PINAR SU SANAY‹ ve T‹CARET A.fi.2008 ANNUAL REPORT

Board of Directors 03

Letter from the Chairperson 04

Agenda for the Ordinary General Meeting 06

P›nar Su Sanayi ve Ticaret A.fi. 2008 Annual Report 07

Company History and Highlights 10

Total Quality 12

Exports 12

Human Resources 12

Social and Cultural Activities 13

Corporate Governance Principles Compliance Report 14

Statutory Auditors’ Report 23

Financial Statements and Independent Auditor’s Report 25

Content

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Yönetim Kurulu 03

Emine Feyhan YAfiAR(Chairperson)

Taflk›n TU⁄LULAR(Member)

Korkmaz ‹LKORUR(Member)

Y›lmaz GÖKO⁄LU(Member)

Ata Murat KUDAT(Member)

B. Safa OCAK(Member)

‹dil Y‹⁄‹TBAfiI(Vice Chairperson)

Dear Shareholders,

The problems that arose due to increased risks in the US housing market, com-bined with the losses on banks’ balance sheets and the sharp sales tendency inglobal asset markets led to a rising uncertainty in the world economy. In the lastquarter of 2007, economic growth in the USA underwent a visible deceleration,thus leading to declined production and weakened employment and consumption.This situation affected all of the countries integrated with the global economy, asTurkey, which had achieved an annual average growth of 6.8% in the 2002-2007period, was able to complete 2008 with a mere growth rate of 1.1%.

Despite these unfavorable conditions, P›nar Su capitalizes on the advantage of itsability to recognize the future of the water sector back in 1984 when the compa-ny’s vision targeting improvement and innovations was set, as well as its success-ful strategies, and continues to be the source of life for the consumers in nationaland international markets where it has a presence.

Water means life; it means energy and food... Despite the vital importance of water,the United Nations’ World Water Development Report does not reflect encouragingdata. In 2030, 67% of the world population, in other words 5 billion people will nothave access to healthy water. Each one of us must take this report as a warning.We have to be aware that the world will be faced with an extremely serious watercrisis unless we change our established water consumption behavior.

We know that water is not an ordinary commercial article but a heritage that needs to beprotected. Water scarcity is a factor that rises as a threat against economic growth, humanrights, health, safety and national security. Acting on this awareness, PINAR, the first brandto introduce Turkey’s first bottled natural spring water, currently presents the natural min-eral water obtained from Madran, Çaml›ca and Toros springs to the liking of the consumersin Turkey and its export destinations under the brand name P›nar Yaflam P›nar›m.

With our slogan “There is life in it!” , we invite our consumers to take urgent actionagainst global warming and to protect life. We believe that it is our duty to raisepublic awareness on this topic and to guide people towards the correct use ofwater resources. We constantly share our sensitivity about the matter with our con-sumers and help develop awareness among them through leaflets focusing on“What can we do against global warming?”. We reach our consumers with ourmagazine Su P›nar›m (My Source of Water) developed specifically for 5th of JuneWorld Environment Day, and share our responsibilities for achieving enhanced envi-ronmental awareness. We organize tree planting festivals every year with selectedschools, in an effort to instill the love of nature among students and help developenvironmental sensitivity and awareness at an early age via the saplings they plant.

The term “Natural Mineral Water” refers to water that is naturally formed under suit-able geological conditions deep in the earth’s crust, the mineral content of which isdetermined by a large number of natural factors and which is protected against anyrisk of contamination. The water must have inherent privileges such as resistanceagainst seasonal changes in its mineral structure, and must not be physically orchemically intervened with at the filling phase.

Letter from the Chairperson04

Bottled at Turkey’s most modern water facilities with its natural composition at thespring fully uncompromised and its mineral balance preserved employing “cleanroom” technology, P›nar Yaflam P›nar›m has been registered as “natural mineralwater” by the Ministry of Health. The remark “natural mineral water” on P›nar YaflamP›nar›m packaging means that the water presented to the consumers is healthy,has a balanced mineral structure, and most importantly, it has been bottled toreflect the exact same qualities at its spring, and has not been subjected to anytreatment that would breach its structure.

P›nar Su employs state-of-the-art technologies at its facilities and constantly fol-lows-up the developments in technology drawing on its infrastructure. Carrying outautomated filling in the filling room whose air is constantly cleaned and into whichair inflow is prevented, P›nar Su subjects the water to sensory, physical, chemicaland microbiological tests at every phase of production from the spring up to its bot-tling, making use of the laboratory facilities at its disposal. As P›nar Su San. ve Tic.A.fi., we implement ISO 9000 Quality Management System, ISO 22000 FoodSafety Management System and ISO 14000 Environmental Management Systemsat our facilities and at each one of our departments, and work to continuallyimprove them.

According to the results of research conducted in relation to the sector, bottledwater sector reached a turnover of nearly TL 3 billion in 2008 on a volume of 8.6billion liters. 19 liter demijohn sales account for nearly 80% of the consumption inthe sector, which is followed by the PET bottle segment with 20% share.

In 2008, P›nar Su realized a 9% market share in PET packaging in the retail chan-nel. Evidencing P›nar Su’s successful performance and sensitivity towards technol-ogy-related matters, the company made investments in capacity increase, renewaland machinery with a total worth of TL 7.8 million.

In 2008, P›nar Su made exports to Germany, UK, Denmark, Ireland, Belgium, USA,Malta, Kosovo, Cyprus, Azerbaijan, Bahrain, UAE, Kuwait, Yemen, Australia,Singapore and Switzerland amounting to USD 3.1 billion.

The potential of the water sector in Turkey indicates that the growth trend will con-tinue. In the process, P›nar Su is committed to successfully maintain its targets toincrease its exports, to tap new and lucrative markets, and to grow in the marketswhere it already has a presence. In maintaining our activities, we will remain strict-ly loyal to our vision of producing good quality and safe packaged water needed byour society and presenting them to our consumers under healthy and hygienic con-ditions, and of developing our sector and stakeholders.

Sincerely,

Feyhan YaflarChairperson

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PINAR SU SANAY‹ VE T‹CARET A.fi. Agenda for the Ordinary General Meeting convened on 13 May 2009Place of Meeting: Kemalpafla Asfalt› No:1 P›narbafl›-‹ZM‹RDate of Meeting: 10:30

1. Election of the Presiding Board2. Authorizing the Presiding Board to sign the minutes3. Reading of the Board of Directors’ report; the statutory auditors’ report, and the report of the independent audit firm4. Approval of the company’s balance sheet and profit and loss statement for 2008 submitted to the Capital Markets Board of Turkey

(CMB) and ‹stanbul Stock Exchange (ISE); individual acquittal of the members of the Board of Directors and statutory auditors of their fiduciary responsibilities

5. Approval of the independent audit firm chosen by the Board of Directors, and of its term of service6. Deliberation and decision on the determination of the remuneration to be paid to the Board of Directors members7. Pursuant to section 15 of the company’s articles of association, election for the succession of statutory auditors whose terms of

office have expired8. Deliberation and decision on the determination of the remuneration to be paid to statutory auditors9. Presentation of information to the shareholders concerning the grants and donations made in the fiscal year10. Deliberation and decision on the profit for the year11. Presentation of information to the General Assembly on the company’s disclosure policy12. Deliberation and decision on authorizing the Board of Directors for distribution of interim dividends to the shareholders to be

set-off from 2009 dividends, under Article 15 of the Capital Market Law and Article 9 of the CMB Communiqué Serial: IV No: 27, and on setting-off, pursuant to the same article, interim dividends to be distributed from the extraordinary reserves of the prior year’s balance sheet, in case there has not been sufficient profit or a loss has been realized, or from such amount which shall be generated by the liquidation of the guarantee obtained for interim dividends, pursuant to Article 10 of the abovementioned Communiqué, and which shall be entered as income, in case the extraordinary legal reserve is not sufficient to cover such loss

13. Authorizing, pursuant to Articles 334-335 of the TCC, the Board of Directors13. Wishes

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PINAR SU SANAY‹ VE T‹CARET A.fi. BOARD OF DIRECTORS’ ANNUAL REPORT PREPARED BASED ON

THE COMMUNIQUÉ SERIAL: XI NO: 29

a) Period of the Report : 01.01.2008-31.12.2008

Commercial Title of the Company : PINAR SU SANAY‹ VE T‹CARET A.fi.

Issued Capital : TL 12,732,753.50

Authorized Capital : TL 50,000,000.00

Members of the Board of Directors :

Position Name & Surname Term of Office

Chairperson Emine Feyhan Yaflar 15.05.2008-3 YearsVice Chairperson ‹dil Yi¤itbafl› 15.05.2008-3 YearsMember Taflk›n Tu¤lular 15.05.2008-3 YearsMember Ata Murat Kudat 15.05.2008-3 YearsMember B. Safa Ocak 15.05.2008-3 YearsMember Y›lmaz Göko¤lu 15.05.2008-3 YearsMember Korkmaz ‹lkorur 15.05.2008-3 Years

Scope of Authority:The chairperson and the members of the Board of Directors possess the respective authorities stipulated by the relevant articles of the TurkishCommercial Code and by sections 12 and 13 of the company’s articles of association.

Members of the Board of Auditors:

Name & Surname Date of Appointment Term of OfficeKamil DEVEC‹ 15.05.2008 1 YearRecep ÇET‹NSÖZ 15.05.2008 1 Year

Scope of Authority:According to section 16 of the company’s articles of association, the duties, authorities and responsibilities of statutory auditors are in con-formity with the principles stipulated by the relevant articles of the Turkish Commercial Code.

b) Factors Affecting the Company’s Performance and Estimations about the Development of the Establishment:From the perspective of the problems the humankind is faced with, one of the crucial challenges of the 21st Century arises as sufficient andsafe fulfillment of the increasing water need of the world population. Summer droughts and decreased precipitation resulting from globalwarming will possibly have a negative impact on water resources leading to their depletion and pose a risk factor with respect to the Turkishand world population.

c) The Company’s Finance Sources and Risk Management Policies:The finance sources of the establishment consist of the company’s shareholders’ equity, loans utilized and loans from vendors. Due to thenature of its activities, the company is exposed to various financial risks including the impact of changes in exchange rates and interest ratesin the lending and capital markets. The financial risk that the company is exposed is low within the total asset size, and the company’s riskmanagement model is aimed at minimizing its adverse impacts upon the company’s financial performance.

d) The Company’s Values Excluded from the Financial Statements within the Framework of the Capital Market Board’s AccountingStandards:The company’s products are presented to the consumers in Turkey and in our export destinations under the brand name “P›nar YaflamP›nar›m”. Although the financial statements do not include any values relating to this brand, it evidently possesses a value by virtue of the factthat it is a recognized brand in its sector.

e) Corporate Governance Principles Compliance ReportPlease see App. 1.

f) Research and Development Activities:With a view to upgrading the product quality, the new PET line went into service at our Sakarya facility and the machinery park at our Ispartafacility was separated from the warehouse storage area during 2008. Other activities during the reporting period included the work on thesecurity seal for our 19 liter demijohns which was redesigned to become perforated to enable easy tearing, and also to be more safe/stable soas to cover part of the lid from the top.

g) Changes in the Articles of Association During the Reporting Period:No changes were made to the articles of association during the reporting period.

h) Issued Capital Market Instruments:As at 31 December 2008, the company has 1,273,275,350 bearer shares each with a nominal value of Kr 1.

i) The Relevant Sector and the Company’s Position Therein:As the natural water resources around the world are polluted and depleted rapidly, P›nar made use of the idle springs in our country andbrought Turkey’s first bottled natural spring water to the consumers. Today, P›nar addresses the liking of the consumers in Turkey, as wellas in its export destinations, with the natural mineral water obtained from Madran, Çaml›ca and Toros springs marketed under the P›narYaflam P›nar›m brand.

P›nar Su set its vision targeting improvement and innovations as early as in 1984. Capitalizing on the advantage of its ability to recognize thefuture of the water sector, the company made itself a firm place in the lives of everyone living in Turkey.

According to the results of research conducted in relation to the sector, bottled water sector reached a turnover of nearly TL 3 billion in 2008.

19 liter demijohn sales account for nearly 80% of the consumption in the sector, which is followed by the PET bottle segment with 20% share.

In 2008, P›nar Su realized a 9% market share in PET packaging in the retail channel.

Evidencing P›nar Su’s successful performance and sensitivity towards technology-related matters, the company made investments in capacityincrease, renewal and machinery with a total worth of TL 7.8 million.

j) Investments:Investments in 2008 totaled TL 7,797,259, breaking down as follows:TL 13,352 in buildings, TL 6,037,693 in machinery and facilities, and TL 1,746,214 in fixtures.

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k) Production:

PRODUCTION (TONS) 2008 2007 2006PET BOTTLES 193,666 216,929 171,221GLASS BOTTLES 957 633 45719 L PC DEMIJOHNS 254,015 256,686 214,304TOTAL 448,638 474,248 385,982

l) Sales:

SALES TONS TLPET BOTTLES 204,771 69,105,,187GLASS BOTTLES 942 905.92319 PC DEMIJOHNS 253.929 26.611.967TOTAL 459.642 96.623.077

The company’s 2008 exports were worth USD 3,033,288.

m) Financial Structure:The company’s financial statements for the year ended 31 December 2008 were drawn up, and incorporated in the annual report, in accor-dance with the Communiqué No XI-29 on “Accounting Standards in Capital Markets” published by the CMB.

The key financial ratios in relation to the last two years are as follows:

2008 2007Total Borrowings/Total Assets % 27 25Total Borrowings/Shareholders’ Equity % 37 33Current Assets/Current Liabilities 1.21 1.31Equity Turnover Ratio 1.04 1.15Financing Costs/Net Sales % 4 2Financing Costs/Shareholders’ Equity % 4 2

n) Senior Management:Current senior management is constituted by the following individuals:Chief Operations Officer : Ahmet Olcay SUNUCUGeneral Manager : Ahmet ATAY

o) Personnel Matters:The average number of personnel employed by the company in 2008 was 362, which was 347 in 2007.

Collective bargaining agreement is not practiced at the company; the employees are granted the rights and benefits commensurate with thelaws and peer work places.

p) Grants and Donations during the Reporting Period:The company’s grants and donations to various institutions and organizations in 2008 amounted to TL 192,838.

q) Non-headquarter Organizations: N/A

Company History and Highlights10

The pioneer of the bottled water sector, P›nar Su produced Turkey’s first bottlednatural spring water in one-way packaging in 1984. 1996 marked the com-

mencement of the establishment of P›nar Madran facility, Turkey’s most modernwater establishment. Established on a covered area of 14,000 sqm in a total areaof 64,000 sqm in the Bozdo¤an district of Ayd›n, P›nar Madran facility reached atotal covered area of 17,000 sqm with the additional investments made in 2005.

In order to respond to the increasing demand, P›nar purchased two new naturalwater springs in 2003. Bottled at these two new springs, P›nar Yaflam P›nar›m andP›nar Denge brands were presented to the liking of the consumers.

Started at P›nar Su in 2002 in the Aegean and Mediterranean Regions with P›narMadran, sales in demijohns have extended its reach first in the Marmara Region,and then across the country, with the investments in new facilities.

A good spring is one that is distant from settlement areas and that maintains a fixedflow and stable chemical properties despite precipitation or drought during a givenyear. Healthy natural spring water means the water with mineral content that doesnot exceed the limit values stipulated by the applicable regulation, is free from path-ogenic microorganisms, and possesses suitable physical and chemical properties.All springs owned by P›nar Su represent some of Turkey’s highest quality naturalwater springs, located far from settlement areas, and holding chemical properties

remaining unvarying throughout the year.

Obtained from the valuable natural springs of Turkey located in Ayd›n/Madran,Sakarya/Çaml›ca and Isparta/Toros, P›nar Yaflam P›nar›m Natural Mineral Waterbrings this unique gift of nature to consumers in its most hygienic, most useful andpurest form.

The term “Natural Mineral Water” refers to water that is naturally formed under suit-able geological conditions deep in the earth’s crust, the mineral content of which isdetermined by a large number of natural factors and which is protected against anyrisk of contamination. The water must have inherent privileges such as resistanceagainst seasonal changes in its mineral structure, and must not be physically orchemically intervened with at the filling phase.

The company’s P›nar Yaflam P›nar›m-Çaml›ca facility earned natural mineral watermanufacturing license on 26 November 2007, followed by P›nar Yaflam P›nar›m-Madran and P›nar Yaflam P›nar›m-Toros facilities that were granted with the samelicense on 26 December 2007 and 03 March 2008 respectively.

With a French hardness of 1.65, P›nar Yaflam P›nar›m-Madran is one of the softestand easiest-to-drink waters in the world. P›nar Yaflam P›nar›m-Madran facility takeson the bottling of 0.33 L, 0.5 L, 1.5 L, 2.5 L, 5 L and 8 L PET bottled waters, 0.33L, 0.75 L NRB glass bottled waters, and 19 L Polycarbonate demijohns, and hasan annual filling capacity of 490,000 tons.

Its spring located in Hendek, Adapazar›, P›nar Yaflam P›nar›m-Çaml›ca NaturalMineral Water is a specialty natural mineral water with its natural and balanced min-eral content. It is presented to consumers in its 19 liter bottles delivered to theaddresses in hygienic plastic bags, along with 0.33, 0.5, 1, 1.5 and 5 liter PETproducts. In 2008, the facility reached a total production capacity of 400,000 tons.

The spring of P›nar Yaflam P›nar›m-Toros is a valuable one named Dikilitafl inIsparta’s E¤irdir region of our country which is quite rich in terms of natural springwaters. P›nar Yaflam P›nar›m-Toros plant has an annual production capacity of210,000 tons. P›nar Yaflam P›nar›m-Toros is bottled employing cutting-edge tech-nology under P›nar’s quality assurance and marketed in 0.5, 1.5 and 5 liter PETpackaging.

P›nar Su as the leading brand among packaged natural spring waters exported fromTurkey, makes exports to numerous countries including, particularly, Germany, TurkishRepublic of Northern Cyprus, UK, Azerbaijan, Denmark, Switzerland, USA, Bahrain,Singapore, Kosovo, Ireland, Northern Iraq, Malta, Kuwait, Australia and UAE.

P›nar Su displayed its distinction once again in its innovative character and the mis-sion of being the spearheading company in its sector, and fulfilled the consumers’expectations for health, reliability and taste. P›nar’s marketing strategy in the watersector is focused on strengthening distribution and increasing availability. Alwaysthe leading brand in the overall Turkish water market, P›nar Su will continue tosolidify its position with new investments.

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Total QualityP›nar Su employs state-of-the-art technologies at its facilities and constantly fol-lows-up the developments in technology drawing on its infrastructure. Carrying outautomated filling in the filling room whose air is constantly cleaned and into whichair inflow is prevented, P›nar Su subjects the water to sensory, physical, chemicaland microbiological tests at every phase of production from the spring up to its bot-tling, making use of the laboratory facilities at its disposal.

As P›nar Su San. ve Tic. A.fi., we implement ISO 9000 Quality ManagementSystem, ISO 22000 Food Safety Management System and ISO 14000Environmental Management Systems at our facilities and at each one of our depart-ments, and work to continually improve them. As a result of this commitment, ourfacility in Bozdo¤an, Ayd›n holds TS EN ISO 9000 Quality Management SystemCertificate, TS EN ISO 22000 Food Safety Management System Certificate and TSEN ISO 14000 Environmental Management System Certificate. Our facilities inHendek, Sakarya and E¤irdir, Isparta possess TS EN ISO 9000 QualityManagement System and TS EN ISO 22000 Food Safety Management System cer-tificates. All these management systems are periodically audited and reviewed bythe Turkish Standards Institution (TSE). In addition, all three facilities possess TSEconformity certificates. Furthermore, examinations and inspections performed bythe NSF and international customers verify that the products and production con-ditions are in conformity with European and US norms. Upon detailed and lengthyexaminations conducted following the applications filed with the Ministry of Health,P›nar Yaflam P›nar›m Madran, Toros and Çaml›ca water brands earned the NaturalMineral Water manufacturing license.

