ANNUAL REPORT - Pneusnews.itpneusnews.it/wp-content/uploads/2013/09/Brisa-2004.pdfManager for...

‹stanbul Office:

Sabanc› Center Tower 2, Floor 3, 4.Levent 34330 ‹stanbul, Turkey Telephone: +90 (212) 278 00 21 Fax: +90 (212) 281 16 81

Head Office:

Alikahya 41220 ‹zmit, Turkey Telephone: +90 (262) 364 73 00 Fax: +90 (262) 364 73 50

ANNUALREPORT

2004

2004

>01:

Brisa BridgestoneSabanc› LastikSanayi ve Ticaret A.fi.

Paid Capital:YTL 7,441,875

‹stanbul Office:Sabanc› Center Tower 2, Floor 34. Levent 34330 ‹stanbul, Turkey

Telephone: +90 (212) 278 00 21Fax: +90 (212) 281 16 81

Head Office:Alikahya 41220 ‹zmit, Turkey

Telephone: +90 (262) 364 73 00Fax: +90 (262) 364 73 50

Translated into English from the original Turkish Report

Message From the Chairperson of the Board

>02: >03:

GÜLER SABANCI

Dear Shareholders,

Year 2004 has been a year of significant achievements in our

country in terms of stabilization of the national economy. The

steady decrease in inflation and the consistent growth for the

past three years have increased the support for the current

economic program, re-enforcing the belief that the

improvements in the economy would be permanent. Another

important reason for our optimistic approach for the future

is, of course, the distance covered on the road to EU

Membership.

In line with the positive developments in our economy, the

domestic demand in tire sector increased by 15% in 2004. As

the Turkish Lira gained power, the imports also gained

competitive power in the tire sector as well as in other sectors,

resulting with intense competition in domestic market. Rather

than leading only a price-based competition policy, Brisa aimed

to maintain its leadership position in domestic market through

increased quality and variety of products and services offered

to end-users. Within this framework, Brisa has introduced 136

new products in various sizes and tread patterns to domestic

market in 2004 while our consistent efforts continued to

increase the effectiveness of our dealer network and the quality

of our service.

With the increased production of automotive sector, the sales

of our Company in this channel increased by 26% in volume

compared to previous year. Our exports reached to the level

of US$ 119 million (FOB) in 2004. As a result our total sales

marked a 10% annual increase in volume, reaching to 6.2

million tires.

Using its capacity in full, Brisa realized a production of 107

thousand tons in 2004. The comprehensive investment plan,

which was announced in June, to increase our production

capacity and for modernization, was put into effect. Within

this scope, a US$ 21.9 million worth investment was realized

in 2004. Our investment activities will continue in 2005,

extending to an even broader scale. We are planning to increase

our production capacity to 7.2 million tires/year by the end of

2005.

The increase in raw material prices mainly due to demand-

supply imbalance in global scale and strong Turkish Lira were

the main factors that had adversely affected our Company’s

profitability during last year. The steep increase in raw material

costs could partially be recovered by the improvements achieved

in other cost and expenditure items and by the increase in our

productivity. We, therefore, believe that the decrease in our

profitability is understandable.

I would like to thank all of you esteemed shareholders for the

support you have shown to our Company, during the course

of the year 2004.

Agenda of the Ordinary General Assembly

>04: >05:

AGENDA OF THE ORDINARY GENERAL ASSEMBLY1- Commencement and election of the Presiding Board.

2- Authorization of the Presiding Board to sign the minutes of the General

Assembly Meeting.

3- Presentation and discussion of the Board of Directors’ Annual Report

and the Auditors’ Report covering the activities and the financial results

of the year 2004.

4- Presentation, discussion and approval of the 2004 Balance Sheet and

Profit and Loss Statement; discussion and resolution of the Board proposal

on profit distribution.

5- Release of the Board of the Directors and Auditors for the activities

of the Company in 2004.

6- Approval of the assignment of the Board Member who has been

elected to serve for the remaining term of the Board Membership position

vacated during the year.

7- Election of the Auditors and determination of their duty period and

remuneration.

8- Authorization of the Chairman and Board Members to conduct the

transactions listed in Articles 334 and 335 of the Turkish Commercial

Code.

Meeting Date: 22 March 2005, Tuesday at 10:00 a.m.

Meeting Place: Hac› Ömer Conference Hall

Sabanc› Center, Tower 2

4.Levent / ‹STANBUL

INTRODUCTION

>06:

Period of the Report01.01.2004 / 31.12.2004

Company’s TitleBrisa Bridgestone Sabanc›Lastik Sanayi ve Ticaret Anonim fiirketi

Board of Directors

Güler Sabanc›

Chairperson of the BoardDuty Period:

17.03.1989 / March 2007

After graduating from TED Ankara College and Bosphorus University(Business Administration) Ms. Güler Sabanc› started to work for Lassa LastikSanayi ve Ticaret A.fi. in 1978. Following Lassa, she became the GeneralManager of Kordsa Kordbezi Sanayi ve Ticaret A.fi. and ran this companyfor 14 years as a Board Member and General Manager. While she wasworking for Kordsa, she was also the core member of a team to set-up anumber of JV’s for Sabanc› Group and overseeing the part of the operationsof these JV’s.

After serving as the President of Tire and Reinforcement Materials Groupfor five years, in May 2004 Ms. Güler Sabanc› was elected to her currentpost as the Chairperson and Managing Director of Sabanc› Holding A.fi..Güler Sabanc› is also the Chairperson of Human Resources Committee ofSabanc› Holding.

Other than the industrial business world, she is active in the academia aswell. She was the responsible person to design and activate Sabanc›University and today she is the Chairperson of the Board of Trustees of theUniversity.

In her social and cultural life, Ms. Güler Sabanc› is the Board Member ofTurkish Businessmen and Industrialists Association and ‹stanbul Art andCulture Foundation.

Started his professional career at the Bridgestone Corporationupon graduating from Tokyo University of Foreign Studies in1968 where he became a Board Member in 1997. He heldthe positions as the Chairman and CEO of Bridgestone/FirestoneEurope during 2001-2003. He became the Vice Chairman ofthe Bridgestone Corporation in 2001 and Senior Vice Chairmanin 2003. He has assumed the responsibility for the overseasoperations of the Bridgestone Corporation since 2004. He waselected as a Board Member of Brisa at 19.04.2004.

Soshi ArakawaVice ChairmanDuty Period:19.04.2004 / March 2007

Mustafa BayraktarDirectorDuty Period:19.04.2004 / March 2007

Graduated from Alabama University, Finance Department.Completed his post-graduate study in the same field in BostonCollege. He is the Chairman of the Board of Directors of H.Bayraktar Yat›r›m Holding A.fi. since 2002. He was appointedas a Board Member of Brisa at 19.04.2004.

>07:

Graduated from Ankara Academy of Economic and CommercialSciences. Started his professional career in Ziraat Bank in 1977.He joined the Sabanc› Group in 1994 as Vice President ofInternational Trade Strategic Business Unit of Sabanc› Holdingand held positions as the General Manager of Universal Tradingand Exsa UK. He became the President of the InternationalTrade Strategic Business Unit in 1996. He heads Sabanc›Holding’s Chemicals and International Trade Strategic BusinessUnit since October 2004.

Engin TuncayDirectorDuty Period:21.11.2000 / March 2007

Graduated from Robert College High School in Istanbul in1986. Following that he attended University of Pennsylvaniaand in 1990 received dual-degree from the Wharton Schoolin Finance and the School of Engineering in ElectricalEngineering. Between 1990-1992, he worked at Goldman,Sachs & Co. in the Corporate Finance Department in New York.In May 1994, he graduated from Harvard Business School andreturned to Turkey as the Head of Corporate Finance atFinansbank A.fi. In less than one year, he became the Head ofInvestment Banking and Capital Markets at Finansbank. In May1996, he moved on to H.Ö. Sabanc› Holding A.fi. where heinitially headed the Capital Markets Department. SinceSeptember 1997, he has been the Chief Financial Officer ofSabanc› Holding. He serves as a Board Member at the followingcompanies: Carrefoursa, Brisa, Beksa, Marsa, Ak Securities, AkPor t fo l io Management and Ak Inves tment Fund.

Faruk BilenDirectorDuty Period:19.04.2004 / March 2007

Graduated from Middle East Technical University, Departmentof Industrial Engineering. Joined the Sabanc› Group in 1981.After working 6 years for Lassa Lastik Sanayi ve Ticaret A.fi., hebecame the Production Manager of the newly establishedBeksa in 1987. In 1992, he was assigned as the ProcessDevelopment Manager at the Technical Center of Bekaert inBelgium, the partner of Beksa. He returned to Beksa in 1994as the Operations Director and became Beksa General Managerin 1998. In June 2004 he was appointed as the President ofTire and Reinforcement Strategic Business Unit of Sabanc›Holding, which was later reorganized to include the Holding’sautomotive group as well. Besides his Board Membership inBrisa, he is also a Member of the Boards of Dusa InternationalLCC, Kordsa, Beksa, Sakosa, Enerjisa Elektrik Enerjisi ToptanSat›fl, Enerjisa Enerji Üretim, Temsa, Toyotasa companies andKal-Der (Turkish Association for Quality).

Turgut UzerDirectorDuty Period:01.06.2004 / March 2007

Hisao IkawaDirectorDuty Period:19.09.2002 / March 2007

Hisao KawamotoDirectorDuty Period:24.03.2000 / March 2007

Yoshio NeagariDirectorDuty Period:19.09.2002 / March 2007

Graduated from Keio University, Department of Law and PoliticalSciences in 1974, and the same year started his professionalcareer at the Bridgestone Corporation. He worked atCorporation’s domestic operations until 1986, then was assignedto International Operations section. He worked as Sales andMarketing Director for Bridgestone Earthmover Tyres Pty. Ltd.in Australia between 1992-95. He was appointed as the GeneralManager for Bridgestone Corporation’s Off the Road TireDepartment in 1998. Starting from 2002, he is working forBrisa as Executive Coordinator and Member of the Board.

Graduating from Shibaura Institute of Technology University,Department of Mechanical Engineering, he joined theBridgestone Corporation in 1967. He worked as lead advisorand technical director for production and technology issues atBridgestone’s various plants in Japan, USA, Italy and Spain. Heserved at the Board of Directors of the Bridgestone Corporationbetween 1997- 2000. Starting from 2000, he is working forBrisa as Chief Technical Officer and Member of the Board.

Graduated from Tokyo University of Foreign Studies in 1978and started working for the Bridgestone Corporation at thesame year. After performing various duties related to finance,he was appointed as Controller and Vice President forBridgestone/Firestone Canada Inc., located in Canada, in 1996.Upon his return to Japan, he acted as the project leader forthe Corporation’s Shared Service Center in 1998. Prior to hisappointment as the Financial Assistant and a Member of theBoard in Brisa in September 2002, he was the Vice Presidentof Bridgestone Finance Inc.

AUDITORS COMMITTEE

Fuat ÖksüzDuty Period:19.04.2004 / March 2005H. Ömer Sabanc› Holding A.fi.Head of Auditing Department

Akira SakanashiDuty Period:21.03.2003 / March 2005Bridgestone CorporationExecutive

Mehmet BingölDuty Period:19.03.1999 / March 2005H. Ömer Sabanc› Holding A.fi.Tax Management and Finance Department Assistant Director

Members of the Board of Directors and Auditor’s Committee are empowered with all the powers determined and set out by the Turkish Commercial Code and other regulations in relation therewith.

Brisa Mission

To develop, manufacture, and supply top quality tires

only; and to provide the associated services at the highest

standards. In doing so, we will meet our stakeholders’

expectations of:

• Selling highest value products with best-in-class service

to our Customers.

• Managing an admirable place of work for our

Employees.

• Being a value creating company for our Shareholders.

• Sustaining superior corporate citizenship for the Society.

Brisa Vision

Brisa is and will be a tire company acknowledged as

providing top quality and highest value products both at

home and abroad. Brisa deems quality as a basic norm

of doing business, and is committed to creating and

delivering value to its stakeholders.

