2013 Annual Report - Ülker Investor Relations
Transkript
2013 Annual Report - Ülker Investor Relations
100% Happiness 2013 ANNUAL REPORT Contents Key Financial Indicators In 2013, Ülker increased its consolidated sales by 17.3% and its operating profit by 39.5%. 05 Key Financial Indicators 06 Operational Indicators 07 Capital and Shareholder Structure 08 Production Facilities 09 Ülker’s Share Performance on the BIST 10 Message from the Chairman 12 Board of Directors 15 Message from the CEO 16Strategies 18 Current Economic Outlook, Global and Turkish Food Industries 20 Key Developments 22 Production and Capacity 25Investments 26Subsidiaries 30 Human Resources 33 Quality and R&D 38 Social Responsibility 42 Corporate Governance Principles Compliance Report 53 Risk Management 54 Investor Relations 55 Amendments to the Articles of Association 64 2013 Ordinary General Assembly Meeting Agenda 65 Subsidiary Company Report Results 66 Power of Attorney 67 Dividend Distribution Policy 68 Independent Audit Report 05 Message from the Chairman 2013 was a year with innovation and achievements for Ülker. 10 Current Economic Outlook, Global and Turkish Food Industries Global economy continued to grow in low gear in 2013. 18 Production and Capacity Increasing capacity utilization rates... 22 Human Resources Ülker sees its employees as its “biggest capital” and “most valuable asset”. 30 70 years ago, launching its operations in a small workshop in Istanbul Eminönü with six-seven boilers, a small oven and three workers, Ülker is the world’s giant brand in its sector today. With its innovative vision, Ülker always freshened its consumers’ trust as well as its products. Getting the outcomes of its investments in 2013, Ülker continues to give happier moments to more consumers in more locations while continuing to be among Turkey’s most famous and most appreciated top brands. 2 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Increasing Sales Increasing sales volume SALES VOLUME BY CATEGORY (TonS) Biscuit Chocolate Cake 478,725 2013 158,776 254,889 Biscuit Chocolate 65,060 13.4% Cake 422,008 2012 133,784 231,659 56,565 NET SALES BY CATEGORY (TL MILLION) Biscuit Chocolate Cake Other 2,748 2013 992 Biscuit 1,351 Chocolate 299 Cake Other 2,344 2012 846 106 1,139 264 95 17.3% 3 Increasing Profit Increasing profitability NET PROFIT (TL MILLION) NET PROFIT MARGIN (%) 189 2013 167 2012 EBITDA (TL MILLION) 6.9 2013 7.1 2012 EBITDA MARGIN (%) ADJUSTED EBITDA (Excludes Other Nonoperating Income & Expenses) 315.1 2013 2012 220.9 11.5 2013 2012 9.4 4 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Sustainable Profitability Successful results COMPONENTS OF EBITDA MARGIN IMPROVEMENT (%) 2013 EBITDA Margin 11.5 Better Cost & OPEX Management 2.5 Category Mix Effect 1.3 Distribution Restructuring 3.4 2011 EBITDA margin 4.3 5 Key Financial Indicators Strong financial structure Summary Balance Sheet (TL) 2013 2012 Current Assets 2,128,504,531 2,258,514,250 Non-Current Assets 1,033,447,409 898,093,294 Total Assets 3,161,951,940 3,156,607,544 Short-term Liabilities 1,826,580,192 1,143,105,831 Long-term Liabilities 67,203,301 933,748,301 Shareholders’ Equity 1,129,829,508 957,451,288 138,338,939 122,302,124 3,161,951,940 3,156,607,544 2013 2012 2,748,370,545 2,343,232,826 Gross Profit 633,310,272 505,250,892 Operating Profit 312,603,638 224,166,175 Net Profit 188,648,445 166,968,003 Ratios 2013 2012 Gross Profit Margin (%) 23.0 21.6 6.9 7.1 0.55 0.49 Non-controlling interest Total Assets Summary Profit and Loss (TL) Revenue Net Profit Margin (%) Earnings per share (1 TL Nominal) Operating Profit (TL million) 313 2013 224 2012 2011 Shareholders’ Equity (TL million) 113* 2013 2012 2011 *In line with the reporting prior to the new Announcement of Public Oversight. Ülker’s operasting profit realized TL 313 million in 2013. 1,268 1,080 1,097 6 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Operational Indicators Increasing production capacity 2013 Total Production (Tons) 448,643 Biscuit Production Chocolate Production Cake Production 225,485 158,298 64,860 2013 Total Sales (TONS) 478,725 Biscuit Sales Chocolate Sales Cake Sales 254,889 158,776 65,060 7 Capital and Shareholder Structure Solid future Ülker’s shareholding structure as of December 31, 2013 is presented below. As of December 31, 2013, 39.81% of Ülker stock consisted of free-float shares. Yıldız Holding A.Ş. Share Value December 31, 2013, Share Ratio Share Value December 31, 2012, Share Ratio 166,967.458 48.82% 151,778,531 44.38% - - 73,308,031 21.44% 38.888.808 11.37% 48.220.722 14.10% 136,143734 39.81% 68.692.716 20.08% 342,000,000 100.00% 342,000,000 100.00% Dynamic Growth Fund Yıldız Holding Subsidiaries and Ülker Family Members Free Float Total CAPITAL STRUCTURE 48.82% Yıldız Holding A.Ş. 39.81% Free Float 11.37% Yıldız Holding Subsidiaries and Ülker Family Members For Ülker Biscuits, 2013 was a year full of innovations and achievements. We make our investors happy with our corporate procedures and operational success while making our consumers happy with our quality products. 8 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production Facilities Production facilities Hadımköy, Istanbul Factory •Cake •Established in 1992 • Capacity: 45 thousand ton/year •27 thousand m2 indoor area Gebze Factory •Biscuit & cracker •Established in 1997 •Capacity: 59 thousand ton/year •41 thousand m2 indoor area Ankara Factory •Biscuit •Established in 1969 •Capacity: 109 thousand ton/year •86 thousand m2 indoor area •The biggest biscuit production factory of the Middle East region Topkapı, Istanbul Factory •Chocolate •Established in 1991 •Capacity: 194 thousand ton/ year •68 thousand m2 indoor area Silivri, Istanbul Factory •Chocolate, chocolate covered biscuit •Established in 1995 •Capacity: 30 thousand ton/year •12 thousand m2 indoor area Karaman Factory •Biscuit, cake, cracker & chocolate •Established in 1986 •Capacity: 195 thousand ton/year •102 thousand m2 indoor area •Ülker branded other products •Ülker ownership ratio: 44% 9 Ülker’s Share Performance on the Bist Rising market value Ülker’s shares are publicly traded on the BIST National Market under the ticker symbol ULKER.IS. Investors who sought a long-term investment with consistent returns continued to invest in Ülker. The Company’s share price stood at TL 15.20 as of December 31, 2013. At year-end, Ülker’s market capitalization totaled TL 5,198 million, while the market value of its free-float shares had risen to TL 2,070 million. Company Reuters & Forex Code Bloomberg Code Industry Ülker Bisküvi ULKER.IS ULKER TI Food NATIONAL MARKET BIST ALL BIST FOOD, DRINK BIST INDUSTRIAL BIST DIVIDEND BIST DIVIDEND 25 BIST NATIONAL BIST 100 BIST 50 BIST 30 Related BIST Index As of December 31, 2013 Share Price (TL) Free-float Ratio (%) Market Capitalization (TL million) Share Performance (%) TL USD 2011 (0.8) (19.0) 15.20 39.81 5,198 2012 103.8 115.9 2013 53.7 30.6 BIST 100 and Ülker 19 ÜLKER 100 BIST-100 17 90 15 80 13 70 11 60 12/25/2013 12/4/2013 11/13/2013 10/23/2013 10/2/2013 9/11/2013 8/21/2013 7/31/2013 7/10/2013 6/19/2013 5/29/2013 5/8/2013 4/17/2013 3/27/2013 3/6/2013 2/13/2013 1/23/2013 1/2/2013 9 10 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Message from the Chairman An innovative world brand Achieved year-end results reveal the correctness of our strategies and the success in our practices. Dear Shareholders, Given that developments in the global economy and actions taken by central banks have played a significant role in shaping the current market environment. I believe it would be useful to first review the world’s economy in 2013 before I move on to an evaluation of the Turkish economy and our business. The global recession experienced over the last three years entered a phase of recovery and improvement in 2013, increasing expectations that moderate growth will be achieved in the coming years. The acceleration in US gross domestic product (GDP) growth along with the positive signals in the European economy boost hopes for 2014. Looking back at the domestic environment, the Turkish economy posted stronger growth, as high as 4%, compared to other nations in the first nine months of 2013, right after we began the year with new goals and expectations. Although the US Federal Reserve’s announcement that it would start to taper its liquidity injections from July onwards caused some fluctuations in financial markets, it did not lead to significant cash outflows from developing countries until the end of the year. The food and beverage industry in our country benefited from this positive market environment and posted its biggest growth in recent years. 11 2013 was full of innovations and new achievements for Ülker Bisküvi. While our corporate efforts and operational successes pleased our investors, our high quality products made our consumers happy. Quality was the main theme we focused on throughout the year. In 2013, we did not limit the concept of quality solely to our products but evaluated all Company processes and results in different contexts and from different perspectives, and put a great deal of effort into doing our job in the best possible way. These intensive efforts throughout the year yielded favorable financial results: In 2013, our Company increased consolidated sales by 17% while operating profit rose 40%. We owe this success to our employees and their constant drive to achieve continuous improvements as well as to our customers’ consumption habits and their unwavering confidence in Ülker. Following the block sale, Ülker Bisküvi’s average daily trading volume increased fivefold when compared with the period prior to the sale. Further, Ülker Bisküvi was subsequently included in some of the most credible stock exchange indices and its market capitalization increased significantly. All of these developments clearly demonstrate that we made the right decision. In 2014, we plan to continue giving top priority to the quality of our products and all Company operations as we always do, while responding to our customers’ needs and demands in a faster and more effective manner. I believe that in the coming period our relationship with our stakeholders will further strengthen. We will continue to listen closely to the voices of our customers, stakeholders and employees, value their priorities, and achieve even stronger results than in previous years by operating in a high quality and competitive manner. Respectfully yours, Another important development in 2013 was the sale of Yıldız Holding’s 20% stake in Ülker Bisküvi. In order for Ülker Bisküvi to reach a market capitalization it well deserves, to become included on well-known global stock market indices, and to increase the daily trading volume to a level acceptable for investors, Yıldız Holding sold its 20% stake in Ülker Bisküvi to 44 international investors on October 4, 2013. Murat ÜLKER Chairman 12 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Board of Directors Murat Ülker Chairman A graduate of Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Murat Ülker began his professional career in 1982 and started work as Control Coordinator with the Group in 1984. He later attended various training courses (AIB and ZDS) abroad and worked as a trainee at Continental Baking Company in the US. Mr. Ülker also worked in the export business for two years in the Middle East. Subsequently, he analyzed about 60 factories and facilities operating in the biscuit, chocolate and food industries in the US and Europe over a period of three years. Mr. Ülker also participated in various IESC projects, and spearheaded many vertical integration related investments. After serving as Assistant General Manager for Enterprises, General Manager, Executive Committee Member and Board Member in various companies of the Group, Mr. Ülker was appointed Chairman of the Board of Yıldız Holding in 2000. Mr. Ülker speaks English and German; his hobbies include sailing and traveling with his family. He is married and has three children. Ali Ülker Deputy Chairman Ali Ülker graduated from Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Economics and Business Administration. He also 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 began his professional career in 1985 as a trainee in the Quality Control Department of Ülker Gıda A.Ş. Later, he served as trainee, Sales Executive, Sales Coordinator, Product Group Coordinator and Product Group Manager between 1986 and 1998 at the chocolate production facilities and at Atlas Gıda Pazarlama A.Ş. He then served as General Manager of Atlas Gıda Pazarlama in 1998, Deputy Chairman of the Consumer Group for Marketing and responsible for Chain Stores in 2000, General Manager of Merkez Gıda Pazarlama A.Ş. in 2001 and Deputy Chairman of the Organized Retail Food Group in 2002. In 2005, he was appointed Chairman of Ülker (Biscuit, Chocolate, Candy) Group. Mr. Ülker speaks English and German; his hobbies include fishing, watching movies, reading books, and playing basketball and billiards. Mehmet Tütüncü Board Member - CEO Mehmet Tütüncü was appointed Chairman of the Food and Beverages Group in 2005. As of October 2009, the Gum and Candy companies were incorporated into the Food Group; Mr. Tütüncü was appointed CEO for biscuit-chocolate-cake operations in September 2011, in addition to his other duties. Mr. Tütüncü began his professional career in 1981 as an engineer at the Ministry of National Education, Construction Department. From 1983 to 1987, he worked as a Local Industry Specialist at the Ministry of Industry and Trade. Between 1987 and 1996, he served as Production Manager, Business Manager and General Manager, respectively, at Best Rothmans Entegre Sigara ve Tütün Sanayi A.Ş. Mr. Tütüncü joined the Group in 1996 as Facilities Coordinator, and later served as General Manager of Ülker Bisküvi and Çikolata production facilities in 1998; in 2000, he became the Deputy Chairman of the Ülker Group. Mr. Tütüncü is a graduate of Gazi University, Faculty of Engineering, Mechanical Engineering Department. In 1987, he won the IRI scholarship and studied Production, Quality Control and Maintenance Procedures in Italy. He also holds a Master of Science degree in the field of Industrial and Organizational Psychology. From 1993 until 1994, Mr. Tütüncü attended the Business Administration Training Program at Boğaziçi University where he studied Marketing Techniques, International 13 Marketing, Factory Organization and Management. He also completed the Strategic Marketing Program at Harvard Business School and attended several training programs at IMD/Switzerland and Insead/Singapore. Mr. Tütüncü speaks English and is a member of TÜSİAD (Turkish Industrialists’ and Businessmen’s Association). Mr. Tütüncü was born in 1958. He is married and has three children. Ahmet Özokur Board Member Ahmet Özokur studied Business Administration and Marketing at Indiana University, Department of Business Administration and at the European Business School. He began his professional career in 2004 as Executive Board Member at Hızlı Sistem A.Ş. In 2005, he was appointed General Manager of Datateknik, and he was promoted to the position of CEO of Datateknik Informatics Group within the same year. Post merger in 2006, Datateknik Informatics Group became a fully integrated group engaged in systems integration, distribution of computer components, software development and distribution, development of interactive applications, manufacturing and distribution of Expert branded products; it was a pioneering and innovative company in its sector. In 2008, with the restructuring of Datateknik Informatics Group under the umbrella of Yıldız Holding, Mr. Özokur was appointed Assistant to the Chairman. Within the same year, he was also appointed Project Leader at Yıldız Holding Real Estate Investment Group and Executive Member of Beta Marina İşletmeciliği A.Ş. Subsequently, Mr. Özokur also served as the General Manager of Sağlam Real Estate Investment Trust which eventually merged with SAF REIT. Mr. Özokur has an interest in aquatic sports. He is married and has two children. Mahmut Mahir Kuşculu Board Member Mahmut Mahir Kuşculu graduated from Istanbul Erkek Lisesi, and then from Istanbul University, Faculty of Economics. He went on to complete his postgraduate education in marketing in the US. From 1970, Mr. Kuşculu served as Executive Manager and Board Member in the family glass industry businesses, Tamcam A.Ş. and Arsal Cam Sanayii. He founded Kutaş Dış Ticaret ve Pazarlama A.Ş. in 1982, and Erdem Dış Ticaret A.Ş. in 1985, while also taking part in the management of these companies. Mr. Kuşculu has served on the professional committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years; also, he has served as a Member of the Assembly of Istanbul Chamber of Industry for 15 years. Mr. Kuşculu is married and has two children. Cengiz Solakoğlu Board Member Cengiz Solakoğlu graduated from the Istanbul Academy of Economic and Business Studies in 1964, and began his professional career in sales at Beko Ticaret A.Ş. He was promoted to Regional Sales Manager in 1969 and to Sales Director in 1975. After serving as the General Manager of Beko Ticaret from 1977 to 1983, he was appointed General Manager of Atılım A.Ş., another Koç Group company. During his eight year tenure in that position, he pioneered the efforts to strengthen the Arçelik Authorized Dealer System. In 1991, Mr. Solakoğlu was appointed Deputy Chairman of the Consumption Group of Koç Holding; he was also a Member of the Executive Committee of the Group between 1996 and 1998. In 2002, he was appointed Chairman of the Durable Consumer Goods Group of Koç Holding. Having worked at 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 is among the founders of the Educational Volunteers Foundation of Turkey (TEGV) and the 1907 Fenerbahçe Association. Mr. Solakoğlu was named a Leader of Civil Society by Ekonomist magazine in 2003. He is married and has two children. 14 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Board of Directors Alain Strasser Board Member Alain Strasser was born in 1947. After first graduating from the Departments of Mathematics and Philosophy in 1964, he obtained an MBA from E.S.C. in Paris in 1968 and a Masters in Economics from the same university in 1970. Until 1972, he was employed at Senegal’s Dakar University as an instructor in management. His career in the private sector began when he held several positions at Unilever, mainly in France, in the sales and marketing departments. In 1982, Mr. Strasser, who had become an expert in homecare products, joined Tambrands, and there he served as Sales and Marketing Director for France (1982-83), General Manager for France (198387), General Manager for the United Kingdom (1987-89), European Division Deputy Head (199093), and International Head (1993-94). After the acquisition of Tambrands by Procter & Gamble, Mr. Strasser was appointed to Campell Soup Company in 1994 as President of Campbell Biscuits Europe. He was instrumental in the Campbell’s acquisition of Danone’s Liebig Soup and he served as the President of Delacre Biscuits and Liebig Soup until 1998. From 1998 to 2007, Mr. Strasser was employed by Artal, a Belgian private equity firm, as CEO of Harry’s SAS, where he actively managed the company’s restructuring and strategic partnership processes. Mr. Strasser is still a member on the Boards of several companies, including SSL in London; Mood Media and Benedicta in Galapagos; Alpina in France; and Mankattan in China. Mr. Strasser is married and has three children. Duran Akbulut Board Member (Independent) Born in the Suşehri district of Sivas in 1937, Mr. Akbulut completed primary school and junior high school there before moving to Istanbul. In 1959, he started his professional career and became a partner in the “Goya” retail chain. From the 1970s onwards, he served as Board Member at various Cankurtaran Holding companies including Esem, Roventa, Adidas; Chairman at Aymasan; and partner at Adidas and Esem for 28 years. He was a member of the Turkish Football Federation in 1983, as well as Board Member at Cercle d’Orient from 1978 until 1994, which included two years of service as Vice Chairman. Since 1996, Mr. Akbulut has served as Chairman of Cercle d’Orient. He is married and has two children. Prof Dr. Ekrem Pakdemirli Board Member (Independent) Born in 1939 in İzmir, Mr. Pakdemirli graduated from Middle East Technical University, Department of Mechanical Engineering, and received his master’s degree from the same institution. He obtained his PhD from Imperial College in London. During his career, Mr. Pakdemirli has served as Assistant to the Undersecretary of State Planning Organization, Vice President of Dokuz Eylül University, Undersecretary of Treasury and Foreign Trade, Chief Advisor to the Prime Minister and Ambassador in the home office. From 1987 until 2002, he was the Member of Parliament for the province of Manisa for four terms, serving as Minister of Transportation, Minister of Finance and Customs, Minister of State, and Deputy Prime Minister. Between 2003 and 2008, Mr. Pakdemirli served as faculty member at Bilkent and Başkent Universities, and has been a faculty member of Istanbul Commerce University since 2008. Currently, he serves as Independent Board Member at Saf REIT and Sinpaş REIT, as well as Board Member at Albaraka Türk. Mr. Pakdemirli has had more than 500 articles and 10 books published to date. He is married and has five children. 15 Message from the Ceo Operational profitability 2013 was one of Ülker’s best years ever in terms of sales and profits. Dear Shareholders, Achieving 4% growth in the first nine months of 2013, Turkey’s economy once again outperformed that of other countries around the world. This solid domestic economic growth had a positive effect on the food and beverage industry in particular. As the sector leader, Ülker’s own robust performance made a significant contribution to the 10% growth achieved in the Turkish food and beverage industry in 2013. 