ECZACIBAÞI COMPANY - Eczacıbaşı · Vitra Ceramic Sanitary Ware 10 Artema Sanitary Fittings 14...

ECZACIBAfiI

BUILDING MATERIALS

COMPANY

ANNUAL REPORT 2001

3

Group Profile / Company Profile 5

Board of Directors 6

Message from the Chairman 8

Vitra Ceramic Sanitary Ware 10

Artema Sanitary Fittings 14

Report and Accounts for 2001 21

Balance Sheet 28

Notes to the Balance Sheet 30

Statement of Income 43

Notes to the Statement of Income 44

Statement of Retained Earnings 47

Statement of Sources and Uses of Funds 48

Statement of Cash Flows 49

Statement of Cost of Goods Sold 50

Independent Auditor’s Report 51

CONTENTS

4

Eczac›bafl› is a prominent Turkish industrial group with a

combined net turnover of $1.2 billion, 37 companies and

more than 7,200 employees in 2001. Eczac›bafl›’s core

sectors are pharmaceuticals, building materials and

consumer products. The Group is also active in finance,

information technology and welding technology.

In Turkey, Eczac›bafl› is the leader in seven of its 12

industries, including pharmaceuticals, ceramic sanitary

ware, tissue paper and personal care products. It also has

the most extensive distribution coverage, reaching over 90

percent of the nation’s sales points.

International partnership is a central component of the

Eczac›bafl› Group’s growth strategy. Eczac›bafl› has 10 joint

ventures and close to 30 cooperation agreements with

leading international companies. All of these are grounded

on the principle of long-term mutual benefit, based on firm

business criteria and ethical business practices.

Founded in 1942 by Dr. Nejat F. Eczac›bafl›, the Eczac›bafl›

Group takes its name from the honorary title "chief

pharmacist", conferred on the father of Dr. Eczac›bafl› at

the turn of the last century. The Eczac›bafl› Group’s

mission is to be a pioneer of modern, high quality and

healthy lifestyles. Accordingly, the Group encourages each

of its companies to surpass established standards in their

sectors and raise consumer benchmarks of product and

service quality. Through sponsorship and responsible

corporate practices, it also promotes social and economic

development that nurtures cultural and scientific activity,

protects the environment and preserves scarce natural

resources.

Eczac›bafl› Holding is the parent company of the Eczac›bafl›

Group. This is a family-owned, professionally managed

company now directed by the second generation. Five

Group companies are traded on the Istanbul Stock

Exchange, including Eczac›bafl› Pharmaceuticals Company,

Eczac›bafl› Building Materials Company and Intema Building

Materials Marketing and Sales Company.

5

GROUP PROFILE COMPANY PROFILE

Eczac›bafl› Building Materials Company (EYAP) comprises

two divisions: Vitra Ceramic Sanitary Ware, Turkey’s

leading producer of ceramic sanitary ware, and Artema

Sanitary Fittings, Turkey’s largest supplier of single lever

mixers. In Turkey, Vitra and Artema primary serve the

quality-conscious, high-income consumer segments, where

they compete successfully with prestigious international

brands. Vitra and Artema also export over half their sales

to major markets in Europe and North America. Vitra is

particularly strong in Germany and the UK, where it has

respective market shares of 12 percent and 5 percent.

Artema’s main export market is the US, but it is rapidly

increasing its presence in Europe as well.

The main shareholders of Eczac›bafl› Building Materials

Company are Eczac›bafl› Holding Company (52.02 percent)

and Intema Building Materials and Marketing Company (11.0

percent). Twenty-nine percent of the company is traded on

the Istanbul Stock Exchange.

6

7

(From left to right)

N. Atila Ildafl Director

Hüsamettin Onanç Director

A. Tayfun ‹ndirkafl Director

F. Bülent Eczac›bafl› Chairman

M. Reflat Alatal› Director

A. fiadi Burat Director

Ahmet T. Yamaner Director

Engin Bayraktar Director

BOARD OF DIRECTORS

8

Eczac›bafl› Building Materialsachieved a solid performance in2001.

In Turkey, where domesticdemand and construction activityplunged, Eczac›bafl› BuildingMaterials reinforced its standingin both the premium and economy

segments of the ceramic sanitary ware and fittings markets. During theyear, Eczac›bafl› launched more than 100 new products aimed atreinforcing its reputation for innovative design and functionality in thepremium segment and enhancing its offer of quality-for-value products inthe middle and economy segments.

Abroad, Eczac›bafl› Building Materials continued to expand itsdistribution reach in targeted export markets. Backed by its strongbrand position in the domestic market, Eczac›bafl› has increasinglyfocused on developing its share in major export markets. Today,exports account for 70-75 percent of total sales. Eczac›bafl› BuildingMaterials’ long-term goal is to transform Vitra and Artema intoglobal brands.

EYAP-Vitra Ceramic Sanitary Ware exported 74 percent of its totalsales in 2001, advancing its position in Germany, Britain, the United

MESSAGE FROM THE CHAIRMAN

9

States, France, Portugal, Israel and Scandinavian countries. It alsoinitiated exports to China, India, South Africa and several MiddleEastern countries, raising the number of its export markets to 51.Looking ahead, Vitra finalized cooperation agreements with severalinternational bathroom and furniture companies that will contributesignificantly to export sales in the coming years.

EYAP-Artema Sanitary Fittings also extended its export reach in2001, raising the number of its export markets from 29 to 36 andstrengthening its cooperation agreements with international companies.Last year, the world’s largest DIY hypermarket chain, IKEA,increased its product orders from Artema from two categories to 30,leading to a sharp increase in business between the two companies.Despite adverse conditions in Turkey’s financial markets, Artemacompleted a major investment in a new plating unit that will enable it tooffer life-long guarantees on products coated with this specialtechnology.

Last year, developments in the Turkish market reconfirmed the wisdomof Eczac›bafl› Building Materials’ long-standing focus on exports. Webelieve that sustainable long-term growth can only be achieved throughnew market development and the building of international brandrecognition. Eczac›bafl› Building Materials is making steady progressin both areas.

BÜLENT

ECZACIBAfiI

10

Vitra is Turkey’s leading supplier and exporter of high

quality ceramic sanitary ware for bathrooms and kitchens.

With an annual capacity of 3.5 million big pieces and state-

of-the-art technology, Vitra’s plant in Bozüyük, Turkey,

ranks among the world’s top three in terms of capacity and

product quality. Founded in 1958, Vitra‘s mission is to raise

continually the standards for modern bathrooms through

innovative, high quality products that revolutionize the

look and functionality of bathrooms and enhance consumer

value. Vitra aims to become a global brand by extending

this mission to international markets.

REVIEW OF OPERATIONS

VITRA

CERAMIC SANITARY WARE

11

Vitra achieved a solid performance in 2001, strengthening

its domestic brand leadership while expanding its presence

in major export markets.

In Turkey, where the economic crisis and sharp decline in

disposable income further exacerbated stagnant conditions

in the construction market, Vitra bolstered its market share

with new product launches and marketing campaigns aimed

at increasing distributor and consumer awareness of

innovative product attributes.

Abroad, Vitra continued efforts to build sizeable and

sustainable market shares in major international markets, a

strategy it has pursued actively for more than two decades.

In 2001, Vitra directed more than 70 percent of its sales to

51 export markets and established several new strategic co-

operation agreements with global companies.

Vitra has a particularly strong reputation in the German and

UK markets, where it has respective market shares of 12

percent and 5 percent. In 2001, Vitra accelerated

preparations to expand its sales in the premium segment of

the German market and raise its overall market share in the

UK to 10 percent within a few years time.

One of Vitra’s top priorities is to establish a strong foothold

in the large and highly competitive US market. Last year,

Vitra took a major step towards achieving this goal with the

establishment of a wholesaler network that will expand its

reach to distributors and retailers from New England to

California.

In France, Vitra expanded its export volume by 48 percent

in 2001 and the number of its customers to more than 100.

New agreements with large customers and wholesaler

groups contributed to this achievement, as did the

establishment of customer warehouses and improvements in

logistic services. In Italy, cooperation agreements enabled

Vitra to augment its share of this market to 2 percent.

Vitra became the leading international supplier of ceramic

sanitary ware to Scandinavian markets in 2001. Last year,

Vitra activated a large warehousing operation in Denmark to

facilitate quick and efficient supplies to customers in

Denmark, Sweden, Finland and Norway.

Measures taken in other European markets also yielded

good results. Strong sales to Spain, the Czech Republic and

MARKET DEVELOPMENTS

12

Malta were complemented by first-time exports to

Lithuania and an expanded presence in the luxury segments

of the Portuguese and Croatian markets. To reinforce sales

in neighboring Greece, Vitra established a wide-reaching

distribution network with regional wholesalers.

In recent years, Vitra has also increased its marketing

activity in Asian and Pacific markets. Vitra aims to acquire

a 10 percent share of the Israeli market, where it is already

the best known building material brand. In 2001, Vitra also

initiated contacts with distributors in Yemen and Palestine

and finalized commercial agreements with large-scale

distributors in Algeria and Tunisia. New showrooms in

Lebanon, Saudi Arabia and the United Arab Emirates

continued to boost sales in these markets, as did strong

distribution channels and showroom networks in Australia

and New Zealand. In a major move last year, Vitra also

established sales networks in India and China, opening the

door for exports to these giant markets.

