nor an influence on this company’s business and management policies. EYAP acquired a majority share of Burgbad AG in July 2008 and now has a shareholding of 95.02% in this German company. 12. Descriptions of the Main Components of the Building Products Division’s Internal Audit and Risk Management Systems with respect to the Preparation of its Consolidated Financial Statements: An international independent auditing company located in Germany has audited the 31 December 2009 financial statements of the subsidiary included in the consolidation to ensure their compliance with the legislation of Turkey’s Capital Markets Board and International Financial Reporting Standards.

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I. OPERATIONS A) Investments EYAP invested TRY 5,506,116 (USD 3,564,060) in the modernization of its ceramic sanitary ware plant during the 1 January 2009-31 December 2009 period. B) Developments in Production of Goods and Services Capacity Utilization Rates (%) Production Units 2009/12 2008/12 Ceramic Sanitary Ware 69 80 Sanitary Fittings 56 72 Bathtubs 87 104 Changes in Production Volume 2009/12-2008/12 Production (1000 Units) 2009/12 2008/12 Change (%) Ceramic Sanitary Ware 3,438 4,002 (14) Duroplast Toilet Seats 368 441 (17) Concealed Cisterns 128 139 (8) Furniture 22 31 (29) Chrome-Plated Products+ Colored Products 1,754 2,279 (23) Bathtubs and Panels 125 155 (19) Shower Trays 58 65 (12) The foreign currency value of exports slipped from Euro 97.58 million in 2008 to Euro 81.01 million in 2009. Export Revenue:

Eczacibasi Yapi Gerecleri Exports - Million €

120.00

97.58 100.00

81.01 80.00

60.00

40.00

20.00

- 2009/12 2008/12

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Eczacibasi Yapi Gerecleri Main Export Markets (% of Total)

Germany27%

Germany USA

Other CountriesUSA UK55%

4% Other Countries UK

14%

C. Major Financial Ratios 2009/12 2008/12 Current Ratio 0.85 1.07 Liquidity Ratio 0.58 0.57 Total of Debts / Assets 0.80 0.58 Total of Equity / Assets 0.20 0.42 Total of Equity / Debts 0.25 0.72 D. Administrative Operations 1. Company Directors and their Functions: Name Surname Function Profession Haluk Bayraktar General Manager MSc. Mechanical Engineer Levent Giray Assistant General Manager MSc. Industrial Engineer Hakan Şahin Projects Director Industrial Engineer Cem Görürgöz Factory Manager-Kuvet Mechanical Engineer Mustafa Akdoğan Purchasing Manager Industrial Engineer D.Erhan Arpaç HR Manager Lawyer Berna Erbilek Marketing Manager Business Manager Mustafa Manavoğlu Product Development Manager. Mechanical Engineer Mehmet Mercan Factory Manager-VitrA Metallurgy Engineer Oktay Pehlevan Factory Manager-Artema Mechanical Engineer Ayşegul Uzel Financial Affairs Manager Business Manager-S.M.M.M 2. Personnel and Labor Changes:

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Status Entries Departures Year-end headcount Union 185 98 1,260 Non-Union 82 70 410 Total 267 168 1,670 3. Collective Bargaining Agreements: On 1 August 2009, EYAP signed a new Collective Bargaining Agreement with the Union for the VitrA unit that is effective for the period 1 January 2009-31 December 2010. The Collective Bargaining Agreement for the Artema unit that EYAP signed on 5 December 2008 is valid for the period 1 September 2008-31 August 2010. 4. Research & Development Activities: In 2009, EYAP spent TRY 4,404,725 on research and development activities. 5. Donations: In 2009, EYAP donated a total of TRY 259,440 to various projects, including TRY 154,840 in materials and services to Primary Boarding Schools involved in the Eczacıbaşı Group Hygiene Project and TRY 57,000 to the Dr. Nejat Eczacıbaşı Foundation. III) RECOMMENDED DISTRIBUTION OF PROFITS AND RESULT EYAP has no profit to distribute due to its net loss for the period. BOARD OF DIRECTORS

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Eczacibasi Yapi Gerecleri Sanayi ve Ticaret A.S. Report on Compliance with Corporate Governance Principles 1. Declaration of Compliance with Corporate Governance Principles: During the period 1 January 2009 – 31 December 2009, we implemented some but not all of the principles issued by the Capital Markets Board (CMB). Detailed information is given below. PART I. SHAREHOLDERS 2. Division of Relations with Shareholders: EYAP does not have a shareholder relations unit because there is little demand for a unit of this kind. Instead, we manage these relations through the Finance Department, which oversees communication with the CMB, Istanbul Stock Exchange, Central Registry Agency, Takasbank and shareholders. In 2009, we received and responded to four inquiries and 15 requests for annual reports. 3. Exercise of Shareholders Right to Obtain Information:

Shareholders’ requests for information are usually transmitted by intermediary organizations. These requests are accepted by appointment and the required meetings arranged. Individual requests are generally received in written form and answered as soon as possible. In 2009, we received and responded to five written requests. Shareholders’ rights and developments that can affect these rights are announced by the Istanbul Stock Exchange; hence, we did not use the electronic media for this purpose during the period. Our articles of association do not contain any clause about appointing a special auditor, nor did we receive any demand for one during the period. 4. Information on the General Meeting: The general shareholders’ meeting was held punctually during the period, and the attendance rate was 89.6%. Shareholders were invited to the meeting through announcements in the press and the bulletin of the Istanbul Stock Exchange. Fifteen people attended the meeting including members of the media and shareholders from the publicly-owned part of the Company. The Company made its annual report and financial statements available to shareholders at its headquarters during the two weeks before the meeting. Shareholders exercised their right to ask questions at the general meeting and received responses from the Board of Directors. There is no provision in the Company’s articles of association that decisions regarding the sales, purchase and lease of large assets be taken up at the general meeting, but they are put on the agenda anyway. To facilitate attendance, the general meeting is announced in popular newspapers and held in the city center. The minutes of the general meeting are sent to the Istanbul Stock Exchange and CMB; they can also be freely viewed at the Company’s headquarters and on the Investor Relations page of Eczacıbaşı Holding’s web site: (www.eczacıbasi.com.tr).

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http://www.eczac%C4%B1basi.com.tr/



5. Voting Rights and Minority Rights: There are no privileged voting rights or mutual affiliate relationships. To date, there has been no shareholder demand concerning minority shares. The Company does not use the cumulative voting procedure. 6. Dividend Policy and Time of Dividend: At a meeting held on 17 March 2006, the Board of Directors established the following corporate governance principles with regard to the Company’s profit distribution policy: There are no special references in the Company’s articles of association to privileged shares, founder benefit shares, the distribution of profit to members of the Board of Directors and employees, and advanced dividends. The Company’s articles of association accept the principle of distribution of the first dividend based on the ratio and amount decided by the CMB. The Board of Directors proposes to the General Meeting how much profit should be distributed based on the principle of maintaining a balance between company profitability, shareholder expectations, and growth strategies. Dividend payments (cash or bonus shares) are to be made as soon as possible within the legal time limit. 7. Transfer of Shares: The Company’s articles of association do not include any provision restricting share transfers. PART II – PUBLIC DISCLOSURE AND TRANSPARENCY 8. Company Information Policy: The Company’s principle is to present all non-confidential information whenever requested and as soon as possible. The Finance Department provides written or oral responses to all requests from shareholders, media or potential investors. 9. Disclosure of Special Cases: In 2009, the Company made 21 special event disclosures to the PDP (Public Disclosure Platform) and the Istanbul Stock Exchange and CMB. Neither institution requested further information. Since the Company’s stocks are not traded in international markets, the disclosures were timely and the CMB did not issue warnings.

10. Company Website and Content: The Company has a website with general information for customers and business partners, www.vitra.com.tr. Information for investors is available on the Investor Relations page of Eczacıbaşı Holding’s web site, www.eczacibasi.com.tr.

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http://www.eczacibasi.com.tr/



11. Statement of Final and Real Person Shareholder/Shareholders: The Company is a member of the Eczacıbaşı Group and no study has been done on this subject. 12. Public Disclosure of Potential Insiders: The Company has disclosed this list to the CMB but not to the public. The list includes management, the board of auditors and other boards established according to CMB requirements as listed in the annual report. PART III – STAKEHOLDERS 13. Informing Stakeholders: Stakeholders are informed through general meetings, supplier and customer meetings, strategic planning meetings, general manager meetings and departmental meetings. (Targets, changes in wages, social benefits, travel allowances and satisfaction surveys are reviewed in these meetings.) The Company shares information with customers and suppliers in every area and undertakes joint efforts to develop processes. Strategic meetings with employees are held once a year; general manager meetings are held at least four times a year. Meetings to evaluate customers and suppliers are held at least once a year and related sales and marketing departments make customer visits. 14. Contribution of Stakeholders in Management: Stakeholders contribute to management through strategic planning meetings for employees, general meetings for shareholders, supplier meetings, customer meetings and customer visits. 15. Human Resources Policy:

Relations with employees are managed by the Human Resources Department. Our human resources policy aims to:

-Establish an organizational structure that is flexible and open to change, while ensuring that human resources are used effectively and productively to achieve the Company’s strategic goals;

-Continually review and improve the Company’s human resources processes and systems, and encourage employees to learn so that they might improve their knowledge, competencies, and behavior, thus enhancing their individual performance as well as the performances of their teams and the Company;

-Create opportunities for personal and career development that respond to the needs of the Company and reflect performance evaluation results;

-Attract employees who have the right competencies for their jobs: who are creative, innovative, participative, open to change, entrepreneurial, energetic and strong communicators; who want to develop personally and professionally and who are able to train others; who share our values;

To date, there have been no complaints of discrimination from Company employees.

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16. Information about Relations with Customers and Suppliers: Customer satisfaction is evaluated through semi-annual surveys carried out by wholesalers and retailers in Turkey and international markets. Apart from surveys, the Company organizes retailer meetings, visits, and trips to the plant. A supplier satisfaction survey is held once a year on “Suppliers’ Day”.

17. Social Responsibility: The Company supports many social, cultural and sports activities, in line with the principles of the Eczacıbaşı Group. There are no legal claims on the Company related to environmental pollution.

PART IV – BOARD OF DIRECTORS 18. Structure and Composition of Board of Directors and Independent Members: The Board of Directors consists of 7 members, one of which is an executive officer. Bülent Eczacıbaşı Chairman Erdal Karamercan Vice Chairman Haluk Bayraktar Member-General Manager Hüsamettin Onanç Member Mustafa Sacit Basmacı Member Atalay Muharrem Gümrah Member Ahmet Tahsin Yamaner Member The Board does not have any independent members. The Company’s view is that independent members are not needed since the Board is careful to listen to the views of shareholders and outsources consultancy services when required. 19. Qualifications of Board Members: The structure of the Board of Directors is in accordance with Articles 3.1.1, 3.1.2 and 3.1.5 of the CMB’s Corporate Governance Principles. Related procedures, however, are not included in the Company’s articles of association.

20. Mission, Vision and Strategic Targets of the Company: The Board of Directors’ vision for EYAP in 2009 was to “make VitrA an internationally recognized brand offering complete bathroom solutions”. Its 2009 strategic targets, in line with the Eczacıbaşı Group’s three-year strategic plan for the Building Products Division, were to defend its market leadership in Turkey, expand international sales of branded products, reinforce its financial structure and improve its profitability. The Board of Directors reviews these targets at monthly meetings. 21. Risk Management and Internal Control Mechanism: The Company receives support on every issue from the Audit Committee, which comprises two members of the Board of Directors, as well as from the Financial Coordination Unit of Eczacıbaşı Holding and the Company’s independent auditor.

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22. Authorization and Duties of Board Members and Directors: These are clearly defined in the articles of association. 23. Operating Principles of the Board of Directors: The Chairman assigns the General Manager the duty of preparing the agenda of Board meetings. Over the year, the Board held 27 meetings that were attended by a majority of the members. Invitations were made by phone or e-mail. The office of the Vice President of the Building Products Division is responsible for organizing meetings and distributing related information

No member opposed the Board’s resolutions during the year. All Board members have attended meetings on the subjects listed in Part IV, Article 2.17.4 of the CMB’s Corporate Governance Principles.

None of the members have special voting or veto rights.

24. Prohibition on Transactions with the Company and Competition: In line with the general principles of the Eczacibasi Group, no member of the Board of Directors can make a transaction with the Company. 25. Ethical Rules: The Company abides by the ethical rules of the Eczacıbaşı Group. These are distributed to all employees in written format but are not disclosed to the public.

26. Number, Structure and Independence of Committees established by the Board of Directors: The Board only has one Corporate Governance committee, the Audit Committee. The reason for this is that the Company outsources consultancy services when needed.

27. Financial Benefits provided to the Board of Directors: In accordance with the decisions of the general assembly, members of the Board of Directors do not receive wages, make financial transactions with the Company, nor receive performance awards. In 2009, no member of the Board of Directors received guarantees, credit or loans from the Company.

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ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2009 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT

Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers BJK Plaza, Süleyman Seba Caddesi

No:48 B Blok Kat 9 Akaretler Beşiktaş 34357 İstanbul-Turkey

www.pwc.com/tr Telephone +90 (212) 326 6060 Facsimile +90 (212) 326 6050

CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT

ORIGINALLY ISSUED IN TURKISH

INDEPENDENT AUDITOR’S REPORT To the Board of Directors of Eczacıbaşı Yapı Gereçleri Sanayi ve Ticaret A.Ş. 1. We have audited the accompanying consolidated financial statements of Eczacıbaşı

Yapı Gereçleri Sanayi ve Ticaret A.Ş. and its subsidiaries (the “Group”) which comprise the consolidated balance sheet as of 31 December 2009 and the consolidated statement of income, consolidated statement of changes in shareholders’ equity and the consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements 2. The Group management is responsible for the preparation and fair presentation of

these consolidated financial statements in accordance with the financial reporting standards issued by the Capital Markets Board (“CMB”). This responsibility includes, designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated 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 consolidated financial

statements based on our audit. We conducted our audit in accordance with the auditing standards issued by the CMB. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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.

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

Opinion 4. In our opinion, the accompanying consolidated financial statements present fairly, in

all material respects, the consolidated financial position of Eczacıbaşı Yapı Gereçleri Sanayi ve Ticaret A.Ş. as of 31 December 2009, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the financial reporting standards issued by the CMB (Note 2).

Additional paragraph for convenience translation into English 5. The accounting principles described in Note 2 to the consolidated financial

statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January - 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the consolidated financial position and results of operations of the Group in accordance with IFRS.

Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers Originally issued and signed in Turkish Coşkun Şen, SMMM Partner Istanbul, 15 March 2010

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FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2009

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CONTENTS PAGE CONSOLIDATED BALANCE SHEETS ................................................................................... 1-2 CONSOLIDATED STATEMENTS OF INCOME .................................................................... 3 CONSOLIDATED COMPREHENSIVE STATEMENTS OF INCOME ............................... 4 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................................... 5 CONSOLIDATED STATEMENTS OF CASH FLOW ............................................................ 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...................................... 7-67 NOTE 1 ORGANISATION AND NATURE OF OPERATIONS ......................................................................... 7-8 NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS .......................................................... 8-23 NOTE 3 BUSINESS COMBINATIONS ............................................................................................................... 24-26 NOTE 4 SEGMENT REPORTING ....................................................................................................................... 27-30 NOTE 5 CASH AND CASH EQUIVALENTS ..................................................................................................... 30 NOTE 6 FINANCIAL INVESTMENTS ............................................................................................................... 31 NOTE 7 FINANCIAL LIABILITIES .................................................................................................................... 32-33 NOTE 8 TRADE RECEIVABLES AND PAYABLES ......................................................................................... 33-34 NOTE 9 OTHER RECEIVABLES AND PAYABLES ......................................................................................... 34 NOTE 10 INVENTORIES ....................................................................................................................................... 35 NOTE 11 PROPERTY, PLANT AND EQUIPMENT ............................................................................................. 36-37 NOTE 12 INTANGIBLE ASSETS .......................................................................................................................... 38-39 NOTE 13 GOODWILL ............................................................................................................................................ 40 NOTE 14 GOVERNMENT GRANTS ..................................................................................................................... 40 NOTE 15 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES .............................................................. 40-41 NOTE 16 EMPLOYEE BENEFITS ........................................................................................................................ 41-42 NOTE 17 OTHER ASSETS AND LIABILITIES ................................................................................................... 43 NOTE 18 EQUITY .................................................................................................................................................. 44-46 NOTE 19 REVENUE AND COST OF SALES ....................................................................................................... 47 NOTE 20 EXPENSES BY NATURE ...................................................................................................................... 47-48 NOTE 21 OTHER OPERATING INCOME/EXPENSES ....................................................................................... 48 NOTE 22 FINANCIAL INCOME ........................................................................................................................... 49 NOTE 23 FINANCIAL EXPENSES ....................................................................................................................... 49 NOTE 24 TAX ASSETS AND LIABILITIES ........................................................................................................ 49-53 NOTE 25 EARNINGS PER SHARE ....................................................................................................................... 54 NOTE 26 TRANSACTIONS AND BALANCES WITH RELATED PARTIES .................................................... 54-57 NOTE 27 FINANCIAL RISK MANAGEMENT .................................................................................................... 58-66 NOTE 28 FINANCIAL INSTRUMENTS ................................................................................................................ 66-67 NOTE 29 EVENTS AFTER THE BALANCE SHEET DATE ................................................................................ 67

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Notes 2009 2008 ASSETS Current assets: Cash and cash equivalents 5 25,012,485 38,533,767 Trade receivables 8 14,924,793 10,428,148 Due from related parties 26 92,234,000 76,200,736 Other receivables 9 7,053,485 5,258,738 Inventories 10 57,576,479 66,645,278 Other current assets 17 5,345,162 4,101,561 Total current assets 202,146,404 201,168,228 Non-current assets: Other receivables 9 73,154 51,320 Financial investments 6 4,370,041 4,370,041 Property, plant and equipment 11 188,019,654 196,495,039 Intangible assets 12 87,112,324 88,569,557 Goodwill 13 32,183,470 32,183,470 Deferred income tax assets 24 1,543,331 238,182 Other non-current assets 17 1,239,840 1,309,049 Total non-current assets 314,541,814 323,216,658 Total assets 516,688,218 524,384,886

The accompanying notes form an integral part of these consolidated financial statements.

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Notes 2009 2008 LIABILITIES Current liabilities: Financial liabilities 7 138,743,127 203,411,204 Trade payables 8 63,690,390 42,619,839 Due to related parties 26 4,386,279 8,921,150 Other payables 9 7,741,732 4,814,753 Current income tax liabilities 24 1,344,227 131,972 Provisions 15 11,588,399 11,950,799 Other current liabilities 17 11,305,124 14,929,906 Total current liabilities 238,799,278 286,779,623 Non-current liabilities: Financial liabilities 7 130,745,175 80,913,688 Provisions for employee benefits 16 17,012,611 15,211,123 Deferred income tax liabilities 24 25,920,547 27,844,457 Provisions 15 163,319 1,333,290 Total non-current liabilities 173,841,652 125,302,558 Total liabilities 412,640,930 412,082,181 EQUITY Attributable to equity holders of the parent 18 98,654,349 102,262,544 Share capital 18 112,830,900 100,000,000 Additional contribution to shareholders’ equity related to merger 18 4,555,100 - Restricted reserves 18 2,058,373 1,303,016 Translation reserve 18 10,542,660 9,777,150 Retained earnings 18 (14,441,272) 76,603,199 Net loss for the period 18 (16,891,412) (85,420,821) Minority interests 18 5,392,939 10,040,161 Total equity 104,047,288 112,302,705 Total liabilities and equity 516,688,218 524,384,886 Commitments, contingent assets and liabilities 15


CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Notes 2009 2008 Revenue 4, 19 484,690,909 382,207,691 Cost of sales (-) 4, 20 (303,141,012) (252,986,750) GROSS PROFIT 181,549,897 129,220,941 Marketing, selling and distribution expenses (-) 20 (114,451,400) (86,979,660) General administrative expenses (-) 20 (56,828,824) (66,544,558) Research and development expenses (-) 20 (6,936,967) (5,105,264) Other operating income 21 2,953,945 2,551,682 Other operating expense (-) 21 (2,592,664) (1,615,132) OPERATING PROFIT / (LOSS) 3,693,987 (28,471,991) Financial income 22 42,376,785 36,036,131 Financial expense (-) 23 (58,930,419) (89,845,366) LOSS BEFORE TAX (12,859,647) (82,281,226) Income tax expense - Taxes on income (6,545,235) (800,336) - Deferred income tax income/(expense) 24 2,849,489 (2,328,892) NET LOSS (16,555,393) (85,410,454) Net loss attributable to: - Equity holders of the parent (16,891,412) (85,420,821) - Minority interests 336,019 10,367 (16,555,393) (85,410,454) Losses per 1,000 shares (Kr) 25 (0.78) (14.61)


CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED COMPREHENSIVE STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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2009 2008 NET LOSS (16,555,393) (85,410,454) Other comprehensive income: Translation reserve 868,616 10,808,257 Other comprehensive income 868,616 10,808,257 TOTAL COMPREHENSIVE LOSS (15,686,777) (74,602,197) TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: - Equity holders of the parent (16,125,902) (75,643,671) - Minority interests 439,125 1,041,474 (15,686,777) (74,602,197)


CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Additional equity Equity attributable Share contribution due Restricted Translation Retained Net loss to equity holders Minority Total capital to legal merge reserves reserve earnings for the period of the parent interests equity Balances at 1 January 2008 56,250,000 - 1,303,016 - 119,070,775 (42,567,115) 134,056,676 - 134,056,676 Capital increase 43,750,000 - - - - - 43,750,000 - 43,750,000 Transfers - - - - (42,567,115) 42,567,115 - - - Business combinations (Note 3) - - - - - - - 9,346,793 9,346,793 Effect of change in the effective rate of subsidiary (Note 2) - - - - 99,539 - 99,539 (348,106) (248,567) Total comprehensive expense - - - 9,777,150 - (85,420,821) (75,643,671) 1,041,474 (74,602,197) Balances at 31 December 2008 100,000,000 - 1,303,016 9,777,150 76,603,199 (85,420,821) 102,262,544 10,040,161 112,302,705 Balances at 1 January 2009 100,000,000 - 1,303,016 9,777,150 76,603,199 (85,420,821) 102,262,544 10,040,161 112,302,705 Transfers - - - - (85,420,821) 85,420,821 - - - Dividend paid - - - - - - - (828,300) (828,300) Business combinations (Note 3) - - - - - - - (133,680) (133,680) Additional equity contribution Due to acquisition (Note 3) 12,830,900 4,555,100 755,357 - (3,166,518) - 14,974,839 - 14,974,839 Effect of change in the effective rate of subsidiary (Note 2) - - - - (2,457,132) - (2,457,132) (4,124,367) (6,581,499) Total comprehensive expense - - - 765,510 - (16,891,412) (16,125,902) 439,125 (15,686,777) Balances at 31 December 2009 112,830,900 4,555,100 2,058,373 10,542,660 (14,441,272) (16,891,412) 98,654,349 5,392,939 104,047,288


CONVENIENCE TRANSLATION INTO ENGLISH OF ONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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Notes 2009 2008 Operating activities: Net loss attributable to equity holders of the parent (16,891,412) (85,420,821) Adjustments to reconcile net loss to net cash generated from /(used in) operating activities: Minority interests 336,019 10,367 Depreciation 11 31,184,693 29,656,633 Amortisation 12 9,270,953 5,720,930 Impairment on financial investments 6 - 652,522 Provision for employment termination benefits 5,410,122 8,122,016 Provision for doubtful receivables 3,003,205 1,953,680 Provision for unused vacation pay liability 15 2,238,621 373,544 Provision for lawsuits 15 475,942 1,666,385 Accrual for forward foreign exchange contracts 17 - 1,437,194 Provision for warranty expenses 15 776,434 294,398 Expense accruals 576,989 7,704,046 Tax expense 24 6,545,235 800,336 Deferred income tax (expense)/income 24 (2,849,489) 2,328,892 Provision for impairment of inventory 10 720,921 1,766,582 Interest expense 23 19,258,576 14,254,609 Interest income 22 (1,699,217) (710,619) Expenses due to business acquisition 3 447,354 - Gain on sale of property, plant and equipment-net (158,839) (214,972) Cash flows generated from/(used in) operating activities before changes in operating assets and liabilities 58,646,107 (9,604,278) Changes in assets and liabilities: Trade receivables (5,886,705) 17,195,782 Due from related parties (8,488,513) 3,543,452 Inventories 11,756,865 5,706,390 Other receivables (1,812,585) 194,180 Other current assets (427,553) 1,010,355 Other non-current assets 203,558 (335,467) Trade payables 14,282,325 9,256,904 Due to related parties (5,631,640) 737,373 Other payables 2,534,552 308,470 Other liabilities (3,122,982) (17,275,999) Income taxes paid (5,332,980) (2,571,289) Employment termination benefits paid 16 (3,621,219) (9,355,564) Utilised provision for lawsuit expenses (2,017,028) - Annual vacation paid or used (3,050,636) (1,056,025) Utilised provision for warranty expenses (987,449) - Premiums paid (1,196,116) (2,880,082) Net cash generated from/(used in) operating activities 45,848,001 (5,125,798) Cash flows from investing activities: Cash outflow on acquisition of subsidiary 3 (282,312) (118,644,826) Purchases of property, plant and equipment 11 (13,940,217) (20,138,883) Purchase of intangible assets 12 (4,224,462) (2,053,694) Purchase of financial investments - (377,363) Proceeds from sale of property, plant and equipment 497,695 468,676 Interest received 1,699,217 710,619 Cash outflow on additional share purchase of subsidiary (6,581,499) (248,567) Cash inflow on business acquisition 2,681,271 - Net cash used in investing activities (20,150,307) (140,284,038) Cash flows from financing activities: Share capital increase - 43,750,000 Increase in bank borrowings, net (16,918,309) 148,582,283 Interest paid (21,395,549) (10,512,973) Dividend paid (828,300) - Net cash (used in)/ generated from financing activities (39,142,158) 181,819,310 Currency translation differences (76,818) (1,218,439) Net increase in cash and cash equivalents (13,521,282) 35,191,035 Cash and cash equivalents at the beginning of the period 5 38,533,767 3,342,732 Cash and cash equivalents at the end of the period 5 25,012,485 38,533,767


CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ECZACIBAŞI YAPI GEREÇLERİ SANAYİ VE TİCARET A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)

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NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS Eczacıbaşı Yapı Gereçleri Sanayi and Ticaret A.Ş. (“EYAP” or the “Company”) is a manufacturing company involved in the production of a wide range of ceramic sanitary ware units and complementary products for bathrooms, acyrylic bathtubs and shower cabins, and sanitary fittings and bathroom accessories under the Vitra and Artema brand names. The Company manufactures ceramic sanitary ware, faucets and complementary products for bathrooms in the Bozüyük-Bilecik factory, and bathroom furniture in the Kartal-İstanbul factory. EYAP is a member of the Eczacıbaşı Group of companies, one of the oldest and most prominent industrial groups in Turkey. At the Board of Directors meeting of the Company held on 30 January 2009, the decision was taken to merge Vitra Küvet San. ve Tic. A.Ş., another Eczacıbaşı Group company, into EYAP by taking over the whole of its assets and liabilities as of 31 December 2008 in line with Turkish Law No:451 and Corporate Tax Law No:18-20 and based on the balance sheets prepared in accordance with CMB regulations at 31 December 2008. The aforementioned legal merger was approved at the Extraordinary General Assembly meeting of the Company on 29 June 2009 and realized on 30 June 2009. At the aforementioned meeting at 30 June, it was decided to increase the share capital of the Company from TL100,000,000 to TL112,830,900 and to give the increased capital of TL12,830,900 to the shareholders of the dissoluted company; Vitra Küvet, in return for 1,283,090,000 nominal EYAP shares with 1Kr par value. Vitra Küvet produces acrylic bathtubs and shower cabins. EYAP is registered with the Capital Markets Board (“CMB”) and its shares have been quoted on the Istanbul Stock Exchange (“ISE”) since 15 June 1995. As of 31 December 2009, 16.70% (2008: 18.84%) of the Company's shares were held by the public (Note 18). After the share purchases made by Eczacıbaşı Holding A.Ş. and Eczacıbaşı Yatırım Holding A.Ş. from the ISE, the publicly held share dropped to 9.95% of the Company’s total shares (2008: 18.84%). The address of the registered office is as follows: Kanyon Ofis Büyükdere Cad. No: 185 Kat: 20-21 Levent-İstanbul Subsidiaries: The subsidiaries consolidated in these consolidated financial statements as of 31 December 2009 and the nature of their businesses are as follows: Country Nature Subsidiaries of incorporation of business Burgbad Aktiengesellschaft (“Burgbad”) Germany Bathroom accessories Burgkama GmbH Germany Bathroom accessories Burgbad Produktions GmbH Germany Bathroom accessories Miral Gmbh Germany Bathroom accessories KAMA Bad Verwaltungs GmbH Germany Bathroom accessories Société d’Equipement Postformé (S.E.P.) France Bathroom accessories S.C.I. Convention France Bathroom accessories Burg Nederland Netherlands Bathroom accessories Burg North America Inc. U.S.A. Bathroom accessories Burg Belux BVBA Belgium Bathroom accessories


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NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) These consolidated financial statements were approved for issue by Haluk Bayraktar and Hüsamettin Onanç in the name of the Board of Directors on 15 March 2010. The owners of EYAP have the power to amend the consolidated financial statements after their issue in the General Assembly meeting of EYAP. NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Basis of presentation A) Financial Reporting Standards The Capital Markets Board of Turkey (“CMB”) regulates the principles and procedures of preparation, presentation and announcement of financial statements prepared by the entities with the Communiqué No: XI-29, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”). This Communiqué is effective for the annual periods starting from 1 January 2008 and supersedes the Communiqué No: XI-25 “The Financial Reporting Standards in the Capital Markets”. According to the Communiqué, entities shall prepare their financial statements in accordance with International Financial Reporting Standards (“IAS/IFRS”) endorsed by the European Union. Until the differences between the IAS/IFRS as endorsed by the European Union and the ones issued by the International Accounting Standards Board (“IASB”) are announced by Turkish Accounting Standards Board (“TASB”), IAS/IFRS issued by the IASB shall be applied. Accordingly, Turkish Accounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”) issued by the TASB which are in line with the aforementioned standards shall be considered. With the decision taken on 17 March 2005, the CMB has announced that, effective from 1 January 2005, for companies operating in Turkey and preparing their financial statements in accordance with CMB Financial Reporting Standards the application of inflation accounting is no longer required. Accordingly, the Group did not apply IAS 29 “Financial Reporting in Hyperinflationary Economies” issued by IASB in its financial statements for the accounting periods starting 1 January 2005. As the differences between the IAS/IFRS endorsed by the European Union and the ones issued by the IASB have not been announced by TASB as of the date of preparation of these consolidated financial statements, the consolidated financial statements have been prepared within the framework of Communiqué XI, No: 29 and related promulgations to this Communiqué as issued by the CMB in accordance with the accounting and reporting principles accepted by the CMB (“CMB Financial Reporting Standards”) which are based on IAS/IFRS. The consolidated financial statements and the related notes to them are presented in accordance with the formats required by the CMB including the compulsory disclosures. As per CMB’s Communiqué Serial XI, No:29 and its announcements clarifying this communiqué enterprises are obliged to present the hedging rate of their total foreign exchange liability and total export and import amounts in the notes to the financial statements. Accordingly, required reclassifications have been made in the comparative financial statements (Note 2.4). All consolidated financial statements are prepared in Turkish Lira (“TL”) based on the historical cost convention except for the financial assets and liabilities which are expressed with their fair values.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of presentation (Continued) Amendments in International Financial Reporting Standards (a) Standards, amendment and interpretations effective in 2009 and relevant to the Group

The Group has adopted the following new and amended IFRS as of 1 January 2009; - IAS 1 (Revised), “Presentation of financial statements” (effective from 1 January 2009): The

revised standard prohibits the presentation of items of income and expenses (that is, “non-owner changes in equity”) in the statement of changes in equity, requiring “non-owner changes in equity” to be presented separately from owner changes in equity in a statement of comprehensive income. All non-owner changes in equity are required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they are required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Company has decided to present two statements and disclose other comprehensive income in the statement of comprehensive income

- IFRS 8 has been effective as a replacement to “Operating Segments”- IFRS 8, IAS 14 “Segment

reporting” Standard. The new Standard necessitates a “Corporate Approach” in order to make segment reporting and the information used in internal reporting consistent with each other. The Group began applying IFRS 8 on 1 January 2009.

