Contents 2 Ülker Bisküvi in Brief 3 The Vision of Ülker Bisküvi 4 The History of Ülker Bisküvi 6 Overview of Yıldız Holding 8 Key Financial and

Transcription

1 Annual Report 2008

2 Contents 2 Ülker Bisküvi in Brief 3 The Vision of Ülker Bisküvi 4 The History of Ülker Bisküvi 6 Overview of Yıldız Holding 8 Key Financial and Operational Indicators 8 Capital and Shareholder Structure 9 Performance of Ülker Bisküvi Shares 10 Message from the Chairman of the Board 11 Board of Directors 12 Message from the General Manager 14 The Food Industry Worldwide 15 The Food Industry in Turkey 17 Activities in 2008 Ülker Bisküvi in 2008 Production and Capacity Marketing and Distribution Investments Subsidiaries Birlik Pazarlama İdeal Gıda İstanbul Gıda-Birleşik Dış Ticaret Biskot Gıda Atlas Gıda Pazarlama Godiva Other Subsidiaries 28 Corporate Governance Ülker Bisküvi Family: Human Resources R&D, Quality and Environment Activities Stockholder Relations and Profit Distribution Policy Social Responsibility Projects Corporate Governance Principles Compliance Report 40 Profit Distribution Proposal 42 Audit Board Report 43 Independent Audit Report

3 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 1 In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer, becoming Yıldız Holding, a world-renowned brand name. With a 56% share in the biscuit market, Ülker Bisküvi is by far the market leader in the industry. In the Brands 2008 survey by AC Nielsen, Ülker was ranked first in the biscuit category, and second and third in the categories of topof-the-mind brands and those that consumers feel closest to, respectively.

4 2 Ülker Bisküvi in Brief As the indisputable leader in the Turkish biscuit industry, Ülker Bisküvi takes its place among the giant food producers of the world with its 280 assorted biscuit and cracker products that are supplied to both the local and international markets. Ülker Bisküvi not only contributes to Turkey s economy through its exports to Europe, Africa and the United States, but it also successfully represents Turkey s approach to quality on a global scale. As the first company of Yıldız Holding, operating its core business for 64 years, Ülker Bisküvi serves as the flagship of the Holding both in terms of sales turnover and profitability. According to the Istanbul Chamber of Industry (ICI) 2007 list of Turkey s Top 500 Industrial Enterprises, Ülker Bisküvi was ranked 108 th. Ülker Bisküvi produces biscuits, crackers, chocolate covered biscuits and wafers at its factories in Istanbul/Topkapı and Ankara. As the indisputable leader in the Turkish biscuit industry, Ülker Bisküvi also takes its place among the giant food producers of the world with its 280 assorted biscuit and cracker products that are supplied to both the local and international markets. In 1996, Ülker Bisküvi received the ISO 9002 certification for quality standards in production; and in 2001, it was awarded the HACCP certification for quality standards in food safety. In 2002, it won the top mark of High Level in an analysis made by the Europe-based quality certification firm BRC, which has further secured its success in the field of quality control. Ülker Bisküvi develops new products in its independent laboratories, employing an experienced and expert R&D staff in keeping with its quality-focused approach. Introducing an average of 60 new products per year to the market, Ülker Bisküvi has continued to excel in innovation, thus making Ülker one of the top food brands. Ülker Bisküvi s products are exported mainly to the Middle East, Russia and Central Asian Republics, as well as to Europe, Africa and the United States. Ülker Bisküvi not only contributes to Turkey s economy through its exports, but it also successfully represents Turkey s approach to quality on a global scale. Ülker Bisküvi has an effective quality control system that injects synergy into the entire process from production through consumption; and it continues its investments based on its strategy that is focused on sustainable and profitable growth. Ülker Bisküvi is a consumer-focused company that satisfies its consumers needs and expectations at the maximum level, and it has formed a harmonious and lasting relationship with its target group. Surveys conducted in recent years attest to the high levels of loyalty to the Ülker brand. In the Brands 2008 survey by AC Nielsen, Ülker has ranked first in the biscuit category, and second and third in the categories of top-of-the-mind brands and those that consumers feel closest to, respectively. Local distribution of biscuits and chocolate covered products produced by Ülker Bisküvi and its subsidiaries is undertaken by its subsidiary, Atlas Gıda Pazarlama, and other marketing companies of Yıldız Holding, i.e. Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama.

5 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 3 The Vision of Ülker Bisküvi is to strengthen its position as a most preferred brand by consumers, and to be among the first five companies in the world in 10 years, particularly in the area of bakery products.

6 4 The History of Ülker Bisküvi In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer, becoming the flagship of Yıldız Holding, and a world-renowned brand name Ülker Bisküvi was established by Sabri Ülker in 1944 in the Eminönü district of Istanbul. It started out as a small bakery, with just three workers, producing 200 kg of biscuits per day. Within a few years, the company relocated to the Topkapı district of Istanbul and had four 20 m 2 ovens, which enabled the Company to achieve what was considered a high level of production at the time Producing a total of 75 tons of biscuits in 1944, Ülker Bisküvi tripled its capacity at its Topkapı facility that was specifically set up in 1948 in order to increase production In 1955, Ülker Bisküvi began distributing its products throughout Turkey at factory prices, and enjoyed a huge growth in production. The marketing of biscuits, chocolate and other products by street vendors in Turkey s larger cities represented a truly revolutionary approach In keeping with the growth of Ülker Bisküvi, a multiple shareholder company, Anadolu Gıda Sanayii A.Ş., was established in 1970 in Ankara, doubling its biscuit production capacity.

