SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Report on Form 6-K dated October 3, 2004
CELLCO FINANCE N.V.
Pareraweg 45
Curacao
Netherlands Antilles
(Address of Principal Executive Offices)
---------------------
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
Form 20-F: |X| Form 40-F: |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes: |_| No: |X|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes: |_| No: |X|
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes: |_| No: |X|
Enclosure: Report: "Operating and Financial Review and Prospects for the
Nine-Month Period Ended September 30, 2003"
<Page>
OPERATING AND FINANCIAL REVIEW AND PROSPECTS FOR THE THREE-MONTH PERIOD ENDED
MARCH 31, 2004
Overview
This is the quarterly report for the three-month period ended March 31,
2004 of Cellco Finance N.V. ("Cellco Finance"), a Netherlands Antilles limited
liability company ("naamloze vennootschap"). Cellco Finance's sole business is
to issue debt securities and lend the proceeds of those debt securities to
Turkcell Iletisim Hizmetleri A.S. ("Turkcell"), a joint stock company organized
and existing under the laws of the Republic of Turkey.
On July 23, 1998, Cellco Finance issued $300,000,000 of 15% Senior
Subordinated Notes due 2005 pursuant to an Indenture dated July 23, 1998 between
Cellco Finance and HSBC Bank USA (then known as Marine Midland Bank) (the "1998
Restricted Notes"). On December 22, 1999 Cellco Finance issued $400,000,000 of
12.75% Senior Notes due 2005 pursuant to an Indenture dated December 22, 1999
between Cellco Finance and HSBC Bank USA (the "1999 Restricted Notes"). Each of
the 1998 Restricted Notes and 1999 Restricted Notes were offered and sold in
private placements to a small number of institutions, which resold those Notes
pursuant to exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act") in transactions outside the United States in
reliance on Regulation S under the Securities Act and to "qualified
institutional buyers" under Rule 144A under the Securities Act.
Cellco Finance loaned the proceeds of the 1998 Restricted Notes and the
1999 Restricted Notes to Turkcell pursuant to a Subordinated Credit Agreement
dated July 23, 1998 and a Credit Agreement dated December 22, 1999, respectively
(such Credit Agreements being collectively herein called the "Credit
Agreements").
Pursuant to a Registration Statement filed with the Securities and the
Exchange Commission (the "SEC") and declared effective on October 13, 1999,
Cellco Finance offered to exchange notes that had been registered with the SEC
for the 1998 Restricted Notes. Pursuant to the exchange offer completed November
22, 1999, $285,036,000 in principal amount of Senior Subordinated Exchange Notes
were issued in exchange for a like principal amount of 1998 Restricted Notes
(such Senior Subordinated Exchange Notes being herein called the "1998 Exchange
Notes"). Pursuant to a Registration Statement filed with the SEC and declared
effective on July 10, 2000, Cellco Finance offered to exchange notes that had
been registered with the SEC for the 1999 Restricted Notes. Pursuant to the
exchange offer completed August 18, 2000, $385,038,000 in principal amount of
Senior Exchange Notes were issued in exchange for a like principal amount of
1999 Restricted Notes (such Senior Exchange Notes being herein called the "1999
Exchange Notes" and, together with the 1998 Exchange Notes, "Exchange Notes";
the Exchange Notes, the 1998 Restricted Notes and the 1999 Restricted Notes are
collectively referred to as the "Notes"). On October 8, 2003, Cellco Finance
announced that the holders of almost 90% in aggregate principal amount of its
outstanding 12.75% Senior Notes due 2005 have consented to the proposed
redemption of 15% Senior Subordinated Notes due 2005. The redemption price was
103.75% and the redemption was made on November 10, 2003.
The terms "we," "us," "our" and similar terms refer to Cellco Finance
and do not include or refer to Turkcell. We do not control Turkcell. However,
because our sole business is to issue debt securities and lend the proceeds of
those debt securities to Turkcell and our only significant assets are claims
against Turkcell under the Credit Agreements, the success of our business is
dependent entirely on the success of Turkcell's business, and our business is
subject to all risks and uncertainties to which Turkcell's business is subject.
