For 66 years, we have worked hard to become our customers sweet memories...

Transcription

1 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 2010 ANNUAL REPORT 1 For 66 years, we have worked hard to become our customers sweet memories...

2 Contents 2 Ülker Biscuits in Brief 4 An Overview of Yıldız Holding 6 Key Financial and Operational Indicators 6 Performance of Ülker Biscuits Shares 7 Capital and Shareholder Structure 8 A Message from the Chairman of the Board 10 Board of Directors 12 A Message from the General Manager 16 Milestones 18 The Food Sector in Turkey and Abroad Business Activities Production and Capacity Marketing and Distribution Investments Subsidiaries Birlik Pazarlama Ideal Gıda Istanbul Gıda Birleşik Dış Ticaret Biskot Gıda Atlas Gıda Pazarlama Godiva Other Subsidiaries 40 Corporate Governance Human Resources Environmental, Quality and R&D Acivities Shareholder Relations and Profit Sharing Policy Social Responsibility Projects Corporate Governance Principles Compliance report 53 Profit Sharing Proposal 55 Audit Board Report 57 Independent Audit Report

3 66 years of happy moments Everything began with a happy moment. Exactly 66 years ago Ülker Biscuits, a giant in the food production industry, continues its leading role in the sector with 280 varieties, sold both nationally and internationally. The organization strives to create hundreds of thousands of Happy Moments and to be part of our customers most memorable moments - at little girls tea parties, for students who are moving to a new city, for university students stranded by snow, for newlywed couples moving into their first homes. Our aim is to create more Happy Moments

4 2 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Ülker Biscuits in Brief Since 1944, products with the Ülker Biscuits brand name have been creating memorable Happy Moments for three generations of customers. 60 Average number of products introduced to the market by Ülker Biscuits annually The expert and experienced R&D staff constantly takes its innovative approaches to higher levels. Ülker Biscuits began operations 66 years ago in a small Eminönü workshop with only 6 7 cooking vessels, one small oven and three workers. Today, both in volume of sales and profitability, Ülker Biscuits is the flagship company of the Yıldız Holding organization. Ülker Biscuits production facilities in Istanbul/Topkapı and Ankara produce biscuits, cakes, chocolatecovered biscuits and wafers. Ülker Biscuits consolidated production volume of 559,679 tons of biscuits and crackers are sold to domestic and international markets. With 280 varieties, Ülker Biscuits is one of the giants in the world s food industry and one of its unrivaled leaders in the sector. In 1996 the Company obtained the production quality standard certification ISO 9002, and in 2001 Ülker Biscuits was granted European HACCP certification for its food quality and safety standards. In 2002 Ülker Biscuits success was recognized by the BRC, which awarded the Company with its highest level degree of quality certification. Ülker s Quality in the World Markets Ülker Biscuits introduces approximately 60 new products to the market annually. It constantly takes an innovative approach to higher levels in its independent laboratories and with expert and experienced R&D staff. This innovative approach is the reason why Ülker is one of the brands that are most in demand. Ülker Biscuits products are exported mainly to the Middle East, Russia and Central Asian republics, as well as to Europe, Africa and the USA. In 2010, Ülker Biscuits successfully represented Turkey s approach to quality on a global scale and had consolidated export sales of 275,000,000 TL. Ülker Biscuits efficient quality control system injects synergy into the entire range of processes, from production to consumption. The Company continues to make timely investments, based on a strategy that focuses on sustainable growth and profitability. Ülker and Happy Moments Since 1944, Ülker Biscuits has been a part of the lives of three generations. Everyone has Happy Moments of their own, of which Ülker was a part. The advertising campaign that was launched to celebrate the 65th anniversary of the Ülker brand and the incorporation of Ülker Biscuits, was developed around this concept. According to surveys that have been conducted, loyalty to the Ülker brand remains at a high level. In the 2009 AC Nielsen Brand Names Report, Ülker ranked first in the biscuits category. Ülker ranked second in the category of Best Perceived Brand and third in the categories of Most Recalled Company and Most Recalled Brand Name. According to research carried out in 2009 by the Istanbul Chamber of Commerce, Ülker Biscuits was ranked 104th among the top 500 Turkish Industrial Enterprises. Local distribution of biscuits and chocolate-covered products produced by Ülker Biscuits and its companies is undertaken by the subsidiary Atlas Gıda Pazarlama and other companies in the Yıldız Holding group including Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama. Throughout every phase, from manufacturing to sales, from marketing to distribution, Ülker s management philosophy has always been focused solely on the satisfaction of its customers. By meeting the needs and living up to the expectations of its customers in the best possible way, Ülker Biscuits continues to carry out consumeroriented activities that continue to create more Happy Moments.

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6 4 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT An Overview of Yıldız Holding The food companies of Yıldız Holding are managed by its Ülker Division and the Foods- Beverages Division With a total of 56 factories, ten of which are located abroad, Yıldız Holding employs a workforce of 24,400. Its strong distribution network, depth of knowledge of current consumer trends, range of products and years of experience has made Yıldız Holding a leading force in national and international arenas. Yıldız Holding has reached its current position through the combined efforts of the Company s 10 major business divisions, and a deep and strong corporate culture. Yıldız Holding s pioneering Ülker Division (Biscuits-Chocolate-Cake), while concentrating on satisfying the demands of consumers for Foods, Beverages, Candy and Chewing Gum, also focuses on bringing new food products innovations to the market. The Foods, Frozen Foods and Personal Care Division manage subsidiaries that produce and process tea and frozen foods. At the same time, this division oversees the Company s investments in the personal care products sector. The Information, Packaging and Real Estate Divisions fulfill the requirements of Yıldız Holding subsidiaries for these services and carry on marketing activities in their own respective sectors. The Corporate Strategy, Marketing and International Operations Division is responsible for developing brand name strategies for the Ülker brand and other brand name products. The group prepares and plans marketing strategies for foreign investments. The Retail Division and the Supply Chain Division are responsible, respectively, for retail investments and all purchasing and procurement functions of Yıldız Holding. The Chief Financial Office is responsible for managing the financial affairs of all subsidiaries. Financial Subsidiary Division and Auditing Division are responsible for the financial affairs of the subsidiaries, internal auditing and Human Resources and Information Technology. At the end of 2007, Yıldız Holding welcomed Godiva world-renowned and global leader in the production of fine chocolate, into its family of companies. In the pursuit of globalization, Yıldız Holding has formed partnerships with many foreign international companies including Kellogg s, Hero Baby, Cargill, Gumlink, Laurens Spethmann Holding, Eckes Granini and McCormick. Through its strategic partnerships, Yıldız Holding establishes itself as a global entity. 24,400 Yıldız Holding s total workforce 24,400 employees, an extensive distribution network, a wide range of products and superior production and marketing have put Yıldız Holding as a sector leader, domestically and internationally. Yıldız Holding, known for its social responsibility projects targets the environment, sports, education, health and the arts, is being perceived more and more as an integral component in community growth and economic development. Beginning in the first half of the 20th century and extending into the 21st century, the value system of Yıldız Holding, entrepreneurship, honesty, vision, innovation, decisiveness, trust and courage of spirit has created these differences which can be measured on a global scale.

7 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 5 An Essential Element of every Little Lady s Tea Party: Ülker Çokoprens My name is Ezgi Kılıç. I am a 5th grade student and I love my friends very much. Especially my girl friends. I like the boys in my class too. However, they are generally more interested in playing football and other active games. The favorite thing my girl friends and I like to do is to have tea parties. My friends and I organize a monthly tea party, just like my mother and her friends. At these parties we discuss our lessons, school and how naughty boys are. Ülker Çokoprens always plays key role at our parties, and has become a symbol for our Happy Moments Ezgi Kılıç (11), student

8 6 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Key Financial and Operational Indicators Gross real operating profit TL million Net profit for the year TL million Production amount, Istanbul, Ankara, Gebze and Karaman factories total 267,934 tons Consolidated investments TL 41.7 million Key Financial Indicators (TL) Shareholder s Equity 1,125,668,600 1,458,891,511 Gross Profit 378,642, ,135,004 Operating Profit 147,079,597 58,038,298 EBIDTA 177,941,880 84,905,909 Net Profit for the Year 102,917, ,846,830 Total Investment 27,522,772 41,701,452 Production Amount (*) 265, ,934 Sales Amount (*) 266, ,659 (*) Amounts are given in tons. Performance of Ülker Biscuits Shares Ülker Biscuits Price Performance Full Year January February March April May June July August September October November December 2010 XU100 ÜLKER

9 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 7 Capital and Shareholder Structure 15,685, ,917, ,846, Profit for the Year (TL) 271, , , Production Volume (Tons/year) The shareholder structure of Ülker Biscuits as of December 31, 2010 was as indicated below. No real person directly owns more than 10% of the Company s shares. 29% of the shares of Ülker Biscuits have been publicly traded since December 31, ,999, % Yıldız Holding A.Ş. 306,330, ,642, ,135, , , , ,600, % Diğer 268,600, % Total Gross Real Operating Profit (TL) Sales Volume (Tons/year) Company Reuters & Forex Code Sector Ülker Biscuits ULKER Foods Price (TL) ( Dec 31,2010) 5.50 Publicly Traded Shares (%) 29 Market Value (USD) 960,783,039 Within the Scope of ISE Indexes XU100 XU050 XUTUM XUSIN XGIDA XYUZO XSANK XULUS Publicly Traded Value (USD) 307,450,572 Average Trading Volume (USD) (Jan 1,2010-Dec 31,2010) Source: Reuters 7,523,553 Beta 0.84

10 8 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT A Message from the Chairman of the Board During 2010, our management strategy was implemented that was aimed at re-defining the role of Ülker both in Turkey and throughout the world. This strategy, which was backed by innovation, focused on attaining high productivity and sustainable growth targets, based the changing demands of consumers. Esteemed Shareholders, We are living in times when it is impossible to interpret the conditions in our country without communicating with the rest of the world. The concept known as globalization and the virtual shrinking of the world was never demonstrated more fully than during the economic crisis of Along with the economic conditions of that time, the world underwent a number of other challenges. The momentum of Turkey s economy, which surfaced from this period relatively unscathed, is reflected in encouraging indicators. In 2009, the Turkish Economy contracted by 4.7%. If we compare this with other regions and countries, the interpretation of the damage done is much easier to digest. By emerging from 2009 with this rate of contraction, we had estimated that we would enter a period of economic growth in Economic indicators from 2010 proved that this prediction had been correct, and the Turkish Economy entered 2011 with a 8.9% growth rate. In a period when our closest neighboring economies were still experiencing economic difficulties, Turkey had the second fastest growing economy of all European countries. This is a real indication that the country s economy is no longer the fragile structure to which we had become accustomed in the past. Some of the credit for all of these developments, along with our optimistic forecast, must also be given to developments that took place in the region and the world. The political developments in the region that took place at the beginning of 2011, the huge economic losses created by events in the Middle East, and the economic woes that natural disasters have created for the world s largest economy, Japan, are all factors that will all have consequences that are yet to be determined for the coming year. It is our fervent hope that the Turkish economy will achieve its goals aimed at increasing the country s regional strength in 2011 by continuing to grow. In 2009, despite negative macroeconomic conditions and increased costs, Ülker Biscuits reached levels of growth which had worked so hard to achieve. The most difficult period, 2009, we survived because of our experience, fighting spirit, our innovative approach, focus on productivity and our consumers. In 2010, the Company went through a period of recovery and returned to its pre-crisis form. Compared to 2009 sales figures, 2010 showed an increase. During 2010, strategy was implemented that was aimed at re-defining Ülker s role in the domestic and international markets. The Company s objectives were achieved due to the setting of correct goals for growth, instituting cost-controls, austerity measures and efficiency principles, focusing on main tasks, meeting the demands of the consumer and encouraging innovation. Ülker Biscuits has achieved success and created value for our esteemed shareholders by following the principles of sustainable growth and the application of a profitable business model. I am happy to announce that the success of Ülker Biscuits has been recognized and honored by the Turkish American Business Council, which has presented Ülker Biscuits with the council s Business Leader Award. We will continue to closely monitor developments in Turkey and the rest of the world to increase our global competitiveness in Without losing sight of our goals, we will continue to work to provide our shareholders, customers, employees and the national economy with maximum benefits. Respectfully, Murat Ülker Chairman of the Board of Directors