- IFRS 7 (Amendment), “Financial instruments - Disclosures” (effective 1 January 2009): The

amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on prior year decisions.

- IAS 23 (Amendment), “Borrowing costs”: The Standard was amended by IASB on 29 March

2007. Revised IAS 23 is applicable from 1 January 2009 on, with early application permitted. The Group has voluntarily applied the accounting policy about borrowing costs in IAS 23 since 1 January 2007. The financial costs arising from borrowings are added on the purchasing or building cost of a qualifying asset in cases where the borrowing cost is related to the purchase or building of the qualifying asset. Other borrowing costs are disclosed in the statement of income of the related period.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of presentation (Continued) (b) Standards, amendments and interpretations, effective in 2009 but not relevant to the Group’s

consolidated financial statements • IAS 32, “Financial instruments: Presentation” and IAS 1 (Amendment), “Presentation of

financial statements” - Puttable financial instruments and obligations arising on liquidation

• IAS 39 (Amendment), “Financial instruments: Recognition and measurement” • IFRS 2 (Amendment) “Share-based payment” • IFRS 1 (Amendment), “First time adoption of IFRS” • IFRIC 13, “Customer Loyalty Programmes” • IFRIC 15, “Agreements for the construction of the real estates” • IFRIC 16, “Hedges of a net investment in a foreign operation”

(c) Effective on 1 July 2009 or effective in the annual reporting period that beginning after this

date:

• IFRS 3, “Business combinations” • IAS 27, “Consolidated and Separate Financial Statements” • IAS 28, “Investments in associates” • UMS 31 “Interests in joint ventures” (Amendment), • IFRIC 17, “Distributions of Non-Cash Assets to Owners” • UFRYK 18, “Transfer of assets from customers”

B) Translation of Financial Statements of Foreign Subsidiaries Financial statements of subsidiaries operating in foreign countries are prepared according to the legislation of the country in which they operate and adjusted to the CMB Financial Reporting Standards to reflect the proper presentation and content. Foreign subsidiaries’ assets and liabilities are translated into TL using the foreign exchange rate at the balance sheet date and income, and expenses are translated into TL using the average foreign exchange rate. Exchange differences arising from the retranslation of the opening net assets of foreign undertakings and differences between the average and balance sheet date rates are included in the “translation reserve” under equity. C) Basis of Consolidation a) The consolidated financial statements include the accounts of the parent company, Eczacıbaşı

Yapı Gereçleri Sanayi ve Ticaret A.Ş., and its subsidiaries (“Group”) on the basis set out in sections (b), (c), (d) and (e) below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements and in accordance with CMB Financial Reporting Standards, applying uniform accounting policies and presentation. The results of subsidiaries are included or excluded from their effective dates of acquisition or disposal respectively.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of presentation (Continued) b) Subsidiaries are companies in which the Company has the power to control the financial and

operating policies for the benefit of the Company, either (a) through the power to exercise more than 50% voting rights relating to shares in the companies or (b) although not having the power to exercise more than 50% of the voting rights, through the exercise of actual dominant influence over financial and operating policies. The table below sets out the subsidiaries and their shareholding structure as of 31 December 2009 and 2008: Direct shareholding Proportion of by the Group (%) effective interest (%) Subsidiaries 2009 2008 2009 2008 Burgbad (*) 95.02 90.78 95.02 90.78 Burgkama GmbH 100.00 100.00 95.02 90.78 Burgbad Produktions GmbH 100.00 100.00 95.02 90.78 miral Gmbh 100.00 100.00 95.02 90.78 KAMA Bad Verwaltungs GmbH 100.00 100.00 95.02 90.78 Société d’Equipement Postformé (S.E.P.) 100.00 100.00 95.02 90.78 S.C.I. Convention 100.00 100.00 95.02 90.78 Burg Nederland 100.00 100.00 95.02 90.78 Burg North America Inc. 100.00 100.00 95.02 90.78 Burg Belux BVBA 50.48 - 47.97 - (*) On 2 July 2008 the Group acquired 47.16% of Burgbad shares owned by Ruddies Beteiligungs-

und Vermögensverwaltungsgesellschaft mbH for EUR33,399,220. The Group acquired another 41.76% on 31 July 2008 and 1.54% on 20 August 2008 for EUR29,577,245 and EUR1,090,323 respectively, in compliance with the call liability arising from the public trading of Burgbad shares in the Frankfurt and Duesseldorf stock exchanges

The Group acquired another 0.26% of Burgbad shares for EUR98,940 (TL203,252) between dates 7 November 2008 and 31 December 2008. As a result of these purchases, the Company’s effective shareholding in Burgbad increased to 90.78% as of 31 December 2008. Additionally the Group acquired 4.24% of Burgbad shares for EUR3,011,341 (TL6,581,499) between 6 March 2009 and 16 October 2009. As a result of these purchases, the Company’s effective shareholding in Burgbad increased to 95.02% as of 31 December 2009. The difference between the cost of the share purchase and the carrying amount of the shares acquired from minority interest holders has been accounted for under retained earnings. After the aforementioned acquisition of shares, the effective shareholding of Eyap increased to 95.02%, which made EYAP the only controlling shareholder per German Stock Corporation Law. Consequently EYAP had the right to purchase the minority shares of Burgbad on a price determined by a court expert. Therefore, on 19 October 2009 the Board of Directors of EYAP requested Burgbad to summon an Extraordinary General Assembly. In the Extraordinary General Assembly meeting it was decided, in line with German Stock Corporation Law, to assign a court expert to determine a purchase price. The results of Burgbad are included from its effective date of acquisition in the consolidated financial statements and reported under the “Bathroom furniture” segment.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of presentation (Continued) The balance sheets and statements of income of the subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by EYAP and its subsidiary is eliminated against the related equity. Intercompany transactions and balances between EYAP and its subsidiaries are eliminated during the consolidation. The cost of, and the dividends arising from, shares held by EYAP in its subsidiaries are eliminated from equity and income for the period.

c) Investments in which the Group has interests below 20%, or over which the Group does not

exercise a significant influence, or which are considered not having a significant impact on the consolidated financial statements are classified as available for sale. Available for sale investments that do not have a quoted market price in active markets and whose fair value cannot be measured reliably are carried at cost less any provision for impairment (Note 6).

d) The results of subsidiaries are included or excluded from consolidation on the basis of to their

effective dates of acquisition and disposal, e) The minority shareholders’ share in the net assets and results for the period for subsidiaries are

separately classified respectively in the consolidated balance sheet and statement of income as minority interest and income or loss attributable to minority interest.

2.2 Changes in the Accounting Policies and Errors Significant changes in accounting policies or significant errors are corrected retrospectively by restating the prior period consolidated financial statements. There are no changes in the accounting policies as of 31 December 2009 and 2008. 2.3 Changes in the Accounting Estimates The effect of changes in accounting estimates affecting the current period is recognised in the current period; the effect of changes in accounting estimates affecting current and future periods is recognised in the current and future periods. There are no changes in the accounting estimates for the period 1 January - 31 December 2009. 2.4 Convenience translation into English of consolidated financial statements originally issued

in Turkish The accounting principles for the consolidated financial statements (defined as “CMB Financial Reporting Standards”) differ from the IFRS issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period 1 January - 31 December 2005, measurement principles and disclosure requirements for retirement benefits, and the presentation of basic financial statements and the notes to them. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies The significant accounting policies applied in the preparation of these consolidated financial statements are summarized below. These accounting policies are applied on a consistent basis to comparative balances and results, unless otherwise indicated. a) Cash and cash equivalents Cash and due from banks are presented on the balance sheet with their acquisition values. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with insignificant risk of value in exchange and original maturities of 3 months or less, and marketable securities with original maturities of less than 3 months (Note 5). b) Trade receivables and provision for doubtful receivables Trade receivables that are created by the Group by way of providing goods or services directly to a debtor are carried at amortised cost using the effective yield method. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant. EYAP uses a direct collection system for receivables arising from domestic sales as a form of guarantee. EYAP carries out its domestic sales via İntema İnşaat ve Tesisat Mlz. Yat. Paz. A.Ş. (“İntema”); the premiums paid by İntema to dealers that make payments through this system, on the collection amounts at the time of collection, are charged to EYAP. Premiums amounting to TL1,208,853 for the period 01 January – 31 December 2009 period (2008: TL1,015,260) have been accounted for under financial expenses (Note 23). EYAP uses an advance payment system to minimise collection risk and create funds for itself as a requirement of its sector. According to this method, the premiums paid by İntema to dealers with a cash surplus for collections made before the maturity date are charged to EYAP. Premiums amounting to TL4,488,787 for the 01 January – 31 December 2009 period (2008: TL1,335,108) have been accounted for under financial expenses (Note 23). A credit risk provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount. The recoverable amount is the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted by the original effective interest rate of the originated receivables at inception. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income (Note 8).


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) c) Credit finance income/expenses Credit finance income/expenses represent imputed finance charges on credit sales and purchases. Such income and expenses are recognised using the effective yield method over the year of credit sales and purchases, and included under financial income and expenses. d) Inventories Inventories are valued at the lower of cost or net realisable value less costs to sell. Cost of inventories is comprised of the purchase cost and the cost of bringing inventories into their present location and condition. Cost is determined by the monthly moving weighted average method. Net realisable value less costs to sell is the estimated selling price in the ordinary course of business, less the estimated costs necessary to sell (Note 10). e) Property, plant and equipment Property, plant and equipment are carried at the acquisition value less accumulated depreciation and, if any, impairment (Note 11). Depreciation is provided over the economically useful lives for property, plant and equipment on a straight-line basis The depreciation periods for property, plant and equipment, which approximate the economic useful lives of such assets, are as follows: Years Land improvements 5-30 Buildings 20-50 Machinery and equipment 2-30 Motor vehicles 2-15 Furniture and fixtures 2-15 Special costs 2-5 Other tangible assets 2-15 Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in the related income and expense accounts, as appropriate. Where the carrying amount of an asset is greater than its recoverable amount, it is written down immediately to its recoverable amount. The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset less the costs of disposal. Value in use is the present value of the future cash flows expected to be derived from an asset. Expenses for the repair of property, plant and equipment are normally charged against income. They are, however, capitalised in exceptional cases if they result in an enlargement or substantial improvement of the respective assets.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) f) Intangible assets Intangible assets comprise trademarks, order backlogs, customer relationships, production knowhow, acquired rights and computer software. The value of trademarks, order backlogs, customer relationships and production knowhow were determined through independent valuations made during business combinations. Intangible assets are carried at cost less accumulated amortisation. The amortisation periods for intangible assets, which approximate the useful lives of such assets, are as follows: Years Trademark 20 Customer relationships 11 Production knowhow 11 Computer software and other rights 2-15 Where an indication of impairment exists, the carrying amount of any intangible asset is assessed and written down immediately to its recoverable amount (Note 12). g) Business combinations and goodwill A business combination is the bringing together of separate entities or businesses into one reporting entity. Business combinations are accounted for by applying the purchase method in accordance with IFRS 3. The cost of a business combination is allocated by recognising the acquiree’s identifiable assets, liabilities and contingent liabilities at the date of acquisition. Goodwill has been recognised as an asset and has initially been measured as the excess of the cost of the combination over the fair value of the acquiree’s assets, liabilities and contingent liabilities. In business combinations, the acquirer recognises identifiable assets (such as deferred income tax on carry forward losses), intangible assets (such as trademarks) and/or contingent liabilities which are not included in the acquiree’s financial statements at their fair values in the consolidated financial statements. The goodwill previously recognised in the financial statements of the acquiree is not considered as an identifiable asset. Goodwill recognized as a result of business combinations is not amortised and its carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. If the acquisition cost is lower than the fair value of the identifiable assets, liabilities and contingent liabilities acquired, the difference is accounted for as income in the related period. The Group treats transactions with minority interests as transactions with equity owners of the Group. Accordingly, for purchases from minority interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity. Gains and losses on disposals to minority interests are also recorded in equity.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) h) Available-for-sale financial instruments Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are included in non-current assets unless management has the intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. All financial assets are initially recognized at cost, being the fair value of the consideration given and including acquisition charges associated with the investment. After initial recognition, financial assets that are classified as available-for-sale are measured at fair value unless fair value cannot be reliably measured. Other financial assets in which the Group has an interest below 20%, that do not have a quoted market price in active markets, and whose fair value cannot be measured reliably are carried at cost, if applicable, less any provision for impairment. Available-for-sale investments that have a quoted market price in active markets and whose fair values can be measured reliably are carried at fair value. In accordance with the revised IAS 39 “Financial Instruments”, unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are deferred in the equity until the financial asset is sold, collected, or otherwise disposed of. When the marketable securities available-for-sale are derecognized from the consolidated financial statement, the related income and expenses followed in the fair value reserve of financial assets under equity are transferred to the consolidated income statement. There is no fair value reserve in the accompanying consolidated financial statements for the periods presented. i) Share capital Ordinary shares are classified as equity. Dividends payable are recognised as an appropriation of profit in the period in which they are declared. In the restatement of shareholders’ equity items, the addition of funds formed due to hyperinflation, such as the revaluation value increase fund in share capital, is not considered a contribution from shareholders. Additions of legal reserves and retained earnings to share capital are considered contributions by shareholders. In the restatement of shareholders’ equity items added to share capital, the capital increase registry dates or the payment dates are considered. In the restatement of share premiums, the payment dates are considered (Note 18).