7 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ Exports began in 1974, with the Middle East market chosen as the first target. During the same year, the Company also set up an R&D department to improve its performance in international competition Ülker products began to be produced in cellophane-based packaging In 2003, Ülker Bisküvi merged with Anadolu Gıda, and realized important steps towards increased institutionalization The company name was changed from Ülker Gıda to Ülker Bisküvi in 2007 as part of a move to provide a clearer description of its field of business Within the scope of Corporate Governance, Articles of Incorporation were amended and Corporate Governance and Audit Committees were set up. At the beginning of 2008, Ülker Bisküvi took part in the acquisition of the premium chocolatier brand, Godiva, with a 25.23% share.

8 6 Overview of Yıldız Holding Yıldız Holding, continuing its growth in FMCG, is considered one of the pioneers and leading groups of the sector in both the domestic and international arenas. Yıldız Holding Yıldız Holding, continuing its growth in FMCG, is considered one of the pioneers and leading groups of the sector in both the domestic and international arenas. As of the end of 2008, Yıldız Holding, consisting of seven different groups, contributed a major added value, as represented by a USD 10.9 billion turnover. The Company employs 29,500 people in 43 factories, 9 of which are located abroad, and differentiates itself from the competitors with its production and sales capability, product variety and distribution network. Today, food is the main area of growth for Yıldız Holding, as it was in the past. Organized under Yıldız Holding umbrella, Ülker (Biscuit, Chocolate, Candy) Group and Food and Beverage Group reaches customers directly, with 160 brands and more than 2,700 assorted products. In addition to meeting all nutritional demands of customers, these two groups also forecast possible demands and plan products for the future. R&D and the Business Development Group support other groups in products, marketing and new investment fields. The International Operations Group manages the foreign investments of the Holding. The Information Technology Group and the Packaging Group meet the needs of Yıldız Holding, and are growing in the sector with their visionary approach. A new business field, the Real Estate Investment Group, continues its growth as well. Yıldız Holding, drawing global attention for its success, is the preferred strategic partner for giant global brands such as Kellogg s, Hero Baby and Cargill. Thus, the Holding is consistently transcending its borders. The Company has strengthened its long-established reputation thanks to its social awareness, reflected in various projects such as environment, sports, education, health and the arts. Yıldız Holding contributes to social development through the social responsibility and sponsorship projects it has undertaken. In addition to figures and created capacities, Yıldız Holding represents a system of values that reaches from the first half of the 20 th century into the 21 st century. The Company, growing with a spirit of entrepreneurship, evolution, trust, honesty, vision, innovation, determination and bravery, has created a global value.

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10 8 Key Financial and Operational Indicators With the strong financial and operational results it has achieved, Ülker Bisküvi increased its value in the eyes of stakeholders, and decisively moved forward towards its goals. Ülker Bisküvi s gross profit in 2008 was TRY million, while its net profit for the year reached TRY 15.6 million. In 2008, total production increased by 4,800 tons with the wafer facility investment in Ankara Factory. The total production of the Istanbul and Ankara factories reached 127,624 tons, with an increase of 75% in total capacity utilization. Key Financial Indicators (TRY) Shareholders Equity 716,159, ,944,420 Gross Profit 307,237, ,330,460 Operating Profit 99,500, ,489,893 EBITDA 125,549, ,891,705 Net Profit for the Year 116,073,842 15,685,234 Production (*) 129, ,624 Sales (*) 131, ,103 (*) Figures are given in tons. Gross Operating Profit (TRY) Net Profit for the Year (TRY) ,330, ,792, ,203,854 Production (Ton/Year) , ,685, ,054,667 89,291,998 Sales (Ton/Year) , , , , ,575 Capital and Shareholder Structure The shareholder structure of Ülker Bisküvi, as of 31 December 2008, is provided below. No single individual owns more than a 10% share in the Company. Shareholder Amount (TRY) % Yıldız Holding A.Ş. 113,049, Dynamic Growth Fund 71,369, Ülker Family 12,370, Free Float and Others 71,811, Total 268,600,

11 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 9 Performance of Ülker Bisküvi Shares Ülker Bisküvi, celebrating its 65 th anniversary in 2009, gained its consumers confidence by constantly emphasizing quality and efficiency in its structure. Focusing on the needs and demands of its consumers, the Company enjoyed a year of success, despite the unfavorable environment caused by macroeconomic conditions. In 2008, the net sales of Ülker Bisküvi reached TRY 1,412 million, and the operating profit was TRY 112 million. Source: Reuters and Bizim Menkul Değerler Company Ülker Bisküvi Reuters & Foreks Code ULKER.IS ISIN Code TREULKR00015 Industry Food XU100 XU050 ISE Index Listings XUTUM XUSIN XGIDA XSANK Price (TRY) Free Floatation (%) 31 Market Value ( 000 USD) 310,643 Free Floating Market Value ( 000 USD) 96,299 Average Trading Volume ( 000 USD) (01 January December 08) 1,543 Beta 0.81 XU100 ÜLKER February March April May June July August September October November December 2009 February