11 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 9

12 10 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Board of Directors Murat Ülker Chairman of the Board Orhan Özokur Deputy Chairman of the Board Ali Ülker Board Member (Executive Director) Alain Strasser Board Member Murat Ülker was born in Istanbul in He began his business career in 1982, after graduating from the Management Department Faculty of Economics and Administrative Sciences at Boğaziçi University. He worked as the Control Coordinator in the Group in 1984, and afterwards, attended various training courses (AIB and ZDS) abroad and worked as a trainee at the Continental Baking Company in the US. Mr. Ülker worked in the export field for two years in the Middle East. He also oversaw about 60 factories and facilities operating in the biscuit, chocolate and food industry in the US and Europe for three years. Mr. Ülker participated in various IESC projects, and undertook many investments keeping in line 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, Mr. Ülker was elected the Chairman of the Board of Yıldız Holding in Mr. Ülker speaks English and German and his hobbies include sailing, as well as traveling with his family. He is married with three grown children. Orhan Özokur was born in Balıkesir in Having begun working during his high school years, Orhan Özokur pursued his academic and business life hand in hand. He 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 within Group. He was appointed Deputy Chairman of the Board of Directors of Yıldız Holding in Mr. Özokur speaks English, has a special interest in basketball, and his hobbies include tennis, listening to music and playing the guitar. He is married with three grown children. Born in Istanbul in 1969, Ali Ülker graduated from the Economics and Business Management Department Faculty of Economics and Administrative Sciences at Boğaziçi University. He began his business career in 1985 as a trainee in the Quality Control Department of Ülker Gıda A.Ş. Mr. Ülker attended various academic programs at IMD, Harvard and Wharton. Mr. Ülker took part in the De Boccard & Yorke Consultancy Company s Internal Kaizen Study (1992) and the IESC Sales System Improvement and Internal Organization Project (1997). He served as a trainee, Sales Executive, Sales Coordinator, Product Group Coordinator and Product Group Manager from 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, Deputy Chairman of the Consumer Group for Marketing and Chain Stores in 2000, General Manager of Merkez Gıda Pazarlama A.Ş. in 2001 and Deputy Chairman of the Food Group in In 2005, he was appointed Chairman of the Ülker (Biscuit, Chocolate, Candy) Group. Mr. Ülker speaks English and German and his hobbies include fishing, watching movies, reading books, and playing basketball and billiards. He is married with three grown children. Mr. Strasser was born in After graduating in 1964 from the Faculty of Mathematics and Philosophy, in 1968 he obtained an MBA from the E.S.C. in Paris and a Masters in Economics from the same university in Until 1972 he was employed at Senegal s Dakar University as an instructor. His career in the private sector began when he held several positions at Unilever, mainly in France, in sales and marketing departments. Mr. Strasser, who had become an expert in cleaning products, began his employment with the Tambrands Firm in 1982 where he served as the France Sales and Marketing Director ( ), France General Manager ( ), England General Manager ( ), European Division Deputy Head ( ) and International Head ( ). After the acquisition of Tambrands by P&G, Mr. Strasser was appointed to Campell Soup in 1994 as President of Campbell Biscuits Europe. He was instrumental in the Campbell s Soup acquisition of Danone s Liebig Soup and was President of Delacre Biscuits and Liebig Soup until From 1998 to 2007 Mr. Strasser was employed by Artal, a Belgian private equity firm, as CEO of Harry s SAS in Paris active in the company s restructuring and strategic processes. After that company was sold to Barilla, in 2008 he joined the Ülker group as Ülker International Division President. Mr. Strasser has been a member on the Board of several companies including as SSL in London, Mood Media, Benedicta sauces, Galapagos, Alpina in France and Mankattan in China. Mr. Strasser is married with three grown children.

13 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 11 Cengiz Solakoğlu Board Member (Independent) Mahmut Mahir Kuşculu Board Member (Independent) Güven Obalı Board Member (Independent) Cengiz Solakoğlu was 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 in He became an Area Sales Manager in 1969 and Sales Director in After serving as the General Manager of Beko Ticaret A.Ş. between 1977 and 1983, and Atılım A.Ş. between 1983 and 1991, Mr. Solakoğlu was appointed Deputy Chairman in 1991 and Chairman in 1994 of the Consumption Group of Koç Holding. Also serving as a member of the Executive Committee of the Koç Group, in he was appointed Chairman of the Durables Consumption Group of Koç Holding in Having worked in the Koç Group continuously for more than 37 years, 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 2002 and 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. Mr. Solakoğlu is a Board Member of Ülker Çikolata A.Ş., Ülker Biscuits 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 has three grandchildren. Born in Istanbul in 1950, Mr. Kuşculu graduated from Istanbul Erkek Lisesi, and then the Faculty of Economics, Istanbul University. He completed his postgraduate education in international marketing in Georgia, the US. Mr. Kuşculu served as Executive Manager and Board Member in the family glass industry businesses, Tamcam A.Ş. and Arsal Cam Sanayii. He established 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 continues to work as a Board Member in these companies and other companies. Mr. Kuşculu has served on the Professional Committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years, and as a member of the Assembly of Istanbul Chamber of Industry for 14 years. He is also a Board Member of Ülker Çikolata A.Ş., Ülker Biscuits 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. Born in Cihanbeyli in 1943, Mr. Obalı graduated from Finance and Economics Department Political Sciences Faculty at Ankara University in He was appointed Assistant Tax Inspector in the same year and became a Tax Inspector in In 1971, Mr. Obalı studies value added tax regulation & application in Germany. In 1975, he left the Ministry of Finance and began working at the Industrial Development Bank of Turkey (Türkiye Sınai Kalkınma Bankası). Starting his career as a 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, including Şişe Cam Group, Koruma Tarım Ilaçları 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 Mr. Obalı continues to serve as Audit Board Member in Kuveyt Türk Katılım Bank and as a Board Member of Ülker Çikolata A.Ş., Ülker Biscuits A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Bizim Toplu Tüketim A.Ş. and Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş. He is an honorary member of various associations and foundations. He is married with two children. Audit Committee Ataman Yıldız Member of the Audit Committee Nurettin Aliz Member of the Audit Committee

14 12 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT A Message from the General Manager We are working diligently to continue the tradition and carry forward the Happy Moments experience which we have been providing for 66 years. As a company, we are constantly striving to do better. 66 Number of Years that Children Remember Ülker with Happiness During Ülker s 66th year of creating Happy childhood memories, children will be treated to tours of our factories so that they can learn where and how their favorite products that made them so happy are manufactured Total Amount of Investment Realized in 2010 by Ülker Biscuits (million TL) The total amount of Ülker Biscuits real investments in 2010 was TL 12.1 million. At the Topkapı Factory TL 2.1 million was invested to increase the factory s capacity and make modifications in the production lines, which consequently resulted in a higher production rate. The remaining TL 10 million was invested in the Ankara Factory. Esteemed Shareholders, 2010 was a year in which we strove to overcome the effects of the global economic crisis. It was also a year in which we continued to celebrate the 65th Anniversary of Ülker s founding, extending celebrations into Whether within the company or in the community, we steadfastly continued to share the concept of happy moments and to instill that notion into our employees and shareholders. The full force of the economic crisis was felt in 2009 as markets hit bottom, however during the last quarter of 2009 the economy started to rally and that momentum continued throughout Turkey s economy, which had contracted by 4.7% in 2009 bounced back in 2010 and reached a growth rate of 8.9%. Compared to the previous year, sales in 2010 increased by 5.3% and once again reached pre-crisis levels. Our Company, operating on the principle of discipline, maintained its increased savings and efficiency policies, which had seen it through the crisis, into In spite of numerous increases in materials costs, Ülker not only achieved an increase in net sales but also increased its profit before taxes from TL 138 million in 2009 to TL 223 million in Our Company, by adopting a primarily finance-focused strategy in 2010, sold its 12.5% stake in Netlog Logistic Services to the Company s partners, including 1.9% of the shares in Tire Kutsan Paper and Packaging which had been sold to Mondi Packaging Corrugated BV under the terms of a 2007 sales agreement. Ülker Biscuits continues its business relations with both companies. By means of the Company s Risk Committee, in 2009 corporate risk studies began to be conducted. The studies were successfully completed toward the end of 2010 and the components of the necessary action plan procedures were prepared. As well, the applications which had been installed in both Ülker Biscuits factories to facilitate the transition to a plain production philosophy were completed successfully in These studies are key elements of the sustainability and efficiency of production. It is my great pleasure to announce that our Company is now recognized for its successes not only in Turkey, but is also being recognized by foreign countries. This fact was demonstrated by acknowledgement of the Turkish American Business Council s Business Leader Award to Ülker Biscuits, in a 2010 ceremony held in New York. I would also like to share with you some of the other studies and evaluations that were carried out in 2010 with regard to our Company.

15 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 13 Our Production Activities At the end of 2010, our production volume in the Istanbul and Ankara factiories had reached a total of 126,928 tons. The capacity utilization ratio in the Istanbul factory was 89% while in Ankara it was 68%. This indicates that, compared to the previous year, the capacity utilization ratio in 2010 had increased from 72% to 77%, respectively. The Company invested a total of TL 12.1 million in its facilities in We invested TL 2.1 million in the Topkapı factory and TL 10 million in the Ankara factory to increase efficiency and modify production lines. R&D, Quality and New Product Research Ethical R&D principles were determined and implemented in 2010 by Ülker Biscuits. In parallel to the R&D staff s expertise and experienced understanding of quality, new products are being developed and the concept of innovation was taken to higher levels. Within this scope, R&D projects that are targeted at more efficient capacity utilization are being stressed by initiating the manufacture of new products. The R&D units of our Istanbul and Ankara factories worked on 73 new products in Of those products, 18 are currently being manufactured and presented for sale in the marketplace. One of the biggest projects brought into being by Ülker Biscuits in 2010 was one based on the Bolero Gofret. In addition to this product, in the biscuits, wafer and cracker group, six new products produced by the Ankara factory and 12 new products manufactured by the Istanbul factory were launched in In Ankara, two product developments and 11 packaging development studies came to fruition, while in Istanbul 41 packaging development studies were completed successfully. Products that were developed in 2010 by the R&D units made up 6.3% of the production tonnage in Ankara and 5% of the production tonnage manufactured in Istanbul. Delicious, Healthy and Trusted Products Ülker conducts a number of routine tests and analyses on its raw materials, packaging, semi-manufactured and end products in 2010, this is to ensure the highest standard, quality and safety of products and to eliminate the risks associated with human error. Besides these routine tests, analyses requested from suppliers and conducted on raw materials by accredited laboratories are performed and recorded. Recognized analysis procedures and plans including process controls are utilized; critical control points (CCP), shelf-life analyses, scorings, equipment, location and employee hygiene control studies are also conducted on an ongoing basis. Each of the studies that are conducted is carried out in compliance with consideration for Ülker s high standards of quality control and puts the health and tastes of consumers as priority. To better assure the safety and hygiene of our products, in 2010 a number of training sessions were organized that included Employee Hygiene, The Environment and Allergens. To meet the expectations of consumers at the highest level, and to promote increased standards of customer satisfaction, Ülker Biscuits carefully examines consumer data and makes the necessary adjustments to ensure quality. On the other hand, by working with suppliers to examine and carry out tests, problems with the quality of resources can be avoided before they occur. With regard to food safety, to ensure that our products are handled under the strictest of hygienic condition until they reach the consumer, distributor warehouses in various provinces undergo rigid inspection procedures. In compliance with legal regulations and methods, hygienic conditions and constant standards of high quality, Ülker Biscuits manufactures delicious, healthy and trusted products. The Company was the first to obtain the following certifications: ISO 9001:2008 Quality Management System, ISO Food Safety Management System, ISO Environmental Management System, TS Worker Health and Safety Management System, BRC (Achieved Grade: A), IFS (Higher Level) which were renewed in 2010, along with becoming a icix member. Our employees are our greatest asset At the end of 2010 our Company employed a workforce totalled of 1,254. In order for our workers to be the best at their jobs and to prepare them for the future, Ülker Biscuits supports training and development programs focusing on personal and career growth.