2013 was one of Ülker’s best years ever in terms of sales and profits. During the year, our Company’s sales increased 17%, and we closed the period with TL 2.75 billion in revenues. In 2013, Ülker’s operating profit also hit a record high, significantly increasing by 40%, to TL 224 million, up from TL 313 million a year earlier. This positive change in the income statement stemmed from the increase in the Company’s sales volume and revenues, thanks to its simple yet highly competitive business model. Operating profit also improved significantly thanks to our ongoing efforts to reach operational excellence. With our strong launching strategy, we continued to create few but strong brands. We focused on new product launches in 2013. We offered our consumers new tastes with Laviva in the chocolate category, with Dore and Saklıköy in the biscuits category and with Islak Kek in the cake category. The financial and operational success we had achieved by year’s end was a gratifying result for our investors, who have invested in the future of Ülker. The Company’s steady financial growth over the last eight quarters shows that a solid financial and operational foundation has been built to assure a sustainable and profitable growth trajectory. Our market shares continue to reflect Ülker’s competitive strength in our categories. Creating alignment across the value chain to achieve efficiency and shared objectives is essential for sustaining this growth. Thanks to our commitment to being customer-focused, more competitive, more efficient and more innovative, we believe that we will continue to create significant value for all our customers and stakeholders. The results we have achieved also strengthens our faith and motivation to meet our 2016 targets. As in previous years, I hereby express my gratitude to our shareholders, business partners, employees and customers that we have always felt their support and contribution. Best regards, Mehmet TÜTÜNCÜ CEO 16 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Strategies Increasing brand investments Our competitive power in the categories we operate continues to be reflected in our market share figures as well. In the area of productivity, we aim to: •Become the most productive company in all segments of the industry, •Boost product quality through operational efficiency efforts and slash production costs, •Achieve further efficiency and productivity in distribution channels and sales points by cutting sales costs. In brand investments, we aim to: •Offer our powerhouse brands to consumers at reasonable prices, •Ensure the continuity of our brand investments. Overall, we aim to: •Increase our operating profit by achieving higher sales volumes and revenues in biscuit, chocolate and cake operations, •Expand to become a strong regional player, •Implement and maintain good corporate governance practices at the highest level, •Achieve strong results that will satisfy all stakeholders. Profit Margin Management •Decreasing average cost through opportunity purchases and effective raw material price management. 17 18 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Current Economic Outlook, Global and Turkish Food Industries Expectation for positive growth In parallel to the developments in the global markets, in 2013 increasing trend started in the decreased food prices. In 2013, the global economy continued to grow at a slow pace. While the dynamics of growth began to change, risks remained. The growth rates in emerging markets, which have driven global economic growth in previous years, somewhat decelerated in 2013. According to projections in the IMF’s October 2013 report, the world economy is expected to have grown 2.9% in 2013, with the highest contribution coming from developing countries with their projected growth rate of 4.5%. Meanwhile in 2014, the global economy is forecast to grow 3.6%, with most of the pickup in growth expected to be driven by advanced economies. US economic growth will most likely have an impact on global growth in 2014. As everyone is now convinced that the Federal Reserve will end asset purchases toward the end of 2014, some cash outflows from developing countries are expected. Europe’s economy will likely demonstrate positive, though limited, growth in 2014 and the European Central Bank will possibly cut interest rates in the second half of the year. Although food commodity prices had previously been on the decline due to global market developments, they began to rise in 2013. By year’s end, prices of dairy products, oils and cocoa had increased. Specifically, negative developments in cocoa and oil production and supply-demand imbalances led to an upswing in prices. The food price index averaged 212 points in 2013, a drop of 7% compared with the prior year. The UN Food and Agriculture Organization (FAO) forecasts that food prices will remain high in the coming period. 19 The Turkish Economy The Turkish economy has maintained positive growth since the last quarter of 2009, and it continued to grow steadily through third quarter 2013. While most developed economies experienced downturns due to global financial crisis, Turkey is ranked second among OECD countries as of end of third quarter of 2013, and emerged as the fourth fastest-growing economy among the G-20 nations. Rising domestic demand and increased government spending drove growth in the Turkish economy during the first and second quarters of the year; in the third quarter, an increase in private sector spending further contributed to the country’s economic growth. Turkey’s economic growth rates for the first three quarters were 3%, 4.5% and 4.4%, respectively. By the end of the first nine months of the year, the Turkish economy had grown 4%, proof that the IMF’s target of 3.8% for the year, as well as the 3.6% target set in the government’s Medium Term Fiscal Plan, were achievable. According to the Medium Term Fiscal Plan prepared by the Turkish Ministry of Finance, the country’s growth rate for 2014 is projected at 4%. Looking back at the economy’s growth drivers, exports made a relatively low contribution to Turkey’s economic growth in 2013 when compared with the prior year. This was mainly due to the decline in foreign demand caused by the recession in Europe and the political uncertainty in the Middle East and North African regions, which are generally seen as alternative markets to Europe. On the other hand, a strong rise in consumer lending had a positive effect on domestic economic growth. As of third quarter of 2013, Turkish economy has been ranked as the second most rapidly growing economy among the OECD countries and has been ranked as the fourth most rapidly growing economy among the G-20 countries. As of year-end 2012, Turkey’s annual inflation rate stood at 6.6%; however, due to the increase in foreign exchange rate and energy costs, inflation had spiked to 7.4% by the end of 2013. An analysis of the main consumer spending categories shows that inflation in the Food and Non-alcoholic Beverages category was 9.7% for the year. In its latest forecast, the Central Bank of Turkey expects a 6.6% inflation rate in 2014. 20 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Key Developments Increasing stock value Average trading volume of Ülker Bisküvi shares increased to TL 27 million between October 5 and December 31, 2013. Profit Distribution Policy On January 18, 2013, the Company’s profit distribution policy for 2012 and beyond was established within the framework of Corporate Governance Principles. Dividend Distribution in 2013 The Ordinary General Assembly held on March 28, 2013 approved the distribution of TL 150 million in dividends, as well as the amendments to the Articles of Association, in accordance with the Capital Market Law enacted on December 6, 2013, and the Turkish Commercial Code. Transfer of Shares Due to the liquidation of the Dynamic Growth Fund on July 15, 2013, all assets in the portfolio were transferred to participation shareholders in proportion to their existing shareholdings. As a result, 73,308,031 shares of Ülker Bisküvi San. A.Ş., which had belonged to the Fund, have been transferred to Yıldız Holding and its subsidiaries. With this transfer, Yıldız Holding, its subsidiaries and the Yıldız family increased their stake from 58.49% to 79.90%. The Sale of Yıldız Holding’s Stake On the morning of October 4, 2013, it was announced via Public Disclosure Platform that a block trade would be carried out with the price per share set at TL 12.60. With investor demand having reached USD 1.3 billion, an amount nearly three times the USD 461 million issue, investors clearly demonstrated their confidence in the operations and future strategies of Ülker Bisküvi. As it was impossible to meet all the demand, the Company sold the shares to 44 foreign institutional investors. Between October 5 and December 31, 2013, the average daily trading volume of Ülker Bisküvi shares increased to TL 27 million, compared to TL 5 million from the beginning of the year to October 4, the date of the sale. On November 8, 2013, MSCI (Morgan Stanley Capital Index) included Ülker Bisküvi in the MSCI Turkey index, to be effective as of November 26, 2013. On December 18, 2013, Borsa Istanbul announced the inclusion of Ülker Bisküvi shares in BIST-30 for the period January 2 to March 3, 2014. 21 22 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production and Capacity Increasing capacity utilization Biskot Bisküvi, an Ülker subsidiary, produces biscuits at 20 different facilities at its Karaman Factory. The Ankara Factory is located on a 110,000 m2 land parcel, of which 80,000 m2 is covered space. In 2013, the factory’s actual capacity utilization rate hit 89.9%, with three work shifts. The factory produced 103,000 tons of biscuits with net sales of 103,000 tons for the year. Biscuit Biskot Bisküvi, an Ülker subsidiary, produces biscuits at 20 different facilities at its Karaman Factory, which had a capacity utilization rate of 69% in 2013. The factory produced 87,000 tons of biscuits and recorded net sales of 87,000 tons for the year. The Gebze Factory, which has manufactured biscuits and crackers since 2000, reached a capacity utilization rate of 88.9% in 2013. During the year, the factory manufactured 66,000 tons of products and recorded a net sales volume of 66,000 tons. Main Brands Pötibör, Çizi, Krispi, Haylayf, Mavi Yeşil, Hanımeller, Biskrem, Krim Kraker, Probis, Çokoprens, As Kraker, İkram, Rondo, Altınbaşak, 9 Kat Tat, Halley, Kat Kat Tat, Çubuk Kraker, Ülker Kremalı, Dore, Saklıköy, Çokomel, Rulokat, Ülker Grissini 23 Within 2013, Ülker Çikolata produced 110,000 tons of goods at its Topkapı Factory. Chocolate As one of the affiliate of Ülker, Ülker Çikolata operates three facilities with a total covered area of 67,745 m2. Ülker Çikolata produced 110,000 (2012: 100,000) tons of goods at its Topkapı Factory in 2013, with net sales totaling 112,000 (2012: 97,000) tons. The Company’s 2012 capacity utilization rate stood at 57%. Ülker subsidiary Biskot produced 28,000 tons of goods and recorded a net sales volume of 28,000 tons; in addition, its Silivri facility produced 20,000 tons of goods with net sales of 19,000 tons. Main Brands Cocostar Smart, Alpella, Karsa 24 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Production and Capacity Cake Production in Esenyurt Factory was 35.000 tons in 2013. Ülker produces cakes at its Esenyurt Factory, which was established in 1993 on a covered area of 26,000 m2. The factory’s capacity utilization rate was 91.2% in 2013; the facility produced 32,351 tons and had net sales of 35,000 tons. One of Ülker’s subsidiaries, Biskot produced 30,000 tons of goods and recorded net sales of 30,000 tons in 2013. Main Brands Dankek, Kekstra, Ülker Ev Kek, Halk and Karsa 25 Investments Stronger sector position The consolidated total of expansion and modernization investments was about TL 78 million. In 2013, Ülker further reinforced its robust market position with new capital investments that included new installations in the factories, capacity increases, modifications to production lines, productivity upgrades, and improvements in hygienic conditions and warehousing processes. Ülker’s capital expenditures aim to further solidify the Company’s dominant market position, increase consumer satisfaction, improve product quality, and to make its cost structure more competitive by increasing operational efficiency. Throughout the year, Ülker invested in the installation of new facilities, capacity increases, renovations, modifications to production lines, efficiency increases, and improvements in the areas of hygiene and warehousing. The consolidated total of expansion and modernization investments was about TL 78 million. 26 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Subsidiaries Restructuring for the objectives Subsidiaries and Financial Investments (Current situation) Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. Production Ülker Çikolata Sanayi A.Ş. Production İstanbul Gıda Dış Ticaret A.Ş. Marketing/Trade Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. Marketing/Trade Birleşik Dış Ticaret A.Ş. Marketing/Trade Rekor Gıda Pazarlama A.Ş. Marketing/Trade G New Inc. Investment Godıva BelgIum BVBA Production Reform PazaRlama Marketing/Trade 27 Biskot Bisküvi Gıda and Ülker Çikolata Biskot Bisküvi Gıda Thanks to the merger of AGS-Anadolu Gıda San. ve Tic. A.Ş., a cakes producer, with Biskot Bisküvi Gıda San. ve Tic. A.Ş. at 2011 year-end, the Company attained a larger production volume. Biskot Bisküvi Gıda operates in a covered space of 111,549 m2 and has approximately 5,000 employees; the Company is one of the most important industrial companies and employers in its operating region. In 2013, Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş.’s production volume of biscuits, chocolates and cakes totaled 165,000 tons at the factories; the Company had a total production capacity 228,000 tons. Its product portfolio consists of petit-beurre biscuits, fingers, biscuits for babies, crackers, cream-filled biscuits, sandwich biscuits, wafers, cakes, chocolate-covered bars, chocolate wafers, chocolate-covered cakes, rulokat, çokomel, chocolate cream, special biscuits, chocolate eggs with toys, and giftable chocolates. Ülker Çikolata In 2011, Ülker acquired a majority stake in Ülker Çikolata, previously jointly held by Yıldız Holding. Ülker Çikolata produces solid chocolate, chocolate covered products, chocolate cream, giftable chocolates and powder cocoa under the. The Company is the market leader in its sector and operates the facilities located in Topkapı/Istanbul with a total covered area of 67,745 m2. The Company has a total production capacity of 190,000 tons; its average capacity utilization rate was 57% for the reporting year. Currently, Ülker Çikolata produces 189 different products and 48 sub-brands. 28 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Subsidiaries İstanbul Gıda ve Birleşik Dış Tic. İstanbul Gıda İstanbul Gıda achieved 2013 with a double-digit growth compared to the the previous year. The Company achieved a comparable level of revenue despite having transferred its non-essential businesses such as dairy, beverages, and personal care to other companies under the Holding. With a strong sales and distribution network, İstanbul Gıda exports Ülker products to more than 80 countries in the Europe and the Middle East, as well as the Turkic Republics, Africa, the Far East, the US, and Europe. The Company closed the year near amount of the previous year in terms of sales amount. The Company’s workforce numbered 80 employees as of year-end 2013. Birleşik Dış Tic. 2013 was a year of success for Birleşik Dış Ticaret A.Ş. as the Company’s strategy to focus on its main product categories of biscuits, chocolates, and cakes proved effective. As a result of the solid performance of its sales organization, the Company improved organizational and regional efficiency and boosted productivity. With a strong sales and distribution network, Birleşik Dış Ticaret exports Halk and Karsa branded Ülker products to countries in the Balkans and the Middle East, as well as the Turkic Republics, the US, Europe, Africa and the Far East. Rekor Gıda Rekor Gıda maintained its operations thereby increasing its sales and distribution network in 2013 compared to the previous years with the Halk, Ülker and Ona branded products. Quite a wide range of products and categories all over the country, the Company has 76 Traditional Channels and operates with two Modern Channels. As of year-end 2013, Rekor Gıda employed 83 personnel. Godiva Godiva Chocolatier Inc., in which Ülker Bisküvi has a 19% stake, is the owner of the Godiva brand, the world’s leading brand of premium chocolate and chocolate coated products. In 2008, Yıldız Holding acquired Godiva Chocolatier Inc. for USD 850 million, the largest overseas acquisition by a Turkish company. Over the last five years, Godiva has truly been a success story. Since that time, Godiva has reached 32 thousand points of sale across the world, and has achieved more than 10% sales growth each year. The Company’s 2013 revenue totaled USD 750 million. After entering new markets such as Australia, China, Indonesia, Korea, Macau, Saudi Arabia and Turkey, Godiva has become a true global brand with international sales rising to 52% of the Company’s total, up from 43% five years earlier. In the coming years, Godiva plans to focus on further expansion in China, Middle East, Russia and Turkey. The Company aims to open 50 new stores every year and reach sales of USD 1 billion by the year 2016. 29 30 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Human Resources Effective organization With the effective human resources practices, it is aimed to increase the competitive power of Ülker in domestic and foreign markets. In line with Ülker’s vision to “become a food and beverage company which always pleases its consumers, customers, employees and shareholders, and makes them smile,” Ülker’s global vision and an innovative and sustainable human resource management system, by: •Developing and empowering employees, and reinforcing their loyalty to the Company, •Establishing a highly competent, effective and flexible organization, •Embracing a performance culture that reflects the Company’s values. Ülker shapes its human resources practices in line with Yıldız Holding Values and Yıldız Holding Human Resources Strategies, which are expressed as: “Our Customers Come First!”; “We Are Number 1 in Quality!”; “We Are Competitive!”; “We Achieve Together!”; “We Are Results Oriented!” and “We Are Driven By Change!” The Company aims to increase its competitive advantages in both domestic and foreign markets via effective human resources practices, which aim to achieve superior quality in all business processes, high levels of motivation and loyalty among employees, and a culture of collaboration. As in previous years, the Company organized a series of events in 2013 to increase the level of motivation of the entire workforce, encourage social interaction among employees and foster their loyalty toward the Company: •The Company held the Traditional Ülker Picnic to provide an opportunity for staff members and their families to socialize and spend time with each other in a fun-filled environment outside of work. •The Company organized employee celebrations on special commemorative days, such as International Day of Persons with Disabilities, International Women’s Day, and the like. •Within the April 23rd National Sovereignty and Children’s Festival events, the Company enabled the children of employees to attend the April 23rd Film Festival sponsored by Ülker. •In support of the “Brain Box” initiative, the Company organized campaigns that focused on issues such as productivity, energy efficiency, occupational health and safety, quality etc.; then, Ülker rewarded and implemented the best ideas submitted by personnel. •During the month of Ramadan, Ülker organized iftar (breaking the fast) dinners attended by employees together with senior management. A festive spirit was shared among personnel at the ceremonies organized to exchange greetings and well wishes. •The Company organized sports activities (football, bowling and table tennis tournaments and swimming etc.) to encourage employees to enjoy themselves and socialize. •Ülker organized special visits during major life events of personnel, including marriages, births and funerals. In addition, the Company celebrated employee birthdays with congratulatory greetings and small gifts. 31 •Ülker renovated the libraries at the Company’s factories and enriched the collections with local and foreign books and periodicals in order to support the cultural development of personnel and increase their access to knowledge resources. In addition, staff members received access to electronic resources (contracted services of Yıldız Holding) on company computers. •The Company arranged price discounting with various companies (tutoring schools, driving courses, supermarkets, hospitals, gas stations, and the like) for employees, to enhance their social lives and help them meet their needs for basics such as food, health, education, and transportation. •In 2013, Ülker employee teams participated and competed in football, table tennis and bowling tournaments organized by Yıldız Holding as part of the Yıldız Cup. •In addition to the Prestige Club, which was established as a hobby and events group within Yıldız Holding, Ülker established a Photography Club, an Excursion Club, a Culinary Club, and a Diving Club. The Company encouraged employees to participate in these clubs and improve their skills in their respective areas of expertise by attending various training programs and taking club-related trips. •Yıldız Holding declared 2013 as the “The Year of Quality” and carried out several different activities under the slogan, “Our Goal is Zero Errors.” Ülker factories also undertook various initiatives and events as part of this quality movement. Senior managers participated in these events, which included stand-up comedy performances and other shows. Ülker is committed to supporting its employees, viewed as “the Company’s most important capital and asset,” not only to reach business targets and enhance competitiveness, but also for their own personal development. Support for the personal and professional development of staff members is given through training and development programs, so that they can maintain top performance in their jobs and help prepare Ülker, as well as themselves, for the future. Ülker offers personnel various training opportunities in a diverse range of topics that include: In line with the Human Resources Planning program, initiated across Ülker companies in 2011 and further enhanced with various measures in 2013, Ülker developed a backup system for managerial positions to ensure the continuity of the Company’s success. In addition, the Company devised Individual Development Plans to ensure the career development of personnel. In order to create a “feedback culture” within the framework of the Human Resources Planning and Performance Management Process initiatives, the Company actively encouraged managers to provide feedback to employees. As a result, personnel became better prepared for career opportunities that may arise in the future at Ülker. Additionally, the Company first announced and shared information about new job openings to employees within the Group. With its superior quality standards, Ülker has created “Happy Moments” for the Turkish people since 1944; and the Company is committed to developing its human capital in line with its future goals and in keeping with the principle of continuity of service. 32 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Human Resources Rising motivation Breakdown by Age (2013*) (%) Breakdown by Seniority (2013*) (%) 7 45 and above 16.4 More than 10 years 50.7 Between 31-44 18.6 Between 6-10 years 42.3 30 and below Breakdown by Education (2013*) (%) 2.9 Associate Degree 5.8 Bachelor’s Degree and Higher 39.3 High School 52 Primary School * The data refers to December 31, 2013. 