12 10 Message from the Chairman of the Board In 2008, Ülker Bisküvi took the potential impact of the financial crisis of the last quarter of the year into account, and managed to reach its objectives according to plan, and in spite of an intense competitive environment. The dynamics of the food sector, where Ülker Bisküvi operates, offered an important advantage for our Company. Since the food sector is not among the first three sectors that consumers will cut back on, it can be assumed that our sector will be impacted less by the existing economic conditions than other sectors. Dear Shareholders, The growth period that the world economy enjoyed in the past several years ended in the last quarter of 2008 with the US-based financial crisis will be remembered as a year when the developed, great economies were confronted with a global financial crisis, resulting in a global recession. Although the shock waves of the economic crisis reached Turkey in 2008, the impact was felt towards the end of the year, thanks to the fact that our country was at the perimeter of these developments. However, entering into a crisis psychology was inevitable. Structural arrangements, such as lean management implementations and strategic planning efforts, which were initiated during previous years, helped our companies to be well-prepared against any crisis. Thus, our companies were protected against the crisis, which began in the last quarter of the year. In 2008, Ülker Bisküvi took the potential impact of the financial crisis of the last quarter of the year into account, and managed to reach its objectives according to plan, and in spite of an intense competitive environment. The dynamics of the food sector, where Ülker Bisküvi operates, offered an important advantage for our Company. Since the food sector is not among the first three sectors that consumers will cut back on, it can be assumed that our sector will be impacted less by the existing economic conditions than other sectors. Ülker Bisküvi, celebrating its 65 th anniversary in 2009, gained its consumers confidence by constantly emphasizing quality and efficiency in its structure. Focusing on the needs and demands of its consumers, the Company enjoyed a year of success, despite the unfavorable environment caused by macroeconomic conditions. In 2008, the net sales of Ülker Bisküvi reached TRY 1,412 million, and the operating profit was TRY 112 million. The Company gained a competitive advantage by presenting the best quality in the most efficient way to its consumers, thanks to realized investments and newly developed products by the R&D teams in Implementations, which were already in effect in the existing corporate structure, have been rearranged along Corporate Governance Principles, with the amendments made in the Articles of Incorporation in According to the changes in the Articles of Incorporation, the number of independent members on the Board of Directors was raised from two to three. The Corporate Governance, Audit and Risk Committees were set up. Transparency, accountability and responsibility was adopted in all of our business processes and in our relations with all stakeholders. With the changes introduced, in regards to increased effectiveness and efficiency in corporate actions, reporting safety and compliance with legal regulations, the solid structure of Ülker Bisküvi was strengthened even more. At Ülker Bisküvi, we assign great value to our consumers opinions and expectations. We believe that our Company will continue to differentiate itself, thanks to its capacity to develop product concepts in accordance with customer needs. Our integrated structure, advanced technology, strong distribution network, and our relationship with our suppliers based on trust, constitute major advantages for Ülker Bisküvi. With the help of the synergy from the Godiva acquisition of 25.23%, solid capital structure, export activities in 110 countries and a wide distribution network, Ülker Bisküvi will carry its successes into 2009 as well. Yours Sincerely, Murat Ülker Chairman of the Board

