CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR S REVIEW REPORT ORIGINALLY ISSUED IN TURKISH KOÇ HOLDİNG A.Ş. - PDF

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CONVENIENCE TRANSLATION INTO ENGLISH OF FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2005 TOGETHER WITH AUDITOR S REVIEW REPORT INDEPENDENT AUDITOR S REVIEW REPORT INDEPENDENT AUDITOR S REVIEW REPORT FOR THE

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CONVENIENCE TRANSLATION INTO ENGLISH OF FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2005 TOGETHER WITH AUDITOR S REVIEW REPORT INDEPENDENT AUDITOR S REVIEW REPORT INDEPENDENT AUDITOR S REVIEW REPORT FOR THE SIX-MONTH PERIOD ENDED 30 JUNE We have reviewed the accompanying consolidated interim balance sheet of Koç Holding A.Ş. ( Koç Holding ) at 30 June 2005 and the related consolidated interim statement of income for the period then ended in accordance with the limited review standards issued by the Capital Market Board ( CMB ). Our work on the consolidated interim balance sheet and the statement of income was limited compared to the work performed in accordance with generally accepted auditing standards for the year-end financial statements. Our work covered mainly analytical review, gathering information and various audit techniques in accordance with the limited review standards, on the basis of our understanding of the interim financial statements preparation system. Accordingly, our report should not be considered comparable to an independent full scope audit report. 2. Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements stated in the paragraph 1 above, are not presented fairly, in all material respects, in accordance with accounting principles issued by the CMB (Note 2). We would like to draw your attention to the following matters: 3. As explained in Note 3 to the consolidated interim financial statements, the statements include the accounts of the parent company, its Subsidiaries and Joint Ventures. Subsidiaries are companies in which Koç Holding has power to control the financial and operating policies for the benefit of Koç Holding through the exercise of voting power relating to the shares held by Koç Holding and its Subsidiaries together with the voting power which Koç Holding effectively exercises relating to the shares held by Koç family members and enterprises controlled by them. Joint Ventures are companies in respect of which there are contractual arrangements through which an economic activity is undertaken subject to joint control by Koç Holding and its Subsidiaries (through the control basis ) and one or more other parties. In effect the Koç family members allow Koç Holding to exercise the voting power in respect of their shares held in these companies. In the consolidated interim financial statements, the shares held by Koç family members are treated as minority interest. 4. As explained in Note 2 to the consolidated interim financial statements, Euro ( EUR ) and US Dollar ( USD ) amounts shown in the accompanying consolidated financial statements have been included solely for the convenience of the reader of the consolidated interim financial statements and are translated from New Turkish Lira ( YTL ), as a matter of arithmetic computation only, at the official EUR and USD bid rates announced by the Central Bank of the Republic of Turkey at 30 June Such translation should not be construed as a representation that the YTL amounts have been or could be converted into EUR and USD at these or any other rates. 5. Additional paragraph for convenience translation into English: As of 30 June 2005, the accounting principles described in Note 2 (defined as CMB Accounting Standards ) to the accompanying consolidated interim financial statements differ from International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board with respect to the application of inflation accounting and presentation of basic financial statements and the notes to them. Accordingly, the accompanying consolidated interim financial statements are not intended to present the financial position and results of operations in accordance with IFRS. Başaran Nas Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi a member of PricewaterhouseCoopers Zeynep Uras, SMMM Partner Istanbul, 8 September 2005 AT 30 JUNE 2005 Contents Page CONSOLIDATED INTERIM BALANCE SHEETS CONSOLIDATED INTERIM STATEMENTS OF INCOME... 