One of Vitra’s major marketing achievements in 2001 was

the establishment of cooperation agreements with three

global companies. Last year, Vitra signed cooperation

agreements with Toto and Kohler and became the exclusive

supplier of ceramic sanitary ware products to IKEA, the

world’s largest DIY hypermarket chain.

Vitra’s long-term goal is to become a global brand. To raise

the prestige and recognition of its brand in international

markets, Vitra is continually expanding the number of its

showrooms and its marketing activities abroad. In 2001,

Vitra participated in several international fairs, including

the ISH fair in Germany, the Mosbuild fair in Russia, the

Kievbuild fair in the Ukraine and the Cersaie fair in Italy.

Vitra manufactures ceramic toilet bowls, reservoirs, wash

basins, basin stands, bidets, pissoirs, kitchen sinks, shower

stalls and a variety of ceramic accessories. It also

produces toilet seats, built-in reservoirs, flushing systems,

hand bars and seats for the elderly and disabled, as well as

complementary products for bathroom sets.

In 2001, Vitra launched 85 new products and four

bathroom sets aimed at enhancing its prestigious image in

domestic and export markets: Nuova, Mona, Katia and Mia.

Nuova and Mona are geared to consumers seeking unique

and modern designs; Katia and Mia offer ergonomic designs

with a classic feel. All together, Vitra produces 14 complete

bathroom suites for a wide variety of lifestyles.

Most of Vitra’s new products incorporate innovative

technological features, such as water-saving and photocell

flushing systems and hygiene-enhancing surfaces. Last

year, Vitra expanded the range of products under its

VitrAclean and VitrAhygiene labels, which refer to special

technologies that prevent the accumulation of dirt and

bacteria on surfaces. First applied to ceramic sanitary

ware, Vitra now offers anti-bacterial options for toilet

seats and acrylic shower trays as well.

All Vitra products are certified by the Turkish Standards

Institute (TSE) as well as by the standards institutes of

major export markets. These include, among others,

certifications from Germany, the UK, France, Holland,

Denmark, the US, Israel, Australia, Canada and Russia.

Vitra obtained ISO 9001 Quality Systems Certification in

1994 and ISO 14001 Environmental Management Systems

Certification in 1998. Vitra is the only ceramic sanitary

ware producer in Turkey and the second in the world to

receive ISO 14001, a demonstration of its singular

commitment to protecting the environment and preserving

scarce natural resources.

NEW PRODUCT LAUNCHES

13

14

Artema is the leading supplier of single lever mixers to the

Turkish market and the second largest sanitary fittings

producer overall, with a combined annual capacity of 5

million chrome-plated, color-finished and brass faucet

batteries. In addition to sanitary fittings for bathrooms and

kitchens, Artema manufactures bathroom accessories.

Artema’s mission is to provide bathroom and kitchen

solutions that surpass customer expectations of quality,

design and functionality.

ARTEMA

SANITARY FITTINGS

15

Artema maintained its strong share in the Turkish market

in 2001 while increasing its export markets and

strengthening its business with global companies.

Artema used the sharp contraction in domestic building

material sales in 2001 to review its competitive position in

the Turkish market and initiate a series of measures aimed

at strengthening its domestic market share in coming

years. Based on a careful analysis of competitor products

and market segments, Artema adjusted its product

development plans and stepped up marketing activities

aimed at communicating product attributes to dealers and

consumers.

Abroad, Artema was particularly successful in expanding

its export reach, raising the number of its export markets

from 29 to 36 in 2001, four more than originally planned.

Product and brand communication were the key objectives

of Artema’s international marketing activity last year.

Here, Artema focused primarily on target export markets

Germany, Sweden, Israel, the UK, Italy, Poland, Australia as

well as Middle Eastern and CIS republics providing

training to sales and marketing teams distributing Artema

products. It also participated in major international fairs in

these markets, including the ISH fair in Germany, the

Mosbuild fair in Russia, the Kievbuild fair in the Ukraine,

the Cersaie fair in Italy and the Interbuild fair in Australia.

Artema’s strong export record 65 percent of sales in

2001 reflects the strength of its international customer

portfolio. Business with these customers has increased

steadily over the last decade, indicating high satisfaction

with Artema’s product quality and customer services. As

of end-2001, 40 of its 69 large international customers

were concluding their fourth consecutive year of business

with Artema.

Artema’s single largest customer is Moen Inc., the leading

supplier of faucets to the US market. In 2000, Artema also

became a preferred supplier of IKEA, the world’s largest

DIY hypermarket chain. Last year, IKEA increased its

orders from two product categories to 30, leading to a

sharp increase in business between the two companies.

IKEA’s satisfaction with Artema’s performance was

confirmed by its selection of Artema for its 2001 IKEA

Most Successful Supplier, Second Prize. As of end-2001,

Artema products were available in more than 150 IKEA

sales points in 30 countries.

MARKET DEVELOPMENTS

16

NEW PRODUCT DEVELOPMENTMANAGING THE 2001

ECONOMIC CRISISLast year, Artema reinforced its leadership in the luxury

segment of the Turkish sanitary fittings market with a new

series for design and quality-conscious consumers — the

Juno minimalist series of fittings and accessories. To

counter the effect of the narrowing domestic market,

Artema also launched three new series for the middle-

income and economy segments of the market — Ares and

Atlas fittings and Pratica accessories. It also strengthened

its position in the rapidly growing commercial

establishment market, launching the Arion series of

fittings and accessories and expanding the range of its

Arkitekta series of bathroom accessories for hotels.

Arion single lever mixers, designed specifically for the

needs of hotels, restaurants, hospitals and other large

commercial establishments, contain special cartridges that

control water temperature and water flow and thus reduce

energy and water costs. They also contain calcium-

resistant filters that ensure a clean and smooth flow of

water.

In addition to the series listed above, Artema developed

close to 100 products specifically for the needs of several

export markets and large international customers.

All Artema products are certified as meeting the quality

standards of the Turkish Standards Institute. Export

products are additionally certified as meeting the quality

standards of export markets, including KIWA in Holland,

LGA in Germany, QAS in Australia, Gost and R in Russia,

NUTEK in Hong Kong, SITAC in Sweden, WRC in the UK,

CSA in the US, STF in Finland, ETA in Denmark and

BYGGFORSK in Norway.

In anticipation of a difficult economic environment,

Eczac›bafl› Building Materials entered 2001 with a highly

liquid financial structure and a relatively low volume of

foreign currency-denominated debt. All the same, the depth

of the financial crisis in February 2001 and the subsequent

halt in economic activity posed a major challenge to the

company’s management last year.

To minimize the negative impact of the crisis and maintain

profitability, Eczac›bafl› Building Materials implemented a

series of coordinated measures aimed at reducing general

expenditures and enhancing its management of cash,

working capital and financial risk. At the same time, it

increased significantly its exports and improved the

productivity of its operations.

Eczac›bafl› Building Materials’ long-standing export

strategy served it well in 2001. Because of the high ratio of

exports in its total sales, 70 percent for the year as a

whole, Eczac›bafl› Building Materials’ profitability was

strengthened by the sharp devaluation of the Turkish lira in

February of last year. This performance enabled Eczac›bafl›

Building Materials’ to retain every one of its employees in

2001.

In readiness for potential new risks in coming periods,

Eczac›bafl› Building Materials will continue to implement a

highly liquid financial strategy in 2002. To this end, it has

postponed major investment expenditures until the second

half of 2002 and enhanced its purchasing terms with

major suppliers.

17

Eczac›bafl› Building Materials’ human resource

management system is an integral component of its

strategic planning process and total quality management

applications. Through its performance management

system, Eczac›bafl› Building Materials transforms

company-wide goals and strategies into measurable critical

success areas for the company as a whole, as well as for

departments and individuals.

Regular performance evaluations enable Eczac›bafl›

Building Materials to monitor individual achievements in

the area of goals and competency levels. Eczac›bafl›

Building Materials expects every one of its employees to

attain clearly defined levels of competency, assisting them

through the provision of career development-structured

learning opportunities.

Eczac›bafl› Building Materials uses the "Balanced

Scorecard" system to monitor and compare departmental

and individual performance. Since 1999, it is also preparing

the necessary groundwork for implementing the "Economic

Value-Added" financial performance evaluation system.

In its entirety, the main goals of Eczac›bafl› Building

Materials’ human resources systems are to encourage

employees to participate in the formulation of its vision

and strategies, assist it identify future weaknesses and

prepare its human resources accordingly.

HUMAN RESOURCE STRATEGIESINVESTING

IN THE FUTURE

Eczac›bafl› Building Materials began its total quality drive

in the mid-1990s, winning national and international

recognition for its achievements in this area. These include

the TÜS‹AD-KalDer National Quality Award in the Large

Business Category (Vitra, 1998), the EFQM Quality Prize in

the Large Business Category (Vitra, 2000) and the

TÜS‹AD-KalDer National Quality Prize in the Large

Business Category (Artema, 2000).