Brisa targets to continue to be the leader of domestic tire

market in Turkey.

Brisa aims to implement the most current product and

manufacturing technologies of Bridgestone, developing

further as a viable, high quality supplier to the international

network.

Brisa is a company of high standards, fully adhering to

honest and ethical business conduct principles.

To improve and add value to her business processes, Brisa

closely monitors and implements most advanced

applications obtained from the developments in information

and communication technologies.

Knowledgeable and motivated people working for Brisa

are the keys of Brisa’s business success. Brisa will endeavor

to develop its people and ensure that the company is an

admirable place to work.

Brisa is a natural-resource conscious company and respects

the environment for sustainable development.

Brisa Values

• Quality in everything we do.

• Dealing with our customers with passion.

• Continuous improvement and readiness for change

• Trust, respect and integrity in our relationships

• Pride we take from our work, from our products, and

from our company’s reputation in the society.

• Fairness manifested in just, impartial and

equitable treatment of our employees.

• Open and honest communication.

• Teamwork spirit.

• Speed and Excellence :

- Timely decision making.

implementation and thorough follow- up

of projects.

- Adopting advanced information

technologies enabling a workplace with

enriched abilities.

• Responsible attitude from each employee

to contribute to company’s success.

Amendments made to the Articles of Association within

the term:

No amendments were made to the Articles of Association

within the term.

Capital movements, changes in stock prices, distribution

of dividend, and status of shareholders:

The Company has approximately 1,000 shareholders. The

Company’s stock prices fluctuated between YTL 44.75 and

YTL 85.50 during the year. The rates of dividends distributed

in the last three years are as follows:

2001: 270 %

2002: 500 %

2003: No dividends distributed

Shareholders holding more than 10% of the Company’s

capital are:

Hac› Ömer Sabanc› Holding A.fi.- 43.26%, Bridgestone

Corporation –42.86%.

Stocks and bonds issued:

The Company has shares with nominal total value of

YTL 7,441,875 that are entitled to dividends from profit

and an additional 100 privileged shares. No bonds have

been issued.

The sector and our position therein:

2004 marked a year of growth for the Turkish

tire industry and for Brisa. The tire production

in Turkey increased by 6% in 2004,

compared to that of 2003, amounting to

22 million tires. The domestic demand

reached over 13 million tires in 2004,

showing a 15% increase compared to that

of 2003. During the same period Brisa

produced 6 million tires, and selling out its

total production Brisa set new records of

success in all sales channels in 2004.

The replacement market, forming the largest portion of

domestic sales, displayed an increase parallel to that of

GNP in 2004 and market reached to 9.5 million tires, with

an increase of 10% compared to that of 2003.

The amount of imports in tire sector, while reflecting a

relative decrease towards the end of the year, remained

at the same overall level they had reached the previous

year.

The demand in the original equipment (OE) market

continued to increase in 2004, marking a growth beyond

the total growth in domestic tire market. Brisa, realizing

a significant increase in its sales to OE market in 2004,

maintained its leadership in this market.

The Turkish tire industry, directing a large part of its

production to exports, sold 13.5 million tires to foreign

markets and foreign partners in 2004. Brisa, renewing its

record in this channel as well, exported over 2 million

tires under Lassa brand for the first time in Company’s

history. Noting exports of the tire industry are mostly

supplies to foreign parent companies, the success of Lassa

as a brand representing Turkey, is much more significant.

As a result of all these developments in 2004, Brisa

increased its sales by 10% and, challenging the limits of

its capacity, realized a sales level of 6.2 million tires.

>10: >11:

INVESTMENTS

Developments in investments:

Th e C om pa n y i n v e s t e d U S D

21,894,000 for modernization and

capac i t y expans ion in 2004 .

The state and extent of legal incentives

utilized:

In 2004 Brisa continued to utilize all

legal incentives it was entitled to within

the framework of the incentive

cer t i f i ca te da ted 10 .04 .2000.

Efficiency and productivity:

With its high production technology

and continuous investments, Brisa

continues to increase its productivity

on a global scale and maintains its

leading posi t ion in the sector.

ACTIV IT IES RELATED TO

PRODUCTION OF GOODS

AND SERVICES

Capacity utilization and development:

In 2004, total production quantity

reached 6,005,596 units, 8.7 %

increase compared to previous year.

Developments in production of goods

and services in relevant lines of

business:

In 2004 Brisa enriched its wide range

of products with the introduction of

136 new products in various sizes and

patterns. 12 of the new products were

produced domestically while 124 were

imported.

Among the new patterns introduced

to the market in 2004, "Lassa Impetus

Sport" in Ultra High Performance

category and "Bridgestone GR 80" in

High Performance category stood up

as the stars of the bunch. Impetus

Sport marked another pioneering

move by Brisa, being the first Ultra

High Performance tire produced in

Turkey.

In promoting i ts products, the

Company developed a different

approach in 2004, planning the new

product launching activities to reach

to wider groups of audience for the

first time. To realize this, regional

meetings were organized in ‹stanbul,

Ankara, ‹zmir, Adana, Antalya,

Diyarbak›r, Samsun and Erzurum to

introduce the Company’s goods as

well as the services and all dealers in

respective regions were invited to join

the meetings. As a result of this

approach, communicat ion and

interaction between Brisa and its dealer

network increased signif icantly.

"30th Year" anniversary was celebrated

with an intense participation of dealers

in ‹stanbul in May 2004. The meeting

preparations had been initiated by Mr.

Sak›p Sabanc›, however regretfully the

meeting was held upon his loss. This

intensely emotional atmosphere was

a source of pride for those veteran

dealers working with the Company

for the past 30-years while they were

honored. The meeting reinforced the

relations between the Company and its dealers in those

hard days of mourning for Mr. Sabanc›.

Another milestone for the Company in 2004 was the "Best

Social Responsibility Campaign Award" given by the

Marketing Agencies Association Worldwide – MAA to Brisa’s

“Daytime running lights” campaign that has been

continuing since its launch in 1999. The Award signified

a concrete and impartial recognition for Brisa’s leading

approach in the f ie ld of soc ia l respons ib i l i ty.

In 2004 the Company enjoyed recognitions by other

institutions as well. Brisa, with its superior performance

in product supply processes in 2003, received "Toyota’s

Most Successful Supplier“ award given by the Toyota Motor

Engineering and Manufacturing Europe – TMEM in 2004.

The award, which was presented to Brisa in Brussels in

presence of 600 international suppliers, marked an

international approval of the Company’s successful

performance.

Brisa, actively taking part in motor sports, remained at

the focus of mass communications in 2004. The Company

sponsored the "Shakedown" stage of the World Rally

Championship in Turkey; supported Formula 3 and Honda-

Alpet Cup races, further strengthening its place in this

community. Following the first one launched in 2003, the

s e c o n d " L a s s a

C o m p e t u s

Discovery Convoy“

activity was realized

in 2004 and this

unique adventure

had wide coverage

on nat ional TV

channels.

In 2004, among

the significant steps

to serve the end-

users, the reorga-

nization of Brisa web-site, launching of Lassa international

web-site, and tire-safety-awareness-building activities

initiated together with TRT (the State Radio and Television)

are worth mentioning. In commercial vehicle market, the

Company supported the sectoral organizations such as

the International Transporters Association (UND) and the

Cooperative of Private City Bus Owners.

Having completed the preparations initiated in 2003, Brisa

started implementing several important projects to further

improve dealer relations. Within this framework a “Reward

System“ was introduced to promote dealer purchases in

>12:

2004; the "Sales Support Teams" project, whose pilot

implementation was completed the year before, was

extended for nationwide application; the nationwide

installation of "Dealer Automation System" was started,

marking a significant investment for the Company’s

communications infrastructure.

A wide range of activities were conducted to further

develop sales channels in 2004. In order to increase Brisa’s

activity among fleets, "Tire Management System" was

introduced through two pilot projects. The Company

increased its activities at BMW and Nissan sales points, as

well as at CMS Shops, all of which are considered as Key

Customers.

Brisa, at the same time, realized various organizational

improvements to further increase effectiveness of its sales

and marketing activities.

Changes in Sales Volume and Amount:

Sales Volume (unit)

increase compared

2004 to 2003

Tires 6,194,799 +10%

Inner tubes 111,654 +3%

Flaps 208,214 +12%

Net sales revenue amounted to YTL 544,238,856 in 2004,

5% increase compared to 2003.

>13:

BR‹SA BRIDGESTONE SABANCI LAST‹K SANAY‹ VE T‹CARET A.fi.

FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2004

Translated into English from

The Original Turkish Report

>14:


Note 31 December 2004 31 December 2003YTL YTL

CURRENT ASSETS

Cash and banks 4 113,761,722 87,579,537Trade receivables (net) 5 53,881,897 46,177,294Due from related parties 6 20,831,098 18,337,898Inventories (net) 7 70,772,848 65,326,578Other receivables and current assets (net) 8 4,153,600 2,580,128

Total Current Assets 263,401,165 220,001,435

LONG TERM ASSETS

Long term receivables (net) 43,107 115,994Equity participations 9 15,079,381 15,079,381Property, plant and equipment (net) 10 192,932,959 198,249,088Intangible assets (net) 11 8,887,231 7,871,675

Total Long Term Assets 216,942,678 221,316,138

TOTAL ASSETS 480,343,843 441,317,573

CURRENT LIABILITIES

Short-term borrowings 12 1,814,943 1,179,254Trade payables (net) 13 24,055,104 23,773,962Due to related parties 6 8,830,928 7,884,809Advances received 14 355,533 588,917Other payables and current liabilities 15 9,969,407 8,819,902Corporate tax payable 16 3,116,955 10,230,510

Total Current Liabilities 48,142,870 52,477,354

LONG TERM LIABILITIES

Long-term borrowings 12 32,848 -Retirement pay provision 17 11,037,424 11,313,506Other long term liabilities 1,466,135 1,362,142Deferred tax liabilities 16 11,321,839 16,057,092

Total Long Term Liabilities 23,858,246 28,732,740

COMMITMENTS & CONTINGENCIES 19 - -

SHAREHOLDERS' EQUITY

Capital 20 360,101,898 410,139,251Premium in excess of par 5,581 2,479,072Accumulated deficit (-) - (52,510,844)Net profit 48,235,248 -

Total Shareholders' Equity 408,342,727 360,107,479

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 480,343,843 441,317,573

BALANCE SHEETS AS AT 31 DECEMBER 2004 AND 31 DECEMBER 2003[Amounts expressed in New Turkish Lira (YTL) in terms of the purchasing power as at 31 December 2004 (note 2)]

The accompanying notes form an integral part of these financial statements. >15:


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

Note 2004 2003YTL YTL

Net sales 21 544,238,856 519,972,067Cost of sales 22 (393,439,992) (365,128,642)

Gross profit 150,798,864 154,843,425

Operating expenses 23 (79,675,027) (76,033,864)

Operating profit 71,123,837 78,809,561

Finance income (net) 24 19,831,169 19,734,952Other expenses (net) 25 (6,994,672) (1,690,232)

Profit before taxation and monetary loss 83,960,334 96,854,281

Taxation 16 (21,598,041) (26,257,254)

Profit after taxation and before monetary loss 62,362,293 70,597,027

Monetary loss (14,127,045) (7,198,693)

Net profit 48,235,248 63,398,334

Earnings per share 3.s 6.01 7.92

STATEMENTS OF INCOME FOR THE YEARS ENDED31 DECEMBER 2004 AND 31 DECEMBER 2003[Amounts expressed in New Turkish Lira (YTL) in terms of the purchasing power as at 31 December 2004 (note 2)]

>16:

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARSENDED 31 DECEMBER 2004 AND 31 DECEMBER 2003[Amounts expressed in New Turkish Lira (YTL) in terms of the purchasing power as at 31 December 2004 (note 2)]

Balance as of 1 January 2003 7,441,875 402,697,376 2,479,072 (66,504,745) 346,113,578

Dividends paid - - - (49,404,433) (49,404,433)