16 14 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj A Message from the General Manager Seeing our employees as our most important asset, in 2010 many sessions were organized for the purpose of increasing their personal skills. In the past year our employees were provided with a total of 26,645 hours of training. Ülker Biscuits employees were provided with training sessions on subjects such as Quality Systems, Personal Development, Managerial Development, Managerial Preparation, Upper Management Leadership, Foreign Languages and Technology, as well as On-the-Job Training and Orientation Classes, both internally and externally. Ülker Biscuits utilizes a Performance and Career Management System aimed at rewarding employees and determining employee success and potential. Under the Performance and Career Management System, Ülker Biscuits strives to develop the roles and skills of every employee who contributes to the vision of the Company. The Performance Simplification Project and the Performance and Career Management System underwent changes in 2010 to make them more user-friendly. At the end of 2010, the 360 Degree Evaluation System and Balanced Score Card methods of measuring performance were introduced for both managers and lower level employees, within the scope of the Performance and Career Management System. We are working diligently to continue the tradition and carry the Happy Moments experience which we have been both providing and experiencing for 66 years. As a company, we are constantly striving to do better and to further develop our further processes. Within a short period of time during 2010, in order to reward workers who were not directly employed by Yıldız Holding and its associated companies, we initiated the Moments Awards to recognize those who, within the framework of Ülker values and core competencies, had achieved better results than expected, displayed exemplary behavior and generally made a difference with their extraordinary job performance. In order to increase the retention ratio and job satisfaction of our employees the Company keeps an open dialogue regularly accepting suggestions and opinions. This management principle was reflected twice in 2010 during meetings held with the participation of our workers and the workplace union and a Partner Relations Platform meeting attended by workers not directly employed by Yıldız Holding or its companies, organized in cooperation with the Industrial Relations Board. At the meetings, the relationship between employees and employers was discussed and it was stressed that the continued progress of Ülker Biscuits could be facilitated and developed through continued dialogue between employees and employers. As in previous years, in 2010 a series of events were organized for all employees, aimed at increasing motivation, expanding social interaction and strengthening the bonds between workers and the Company. These events and activities included the Traditional Ülker Picnic, Award Ceremonies for those with 10 or more years of employment with Ülker Biscuits, International Day of the Disabled, Price Reduction Agreements, etc. In the future we will continue to hold events and demonstrate our belief that our employees are our most valuable asset. Corporate Social Responsibility In 2010, Ülker Biscuits and Yıldız Holding s general sense of social responsibility and their numerous sponsorship of related projects, played an important role in the life of the community. The scope of Yıldız Holding s social activities are concentrated for the most part, on making a difference in the lives of children. As examples: Ülker encourages children to develop a healthy habit of playing sports, the Football For Everybody and Futbol Villages projects and a series of football and basketball festivals have been established. In addition to these projects, the Holding has opened the Sabri Ülker soup kitchen, in cooperation with the Red Crescent in Bingöl. Our Goals for 2011 As the leading firm in the sector, Ülker Biscuits has the task of fullfilling the expectations of our shareholders and to especially meet the expectations of our customers with the high quality and nutritional integrity of our products. In 2011, in spite of intense competition and rising costs, we are confident that we will once more be able to achieve our financial and operational targets, with the support of our consumers and shareholders. Our wish is to continue to meet the expectations of our customers at the highest level and reward our shareholders with strong financial return for many years to come, and to do so hand in hand with our employees, producing high quality and hygienic products, increasing our efficiency without sacrificing our simple production principles. Respectfully, Dr. Hasan İrfan DEMİRYOL General Manager

17 Enjoy new experiences with Ülker Bolero For me, 2010 was a year filled with many new and different experiences. After a difficult period of preparation, to my great joy, I was finally enrolled in the Faculty of Architecture at Istanbul Technical University, leave Çorum where I had lived since I was born and move to Istanbul to live with my older sister. During the year I was able to cope with all these new experiences (Istanbul, University, architecture, new friends) rather easily because these new experiences were things that I had dreamed about since my childhood. It was during this enjoyable time that I had another new experience, namely Ülker s new Ülker Bolero. I especially appreciated the strawberry and banana varieties because they helped make all of my new experiences even more delicious. Yeşim Akın (19), University Student

18 16 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Milestones Steps toward Happy Moments 1955 In 1955, Ülker Biscuits decided to provide the entire country with biscuits at factory prices. This enterprising decision brought about a huge increase in demand. By hiring sales representatives to sell its products door-to-door in large cities, the Company s unorthodox strategy created a revolution in the marketing of biscuits, chocolate and similar products Ülker Biscuits was founded by Sabri Ülker in 1944, started operations with only on an oven and three workers and initially produced only 200 kg of biscuits a day. The Company grew and within a few years it was relocated to Topkapı. Under the conditions of the time, the Company s four 20 m3 ovens were sufficient to allow the Company to achieve a high production capacity In 1970, during a preriod of growth, Ülker Biscuits formed a multi-partner company with Anadolu Gıda Sanayi A.Ş. which was located in Ankara. This virtually doubled the production capacity of Ülker Biscuits Total production volume in 1944 was 75 tons. By 1948 that volume had tripled Recognizing that the Middle East was a potential market for its products, in 1974 Ülker Biscuits exported its first biscuits. In the same year the Company established an R&D department to enhance its competiveness internationally.

19 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION Ülker began to package its products in cellophane-based material in In 2008, Corporate Governance and Audit Committees were established, within the scope of the Company s Articles of Incorporation. Also in 2008, the premium chocolate producer, Godiva, became a 25.23% subsidiary of the Company With the merger in 2003 with Anadolu Gıda, Ülker Biscuits grew even larger and, with its institutionalization it began to bring important projects to life Harvard Business Review, one of the world s most respected academic publications, published an article about Godiva s acquisition entitled Don t integrate your acquisitions, partner with them and cited the process as a successful business model. Ülker s 65th anniversary celebrations got underway with an advertising campaign based on the concept of Happy Moments The Company changed its name from Ülker Gıda to Ülker Biscuits to reflect its core business offering One of the largest projects undertaken in 2010 by Ülker Biscuits was the Ülker Bolero Wafer campaign. In the Biscuit, Chocolate and Cracker group, in Ankara; six new products and in Istanbul 12 new products were developed and successfully launched.

20 18 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT The Food Sector in Turkey and Abroad Though its dynamism in domestic consumption, food sector was affected intimately by the global economic crisis. The Global Food Sector The global economic crisis which became apparent in 2008 caused major damage and recession of the world s economy. Forecasters predicted that the effect on production and trade would dissipate in 2010, but the countries of the European Union and many other developed countries were still experiencing financial struggles and it is likely that these will continue well into The most significant development in the global food sector was a rapid increase in the cost of raw materials, particularly in the last quarter of 2010 when fluctuations in world commodity markets sent deep shockwaves through the food sector. Though there were many reasons for the rise in the cost of raw materials, the most important reason was global warming, which caused severe droughts or flooding over vast areas of farmland. New data released by the UN shows that food prices are at an unprecedented level throughout the world. Sugar, grains, oil and meat products that make up the virtual food basket, upon which the food price index is based, jumped to points in December 2010, setting a new record. The world s largest producers (Russia, Australia, Canada, etc.) had experienced unseasonable weather conditions and natural disasters which had badly damaged crops. Some basic raw material components in 2010: Palm oils: During the year, the world s stock of palm oil fell 28% from the previous year. The low levels of the stock pushed 2010 prices up 42% more than they were at the beginning of the year to Ringgit/ton. Wheat prices: Wheat prices on the Chicago Stock Exchange at the beginning of 2010 stood at USD 200/ton. By year s end, the price of wheat had climbed to USD 300/ton. The fluctuations experienced in wheat prices were exascerbated by an unforeseen drought which resulted crop losses triggering sky-rocketing prices in the countries affected. Corn prices: Corn commodities were being traded on the Chicago Stock Exchange for USD 165/ton at the beginning of By the last quarter of the year, as a result of bans on exports by Russia and the Ukraine, the imposition of quotas and a rise in the prices of wheat and soy beans, the price of corn soared to USD 245/ton by year-end. Cocoa beans: The price of cocoa beans which was USD 3,500/ton at the beginning of 2010 fell to USD 3,000/ ton at the end of the year. The latest forecast from the International Cocoa Organization (ICCO) states that cocoa prices will stay within 2010 levels in In the last year, steadily increasing raw materials and food prices and the rise in inflation, even in countries with a relatively low rate of unemployment, have resulted in the fall of the governments in countries like Algeria, Tunisia and Egypt. The political unrest in petrol exporting countries after the global financial crisis sent petrol prices soaring. Together with a host of other factors, the price of petrol increased the costs for energy and transportation which, in turn, caused a significant rate of increase in the prices of raw materials and foods. At this time, while an economic turnaround is expected in 2011, the possibility remains that negative factors could affect our economic situation.

21 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 19 77% is the total capacity utilization ratio of Ülker Biscuits in 2010 Parallel to the recovery of total capacity utilization ratio both in Turkey and internationally, Ülker Biscuits total capacity utilization ratio in 2010 rose to 77%. The Turkish Food Sector 2010 was considered to be a period of recovery for the Turkish economy. become problematic. Another area where the effects of the crisis are still apparent is the rate of employment. Due to delayed investments and the shifts that were experienced, despite the recovery of the economy in 2010, the unemployment rate remained above 11%. On the other hand, in 2010 the number of jobless increased by nearly a million, even though the rate of unemployment fell. The food sector in Turkey is a US$142 billion industry that feeds almost 73 million people and 30 million tourists each year. According to Household Consumption Expenditure figures compiled by the Turkish Statistical Institute, Turkish families spend an average of 23% of their incomes on food. Food expenditures classified into income groups shows that of the 20% households with the highest income levels, 17.4% goes for food while in the bottom 20% households with the lowest level of income, food expenditures average 34% of income. Therefore, the global crisis has seriously affected the the food industry and the important dynamic in domestic consumption in the food sector. The table below compares the total producton in all industry and the increase of food producton over the last five years. Beginning in September, 2008, a global crisis began that lasted for all of In 2010, many countries, including Turkey, began to recover. The Turkish economy contracted in 2009 by 4.7%, however in 2010 it recovered and grew by 8.9%. Within that period, while indicators in the Turkish economy like production and domestic consumption reached pre-crisis levels, other indicators such as export and unemployment were not rebounding as quickly. In addition, the increase in exports and lagging imports created more significant deficits. Contrary to the crisis of 2001, after the main crisis of 2010, in Turkey the economic recovery was propelled by domestic consumption rather than exports. During the last year, despite the significant rate of diversification in export markets, the European countries, which are Turkey s largest export markets, recovered more slowly, and exports were being negatively affected. The rate of loss in Turkey s volume of exports, compared to precrisis levels remains at 15%. Although there is rapid growth in the GDP, the fall in exports and at current deficits had Increase in Industrial Production, by year (%) Food Industry Total Industry In 2009 the decrease of total production also affected revenues, however, with the rise in production in 2010, a healthy increase in revenue was achieved Production 0.4% 7.2% Financial turnover 5.3% 16.2% Capacity Utilization Ratio 71.0% 68.3% The decrease in domestic demand led food companies to direct their efforts toward exporting. In 2010 the value of exports, according to values over the last ten years rose 48.1% and was worth US$ 6.5 billion.

22 20 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT

23 2010 Business Activities For Ülker Biscuits, 2010 was a year filled with accomplishments. A lean manufacturing philosophy was implemented and corporate risk studies were completed. By targeting increased capacity, renovation, modification of production lines and improving efficiency, a production volume of 126,928 tons was achieved. Below is a summary of the corporate applicatiıons that took place in 2010 within Ülker Biscuits: Under the leadership of the Risk Committee, the corporate risk studies that had begun in 2009 were completed; action plans were subsequently developed and adopted as one of the Company s business processes. A lean manufacturing philosophy was successfully implemented in Ülker Biscuits two main production facilities. The best practice application which was implemented to share best practices among the companies continued throughout the year. A Partner Communication Platform in which all employees participated was held. To increase operational productivity, work studies and permanent staff studies were carried out. The Workers Syndicate organization held Industial Relationships meetings at the Ülker Biscuits factories.