13 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 11 Board of Directors Murat Ülker Chairman of the Board Born in Istanbul in Murat Ülker began his business career in 1982, after graduating from the Management Department, Faculty of Economics and Administrative Sciences, Boğaziçi University. After working as the Control Coordinator in the Group in 1984, he attended various training courses (AIB and ZDS) abroad and worked as a trainee at the Continental Baking Company in the United States. Mr. Ülker worked in the export field for two years in the Middle East, and also oversaw about 60 factories and facilities operating in the biscuit, chocolate and food industry in the United States and Europe for three years. Mr. Ülker participated in various IESC projects and realized many investments in keeping with the principle of vertical integration. After working as Assistant General Manager for Enterprises, General Manager, Executive Committee Member and Board Member in various companies of the Group, Murat Ülker was elected as the Chairman of the Board of Directors of Yıldız Holding in He is married, with three children, and speaks English and German. His hobbies include sailing, as well as traveling with his family. Orhan Özokur Vice-Chairman of the Board Born in Balıkesir in Having begun working during his high school years, Orhan Özokur carried on his academic and business life hand-in-hand, and graduated from the Academy of Economic and Business Studies. Mr. Özokur joined the Group as a Commercial Manager in 1973, and served as Chairman of the Board and Board Member in different companies of the Group before being appointed as Vice-Chairman of the Board of Directors of Yıldız Holding in Mr. Özokur is married, with three children, and speaks English. He has a special interest in basketball, and his hobbies also include tennis, listening to music and playing the guitar. Ali Ülker Board Member (Managing Director) Born in Istanbul in After studying at the Economics and Business Management Departments, Faculty of Economics and Administrative Sciences, Boğaziçi University, Ali Ülker attended various academic programs at IMD, Harvard and Wharton. Mr. Ülker took part in De Boccard & Yorke consultancy company s Internal Kaizen Study (1992) and IESC Sales System Improvement and Company Internal Organization Project (1997). He began his business career in 1985 as a trainee at the Quality Control Department of Ülker Gıda A.Ş. He served as a trainee, Sales Executive, Sales Coordinator, Product Group Coordinator and Product Group Manager during at the chocolate production facilities and Atlas Gıda Pazarlama A.Ş. He served as the General Manager of Atlas Gıda Pazarlama A.Ş. in 1998, Vice-Chairman of the Consumer Group for Marketing and Chainstores in 2000, and General Manager of Merkez Gıda Pazarlama A.Ş. in Mr. Ülker was appointed Vice-Chairman of the Food Group in In 2005, he was appointed Chairman of the Ülker (Biscuit, Chocolate, Candy) Group. He is married with three children, and speaks English and German. His hobbies include fishing, watching movies, reading books, and playing basketball and billiards. Necdet Buzbaş Board Member Born in Samsun in Necdet Buzbaş graduated from the Faculty of Chemistry, Istanbul University, and began his business career at Adeka İlaç Sanayii, a pharmaceutical company in Samsun. Mr. Buzbaş joined the Ülker Group in 1975 for a new chapter in his professional career, and subsequently worked as Plant Chief Officer, Production Manager, Assistant General Manager and General Manager at Ülker Gıda Sanayi A.Ş. before being appointed as Chairman of the Ülker Group as part of the 2000 reorganization of the Company. Appointed a member of the Advisory Committee in 2005, Mr. Buzbaş has also served as a member of the Governing Body of the Confederation of Turkish Employers Associations (TİSK), Chairman of the Turkish Food Industry Employers Association, member of the Assembly of Istanbul Chamber of Industry (ICI), and member of the Executive Committee of the Association of Sugar Products Industry (ŞEMAD). He speaks English, and has also served in civil society organizations including the Educational Volunteers Foundation of Turkey (TEGEV), KalDer (Quality Association) and Katek (Quality and Technology Advisory Committee of ISO). Cengiz Solakoğlu Board Member (Independent) Born in Erzurum in After graduating from the Istanbul Academy of Economic and Business Studies in 1964, Cengiz Solakoğlu began his business career as a salesman at Beko Ticaret A.Ş. He became an Area Sales Manager in 1969, and Sales Director in Solakoğlu was General Manager in Beko Ticaret A.Ş. between , and in Atılım A.Ş. between He was appointed Vice-Chairman in 1991 and Chairman in 1994 of the Consumption Group of Koç Holding. Also serving as a member of the Executive Committee of Koç Group in , he was appointed Chairman of the Durables Consumption Group of Koç Holding in Having worked uninterruptedly for 37 years in the Koç Group, Mr. Solakoğlu retired due to the Group s policy of mandatory retirement at age 60. He was one of the founders of the Educational Volunteers Foundation of Turkey and has been a Board Member since its foundation, serving as Chairman of the Board between He was elected a Leader of Civil Society by the Ekonomist magazine in In 2007, he reassumed the role of Chairman of the Board of the Educational Volunteers Foundation of Turkey. Çolakoğlu is a Board Member in Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Fresh Cake San. A.Ş., İdeal Gıda A.Ş. and Anadolu Gıda San A.Ş. He is married with two children and three grandchildren. Mahmut Mahir Kuşculu Board Member (Independent) Born in Istanbul in After graduating from the Istanbul Erkek Lisesi and then the Faculty of Economics, Istanbul University, Mr. Kuşculu completed his postgraduate education in marketing in the United States. Mr. Kuşculu served as Executive Manager and Board Member in the family glass industry businesses, Tamcam A.Ş. and Arsal Cam Sanayii, from He established the foreign trade companies, Kutaş Dış Ticaret ve Pazarlama A.Ş. in 1982, and Erdem Dış Ticaret A.Ş. in 1985, also taking part in their management. Mr. Kuşculu has served on the Professional Committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years, and has also been a member of the Assembly of Istanbul Chamber of Industry for 13 years. Mr. Kuşculu is also Board Member of Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Fresh Cake San. A.Ş. İdeal Gıda A.Ş., Anadolu Gıda San A.Ş., Polinas Plastik San. A.Ş., Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş. and Godiva Chocolatier Inc. He is married, and has two children. Güven Obalı Board Member (Independent) Born in Cihanbeyli in After graduating from Ankara Yıldırım Beyazıt Middle School in 1957, and Ankara Gazi High School in 1960, he completed his degree in Ankara University Political Sciences Faculty, Finance and Economics Department in He was appointed Assistant Tax Inspector the same year and became Tax Inspector in He was sent to Germany in order to study Value Added Tax Regulation for one year in In 1975, left the Ministry of Finance and began working at the Industrial Development Bank of Turkey (Türkiye Sınai Kalkınma Bankası). Starting his career as Financial Analyst, he continued with managerial positions in various units. During his tenure, he also acted as a representative of the bank in the Management and Audit Boards of various companies, such as Şişe Cam Group, Koruma Tarım İlaçları A.Ş., Çelik Halat A.Ş. and Bakırsan A.Ş. After retiring, he founded ABC Sworn Financial Advisor Company in He retired as sworn financial advisor in Obalı continues to serve as Audit Board Member in Kuveyt Türk Katılım Bank and as a Board Member in Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Bizim Toplu Tüketim A.Ş. and Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş. companies. He is honorary member in various associations and foundations. He is married, with two children. Audit Committee Ataman Yıldız Audit Committee Member Nurettin Aliz Audit Committee Member Musa Doğan Audit Committee Member