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) j) Taxes on income Taxes on income for the period comprise current tax and the change in deferred income taxes. Current year tax liability consists of the taxes calculated over the taxable portion of the current year income by reference to corporate income tax rates enacted as of the balance sheet date and adjustments provided for previous years’ income tax liabilities. Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax base of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used to determine deferred income taxes. Deferred income tax liabilities are recognised for all taxable temporary differences, whereas deferred income tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities (Note 24). Deferred income tax assets and deferred income tax liabilities are classified as long term in the consolidated financial statements. k) Revenue recognition Revenues are recognised on an accrual basis at the time deliveries are made, when 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 considerations received or receivable. The Group carries out domestic and foreign sales through İntema İnşaat ve Tesisat Mlz.Yat.Paz. A.Ş. and Eczacıbaşı Dış Ticaret A.Ş. respectively. Revenue from domestic sales is recognized when the goods are delivered to dealers. Revenue from foreign sales is recognized when the goods are delivered to the related custom office or port. Net sales represent the invoiced value of goods sold less sales returns and commission, and exclude sales taxes. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognized as interest income on a time proportion basis that takes into account the effective yield on the asset. Other revenues earned by the Group are recognised on the following bases: Royalty and rental income - on an accrual basis. Interest income - on an effective yield basis. Dividend income - when the Group’s right to receive payment is established.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) l) Foreign currency transactions and translations Transactions in foreign currencies during the period have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated at the exchange rates prevailing at the balance sheet date. Exchange gains or losses arising on the settlement and translation of foreign currency items have been included in the statement of income. m) Borrowings and borrowing costs Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings. Borrowing costs are charged to the income statement when they are incurred (Note 7). IAS 23 (Amendment), “Borrowing costs” was amended by IASB at 29 March 2007. The revised IAS 23 is applicable from 1 January 2009 onward, with early application permitted. The Group has voluntarily applied the accounting policy about borrowing costs in IAS 23 on 1 January 2007. The financial costs arising from borrowings are added on the purchasing or building cost of a qualifying asset when the borrowing cost is related with the purchase or building of the qualifying asset. Qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. Other borrowing costs are disclosed in the statement of income of the related period. n) Employee benefits /Provision for employment termination benefits The provision for employment termination benefits represents the present value of the estimated total reserve of the future probable obligation of the Group arising from the retirement of employees in accordance with Turkish Labour Law and calculated by applying actuarial valuation methods (Note 16). o) Provisions, contingent liabilities and contingent assets The conditions that must be met in order to recognise a provision in the consolidated financial statements are that the Group has a present legal or constructive obligation as a result of past events, that it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and that a reliable estimate can be made of the amount of the obligation. Liabilities or assets that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not wholly within the control of the entity are not recognised as liabilities or assets and should be disclosed as contingent liabilities or assets (Note 15).


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) p) Related parties The Group is under the control of Eczacıbaşı Holding A.Ş., which owns 70% of the shares. For the purpose of these consolidated financial statements, shareholders, key management personnel and Board members, including their families and companies controlled by or affiliated with them as well as associated companies, are considered and referred to as related parties (Note 26). r) Warranties Warranty expenses are recorded as a result of repair and maintenance expenses for products produced and sold, authorised services’ labour and material costs for products under the scope of the warranty terms without any charge to the customers, initial maintenance costs and estimated costs based on statistical information for possible future warranty services and returns of products with respect to products sold during the year (Note 15). s) Earnings per share Earnings per share disclosed in the consolidated statement of income are determined by dividing net profit by the weighted average number of outstanding shares during the period concerned. In Turkey, companies can increase their share capital through a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such Bonus Share issuances are regarded as issued shares. Accordingly the weighted average number of shares used in earnings per share computations is derived by giving retrospective effect to share issuances without consideration. Profit or loss derived from changes in fair values of derivative financial instruments is recorded as income or expense in the consolidated statement of income.

t) Statement of cash flows Cash flows during the period are classified and reported by operating, investing and financing activities in the cash flow statements. Cash flows from operating activities represent the cash flows of the Group generated from operating activities. Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (fixed investments and financial investments). Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds. Cash and cash equivalents comprise cash on hand and bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities equal or less than three months and which are subject to an insignificant risk of change in value (Note 5).


35

NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of Significant Accounting Policies (Continued) u) Derivative financial instruments Derivative financial instruments are initially recognised in the consolidated balance sheet at cost (including transaction costs) and subsequently measured at their fair value. The derivative financial statements of the Group consist of forward foreign exchange contracts and commodity swap agreements. The fair value of over-the-counter forward foreign exchange contracts is determined based on the comparison of the original forward rate with the forward rate calculated in reference to the market interest rates of the related currency for the remaining period of the contract, discounted to 31 December 2009. All derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. v) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker responsible for allocating resources and assessing the performance of operating segments has been identified as the steering committee, which makes strategic decisions. Management has determined the operating segments based on reports for the steering committee’s strategic decisions. Management approaches its business from a product perspective: ceramic sanitary ware, faucets, bathroom furniture, and bathtubs. Reportable operating segments derive their revenue primarily from domestic and international manufacturing and wholesaling. The steering committee assesses the performance of operating segments based on a measure of Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) (Note 4). y) 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.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.6 Critical Accounting Estimates and Assumptions Preparation of the consolidated financial statements in accordance with CMB Financial Reporting Standards necessitates the usage of estimates and assumptions that can affect amounts of reported assets and liabilities as of the balance sheet date, as well as the explanations for contingent assets and liabilities and income and expenses reported during the accounting period. Although these estimates and assumptions are based on the best judgment of Group management with regard to existing conditions and transactions, actual results may differ from these estimates. Estimates are reviewed on a regular basis and the necessary adjustments and corrections are made; they are included in the income statement when they accrue. Estimates and assumptions subject to the risk of being corrected in the registered value of assets and liabilities in the next financial period are stated below: (a) Estimated impairment of goodwill The Group tests annually whether goodwill has been impaired, in accordance with the accounting policy stated in Note 2.5. The recoverable amount of a cash-generating unit has been determined based on value-in-use calculations. These value-in-use calculations include discounted after-tax cash flow projections based on EUR-denominated financial budgets covering a three-year period and approved by Group management. Cash flows beyond three years are extrapolated. The fair value in EUR is converted into TL using the related foreign exchange rate on the date of the balance sheet. Therefore, the value-in use calculations are affected by fluctuations in the foreign exchange market. The discount rate used in the value-in-use calculations is 8.20%. The discount rates used are before tax and reflect specific risks relating to the Company. As of 31 December 2009, the Group did not determine any impairment in the amount of goodwill as a result of the impairment test performed with the aforementioned assumptions. The sensitivity analysis below presents the changes in value-in-use when the discount rate used in the goodwill impairment test changes: Value-in-use (TL) Basic discount rate +1 250,916,898 Basic discount rate 0 282,916,556 Basic discount rate -1 323,838,414


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.6 Critical Accounting Estimates and Assumptions (Continued) (b) Estimated impairment of property, plant and equipment In accordance with the accounting policy stated in Note 2.5, tangible assets were analysed for impairment by the Group. The recoverable amount of property, plant, and equipment has been determined based on value-in-use calculations. These value-in-use calculations include discounted before-tax cash flow projections based on three-year, TL financial budgets approved by Group management. The discount rate used in the value-in-use calculations is 12.80%. This rate is before tax and reflects the company’s specific risks. As of 31 December 2009, the Group did not determine any impairment in the amount of property, plant, and equipment through an impairment test performed with the aforementioned assumptions. The sensitivity analysis below presents the changes in value-in-use when the discount rate used in the property, plant and equipment impairment test changes: Value-in-use (TL) Basic discount rate +1 306,547,419 Basic discount rate 0 321,589,346 Basic discount rate -1 337,751,236 (c) Net realisable value Inventories are valued at the lower of cost or net realisable value as described by the accounting policy in Note 2.5. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. (d) Useful lives of tangible and intangible assets In accordance with the accounting policy stated in Note 2.5, tangible and intangible assets are stated at historical cost less depreciation and net of any impairment. Depreciation on tangible assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives. Useful lives depend on the best estimates of management, and are reviewed in each financial period and corrected accordingly. (e) Provision for doubtful receivables The Group calculates the provision for impairment of trade receivables to cover the estimated losses resulting from customers’ inability to make required payments. The estimates used in evaluating the adequacy of the provision for impairment of trade receivables are based on the aging of the trade receivable balances and the trend of collection performance. The provision for doubtful trade receivables is a critical accounting estimate that is formed by past payment performance and the financial position of customers. (f) Provisions In accordance with the accounting policy stated in Note 2.5, provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, 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.


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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Going concern The Group prepares its consolidated financial statements based on the assumption that the Group will continue as a going concern. As of 31 December 2009, the Group’s total current liabilities exceeded its total current assets by TL36,652,874. The operating profit of the Group as of 31 December 2009 was TL3,693,987, while its loss before tax as of 31 December 2009 was TL12,859,647. The Group managed to turn an operating loss of TL28,471,991 in 2008 into an operating profit of TL3,693,987 in 2009 through actions to increase efficiency and profitability, despite the decrease in sales caused by the continuing effects of the global economical crisis. In order to reduce the cost of production and increase efficiency, Group management; Moved the ceramic sanitary ware factory in İstanbul-Kartal to the factory in Bozüyük in 2007 and the bathroom accessory and concealed cistern plant in Kocaeli-Gebze to the factory in Bozüyük in 2008. In 2009, Group management also moved the complementary products production facility to Bozüyük. In 2008, the Group acquired the shares of Burgbad, a premium brand in the European bathroom furniture market, in order to become a global brand in the bathroom furniture segment (Note 3). In 2009, the Group sought to create synergy in its European sales organizations by taking advantage of Burgbad’s power and efficiency. In order to gain a competitive advantage and increase its market share, the Group decided to add acrylic bathtubs and shower cabins to its product line by merging with Vitra Küvet (Note 4). Through this merger, the Group aims to create synergy and decrease costs, strengthen its “complete bathroom” concept, and differentiate itself from competitors in domestic and international markets. The Group has decided to begin kitchen furniture production, effective from 1 January 2010, utilizing the kitchen furniture production facilities previously rented to İntema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. by Vitra Küvet, in order to increase the efficiency of furniture production (Note 29). The Group is continuing to implement measures to increase operating efficiency by reviewing administrative processes and taking measures to increase savings. Group management believes that the strategy and market developments described above will help EYAP become more competitive and contribute to improved results.


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NOTE 3 - BUSINESS COMBINATIONS 31 December 2009 Business combinations: Burgbad, one of the subsidiaries of EYAP, acquired a 50.48% of Burg Belux BVBA’s shares for EUR144,000 in November 2009. The portion of the acquisition cost which exceeds the fair values of identifiable assets, liabilities and contingent liabilities has been added into the consolidated statement of income since no future benefit is expected from future operations (Note 20). The rest of the shares of Burg Belux BVBA will be acquired by Burgbad for EUR141,000 in 2010 according to the agreement signed, and a provision for such additional amount has been accounted for in the consolidated statement of income as of 31 December 2009. The fair value of the acquired identifiable intangible assets and liabilities and the cost of acquisition are as shown below: TL Acquisition cost 311,083 Acquired net assets 136,271 Direct costs relating to the acquisition 447,354 The fair value of assets and liabilities arising from the acquisition are as follows: Cash and cash equivalents 28,771 Trade receivables 83,703 Inventories 6,585 Intangible assets 455,733 Property, plant and equipment 118,232 Deferred income tax asset 95,831 Other current/non-current assets 23,486 Trade payables (1,082,292) Total of net assets (269,951) Minority interests 133,680 Net assets acquired (136,271) Purchase consideration settled in cash (311,083) Acquired cash and cash equivalents 28,771 Cash outflow on acquisition (net) (282,312)


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NOTE 3 - BUSINESS COMBINATIONS (Continued) Legal Merge of Entities Under Common Control: At the Board of Directors Meeting of EYAP, held on 30 January 2009, it was decided that Vitra Küvet be merged with EYAP, that the merger be reflected in the balance sheets of the companies dated 31 December 2008, prepared in accordance with the relevant regulations of the CMB, and that all the assets and liabilities of Vitra Küvet’s balance sheet dated 31 December 2008 be transferred to EYAP as a whole; the merger was approved at the EYAP Extraordinary General Assembly meeting held on 29 June 2009 and realised on 30 June 2009. At the EYAP Extraordinary General Assembly meeting held on 29 June 2009, it was decided that the merger be done via EYAP’s taking over of all the assets and liabilities on the balance sheet of Vitra Küvet San. ve Tic. A.Ş. dated 31 December 2008, based on file No. 2009/1000 D.İş of the Istanbul 9th Commercial Court of First Instance, in accordance with Article 451 of the Turkish Commercial Code, Articles 18 and 20 of the Corporate Tax Law, and provisions of Capital Markets Board Communiqué Serial I No. 31 on the Principles of Merger Transactions. The Istanbul Trade Registry announced in Trade Registry Gazette No. 7347, dated 06 July 2009, that EYAP’s Extraordinary General Assembly Decision dated 29 June 2009 and merger agreement were registered on 30 June 2009. The merger transaction was made by taking the merger rate as 0.886282 and the change rate as 0.738001 and according to the equity method stated in the expert report prepared by the experts assigned based on file No. 2009/1000 D.İş of the Istanbul 9th Commercial Court of First Instance, on the balance sheets dated 31 December 2008, prepared as per the relevant regulations of the CMB; and due to the merger, the issued capital of EYAP was increased by TL12,830,900 to TL112,830,900. Since the merger took place between two companies controlled by Eczacıbaşı Holding A.Ş. as of 30 June 2009 and because EYAP took over all the existing assets and liabilities of Vitra Küvet as a whole in this merger, EYAP’s balance sheet dated 31 December 2009 was prepared by consolidating the two companies’ balance sheets, prepared according to CMB Financial Reporting Standards. As the merger was applied prospectively, the activity results of Vitra Küvet arising after 30 June 2009 have been included in the consolidated income statement for the year ending 31 December 2009. Since the difference of TL4,555,100 arising after this merger is not an item relevant to the presentation of financial statements required by the CMB, it has been indicated as “additional equity contribution due to legal merge” under the consolidated statements of changes in equity.


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NOTE 3 - BUSINESS COMBINATIONS (Continued) 31 December 2008 On 2 July 2008 the Group acquired 47.16% of Burgbad shares owned by Ruddies Beteiligungs-und Vermögensverwaltungsgesellschaft mbH for EUR33,399,220. The Group acquired another 41.76% on 31 July 2008 and 1.54% on 20 August 2008 for EUR29,577,245 and EUR1,090,323 respectively, in compliance with the call liability arising from the public trading of Burgbad shares in the Frankfurt and Duesseldorf stock exchanges. The fair values of identifiable assets, liabilities and contingent liabilities acquired, and the cost of acquisition are as follows: TL Acquisition cost 117,384,647 Direct costs relating to the acquisition 3,426,795 Purchase consideration settled in cash 120,811,442 Net assets acquired (88,627,972) Goodwill (Note 13) 32,183,470 The fair value of assets and liabilities arising from the acquisition are as follows: TL Cash and cash equivalents 2,166,616 Trade receivables 27,542,398 Other receivables 2,558,565 Inventories 15,376,326 Intangible assets 73,627,828 Property, plant and equipment 49,433,074 Deferred income tax asset 109,848 Other current/non-current assets 788,635 Trade payables (6,654,332) Provisions for pensions (6,595,127) Other non-current provisions (472,140) Deferred income tax liabilities (25,349,055) Provisions (11,494,173) Financial liabilities (1,109,766) Other liabilities (20,052,441) Taxes on income (1,901,491) Total of net assets 97,974,765 Minority interests (9,346,793) Net assets acquired 88,627,972 Purchase consideration settled in cash (120,811,442) Acquired cash and cash equivalents 2,166,616 Cash outflow on acquisition (net) (118,644,826)


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NOTE 4 - SEGMENT REPORTING Ceramic sanitary ware and complementary products are classified as Ceramic Sanitary Ware, faucets, accessories and reservoirs are classified as Sanitary Fittings, bathroom furniture is classified as Bathroom Furniture, and acrylic bathtubs are classified as Bathtubs by Group management in order to make strategic decisions about product groups and track business performance. Management takes EBITDA into consideration when evaluating the business performance of segments. EBITDA has been calculated without taking the adjustments and reclassifications for true presentation mentioned in Note 2.1 into consideration. Segment reporting presented to the Group management as of 31 December 2009 and 2008 is as follows: 2009 Ceramic Sanitary Sanitary Bathroom Ware Fittings Furniture Bathtubs Total Gross sales 243,350,265 168,516,397 234,535,744 27,480,183 673,882,589 Less: Discounts (48,603,855) (67,780,043) (58,192,750) (9,718,823) (184,295,471) Less: Returns (386,178) (1,056,181) (8,209) (44,104) (1,494,672) Net sales 194,360,232 99,680,173 176,334,785 17,717,256 488,092,446 Cost of sales (-) (119,637,577) (61,869,956) (102,415,956) (10,687,142) (294,610,631) Gross profit 74,722,655 37,810,217 73,918,829 7,030,114 193,481,815 Marketing, selling and distribution expenses (-) (49,187,749) (16,082,270) (47,609,212) (3,124,006) (116,003,237) General administrative expenses (-) (23,118,417) (10,679,645) (15,575,932) (2,190,575) (51,564,569) Research and development expenses (-) (3,297,088) (907,703) (3,647,767) (46,229) (7,898,787) Operating (loss)/profit (880,599) 10,140,599 7,085,918 1,669,304 18,015,222 Depreciation and amortisation 15,381,560 1,762,400 14,587,074 617,798 32,348,832 EBITDA 14,500,961 11,902,999 21,672,992 2,287,102 50,364,054