3 CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY... 4 CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW... 5 NOTES TO THE NOTE 1 ORGANISATION AND NATURE OF OPERATIONS NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 4 CASH AND CASH EQUIVALENTS NOTE 5 MARKETABLE SECURITIES NOTE 6 FINANCIAL LIABILITIES NOTE 7 TRADE RECEIVABLES AND PAYABLES / LOANS AND ADVANCES TO CUSTOMERS NOTE 8 LEASE RECEIVABLES AND PAYABLES NOTE 9 DUE FROM/TO RELATED PARTIES NOTE 10 OTHER RECEIVABLES AND PAYABLES NOTE 11 BIOLOGICAL ASSETS NOTE 12 INVENTORIES NOTE 13 CONSTRUCTION CONTRACT RECEIVABLES AND PROGRESS BILLINGS NOTE 14 DEFERRED TAX ASSETS AND LIABILITIES NOTE 15 OTHER CURRENT/NON-CURRENT ASSETS AND LIABILITIES 42 NOTE 16 FINANCIAL ASSETS NOTE 17 GOODWILL / NEGATIVE GOODWILL NOTE 18 INVESTMENT PROPERTY NOTE 19 PROPERTY, PLANT AND EQUIPMENT NOTE 20 INTANGIBLE ASSETS NOTE 21 ADVANCES RECEIVED NOTE 22 RETIREMENT PLANS NOTE 23 PROVISIONS NOTE 24 MINORITY INTEREST NOTE 25 SHARE CAPITAL/TREASURY SHARES NOTE 26 CAPITAL RESERVES NOTE 27 PROFIT RESERVES NOTE 28 RETAINED EARNINGS NOTE 29 FOREIGN CURRENCY POSITION NOTE 30 GOVERNMENT GRANTS NOTE 31 COMMITMENTS AND CONTINGENT LIABILITIES NOTE 32 BUSINESS COMBINATIONS NOTE 33 SEGMENT REPORTING NOTE 34 SUBSEQUENT EVENTS NOTE 35 DISCONTINUED OPERATIONS NOTE 36 OPERATING REVENUE NOTE 37 OPERATING EXPENSES NOTE 38 OTHER INCOME/EXPENSES NOTE 39 FINANCIAL INCOME/EXPENSES NOTE 40 NET MONETARY POSITION GAIN/LOSSES NOTE 41 TAXES ON INCOME NOTE 42 EARNINGS PER SHARE NOTE 43 SUPPLEMENTARY CASH FLOW INFORMATION NOTE 44 DISCLOSURE OF OTHER MATTERS CONSOLIDATED INTERIM BALANCE SHEET AT 30 JUNE 2005 AND 31 DECEMBER 2004 ASSETS Restated 30 June June 2005 Notes EUR 000 (*) USD 000 (*) YTL 000 YTL 000 Current Assets: Cash and due from banks 4.a Marketable securities (net) Reserve deposits with the Central Banks 4.b Trade receivables (net) 7.a Loans and advances to customers 7.b Lease receivables (net) Due from related parties (net) 9.a Other receivables (net) Biological assets (net) Inventories (net) Construction contracts receivables (net) Deferred tax assets Other current assets 15.a Total current assets Non-current assets: Trade receivables (net) 7.a Loans and advances to customers 7.b Lease receivables (net) Due from related parties (net) 9.a Other receivables (net) Financial assets (net) Goodwill/negative goodwill (net) Investment property (net) Property, plant and equipment (net) Intangible assets (net) Deferred tax assets Other non-current assets 15.b Total non-current assets Total assets (*) Euro ( EUR ) and US Dollar ( USD ) amounts presented above are translated from New Turkish Lira ( YTL ) for convenience purposes only, at the official YTL exchange rate announced by the Central Bank of the Republic of Turkey ( CBRT ) at 30 June 2005, and therefore do not form part of these consolidated interim financial statements (Note 2.5). These consolidated interim financial statements as at and for the period ended 30 June 2005 have been approved for issue by the Board of Directors on 8 September 2005 and signed on its behalf by Rüşdü Saraçoğlu, President of Financial Services Group, and by Emine Alangoya, Accounting Manager. The accompanying notes form an integral part of these consolidated interim financial statements. 