24 22 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Production and Capacity Ülker Biscuits which has two factories, one in Istanbul/Topkapı and one in Ankara, is the sector leader. Apart from these two main factories, Ülker Biscuits also carries on production operations in the İdeal Gıda/ Gebze and Biskot Gıda/Karaman manufacturing facilities. Ülker Biscuits Istanbul and Ankara factories, which are fitted with the latest technological equipment, manufactured 126,928 tons of biscuits for comsumption market in In the Topkapı factory there are nine installations and in the Ankara factory there are 19 installations devoted to the manufacture of biscuits, chocolate-covered biscuits and wafers. Istanbul/Topkapı Factory At Ülker Biscuits Topkapı factory, with three workshifts were initiated in 2010, an actual capacity utilization ratio of 89% achieved. This translates into the production of 54,697 tons of biscuits and net sales of 54,156 tons of biscuits during the year At the Topkapı factory, logistical support such as boxing, box handling, packaging, and storage are almost fully automated, and the facility s technology is extensive. Main Products Manufactured in the Topkapı Factory Pötibör (plain, chocolate, double baked) Çizi (sesame) Krispi Haylayf Mavi Yeşil Hanımeller (hazelnut, chocolate chip, nutritional, negrita, salty, shortbread) Bebe Biscuits (good night, googly, honey-banana) Biskrem (chocolate, apple, fig, dark, hazelnut krem, duo) 128, , , Ülker Biscuits Sales (Tons)

25 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 23 The Ankara Factory The Ankara factıory is located in a covered area measuring 80,000 m² on a 110,000 m² tract, making it the largest biscuit manufacturing and warehousing facility in the Middle East. The factory has been one of the region s most important economic contributors for more than 39 years. In 2010, three workshifts were adopted which resulted in actual capacity utilization ratio of 68% for the year. In other terms, 72,231 tons of biscuits were manufactured, which resulted in the net sale of 72,305 tons. 127, , ,928 Main Products Manufactured in the Ankara Factory Pötibör (plain, two-color) Krim Kraker Probis Çokoprens As Kraker Başak (plain, chocolate, flax seed) Ikram (chocolate, hazelnut, cheese) Canpare Rondo (banana, strawberry, plain, coconut, orange, raspberry, cheesecake) Altınbaşak Wafers (hazelnut, banana, orange, strawberry, coconut, vanilla, cocoa, chocolate) Halley Kat Kat Tat Çubuk Kraker Alpella Ring Mavi Yeşil brand products Hasat Hanımeller Kurabiyem (hazelnut, chocolate) Bolero (strawberry, banana) Istanbul and Ankara Factories Total Production Volume (Tons)

26 24 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Production and Capacity Pötibör Biscuits The indispensable, classic, multi-purpose biscuit Probis Cocoa and banana cream-filled sandwich biscuit Krim Cracker A fine breakfast with cheese and tomatoes Çokoprens Unforgettable taste Başak The perfect blend of nature and taste Biskrem Crunchy biscuits with a delightful chocolate center İkram Two rectangular biscuits with a cream filling Rondo Canpare Life s got drama, Rondo s got cream. Kat Kat Tat Cocoa, apricot, strawberry, sesame paste, vanilla mille feuille Rondo Crispy biscuits with lots of cream filling Now it also comes in Dark. Altınbaşak Keep fit with natural taste

27 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 25 Halley Should be eaten among the stars Alpella Ring For those who know how to have fun Çubuk Cracker Crispy, crunchy sticks to snack on Hasat With oats and bran, a very natural taste Hanımeller Reminding you of the biscuits your Mom used to make Hero Baby Melts in milk to make your baby smile Çizi Have a snack to curb your appetite. Haylayf The world s lightest dessert Mavi Yeşil A light between-meal snack to keep your life light. Bolero It s thin, but its flavor is huge.

28 26 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Marketing and Distribution Ülker has developed a powerful distrubition network, which can meet the demand of consumers, this means that anywhere, and at any time everyone can have easy access to all Ülker Biscuits products. The production volume of Ülker Biscuits and its subsidiaries over a two-week period would be enough provide a biscuit for every person in the world. Ülker Biscuits has an effective organizational infrastructure. The Company has developed huge production capability and a powerful sales and marketing organization. Biscuits and chocolate-covered products that are manufactured by Ülker Biscuits and its subsidiaries are marketed and distributed to domestic markets by Ülker Biscuits subsidiary Atlas Gıda Pazarlama and Yıldız Holding companies Pasifik Pazarlama, Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama. Atlas Pazarlama is a highly respected and experienced company that markets and delivers Ülker Biscuits products to general consumers in Turkey and 129 regional headquarters in Istanbul, Ankara, Izmir, Trakya, Bursa, Samsun, Gaziantep, Adana and Erzurum. Each week, the 1,150 covered cargo trucks belonging to Atlas Pazarlama regularly call on and provide quality products to 181,000 sales points. This powerful distribution network ensures that Ülker Biscuits products are always readily available to the consumer. At every level, the Ülker distribution infrastructure is capable of meeting consumer demand for Ülker Biscuits products. 129 Number of Ülker Biscuits General Distributors in Turkey Atlas Pazarlama, a highly-respected company with vast market experience in Turkey, regularly reaches 129 regional directorates and many general customers in Istanbul, Ankara, Izmir, Trakya, Bursa, Samsun, Gaziantep, Adana and Erzurum.

29 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION Ülker İkram was the first to come to our aid. During the winter of 2003, a group of university friends and I decided to go skiing together in Bolu, Kartalkaya. Since it was semester break, we planned to spend the better part of a week skiing in Kartalkaya. The five of us were having a pleasant time while we were driving from Ankara to Kartalkaya in Emre s car. On the main highway it began to snow lightly and by the time we reached Kartalkaya the light snow had become a virtual blizzard. About an hour from our hotel, we were forced to stop and wait in a convoy of vehicles which were being organized due to the blizzard conditions. We had planned to eat our evening meal at the hotel, and the unexpected delay because of the weather rendered us helpless. With our stomachs growling with hunger, we waited for the road to open. Suddenly, Ali discovered an unopened package of Ülker Ikram biscuits in his backpack. In a stranded vehicle, an hour from our hotel, thanks to Ülker Ikram biscuits, we quieted our hunger and relived memories of some Happy Moments that we had shared with our friends. Thank you Ülker Ahmet Sekman (33), Computer Engineer 27

30 28 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Investments Ülker Biscuits is strengthening its position in the market with new investments in new installations in its factories, increase capacity, modify production lines, increase efficiency, ensure hygienic conditions and improve warehousing procedures. Ülker Biscuits achieved all of the goals outlined in it strategic development plans planned for The investments by Ülker Biscuits were made to further solidify the Company s position in the market, increase consumer satisfaction, improve product quality by increasing efficiency, to achieve its predetermined targets and make its cost base and products more competitive. In 2010, Ülker Biscuits invested in the installation of new facilities at the Istanbul/Topkapı ve Ankara factories, renovations, modifications to production lines, increased efficiency, and improvements in the areas of hygiene and warehousing. At the Topkapı factory, TL 2.1 million was invested for expansion and modernization, while close to TL 10 million was invested in the Ankara factory Total amount of investment made in the Ankara Factory of Ülker Biscuits in 2010 (million TL) Ülker Biscuits Total 2010 Investment in its Ankara factory and Istanbul factory In 2010, while Ülker Biscuits invested TL 2.1 million for expansion and modernization of its Istanbul factory, it invested nearly TL 10 million in its Ankara factory Ülker Biscuits Actual Total Investment Amount (million TL )

31 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 29

32 30 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Subsidiaries Added value created by experience and business cooperation 99.0% 97.5% 83.8% Birlik Pazarlama A.Ş. Flour Production İdeal Gıda San. ve Tic. A.Ş. Biscuits and Cracker Production İstanbul Gıda Dış Ticaret A.Ş. Foreign Trade 78.2% 68.0% 50.5% Atlas Gıda Paz. San. ve Tic. A.Ş. Domestic Marketing Birleşik Dış Ticaret A.Ş. Foreign Trade Biskot Bisküvi San. ve Tic. A.Ş. Biscuits and Chocolate-covered Products 25.2% 25.2% 23.0% G-New Inc. (Godiva) Foreign Investments Godiva Belgium BVBA. (Godiva) Chocolate Production and Marketing PNS Pendik Nişasta A.Ş. Corn Starch and Cornstarch-based Candy Production

33 Ülker BISCUITS OTHER BİRLİK PAZARLAMA Birlik Pazarlama, which produces all types of flour products such as pasta, farina, packaged wheat and rice flour for Ülker Biscuits, was relocated to Ankara in 1992 İdeal GIDA Located in a m 2 facility on an m 2 tract of land, İdeal Gıda has been mainly manufacturing biscuits and crackers since % BİM Birleşik Mağazalar A.Ş.* Discount Markets 10.7% Sağlam GYO A.Ş. Real Estate Investment Partnership İSTANBUL GIDA - BİRLEŞİK DIŞ TİCARET İstanbul Gıda is responsible for the international sales and marketing of Ülker brand products, while Birleşik Dış Ticaret is responsible for the international sales and marketing of products with brand names other than Ülker. 10.0% 7.0% BİSKOT Gıda With four separate factories in the Karaman Organized Industrial Zone, Biskot Gıda has been a subsidiary of Ülker Biscuits since Fresh Cake A.Ş. Cake Production Besler Gıda A.Ş. Oil and Margarine Production ATLAS Gıda pazarlama Atlas Gıda Pazarlama began operations in 1987 and is the sales and distribution market leader in the flour product sestor, focused on distributing 36 brand names within the country. godiva In March 2008, Godiva, the leading premium chocolate producer, joned the Yıldız Holding family. *BİM Birleşik Mağazıcılık was sold as of Other subsıdıarıes Besler Gıda, PNS Pendik Nişasta, Fresh Cake, Sağlam GYO ve BIM Birleşik Mağazacılık*, are also found among Ülker Biscuits subsidiaries.

34 32 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Subsidiaries Bİrlİk Pazarlama Birlik Pazarlama produces all types of flour products for Ülker Biscuits, as well as pasta, semolina, packaged wheat and rice flour. In a survey published by the Istanbul Chamber of Industry in 2009, Birlik Pazarlama was ranked 242 nd among the top 500 industrial enterprises in Turkey. Birlik Pazarlama, one of the most important subsidiaries of Ülker Bisküvi Sanayi A.Ş., was incorporated in Birlik Pazarlama, which produces not only flour from every kind of grain based on the needs of the Group but also pasta, semolina, packaged wheat flour and rice flour for the market, moved its headquarters to Ankara in Located on the same site as Ülker Biscuits s Ankara Factory, Birlik Pazarlama operates in an enclosed area of about 24,000 m 2. In addition to its three flour factories in Ankara, Birlik Pazarlama has two factories which processes soya and rice, a branch office and a flour factory in Karaman. Birlik Pazarlama has undertaken contractual planting in cooperation with a number of agricultural research institutes to cultivate varieties of wheat that produces the flour necessary for biscuit production. These varieties are currently not grown in sufficient quantity in Turkey. Birlik Pazarlama has obtained TSE-ISO- EN 9000, TSE-ISO-EN quality certification. The subsidiaries of Birlik Pazarlama include Hero Gıda, PNS Pendik Nişasta and Birleşik Dış Ticaret. The Company s actual total wheat processing capacity is 930 tons/day. This figure includes 730 tons/day in Ankara and 200 tons/ day in Karaman. Birlik Pazarlama s rice processing capacity is 19 tons/ day, its soya processing capacity is 7.5 tons/day and it has an oat processing capacity of 2 tons/day. In a survey published by the Istanbul Chamber of Industry in 2009, Birlik Pazarlama was ranked 242nd among the top 500 industrial enterprises in Turkey. With a total grain storage capacity of 35,000 tons, Birlik Pazarlama is continuing to make investments in 2011 to ensure higher quality products and more competitive prices.

35 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION Small flavors, a lot of happiness I have been married to my wife Pelin for nearly three years. We have overcome a number of difficulties and based our marriage on strong foundations. Three months ago, the birth of our daughter, Duru, added to our happiness. Looking back, I can remember the day that we moved into our first home. Despite our tiredness, at the end of the day I also remember Pelin s smiling face as she stood there, snacking on Ülker Biskrem biscuits her favorite. Duru s smile and Ülker Biskrem was enough to make us forget our problems. Şafak Eser (32), Accountant 33

36 34 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Subsidiaries İdeal Gıda İdeal Gıda with its workforce of 432, achieved a capacity utilization rate of 84% in 2010 by stabilizing production during the last period. İdeal Gıda, which was established in the Gebze Organized Industrial Zone in 1997, operates in a 41,000 m 2 enclosed area on an 85,000 m 2 tract of land. İdeal Gıda has been producing biscuits and crackers since 2000 and its capacity utilization rate was 84% in Since it began operations, İdeal Gıda has focused on investing in technology and developing its infrastructure, in order to increase its production capacity. The four production lines of İdeal Gıda produce four main groups of products for domestic and foreign markets. At the end of 2010 İdeal Gıda achieved a stable capacity utilization rate of 84%. Biscuit and cracker production in 2003 was 30,654 tons; in 2004 production increased to 37,770 tons. In 2005, production reached 41,338 tons. In 2006 production had to stop for a month during the conversion of ovens to natural gas and production fell to 37,337 tons as a result. Stable production occurred in 2007, 2008 and 2009 with 40,205 tons, 42,166 tons and 43,902 respectively. Production in 2010 reached 41,833 tons. İdeal Gıda s production facilities are ISO 9001:2000, ISO 22000, ISO 14001:2004, OHSAS 18001:1999, BRC and IFS certification standards. In 2009, İdeal Gıda was ranked 335th in the Istanbul Chamber of Industry s list of Turkey s Top 500 Industrial Enterprises.