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NOTE 4 - SEGMENT REPORTING (Continued) 2008 Ceramic Sanitary Sanitary Bathroom Ware Fittings Furniture Total Gross sales 251,390,007 184,342,197 107,426,232 543,158,436 Less: Discounts (50,788,471) (71,381,638) (26,858,223) (149,028,332) Less: Returns (362,711) (728,228) (43,660) (1,134,599) Net sales 200,238,825 112,232,331 80,524,349 392,995,505 Cost of sales (-) (117,953,201) (78,116,713) (52,212,477) (248,282,391) Gross profit 82,285,624 34,115,618 28,311,872 144,713,114 Marketing, selling and distribution expenses (-) (49,464,955) (17,561,315) (20,384,039) (87,410,309) General administrative expenses (-) (29,397,235) (14,480,150) (5,593,932) (49,471,317) Research and development expenses (-) (1,865,474) (937,952) (1,889,019) (4,692,445) Operating profit 1,557,960 1,136,201 444,882 3,139,043 Depreciation and amortisation 13,258,150 1,811,800 7,937,404 23,007,354 EBITDA 14,816,110 2,948,001 8,382,286 26,146,397 The reconciliation of EBITDA and loss before tax presented in the consolidated statement of income is as follows: 2009 2008 EBITDA 50,364,054 26,146,397 Due date difference on term purchases 1,605,976 4,789,605 Utilised/(additional) provision for lawsuit 1,541,086 (1,666,385) Depreciation and amortisation (40,455,646) (35,377,563) Due date charges on term sales (2,668,611) (11,696,883) Provision for doubtful receivables (1,448,899) (1,380,091) Provision for employment termination benefits, net (3,614,717) (8,122,015) Other (1,990,537) (2,101,606) 3,332,706 (29,408,541) Other operating income 2,953,945 2,551,682 Other operating expense (2,592,664) (1,615,132) Operating profit/(loss) 3,693,987 (28,471,991) Financial income 42,376,785 36,036,131 Financial expense (58,930,419) (89,845,366) Loss before tax (12,859,647) (82,281,226)


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NOTE 4 - SEGMENT REPORTING (Continued) Segment assets 2009 2008 Ceramic sanitary ware 176,598,682 195,949,904 Sanitary fittings 58,503,842 55,702,488 Bathroom furniture 187,753,259 188,149,491 Bathtubs 24,435,189 - Segment assets (*) 447,290,972 439,801,883 Unallocated assets 58,815,845 62,064,685 Total assets 506,106,817 501,866,568 (*) Segment assets are generally related to segment operations. The reconciliation of segment assets with the total assets presented in consolidated financial statements is as follows; 2009 2008 Segment assets 506,106,817 501,866,568 Depreciation and amortisation 21,924,374 33,407,960 Impairment on property, plant and equipment (3,830,304) (3,830,304) Provision for doubtful receivables (2,711,034) (2,391,361) Written-off tangible and intangible assets (3,261,972) (1,374,989) Impairment on inventory (1,695,232) (2,417,804) Impairment on financial assets (1,225,009) (1,225,009) Deferred tax assets 1,164,294 - Other 216,284 349,825 Total assets 516,688,218 524,384,886 Segment liabilities 2009 2008 Ceramic sanitary ware 10,422,355 8,891,207 Sanitary fittings 13,246,342 28,981,969 Bathroom furnitures 75,875,030 74,707,558 Bathtubs 3,065,135 - Segment liabilities (*) 102,608,862 112,580,734 Unallocated liabilities 293,937,456 279,845,502 Total liabilities 396,546,318 392,426,236 (*) Segment liabilities generally comprise operating liabilities.


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NOTE 4 - SEGMENT REPORTING (Continued) The reconciliation of segment liabilities with the total liabilities presented in consolidated financial statements is as follows; 2009 2008 Segment liabilities 396,546,318 392,426,236 Provision for employment termination benefits 10,596,601 9,441,731 Provision for unused vacation pay liability 4,101,874 4,160,815 Provision for lawsuits 1,756,144 3,274,468 Unrecognized financial expenses (360,007) (403,280) Deferred tax liability - 301,511 Forward foreign exchange contracts - 1,437,194 Premiums paid - 1,196,116 Other - 247,390 Total liabilities 412,640,930 412,082,181 NOTE 5 - CASH AND CASH EQUIVALENTS 2009 2008 Cash 32,589 24,905 Banks - TL demand deposits 30,773 70,376 - Foreign currency demand deposits 16,553,561 11,382,370 - TL time deposits 7,381,855 17,292,000 - Foreign currency time deposits 1,013,707 9,764,116 25,012,485 38,533,767 The terms of the time deposits are up to one year as of 31 December 2009 and 2008. The interest rates applied are 8.50% and 0.25% for TL and EUR time deposits respectively (2008: Interest rates for TL time deposits are 16.18%. Interest rates for EUR time deposits are 4.79%).


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NOTE 6 - FINANCIAL INVESTMENTS 2009 2008 Percentage of Percentage of shareholding % Amount shareholding % Amount Vitra Bathroom Products LLC OOO 100 3,331,687 100 3,331,687 Vitra Bath and Tiles JSC 50 1,006,138 50 1,006,138 Vitra Bulgaria Ood 50 682,509 50 682,509 Vitra U.S.A. Inc. 49 572,488 49 572,488 Seramik Araştırma Merkezi 1< 2,000 1< 2,000 Akenerji Elektrik Üretimi ve Otoprodüktör A.Ş. 1< 229 1< 229 5,595,051 5,595,051 Less: Diminution in value (-) (1,225,010) (1,225,010) 4,370,041 4,370,041 Financial investments are carried at acquisition cost and shareholding percentages are calculated using nominal values. The financial assets have neither been accounted for using the equity method nor consolidated line-by-line due to the insignificance of their combined impact on the net profit, financial position and results of the Group. The movements of financial assets as of 31 December 2009 and 2008 are below: 2009 2008 1 January 4,370,041 4,645,200 Contribution of capital increase - 377,363 Diminution in value (Note 21) - (652,522) 31 December 4,370,041 4,370,041


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NOTE 7 - FINANCIAL LIABILITIES 2009 2008 Weighted average Weighted average interest rate p.a. TL interest rate p.a. TL Short-term bank borrowings USD borrowings 5.24 6,926,220 4.54 12,105,206 TL borrowings 7.90 5,266,219 - 114,464 EUR borrowings - - 5.57 19,435,273 Interest accrual 400,849 982,255 12,593,288 32,637,198 Current portion of long-term bank borrowings EUR borrowings 3.59 108,860,839 7.30 126,661,971 USD borrowing 5.75 10,625,940 4.38 34,688,608 GBP borrowing 5.90 3,583,800 5.22 3,288,600 TL borrowing - - 16.50 1,500,000 Interest accrual 3,079,260 4,634,827 126,149,839 170,774,006 138,743,127 203,411,204 2009 2008 Weighted average Weighted average interest rate p.a. TL interest rate p.a. TL Long-term bank borrowings EUR borrowings 5.12 100,222,485 6.77 79,371,908 USD borrowings 5.50 30,522,690 4.29 1,541,780 130,745,175 80,913,688 The redemption schedule of long-term bank borrowings is as follows: 2009 2008 2010 - 80,913,688 2011 - - 2012 130,745,175 - 130,745,175 80,913,688


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NOTE 7 - FINANCIAL LIABILITIES (Continued) The carrying amounts and fair values of bank borrowings are as follows: Carrying amount Fair value 2009 2008 2009 2008 Bank borrowings 269,488,302 284,324,892 277,600,362 289,688,936 269,488,302 284,324,892 277,600,362 289,688,936 The fair values are based on cash flows discounted with the weighted average interest rates of 2.17% (2008: 4.78 %), 2.46% (2008: 4.41%), 1.11% (2008: 5.22%) and 9.67% (2008: 15.33%) per annum for EUR, USD, GBP and TL borrowings respectively. NOTE 8 - TRADE RECEIVABLES AND TRADE PAYABLES Trade receivables 2009 2008 Trade receivables 15,696,029 11,801,938 Notes receivables 880,467 785 Other trade receivables 1,842,435 342,420 18,418,931 12,145,143 Less: Provision for doubtful receivables (3,494,138) (1,716,995) 14,924,793 10,428,148 The weighted average term of trade receivables is less than 3 months. The balances are calculated based on cash flows discounted using weighted average interest rates of 0.89% (2008: 2.83%), 0.44% (2008: 1.02%), 0.66% (2008: 2.80%) and 0.30% (2008: 0.15%) per annum for EUR, USD, GBP and TL trade receivables, respectively. Movement schedules of provision for doubtful receivables as of 31 December 2009 and 2008 are as follows: 2009 2008 1 January 1,716,995 644,590 Current year charge 1,797,948 182,934 Disposals and collections (29,806) (215,060) Additions due to business combinations - 1,017,167 Currency translation differences 9,001 87,364 31 December 3,494,138 1,716,995


49

NOTE 8 - TRADE RECEIVABLES AND TRADE PAYABLES (Continued) Trade payables 2009 2008 Trade payables 64,050,398 43,023,119 Less: Unrealised credit finance expense (360,008) (403,280) 63,690,390 42,619,839 The weighted average term of trade payables is less than 3 months. The balances are calculated based on cash flows discounted using weighted average interest rates of 5.10% (2008: 2.37%), 3.07% (2008: 0.35%), 2.81% (2008: 2.40%) and 6.20% (2008: 16.95%) per annum for EUR, USD, GBP and TL trade payables, respectively. NOTE 9 - OTHER RECEIVABLES AND PAYABLES 2009 2008 Other Short-Term Receivables VAT receivable 6,541,844 5,111,173 Prepaid taxes and funds 233,792 - Receivables from personnel 166,844 146,515 Other receivables 111,005 1,050 7,053,485 5,258,738 2009 2008 Other Long-Term Receivables Deposits and guarantees given 67,582 45,748 Other receivables 5,572 5,572 73,154 51,320 2009 2008 Other Short-Term payables Payable to personnel 2,851,334 972,170 Social security payable 2,440,554 2,222,270 Taxes and dues payable 2,356,316 1,620,313 Order advances taken 90,970 - Deposits and guarantees taken 2,558 - 7,741,732 4,814,753


50

NOTE 10 - INVENTORIES 2009 2008 Raw materials and supplies 27,067,878 25,938,480 Semi-finished goods 11,202,162 9,012,580 Finished goods 20,846,642 33,918,084 Trade goods 17,281 - 59,133,963 68,869,144 Less: Provision for impairment on inventories (1,557,484) (2,223,866) 57,576,479 66,645,278 The cost of inventories recognised as expense and included in “cost of sales” amounted to TL153,251,080 (2008: TL127,271,627). Movement schedules for provision for impairment on inventories are as follows: 2009 2008 1 January 2,223,866 1,812,580 Current year charge 720,921 1,766,582 Cancelled provisions (1,387,303) (1,355,296) 31 December 1,557,484 2,223,866


51

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT Additions due Additions due Currency 1 January to legal to business translation 31 December 2009 Additions merge combinations Disposals Transfers differences 2009 Cost: Land 1,091,822 - - - - - - 1,091,822 Land improvements 3,954,222 6,406 494,021 - - - - 4,454,649 Buildings 100,931,129 328,123 10,873,134 - (31,383) 868,401 517,996 113,487,400 Machinery and equipment 423,430,835 1,383,125 10,328,095 25,870 (2,029,102) 2,942,195 343,343 436,424,361 Motor vehicles 1,524,409 47,241 81,732 - (544,242) - - 1,109,140 Furniture and fixtures 49,739,392 2,172,214 3,243,303 92,362 (3,177,386) - 265,436 52,335,321 Special costs 8,006,396 30,100 396,355 - - - - 8,432,851 Other tangible assets 942,486 19,295 682,486 - - - - 1,644,267 Construction in progress and advances given 2,770,046 9,953,713 13,461 - - (5,574,629) 22,862 7,185,453 592,390,737 13,940,217 26,112,587 118,232 (5,782,113) (1,764,033) 1,149,637 626,165,264 Accumulated depreciation: Land improvements 2,200,865 180,948 421,429 - - - - 2,803,242 Buildings 42,780,743 3,256,514 3,703,572 - (19,754) - 204,085 49,925,160 Machinery and equipment 304,808,138 23,565,356 7,662,984 - (1,854,559) - 231,187 334,413,106 Motor vehicles 1,233,345 65,562 80,808 - (494,603) - - 885,112 Furniture and fixtures 37,987,507 3,271,263 3,089,528 - (3,074,341) - 178,885 41,452,842 Special costs 6,107,015 728,973 396,355 - - - - 7,232,343 Other tangible assets 778,085 116,077 539,643 - - - - 1,433,805 395,895,698 31,184,693 15,894,319 - (5,443,257) - 614,157 438,145,610 Net book value 196,495,039 188,019,654

As of 31 December 2009 and 2008, there are no mortgages on property, plant and equipment. Transfers amounting to TL1,764,033 are related to intangible assets (Note 12). Depreciation and amortisation expenses of TL30,594,345 have been recorded in “cost of sales”, of TL1,653,098 in “research and development expenses”, of TL1,780,137 in ‘general administrative expenses’ and of TL6,428,066 in “marketing and selling expenses”.


52

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT (Continued) Additions due Currency 1 January to business translation 31 December 2008 Additions combinations Disposals Transfers differences 2008 Cost: Land 1,093,794 - - (1,972) - - 1,091,822 Land improvements 3,356,360 29,746 - - 568,116 - 3,954,222 Buildings 43,871,028 2,184,212 29,933,687 (232,418) 485,478 24,689,142 100,931,129 Machinery and equipment 375,801,600 9,338,774 10,466,121 (649,184) 3,215,494 25,258,030 423,430,835 Motor vehicles 1,838,476 67,819 - (381,886) - - 1,524,409 Furniture and fixtures 19,934,616 1,525,958 8,728,610 (428,555) - 19,978,763 49,739,392 Special costs 8,079,833 37,218 - (110,655) - - 8,006,396 Other tangible assets 949,595 - - (7,109) - - 942,486 Construction in progress and advances given 465,269 6,955,156 304,656 - (5,016,212) 61,177 2,770,046 455,390,571 20,138,883 49,433,074 (1,811,779) (747,124) 69,987,112 592,390,737 Accumulated depreciation: Land improvements 2,054,148 146,717 - - - - 2,200,865 Buildings 19,660,564 2,170,184 - (232,418) - 21,182,413 42,780,743 Machinery and equipment 257,097,329 24,221,646 - (489,472) - 23,978,635 304,808,138 Motor vehicles 1,419,519 147,816 - (333,990) - - 1,233,345 Furniture and fixtures 17,376,787 2,044,220 - (429,675) - 18,996,175 37,987,507 Special costs 5,358,321 819,782 - (71,088) - - 6,107,015 Other tangible assets 673,249 106,268 - (1,432) - - 778,085 303,639,917 29,656,633 - (1,558,075) - 64,157,223 395,895,698 Net book value 151,750,654 196,495,039 Transfers amounting to TL747,124 are related to intangible assets (Note 12). Depreciation and amortisation expenses of TL23,883,447 have been recorded in “cost of sales”, of TL1,146,158 in “research and development expenses”, of TL3,878,141 in “general administrative expenses” and of TL6,469,817 in “marketing and selling expenses”.