1 CONSOLIDATED INTERIM BALANCE SHEET AT 30 JUNE 2005 AND 31 DECEMBER 2004 Restated 30 June June 2005 Notes EUR 000 (*) USD 000 (*) YTL 000 YTL 000 LIABILITIES Current Liabilities: Customer deposits 6.b Short-term borrowings (net) 6.a Short-term portion of long-term borrowings (net) 6.a Lease payables (net) 8.b Insurance technical reserves 23.c Other financial liabilities (net) Trade payables (net) 7.a Due to related parties (net) 9.b Advances received Construction contracts progress billings (net) Provisions 23.a Deferred tax liabilities Other current liabilities (net) 15.c Total current liabilities Non-current liabilities: Customer deposits 6.b Long-term borrowings (net) 6.a Lease payables (net) 8.b Insurance technical reserves 23.c Other financial liabilities (net) Trade payables (net) 7.a Due to related parties (net) 9.b Advances received Provisions 23.b Deferred tax liabilities Other non-current liabilities (net) 15.d Total non-current liabilities Total liabilities MINORITY INTEREST SHAREHOLDERS EQUITY Share capital Treasury shares Capital reserves Share premium Share cancellation gains Revaluation fund Financial assets fair value reserve Inflation adjustment to shareholders equity Profit reserves Legal reserves Statutory reserves Extraordinary reserves Special reserves Investment and property sales income to be added to the capital Translation reserve (20.439) (24.635) (33.043) (22.080) Cumulative gain/(loss) on hedging (4.220) Current year profit Retained earnings Total shareholders equity Total liabilities and shareholders equity Commitments and contingent liabilities 31 (*) EUR and USD amounts presented above are translated from YTL for convenience purposes only, at the official YTL exchange rate announced by CBRT at 30 June 2005, and therefore do not form part of these consolidated interim financial statements (Note 2.5). The accompanying notes form an integral part of these consolidated interim financial statements. 2 CONSOLIDATED INTERIM STATEMENTS OF INCOME FOR THE PERIODS ENDED 30 JUNE 2005 Operating Revenues Not Restated reviewed Restated 1 January - 1 January - 1 January - 1 January - 1 April - 1 April - 30 June 30 June 30 June 30 June 30 June 30 June Notes EUR 000 (*) USD 000 (*) YTL 000 YTL 000 YTL 000 YTL 000 Revenues (net) Cost of revenues (-) 36 ( ) ( ) ( ) ( ) ( ) ( ) Gross operating profit Operating expenses (-) 37 ( ) ( ) ( ) ( ) ( ) ( ) Net operating profit Other income Other expenses 38 (30.516) (36.782) (49.336) (55.655) (40.627) (34.215) Financial income/(expenses) - net (46.713) ( ) Income before monetary loss, taxes and minority interests Monetary loss (net) (54.303) - (5.711) Income before taxes and minority interests Taxes on income 41 ( ) ( ) ( ) ( ) ( ) ( ) Income before minority interest Minority interest 24 ( ) ( ) ( ) ( ) ( ) ( ) Net income Earnings per share (YTL) 42 0,252 0,287 0,162 0,179 (*) EUR and USD amounts presented above are translated from YTL for convenience purposes only, at the official YTL exchange rate announced by CBRT at 30 June 2005, and therefore do not form part of these consolidated interim financial statements (Note 2.5). The accompanying notes form an integral part of these consolidated interim financial statements 3 CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE SIX MONTH PERIODS ENDED 30 JUNE Capital Reserves Profit Reserves Retained Earnings Investment Inflation Financial Cumulative and property adjustment to assets gain and sales income Total Share Share shareholders fair value Legal Extraordinary Translation loss to be added Retained Undistributed shareholders Capital premium equity reserve reserves reserves reserve on hedging to the capital earnings profits Total equity Balance at 31 December 2003 as previously reported (9.080) (21.083) Accounting policy change - IAS 39 (Note 2) (6.871) - (6.871) - Balance at 1 January as restated (9.080) (21.083) Transfers ( ) - - Avaible-for-sale investments net fair value losses, net of tax (10.949) (10.949) Currency translation differences (2.085) (2.085) Cumulative gain on hedging Dividends paid (94.067) - (94.067) (50.096) Net income for the period Balance at 30 June (4.078) (11.165) (13.225) Balance at 31 December as previously reported (22.080) (4.220) Accounting policy change - IAS 39 (Note 2) (6.871) (303) (7.174) - Balance at 31 December as restated (22.080) (4.220) Effect of IFRS 3 - negative goodwill (Note 2) Balance at 1 January (22.080) (4.220) Transfers ( ) - - Avaible-for-sale investments net fair value gains, net of tax Currency translation differences (10.963) (10.963) Cumulative gain on hedging Dividends paid ( ) - ( ) (86.320) Net income for the period Balance at 30 June (33.043) The accompanying notes form an integral part of these consolidated interim financial statements. 