In 2001, Artema stepped up efforts to enhance its

implementation of total productive maintenance, a program

it initiated formally in 1999. The aim of this program, in

which 78 percent of its workforce are involved, is to

achieve "zero accidents on the job, zero production halts

and zero error". In 2001, measures taken within the scope

of this program led to a 26 percent reduction in waste in

Artema’s operations.

In 2001, Artema also implemented several organizational

changes aimed at condensing its management structure

along process lines to improve its response capacity to

changing market demands.

18

TOTAL QUALITY MANAGEMENT

Plant Modernization

Eczac›bafl› Building Materials is committed to investing

continually in new production technologies that enhance

the value of its products to consumers.

Last year, Eczac›bafl› Building Materials expanded the use

of pressurized casting capacity at Vitra’s two ceramic

sanitary ware plants and completed a new PVD (physical

vapor deposition) unit at Artema’s Bozüyük plant. The

latter investment will enable Artema to significantly

increase the durability of its plating. Artema plans to

launch its first PVD-plated products in 2002 with life-long

guarantees.

Other investments in 2001 were aimed at modernizing

Artema’s accessory unit at its Tuzla plant and plating unit

at its Bozüyük plant; improving quality and reducing costs

in Artema’s sanding, polishing and casting units and

upgrading Artema’s Quality Control Laboratory.

Information Systems Management

In 2001, Vitra completed the installment of two

information management projects aimed at enhancing time

management and information sharing between

departments. In 2002, Vitra plans to augment further the

effectiveness of its Intranet system and to initiate the

integration and implementation of SAP applications on the

Internet. Vitra began using SAP R/3 ERP applications for

customer relations management, supplier chain

management, strategic enterprise management and

process life management in 1997.

Environment

Eczac›bafl› Building Materials is committed to reducing as

far as possible the negative impact of its industrial

activities on the environment and to preserving scarce

natural resources. It has fitted all of its manufacturing

units with waste treatment facilities and obtained ISO

14001 certification of both Vitra and Artema’s

environmental management systems.

As part of this ongoing commitment, Artema initiated

several new environmental investments in 2001, including

the modernization of its waste treatment facility, the

installation of air filters on its casting unit stacks and the

installation of an internal ventilation system. Other

measures led to a significant reduction in water and

electricity consumption last year.

CAPITAL INVESTMENTS

19

The Eczac›bafl› Group’s founder, Dr. Nejat F. Eczac›bafl›,

firmly believed that corporations had a fundamental

responsibility to contribute to the healthy development of

their communities through sponsorship of the arts,

education, scientific research and sports. Today, this

continues to be one of the core values of the Eczac›bafl›

Group.

In line with this commitment, Vitra provides substantial

monetary support to three of Turkey’s leading cultural

foundations the Dr. Nejat F. Eczac›bafl› Foundation, the

Istanbul Foundation for Culture and the Arts and the Izmir

Culture, Arts and Education Foundation. It also sponsors

the "Vitra Ceramic Art Studio", a project it founded in

1997 to promote ceramic art and raise public awareness of

this medium.

In 2001, Vitra organized two exhibitions of ceramic art

produced by nine artists at the workshop and hosted a

Turkish-Greek Ceramic Symposium aimed at reinforcing the

bonds of friendship between the two countries. In parallel

with this friendship theme, Vitra chose the world’s oldest

known peace treaty, the Kadesh Agreement, as the model

for its 2001 limited "Anatolia Collection" series.

Artema is a long-time sponsor of the Eczac›bafl› Sports

Club, which the Eczac›bafl› Group founded in 1966 to

promote sports among young people. Over the years, the

club has trained some of Turkey’s best basketball,

volleyball and table tennis athletes; today, its primary

objective is to prepare young women for its professional

volleyball team, which has an impressive record in both

national and international tournaments. Artema also

provides monetary and logistic support to a number of

public organizations in its community.

CORPORATE

REPONSIBILITY

20

21

REPORT AND ACCOUNTS 2001ECZACIBAfiI

BUILDING MATERIALS

COMPANY

I. Introduction

1. Period Covered by the Report

This report covers the activities of EYAP from January 1, 2001 to December 31, 2001.

2. Company Name

Eczac›bafl› Building Materials Industry and Trading Company (EYAP).

3. Board of Directors

F. Bülent Eczac›bafl› Chairman

M. Reflat Alatal› Executive Director

A. fiadi Burat Executive Director

A. Tayfun ‹ndirkafl Executive Director

Engin Bayraktar Director

N. Atila ‹ldafl Director

Hüsamettin Onanç Director

Ahmet T. Yamaner Director

The Board of Directors was elected at the April 18, 2001 General Shareholders' Meeting for a

period of one year.

Auditor

Ülkü Kabaday›

The auditor was appointed to serve until the examination of the accounts at the General

Shareholders' meeting.

4. Shareholders' Registered and Paid-in Capital

Registered Capital TL10,000,000,000,000

Paid-in Capital TL2,500,000,000,000

Profit before tax TL16,613,1 17,067,159

As it is a publicly-traded company, the exact number of EYAP shareholders is not known.

The value of the Company's shares fluctuated over the year parallel to movements in the

composite index of the Istanbul Stock Exchange. The 2001 closing price per share was TL

28,500.

In 1998 and 2000, the Company transferred profits to reserves. In 1999, the Company retained

all of its profit, amounting to TL 359,493,827,113, and used this to increase its capital in 2000.

22

ECZACIBAfiI

BUILDING MATERIALS COMPANY

REPORT AND ACCOUNTS FOR 2001

23

The list of shareholders owning 10% or more of Company shares is as follows:

Shareholder Share Value (TL) Share (%)

Eczac›bafl› Holding Company 1,300,411,430,000 52,02

Intema Building and Installation Materials Investment and Marketing Company 275,000,000,000 11,00

II. Activities

A) Investments

In 2001, the Company invested a total of TL 8.789,5 billion ($ 7,256,000) in improving Vitra and Artema's plants.

All of the investments benefited from investment incentives.

Description Total Investment Incentive Certificate

of the Investment (TL Billion) Date & Number Incentives

Artema modernization 4,757 12.05.1999-3278 100% Investment allowance

100% Duty free import

VAT exemption

Exemption from taxes and fees

Artema capacity increase 2,309 11.06.2000-3533 100% Investment allowance


VAT exemption


Vitra-Bozüyük modernization 1,691 30.04.2001-3743 60% Investment allowance


VAT exemption


Vitra-Kartal modernization 1,464 30.04.2001-3747 40% Investment allowance


VAT exemption


Vitra-Bozüyük modernization 427 26.04.2000-3502 100% Investment allowance


VAT exemption


Vitra-Bozüyük modernization 364 01.05.2000-3508 100% Investment allowance


VAT exemption


B) Developments in Products and Services

Capacity Utilization Ratios (%) 2001 2000

Ceramic Sanitary Ware 90 90

Sanitary Fittings 85 100

Output (' 000 Units) 2001 2000 (%) Change

Ceramic Sanitary Ware 3,034 3,065 -1

Duroplast Toilet Seats and Covers 195 255 -23

Chrome-Plated Fittings 1,451 1,719 -16

Brass Products 84 154 -45

Accessories 351 302 16

Other Products * 9,301 10,085 -8

* Parts of sanitary fittings sold to external producers

4. EYAP achieved net sales of TL 137,286.9 billion in 2001. Of this amount, TL 41,361.2 billion

comprised sales to the Turkish market and TL 95,925.7 billion comprised export sales. In 2001,

Vitra and Artema's domestic sales increased by 25.7% and 9% respectively, while their export

sales rose by 139% and 96.7% relative to the previous year.

Net Sales (TL Million)

2001 2000 Increase Change (%)

Domestic Sales

Vitra 21,843,631 17,373,614 4,470,017 25.7

Artema 19,517,537 17,846,419 1,671,118 9.3

Exports

Vitra 59,594,549 24,930,563 34,663,986 139.0

Artema 36,331,255 18,468,764 17,862,491 96.7

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The US dollar value of EYAP's total exports increased 10% to $ 71.5 million in 2001 from $ 65.2

million in 2000.

EYAP Exports ($ Million) EYAP Export Markets

C) Financial Statements

1. Balance Sheet

a) EYAP's current assets grew by TL 35,598.7 billion in 2001 to TL 76,138.4 billion. The TL

10,156.6 billion increase in short term receivables resulted from an increase in receivables from

customers. In other current assets, other VAT decreased by TL 101.8 billion, whereas prepaid

expenses rose by TL 6.5 billion and prepaid taxes rose by TL 3,190.6 billion.

b) Fixed assets rose by TL 12,415.6 billion, as a result of a TL 8,851.4 billion increase in tangible

and intangible fixed assets and a TL 3,564.2 billion increase in other VAT.

c) Short term liabilities increased TL 18,025.5 billion in 2001 to TL 41,487.6 billion. This was

primarily caused by increases of TL 3,132.6 billion in trade payables, TL 9,741.4 billion in

financial liabilities, TL 4,348.6 billion in provisions for loans and expenses, and TL 802.9 billion

in other short term liabilities.

d) EYAP's long term liabilities rose from TL 13,565.4 billion in 2000 to TL 22,387.9 billion in

2001, as a result of a TL 5,065.2 billion increase in provisions for severance indemnity and a TL

3,757.3 billion reduction in VAT.