Net profit for the period - - - 63,398,334 63,398,334

Balance as of 1 January 2004 7,441,875 402,697,376 2,479,072 (52,510,844) 360,107,479

Offsetting of Previous Year’sLosses (Note 20) - (50,037,353) (2,473,491) 52,510,844 -

Net profit for the period - - - 48,235,248 48,235,248

Balance as of 31 December 2004 7,441,875 352,660,023 5,581 48,235,248 408,342,727

CapitalInflationary AccumulatedAdjustment Premium in (Deficit)

Capital Differences Excess of Par /Earnings TotalYTL YTL YTL YTL YTL


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

STATEMENT OF CASH FLOWS FOR YEARS ENDED31 DECEMBER 2004 AND 31 DECEMBER 2003[Amounts expressed in New Turkish Lira (YTL) in terms of the purchasing power as at 31 December 2004 (note 2)]

Note 2004 2003YTL YTL

CASH FLOW FROM OPERATING ACTIVITIES

Net profit for the period 48,235,248 63,398,334

Adjustments to reconcile net profit to net cash

provided by operating activities:

Depreciation of property, plant and equipment 10 38,750,703 37,826,379

Amortization of intangible assets 11 2,011,779 1,043,737

Sundry provisions 15 2,683,726 1,044,631

Changes in provision for retirement pay 17 (276,082) (1,337,707)

Changes in allowances for doubtful receivables 5,8 (120,421) (134,630)

Accrued interest income (17,966,647) (17,240,252)

Accrued taxation net of monetary gain 16 19,645,885 22,906,336

Operating cash flow before changes in

working capital 92,964,191 107,506,828

Changes in working capital 27 (17,637,470) (14,048,698)

Cash generated from operations 75,326,721 93,458,130

Taxes paid 16 (31,494,694) (34,761,534)

Net cash provided by operating activities 43,832,027 58,696,596

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 17,346,895 16,921,832

Purchases of property, plant, equipment 10 (34,048,573) (10,723,606)

Purchases of intangible assets 11 (3,075,069) (7,381,360)

Changes in other investing activities 28 176,883 699,692

Net book value of fixed assets disposed 10 613,999 104,833

Net book value of intangible assets disposed 11 47,734 -

Net cash provided by/(used in) investing activities (18,938,131) (378,609)

CASH FLOWS FROM FINANCING ACTIVITIES

Changes in borrowing (net) 668,537 287,833

Dividends paid - (49,404,434)

Net cash used in financing activities 668,537 (49,116,601)

NET CHANGES IN CASH AND BANKS 25,562,433 9,201,386

CASH AND BANKS AT THE BEGINNING OF YEAR 4 87,579,537 78,059,733

Effect of exchange rates and interest accrual on cash and bank 619,752 318,418

CASH AND BANKS AT THE END OF YEAR 4 113,761,722 87,579,537

>17:


1. ORGANIZATION AND OPERATIONSOF THE COMPANYBrisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi.("Brisa" or "the Company") was established in 1974 as aTurkish company by, among others, Hac› Ömer Sabanc›Holding A.fi. ("Sabanc› Holding"), one of the largestconglomerates in Turkey. Brisa was established for theprimary purpose of manufacturing, marketing and sellingvehicle tires in Turkey. In 1988 the Company entered intoa licensing agreement with Bridgestone Corporationpermitting the Company to produce and sell Bridgestonetires.The Company is registered with the Turkish Capital MarketBoard ("CMB") and a portion of its shares is publicly traded.The Company conducts a significant portion of its businesswith corporations that are affiliates of Sabanc› Holding.The company has 1,364 employees and 10 temporarypersonnel as of 31 December 2004. (The company had1,158 employees and 182 temporary personnel as at 31December 2003).

2. BASIS OF THE FINANCIAL STATEMENTSThe Company maintains its books of accounts and preparestheir statutory financial statements ("Statutory FinancialStatements") in accordance with accounting principles inthe Turkish Commercial Code (the "TCC") and tax legislation(collectively, "Turkish Practices").On 15 November 2003, Capital Market Board (“CMB”)published Communiqué No: 25 of Series XI, “Communiquéon Capital Market Accounting Standards”. TheCommuniqué is applicable to first interim financialstatements ending after 1 January 2005 and is effectivefrom the date of publishing. However, companies maychoose to adopt Communiqué No: 25 of Series XI, foryears or interim periods ending on or after 31 December2003.As explained in the first tentative clause of Article 34 ofthe foresaid Communiqué – General Provisions relatedwith financial statements obligations, preparation andpublic announcement of financial statements in accordancewith IFRS until the beginning of that period whichapplication Communiqué No: 25 of Series XI becomesenforceable, is counted for fulfillment of provisions ofpreparation of financial statements and publicannouncement in accordance with that Communiqué.Consequently, the Company prepared and publiclyannounced its financial statements as of 31 December2003 in accordance with IFRS. The accompanying financialstatements are based on the statutory records, withadjustments and reclassifications, including restatementfor the changes in the general purchasing power of theTurkish Lira, for the purpose of fair presentation inaccordance with Statements of IFRS. The basis of thefinancial statements used in the preparation of theaccompanying financial statements are set out below andin Note 3.

Inflation accountingIn the accompanying financial statements, restatementadjustments have been made to compensate the effect

of changes in the general purchasing power of the TurkishLira, as of the balance sheet date, in accordance withInternational Accounting Standard No. 29 “FinancialReporting in Hyperinflationary Economies” ("IAS 29").IAS 29 requires that financial statements prepared in thecurrency of a hyperinflationary economy be stated interms of the measuring unit current at the balance sheetdate and the corresponding figures for previous periodsbe restated in the same terms. One characteristic thatnecessitates the application of IAS 29 is a cumulative three-year inflation rate approaching or exceeding 100%. Suchcumulative rate was 69.7% for the three years ended31 December 2004 based upon the wholesale price indexannounced by the Turkish State Institute of Statistics.Although the three year cumulative inflation rate wasbelow the rate indicated in the preceding paragraph,since majority of the people keep their savings in foreigncurrencies, the prices of services and goods are set interms of foreign currencies, interest rates and wages areexpressed in terms of the inflation indexes, and the marketprices are determined taking into account the losses dueto the the credit sales including the short term transactions,the economy shows the characteristics of ahyperinflationary environment and therefore IAS29 needsto be applied to the financial statements.Such index and the conversion factors used to restate theaccompanying financial statements as of the end of eachperiod to 31 December 2004 are given below:

Index Conversion Factor31 December 2001 4,951.7 1.697231 December 2002 6,478.8 1.297131 December 2003 7,382.1 1.138431 December 2004 8,403.8 1.0000

The annual change in the TL exchange rate against theUS Dollar can be compared with the rates of general priceinflation in Turkey according to the WPI as set out below:

Year: 2004 2003 2002 2001 2000CurrencyDeflation US $ (3.9)% (14.6)% 13.5% 114.3% 24.4%WPI Inflation 13.8% 13.9% 30.8% 88.6% 32.7%

At 31 December 2004 the exchange rate announced bythe Turkish Central Bank (which is a market rate) was YTL1.3421 = US$ 1 (31 December 2003, YTL 1.3958=US$1).

The main guidelines for the IAS 29 restatementare as follows:• All balance sheet amounts not already expressed interms of the measuring unit current at the balance sheetdate are restated by applying a general price index (theWPI). Corresponding figures for previous periods aresimilarly restated.• Monetary assets and liabilities are not restated becausethey are already expressed in terms of the measuring unitcurrent at the balance sheet date. Monetary items aremoney held and items to be received or paid in money.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED31 DECEMBER 2004 AND 31 DECEMBER 2003

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• Non-monetary assets and liabilities are restated byapplying, to the initial acquisition cost and any accumulateddepreciation, the change in the general price index fromthe date of acquisition or initial recording to the balancesheet date. Hence, property, plant and equipment,investments and similar assets are restated from the dateof their purchase, not to exceed their market value.Depreciation is similarly restated. The components ofshareholders' equity are restated by applying the applicablegeneral price index from the dates the components werecontributed or otherwise arose.• All items in the statement of income are restated byapplying the relevant conversion factors from the dateswhen the income and expense items were initially recordedin the financial statements.• The gain or loss on the net monetary position is theresult of the effect of general inflation and is the differenceresulting from the restatement of non-monetary assets,shareholders' equity and income statement items. Thegain or loss on the net monetary position is included innet income.

New Turkish LiraCommencing from 1 January 2005, law concerning thelegal currency of the Turkish Republic was enacted, andthe new legal currency was announced as the “NewTurkish Lira” (YTL), where 1 YTL is equal to 100 YKr whichis the sub measuring unit of the New Turkish Lira. Thesecond article of this law has replaced the Turkish Lirawith New Turkish Lira , the conversion rate was set as1,000,000 TL=1 YTL. In accordance with theannouncement, numbered MSD-10/832-43399 and dated1 December 2004 of the capital market board, prior yearcomparative figures of financial statements that will bepublished to the public will be expressed in New TurkishLira to confront the current year presentation.

3. SUMMARY OF SIGNIFICANTACCOUNTING POLICIESThe significant accounting policies used in the preparationof the accompanying financial statements are as follows:

a. Related partiesFor the purpose of the accompanying financial statements,shareholders of the Company, and the companies relatedto those companies, their directors and key managementpersonnel and any companies to which they are knownto be related, are considered and referred to as relatedcompanies.

b. Marketable securitiesMarketable securities portfolio primarily representsGovernment bonds and Treasury bills which are accountedfor at the fair value of the consideration given (at cost) at

initial recognition determined by reference to thetransaction price or market prices. The cost of foreigncurrency denominated securities is translated at year-endexchange rates.Securities are impaired if their carrying amounts are lessthan their estimated recoverable amounts. The Companyassesses at each balance sheet date whether there is anyobjective evidence that they may be impaired. If any suchevidence exists, the Company estimates the recoverableamount of that asset or group of assets and recogniseimpairment losses in net profit or loss for the period.Interest earned for holding securities are included ininterest income. All gains or losses on sale of tradingsecurities, and on investment securities if such transactionsoccur, are accounted for in the statement of income forthe period.The Company designates its securities portfolio inaccordance with IFRS 39 (Financial Instruments: Recognitionand Measurement) as follows:

Securities held for trading:Securities held for trading are those acquired principallyfor the purpose of generating profit from short-termfluctuations in their price or dealer’s margin. Subsequentto initial recognition, held for trading securities are valuedat their fair value if reliably measured. Gains or losses onheld for trading securities are included in net profit or lossfor the period in which they arise.Investment fund share certificates are stated at marketvalue. Quoted shares are carried at market value.

Securities held-to-maturity:Held-to-maturity investments are securities with fixed ordeterminable payments and fixed maturity that theCompany has the positive intent and ability to hold tomaturity. Held to maturity securities having a fixed maturityare to be measured at amortised cost using the effectiveinterest rate method.

Securities available for sale:Available-for-sale securities are those that are not held-to-maturity investments, or securities held for trading.Subsequent to acquisition, available for sale securities arevalued at their fair value if reliably measurable. Otherwise,they are accounted for at amortised cost. Gains or losseson available for sale securities are included in net profitor loss for the period in which they arise.Investments in equity instruments that does not have aquoted market price in an active market and for whichother methods of reasonably estimating fair value areclearly inappropriate or unworkable, are accounted forat cost. Securities that do not have a fixed maturity aremeasured at cost.