ExportsIn 2008, P›nar Su made exports worth USD 3.1 million to Germany, UK, Denmark,Ireland, Belgium, the USA, Malta, Kosovo, Cyprus, Azerbaijan, Bahrain, UAE,Kuwait, Yemen, Australia, Singapore and Switzerland. The potential of the watersector in Turkey indicates that the growth trend will be ongoing.

In the process, P›nar Su will successfully maintain its commitment to and targets ofincreasing its exports, identifying new and lucrative markets, and growing in exist-ing markets so as to become a global brand.

Human ResourcesEver since its inception, P›nar Su made it a principle to involve employees in themanagement in line with the participative management approach of the YaflarGroup. The company plans and manages HR management processes in parallelwith the company’s corporate goals.

While supporting the employees with the Operational Cost Improvement andPerformance Appraisal System, the company also implements Strategic HumanResources Management policy with a view to engaging them in the strategic plan-ning process. Formulated in line with the company’s strategic priority to make ourhuman resource a high-performing team, this policy is a set of the process and therelated substructures for measuring work performance against management basedon preset targets and competencies, and providing feedback thereon.

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Along this line, P›nar Su A.fi. designed policies and systems that focus on manag-ing and evaluating employee performance from 2005. The Corporate BalancedScorecard initiative monitors the employees’ performances towards achieving thecompany’s goals and targets. This is ensured by biannual performance discussionswhich are held by the relevant employee and the management. Performance dis-cussions address all tasks and activities as determined in the previous meeting,and the results achieved in the six-month period by the company and the employ-ee are evaluated. Also, the targets and actions for improvement for the followingperiod are set. The teamwork for continuous improvement is also carried on.

The company management reviews, and shares with the employees, the resultsfrom the annual Employee Satisfaction Survey, and devises and puts into life initia-tives aiming to enhance employee satisfaction. The company has empowered itsemployees and helped them reflect their creativity in the work via the improvementteams set up.

Decisions relating to the development of employees are made each year duringstrategy formulation, assessment and budgeting, and implemented annually atP›nar Su. Employee development plan covers action steps to enrich their trainingand skills thus helping them to build on their skills to increase the depth andbreadth of their expertise. Water and Beverages Group achieved and furtherexceeded its training targets set for 2008.

Social and Cultural ActivitiesWe believe our duty in relation to the necessity of urgent actions against globalwarming is to raise public awareness on this topic and to guide people towards thecorrect use of water resources. We share our sensitivity about the issue with ourconsumers through our slogan “There is life in it!” and leaflets focusing on “Whatcan we do against global warming?”. Our Su P›nar›m (My Source of Water) maga-zine developed specifically for the 5th of June World Environment Day representsanother significant step taken towards enhancing awareness among our con-sumers. In addition, we organize tree planting festivals every year with selectedschools, in an effort to instill the love of nature among students and help developenvironmental sensitivity and awareness at an early age via the saplings they plant.

1) Statement of Compliance with Corporate Governance Principles:In the fiscal year ended on 31 December 2008, PINAR SU SANAY‹ VE T‹CARET A.fi. (thecompany) complied with and implemented the Corporate Governance Principles pub-lished by the Capital Markets Board of Turkey (CMB), save for the matters listed herein-below.

a) Cumulative voting systemb) Independent membersc) Representation of minority shares in the board of directors

Nature and grounds relating to matters that are not complied with in part or in whole aredetailed in the relevant sections of the report. During the reporting period, training activ-ities on corporate governance were participated in, the company’s articles of association,procedures and practices were reviewed with respect to their compliance with the princi-ples, and improvement areas were identified.

SECTION I – SHAREHOLDERS

2) Shareholder Relations Unit:While there was not an investor relations unit at the company until 18 March 2009, thesaid function was carried out by the Financial Affairs Department receiving support fromthe relevant central departments of the Yaflar Group for the fulfillment of this function. Asstated in the material event disclosure made on the said date, it was decided by the com-pany’s Board of Directors to set up an Investor Relations Unit as of 18 March 2009 and toappoint Ms. Senem Demirkan who holds Capital Market Activities Advanced Level andCorporate Governance Rating Specialist licenses as the manager of this unit.

Contact informationTel : 0 232 482 22 00Fax : 0 232 489 15 62E mail : yatirimci@pinarsu.com.tr

The duties of the Investor Relations Unit are listed below:

a) Ensuring maintenance of the records about shareholders in a healthy, secure and up-to-date manner;b) Responding to the shareholders’ written information requests about the company, apartfrom those that are not publicly disclosed, are of a confidential and/or trade secret nature;c) Ensuring that General Meetings are convened in accordance with the applicable legis-lation, the articles of association and other internal regulations;d) Preparing the documents the shareholders could make use of in general meetings;e) Ensuring that the results of the voting are recorded and reports on the outcomes areforwarded to shareholders;f) Observing and complying with all considerations related to public disclosure, includ-ing the legislation and the company’s disclosure policy.

No written requests were received from the shareholders during the reporting period. Onthe other hand, a large number of verbal information requests are received from the share-holders; however, no statistical data are available with respect to such queries.

Corporate Governance Principles ComplianceReport (App. 1)

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3) Shareholders’ Exercise of their Right to Obtain Information:Indiscrimination is the basic principle in the shareholders’ exercise of their right to obtainand examine information. All necessary information and documents necessary for healthyexercise of shareholding rights are made equally available to the shareholders through ourwebsite. Numeric information regarding the applications for obtaining information in thefiscal year 2008 was provided in article 2 above. These information requests are usuallyrelated to such matters as the date of the general meeting, capital increases and bonusshares, and profit distribution. All information requests, apart from those falling underthe scope of trade secrets or company interest that is worth protecting, are responded towithout any discrimination among the shareholders and in parallel with the disclosurespreviously made to the public within the scope of material event disclosures.Developments that have an impact on the exercise of shareholding rights as required bythe Turkish Commercial Code (TCC) and CMB arrangements are disclosed via materialevent disclosures, newspaper announcements and by post. The company’s articles of asso-ciation contain no provisions stipulating the request for appointment of a special auditoras an individual right. During the reporting period, no such request was received from theshareholders.

4) Information on General Meetings:In 2008, 2007 Ordinary General Meeting was convened on 15 May 2008. According tosection 20 “Meeting Quorum” of the company’s articles of association, quorum at ordi-nary and extraordinary general meetings is subject to the relevant provisions of theTurkish Commercial Code. In 2007 Ordinary General Meeting, meeting and decisionquorums were 67.55% of the company’s share capital. Stakeholders and media did notattend the meeting. Invitation to the general meeting was made by the Board of Directors.In addition to the shareholders, authorized representatives of the independent audit firmare also invited in writing. The announcement for the company’s general meeting invita-tion was promulgated in the Turkish Trade Registry Gazette (TTRG) at least two weeks inadvance of the meeting date, excluding the dates of promulgation and meeting, in accor-dance with section 23 “Announcement” of the articles of association and under the provi-sions of the TCC and CMB arrangements. In addition, the invitation was also posted onthe corporate website and published in a local newspaper, and the shareholders, whoseaddresses were registered, were also informed on the meeting date, place and agenda bypost. Prior to the general meeting, the place, date and agenda of the meeting, dividenddistribution proposal of the Board of Directors to be submitted to the General Assembly,as well as the independent audit firm chosen are publicly announced by way of materialevent disclosures.

The company’s annual report is made available for the examination of shareholders at thecompany’s head office and on the corporate website 15 days in advance of the generalmeeting. At the general meeting, the topics on the agenda are communicated impartiallyand in detail, in a clear and understandable method, and the shareholders are providedwith the chance to voice their opinions and direct their questions under equal conditions,thus creating a healthy discussion climate.

The articles of association contain no provisions with regard to the adoption of materialdecisions at the general meeting, such as demerger, acquisition, disposal, leasing etc. ofsubstantial assets. In order to assure the company activities to proceed in their normalcourse, such decisions are adopted by the Board of Directors, with keen consideration ofthe CMB arrangements, TCC and tax legislation. Upon adoption, such resolutions are

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publicly disclosed as material event disclosures. In addition to the effective use of theabove mentioned communication channels to facilitate attendance of shareholders to thegeneral meetings, various means are provided for the transportation of shareholders to thevenue of the general meeting, when necessary. The minutes of the general meetings aremade available to shareholders at all times at the company’s head office. Furthermore, theminutes of the company’s general meetings convened in the past three years are availableunder the Investor Relations section on our corporate website accessible atwww.pinar.com.tr.

5) Voting Rights and Minority Rights:There are no privileges attached to voting rights. In relation to exercise of voting rights,the company’s articles of association contain no provisions preventing a non-shareholderfrom voting in proxy in the capacity of a representative. The provisions contained inapplicable legislation and the articles of association being reserved, open voting is per-formed by raise of hands at general meetings. However, upon demand by shareholders,the voting fashion shall be determined by the general assembly. There are no cross-share-holding interests between the company and another company. There are no independentmembers on the board of directors (Please refer to article 18 on detailed informationabout the members of the Board of Directors.) Minority rights are not represented in theBoard of Directors. At our company, minority rights and exercise thereof are implement-ed in parallel with Article 11 of the Capital Market Law that governs all publicly-floatedcompanies. Currently, the company’s articles of association do not contain a provisionallowing cumulative voting method.

6) Dividend Distribution Policy and Timing:The company’s general dividend distribution policy is to make dividend distributionupon consideration of the company’s financial position, the investments to be made andother funding needs, the sectoral conditions, economic environment, the capital marketlegislation and the tax legislation. In consideration of the fact that the dividend distribu-tion ratio is currently 20% under the capital market legislation, it is envisaged to makedividend distribution at this ratio at a minimum in the subsequent years as well. However,determination of the actual dividend ratios shall each year be made based on the consid-erations mentioned above. The company’s dividend distribution for 2007 was completedwithin legally prescribed period of time.

The company’s dividend distribution policy for 2008 and subsequent years was present-ed for the information of the shareholders at the general meeting convened on 15 May2008, and it is also publicly disclosed on the corporate website.

The company authorized, via the articles of association, the Board of Directors in relationto interim dividends. The Board of Directors evaluates the exercise of the power to grantinterim dividends within the framework of applicable legislation and economic environ-ment. Dividend distribution methods and processes are stipulated by the provisions con-tained in the TCC, CMB arrangements and the company’s articles of association. Upon theBoard of Directors’ relevant decision made in parallel with the set dividend distributionpolicy in each fiscal year, the public is informed by way of a material event disclosure.The Board of Directors decision relating to the amount of dividends is laid down forapproval at the general meeting and the amount of dividends approved as such is distrib-uted to the shareholders within the prescribed period of time as determined at the gener-al meeting within the framework of the CMB Communiqué Serial: IV, No: 27.

Although there are no privileged rights concerning participation in the company’s profit

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attached to the shares constituting the company’s issued capital, section 27 “Distributionof Profit” of the articles of association stipulates that an amount up to 5% of the portionremaining after setting aside the first dividends at the percentage determined by the CMBcan be set aside as provision for allocation to the members of the Board of Directors, andan amount up to 10% will be allocated to holders of founder’s redeemed shares as per sec-tion 8 of the articles of association.

7) Transfer of Shares:The company’s articles of association contain no provisions restricting the transfer of shares.

SECTION II – PUBLIC DISCLOSURE AND TRANSPARENCY

8) Company Disclosure Policy:Although there is no disclosure policy that has been formed and publicly disclosed asdefined in Section II, Article 1.2 of the Corporate Governance Principles, the companykeeps all the shareholders and stakeholders informed within the framework of the CMBCommuniqué concerning the Principles Relating to Disclosure of Material Events.Disclosures are coordinated by the company’s Board of Directors, General Manager AhmetAtay, and Accounting Team Leader Nevzat Gazio¤lu in a timely, accurate, complete, intel-ligible, interpretable manner, and equally available to all at low-cost so as to assist theindividuals and institutions that will benefit from such disclosures in their decision-mak-ing. Drawn up in accordance with the International Financial Reporting Standards (IFRS),the company’s quarterly financial statements and complementary notes are disclosed tothe public upon being independently audited pursuant to the CMB arrangements.

9) Disclosure of Material Events:The company made 11 material event disclosures in 2008 fiscal year. No additional infor-mation was required for these disclosures either by the CMB and/or the ISE. The compa-ny was not in breach of any matter with regard to public disclosure. The company has nocapital market instruments quoted on any overseas stock exchange, hence is not subjectto additional public disclosure obligations.

10) Company Internet Site and its Content:Accessible at www.pinar.com.tr, the company website is structured in the format, andprovides the content in Turkish and English languages, as required in the section titled“Principles and Means of Public Disclosure”, Article 1.11.5 of the Corporate GovernancePrinciples. The website is actively used. Improvement efforts will be ongoing to enhancethe services offered by the website.

11) Disclosure of Non-corporate Ultimate Shareholder(s) Who Have a ControllingInterest:The company’s shareholding structure as at 31 December 2008 is as follows:

Shareholders Share (%) TLYaflar Holding A.fi. 57.93 7,376,045.42P›nar Süt A.fi: 8.81 1,122,150.07Others 33.26 4,234,558.01Total 100.00 12,732,753.50

As seen in the table above, shares corresponding to 66.74% of the company’s share capi-tal held by Yaflar Holding A.fi. and P›nar Süt A.fi. are controlled by Yaflar Group compa-nies owned by the Yaflar family.

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12) Public Disclosure of Those Who May Have Access to Insider Information:Individuals who are in a position to have access to insider information as of this writingare named below. Such individuals are publicly disclosed each year through the annualreports and also posted on our website.

All Board of Directors members and statutory auditorsAhmet Atay (General Manager)Gökhan Serdar (Financial Affairs and Finance Director)Ender Pad›r (Financial Affairs Manager)Nevzat Gazio¤lu (Accounting Team Leader)Adnan Akan (Partner of Independent Audit Firm)Relevant employees of the independent audit firm

SECTION III – STAKEHOLDERS

13) Keeping Stakeholders Informed:On matters apart from trade secrets, stakeholders are kept informed through the CMB’smaterial event disclosures within the framework of CMB arrangements, the TCC,Competition Law, tax laws, and the Turkish Code of Obligations.

14) Stakeholder Participation in Management:Stakeholder participation in management occurs in the form of consideration of their pro-posals and suggestions that will enable improvement in any matter relating to the compa-ny’s activities, which are communicated at general meetings or via various communica-tions tools, by the relevant units (further details are provided in article 16).

15) Human Resources Policy:The basic mission of the Human Resources is to maintain at P›nar Su an innovative HRmanagement that makes total quality concept a principle, that is able to easily align withchange and development, and that provides global competitive advantage. The company’skey HR policies are clearly covered in the Personnel Regulation distributed to all employ-ees against signature. Personnel Regulation contains information on basic policies, workdurations, recruitment process and principles, termination of employment contracts anddiscipline regulation.

Our basic policies are as follows:a) The staff cadres at the company are determined based on the business economics cri-teria and all employees acknowledge that dignified work is possible only through produc-tive work.b) In-house and external training programs are implemented within the scope of the plandetermined at each level so as to develop the personnel.c) Equality of opportunity is observed in promotions and appointments in the organiza-tion, and in principle, appointments are made from within.d) Development plans are implemented so as to offer promotion opportunities at thebroadest extent to the employees possessing the potential through the career planningsystem.e) The employees’ performance appraisals are based on achievement of targets, as well ason competencies.f) Job descriptions and performance standards are documented for every position from

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the top to the lowest level and this system is made the basis of employee assessment.g) Employee Opinion Survey is administered every year periodically, seeking the employ-ees’ ideas on working conditions, management, social activities, remuneration, training,performance appraisal, career planning, participative management and company satisfac-tion. Improvement efforts are taken on in line with the feedbacks received.h) Our company gives utmost importance to providing a safe working environment andconditions. All legally required actions are taken within the framework of OccupationalHealth and Safety Regulation to prevent occupational risks, to maintain safety and health,and to eliminate the risk and accident factors. Improvement works are carried on con-stantly through regular meetings.i) Our management philosophy is “to sustain our existence as a company that acts in com-pliance with laws and ethical rules, and that adopts total quality philosophy and partici-pative management approach.”j) It is the basic principle at the company to treat all employees equally without any dis-crimination on the basis of language, race, color, sex, political affiliation, philosophicalbelief, religion, sect and similar reasons. Necessary actions are taken to protect the saidconstitutional right of the employees.

There are no employee representatives at P›nar Su; however, work has been planned forthe election process in 20078whereby the representative will be identified. All employeesare informed on various topics including company procedures, organizational changes,modifications in benefits and rights, and practices and decisions concerning the employ-ees through the Regulation and announcements posted on the intranet and bulletinboards, which are prepared within the framework of the Announcement Regulation putinto writing. To date, no complaints about discrimination were received by the companymanagement and HR department from the employees.

16) Relations with Customers and Suppliers:In order to secure customer satisfaction for the services offered by our company, jobdescriptions for all employees were drawn up; related instructions were formulated andinformed to the employees. Our customers can communicate their demands, and com-plaints, if applicable, regarding the company’s services to any level in the company, andmay also convey them via the Internet. With a view to ensuring customer satisfaction,Marketing, Total Quality and Production departments evaluate the feedbacks receivedthrough P›nar online customer hotline, dealers, consumer satisfaction surveys and otherchannels, and improvement efforts in all aspects are carried out constantly. Every year,dealer satisfaction survey is administered with our dealers, who are also our customers,and their problems, if any, are taken into due consideration by the Sales, Marketing andTotal Quality departments upon which improvements are effected.

Our suppliers are assessed within the framework of ISO 9000 Quality SystemCertification, and are scored on monthly basis in terms of pricing, quality and deliveries.Additionally, information on company visits is shared, and efforts are undertaken toenhance our quality and costs.

All purchasing transactions at the company are carried out upon implementation of rele-vant purchasing procedures. The criteria applied in the selection of the suppliers fromwhich the products and services purchased by the company shall be procured are cost-effectiveness, appropriate quality, adequate capacity and after-sales service.

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17) Social Responsibility:The company holds ISO 14000 Environmental Management System certification, underwhich work is carried out to monitor the environmental impact of our wastes and theirdisposal without harming the environment. In addition, parameters relating to noise, gas,etc. are measured at certain intervals. Packaging waste such as PET, glass and cardboardsare collected pursuant to the applicable regulation of the Ministry of Environment. Ourcompany does not hold an Environmental Impact Assessment report since it is not anunhygienic establishment.

SECTION IV – THE BOARD OF DIRECTORS

18) Structure and Formation of the Board of Directors and Independent BoardMembers:As set forth in sections 9 and 10 of the company’s articles of association, the company’sbusiness affairs and management are carried out by a board of directors that will consistof 3 to 7 members who will be elected by the general assembly of shareholders fromamongst the shareholders under the provisions of the Turkish Commercial Code. Boardmembers are elected every three years. Any member whose term of office has expired maybe re-elected. If so deemed necessary by the general assembly, the same may change theBoard of Directors at any time. The Board of Directors exercises its authorities, fulfills itsresponsibilities and represents the company in line with the powers granted thereto by theshareholders at the general meeting and within the scope of applicable legislation, thearticles of association, internal regulations and policies.

The Board members are listed below.Emine Feyhan Yaflar Chairperson of the Board‹dil Yi¤itbafl› Vice Chairperson of the BoardTaflk›n Tu¤lular Board MemberAta Murat Kudat Board MemberB. Safa Ocak Board MemberY›lmaz Göko¤lu Board MemberKorkmaz ‹lkorur Board Member

• Ahmet Atay serves as the General Manager of the company.• There are no independent members on the company’s Board of Directors.• Board members’ performance of the activities mentioned in Articles 334 and 335 of theTCC is subject to the approval of the general assembly. Save for the activities mentionedtherein, there are no restrictions regarding the activities of the Board members.