37 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 35 İstanbul Gıda The strong sales and distribution network of İstanbul Gıda, which markets Ülker products to more than 80 nations in the Balkans and the Middle East and other countries including the Turkic Republics, America, Europe and the Far East, extended its marketing channels in 2010 even further into the Middle east and also into African markets. İstanbul Gıda was established in 1987 to undertake the international sales and marketing of all Ülker brand products. In 2010, İstanbul Gıda s marketing strategy was focused on the main business categories of biscuits, chocolate, cake and candy. During the year, sales and marketing of Yıldız Holding s secondary product categories - milk, beverages and personal care products were transferred to other companies. Parallel to this change, the marketing processes for the main categories of the Company underwent restructuring. Through the strong sales and distribution network of İstanbul Gıda Ülker products are exported to more than 80 nations in the Balkans, the Middle East and other countries including the Turkic Republics, America, Europe, Africa and the Far East. In 2010, while the global economic crisis was still producing negative effects in European market, to counterbalance these effects, the Company increased its marketing activities in the less-affected countries of the Middle East and Africa. This move resulted in a 10% rise in exports to the Middle East and a 23% increase in exports to Africa.

38 36 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Subsidiaries Bİrleşİk Dış Tİcaret Birleşik Dış Ticaret A.Ş. focused its strategy on the Company s main product categories of biscuits, chocolate, and cakes in Established in 1999, Birleşik Dış Tic., is focused on selling and marketing products with the brand names Halk and Karsa to foreign markets. The 2010 business year saw Birleşik Dış Ticaret A.Ş. engaged in a marketing strategy that focused on the Company s main product categories, namely, biscuits, chocolate and cakes. Simultaneously, the Company s marketing processes were restructured to increase productivity and efficiency.

39 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 37 Bİskot Gıda Located in an enclosed space of m 2, Biskot Gıda carries on operations with a workforce of 2,700 employees and is one of the most important companies in the region. The Company, which has been one of Ülker Biscuits subsidiaries since 1999, operates three factories on a combined enclosed space of 85,000 m 2 and is one of the most important industrial enterprises in the Karaman Organized Industrial Zone. In 2010 the Company put four new production units into service. In the Biscuits-1 factory, a new dough mill was added to the existing facilities. In the Biscuits-2 factory, in addition to the existing facilities which had been automated in 2009, three separate facilities were automated. In addition, a new packaging machine was purchased which has significantly increased the capacity of the factory. The capacity utilization ratio in Biscuits-1 averages 75%, while in the chocolate factory the ratio is 76% and the Biscuits-2 factory has a capacity utilization ratio of 63%. On average, the capacity utilization ratio for the entire company is 66%. Biskot Gıda achieved a volume of 99,300 tons in 2010, as a result of its investments and increased efficiency. Biskot Gıda s product portfolio consists of Pötibör, finger, piknik, bebe, creamfilled biscuits, chocolate-covered bars, wafers, chocolate wafers, rulokat, çokomel, chocolate cream, special biscuits, giftable chocolates, crackers and coated cakes. The Company manufactures Ülker, Halk and Karsa brand products plus private label products including crackers, marshmallow wafers, chocolate and chocolate-covered products in three separate fractories. The Company s production facilities are compliant with TSE-ISO-EN 9000 Quality Management System, TSE-ISO- EN Food Safty Management System, TSE-ISO-EN Environmental Management System, IFS International Food Standard and BRC - Global Standard for Food Safety quality certifications. In 2008 Biskot Biscuits Gıda was ranked 81 and in 2009 it was ranked 157 in the Istanbul Chamber of Industry s list of the Top 500 Turkish Enterprises.

40 38 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Subsidiaries Atlas Gıda Pazarlama Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. joined Ülker Biscuits as a subsidiary in Since the restructuring that took place in 2010, the Company s business operations have been refocused to concentrate on the sales and distribution of 36 brands of biscuits, cakes, crackers, and chocolatecovered products. In terms of sales and scope, Atlas Gıda Pazarlama, which was established in 1987, is one of the leading marketers and distributors of flour products. The widespread distribution network of the Company reaches and issues invoices to virtually every sales point in Turkey on a regular basis at least once a week. Atlas Gıda Pazarlama conducts efficient and widespread distribution/marketing operations to 10 regions across Turkey. Atlas Gıda Pazarlama s distribution network consists of channels that included chain markets, local markets and door-to- door sales vendors in However, at the end of 2007 it transferred its chain market channels to the newly established Group company, Pasifik Gıda Pazarlama. Atlas Gıda Pazarlama operates its sales and distribution activities with its own sales representatives and distributors. Its 108 distributors buy products from the Company and sell them to customers and points of sale in their own regions. Sales representatives hire vehicles from Atlas Gıda Pazarlama, and sell to their own pre-determined pointof-sale. There are 123 sales representatives working for Atlas Gıda Pazarlama in Istanbul and Ankara. As a result of restructuring in 2005, since that time Atlas Gıda Pazarlama has focused primarily on the domestic sales and distribution of 36 brands of biscuits, cakes, crackers and chocolatecovered products. The Company s rapidly expanding product portfolio is accompanied by various promotions for different products, customerfocused activities and the development of product-based logistics and warehousing strategies and distribution analyses to enable the Company to measure the efficiency of their distribution network more precisely.

41 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 39 Godİva By serving its customers through 450 stand-alone boutiques and 9,300 sales points worldwide,the Godiva brand symbolizes that of a first-class chocolate production for over the 80 years. After the signing of an acquisition agreement in December 2007, Godiva officially joined the Yıldız Holding family of companies in March During this process, Ülker Biscuits played an important part. On the basis of Ülker Biscuits 25.23% partnership with Godiva, a rapid increase in the world s production of biscuit and chocolate occurred in the last period. From the aspect of shared experience and coping with foreign synergy, this partnership is a significant new enterprise for Ülker Biscuits. Established by Josep Draps in 1926 and named for the legendary Lady Godiva, Godiva has been producing high quality chocolate for more than 80 years. Since April 2008, Yıldız Holding has been providing chocolate lovers with the incomparible taste of Godiva products. Many new Turkish consumers were introduced to the Godiva brand in September 2010, when the first Godiva boutique in Turkey was opened in Istanbul/Nişantaşı. Two more boutiques were opened soon afterwards, in Akmerkez and Suadiye. To draw customers, Godiva boutiques are always new, exciting and interesting because their decorative themes are constantly renewed, innovative collections are regularly introduced and decor is changed for each season. The excitement of the seasons, special days or holidays are reflected in the themes of Godiva s packaging. Other Subsidiaries Among the other subsidiaries of Ülker Biscuits are: Besler Gida, which produces the oils which are so essential in the manufacture of biscuits and wafers, PNS Pendik Nişasta, which is one of the largest companies in the corn and starch sector, Fresh Cake, which produces readymade cakes, Sağlam GYO, a company that went public in 2007 and has operations in the real estate sector and BIM Birleşik Mağazacılık*, a discount market chain. *The stake in BİM Birleşik Mağazıcılık was sold as of

42 40 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Corporate Governance Ülker Biscuit Family Due to the quality and motivation shown in its business processes, loyalty to the company and cooperation among employees is heightened and human resources applications are aimed at increasing competitive strength. Human Resources The vision of Ülker Biscuits Human Resources is to organize and implement the the best human resources for all business fields. The human resources practices of the Company are shaped by the Human Resources Strategy of Yıldız Holding. The mission of the Company s human resources department is to increase the domestic and international competitiveness of Ülker Biscuits through the efficient management of its human capital while providing motivation and encouraging high quality work, company loyalty and cooperation. Under conditions of global competition, we feel that a human resources policy that monitors and utilizes new developments is reflected in the attainment of high technology and the achievement of new business opportunities. Through the efforts of its Human Resources Department, on the one hand, Ülker Biscuits aims at strengthening the bond between itself and its workers, developing high motivation and boosting employee satisfaction and on the other hand, providing development programs and organizing company social events to strengthen relationships between employer and employees. To maintain a high level of employee satisfaction and boost loyalty, Ülker Biscuits routinely conducts surveys and distributes evaluation forms to its workers, to obtain pertinent information. Twice each year, Ülker Biscuits holds meetings with workplace union representatives, in cooperation with the Indutrial Relations Board. These meetings are held to develop better communication and relationships between the employer and employees and provide opportunities for the sharing of ideas that will move the company forward. In a similar manner, partnership communications meetings arranged by Ülker Biscuits are conducted to open new channels of communication, create employee satisfaction and boost employee loyalty. As in previous years, a series of events aimed at increasing motivation, expanding social interaction and strengthening the bonds between workers and the company were organized for all employees in 2010: While technical visits between factories were organized to strengthen the social communication network among employees, workplace tours and company information sessions were arranged for the families of employees at various factories. The Traditional Ülker Picnic was held to provide an opportunity for employees and their families to interact with each other. Opportunities were provided for employees to attend sporting matches of Ülker-sponsored Fenerbahçe Ülkerspor Basketball Team. An awards ceremony was arranged to honor employees who had worked for Ülker Biscuits for 10 years of more and plaques to commemorate their dedication were presented. The above-mentioned plaque award ceremony is an indicator of employee loyalty and was met with approval by all employees, both inside and outside the company. In keeping with Ülker s 65 th Anniversary events, elementary school students were treated to tours of Ülker Biscuits factories. Special commemoration days (International Disabled day, International Women s day, etc.) were observed and celebrated with the workers. April 23 International Sovereignty and Children s Festival events were arranged for the children of our employees and the April 23 Cinema Fesitval was once more organized. Employees who had submitted successful ideas, suggestions and applications under the Brain Box project received awards. The project was conducted more rapidly in 2011 because it was conducted in an electronic environment. The Koza Social Responsibility Project organized by YASED (International Investors Association of Turkey) in 2010 provided two university students studying in Eastern and Southeastern Turkey with possibilities to work as company interns. Price discounts were arranged with various organizations for Ülker Biscuits employees, to add enjoyment to their social lives and meet extra requirements for such things as food, health and training (tutoring schools, driving courses, supermarkets, hospitals etc.).