65 5 years and less 33 Quality and R&D High standards in production Ülker Chocolate factory manufactures all of its products in compliance with “Gold Product Standards”. Biscuit and Cake Quality Assurance Ülker factories in Esenyurt, Gebze and Ankara manufacture biscuit and cake products at “gold standard” consumer specifications. From raw material to the end product, Ülker production always meets the prescribed requirements and standards. In addition, results of raw material analyses performed by accredited laboratories were requested from suppliers and regularly recorded in 2013. Within the scope of defined analysis methods and procedures, the Company also carried out routine process controls, critical control point (CCP) checks, shelf life analyses, scoring, as well as supervision of equipment, workplace and employee hygiene. In addition, Ülker conducts a 12-month shelf life analysis of the products. To set production standards of Ülker products, and to determine the differences in similar products manufactured by competitors, the Company carried out 21 consumer checks including field controls and benchmarking in 2013 on select products including Çay Saati Mozaik, Albeni Kaplamalı Kek, Alpella, 8 Kek Çikolata-muz Hindistan cevizli and Pötü Meyveli, Ülker Çizi, Hanımeller, Çokodamla, Rondo, Ülker Çubuk and Ülker Susamlı Çubuk, Ülker Halley, Ülker Çizi, Mavi Yeşil Limon Lifli, Ülker Çubuk Kraker, Çiziviç, Haylayf, Rondo Sade Kremalı, Fındıklı Gofret. Ülker provided training sessions to its own employees and the employees of its contractors on the topics of Quality, Food Safety, Occupational Safety and Health, Environment Management Systems and Energy Management Systems, and Allergenic Substances. Ülker always aims to meet consumer expectations at the highest level possible and to consistently increase customer satisfaction. Therefore, the Company continuously solicits consumer feedback and takes any corrective action that is required. In addition, inspections and analyses are conducted in collaboration with suppliers to prevent any quality-related problems at the source. To this end, the Company initiated the project for setting up the Food Quality and Safety Chain from the Supplier to Consumer (AIB - American Institute of Bakery), and conducted factory inspections on a weekly basis. To reach sustainable quality and ensure employee compliance with Ülker principles and values, Company personnel completed AIB Awareness and Internal Inspection trainings, and internal inspection teams were set up in the three factories. The teams carry out internal food safety inspections in all sections of the each factory on a monthly basis. In order to ensure food safety and quality standards of Ülker products from the raw material supplier to the end-product warehouse, food safety inspections were conducted at supplier premises, distributors and AIB/ Quality Units in various locations throughout the year. Ülker products were also checked through field visits by the sales team and all observations were reported to factory management. 34 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Quality and R&D High quality production Ülker consistently produces “Delicious, Healthy and Trusted” products of superior quality, in compliance with existing laws and regulations, and under stringent hygienic conditions. Accordingly, the Company holds the following quality certifications: •ISO 9001:2008 Quality Management System (Esenyurt, Gebze, Ankara) •ISO 22000 Food Safety Management System (Esenyurt, Gebze, Ankara) •ISO 14001 Environment Management System (Gebze, Ankara) •OHSAS 18001 Occupational Health and Safety Management System (Esenyurt, Gebze, Ankara) •BRC (Achieved Grade: A) (Gebze, Ankara) •IFS (Higher Level) (Gebze, Ankara). Biscuit and Cake R&D Ülker offers innovative products that appeal to traditional taste buds both in Turkey and around the world. The ethical principles of the Company’s R&D practices are: •To use scientific methods and techniques to research, locate and report facts; •To show concern for humankind, the environment and the public good by adhering to existing laws and regulations as well as to the principles and goals of the Group; •To always give priority to consumers’ needs and expectations; •To ensure food safety-high quality-price-variety optimization in all products; •To act according to the principle, “We will never offer our consumers a product that we would not consume ourselves, or give to our children.” Biscuit and Cake R&D Unit implemented numerous projects in 2013. The Company carried out many R&D related projects in rapid succession in line with corporate and consumer-focused strategies in a wide range of areas including new product development, current product improvement, cost cutting, quality enhancement, alternative raw material approval and technical/technological support. Ülker assessed these projects in terms of business, consumer and technology, and prioritized those that were most innovative. In order to continue to bolster its culture of innovation, the Company planned a variety of new R&D initiatives for the future. One of the key steps of the quality drive initiated in 2013 in line with Ülker’s quality road map is the establishment of the specification center. For this purpose, the Company revised quality specifications of all product categories in terms of business, consumer and technology, and defined and launched new specifications. The Biscuit and Cake R&D Unit completed 138 projects in 2013; of these, 39 yielded new products and 18 resulted in significant improvements to existing products. The following products were rolled out as a result of Biscuit and Cake R&D activities: Saklıköy Klasik, Saklıköy Yulaflı, Saklıköy Fındıklı Kremalı, Saklıköy Sütlü Kremalı, Mini 8 Kek Çilekli, Mini 8 Kek Muzlu, Pöti Havuçlu Tarçınlı, 8 Kek Double Çikolatalı, Mini Pöti Çikolatalı, Çay Saati Islak Kek, Ev Kek Mozaik, Ev Kek Üzümlü, Atıştırmalık Probis, Çizi Mini, Dore Bisküvi, Mini çizi, Mini Biskrem, Mavi Yeşil Mısır ve Pirinç Çıtırı. 35 Chocolate Quality Assurance Ülker Chocolate factory manufactures all of its products in compliance with “Gold Product Standards,” a consumer product standard. From raw materials to end products, all production processes meet the requirements prescribed in the Gold Product Standards specifications. From raw material to the end-product, Ülker production always meets the prescribed requirements and standards. In addition, iresults of raw material analyses performed by accredited laboratories were requested from the suppliers and regularly recorded in 2013. Specifications related to raw materials and packaging are currently being updated within the specification standards project, which is carried out by the Company’s Quality Center. In addition, Ülker conducts a 12-month shelf life analysis of the products. Ülker Çikolata provided training sessions to its own employees and the employees of its contractors on the topics of Quality, Food Safety, Occupational Safety and Health, Environment Management Systems and Energy Management Systems, and Allergenic Substances. Ülker always aims to meet consumer expectations at the highest level possible and to consistently increase customer satisfaction. A packaging control laboratory was set up at Ülker’s Chocolate factory. Additionally, another laboratory was set up to bring together all packaging materials quality controllers in a single area. Therefore, the Company continuously solicits consumer feedback and takes any corrective action that is required. In addition, inspections and analyses are conducted in collaboration with suppliers to prevent any qualityrelated problems at the source. Ülker Çikolata, too, started to cooperate with AIB (American Institute of Bakering) in August 2011, to set up a food quality and safety chain from supplier to consumer. Ülker Çikolata conducts internal food safety inspections in all sections of the factory on a monthly basis. The first AIB audit of 2013 was conducted in May 2013 without notice, and the Company passed the audit successfully with a score of 820 points. The Ülker Çikolata facility scored 845 points at the audit in late 2013, and inspectors found nothing that could jeopardize food safety. Internal food safety inspections continue across the factory according to a set schedule. In addition, all of the Company’s coated, molded, cream and powder products successfully passed the halal inspection conducted by LRQA-HELALDER on December 12, 2013, and Halal Certificates were received. 36 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Quality and R&D Continuous progress for taste Ülker Çikolata consistently produces “Delicious, Healthy and Trusted” products of superior quality, in compliance with applicable laws and regulations, and under stringent hygienic conditions. Accordingly, the Company holds the following quality certifications: •ISO 9001:2008 Quality Management System (Esenyurt, Gebze, Ankara) •ISO 22000 Food Safety Management System (Esenyurt, Gebze, Ankara) •ISO 14001 Environment Management System (Gebze, Ankara) •OHSAS 18001 Occupational Health and Safety Management System (Esenyurt, Gebze, Ankara) •BRC (Achieved Grade: A) (Gebze, Ankara) •IFS (Higher Level) (Gebze, Ankara). •LRQA-HELALDER Certificate Chocolate R&D Thanks to its experienced and new entrant strong R&D personnel, Ülker Çikolata continued to develop new products compliant with the Company’s high quality standards in 2013, and took its innovative and customeroriented approach to even higher levels. Thanks to its great taste and visual appeal, Laviva, launched in the last quarter of 2013, deserves its place among the leading products of Ülker Çikolata. The Company added several new products to its portfolio, including milky and bitter finger 12 g and the Sylvester variant under the Smart brand. Ülker maintained its strong market position and competitive advantage by further improving its Çokonat, Metro, Çokokrem Golden and long baton products. In 2013, Ülker Çikolata continued to conduct routine tests and analyses in areas such as raw materials and packaging; the Company also carried out evaluations on semi-manufactured and finished products, to guarantee consistent quality standards and reliable production, free of human error. Without compromising the quality of its chocolate products, Ülker pursued alternative raw materials to achieve higher profits. In addition, results of raw-material analyses performed by accredited laboratories were requested from the suppliers and recorded. Within the scope of defined analysis methods and procedures, the Company carried out routine process controls, critical control point (CCP) checks, shelf life analyses, scoring, as well as supervision of equipment, workplace and employee hygiene. In 2013, the Company once again reviewed all of its business processes to resolve any shortcomings and make existing processes more effective. As part of this continuous improvement process, the OOS system was put into use in order to monitor product recipes and production processes more easily. Furthermore, the Company initiated efforts to improve hygiene and shelf layouts to increase efficiency at the laboratories and the test facilities. To ensure product safety and hygiene, in 2013, Ülker Çikolata organized training sessions on Employee Hygiene, Environment, Management Systems, and Allergenic Substances. The Company always aims to meet consumer expectations at the highest level possible and to consistently increase customer satisfaction. As such, the Company constantly solicits consumer feedback and takes any corrective action that is required. In addition, inspections and analyses are conducted in collaboration with suppliers in order to prevent quality-related problems at the source. Ülker Çikolata inspected distributor warehouses located in various cities in order to ensure that its products reach end consumers in a hygienic manner. 37 38 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Social Responsibility For healthy and happy generations Also in the future, Ülker aims to maintain its corporate responsibility projects for the children. Ülker’s social responsibility approach Ülekr shapes its social responsibility initiatives mainly around children, inspired by the words of its founder Sabri Ülker: “Everyone has the right to a happy childhood, no matter where they live.” Ülker’s social responsibility projects for youth mainly focus on two areas: culture and arts. To date, 250 thousand young people have participated in various sports activities, thanks to the Company’s “Football for Children” initiative, which is carried out in collaboration with the Turkish Football Federation, and the Basketball Festivals organized by the Turkish Basketball Federation. Ülker Children’s Film Festival, now an annual tradition, has opened the door to the magical world of movies for some 750 thousand youngsters. Ülker Children’s Art Workshop, which aims to introduce children to arts at a young age, debuted in 2011 as part of the Art Beat Istanbul contemporary art platform. In 2012, young visitors enjoyed the event “Fifty Years of Urban Walls: A Burhan Doğançay Retrospective and Contemporary Istanbul.” To date, 7 thousand children learned about contemporary art thanks to the Ülker Children’s Art Workshop. In the future, Ülker plans to continue carrying out youthfocused social responsibility initiatives in the areas of sports, culture and arts. Culture-Arts Sociable individuals who can dream and express themselves Ülker Children’s Film Festival Ülker Children’s Film Festival, which was initiated in 2008, is the very embodiment of Ülker’s approach to social responsibility and its focus on the concept of “Children First.” Ülker’s now annual Children’s Film Festival stems from the idea that large numbers of youngsters across Turkey should receive the same gift at the same time. As this gift is offered on a very special day, April 23rd National Sovereignty and Children’s Day, the Ülker brand becomes part of a festival memory for many of the country’s young people. Since 2008, the Film Festival has reached some 912 thousand people, of whom 750 thousand were youngsters, and has opened the doors to a new dream world every year. 2008 33 cities, 123 theaters 1,300 screenings 125,000 children 80,000 gifts 2009 49 cities, 133 theaters 1,345 screenings 130,000 children 130,000 gifts 2010 50 cities, 158 theaters 1,580 screenings 140,000 children 140,000 gifts 2011 55 cities, 157 theaters 785 screenings 110,000 children 110,000 gifts 2012 62 cities, 157 theaters 785 screenings 155,000 children 135,000 gifts 2013 63 cities, 158 theaters 785 screenings 155,000 children 140,000 gifts 39 40 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Social Responsibility Football and winning the future The Environment Ülker does not limit its relationship with society at large to production only, but also offers its resources to the public by implementing social responsibility initiatives that focus on environmental issues. The best example of these efforts is the “Prevent” project carried out in collaboration with TEMA Foundation. Ülker is one of the founders of TEMA Foundation, which was established to protect agricultural lands in Turkey against neglectful destruction. Under the “Prevent” initiative implemented by TEMA, Ülker contributed to the development of three villages in Turkey. The project was studied by a group of students from Yale University, and aims to bring Turkish villages to a level matching European standards through years-long efforts. The Holding was publicly recognized by TEMA Foundation for all of its efforts in fighting erosion, primarily under the “Prevent” project. Environmental education to 250 thousand children Ülker integrates environmental protection into its social responsibility efforts. For example, to date, 250 thousand children have been provided with environmental education at several events, including the “Football for Children” initiative, which is carried out in collaboration with the Turkish Football Federation, and the Basketball Festivals organized by the Turkish Basketball Federation. The Holding aims to raise the environmental awareness of future generations. Ülker and Football Infrastructure Projects More physical activity, more vigor, more health for the younger generation Through its football infrastructure initiatives, Ülker aims to: •Increase physical activity in the lives of the country’s youth and make a significant difference in their general welfare, •Contribute to the physical, social and cultural development of young people, •Enhance sports investments in a way to touch children’s lives, as part of the Company’s social responsibility approach. Since 2007, the Company has reached some 250 thousand children through several social responsibility projects carried out in collaboration with relevant federations. Duration Number of Children Reached Football Training Centers 6 years 59,000 Football Villages 7 years 4,000 Football Festivals 5 years 162,000 U20 Grassroots Festivals 2 months 1,700 Grassroots Day 4 years 14,100 Basketball Festival 7 years 7,000 Project Total 247,800 41 Football Training Centers In addition to the events held at certain times of the year to meet specific needs, all youth aged between 6 and 12 years can enroll for free at the Football Training Centers, which remain open nine months a year and five days a week. These centers provide youngsters with training in football, fair play, environmental awareness and balanced nutrition. At the 50 Football Training Centers, trainers with TFF E licenses designated by the provincial representatives of the National Football Federation give three days of training during weekdays, a total of 900 hours per month, for nine months a year. On weekends, participants receive a total of eight hours of training per month, as part of a four-week program. •Five children from the Van Football Village, the first ever Football Village, were selected for the National U15 Football Team. •Ten players from the 2008 Sinop Football Village were selected for the U15 Girls’ National Team, which represented Turkey at the First Youth Olympic Games held in Singapore in 2010. •Enes Ünal (born 1997), who received training at the 2009 Sakarya Football Village, became the youngest goal scorer ever after he scored for Bursaspor versus Galatasaray. U20 Grassroots Festivals During April and May 2013, Ülker hosted Grassroots Festivals in Antalya, Bursa, Gaziantep, Istanbul, Kayseri, Rize and Trabzon. Football Villages The TFF-Ülker Football Villages project aims to bring together talented children from across the country in a football-focused social environment in order to support their social, cultural and personal development. Grassroots Day Youth from cities across Turkey can participate in the Football Day for Children, which has been celebrated annually for the past four years. To date, about 14,100 players and trainers have had the pleasure to participate in this event. A total of 43 Football Villages have been held over a seven year period: •2007 - Van •2008 - Sinop, Isparta, Bolu and Sivas •2009 - Malatya, Sakarya (2), Sinop, Trabzon, Erzincan, Kütahya, Zonguldak •2010 - Kocaeli, Trabzon, Malatya, Sakarya, Sivas, Sinop and Erzurum •2011 - Sinop, Gümüşhane, Bolu and Karabük Ovacık (2) •2012 - Sinop, Sakarya, Kocaeli, Isparta, Erzurum, Nevşehir, Gümüşhane and Riva •2013 - Izmir, Sakarya, Rize, Balıkesir, Sinop, Erzurum, Nevşehir, Elazığ, Isparta and Yozgat Children’s Football and Basketball Festivals For the past six years, the Company has organized Basketball Festivals in collaboration with the Turkish Basketball Federation; to date, 6 thousand children have been hosted at these events. In 2013, Basketball Festivals were held in a number of cities, including Ankara, Izmir, Konya, Çanakkale and Nevşehir. •Children of the World •Ülker extended its focus on youth to the 2010 FIBA World Championship, and contributed to the Children of the World project. 42 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report 1. Corporate Governance Principles: Compliance Statement The Company has provided in detail below the assessment and findings on the level of compliance with the Corporate Governance Principles and our comments on the potential improvement areas related to compliance in scope and quality. The Company also plans to implement those principles that have not been implemented yet as soon as possible, although there have not been any conflicts of interest among shareholders due to the limited number of corporate governance principles implemented to date. Pursuant to Capital Markets Board Communiqué and Article 17 of the Capital Market Law No: 6362, dated December 6, 2012, and II-17.1 Corporate Governance Communique released on 1.3.2014 issuance of a “Corporate Governance Compliance Report” and compliance with specified Corporate Governance Principles have become mandatory for companies traded on Borsa Istanbul (BIST). Accordingly, the Company has resolved that the requirements imposed by the CMB be strictly followed, and the Company has also completed all the work necessary for compliance with the other principles specified in the Communiqué. The Company has also disclosed the following Corporate Governance Principles Compliance Report to the public via the website: www.ulkerbiskuvi.com.tr. PART I – SHAREHOLDERS 2. Investor Relations Unit The Company’s relations with shareholders are handled by the Investor Relations Unit and coordinated by the Financial Affairs Department. The Unit processes any and all written or online inquiries submitted by our shareholders and attends all local and international investor conferences. Contact information for the Investor Relations Department follows: İlhan Turan Usta Director of Financial Affairs Davutpaşa Cad. No:10 34015 Topkapı/Istanbul ilhan.usta@ulker.com.tr +90 212 567 68 00 Özgür Kalyoncu Investor Relations Manager Kısıklı Mah. Ferah Cad. No: 1 B Çamlıca Üsküdar/Istanbul ozgur.kalyoncu@ulker.com.tr +90 216 524 25 56 The Investor Relations Unit holds meetings with local and international investors and participates in investor conferences in Turkey and abroad. As a result, the Investor Relations Unit meets directly with various domestic and international investors. Relations with shareholders are coordinated by the Financial Affairs Department. The Financial Affairs Department manages the public disclosures as required to the BIST, the Capital Markets Board, and the Central Registry Agency and other communications with these agencies. In addition to organizing the ordinary and extraordinary general assembly meetings, the Investor Relations Unit may organize other ad-hoc meetings held at the request of shareholders. 3. Shareholders’ Right to Information Except for information considered either commercial secret or insider information, all written or verbal requests from our investors for information in the period were met. We provided our shareholders with all the information as required under their rights as shareholders via the annual report, material disclosures, and replies to individual inquiries. In accordance with Article 1524 of the Turkish Commercial Code No: 6102, dated January 13, 2011, the Company has also shared all necessary information and announcements with shareholders on its corporate website, www.ulkerbiskuvi.com.tr, under the section “Investor Relations,” subsection “News and Announcements.” Auditing principles and procedures are described in Article 20 of the Company’s Articles of Association. In 2013, shareholders did not call for any private audits. 