25

United Kingdom 8%

United States 31%

Other 33%

2000 2001

65.2 71.5

Germany 28%

72

68

64

60

56

52

48

44

40

2.Statement of income

a) In 2001, EYAP's net sales increased by TL 58,667.6 billion to TL 137,286.9 billion. Of this

amount, TL 95,925.8 billion was generated from exports and TL 41,361.1 billion from sales to the

domestic market.The US dollar value of FOB exports was $ 71.5 million.

b) The cost of goods sold increased to TL 72,760.7 billion in 2001 from TL 50,561.4 billion in

2000.

c) Sales and marketing expenses rose by TL 12,178.3 billion to TL 21,986.4 billion, while general

administrative expenses increased by TL 4,848.4 billion to TL 16,003.6 billion.

d) Financial expenses increased by TL 13,289.9 billion to TL 16,106.2 billion.

3.Financial Ratios

EYAP's key financial ratios for 2001 and 2000 were as follows:

Ratios 2001 2000

Current Ratio 1.84 1.71

Liquidity Ratio 1.15 1.04

Total Debts/Total Assets 0.15 0.53

Shareholders' Equity/Total Assets 0.46 0.47

Shareholders' Equity/Total Debts 0.84 0.88

Operating Income/Net Sales 0.15 0.07

Profit Before Taxes/Net Sales 0.22 0.06

26

D) Administrative Activities

1.Changes in the Number of Employees

New Departed End-Year Total

Union 20 82 1,171

Non-Union 40 40 510

Total 60 122 1,681

2.Implementation of Collective Bargaining Agreements

The Vitra Division's collective bargaining agreement, signed on May 19, 2001, will terminate on

December 31, 2002.

The Artema Division's collective bargaining agreement, signed on September 1, 2000, will

terminate on August 31, 2002.

3.Severance Indemnity

As of the end of 2001, the total amount accrued for severance indemnity was TL 14,022,352

million.

III) Recommended Distribution of Profits

The Company recommended that the whole of 2001 net profits be transferred to its retained

earnings.

The Board of Directors.

27

Assets Dec. 31, 2001 Dec. 31, 2000

I. Current Assets 76,138,361 40,539,634

A. Cash and Cash Equivalents 14,292,002 1,305,221

1 . Cash 7,527 9,578

2. Bank Deposits 14,256,804 1,282,908

3. Other 27,671 12,735

B. Securities 263,732 2,972,490

C. Short Term Receivables 30,406,634 20,250,011

1 . Accounts Receivable 27,794,694 14,312,784

2. Rediscount on Accounts Receivable (-) (432,778) (1,061,750)

3. Notes Receivable 3,048,014 7,004,038

4. Rediscount on Notes Receivable (-) (3,297) (5,062)

5. Deposits and Guarantees

6. Other Short Term Receivables 23,400 7,226

7. Provision for Bad Debts (-) (23,399) (7,225)

D. Other Short Term Receivables 2,764,284 466,815

1 . Receivables from Shareholders

2. Receivables from Affiliates

3. Other Receivables 2,764,284 466,815

E. Inventories 23,045,284 13,273,951

1 . Raw and Auxiliary Materials 6,369,364 3,056,269

2. Semi-Finished Goods 4,654,243 2,994,526

3. Finished Goods 11,165,924 6,907,763

4. Commodities 236,144 190,441

5. Other Inventories 71,813 55,205

6. Advance Payments for Inventories 547,796 69,747

F. Other Current Assets 5,366,425 2,271,145

II.Fixed Assets 41,327,416 28,911,839

A. Long Term Receivables 3,221 3,726

1 . Deposits and Guarantees 3,221 2,564

2. Other 1,162

B. Other Long Term Receivables

C. Financial Fixed Assets 27,330 27,330

D. Tangible Fixed Assets 31,613,570 23,063,473

1 . Land 13,328 3,007

2. Land Improvements 835,020 688,738

3. Buildings 12,561,425 8,186,718

4. Machinery and Equipment 78,682,013 52,833,808

5. Vehicles 1,572,923 1,139,241

6. Furniture and Fixtures 5,322,105 3,768,008

7. Other Tangible Fixed Assets 11,390 7,572

8. Accumulated Depreciation (-) (69,472,948) (45,517,878)

9. Investment-In-Progress 625,489 1,469,950

10. Advance Payments for Fixed Assets 1,462,825 484,309

E. Intangible Fixed Assets 1,506,458 1,204,623

1 . Rights 680,425 389,624

2. Research and Development Expenses 125,227 125,227

3. Other Intangible Fixed Assets 2,814,846 1,762,808

4. Accumulated Depreciation (-) (2,114,039) (1,073,037)

F. Other Fixed Assets 8,176,837 4,612,686

Total Assets 117,465,777 69,451,473

28

ECZACIBAfiI


BALANCE SHEET

AT DECEMBER 31, 2001 AND 2000

(Turkish Liras in Million)

Liabilities and Shareholders' Equity Dec. 31, 2001 Dec. 31, 2000

I. Short-Term Liabilities 41,487,588 23,462,113

A. Financial Liabilities 21,779,465 12,038,109

1 . Bank Loans 3,101,718 3,591,042

2. Current Installments of

Long Term Credits and Equities 873

3. Other Financial Liabilities 18,677,747 8,446,194

B. Trade Payables 9,376,779 6,244,146

1 . Accounts Payable 9,332,959 6,201,687

2. Notes Payable 18,556 35,860

3. Deposits and Guarantees 27,671 12,735

4. Other

5. Rediscount on Payables (-) (2,407) (6,136)

C. Other Short Term Liabilities 3,274,437 2,471,534

1. Debts to Shareholders 413,966 946

2. Debts to Affiliates and Subsidiaries

3. Taxes and Duties Payable 2,032,579 1,752,595

4. Other 827,892 717,993

D. Provisions for Loans and Expenses 7,056,906 2,708,323

1 . Provisions for Taxes 6,585,144 2,488,118

2. Provisions for Prepaid Taxes

3. Provisions for Expenses 471,762 220,205

E. Others

II.Long-Term Liabilities 22,387,971 13,565,404

A. Financial Liabilities 373

1 . Bank Loans 373

B. Trade Payables 745 346

1 . Deposits and Guarantees 745 346

C. Other Long Term Liabilities 8,400,769 4,643,425

1. Other VAT 8,400,769 4,643,425

D. Provisions for Loans and Expenses 13,986,457 8,921,260

1 . Severance Indemnity 13,986,457 8,921,260

III. Shareholders' Equity 53,590,218 32,423,956

A. Paid-In Capital 2,500,000 2,500,000

B. Revaluation Fund 36,322,254 25,204,376

1 . Revaluation of Fixed Assets 36,322,254 25,204,376

2. Revaluation of Participations

3. Other Funds

C. Retained Earnings 4,739,991 2,050,653

1 . Legally Retained Earnings 433,201 305,165

2. Undistributed Profits 4,178,175 1,745,488

3. Other Reserves 128,615

D. Net Profit 10,027,973 2,668,928

Total Liabilities and Shareholders' Equity 117,465,777 69,451,473

29

1. Operations of the Company :

Eczac›bafl› Building Materials Company (''EYAP'' or ''the Company'') is a manufacturing

company involved in the production of a wide range of ceramic sanitary ware and sanitary

fittings under the Vitra and Artema brand names. The Company manufactures ceramic sanitary

ware products at its Kartal and Bozüyük plants and sanitary fittings at its Bozüyük plant.

EYAP is a member of the Eczac›bafl› Group, a prominent industrial group in Turkey comprising

37 companies. The Group's core businesses are pharmaceuticals, building materials and

personal care products. It is also active in domestic and foreign trade, capital markets,

construction and information technology.

The Company issued 30% of its shares to the public on June 15, 1995. As of December 31, 2001,

31.25% of the Company's shares were trading in the Istanbul Stock Exchange (2000: 31.25%).

2. Shareholders owning 10% or more of the Company's shares are as follows :

December 31, 2001 December 31, 2000

Shareholders Share(%) Share Value Share(%) Share Value

Eczac›bafl› Holding Co. 52.02 1,300,411 52.02 1,300,411

Intema Building Materials Marketing and Sales Co. 11.00 275,000 11.00 275,000

Publicly-Owned 31.25 781,250 31.25 781,250

30

ECZACIBAfiI


CONVENIENCE TRANSLATION OF REPORT AND FINANCIAL STATEMENTS

ORIGINALLY ISSUED IN TURKISH - SEE NOTE 34 TO BALANCE SHEET

NOTES TO BALANCE SHEET

JANUARY 1 - DECEMBER 31, 2001 AND 2000


3. Privileges given to share stocks representing capital: None (2000: None).

4. Registered Capital: The Company's registered capital was TL 10,000,000,000,000 as of

December 31, 2001 and 2000.

5. Capital increases during the year and their sources: None (2000: The Company increased

its capital by TL 500 billion.)

6. Marketable securities other than share stock issued during the year: None (2000:None).

7. Marketable securities representing borrowings which expired during the year:

None (2000: None).