The financial information contained in the following discussion and
analysis has been prepared and is presented in accordance with US GAAP in US
dollars. The following discussion and analysis should be read in conjunction
with the financial statements and related notes as of December 31, 2002 and
2003, and for the years ended December 31, 2001, 2002 and 2003 included in the
Cellco
3
<Page>
Annual Report for the year ended December 31, 2003, and the financial statements
and related notes as of December 31, 2003 and March 31, 2004, and for each of
the three-month periods ended March 31, 2003 and 2004 included herein. The
information as of and for each of the three-month periods ended March 31, 2003
and 2004 is not audited.
Certain statements contained below, including information with respect
to our plans and strategy for our business, are forward looking statements. The
statements contained in this discussion of operating results, which are not
historical facts, are forward looking statements with respect to our plans,
projections or future performance, the occurrence of which involves certain
risks and uncertainties.
Operating Results
Revenues. Our revenue consists primarily of interest and financing fees
from Turkcell paid pursuant to the Credit Agreements. Revenues for the
three-month periods ended March 31, 2003 and 2004 amounted to $24,856,000 and
$13,285,000, respectively.
Expenses. Expenses consist primarily of interest paid on the Notes and
taxes. Expenses for the three-month periods ended March 31, 2003 and 2004
amounted to $24,856,000 and $13,285,000, respectively.
Critical Accounting Policies
We have prepared our financials statements assuming we will continue as
a going concern; accordingly we have recorded the loans receivable and the
related interest income at the full amount receivable from Turkcell. Economic
developments in Turkey have had, and may continue to have, a material adverse
effect on Turkcell's business, financial condition and results of operations.
Should Turkcell's operating results or the Turkish economy suffer further
significant declines it could result in Turkcell lacking the financial resources
to repay the loans. If Turkcell were unable to repay the loans then an
impairment charge would need to be recorded.
Liquidity and Capital Resources
We are a special purpose finance vehicle formed to issue debt
instruments and lend the proceeds to Turkcell. All of our existing obligations
are matched by claims on Turkcell. We do not expect to incur additional
indebtedness other than to fund Turkcell's operations, and any such additional
indebtedness will be matched by claims on Turkcell.
At March 31, 2004, substantially all of our assets represent amounts
receivable from Turkcell. Our results of operations and financial position are
largely dependent upon the results of operations and financial position of
Turkcell, whose operations are substantially all inside Turkey.
The financial condition of Turkcell and its future operations and cash
flows could be adversely affected by continued economic difficulty. Accordingly,
our financial condition and our future operations and cash flows could be
adversely affected by such continued economic difficulty in Turkey. Turkcell has
generated positive cash flows from operations for the past years. We have
continued to receive timely payments from Turkcell on our Note receivable and we
believe that Turkcell will continue to be able to service its debt on a timely
basis.
According to the 1999 Indenture, we cannot make any principal payments
on any of its indebtedness that is subordinated or junior in right of payment to
the 1999 Notes prior to any scheduled final maturity.
4
<Page>
The following table illustrates our major contractual obligations as of
March 31, 2004.
<Table>
<Caption>
US$ Million Payments due by period
Contractual Obligations Total Less than 1 year 1-3 years 4-5 years After 5 years
- ----------------------- ----- ---------------- --------- --------- -------------
Notes payable 400.0 -- 400.0 -- --
----- -----
400.0 -- 400.0 -- --
===== =====
</Table>
Research and Development, Patents and Licenses
We have not had any research and development activities for the last
three years. We own no patents.
Trend Information
At March 31, 2004, substantially all of our assets represent amounts
receivable from Turkcell. Our results of operations and financial position are
largely dependent upon the results of operations and financial position of
Turkcell, whose operations are substantially all inside Turkey.