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3. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (cont’d)c. Trade receivablesTrade receivables are carried at anticipated realizable valuethat is the net off trade receivables measured at amortizedcost method using the effective interest rate in accordancewith IAS 39 and the allowance for doubtful receivables.The allowance for doubtful receivables is based onmanagement’s evaluation of the receivables, includingsuch factors as the volume type of receivable outstanding,collateral obtained, past experience and economicconditions. Bad debts are written off during the year inwhich they are identified.

d. Inventory valuationInventories are valued with the weighted average methodand are stated at the lower of cost or net realizable value(market value less sales expenses). Cost includes rawmaterials, direct labor and production overhead appropriateto the relevant stage of production.

e. Investments in equity participationsEquity investments are carried at indexed cost restated asat balance sheet date, unless there is evidence ofpermanent diminution of value.

f. Property, plant and equipmentProperty, plant and equipment are carried at indexedhistorical cost. Property, plant and equipment, except landthat is deemed to have indefinite life, are depreciatedprincipally on a straight-line basis using the followingrates, which amortize the assets over their expected usefullives:

Buildings 25 yearsLand improvements 10 yearsMachinery and equipment 8 yearsVehicles 5 yearsFurniture and fittings 10 yearsIntangible assets 24 years

Gains or losses on disposal of property, plant andequipment with respect to their restated amounts areincluded in the related income and expense accounts, asappropriate.Expenses for the repair of property, plant and equipmentare normally charged against income.Following the new legislation of Turkish Capital MarketBoard (“CMB”), with regards to adopt inflation accountingfor financial statements, the Company had revised theindexed cost of property, plant and equipment as at 31December 2002 and therefore there have been somereclassifications between fixed asset accounts, though netbook value effect of such reclassifications was nil.

g. Impairment of assetsLong-term assets other than deferred tax assets andfinancial assets are tested for impairment according to theprovisions of IAS 36 (“Impairment of Assets”). IAS 36 requires

an impairment loss to be recognized whenever the carryingamount of an asset exceeds its recoverable amount.Recoverable amount of an asset is the higher of an assetnet selling price and its value in use. Value in use is thepresent value of estimated future cash flow expected toarise from the continuing use of an asset and from itsdisposal at the end of its life.

h. Borrowing costsInterest expenses directly attributable to the acquisition,construction or production of qualifying assets, which areassets that necessarily take a substantial period of time toget ready for their intended use or sale, are added to thecost of those assets, until such time as the assets aresubstantially ready for their intended use or sale.All other borrowing costs are recorded in the incomestatement in the period in which they are incurred.

i. Taxation and deferred income taxesTaxes on income for the year comprise of current tax andthe change in deferred taxes. The Company accounts forcurrent and deferred taxation on the results for the period,in accordance with IAS 12 (Revised).Provision is made in the financial statements for theCompany’s estimated liability to Turkish corporation taxon its results for the year. The charge for current tax isbased on the results for the year as adjusted for items,which are non-assessable or disallowed.Deferred tax assets and liabilities are recognized using theliability method in respect of material temporary differencesarising from different treatment of items for accountingand taxation purposes. Deferred tax liabilities are recognizedfor all taxable temporary differences and deferred taxassets are only provided to the extent if it is probable thattaxable profit will be available against which the deductibletemporary differences can be utilized.Deferred tax is calculated at the tax rates that are expectedto apply to the period when the asset is realized or theliability is settled. Deferred tax is charged or credited inthe statement of income.Prepaid corporation taxes and corporation tax liabilitiesoffset as they relate to income taxes levied by the sametaxation authority. Deferred income tax assets and liabilitiesare also offset.

j. Retirement pay provisionUnder Turkish law and union agreements, lump sumpayments are made to employees retiring or involuntarilyleaving the Company. The total provision represents thevested benefit obligation as at the balance sheet date.International Accounting Standard No. 19 (Revised)“Employee Benefits” (“IAS 19”) has been applied in theaccompanying financial statements. Future retirementpayments are discounted to their present value at thebalance sheet date at an interest rate determined as netof an expected inflation rate and an appropriate discountrate. This standard also allows the employee benefit liabilityto be reduced by anticipated forfeitures by eligibleemployees of their benefit.


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k. Foreign currency transactionsIn the statutory accounts of the Company, transactions inforeign currencies (currencies other than Turkish Lira) aretranslated into Turkish Lira at the rates of exchange rulingat the transaction dates. Assets and liabilities denominatedin foreign currencies are translated at the exchange rateruling at the balance sheet date. Gains and losses arisingon settlement and translation of foreign currency itemsare included in the statements of income.

l. Revenue recognitionRevenue is recognized on an accrual basis at the time ofdelivery. Net sales represents the invoiced value of goodsshipped or services rendered less any sales returns anddiscounts, all restated in equivalent purchasing power asof 31 December 2004.

m. Cash and banksCash and banks include cash on hand and demanddeposits and time deposits with banks.

n. Financial instrumentsFair value is the amount for which an asset could beexchanged or a liability settled, between knowledgeablewilling parties in an arms length transaction. Market valueis the amount obtainable from the sale, or payable on theacquisition, of a financial instrument in an active market,if one exists.The estimated fair values of financial instruments havebeen determined by the Company using available marketinformation and appropriate valuation methodologies.However, judgment is necessarily required to interpretmarket data to develop the estimated fair value.Accordingly, the estimates presented here in may notnecessarily be indicative of the amounts the Companycould realize in a current market exchange.Balances with banks, receivables, contingent liabilities likeletters of guarantee, letters of credit are important financialinstruments which would have negative effects on thefinancial structure of the Company if the other party failedto comply with the terms and conditions of the agreement.The fair values of certain financial assets carried at costare considered to be representative of carrying values dueto their short-term nature.The following methods and assumptions were used toestimate the fair value of each class of financial instrumentfor which it is practicable to estimate fair value.

Cash and Bank Balances: Cash and bank balancesdenominated in foreign currencies are translated at year-end exchange rates. The carrying amounts of the remainingcash and bank balances are reasonable estimates of theirfair value.

Marketable Securities: Fair value is estimated usingquoted market prices wherever applicable. For thosewhere no market price is available, the carrying amountsin the books are estimated to be their fair values.

Trade Receivables and Trade Payables: Book values ofthe trade receivables along with the related allowances

for uncollectibility and trade payables balances areestimated to be their fair values.

Due to/from Related Parties: The carrying value of dueto and due from related parties are estimated to be theirfair value.

Borrowings: Borrowings have interest rates that arefixed on an entry value basis but may be subject tofluctuations in accordance with prevailing interest ratesin the market. Interest-bearing bank loans and overdraftsare recorded at the proceeds received. Finance chargesare accounted for on an accrual basis and are added tothe carrying amount of the instrument to the extent theyare not settled in the period in which they arise.The Company deals with financial instruments with off-balance sheet risk in the normal course of business suchas letters of credit, etc.. The Company’s exposure to lossesarising from these instruments is represented by thecontractual amount of those instruments.

Credit riskThe Company’s credit risk is primarily attributable to itstrade receivables. The amounts presented in the balancesheet are net of allowances for doubtful receivables,estimated by the Company’s management based on priorexperience and the current economic environment. Thecredit risk on liquid funds is limited because the funds areinvested in government bonds and treasury bills for short-term purposes.The Company has no significant concentration of creditrisk, with exposure spread over a large number ofcustomers.

Price riskThe Company is exposed to exchange rate fluctuationsbetween foreign currencies and Turkish Lira due to thenature of its business. The Company’s export sales are inEURO and imports are in US$ and JPY currencies. Thestrengthening of Turkish Lira against EURO have an adverseeffect on the Company’s export sales whereas thestrengthening of US$ and JPY against Turkish Lira havean adverse effect on the Company’s imports.

Liquidity riskThe Company is generally raising funds by liquidating itsshort-term financial instruments such as collecting itsreceivables and disposing of marketable securities. TheCompany’s proceedings from these instruments generallyapproximate their fair values.

o. Use of estimatesThe preparation of financial statements in conformity withInternational Financial Reporting Standards requiresmanagement to make estimates and assumptions thataffect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts ofrevenue and expenses during the period. Actual resultscould differ from those estimates.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)p. OffsettingFinancial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceableright to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settlethe the liability simultaneously.

q. DividendsDividends receivable are recognized as income in the period when they are declared and dividends payable are recognizedas an appropriation of profit in the period in which they are declared.

r. Segmental informationThe Company operates predominantly in one industry segment, basically production, marketing and distribution of vehicletires. As the Company is in this industry segment, the accompanying financial statements include domestic segmentalfinancial information in terms of distribution channels and brands. All assets, production facilities are located in Turkey.The Company’s export sales are channeled as indirect export sales through Exsa, which is a H.Ö. Sabanc› Holding GroupCompany, and direct export sales mainly to European countries.

s. Earnings per shareIAS 33 “Earnings Per Share” requires disclosure of basic earnings per share and diluted earnings per share (if applicable)for companies whose shares are publicly traded or which are in the process of issuing shares in a public market.

A summary of the weighted average number of shares outstanding during 2004 and 2003 and the basic earnings pershare calculation is as follows (assuming that the cash increases do not involve a bonus element):

2004 2003

Number of shares outstanding at 1 January (in full) (1,000 Shares =1 YTL) 7,441,875 7,441,875

Bonus shares issued (by transfer of the revaluation fund)

- New shares issued (cash increase) - -

Number of shares outstanding at 31 December (in full)(1,000 Shares=1 YTL) 7,441,875 7,441,875

Weighted average number of shares outstanding during the year(in full) (1,000 Shares) 7,441,875 7,441,875

Net profit (YTL) 48,235,248 63,398,334

Basic earnings per 100 preferred shares gross (YTL) 34,917 44,828

(*) Basic earnings per common share gross (YTL) 6.01 7.92

Basic earnings per common share (%) 601% 792%

(*) Calculations above are based on the 1 Share = 1 YTL = 1 Lot equation.


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31 December 2004 31 December 2003YTL YTL

Cash on hand - 2,923Demand deposits 2,461,242 2,306,690Time deposits 111,300,480 78,833,634Repurchasing - 6,436,290

113,761,722 87,579,537

The company has YTL 2,027,872 blocked bank deposit which results from the dealers credit card sales, out of YTL2,461,242 demand deposit as at 31 December 2004 (Blocked bank deposit is YTL 1,481,894, as at 31 December 2003).

Time DepositsCurrency Interest 31 December 2004

Amount Foreign Currency Type Rate % Maturity YTL

12,059,331 EURO 2.75 - 3.00 03.01 - 28.03.2005 22,029,98615,809,358 US$ 2.75 - 3.25 31.01 - 09.12.2005 21,217,739

TL 19.0 - 23.15 03.01 - 28.03.2005 68,052,755

111,300,480

Currency Interest 31 December 2003Amount Foreign Currency Type Rate % Maturity YTL

6,817,107 EURO 2.00 - 3.75 02.01 - 23.01.2004 13,542,82518,393,559 US$ 1.00 - 3.50 02.01 - 09.12.2004 29,227,767

TL 27.00 07.01 - 27.01.2004 36,063,042

78,833,634

Repo 24.50 02.01.2004 6,436,290

4. CASH AND BANKS



5. TRADE RECEIVABLES (NET)31 December 2004 31 December 2003

YTL YTL

Trade receivables 24,930,849 26,954,656Notes receivables 30,859,538 20,858,873Discount on receivables (-) (2,081,872) (858,100)Other trade receivables 988,260 155,058Allowance for doubtful receivables (-) (814,878) (933,193)

Total 53,881,897 46,177,294

The average days in sales outstanding is 45 days. An allowance has been made for estimated irrecoverable amounts.

Movements in the allowance for doubtful receivables during 2004 and 2003 are as follows:2004 2003

YTL YTL

Beginning balance 933,193 1,065,408Charge for the period 17,907 17,307Collection for the period (22,768) (19,155)Monetary (gain)/loss (113,454) (130,367)

Ending balance 814,878 933,193

Receivables are discounted by the yield at the reference 3-month t-bill auction during the period. The discount rate forreceivables issued in December 2004 period is 21.4 %.