8. Movements of tangible fixed assets during the year:

Dec. 31, 2001 Dec. 31, 2000

a. Movements of tangible fixed assets during the year 8,849,227 7,470,118

b. Total cost of tangible fixed assets sold or scrapped 531,208 408,515

c. Increase due to the revaluation of fixed assets in the current period 11,305,811 8,490,095

- Increase in value (+) 25,395,931 19,408,228

- Increase in accumulated depreciation (-) 14,090,120 10,918,133

d. Description, total amount, starting and completion dates, and percentage of completion of investment-in-progress:

Description Total Total

of the Investment Investment Incentive Certificate Starting Completion Completion

Investment (TL Million) ($) Date Number Date Date Ratio (%)

Modernization, quality improvement 1,691,680 1,439,728 30/04/2001 3743 15/03/2001 30/06/2002 49%

Modernization, quality improvement 1,463,588 1,219,657 30/04/2001 3747 14/03/2001 30/06/2002 29%

9. Current and unutilized investment allowances:

Dec. 31, 2001 Dec. 31, 2000

Current 866,439 4,302,235

To be used in the future 3,100,000 3,250,000

31

10. Balances and transactions with shareholders, subsidiaries, affiliates and group

companies: Those companies which are wholly or partly owned by the shareholders of the

company are defined as group companies.

December 31, 2001 Receivables Payables

Trade Non-Trade Trade Non-Trade

1) Shareholders 7,927,481 - - 413,966

Eczac›bafl› Holding Co. - - - 413,966

Intema Building Materials Marketing and Sales Co. 7,927,481 - - -

2) Subsidiaries - - - -

3) Affiliates - - 79,612 -

Vitra USA Inc. - - 79,612 -

4) Group Companies 17,261,164 30,148 864,093 19,153,109

Eczac›bafl› Foreign Trade Company 17,060,451 - - 18,677,747

Eczac›bafl› Kitchen and Bathroom Furniture M.Co.(*) 200,663 30,148 - -

Eczac›bafl› Information Technology Co. - - - 78,444

Do¤a Minerals Trading Company - - 14,489 -

Eczac›bafl› Ceramic Tiles Manufacturing Co. - - 78,344 59,854

Eczac›bafl› Industrial Raw Materials Co. - - 703,680 -

Eczac›bafl› Insurance Agency - - - 46,308

EKOM Sanitaer Marketing GmbH - - 67,580 -

Vitra Sanitary Ware Marketing U.K.Ltd. - - - 290,756

Other 50 - - -

Total 25,188,645 30,148 943,705 19,567,075

December 31, 2000 Receivables Payables

Trade Non-Trade Trade Non-Trade

1) Shareholders 6,201,545 - - 157,835

Eczac›bafl› Holding Co. - - - 157,835

Intema Building Materials Marketing and Sales Co. 6,201,545 - - -

2) Subsidiaries - - - -

3) Affiliates - - 37,151 -

Vitra USA Inc. - - 37,151 -

4) Group Companies 9,440,983 502 912,566 8,599,870

Eczac›bafl› Foreign Trade Company 9,396,617 - - 8,446,194

Eczac›bafl› Bathtubs Manufacturing Co. (*) 16,750 - - -

Eczac›bafl› Kitchen and Bathroom Furniture M.Co. (*) 22,627 - - -

Eczac›bafl› Information Technology Co. - - - 12,836

Do¤a Minerals Trading Company 4,989 - - -

Eczac›bafl› Ceramic Tiles Manufacturing Co. - - 32,732 -

Eczac›bafl› Industrial Raw Materials Co. - - 285,190 -

Eczac›bafl› Insurance Agency - - - 82,633

EKOM Sanitaer Marketing GmbH - - 594,644 -

Vitra Sanitary Ware Marketing U.K.Ltd. - - - 57,925

Eczac›bafl›-Baxter Hospital Supply Co. - - - 282

Kaynak Tekni¤i Welding Electrodes Co. - 484 - -

Other - 18 - -

Total 15,642,528 502 949,717 8,757,705

(*) On April 30, 2001, these two companies merged under Eczac›bafl› Kitchen and Bathroom Furniture Manufacturing Co., whose name was changed

to Eczac›bafl› Bathroom and Kitchen Products Company.

32

11. Valuation, compilation and depreciation policies for inventories and other balance sheet

items; changes made in these and other accounting policies compared to the previous

period; the monetary effects of these changes; probable developments which may alter the

continuity and periodic assumptions of the company and reasons for the above:

Accounting policies

The Turkish Capital Market Board (CMB) has set out the principles and rules relating to the

preparation and presentation of financial statements and reports prepared on or after

December 31, 1988, by companies and intermediary institutions in Communiqué XI/1 issued in

the Official Gazette dated January 29, 1989, amended and supplemented by Communiqués XI/4,

XI/5, XI/11, XI/13, XI/14, XI/15 and XI/16. The principles and rules relating to the preparation and

presentation of interim financial statements are set out in Communiqué XI/3 issued in the

Official Gazette dated July 26, 1989.

The Company has prepared its financial statements in compliance with relevant commercial

practice and the generally accepted accounting principles issued by the CMB.

Inventories

Inventories are stated at the lower of acquisition cost or net realizable value. Cost is

determined by the weighted average method and includes material, labor and an appropriate

amount of overhead.

Tangible fixed assets

Tangible fixed assets (except land and current year purchases) are carried at acquisition cost

plus revaluation, which is computed by applying indices and procedures to acquisition costs in

accordance with Law No.3094. The revaluation rate used at December 31, 2001 was 53.2%

(2000:56%). Depreciation is based on revaluation amounts except in the case of buildings.

Depreciation is calculated by the straight-line method for entries before 2001.

For 2001 entries, the Company used the declining balance method.

Depreciations Rates

Assets acquired Assets acquired Assets acquiredBefore 1983 (%) between 1983 and 1994 1994 onwards (%)

Land improvements 4-6 25 20

Buildings 2 2-4 2-4

Machinery and equipment 2-10 5-25 10-20

Vehicles 5-20 25 20

Furniture and Fixtures 6 6-25 20

Marketable securities

The marketable securities portfolio, which consists of public sector bonds and bills as well as

shares, is stated at cost. Accrued income and profit from sales of marketable securities are

charged to current year profit.

33

Valuation of receivables and payables Trade receivables and payables with terms exceeding

three months, apart from advances, deposits and guarantees, are discounted in 1997 in

accordance with the CMB Communiqué No./I issued in the Official Gazette dated March 1, 1995,

No:22217.

The rediscount on accounts and notes receivable is TL 436,075 million (2000: TL 1,067,855

million) and is included in ''Non-Operating Expenses and Losses'', while the rediscount for

payables amounting to TL 2,407 million (2000: TL 6,136 million) is included in "Others".

Foreign currency assets and liabilities Transactions in foreign currencies are converted into

Turkish lira at the exchange rates prevailing at the dates of such transactions. Balance sheet

assets and liabilities denominated in foreign currencies are converted into Turkish lira at the

exchange rates declared by the Central Bank of Turkey at the balance sheet dates. Foreign

exchange gains or losses arising from the settlement and translation of foreign currency items

are included in the related income and expense accounts as appropriate.

Severance indemnity As required by Turkish Labor Law, severance indemnity is booked in the

accompanying financial statements as it is earned.

12. Subsequent events: None (2000:None).

13. Contingent losses and income:

a) Cases in which EYAP is plaintiff:

Subject Amount (TL) Statement

Objection to bills 82,188 Objection to bills issued by the Istanbul Gas Distribution Company

Receivable claims 11,634 Miscellaneous receivable claims

b) Cases against EYAP: None (2000:None).

c) Letters of guarantee

Subject Amount (TL) Statement

Value Added Tax 1,044,602 To customs

Investments 8,036 To investment credits benefiting from incentives

Other 260,945 Energy consumption and other

Total 1,313,583

14. Changes in accounting forecasts and their monetary effects: None (2000:None).

34

15. Mortgages or collateral on assets: There was no mortgage on assets as of December 31,

2001. The list below refers to 2000.

December 31, 2000

Mortgage Mortgage Reason Mortgage Release Amount Collateral Degree Benefactor for Mortgage Date Date (TL)

Mortgage 1 Turkish Industrial Development Bank 23/10/1980 * 1,545

Mortgage 1 Garanti Bank A.fi. 30/03/1981 * 100

Mortgage 2 Turkish Industrial Development Bank 30/11/1982 * 750

Mortgage 2 Garanti Bank A.fi. Long 30/11/1982 * 50

Mortgage 3 Turkish Industrial Development Bank Term 09/12/1985 * 3,500

Mortgage 7 Turkish Industrial Development Bank Credit 19/01/1989 * 12,000




Total 36,945

16. Total insurance coverage on assets :

December 31, 2001

Asset Insurance Insurance Book Beginning Endinginsured Company Value Value Date (*) Date

Vehicles Koç Alliance A.fi. 1,090,988 1,572,923 01/01/2001 31/12/2001

Inventory (inc. transport insurance) Koç Alliance A.fi. 32,101,039 22,497,488 01/01/2001 31/12/2001

Machinery equipment Koç Alliance A.fi. 119,160,846 97,413,891 01/01/2001 31/12/2001

Cash Koç Alliance A.fi. 5,279,900 3,062,141 01/01/2001 31/12/2001

Other (**) Koç Alliance A.fi. 40,419,099 - 01/01/2001 31/12/2001

Total 198,051,872 124,546,443

December 31, 2001

Asset Insurance Insurance Book Beginning Endinginsured Company Value Value Date (*) Date

Vehicles Koç Alliance A.fi. 931,138 1,139,241 01/01/2000 31/12/2000

Inventory (inc. transport insurance) Koç Alliance A.fi. 21,100,000 13,204,204 01/01/2000 31/12/2000

Machinery equipment Koç Alliance A.fi. 69,114,415 65,484,845 01/01/2000 31/12/2000

Cash Koç Alliance A.fi. 5,395,600 6,924,539 01/01/2000 31/12/2000

Other Koç Alliance A.fi. 32,231,192 - 01/01/2000 31/12/2000

Total 128,772,345 86,752,829

* Beginning date for the goods purchased during the year varies.** Includes financial liability, fraud and profit loss.