The Turkish economy has been adversely affected by the significant
economic difficulties that occurred in Turkey in 2001. Despite the continued
negative impact of political uncertainty and regional instability, the Turkish
economy showed signs of recovery from the worst of the financial turmoil in 2001
and during 2002. Although macroeconomic indicators and consumer sentiment showed
significant improvement during 2002 and 2003, the Turkish economy remains
fragile. The annual inflation rates in Turkey were 29.7% and 18.4% for the years
ended December 31, 2002 and 2003, respectively, based on the Turkish consumer
price index. Annual inflation rates were 11.8% as of March 31, 2004 and 29.4%
for the same period in 2003.
During 2002 and 2003, a new IMF backed program sought to decrease the
likelihood of the Turkish economy suffering a future crisis by encouraging
sustained non-inflationary growth through a floating exchange regime, using
inflation targeting to combat chronic inflation, strengthening the financial
structure of Turkey, implementing reforms in taxation, the banking sector and
public sector, ensuring debt sustainability and accelerating privatization
efforts. The IMF hoped that the implementation of banking reform and enactment
of other reforms would improve the liquidity position of the private sector and
stimulate growth. Accordingly, the IMF and World Bank extended additional
financial support for the implementation of the program targets through the end
of 2004 via a new standby program. These targets were realized thanks to a tight
fiscal policy backed by inflation targeting in 2002 and 2003.
Turkey's return to economic stability is dependent to a large extent on
the effectiveness of the measures taken by the government, decisions of
international lending organizations, and other factors, including regulatory and
political developments. The economic problems that Turkey may face in 2004 and
the future are primarily the current account deficit resulting from the ongoing
appreciation of the Turkish Lira against the US dollar, debt sustainability
problems due to populist policies, possible easing of 6.5% primary surplus
target or not meeting it and a possible increase in interest rates in the United
States, which could lead to an outflow of fund from emerging markets. In
addition, macroeconomic indicators may be negatively impacted by the political
situation in Cyprus and the progress of Turkey's application for accession to
the European Union (EU). Furthermore, increased consumer confidence and wages
may result in an increase in inflation. Inflation and the level of government
debt may also increase as a result of populist economic policies carried out by
the government. On the other hand, tight monetary and fiscal policies may lead
to decrease in investment spending which will also lead to a lower GDP ratio and
employment rate. Government's GDP target is 5% for 2004 which is also forecasted
by Turkcell. Our financial condition, future operations and cash flows could be
adversely affected by continued economic difficulties in Turkey.
5
<Page>
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Tabular Disclosure of Contractual Obligations
The following table illustrates our major contractual obligations as of
March 31, 2004.
<Table>
<Caption>
US$ Million Payments due by period
Contractual Obligations Total Less than 1 year 1-3 years 4-5 years After 5 years
- ----------------------- ----- ---------------- --------- --------- -------------
Notes payable 400.0 -- 400.0 -- --
----- -----
400.0 -- 400.0 -- --
===== =====
</Table>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Exchange Risk Management
The fair value of the 1999 Notes decreased from $446.0 million at
December 31, 2003 to $442.5 million at March 31, 2004.
The following table sets forth as at December 31, 2003 and March 31,
2004 the principal and maturities of our indebtedness that are sensitive to
foreign currency exchange rate fluctuations:
<Table>
<Caption>
December 31, 2003 March 31, 2004
Carrying amount Fair value Carrying amount Fair value
$ $ $ $
(in millions) (in millions) (in millions) (in millions)
Financial instrument
1999 Notes 400.0 446.0 400.0 442.5
</Table>
Expected future maturities as of March 31, 2004, for each of the next two years
are set forth in the following table:
2004 2005 Total
---- ---- -----
(in millions of US Dollars)
1999 Notes -- 400.0 400.0
6
<Page>
Interest Rate Risk Management
The following table sets forth as at December 31, 2003 and March 31, 2004 the
principal and maturities of our indebtedness that are sensitive to interest rate
fluctuations:
<Table>
<Caption>
December 31, 2003 March 31, 2004
Carrying amount Fair value Carrying amount Fair value
$ $ $ $
(in millions) (in millions) (in millions) (in millions)
Financial instrument
1999 Notes 400.0 446.0 400.0 442.5
</Table>
Expected future maturities as of March 31, 2004, for each of the next two years
are set forth in the following table:
2004 2005 Total
---- ---- -----
(in millions of US Dollars)
1999 Notes -- 400.0 400.0
7
<Page>
Table of contents
Financial statements
Balance sheets at December 31, 2003 and March 31, 2004 (unaudited) 1
Statements of operations for the three-month periods ended
March 31, 2003 and 2004 (unaudited) 2
Statements of cash flows for the three-month periods ended
March 31, 2003 and 2004 (unaudited) 3
Notes to the financial statements as of December 31, 2003
and March 31, 2004 (unaudited), and for the three month periods ended
March 31, 2003 and 2004 (unaudited) 4 - 9
<Page>
Cellco Finance N.V.