19) Qualifications of Board Members:In the election of Board members, care is paid to organize the Board in the manner thatwill guarantee maximum efficiency and effect. For this purpose, care is given to elect, inprinciple, members possessing the qualifications stated in articles 3.1.1, 3.1.2 and 3.1.3of Section IV of the CMB’s Corporate Governance Principles, although no general princi-ples are incorporated in the company’s articles of association. A Corporate GovernanceCommittee was set up at the company’s Board of Directors meeting of 13 March 2006,and training and orientation programs are implemented for the Board members in linewith current developments and changes.

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20) Mission, Vision and Strategic Goals of the Company:The company’s mission is “to be an organization that achieves customer and consumersatisfaction through consumer-oriented production philosophy, that gives the forefront toits human resources through its participative management approach, and that spearheadsits sector with its innovative structure closely following up the advanced technologies inthe world”. Activities and results in relation to the key strategy enabling fulfillment of thismission are regularly monitored and reviewed by the Board of Directors.

21) Risk Management and Internal Control Mechanism:In essence, the Board of Directors oversees the risk management-related activities via theAudit Committee. In fulfilling this function, the Audit Committee utilizes the findings ofthe financial affairs and accounting assistant manager, and of establishments carrying outcertification within the scope of independent audit and certified counsellorship.

22) Authority and Responsibilities of the Board Members and Executives:Although the company’s articles of association contain no provisions in relation to theauthorities and responsibilities of the Board members and executives, the Board membersand executives, in principle, carry out the company’s activities on the principles of egali-tarianism, transparency, accountability and responsibility and in accord with the TCC.

23) Operating Principles of the Board of Directors:The operating principles of the board of directors are stipulated as follows in section 11of the company’s articles of association:

"The Board of Directors shall convene as and when necessitated by the business affairsand transactions of the company. However, the Board must hold at least monthly meet-ings.”

The operating principles of, and the works carried out by, the Board of Directors in 2008fiscal year are detailed below:

The agenda of the Board meetings are determined by the Chairperson, upon conferringwith other Board members and the General Manager. The Board of Directors met 28 timesduring the reporting period. Invitation to the meeting is made by the Chairperson of theBoard, or upon written request by any Board member. The meeting agendas are sent tothe members by registered mail at least two weeks in advance of the meeting date. Usuallyall members participate in the meetings. In 2008 fiscal year, there were no topics uponwhich agreement was not secured. In meetings related to matters contained in articleIV.2.17.4 of the Corporate Governance Principles, the Board secured personal attendance.Questions posed during the course of the meetings are not recorded. No weighted votingand/or vetoing rights are granted to the Board members.

24) Prohibition on Doing Business or Competing with the Company:Although the Board of Directors was authorized in the matters related to Articles 334 and335 of the Turkish Commercial Code at the 2007 general meeting convened in 2008, nomember of the Board of Directors carried out, directly or indirectly, any commercialtransaction that falls under the company’s scope with the company, either on his own orothers’ behalf.

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25) Code of Ethics:The company pursues its operations within the framework of the core values, which havebeen espoused by all Yaflar Group companies; these core values are carrying out produc-tion of services and goods on the basis of an approach requiring compliance with the lawsand ethical rules, not neglecting the country’s issues but refraining from being involvedin active politics, and caring for the environment and the nature. These core values areknown to all employees. In addition, necessary work is underway to spell out the compa-ny’s code of ethics within the scope of its approach to Corporate Governance.

26) Number, Structures and Independence of the Committees under the Board ofDirectors:Two committees have been set up at the company: the Audit Committee and theCorporate Governance Committee. In 2008 fiscal year, the Audit Committee met fourtimes and obtained quarterly information on the activities and internal control systemsfrom the company executives and on the audit findings from the independent auditors.The Committee oversees the operation and effectiveness of the company’s accounting sys-tem, public disclosure of financial data, independent audit and internal control system. Italso supervises the selection of the independent audit firm, initiation of the independentaudit process, and the work carried out by the independent audit firm. The committeereports to the Board of Directors as to the accuracy and truthfulness of the annual andinterim financial statements that will be publicly disclosed. Members of the AuditCommittee are Messrs. Ata Murat Kudat and B. Safa Ocak. Because there are no independ-ent members on the company’s Board of Directors, the Audit Committee consists of non-executive members. No member of the Board of Directors serves on more than one com-mittee.

The company’s Corporate Governance Committee was set up with the Board of Directorsresolution dated 13 March 2006. Mr. Taflk›n Tu¤lular and Mr. Mehmet Aktafl have beenelected to serve as the head and member on the Corporate Governance Committee,respectively.

The Corporate Governance Committee establishes whether the Corporate GovernancePrinciples are implemented at the company, and determines the adversities stemmingfrom failure to fully comply with these principles, and proposes improvement actions tothe Board of Directors. The committee coordinates the investor relations efforts, works tocreate a transparent system, and to devise the relevant policies and strategies regardingthe identification of appropriate nominees for the Board of Directors, as well as theirassessment, training and rewarding. The Corporate Governance Committee also formu-lates recommendations regarding the number of Board members and executives.

27) Remuneration of the Board of Directors:As stated in section 14 of the company’s articles of association, the members of the com-pany’s Board of Directors receive the attendance fee set by the General Assembly. Thegross monthly attendance fee determined for 2008 activities is TL 600. Financial benefitsto be granted to the members of the Board of Directors are determined at the GeneralMeetings and publicly disclosed via the minutes of these meetings. There is no other per-formance-based rewarding system for the Board members at the company. The companydoes not, directly or indirectly, lend money or extend loans to any Board member or exec-utive.

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TO THE GENERAL ASSEMBLY OF PINAR SU SANAY‹ VE T‹CARET A.fi.

Commercial Name: PINAR SU SANAY‹ VE T‹CARET A.fi.

Head Office: ehit Fethi Bey Cad. No: 120 ‹ZM‹R

Capital: TL 12,732,753.50

Field of Activity: Spring Water Bottling and Bottle Production

Statutory auditors’ names, surnames, Kamil Deveci (15.05.2008 - one year) has no shareholding interestterms of office and whether they have a Recep Çetinsöz (15.05.2008 - one year) has no shareholding interestshareholding interest in the company:

Number of Board of Directors Meetings Board of Directors Meetings 28Participated in and of Board of Board of Auditors Meetings 12Auditors Meetings Held:

Scope, dates and conclusion of the At the end of each month, cash, cheques, bonds and receipts wereexamination made on the accounts, counted, and the records and documents were screened on the basis books and documents of the company: of sampling method and no irregularities were established.

Number and results of the cash counts held The pay desk was checked and counted 12 times and noin the Company’s pay desk pursuant to irregularities were established.Article 353, paragraph 1, subparagraph 3 of the Turkish Commercial Code:

Dates and results of the examinations made Examination was performed at the end of each month, commentspursuant to Article 353, paragraph 1, were provided for matters of uncertainty, and no irregularities were subparagraph 4 of the Turkish Commercial Code: established.

Complaints and irregularities received and the None were receivedactions taken in relation thereto:

We have examined the accounts and transactions of P›nar Su Sanayi ve Ticaret Anonim fiirketi for the period 01 January 2008 – 31December 2008 with respect to their compliance with the Turkish Commercial Code, the company’s articles of association, and other appli-cable legislation, as well as generally accepted accounting principles and standards. In our opinion, the attached balance sheet drawn upon 31 December 2008, the contents of which we acknowledge, fairly and accurately presents the company’s financial status on the date,and the income statement for the period 01 January 2008 – 31 December 2008 fairly and accurately presents the operating results for theperiod.

We hereby submit the balance sheet and income statement for your approval and the acquittal of the Board of Directors for your voting.

Statutory Auditor Statutory Auditor Kamil DEVEC‹ Recep ÇET‹NSÖZ

Statutory Auditors’ Report23

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PINAR SU SANAY‹ VE T‹CARET A.fi.

FINANCIAL STATEMENTS AT 31 DECEMBER 2008TOGETHER WITH INDEPENDENT AUDITOR’S REPORT

(CONVENIENCE TRANSLATION - THE TURKISH TEXT IS AUTHORITATIVE)

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Baflaran Nas Ba¤›ms›z Denetimve Serbest Muhasebeci MaliMüflavirlik A.fi.a member ofPricewaterhouseCoopers BJK Plaza, Süleyman Seba CaddesiNo: 48 B Blok Kat 9 AkaretlerBefliktafl 34357 ‹stanbul-Turkeywww.pwc.com/trTelephone: +90 (212) 326 6060Facsimile: +90 (212) 326 6050

INDEPENDENT AUDITOR’S REPORT(Convenience translation - the Turkish text is authoritative)

To the Board of Directors ofP›nar Su Sanayi ve Ticaret A.fi.

1. We have audited the accompanying financial statements of P›nar Su Sanayi ve Ticaret A.fi. (the “Company”) which comprise the balance sheetas of 31 December 2008 and the statement of income, statement of changes in equity and statement of cash flow for the year then ended and asummary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements2. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting stan-dards issued by the Turkish Capital Market Board. This responsibility includes: designing, implementing and maintaining internal control rele-vant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; select-ing and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with gen-erally accepted auditing standards issued by the Turkish Capital Market Board. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether dueto fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion4. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of P›nar Su Sanayi ve TicaretA.fi. as of 31 December 2008, and its financial performance and its cash flows for the year then ended in accordance with the financial reporting standardsissued by the Turkish Capital Market Board (Note 2.1).

Emphasis of Matter5. As explained in Notes 1 and 37 to the financial statements, the Company sells all of its products in the domestic market to its related party andassociate, Birmafl Tüketim Mallar› Ticaret A.fi. (“Birmafl”), which performs sales and distribution of the Company’s products in the domestic mar-ket.

6. As explained in Note 42 to the financial statements, the accounting principles described in Note 2 to the financial statements differ fromInternational Financial Reporting Standards (“IFRS”) with respect to the application of inflation accounting for the period between 1 January - 31December 2005. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operationsof the Company in accordance with IFRS.

Baflaran Nas Ba¤›ms›z Denetim veSerbest Muhasebeci Mali Müflavirlik A.fi.a member ofPricewaterhouseCoopers

ORIGINAL COPY ISSUED AND SIGNED IN TURKISH

Adnan Akan, SMMMPartner

‹stanbul, 9 April 2009

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CONTENTS SAYFA

BALANCE SHEETS 30-31

STATEMENTS OF INCOME 32

STATEMENTS OF CHANGES IN EQUITY 33-34

STATEMENTS OF CASH FLOWS 35

NOTES TO THE FINANCIAL STATEMENTS 36-92

NOTE 1 ORGANISATION AND NATURE OF OPERATIONS 36NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 36-51NOTE 3 BUSINESS COMBINATIONS 51NOTE 4 JOINT VENTURES 51NOTE 5 SEGMENT REPORTING 51NOTE 6 CASH AND CASH EQUIVALENTS 52NOTE 7 FINANCIAL ASSETS 52-53NOTE 8 FINANCIAL LIABILITIES 54-55NOTE 9 OTHER FINANCIAL LIABILITIES 55NOTE 10 TRADE RECEIVABLES AND PAYABLES 56-57NOTE 11 OTHER RECEIVABLES AND PAYABLES 57NOTE 12 RECEIVABLES AND PAYABLES FROM FINANCE SECTOR OPERATIONS 58NOTE 13 INVENTORIES 58NOTE 14 BIOLOGICAL ASSETS 58NOTE 15 CONSTRUCTION CONTRACT RECEIVABLES 58NOTE 16 INVESTMENT IN ASSOCIATE ACCOUNTED BY EQUITY ACCOUNTING 59NOTE 17 INVESTMENT PROPERTY 59NOTE 18 PROPERTY, PLANT AND EQUIPMENT 60-63NOTE 19 INTANGIBLE ASSETS 63NOTE 20 GOODWILL 64NOTE 21 GOVERNMENT GRANTS 64NOTE 22 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES 64-656NOTE 23 COMMITMENTS 65NOTE 24 EMPLOYEE BENEFITS 65-66NOTE 25 PENSION PLANS 66NOTE 26 OTHER ASSETS AND LIABILITIES 67NOTE 27 EQUITY 67-70NOTE 28 SALES AND COST OF SALES 71NOTE 29 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING,

SELLING AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVE EXPENSES 71NOTE 30 EXPENSES BY NATURE 72NOTE 31 OTHER OPERATING INCOME/(EXPENSE) 72NOTE 32 FINANCIAL INCOME 73NOTE 33 FINANCIAL EXPENSE 73NOTE 34 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 73NOTE 35 TAXATION ON INCOME 74-77NOTE 36 EARNINGS PER SHARE 77NOTE 37 TRANSACTIONS AND BALANCES WITH RELATED PARTIES 78-82NOTE 38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT 83-91NOTE 39 FINANCIAL INSTRUMENTS (FAIR VALUE AND

FINANCIAL RISK MANAGEMENT DISCLOSURES) 91-92NOTE 40 SUBSEQUENT EVENTS 92NOTE 41 DISCLOSURE OF OTHER MATTERS 92NOTE 42 EXPLANATION FOR CONVENIENCE TRANSLATION INTO ENGLISH 92

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CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007

Notes 31 December 2008 31 December 2007

ASSETS

Current Assets 14.293.320 15.481.883

Cash and Cash Equivalents 6 42.445 1.866.776Trade Receivables 8.073.094 6.347.740- Due from Related Parties 37 6.322.623 5.734.629- Other Trade Receivables 10 1.750.471 613.111Other Receivables 524.635 214.334- Due from Related Parties 37 498.369 193.087- Other Receivables 11 26.266 21.247Inventories 13 2.872.049 4.440.563Other Current Assets 26 2.781.097 2.612.470

Non-Current Assets 69.707.004 59.757.578

Other Receivables 11 1.800 1.800Financial Assets 7 13.010.226 11.724.807Investment in Associate

accounted by equity accounting 16 27.634 264.859Property, Plant and Equipment 18 56.611.084 47.078.367Intangible Assets 19 15.896 27.396Other Non-Current Assets 26 40.364 660.349

TOTAL ASSETS 84.000.324 75.239.461

These financial statements at 31 December 2008 and for the year then ended have been approved for issue by the Board of Directors of theCompany on 9 April 2009.

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

30CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.BALANCE SHEETS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

Notes 31 December 2008 31 December 2007

LIABILITIES

Current liabilities 12.110.330 11.804.315

Financial Liabilities 8 1.902.273 770.321Trade Payables 5.744.789 4.344.881- Due to Related Parties 37 47.614 63.744- Other Trade Payables 10 5.697.175 4.281.137Other Payables 739.020 1.000.987- Due to Related Parties 37 540.273 725.000- Other Payables 11 198.747 275.987Current income tax liabilities 35 761.651 3.043.032Provisions 22 2.612.837 2.480.305Other Current Liabilities 26 349.760 164.789

Non-Current Liabilities 10.563.715 7.008.946

Financial Liabilities 8 5.055.576 2.520.066Provision for Employment Termination Benefits 24 329.238 246.585Deferred Income Tax Liabilities 35 5.178.901 4.242.295

TOTAL LIABILITIES 22.674.045 18.813.261

EQUITY 61.326.279 56.426.200

Share Capital 27 12.732.754 12.732.754Adjustment to Share Capital 27 11.713.515 11.713.515Revaluation reserves 25.096.968 20.557.860- Revaluation reserve 18 17.351.076 13.570.292- Fair value reserve of available for sale investments 7 7.745.892 6.987.568Restricted Reserves 27 2.181.402 928.755Retained Earnings 27 3.921.884 2.156.392Net Income for the Year 5.679.756 8.336.924

TOTAL LIABILITIES AND EQUITY 84.000.324 75.239.461

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

31CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.BALANCE SHEETS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

1 January - 1 January -Notes 31 December 2008 31 December 2007

Sales 28 61.167.192 60.571.593Cost of Sales (-) 28 (40.891.459) (37.271.850)

GROSS PROFIT 28 20.275.733 23.299.743

Marketing, Selling and Distribution Expenses (-) 29 (7.224.181) (5.181.033)General Administrative Expenses (-) 29 (6.550.329) (5.105.342)Other Operating Income 31 581.584 630.154Other Operating Expense (-) 31 (261.121) (1.899.619)

OPERATING PROFIT 6.821.686 11.743.903

Share of results of investment in associate 16 (158.014) 105.307Financial Income 32 3.250.527 2.718.745Financial Expense (-) 33 (2.377.480) (1.184.510)

INCOME BEFORE TAXATION 7.536.719 13.383.445

Taxation on Income (1.856.963) (5.046.521)- Taxes on Income 35 (1.705.995) (3.043.032)- Deferred Tax Expense 35 (150.968) (2.003.489)

NET INCOME FOR THE YEAR 5.679.756 8.336.924

EARNINGS PER SHARE 36 0,4461 0,6548

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

32CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

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34

1 January - 1 January -Notes 31 December 2008 31 December 2007

Cash flows from operating activities:

Income before taxation 7.536.719 13.383.445

Adjustments to reconcile net cash generated from operatingactivities to income before taxation on income:

Depreciation and amortisation 18-19 3.830.925 3.653.485Loss/ (gain) from sales of

property, plant and equipment 31 43.586 (143.053)Interest income 32 (179.284) (113.465)Interest expense 33 308.508 129.658Provision for employment termination benefits 24 117.794 43.973Reversal of impairment on

property, plant and equipment 18-31 (259.818) (177.782)Management bonus expense 29 420.000 330.000Provision for water and rent 22 176.331 176.331Share of results of associates- net 16 158.014 (105.307)Impairment on available for sale investments 31 - 900.000

12.152.775 18.077.285Changes in operating assets and liabilities:Increase in other trade receivables 10 (1.137.360) (560.929)Decrease/ (increase) in inventories 13 1.568.514 (1.718.341)Increase in due from related parties 37 (587.994) (4.063.722)Increase in other receivables 11 (5.019) (2.525)(Increase)/ decrease in other current assets 26 (186.939) 275.827Decrease in other non-current assets 26 619.985 87.071Increase/ (decrease) in other trade payables 10 1.416.038 (799.556)Decrease in due to related parties 37 (16.130) (361.759)Employment termination benefits paid 24 (35.141) (9.169)Management bonus paid 11-22-29 (611.586) (227.108)Taxes paid 35 (3.987.376) (661.904)Increase in other liabilities 11-22-26 255.518 18.420

Net cash generated from operating activities 9.445.285 10.053.590

Investing activities:Interest received 8 197.596 97.454Increase in due from related parties 37 (305.282) (39.960)Decrease in due to related parties 37 (724.727) (1.656.109)Interest paid (243.065) (63.345)Capital increase in available for sale investments 7 (485.714) (900.000)Purchase of property,

plant and equipment and intangible assets 18-19 (7.694.744) (7.029.728)Proceeds from sales of property, plant and equipment

and intangible assets 18-19-31 289.484 423.780

Net cash used in investing activities (8.966.452) (9.167.908)

Financing activities:Increase in bank borrowings 3.605.019 3.209.074Dividends received 16 79.211 220.891Dividends paid 37.i.d-37.ii.k (5.984.394) (4.809.316)

Net cash used in financing activities (2.300.164) (1.379.351)Net decrease in cash and cash equivalents (1.821.331) (493.669)Cash and cash equivalents at the beginning of the period 6 1.851.776 2.345.445Cash and cash equivalents at the end of the period 6 30.445 1.851.776

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

35CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS

P›nar Su Sanayi ve Ticaret A.fi. (the “Company”) is engaged in the production of bottled water under the brand name “P›nar Yaflam P›nar›m”. TheCompany’s production facilities are located in Ayd›n, Isparta and Sakarya whereas the Company’s headquarter is located in Izmir.

Sales and distribution of the Company’s products in the domestic market are performed by its associate, Birmafl Tüketim Mallar› ve Ticaret A.fi.(“Birmafl”), and its exports are performed by Yaflar D›fl Ticaret A.fi. (“Yatafl”), which are both Yaflar Group companies (Note 37).

The Company is subject to the regulations of the Capital Markets Board (“CMB”) and 32,46% (2007: 32,46%) of its shares are quoted on the Istanbul Stock Exchange (“ISE”) as at 31 December 2008. The ultimate parent of the Company isYaflar Holding A.fi (“Yaflar Holding”) with 57,93% of shares of the Company (2007: 57,93%) (Note 27).