43 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 41 Parallel developments, adjusting to changing conditions, and staying competitive under global conditions by taking advantage of improved technology and new opportunities, Ülker Biscuits is aware of the significance of maintaining a human resources policy that is flexible and open to development. Besides its investments in technology, the Company s large investments in human resources enable it to maintain its leading role in the sector. Believing that every manager must also be a good human resources manager, Ülker Biscuits arranged for its managers to attend an HR Training Program to provide information and promote a better understanding of HR processes. Regarding employees as our biggest capital and our most important asset, Ülker Biscuits is committed to ensuring and supporting the development of its employees, not only for the Company s business targets and competitiveness but for their own development. Support for the personal and professional development of employees is given through training and development programs, so that they can maintain top performance in their job and help to prepare Ülker Biscuits and themselves for the future. Ülker Biscuits offers its employees various opportunities for both on-site and off-site training on different subjects as indicated below. Quality systems Training (Hygiene, ISO Environmental Management system, OHSAS Worker Health and Safety, etc.) Personal Development Training (Innovation Management, Relationship Management and Communication Skills, etc.) Foreign Language Education (English, etc.) Technical Training (Pneumatics, Mechantronics, Siemens S7 200, Siemens S7 300 vb.) On-the-Job Training (TQM and Management Systems Documentation, Hand and Uniform Washing Considerations, Allergens / What is OÖGP?, etc.) Orientation (Job-entry program, factory visit, etc.) Ülker Biscuits utilizes a Performance and Career Management System aimed at rewarding employees and determining employee success and potential. Under the Performance and Career Management System, Ülker Biscuits strives to develop the roles and skills of every employee who contributes to the vision of the Company. The Performance Simplification Project and the Performance and Career Management System underwent changes in 2010 to make them more user-friendly. At the end of 2010, the 360 Degree Evaluation System and Balanced Score Card methods of measuring performance were introduced for both managers and lower level employees, within the scope of the Performance and Career Management System. We are working diligently to continue the tradition and carry the Happy Moments experience which we have been both providing and experiencing for 65 years. As a company, we are constantly striving to do better and to develop processes. Within a short period of time during 2010, in order to reward workers who were not directly employed by Yıldız Holding and its associated companies, we initiated the Moments Awards to recognize those who, within the framework of Ülker values and core competencies, had achieved better results than expected, displayed exemplary behavior and generally made a difference with their extraordinary job performance. The collective agreement with the Worker s Union continued for the January 1, 2010 December 31, 2011 period and a related agreement for the period was signed. The seniority and job severance liability of Ülker Biscuits was TL 21,514,0236 as of August 31, ÜLKER Biscuits EMPLOYEE PROFILE 8.5% Graduate and post- Graduate Degree 23.2% Elementary Degree Training Distribution (2010) 32.0% 30 and below 13.5% 45 and above Age Distribution (2010) 8.7% Between 6-10 years 88.0% 5 years and below Seniority Distribution (2010) 2.2% Associate Degree 66.0% High School 54.4% Between the ages of % 10 years and above

44 42 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Environmental, Quality and R&D Activities In order to ensure the viability and sustainability of the world and adhering to the principle that We will never present any product that we would not consume or that we would not allow our children to consume, Ülker Biscuits strives to provide the necessary training which focuses on these core values. environmental policy Ülker Biscuits environmental policy To bring under control all wastes resulting from activities and all kinds of contamination; To educate employees, suppliers and business partners regarding this issue; To support efficient use of natural resources and energy sources and to prevent loss; and To perform as per defined standards and regulations in this area. Training for employees and business partners was organized, and actions were taken to raise awareness for sustaining a habitable world in harmony with these principles and objectives. Both Ülker Biscuits factories have obtained the emissions reduction certificate. According to the results of emissions measurements, it was reported that of all the greenhouse gases, only carbon dioxide is produced in our facilities. The resulting figure for the consumption of natural gas is far below the regulatory limits. Burning systems in the facilities are regularly maintained to prevent fuel loss and increase efficiency. In Ülker Biscuits Istanbul Factory, 404A refrigerant gas is used in cooling systems in place of Freon 22 refrigerant, which is one of the hydrofluorocarbons that produces greenhouse gases subject to restrictions based on the Kyoto Protocol. R&D and Quality Studies Ülker Biscuits offers innovative products that appeal to traditional taste buds both in Turkey and around the world. The ethical principles of Ülker Biscuits R&D practices are: To use scientific methods and techniques to research, locate and report facts; To show concern for people, the environment and the public good and to do so by adhering to existing laws and regulations, principles and goals of the company; To ensure customer satisfaction and care in meeting the demands of customers; To providing safe, high-quality, economical and varied products; and To operate according to with the principle we will never offer our customers a product that we would not consume ourselves or that we would give to our children to consume. Ülker Biscuits Professional, experienced R&D staff continued to develop new high quality products in 2010 and took its innovative approach to higher levels. R&D projects concentrated on utilizing the unproductive capacity of the facilities, and significant improvements in the utilization of capacity was accomplished with the manufacturing of new products. On 2010 the R&D units in the Istanbul and Ankara factories worked on a total of 73 new projects. 18 of the resulting products have gone into production and are now on the market. One of Ülker Biscuits biggest projects in 2010 was the launching of Bolero Gofret. Besides this new product, in the biscuit and crackers group: Six new products from the Ankara Factory were launched (Bolero Hazelnut Wafer, Bolero Strawberry Wafer, Bolero Banana Wafer, Snack-size Çokoprens, Choco Rondo, Mavi Yeşil Bran, Oat Crackers); 12 new products from the Istanbul Factory were launched (Hanımeller Shortbread, Pötibör Çoko, Hanımeller Date Shortbread, Hanımeller Shortbread with Sesame, Hanımeller Mixed Shortbread (plain + sesame + nigella seed), Mavi Yeşil Scurfy Biscuits, Albeni Draje Cube Biscuits, Albeni Slim Biscuits, Exported Albeni 31 gr., Biskrem Single 23 gr., Hanımeller Shortbread with Hazelnut).

45 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 43 In Ankara 2 new products were developed (Deluxe Wafers 40 g, Strawberry Wafer); In Ankara 11 types of packaging were developed (800 g Rondo Plain Cream Sandwich Biscuits, Rondo Canpare 4 in MP, Rondo Choco 3 in MP, Rondo Dark 4 in MP, Rondo Plain Cream and Banana Cream 2 in MP, Pocket Wafer with Hazelnut, Pocket Wafer with Banana, Mini Halley 3 in MP and Mini Halley 5 in MP, Pötibör Mixed Package); In Istanbul 41 types of packaging were successfully developed (Hanımeller Stand koli, export Biskrem 3*2, Hero Baby Bim Baby s Biscuit 190 gr*12 units, Hero Baby Mini Baby, Hanımeller with Hazelnut 500 gr * 10 units, Hanımeller with chocolate chips 500 gr* 10 units, Passions Cookie 2 units, Hero Baby Baby s Biscuit Bim 1200 gr, Pötibör Can, Pötibör Çoko 65th year sample size, Hanımeller Shortbread with Sesame, Gold packaging machine, Çizi 4 in MP, Çizi 2*77 gr, Haylayf 2*83 gr, Hero Baby Bebe 1000 gr. etc. ). Products developed by R&D represented 6.3 % of the total tonnage of Ankara Factory and 5 % of the total tonnage of Istanbul Factory. Delicious, Healthy and Trusted Products In 2010 Ülker Biscuits continued to conduct routine tests and analyses in areas such as raw materials and packaging, as well as carrying out semi-manufactured and manufactured product evaluations, in order to guarantee consistent standards of quality and reliable production, free from human error. Production trials and physical, chemical and microbiological analyses were performed on a total of 80 separate alternative raw materials in Ankara, and on a total of nine alternative raw materials in Istanbul/Topkapı. In addition, results of analyses performed by accredited laboratories were requested from suppliers and recorded. Within the scope of defined analysis methods and procedures, routine activities and critical control point (CCP) checks, shelf life analyses, scoring, equipment and supervision of workplace and employee hygiene were routinely carried out. To set production standards of Ülker products, and to determine differences in similar products manufactured by competitive companies, benchmarking was carried out on a group of products including Halley, Pötibör, Çubuk Kraker, Çokoprens, Gofret, Rondo Kremalı, Canpare Kremalı, Hanımeller Cookies and Altınbaşak. To ensure the safety and hygeine of its products, in 2010 Ülker Biscuits organized training sessions in Workers Hygiene, the Environment, Management Methods and Allergens. Ülker Biscuits objective is to consistently meet customer expectations with the highest possible level of quality and to increase customer satisfaction. The Company therefore solicits customer feedback constantly and takes any corrective action that is required. In addition, tests and analyses are conducted on distributor warehouses, and with the cooperation of suppliers, to prevent quality-related problems at the source. Ülker Biscuits, consistently produces Delicious, Healthy and Safe products of superior quality, in compliance with existing laws and regulations, under stringent hygienic conditions. Certifications that have been obtained and which were renewed in 2010 are listed below: ISO 9001:2008 Quality management System, ISO Food Safety Management System, ISO Environment Management System, TS Worker Health and Safety Management system, BRC (Achieved Grade: A), IFS (Higher level). Ülker Biscuits also became a registered member of İCİX.

46 44 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Shareholder Relations and Profit Sharing Policy Ülker Biscuits shares continue to be preferred by investors, as in the previous years. Despite the short-term losses due to negative financial events in international markets, ISE index exceeded the pre-crisis levels in 2009 and 2010 and reached the highest level in history. Ülker Biscuits shares have moved in line with general trends at the ISE in 2010, as in the previous years. With this aspect, Ülker Biscuits shares have been preferred by those investors who tend to make a longterm investment far from speculative considerations, seeking an attractive dividend alongside a balanced price course, and also looking for stable return compared to alternative investment opportunities. Ülker Biscuits shares are traded on the ISE National Market with the Reuters ticker symbol ULKER.IS and Bloomberg s ULKER.TI. Relations with shareholders are coordinated by the Department of Finance. The Investor Relations Unit manages communications with the ISE, CMB and CRA and other official agencies. It also organizes meetings with shareholders upon their request, in addition to ordinary and extraordinary shareholders meetings. The Investor Relations Unit holds meetings with local and foreign investors, and is present at investor conferences organized both in Turkey and abroad. To this end, the Investor Relations Unit met with many local and foreign corporate investors in Profit Distribution Policy Ülker Biscuits policy is to determine the amount of dividend to be distributed, no matter it may be, as a value not less than the proportion and amount set by the CMB, in accordance with the resolutions of the General Assembly within the framework of Turkish Commercial Code, the rules and regulations of the CMB and the provisions laid down in its Articles of Incorporation. The dividend amount is to be distributed within the legal periods designated by the CMB. Profit distribution proposals by the Board of Directors at the General Assembly are set, taking delicate balance between the shareholders expectations and the growth dynamics of the Company into account and considering prevailing conditions of the national economy and the subject industry. The policy of distributing dividends in cash and/or as bonus shares has been adopted. The practice of giving advance dividends, even though it is allowed by the Articles of Incorporation, has not been utilized. Furthermore, the Articles of Incorporation also state that employees shall be paid merit bonuses from the profit according to their performance. Although there is a provision in the Articles of Incorporation for payment of advance dividend, this method has not been exercised to date.

47 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 45 Company Reuters & Forex code Ülker Biscuits ULKER Sector Foods XU100 XU050 XUTUM Within the scope of IMKB Indexes XUSIN XUSIN XGIDA XYUZO XSANK XULUS Price (TL) (December 31, 2010) 5.50 Publicly traded (%) 29 Market Value (US$) 960,783,039 Publicly Traded Market Value (US$) 307,450,572 Mean Production Volume (US$) (January 1, 2010-December 31, 2010) 7,523,553 Beta 0,84 Market Value (US$) Max 1,069,449,025 1,131,222,878 1,081,238, ,896,149 1,022,233,358 Min 747,369, ,843, ,644, ,760, ,008,000 Share Performance (%) TL US$ Relative Performance to ISE

48 46 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Social Responsibility Projects Ülker Biscuits occupies a place close to the hearts of its customers, and a result of its environmentally-friendly production facilities, healthy products, and its projects for children. These elements have defined Ülker Biscuits as an organization with a sense of social responsibility and a good global citizen. Respect for the Environment in Production Ülker Biscuits environmental policy was established, not because of legal obligation, but due to its sense of responsiibility as a citizen of Turkey and the world. Its production processes are are based on a strategy to reduce greenhouse gas emission, the greatest cause of global warming. This objective is also reflected in the way that the Company s production facilities are regularly maintained to prevent fuel loss and increase efficiency. The factory s chimney gas emission measurements are in compliance with Control of Industrial Facilities Air Pollution Origination Legislation, and indicate that smoke gas emissions from Ülker Biscuits production facilities are below legal limits prescribed by law. Ülker Biscuits efforts to protect the environment are not only limited to greenhouse gas emissions. Water sources are becoming more and more important every day because of global warming. Increased efficiency of waterusage is achieved through the water purification facilities in Ülker Biscuits factories which clean and recycle more than 73,000 m 3 of water annually. Used paper and similar materials are also collected separately for recycling and batteries are disposed of appropriately. Ülker Offers Healthy Products Ülker Biscuits offers a wide range of products based on the different requirements of different consumer segments. Ülker Biscuits, which has not used trans-fats in its products since June 2007, differentiates itself by developing healthy products thanks to its technological infrastructure. Ülker Biscuits contributes to healthy nutrition with its products, not only in Turkey but also in its countries of export by strictly observing the food standards applicable in these countries. Projects to Improve the Lives of Children Since its inception, Yıldız Holding has undertaken social responsibility projects aimed at social development, as well as contributing to the economic development of Turkey. As the flagship of Yıldız Holding, Ülker Biscuits continues to support the social responsibility and sponsorship projects undertaken by the Group. The wide-ranging social activities of the Group, which range from environmental protection to sports, focus especially on projects that invite children to get involved with life. Yıldız Holding continues to support projects for children, who are the future of Turkish sports. With this in mind, the HIF project that aims to get children into the habit of participating in sports has been undertaken in cooperation with the Turkish Football Federation. Due to rapid urabanizaiton, playgrounds are decreasing day by day and consequently children have to spend more and more time indoors. In order to get more children between the ages of 6-12 outdoors, they can enroll for free at HIF centers in Istanbul, Adana, Trabzon, Diyarbakır, Sinop and