4 CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW FOR THE SIX-MONTHS PERIODS ENDED 30 JUNE Restated 1 January - 1 January - 1 January - 1 January - 30 June June June June 2004 Notes EUR 000 (*) USD 000 (*) YTL 000 YTL 000 Operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Net income attributable to minority interest Depreciation and amortisation - net 18, 19, Changes in provisions Net interest income 43 ( ) ( ) ( ) ( ) Banking sector interest income 33.h, Banking sector interest expense 33.h, 43 ( ) ( ) ( ) ( ) Gain on sale of tangible assets 38 (22.478) (27.093) (36.340) (16.362) Net income from sale of subsidiary (49.164) Taxation expenses Net cash provided from operating activities before changes in operating assets and liabilities Net changes in operating assets and liabilities 43 ( ) ( ) ( ) ( ) Changes in other non-current assets and liabilities 43 (13.761) (16.586) (22.247) Income taxes paid 41 ( ) ( ) ( ) ( ) Net change in operating assets and liabilities ( ) ( ) ( ) ( ) Net cash used in operating activities ( ) ( ) ( ) ( ) Investing activities: Acquisition of tangible and intangible assets 18, 19, 20 ( ) ( ) ( ) ( ) Cash provided from sale of tangible and intangible assets Effect of change in minority interest Cash provided from sale of subsidiary Acquisition of subsidiaries (47.262) Net cash used in investing activities ( ) ( ) ( ) ( ) Financing activities: Dividends paid (53.393) (64.355) (86.320) (50.096) Share capital increase attributable to minority interest ( ) Dividends paid attributable to minority interest 24 ( ) ( ) ( ) Increase/(decrease) in short-term borrowings Increase/(decrease) in long-term borrowings (22.517) (27.141) (36.404) Non-banking sector interest income 39, Non-banking sector interest expense 39, 43 (60.733) (73.203) (98.187) ( ) Net cash provided from/(used in) financing activities Cumulative gain on hedging Cumulative gain on hedging attributable to minority interest Translation difference (366) (441) (592) (2.086) Translation difference attributable to minority interest (400) (482) (647) (1.154) Net decrease in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the period 4.a Cash and cash equivalents at the end of the period 4.a (*) EUR and USD amounts presented above are translated from YTL for convenience purposes only, at the official YTL exchange rate announced by CBRT at 30 June 2005, and therefore do not form part of these consolidated interim financial statements (Note 2.5). The accompanying notes form an integral part of these consolidated interim financial statements. 5 NOTES TO THE NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS Koç Holding A.Ş. ( Koç Holding ) was established on 11 December 1963 as a corporation to coordinate the activities of, and liaise between, companies operating in different fields including trade, manufacturing, agriculture, finance and retailing, and is registered in Turkey. As of 30 June 2005, the number of people employed by Koç Holding, Subsidiaries and Joint Ventures (collectively referred as the Group ) is (31 December 2004: ). The address of the registered office is as follows: Nakkaştepe Azizbey Sok. No: 1 Kuzguncuk-İSTANBUL Koç Holding is registered with the Capital Markets Board ( CMB ) and its shares have been quoted on the Istanbul Stock Exchange ( ISE ) since 10 January At 30 June 2005, the shares quoted on the ISE represent some 22,00% of the total shares. At 30 June 2005, the principal shareholders and their respective shareholdings in the Company are as follows (Note 25): Companies owned by Koç family members 42,26 Koç family members 26,60 Vehbi Koç