35

Long

Term

Credit

17. Total mortgages and collateral obtained for receivables

Guarantee letters December 31, 2001

Subject TL USD EURO TOTAL TL

Transport 47,650 42,000 194,291 354,495

Sales - 11,181 920,000 1,182,761

Dealers 107,994 47,000 355,629 626,633

Customs 5,000 - 20,452 30,935

Total 160,644 100,181 1,490,372 2,194,824

December 31, 2000

Subject TL DM USD CHF EURO TOTAL TL

Transport 41,044 483,000 42,000 - - 222.014

Sales 62,467 - 34,786 - - 85.835

Dealers 59,501 1,029,230 33,337 426,000 750,000 1,045,084

Total 163,012 1,512,230 110,123 426,000 750,000 1,352,933

Guarantee bills

December 31, 2001

Subject TL USD EURO TOTAL TL

Transport 24,950 35,000 10.609 88,788

Sales - 25,636 - 36,905

Customs - - - -

Dealers 395,512 54,550 70.916 563,970

Total 420,462 115,186 81.525 689,663

December 31, 2000

Subject TL DM USD TOTAL TL

Transport 24,850 - 35,000 48,362

Sales - - 25,636 17,221

Customs 600 - - 600

Dealers 170,412 159,450 7,150 225,643

Total 195,862 159,450 67,786 291,826

36

Guarantee checks

December 31, 2001

Subject TL USD TOTAL TL

Transport 32,500 2,672 36,346

Sales 25,514 8,018 37,057

Customs - - -

Dealers 18,435 - 18,435

Total 76,449 10,690 91,838

December 31, 2000

Subject TL USD TOTAL TL

Transport 33,357 2,672 35,152

Sales 21,324 2,046 22,698

Customs 2,000 - 2,000

Dealers 6,434 23,053 21,920

Total 63,115 27,771 81,770

Exchange rates


USD 1,439,567 671,765

DM 648,377 316,265

CHF 854,490 407,884

EURO 1,268,115 618,561

18. Off-Balance sheet commitments and contingent liabilities: None (2000:None).

19. Blocked deposits at banks: None (2000:None).

20. Information regarding the value of marketable securities as per current market rates

when their book value is below the market rate: None (2000:None).

21. Marketable securities of shareholders affiliates and subsidiaries included under

marketable securities: None (2000:None).

37

22. Other items exceeding 20% of the caption under which they are included :


Other Short Term Receivables

Taxes 2,731,977 438,067

Eczac›bafl› Kitchen and Bathroom Furniture M.Co. 25,825 12,129

Employees 5,400 -

Other 995 8,557

Eczac›bafl›-Koramic Building Chemicals Man. Co. 87 18

Do¤a Minerals Trading Company - 4,989

Eczac›bafl› Information Technology Co. - 2,572

Kaynak Tekni¤i Welding Electrodes Co. - 484

Other Current Assets

Prepaid taxes and funds 5,137,817 1,947,182

Prepaid expenses 176,042 167,530

Accruals 45,213 46,185

Personnel advances 7,353 8,454

Other VAT - 101,794

Other Tangible Assets

Computer software 787,151 499,459

Extraordinary costs 309,239 309,239

Other 52,798 128,286

Other Fixed Assets

Other VAT 8,176,836 4,612,686

Other Financial Liabilities

Eczac›bafl› Foreign Trade Company 18,886,952 8,561,691

Other financial liabilities include export credits obtained by Ekom and transferred to the Company.

Other Long Term Liabilities

Deferred VAT 8,176,836 4,612,705

Payables to the group companies 187,077 -

Other 36,856 30,719

Other Income and Profits

FX Gains 3,681,278 376,345

Interest income 1,481,615 1,031,753

Discount interest gain 1,070,262 864.271

Other Expenses and Losses

Discount interest loss 442.211 1,077,405

FX Losses 389,240 6,370

Provisions 70,773 103,312

Other 1,226,720 739,761

Other Extraordinary Income and Profits

Fixed asset sales 121,394 188,658

Other 310,620 224,432

Other Extraordinary Expenses and Losses

Donations 77,824 276,855

Other 67,011 30,560

38

23. Receivables from and payables to employees included under ''Other receivables'' and

''Other current or long-term liabilities'' accounts and exceeding 1% of total assets: None

(2000:None).

24. Bad debt due from shareholders, affiliates and subsidiaries: None (2000:None).

25. Provisions for overdue and non-overdue trade receivables:


23,399 7,225

26. Breakdown of affiliates and subsidiaries having an indirect shareholding and

management relationship with the company; names, participation rates, and amounts of

these affiliates and subsidiaries; latest profit/loss statement of these companies, whether

or not they prepare their financial tables according to CMB principles and the accounts are

examined by independent auditors:

01 Financial tables are prepared according to CMB principles, Y=Yes N=No

02 Financial tables are examined by independent auditors, Y=Yes N=No

03 Independent auditor approved the financial tables Y=Yes N=No

Name of the Foreign Share Latest Financial Profit affiliate Capital Currency Share(%) Value Table Date Before Tax Net Profit

Vitra USA Inc. 540,000 USD % 49 264,600 USD December 31, 2000 3,944 USD

Ak Energy Co. 13,500,000 TL. 12 September 30, 2001 140,067,861 99,884,301

Name of the affiliate 01 02 03

Vitra USA Inc. N N -

Ak Energy Co. Y N -

27. Pro-rata share stock amounts as realized from financial investments: None

(2000:None).

28. Rights of third parties on fixed assets: None (2000:None).

29. Revaluation of tangible fixed assets in the last three years:

Year Revaluation value

Dec.31, 2001 11,305,811

Dec.31, 2000 8,490,095

Dec.31, 1999 6,116,814

Total 25,912,720

39

30. The amount of assets and liabilities not hedged and denominated in foreign currency,

foreign currency amounts in assets, and exchange rates used for the translation of these

items:

December 31, 2001

Foreign currency assets

Foreign Currency Exchange rateAsset Amount Type Used In Translation Amount in TL

Cash 4,205 USD 1,438,559 6,049

Bank 2,995,259 USD 1,439,567 4,311,876

3,385 GBP 2,081,497 7,046

2,502,246 EURO 1,268,115 3,173,136

537,000 SEK 135,513 72,770

Trade Receivables 11,695,593 DM 648,377 7,583,153

3,117,262 USD 1,439,567 4,487,507

1,934,147 GBP 2,081,497 4,025,921

1,586,363 EURO 1,268,115 2,011,691

5,390,203 SEK 135,513 730,442

3,315,617 FF 193,323 640,985

265,745,760 ITL 655 174,063

Short Term

Checks & Bills 6,910 USD 1,439,567 9,947

Total 27,234,586

Foreign currency liabilities

Foreign Currency Exchange rateLiability Amount Type Used In Translation Amount in TL

Short Term 217,042 USD 1,446,510 313,953

Liabilities 156,263 GBP 2,092,377 326,961

197,044 EURO 1,274,231 251,079

152,432 FF 194,255 29,611

59,791 AUD 738,588 44,161

Letters of Credit 1,917 GBP 2,092,377 4,011

375 EURO 1,274,231 478

20,015,000 ITL 658 13,170

Total 983,424

Loans in foreign currency

Foreign Currency Exchange rateLoan Amount Type Used In Translation Amount in TL

Short Term 4,400,000 USD 1,446,510 6,364,644

Credits 9,250,000 EURO 1,274,231 11,786,637

4,020,000 SEK 136,923 550,430

Total 18,701,711

40

December 31, 2000

Foreign currency assets

Foreign Currency Exchange rateAsset Amount Type Used In Translation Amount in TL

Cash 10,223 USD 671,295 6,863

60 DM 316,044 19

Bank 92,935 USD 671,295 62,387

15,205 DM 316,044 4,805

1,296 EURO 618,561 802

Trade Receivables 4,331,276 USD 671,765 2,909,600

5,865,669 DM 316,265 1,855,106

2,651,272 GBP 993,878 2,635,041

3,993,437 FF 94,299 376,577

376,907,040 ITL 319 120,233

19,832 EURO 618,561 12,267

Short Term

Checks & Bills 133,994 USD 671,765 90,012

Total 8,073,712

Foreign currency liabilities

Foreign Currency Exchange rateLiability Amount Type Used In Translation Amount in TL