4. General Assembly Meetings Pursuant to Article 1527 of the Turkish Commercial Code No. 6102 dated January 13, 2011, which stipulates that online participation in general assembly meetings, making proposals and statements online, and online voting shall have the same legal effects in all aspects as participating and voting in any general assembly meeting in person; and that all companies traded on the stock exchange are 43 required to set up and maintain a system allowing online participation in general assembly meetings and voting; the online general assembly convenes on the same date and with a parallel agenda as the physical general assembly. The amount of contributions and donations made by the Company during the fiscal period have been discussed at the General Assembly meeting as a separate agenda item and shareholders have been informed about same. The Ordinary General Assembly of 2012 was convened on March 28, 2013. Prior to the General Assembly meeting, the Company shared with the shareholders the meeting agenda, a sample proxy form, informational document, balance sheet, profit-loss statements, independent auditor’s report and footnotes, auditor’s report, Board of Directors’ resolution on profit distribution, the annual report, and the resolution on the selection of an independent audit company, via the corporate website, www.ulkerbiskuvi. com.tr. The 2012 Ordinary General Assembly of the Company convened at Barcelo Eresin Topkapı Hotel at Millet Caddesi No:186 Topkapı – ISTANBUL with the participation of shareholders representing almost 86% of the paid-in capital of TL 342,000,000. No stakeholders or media representatives were present at the meeting. The invitation for the General Assembly, which stated the date and agenda of the meeting, was published in the Turkish Trade Registry Gazette No. 8272 dated March 6, 2013 and in the daily Dünya Newspaper dated March 6, 2013 and on the Ülker Bisküvi Sanayi A.Ş. website: www.ulkerbiskuvi.com.tr as specified by law and the Articles of Association within the prescribed time limit. The Company makes the financial statements and reports, including the annual report, dividend proposal, memo on the proposed agenda to be discussed at the General Assembly, and other supporting documents for items of the agenda, the current version of the Articles of Association, and proposed amendments to the Articles of Association, if any, and the rationale thereof available for review by our shareholders at the headquarters and branches of the Company starting from the date of the invitation for the General Assembly. Amendments to the Articles of Association related to the cancellation of the privileges of registered shares in terms of presenting candidates to the Board of Directors, as pursuant to the Turkish Commercial Code No: 6102 and Capital Market Law No: 6362, and the relocation of the Head Office have been approved. With this amendment, all privileges have been revoked. Items on the agenda are expressed in an unbiased and detailed manner at the General Assembly and shall be clear and intelligible. Shareholders are provided with equal opportunity to express their opinions, and raise any questions to create a healthy atmosphere for discussion. No shareholder asked any question at the 2011 General Assembly nor made any suggestions except for those related to the items in the agenda. 5. Voting and Minority Rights According to the Articles of Association, each share carries the right to one vote. Any shareholder, who is entitled to attend General Assembly meetings, may attend the meetings via electronic communication means in accordance with Article 1527 of the Turkish Commercial Code. Pursuant to the Regulation on the General Assembly of Joint Stock Companies to be Held via Electronic Means, the Company may set up an electronic General Assembly system or procure any system developed for this purpose so that shareholders are able to attend, express their views, make suggestions, and cast their votes via electronic communication means. Pursuant to the relevant provision in the Articles of Association, shareholders and their proxies are allowed to exercise their respective rights at any General Assembly meeting, under the referenced regulations via the electronic system set up for this purpose. The Company does not grant any privileges to share groups or other shares. None of our shareholders controls, or is controlled by, the Company. Cumulative voting is not practiced in the Company. As per Article 27 of the Company’s Articles of Association, shareholders representing one-twentieth (1/20) of the share capital can exercise minority rights. The Articles of Association do not contain any provision prohibiting voting by proxy, who is not a shareholder of the Company. 44 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report 6. Dividend Rights Our Board of Directors has adopted the profit distribution policy in accordance with the Corporate Governance Principles published by the CMB: The Company distributes profit in accordance with the Turkish Commercial Code, Capital Market Law, Tax Law, other applicable legislation and the articles related to profit distribution in the Company’s Articles of Association. The Board of Directors’ profit distribution proposal, which complies with the Company’s profit distribution policy and the Capital Markets Board’s Corporate Governance Principles, is included in the annual report and is submitted for the approval of shareholders at the General Assembly; detailed information on the history of profit distribution and capital increases is disclosed to the general public via the corporate web site. The Company has set its profit distribution policy in accordance with the Capital Market Law and Articles of Association, taking into consideration the Company’s operational performance, financial situation and market developments. Starting from the earnings of fiscal year 2012, the Company will distribute a minimum of 70% of its net distributable profit for each accounting period in cash, upon the proposal of the Board of Directors and the approval of the General Assembly, with any changes made by these entities, in accordance with Turkish legislation, and after due consideration of the Company’s cash flow requirements. This policy will be reviewed each year by the Board of Directors, taking into account any negative developments in domestic and global economic conditions, the situation of current projects and the Company’s financial resources. In accordance with the profit distribution policy, dividends are equally distributed to all shares in the relevant accounting period, and no privileges are granted. Again, the Articles of Association provides for advanced dividend payment, but the Company has not made any advanced dividend payment so far. Shareholders were informed of the Company’s profit distribution policy at the General Assembly, and the profit distribution policy has been disclosed to the public and included in our annual reports, and is also available on the Company’s website. 7. Share Transfer Following the approval of the amendments to the Articles of Association at the Ordinary General Assembly meeting held on March 28, 2013, the Company shall not issue any registered shares. PART II – PUBLIC DISCLOSURE AND TRANSPARENCY 8. Company’s Disclosure Policy The Company’s Information Policy is implemented in accordance with CMB legislation and rules specified in the relevant Communiqué. The Company has drafted a written document on its public disclosure and information policies, which is made available to shareholders and the public on the Company’s website upon the approval by Board of Directors. In addition, it is our basic principle that any information which is already in the public domain is made available to any person inquiring for such information. In the case of any inquiry for information by any shareholder, the Company provides a written or verbal reply. In the event there is any material change during the period, a related material change disclosure is promptly made. The annual report is prepared in a manner to ensure public access to all kinds of information regarding the Company’s activities. Material Event Disclosure The Company has made 27 material event disclosures in accordance with CMB regulations between January and December 2013. All material event disclosures have been made within prescribed time limits. 9. Company’s Website and Contents Thereof The Company website at www.ulkerbiskuvi.com.tr is available in Turkish and English. The following information is available for the purpose of disclosure to our shareholders: •Company’s Vision •Code of Conduct •Information on the Board of Directors and Executive Management •Company’s Shareholding Structure 45 •Organizational Chart •Social Responsibility •Registration Information and Company Profile •Articles of Association •Financial Statements and Notes •Annual Reports •Material Event Disclosures •Report on Compliance with Corporate Governance Principles •Information on the General Assembly (Agenda, Proceedings, List of Attendees and Proxy Form Template) •Company’s Information Policy •Committees •News and Announcements (Invitations to the General Assembly, and the like) •List of Corporate Insiders •Ratings Reports •Ülker on the BIST (Ratios and Charts related to the Company’s Shares) •List of Monitoring Analysts and Investor Presentations 10. Annual Report The Company’s annual reports are prepared in Turkish in accordance with the Capital Markets Board (CMB) Communiqué on Corporate Governance Principles Compliance Report and the Regulation on the Determination of the Minimum Content of Companies’ Annual Reports issued by the Turkish Ministry of Customs and Trade on August 28, 2012, and published in the Official Gazette Issue: 28395. The Company’s annual reports are submitted for the approval of the Board of Directors and then published on the website www.ulkerbiskuvi.com.tr, under the section “Investor Relations,” subsection “Annual Reports.” The Company has taken every action and measure to prevent insider trading; an online list of Company executives and other individuals/institutions that provide services to the Company, who have the opportunity to access to non-public information that may have material impact on the value of the shares, is maintained and regularly updated. The list of Company executives and other individuals/institutions that provide services to the Company, who have the opportunity to access to nonpublic information that may have material impact on the value of the securities, as specified in the annual report follows. Name-Surname Murat Ülker Ali Ülker Ahmet Özokur Mehmet Tütüncü Mahmut Mahir Kuşçulu Cengiz Solakoğlu Alain Strasser Duran Akbulut Ekrem Pakdemirli Halil Cem Karakaş Şener Astan Mustafa Tercan Emre Şehsuvaroğlu İhsan Saribaş Bora Yalinay Hüseyin Avni Metinkale Naci Yekta Caymaz Sadettin Atilla İbrahim Taşkin Hafize Nurtaç Ziyal Title Chairman Member of Board of Directors Member of Board of Directors Member of Board of Directors Member of Board of Directors Member of Board of Directors Member of Board of Directors Member of Board of Directors Member of Board of Directors Holding CFO Vice Presidency (Biscuit-Cakes) Chairmanship of Holding Finance Chairmanship of Internal Audit Holding Directorship Budgeting and Internal Planning Group CFO General Manager of Holding General Directorate of Information Technologies General Directorate of Supply Chain General Directorate of Legal Affairs General Directorate of M&A Business Development and Investor Relations Zuhal Şeker Tucker General Directorate of Corporate Communication İlhan Turan Usta Finance Directorate Yasemin Hocaoğlu Chairmanship of Board of Directors Gülay Çuğu Bal Finance Directorate Muhammed Satilmiş General Directorate of Facility Nazif Solmaz General Directorate of Ankara Facility İdiris Can General Directorate of Trade Murat Bora Dal General Directorate of Internal Audit Bahar Erbengi Directorship of Corporate PR and Advertising Esra Angin Arslan Chairmanship of Ülker Group Bingül Altinkaynak Chairmanship of Ülker Group Mehmet Akif Ersoy Chairmanship of Ülker Group Fulya Erkmen Sunter Chairmanship of Ülker Group Selda Şenkul Chairmanship of Board of Directors Abdullah Topbaş Chairmanship of Board of Directors Serra Karapinar Chairmanship of Ülker Group Can İnci Chairmanship of Ülker Group Burak Kazanciyan Chairmanship of Ülker Group Büşra Özdemir Chairmanship of Ülker Group Nihan Baştak Sales & Marketing Directorate Nihal Gül Sales & Marketing Directorate Serkan Karadağ General Directorate of Internal Audit Nagihan Şengül Karpuz Holding Tax Coordinator Talat Çallak Corporate Transactions Murat Sorkun General Directorate of Financial Standards Serkan Asliyüce General Directorate of Financial Standards Özgür Kalyoncu Investor Relations Kerim Beytekin General Directorate of Financial Standards Erdal Atak Finance Directorate Akif Ziya Arican Tax Coordinator Levent Taşçi Corporate Transactions Cem Kütük General Directorate of M&A Business Development and Investor Relations Mesut Emre Yalçin General Directorate of M&A Business Development and Investor Relations Fatma Tanla Dağtekin General Directorate of M&A Business Development and Investor Relations Emir Erçel Chairmanship of Holding Finance İlter Oktay Holding Tax Coordinator Muhammet Raşit Dereci Chairmanship of Holding Finance Leyla Şen Directorship of Corporate PR and Advertising Bariş Öner General Directorate of Legal Affairs Yusuf Gümüş General Directorate of Legal Affairs Murat Karababa General Directorate of Financial Standards İrem Sadikoğlu General Directorate of Financial Standards Ayyüce Baştan Corporate Transactions Hasan Riza Bayar Chairmanship of Holding Finance Erkan Taşdemirci Finance Directorate Ahmet Temizyürek Tax Coordinator Muhammet Mustafa Gül Corporate Transactions Abdullah Çakar Chairmanship of Board of Directors Can Öngör Finance Directorate Can Koreş Finance Directorate Nesrin Özel Holding Tax Coordinator Melis Egeryilmaz Chairmanship of Holding Finance Sezen Öztürk Chairmanship of Holding Finance Ahmet Nihat Koçak General Directorate of Management Accounting and Planning Tarik Öztürk General Directorate of Management Accounting and Planning Aynur Dal General Directorate of Management Accounting and Planning Burçin Çokyılmaz General Directorate of Management Accounting and Planning 46 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report Name-Surname Caner Özdurak Cihangir Çimenoğlu Mehmet Arikan Fatih Karaca Murat Kiliç Ayşe Ertükoğlu Gülnur Canan Başaran Burcu Ateş Ayşegül Özfindik Sezgin Selimoğullari Murat Demirkol Bayram Erol Evren Bayraktaroğlu Duygu Hoçalar Emrah Ebeperi Zeynep Sinem Ülker Fatma Buket Uğur Semra Ahçioğlu A. Erdem Topçu Mustafa Yağiz E.Emre Terzi Kadir Damar Günceli Çakmakçi Safiye Ayyildiz Elif Başman Günseli Çakmakçi Babür Kaan Şener Mehmet Daim Dursun Erdem Sari Can İnanli Ahmet Murat Yalnizoğlu Salim Alyanak Muratcan Aksoy Mert Tüten Cemal Öztaş Yakup Babaoğlu Murat Ülker Ali Ülker Ahmet Özokur Mehmet Tütüncü Mahmut Mahir Kuşculu Cengiz Solakoğlu Alain Strasser Duran AKBULUT Ekrem PAKDEMİRLİ Halil Cem Karakaş Şener Astan Mustafa Tercan Emre Şehsuvaroğlu İhsan Sarıbaş Bora Yalınay Hüseyin Avni Metinkale Naci Yekta Caymaz Sadettin Atilla İbrahim Taşkın Hafize Nurtaç Ziyal Zuhal Şeker Tucker İlhan Turan Usta Yasemin Hocaoğlu Gülay Çuğu Bal Muhammed Satılmış Nazif Solmaz İdiris Can Murat Bora Dal Bahar Erbengi Esra Angın Arslan Bingül Altınkaynak Mehmet Akif Ersoy Fulya Erkmen Sünter Selda Şenkul Abdullah Topbaş Serra Karapinar Can İnci Burak Kazanciyan Büşra Özdemir Nihan Baştak Title General Directorate of M&A Business Development and Investor Relations Holding Tax Coordinator General Directorate of Management Accounting and Planning Chairmanship of Holding Finance Chairmanship of Holding Finance Chairmanship of Holding Finance Chairmanship of Holding Finance Holding Tax Coordinator General Directorate of Legal Affairs Holding Tax Coordinator Finance Directorate Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Consultant Başaran Nas Bağımsız Denetim ve. Serbest Muhasebeci Mali Müşavirlik A.Ş. Başaran Nas Bağımsız Denetim ve. Serbest Muhasebeci Mali Müşavirlik A.Ş. Başaran Nas Bağımsız Denetim ve. Serbest Muhasebeci Mali Müşavirlik A.Ş. Başaran Nas Bağımsız Denetim ve. Serbest Muhasebeci Mali Müşavirlik A.Ş. Başaran Nas Bağımsız Denetim ve. Serbest Muhasebeci Mali Müşavirlik A.Ş. Chairman of the Board of Directors Board Member Board Member Board Member Board Member Board Member Board Member Board Member Board Member Office of Holding CFO Vice President (Bakery Products) Head of Financial Affairs Group Head of Audit Holding Financial Coordinator Group CFO Holding’s Headquarters General Director IT General Director of Supply Chain Legal Affairs Department General Director of M&A Business Development and General Director of Investor Relations General Director of Corporate Communication Financial Affairs Director Executive Assistant Financial Standards Department Office of Ülker Group President Ankara Factory General Manager Trade Department Internal Audit Director Corporate PR and Advertisement Department Director Office of Food Group President Office of Ülker Group President Office of Ülker Group President Assistant of Holding Financial Affairs Coordination Assistant of Chairman of Board of Directors Assistant of Chairman of Board of Directors Executive Assistant Executive Assistant Executive Assistant Executive Assistant Marketing Director Name-Surname Nihal Gül Serkan Karadağ Nagihan Şengül Karpuz Talat Çallak Murat Sorkun Serkan Asliyüce Özgür Kalyoncu Kerim Beytekin Erdal Atak Akif Ziya Arican Levent Taşçi Cem Kütük Mesut Emre Yalçin Fatma Tanla Dağtekin Emir Erçel İlter Oktay Muhammet Raşit Dereci Leyla Şen Bariş Öner Yusuf Gümüş Murat Karababa İrem Sadikoğlu Ayyüce Baştan Hasan Riza Bayar Erkan Taşdemirci Ahmet Temizyürek Muhammet Mustafa Gül Abdullah Çakar Can Öngör Can Koreş Nesrin Özel Melis Egeryilmaz Sezen Öztürk Ahmet Nihat Koçak Tarik Öztürk Aynur Dal Burçin Çokyilmaz Caner Özdurak Cihangir Çimenoğlu Mehmet Arikan Fatih Karaca Murat Kiliç Ayşe Ertükoğlu Gülnur Canan Başaran Burcu Ateş Ayşegül Özfindik Sezgin Selimoğullari Murat Demirkol Bayram Erol Evren Bayraktaroğlu Duygu Hoçalar Emrah Ebeperi Zeynep Sinem Ülker Fatma Buket Uğur Semra Ahçioğlu A. Erdem Topçu Mustafa Yağiz E.Emre Terzi Kadir Damar Günceli Çakmakçi Safiye Ayyildiz Elif Başman Günseli Çakmakçi Babür Kaan Şener Mehmet Daim Dursun Erdem Sari Can İnanli Ahmet Murat Yalnizoğlu Salim Alyanak Muratcan Aksoy Mert Tüten Cemal Öztaş Yakup Babaoğlu Title Marketing Director Internaş Audit Coordinator Tax Coordinator Financial and Corporate Affairs Group Manager Strategic Finance Manager Financial Control Manager Investor Relations Manager Finance Manager Accounting Manager CPA – Tax Manager Corporate Affairs Manager M&A Business Development Manager M&A Business Development Manager M&A Business Development Manager Financial Standards Manager Tax Manager Financial Standards and Consolidation Manager Corporate Communication Manager Senior Legal Adviser Legal Adviser Strategic Finance Manager Financial Standards Manager Corporate Affairs Manager Financial Standards and Risk Manager CMB IFRS Executive Certified Public Accountant Corporate and Financial Affairs Assistant Specialist Project Manager Food Group Project Manager Budget and Analysis Manager Legal Record Manager Consolidation Specialist Consolidation Specialist Financial Control Specialist Financial Control Specialist Financial Control and Analysis Specialist Financial Control and Analysis Specialist M&A Business Development Manager Legal Record Specialist Strategic Finance Specialist Financial Control Specialist Consolidation Specialist Financial Control Specialist Financial Control Specialist Legal Record Specialist Legal Adviser Legal Record Specialist Chief Accountant Internal Audit Manager Senior Audit Senior Audit Senior Audit Senior Internal Audit Senior Internal Audit Senior Internal Audit Senior Internal Audit Senior Internal Audit Senior Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit IT Audit IT Audit IT Audit Senior Tax Audit Consultant Independent Audit (Başaran Nas Bağimsiz Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.) Independent Audit (Başaran Nas Bağimsiz Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.) Independent Audit (Başaran Nas Bağimsiz Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.) Independent Audit (Başaran Nas Bağimsiz Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.) Independent Audit (Başaran Nas Bağimsiz Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.) 47 PART III – STAKEHOLDERS 11. Information to Stakeholders In the event there is not any regulation in laws or contracts regarding rights of stakeholders, the Company endeavors to protect their rights in good faith and within means available to the Company with due consideration given to the reputation of the Company. In addition, all employees have access to internal circulars and memos through the Company’s Intranet and receive certain important announcements through e-mail. There are no restrictions that prevent stakeholders from contacting the Corporate Governance Committee or the Audit Committee about any Company transactions they deem either unethical or contrary to regulations. Stakeholders may contact these committees by any communication means they prefer. 12. Participation of Stakeholders in Management According to the Articles of Association, the Board of Directors has at least seven members who are elected by the General Assembly upon nomination by shareholders of different share classes in accordance with the Articles of Association. The Board of Directors has nine members, including three independent directors. The Company does not have any practices related to stakeholders’ participation in management. 13. Human Resources Policy The main purpose of the Company’s human resources policy is to build a team of high performance employees by improving and developing the human capital on the basis of the things done so far. The human resources policy adopted by the Company is fundamentally that of Yıldız Holding’s, and is available at www.ulkerbiskuvi.com.tr. The Company has never received any complaints that its human resources policy is discriminatory. 