49 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 47 Muş. The Herkes İçin Futbol project also arranges football villages. This activity was first organized in Van in 2007 and later on in Sinop, Bolu, Sivas and Isparta in 2008 and in Sakarya, Zonguldak, Kütahya, Malatya, Trabzon and Erzincan in At the football villages children are not only taught to play football, but they are also given information on nutrition, taught to play chess and given guidance on personal development and environmental awareness. Sports and fun come together at the football and basket festivals that are organized in the four corners of Turkey every year. Every year festivals are organized in different provinces. At these events children learn how to play sports and learn sportsmanlike. Thay also form new friendships. Since the festivals began, more than 100,000 children have benefited from this project by improving their sports skills and traveling around the country. Ülker was one of the brands represented at the Yıldız Holdingsponsored 2010 FIBA World Championship. Ülker Biscuits organized the Children of the World 2010 project in conjunction with the FIBA events. With the cooperation of the Turkish Basketball Federation, children from 100 countries came to Turkey to participate. 220 of the 300 children who took part were from countries other than Turkey. The children gathered in Istanbul to enjoy cultural, artistic and educational activities together. Another event was organized for children by Ülker in concert with the April 23 Sovereignty and Children s Day celebrations. The Ülker Children s Cinema Festival was attended by children and adults from all over Turkey, who were treated to a free day at the cinema. Since the beginning of the festival 395,000 children have participated and films have included Adventure Island in 2008, Moon Princess in 2009 and Astro Boy in The films were chosen to give children an opportunity to become aware of brand-new possibilities and strengthen their imaginative capabilities. Yıldız Holding continues to invest in training and sports projects for children and also participates in and supports congresses and conferences that contribute to the development of these sectors.

50 48 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT Corporate Governance Principles Compliance Report 1.Declaration of Compliance with the Corporate Governance Principles Our Company is aware of the importance of the implementation of the principles included in the Corporate Governance Principles published by the Capital Market Board in 2003 and revised and finalized in 2005, and has undertaken necessary work and continues to show necessary care to make further progress in this process. Please find below the evaluations and findings of our Company in respect of the level of compliance with the Corporate Governance Principles, as well as its comprehensive opinion for the improvement of the level of compliance in terms of scope and nature. In brief: The Unit in charge of the Shareholders Relations has been restructured. Arrangements have been made in respect of trading of insider information. The working guidelines of Committees have been reshaped. The website has been designed as stated in the Principles. Work has been undertaken for the Compliance of the Articles of Incorporation with the Corporate Governance Principles. The Corporate Governance Committee and the Risk Committee, which will report to the Board of Directors, have been established and the Audit Committee has been reorganized. It is also planned gradually to implement those principles which have not yet been implemented, although this has not led to any conflict of interests between the interest owners to date. The following Corporate Governance Principles Compliance Report has also been disclosed to the public on the Company s website at www. ulkerbiskuvi.com.tr. SECTION I Share Owners 2. Party Share Owner Relationships Relations with shareholders are coordinated by the Department of Finance. This Department responds to the queries made by our shareholders in writing or via the Internet, as well as attending investor meetings held in Turkey and abroad. Contact details of the Shareholder Relations Unit are given below: İlhan Turan Usta Director of Financial Affairs Davutpaşa Cad. No: Topkapı/ Istanbul [email protected] Hafize Nurtaç Ziyal* M&A Business Development and Investor Relations General Manager Kısıklı Mah. Ferah Cad. No: 1 B Çamlıca Üsküdar/Istanbul [email protected] * As of April 13, 2011, Hafize Nurtaç Ziyal was transferred to the Shareholder Relations Unit. Relations with shareholders are coordinated by the Department of Finance. This Department manages the communication with the ISE, CMB, CRA (Central Registry Agency) and Takasbank (the ISE Settlement and Custody Bank) and informs shareholders of announcements from these bodies. It also organizes meetings with shareholders upon their request, or on a project basis as required, in addition to the ordinary and extraordinary shareholders meetings. 3. Exercise of the Right of Access to Information by Shareholders The written or verbal requests for information from our shareholders during the period have been met, except those that are characterized as business secrets or not disclosed to the public. All information that might be required for the exercise of the shareholders rights is provided to our shareholders in our annual reports and material case announcements and through individual requests. Furthermore, necessary information is also made available to shareholders in general at the website: www. ulkerbiskuvi.com.tr. 4. Information about General Meetings One ordinary Shareholders General Meeting was held in The General Meeting: The Ordinary General Meeting of 2009, held on May 6, 2010, was attended by our shareholders representing approximately 75% of the paid-in capital, which was TL 268,600,000. No interest owner or media came to the meeting. As provided in the Law and Articles of Incorporation, the invitation to the meeting containing venue, date, time, agenda and power of attorney form was duly made by a notice given in the Turkish Trade Registry Gazette No. 7545, dated April 16, 2010, in the daily newspapers Dünya and Referans published on April 16, 2010 and via the Internet, as well as by sending registered mail to the holders of shares issued to name and to holders of shares issued to the bearer if they have lodged shares and notified the Company of their address in advance. The financial statements and reports, including the annual report, the profit distribution proposal, any necessary information document prepared in relation to the items on the agenda of the General Meeting, and any other

51 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 49 documents in support of the items on the agenda as well as the latest version of the Articles of Incorporation and the copy of amendments and grounds thereof, if any amendment will be in the Articles of Incorporation, are made available to our shareholders for review at the Head Office and branch offices of our Company from the date of notice given for the invitation to the General Assembly. In the General Meeting, information about the issues on the agenda was given in a straightforward and clear manner. Shareholders were offered equal opportunity to express their feelings and ask questions, and an atmosphere of healthy discussion was created. No questions were raised by the shareholders at the General Meeting of 2009, and no proposals were made other than the items on the agenda. 5. Voting Rights and Minority Rights Every share has one vote, as per our Articles of Incorporation. The capital of our Company consists of Group A, B, C and D shares. Four members of the Board of Directors can be elected from among the candidates nominated by the absolute majority of Group A shareholders, and one member can be elected from among the candidates nominated by the absolute majority of Group D shareholders. The other members can be elected from among the candidates nominated according to the general provisions. There is no relationship of mutual affiliation between any of our shareholders and the Company. The cumulative voting method is not exercised in our Company. There is no provision in our Articles of Incorporation that prevents voting by proxy as the representative of shareholders not present. 6. Profit Distribution Policy and Date of Profit Distribution Within the scope of the Corporate Governance Principles set forth by the CMB, our Board of Directors has adopted a profit distribution policy as mentioned herein below. Accordingly: Our Company has adopted the principle of determining the amount of dividend to be distributed according to the resolution adopted in the Shareholders Meeting within the framework of Turkish Commercial Law, the provisions of the CMB and the provisions laid down in the Articles of Incorporation. The dividend will not be less than the rate and amount fixed by the Capital Market Board, and will be distributed within the legal periods designated by the CMB. Profit distribution proposals made by the Board of Directors at the General Meeting maintain a sensitive balance between the expectations of shareholders and the growth requirements of Ülker Biscuits, taking into consideration the prevailing conditions of the national economy and the industry in which the Company operates.the principle of distributing the dividends in cash and/or as free shares has been adopted, and the A and B shares and the founding shares are privileged to receive shares from the profit at the rates laid down in the Articles of Incorporation. Furthermore, the Articles of Incorporation also state that employees shall be paid merit bonuses from the profit according to their performance. Also, although there is a provision in the Articles of Incorporation for payment of advance dividend, this method has not been exercised to date. The shareholders were informed about the profit distribution policy of our Company at the General Meeting. This profit distribution policy is disclosed to the public and is also included in the Company s website and annual reports. 7. Transfer of Shares Article 10 of our Articles of Incorporation provides for the transfer of shares issued to name. According to the said Article, the shares issued to name can be transferred in principle. The transfer shall be effective as from delivery of share to the transferee and registration into the share book. The Company may refrain from registering the transfer into the share book without stating a reason. SECTION II - PUBLIC INFORMATION AND TRANSPARENCY 8. Company Information Policy Company information policy is carried out in accordance with legal regulations, CMB legislation and the rules determined by legal announcements. The Company has prepared a written document regarding public disclosure and information and published it on its website following the approval of the Board of Directors. Additionally, it has been adopted as the basic channel to make available any information which has already been disclosed to the public, to the relevant person in the shortest time possible upon request. Shareholders requests for information are met in writing or verbally. In the event of any important developments requiring public information during the year, necessary material case announcements are also made in a timely manner. Our annual report is prepared in detail to ensure public access to any information regarding the activities of the Company. 9. Material Case Announcements Our Company issued 22 material case announcements during the period of January - December 2010, pursuant to the CMB regulations. No additional explanation was requested by the CMB in reference to the material case announcements made by our Company in There are no material case announcements that have not been made in due time by our Company.

52 50 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Corporate Governance Principles Compliance Report 10. Company Website and its Content Our Company s website, in Turkish and English, is available at com.tr. The information below is available on our website for the purpose of informing the shareholders in relation to our Company: Information on Ülker Biscuits and its subsidiaries The Vision of the Company Ethical principles Information about the Board of Directors and the General Manager Shareholder structure Organizational structure Community responsibility Trade registry information and Company profile Articles of Incorporation Financial Statements and footnotes Annual reports Material case announcements Corporate Governance Principles Compliance Report Information on General Meetings (Agenda, minutes, list of attendants and power of attorney form) Company Information Policy Committees Newspaper advertisements and Press Releases (General Meeting announcements, etc.) Insider information list Rating reports Ülker Biscuits at the ISE (ratios and graphic information regarding the shares) 11. Declaration of Individual Ultimate Controlling Shareholder(s) There is no individual ultimate controlling shareholder in our Company. Our shareholder structure is included in the annual report and on our website. 12. Public Disclosure of Persons who Can Have Insider Information Our Company has taken every precaution necessary to prevent the use of insider information. Our website lists these precautions and the executives who have access Corporate Governance Principles Compliance Report to information that can affect the value of capital market instruments, as well as other individuals/entities from whom it receives services. SECTION III - INTEREST OWNERS 13. Informing the Interest Owners In the event that the rights of interest owners are not regulated by the legislation or contract, their interests shall be protected within the framework of the rules of goodwill and by observing the prestige of Company to the extent permitted by the resources of the Company. Additionally, the employees have access to circulars and announcements through the Internet portal of the Company. Some of the important announcements are released simultaneously to all employees via Participation of Interest Owners in the Management The Board of Directors consists of seven members, as per our Articles of Incorporation, and these members are elected by the General Meeting upon recommendation of various shareholders according to the provisions laid down in the Articles of Incorporation. 15.Human Resources Policy The basic policy of the human resources department is to develop a high performance team with the improvement and development of human resources building upon what has been done to date. The human resources policy adopted by our Company is in general the policies adopted by Yıldız Holding. These policies are available at tr and No discrimination complaint has ever been made against the human resources policy implemented by our Company. 16. Information Regarding Relations with Customers and Suppliers Our Company seeks continuity of service quality and standards at all stages of production. The utmost care is taken with the confidentiality of the customers and suppliers information that has the nature of trade secrets. Customer satisfaction is one of the basic principles of our Company. 17. Social Responsibility The social responsibility activities of our parent holding company, namely, Yıldız Holding, are listed in our annual report and are also available at www. ulker.com.tr and tr. Our Company takes the utmost care in implementing such policies which respect and support the environment, sports, education and public health. SECTION IV - BOARD OF DIRECTORS 18. Structure and Composition of the Board of Directors, and the Independent Members The Board of Directors is composed of seven members. In line with the Articles of Incorporation, these members are elected by the General Meeting; four members are elected from among the candidates nominated by the absolute majority of Group A shareholders and one member is elected from among the candidates nominated by the absolute majority of Group D shareholders. The other members are elected from among the candidates nominated according to the general provisions.