Short Term Liabilities 289,587 USD 675,004 195,472

2,146,658 DM 317,790 682,186

58,657 GBP 999,073 58,603

532,804 FF 94,754 50,485

723,488,000 ITL 321 232,240

369,000 CHF 410,511 151,478

14,057 AUD 375,842 5,283

Letters of Credit 245,755 DM 317,790 78,098

161,828 GBP 999,073 161,678

284,580 FF 94,754 26,965

Total 1,642,488

Loans in foreign currency

Foreign Currency Exchange rateLoan Amount Type Used In Translation Amount in TL

Short Term 3,900,000 USD 675,004 2,632,516

Credits 13,700,000 EURO 621,544 8,515,153

Total 11,147,669

41

31. Guarantees, commitments and securities given for shareholders affiliates and

subsidiaries:

December 31, 2001

Shareholder/group company Liability Amount (TL) Foreign currency

Eczac›bafl› Foreign Trade Company Guarantee 10,144,920 8,000,000 EURO

Eczac›bafl› Foreign Trade Company Guarantee 4,462,658 3,100,000 USD

Total 14,607,578

December 31, 2000

Shareholder/group company Liability Amount (TL) Foreign currency

Eczac›bafl› Foreign Trade Company Guarantee 1,701,043 2,750,000 EURO

Eczac›bafl› Foreign Trade Company Guarantee 940,471 1,400,000 USD

Total 2,641,514

32. Average number of employees:

December 31,2001 December 31,2000

Number of employees (beginning of the year) 1,743 1,755

White collar (Non-union) 507 512

White collar (Union) - -

Other (Union) 1,236 1,243

Other (Non-union) 12 -

Number of employees (end of the year) 1,681 1,743

White collar (Non-union) 510 507

White collar (Union) - -

Other (Union) 1,171 1,224

Other (Non-union) - 12

33. Other significant issues

As of December 31, 2001, the total amount of rediscounted checks receivable from Intema

Building Materials Marketing and Sales Company was TL 2,988,237 million (2000: TL

3,325,750). These receivables are booked under ''Notes Receivable'.'

34. Explanation added for convenience translation into English

As indicated in Note 1, the accompanying financial statements are prepared and presented in

accordance with the accounting and reporting principles issued by the Turkish Capital Market

Board, which differ from the accounting principles generally accepted in countries where the

accompanying financial statements are to be distributed as well as from International

Accounting Standards (IAS). The effects of such differences have not been quantified.

Accordingly, the accompanying financial statements are not intended to present the Company's

financial position, results of operations and changes in financial position and cash flow in

accordance with the accounting principles generally accepted in such countries and IAS

accounting principles.

42

Jan. 1 - Dec. 31 2001 Jan. 1 - Dec. 31 2000

A) Gross Sales 143,117,527 79,335,789

1 . Domestic Sales 41,545,672 35,373,267

2. Exports 93,032,493 42,983,445

3. Other Sales 8,539,362 979,076

B) Discounts and Returns (5,830,555) (716,430)

1 . Returns on Sales (415,453) (294,450)

2. Sales Discounts (5,415,102) (421,980)

3. Other Discounts

C) Net Sales 137,286,972 78,619,359

D) Cost of Goods Sold (-) (72,760,705) (50,651,375)

Gross Production Margin 64,526,267 27,967,984

E) Operating Expenses (-) (38,308,805) (20,963,297)

1 . Research and

Development Expenses (-) (318, 784)

2. Marketing, Sales and

Distribution Expenses (-) (21,986,391) (9,808,070)

3. General Administrative

Expenses (-) (16,003,630) (11,155,227)

Operating Income 26,217,462 7,004,687

F) Non-Operating Income and Profits 8,980,149 2,775,376

1 . Dividend Income

from Affiliates and Subsidiaries

2. Interest and Other

Dividend Income 1,948,223 36,680

3. Other 7,031,927 2,738,696

G) Non-Operating Expenses and Losses (-) (2,128,944) (1,926,847)

H) Financial Expenses (-) (16,106,192) (2,816,322)

1 . Interest on

Short-Term Loans (-) (15,873,710) (2,328,970)

2. Interest on Long-Term Loans (-) (232,483) (487,352)

Profit After Interests 16,962,475 5,036,894

I) Extraordinary Income and Profits 494,787 448,459

J) Extraordinary Expenses and Losses (-) (844,145) (328,307)

Profit Before Taxes 16,613,117 5,157,046

K) Taxes (-) (6,585,144) (2,488,118)

Net Profit 10,027,973 2,668,928

43

ECZACIBAfiI


STATEMENT OF INCOME



Jan. 1 - Dec. 31 2001 Jan. 1 - Dec. 31 2000

1. Depreciation and amortization expenses:

Depreciation and amortization expenses 11,315,472 8,074,193

a) Depreciation expenses

aa) Normal depreciation expenses 8,576,255 4,009,067

ab) Depreciation expenses due to revaluation 2,739,217 3,604,527

b) Amortization 874,725 460,599

2. Rediscount and provision expenses: 5,594,353 4,892,850

3. Financial expenses:

12/31/2001 12/31/2000

Exchange Loss Financial Expenses Exchange Loss Financial Expenses

A) In Cost of goods produced - - - -

Aa) In Cost of goods sold - - - -

Ab) In Inventories - - - -

B) In fixed asset costs - - - -

C) Expenses 11,947,464 4,158,728 1,304,568 1,511,754

Total 11,947,464 4,158,728 1,304,568 1,511,754

4. Amounts of financial expenditures related to shareholders, affiliates and subsidiaries:

None. (2000: None)

5. Sales and purchase transactions with affiliated companies exceeding 20% of total:

December 31, 2001 Purchase Sale

Shareholder/ % in Total % in TotalGroup company name Relation Amount Amount Amount Amount

Intema Building Materials Marketing and Sales Co. Shareholder 37,316,967 26

Eczac›bafl› Foreign Trade Co. Group Company 100,623,467 70

Eczac›bafl› Industrial Raw Materials Co. Group Company 1,261,678 60

December 31, 2000 Purchase Sale

Shareholder/ % in Total % in TotalGroup company name Relation Amount Amount Amount Amount

Intema Building Materials

Marketing and Sales Co. Shareholder 30,794,527 39

Eczac›bafl› Foreign Trade Co. Group Company 42,238,454 54

Eczac›bafl› Industrial Raw Materials Co. Group Company 410.298 31

44

ECZACIBAfiI


CONVENIENCE TRANSLATION OF REPORT AND FINANCIAL STATEMENTS

ORIGINALLY ISSUED IN TURKISH - SEE NOTE 34 TO BALANCE SHEET

NOTES TO STATEMENT OF INCOME



6. Interest, rent and equivalents paid to and received from shareholders, affiliates and

subsidiaries:

December 31, 2001

Financial, Rent and other expenses

Shareholder/ % in Total Group Company Name Relation Expense type Amount Amount

Eczac›bafl› Foreign Trade Co. Group Company Service 16,160,886 69

Eczac›bafl› Holding Co. Shareholder Service and rent 2,854,419 12

Intema Building Materials Marketing and Sales Co. Shareholder Service 608,492 3

Eczac›bafl› Information Technology Co. Group Company Service 945,612 4

EKOM Sanitaer Marketing GmbH Group Company Service 1,939,521 8

Other Group Company Service 990,828 4

Total 23,499,754 100

December 31, 2000

Financial, Rent and other expenses

Shareholder/ % in Total Group Company Name Relation Expense type Amount AmountEczac›bafl›

Foreign Trade Co. Group Company Service 2,491,841 40

Eczac›bafl› Holding Co. Shareholder Service and rent 2,164,983 35

Intema Building and Installation Materials Co. Shareholder Service 577,862 9

Eczac›bafl› InformationTechnology Co. Group Company Service 562,250 9

Other Group Company Service 454,311 7

Total 6,251,247 100

7. Payments to top management: At December 31, 2001, these payments totalled TL

3,003,490 million (2000: TL 1,782,643 million).

8. Depreciation calculation method and changes in depreciation expenses: Depreciation was

calculated using the straight-line method for assets acquired before 2001. The declining balance

method was used for 2001 entries.

9. Inventory costing system and procedures: The company uses the cost-per-stage and the

yearly moving average method for the valuation of inventories.

10. Stock count: Stock count was carried out at the end of the year.

11. Product, scrap or service sales that exceed 20% of gross sales :

Dec. 31, 2001 Dec. 31, 2000

Ceramic sanitary ware 81,495,890 40,134,049

Sanitary fittings 55,846,878 33,269,969

45

12. Sales incentives and subsidies, if any:

December 31, 2001 At December 31, 2001, the Company had various export incentive

certificates with export commitments amounting to USD 51,567,281.