53

NOTE 12 - INTANGIBLE ASSETS Additions due Additions due Currency 1 January to legal to business translation 31 December 2009 Additions merge combinations Disposals Transfers differences 2009 Cost: Rights 32,650,141 1,431,636 772,783 455,733 (2,196,309) 1,764,033 186,635 35,064,652 Order backlog 813,504 - - - (817,299) - 3,795 - Computer software 8,561,882 91,527 1,488,669 - - - - 10,142,078 Brand name 23,790,710 - - - - - 216,703 24,007,413 Customer relationships 25,873,709 - - - - - 235,677 26,109,386 Production know-how 27,162,471 - - - - - 247,416 27,409,887 Advances given 595,191 2,701,299 - - - - 17,371 3,313,861 119,447,608 4,224,462 2,261,452 455,733 (3,013,608) 1,764,033 907,597 126,047,277 Accumulated amortisation: Rights 20,665,718 2,526,415 396,609 - (2,196,309) - 145,965 21,538,398 Order backlog 813,504 - - - (817,299) - 3,795 - Computer software 6,393,328 705,494 1,199,097 - - - - 8,297,919 Brand name 594,768 1,195,084 - - - - 10,704 1,800,556 Customer relationships 1,176,076 2,363,127 - - - - 21,166 3,560,369 Production know-how 1,234,657 2,480,833 - - - - 22,221 3,737,711 30,878,051 9,270,953 1,595,706 - (3,013,608) - 203,851 38,934,953 Net book value 88,569,557 87,112,324


54

NOTE 12 - INTANGIBLE ASSETS (Continued) Additions due Currency 1 January to business translation 31 December 2008 Additions combinations Disposals Transfers differences 2008

Cost: Rights 11,191,351 1,255,187 20,446,508 (3,082,434) 785,125 2,054,404 32,650,141 Order backlog - - 732,298 - - 81,206 813,504 Computer software 8,180,760 381,122 - - - - 8,561,882 Brand name - - 21,415,862 - - 2,374,848 23,790,710 Advances given - 417,385 153,879 - (38,001) 61,928 595,191 Customer relationships - - 23,290,931 - - 2,582,778 25,873,709 Production know-how - - 24,451,045 - - 2,711,426 27,162,471

19,372,111 2,053,694 90,490,523 (3,082,434) 747,124 9,866,590 119,447,608

Accumulated amortisation: Rights 3,828,493 1,454,027 16,862,695 (3,082,434) - 1,602,937 20,665,718 Order backlog - 727,476 - - - 86,028 813,504 Computer software 5,541,569 851,759 - - - - 6,393,328 Brand name - 531,871 - - - 62,897 594,768 Customer relationships - 1,051,705 - - - 124,371 1,176,076 Production know-how - 1,104,092 - - - 130,565 1,234,657

9,370,062 5,720,930 16,862,695 (3,082,434) - 2,006,798 30,878,051

Net book value 10,002,049 88,569,557


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NOTE 13 - GOODWILL Goodwill amounting to TL32,183,470 resulted from the acquisition of shares of Burgbad on 2 July 2008 (Note 3). The Group has not identified any impairment of goodwill based on the test performed as of 31 December 2009. NOTE 14 - GOVERNMENT GRANTS The Group is entitled to the following incentives and rights: i) Exemption from customs duty on imported machinery and equipment ii) Exemption from customs duty on imported investment goods; exemption from VAT, duties and

charges on investment goods purchased from local suppliers. NOTE 15 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES Short-term provisions 2009 2008

Provision for unused vacation pay liability 7,003,760 7,343,242 Provision for warranty expenses 2,174,126 1,193,091 Provision for lawsuits 1,756,144 3,274,468 Provision for employment termination benefits 654,369 139,998 11,588,399 11,950,799 Long -term provisions 2009 2008

Provision for warranty expenses 163,319 1,333,290 163,319 1,333,290 Movements of provisions are as follows: 2009 2008 1 January 13,284,089 6,698,769

Charge for unused vacation pay liability 2,238,621 373,544 Charge for warranty provision 776,434 294,398 Additions due to legal merge 528,446 - Additions due to business combinations - 4,619,896 Charge for lawsuits 475,942 1,666,385 Charge for employment termination benefits 654,369 139,998 Paid employment termination benefits (139,998) - Paid warranty liability (987,449) - Utilised provision for lawsuit expenses (2,017,028) - Paid or used unused vacation pay liability (3,050,636) (1,056,025) Currency translation differences (11,072) 547,124 31 December 11,751,718 13,284,089


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NOTE 15 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued) Provisions in the amount of TL1,756,144 (2008: TL3,274,468) were recorded in light of legal consultations and past experiences of legal, labour, trade and administrative lawsuits against the Group. Guarantees received 2009 2008 Guarantee bills received 6,265,667 7,060,439 Letter of guarantees received 2,037,820 1,706,732 Guarantee cheques received 1,974,647 1,321,140 Mortgages received 159,000 140,000 10,437,134 10,228,311 Guarantees given 2009 2008 Letter of guarantees given 5,628,198 6,526,646 NOTE 16 - EMPLOYEE BENEFITS 2009 2008 Provision for employment termination benefit 9,942,232 8,120,249 Provision for pensions 7,070,379 7,090,874 17,012,611 15,211,123 Turkey Provision for employment termination benefits is allocated in accordance with the disclosures given below. Under Turkish Labour Law, the Company is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies, or retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002, there are certain transitional provisions relating to length of service prior to retirement. At 31 December 2009, the amount payable consists of one month’s salary limited to a maximum of TL2,365 (2008: TL2,173) for each year of service. The liability is not funded, as there is no funding requirement. The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees.


57

NOTE 16 - EMPLOYEE BENEFITS (Continued) IAS 19 “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: 2009 2008 Discount rate (%) 5.92 6.26 Turnover rate to estimate the probability of retirement (%) 94.00 97.00 The principal assumption is that maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum amount of TL2,427 (1 January 2009: TL2,260), which is effective from 1 January 2010, has been taken into consideration in calculating the Company’s provision for employment termination benefits. Movements in the provision for employment termination benefits during the year are as follows: 2009 2008 1 January 8,120,249 9,283,108 Increase during the year 4,955,473 8,416,758 Additions due to legal merge 462,368 - Actuarial gain (621,214) (434,740) Paid during the year (2,974,644) (9,144,877) 31 December 9,942,232 8,120,249 Germany Pension provisions have been stated for obligations resulting from pension plan commitments for retirement, invalidity and dependants payments which guarantee a spesific pension entitlement to employees of Burgbad. The pension provisions are measured using the projected unit credit method on the basis of actuarial surveys. The calculation of provisions has been based on the assumed rate of interest and pension trend which are 5.75% and 2.00% respectively. The movement schedule of provision for employment retirement benefit plans is as follows: 2009 2008 1 January 7,090,874 - Addition due to business combinations - 6,595,129 Increase during the year 421,494 - Payments (506,577) (210,687) Currency translation differences 64,588 706,432 31 December 7,070,379 7,090,874


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NOTE 17 - OTHER ASSETS AND LIABILITIES 2009 2008 Other current assets Order advances given 2,553,178 186,788 Prepaid expenses 1,689,797 2,223,137 Prepaid taxes and funds 661,053 1,073,725 Job advances 58,256 - Income accruals 47,407 68,457 Advances given to personnel 4,842 1,962 Other current assets 330,629 547,492 5,345,162 4,101,561 Other non-current assets Prepaid expenses 902,929 948,119 Other non-current assets 336,911 360,930 1,239,840 1,309,049 Other liabilities Accrued salaries and wages 4,360,554 3,844,398 Bonus accrual 2,211,751 5,457,791 Deferred income 761,019 777,922 Order advances received 564,430 - Accrual for marketing expenses 432,060 235,488 Accrual for commission expenses 92,160 98,704 Accrual for energy expenses 21,320 31,702 Forward foreign exchange contacts - 1,437,194 Accrual for reclaims - 690,927 Other 2,861,830 2,355,780 11,305,124 14,929,906


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NOTE 18 - EQUITY Paid-in capital The total authorised number of ordinary shares of par value YKr1 each at 31 December 2009 is 11,283,090,000 (2008: 10,000,000,000). There is no preferred stock. The movement of ordinary shares issued that are fully paid is as follows: 2009 2008 1 January 10,000,000,000 5,625,000,000Issued for legal merge 1,283,090,000 - Issued for cash - 4,375,000,000 31 December 11,283,090,000 10,000,000,000 The Company’s shareholders and their shareholding percentages as of 31 December 2009 and 2008 are as follows: Share Share 2009 (%) 2008 (%) Eczacıbaşı Holding A.Ş. 78,937,180 70 69,562,424 70 İntema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. 6,187,500 5 6,187,500 6 Eczacıbaşı Yatırım Holding Ortaklığı A.Ş. 8,455,335 7 5,000,000 5 İslam Kalkınma Bankası 400,604 <1 400,604 <1 Kale Seramik A.Ş. 12,013 <1 12,013 <1 Other 809 <1 - - Publicly owned 18,837,459 17 18,837,459 19 Total capital 112,830,900 100 100,000,000 100 Adjustment to share capital (*) 57,797,233 56,796,542 Total paid-in capital 170,628,133 156,796,542 (*) Adjustment to share capital presents the difference between the cash and cash equivalent capital additions

adjusted per inflation and the amount before adjustment has been made. After the share purchases made by Eczacıbaşı Holding A.Ş. and Eczacıbaşı Yatırım Holding A.Ş. from the ISE, the shares of Eczacıbaşı Holding A.Ş. and Eczacıbaşı Yatırım Holding A.Ş. have increased to 74.22% and 9.98%, respectively.


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NOTE 18 - EQUITY (Continued) Restricted Reserves As of 31 December 2009, restricted reserves comprise legal reserves amounting to TL2,058,373 (2008: TL1,303,016). Legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, legal reserves can only be used to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital. These amounts should be classified as restricted reserves according to CMB Financial Reporting Standards. As of 31 December 2009\ restricted reserves comprise legal reserves amounting to TL2,058,373 (2008: TL1,303,016). In accordance with the CMB regulations effective until 1 January 2008, inflation adjustment differences arising at the initial application of inflation accounting which are recorded under “accumulated losses” can be netted off from the profit to be distributed based on CMB profit distribution regulations. In addition, the aforementioned amount recorded under “accumulated losses” can be netted off from net income for the period, if there is any, undistributed prior period profits, and inflation adjustment differences of extraordinary reserves, legal reserves and capital, respectively. In addition, in accordance with the CMB regulations effective until 1 January 2008, “Capital, Share Premiums, Legal Reserves, Special Reserves and Extraordinary Reserves” were recorded at their statutory carrying amounts and the inflation adjustment differences related to such accounts were recorded under “inflation adjustment differences” at the initial application of inflation accounting. “Equity inflation adjustment differences” could be utilised in issuing bonus shares and offsetting accumulated losses, and the carrying amount of extraordinary reserves could be utilised in issuing bonus shares, cash dividend distribution and offsetting accumulated losses. In accordance with Communiqué No:XI-29 and related announcements of the CMB, effective from 1 January 2008, “Share capital”, “Restricted Reserves” and “Share Premiums” should be carried at their statutory amounts. The valuation differences (such as inflation adjustment differences) should be disclosed as follows: - if the difference arises from the inflation adjustment of “Paid-in Capital” and has not yet been

transferred to capital, it should be classified under the “Inflation Adjustment to Share Capital”; - if the difference is due to the inflation adjustment of “Restricted Reserves” and “Share

Premium” and the amount has not been utilised in dividend distribution or capital increase yet, it should be classified under “Retained Earnings”.

Other equity items should be carried at the amounts calculated based on CMB Financial Reporting Standards. Capital adjustment differences have no other use other than being transferred to share capital.


61

NOTE 18 - EQUITY (Continued) In accordance with the CMB Decision No. 02/51 and dated 27 January 2010, concerning the allocation basis of profit from operations in 2009, the minimum profit distribution will not be applied for the year 2009 (31 December 2008: 20%). According to the Board’s decision and Communiqué No. IV-27 issued by the CMB regarding the allocation basis of profit of publicly owned companies, the distribution of the relevant amount may be realised as cash or as bonus shares or partly as cash and bonus shares; and in the event that the first dividend amount to be specified is less than 5% of the paid-up capital, the relevant amount can be retained within the Company. However, companies that made capital increases before distributing dividends related to the prior period, whose shares are therefore classified as "old" and "new", and that will distribute dividends from the profit made from 2008 operations are required to distribute the initial amount in cash. In accordance with the CMB Decision No. 7/242 on 25 February 2005, if the amount of net distributable profit based on the CMB’s requirement regarding the minimum profit distribution arrangements, which is computed over the net profit determined according to CMB regulations, does not exceed net distributable profit in the statutory accounts, then the whole amount calculated per CMB regulations should be distributed. Similarly, if the amount of net distributable profit based on the CMB’s requirement regarding the minimum profit distribution arrangements, which is computed over the net profit determined according to CMB regulations, exceeds net distributable profit in the statutory accounts, then distributable profit is limited to the profit per statutory accounts. When there is a net loss per statutory accounts or financial statements prepared in accordance with CMB financial reporting standards, a distribution of profit is prohibited. Equity table of the Group as of 31 December 2009 and 2008 is as follows; 2009 2008 Share capital 112,830,900 100,000,000 Additional equity contribution due to acquisition 4,555,100 - Restricted reserves 2,058,373 1,303,016 Exraordinary reserves 30,182,811 30,182,811 Equity inflation adjustment differences 102,708,895 101,708,204 Net loss (16,891,412) (85,420,821) Retained earnings (147,332,978) (55,287,816) Total attributable equity 88,111,689 92,485,394 Currency transliation differences 10,542,660 9,777,150 Equity attributable to equity holders of the parent 98,654,349 102,262,544


62

NOTE 19 - REVENUE AND COST OF SALES 2009 2008 Domestic sales 420,580,118 325,043,159 International sales 249,420,042 209,474,610 Other sales 480,893 203,221 Gross sales 670,481,053 534,720,990 Less: discounts (184,295,471) (151,378,700) Less: returns (1,494,673) (1,134,599) Net sales 484,690,909 382,207,691 Cost of sales (-) (303,141,012) (252,986,750) Gross profit 181,549,897 129,220,941 NOTE 20 - EXPENSES BY NATURE Cost of sales 2009 2008 Raw materials, supplies and semi-finished goods 153,251,080 127,271,627 Personnel 82,957,752 70,840,698 Depreciation and amortisation expenses 30,594,345 23,883,447 Energy 16,075,287 17,973,765 Maintenance 4,143,200 4,706,409 Rent 1,045,806 1,078,614 Insurance 1,003,171 937,230 Transportation 859,902 1,778,219 Other 13,210,469 4,516,741 303,141,012 252,986,750


63

NOTE 20 - EXPENSES BY NATURE (Continued) Operating expenses 2009 2008 Personnel 54,502,462 37,689,119 Transportation 27,273,916 23,193,352 Advertising and promotion 24,064,750 14,921,290 Consultancy 17,634,909 22,437,611 Commissions 13,509,477 12,304,598 Amortisation and depreciation expenses 9,861,301 11,494,116 Employment termination benefits, net 4,988,628 8,122,016 Rent 3,199,013 3,003,192 Provision for doubtful receivables, net 1,589,772 1,166,835 Travel 2,492,531 1,641,985 After-sales service 1,445,067 2,417,932 Sponsorship 1,409,680 1,640,000 Energy 1,090,506 1,038,004 Dealer training 1,087,451 1,575,393 Communication 1,086,214 1,242,483 Expenses due to business combination (Note 3) 447,354 - Termination benefit 282,183 1,483,529 Other 12,251,977 13,258,027 178,217,191 158,629,482 NOTE 21 - OTHER OPERATING INCOME/EXPENSES Other income: 2009 2008 Gain on sales of scrap goods 1,008,584 1,286,364 Rent income 239,995 22,744 Insurance compensation 222,922 241,913 Incentive fund income 202,106 91,751 Gain on sale of property, plant and equipment 158,839 214,972 Other 1,121,499 693,938 2,953,945 2,551,682 Other expenses: 2009 2008 Indemnities 773,170 - Penalties 345,500 118,503 Donations 259,440 281,511 Moving out expenses 190,232 - Taxes paid for stock count differences 148,073 364,777 Impairment on financial assets - 652,522 Other 876,249 197,819 2,592,664 1,615,132


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NOTE 22 - FINANCIAL INCOME 2009 2008 Foreign exchange gains 36,039,973 25,831,092 Due date charges on term sales 3,200,401 9,155,681 Interest income 1,699,217 710,619 Forward foreign exchange contracts 1,437,194 - Commodity swap contracts - 338,739 42,376,785 36,036,131 NOTE 23 - FINANCIAL EXPENSE 2009 2008 Foreign exchange losses 36,171,445 67,485,012 Interest expense 19,258,576 14,254,609 Due date difference on term purchases 1,269,883 4,386,325 Forward foreign exchange contracts 790,950 3,416,389 Other 1,439,565 303,031 58,930,419 89,845,366 NOTE 24 - TAX ASSETS AND LIABILITIES 2009 2008 Taxes and funds payable 6,545,235 800,336 Less: prepaid current income taxes (5,201,008) (668,364) Tax provision, net 1,344,227 131,972 Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in these consolidated financial statements, have been calculated on a separate-entity basis. Turkey Turkey’s Corporate Income Tax Law was changed with Law No. 5520 which was published on 13 June 2006. Most of the rules of the new Corporate Income Tax Law are applicable from 1 January 2006. According to this, the corporate tax rate applicable for the year 2009 is 20% (2008: 20%). The corporate tax rate is applied to taxable profit, which is calculated by adding non-taxable expenses and deducting some exemptions offered by tax laws (exemptions for participation revenues, exemptions for investment incentives) from the accounting profit of the Company. No additional taxes are paid unless profit is distributed (except a 19.8% withholding tax paid on used investment incentives).