Vakfı 7,17 Koç Holding Emeklilik Vakfı 1,97 Other 22,00 Koç Holding is organised mainly in Turkey in six main business segments: Automotive Finance (*) Consumer durable Food and retailing Energy Other (**) % 100,00 (*) The finance segment includes three main groups; banking, insurance and consumer finance. In the segmental presentation of the accompanying consolidated financial statements, banking, leasing, factoring, portfolio management, custody and brokerage services are included in the banking group. (**) Other operations of Koç Holding mainly comprise of foreign trade, tourism, information technologies and construction, none of which is of a sufficient size to be reported separately. Geographical segment information has not been included in the consolidated financial statements since geographical segments other than Turkey are not material enough to be reported separately. 6 NOTES TO THE NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) The Subsidiaries ( Subsidiary ) of the Group, their country of incorporation, nature of business and their respective business segment, are as follows: Country of Nature of Subsidiary incorporation business Segment Beldesan Otomotiv Yan Sanayii ve Tic. A.Ş. ( Beldesan ) Turkey Production Automotive Beldeyama Motorlu Vasıtalar San. A.Ş. ( Beldeyama ) Turkey Production Automotive Birmot Birleşik Motor Sanayi ve Tic. A.Ş. ( Birmot ) Turkey Trading Automotive Döktaş Ticaret ve San. A.Ş. ( Döktaş ) Turkey Production Automotive Otokar Otobüs Karoseri Sanayi A.Ş. ( Otokar ) Turkey Production Automotive Otokoç Otomotiv Tic. ve San. A.Ş. ( Otokoç ) Turkey Trading Automotive Otomotiv Lastikleri Tevzi A.Ş. ( Otomotiv Lastikleri ) Turkey Trading Automotive Otoyol Sanayi A.Ş. ( Otoyol ) Turkey Production Automotive Koç Allianz Hayat ve Emeklilik A.Ş. ( Koç Allianz Hayat ) Turkey Life insurance Finance Koç Allianz Sigorta T.A.Ş. ( Koç Allianz Sigorta ) Turkey Insurance Finance Koç Tüketici Finansmanı ve Kart Hizmetleri A.Ş. ( Koç Finans ) Turkey Consumer finance Finance Arçelik A.Ş. ( Arçelik ) Turkey Production Consumer durable Ardutch B.V. ( Ardutch ) The Netherlands Holding Consumer durable Beko Deutschland GmbH ( Beko Deutschland ) Germany Trading Consumer durable Beko Electronics Espana S.L. ( Beko Espana ) Spain Trading Consumer durable Beko Elektronik A.Ş. ( Beko Elektronik ) Turkey Production Consumer durable Fusion Digital Technology Ltd. ( Fusion ) The U.K. Technology Consumer durable development Beko France S.A. ( Beko France ) France Trading Consumer durable Beko Polska S.A. ( Beko Polska ) Poland Trading Consumer durable Beko Plc. ( Beko Plc ) The U.K. Trading Consumer durable Blomberg Werke GmbH ( Blomberg Werke ) Germany Production Consumer durable Blomberg Vertriebsgesellschaft mbh ( Blomberg Vertrieb ) Germany Distribution Consumer durable Elektra Bregenz AG ( Elektra Bregenz ) Austria Trading Consumer durable Raupach Wollert GmbH ( Raupach ) Germany Holding Consumer durable SC Arctic SA ( Arctic ) Romania Production Consumer durable Sherbrook International Ltd. ( Sherbrook ) The U.K. Trading Consumer durable Türk Demir Döküm Fabrikaları A.Ş. ( TDDF ) Turkey Production Consumer durable Demrad Döküm Ürünleri Sınai ve Tic. A.Ş. ( Demrad ) Turkey Production Consumer durable DD Heating Limited ( DD Heating ) The U.K. Trading Consumer durable Panel Radyatör Sanayi ve Ticaret A.Ş. ( Panel ) Turkey Production Consumer durable Düzey Tüketim Malları Pazarlama A.Ş. ( Düzey ) Turkey Trading Food and retailing Limited Liability Company Rambutya ( Rambutya ) Kazakhstan Retail Food and retailing Migros Türk T.A.Ş. ( Migros ) Turkey Retail Food and retailing Ramstore Macedonia D00 ( Ramstore Macedonia ) Macedonia Retail Food and retailing Ramstore Bulgaria A.D. ( Ramstore Bulgaria ) Bulgaria Retail Food and retailing Ramstore Sınırlı Sorumlu Türk Gıda Müessesesi ( Ramstore ) Azerbaijan Retail Food and retailing Tat Konserve Sanayi A.Ş. ( Tat Konserve ) Turkey Food Food and retail
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