The average number of the employees of the Company is 122 between 1 January - 31 December 2008 (2007: 114).

The Company is registered in Turkey and the address of the registered head office is as follows:

fiehit Fethibey Caddesi No: 120 Alsancak/ Izmir

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS

2.1 Accounting Standards

The Company prepares its financial statements in accordance with the financial reporting standards issued by the Turkish Capital Market Board(“CMB”).

CMB regulated the principles and procedures of preparation, presentation and announcement of financial statements prepared by the entities withthe Communiqué XI, No: 29, “Principles of Financial Reporting in Capital Markets” (the “Communiqué”). The Communiqué is effective for theannual periods starting from 1 January 2008 and supersedes Communiqué XI, No: 25, “The Accounting Standards in the Capital Markets”.

According to the Communiqué, entities shall prepare their financial statements in accordance with International Financial Reporting Standards(“IAS/IFRS”) endorsed by the European Union. Until the differences of the IAS/IFRS as endorsed by the European Union from the ones issued bythe International Accounting Standards Board (“IASB”) are announced by Turkish Accounting Standards Board (“TASB”), IAS/IFRS issued by theIASB shall be applied. Accordingly, Turkish Accounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”) issued by the TASB,which do not contradict with the aforementioned standards shall be applied.

With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, the application of inflation accounting is nolonger required for companies operating in Turkey and preparing their financial statements in accordance with the CMB Financial ReportingStandards. Accordingly, IAS 29, “Financial Reporting in Hyperinflationary Economies”, issued by the IASB, has not been applied in the financialstatements for the accounting year commencing from 1 January 2005.

36CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

As the differences of the IAS/IFRS endorsed by the European Union from the ones issued by the IASB have not been announced by TASB as ofthe date of preparation of these financial statements, the financial statements have been prepared within the framework of Communiqué XI, No:29 and related promulgations to this Communiqué as issued by the CMB, in accordance with the CMB Financial Reporting Standards which arebased on IAS/IFRS. The financial statements and the related notes to them are presented in accordance with the formats recommended by the CMBincluding the mandatory disclosures. Within the framework of Communiqué XI, No: 29 and related promulgations to this Communiqué as issuedby the CMB, enterprises are obliged to present the hedging rate of their total foreign exchange liability and total export and import amounts in thenotes to the financial statements (Note 38). In this respect, the Company made the necessary reclassifications in the statements of income, changesin equity, cash flows for the year ended 31 December 2007 and balance sheet as at 31 December 2007 in accordance with the requirements of theCommuniqué (Note 2.4).

Other than land, buildings, land improvements, machinery and equipments and financial assets and liabilities carried at their fair values, financialstatements are prepared in Turkish Lira (“TL”) based on the historical cost convention (Note 40).

2.2 Amendments in International Financial Reporting Standards (IFRS)

a) Interpretations effective in 2008 and relevant to the Company’s operationsIFRIC 14, “IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction”, provides guidance on assessingthe limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affect-ed by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the Company’s financial state-ments.

b) Standards and amendments early adopted by the Company None.

c) Interpretations effective in 2008 but not relevant to the Company’s operations The following interpretations to published standards are mandatory for the accounting periods beginning on or after 1 January 2008 but are notrelevant to the Company’s operations:

• IFRIC 11, “IFRS 2 - Group and treasury share transactions”.• IFRIC 12, “Service concession arrangements”.• IFRIC 13, “Customer loyalty programmes” (effective for the accounting periods beginning on or after 1 July 2009).

37CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

d) Standards, amendments and interpretations to existing standards that are not yet effective in 2008 and have not been early adopted by the Company.The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1January 2009 but they are not early adopted by the Company:

• IAS 23 (Amendment), “Borrowing costs” (effective for the accounting periods beginning on or after 1 January 2009). The amendment requiresan entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes asubstantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing the borrowing costswill be removed. It is not expected to have a material impact on the Company’s financial statements. In addition, the definition of borrowingcosts has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 ‘Financial instruments:Recognition and measurement’. The Company will apply the IAS 23 (Amendment) prospectively to the capitalisation of borrowing costs onqualifying assets starting from 1 January 2009.

• IFRS 3 (Revised), “Business Combinations” (effective from 1 July 2009). The revised standard continues to apply the acquisition method to busi-ness combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acqui-sition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acqui-sition-by-acquisition basis to measure the non-controlling interest in the acquire either at fair vale or at the non-controlling interest’s propor-tionate share of the acquire’s net assets. All acquisition-related costs should be expensed. The Company will apply IFRS 3 (Revised) prospec-tively to all business combinations effective from 1 January 2010.

• IAS 28 (Amendment), “Investments in associates” (and consequential amendments to IAS 32, “Financial Instruments: Presentation” and IFRS 7,“Financial instruments: Disclosures”) (effective from 1 January 2009). An investment in associate is treated as a single asset for the purposes ofimpairment testing and reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverableamount of the associate increases. The Company will apply the IAS 28 (Amendment) to impairment tests related to investments in subsidiariesand any related impairment losses effective from 1 January 2009. Where an investment in associate is accounted for in accordance with IAS 39‘Financial instruments: recognition and measurement’, only certain rather than all disclosure requirements in IAS 28 need to be made in addi-tion to disclosures required by IAS 32, ‘Financial Instruments: Presentation’ and IFRS 7 ‘Financial Instruments: Disclosures’. The amendmentwill not have an impact on the Company’s operations because it is the Company’s policy for an investment in an associate to be equity account-ed in the Company’s accounts.

• IAS 36 (Amendment), “Impairment of assets” (effective from 1 January 2009). Where fair value less costs to sell is calculated on the basis of dis-counted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The Company will apply the IAS 36(Amendment) and provide the required disclosure where applicable for impairment tests effective from 1 January 2009.

38CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

Within the framework of the IASB’s annual improvements project published in May 2008, there are some amendments in the following standards.Since, it is not expected to have a material impact on the Company’s financial statements, these amendments have not been explained in detail.

• IFRS 7, “Financial instruments: Disclosures”.• IAS 8, “Accounting policies, changes in accounting estimates and errors”.• IAS 10, “Events after the reporting period”.• IAS 18, “Revenue”.• IAS 34, “Interim financial reporting”. • IAS 38 (Amendment), “Intangible assets” (Effective from 1 January 2009).• IAS 19 (Amendment), “Employee benefits” (Effective from 1 January 2009).• IAS 39 (Amendment), “Financial instruments: Recognition and measurement” (Effective from 1 January 2009). • IAS 1 (Revised), “Presentation of financial statements” (Effective from 1 January 2009).

e) Interpretations and amendments to existing standards that are not yet effective and not relevant for the Company’s operations The following interpretations and amendments to existing standards have been published and are mandatory for the accounting periods begin-ning on or after 1 January 2009 or later periods but are not relevant for the Company’s operations:

• IAS 1 (Amendment), “Presentation of financial statements” (effective from 1 January 2009). The revised standard will prohibit the presentationof items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changesin equity’ to be presented separately from owner changes in equity All non-owner changes in equity will be required to be shown in a per-formance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or twostatements (the income statement and statement of comprehensive income Where entities restate or reclassify comparative information, theywill be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to presentbalance sheets at the end of the current period and comparative period. The Company will apply the IAS 1 (Amendment) from 1 January 2009.It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.

• IAS 27 (Revised), “Consolidated and separate financial statements”, (effective from 1 January 2009). The revised standard requires the effects ofall transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer resultin goodwill or gains and losses the standard also specifies the accounting when control is lost. Any remaining interest in the entity where thecontrol is lost is re-measured at fair value, and a gain or loss is recognised in profit or loss. The standard will not have any impact on theCompany’s financial statements, as there is no consolidated subsidiary.

39CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

• IFRS 1 (Amendment) “First time adoption of IFRS”, and IAS 27 “Consolidated and separate financial statements” (effective from 1 January 2009).The amended Standard allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accountingpractice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.

• IAS 16 (Amendment), “Property, plant and equipment” (and consequential amendment to IAS 7, “Statement of cash flows”). Entities whose ordi-nary activities comprise renting and subsequently selling assets present proceeds from the sale of those assets as revenue and should transfer thecarrying amount of the asset to inventories when the asset becomes held for sale.

• IAS 20 (Amendment), “Accounting for government grants and disclosure of government assistance” (effective from 1 January 2009).

• IAS 29 (Amendment), “Financial reporting in hyperinflationary economies” (effective from 1 January 2009). The amendment will not have anyimpact on the Company’s financial statements, since the Company does not operate in hyperinflationary economies.

• IAS 31 (Amendment), “Interests in joint ventures” (and consequential amendments to IAS 32 and IFRS 7) (effective from 1 January 2009).

• IAS 32 (Amendment), “Financial instruments: Presentation”, and IAS 1 (Amendment), “Presentation of financial statements” - “Puttable finan-cial instruments and obligations arising on liquidation” (effective from 1 January 2009).

• IAS 38 (Amendment), “Intangible assets” (effective from 1 January 2009). The amendment is part of the IASB’s annual improvements projectpublished in May 2008. The amendment deletes the wording that states that there is “rarely, if ever” support for use of a method that results ina lower rate of amortisation than the straight-line method. The amendment will not have an impact on the Company’s operations, as all intan-gible assets are amortised using the straight-line method.

• IFRS 2 (Amendment), “Share-based payment” (effective from 1 January 2009).

• IAS 40 (Amendment), “Investment property” (and consequential amendments to IAS 16) (effective from 1 January 2009).

• IAS 41 (Amendment), “Agriculture” (effective from 1 January 2009).

* IFRIC 15, “Agreements for construction of real estates” (effective from 1 January 2009).

• IFRIC 16, “Hedges of a net investment in a foreign operation” (effective from 1 October 2008).

• IFRS 5 (Amendment), ‘Non-current assets held-for-sale and discontinued operations’ (and consequential amendment to IFRS 1, “First-timeadoption”) (effective for accounting periods beginning on or after 1 July 2009).

40CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

2.3 Basis of consolidation

The Company does not have any subsidiary to be consolidated in the financial statements. The investments in associates are accounted for usingthe equity method. These are undertakings over which the Company has between 20% and 50% of the voting rights, or over which the Companyhas significant influence. The unrealised gains on transactions between the Company and its associated undertakings are eliminated to the extentof the Company's interest in the associated undertakings; unrealised losses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred.

Equity accounting is discontinued when the carrying amount of the investment in an associated undertaking reaches zero, unless the Companyhas incurred obligations or guaranteed obligations in respect of the associates or significant influence of the company ceases. The carrying amountof the investment at the date when significant influence ceases is regarded as cost thereafter.

The table below sets out the associates and the proportion of ownership interest as of 31 December 2008 and 2007 (Note 16):

Shareholding (%)

2008 2007Investment in associate:

Birmafl 25,00 25,00

2.4 Comparatives and Restatement of Prior Year Financial Statements

The Company prepared its financial statements on a comparative basis with the preceding financial period, which enables determination of trendsin financial position and performance. The Company prepared its balance sheet as at 31 December 2008 on a comparative basis with balance sheetas at 31 December 2007; and statements of income, cash flows and statements of changes in equity for the period of 1 January - 31 December2008 on a comparative basis with financial statements for the period of 1 January - 31 December 2007.

According to International Accounting Standard 19, Employee Benefits (“IAS 19”), the management bonus paid to the management of theCompany, should be recognised as a provision within the period in which such liability arises. Based on the General Assembly dated 16 May 2007,it was decided to pay management bonus relating to the profit of 2006 to the senior management. In this respect, as the bonus accrual was notrecognised in the financial statements at 31 December 2006, the accrual was reported as an adjustment to the opening balance of retained earn-ings as of 1 January 2007, without restating prior year financial statements on the grounds of materiality (see “the Statements of Changes inEquity”).

41CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

The financial statements and the related notes to them are presented in accordance with the formats recommended by the CMB, with theannouncement dated 14 April 2008, including the mandatory disclosures (Note 2.1). In this respect, the Company has performed reclassificationsin the financial statements as of 31 December 2007 in order to conform to presentation of the financial statements as of 31 December 2008. Suchreclassifications are explained below:

• Other receivables: Deposits and guarantees given amounting to TL17.802 which were classified under “trade receivables” and receivables frompersonnel amounting to TL3.445 which were classified under “due from related parties” in the balance sheet as of 31 December 2007 have beenreclassified to “other receivables” in the balance sheet as of 31 December 2008 prepared on a comparative basis with the preceding financialperiod. Deposits and guarantees given amounting to TL1.800 which were classified under “other non-current assets” in the balance sheet as of31 December 2007, have been reclassified to “other receivables” under the non-current assets in the balance sheet as of 31 December 2008 pre-pared on a comparative basis with the preceding financial period

• Other current assets: Order advances given amounting to TL150.921 which was classified under “inventories” and other receivables amountingto TL2.441.032 which were classified under “other receivables”, have been reclassified to “other current assets” in the balance sheet as of 31December 2008 prepared on a comparative basis with the preceding financial period.

• Financial assets: Available for sale investments amounting to TL11.724.807 which were classified under “financial assets-net” in the balancesheet as of 31 December 2007, have been reclassified to “financial assets” in the balance sheet as of 31 December 2008 prepared on a compar-ative basis with the preceding financial period.

• Investment in associates accounted by equity accounting: Associate amounting to TL264.859 which was classified under “financial assets-net”in the balance sheet as of 31 December 2007, has been reclassified to “investment in associates accounted by equity accounting” in the balancesheet as of 31 December 2008 prepared on a comparative basis with the preceding financial period.

• Other non-current assets: Property, plant and equipment advances amounting to TL612.465 which were classified under “property, plant andequipment” in the balance sheet as of 31 December 2007, have been reclassified to “other non-current assets” in the balance sheet as of 31December 2008 prepared on a comparative basis with the preceding financial period.

• Other payables: Deposits and guarantees received amounting to TL3.039 which were classified under “trade payables” in the balance sheet asof 31 December 2007, have been reclassified to “other payables” in the balance sheet as of 31 December 2008 prepared on a comparative basiswith the preceding financial period.

• Other current liabilities: Payables to personnel amounting to TL272.948 which were classified under “due to related parties” in the balancesheet as of 31 December 2007, have been reclassified to “other current liabilities” in the balance sheet as of 31 December 2008 prepared on acomparative basis with the preceding financial period.

• Adjustment to share capital: Inflation adjustment to equity amounting to TL11.713.515 reported in the balance sheet as of 31 December 2007,has been reclassified to “adjustment to share capital” in the balance sheet as of 31 December 2008 prepared on a comparative basis with thepreceding financial period.

42CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

• Restricted reserves: Legal reserves amounting to TL774.649 in the balance sheet as of 31 December 2007, have been reclassified to “restrictedreserves” in the balance sheet as of 31 December 2008 prepared on a comparative basis with the preceding financial period.

• Retained earnings: Extraordinary reserves amounting to TL63.664 reported in the balance sheet as of 31 December 2007, have been reclassi-fied to “retained earnings” in the balance sheet as of 31 December 2008 prepared on a comparative basis with the preceding financial period.

• Share of results of investment in associate: amounting to TL133.831 which were classified under "other income" in the statement of income asof 31 December 2007, has been reclassified to share of results of investment in associate in the statement of income as of 31 December 2008prepared on a comparative basis with the preceding financial period.

• Financial income: Other income amounting to TL2.718.745 in the balance sheet as of 31 December 2007, has been reclassified to “financialincome” in the balance sheet as of 31 December 2008 prepared on a comparative basis with the preceding financial period.

2.5 Offsetting

All items with significant amounts and nature, even with similar characteristics, are presented separately in the financial statements. Insignificantamounts are grouped and presented by means of items having similar substance and function. When the nature of transactions and events neces-sitate offsetting, presentation of these transactions and events over their net amounts or recognition of the assets after deducting the related impair-ment are not considered as a violation of the rule of non-offsetting. As a result of the transactions in the normal course of business, revenue otherthan sales are presented as net if the nature of the transaction or the event qualify for offsetting.

2.6 Summary of Significant Accounting Policies

The significant accounting policies applied in the preparation of the financial statements are summarised below:

2.6.1 Revenue recognition

Revenues are recognised on an accrual basis at the time deliveries are made, services are given and significant risks and rewards are transferred tothe buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flowto the Company at the fair value of considerations received or receivable. Net sales represent the invoiced value of goods shipped less sales returns,sales discounts and commissions given (Note 28). Interest income is recognised on a time-proportion basis using the effective interest method.The amount of the provision for trade receivables is the difference between the asset’s carrying amount and the present value of estimated futurecash flows, discounted at the original effective interest rate. Interest income on loans is recognised using the effective interest rate. Dividend incomeis recognised when the Company’s right to receive the payment is established.

43CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

2.6.2 Inventories

Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of busi-ness, less the costs of completion and selling expenses. Cost elements included in inventories comprise all costs of purchase of material and othercosts incurred in bringing the inventories to their present location and condition. The cost of inventories is determined on the monthly weightedaverage basis (Note 13).

2.6.3 Property, plant and equipment

The Company’s land, land improvements, buildings, machinery and equipment are stated at their fair values based on the valuations performedby external independent valuers, namely Elit Gayrimenkul De¤erleme A.fi. and Vak›f Gayrimenkul Ekspertiz ve De¤erleme A.fi. as of 31 December2008. All other items of property, plant and equipment acquired before 1 January 2005 are carried at cost in the equivalent purchasing power ofTL as at 31 December 2004 and items acquired after 1 January 2005 are carried at cost, less the subsequent depreciation and impairment loss, ifany (Note 18).

Increases in the carrying amount arising on the revaluation of property, plant and equipment are credited to the revaluation reserve in equity.Decreases that offset previous increases of the same asset are charged against that reserve; all other decreases are charged to the statement ofincome.

Each year, the difference between depreciation based on the revalued carrying amount of the asset (the depreciation charged to the statements ofincome) and the depreciation based on the asset’s original cost stated in terms of purchasing power of TL at the prior years is transferred fromretained earnings to the revaluation reserves.

Property, plant and equipment are capitalised and depreciated when they are fully commissioned and in a physical state to meet their designedproduction capacity. Residual values of property, plant and equipment are deemed as negligible. The advances given for the property, plant andequipment purchases are classified under the other non-current assets until the related asset is capitalised (Note 26).

Depreciation is provided on the restated or revalued amounts of property, plant and equipment on a straight-line basis (Note 8). Land is not depre-ciated as it is deemed to have an indefinite life. The depreciation rates for property, plant and equipment, which are based on the approximateuseful lives of such assets, are as follows:

Rate (%)

Buildings and land improvements 2-4Machinery and equipment 5-10Motor vehicles 20Furniture and fixtures 10

44CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

Where the carrying amount of an asset is greater than its recoverable amount, an impairment loss is recognised for the amount by which the car-rying amount of the asset exceeds its recoverable amount (Notes 2.6.5 and 18). If the property plant and equipments that are impaired, are reval-ued, the impairment is charged to the revaluation reserves for an amount equivalent to the increases included in the revaluation reserve in the pre-ceding periods and the remaining amount is recognised in the statement of income.

Gains or losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are included in the relat-ed income and expense accounts, as appropriate (Note 31). On the disposal of revalued assets, amounts in the revaluation reserve relating to thatasset are transferred to the retained earnings.

Repairs and maintanance expenses are charged to the statements of income during the financial period in which they are incurred. Expensesincurred after capitalization are included in the cost of the asset or recorded as an asset in case when it is probable that the future economic ben-efits will flow to the Company and the cost can be reliably measured. The Company derocognises the carrying amounts of the replaced parts relat-ed to renovations regardless of whether the replaced parts were depreciated separately. Expenses incurred after capitalisition which are includedin the cost of the related assets are depreciated based on their useful lives.

2.6.4 Intangible assets

Intangible assets comprise acquired rights, information systems and software. Intangible assets acquired before 1 January 2005 are carried at costin the equivalent purchasing power of TL as at 31 December 2004 and items acquired after 1 January 2005 are carried at cost, less accumulatedamortisation and impairment losses if any. They are recorded at acquisition cost and amortised on a straight-line basis over their estimated usefullives for a period five years from the date of acquisition. Residual values of intangible assets are deemed as negligible. An impairment loss is recog-nised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of fair value less cost to sellor value in use (Notes 2.6.5 and 19).