65

NOTE 24 - TAX ASSETS AND LIABILITIES (Continued) 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 a profit distribution and thus does not incur withholding tax. Corporations are required to pay advance corporation tax quarterly at the rate of 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 is credited against the annual corporation tax liability. The balance of the advance tax paid may be refunded or used to set off against other liabilities to the government. In accordance with Tax Law No: 5024 “Law Related to Changes in Tax Procedure Law, Income Tax Law and Corporate Tax Law” that was published on the Official Gazette on 30 December 2003 to amend the tax base for non-monetary assets and liabilities, effective from 1 January 2004, income and corporate taxpayers will prepare their statutory financial statements by adjusting non-monetary assets and liabilities to changes in the general purchasing power of the Turkish Lira. In accordance with the aforementioned law provisions, in order to apply inflation adjustment, the cumulative inflation rate (SIS-WPI) over the previous 36 months and 12 months must exceed 100% and 10%, respectively. Since these conditions in question were not fulfilled after 1 January 2005, no inflation adjustments were performed. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns by 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. Germany In Germany, the corporation tax rate is 29.83%. The applicable tax rate is the result of the corporate income tax rate of 15%, plus a solidarity surcharge of 0.83% and a trade tax rate of 14.00% . The details of taxation on income for the years ended 31 December 2009 and 2008 are as follows: 2009 2008 Current period tax expense (-) (6,545,235) (800,336) Deferred income tax income/(expense) 2,849,489 (2,328,892) (3,695,746) (3,129,228)


66

NOTE 24 - TAX ASSETS AND LIABILITIES (Continued) The reconciliation of tax expenses stated in the consolidated income statements as of 31 December 2009 and 2008 is as follows: 2009 2008 Loss before tax in the consolidated financial statements (12,859,647) (82,281,226) Tax charge according to parent company’s tax rate of 20% 2,571,929 16,456,245 Effect of current year loss (3,699,727) (13,464,891) Tax calculated based on the dividend paid (1,239,040) - Non-deductible expenses (467,266) (440,607) Effect of carry forward tax losses - (6,883,209) Exemptions - 714,456 Effect of property, plant and equipment and intangible assets - 385,674 Effect of tax rate difference (899,248) (25,423) Other 37,606 128,527 Tax (expense)/income (3,695,746) (3,129,228) Deferred Income Taxes The Group recognises deferred income tax assets and liabilities based upon temporary differences arising between their financial statements as reported under CMB Financial Reporting Standards and their statutory tax financial statements. Tax rates used for deferred income tax assets and liabilities calculated on temporary differences that are expected to be realised or settled based on taxable income under the liability method are 20% in Turkey and 29.5% in Germany (2008: 20% and 29,5%).


67

NOTE 24 - TAX ASSETS AND LIABILITIES (Continued) The composition of cumulative temporary differences and the related deferred income tax assets and liabilities in respect of items for which deferred income tax has been provided at 31 December 2009 and 2008 using the enacted tax rates are as follows: Cumulative temporary Deferred income differences tax assets/(liabilities) 2009 2008 2009 2008 Deferred income tax asset Provision for employment termination benefits 11,936,436 8,260,247 2,514,571 1,652,049 Provision for unused vacation pay liability 4,101,874 4,408,205 820,375 881,641 Provision for impairment of property, plant and equipment 3,342,260 3,830,304 668,452 766,061 Provision for doubtful receivables 2,711,034 2,391,361 542,207 478,272 Provision for lawsuits 1,756,144 3,274,468 351,229 654,894 Provision for impairment on inventory 1,557,484 2,223,866 311,497 444,773 Scrap goods 469,447 193,937 125,401 38,787 Unrealised credit finance income 590,468 851,123 118,094 170,225 Administrative expenses 428,193 517,124 72,963 152,551 Financial assets 251,910 251,910 50,382 50,382 Forward foreign exchange contracts - 1,437,194 - 287,439 Personnel bonus accrual - 1,196,116 - 239,223 Other 270,618 290,278 54,123 85,632 5,629,294 5,901,929 Deferred income tax liabilities Property plant and equipment and intangible assets (107,211,314) (123,667,058) (29,909,792) (33,373,779) Unincurred credit finance expenses (360,008) (403,280) (72,002) (80,656) Other (120,804) (213,690) (24,716) (53,769) (30,006,510) (33,508,204) Deferred income tax (liabilities)/assets - net (24,377,216) (27,606,275)


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NOTE 24 - TAX ASSETS AND LIABILITIES (Continued) A deferred income tax asset is recognised only to the extent that it is probable that a tax benefit will be realised in the future. If it is probable that a tax benefit will be realised, a deferred income tax asset is recognised on unused tax losses, unused tax credits and other temporary differences. The Company did not recognise deferred income tax assets in respect of losses amounting to TL118,538,891 (2008: TL102,601,910) that can be carried forward against future taxable income: 2009 2008 2009 - 332,686 2010 4,651,626 4,651,626 2012 34,383,662 34,383,662 2013 63,233,936 63,233,936 2014 16,269,667 - 118,538,891 102,601,910 Deferred Income Tax Assets: 2009 2008 Deferred income tax assets to be realized in twelve months 1,575,514 2,579,795 Deferred income tax assets to be realized after twelve months 4,053,780 3,322,134 5,629,294 5,901,929 Defered Income Tax Liabilities: 2009 2008 Deferred income tax liabilities to be settled after twelve months (96,718) (134,425) Deferred income tax liabilities to be settled after twelve months (29,909,792) (33,373,779) (30,006,510) (33,508,204) Movements in deferred income taxes can be analysed as follows: 2009 2008 1 January (27,606,275) 2,683,108 Additions due to legal merge (Note 3) 524,012 - Addition due to business combinations (Note 3) 95,831 (25,239,206) Current year deferred income tax income/(expense)-net 2,849,489 (2,328,892) Currency translation differences (240,273) (2,721,285) 31 December (24,377,216) (27,606,275)


69

NOTE 25 - EARNINGS PER SHARE 2009 2008 Net loss attributable to the equity holders of the parent (16,891,412) (85,420,821) Weighted average number of shares with Kr1 face value each 21,603,637,444 5,845,308,652Losses per 1,000 shares (Kr) (0.78) (14.61) NOTE 26 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES The due to and due from related party balances as of year-end, and transactions performed with related parties during the period are summarized below: a) Due from related parties: 2009 2008 Due from shareholders: İntema İnşaat ve Tesisat Mlz.Yat.Paz.A.Ş. 49,126,483 37,881,481 49,126,483 37,881,481 Due from group companies: EKOM Eczacıbaşı Dış Ticaret A.Ş. 44,294,653 38,602,942 Vitra Bad GMBH 1,215,860 1,903,686 Vitra Karo San. ve Tic.A.Ş. 153,946 82,184 Vitra USA Inc - 79,976 Other 88,741 407,846 45,753,200 41,076,634 Less: Provision for doubtful receivables (2,055,229) (1,906,256) Less: Unearned credit finance income (590,454) (851,123) 92,234,000 76,200,736 The movement of provisions for doubtful receivables is summarized below: 2009 2008 1 January 1,906,256 707,295 Additions due to legal merge 327,343 - 1 January 1,205,257 1,770,746 Collections and disposals (1,383,627) (571,785) 31 December 2,055,229 1,906,256


70

NOTE 26 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) On average, credit terms for trade receivables are less than 3 months. The effective interest rates applied to receivables from related parties are 0.89% (2008: 2.83%), 0.44% (2008: 1.02%), 0.66% (2008: 2.80%) and 0.30% (2008: 0.15%) for EUR, USD, GBP and TL, respectively. b) Due to related parties: 2009 2008 Due to shareholders: Eczacıbaşı Holding A.Ş. 2,190,551 6,534,346 İntema İnşaat ve Tesisat Mlz.Yat.Paz.A.Ş. 389,323 - 2,579,874 6,534,346 Due to group companies: ESAN Eczacıbaşı Endüstriyel Hammaddeler San. ve Tic.A.Ş. 1,213,070 936,972 Vitra Sanitary Marketing U.K. 291,257 303,253 Vitra Bath and Tiles 132,332 896,794 Vitra USA Inc. 56,727 79,976 Eczacıbaşı Sigorta Acenteliği A.Ş. 34,193 483 Eczacıbaşı Koramic Yapı Kimyasalları San. ve Tic.A.Ş. 30,889 17,624 Eczacıbaşı Bilgi İletim San. ve Tic.A.Ş. 8,398 51,096 Eczacıbaşı Sağlık Hizmetleri A.Ş. 395 5,288 Other 39,144 95,318 1,806,405 2,386,804 4,386,279 8,921,150 c) Net sales to related parties: 2009 2008 Eczacıbaşı Dış Ticaret A.Ş. 173,211,997 175,470,093 İntema İnşaat ve Tesisat Mlz.Yat.Paz.A.Ş. 143,502,126 135,904,026 316,714,123 311,374,119


71

NOTE 26 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

d) Product, service and property, plant and equipment purchases: 2009 Financial Product Service Fixed assets expense (*) Total EKOM Eczacıbaşı Dış Ticaret A.Ş. (*) - 2,844,646 - 27,068,671 29,913,317 Eczacıbaşı Holding A.Ş. (**) - 17,058,724 (**) - 2,352,193 19,410,917 İntema İnşaat ve Tesisat Mlz. Yat. Paz. A.Ş. (***) 6,484 14,852,035 (***)731,120 5,309,694 20,899,333 ESAN Eczacıbaşı Endüstriyel Hammaddeler San. ve Tic. A.Ş. 3,919,934 57,587 - - 3,977,521 Vitra Bad GMBH - 2,245,725 - - 2,245,725 Eczacıbaşı Spor Kulübü- - 1,381,000 - - 1,381,000 Vitra USA Inc. - 903,087 - - 903,087 Vitra Bath and Tiles- - 1,253,057 - - 1,253,057 Vitra Sanitary Marketing U.K - 1,470,431 - - 1,470,431 Eczacıbaşı İlaç Sinai ve Finansal Yat. San. ve Tic. A.Ş. - 972,147 - - 972,147 Vitra Karo San.ve Tic. A.Ş. - 483,858 - - 483,858 Kanyon Yönetim İşletim Pazarlama Ltd. Şti. - 460,481 - - 460,481 Eczacıbaşı Havacılık A.Ş. - - 6,661 - - 6,661 Eczacıbaşı Bilişim San. ve Tic. A.Ş. - 111,792 78,778 - 190,570 İstanbul Modern-İKSV - 2,387 - - 2,387 VILLEROY & BOCH - 30,832 - - 30,832 Eczacıbaşı Sağlık Hizmetleri A.Ş. - 73,891 - - 73,891 Eczacıbaşı Koramic Yapı Kimyasalları San.ve Tic.A.Ş. - 64,863 14,607 - 79,470 Girişim Paz.Tük.Ür.San.Tic.A.Ş. - 10,277 - - 10,277 İpek Kağıt San. Ve Tic A.Ş. 2,800 - - - 2,800 Eczacıbaşı İnşaat ve Tic.A.Ş. - - 1,296 - 1,296 3,929,218 44,283,481 825,801 34,730,558 83,769,058 (*) Comprises interest expense and foreign exchange losses on bank borrowings used through Eczacıbaşı Dış

Ticaret A.Ş. and Eczacıbaşı Holding A.Ş.. (**) Services received from Eczacıbaşı Holding A.Ş. consist of legal consultancy, financial consultancy,

auditing, budget planning, corporate identity and human resource services. These services are charged according to the time spent by the related departments of Eczacıbaşı Holding A.Ş.. Additionally, these services include the time spent for the acquisition of the subsidiary in 2008, legal services and services related with human resources.

(***) Service received from Intema İnşaat ve Tesisat Mlz.Yat.Paz.A.Ş. mainly include sales commissions and

shared expenses.