14. Code of Conduct and Social Responsibility Information on the corporate social responsibility activities of the parent company, Yıldız Holding, is available in our annual reports and on the website: www.ulkerbiskuvi.com.tr. Keenly aware of our social responsibility, the Company takes utmost care to adopt policies that support environmental, sports, educational, and health care related projects. The Code of Conduct is also available in a related section on the website. The Company observes the continuity of service quality and standard at all phases of production and maintains trade secrets of customers and suppliers as confidential. Customer satisfaction is one of the main principles of our Company. Ülker Bisküvi, since its inception, has been a part of a Group of companies that produce quality and healthy products; respect their employees; uphold the rights of their partners and shareholders, and of their suppliers and customers; comply with all applicable laws; recognize social values; and have social responsibility. In addition, the Group of companies’ management philosophy pursues the highest level of respect and trust among executives, employees, suppliers, and customers; achieves employee cooperation and high performance of personnel; maintains dignity, consistency and a sense of responsibility in its approach; all the while continually striving to improve this management philosophy. The Code of Conduct as adopted by Yıldız Holding is generally abided by all Group companies and is disclosed to the public within the scope of the Group’s information policy and is available to our shareholders on the website: www.ulkerbiskuvi.com.tr. PART IV – BOARD OF DIRECTORS 15. Structure, Organization, and Independent Members of the Board of Directors The Company’s Board of Directors is composed of nine members, three of whom are independent members. The Board of Directors comprises executive and non-executive members, and a majority of the Board’s members are non-executive members. Nonexecutive members include independent members, who satisfy all of the criteria set out in the Capital Market Law, who have the capacity to perform their duties with impartiality, and who can devote their time 48 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report to monitor the functioning of the Company and to fulfill all the responsibilities vested to them as independent members. Details of the Company’s Board of Directors are as follows: Name-Surname Position Status Term of Office Chairman of Board Directors Non-executive 10.05.201110.05.2014 Vice Chairman of Board of Directors Non-executive 10.05.201110.05.2014 Ahmet ÖZOKUR Member Executive 10.05.201110.05.2014 Mehmet TÜTÜNCÜ Member Executive 10.05.201110.05.2014 Murat ÜLKER Ali ÜLKER Mahmut Mahir KUŞCULU Member Non-executive 10.05.201110.05.2014 Cengiz SOLAKOĞLU Member Non-executive 10.05.201110.05.2014 Alain STRASSER Member (Independent) Non-executive 10.05.201110.05.2014 Duran AKBULUT(*) Member (Independent) Non-executive 09.08.201209.08.2015 Ekrem PAKDEMİRLİ(*) Member (Independent) Non-executive 09.08.201209.08.2015 (*) Elected by the General Assembly convened on August 9, 2012. The Chairman of the Board of Directors and the General Manager are two different persons. The Company’s CEO is Mr. Mehmet Tütüncü. Mr. Ekrem Pakdemirli, Mr. Duran Akbulut and Mr. Alain Strasser serve as independent board members. There are no female members on the Company’s Board of Directors. The report on the two independent Board candidates and their compliance with independence criteria has been presented to the Board of Directors. Board membership of these presented candidates have been approved unanimously at the Extraordinary General Assembly meeting held on August 9, 2012. Murat Ülker- Chairman of Board of Directors Murat Ülker began his professional career at the Group in 1982 after graduating from Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Business Administration. He is married with three children. He is fluent in English and German. Ali Ülker- Member Born in 1969, Ali Ülker is married with three children. He is fluent in English and German. His hobbies include fishing, watching movies, reading books, and playing basketball and billiards. Mehmet Tütüncü- Member Mehmet Tütüncü was appointed Chairman of the Food and Beverages Group in 2005. As of October 2009, the Gum and Candy companies were incorporated into the Food Group. He was born in 1958 and is married with three children. He likes to travel and collect small hand-crafted boxes. Ahmet Özokur-Member In 2005, Ahmet Özokur was appointed General Manager of Datateknik, and he was promoted to the position of CEO of Datateknik Informatics Group within the same year. On January 4, 2010, he was appointed General Manager of Sağlam Real Estate Investment Trust. Mr. Özokur’s interests include aquatic sports. He is married with one child. 49 Mahmut Mahir Kuşculu - Member Mahmut Mahir Kuşçulu graduated from Istanbul Erkek High School, and subsequently from Istanbul University, Faculty of Economics. He then received his master’s degree in marketing in the US. He founded Kutas Dis Ticaret ve Pazarlama A.Ş. in 1982 and Erdem Dis Ticaret A.Ş. in 1985, and served as director and manager at both enterprises. Mr. Kuşçulu has served on the professional committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years. He has been a member of the Assembly of the Istanbul Chamber of Industry for 13 years. Mr. Kuşçulu is married with two children. Cengiz Solakoğlu - Member Having worked at Koc Group continuously for 37 years, Cengiz Solakoğlu retired due to the Group’s policy for mandatory retirement at age 60. He is among the founders of the Educational Volunteers Foundation of Turkey (TEGV) and the 1907 Fenerbahçe Association. Mr. Solakoğlu was named a Leader of Civil Society by Economist magazine in 2003. He is married with two children. Duran Akbulut - Member (Independent) Duran Akbulut was born in the town of Susehri in Sivas in 1937. He completed his primary and secondary education in Susehri, Sivas before moving to Istanbul. He is married with two children. Prof. Dr. Ekrem Pakdemirli - Member (Independent) Dr. Ekrem Pakdemirli was born in Izmir in 1939. He received a BSc in Mechanical Engineering from Middle East Technical University where he also completed his post graduate studies. He then studied at London Imperial College where he received his PhD. He taught at Bilkent and Baskent Universities between 2003 and 2008. He has been a member of the faculty of Istanbul Commerce University since 2008. He is also a Board member of Albaraka Turk. To date, he has published more than 500 papers and 10 books. He is married with five children. Alain Strasser - Member (Independent) Alain Strasser was born in 1947. He received a BSc degree in mathematics and philosophy in 1964. In 1982, Mr. Strasser, who had become an expert in homecare products, joined Tambrands, and there he served as Sales and Marketing Director for France (1982 - 1983), General Manager for France (1983 - 1987), General Manager for the United Kingdom (1987 - 1989), European Division Deputy Head (1990 - 1993), and International Head (1993 - 1994), respectively. The common Statement of Independence of the independent Board members follows: STATEMENT OF INDEPENDENCE “I have been elected as an independent Board member by the Extraordinary General Assembly of Ülker Bisküvi Sanayi Anonim Şirketi convened on July 9, 2012 in accordance with the criteria specified in the Corporate Governance Principles published by the Capital Markets Board and henceforth I hereby declare that: Neither I nor my spouse, or any blood or non-blood relatives within the third degree of relationship have had, directly or indirectly, within the last five years, any employment, equity, or otherwise material business relationship with the Company or any of its related parties, or any entity where a shareholder of the Company, which holds, directly or indirectly, 5% or more share in Company, is related with respect to management or equity; I have not, within the last five years, been employed by any company, in particular those which audited, rated, or consulted with the Company, which carried out whole or part operation and organization of the Company in accordance with agreed terms, nor have I become a Board member of such companies; I have not, within the last five years, been a shareholder, employee, or Board member of a company which significantly provides services and products to the Company, I do not hold more than 1% of the share capital of the Company, and that none of these shares are preferential; I have all the professional education, knowledge, and experience that are necessary for me to fulfill my duties as a member; 50 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report I have solid professional ethical standards, dignity, and experience to make a positive contribution to the Company’s operations, to enable me to maintain my impartiality in the cases of conflicts of interest among shareholders of the Company and to freely make my decisions by taking into account rights of stakeholders; and I am able to devote my time to the Company’s affairs, to closely attend to the functioning of the Company’s operations and to fully perform the duties vested to me.” Name-Surname The internal and external Group duties of each Board member assumed on behalf of the Company and rationale thereof are disclosed for the information of the General Assembly where the election of each Board member is discussed. There is not any separate committee designated. The duties of a nomination committee are performed by the Corporate Governance Committee. Title Outside Group Duty Chairman of the Board of Directors Chairman of the Board of Directors of Group companies Vice Chairman of the Board of Directors Member of the Board of Directors of Group companies Ahmet ÖZOKUR Member Member of the Board of Directors of Group companies Mehmet TÜTÜNCÜ Member Member of the Board of Directors of Group companies Mahmut Mahir KUŞCULU Member Member of the Board of Directors of Group companies Cengiz SOLAKOĞLU Duran AKBULUT Member Member Ekrem PAKDEMİRLİ Alain STRASSER Member Member Member of the Board of Directors of Group companies Chairman of the Executive Board of Büyük Kulüp Member of the Board of Directors of Albaraka Türk Katılım Bankası - Murat ÜLKER Ali ÜLKER 16. Rules of Conduct of the Board of Directors The Company’s Board of Directors held 20 meetings between January and December 2013. Due consideration was given when setting the meeting dates and times so that each and every member is able to attend the meeting. The Board of Directors meets regularly and as often as necessary to conduct its business and affairs effectively. The Board of Directors shall convene once a month when it is deemed necessary due to the Company operations and transactions. The Board of Directors must also convene when it is deemed necessary by the Chairman or one-third of the Board members. The meetings of the Board of Directors may be held at the headquarters of the Company or at a convenient location in the city where the headquarters is located or in another city by resolution of the Board of Directors. The Board of Directors may, upon resolution, determine whether or not they will have a distribution of responsibilities among the Board members. An invitation for the meeting must made by a seven-day prior notice and include the agenda and documentation related to the call for the meeting. In principle, members participate in a Board of Directors meeting in person. However, it is possible that Board members may participate in a Board of Directors meeting by means of electronic communication. Written stipulations of a member who does not participate in a Board meeting but submits his/her comments on the agenda in writing shall be presented to the other members. Any discussion and resolution of Board of Directors must be recorded in written minutes, which must be signed by each member present at the meeting and then recorded in the book of resolutions. Any member with a dissenting vote must also state his/ her rationale for his/her dissenting vote before signing the minutes of that meeting. Minutes of meetings and related documents and correspondence related 51 therewith shall be regularly archived by the Secretariat of the Board of Directors. The Board of Directors shall meet with a quorum of at least more than one-half of the number of members and resolve by a majority of members present at the meeting. In the event there is a tie in the votes, the voted issue shall be discussed at the next meeting. The proposal shall be deemed rejected if it is not approved by a majority vote at the next meeting. Each Board member has one voting right regardless of his/her title and area of duty. The names, duties and responsibilities of members of the Board of Directors are clearly specified in the Articles of Association which is available on our website: www.ulkerbiskuvi.com.tr. While carrying out their responsibilities, the members of the Board Directors are furnished all the information necessary for them to fully perform their duties and act prudently and in good faith. No objection has been raised against any resolution adopted by the Board of Directors during 2013. Nor has there been any material transaction with respect to related party transactions which were presented to independent members for approval. Any material information which must be disclosed to the public is promptly disclosed after the end of each meeting. 17. Number, Structure, and Independency of Committees Formed by the Board of Directors Audit Committee: The Audit Committee, which was established by a resolution of the Board of Directors on May 22, 2006, was restructured by a resolution of the Board of Directors dated August 5, 2008 in accordance with Communiqué No. 22 Serial No.: X of the Capital Markets Board. The Audit Committee ensures that the Company’s financial and operational functions are monitored in a reliable manner. The purpose of the Committee, which reports directly to the Board of Directors, is to oversee the Company’s accounting system, audit and disclosure of financial information, and the functioning and effectiveness of the internal audit system. This Committee meets as necessary, but at least four times each year. The new members of the Audit Committee as selected by the resolution of the Board of Directors dated October 15, 2012 are as follows: Name Duran Akbulut Ekrem Pakdemirli Title Position with Company Chairman of Board Member Committee (Independent) Board Member Member (Independent) Corporate Governance Committee: The Company established a Corporate Governance Committee by resolution of the Board of Directors dated August 5, 2008 in accordance with the Corporate Governance Principles published by the Capital Markets Board. This Committee reports directly to the Board of Directors and meets as necessary but at least three times each year. The new members of the Audit Committee as selected by resolution of the Board of Directors dated October 15, 2010 are as follows: Name Duran Akbulut Alain Strasser Hafize Nurtaç Ziyal Title Position with Company Chairman of Committee Board Member (Independent) Member Board Member (Independent) Member General Director of M&A Business Development and Investor Relations 52 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Corporate Governance Principles Compliance Report Risk Committee: The Company established a Risk Committee in accordance with the Corporate Governance Principles published by the Capital Markets Board. This Committee reports directly to the Board of Directors and meets as necessary. The new members of the Audit Committee as selected by resolution of the Board of Directors dated October 16, 2012 are as follows: Name Ekrem Pakdemirli Necdet Buzbaş Position with Title Company Chairman of Board Member Committee (Independent) Member Any independent member may be a member of more than one committee, but s/he may be selected as chairman of only one committee. The Board of Directors may appoint an independent member as a committee member for more than one committee in accordance with the Corporate Governance Principles. 18. Risk Management and Internal Audit Mechanism The Company’s activities with regard to risk management are carried out by the Risk Committee. The Company is also audited regularly by the auditing units of Yıldız Holding A.Ş., which is the majority shareholder of the Company, and an independent audit firm. The findings of these audits are communicated to the members of the Audit Committee and to the Board of Directors. The business flows, and procedures of the Company, and authorities and responsibilities of employees are controlled within the framework of risk management and are subject to continuous monitoring and checks. 19. Strategic Objectives of the Company Mission, Vision, and Strategic Objectives of the Company The Company and all subsidiaries of Yıldız Holding were founded on the philosophy that “every person has the right to a nice childhood regardless of the country s/he lives in.” The vision of Ülker Bisküvi is to further strengthen and advance its brand reputation, which is the most preferred brand by consumers particularly in bakery products, and become one of the top five companies in Turkey within the next 10 years. The vision and mission of Yıldız Holding and our Company is disclosed to the public and is available on the websites: www.ulker.com.tr and www.ulkerbiskuvi. com.tr. 20. Remuneration Remuneration of each member of the Board is determined separately by the General Assembly depending on the financial position of the Company at that time. The General Assembly has resolved that each Board member is paid TL 2,599.21 per month in 2012 and each independent member who was elected on August 9, 2012 be paid TL 5,304.50 per month. No loan was extended to any member or executive officer during the period, nor extended, directly or through a third party, any personal loan or given any collateral on their behalf, such as a surety. Principles for remuneration regarding interests of executive management and the Board of Directors are explained in detail on the website: www.ulkerbiskuvi. com.tr. 53 Risk Management Corporate Risk Management efforts include determining potential incidents that may affect Ülker Bisküvi, managing risks in line with the Company’s risk taking profile, and providing an acceptable level of assurance for the Company to achieve its goals. Corporate Risk Management is a systematic process which is utilized in devising strategies, implemented across the Company and impacted by the Company’s Board of Directors, senior management as well as all of its employees. As a result of proper Risk Management, Companies are able to: •Sustain profitability and growth, •Minimize revenue fluctuation, •Make healthier decisions about risks, •Identify opportunities and threats in a better way •Sharpen the competitive edge, •Utilize resources more efficiently, •Comply with laws and regulations, •Improve the quality of Corporate Governance. While a potential risk may present a negative factor which must be taken under control, for companies that implement Corporate Risk Management it creates important opportunities. In the past, risks were managed by individual departments; however, in line with the changes in the overall risk management concept, risks are now tackled as a whole and assessed on the basis of each company. Previously, risk assessment was carried out by the internal audit departments of companies, measurements were evaluated in a subjective manner, and risk management functions were unstructured and inconsistent. However, at companies which adopt the principles of Corporate Risk Management, a risk committee ensures effective risk management as imposed by the Board of Directors, and thus risks can be properly measured. Additionally, risk management is structured to cover all management systems of companies. As a company engaged in production and sales activities in various countries, Ülker Bisküvi is aware of the necessity to monitor risks and take necessary measures, especially about risks arising from currency and interest rates, raw material prices, partnerships and new investments, which have become even more important with the latest developments. The Company’s risk management activities are carried out by the Risk Committee. Furthermore, Ülker Bisküvi is also audited regularly by the audit units of Yıldız Holding A.Ş., the parent company, and also by independent auditors. The findings of these audits are reported to the members of the Audit Board as well as to Board members. The Company’s workflows, procedures, and the authorities and responsibilities of employees have been placed under control, and subjected to constant supervision within the framework of risk management. 54 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Investor Relations The Ülker Bisküvi Investor Relations Department always seeks to establish more effective, transparent, equal and timely communications with investors. The Company strives to carry out such processes in strict compliance with applicable laws, rules and regulations, and on par with global best practices. In 2013, Ülker Bisküvi held a total of 293 meetings in Turkey and overseas (including the meetings held at the Head Office) with 281 investors and 12 analysts. (Number of meetings in 2012: 255.) The Company also participated in conferences and road shows in New York, Boston, Chicago, London, Frankfurt, Edinburgh, Warsaw, Amsterdam, Stockholm and Copenhagen. At these conferences and meetings, Ülker Bisküvi provided information to shareholders and prospective investors, and regularly received requests for information. The number of analysts covering Ülker Bisküvi totaled 14 in 2013. As a result of all activities, announcements and projections shared with investors throughout 2013 along with the share sale, Ülker Bisküvi shares outperformed the BIST 100, BIST 50 and BIST Food and Beverage indices by a wide margin. Ülker Bisküvi hosted teleconferences and webcasts for informational purposes and to respond to the questions of investors and analysts on the days after the announcement of quarterly financial results on the Public Disclosure Platform. The Company’s phone numbers and email address were announced on the corporate website, www.ulkerbiskuvi.com. tr, on the day of the meetings. Investors and analysts showed significant interest in the teleconferences and webcasts, and submitted questions about Ülker Bisküvi’s strategies, restructuring efforts, market share and growth targets. The Investor Relations Unit is in charge of establishing the Company’s information disclosure policy and ensuring that this policy is adopted across the organization. The main responsibilities of the Unit are as follows: a) To ensure that shareholders’ records are kept in a secure, safe and an up-to-date form, b) To respond to shareholders’ written requests for information in writing, except that information undisclosed to the public, or classified as confidential or commercial secret, c) To ensure that General Assembly meetings are held in conformity with applicable rules and regulations, Articles of Association, and other internal regulations, d) To prepare the documents that may be useful to the shareholders at the General Assembly meetings, e) To keep record of voting results and ensure that the reports of the results are delivered to the shareholders, f) To oversee and monitor all matters related to applicable legislation and the Company’s information disclosure policy. 