Balance sheets at December 31, 2003
and March 31, 2004 (unaudited)
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
December 31, March 31,
Assets 2003 2004
(unaudited)
- ----------------------------------------------------------- ------------ -----------
(in thousands of US dollars)
Current assets
Cash and cash equivalents (note 4) 3 3
Accrued interest receivable (note 5) 21,250 8,500
Deferred financing costs (notes 3 and 5) 1,247 2,139
Other current assets and receivables 352 380
------------ -----------
Total current assets 22,852 11,022
Loans receivable (notes 4 and 5) 400,000 400,000
Deferred financing costs (notes 3 and 5) 2,139 712
------------ -----------
424,991 411,734
============ ===========
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
December 31, March 31,
Liabilities and shareholders' equity 2003 2004
(unaudited)
- ----------------------------------------------------------- ------------ -----------
(in thousands of US dollars, except share data)
Current liabilities
Accrued interest payable (note 5) 21,250 8,500
Taxes payable (notes 3 and 6) 343 371
------------ -----------
Unearned financing fee income (notes 3 and 5) 1,247 2,139
Total current liabilities 22,840 11,010
Notes payable (notes 4 and 5) 400,000 400,000
Unearned financing fee income (notes 3 and 5) 2,139 712
Shareholders' equity
Common stock
Par value US$1.00; authorized 60,000, issued and paid 12 12
12,000 shares (note 1)
Retained earnings - -
------------ -----------
Total shareholders' equity 12 12
------------ -----------
424,991 411,734
============ ===========
</Table>
See accompanying notes to the financial statements.
2
<Page>
Cellco Finance N.V.
Statements of operations for the three-month periods
ended March 31, 2003 and 2004 (unaudited)
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------
Three months ended March 31,
2003 2004
- --------------------------------------------------------- --------- ---------
(in thousands of US dollars, except share data) (unaudited)
Revenue
Interest income (notes 3 and 5) 24,000 12,750
Financing fee income (notes 3 and 5) 856 535
--------- ---------
Total revenue 24,856 13,285
Expenses
Interest expense (notes 3 and 5) (24,000) (12,750)
Financing cost (notes 3 and 5) (856) (535)
Operating and other expenses re-charged (note 1) 38 27
--------- ---------
Income before taxes 38 27
Taxes on income (notes 3 and 6) (38) (27)
--------- ---------
Net income - -
========= =========
Basic and diluted earnings per common share - -
========= =========
Weighted average number of common shares outstanding 12,000 12,000
========= =========
</Table>
See accompanying notes to the financial statements.
3
<Page>
Cellco Finance N.V.
Statements of cash flows for the three-month periods
ended March 31, 2003 and 2004 (unaudited)
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
Three months ended March 31,
2003 2004
- ------------------------------------------------- --------- ---------
(in thousands of US dollars) (unaudited)
Cash flows from operating activities:
Net income - -
Changes in assets and liabilities:
Accrued interest receivable 24,000 12,750
Other current assets and receivables (38) (28)
Accrued interest payable (24,000) (12,750)
Accrued income taxes 38 28
--------- ---------
Net cash used in operating activities - -
Cash flows from financing activities:
Deferred financing costs 856 535
Unearned financing fees (856) (535)
--------- ---------
Net cash provided by financing activities - -
--------- ---------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at the beginning of period 3 3
--------- ---------
Cash and cash equivalents at the end of period 3 3
========= =========
Supplemental cash flow information:
Interest paid 48,000 25,500
Taxes paid - -
</Table>
See accompanying notes to the financial statements.