53 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 51 Details about members of the Board of Directors are provided below. Name Surname Murat Ülker Orhan Özokur Ali Ülker Alain Strasser Title Chairman of the Board Deputy Chairman of the Board Member of the Board (Executive Director) Member of the Board Cengiz Solakoğlu Member of the Board Mahmut Mahir Member of the Board Kuşculu Güven Obalı Member of the Board Board Members Mahmut Mahir KUŞCULU, Cengiz SOLAKOĞLU and Güven OBALI are independent members. 19. Qualifications of Members of the Board ofdirectors The minimum qualifications required for election as a member of the Board of Directors are in line with the qualifications set forth in Articles 3.1.1, and of Section IV of the CMB Corporate Governance Principles. In the Articles of Incorporation, there is a provision requiring that the Board Members have sufficient knowledge of the legal framework which regulates the activities of the Company, and be qualified and experienced in company management and able to analyze the financial statements and reports of the Company. Additionally, as per the Articles of Incorporation, at least one third of the members of the Board of Directors are required to be elected from among university graduates. Our Board of Directors consists of seven members, and this number ensures efficient organization of the activities of the Board of Directors. 20. The Vision of the Company Our Company and all companies of Yıldız Holding have been founded with the belief that every person is entitled to enjoy a pleasant childhood no matter which country s/he may live in. The vision of Ülker Biscuits is to strengthen its position as a brand most preferred by consumers, and to be among the top five companies in the world markets within the next ten years, particularly in the area of bakery products. The vision and mission of Yıldız Holding and our Company have been made public and are available at and Risk Management and Internal Control Mechanism Activities regarding risk management are carried out by the Risk Committee. Furthermore, our Company is also audited regularly by the audit units of Yıldız Holding A.Ş., its principal shareholder, and by independent auditors. The findings of these audits are submitted to members of the Committee in Charge of Audit and other members of the Board of Directors. Company workflows, procedures, and the authorities and responsibilities of employees have been placed under control, subjected to constant supervision within the framework of risk management. 22. Authorities and Responsibilities of Members of the Board of Directors and Executives The authorities and responsibilities of members of the Board of Directors and executives are clearly set forth in the Articles of Incorporation available at The Board of Directors exercises its powers having all the information required, prudently and within the framework of the rules of goodwill to ensure proper fulfillment of its role. 23. Principles of Activity of the Board of Directors The Board of Directors held 23 meetings during the period From January - December Utmost care is taken to determine the date of meetings to allow all members to attend. The Board of Directors meets regularly, whenever the businesses of the Company require. 24. Non-Transaction and Non- Competition with the Company Members of the Board of Directors do not have any transaction or activity that may be within the scope of prohibition of transaction and competition with the Company and which, hence, require permission from the General Meeting. 25. Ethical Rules Ülker Bisküvi is a member of a Group that produces quality and healthy products, respects its employees, cares for the rights of partners and shareholders, suppliers and customers, is law-abiding, attaches importance to the values of society, bears social responsibility, has adopted principles of management that are based on the highest level of respect, cooperation, high performance of work, honesty, consistence, respect, confidence and responsibility between executives, employees, suppliers and customers, and endeavors to improve upon these principles. The ethical rules adopted by Yıldız Holding companies are implemented in all Group companies, and these ethical rules have been made public and are available for the information of our shareholders at

54 52 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT njnj Corporate Governance Principles Compliance Report 26. Number, Composition and Independence of the Committees in the Board of Directors Audit Committee: An Audit Committee was established by the Board of Directors on May 22, It was reorganized in compliance with CMB Communiqué No. 22 Series X following a decision taken by the Board on August 5, The Audit Committee was formed to ensure that the financial and operational activities of the Company are carried out on a solid and healthy basis. Working under the Board of Directors, the Committee is responsible for following up the processes of the accounting system, the auditing and disclosure of financial information, and the functioning and efficiency of the internal control system. This Committee meets whenever required, which should be no less than quarterly. The structure of the Audit Committee, amended with the Board of Directors decision dated March 31, 2010, is as follows: Name Surname Title Company and Relationship Mahmut Mahir Kuşculu Committee Chairman Board Member (Independent) Güven Obalı Committee Member Board Member (Independent) Dr. Halil Cem Karakaş Committee Member Holding CFO 27. Financial Benefits Provided for the Board of Directors The fees of members of the Board of Directors are determined separately for each by the General Assembly in view of the financial conditions of the Company. It was decided to pay a monthly gross fee of TL 2,450 to each member of the Board of Directors in 2010, pursuant to the decision adopted at the General Meeting. No member of the Board of Directors or executive has been either directly or through a third party, given any loan, or allowed to use any credit, or provided any guarantees during this period. Corporate Governance Committee:: Following the decision of the Board on August 5, 2008, a Corporate Governance Committee was established within the Company as per CMB Corporate Governance Principles. The Committee reports to the Board of Directors. It meets whenever required, which should be no less than three times in a year. The structure of the Corporate Governance Committee, amended with the Board of Directors decision dated March 31, 2010, is as follows: Name Surname Title Company and Relationship Cengiz Solakoğlu Committee Chairman Board Member (Independent) İlhan Turan Usta Committee Member Financial Affairs Director Hafize Nurtaç Ziyal* Committee Member M&A Business Development and Investor Relations General Manager Risk Committee: Following the decision of the Board on August 21, 2009, a Risk Committee was established within the Company as per CMB Corporate Governance Principles and the Articles of Incorporation. The Committee reports to the Board of Directors and meets whenever required. Details of the Risk Committee are as below: Name Surname Title Company and Relationship Necdet Buzbaş Committee Chairman - Mahmut Mahir Kuşculu Committee Member Board Member (Independent) * Hafize Nurtaç Ziyal was appointed to the Committee of Corporate Governance as of

55 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 53 Profit Sharing Proposal At the Meeting with number 577, dated April 20, 2011, the Board of Directors of Ülker Biscuits reviewed the consolidated income statement which was issued in accordance with the Capital Market Board s Communiqué No. 29, Series XI and which passed the independent audit, and the profit distribution table, which was prepared in view of the Capital Market Board s resolutions number 7/242, dated February 25, 2005, and number 21/537, dated May 5, 2006 as well as resolution number 02/51, dated January 27, 2010, regarding the calculation of the net distributable annual profit from the activities in 2009 in respect of the companies that are open to public offering; and decided to distribute dividends in cash against dividend coupons No. 8 for the founding shares and against dividend coupons 2010 for the group A, B, C and D shares. It was decided to submit a proposal to our shareholders at the Ordinary General Meeting to distribute the intended TL 17,966, gross and TL 15,271, net sum of dividends in accordance with article 34 of our Articles of Incorporation on profit distribution, on the basis of a cash dividend at the gross amount of TL (5.17%) and net amount of TL (4.39%) for each publicly traded ordinary share with a nominal value of TL 1, so that the gross amount of TL 13,883, (net 11,801,132.92) will be distributed to the ordinary shares and the gross amount of TL 2,450, (net 2,082,899.96) will be distributed to Group A and B shares, and gross amount of TL 1,632, (net 1,387,813.23) will be distributed to the founding shares, with the remaining revenue to be recorded in the account of Extraordinary Reserves. Profit Distribution Table for Paid-in / Issued Capital 268,600, Total Capital Reserve (According to Legal Records) 47,940, As per the Articles of Incorporation, if there is a privilege in the profit distribution, information regarding this is as stated below. An amount of 17.65% of the first dividend will be distributed to A and B group shareholders, and an amount of 11.76% of the first dividend will be distributed to the registered dividend right certificate holders. According to the CMB According to Legal Records (LR) 3. Profit for the Period 217,148, ,422, Outstanding Taxes (-) (32,301,882.00) (32,335,150.73) 5. Net profit for the Period (=) 184,846, ,087, Losses from Previous Years (-) Primary Reserve (-) 5,779, ,779, NET DISTRIBUTABLE PROFIT (=) 179,067, ,307, Donations Paid during the Year (+) 540, Primary dividends plus calculated donations net distributable 179,607, profits 11. Primary Shareholder Dividend 13,883, Currency 13,883, Gratis Total 13,883, Preferred Stock Dividends to be Distributed 2,450, Dividends payable to Board Members, Employees, etc Dividend to Redeemed Shareholders 1,632, Secondary Shareholder Dividends (Gratis) Secondary Reserves Statutory Reserves Special Reserves RESERVE FOR CONTINGENCIES 161,100, ,340, Other resources planned for distribution Past Years Profit Reserve for Contingencies Other Distributable Reserves Pursuant to the Law and Articles of Incorporation

56 54 ÜLKER BİSKÜVİ 2010 ANNUAL REPORT INFORMATION ON DISTRIBUTED PROFIT RATIO INFORMATION ON DIVIDEND PER SHARE GROUP TOTAL AMOUNT OF DIVIDEND (TL) DIVIDEND PER TL 1 NOMINAL VALUED SHARE RATIO (%) AMOUNT (TL) RATIO (%) A 1,641, , ,052, B 808, , ,052, GROSS C and D 13,883, FOUNDER 1,632, TOTAL 17,966, A 1,395, , ,394, B 687, , ,394, NET C and D 11,801, FOUNDER 1,387, TOTAL 15,271, RATIO OF THE DISTRIBUTED DIVIDEND OVER THE NET DISTRIBUTABLE TERM PROFIT INCLUDING DONATIONS GROUP FOUNDER SHARES AMOUNT OF DIVIDENDS DISTRIBUTED TO PARTNERS (TL) RATIO OF THE DISTRIBUTED DIVIDEND TO SHAREHOLDERS OVER THE NET DISTRIBUTABLE TERM PROFIT INCLUDING DONATIONS (%) 17,966, TOTAL DIVIDEND AMOUNT (TL) GROSS 1,632, QUANTITY DIVIDEND PER SHARE (TL) 73, , NET 1,387, ,59588

57 INTRODUCTION ACTIVITIES CORPORATE GOVERNANCE FINANCIAL INFORMATION 55 Audit Board Report The Company s * Title : ÜLKER BİSKÜVİ SANAYİ A.Ş. * Headquarters : İSTANBUL * Capital : TL 268,600,000 * Field of Business : Production of biscuits, chocolate covered products and wafers. Names and surnames of auditor(s), terms of office, whether they are shareholders or employees of the Company : Ataman YILDIZ - Nurettin ALİZ Their term of office is one year. The auditors are neither shareholders nor employees of the Company. Number of the Board of Directors : Four meetings of the Board of Directors and monthly meetings held meetings of the Audit Committee were attended in Scope, dates and conclusion of review Dates and results of counts made in the cash Dates and results of review made pursuant Any complaint or corruption reported : Company accounts, books and documents were duly audited at the end of each month, and the Company documented that the shareholders accounts and the statutory books were kept in compliance with the provisions of its Articles of Incorporation and the Turkish Commercial Code. : Since the Company does not have any cash of the Company pursuant to sub-paragraph 3 in the Company cash office and all payments of paragraph 1 of Article 353 of the and receipts are realized through check and Turkish Commercial Code bank channels, no counts were made. : The required review was made at the end of to sub-paragraph 4 of paragraph 1 of Article every month, and the existing securities and 353 of the Turkish Commercial Code negotiable instruments were found in accordance with the records, and other duties assigned to the auditors in the other paragraphs of the same article were fulfilled. : No complaint or corruption was reported and the action taken verbally or in writing to us during our term of office. We have reviewed the accounts and transactions of ÜLKER BİSKÜVİ SANAYİ A.Ş. for the period January 1, 2010 to December 31, 2010 in accordance with the Turkish Commercial Code, its Articles of Incorporation, and other applicable regulations and generally accepted accounting principles and standards. In our opinion, the operations of the Company, summarized in the report prepared by the Board of Directors and, accordingly, the annexed balance sheet dated December 31, 2010 reflect the financial status of the Company at that date, and the income statement for the period from January 1, 2010 to December 31, 2010 reflects the results of activities in that period accurately and correctly, of which we agree with the contents, and the profit distribution proposal appears to be in compliance with the laws and Articles of Incorporation of the partnership. In conclusion, we hereby kindly request you to consider and vote for the approval of the balance sheet and income statement and to grant discharge to the Board of Directors Auditor Ataman YILDIZ Auditor Nurettin ALİZ

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