55 Amendment to the Articles of Association Current Version New Version 4 – Registered Office and Branch Offices: Article 4 - The registered office of the Company is at Davutpasa Caddesi No.: 10, Topkapı in the district of Zeytinburnu, Istanbul. In the event of a change of address of the registered office, the new address shall be registered before the Trade Registry Office and announced in the Turkish Trade Registry Gazette, and the change of address shall also be notified to the Ministry of Customs and Commerce and to the Capital Markets Board. Any notice sent to the registered address of the Company shall be deemed to have been made to the Company. The Company’s failure to have its new address registered within the prescribed time limit although it has moved from its registered address, which is already announced to the public, shall be considered as grounds for termination of the Company. The Company may establish branches or facilities either at home or abroad, provided that the Company should notify the Ministry of Customs and Commerce and the Capital Markets Board. 4 - Registered Office and Branch Offices: Article 4 - The registered office of the Company is at Kısıklı Mahallesi Ferah Caddesi No: 1 Büyük Çamlıca in the town of Üsküdar in the city of Istanbul. In the event of a change of address of the registered office, the new address shall be registered before the Trade Registry Office and announced in the Turkish Trade Registry Gazette, and the change of address shall also be notified to the Ministry of Customs and Commerce and to the Capital Markets Board. Any notice sent to the registered address of the Company shall be deemed to have been made to Company. The Company’s failure to have its new address registered within the prescribed time limit although it has moved from its registered address, which is already announced to the public, shall be considered as grounds for termination of the Company. The Company may establish branches or facilities either domestically or abroad, provided that the Company notify the Ministry of Customs and Commerce and the Capital Markets Board. II. Capital and Shares II. Capital and Shares 1 – Capital of the Company: Article 7 - The Company has adopted the registered capital system as per the provisions of the Capital Market Law No. 2499 as amended by Law No. 3794, and has started to implement this system on the basis of permission no. 2/24 dated January 16, 2004 of the Capital Markets Board. The registered capital of the Company is TL 500,000,000 (five hundred million) divided into 50,000,000,000 (fifty billion) shares with a nominal value of 1 (one) Turkish kuruş each. Capital of the Company: Article 7 - The Company has adopted the registered capital system as per the provisions of the Capital Market Law No. 6362, and has started to implement this system on the basis of the permission of the Capital Markets Board. The registered capital of the Company is TL 500,000,000 (five hundred million) divided into 50,000,000,000 (fifty billion) shares with a nominal value of 1 (one) Turkish kuruş each. The previous capital of the Company was TL 268,600,000 (two hundred sixty-eight million and six hundred thousand) and now it has been increased by TL 73,400,000, which is equivalent to 7,340,000,000 shares, through private placement with premium on issued shares. This capital increase has been implemented by setting off of all sums owed by the Company to existing shareholders on the condition of revocation of dividend privileges and interests granted to shareholders upon full restriction The permission for the registered capital cap granted by the Capital Markets Board is valid for five (5) years between 2013 and 2017. Even if this registered capital cap has not yet been satisfied by the end of 2017, the Board of Directors must obtain the General Assembly’s authorization to apply for an extension of time for a previous or a new cap authorization upon the permission of the Capital Markets Board. In the event of failure to obtain such authorization and loss of eligibility for a registered capital system, the Company shall be removed from the system by the Capital Markets Board. 56 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Amendment to the Articles of Association of pre-emption rights granted to existing shareholders and disqualifying bearer shareholders for the purpose of application of Article 9, paragraph (d) of Article 34 of the previous version of the Articles of Association before amendment, and Class A and Class B bearer shareholders for the purposes of application of paragraph (d) of Article 34 of the previous version of the Articles of Association. Accordingly, 22,171 pre-emptive shareholders are now given Class C shares equivalent to TL 29,350,020, 1,486 Class A bearer shareholders Class C shares equivalent to TL 29,525,607, and 731 Class B registered shareholders Class C shares equivalent to TL 14,524,373. Previous 731 Class B shares have been converted into Class C shares, as all dividend privileges previously granted to this class of shares have been abrogated, and there is not any other kind of privileges left. Since all the privileges granted to Class D shares are still valid (as per Article 11 of these Articles of Association), this class of shares has been renamed as Class B. The capital of the Company, which is now increased, is divided into 34,200,000,000 (thirty-four billion two hundred million) shares with a nominal value of 1 Turkish kuruş each. The issued capital of the Company is TL 342,000,000 (three hundred and forty-two million) and is composed of 34,199,996,297 Class C bearer shares, 1,486 Class A bearer shares, and 2,217 Class B registered shares. The issued capital of the Company is fully paid up. Securities to be issued out of the Company’s fund shall be distributed to existing shareholders pro rata to their respective shareholding percentage at no cost. The Board of Directors may issue shares in the form of share certificates representing multiple shares. Although the nominal value of each share was TL 1,000 it has been changed to 1 Turkish kuruş pursuant to Law No. 5274 Amending the Turkish Commercial Code. As a result of this change, the total number of shares has decreased, and each shareholder will receive one (1) share with a nominal value of 1 Turkish kuruş in return for 10 shares with a nominal value of TL 1,000 each. All vested rights of shareholders with respect to such exchange shall be reserved. All shares representing the capital of the Company shall be tracked through appropriate records in accordance with the guidelines for registration of shares. The issued capital of the Company is TL 342,000,000 (three hundred and forty-two million) divided into 34,200,000,000 (thirty-four billion two hundred million) bearer shares with nominal value of 1 Turkish kuruş each, and is fully paid up. There is not any difference between shares in terms of privileges or classes. The Board of Directors shall be entitled, at its discretion, to increase the issued capital by issuing new shares up to the registered upper limit of the capital, and to adopt resolutions in relation to limitation of subscription rights of shareholders, as well as in relation to issuance of premium stocks in accordance with the provisions of the Capital Market Law. Securities to be issued out of the Company’s fund shall be distributed to existing shareholders pro rata to their respective shareholding percentage at no cost. All shares representing the capital of the Company shall be tracked through appropriate records in accordance with the guidelines for registration of shares. 57 3 - Transfer of Bearer Shares: Article 9 - In principle, any bearer share may be transferred. Transfer shall become valid if an endorsed share certificate is delivered to the transferee, and the transfer is registered in the share ledger. Without prejudice to Article 418 of the Turkish Commercial Code, the Company may refrain from recording a share transfer in the share ledger without stating a cause. 3 - Transfer of Bearer Shares: Article 9 - ABROGATED III. Management III. Management A – Board of Directors A – Board of Directors Members Article: 11 - The Board of Directors consists of executive and non-executive members. The Corporate Governance Principles of the Capital Markets Board shall be abided by with respect to the number and the qualifications of the independent members of the Board of Directors and the structure and organization of the Board of Directors. Directors Article: 11 - The Board of Directors consists of executive and non-executive members. The Corporate Governance Principles of the Capital Markets Board shall be abided by with respect to the number and the qualifications of the independent members of the Board of Directors and the structure and organization of the Board of Directors. Without prejudice to the first paragraph of this article, the affairs of the Company shall be executed and represented by a Board of Directors which consists of at least seven members to be elected by the General Assembly in accordance with the Turkish Commercial Code and the conditions specified below. Without prejudice to the first paragraph of this article, the affairs of the Company shall be executed and represented by the Board of Directors which consists of at least seven members to be elected by the General Assembly in accordance with the Turkish Commercial Code and the conditions specified below. Four members are nominated by simple majority of Class A shareholders, one member by simple majority of Class B shareholders, and rest of the members are nominated in accordance with general provisions. As a rule, each Board member must have basic knowledge of the legal rules on actions and disposals regarding the fields of activities of the Company, training and experience in management of a company, and the ability to review the financial statements and reports of the Company, and at least one-third of members must have a university degree. As a rule, each member must have the basic knowledge of the legal rules on actions and disposals regarding the fields of activities of the Company, training and experience in management of a company, and the ability to review the financial statements and reports of the Company, and at least one-third of the members must have a university degree. The Board of Directors shall elect a Chairman and a Vice Chairman from among its members to fully exercise its powers and fully perform its responsibilities. It is important that the Chairman of the Board of Directors and General Manager of the Company are not the same person. The Board of Directors may, as it deems necessary, delegate part of its powers and certain parts of its responsibilities to the Company to executive management, who shall also be responsible for monitoring of the implementation of The Board of Directors shall elect a Chairman and a Vice Chairman from among its members to fully exercise its powers and fully perform its responsibilities. It is important that the Chairman of the Board of Directors and General Manager of the Company are not the same person. The Board of Directors may, as it deems necessary, delegate part of its powers and certain parts of responsibilities to the Company to executive management, who shall be also responsible for monitoring of the implementation of resolutions of the Board of Directors. 58 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Amendment to the Articles of Association resolutions taken by the Board of Directors. The Chairman of the Board of Directors shall be responsible for convening the Board of Directors for meeting and proper functioning of discussions and causing any resolution adopted to be recorded in minutes. It exercises this responsibility through the Secretariat of the Board of Directors. The Vice Chairman of the Board of Directors shall undertake the powers and responsibilities that are delegated to him/her by the Chairman of the Board of Directors, s/he shall preside over meetings of the Board to which the Chairman cannot attend for any reason, and s/he shall assist the Chairman in performing his/her duties. The Chairman of the Board of Directors shall be responsible for convening the Board of Directors for meeting and proper functioning of discussions and ensuring that any resolution made to be recorded in the minutes. It exercises this responsibility through the Secretariat of the Board of Directors. The Vice Chairman of the Board of Directors shall undertake the powers and responsibilities that are delegated to him/her by the Chairman of the Board of Directors, s/he shall preside over meetings of the Board to which the Chairman cannot attend for any reason, and s/he shall assist the Chairman in performing his/her duties. In the case of vacancy in the Board of Directors for any reason whatsoever, the Board of Directors shall appoint a member, who has the necessary qualifications, and who will act as a member until the approval for the next the General Assembly, in accordance with paragraph one above. A newly appointed member shall complete the remaining term of office of the replaced member. The scope of right to information on the affairs of the Company, and to examine statutory books or documents of the Company granted to the Chairman of the Board of Directors or member, may at any time be expanded by a resolution of the Board of Directors. In the case of a vacancy in the Board of Directors for any reason whatsoever, the Board of Directors shall appoint a member, who has the necessary qualifications, and who will act as a member until the approval for the next the General Assembly, in accordance with paragraph one above. A newly appointed member shall complete the remaining term of office of the replaced member. 7 – Management and Representation of the Company: Article 17 – Without prejudice to the first paragraph of Article 12 Duties and Powers of the Corporate Governance Principles in Part III of these Articles of Association, the Board of Directors shall manage and represent the Company before any third party. The method of valid representation of the Company before any third party shall be determined by the Board of Directors. Any document given or any agreement executed by the Company shall be valid if it bears signatures of any two members underneath the common seal of the Company, unless otherwise agreed. 7 – Management and Representation of the Company: Article 17 – Without prejudice to the first paragraph of Article 12 Duties and Powers of the Corporate Governance Principles in Part III of these Articles of Association, the Board of Directors shall manage and represent the Company before any third party. The method of valid representation of the Company before any third party shall be determined by the Board of Directors. Any document given or any agreement executed by the Company shall be valid if it bears signatures of any two Board members underneath the common seal of the Company, unless otherwise agreed. The Board of Directors may delegate whole or part of its representation powers and duties to one or more executive members of the Board of Directors or to any executive(s), who is/are executive(s) of the Company or not in accordance with Article 319 of the TCC. Executives may at any time be appointed for the duration longer than the term of office of a member. The Board of Directors may designate a committee or committees for execution of certain activities. The Board of Directors may delegate the whole or part of its representation powers and duties to one or more executive members of the Board of Directors or to any executive(s), who is/are executives(s) of the Company or not in accordance with Article 370 of the TCC. Executives may at any time be appointed for a duration longer than the term of office of a Board member. The Board of Directors may designate a committee or committees for execution of certain activities. 59 The Board of Directors shall determine the powers of executives and whether or not they individually or jointly represent the Company. Any resolution of the Board of Directors in that regard shall be recorded and disclosed. The Board of Directors shall determine the powers of executive management and whether or not they are individually or jointly represent the Company. Any resolution of the Board of Directors in that regard shall be recorded and disclosed. B – Auditors 1 – Election: Article 20 - The General Assembly shall elect two or three auditors for a maximum of three years among the shareholders or from outside. The auditors shall constitute a board. The General Assembly shall set and determine remuneration payable to auditors. Auditors Article 20 - The Company shall be audited by an auditor to be elected by the General Assembly in accordance with the Turkish Commercial Code, and the Capital Market Law and applicable regulations. The Turkish Commercial Code shall apply for election, dismissal, termination of contract for service, and the procedures and principles of internal audit. The independent audit firm which will perform the independent audit of the financial statements of the Company shall be appointed by the General Assembly upon the proposal of the Board of Directors, or the General Assembly shall authorize the Board of Directors to appoint one. The same independent audit firm may be retained continuously and/or for ad-hoc audits for the duration determined in accordance with applicable capital market laws and regulations. The Company is not allowed to procure consulting services from the same independent audit firm, or from personnel who are employed by this firm, or from any consultant firm which is, directly or indirectly, controlled with respect to management or capital by the same independent audit firm. This also applies to any consultancy service provided by real person partners and executives of the independent audit firm. 2 – Duties: Article 21 - Auditors are obliged to perform the duties specified in Article 353 of the Turkish Commercial Code. In addition, auditors have the power and responsibility to call the General Assembly and to take all actions that the General Assembly may deem necessary for the good management and protection of the interests of the Company, to determine the agenda for the General Assembly, and to prepare the report specified in Article 354 of the Turkish Commercial 2 – Duties: Article 21 - ABROGATED 60 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Amendment to the Articles of Association Code. Auditors must promptly exercise these powers in the event of contingencies. Auditors shall be jointly held liable for the failure of performing their duties in accordance with applicable laws and these Articles of Association. C – General Assembly 1 – Form of Meetings: Article 22 – The General Assembly may have either ordinary or extraordinary meetings. The ordinary General Assembly shall convene at least once a year within three months following the end of a fiscal period. The General Assembly shall discuss matters specified in Article 369 of the Turkish Commercial Code and resolve as necessary. C – General Assembly 1 – Form of Meeting: Article 22 – The General Assembly may have either ordinary or extraordinary meetings. The ordinary General Assembly shall convene at least once a year within three months following the end of a fiscal period and resolve as necessary. An extraordinary General Assembly shall convene when and if it deems necessary for the business of the Company and in accordance with relevant provisions of the Turkish Commercial Code and these Articles of Association and resolve as necessary. An extraordinary General Assembly shall convene when and if it deems necessary for the business of the Company and in accordance with relevant provisions of the Turkish Commercial Code and these Articles of Association and resolve as necessary. It is appropriate for the Board members and auditors to participate in the General Assembly. In addition, any person who assumes any responsibility with respect to any matter included in the agenda, and who is required to provide information with respect to any matter included in the agenda must be present at the General Assembly. The venue for meetings held by the General Assembly is the principal place of business of the Company. The General Assembly may convene at another convenient place in the locale where the Company’s principal place of business or branch office is located. This shall be indicated in an invitation and announcement for the General Assembly. Also, background information on nominated Board members is provided to the General Assembly. Also, background information on nominated Board members is provided to the General Assembly. All General Assembly meetings shall be open to the public, unless otherwise agreed by the General Assembly. However, any person present at the General Assembly, who does not possess a shareholder or proxy entrance pass, is not permitted to speak or vote at the General Assembly. The General Assembly shall exercise the powers and perform its duties mandated by the Turkish Commercial Code, the Capital Market Law, and other relevant laws and regulations. 61 3 – Appointment of Proxies: Article 24 - A shareholder may be represented at the General Assembly by a proxy, who may be a shareholder or a person outside the Company. A proxy who is also a shareholder of the Company is entitled to vote on behalf of the shareholder, whom s/he represents in addition to his/her voting right in accordance with the relevant communiqué of the Capital Markets Board. The form of proxy shall be determined and announced by the Board of Directors in accordance with the relevant provisions of the Capital Markets Board. 3 – Appointment of Proxies: Article 24 - A shareholder may be represented at the General Assembly by a proxy, who may be a shareholder or a person outside the Company, provided that all requirements for representation through proxies set out by the Capital Markets Board are complied with. A proxy who is also a shareholder of the Company is entitled to vote on behalf of the shareholder, whom s/he represents in addition to his/ her voting right. Without prejudice to appointment of proxies implemented via the Electronic General Assembly System, a power of attorney to be given to a proxy must be in writing. 4 – Announcement: Article 25 - Without prejudice to paragraph 4 of Article 37 of the Turkish Commercial Code, announcements related to the Company shall be made by a 21-day prior publication to be made in a newspaper of the location where the principal place of business of the Company is registered in accordance with relevant regulations, including the Corporate Governance Principles published by the Capital Markets Board. The invitation to the General Assembly shall be made by at least a three-week prior notice to be given before the meeting date by any means of communication, including electronic communications, so that it is received by as many shareholders as possible. In addition to invitations for the General Assembly meeting and disclosures and notices that the Company is required to publish in accordance with applicable regulatory requirements specified in the Corporate Governance Principles published by the Capital Markets Board, these shall be published on the Company’s website. 