4
<Page>
Cellco Finance N.V.
Notes to the financial statements
As of December 31, 2003 and March 31, 2004 (unaudited) and for the
three-month periods ended March 31, 2003 and 2004 (unaudited)
(1) Activities and ownership
Cellco Finance N.V. (the "Company") was incorporated on January 27,
1998 as a limited liability company under the laws of the Netherlands
Antilles. The Company has its registered office at Pareraweg 45,
Curacao, the Netherlands Antilles, and is registered with the trade
register of the Chamber of Commerce and Industry in Curacao. The
authorized share capital of the Company is divided into 60,000 ordinary
shares with a par value of one US Dollar each, of which 12,000
fully-paid shares have been issued. The sole shareholder is Cellco
Stichting, a stichting, or foundation, organized under the laws of the
Netherlands Antilles (the "Foundation"). The sole beneficiary of the
Foundation is a Netherlands Antilles charitable foundation. The
Foundation has a single member board of directors, consisting of
Amicorp Curacao N.V., a Netherlands Antilles trust company (the "Trust
Company"). The Company is managed by a Board of Managing Directors
comprised of a single managing director, appointed by the General
Meeting of Shareholders. The Trust Company is also the sole managing
director. The Company has no officers, the managing director carries
out the functions of the executive officers, consistent with the
Netherlands Antilles law.
The Company was formed for the purpose of issuing debt securities and
lending the proceeds thereof to Turkcell Iletisim Hizmetleri A.S.
("Turkcell"). The Company issued $300,000,000 15% Senior Subordinated
Notes (the "Senior Subordinated Notes") due 2005 (which was redeemed on
November 10, 2003) and $400,000,000 12.75% Senior Notes (the "Senior
Notes") due 2005, and entered into Issuer Credit Agreements with
Turkcell, under which the proceeds of these Notes were loaned to
Turkcell. The Company has conducted no operations since it was
established other than the issuance of these Notes and will have no
subsidiaries or significant business activities and is not expected to
produce any revenues except payments received from Turkcell under the
Issuer Credit Agreements and under any similar agreements which may be
required upon any additional debt issuances. Pursuant to the Issuer
Credit Agreements, any operating and other expenses of the Company are
payable by Turkcell.
Shareholders' equity consists of the following at December 31, 2003 and
March 31, 2004 (amounts in thousands, except share data):
<Table>
<Caption>
----------------------------------------------------------------------------------------------------------------
Common stock Total
--------------------------
Shares Amount shareholders'
equity
----------------------------------------------------------------------------------------------------------------
(in thousands of US dollars, except share data)
------------------------------------------
Balance at December 31, 2003 and March 31, 2004 (unaudited) 12,000 12 12
------------------------------------------
</Table>
The Company had no comprehensive income for the three months ended
March 31, 2003 and 2004 (unaudited).
5
<Page>
(2) Basis of preparation of financial statements
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America. The Company's year-end is December 31. These financial
statements cover the three month-period ended March 31, 2004. The
comparative figures for 2003 in the statements of operations and cash
flows cover the three month-period ended March 31, 2003.
The financial statements and related notes for the three month periods
ended March 31, 2003 and 2004 are unaudited and in the opinion of
management, such interim financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results for such periods. The results of operations
for the three months ended March 31, 2004 are not necessarily
indicative of the results to be expected for the full year or any other
interim period.
At March 31, 2004, substantially all of the Company's assets represent
amounts receivable from Turkcell. The Company's results of operations
and financial position are largely dependent upon the results of
operations and financial position of Turkcell, whose operations are
substantially all inside Turkey.