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NOTE 26 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

2008 Financial Product Service Fixed assets expense (*) Total Eczacıbaşı Dış Ticaret A.Ş. 113,046 3,138,622 - 62,661,096 65,912,764 Eczacıbaşı Holding A.Ş. - 21,208,866 (**)16,694 8,721,902 29,947,462 İntema İnşaat ve Tesisat Mlz.Yat.Paz.A.Ş. 121,133 16,956,804 (***)3,919 2,350,368 19,432,224 Eczacıbaşı Endüstriyel Hammaddeler San.ve Tic.A.Ş. 4,151,171 111,135 - - 4,262,306 Vitra Bad GMBH - 2,511,978 - - 2,511,978 Vitra USA - 1,742,855 - - 1,742,855 Vitra Bath and Tiles - 1,204,586 - - 1,204,586 Vitra Sanitary Marketing U.K - 1,181,306 17,863 - 1,199,169 Eczacıbaşı İlaç Sanayi - 874,735 - - 874,735 Vitra Karo San.ve Tic.A.Ş. - 349,429 - - 349,429 Eczacıbaşı Bilgi İletim San. ve Tic.A.Ş. - 40,515 223,791 - 264,306 Eczacıbaşı Sağlık Hizmetleri A.Ş. - 35,731 - - 35,731 Eczacıbaşı Koramic Yapı Kimyasalları San.ve Tic.A.Ş. - 34,916 - - 34,916 Girişim Paz.Tük.Ür.San.Tic.A.Ş. - 12,953 - - 12,953 Vitra Küvet San.ve Tic.A.Ş. - 11,824 - - 11,824 İpek Kağıt San. Ve Tic A.Ş. 6,517 - - - 6,517 Eczacıbaşı İnşaat ve Tic.A.Ş. - 5,852 - - 5,852 Eczacıbaşı Beiersdorf Kozmetik - 1,078 - - 1,078 4,391,867 49,423,185 262,267 73,733,366 127,810,685 e) Key Management Compensation: The Group has determined key management personnel as the chairman, members of the Board of Directors, general manager and assistant general managers. Key management compensation is summarized as below. 2009 2008 Salaries and other short-term benefits 8,318,483 7,053,175 Employment termination benefits 1,767,214 668,587 Personnel bonuses 1,489,018 2,341,582 Unused vacation pay liabilities 902,332 1,104,733 12,477,047 11,168,077


73

NOTE 27 - FINANCIAL RISK MANAGEMENT Financial risk management The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Credit Risk Credit risk arises from deposits with banks, as well as credit exposures to customers, including outstanding receivables. Ownership of financial assets involves the risk that counter parties may be unable to meet the terms of their agreements. A significant portion of trade receivables is due from domestic and international related-party sales companies. Since the credit risk of receivables from domestic sales is born by the related party, there is no risk. Receivables from international sales are guaranteed by Eximbank insurance. The risk has been reduced for international receivables that are not covered by Eximbank insurance by collecting them in cash or by receiving a guarantee letter provided by banks. The aging of the Group’s overdue but not impaired trade receivables, including due from related parties which takes into account the overdue terms, is as follows: 2009 2008 Trade Receivables Other Receivables Trade Receivables Other Receivables 1-30 days overdue 6,516,774 - 14,524,294 - 1-3 months overdue 3,454,230 - 3,106,109 - 3-12 months overdue 2,701,434 - 1,377,439 - 1-5 years overdue - - - - More than 5 years overdue - - - - Collateralized or secured with guarantees * - - - -


74

NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) Trade receivables Other receivables Related Related Bank Financial 2009 Other Party Other Party Deposits Instruments Maximum net credit risk as of balance sheet date (A+B+C+D+E) (1) 14,924,793 92,234,000 2,661,357 - 24,979,896 - - The part of maximum risk under guarantee with collateral 1,339,584 - - - - - A. Net book value of financial assets that are not past due/impaired 10,783,593 83,702,762 2,661,357 - 24,979,896 - B. Net book value of financial assets that are renegotiated, if not that will be accepted as past due or impaired - - - - - - C. Net book value of past due but not impaired financial assets (6) 4,141,200 8,531,238 - - - - - Collateralized or guaranteed part 1,339,584 - - - - - D Net book value of impaired financial assets (4) - - - - - Past due (gross carrying amount) 3,494,138 2,055,229 - - - - Impairment (-) (3,494,138) (2,055,229) - - - - - The part of net value under guarantee with collateral - - - - - - - Not over due (gross carrying amount) - - - - - - - Impairment (-) - - - - - - - The part of net value under guarantee with collateral - - - - - - E. Off-balance sheet items with credit risk - - - - - -


75

NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) Trade receivables Other receivables Related Related Bank Financial 2008 Other Party Other Party Deposits Instruments Maximum net credit risk as of balance sheet date (A+B+C+D+E) (1) 10,428,148 76,200,735 1,979,545 - 38,508,862 12,193,250 - The part of maximum risk under guarantee with collateral 116,526 - - - - - A. Net book value of financial assets that are not past due/impaired 6,914,734 60,706,307 1,979,545 - 38,508,862 12,193,250 B. Net book value of financial assets that are renegotiated, if not that will be accepted as past due or impaired - - - - - - C. Net book value of past due but not impaired financial assets (6) 3,513,414 15,494,428 - - - - - Collateralized or guaranteed part 116,526 - - - - - D Net book value of impaired financial assets (4) - - - - - - - Past due (gross carrying amount) 1,716,995 1,906,256 - - - - Impairment (-) (1,716,995) (1,906,256) - - - - - The part of net value under guarantee with collateral - - - - - - - Not over due (gross carrying amount) - - - - - - - Impairment (-) - - - - - - - The part of net value under guarantee with collateral - - - - - - E. Off-balance sheet items with credit risk - - - - - -


76

NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions Group management develops weekly, monthly and 4-month period cash flow plans to determine the liquidity risk; carries out monthly analyses of operating cash adequacy, operating cash’s ability to pay interest, operating profit’s ability to pay interest, and level of operating cash generation; and takes the necessary precautions accordingly. As of 31 December 2009 and 2008, the undiscounted contractual cash flows of the financial liabilities of the Group are as follows: Carrying Contractual Less than 3-12 1-5 Over 2009 amount cash flow 3 months months years 5 years Non-derivative financial liabilities Financial liabilities 269,488,302 295,629,276 62,228,715 69,928,209 163,472,352 - Trade payables and due to related parties 68,076,669 68,076,669 67,077,522 999,147 - - Other payables 7,741,732 7,741,732 7,741,732 - - - Other short term liabilities 11,305,124 11,305,124 11,305,124 - - - 356,611,827 382,752,801 148,353,093 70,927,356 163,472,352 - Derivative financial liabilities Derivative cash inflows - - - - - - Derivative cash outlows - - - - - - Net cash outflow from forward contracts - - - - - - Carrying Contractual Less than 3-12 1-5 Over 2008 amount cash flow 3 months months years 5 years Non-derivative financial liabilities Financial liabilities 284,324,892 299,274,938 34,405,490 179,287,081 85,582,367 - Trade payables and due to related parties 51,540,989 51,540,989 49,152,695 2,388,294 - - Other payables 4,814,753 4,814,753 4,814,753 - - - Other short term liabilities 14,929,906 14,929,906 8,757,419 6,172,487 - - 355,610,540 370,560,586 97,130,357 187,847,862 85,582,367 - Derivative financial liabilities Derivative cash inflows 12,193,250 12,193,250 2,923,550 9,269,700 - - Derivative cash outflows 12,844,800 12,844,800 3,211,200 9,633,600 - - Net cash outflow from forward contracts 25,038,050 25,038,050 6,134,750 18,903,300 - -


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NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) Funding risk The ability to fund existing and prospective debt requirements is managed by maintaining the availability of adequate committed funding lines from high quality lenders. Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest-bearing liabilities and assets. These exposures are managed by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities. The Group utilizes its cash in time deposits and the purchase of company bonds. To keep these exposures at a minimum level, the Group tries to borrow at the most suitable rates. Average effective annual interest rates at 31 December 2009 and 2008 are as follows: 2009 2008 USD EUR GBP TL USD EUR GBP TL Current Assets Cash and cash equivalents - 0.25 0.50 8.50 - 4.79 - 16.18 Short-Term liabilities Short-term bank borrowings 5.24 - 7.90 4.54 5.57 - - Current portion of long-term bank borrowings 5.75 3.59 5.90 - 4.38 7.30 5.22 16.50 Long-Term liabilities Long-term bank borrowings 5.50 5.12 - - 4.29 6.77 - - Interest rate positions of the Group at 31 December 2009 and 2008 are as follows: 2009 2008 Financial instruments with fixed interest rates Cash and cash equivalents 8,395,562 27,056,116 Bank borrowings 269,488,302 284,324,892 There are no financial instruments with floating interest rates. - Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Turkish Lira. The Group constantly monitors the currency risk and net financial position through regular meetings and monthly reports. Foreign Currency Position The Group’s assets and liabilities denominated in foreign currencies at 31 December 2009 and 2008 are as follows:


78

NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) 2009 ABD Other TL equivalent Doları AVRO GBP TL equivalent Assets: Cash and cash equivalent 17,595,619 219,682 7,815,286 159,669 - Receivables from related parties 50,509,710 3,847,423 15,362,173 4,274,891 1,316,173 Trade receivables 12,780,446 161,284 5,562,975 217,606 - Other current assets 1,134,884 - 525,336 - - Other receivables 3,259,168 - 1,508,664 - - Other non-current assets 336,909 - 155,955 - - 85,616,736 4,228,389 30,930,389 4,652,166 1,316,173 Liabilities: Short-term financial liabilities 133,468,778 12,402,916 51,413,939 1,558,754 - Long-term financial liabilities 130,745,175 20,079,818 46,526,405 - - Trade payables 31,721,522 1,738,488 12,554,372 827,804 4,882 Due to related parties 957,291 136,627 187,464 145,067 - Short-term debt provisions 5,763,336 13,077 2,558,933 45,266 107,432 Other short-term payables 3,359,677 - 1,555,190 - - Other short-term liabilities 10,146,510 85,958 4,636,894 - - Long-term debt provisions 163,319 - 75,600 - - Provision for employment termination benefits 7,070,379 - 3,272,869 - - 323,395,987 34,456,884 122,781,666 2,576,891 112,314 Net Foreign Currency Position (*) (237,779,251) (30,228,495) (91,851,277) 2,075,275 1,203,859 Off-balance sheet foreign currency derivative assets - - - - - Off-balance sheet foreign currency derivative liabilities - - - - - Net asset/(liability)position of off balance sheet financial instruments - - - - - Net Foreign Currency Position (237,779,251) (30,228,495) (91,851,277) 2,075,275 1,203,859

Fair value of foreign currency hedged financial assets - - - - - Exports 173,816,812 13,919,781 54,211,569 8,110,578 16,406,735 Imports 42,220,332 9,625,685 10,136,954- 2,089,118 553,842


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NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) 2008 Other TL equivalent USD EUR GBP TL equivalent Assets: Cash and cash equivalent 21,167,155 1,139,639 9,056,755 25,076 - Receivables from related parties 40,295,575 4,600,262 14,843,279 1,120 1,574,646 Trade receivables 9,733,426 146,814 4,442,918 - - Other current assets 2,334,016 11,403 1,033,244 44,315 7,739 Other receivables 3,331,637 - 1,556,258 - - Other non-current assets 304,120 4,279 307,632 - - 77,165,929 5,902,397 31,240,086 70,511 1,582,385 Liabilities: Short-term financial liabilities 201,704,752 31,647,936 70,315,134 1,511,102 - Long-term financial liabilities 80,913,688 1,019,493 37,075,817 - - Trade payables 12,553,076 591,957 5,101,239 294,288 9,115 Due to related parties 1,123,267 510,968 9,557 150,552 - Short term provisions 4,128,128 - 1,928,311 - - Other short-term payables 922,633 - 430,976 - - Other short-term liabilities 12,141,661 15,527 5,585,229 25,949 105,690 Long term provisions 8,424,164 - 3,935,054 - - 321,911,369 33,785,881 124,381,317 1,981,891 114,805 Net Foreign Currency Position (*) (244,745,440) (27,883,484) (93,141,231) (1,911,380) 1,467,580 Off-balance sheet foreign currency derivative assets (**) - - - - - Off-balance sheet foreign currency derivative liabilities (***) 12,844,800 - 6,000,000 - - Net asset/(liability)position of off balance sheet financial instruments (12,844,800) - (6,000,000) - - Net Foreign Currency Position (257,590,240) (27,883,484) (99,141,231) (1,911,380) 1,467,580

Fair value of foreign currency hedged financial assets 11,407,606 - 11,407,606 - - Exports 176,307,394 29,339,722 59,607,387 5,226,764 13,728,197 Imports 46,213,136 13,215,070 13,270,209 55,549,082 986,327


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NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) The foreign currency position as of 31 December 2009 and 2008 in regard to changes in foreign currency rates is depicted in the table below. The Group is mainly exposed to EUR and USD currency risk. 2009 Profit/Loss Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency Change in USD against TL by 10% USD Net assets/liabilities (4,551,504) 4,551,504 - - Hedged USD (-) - - - -

USD Net Effect (4,551,504) 4,551,504 - -

Change in EUR against TL by 10% EUR Net assets/liabilities (19,842,631) 19,842,631 615,899 (615,899) Hedged EUR (-) - - - -

EUR Net Effect (19,842,631) 19,842,631 615,899 (615,899) 2008 Profit/Loss Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency Change in USD against TL by 10% USD Net assets/liabilities (4,227,677) 4,227,677 - - Hedged USD (-) - - - -

USD Net Effect (4,227,677) 4,227,677 - -

Change in EUR against TL by 10% EUR Net assets/liabilities (19,751,491) 19,751,491 10,878,301 - Hedged EUR (-) (1,284,480) 1,284,480 - -

EUR Net Effect (21,035,971) 21,035,971 10,878,301 -


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NOTE 27 - FINANCIAL RISK MANAGEMENT (Continued) Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group performs a monthly financial risk analysis of capital risk management, the general monetary situation, short-term balance sheet liquidity and net financial liability levels. As of 31 December 2009 and 2008, net debt/(Equity+net debt+minority interest) rates are: 2009 2008 Total liabilities 412,640,930 412,082,181 Cash and cash equivalents (25,012,485) (38,533,767) Net deferred income tax liabilities (24,377,216) (27,606,275) Net debt 363,251,229 345,942,139 Equity 98,654,349 102,262,544 Minority interest 5,392,939 10,040,161 Equity+net debt 467,298,517 458,244,844 Net debt/Equity+net debt 78% 75% NOTE 28 - FINANCIAL INSTRUMENTS Fair value of financial instruments 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. Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability,

either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). • Inputs for the asset or liability that are not based on observable market data (that is, unobservable

inputs) (Level 3).


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NOTE 28 - FINANCIAL INSTRUMENTS (Continued) For disclosure purposes, the borrowings carried at the amortised cost at the balance sheet are presented with their values in Note 6. The fair value of borrowings for disclosure purposes is estimated by NOTE discounting the future contractual cash flows at the current market interest rate (Libor) that is available to the Group for similar financial instruments that can be classified as level 2. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to the short-term nature of trade receivables and payables. NOTE 29 - EVENTS AFTER THE BALANCE SHEET DATE Starting on 1 January 2010, EYAP began to utilise the kitchen furniture production facilities that had previously been rented to Intema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. by Vitra Küvet, with which EYAP merged on 6 June 2009. The Group decided to take over the premise located at E-5 Karayolu Üzeri, Sifa Mahallesi, Aslı Sokak Tuzla-Istanbul and used by Intema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. in accordance with Article 6 of the Labour Law on the transfer of business premises. Domestic sales of kitchen furniture products will be carried out by Intema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. as the exclusive authorised distributor.

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ECZACIBASI YAPI GERECLERI SANAYI VE TICARET A.S. AUDIT COMMITTEE REPORT FOR THE ACCOUNTING PERIOD 1 JANUARY –31 DECEMBER 2009 To: Eczacibasi Yapi Gerecleri Sanayi ve Ticaret A.S. General Assembly Title of Company Eczacibasi Yapi Gerecleri Sanayi ve Ticaret A.S. Registered Office Istanbul Capital TRY 112,830,900.- Field of Activity Production of ceramic sanitary ware and fixtures Name & term of office of Auditors, Shareholders, or Company personnel Tayfun Icten and Bulent Avci are in charge up to the

Ordinary General Meeting to be held to review Company accounts for the year 2009. They are not shareholders or personnel of the Company.

Number of Board meetings held and of Audit Committee meetings attended No attendance at Board meetings; five audits were

conducted. Scope, dates and results of audit conducted on Company Accounts, books and documents All operations as of end-April, June, August, October

and December 2009 were audited and determined to comply with all laws and regulations.

Number and results of counts made in shareholding cash desk as per sub-paragraph 3 of paragraph 1 of Article 353 of the Turkish Commercial Code Counting was performed once every two months or

six times a year. In all cases, the cash desk was found to be appropriate for counting.

Dates and results of audits conducted as per sub-paragraph 4 of paragraph 1 of Article 353 of the Turkish Commercial Code Audits were conducted at the end of every month

and inventories were found to be consistent with records.

Complaints and corruptions submitted and related actions No complaints or cases of corruption. We have audited the accounts and transactions for the period 01 January 2009-31 December 2009 in accordance with the Turkish Commercial Code, the Company’s articles of association, other legislation and Generally Accepted Accounting Principles and Standards. We believe that the Balance Sheet prepared as of 31 December 2009 and attached hereto reflects the financial position of the Company on said date and that the Income Statement for the period 01 January 2009-31 December 2009 reflects the operating results for said period fairly and accurately. We kindly request that you approve the Balance Sheet and Income Statement and discharge the Board of Directors of their duties. Audit Committee Tayfun Icten Bulent Avci

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