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2004 2003 YTL YTL

Bank DepositsAkbank T.A.fi. 110,610,284 80,900,071BNP Ak Dresdner Bank 39 45

110,610,323 80,900,116Due from related partiesExsa 13,782,434 11,931,802Bridgestone Corporation Japan 5,694,299 5,333,530Others 1,354,365 1,072,566

20,831,098 18,337,898Borrowings From Related PartiesAkbank T.A.fi. 1,316,200 1,179,254BNP Ak Dresdner Bank 531,591 -

1,847,791 1,179,254Due to related partiesEnerjisa 2,044,517 1,873,353Bridgestone Singapore Pte Ltd. 2,786,252 2,328,589Universal Trade 1,156,219 523,400Bimsa 704,878 1,843,328Beksa 740,454 2,565Others 1,398,608 1,313,574

8,830,928 7,884,809Major sales to related partiesExsa 86,408,722 81,029,514Bridgestone Corporation Japan 69,694,957 87,771,758Others 7,357,523 4,183,147

163,461,202 172,984,419Major purchases from related partiesBridgestone Singapore Pte Ltd. 55,648,398 43,414,503Beksa 46,734,239 40,390,452Universal 21,250,536 21,533,563Enerjisa 16,477,905 17,416,213Kordsa 16,264,847 18,666,166Bridgestone Corporation Japan 15,637,351 12,060,100Others 14,376,606 15,047,703

186,389,882 168,528,700Major purchases from related parties (Services)Aksigorta 5,521,793 7,817,489Bimsa 2,273,404 1,983,772Others 1,196,280 1,342,161

8,991,477 11,143,422Interest income from related partiesAkbank 10,567,622 3,512,854BNP Ak Dresdner Bank 1,297 86,105

10,568,919 3,598,959Interest expense to related partiesBNP Ak Dresdner Bank 42,076 164,781

Rent expense to related partiesH.Ö. Sabanc› Holding A.fi. 166,387 242,691

Other expenses to related partiesExsa 8,147,001 6,020,115Exsa UK Ltd. 1,122,577 714,628Others 146,092 85,929

9,415,670 6,820,672Other income from related partiesAksigorta 151,755 207,785

Fixed Asset Purchases from Related PartiesBridgestone Corporation Japan 8,986,090 2,120,302Bimsa 1,664,178 2,167,454Others 1,180,968 1,032,616

11,831,236 5,320,372

6. TRANSACTIONS WITH RELATED PARTIES

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7. INVENTORIES31 December 2004 31 December 2003

YTL YTL

Raw materials 23,035,152 20,914,623Work in process 7,700,046 4,941,114Finished goods 19,817,502 18,806,072Trade goods 5,937,953 6,173,325Order advances given 3,778,534 6,388,246Other inventories 10,503,661 8,103,198

70,772,848 65,326,578

8. OTHER RECEIVABLES AND CURRENT ASSETS31 December 2004 31 December 2003

YTL YTL

Prepaid expenses 766,603 878,875Due from personnel 838,849 1,042,903Other VAT 1,571,358 -Doubtful receivables 15,216 17,322Provision for doubtful receivables (-) (15,216) (17,322)Other receivables 401,755 593,976Sundry receivables 575,035 64,374

4,153,600 2,580,128

9. EQUITY PARTICIPATIONS

The Company's shares in its equity participations and unconsolidated subsidiaries as of 31 December 2004 and 31December 2003 were as follows:

31 December 2004 31 December 2003Company Share YTL Share YTL

Enerjisa Enerji Üretim A.fi. 4.79% 15,079,381 4.79% 15,079,381

10. PROPERTY, PLANT AND EQUIPMENT (NET)


Acquisition costOpening balance1 January 2004 5,636,595 9,736,770 140,865,305 683,719,333 4,279,416 12,567,731 44,386 2,540,909 859,390,445Additions - - 10,659 318,891 544,944 1,064,548 539,222 32,329,142 34,807,406Disposals (328,235) - - (451,838) (677,139) (603,645) (2,499) - (2,063,356)Transfers from CIP - 6,280 289,788 23,730,225 - 441,593 - (25,226,719) (758,833)Closing balance31 December 2004 5,308,360 9,743,050 141,165,752 707,316,611 4,147,221 13,470,227 581,109 9,643,332 891,375,662

Accumulated depreciationOpening balance1 January 2004 - (8,513,898) (74,262,843) (566,774,461) (3,353,556) (8,234,110) (2,489) - (661,141,357)Charge for the year - (146,087) (4,193,375) (33,178,744) (333,150) (873,774) (25,573) - (38,750,703)Disposals - - - 403,937 644,195 401,145 80 - 1,449,357Closing balance31 December 2004 - (8,659,985) (78,456,218) (599,549,268) (3,042,511) (8,706,739) (27,982) - (698,442,703)

Net book value at31 December 2004 5,308,360 1,083,065 62,709,534 107,767,343 1,104,710 4,763,488 553,127 9,643,332 192,932,959

Land YTL

LandImprove-

mentsYTL

BuildingsYTL

Machineryand

EquipmentYTL

VehiclesYTL

Furnitureand

FixturesYTL

OtherYTL

Constructionin Progress

YTLTotal

YTL


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11. INTANGIBLE ASSETS (NET)

Leasehold OtherRights Improvements Intangible Assets Total

YTL YTL YTL YTLAcquisition costOpening balance 1 January 2004 2,215,316 477,793 9,484,072 12,177,181Additions 892,224 - 1,424,012 2,316,236Disposals (40) - (317,262) (317,302)Transfers from CIP - - 758,833 758,833

Closing balance 31 December 2004 3,107,500 477,793 11,349,655 14,934,948

Accumulated depreciationOpening balance 1 January 2004 (1,241,942) (156,080) (2,907,484) (4,305,506)Charge for the year (285,582) (19,111) (1,707,086) (2,011,779)Disposals 8 - 269,560 269,568

Closing balance 31 December 2004 (1,527,516) (175,191) (4,345,010) (6,047,717)

Net book value at 31 December 2004 1,579,984 302,602 7,004,645 8,887,231

12. BORROWINGS31 December 2004 31 December 2003

YTL YTL

Short term bank loans 1,316,200 1,179,254Financial leasing loans 498,743 -Total short term loans 1,814,943 1,179,254

Long term financial leasing loans 32,848 -

Total borrowings 1,847,791 1,179,254

Bank loans as of 31 December 2004 and 31 December 2003 comprise spot loans with no interest charge.

13. TRADE PAYABLES (NET)31 December 2004 31 December 2003

YTL YTL

Trade payables 14,222,277 12,497,240Royalty payable 2,130,949 2,846,906Deposits and guarantees received 490,609 696,463Sales premium payable to dealers 6,053,168 7,156,851Payable to constructors 1,177,451 592,121Discount on trade payables (19,350) (15,619)

24,055,104 23,773,962

14. ADVANCES RECEIVED

Bridgestone Co. Japan US$ 102,799.17 137,967 270,209.76 377,168EURO 2,694.20 4,922 13,428.39 23,434

Others 212,644 188,315

355,533 588,917

CurrencyType

31 December2004 Foreign

Exchange

31 December2004

YTL

31 December2003 Foreign

Exchange

31 December2003

YTL

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Corporate Tax:The Company is subject to Turkish corporate taxes. Provisionis made in the accompanying financial statements for theestimated charge based on the Group’s results for theyear.Corporate tax is applied on taxable corporate income,which is calculated from the statutory accounting profitby adding back non-deductible expenses, and by deductingdividends received from resident companies, other exemptincome and investment incentives utilized.

The effective rates of tax are as follows:•In 2002 and prior years: 33%, being 30% corporate taxplus a 10% surcharge of funds contribution on corporatetax.•In 2003: 30% (10% fund contribution was abolished.)•In 2004: 33% (the corporate tax rate was increased from30% to 33% by Law No. 5035 published in the OfficialGazette on 2 January 2004)•In 2005: 30% (the corporate tax rate decreased to 30%subsequent to 31 December 2004)In Turkey, advance tax returns are filed on a quarterlybasis. The advance corporate income tax rate was increasedfrom 25% to 30%, effective from 24 April 2003, and to33% for 2004.Losses can be carried forward for offsetting against futuretaxable income for up to 5 years. Losses cannot be carriedback for offsetting against profits from previous periods.In Turkey there is no procedure for a final and definitiveagreement on tax assessments. Companies file their tax

returns within 15 April following the close of the accountingyear to which they relate. Tax authorities may, however,examine such returns and the underlying accountingrecords and may revise assessments within five years.

Income withholding taxIn addition to corporate taxes, companies should alsocalculate income withholding taxes and funds surchargeon any dividends distributed, except for companiesreceiving dividends who are resident companies in Turkeyand Turkish branches of foreign companies. The rate ofincome withholding tax is 10% starting from 24 April2003. Undistributed dividends incorporated in share capitalare not subject to income withholding taxes.Income withholding tax was also calculated in 2002 andprior years on various types of income and gains exemptfrom corporation tax, whether distributed or not. Suchwithholding tax has been removed in general. However,19.8% withholding tax is still applied to investmentallowances relating to investment incentive certificatesobtained prior to 24 April 2003. Such allowances may beused to relieve corporation tax liability until the profitsreach the calculated level of exemption. If companies failto make a profit or incur losses, any allowance outstandingmay be carried forward to following years so as to bededucted from taxable income of subsequent profitableyears. Carried forward investment incentives to be deductedfrom corporate tax liability in the following periods arerevalued with the applicable WPI.


15. OTHER PAYABLES AND CURRENT LIABILITIES31 December 2004 31 December 2003

YTL YTL

Taxes and dues payable 2,682,954 3,201,606Social security premiums payable 1,620,027 1,563,950Taxes and dues on installments 2,744,180 2,069,150Provisions 2,683,726 1,044,706Personnel expense accruals - 589,510Sundry liabilities 97,146 112,086Other payables 141,374 235,226Unearned income - 3,668

9,969,407 8,819,902

16. TAXATION ON INCOME31 December 2004 31 December 2003

YTL YTLCurrent Tax Payable:Current corporate and income tax 24,381,139 34,234,174Prepaid taxes and funds (21,264,184) (24,003,664)

3,116,955 10,230,510

2004 2003YTL YTL

Taxation:Current income tax 24,381,139 34,234,174Deferred tax charge (2,783,098) (7,976,921)

21,598,041 26,257,253


>27:


16. TAXATION ON INCOME (cont’d)Inflation Adjusted Tax CalculationFor 2003 and previous years, taxable profits were calculated without any inflation adjustment to the statutory records,except that fixed assets and the related depreciation were revalued annually. Law No. 5024 published in the OfficialGazette No. 25332 on 30 December 2003 requires the application of inflation accounting in Turkey in 2004 and futureyears for tax purposes, if the actual rate of inflation meets certain thresholds, using principles which do not differsubstantially from the principles in IAS 29 “Financial Reporting in Hyperinflationary Economies”. Application of the newprinciples is optional in the first quarterly advance tax return in 2004.

Deferred TaxThe Company recognizes deferred tax assets and liabilities based upon temporary differences arising between its financialstatements as reported for IFRS purposes and its statutory tax financial statements. These differences usually result in therecognition of revenue and expenses in different reporting periods for IFRS and tax purposes and are set out below.Temporary differences occur between the years in which certain items of income and expense are recorded for accountingand for tax purposes. There are timing differences resulting from the restatement of inventories, property, plant andequipment (except land) and intangible fixed assets, prepaid expenses, allowances, retirement pay provision, lease payableand investment incentive deductions.