4 – Announcement: Article 25 - Announcements related to the Company shall be made by a 21-day prior publication to be made in a newspaper of the location where the principal place of business of the Company is registered in accordance with relevant regulations, including paragraph 4 of Article 37 of the Turkish Commercial Code and the Corporate Governance Principles published by the Capital Markets Board. An invitation to the General Assembly shall be made by at least three-week prior notice to be given before the meeting date by any means of communication, including electronic communications, so that it is received by as many shareholders as possible. In addition to invitations for the General Assembly and disclosures and notices that the Company is required to publish in accordance with applicable regulations and requirements specified in the Corporate Governance Principles published by the Capital Markets Board, these shall also be published on the Company’s website. 5 – Form of Exercising the Right to Vote: Article 26 - Voting at the General Assembly shall be made by a show of hands. However, a secret ballot must be held upon the request of one-twentieth of the shares represented by shareholders present at the General Assembly. 5 – Form of Exercising the Right to Vote: Article 26 - Voting at the General Assembly shall be held in accordance with the provisions of the Turkish Commercial Code and regulations of the Capital Markets Board. Participating in the General Assembly by Electronic Communication Means: Any shareholder who is entitled to attend a meeting held by the General Assembly may attend the meeting held by the General Assembly by an electronic communication means in accordance with Article 1527. Pursuant to the regulation on the General 62 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Amendment to the Articles of Association Assembly convened by electronic communication means, the Company may set up an e-General Assembly system or procure any system which is developed for this purpose so that any shareholder is able to attend, express his/her views, make suggestions, and cast his/her vote by an electronic communication means. At any meeting held by the General Assembly, shareholders and their proxies shall be allowed to exercise their respective rights under the referenced regulations via the system to be so set up. V. Distribution of Profit, Reserve Fund 1 – Distribution of Profits: Article 33 - The net end-of period income less overhead and miscellaneous depreciation expense of the Company, and any sums which the Company must pay or set aside and compulsory taxes that the Company is required to pay, as shown in the balance sheet of the Company shall be reduced by losses from previous periods, if any, and is distributed as follows: a) 5% of profit as shown in the balance sheet, in accordance with paragraph one of Article 466 of the Turkish Commercial Code (TCC). b) First dividend in the amount and at the rate to be determined by the Capital Markets Board shall be set aside for shareholders. The first dividend, which must be set aside under applicable laws, shall be equally distributed among all outstanding shares as of the current period regardless of date of issue and acquisition thereof. c) No resolution on distribution of profit among Board members as well as officers, employees, and workers of the Company, and foundations pursuing various objectives and similar real and legal entities and on setting aside another reserve or carrying any undistributed profit to next year’s balance sheet shall be made unless all legal reserves and the first dividend for shareholders as per these Articles of Association are set aside, and the first dividend has been paid. d) Rules of distribution of profit specified in above subsection (b) shall apply if the General Assembly approves distribution of remaining profit. e) One-tenth of the net of the second dividend, which is approved by the General Assembly for distribution to shareholders and other stakeholders, less a profit share in amount of 5% of paid-in capital to be distributed to shareholders in accordance with subparagraph 3 of Article 466 of the TCC shall be set aside as reserve. V. Distribution of Profit, Reserve Fund 1 – Determination and Distribution of Profit: Article 33 – The Company shall comply with the Turkish Commercial Code and the capital market regulations with respect to any distribution of profit. The net end-of-period income less overhead and any sums which the Company must pay or set aside, such as miscellaneous depreciation expense and compulsory taxes that the Company is required to pay, as shown in the balance sheet of the Company, which is prepared in accordance with applicable capital market regulations, shall be reduced by losses from previous periods, if any, and is distributed as follows: Legal reserve fund: a) 5% of the profit as shown in the balance sheet, in accordance with paragraph one of Article 519 of the Turkish Commercial Code (TCC). First Dividend: b) A first dividend in the amount and at the rate to be determined by the General Assembly in accordance with the Turkish Commercial Code and Capital Markets Board shall be set aside by adding up any donation, if any, which was made during the period, to the remainder of the net profit. c) The General Assembly shall have the right to determine any profit distribution payable to Board members, officers, employees, and workers of the Company, and foundations pursuing various objectives and similar real and legal entities once the above sums have been deducted. Second Dividend: d) The General Assembly shall be entitled to distribute the remainder of net profit less the sums specified in subsections (a), (b), and (c) above in part or 63 f) Pursuant to the Capital Market Law, a dividend advance may be distributed. The General Assembly shall determine, upon proposal by the Board of Directors, when and how profit is to be distributed among shareholders in accordance with the Capital Market Law and other relevant laws. Distributions of profits made in accordance with these Articles of Association cannot be revoked. whole as the second dividend, or to carry such sum to the balance sheet as end-of-year profit, or add such sum to legal or voluntary reserves, or set it aside as contingency reserve. e) One-tenth of the portion of net profit, which is approved by the General Assembly for distribution to shareholders and other stakeholders, less a profit share in the amount of 5% of paid-in capital to be distributed to shareholders shall be added into the general legal reserve in accordance with the Turkish Commercial Code. f) No resolution on distribution of profit among Board members as well as officers, employees, and workers of the Company, and foundations pursuing various objectives and similar real and legal entities and on setting aside another reserve or carrying any undistributed profit to next year’s balance sheet shall be made unless all legal reserves have been set aside and the first dividend for shareholders as per these Articles of Association are distributed in cash or inkind in the form of the Company’s shares. g) The dividend, which must be set aside under applicable laws, shall be equally distributed among all outstanding shares as of the current period regardless of date of issue and acquisition thereof. The General Assembly shall determine, upon proposal by the Board of Directors, when and how an agreed distribution of profit will be made. Pursuant to the Capital Market Law, a dividend advance may be distributed. Capital Markets Board regulations on distribution of profit shall be complied with in full. The General Assembly shall determine, upon proposal by the Board of Directors, when and how an agreed distribution of profit will be made 4 - Legal Provisions during Liquidation: Article 38 - The termination and liquidation of the Company, the manner and course of actions of the liquidation process, and powers and liabilities of liquidators are specified in Article 44 and 449 of the Turkish Commercial Code. 4 - Legal Provisions during Liquidation: Article 38 - The termination and liquidation of the Company, the manner and course of actions of the liquidation process, and the powers and responsibilities of liquidators shall be determined in accordance with relevant provisions of the Turkish Commercial Code. 64 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 2013 Ordinary General Assembly Meeting Agenda 1. Opening and appointing the Chairman, 2. Presenting and negotiating 2013 Annual Report, 3. Presenting and negotiating 2013 Independent External Audit Report, 4. Presenting, negotiating and approving 2013 Financial Statements, 5. Acquaintance of the member of the Board of Directors and Auditors separately, 6. Determining the way to use the Company’s profit, and determining the percentage of profit and dividend shares to be distributed, 7. Presenting the Company Auditor recommended by Board of Directors to the approval of General Assembly, 8. Election of the members of the Board of Directors, 9. Informing the General Assembly about the donations made by the Company within the year, 10. Informing the General Assembly about the details of Collaterals, Pledges and Mortgages given by the Company within 2013, 11. Determining the remunerations of the Members of the Board of Directors, 12. Informing the General Assembly about the transactions made with the “Related Parties” in accordance with the Capital Markets Board’s Corporate Governance Principles and other related regulations, 13. Authorizing the members of the Board of Directors to perform the written transactions stated in the Articles 395 and 396 of the Turkish Code of Commerce. 65 Subsidiary Company Report Results Pursuant to Article 199 of Turkish Commercial Code No. 6102, which is effective as of July 1, 2012, the Board of Directors of Ülker Bisküvi Sanayi A.Ş. must report on the Company’s relationships with its majority shareholder and subsidiaries thereof in the previous period to be prepared in the first quarter of the current period and incorporate conclusions of the report into the annual report. Information on transactions conducted by Ülker Bisküvi Sanayi A.Ş. with its related parties are provided in note 32 of the financial statements. In the report prepared by the Board of Directors of Ülker Bisküvi Sanayi A.Ş., it is stated that: “It has been concluded on the basis of the events and circumstances known to us as of the date when the transaction or measure was taken or omitted, that for each transaction conducted with the majority shareholders of Ülker Bisküvi Sanayi A.Ş. and affiliates of majority shareholders in 2013, an appropriate counteraction has been taken, that there has not been any action, which may damage the Company, taken or omitted to be taken, and that within that framework there has been no action or measure which requires an adjustment to be made.” 66 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Power of Attorney POWER OF ATTORNEY ÜLKER BİSKÜVİ SANAYİ ANONİM ŞİRKETİ I hereby appoint ………………………. whose information is given below, as my proxy to represent myself, to vote, to submit proposals and to sign the necessary documents in accordance with my below specified opinions at the Ordinary General Assembly Meeting which will be held on Thursday 27th of March 2014, at 14:00, in the address of Barcelo Eresin Topkapı Oteli, Millet Caddesi No:186 Topkapı Fatih / İSTANBUL Proxy’s (*); Name Surname / Trade Name: TR Identification No/ Tax No, Trade Register and Number with Central Registration System number: (*) For the proxies of foreign nationality, it is obliged to submit the mentioned information or if any, the equivalents. The scope of the proxy has to be specified by selecting one of the (a), (b) or (c) options for the sections 1 and 2. 1. Regarding the issues on the agenda of the General assembly; a) The proxy is authorized to vote in accordance with his/her own opinion. b) The proxy is authorized to vote in accordance with the proposals of the Company management. c) The proxy is authorized to vote in accordance with the following instructions. Instructions: In case the shareholder selects the option (c), the instructions specific to the general assembly agenda item, are given upon choosing one of the options (accept and decline) given under the agenda item; and in case the option “decline” is selected the instructions are given upon specifying the dissenting opinion (if ANY) on the minutes of proceedings of the general assembly. Agenda Items (*) Accept Decline Dissenting Opinion 1. 2. 3. (*) Issues on the agenda of the General Assembly are specified one by one. If the minority has another draft resolution, this is specified separately provided that the proxy vote is not given. 2. Special instruction regarding particularly the issue of the protection of the minority rights and the other possible issues that may come up in General Assembly meeting: a) The proxy is authorized to vote in accordance with his/her own opinion. b) The proxy is not authorized represent in these issues. c) The proxy is authorized to vote in accordance with the following special instructions. SPECIAL INSTRUCTIONS; Special instructions, if ANY, which will be given to the proxy by the shareholder are specified here. B) Selecting one of the following options the shareholder specifies the shares which will be represented by the proxy. 1. I do authorize the proxy to represent my shares specified below. a) Class and rank:* b) Number/Group** c) Quantity-Nominal Value: ç) Whether privileged in voting or not: d) Registered or Bearer Shares:* e) Ratio of the total shares of the shareholder to rights to vote: *For dematerialized shares, these details are not required. ** For dematerialized shares, “Group” data (if ANY) will be specified instead of “Number”. 2. I do approve that the proxy will represent all my shares specified on the list, prepared by the CRA (Central Registry Agency) the day before the General Assembly date, regarding the shareholders who can attend the general assembly representation. NAME SURNAME or TRADE NAME (*) OF THE SHAREHOLDER TR Identification No/ Tax No, Trade Register and Number with Central Registration System number: Address: (*) For the proxies of foreign nationality, it is obliged to submit the mentioned information or if any, the equivalents. SIGNATURE 67 Dividend Distribution Policy The Company distributes its profit in line with the Turkish Commercial Code, Capital Market Law, Tax Law, other applicable legislation and the article on profit distribution in the Articles of Association. The Board of Directors’ profit distribution proposal in accordance with the profit distribution policy and the Capital Markets Board’s Corporate Governance Principles is included in the annual report, submitted for the approval of shareholders at the General Assembly, and detailed information on the history of profit distribution and capital increases is disclosed to the general public via the corporate web site. The Company has set its profit distribution policy in accordance with Capital Market Law and Articles of Association, taking into consideration the Company’s operational performance, financial situation and market developments. Starting from the earnings of the fiscal year 2012, the Company will distribute a minimum of 70% of its net distributable profit for each accounting period in cash, upon the proposal of the Board of Directors and the approval of the General Assembly, with any changes made by these entities, in accordance with Turkish legislation, and after due consideration of the Company’s cash flow requirements. This policy will be reviewed each year by the Board of Directors, in parallel with any negative developments in national and global economic conditions, and the situation of current projects and the Company’s financial resources. According to the profit distribution policy, the dividend is equally distributed to all shares in the accounting period and no shares enjoy any privilege. 1. Paid-in/Issued Capital (TL) 2. Total Legal Reserves (According to Legal Requirements) Information regarding privileges in profit distribution according to Articles of Association, if any 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Profit for the Period Taxes Payable (-) Net Profit for the Period (=) Losses from Previous Years (-) First Legal Reserves (-) Emission Premium Correction (+) NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) Donations During the Year (+) Net Distributable Profit plus Donations, for the calculation of the First Dividend First Dividend to Shareholders - Cash - Bonus - Total Dividend to Privileged Shareholders Dividend to Board Members and Employees Dividend to Redeemed Shareholders Secondary Dividend to Shareholders (Bonus) Secondary Legal Reserves Statutory Reserves Special Reserves EXTRAORDINARY RESERVES Other Resources Payable - Previous Year's Profit - Extraordinary Reserves -Other Distributable Reserves as per the Legal Requirements and Articles of Association INFORMATION REGARDING THE DISTRIBUTED PROFIT SHARE DIVIDEND PER SHARE GROUP TOTAL DIVIDEND AMOUNT (TL) GROSS NET - 133,000,000.00 113,050,000.00 According to the CMB 240,434,188.00 (51,785,743.00) 188,648,445.00 0.00 0.00 0.00 188,648,445.00 553,178.22 342,000,000.00 (109.644.348,60) According to Legal Requirements (LR) 192,714,728.38 (16,367,093.03) 176,347,635.35 0.00 0.00 0.00 176,347,635.35 189,201,623.22 133,000,000.00 133,000,000.00 0.00 133,000,000.00 0.00 2,113,921.99 0.00 0.00 11,801,392.20 0.00 0.00 41,733,130.81 0.00 0.00 0.00 29,432,321.17 0.00 0.00 0.00 0.00 0.00 DIVIDEND PER SHARE WITH NOMINAL VALUE OF TL 1 AMOUNT (TL) RATE (%) 0.3888889 38.8889 0.3305556 33.05556 RATIO OF DISTRIBUTED DIVIDEND TO NET DISTRIBUTABLE PROFIT PLUS DONATIONS DIVIDEND DISTRIBUTED TO SHAREHOLDERS THE RATIO OF THE DIVIDEND DISTRIBUTED TO THE SHAREHOLDERS TO NET (TL) DISTRIBUTABLE PROFIT PLUS DONATIONS (%) 135,113,921.99 71.41 68 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 Independent Audit Report CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ON THE ANNUAL REPORT ORIGINALLY ISSUED IN TURKISH INDEPENDENT AUDITOR’S REPORT ON THE ANNUAL REPORT ÜTo the Board of Directors Ülker Bisküvi Sanayi A.Ş., 1. As part of our audit, we have assessed whether the financial information and the assessment and explanations of the Board of Directors presented in the annual report of Ülker Bisküvi Sanayi A.Ş. (“the Company”) prepared as of 31 December 2013 are consistent with the audited financial statements as of the same date. 2. Management is responsible for the preparation of the annual report in accordance with “the Communique on Determining the Minimum Contents of Company Annual Reports”. 3. Our responsibility is to express an opinion on whether the financial information provided in the annual report is consistent with the audited financial statements on which we have expressed our opinion dated 5 March 2014. Our assessment is made in accordance with the principles and procedures for the preparation and issuing of annual reports in accordance with Turkish Commercial Code No. 6102 (“TCC”). Those principles and procedures require that an audit is planned and performed to obtain reasonable assurance whether the financial information provided in the annual report are free from material misstatement regarding the consistency of such information with the audited financial statements and the information obtained during the audit. We believe that the assessment we have made is sufficient and appropriate to provide a basis for our opinion. 4. Based on our opinion, the financial information and the assessment and explanations of the Board of Director’s in the accompanying annual report of Ülker Bisküvi Sanayi A.Ş. are consistent with the audited financial statements as at 31 December 2013. Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers Mert Tüten, SMMM Partner Istanbul, 5 March 2014 ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT (ORGINALLY ISSUED IN TURKISH) CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ORIGINALLY ISSUED IN TURKISH INDEPENDENT AUDITOR’S REPORT To the Board of Directors of Ülker Bisküvi Sanayi A.Ş.; Introduction 1. We have audited the accompanying consolidated balance sheet of Ülker Bisküvi Sanayi A.Ş. (the “Company”) and its Subsidiaries (collectively referred to as the “Group”) as at 31 December 2013 and the related consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes. Management’s responsibility for the financial statements 2. Group’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Turkish Accounting Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) and for such internal controls as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to error and/or fraud. Independent auditor’s responsibility 3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our audit was conducted in accordance with standards on auditing issued by the Capital Markets Board of Turkey. Those standards require that ethical requirements are complied with and that the audit is planned and performed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to error and/or fraud. In making those risk assessments; the Group’s internal control system is taken into consideration. Our purpose, however, is not to express an opinion on the effectiveness of internal control system, but to design procedures that are appropriate for the circumstances in order to identify the relation between the consolidated financial statements prepared by the Group and its internal control system. An audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Group’s management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained during our audit is sufficient and appropriate to provide a basis for our audit opinion. Opinion 4. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Ülker Bisküvi Sanayi A.