The Turkish economy has been adversely affected by the significant
economic difficulties that occurred in Turkey in 2001. Despite the
continued negative impact of political uncertainty and regional
instability, the Turkish economy showed signs of recovery from the
worst of the financial turmoil in 2001 and during 2002. Although
macroeconomic indicators and consumer sentiment showed significant
improvement during 2002 and 2003, the Turkish economy remains fragile.
The annual inflation rates in Turkey were 29.7% and 18.4% for the years
ended December 31, 2002 and 2003, respectively, based on the Turkish
consumer price index. Annual inflation rates were 11.8% as of March 31,
2004 and 29.4% for the same period in 2003.
During 2002 and 2003, a new IMF backed program sought to decrease the
likelihood of the Turkish economy suffering a future crisis by
encouraging sustained non-inflationary growth through a floating
exchange regime, using inflation targeting to combat chronic inflation,
strengthening the financial structure of Turkey, implementing reforms
in taxation, the banking sector and public sector, ensuring debt
sustainability and accelerating privatization efforts. The IMF hoped
that the implementation of banking reform and enactment of other
reforms would improve the liquidity position of the private sector and
stimulate growth. Accordingly, the IMF and World Bank extended
additional financial support for the implementation of the program
targets through the end of 2004 via a new standby program. These
targets were realized thanks to a tight fiscal policy backed by
inflation targeting in 2002 and 2003.
Turkey's return to economic stability is dependent to a large extent on
the effectiveness of the measures taken by the government, decisions of
international lending organizations, and other factors, including
regulatory and political developments. The economic problems that
Turkey may face in 2004 and the future are primarily the current
account deficit resulting from the ongoing appreciation of the Turkish
Lira against the US dollar, debt sustainability problems due to
populist policies, possible easing of 6.5% primary surplus target or
not meeting it and a possible increase in interest rates in the United
States, which could lead to an outflow of fund from emerging markets.
In addition, macroeconomic indicators may be negatively impacted by the
political situation in Cyprus and the progress of Turkey's application
for accession to the European Union (EU). Furthermore, increased
consumer confidence and wages may result in an increase in inflation.
Inflation and the level of government debt may also increase as a
result of populist economic policies carried out by the government. On
the other hand, tight monetary and fiscal policies may lead to decrease
in investment spending which will also lead to a lower GDP ratio and
employment rate. Government's GDP target is 5% for 2004 which is also
forecasted by Turkcell. Our financial condition, future operations and
cash flows could be adversely affected by continued economic
difficulties in Turkey.
The Company has continued to receive timely payments from Turkcell on
its Note receivable and believes that Turkcell will continue to be able
to service its debt on a timely basis.
6
<Page>
(3) Summary of significant accounting policies
Significant accounting policies followed in the preparation of the
financial statements referred to above are set out below:
(a) Revenue and expense recognition
The accrual basis of accounting is followed for the recognition of
revenue and expenses.
(b) Deferred financing cost and unearned financing fees
Financing costs incurred in connection with the issuance of the Notes,
which were recharged by the Company to Turkcell, are deferred and are
amortized over the terms of the Notes as an adjustment to financing fee
income and financing costs. Other costs relating to the issuance of the
Notes are paid directly by Turkcell.
(c) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(d) Earnings per share
The Company adopted SFAS No. 128, "Earnings Per Share". In accordance
with this statement, basic earnings per share is computed by dividing
net earnings by the weighted averaged number of common shares
outstanding. Diluted earnings per share do not differ from basic
earnings per share, as the Company has no common stock equivalents.
(e) Foreign currency transactions
Transactions denominated in currencies other than US Dollar are
recorded at the exchange rates prevailing at the date of the
transactions. Assets and liabilities denominated in currencies other
than US Dollar are converted into US Dollar at the exchange rates
ruling at the balance sheet date with the resulting exchange
differences recognized in the determination of income.
(4) Fair value of financial instruments
The Company's financial instruments consist of cash and cash
equivalents, loans receivable and notes payable.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and cash equivalents
The carrying amounts approximate fair value because of the short
maturity of those instruments.