The balances which form the base for deferred tax and corporate tax are given below:

Temporary differences subject todeferred tax: 31 December 2004 31 December 2003

YTL YTL

Restatement of fixed assets 51,152,577 65,174,184Retirement pay provision (11,037,424) (11,313,506)Restatement of inventories 149,516 19,973Discount of accounts receivable (1,184,554) (226,886)Discount of accounts payable 19,350 15,619Reward Provision (1,360,000) -Lease payable adjustment - (145,171)Restatement of prepaid expenses - (569)

37,739,465 53,523,644

Components of Deferred Tax (Assets)/Liabilities:Restatement of fixed assets 15,345,773 19,552,255Retirement pay provision (3,311,228) (3,394,052)Inventory restatement 44,855 5,992Discount of accounts receivable (355,366) (68,066)Discount of notes payable 5,805 4,686Reward provision (408,000) -Lease payable adjustment - (43,552)Restatement of prepaid expenses - (171)

11,321,839 16,057,092Movement of Deferred Tax (Assets)/Liabilities:Opening balance at 1 January 16,057,092 27,384,930Monetary gain (1,952,155) (3,350,917)Taxation (benefit) on deferred tax (2,783,098) (7,976,921)

Closing balance at 31 December 11,321,839 16,057,092

Reconciliation of Taxation: 2004 2003

YTL YTL

Profit before taxation and monetary gain 83,960,334 96,854,281Monetary loss (14,127,045) (7,198,693)Profit before tax after monetary gain 69,833,289 89,655,588Tax at the domestic income tax rate 33% 30%Expected taxation 23,044,985 26,896,676Tax effects of:- undeductible expenses 1,733,314 824,898- investment incentives and other non-taxable income (3,909,338) (877,073)- effect of non-taxable monetary gains and (losses) 729,080 (587,247)

Taxation per income statement 21,598,041 26,257,254


>28:

17. RETIREMENT PAY PROVISIONUnder Turkish law, the Company is required to payemployment termination benefits to each employee whohas completed one year of service and whose employmentis terminated without due cause, is called up for militaryservice, dies or who retires after completing 25 years ofservice (20 years for women) and achieves the retirementage (58 for women and 60 for men).The provision is made in respect of all eligible employees,at a rate of 30 days gross pay for each year of service.The rate of pay is that ruling at the respective balancesheet dates, subject to a maximum of YTL 1,574.74 permonth as of 31 December 2004. (31 December 2003:YTL 1,389.95)The liability is not funded, as there is no fundingrequirement in Turkey.For the year 1999, IAS 19 (“Employee Benefits” Revised)became applicable for the first time. Although not changingthe fundamental principles involved, the revised standard

made clearer the obligation to consider the issues relatedto accounting for a future benefit:•An expected inflation rate and an appropriate discountrate should both be determined, the net of these beingthe real discount rate. This real discount rate should beused to discount future retirement payments to theirpresent value at the balance sheet date.•The anticipated rate of forfeitures should be considered.Consequently, in the accompanying financial statementsas at 31 December 2004 and 31 December 2003, theprovision has been calculated by estimating the presentvalue of the future probable obligation of the Companyarising from the retirement of the employees andamounting to YTL 20,131,382 (31 December 2003: YTL18,322,533). The provisions at the respective balancesheet dates have been calculated assuming an annualinflation rate of 16% and a discount rate of 10%, resultingin a real discount rate of approximately 5.45%.


31 December 2004 31 December 2003 YTL YTL

Provision at 1 January 11,313,506 12,651,213Charge for the period/year 1,099,368 210,340Monetary gain (1,375,450) (1,548,047)

Provision at 31 December 11,037,424 11,313,506

18. OFF BALANCE SHEET FINANCIAL INSTRUMENTSNo off-balance sheet financial instruments exist.

19. COMMITMENTS AND CONTINGENCIES31 December 2004 31 December 2003

YTL YTL

Letters of Guarantee Given 3,672,460 1,871,340

As of 31 December 2004, the total risk of legal claims pursued against the Company amounts to approximately YTL117,719 (31 December 2003: YTL 136,968) whereas the total amount of claims pursued by the Company amounts toapproximately YTL 403,722 (31 December 2003: YTL 452,200).

20. SHAREHOLDERS’ EQUITY AND LEGAL RESERVEAs of 31 December 2004 and 31 December 2003 the share capital is held as follows:

31 December 2004 31 December 2003Shareholders (%) YTL (%) YTL

Bridgestone Corporation Japan 42.86 3,189,274 42.86 3,189,274H.Ö. Sabanc› Holding A.fi. 43.26 3,219,007 43.26 3,219,007Sabanc› Vakf› 1.14 84,956 1.14 84,956Others 12.74 948,638 12.74 948,638

Historical capital 100.00 7,441,875 100.00 7,441,875

Inflation adjustment 352,660,023 402,697,376

Restated capital 360,101,898 410,139,251


>29:


According to Law No.5228 issued on 31 July 2004 in theOfficial Gazette, it was permitted to offset accumulateddeficit from inflation adjustment differences. Consequently,accumulated deficit amounting to YTL 46.126.789calculated in accordance with the Capital Market Board(“CMB”) published Communique, Series XI Article 25 , wasdecided to be offset for the amount of YTL 2,172,774 ,

from emission premium inflation adjustments and theremaining YTL 43,954,015 amount is offsetted from capitalinflation adjustment differences as of 1 January 2004 inline with the authorization given to Board of Directors atthe Ordinary General Assembly Meeting held on 19 April2004. The summary of the inflated adjusted figures ofthese transactions as at 31 December, 2004 are as follows:


Capital 7,441,875 7,441,875Adjustment to capital (-) (6,881,850) (6,881,850)Premium in excess of par 4,903 4,903Legal reserves - 12,384,883Extraordinary reserves - 18,721,087Inflation adjustment to equity (*) 359,542,551 515,879,637Period profit 48,235,248 63,398,334Accumulated deficit (-) - (250,841,390)

Total Shareholders’Equity 408,342,727 360,107,479

Inflation adjustment to equity (*)

Capital 359,541,873 409,579,226Premium in excess of par 678 2,474,169Legal reserves - 82,804,325Extraordinary reserves - 21,021,917

359,542,551 515,879,637

InflationNominal Adjustments

Value -(net) TotalYTL YTL YTL

CapitalOpening balance 1 Janunary 2004 7,441,875 402,697,376 410,139,251Netting-off ofaccumulated deficit - (50,037,353) (50,037,353)

Closing balance at 31 December 2004 7,441,875 352,660,023 360,101,898

Emission PremiumOpening balance 01 January 2004 4,903 2,474,169 2,479,072Netting-off ofaccumulated deficit - (2,473,491) (2,473,491)

Closing balance at 31 December 2004 4,903 678 5,581

20. SHAREHOLDERS’ EQUITY AND LEGALRESERVE (cont’d)As at 31 December 2004 and 31 December 2003 theCompany has 100 founder-privileged shares entitled toparticipate only in the profit distribution and 5% of thestatutory profit for the year is distributed to holders ofsuch shares as stipulated in the Articles of Association.The legal reserves consist of first and second legal reserves,appropriated in accordance with the Turkish CommercialCode. The first legal reserve is appropriated out of historical

statutory profits at the rate of 5% per annum, until thetotal reserve reaches 20% of the historical paid-in sharecapital. The second legal reserve is appropriated after thefirst legal reserve and dividends, at the rate of 10% perannum of all cash dividend distributions.The companies shareholders’ equity accounts stated inaccordance with the Capital Market Board (“CMB”)Communiqué No: 25 of Series XI, “Communiqué on CapitalMarket Accounting Standards”, published on 15 November2003 are as follows:


>30:

21. NET SALES2004 2003

YTL YTL

Domestic sales 411,035,188 378,817,568Exports 173,166,521 183,277,175Sales returns (-) (1,910,808) (1,748,820)Sales discount (-) (27,263,183) (28,779,319)Other deduction from sales (-) (10,788,862) (11,594,537)

544,238,856 519,972,067

22. COST OF SALES2004 2003

YTL YTL

Raw materials consumed (-) (252,551,328) (228,213,272)Direct labor attributable to production (-) (35,554,214) (29,004,084)Production overheads (-) (53,290,335) (55,453,006)Depreciation of production facilities (-) (36,351,766) (34,372,520)Change in Work in Progress inventories 3,825,079 591,286Change in Finished Goods inventories (-) 1,485,710 (2,835,070)

Cost of products sold (-) (372,436,854) (349,286,666)

Cost of merchandises sold (-) (21,003,138) (15,841,976)

(393,439,992) (365,128,642)

23. OPERATING EXPENSES2004 2003

YTL YTL

Research and development expenses (-) (5,857,578) (5,688,448)Marketing, selling and distribution expenses (-) (51,501,564) (48,515,734)General administrative expenses (-) (22,315,885) (21,829,682)

(79,675,027) (76,033,864)

24. FINANCE INCOME (NET)2004 2003

YTL YTL

Exchange gain 14,394,356 16,441,880Interest income 16,400,216 14,419,679Profit on sale of marketable securities 1,566,435 2,820,573Discount income 592,183 425,158Commission income 143,127 176,649Exchange losses (-) (11,995,970) (13,361,462)RDiscount expenses (-) (1,214,775) (1,013,872)Cost of short term borrowings (-) (50,649) (169,630)Other (-) (3,754) (4,023)

19,831,169 19,734,952



>31:



25. OTHER EXPENSES (NET)2004 2003 YTL YTL

Raw material purchase discounts/(expense) (net) (272,008) 3,385,431Excess tax provision income - 1,796,440Provisions released 65,666 1,335Provision expenses (-) (67,071) (27,417)Export commission expense (-) (4,861,356) (4,487,281)Tax and due expenses (-) (310,937) (1,072,368)Various goods sales expense (-) (783,598) (672,314)Other (-) (765,368) (614,058)

(6,994,672) (1,690,232)

26. SEGMENTAL INFORMATION

Domestic Market Sales2004 2003

Distribution Channels YTL YTL

Replacements 270,149,442 262,820,393Original Equipment 105,584,263 80,436,271Other Sales 437,323 443,449

Net Sales 376,171,028 343,700,113

Cost of Sales (251,653,555) (215,819,282)

Gross Margin 124,517,473 127,880,831

Export Sales2004 2003

Distribution Regions YTL YTL

Europe 140,697,600 139,776,385Other 27,370,228 36,495,569

Net Sales 168,067,828 176,271,954

Cost of Sales (141,786,437) (149,309,360)

Gross Margin 26,281,391 26,962,594

27. CHANGES IN WORKING CAPITAL


Changes in operating assets and liabilities:Trade receivables (7,586,289) (14,362,327)Inventories (5,446,270) (2,146,592)Due from related parties (2,493,200) 2,933,496Other receivables and current assets (1,571,366) 2,263,092Trade payables 281,142 (2,217,922)Due to related parties 946,119 550,314Advances received (233,384) (42,622)Other payables and current liabilities (1,534,222) (1,026,137)

(17,637,470) (14,048,698)

>32:

29. SUBSEQUENT EVENTSThe company got a new investment incentive amounting to YTL 199,210,000 associated with a modernization, renewaland capacity increase project which is planned to start on 31 January 2005 and targeted to be completed as at31 December 2009.The current investment incentives will expire as at 31 January 2005.The severance pay ceiling which was YTL 1,574.74 as of 31 December 2004, increased to YTL 1,648.90 starting from1 January 2005.

28. CHANGES IN OTHER INVESTING ACTIVITIES


Changes in other long term assets and liabilities:Long- term receivables 72,889 192,906Other long- term assets - 1,441Other long term liabilities 103,994 505,345

176,883 699,692

30. FOREIGN CURRENCY POSITIONEquivalent of

31 December 2004 US$ EURO JY GBP YTL

Cash and banks 15,947,181 12,076,250 380,712 11 43,468,718Trade receivables 2,016,073 3,232,818 - - 8,611,483Other assets 64,887 9,573 - - 104,573Trade payables (499,757) (196,379) (11,062,712) (3,300) (1,039,449)

51,145,32531 December 2003

Cash and banks 18,596,996 6,801,595 161,316 172 43,065,918Trade receivables 775,556 2,728,281 - - 6,652,362Other assets 133,599 9,332 - - 230,830Trade payables (821,661) (142,282) (9,722,866) (26,497) (1,807,177)

48,141,933

31. APPROVAL OF FINANCIAL STATEMENTSThe accompanying financial statements of the Company were approved in the Board of Directors meeting held on24 February 2005 with the resolution number 437.



>33:

Financial Highlights (*)

(000) YTL

(*) Amounts expressed in New Turkish Lira (YTL) in terms of the purchasing power as at 31 December 2004.