December 31, 2000 At December 31, 2000, the Company had various export incentive

certificates with export commitments amounting to USD 41,188,000

13. Income and expenses related to prior years:

Dec. 31, 2001 Dec. 31, 2000

Income 62,773 35,369

Expenses 265,259 20,892

14. Profit per share and percentage

Dec. 31, 2001 Dec. 31, 2000

Profit per Profit Dividend per Profit per Profit per Dividend pershare (%) per share share (%) share (%) share share (%)

Common stock - 4,011.19 - 1,067.57

15. Changes in production units:

Output (Units)

Products 2001 2000 (%) Change

Ceramic Sanitary Ware 3,033,962 3,064,512 (1)

Chrome-Plated Fittings 1,450,881 1,719,200 (16)

Duroplast Toilet Seats 195,235 255,013 (23)

Brass Products 83,916 153,730 (45)

Accessories 351,011 302,570 16

Other Products 9,301,183 10,084,654 (8)

Total 14,416,188 15,579,679 8

16. Changes in sales units:

Sales (Units)

Products 2001 2000 (%) Change

Ceramic Sanitary Ware 2,859,935 3,054,708 (6)

Chrome-Plated Fittings 1,411,890 1,870,104 (25)

Duroplast Toilet Seats 194,799 234,018 (17)

Brass Products 99,562 175,914 (43)

Accessories 350,689 289,489 21

Other Products 9,479,794 9,911,223 (4)

Total 14,396,669 15,534,756 (7)

46

Jan. 1 - Dec. 31, 2001 Jan. 1 - Dec. 31, 2000

A) Distribution of Profits

1 . Profit Before Taxes 16,613,117 5,157,046

2. Taxes Payable (6,585,144) (2,488,118)

- Corporate Taxes (5,272,536) (1,487,523)

- Income Taxes (713,959) (774,402)

- Other Taxes (598,649) (226,193)

3. Legal Reserves (140,675) (133,446)

(According to Comm. Code 466-1)

4. Other Compulsory Reserves

Net Income For Distribution 9,887,298 2,535,481

B) Profit Per Share (TL)

1 . Common Stock 4,011.2 1,067.57

C) Dividens per Share (TL)

1 . Common Stock - -

47

ECZACIBAfiI


STATEMENT OF RETAINED EARNINGS



Jan. 1 - Dec. 31, 2001 Jan. 1 - Dec. 31, 2000

A) Sources of Funds 50,292,761 19,999,557

1 . Sources of Operating Income 32,117,585 17,139,727

a) Operating Income 16,962,475 5,036,894

b) Depreciation 10,631,017 8,074,250

c) Expenses that do not require funds 5,594,353 4,892,851

d) Income that does not generate funds (1,070,262) (864,269)

2. Sources of Extraordinary Income 494,787 448,459

a) Extraordinary Income 494,787 -

b) Expenses that do not require funds 448,459

c) Income that does not generate funds - -

3. Decrease in Current Assets

4. Decrease in Fixed Assets

5. Increase in Short-Term Liabilities 13,923,019 2,411,372(Does not include provisions

for loans and expenses)

6. Increase in Long-Term Liabilities 3,757,371 -(Does not include provisions

for loans and expenses)

7. Increase in Paid-In Capital (Cash) - -

8. Premium on Sales of Stocks - -

B) Uses of Funds 50,292,761 19,999,557

1 . Uses Due to Operating Losses - -

2. Uses Due to Extraordinary Losses 844,145 328,307

a) Extraordinary Losses 844,145 328,307

b) Expenses that do not require funds

c) Income that does not generate funds

3. Tax Payments 4,841,363 1,039,849

4. Dividend Payments

5. Increase in Current Assets 32,590,371 10,688,130

6. Increase in Fixed Assets(Does not include revaluation fund) 12,016,882 5,957,280

7. Decrease in Short-Term Liabilities

8. Decrease in Long-Term Liabilities 1,985,991

Changes in Net Working Capital

1 . Increase in Net Working Capital 16,946,245 6,379,201

2. Decrease in Net Working Capital

48

ECZACIBAfiI


STATEMENT OF SOURCES AND USES OF FUNDS



Jan. 1 - Dec. 31, 2001 Jan. 1 - Dec. 31, 2000

A) Cash Beginning Balance 1,305,221 448,057

B) Cash Inflows 147,624,297 82,112,811

1. Cash Inflows Related to Sales 127,761,086 75,044,145

a) Net Sales 137,286,972 78,619,359

b) Increase in Receivables

from Sales (-) (9,525,886) (3,575,214)

2. Cash from Non-Operating

Income and Profits 2,938,792 1,911,107

3. Cash from Extraordinary

Income and Profits 494,787 448,459

4. Increase in Short-Term Liabilities

(Not Related to Purchases) 10,245,854 4,260,573

5. Increase in Long-Term Liabilities

(Not Related to Purchases) 3,533,811 68

6. Cash Increase in Paid-In Capital

7. Other Cash Inflows 2,649,967 448,459

C) Cash Outflows 137,494,566 81,255,647

1. Cash Outflows Related to Costs 69,817,689 45,594,095

a) Cost of Goods Sold 72,760,705 50,651,375

b) Increase in Inventories 9,771,333 4,708,764

c) Increase in Payables

(Related to Purchases) (-) (3,132,633) (2,419,157)

d) Non-Cash Items (-) (9,581,715) (7,346,887)

2. Cash Outflows from Operations 32,194,306 16,523,799

a) Research and Development

Expenses 318,784

b) Marketing, Sales and

Distribution Expenses 21,986,391 9,808,070

c) General Administrative

Expenses 16,003,630 7,443,092

d) Non-Cash Expenses (6,114,499) (727,363)

3. Cash Outflows for Non-Operating

Expenses and Losses 1,599,786 746,131

a) Non-Operating Expenses

and Losses 2,128,943 5,472,105

b) Non-Cash Expenses and Losses (-) (529,157) (4,725,974)

4. Interest Payments 15,874,367 2,663,903

5. Cash Outflows from Operations 844,145 328,307

a) Extraordinary Expenses

and Losses

b) Non-Cash Extraordinary

Expenses and Losses

6. Outflows for Fixed Investments 8,791,413 7,658,210

7. Repayment of Short-Term Liabilities 2,787,666 1,384,881

(Not Related to Purchases)

8. Repayment of Long-Term Liabilities 373 4,270,104

(Not Related to Purchases)

9. Tax Payments 4,841,363 1,039,849

10. Dividend Payments

11. Other Cash Disbursements 743,457 1,046,368

D) Cash-Ending Balance 11,434,952 1,305,221

E) Increase (Decrease) in Cash 10,129,731 857,164

49

ECZACIBAfiI


STATEMENT OF CASH FLOW



Jan. 1 - Dec. 31, 2001 Jan. 1 - Dec. 31, 2000

Production Facilities

A. Direct Raw and Auxiliary Materials 22,273,506 13,956,032

B. Direct Labor Cost 11,883,589 9,581,076

C. General Production Expenses 39,259,146 26,668,902

D. Consumption of Semi-finished Products (1,659,716) (1,538,232)

1-Inventory (Beginning of the year) (+) 2,994,527 1,456,295

2-Inventory (End of the year) (-) (4,654,243) (2,994,526)

Cost of Goods Produced

E. Change in Finished Goods Inventory (4,258,160) (2,380,287)

1-Inventory (Beginning of the year) (+) 6,907,763 4,527,476

2-Inventory (End of the year) (-) (11,165,924) (6,907,763)

I. Cost of Goods Produced and Sold 67,498,365 46,287,490

Trade Activities

A. Merchandise Inventory (Beginning of the year) (+) -

B. Purchase during the year (+) 5,262,340 4,363,884

C. Merchandise Inventory (End of the year) (-) -

II. Cost of Merchandise Sold 5,262,340 4,363,884

III. Cost of Services Sold -

Cost of Goods Sold 72,760,705 50,651,375

50

ECZACIBAfiI


STATEMENT OF COST OF GOODS SOLD



1. We have examined the accompanying balance sheets of Eczac›bafl› Yap› Gereçleri Sanayi ve

Ticaret A.fi. (''The Company'') at 31 December 2001 and the related statements of income for

the year then ended. Our examination was made in accordance with generally accepted auditing

standards issued by the Turkish Capital Market Board (CMB) and accordingly included such

tests of the accounting records and other auditing procedures as we considered necessary

under the circumstances.

2. In our opinion the accompanying financial statements present fairly, in all material respects,

the financial position of Eczac›bafl› Yap› Gereçleri Sanayi ve Ticaret A.fi. at December 31, 2001,

and the results of its operations for the year then ended, in accordance with generally accepted

accounting principles issued by the CMB (see footnote 11 to the balance sheets), which are

applied consistently.

3. Additional paragraph for convenience translation to English:

The effects of differences between accounting principles issued by the CMB and accounting

principles generally accepted in countries where the accompanying financial statements are to

be distributed as well as International Accounting Standards (IAS) have not been quantified in

the accompanying financial statements. Accordingly, the accompanying financial statements are

not intended to present the financial position and results of operations in accordance with

accounting principles generally accepted in such countries and IAS.

Baflaran Nas Serbest Muhasebeci

Mali Müflavirlik Anonim fiirketi

(a member of PricewaterhouseCoopers)

Cansen Baflaran, SMMM, Partner

‹stanbul, March 1, 2002

51

ECZACIBAfiI


CONVENIENCE TRANSLATION OF INDEPENDENT AUDITOR’S REPORT

ORIGINALLY ISSUED IN TURKISH)

INDEPENDENT AUDITOR’S REPORT

1 JANUARY - 31 DECEMBER 2001

Büyükdere Caddesi, 193

Levent 80640, Istanbul, Turkey

Tel: +90 212 339 90 00

Faks: +90 212 282 67 45

www.vitraartema.com.tr

Istanbul, June 2002

52

ECZACIBAfiI


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