2.6.5 Impairment of assets

At each reporting date, the Company assesses whether there is any indication that an asset other than deferred tax asset (Note 35) and property,plant and equipment stated at revalued amounts (Note 18) may be impared. Goodwill accounted for as part of investment-in-associate is testedannually for impairment. If there is an indication of impairment with regards to goodwill, the recoverable amount is estimated. The recoverableamount is the higher of an asset’s fair value less costs to sell and value in use. An impairment loss is recognised for the amount by which the car-rying amount of the asset or any cash-generating unit of that asset exceeds its recoverable amount. Impairment losses are accounted for in thestatement of income.

Impairment losses can be reversed to the extent of previously recorded impairment losses, in cases where increases in the recoverable amount ofthe asset can be associated with events that occur subsequent to the period when the impairment loss was recorded (Note 31).

45CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

2.6.6 Borrowings and borrowings costs

Borrowings are recognised initially at the proceeds received, net of any transaction costs incurred. In subsequent periods, borrowings are meas-ured at amortised cost using the effective yield method. Any difference between proceeds (net of transaction costs) and the redemption value isrecognised in the statement of income over the period of the borrowings. Borrowing costs are expensed as incurred (Note 33). If the borrowingsmature within 12 months, then they are classified in current liabilities, otherwise they are classified in non-current liabilities (Note 8).

2.6.7 Financial assets

The classification of financial assets depends on the purpose for which the financial assets were acquired. Management determines the classifica-tion of its financial assets at initial recognition and re-evaluates this designation at every reporting date. The Company classifies its financial instru-ments in the following categories:

a) Loans and receivables

Loans and receivables constitute non-derivative financial instruments, which are not quoted in active markets and have fixed or scheduled pay-ments. Loans and receivables arise, without held-for-sale intention, from the Company’s supply of goods, service or direct fund to any debtor. If the maturity of these instruments are less than12 months, these loans and receivables are classified in current assets and if more than 12 months, classified in non-current assets. The loans andreceivables are included in “Trade receivables and “Other receivables” in the balance sheet. Loans are recognised initially at the proceeds received,net of any transaction costs incurred. In subsequent periods, loans are stated at amortised cost using the effective yield method.

b) Available for sale financial assets

Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates,are classified as available for sale. These are included in non-current assets unless management has expressed the intention of holding the invest-ment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they areincluded in current assets. Management determines the appropriate classification of its investments at the time of the acquisition and re-evaluatessuch designation on a regular basis.

46CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

All financial investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges asso-ciated with the investments, and subsequently carried at fair value. The financial assets which the Company has shares less than 20% and areclassified as available for sale investments are carried at market value when there is quoted market price, they are carried at fair value by usingvaluation techniques when there is no active market for the financial asset. When there is no quoted market price and when a reasonable esti-mate of fair value could not be determined since other methods are inappropriate and unworkable, available for sale investments acquired before1 January 2005 are carried at cost expressed in purchasing power of TL as at 31 December 2004 and available for sale investments acquiredafter 1 January 2005 are carried at cost, less impairment losses, if any (Note 7). Unrealized gains and losses arising from changes in fair valueof securities classified as available for sale are recognised in the equity, rather than statement of income until the related financial asset is dere-cognised. Change in fair value of available for sale investments is calculated as the difference between the discounted acquisition cost and thecurrent fair value. Dividends on available for sale equity instruments are recognised in the income statement as part of other income when theCompany’s right to receive payments is established.

When securities classified as available for sale are sold, the accumulated fair value adjustments recognised in equity are included in the state-ment of income. A significant or prolonged decline in the fair value of the investment below its cost is considered as an indicator that the invest-ments are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss-measured as the difference between theacquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss-is removedfrom equity and recognized in the statement of income. Impairment losses recognised in the statement of income on investments are notreversed through the statement of income.

2.6.8 Foreign currency transactions and balances

Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetaryassets and liabilities denominated in foreign currencies have been translated into TL at the exchange rates prevailing at the balance sheet dates.The exchange differences that were recorded are recognised in the statement of income.

2.6.9 Earning per share

Earnings per share disclosed in the statement of income are determined by dividing net income for the year by the weighted average number ofshares that have been outstanding during the year concerned (Note 36).

Companies can increase their share capital by making a pro-rata distribution of shares ("bonus shares") to existing shareholders from retained earn-ings. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjustedin respect of bonus shares issued without a corresponding change in resources, by giving them retroactive effect for the year in which they wereissued and for each earlier year.

In case of dividend distribution, earnings per share is calculated by dividing net income by the number of shares, rather than dividing by weight-ed average number of shares outstanding.

47CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

48

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

2.6.10 Subsequent events

Subsequent events, announcements related to net profit or even declared after other selective financial information has been publicly announced,include all events that take place between the balance sheet date and the date when balance sheet was authorised for issue (Note 40).

In the case that events require a correction to be made occur subsequent to the balance sheet date, the Company makes the necessary correctionsto the financial statements. Moreover, the events that occur subsequent to the balance sheet date and that do not require a correction to be madeare disclosed in accompanying notes, where the decisions of the users of financial statements are affected.

2.6.11 Provisions, contingent assets and contingent liabilities

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is more likely than not thatan outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

In cases where the time value of money is material, provisions are determined as the present value of expenses required to be made to settle theliability. The rate used to discount provisions to their present values is determined considering the interest rate in the related markets and the riskassociated with the liability. The discount rate must be pre-tax and does not consider risks associated with future cash flow estimates. In caseswhere the time value of money is material and the provisions approach to their expected realisation date, the increase in the provision due to pas-sage of time is recognised as interest expense.

Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of oneor more uncertain future events not wholly within the control of the Company are treated as contingent assets or liabilities. The Company doesnot recognise contingent assets and liabilities (Note 22). Provisions are not recognised for future operating losses.

2.6.12 Accounting policies, errors and changes in accounting estimates

Material changes in accounting policies and accounting errors are applied on a retrospective basis as if a prior period error had never occurred orthe policy had always been applied. The effect of change in accounting estimate shall be recognised prospectively by including it in the statementof income within the period of the change, if the change affects that period only; or period of the change and future periods, if the change affectsboth.

2.6.13 Related parties

For the purpose of these financial statements, shareholders, Yaflar Group companies, key management personnel and Board members, in each casetogether with their families and companies controlled, jointly controlled or significantly influenced by them are considered and referred to as relat-ed parties (Note 37).

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

49

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

2.6.14 Segment reporting

Segment reporting is not applicable as the Company is only engaged in the production of bottled water; and sales and distribution of theCompany’s products in the domestic market are performed by its associate, Birmafl (Note 37) and operations other than in Turkey are not mate-rial enough to be reported separately (Note 5).

2.6.15 Taxation on income

Taxation on income includes current period tax liability and deferred income taxes. Current period tax liability includes the taxes payable calcu-lated on the taxable portion of the period income with tax rates enacted on the balance sheet date (Note 35). The adjustments related to prior peri-od tax liabilities are recognised in other operating expenses. Deferred tax is recognised in the statement of income, except to the extent that itrelates to items recognised directly in equity. In case, when the tax is related to items recognised directly in equity, the tax is also recognised inequity.

Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities andtheir carrying values for financial reporting purposes with the enacted tax rates as of the balance sheet date (Note 35).

Deferred income tax assets or liabilities are reflected to the financial statements to the extent that they will provide an increase or decrease in thetaxes payable for the future periods where the temporary differences will be reversed. Deferred income tax liabilities are recognised for all taxabletemporary differences, where deferred income tax assets resulting from deductible temporary differences are recognised to the extent that it isprobable that future taxable profit will be available against which the deductible temporary difference can be utilised. To the extent that deferredincome tax assets will not be utilised, the related amounts have been deducted accordingly (Note 35).

2.6.16 Provision for employment termination benefits

In accordance with the Turkish Labor Law, the Company is required to make lump-sum termination indemnities to each employee whose employ-ment is terminated due to retirement or for reasons other than resignation or misconduct and who has completed at least one year of service.Provision is made for the present value of the defined benefit obligation calculated using the projected unit credit method. All actuarial gains andlosses are recognised in the statement of income (Note 24).

2.6.17 Statement of cash flows

In the statement of cash flows, cash flows are classified into three categories as operating, investment and financing activities. Cash flows fromoperating activities are those resulting from the Company’s production and sales activities. Cash flows from investment activities indicate cashinflows and outflows resulting from property, plant and equipments and financial investments. Cash flows from financing activities indicate theresources used in financing activities and the repayment of these resources. For the purposes of the statement of cash flows, cash and cash equiv-alents comprise of cash in hand accounts, bank deposits and short-term, highly liquid investments that are readily convertible to known amountsof cash with maturities equal or less than three months.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

2.6.18 Trade receivables and provision for impairment of receivables

Trade receivables that are realised by the Company by way of providing goods or services directly to a debtor are recognised initially at fair valueand subsequently measured at amortised cost using the effective interest method, less provision for impairment if any. Short-term trade receiv-ables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest is significant.

A credit risk provision for trade receivables is established if there is objective evidence that the Company will not be able to collect the amountsdue. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cashflows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originatedreceivables at inception.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited toother operating income in the statement of income (Note 31).

2.6.19 Share capital and dividends

Ordinary shares are classified as equity. Dividends payable on shares are recognised as an appropriation of the profit in the period in which theyare declared. Dividend income is recognised when the Company’s right to receive the payment is established.

2.7 Critical Accounting Estimates and Judgments

Preparation of financial statements requires the use of estimates and assumptions that may affect the amount of assets and liabilities recognised asof the balance sheet date, disclosures of contingent assets and liabilities and the amount of revenue and expenses reported. Although these esti-mates and assumptions rely on the Company management’s best knowledge about current events and transactions, actual outcomes may vary fromthose estimates and assumptions. Significant estimates of the Company management are as follows:

a) Income taxes There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and sig-nificant judgment is required in determining the provision for income taxes. The Company recognises tax liabilities for anticipated tax issues basedon estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initiallyrecorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

b) Fair value determination of available for sale investmentsThe generally accepted valuation techniques used in fair value determination of available for sale investments for which there is no quoted mar-ket price exists, consist of several assumptions, which are based on the management’s best estimates (Note 7).

50CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued)

c) Revaluation of land, buildings and land improvements, machinery and equipments At 31 December 2008, land, land improvements and buildings, were stated at fair value, based on valuations performed by external independentvaluers as of the same date. As there were not any recent similar buying/selling transactions nearby, revaluations of land were based on the methodof reference comparison whereas revaluations of buildings and land improvements were based on the method of cost approach. In the market ref-erence comparison method, current market information was utilised, taking into consideration the comparable property in the market in recentpast in the region, price adjustment was made within the framework of criteria that could affect market conditions, and accordingly an averagem2 sale value was determined for lands subject to the valuation. The similar lands found were compared in terms of location, size, settlement sta-tus, physical conditions, real estate marketing firms were consulted for up-to-date valuation of the estate market, also, current information andexperience of the professional valuation company was utilised.

In the cost approach method, fair value of the buildings and land improvements was calculated by considering recent re-construction costs andrelated depreciation. In the cost approach method, above explained market reference comparison method was used in calculation of the land value,one of the components. Regarding the valuation of the machinery and equipment, technologic conditions, actual depreciation, commercial attrib-utes and industrial positions as well as demounting and assembling costs were taken into account. Whenever a fully integrated industrial plantwas in discussion, the revaluation work was performed based on all the active and functioning assets in the integrated plant rather than taking asbasis the data for the second-hand market within the scope of the valuation of the machinery and equipment. Such machinery and equipmentwere reviewed and assessed by their line (Note 18).

NOTE 3 - BUSINESS COMBINATIONS

None (2007: None).

NOTE 4 - JOINT VENTURES

None (2007: None).

NOTE 5 - SEGMENT REPORTING

Segment reporting is not applicable as the Company is only engaged in the production of bottled water and as sales and distribution of theCompany’s products in the domestic market are performed by its associate, Birmafl (Note 37) and operations other than in Turkey are not mate-rial enough to be reported separately.

51CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

52

NOTE 6- CASH AND CASH EQUIVALENTS

31 December 2008 31 December 2007

Cash in hand 449 6.474Banks

- Demand deposits 41.996 344.291- Turkish Lira 41.996 32.498- Foreign Currency - 311.793

- Time deposits - 1.516.011- Turkish Lira - 1.516.011

42.445 1.866.77

The Company does not have time deposits at 31 December 2008 (2007: Time deposits are all short-term and denominated in TL maturing in lessthan one month with effective interest rate of 18,50% per annum (p.a.)).

As of 31 December 2008, the Company has blocked deposits amounting to TL12.000 (2007: TL15.000).

Cash and cash equivalents for purposes of statement of cash flows are as follows:

Cash and cash equivalents 42.445 1.866.776Blocked deposits (12.000) (15.000)

Cash and cash equivalents 30.445 1.851.776

NOTE 7- FINANCIAL ASSETS

Available for sale investments:

31 December 2008 31 December 2007TL % TL %

Yaflar Birleflik Pazarlama Da¤›t›m Turizm ve Ticaret A.fi. (“YBP”) 11.717.251 4,79 10.926.852 4,79

Yatafl 767.599 1,96 797.955 1,96Desa Enerji Elektrik Üretimi

Otoprodüktör Grubu A.fi. (“Desa Enerji”) 525.376 6,07 - 6,07

13.010.226 11.724.807

Available for sale investments were stated at their fair values which were determined based on the discounted cash flows.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007(Amounts expressed in Turkish lira (TL) unless otherwise indicated.)

53

NOTE 7- FINANCIAL ASSETS (Continued)

The discount and growth rates used in the calculation of fair values of available for sales investments as at 31 December 2008 are as follows:

Discount rate Growth rates

YBP 17,13% 1%Yatafl 15,3% 0%Desa Enerji 17,50% 0%

Movements of available for sale investments during the year are as follows:

2008 2007

1 January 11.724.807 9.046.572

Increase in fair value 830.061 2.678.235Capital increase (*) 485.714 900.000Impairment losses (30.356) (900.000)

31 December 13.010.226 11.724.807

(*) Based on the Board of Directors decision dated 18 July 2008, the Company participated in capital increase of Desa Enerji in cash, propor-tionately with its share (2007: Based on the Board of Directors decision dated 5 September 2007, the Company participated in capital increase ofDesa Enerji in cash, proportionately with its share).

Movements of fair value reserves of available for sale investments were as follows:

2008 2007

1 January 6.987.568 4.518.853

Increase in fair value 830.061 2.678.235Impairment losses (30.356) -Deferred income tax on available for sale investments (Note 35) (41.381) (209.520)

31 December 7.745.892 6.987.568

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

54

NO

TE

8 -

FIN

AN

CIA

L LI

AB

ILIT

IES

Eff

ecti

ve w

eigh

ted

aver

age

inte

rest

rat

e %

Ori

gina

l Fo

reig

n C

urre

ncy

TL

equi

vale

nt

31 D

ecem

ber

31 D

ecem

ber

31 D

ecem

ber

31 D

ecem

ber

31 D

ecem

ber

31 D

ecem

ber

2008

2007

2008

2007

2008

2007

Shor

t-te

rm f

inan

cial

lia

bili

ties

:

TL b

ank

borr

owin

gs (

*)0,

00-

98.2

15-

98.2

15-

Shor

t-te

rm p

orti

on o

f lo

ng-t

erm

fin

anci

al l

iabi

liti

es:

EUR

bank

bor

row

ings

(**

)5,

314,

8684

2.70

345

0.42

81.

804.

058

770.

321

Tot

al s

hort

-ter

m f

inan

cial

lia

bili

ties

1.90

2.27

377

0.32

1

Long

-ter

m f

inan

cial

lia

bili

ties

:

EUR

bank

bor

row

ings

(**

)5,

394,

862.

361.

536

1.47

3.55

05.

055.

576

2.52

0.06

6

Tot

al l

ong-

term

fin

anci

al l

iabi

liti

es5.

055.

576

2.52

0.06

6

(*)

TL d

enom

inat

ed s

hort

-ter

m b

ank

borr

owin

gs a

re c

ompr

ised

of s

pot b

orro

win

gs w

ithou

t int

eres

t cha

rge

as o

f 31

Dec

embe

r 20

08 (

2007

: Non

e).

(**)

EUR

deno

min

ated

ban

k bo

rrow

ings

con

sist

of b

orro

win

g w

ith s

emi-

annu

ally

floa

ting

inte

rest

rat

es a

ccor

ding

to E

urib

or+0

,50%

p.a

. and

bor

row

ing

with

4,8

6% p

.a. f

ixed

inte

rest

rat

e.(2

007:

Bor

row

ing

with

4,8

6% p

.a. f

ixed

inte

rest

rat

e).

CO

NV

EN

IEN

CE

TR

AN

SLA

TIO

N I

NT

O E

NG

LISH

OF

FIN

AN

CIA

L ST

AT

EM

EN

TS

OR

IGIN

ALL

Y IS

SUE

D I

N T

UR

KIS

H

PIN

AR

SU

SA

NA

Y‹ V

E T

‹CA

RE

T A

.fi.

NO

TE

S T

O T

HE

FIN

AN

CIA

L ST

AT

EM

EN

TS

AT

31

DE

CE

MB

ER

200

8A

ND

200

7A

mou

nts

expr

esse

d in

Tur

kish

Lir

a (T

L) u

nles

s ot

herw

ise

indi

cate

d.)

NOTE 8 - FINANCIAL LIABILITIES (Continued)

The redemption schedule of long-term financial liabilities at 31 December 2008 and 2007 were as follows:

31 December 2008 31 December 2007

2009 - 720.0192010 1.701.967 720.0192011 1.701.967 720.0192012 - 2013 years 1.651.642 360.009

5.055.576 2.520.066

The carrying amounts of the borrowings with floating and fixed interest rates which were classified in terms of periods remaining to contractualrepricing dates are as follows:

Up to 3 months3 months to 1 year Total

31 December 2008:

Borrowings with floating interest rates - 3.656.508 3.656.508Borrowings with fixed interest rates - - 3.301.341

Total 6.957.849

As of 31 December 2007, bank borrowings are all based on fixed interest rates.

The carrying amounts and fair values of borrowings are as follows:

Carrying Amounts Fair Values31 December 31 December 31 December 31 December

2008 2007 2008 2007

Bank borrowings 6.957.849 3.290.387 7.265.076 3.256.784

The fair value of EUR denominated bank borrowings is based on cash flows discounted using the rates of 2,85% p.a. (2007: 5,46%).

NOTE 9 - OTHER FINANCIAL LIABILITIES

None (2007: None).

55CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 10 - TRADE RECEIVABLES AND PAYABLES

31 December 2008 31 December 2007

a) Other trade receivables

Customer current accounts 118.875 104.670Cheques and notes receivables 1.747.791 607.384

1.866.666 712.054

Less: Provision for impairment of receivables (87.857) (87.857)Unearned finance income (28.338) (11.086)

1.750.471 613.111

At 31 December 2008, the effective weighted average interest rate applied to trade receivables is 16,49% p.a. (2007: 16,25% p.a.) and average col-lection terms of trade receivables are within 2 months (2007: 2 months).

The aging of cheques and notes receivables are as follows:

0-30 days 865.243 169.45131-60 days 589.771 328.93361-90 days 83.277 67.00091 days and over 209.500 42.000

1.747.791 607.384

Aging analysis for trade receivables

The aging analysis of trade receivables as of 31 December 2008 and 2007 are as follows:

Overdue receivables - 5.7270-30 days 882.232 175.04931-60 days 580.209 325.19261-90 days 81.927 66.47291 days and over 206.103 40.671

1.750.471 613.111

As of 31 December 2008, there are no overdue trade receivables. The aging and credit risk analysis of overdue receivables as of 31 December 2007are disclosed in Note 38.a.

56CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 10 - TRADE RECEIVABLES AND PAYABLES (Continued)

Movements in the provision for impairment of receivables are as follows:

2008 2007

1 January (87.857) (119.260)

Collections (Note 31.a) - 31.403

31 December (87.857) (87.857)

31 December 2008 31 December 2007

b) Other trade payables:

Supplier current accounts 5.755.951 4.349.885

Less: Unincurred finance cost (58.776) (68.748)

5.697.175 4.281.137

At 31 December 2008, the effective weighted average interest rate applied to short-term trade payables is 16,49% p.a. (2007: 16,29% p.a.) andshort term trade payables mature within 2 months (2007: 2 months).

NOTE 11 - OTHER RECEIVABLES AND PAYABLES

31 December 2008 31 December 2007

a) Other short-term receivables:

Deposits and guarantees given 19.102 17.802Personnel advances 7.164 3.445

26.266 21.247

b) Other long-term receivables:

Deposits and guarantees given 1.800 1.800

1.800 1.800

c) Other short-term payables:

Payables to personnel 195.708 272.948Deposits and guarantees received 3.039 3.039

198.747 275.987

As of 31 December 2008, payable to personnel amounting to TL161.306 (2007:TL272.892) consists of the remaining balances of the dividendsand bonus decided to be paid to the key management and personnel.

57CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 12 - RECEIVABLES AND PAYABLES FROM FINANCE SECTOR OPERATIONS

None (2007: None).

NOTE 13 - INVENTORIES

31 December 2008 31 December 2007

Raw materials- Valued at cost 309.531 777.895- Valued at net realisable value 343.712 -

Finished goods- Valued at cost 565.503 1.978.812- Valued at net realisable value 43.303 -

Demijohn stocks- Valued at cost 449.856 501.892

Pallet stocks- Valued at cost 530.524 585.779

Spare parts- Valued at cost 591.520 561.139

Other 38.100 35.046

2.872.049 4.440.563

As of 31 December 2008, impairment provision amounting to TL24.672 has been provided for raw materials and finished goods (2007: None)and has been included in the cost of sales. Cost of inventories recognized as expense and included in cost of sales amounted to TL24.379.197(2007: TL22.016.242) (Note 30).

NOTE 14 - BIOLOGICAL ASSETS

None (2007: None).

NOTE 15 - CONSTRUCTION CONTRACT RECEIVABLES

None (2007: None).

58CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 16 - INVESTMENT IN ASSOCIATE ACCOUNTED BY EQUITY ACCOUNTING

Investment in associate:31 December 2008 31 December 2007

Shareholding ShareholdingTL (%) TL (%)

Birmafl 27.634 25 264.859 25

27.634 264.859

Movements of associate balance during the period is as follows:2008 2007

1 January 264.859 380.443

Share of results of investment in associate (163.497) 133.831Dividend income from investment in associate (Note 37.ii.j) (79.211) (220.891)Share of income taxes of investment in associate 5.483 (28.524)

31 December 27.634 264.859

The financial information of the investment in associate accounted by equity method is as follows:

31 December 2008 31 December 2007

Total assets 10.433.323 9.098.636Total liabilities 10.322.788 8.039.202

Net (loss)/ profit for the year (632.055) 421.228

NOTE 17 - INVESTMENT PROPERTY

None (2007: None).

59CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

CO

NV

EN

IEN

CE

TR

AN

SLA

TIO

N I

NT

O E

NG

LISH

OF

FIN

AN

CIA

L ST

AT

EM

EN

TS

OR

IGIN

ALL

Y IS

SUE

D I

N T

UR

KIS

H

PIN

AR

SU

SA

NA

Y‹ V

E T

‹CA

RE

T A

.fi.

NO

TE

S T

O T

HE

FIN

AN

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L ST

AT

EM

EN

TS

AT

31

DE

CE

MB

ER

200

8A

ND

200

7A

mou

nts

expr

esse

d in

Tur

kish

Lir

a (T

L) u

nles

s ot

herw

ise

indi

cate

d.)

NO

TE

18

- PR

OPE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

Mov

emen

ts o

f pro

pert

y, p

lant

and

equ

ipm

ent b

etw

een

1 Ja

nuar

y an

d 31

Dec

embe

r 20

08 w

ere

as fo

llow

s:

Rev

erse

of

impa

irm

ent

1 Ja

nuar

y 20

08A

ddit

ions

Dis

posa

lsT

rans

fers

Rev

alua

tion

(Not

e 31

.a)

31 D

ecem

ber

2008

Cos

t/ v

alua

tion

:

Land

4.84

5.53

7-

--

1.07

1.66

827

.795

5.94

5.00

0Bu

ildin

gs, a

nd la

nd im

prov

emen

ts15

.412

.761

13.3

53-

-1.

750.

036

-17

.176

.150

Mac

hine

ry a

nd e

quip

men

t54

.315

.293

1.18

6.13

4-

4.74

8.95

72.

908.

946

232.

023

63.3

91.3

53M

otor

veh

icle

s32

5.01

288

(32.

500)

--

-29

2.60

0Fu

rnitu

re a

nd fi

xtur

es8.

601.

992

1.75

0.41

0(3

73.1

88)

--

-9.

979.

214

Con

stru

ctio

n in

pro

gres

s8.

698

4.74

0.25

9-

(4.7

48.9

57)

(*)

--

-

83.5

09.2

937.

690.

244

(405

.688

)-

5.73

0.65

025

9.81

896

.784

.317

Acc

umul

ated

dep

reci

atio

n:

Build

ings

, and

land

impr

ovem

ents

(2.9

57.7

61)

(568

.389

)-

--

-(3

.526

.150

)M

achi

nery

and

equ

ipm

ent

(28.

017.

293)

(2.5

41.8

00)

--

--

(30.

559.

093)

Mot

or v

ehic

les

(266

.237

)(4

0.96

8)25

.165

--

-(2

82.0

40)

Furn

iture

and

fixt

ures

(5.1

89.6

35)

(663

.768

)47

.453

--

-(5

.805

.950

)

(36.

430.

926)

(3.8

14.9

25)

72.6

18-

--

(40.

173.

233)

Net

boo

k va

lue

47.0

78.3

6756

.611

.084

(*)T

he tr

ansf

ers

clas

sifie

d un

der

the

cons

truc

tion

in p

rogr

ess

acco

unt a

nd c

apita

lised

in th

e cu

rren

t per

iod

are

rela

ted

to th

e ad

ditio

nal m

achi

nery

and

equ

ipm

ent i

nves

tmen

ts fo

r th

e pr

oduc

-tio

n of

bot

tled

wat

er in

Sak

arya

pla

nt.

60

61

CO

NV

EN

IEN

CE

TR

AN

SLA

TIO

N I

NT

O E

NG

LISH

OF

FIN

AN

CIA

L ST

AT

EM

EN

TS

OR

IGIN

ALL

Y IS

SUE

D I

N T

UR

KIS

H

PIN

AR

SU

SA

NA

Y‹ V

E T

‹CA

RE

T A

.fi.

NO

TE

S T

O T

HE

FIN

AN

CIA

L ST

AT

EM

EN

TS

AT

31

DE

CE

MB

ER

200

8A

ND

200

7A

mou

nts

expr

esse

d in

Tur

kish

Lir

a (T

L) u

nles

s ot

herw

ise

indi

cate

d.)

NO

TE

18

- PR

OPE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

(C

onti

nued

)

Mov

emen

ts o

f pr

oper

ty, p

lant

and

equ

ipm

ent

betw

een

1 Ja

nuar

y an

d 31

Dec

embe

r 20

07 w

ere

as f

ollo

ws:

De¤

erR

ever

se o

fim

pair

men

t1

Janu

ary

2008

Add

itio

nsD

ispo

sals

Tra

nsfe

rsR

eval

uati

on(N

ote

31.a

)31

Dec

embe

r 20

08

Cos

t/ v

alua

tion

:

Land

4.44

5.67

724

0.00

0-

-60

.583

99.2

774.

845.

537

Build

ings

, and

land

impr

ovem

ents

13.9

74.3

4267

.290

--

1.37

1.12

9-

15.4

12.7

61M

achi

nery

and

equ

ipm

ent

47.9

46.1

3253

5.27

5(5

.711

)4.

977.

539

783.

553

78.5

0554

.315

.293

Mot

or v

ehic

les

368.

088

15(4

3.09

1)-

--

325.

012

Furn

iture

and

fixt

ures

7.36

1.29

11.

536.

784

(296

.083

)-

--

8.60

1.99

2C

onst

ruct

ion

in p

rogr

ess

340.

073

4.64

6.16

4-

(4.9

77.5

39)

(**)

--

8.69

8

74.4

35.6

037.

025.

528

(344

.885

)-

2.21

5.26

517

7.78

283

.509

.293

Acc

umul

ated

dep

reci

atio

n:

Build

ings

, and

land

impr

ovem

ents

(2.3

72.1

56)

(585

.605

)-

--

-(2

.957

.761

)M

achi

nery

and

equ

ipm

ent

(25.

632.

904)

(2.3

87.2

13)

2.82

4-

--

(28.

017.

293)

Mot

or v

ehic

les

(259

.830

)(4

9.49

8)43

.091

--

-(2

66.2

37)

Furn

iture

and

fixt

ures

(4.6

37.5

45)

(570

.333

)18

.243

--

-(5

.189

.635

)

(32.

902.

435)

(3.5

92.6

49)

64.1

58-

--

(36.

430.

926)

Net

boo

k va

lue

41.5

33.1

6847

.078

.367

(**)

The

tran

sfer

s cl

assi

fied

unde

r th

e co

nstr

uctio

n in

pro

gres

s ac

coun

t and

cap

italis

ed in

the

curr

ent p

erio

d ar

e re

late

d to

the

addi

tiona

l mac

hine

ry a

nd e

quip

men

t inv

estm

ents

for

the

pro-

duct

ion

of b

ottle

d w

ater

in S

akar

ya p

lant

.

NOTE 18 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Depreciation and amortisation charges were allocated to cost of production by TL2.593.531 (2007: TL2.477.741), to selling and marketing costsby TL648.935 (2007: TL634.202) and to general administrative expenses by TL588.459 (2007: TL541.542) (Note 29).

Market Valuation

The Company’s land, land improvements and buildings, machinery and equipment previously revalued at 31 December 2007, was updated as of31 December 2008 by the independent professional valuation company. Revaluations of land were based on market reference comparison method.However, since there were not any recent similar buying/ selling transections nearby, revaluations of land improvements and buildings werederived from cost approach method considering recent re-construction costs and related depreciation. The valuation of the machinery and equip-ment is based on all the active and functioning assets in the integrated plant. Such machinery and equipment were reviewed and assessed by theirlines.

Movements in revaluation reserve related to land, land improvements, buildings, machinery and equipment as of 31 December 2008 and 2007were as follows:

2008 2007

1 January 13.570.292 12.384.885

Increase in fair values arising from revaluationof land, buildings and land improvements 2.821.704 1.431.712

Increase in fair values arising from revaluationof machinery and equipment 2.908.946 783.55

Depreciation transferred from retained earnings (1.205.609) (902.426)Deferred income tax on depreciation transfer 241.122 180.485Deferred income tax arising from revaluation (985.379) (433.965)Effect of tax rate and regulations change - 126.048

31 December 17.351.076 13.570.292

62CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 18 - PROPERTY, PLANT AND EQUIPMENT (Continued)

The cost of property, plant and equipment and the related accumulated depreciation as of 31 December 2008 and 2007 were as follows:

Buildings and Machinery31 December 2008: Land land improvements and equipment

Cost 573.256 6.452.267 43.225.918Less: Accumulated depreciation - (1.839.208) (29.706.689)

Net book value 573.256 4.613.059 13.519.229

Buildings and Machinery31 December 2007: Land land improvements and equipment

Cost 573.256 6.438.914 37.290.827Less: Accumulated depreciation - (1.549.292) (27.197.450)

Net book value 573.256 4.889.622 10.093.377

NOTE 19 - INTANGIBLE ASSETS

The movements of intangible assets and related accumulated amortisation for the years ended 31 December 2008 and 2007 were as follows:

1 January 2008 Additions 31 December 2008

Cost:Rights 1.032.649 4.500 1.037.149Accumulated amortisation (1.005.253) (16.000) (1.021.253)

Net book value 27.396 15.896

1 January 2008 31 December 2008Opening Additions Closing

Cost:Rights 1.028.449 4.200 1.032.649Accumulated amortisation (944.417) (60.836) (1.005.253)

Net book value 84.032 27.396

63CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 20 - GOODWILL

None (2007: None).

NOTE 21 - GOVERNMENT GRANTS

None (2007: None).

NOTE 22 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

31 December 2008 31 December 2007

a) Short-term provisions:

Provision for expense accruals (*) 2.233.194 2.056.863Management bonus accruals 250.000 330.000Provision for litigation 79.757 79.757Other 49.886 13.685

2.612.837 2.480.305

(*) The provision is related to the water and the rent charges in the scope of the law suit filed by the Special Provincial Administration against theCompany and its movement is as follows:

2008 2007

1 January 2.056.863 1.880.532

Increase in the current period (Note 31.b) 176.331 176.331

31 December 2.233.194 2.056.863

31 December 2008 31 December 2007

b) Guarantees given:

Bails 682.915.200 545.553.800Guarantee letters 366.157 353.313

683.281.357 545.907.113

As of 31 December 2008, guarantees given are mainly related with joint guarantees provided by the Company along with Yaflar Holding A.fi.,Çaml› Yem Besicilik Sanayi ve Ticaret A.fi., Dyo Boya Fabrikalari Sanayi ve Ticaret A.fi., P›nar Süt Mamülleri Sanayii A.fi., Viking Ka¤›t ve SelülozA.fi., P›nar Entegre Et ve Un Sanayi A.fi. and Yaflar Birleflik Pazarlama Da¤›t›m Turizm ve Ticaret A.fi. for repayment of borrowings obtained byYaflar Group companies from international capital markets amounting to EUR319 million equivalent of TL682.915.200 (2007: EUR319 millionequivalent of TL545.553.800).

64CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

65

NOTE 22 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued)

31 December 2008 31 December 2007

c) Guarantees received:

Mortgages 1.721.102 2.051.100Guarantee notes 153.000 -Guarantee letters 100.000 638.306Cheques received as guarantee 6.000 210.500

1.980.102 2.899.906

NOTE 23 - COMMITMENTS

Total amount of raw material purchase commitments as of 31 December 2008 is amounted to TL1.035.520 (2007: TL948.960).

NOTE 24 - EMPLOYEE BENEFITS

31 December 2008 31 December 2007

Provision for employment termination benefits 329.238 246.585

329.238 246.585

Under the Turkish Labour Law, the Company is required to pay termination benefits to each employee who has completed one year of serviceand whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of serv-ice (20 years for women) and reaches the retirement age (58 for women and 60 for men).

The amount payable consists of one month’s salary limited to a maximum of TL2.173,18 for each year of service as of 31 December 2008 (2007:TL2.030,19).

The liability is not funded, as there is no funding requirement. The provision has been calculated by estimating the present value of the futureprobable obligation of the Company arising from the retirement of the employees with certain actuarial assumptions.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 24 - EMPLOYEE BENEFITS (Continued)

The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate appliedrepresents the expected real rate after adjusting for the anticipated effects of future inflation. The maximum amount of TL2.260,05 which is effec-tive from 1 January 2009 (1 January 2008: TL2.087,92) has been taken into consideration in calculating the provision for employment termina-tion benefits of the Company which is calculated once in every six months.

The following actuarial assumptions were used in the calculation of the total liability:

31 December 2008 31 December 2007

Discount rate (%) 6,26 5,71Probability of retirement (%) 96,53 94,70

Movements of the provision for employment termination benefits during the years are as follows:

2008 2007

1 January 246.585 211.781

Interest cost 15.436 12.093Actuarial loss/ (gain) 14.336 (901)Annual charge (*) 88.022 32.781Paid during the year (35.141) (9.169)

31 December 329.238 246.585

(*) As of 31 December 2008, the increase in the provision for employment termination benefits amounting to TL42.711 is related with the esti-mation of the provisions developed by actuarial valuation methods of the future probable obligation arising from the retirement of the outsourcedpersonnel.

The total of interest cost, actuarial losses and annual charge for the year amounting to TL117.794 (2007: TL43.973) were allocated to generaladministrative expenses by TL75.083 (2007: TL43.973) (Note 29) and to cost of sales by TL42.711 (2007: None).

NOTE 25 - PENSION PLANS

None (2007: None).

66CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 26 - OTHER ASSETS AND LIABILITIES

31 December 2008 31 December 2007

a) Other current assets:

VAT receivable 2.636.198 2.441.032Prepaid taxes 105.587 20.517Order advances given 39.034 150.921Other 278 -

2.781.097 2.612.470

b) Other non-current assets:

Prepaid expenses 40.364 47.884Order advances given - 612.465

40.364 660.349

c) Other current liabilities:

Withholding taxes and funds payable 321.329 146.969Advances Received 28.431 17.820

349.760 164.789

NOTE 27 - EQUITY

The Company adopted the registered share capital system available to companies registered with the CMB and set a limit on its registered sharecapital representing registered type shares with a nominal value of TL1. The Company’s historical authorized registered share capital as at 31December 2008 and 2007 are as follows:

31 December 2008 31 December 2007

Registered share capital (with historical values) 50.000.000 50.000.000Paid-in share capital with nominal value 12.732.754 12.732.754

Companies in Turkey may exceed the authorised share capital ceiling via bonus shares issued to their shareholders.

67CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 27 - EQUITY (Continued)

The compositions of the Company’s share capital at 31 December 2008 and 2007 were as follows:

31 December 2008 31 December 2007

Share ShareShareholders (%) Amount (%) Amount

Yaflar Holding 57,93 7.376.045 57,93 7.376.045Public quotation 32,46 4.132.567 32,46 4.132.567P›nar Süt Mamülleri Sanayii A.fi.

(“P›nar Süt”) 8,81 1.122.150 8,81 1.122.150YBP 0,80 101.992 0,80 101.992

100 12.732.754 100 12.732.754

Inflation adjustment to share capital 11.713.515 11.713.515

Total paid-in capital 24.446.269 24.446.269

Inflation adjustment to share capital amounting to TL11.713.515 (2007: TL11.713.515) represents the remaining amount after netting-off theaccumulated losses of the year 2003 from the difference between restated share capital and historical cost of share capital.

The Company has 12.732.754 (2007: 12.732.754) units of shares with a face value of TL1 each as of 31 December 2008.

The Company’s authorised registered share capital is composed of registered shares and its shares have been quoted at the Istanbul Stock Exchange(“ISE”).There are no privileges given to specific shareholders.

Retained earnings, as per the statutory financial statements, other than legal reserves, are available for distribution, subject to the legal reserverequirement referred to below:

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipu-lates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of theCompany’s paid-in capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of thepaid-in capital. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed50% of paid-in capital.

68CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 27 - EQUITY (Continued)

The aforementioned amounts were accounted for under “Restricted Reserves” in accordance with CMB Financial Reporting Standards. The restrict-ed reserves of the Company amount to TL2.181.402 (2007: TL928.755) as of 31 December 2008. The unrestricted reserves the Company amountto TL392.899 (2007: TL63.664), and classified in the retained earnings.

In accordance with the CMB regulations effective until 1 January 2008, inflation adjustment differences arising at the initial application inflationaccounting, which were recorded under “accumulated losses,” could be netted off from the profit to be distributed based on the CMB regulationsfor profit distribution. In addition, the aforementioned amount recorded under “accumulated losses” could be netted off with net profit for theperiod and undistributed retained earnings. Remaining amount, if any, could be netted off with extraordinary reserves, legal reserves and sharecapital, respectively.

In accordance with the CMB regulations effective until 1 January 2008, “Capital, Share Premium, Legal Reserves, Special Reserves andExtraordinary Reserves” were recorded at their statutory carrying amounts and the inflation adjustment differences related to such accounts wererecorded under “inflation adjustment differences” at the initial application of inflation accounting. “Equity inflation adjustment differences” couldhave been utilized in issuing bonus shares and offsetting accumulated losses, carrying amount of extraordinary reserves could have been utilisedin issuing bonus shares, cash dividend distribution and offsetting accumulated losses.