2002

2003

2004

YEARS

497,166

519,972

544,239

REVENUES

441,415

441,318

480,344

TOTAL ASSETS

46,568

63,398

48,235

NET INCOME

346,114

360,107

408,343

SHAREHOLDERS’ EQUITY

600,000

500,000

400,000

300,000

200,000

100,000

0

REVENUES

497,166

20

02

20

03

20

04

519,972544,239

600,000

500,000

400,000

300,000

200,000

100,000

0

TOTAL ASSETS

441,415

20

02

20

03

20

04

441,318480,344

>34:

(000) YTL

(000) YTL

2004 Financial Ratios2004 2003

I- Liquidity Ratios1-Current Ratio: (Current Assets / Current Liabilities) 5.47 4.192-Acid Test Ratio: (Current Assets-Inventory / Current Liabilities) 4.00 2.95

II- Financial Structure Ratios1-Total Debts/Total Assets 0.15 0.182-Shareholders' Equity/Total Debts 5.67 4.43

III- Ratios of Operation and Profitability1-Net Profit Margin: (Net Profit/Net Sales) 0.09 0.122-Return on Assets: (Net Profit/Total Assets) 0.10 0.143-Return on Equity: (Net Profit/Shareholders' Equity) 0.13 0.21

Measures relevant to financial structure:

The Company maintained its healthy and strong financial structure in 2004.


>35:

ADMINISTRATIVE ACTIVITIES

6 3 2 1 4 5 7

EXECUTIVE COMMITTEE


>36:

1. Ahmet PikerGeneral Manager. Born in 1950. Graduate of Bo¤aziçi

University, Faculty of Administrative Sciences. General

Manager of Brisa since 01.03.1996.

2. Hisao IkawaExecutive Coordinator. Born in 1951. Graduate of Keio

University, Department of Law. Working for Bridgestone

since 1974 and for Brisa since 10.09.2002.

3. Hakan BaymanAssistant General Manager for Marketing and Sales. Born

in 1966. Graduate of 9 Eylül University, Faculty of

Economics. Masters degree in Marketing from National

University, USA. Working for Brisa since 15.09.2002.

4. Hisao KawamotoChief Technical Officer. Born in 1944. Graduate of Shibaura

Technology Institute, Mechanical Engineering Department.

Working for Bridgestone since 1967 and for Brisa since

07.12.1999.

5. Uygur GülleAssistant General Manager for Finance, Planning and

Control. Born in 1943. Graduate of Middle East Technical

University, Faculty of Administrative Sciences. Masters

degree from the University College of North Wales. Working

for Brisa since 11.09.1987.

6. Yoshio NeagariFinancial Assistant. Born in 1954. Graduate of Tokyo

University of Foreign Studies. Working for Bridgestone

since 1978 and for Brisa since 06.09.2002

7. Tevfik KoyutürkSecretary to the Executive Committee. Budget and

Financing Manager. Born in 1966. Graduate of Bo¤aziçi

University, Department of Industrial Engineering. Masters

degree from the University of Hartford. Working for Brisa

since 01.03.1993.

1. Top Management of the Company

Executive Committee

Haldun KuranSales Director. Born in 1955. Graduate of Middle East

Technical University, Faculty of Administrative Sciences,

Department of Management. Working for Brisa since

01.03.1999.

Hitoshi IgarashiOE Director. Born in 1957. Graduate of Otaru University,

Department of Commerce. Working for Bridgestone since

1980 and for Brisa since 10.05.2004.

Gökhan Cücelo¤luMarketing Director. Born in 1959. Graduate of Bradley

University, USA, Faculty of Business Administration. Working

for Brisa since 16.10.1989.

A. Kemal PamirProduction Director. Born in 1958. Graduate of Middle

East Technical University, Department of Industrial

Engineering. Working for Brisa since 01.12.1982

Ertu¤rul Y›lmazTechnology Director. Born in 1956. Graduate of Middle

East Technical University, Department of Mechanical

Engineering. Working for Brisa since 02.11.1982.

Necip ÖzçerIndustrial Relations and Human Resources Director. Born

in 1955. Graduate of Middle East Technical University,

Department of Chemical Engineering. MBA degree from

Kocaeli University. Working for Brisa since 17.09.1984.

Selim OkuturStrategy and Business Development Director. Born in 1958.

Graduate and Post Graduate degrees from Middle East

Technical University, Department of Mechanical

Engineering. Working for Brisa since 02.01.1985.

Ömer ÖzdilAccounting Manager. Born in 1951. Graduate of ‹stanbul

Academy of Economic and Commercial Sciences.

Management-Accounting Department. Working for Brisa

since 15.09.1976.

Tahsin U¤ur ‹skentLegal Consultant. Born in 1955. Graduate of ‹stanbul

University, Faculty of Law. Working for Brisa since

01.10.1988.

>37:

Employee Turnover:As of 31.12.2004, the total number of people employed

in the Company on indefinite term contract basis is 1,364.

Out of this number, 1,048 are subject to Collective Labor

Contract terms and conditions, while 308 of them are

not. The number of expatriates is 8. Additional 10 persons

are working on a definite period contract basis.

Implementation of the Collective LaborContract:The 13th term Collective Labor Contract was signed on

13.05.2004. The Contract is valid for the period

01.01.2004-31.12.2005.

Severance Pay Liability:The Company’s severance pay liability as of 31.12.2004

is YTL 11,037,424.40.

Fringe Benefits to Employees and WageEarners:The Company provides its employees and wage earners

benefits such as legal vacation pay, bonuses (4 salaries

per year), fuel, allowances for religious holidays and for

annual leave, clothing, work clothes, shoes, allowances

for cleaning material, for education, for birth, death and

marriage, for meals and commuting expenses.


>38:

1. Statement of Compliance with the CorporateGovernance PrinciplesBrisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi. hasacted in compliance with and has performed in accordancewith the Corporate Governance Principles issued by theCapital Markets Board (CMB) of Turkey during the period01 January 2004 - 31 December 2004.

2. Shareholders Relations UnitThe queries from shareholders and relations with investorsare directed by the Company's Budget and FinanceManager. Within this framework, meetings with 14investment institutions were realized in 2004.Contact: Mr. Tevfik Koyutürk

Phone: (Int+90) 262 364 73 00/ext.:6600 e-mail: [email protected]

The Company’s ‹stanbul Office maintains a staff exclusivelyto deal with the issues such as exchange of shares,payments of dividends.Contact: Mr. Cemal Aydemir

Phone: +90 (212) 278 00 21/ext.:20033 e-mail: [email protected]

3. The Exercise of Shareholders’ Right to ObtainInformationTwo written queries were received from the shareholdersduring the year 2004, which were replied in writing.Information requests through telephone calls were alsoanswered.The annual report of our Company is disclosed for publicaccess on our Company's website. Starting from 2005,regular and material information for shareholders andinterim financial statements will also be available onCompany's website.The Articles of Association does not cover a procedure ofappointing a "special auditor". There has been no requestfor such an appointment within the past period.

4. General AssemblyThe 2003 Ordinary General Assembly was held on 19April 2004. 25 shareholders, representing 89% ofCompany's capital, were present at the Meeting. Invitationto the General Assembly was done in accordance withthe procedures stated on the Articles of Association. Theparticipation of registered shareholders to the Meetingwas realized in accordance with the Turkish CommercialCode. Audited financial statements covering 2003 resultswere disclosed to shareholders at the ‹stanbul Office beforethe General Assembly. During the meeting shareholdersdid not raise any questions. Agenda items were decidedas proposed by the shareholders.A procedure for important decisions to be taken by theGeneral Assembly is not included in the Articles ofAssociation, since the Board of Directors represents theconsent of the General Assembly.The records of the General Assembly will be disclosed atCompany's website (www.brisa.com.tr) starting from 2005.

5. Voting Rights and Minority RightsAccording to the Company’s Articles of Association, thereare no privileges regarding voting rights.Cumulative voting procedure was not included in Articles

of Association in order to maintain the current harmoniousmanagement structure.

6. The Dividend Policy and Time of Paymentfor DividendsThe Company’s general policy of profit distribution is topay at least half of the profit as dividend. Each year theBoard of Directors prepare a profit distribution proposalaccording to the status of ongoing/planned projects andfunds.Profit distribution is being realized within the legal timelimits.Hac› Ömer Sabanc› Foundation, owning 100 founderprivileged shares, together with the Board of Directorsare entitled to privileged profit distribution as stipulatedin the Articles of Association. The amount of profit to bedistributed to the Board of Directors is decided by theGeneral Assembly according to the Articles of Association.

7. Transfer of SharesAs stated in details on the Articles of Association (item 31),the transfer of shares owned by Hac› Ömer Sabanc›Holding A.fi. and Bridgestone Corporation, is subject tocertain limitations. Briefly, concerning the transfer of shares, Hac› Ömer Sabanc› Holding A.fi. and BridgestoneCorporation should make their offers first to each other.They cannot transfer their shares to the third parties whoare deemed to be, or will be, or expected to be thecompetitors of either Sabanc› or Bridgestone, or of theiraffiliates or subsidiaries, by meaning having the same asor similar to the subjects of Sabanc› or Bridgestone.The Articles of Association does not include any restrictionsfor other shareholders in transferring their shares.

8. Public Disclosure Policy of the CompanyThe Company does not have a specific disclosure policy.Company's financial statements as of third, sixth, ninthand twelfth months are publicly disclosed.

9. Disclosure of Special EventsIn accordance with CBM regulations, 9 special eventannouncements were made in 2004. An additionalinformation was requested for one of the announcements.Special event announcements were done on time, notleading to implementation of any measures by CMB onthis ground.The shares of the Company are not quoted in foreigncapital markets.

10. Company Website and its ContentThe Company's website is accessible at www.brisa.com.tr.Information listed at Section II item 1.11.5 of CorporateGovernance Principles of Turkey issued by CBM will startto be disclosed by the Company starting from 2005.

11. Disclosure of Ultimate ControllingIndividual Shareholder(s)The Company does not have any ultimate controllingindividual Shareholder.Shareholder structure is disclosed at Annual Reports ofthe Company.

CORPORATE GOVERNANCE PRINCIPLES COMPLIENCE REPORT

>39:

12. Disclosure of Persons who Can PotentiallyPossess Price Sensitive InformationInformation is given at Company's Annual Report aboutthe Board of Directors and about the top managementwho can potentially possess price sensitive information

13. Information to StakeholdersInformation is disclosed to the Company's employeesthrough announcements, meetings and internet.The internet based "Dealer Information System" providesall essential information for Company's dealers, our mostimportant links to end-users. Besides using this channelfor all types of information exchange, meetings withdealers at regional and national levels are held to shareinformation in person and to enhance mutualcommunication.Company's suppliers are informed through meetings andannouncements.

14. Stakeholders' Participation in CompanyManagementOur Company implements a management model, whichis based on employees' contribution for the developmentof the main policies of the Company, for extending thesepolicies throughout its structure and turning them intotargets, for the realization of planned implementationsand for reviewing the results to ensure further improvementin the processes. Suggestions by stakeholders other thanemployees (such as customers, suppliers) are alsoconsidered in development of Company policies.

15. Human Resources PolicyFundamentals of the Human Resources Policy of ourCompany can be summarized under four headings asfollows:a) In parallel with Brisa's long term plans, human resourcesplans and practices aim at meeting the future needs ofthe Company,b) Emphasizing the human aspect and TQM philosophy,employees' dedication to the Company through theirproductivity, motivation and welfare is keenly sought,c) The Company's human resource needs, and qualificationsand expectations of individual employees are balancedthrough right positioning at right time,d) Employees’ performance and potentials are objectivelyevaluated, their skills are developed to meet Company'schanging needs, and they are prepared for furtherresponsibilities through training and gaining of experience.No complaints of discrimination in any form were receivedfrom employees in 2004 and before.