14 12 Message from the General Manager In 2008, our Company acquired 25.23% of Godiva, and became one of its shareholders. As a result of this important breakthrough, Ülker Bisküvi is taking advantage of this opportunity by working towards a combination of biscuit-chocolate, sharing experience and acquiring a synergy in the international arena. Dear Shareholders, 2008 was a year when the global crisis impacted all world economies beginning in the second half of the year. The crisis started in the finance sector in the United States, originating from difficulties experienced in mortgage credits return payments. The crisis, albeit external to us, and due to uncontrollable reasons, affected our country, our sector, although to a lesser extent than the other sectors and, consequently, our Company as well. Although fuel and oil prices, which were overvalued in 2007, started to fall with the crisis, price increases in energy and other items affected our costs unfavorably. For our Company, 2008 has been a year when we focused on efficiency through our continuous efficiency principle, in order to maintain our existing leading position in the intensely competitive environment and to lessen the impacts of the economic crisis, which was felt more fiercely in the second half of the year. Following this principle, the processes, defined in 2007, were analyzed in line with lean management techniques. Monitoring and development of efficiency efforts were systematized in all processes. We monitored developments in the sector and consumer expectations closely, and without compromising quality, we continued production in full force. As a result of our strategic planning activities, we realized our projects for We updated our strategic plan for I would like to share with you, our treasured Shareholders, the following developments in our Company during Institutionalization Activities In line with the Articles of Incorporation, which was amended upon approval of our shareholders in the Ordinary General Meeting in 2007; we carried out some important steps in accordance with the Corporate Governance Principles in For example, the company set up the Corporate Governance and Audit Committees, and launched the corporate website, Production and Capacity Utilization In 2008, total production increased by 4,800 tons, with the wafer facility investment in Ankara Factory. Although the impact of the global crisis environment increased, our total production from the Istanbul and Ankara factories reached 127,624 tons. Our capacity utilization ratios were 73% in our Istanbul Factory, and 76% in our Ankara Factory. Consequently, our total capacity utilization reached 75%. The investments made by our Company during 2008 totaled TRY 12.1 million, including TRY 1.4 million at the Topkapı Factory, and TRY 10.7 million at the Ankara Factory. These investments made in both factories include the establishment of new facilities, capacity growth, renovation, improvements in production lines, efficiency improvement, etc. Continuous Efficiency In 2008, our efforts to expand our Lean Production philosophy continued. The Lean Production Project, which started in the Ankara Factory in 2007, continued in the new facilities of this factory. In the Istanbul Factory, the project began in the second half of Our objective is to implement this philosophy across all departments, and cease all unnecessary expenditures within the Company. Our efforts to implement our continuous efficiency plan includes Job Analysis in order to increase operational productivity, a Permanent Staff Project and the Best Practice Share Application, energy efficiency project and using fewer colors in packaging. Crisis and the Measures In our country, the global crisis that has affected the entire world, has had an impact in the food sector, although to a lesser extent than other sectors. Our projection for 2009 is that the food sector will continue to be less affected than the other sectors. As a Company, we have put great effort in minimizing the impacts of the crisis. As for our major fields of activity, we made agreements with our suppliers in order to increase our terms, we stopped recruiting employees unless it is necessary, we reviewed all investments that are expected to create value in the long term and are not urgent, and, as always, we are taking increased measures to prevent unnecessary expenditures. We are actively taking steps to lessen any impacts on the Company from the current global economic crisis. In line with our principle of focusing on the consumer, we continue to develop new products based on consumer needs and preferences. In addition, with our

15 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 13 integrated structure, advanced technology and strong distribution network based on long relationships with suppliers, we will feel little, if any, affects from the economic crisis. R&D and New Products In 2008, our Company, acting upon our principles of customer satisfaction in a fiercely competitive environment, continued its efforts to introduce new products with various tastes and flavors, in parallel to our consumers opinions and expectations. We believe that opportunities for innovative actions in our sector are infinite. Bearing this in mind, our R&D departments in the Istanbul and Ankara factories worked on 92 new projects, and as a result, 13 new products were introduced into the market. Hanımeller Kurabiyem, Clip Light Crackers, Biskrem Fındıklı, Zengin Tahıllı Kraker, Başak Keten Tohumlu, Kahveli Canpare, Dokuz Kat Çikolatalı Gofret ve Hanımeller Papatya are just a few of our new products. Quality, Environment and Social Contribution During 2008, both of our factories were reviewed for production, worker safety and environmental responsibility. As a result, all of our nine certificates of quality were renewed. We continued with our philosophy of quality production, which resulted in earning certificates of quality in all of our fields of operation. Our factories have earned the ISO 9001:2000 Quality Management System, ISO Food Safety Management System, TS Occupational Health and Safety Management System, BRC and IFS certificates. On the other hand, radical changes in the increase of energy efficiency and a decrease of carbon emissions, due to the regulations linked to the Kyoto Protocol and accepted on 5 February 2009, were implemented. The Company has exerted great efforts to follow the new regulations and I am delighted to report that the carbon emissions of both of our factories is below the legal limits. This is further proof of the Company s dedication to and respect for the environment in which we live. Hand in Hand with Our Employees, We Achieve Success At the end of the year the Company had 1,290 employees. We view our employees as our most important asset, and in order to support personal development of our employees, we provided 52,099 hours of education in Thus, we achieved maximum values in quality and efficiency. Our education-oriented approach for personal development and to increase the quality of work of our employees will continue at the same pace in 2009 as well. Mind Cube is a permanent idea suggestion system that has been in place in the Company for years. Ideas from employees on how to increase efficiency in all areas have grown by 262% over the previous year. Accordingly, 284 employees have been rewarded for their suggestions. The Smile Group, set up in both factories on a voluntary basis for increasing the motivation and morale of our employees, continued its activities in 2008 as well. In both our factories, we organized periodic Industrial Relations Board meetings with employee and syndicate representatives. In these meetings, requests and suggestions from our employees, and sharing of information about company policies was made first hand. Trust, cooperation and empathy with our employees rose to the highest level. Balanced Scorecard Activities In 2008, we finalized the Balanced Scorecard Project. Corporate Balanced Scorecard Activities help to transform our company strategies into operational objectives. In the Balanced Scorecard Project, we formed corporate and department scorecards. The project, which was initiated in the second half of 2008 in order to transfer the scorecards into SAP environment for monitoring, is in the final stage. When the project is finalized, corporate and department scorecards will be monitored in the SAP system. In 2008, we also finalized the Assessment of Process Key Performance Indicators project, which is also complementary to the Corporate Scorecard project. Thus, as per realizing the strategies of our company, the project now allows us to assess corporate, department and process performance. Our Objectives for 2009 We will carry on our activities, characterized by customer orientation, an innovative approach and commitment to quality and a high level of hygiene in 2009 as well. As for reaching our strategic objectives, there are many projects we have laid out in our strategic planning, and we will finalize the ones corresponding to We will continue our transformation to the Lean Production philosophy, which we aim to extend to all our facilities. In 2009, we will commit ourselves to keeping our financial and operational results at the highest possible level, following budget and strategically planned objectives. Our driving forces are, as it has always been, your support as our valued stakeholders and the efforts of our employees. Yours Sincerely, Dr. Cafer Fındıkoğlu General Manager