7
<Page>
Loans receivable and notes payable
The fair values of loans receivable and notes are estimated based on
the quoted market prices.
The estimated fair values of the Company's financial instruments are as
follows:
<Table>
<Caption>
-------------------------------------------------------------------------------------------
December 31, 2003 March 31, 2004
(unaudited)
--------------------- ----------------------
Carrying Fair Carrying Fair
amount value amount Value
------------------------------------------------------- --------- ---------- ----------
(in thousands of US dollars)
Cash and cash equivalents 3 3 3 3
Loans receivable 400,000 446,000 400,000 442,500
Notes payable 400,000 446,000 400,000 442,500
</Table>
(5) Loans receivable, accrued interest receivable, notes payable and
accrued interest payable
12 3/4% Senior Notes due 2005
The Company issued $400,000,000 aggregate principal amount of 12 3/4%
Senior Notes due 2005 on December 22, 1999.
Under an Issuer Credit Agreement dated December 22, 1999, the Company
has loaned to Turkcell US$400,000,000 net of financing fees.
Turkcell and the Company have agreed, for the benefit of all holders of
the Senior Notes, that, after the issuance of the Senior Notes, they
will file a registration statement to register exchange offer under the
Securities Act of 1933 for 12 3/4% Senior Notes of the Company (the
"Senior Notes"). A registration statement for the exchange offer was
declared effective on July 11, 2000 and completed on August 14, 2000.
Principal, maturity and interest:
The Senior Notes are limited in aggregate amount to $500,000,000,
$400,000,000 of which was issued in the offering, and $100,000,000 of
which may be offered from time to time in the future. In the event of
such a future offering, the notes offered thereby would have the same
terms as the Senior Notes. The Senior Notes mature at par on August 1,
2005.
Interest accrues at the rate of 12 3/4% per annum from their date of
original issuance and is payable semi-annually on each February 1 and
August 1 commencing on February 1, 2000, to the registered holders at
the close of business on the preceding January 15 and July 15.
Redemption:
The Senior Notes may be redeemed, in whole, at the Company's option,
upon 30 to 60 days' notice at a redemption price equal to 100% of the
principal amount, plus accrued interest to the redemption date, if any,
if, as a result of any amendment to, or change in, the laws (or any
rules or regulations there under) of Netherlands Antilles or the
Republic of Turkey or any political subdivision or taxing authority
thereof or therein.
Security:
The payment of all obligations under the Issuer Credit Agreement dated
December 22, 1999 is senior in right of payment to the prior payment of
all obligations on subordinated indebtedness of Turkcell.
8
<Page>
Covenants:
The governing Indenture contains certain customary covenants that limit
the ability of the Company and Turkcell and its consolidated and
unconsolidated subsidiaries to, among other things, incur additional
indebtedness, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with
related parties, incur liens, impose restrictions on the ability of a
subsidiary to pay dividends, undergo a change in control, or otherwise
dispose of all or substantially all of the assets of Turkcell and its
consolidated subsidiaries or the Company.
(6) Taxes on income
The Company is subject to taxation in the Netherlands Antilles based on
the Profit Tax Ordinance and a tax ruling obtained from the Tax
Inspector of Netherlands Antilles. In accordance with such tax ruling,
the Company's taxable income is equal to 1% of the average daily
principal amount of the notes outstanding during the period. A rate of
0.5% is applicable for average daily principal amount of notes
outstanding in excess of $80,000,000.
(7) Management agreement
On January 27, 1998, the Company signed a management agreement with
Amicorp Curacao N.V., a Netherlands Antilles trust company. Under this
agreement, Amicorp Curacao N.V. shall be managing director of the
Company and will be responsible for the operations of the Company.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELLCO FINANCE N.V.
By: Amicorp Curacao N.V.
Managing Director
By: /s/ XANDER R.M. ARTS
--------------------
Name: Xander R.M. Arts
Title: Managing Director
Dated: October 3, 2004