16. Information about Customer and SupplierRelationsOur Company serves the end-users through a countrywidedealer network in the domestic market. Technical assistanceto improve service quality is provided for our dealers, andorientation programs are held for the new dealers.Researches are conducted regularly to observe and improvedealers' attitudes towards end-users. The Company’swarranty system completely fulfils legal obligations, whilenew projects and practices for faster and more efficientconnection with customers are realized. All complaintsand suggestions are processed thoroughly by the CustomerRelations and Sales Departments. For passenger vehiclegroup, after-sales "Road Assistance" service is provided

and its effectiveness is closely monitored.Brisa’s products are fitted as original equipment byautomotive manufacturers, producing a wide range ofvehicles of different types and qualifications, majority ofwhich are exported. To serve this end, Brisa establishesclose contacts with automotive manufacturers startingfrom the development stage of the vehicle and focuseson research and development activities to supply the mostsuitable products for the vehicles.Our Company's relations with the suppliers of raw material,equipment and services are established on the principlesof mutual trust, sound communications, consistent supportfor improvement as well as mutual respect for communityand environment. Our suppliers of raw material arequalified according to pre-set Company standards. Brisaestablishes long-term relations with those suppliers whoprioritize customer satisfaction. The performances ofsuppliers are regularly followed and problems, if any, arecarefully considered. Through systematic assessments bythe Company, necessary assistance is provided for suppliersto review their own systems and make necessaryimprovements.

17. Social ResponsibilityEnvironmental AwarenessBrisa cooperates with all stakeholders from suppliers tocustomers for the protection of environment, displayingan active and participatory approach. Brisa's fundamentalprinciple is to control, reduce and prevent the causesadversely affecting natural life.The Company renders utmost attention in designing theproducts, considering the possible adverse effects on theenvironment. Raw materials that do not pollute the natureand do not carry any health risks are selected forproduction. Throughout the production processes possiblesources of pollution are carefully and strictly controlled.The Company’s waste treatment facilities have qualitycontrol certificates for proper discharge, which are regularlyrenewed while the Company also has emissionauthorization, certifying air quality control. The waste thatcan not be recycled are directed to licensed disposalfacilities. All the factors related to products, services andother activities are assessed and displayed on environmentalimpact charts.No legal action has been taken against the Companyconcerning environmental issues.

Social CampaignsBrisa aims to increase public awareness against trafficaccidents in Turkey, through “Daytime running lights”campaign. The campaign was awarded as the Best SocialResponsibility Marketing Campaign by Marketing AgenciesAssociation Worldwide in 2004.

BrisasporFounded in 1982 under the name of Lassaspor, Brisasporaims to provide opportunities for children and youth ofKocaeli area for cycling sport.

Contribution to Hac› Ömer Sabanc› FoundationAccording to the Articles of Association, Brisa contributesto the foundation through profit distribution. The primarygoal of the Foundation is to provide a broad range ofservices to the public and to assist the government in thesocial and cultural development of Turkey, thereby relievingthe state of some of its fiscal burdens.


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18. Structure and Formation of the Board ofDirectors and Independent MembersNon-Executive Board Members:Chairman: Güler SABANCIVice Chairman: Shoshi ARAKAWAMember: Faruk B‹LENMember: Ziya Engin TUNCAYMember: Turgut UZERMember: Mustafa BAYRAKTAR

Executive Board Members:Member: Hisao IKAWAMember: Hisao KAWAMOTOMember: Yoshio NEAGARI

General Manager: Ahmet P‹KER

Brisa is a joint venture established by Sabanc› Holdingand Bridgestone Corporation. Due to joint managementstructure, there are no independent members on theBoard. Members of the Board of Directors have beenpermitted by the Company's General Assembly to conductall actions set out by the Turkish Commercial Code items334 and 335.

19. Eligibility for Board MembershipThe qualifications of the members of the Company's Boardof Directors are in conformity with the qualificationsmentioned at Section IV items 3.1.1, 3.1.2 and 3.1.5 ofCorporate Governance Principles of Turkey issued by CMB.The Company’s Articles of Association does not specifyminimum standards of qualification for the Board Members.

20. Company Mission, Vision and StrategiesCompany mission, vision, values and strategies are annuallyreviewed by the Company’s top management and thestrategic targets formed through these reviews are sharedwith employees at annual meetings and through theCompany’s web-site.Strategic targets are defined by the Executive Committeeunder the light of Brisa mission and vision, and they aresubject to approval of the Board of Directors afterdiscussion. The members of the Executive Committee arethe General Manager; Executive Coordinator; ChiefTechnical Officer; Assistant General Manager for Finance,Planning and Control; Assistant General Manager forMarketing and Sales; and the Financial Assistant.The Board of Directors reviews, at least four times a year,the extent to which the set targets are achieved, theongoing activities and the performance of the Companyin the past period.

21. Risk Management and Internal ControlMechanismThe Executive Committee, established according to theCompany’s Articles of Association whose members are theGeneral Manager; Executive Coordinator; Chief TechnicalOfficer; Assistant General Manager for Finance, Planningand Control; Assistant General Manager for Marketingand Sales; and the Financial Assistant, controls actively allrisks relevant to the Company. Therefore, a separate riskmanagement and internal control mechanism was notestablished by the Board of Directors.

22. Duties and Responsibilities of the Boardof Directors and ExecutivesManagement right and representative authority of theBoard of Directors are defined on the Company’s Articlesof Association. Additional definitions for duties andresponsibilities of the Executives are not given in theCompany’s Articles of Association.

23. Principles of Activity of the Board ofDirectorsThe Board of Directors realized a total of 13 meetings in2004, holding 4 of the meetings in person and 9 of themthrough written consent in line with the Turkish CommercialCode and the Company’s Articles of Association. Theagenda of the Board meeting is disclosed to each Boardmember at least 10 days before the meeting date. Themembers of the Board of Directors do not have weightedvoting right and/or the veto right. As stated by theCompany’s Articles of Association, all resolutions acceptedby six or more members of the nine-person Board ofDirectors become effective.During 2004, there have been no different views statedon decisions taken by the Board. In case of agenda itemsas described in Section IV item 2.17.4 of CorporateGovernance Principles of Turkey issued by CMB, attendanceto the Board meetings of all Members without a validexcuse was ensured. Board Members did not raisequestions to be recorded.

24. Prohibition of Transaction and Competitionwith the CompanyThe members of the Board of Directors have been permittedby the Company's General Assembly to practice the actionsset out by the Turkish Commercial Code items 334 and335. No conflict of interest was staged because of that.

25. Ethical RulesA series of approaches grouped under the title of “BrisaValues” define the ethical rules that Brisa employees areto respect. Brisa Values are disclosed to Companyemployees and explained to public through Brisa website.

26. Number, Structure and Independence ofthe Committees Established by the Board ofDirectorsAudit Committee established by the Board of Directorshas three members, two of them being non-executivemembers of the Board. Audit Committee met 4 times in2004.

Members of the Audit Committee:Shoshi Arakawa, Vice ChairmanTurgut Uzer, Board MemberHisao Ikawa, Board MemberAs the Board of Directors are directly following corporategovernance principles and ensuring compliance withthem, no separate committee was established for thispurpose.

27. Remuneration of the Board of DirectorsThe Board of Directors are entitled for profit distributionas stated on the Company’s Articles of Association(item 28). Board members are not paid any wages andcannot receive any loans.

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PROPOSAL FOR PROFIT DISTRIBUTION


The Board of Directors hereby submits and kindly requests resolution for distribution of the profit worth YTL 45,823,485.93after Corporate Tax, Witholding Tax and First Legal Reserve deduction from the IFRS profit of YTL 69,833,289.74 generatedin the period of 01.01.2004 - 31.12.2004 according to Article 28 of Articles of Association, as given below:

BR‹SA BR‹DGESTONE SABANCI LAST‹K SANAY‹ VE T‹CARET A.fi

STATEMENT OF PROFIT DISTRIBUTION FOR THE YEAR ENDED 31 DECEMBER 2004 (YTL)

31.12.2004

YTL

A- DISTRIBUTION OF PROFIT FOR THE PERIOD

1- PERIOD PROFIT 69,833,289.74

2- TAXES PAYABLE (-) (21,598,041.39)

- Corporate Tax (16,140,078.09)

- Income Tax (5,457,963.30)

3- FIRST LEGAL RESERVES (-) (2,411,762.42)

4- NET DISTRIBUTABLE PERIOD PROFIT 45,823,485.93

5- FIRST DIVIDEND TO SHAREHOLDERS (-) (21,496,759.37)

- To Common Stock Owners (18,005,094.89)

- To Privileged Shareholders (3,491,664.48)

6- DIVIDENDS TO THE BOARD OF DIRECTORS (-) (270,000.00)

7- SECOND DIVIDEND TO SHAREHOLDERS (-) (21,064,748.86)

- To Common Stock Owners (21,064,748.86)

- To Privileged Shareholders -

8- SECOND LEGAL RESERVES (-) (2,482,641.33)

9- EXTRAORDINARY RESERVES (-) (509,336.37)

B- EARNINGS PER SHARE

1- To Common Stock Owners (YTL %) 6.01 / 601%

2- To Privileged Shareholders (YTL) 34,916.65

C- DIVIDENDS PER SHARE

(*)1- To Common Stock Owners (YTL %) 5.25 / 525%

2- To Privileged Shareholders (YTL) 34,916.65

The distributed amount corresponds to 525% of dividend on shares representing YTL 7,441,875 of capital, totally YTL39,069,843.75 , and usufruct,and shares of Board of Directors, as gross amount in cash.

(*) Calculations above are based on 1 YTL =1 Share = 1 Lot equation.

Note : As there was no profit distribution in 2003 , the table above could not have been given comparatively.

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Accounts and procedures of Brisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi. for the period of 1.1.2004 - 31.12.2004

were audited as required by the Turkish Commercial Code, the Articles of Association of the Company, other regulations

and generally accepted accounting principals and standards.

In our opinion, the Balance Sheet prepared as of 31.12.2004 reflects the true financial status of the company at the date,

the Income Statement for the period of 1.1.2004 - 31.12.2004 reflects the actual and accurate results of the Company’s

activities. Profit distribution proposal is in compliance with the Company’s Articles of Association and legislation.

We hereby submit the Balance Sheet and Income Statement for your approval and release of the Board of Directors.

Title Brisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi.

Head Office ‹stanbul

Issued Capital YTL 7,441,875

Field of Activity Production and sales of vehicle tires

Name and duty period of auditors and relation with Fuat Öksüz – Akira Sakanashi – Mehmet Bingöl.company; as shareholder or employee Our duty period is one year. We are not shareholders

and employees of the company.

Number of Board Meetings participated and The number of Board meetings participated was 4.Auditors’ Committee Meetings held The number of Auditors’ Committee Meetings held was 6.

Scope of audits performed on the Company’s The Company’s accounts, books and documents wereaccounts, books and documents; dates on which audited in the first week of the 3rd, 6th, 9th and 12thexaminations were made, conclusions reached. months in compliance with the tax regulations and the

Turkish Commercial Code. The results of the audits were satisfactory.

Number and conclusion of cash counts made according Cash counts were made 4 times and were found into subparagraph 3 of paragraph 1 of article 353 of the accordance with the existing records.Turkish commercial code

Dates and conclusion of audits made according to In the audits made on the first working day of each month,subparagraph 4 of paragraph 1 of article 353 of the it was determined that existing securities were in accordanceTurkish commercial code with records.

Complaints and irregularities received and actions taken There were no complaints received.

01.03.2005

BOARD OF AUDITORS

Fuat ÖKSÜZ Akira SAKANASHI Mehmet B‹NGÖL

AUDIT REPORTTo the General Assembly of

Brisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi.

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To the Board of Directors of

Brisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi.

1. We have audited the accompanying balance sheet of Brisa Bridgestone Sabanc› Lastik Sanayi ve Ticaret A.fi. (the

“Company”) as at 31 December 2004 the related statement of income, shareholders' equity and cash flow for the year

then ended, all expressed in the equivalent purchasing power of the Turkish Lira at 31 December 2004. These financial

statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these

financial statements based on our audit.

2. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

3. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position

of the Company as of 31 December 2004 the results of its operations and its cash flows for the year then ended, in

accordance with International Financial Reporting Standards (formerly International Accounting Standards).

DENET‹M SERBEST MAL‹ MÜfiAV‹RL‹K A.fi.

Member of DELOITTE TOUCHE TOHMATSU

Ömer Tanr›över

Partner

‹stanbul, 24 February 2005

INDEPENDENT AUDITORS' REPORT

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