16 14 The Food Industry Worldwide The products of the food industry cannot be viewed merely as commercial commodities, due to the fact that nutrition is one of the basic needs of life. The food industry has a sustainable and continuous growth rate due to its added value, high employment figures and satisfaction of vital needs. The food industry, which is based on processing agricultural products, animal husbandry and fishing, is the most important branch of the manufacturing industry in the world, with annual sales of over USD 2 trillion. All developed countries place special emphasis on the agricultural and food sector, independent from their intensity of industrialization. The major indicator is that 80% of the agriculture and food production in the world is carried out by 25 developed countries. Food is the most strategic item for life. When food safety is not provided, there are threats to health, stability, peace and faith in the future. Based on the developments in Haiti, United Nations Food Program Director J. Sheeran asserted on 15 April 2008 that if food safety is not provided, it not only causes hunger, but also creates a threat for peace and balance. Increasing world population, contaminated, unusable natural resources in agriculture, global warming, food material and industrial raw materials, allocation of land for products that are used for biofuel and fluctuations in the world agricultural product markets are all threats for the provision of food safety. The products of the food industry cannot be viewed merely as commercial commodities, due to the fact that nutrition is one of the basic needs of life. The food industry has a sustainable and continuous growth rate due to its added value, high employment figures and satisfaction of vital needs. In recent years, price hikes have been seen in basic food items. In 2008, prices for many food items reached record-breaking levels, but with the decrease in demand due to the global economic crisis, it reverted back to the long-term average in the last months of the year. Following the end of the crisis, prices are expected to increase again, inevitably. In the first half of 2008, all food sectors, especially the rice sector, were impacted by global warming. Products such as wheat, corn and rice, which are basic for nutrition, are becoming strategically important. The reflections of this trend were seen in 2008 as well. Many countries implemented limitations to agricultural product export due to inventory drops to strategically critical levels. Strategic inventory levels dropped to 116 million tons of wheat and 79 million tons of rice at the beginning of One of the reasons for increased international demands for grains is the gradually increasing income level in China and India. As the income level has increased, the demand for meat products and the demand for grains used for animal feed has grown. While the increase in the demand for grains used in the production of bread is directly related to the growth in population, the growing demand for meat is related entirely to economic development and growth in the GDP. The rising income levels increased the consumption of meat and other basic food items by millions of people in India and China. China, as the exporter for food items recently in the past, became an importer. Another reason for the increasing prices of agricultural products is the demand for ethanol in the United States. Ethanol is a fuel used on its own or mixed with petrol for cars and other motor vehicles. It is produced mainly from sugar cane and corn. While the United States is the biggest exporter of corn in the world, it currently uses more corn for ethanol than it exports. The ethanol project, introduced in 2005, is the most significant reason behind the increase in the prices of corn. EU countries have decided to move 10% of their total energy consumption from fossil fuel to biofuel by In this context, they are issuing union aid and support oilseeds production for biodiesel, and sugar cane production for bioethanol.

17 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 15 The Food Industry in Turkey The development of consumer awareness is considered an opportunity for the food industry. Demand for trustworthy brands and packaged products has grown with the growing importance of food safety and quality. The food industry is one of the first industries set up in Turkey. Its rich agricultural resources and young workforce makes this industry ever more important. The growth of production in the food industry surpasses the overall economic growth. The industry is also affected by the recent changes in spending trends and eating habits. Such factors as the increase in per capita income, greater participation of the female population in the area of employment and expansion of the core family structure due to changing lifestyles as a result of urbanization have also changed the patterns of consumption. The development of consumer awareness is considered an opportunity for the food industry. Demand for trustworthy brands and packaged products have grown with the growing importance of food safety and quality. Another rising trend is the demand for organic fruit and vegetables. In addition, Turkey s geographic closeness to the EU countries, as well as the Middle East and Russian markets, is an important export advantage for the industry. The reduction of VAT rates to 8% is a positive step in the struggle against unregistered businesses and unfair competition. The VAT reduction, which covered many products from pulses to fizzy drinks, soups, tea and coffee, is aimed at encouraging the public to use trustworthy and packaged products. It also meant a significant relief in the financing burden of the industry and is also expected to make a contribution towards the integration between agriculture and industry, which has been a major problem of the food industry for years. In addition to other factors, due to global warming in 2007, basic nutritional products such as wheat, corn and rice became strategic. The reflections of this trend were seen in Prices increased rapidly, reaching 40% in the world and Turkish market. Although demand elasticity is lower, when compared to other industries, the food industry is expected to be similarly affected by the crisis. Crisis reactions of the consumers are to turn towards more economical products and cut consumption as much as possible. Therefore, it is thought that there may be a drop of about 10% in the industry. The industry also hosts many foreign investments. A total of 258 foreign companies operate in the production of food and beverages in Turkey. 10% of foreign companies in the manufacturing industry, and 2% of all foreign companies that have invested in Turkey, prefer the food industry.

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19 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 17 Activities in 2008 In the scope of corporate governance, Articles of Incorporation were amended at the Ordinary General Board Meeting on 28 May 2008, and Corporate Governance and Audit Committees were set up. In order to enable speedy access to company information for shareholders, the corporate website was launched.

20 18 Ülker Bisküvi in 2008 January 2008 Fresh Cake Gıda A.Ş, in which Ülker Bisküvi has a 10% share, bought a 50% share of Unmaş Unlu Mamuller San. ve Tic. A.Ş. (Uno Ekmek) and Doruk Unlu Mamuller San. ve Perakende Hizmetler A.Ş. March 2008 Ülker Bisküvi acquired 25.23% shares of G-New Inc. in the USA, and Godiva Belgium BVBA Company, which is active in Belgium. The Collective Labor Agreement bargaining between Ülker Bisküvi and Öz Gıda İş Sendikası, covering the term of 01 January December 2009, resulted in an agreement, which was signed.