In accordance with the Communiqué No: XI-29 and related announcements of CMB, effective from 1 January 2008, “Share capital”, “RestrictedReserves” and “Share Premium” shall be carried at their statutory amounts. The valuation differences shall be classified as follows:

-the difference arising from the “Paid-in Capital” and not been transferred to capital yet, shall be classified under the “Inflation Adjustment to SharCapital”;

-the difference due to the inflation adjustment of “Restricted Reserves” and “Share Premium” and the amount has not been utilised in dividenddistribution or capital increase yet, shall be classified under “Retained earnings”. Other equity items shall be carried at the amounts calculatedbased on CMB Financial Reporting Standards.

Capital adjustment differences have no other use other than being transferred to share capital.

69CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 27 - EQUITY (Continued)

Quoted companies are subject to dividend requirements regulated by the CMB as follows:

The minimum profit distribution ratio over net profit for 2008 applicable for public companies, shares of which are publicly traded on IstanbulStock Exchange, is 20% (2007: 20%), as described in the announcement of CMB dated 9 January 2009. According to the aforementionedannouncement and CMB Communiqué No: IV, No: 27, in which profit distribution base of publicly traded companies is set, depending on thedecisions made by the general assemblies, the distribution of the relevant amount may be realized by cash or by pro-rata shares or partly as cashand pro-rata shares; and in the event that the first dividend amount identified is less than 5% of the paid-up capital, the relevant amount can beretained within the company. However, companies that increased capital rather than distributing dividends in the prior period and whose sharesare therefore classified under "old" and "new" categories and who will distribute dividends from the profit for the current year operations arerequired to distribute the first dividend in cash.

The procedure in the context of the aforementioned CMB decision about that income from investment in associates recognised in the financialstatements should be disregarded, if the profit distribution is not approved by the general assemblies of the associates. The procedure of disclos-ing such amount has been cancelled. As long as the statutory accounts and reserves are sufficient profit in the financial statements prepared inaccordance with the Communiqué No. XI-29 can be utilised in the calculation of profit distribution.

Accordingly, based on the related decision, if the amount of profit distributions calculated in accordance with the net distributable profit require-ments of the CMB does not exceed the statutory net distributable profit, the whole amount of distributable profit in accordance with the CMBrequirements, should be distributed. If it exceeds the statutory net distributable profit, the whole amount of the statutory net distributable profitshould be distributed. It is stated that dividend distributions should not be made if there is a loss in either the financial statements prepared inaccordance with CMB regulations or in the statutory financial statements.

At 31 December 2008, the total amount of net income after the deduction of accumulated losses per statutory records, without appropriating legalreserves and other reserves that can be subject to dividend distribution is TL7.027.169. Extraordinary reserves of the Company at 31 December2008 that may be subject to profit distribution amount to TL4.116.727.

Based on the decision of General Assembly meeting on 15 May 2008, dividend payment was made to owners of redeemed shares by the amountnot exceeding the 10% of dividend to shareholders in accordance with the articles of the association of the Company. The Company has distrib-uted 20% of the net income for the year 2007 amounting to TL1.752.680 as first dividend, 47% of the paid-in capital amounting to TL4.231.714as second dividend and TL540.000 as redeemed share, total of which amounted to TL6.524.394.

70CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 28 - SALES AND COST OF SALES

31 December 2008 31 December 2007

Domestic sales 97.197.731 94.344.845Exports 3.852.151 4.978.101

Gross sales 101.049.882 99.322.946

Less: Discounts (39.764.728) (38.662.872)Returns (117.962) (88.481)

Net sales 61.167.192 60.571.593

Cost of sales (40.891.459) (37.271.850)

Gross Profit 20.275.733 23.299.743

NOTE 29 - RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES, GENERALADMINISTRATIVE EXPENSE

2008 2007

a) Selling, marketing and distribution expenses:

Advertisement 2.952.202 2.195.920Transportation and export expenses 1.671.961 1.437.606Rent 1.154.148 150.590Depreciation and amortisation (Note 18) 648.935 634.202Staff costs 293.248 299.833Energy costs 52.034 48.832Other 451.653 414.050

7.224.181 5.181.033

b) General administrative expenses:

Staff costs 2.304.411 1.446.272Consultancy 1.230.091 1.087.343Depreciation and amortisation (Note 18) 588.459 541.542Outsourced services 429.530 413.798Management bonus 420.000 330.000Communication 264.183 234.752Energy costs 217.612 162.024Rent expense 160.314 96.494Representation 109.042 90.041Employment termination benefits 75.083 43.973Tax (excluding corporate tax) 74.438 89.931Travel expenses 47.144 45.337Other 630.022 523.835

6.550.329 5.105.342

Total operating expenses 13.774.510 10.286.375

71CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 30 - EXPENSES BY NATURE

2008 2007

Direct and indirect material and finished goods costs 24.379.197 22.016.242Palette and policarbon costs (*) 5.577.301 4.818.146Staff costs 3.978.182 2.905.999Depreciation and amortisation (Note 18 and 19) 3.931.313 3.547.206Outsourced services 3.205.752 2.898.674Advertisement 2.952.202 2.195.920Energy and utility 2.566.962 2.061.326Transportation 1.671.961 1.437.606Rent 1.653.552 548.259Repair and maintenance 1.403.737 1.779.214Consultancy 1.230.091 1.087.343Management bonus 420.000 330.000Employment termination benefits (Note 24) 117.794 43.973Other 1.577.925 1.888.317

54.665.969 47.558.225

(*) The Company has expensed demijohns amounting to TL729.103 in 2008 as they have become obsolete.

NOTE 31 - OTHER OPERATING INCOME/ (EXPENSE)

2008 2007

a) Other operating income:

Revenue from sales of scrap and packing materials 281.987 181.868Reversal of impairment on property, plant, and equipment (Note 18) 259.818 177.782Gain from sales of property, plant and equipment - 143.053Collected doubtful receivables (Note 10) - 31.403Other 39.779 96.048

581.584 630.154

b) Other operating expenses:

Provision for rent and water expense (Note 22.a) (176.331) (176.331)Loss on sales of property, plant and equipment (43.586) -Impairment on available for sale investments (Note 7) - (900.000)Donations (Note 37.ii.l) - (725.000)Litigation cost - (29.664)Other (41.204) (68.624)

(261.121) (1.899.619)

72CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 32 - FINANCIAL INCOME

2008 2007

Bail charge to related parties (Note 37.ii.i) 1.346.858 1.437.856Foreign exchange gain 1.133.700 907.694Dividend income (Note 37.ii.j) 590.685 259.730Interest income 179.284 113.465

3.250.527 2.718.745

NOTE 33 - FINANCIAL EXPENSE

2008 2007

Foreign exchange loss 1.862.821 713.983Interest expense 308.508 129.658Bank commission expenses 186.461 308.016Other 19.690 32.853

2.377.480 1.184.510

NOTE 34 - NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

None (2007: None).

NOTE 35 - TAXATION ON INCOME

As of 31 December 2008 and 2007, prepaid income taxes and deferred tax liabilities are as follows:

31 December 2008 31 December 2007

Provision for income taxes 1.705.995 3.043.032Less: Prepaid corporate tax (944.344) -

Current income tax liabilities 761.651 3.043.032

The corporation tax rate of the fiscal year 2008 is 20% (2007: 20%). Corporation tax is payable at a rate of 20% on the total income of theCompany after adjusting for certain disallowable expenses, exempt income (exemption for participation in subsidiaries, exemption for investmentincentive allowance etc.) and allowances (such as research and development expenditure allowances). No other tax liabilities arise other than theevent of dividend distribution.

73CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 35 - TAXATION ON INCOME (Continued)

According to Turkish Corporate Income Tax Law numbered 5520, effective from 21 June 2006, a 75% portion of the gains derived from the saleof preferential rights, usufruct shares and founding shares from investment equity and real property, which has remained in assets for more thantwo full years, are exempt from corporate tax. To be entitled to the exemption, the relevant gain is required to be held in a fund account in theliabilities and it must not be withdrawn from the entity for a period of five years. The sales consideration has to be collected up until the end ofthe second calendar year following the year the sale was realised.

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholdingtax. Otherwise, dividends paid are subject to withholding tax at the rate of 15% (2007: 15%). An increase in capital via issuing bonus shares isnot considered profit distribution and thus does not incur withholding tax.

Corporations are required to pay advance corporation tax quarterly at the rate of 20% (2007: 20%) on their corporate income. Advance tax isdeclared by 10th and payable by the 17th (2007: 17) of the second month following each calendar quarter end. Advance tax paid by corporationsis credited against the annual corporation tax liability. The balance of the advance tax paid may be refunded or used to be set off against other lia-bilities to the government.

In Turkey, there is no procedure for final and definitive agreement on tax assessment. Companies file their tax returns within the 25th of the fourthmonth following the close of the financial year to which they relate.

Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have theright to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Underthe Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be car-ried back to offset profits from previous periods.

There are many exemptions in Corporate Tax Law regarding corporations. Those related to the Group are explained below:

Dividend gains from shares in capital of another corporation subject to resident taxpaying (except dividends from investment funds participationcertificates and investment trusts shares) are exempt from corporate tax.

Profits from sale of preferential right certificates and share premiums generated from sale of shares at a price exceeding face values of those sharesduring incorporations or capital increases of joint stock companies are exempt from corporate tax.

Accordingly, the aforementioned gains/ (losses) which have been included in trade profit/ (loss) have been taken into consideration in calculationof Company’s corporate tax.

Apart from the exemptions mentioned in the preceding paragraphs, the deductions granted in 14th and recurring 8th articles of Corporate TaxLaw and 40 th article of the Income Tax Law together with the 10th article of Corporate Tax Law have been taken into consideration in calcula-tion of the Company’s corporate tax.

74CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 35 - TAXATION ON INCOME (Continued)

Transfer Pricing

The Law No: 5520 Article 13, which made new arrangements to transfer pricing was effective from 1 January 2007. With the aforementioned law,considerable amendments have been made to transfer pricing regulations by taking EU and OECD transfer pricing guidelines as a basis. In thisrespect, corporations should set the prices in accordance with the arm’s length principle while entering into transactions regarding the sale or pur-chase of goods and services with related parties. Under the arm’s length principle within the new legislation related parties must set the transferprices for purchase and sale of goods and services as if they would have been agreed between third parties. Depending on the circumstances, achoice of accepted methods in aforementioned law of arm’s length transaction has to be made by corporations for transactions with related par-ties. Corporations should keep the documentary evidence within the company representing how arm’s length price has been determined and themethodology that has been chosen by use of any fiscal records and calculations in case of any request by tax authorities. Besides, corporationsmust report transactions with related parties in a fiscal period.

If a taxpayer enters into transactions regarding the sale or purchase of goods and services with related parties, where the prices are not set in accor-dance with the arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Theprofit distributed in a disguised manner through transfer pricing completely or partially, will be assessed as distributed profit share or transferredamount to headquarter for limited taxpayers. After the distributed profit share is considered as net profit share and complemented to gross amount,deemed profit will be subject to corporate tax. Previous taxation processes will be revised accordingly by taxpayer who distributes disguised prof-it. In order to make adjustments in this respect, the taxes assessed in the name of the company distributing dividends in a disguised manner mustbe finalised and paid.

Taxes on income for the years ended 31 December are summarised as follows:

1 January - 1 January -31 December 2008 31 December 2007

Current corporation income tax expense (1.705.995) (3.043.032)Deferred income tax expense (200.968) (2.003.489)

Taxation on income (1.906.963) (5.046.521)

75CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 35 - TAXATION ON INCOME (Continued)

Reconciliation of taxation on income for the years ended 31 December 2008 and 2007 are as follows:

2008 2007

Profit before tax 7.536.719 13.383.445

Tax calculated at tax rates applicable to the profit (1.507.344) (2.676.689)Effect of depreciation transfer (Note 18) (241.122) (180.485)Expenses not deductible for tax purposes (145.553) (282.708)Income not subject to tax 52.212 176.905Effect of changes in effective tax rates - 22.870Utilisation of unused tax credits - (2.247.213)Other (15.156) 140.799

Taxation on income (1.856.963) (5.046.521)

Deferred taxes

The Company recognises deferred income tax assets and liabilities based upon temporary differences arising between their financial statements asreported under the statutory tax financial statements. Deferred income taxes are calculated on temporary differences that are expected to be realisedor settled based on the taxable income in future periods under the liability method using a principal tax rate of 20% (2007: 20%).

Details of cumulative temporary differences and the resulting deferred income tax assets and liabilities provided as of 31 December 2008 and 2007were as follows:

Taxable Deferred income taxtemporary differences assets/ (liabilities)

2008 2007 2008 2007

Useful life differences 7.336.119 6.519.654 (1.467.224) (1.303.931)Revaluation on buildings and

land improvements 7.624.468 6.152.905 (1.524.893) (1.230.581)Revaluation on machinery and equipments 8.082.498 6.100.689 (1.616.498) (1.220.138)Restatement differences on tangible

and intangible assets 3.293.135 3.876.421 (658.627) (775.284)Fair value reserve of

available for sale investments 7.721.226 6.930.867 (386.063) (346.543)Revaluation on land 5.047.371 3.975.703 (252.369) (198.784)Impairment on available for sale investments (2.739.548) (2.748.854) 547.910 549.771Impairment on machinery and equipment (151.280) (461.414) 30.256 92.283Provision for employment

termination benefits (329.238) (246.585) 65.848 49.317Management bonus (250.000) (330.000) 50.000 66.000Other (261.746) (377.975) 32.759 75.595

Deferred income tax assets 726.773 832.966Deferred income tax liabilities (5.905.674) (5.075.261)

Deferred income tax liability - net (5.178.901) (4.242.295)

76CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 35 - TAXATION AND LIABILITIES (Continued)

The movement of deferred income taxes was as follows:

2008 2007

1 January (4.242.295) (1.901.854)Charged to revaluation reserve (Note 18) (744.257) (127.432)Charged to fair value reserve of available for sale

investments (Note 7) (41.381) (209.520)Charged to statement of income (150.968) (2.003.489)

31 December (5.178.901) (4.242.295)

NOTE 36 - EARNINGS PER SHARE

Basic earnings per share are calculated by dividing profit for the year by the weighted average number of ordinary shares in issue during the year.

Companies can increase their share capital by making a pro-rata distribution of shares ("bonus shares") to existing shareholders from retained earn-ings. For the purpose of loss per share computations, the weighted average number of shares outstanding during the year has been adjusted inrespect of bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issuedand for each earlier year.

Earning per share is calculated by dividing net profit for the period to weighted average number of shares during that period.

1 January - 1 January -31 December 2008 31 December 2007

Net profit for the period A 5.679.756 8.336.924

Weighted average number of shares (Note 27) B 12.732.754 12.732.754

Earnings per share with a TL1 face value A/B 0,4461 0,6548

There are no differences between basic and diluted earnings per share.

77CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 37 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

i) Balances with related parties:

31 December 2008 31 December 2007

a) Trade receivables from related parties:

Birmafl 5.440.023 4.980.987Yatafl 576.431 776.365P›nar Entegre Et ve Un Sanayii A.fi. (“P›nar Et”) 218.833 -P›nar Süt 109.786 -

6.345.073 5.757.352

Less: Unearned finance income (22.450) (22.723)

6.322.623 5.734.629

As of 31 December 2008, the effective weighted average interest rate of short term due from related parties is 16,46% p.a. (2007: 16,26% p.a.)and due from related parties mature within one month (2007: one month).

As of 31 December 2008, vendor and customer cheques obtained in return for the sales to Birmafl, amounting to TL1.747.791 (2007: TL607.384)are classified as trade receivables in the financial statements (Note 10.a).

Due from related party balances are mainly resulted from the sales of bottled water. The Company sells all of its products in the domestic marketto its related party and associate, Birmafl, which is the sole distributor of the Company in domestic market as further explained in Note 1 to thefinancial statements. As of 31 December 2008 trade receivables from P›nar Et and P›nar Süt are mainly related to palette sales.

As of 31 December 2008, due from related parties amounting to TL2.165.765 (2007: TL1.249.406) were over due for a period of less than onemonth (2007: less than one month).

b) Other receivables from related parties:

Viking Ka¤›t ve Selüloz A.fi. (“Viking Ka¤›t”) 198.496 120.739DYO Boya Fabrikalar› A.fi. (“DYO Boya”) 171.421 52.280Çaml› Yem, Besicilik San. ve Tic. A.fi. ("Çaml›") 69.517 16.660Other 60.278 4.173

499.712 193.852

Less: Unearned finance income (1.343) (765)

498.369 193.087

78CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 37 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

The other receivables from related parties consists of income from bail commission charges in relation to the bank borrowings obtained by therelated parties from international capital markets and a financial institution under the guarantee of the Company (Note 22).

31 December 2008 31 December 2007

c) Trade payables to related parties:

Bintur Turizm ve Catering Hizmetleri Tic. A.fi. ("Bintur") 10.078 -YBP - 41.392Other 38.074 29.076

48.152 70.468Less: Unincurred finance cost (538) (6.724)

47.614 63.744

The effective weighted average interest rate applied to due to related parties is 16,37% p.a. as of 31 December 2008 (2007: 16,25% p.a.) and short term due to related parties mature within one month (2007: one month).

d) Other payables to related parties:

Yaflar Holding 540.000 -Yaflar Üniversitesi - 725.000Other 7.574 -

547.574 725.000Less: Unincurred finance cost (7.301) -

540.273 725.000

As of 31 December 2008, due to Yasar Holding is arising from Founders Redeemed Share Allocation that was decided to be paid by the GeneralAssembly of the Company on 15 May 2008.

79CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 37 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

ii) Transactions with related parties:1 January - 1 January -

31 December 2008 31 December 2007

a) Product sales:

Birmafl - net 56.720.750 55.593.492Yatafl - net 4.446.442 4.213.516

61.167.192 59.807.008

The Company sells all of its products in the domestic market to its related party and associate, Birmafl, which is the sole distributor of the Companyin domestic market.

b) Service sales:

Yaflar Holding 163.629 -

163.629 -

c) Sales of property, plant and equipment:

Birmafl 327.520 77.518Other 20.200 -

347.720 77.518

d) Other income from related parties:

P›nar Et 359.970 -P›nar Süt 165.688 -Birmafl - 73.490Other - 1.271

525.658 74.761

Other income from P›nar Et and P›nar Süt is related to palette sales.

e) Product purchases:

Birmafl 2.820.417 2.788.536Viking Ka¤›t - 764.585

2.820.417 3.553.121

The Company purchased palettes and demijohns from Birmafl. The product purchases from Viking Ka¤›t in 2007 consist of purchase of semi-fin-ished sanitary papers that were exported through the Company.

80CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 37 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

1 January - 1 January -31 December 2008 31 December 2007

f) Service purchases:

Yaflar Holding 1.278.805 905.919YBP 246.944 223.347Yadex Export-Import und Spedition GmbH (“Yadex”) 102.790 126.072Yatafl 93.804 110.267P›nar Foods GmbH (“P›nar Foods”) 4.987 310.597Other 12.667 -

1.739.997 1.676.202

Service purchases from Yaflar Holding are mainly related with the consultancy charges.

g) Other purchases:

P›nar Süt 16.339 23.751YBP 2.682 14.668Other 16.682 5.442

35.703 43.861

h) Financial expense:

Yaflar Holding 29.622 75.111Other 1.680 -

31.302 75.111

i) Financial income:

Yaflar Holding 869.758 964.172Dyo Boya 202.662 201.212Viking Ka¤›t 92.887 92.222YBP 67.554 67.070Other 113.997 113.180

1.346.858 1.437.856

The finance income consists of income from bail commission charges in relation to the bank borrowings obtained by the related parties from inter-national capital markets and a financial institution under the guarantee of the Company. The bail commission rate used in the intercompanycharges is 0,75% p.a. (2007: 0,75% p.a.). The Company also charges finance commission by 0,75% (2007:0,75%) in relation to the aforemen-tioned bail.

81CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 37 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

1 January- 1 January -31 December 2008 31 December 2007

j) Dividends received:

YBP (Note 32) 590.685 259.730Birmafl (Note 16) 79.211 220.891

669.896 480.621

k) Dividends paid:

Yaflar Holding 4.006.741 2.992.167Public quotation 1.942.306 1.401.886P›nar Süt 527.411 380.666Other 47.936 34.597

6.524.394 4.809.316

l) Donations:

Yaflar Üniversitesi - 725.000

- 725.000

m) Bails given:

The Company jointly guarantees with Yaflar Holding, Çaml› Yem Besicilik Sanayi ve Ticaret A.fi. (“Çaml› Yem”), Dyo Boya Fabrikalar› Sanayi veTicaret A.fi. (“Dyo Boya”), Viking Ka¤›t, P›nar Süt Mamülleri Sanayii A.fi. (“P›nar Süt”), P›nar Entegre Et ve Un Sanayi A.fi. (“P›nar Et”) and YBPfor the repayment of loans obtained by Yaflar Group companies from international capital markets and a financial institution amounting to EUR319million, equivalent of TL682.915.200 (2007: EUR319 million, equivalent of TL545.553.800).

n) Key management compensation:

Key management includes Chief Operations Officer, General Manager and members of Board of Directors. The compensation paid or payable tokey management are shown below:

2008 2007

Short-term employee benefits 750.714 198.658Bonus and profit sharing 419.400 300.400Other long term benefits 3.687 3.011

1.173.801 502.069

As of 31 December 2007, a provision amounting to TL330.000 was provided for as bonus and profit-sharing of key management with respect tothe profit of 2007. However; as an outcome of the General Assembly on 15 May 2008, it was decided to pay management bonus from 2007 prof-it in an amount of TL500.000. As of 31 December 2008, TL338.694 of the aforementioned amount has been paid and the remaning amount,TL161.306, is recorded as Other Current Liabilities (Note 11.c). In line with the past experiences of the Company management, the Company hasprovided bonus and profit sharing provision from the net income for 2008 in an amount of TL250.000 (Note 22.a).

82CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

83

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NO

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38

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NC

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RIS

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a) C

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all

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the

dom

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mar

ket t

o its

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irm

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s sa

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and

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of t

he C

ompa

ny’s

prod

ucts

in t

he d

omes

tic m

arke

t. In

thi

s re

spec

t, th

ese

risk

s ar

e m

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red

by t

he C

ompa

ny t

hrou

ghBi

rmafl

with

cre

dit

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gs, l

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ng t

he a

ggre

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ris

k fr

om a

ny in

divi

dual

cou

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part

y an

d re

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ing

guar

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es w

hen

requ

ired

. Bir

mafl

man

ages

tho

se r

isks

ari

sing

from

sal

es t

o de

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s an

ddi

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cus

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by li

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divi

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part

y an

d re

ceiv

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requ

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. The

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rien

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the

rew

ere

neve

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, be

lieve

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at c

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ell

man

aged

and

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d ef

fect

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d cr

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is

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car

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g am

ount

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the

fin

anci

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. Als

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e C

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rts

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ed b

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late

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Yat

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are

follo

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the

Com

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31 D

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:R

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from

the

sale

s of

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wat

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(2)

Fact

ors

incr

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such

as

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are

not t

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into

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side

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d am

ount

s.(3

)N

one.

NOTE 38 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

(4) Considering the past experiences, the Company management does not foresee any collection problem for the overdue receivables and theaging of these receivables is as follows:

Receivables

31 December 2008 Trade Receivables Other Receivables Total

1-30 days overdue 1.759.942 13.836 1.773.7781-3 months overdue 405.823 265.626 671.4493-12 months overdue - 198.496 198.496The part covered by guarantees - - -

2.165.765 477.958 2.643.723(*)

Receivables

31 December 2007 Trade Receivables Other Receivables Total

1-30 days overdue 1.252.559 43.255 1.295.8131-3 months overdue 2.574 43.255 45.8293-12 months overdue - 86.509 86.510The part covered by guarantees - - -

1.255.133 173.019 1.428.152

(*) Whole amount of the receivables that were overdue but not impaired have been collected as of the approval date of the financial statements.

b) Liquidity risk:

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequateamount of committed credit facilities and the ability to close out market positions.

The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of adequate committed fundinglines from high quality lenders. The Company management closely monitors the timely collection of trade receivables, take actions to minimizethe effect of delay in collections and arrange cash and non-cash credit lines from financial institutions in case of a requirement.

85CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 38 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The Company’s financial liabilities and liquidity analysis into relevant maturity groupings based on the remaining period as of 31 December2008 and 2007 are as follows:

31 December 2008:Total

cash outflowsBook per agreement Less than 3 - 12 1 - 5 yearsvalue (=I+II+III) 3 months (I) months (II) (III)

Agreement terms:

Non-derivative financial liabilities

Bank borrowings 6.957.849 7.698.022 655.096 1.290.125 5.752.801Trade payables 5.744.789 5.804.103 5.804.103 - -Other payables 739.020 746.311 746.311 - -

13.441.658 14.248.436 7.205.510 (*) 1.290.125 5.752.801

(*) The Company management does not foresee any difficulty in paying its non-derivative financial liabilities considering the operating cashflows and current assets of the Company.

31 December 2007:Total

cash outflowsBook per agreement Less than 3 - 12 1 - 5 yearsvalue (=I+II+III) 3 months (I) months (II) (III)

Agreement terms:

Non-derivative financial liabilities

Bank borrowings 3.290.387 3.639.539 413.568 372.257 2.853.714Trade payables 4.344.881 4.420.353 4.420.353 - -Other payables 1.000.987 1.000.987 1.000.987 - -

8.636.255 9.060.879 5.834.908 372.257 2.853.714

c) Market risk:

i) Foreign exchange risk

The Company is exposed to foreign exchange risks through the impact of rate changes on translation into TL of foreign currency denominatedassets and liabilities. The Company minimizes the risk through balancing foreign currency denominated assets and liabilities. These risks aremonitored by analyses of the foreign currency position. Current risks are discussed by the auditing committee and the management board regu-larly and the foreign exchange rates relevant to the foreign currency position of the Company are followed up.

86CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

87

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31 D

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31

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nanc

ial A

sset

s-

--

--

--

-6b

. Non

-Mon

etar

y Fi

nanc

ial A

sset

s-

--

--

--

-7.

Oth

er-

--

--

--

-8.

Non

-Cur

rent

Ass

ets

(5+6

+7)

--

--

--

--

9. T

otal

Ass

ets

(4+8

)39

5.84

883

.106

126.

199

-1.

011.

713

236.

133

430.

762

-

10. T

rade

Pay

able

s(7

2.97

0)(7

.821

)(2

8.56

0)-

(46.

471)

(15.

441)

(16.

657)

-11

. Fin

anci

al L

iabi

litie

s(1

.804

.058

)-

(842

.703

)-

(770

.321

)-

(450

.428

)-

12a.

Mon

etar

y O

ther

Lia

bilit

ies

(17.

683)

(11.

693)

--

(4.3

51)

(3.7

36)

--

12b.

Non

-Mon

etar

y O

ther

Lia

bilit

ies

--

--

--

--

13. S

hort

-Ter

m L

iabi

liti

es (

10+1

1+12

)(1

.894

.711

)(1

9.51

4)(8

71.2

63)

-(8

21.1

43)

(19.

177)

(467

.085

)-

14. T

rade

Pay

able

s-

--

--

--

-15

. Fin

anci

al L

iabi

litie

s(5

.055

.576

)-

(2.3

61.5

36)

-(2

.520

.066

)-

(1.4

73.5

50)

-16

a. M

onet

ary

Oth

er L

iabi

litie

s-

--

--

--

-16

b. N

on-M

onet

ary

Oth

er L

iabi

litie

s-

--

--

--

-17

. Lon

g-T

erm

Lia

bili

ties

(14

+15+

16)

(5.0

55.5

76)

-(2

.361

.536

)-

(2.5

20.0

66)

-(1

.473

.550

)-

18. T

otal

Lia

bili

ties

(13

+17)

(6.9

50.2

87)

(19.

514)

(3.2

32.7

99)

-(3

.341

.209

)(1

9.17

7)(1

.940

.635

)-

19. N

et A

sset

/ (Li

abil

ity)

Pos

itio

n of

Off

-Bal

ance

She

et

Der

ivat

ive

Inst

rum

ents

(19

a-19

b)-

--

--

--

-19

a. A

mou

nt o

f A

sset

Nat

ure

Off

-Bal

ance

She

et

Der

ivat

ive

Inst

rum

ents

--

--

--

--

19b.

Am

ount

of

Liab

ilit

y N

atur

e O

ff-B

alan

ce S

heet

D

eriv

ativ

e In

stru

men

ts-

--

--

--

-20

. Net

For

eign

Ass

et/ (

Liab

ilit

y) P

osit

ion

(9+1

8+19

)(6

.554

.439

)63

.592

(3.1

06.6

00)

-(2

.329

.496

)21

6.95

6(1

.509

.873

)-

21. N

et F

orei

gn C

urre

ncy

Ass

et/ (

Liab

ilit

y) P

osit

ion

of

Mon

etar

y It

ems

(IFR

S 7.

B23

) (=

1+2a

+5+6

a-10

-11-

12a-

14-1

5-16

a)(6

.554

.439

)63

.592

(3.1

06.6

00)

-(2

.329

.496

)21

6.95

6(1

.509

.873

)-

22. T

otal

Fai

r V

alue

of

Fina

ncia

l In

stru

men

ts U

sed

for

Fore

ign

Cur

renc

y H

edgi

ng-

--

--

--

-23

. Exp

ort

3.85

2.15

13.

033.

288

--

4.97

8.10

13.

254.

409

-26

4.62

324

. Im

port

4.79

5.53

63.

739.

923

--

4.98

9.19

73.

769.

103

--

88

CO

NV

EN

IEN

CE

TR

AN

SLA

TIO

N I

NT

O E

NG

LISH

OF

FIN

AN

CIA

L ST

AT

EM

EN

TS

OR

IGIN

ALL

Y IS

SUE

D I

N T

UR

KIS

H

PIN

AR

SU

SA

NA

Y‹ V

E T

‹CA

RE

T A

.fi.

NO

TE

S T

O T

HE

FIN

AN

CIA

L ST

AT

EM

EN

TS

AT

31

DE

CE

MB

ER

200

8A

ND

200

7A

mou

nts

expr

esse

d in

Tur

kish

Lir

a (T

L) u

nles

s ot

herw

ise

indi

cate

d.)

NO

TE

38

- FIN

AN

CIA

L IN

STR

UM

EN

TS

AN

D F

INA

NC

IAL

RIS

K M

AN

AG

EM

EN

T (

Con

tinu

ed)

31 D

ecem

ber

2008

Tab

le o

f Se

nsit

ivit

y A

naly

sis

for

Fore

ign

Cur

renc

y R

isk

Prof

it/L

oss

Equ

ity

App

reci

atio

n of

Dep

reci

atio

n of

App

reci

atio

n of

Dep

reci

atio

n of

fore

ign

curr

ency

fore

ign

curr

ency

fore

ign

curr

ency

fore

ign

curr

ency

Cha

nge

of U

SD b

y 20

% a

gain

st T

L:

1- A

sset

/Lia

bilit

y de

nom

inat

ed in

USD

- ne

t19

.234

(19.

234)

--

2- T

he p

art h

edge

d fo

r U

SD r

isk

(-)

--

--

3- U

SD E

ffec

t - n

et (

1+2)

19.2

34(1

9.23

4)-

-

Cha

nge

of E

UR

by

20%

aga

inst

TL:

4- A

sset

/Lia

bilit

y de

nom

inat

ed in

EU

R -

net

(1.3

30.1

22)

1.33

0.12

2-

-5-

The

par

t hed

ged

for

EUR

risk

(-)

--

--

6- E

UR

Eff

ect

- net

(4+

5)(1

.330

.122

)1.

330.

122

--

Cha

nge

of O

ther

Cur

renc

ies

by 2

0% a

gain

st T

L

7- A

sset

s/Li

abili

ties

deno

min

ated

in o

ther

fore

ign

curr

enci

es -

net

--

--

8- T

he p

art h

edge

d fo

r ot

her

fore

ign

curr

ency

ris

k (-

)-

--

-9-

Oth

er F

orei

gn C

urre

ncy

Eff

ect

- net

(7+

8)-

--

-

TO

TA

L (3

+6+9

)(1

.310

.888

)1.

310.

888

--

The

Com

pany

doe

s no

t hed

ge fo

reig

n cu

rren

cy d

enom

inat

ed li

abili

ties

by u

sing

hed

ge in

stru

men

ts.

89

CO

NV

EN

IEN

CE

TR

AN

SLA

TIO

N I

NT

O E

NG

LISH

OF

FIN

AN

CIA

L ST

AT

EM

EN

TS

OR

IGIN

ALL

Y IS

SUE

D I

N T

UR

KIS

H

PIN

AR

SU

SA

NA

Y‹ V

E T

‹CA

RE

T A

.fi.

NO

TE

S T

O T

HE

FIN

AN

CIA

L ST

AT

EM

EN

TS

AT

31

DE

CE

MB

ER

200

8A

ND

200

7A

mou

nts

expr

esse

d in

Tur

kish

Lir

a (T

L) u

nles

s ot

herw

ise

indi

cate

d.)

NO

TE

38

- FIN

AN

CIA

L IN

STR

UM

EN

TS

AN

D F

INA

NC

IAL

RIS

K M

AN

AG

EM

EN

T (

Con

tinu

ed)

31 D

ecem

ber

2007

Tab

le o

f Se

nsit

ivit

y A

naly

sis

for

Fore

ign

Cur

renc

y R

isk

Prof

it/L

oss

Equ

ity

App

reci

atio

n of

Dep

reci

atio

n of

App

reci

atio

n of

Dep

reci

atio

n of

fore

ign

curr

ency

fore

ign

curr

ency

fore

ign

curr

ency

fore

ign

curr

ency

Cha

nge

of U

SD b

y 20

% a

gain

st T

L:

1- A

sset

/Lia

bilit

y de

nom

inat

ed in

USD

- ne

t50

.538

(50.

538)

--

2- T

he p

art h

edge

d fo

r U

SD r

isk

(-)

--

--

3- U

SD E

ffec

t - n

et (

1+2)

50.5

38(5

0.53

8)-

-

Cha

nge

of E

UR

by

20%

aga

inst

TL:

4- A

sset

/Lia

bilit

y de

nom

inat

ed in

EU

R -

net

(516

.436

)51

6.43

6-

-5-

The

par

t hed

ged

for

EUR

risk

(-)

--

--

6- E

UR

Eff

ect

- net

(4+

5)(5

16.4

36)

516.

436

--

Cha

nge

of O

ther

Cur

renc

ies

by 2

0% a

gain

st T

L

7- A

sset

s/Li

abili

ties

deno

min

ated

in o

ther

fore

ign

curr

enci

es -

net

--

--

8- T

he p

art h

edge

d fo

r ot

her

fore

ign

curr

ency

ris

k (-

)-

--

-9-

Oth

er F

orei

gn C

urre

ncy

Eff

ect

- net

(7+

8)-

--

-

TO

TA

L (3

+6+9

)(4

65.8

98)

465.

898

--

NOTE 38 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

ii) Interest rate risk

The Company is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities.

Interest Rate Position31 December 2008 31 December 2007

Financial instruments with fixed interest rateFinancial assets 26.266 1.537.258Financial liabilities 3.500.088 3.566.374

Financial instruments with floating interest rateFinancial assets 8.571.463 6.540.827Financial liabilities 9.941.570 4.620.868

As of 31 December 2008, had the interest rate for borrowings denominated in TL increased by 1%, with all other variables held constant, lossbefore tax would be TL59.429 lower (2007: Income before tax TL19.200 lower).

iii) Price risk

Price risk relates to prices of drinking water and raw materials. The profitability of the Company’s operations and the cash flows generated bythose operations are affected by changes in the raw material prices and market competition that are closely monitored by the Board of Directorsand precautions for cost amendment are taken. Price risk is closely monitored by the Board of Directors and Audit Committee.

d) Capital risk management:

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to providereturns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital toshareholders, issue new shares or sell assets to reduce debt.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

90

91CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

NOTE 38 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculat-ed as the total liability (including borrowings, trade, due to related parties and other payables, as shown in the balance sheet) less cash and cashequivalents.

31 December 2008 31 December 2007

Total debt 13.791.418 8.801.044Less: Cash and cash equivalents (Note 6) (42.445) (1.866.776)

Net debt 13.748.973 6.934.268

Total equity 61.326.279 56.426.200

Debt/equity ratio %22 %12

NOTE 39 - FINANCIAL INSTRUMENTS (FAIR VALUE AND FINANCIAL RISK MANAGEMENT DISCLOSURES)

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in aforced sale or liquidation, and is best evidenced by a quoted market price, if one exists.

The estimated fair values of financial instruments have been determined by the Company using available market information and appropriatevaluation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the esti-mates presented herein are not necessarily indicative of the amounts the Company can realise in a current market exchange.

The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimatefair value:

Financial assetsThe fair values of balances denominated in foreign currencies, which are translated at year-end exchange rates, are considered to approximate totheir carrying values. Cash and cash equivalents are carried at their fair values. The fair values of trade receivables and due from related partiesare considered to approximate their respective carrying values due to their short-term nature. Available for sale investments are carried at theirfair values.

D‹PNOT 39 - FINANCIAL INSTRUMENTS (FAIR VALUE AND FINANCIAL RISK MANAGEMENT DISCLOSURES) (Continued)

Financial liabilitiesFair values of bank borrowings are disclosed in Note 8.

Trade payables, payables to related parties and other monetary liabilities are estimated to be presented with their discounted carrying amountsand they are considered to approximate to their fair values and the fair values of balances denominated in foreign currencies, which are translat-ed at year-end exchange rates, are considered to approximate carrying values.

NOTE 40 - SUBSEQUENT EVENTS

In accordance with the Article 1 of the Law No: 5083 concerning the “Currency of the Republic of Turkey” and according to the Decision ofThe Council of Ministers dated April 4, 2007 and No: 2007/11963, the prefix “New” used in the “New Turkish Lira” and the “New Kurufl” havebeen removed as of January 1, 2009. When the prior currency, New Turkish lira (“YTL”), values are converted into TL and Kr, one YTL (YTL1)and one YKr (YKr1) are now equivalent to one TL (TL1) and one Kr (Kr1).

All references made to New Turkish Lira or Lira in laws, other legislation, administrative transactions, court decisions, legal transactions, nego-tiable instruments and other documents that produce legal effects as well as payment and exchange instruments are now considered to havebeen made to TL at the conversion rate indicated above. Consequently, effective from 1 January 2009, the TL replaced the YTL as a unit ofaccount in keeping and presenting of books, accounts and financial statements.

NOTE 41 - DISCLOSURE OF OTHER MATTERS

None (2007: None).

NOTE 42 - EXPLANATION FOR CONVENIENCE TRANSLATION INTO ENGLISH

As of 31 December 2008, CMB Financial Reporting Standards differ from IFRS issued by the International Accounting Standards Board withrespect to the application of inflation accounting for the period between 1 January - 31 December 2005. Accordingly, the financial statementsare not intended to present the financial position and results of operations of the Company in accordance with IFRS.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PINAR SU SANAY‹ VE T‹CARET A.fi.NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2008 AND 2007Amounts expressed in Turkish Lira (TL) unless otherwise indicated.)

92

Tas

ar›m

&Ü

reti

m:

‹nde

ks ‹

çeri

k-‹l

etifl

im D

an›fl

man

l›k

PINAR SU SANAY‹ ve T‹CARET A.fi.

Kemalpafla Cad. No: 4 (35060) P›narbafl›-‹ZM‹R

Tel: 0 (232) 436 52 50

Fax: 0 (232) 436 52 04

E-posta: info@yasar.com.tr

www.pinar.com.tr