21 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 19 May 2008 As per Corporate Governance activities, the Articles of Incorporation were amended at the Ordinary General Board Meeting on 27 May July 2008 In order to enable speedy access to company information for shareholders, the corporate website was launched. August 2008 Within the scope of the Corporate Governance Principles, issued by the Stock Exchange Commission, a Corporate Governance Committee was set up. Again within the scope of SEC regulations, the Audit Committee, which had previously been set up, was reorganized along the subject principles. Activities throughout 2008 The Corporate Balanced Scorecard Project was finalized in order to transform company strategies into operational objectives. The Best Practice application continued this year as well in order to share the best practices among the countries where we operate. Along the Continuous Efficiency principle, the processes definitions in 2007 were analyzed with the Lean Management technique. Monitoring and development of efficiency in all processes were systematized. Job analysis and permanent staff activities have been realized in order to increase operational efficiency.

22 20 Production and Capacity Ülker Bisküvi, which has a 56% market share in the Turkish biscuit sector, produces biscuits at its Istanbul/Topkapı and Ankara factories. In addition to these two main factories, Ülker Bisküvi also makes use of the production facilities of its subsidiaries, İdeal Gıda in Gebze and Biskot Gıda in Karaman. The total biscuit production of Ülker Bisküvi at its high-tech factories in Topkapı and Ankara was 127,624 tons in The Topkapı Factory produces biscuits in 10 production lines. The Ankara Factory produces biscuits, chocolate covered biscuits and wafers in 19 production lines in total, including 14 biscuit production lines and 5 wafer production lines. İstanbul Topkapı Factory The Topkapı Factory operated at high capacity in 2008, with 50,234 tons of biscuit production and 51,087 tons of net biscuit sales. During 2008, the actual average rate of capacity utilization of the factory, operating in three shifts, was 73%. All of the production processes at Ülker Bisküvi s factories are equipped with high technology. Most of the boxing, box handling, packaging and storage processes providing logistic support are carried out using robot technology and automation. Main Products of the Topkapı Factory Petitbeurre (with cacao, double baked) Çizi (with sesame seed) Haylayf Çokodamla Hanımeller Biskrem (with chocolate, apple, fig and dark chocolate) Negrita

23 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 21 Ankara Factory Ülker Bisküvi s Ankara Factory has a total area of 110,000 m 2, including 80,000 m 2 closed space. For more than 38 years, it has been a driving force of the economy in the region as the biggest biscuit production and storage complex in the Middle East. In 2008, the production volume of the Ankara Factory was 77,390 tons. The net sales volume was 77,016 tons. The actual average rate of capacity utilization of the factory, operating in three shifts, was 76% in Main Products of the Ankara Factory Petitbeurre (plain, two colors) Krim Kraker Probis Çokoprens As Kraker Başak - Plain, linseed and chocolate İkram (with chocolate, hazelnut, cheese, walnut, vanilla) Tempo Rondo (plain, banana, strawberry, coconut, orange, raspberry, cheesecake flavors) Altınbaşak Gofret (hazelnut, banana, orange, strawberry, coconut, vanilla, cacao and chocolate flavors) Halley Kat Kat Tat Çubuk Kraker Alpella Ring Mavi Yeşil branded products Hasat Hanımeller Kurabiyem (cookie with hazelnut and chocolate)

24 22 Marketing and Distribution Our powerful distribution network ensures that customers can easily access Ülker Bisküvi products anytime and anywhere. Ülker s distribution network has been specially shaped on every level to know the consumer and to respond to their demands in accordance with the market conditions. The domestic marketing and distribution of biscuits and chocolate covered products of Ülker Bisküvi and its subsidiaries are performed by its subsidiary, Atlas Gıda Pazarlama, as well as Yıldız Holding companies Pasifik Pazarlama, Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama. Atlas Pazarlama performs nationwide distribution through its Regional Offices in Istanbul, Ankara, Izmir, Thrace region, Bursa, Samsun, Gaziantep and Erzurum, and 132 experienced, reputable and efficient distributors across Turkey. Atlas Pazarlama provides regular and high quality service to 170,000 points of sale weekly, with a total of more than 1,750 delivery vans. This powerful distribution network ensures that customers can easily access Ülker Bisküvi products anytime and anywhere. Ülker Bisküvi and its subsidiaries are capable of providing a biscuit to everyone in the world with two weeks production. Ülker s distribution network has been specially shaped on every level to know the consumer and to respond to their demands in accordance with the market conditions.

25 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 23 Investments Ülker Bisküvi has invested TRY 12 million in modernization and expansion in The common objective of the investments is to reinforce Ülker Bisküvi s leading position in the market, increase customer satisfaction, improve product quality, and contribute to efficiency and productivity so as to make the cost basis more competitive. Ülker Bisküvi has fully achieved the investments foreseen in its strategic development plan in The common objective of the investments is to reinforce Ülker Bisküvi s leading position in the market, increase customer satisfaction, improve product quality, and contribute to efficiency and productivity so as to make the cost basis more competitive. Ülker Bisküvi has invested TRY 1.4 million in modernization and expansion of the Topkapı Factory in Also, almost TRY 10.7 million was invested in the Ankara Factory. These investments in both factories include work for the establishment of new facilities, capacity growth, renewal, production line improvements, productivity improvements, and hygiene and storage.

26 24 Subsidiaries Ülker Bisküvi, which is the flagship of Yıldız Holding, is involved in a number of companies within the Holding, and created a strong portfolio and synergistic structure through vertical and horizontal integration. Under this structure, Ülker Bisküvi benefits effectively from the different companies within Yıldız Holding, each having a leading position in their sector. In addition to the biscuit facilities in different cities in Anatolia, Ülker Bisküvi has formed a dynamic value production process that includes all the branches of the food industry, such as obtaining good quality flour, butter and packaging. Ülker Bisküvi Sanayi A.Ş. Subsidiary List as of 31/12/2008 Subsidiary Share (%) Field of Business Birlik Pazarlama 99.0 Flour production İdeal Gıda San. ve Tic. A.Ş Biscuit and cracker production İstanbul Gıda Dış Ticaret A.Ş International marketing Atlas Gıda Paz. San. ve Tic. A.Ş Domestic marketing Birleşik Dış Ticaret A.Ş Foreign trade Biskot Bisküvi San. ve Tic. A.Ş Biscuit and chocolate covered biscuit production G-New Inc International investment Godiva Belgium BVBA Chocolate production and marketing PNS Pendik Nişasta A.Ş Starch and starch-based sugar production Netlog Lojistik A.Ş Logistics and transportation BİM Birleşik Mağazalar A.Ş Retail Sağlam GYO A.Ş REIT Fresh Cake A.Ş Cake production Tire Kutsan A.Ş. 9.8 Paper and cardboard box production Besler Gıda A.Ş. 7.0 Oil and margarine production

27 ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 25 Birlik Pazarlama As one of the important subsidiaries of Ülker Bisküvi Sanayi A.Ş., Birlik Pazarlama produces not only flour from every kind of grain as needed by Yıldız Holding, but also packaged wheat flour and rice flour for the market. Established in 1978, Birlik Pazarlama moved its Head Office to Ankara in Located on the same site as the Ankara Factory of Ülker Bisküvi, in a 63,032 m 2 area, Birlik Pazarlama has about 24,000 m 2 of closed space. Operating three flour factories, a factory processing soya, oat and other grains and a rice plant, Birlik Pazarlama also has a flour factory and a branch office in Karaman. Birlik Pazarlama has done contractual planting in cooperation with agrarian research institutes for improving, developing and increasing cultivation of varieties of wheat necessary for biscuit production, and that are lacking within the country. Birlik Pazarlama has TSE (Turkish Standards Institute)-ISO-EN 9000, TSE HACCP TS and ISO certifications. In 2007, the HACCP certification was replaced with ISO certification. The subsidiaries of Birlik Pazarlama include Hero Gıda, Netlog Lojistik and PNS Pendik Nişasta. Birlik Pazarlama sold its Tire Kutsan shares, which had a registered value of TRY 3,195,000, at TRY 6,400,000. Capacities The company s actual wheat processing capacity is 930 tons per day in total, including 730 tons per day in Ankara and 200 tons per day in Karaman. Birlik Pazarlama s rice processing capacity is 19 tons per day, soya processing capacity is 7.5 tons per day and oat processing capacity is 2 tons per day. With a total grain storage capacity of 35,000 tons, Birlik Pazarlama plans to increase both its grain processing and storage capacity in Birlik Pazarlama will continue its investments for improving quality production with a more competitive price in İdeal Gıda İdeal Gıda, which was established in 1997 in the Gebze Industrial Estate, operating in an area of 85,000 m 2 that includes 39,000 m 2 closed space, has actively produced biscuits and crackers since The capacity utilization in Ideal Gıda was 93% in İdeal Gıda has continuously invested in its facilities and equipment to increase its production capacity since its inception. It produces four main product groups for domestic and international markets in eight production lines. With a workforce of 386, İdeal Gıda increased its biscuit and cracker production from 30,654 tons in 2003 to 37,770 tons in 2004, and 41,338 tons in The total production in 2006 was 37,337 tons due to the fact that production had to stop for a month during the conversion of ovens to natural gas. The production in 2008 reached 42,166 tons, up from 40,205 tons in The production is carried out in compliance with ISO , ISO , ISO 22000, OHSAS , HACCP, BRC and IFS certification standards. İdeal Gıda ranked 398 th in the Istanbul Chamber of Industry list of Turkey s Top 500 Industrial Enterprises in İstanbul Gıda-Birleşik Dış Ticaret İstanbul Gıda was established in 1987 to undertake international sales and marketing of all products of Yıldız Holding. Established in 1999, Birleşik Dış Ticaret is another export company of Yıldız Holding, and has a branch in the Atatürk Airport Free Trade Zone. These two companies export Ülker products to more than 110 countries, including the Balkans and the Middle East in particular, and also the United States, Europe, the Turkic Republics, Africa and the Far East, through their powerful sales and distribution channels. İstanbul Gıda-Birleşik Dış Ticaret owns warehouses with a capacity of 13,450 pallets, which meet all requirements. Biskot Gıda Ülker Bisküvi acquired Biskot Gıda, operating in three factories in the Karaman Industrial Estate, in In 2006, Biskot Gıda sold the cake factory - one of its four factories - to AGS Anadolu Gıda, in which it has a 99% share. In 2007, Biskot Gıda sold its shares in AGS Anadolu Gıda to its shareholders. Providing jobs to around 2,700 people at the three factories in the Karaman Industrial Estate, Biskot Gıda is the most important industrial enterprise and the biggest employer in the region. Significant increases in the production capacity of the chocolate facility with a winkler molding line, semi-finished chocolate preparation facilities, wafer production facility, Rulokat ovens, granulated cakes line and karpuf line were recorded, in addition to the existing ones. The average capacity utilization rate was 78% at the biscuit facilities, 82% at the wafer facilities, and 78% at the Rulokat facilities with newly added ovens. The average annual capacity utilization rate at the chocolate facilities is 55%, although seasonally it goes up to 67%.