Ş. and its Subsidiaries as at 31 December 2013 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards (Note 2). Reports on independent auditor’s responsibilities arising from other regulatory requirements 5. In accordance with Article 402 of the Turkish Commercial Code (“TCC”); the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit, additionally, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January – 31 December 2013 is not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting. 6. Pursuant to Article 378 of Turkish Commercial Code no. 6102, Board of Directors of publicly traded companies are required to form an expert committee, and to run and to develop the necessary system for the purposes of: early identification of causes that jeopardize the existence, development and continuity of the company; applying the necessary measures and remedies in this regard; and, managing the related risks. According to subparagraph 4, Article 398 of the code, the auditor is required to prepare a separate report explaining whether the Board of Directors has established the system and authorized committee stipulated under Article 378 to identify risks that threaten or may threaten the company and to provide risk management, and, if such a system exists, the report, the principles of which shall be announced by the POA, shall describe the structure of the system and the practices of the committee. This report shall be submitted to the Board of Directors along with the auditor’s report. Our audit does not include evaluating the operational efficiency and adequacy of the operations carried out by the management of the Company in order to manage these risks. As of the balance sheet date, POA has not announced the principles of this report yet so no separate report has been drawn up relating to it. On the other hand, the Company formed the mentioned committee on 21 August 2009 and it is comprised of two members. The committee has met one time during the year for the purposes of early identification of risks that jeopardize the existence of the company and its development, applying the necessary measures and remedies in this regard, and managing the risks, and has submitted the relevant reports to the Board of Directors. Other matter 7. The consolidated financial statements of the Group as of 31 December 2012 and for the year then ended were audited by another audit firm whose audit report dated 6 March 2013 expressed an unqualified opinion. Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers Mert Tüten, SMMM Partner Istanbul, 5 March 2014 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). CONTENTS PAGE(S) CONSOLIDATED BALANCE SHEET 72-73 CONSOLIDATED STATEMENT OF INCOME AND STATEMENT OF COMPREHENSIVE INCOME 74-75 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY CONSOLIDATED STATEMENT OF CASH FLOW NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 NOTE 2 NOTE 3 NOTE 4 NOTE 5 NOTE 6 NOTE 7 NOTE 8 NOTE 9 NOTE 10 NOTE 11 NOTE 12 NOTE 13 NOTE 14 NOTE 15 NOTE 16 NOTE 17 NOTE 18 NOTE 19 NOTE 20 NOTE 21 NOTE 22 NOTE 23 NOTE 24 NOTE 25 NOTE 26 NOTE 27 NOTE 28 NOTE 29 NOTE 30 NOTE 31 NOTE 32 NOTE 33 NOTE 34 NOTE 35 ORGANIZATION AND OPERATIONS OF THE GROUP BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS BUSINESS COMBINATIONS. SEGMENTAL INFORMATION CASH AND CASH EQUIVALENTS FINANCIAL INVESTMENTS FINANCIAL LIABILITIES OTHER FINANCIAL LIABILITIES TRADE RECEIVABLES AND PAYABLES OTHER RECEIVABLES AND PAYABLES INVENTORIES INVESTMENT PROPERTIES TANGIBLE ASSETS INTANGIBLE ASSETS GOVERNMENT GRANTS AND INCENTIVES PROVISIONS, CONTINGENT ASSETS AND LIABILITIES COMMITMENTS EMPLOYEE BENEFITS PREPAID EXPENSES EMPLOYEE BENEFITS OTHER ASSET AND LIABILITIES SHAREHOLDERS’ EQUITY REVENUE AND COST OF SALES RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVE EXPENSES EXPENSES BY NATURE OPERATING INCOME/EXPENSES INVESTMENT INCOME/EXPENSES FINANCIAL INCOME FINANCIAL EXPENSES TAX ASSET AND LIABILITIES (INCLUDING DEFERRED TAX ASSET AND LIABILITIES EARNINGS PER SHARE BALANCES AND TRANSACTIONS WITH RELATED PARTIES NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS EVENTS AFTER THE BALANCE SHEET DATE 76 77-78 79-132 79-80 80-97 97 98 98 98-99 99-100 101 101 102 102-103 103 103-105 105-106 106 106-108 108 109 110 110 110 111-112 113 113 113-114 114 115 115 115 115-118 118 118-121 121-129 130-132 132 72 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). ASSETS Current Assets Cash and Cash Equivalent Financial Investments Trade Receivables -Due from related parties -Other trade receivables Other Receivables -Due from related parties -Other receivables Inventories Prepaid Expenses Current Income Tax Assets Other Current Assets Non-Current Assets Financial Investments Other Receivables -Other Receivables Investment Properties Tangible Assets Intangible Assets Prepaid Expenses Deferred Tax Assets Other Non-Current Assets TOTAL ASSETS (*) Notes Audited Current Period 2013 Restated(*) Audited Previous Period 2012 5 6 2.128.504.531 1.164.383.158 611.476 2.258.514.250 1.267.728.071 2.963.016 9-32 9 446.815.319 201.954.749 433.197.344 163.955.235 10-32 10 11 19 21 3.417.357 16.860.567 198.321.733 47.436.206 1.879.695 46.824.271 131.398.216 8.463.471 186.149.155 16.142.125 4.071.798 44.445.819 6 1.033.447.409 464.661.239 898.093.294 326.344.908 161.464 10.035.000 532.558.107 791.589 20.991.312 4.244.512 4.186 125.282 30.460.000 524.302.908 674.439 12.121.201 4.060.370 4.186 3.161.951.940 3.156.607.544 10 12 13 14 19 30 Restatement effects has been explained in Note 2 “Comparative Information and Restatements of Prior Period Consolidated Financial Statements”. The accompanying notes form an integral part of these consolidated financial statements. 73 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). LIABILITIES Current Liabilities Short Term Financial Liabilities Short Term Portion of Long Term Financial Liabilites Trade Payables -Due to related parties -Other trade payables Employee Benefit under Liabilities Other Payables -Due to Related Parties -Other Payables Financial Instruments Current Income Tax Liabilities Short Term Provisions -Provisions for employee benefits -Other Short Term Provisions Other Current Liabilities Non-Current Liabilities Long Term Financial Liabilites Long Term Provisions -Provisions for employee benefits Deferred Tax Liabilites Other Non-Current Liabilities SHAREHOLDERS’ EQUITY Equity Attributable To Equity Holders’ of the Parent Share Capital Inflation Adjustments to Share Capital Other comprehensive income/expense not to be reclassified to profit or loss -Actuarial losses -Investment propertiy valuation fund Other comprehensive income/expense to be reclassified to profit or loss -Financial assets revaluation fund Restricted Reserves Appropriated from Profits Retained Earnings Net Profit for the Period Non Controlling Interest TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (*) Notes Audited Current Period 2013 Restated(*) Audited Previous Year 2012 7 7 1.826.580.192 150.942.003 1.098.791.211 1.143.105.831 133.999.730 480.427.663 247.377.711 223.771.841 15.198.264 10-32 10 8 30 273.321.957 235.142.437 17.716.822 86.857 344.940 11.471.653 18 16 21 14.273.061 8.699.625 15.789.626 11.644.939 11.990.240 11.664.440 7 67.203.301 9.851.176 933.748.301 886.525.280 18 30 21 23.380.797 33.935.757 35.571 20.283.290 26.753.898 185.833 22 1.268.168.447 1.129.829.508 342.000.000 108.056.201 1.079.753.412 957.451.288 342.000.000 108.056.201 (1.307.850) 5.231.735 (1.912.682) 20.637.311 254.670.905 126.205.350 106.324.722 188.648.445 138.338.939 123.114.916 73.181.956 125.405.583 166.968.003 122.302.124 3.161.951.940 3.156.607.544 9-32 9 20 253.281 4.805.214 409.549 1.562.959 Restatement effects has been explained in Note 2 “Comparative Information and Restatements of Prior Period Consolidated Financial Statements”. The accompanying notes form an integral part of these consolidated financial statements. 74 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Notes Revenue Cost of Sales (-) GROSS PROFIT FROM OPERATIONS Research and Development Expenses (-) Marketing, Sales and Distribution Expenses (-) General Administrative Expenses (-) Other Operating Income Other Operating Expenses (-) OPERATING PROFIT FROM MAIN OPERATION Income from Investment Activities Expenses from Investment Activities (-) OPERATING PROFIT BEFORE FINANCE INCOME AND EXPENSES Financial Income Financial Expenses (-) PROFIT BEFORE TAX Tax Charge Tax on Income (-) Deferred Tax Income/(Expense) PROFIT FOR THE PERIOD Distribution of the Profit for the Period Non-Controlling Interest Equity holders of the Parent Earnings per share (*) 23 23 24-25 24-25 24-25 26 26 27 27 28 29 30 31 Audited Current Year 2013 Restated (*) Audited Previous Year 2012 2.748.370.545 (2.115.060.273) 633.310.272 (13.396.585) (262.511.713) (94.030.049) 134.856.075 (85.624.362) 312.603.638 230.266.350 (23.589.386) 519.280.602 52.271.455 (292.435.753) 279.116.304 (51.785.743) (51.860.071) 74.328 227.330.561 2.343.232.826 (1.837.981.934) 505.250.892 (8.900.058) (226.945.293) (96.295.271) 188.514.812 (137.458.907) 224.166.175 100.283.773 (78.301.595) 246.148.353 62.129.715 (64.742.988) 243.535.080 (47.961.146) (31.304.716) (16.656.430) 195.573.934 38.682.116 188.648.445 0,55 28.605.931 166.968.003 0,49 Restatement effects has been explained in Note 2 “Comparative Information and Restatements of Prior Period Consolidated Financial Statements”. The accompanying notes form an integral part of these consolidated financial statements. 75 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Audited Current Year 2013 Restated (*) Audited Previous Year 2012 227.330.561 195.573.934 (14.747.639) (15.415.613) 817.330 17.343.033 22.081.916 (1.586.355) (149.356) (3.152.528) Items to be Reclassified Under Profit and Loss Change in Revaluation Funds of Financial Assets Tax Income/(Expense) Related to Other Comprehensive Income to be Reclassified Under Profit and Loss 131.531.094 138.453.783 52.736.148 55.511.735 (6.922.689) (2.775.587) OTHER COMPREHENSIVE INCOME 116.783.455 70.079.181 TOTAL COMPREHENSIVE INCOME 344.114.016 265.653.115 Distribution of Total Comprehensive Income Non-Controlling Interest Equity holders of the Parent 38.710.326 305.403.690 29.015.158 236.637.957 PROFIT FOR THE PERIOD Other Comprehensive Income: Items not to be Reclassified Under Profit and Loss Change in Revaluation Funds of Investment Property Actuarial Losses Tax Income/(Expenses) Related to Other Comprehensive Income not to be Reclassified Under Profit and Loss (*) Effects of restatements are explained in the Note 2 (Comparative Information and Restatements of Prior Period Consolidated Financial Statements) The accompanying notes form an integral part of these consolidated financial statements. - Transfer to retained earnings and reserve 108.056.201 254.670.905 - - - - 131.555.989 123.114.916 123.114.916 - - - - 49.961.862 73.153.054 5.231.735 - - - - (15.405.576) 20.637.311 20.637.311 - - - - 20.637.311 - Financial Investment Assets Valuation Property Valuation Fund Fund (1.307.850) - - - - 604.832 (1.912.682) (1.912.682) - - - - (929.219) (983.463) Actuarial Loss Other Comprehensive Income Not To Be Reclassified Under Profit And Loss - 126.205.350 - 236.637.957 (1.769.169) - 125.405.583 125.405.583 654.701.498 305.403.690 957.451.288 957.451.288 - (1.769.169) - - 188.648.445 106.324.722 113.944.609 1.568.954 15.405.576 1.129.829.508 - 1.568.954 15.405.576 - (150.000.000) (150.000.000) 188.648.445 166.968.003 166.968.003 53.023.394 (166.968.003) - - - - 73.181.956 73.181.956 (73.400.000) - - (280.000.000) (280.000.000) - 166.968.003 1.002.582.500 Equity Retained Earnings/ Attributable to (Accumulated Equity Holders of the Parent Loss) 658.005.477 (174.126.746) Net Profit for the Period 3.303.979 (658.005.477) - - - - 69.877.977 Restricted Reserves Appropriated from Profits Accumulated Profit (**) (*) The accompanying notes form an integral part of these consolidated financial statements. - 265.653.115 1.097.250.691 Total Euqity 344.114.016 1.079.753.412 1.079.753.412 - (1.665.893) 138.338.939 - - - 1.268.168.447 - 1.568.954 15.405.576 (22.673.511) (172.673.511) 38.710.326 122.302.124 122.302.124 - 103.276 (1.484.501) (281.484.501) - 29.015.158 94.668.191 Non Controlling Interest In previous years Atlas Gıda Pazarlama Tic. A.Ş. was a 100% subsidiary of Ülker Çikolata San. A.Ş. Disclosure is related to Ülker Çikolata San. A.Ş.’s acquisitions of Atlas Gıda San. Tic. A.Ş. at 15 November 201. (note 3) On 18 February 2013, the Group acquired 100% stake in Reform Gıda Paz. San. ve Tic. A.Ş., from Yıldız Holding A.Ş. “transaction under common control” and the Company has started to consolidate Reform Gıda A.Ş. since 1 January 2013. Public Oversight Accounting and Auditing Standards Authority (“POA”) Turkish Accounting Standards Boards has published pricipal related with transaction under common control in official journal as of 21 July 2013. In accordance with the publication transaction under common controls have to perform in accordance with “Pooling of interest Method” by restating previous year financials. The Group has decided to does not restate previous year financials by considering company size and monetary value of purchased company. (Note 1) 342.000.000 - - Transactions under common control(**) As of 31 December 2013 - - Sales of investment property - - Dividend paid - 108.056.201 - 342.000.000 As of 1 January 2013 108.056.201 - - - - - 108.056.201 Total comprehensive income 342.000.000 - - Transactionsunder common control (*) Transfer to retained earninsg and reserve As of 31 December 2012 - 73.400.000 - 268.600.000 Dividend paid Capital increase Total comprehensive income As of 1 January 2012 Inflation Share Adjustments to Capital Share Capital Accumulated Other Comprehensive Income To Be Reclassified Under Profit And Loss 76 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 77 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Notes CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the Period Adjustments to reconcile net profit/(loss) to net cash provided by operating activities -Depreciation expenses of tangible assets -Effect of change in usefull life -Amortization expenses of intangible assets -Losses from sale of investment property -Revaluation of investment property -Goodwill imparement -Allowance for doubtful receivables -Reversal of allowance for doubtful receivables -Provision for employment benefits -Provision for unused vacation -Performance premium provision -Provision for lawsuits -Reversal for sales return -Loan expense accrual -Discount expense (income) -Change in foreign currency and interest expense of financial liabilities -Gain on sale of derivative financial instruments -Gain on sale of tangible and intangible assets (net) -Gain on sale of subsidiary share (net) -Reversal of provision for inventory imparement -Rent income -Dividend income -Change in foreign currency from invesment activity -Interest Income -Tax Provision Net Operating cash flows provided before changes in working capital -Decrease in trade receivables -Increase in trade receivables from related parties -Increase in inventories -Decrease in other receivables and other current assets -Increase in trade payables -Increase in trade payables to related parties -Increase in other payables and liabilities Net cash generated from operations -Taxes paid -Employment termiantion benefit paid -Unused vacation paid -Performance premium paid -Lawsuits provision paid -Collections from doubtful trade receivables Net cash generated from operating activities 13 14 13 12 12 9 9 18 18 18 16 16 27 11 27 27 27 30 30 18 18 18 16 9 Audited Current Year 2013 Restated (*) Audited Previous Year 2012 227.330.561 195.573.934 51.519.567 266.387 (6.632.229) 3.526.906 (220.000) 37.454 (201.484) 11.010.330 5.904.252 7.928.849 13.979 (3.075.479) (8.192.232) 1.665.624 172.804.077 (8.101.398) (15.098.740) (4.357.387) (7.373.538) (434.426) (149.280.945) (37.794.133) 51.785.743 293.031.738 (38.068.353) (15.070.255) (7.815.191) (48.723.096) 11.181.664 26.044.056 1.332.677 221.913.240 (41.951.377) (7.166.143) (4.448.796) (6.756.183) (343.801) 108.647 161.355.587 47.462.702 294.094 (823.000) 1.534.035 3.511.894 (890.539) 10.201.687 4.964.152 5.442.225 2.448.540 (11.302.271) 7.942.949 (1.527.003) (32.895.648) (2.636.234) (4.058.563) (542.032) 6.218.309 (6.974.552) (579.296) 56.343.920 (59.402.548) 47.961.146 268.267.901 123.348.833 (137.193.060) (31.153.088) 16.127.967 17.551.224 33.815.965 (7.128.448) 283.637.294 (37.684.220) (10.371.616) (4.398.128) (4.824.006) (218.306) 290.734 226.431.752 The accompanying notes form an integral part of these consolidated financial statements. 78 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Notes CASH FLOWS FROM INVESTING ACTIVITIES -Acquisitions of tangible assets -Acquisitions of intangible assets -Proceeds from sales of tangible and intangible assets -Proceeds from sales of investment properties -Change in non-trade receivables from related parties -Rent income -Dividend income -Interest received -Change in financial assets Net cash generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES -Loan repayment -Proceeds from sales of derivative financial instruments -Loans acquired -Change in leasing liabilities -Dividends paid -Interest paid -Changes in non-trade payables to related parties Net cash used in financing activities NET CHANGE IN CASH AND CASH EQUIVALENTS 13 14 12 10-32 27 27 Audited Current Year 2013 Restated (*) Audited Previous Year 2012 (77.769.003) (149.765) 41.875.605 17.118.094 277.261.804 7.373.538 434.426 37.794.133 2.351.540 306.290.372 (40.602.588) (348.537) 7.308.392 394.566.592 6.974.552 579.296 59.402.548 5.781.593 433.661.848 (582.689.780) (705.223.400) 7.691.849 250.772.377 1.265.559.036 (7.015.992) (17.375.092) 22 (172.673.511) (281.484.501) (66.909.391) (51.405.440) (166.424) (4.138.087) (570.990.872) 205.932.516 (103.344.913) 866.026.116 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5 1.267.728.071 401.701.955 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5 1.164.383.158 1.267.728.071 The accompanying notes form an integral part of these consolidated financial statements. 79 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 1. ORGANIZATION AND OPERATIONS OF THE GROUP Ülker Bisküvi Sanayi A.Ş. and its subsidiaries (“Group”), comprises of the parent Ülker Bisküvi Sanayi A.Ş. (“the Company”), seven subsidiaries in which the Company owns the majority share of the capital or which are controlled by the Company (2012: six). Ülker Bisküvi Sanayi A.Ş. was established in 1944. The Company’s core business activities are manufacturing of biscuits, chocolate, chocolate coated biscuits,wafers and cakes. Ülker Bisküvi Sanayi A.Ş. which is registered at the Capital Market Board, merged under its own title with Anadolu Gıda Sanayi A.Ş., whose shares have been quoted on İstanbul Stock Exchange since 30 October 1996, as of 31 December 2003. The headquarters of Ülker Bisküvi Sanayi A.Ş. is located Kısıklı Mah. Ferah Cad. No:1 Büyük Çamlıca Üsküdar/Istanbul. As of 31 December 2013, the total number of people employed by the Group is 9.218 which contains 519 employees who worked as subcontractors (31 December 2012: 8.627, subcontractor: 608). The ultimate parent and the controlling party of the Group is Yıldız Holding A.Ş. The ultimate parent of Yıldız Holding A.Ş. is managed by Ülker family. As of 31 December 2013 and 2012, the names and percentages of the shareholders holding more than 10% of the Company’s share capital are as follows: 2013 Name of the Shareholders Yıldız Holding A.Ş. Dynamic Growth Fund (*) Yıldız Holding A.Ş. Subsidiaries and Ülker Family Other (*) Share 166.967.458 38.888.808 136.143.734 342.000.000 2012 Percentage %48,82 %11,37 %39,81 %100,00 Share 151.778.531 73.308.031 48.220.722 68.692.716 342.000.000 Percentage %44,38 %21,44 %14,10 %20,08 %100,00 Dynamic Growth Fund has transferred all assets in its portfolio to the holders of fund participation certificates due to its liquidation. As of 31 December 2013 and 2012, the details of the subsidiaries in terms of direct and effective share of ownership and principal business activities are as follows: Subsidiaries Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. (*) Ülker Çikolata Sanayi A.Ş. İstanbul Gıda Dış Ticaret A.Ş. Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. Birleşik Dış Ticaret A.Ş. Reform Gıda Paz. San. ve Tic. A.Ş.(**) Rekor Gıda Pazarlama A.Ş. (*) 2013 Ratio of Direct Ownership % %43,5 %91,7 %83,8 %98,3 %70,0 %100,0 - Ratio of Effective Ownership % %43,9 %91,7 %91,4 %98,3 %79,2 %100,0 %43,9 2012 Ratio of Direct Ownership % %43,5 %91,7 %83,8 %98,3 %70,0 - Ratio of Effective Ownership % %43,9 %91,7 %91,4 %98,3 %79,2 %43,9 Nature of Operations Manufacturing Manufacturing Sales&Marketing Trading Sales&Marketing Trading Sales&Marketing Whilst the Group has 43.9% effective ownership share in Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş and Rekor Gıda Pazarlama A.Ş, full consolidation method has been used due to the fact that the Group has majority of the voting rights. Group, has total control over the business of its subsidiaries by voting right with respect to the law declaration of intention of its minorities. Depending on the performance results of its subsidiaries, group has right over parameter proceeds and has the right to control the operations of its subsidiaries.The Group has the contingency to use its power over its subsidiaries to effect the proceeds. (**) Reform Gıda Paz. San. ve Tic. A.Ş. which was acquired from Yıldız Holding A.Ş. on 18 February 2013 fully consolidated with scope of transaction under common controls in the consolidated financial statements as of 1 January 2013. (*) 80 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. manufactures and sells similar products with those of Ülker Bisküvi Sanayi A.Ş, on the other hand İstanbul Gıda Dış Ticaret A.Ş., Birleşik Dış Ticaret A.Ş., Birleşik Dış Ticaret A.Ş. and Rekor Gıda Pazarlama A.Ş are involved in domestic and international sales and marketing of products of the above mentioned companies and other food products purchased from the domestic market. The sales and marketing operations of chocolate and cocoa covered products of Ülker Çikolata Sanayi A.Ş. Dividend Paid: Group has paid a dividend of TL 172.673.511 in the current year. Dividend paid per share as of 31 December 2013 is 0,50. (31 December 2012: 0,82) Approval of financial statements: The Board of Directors has approved the financial statements and given authorization for the issuance on 5 March 2014. The General Assembly has the authority to amend the financial statements. 2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS 2.1 Basis of the presentation: Basis of the presentation and Significant Accounting Policies The accompanying consolidated financial statements are prepared in accordance with Communiqué Serial II, No:14.1, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”) published in the Official Gazette numbered 28676 on 13 June 2013. According to Article 5 of the Communiqué, consolidated financial statements are prepared in accordance with the Turkish Accounting Standards issued by Public Oversight Accounting and Auditing Standards Authority (“POAASA”). TAS contains Turkish Accounting Standards, Turkish Financial Reporting Standards (“TFRS”) and its addendum and interpretations (“IFRIC”). The consolidated financial statements of the Group are prepared as per the CMB announcement of 7 June 2013 relating to financial statements presentations. Comparative figures are reclassified, where necessary, to conform to changes in the presentation of the current year’s consolidated financial statements. In accordance with the CMB resolution issued on 17 March 2005, listed companies operating in Turkey are not subject to inflation accounting effective from 1 January 2005. Therefore, the consolidated financial statements of the Group have been prepared accordingly. The Group maintain their books of accounts and prepare their statutory financial statements in accordance with the Turkish Commercial Code (“TCC”), tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance and principles issued by CMB. The foreign subsidiaries maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. These consolidated financial statements have been prepared under historical cost conventions except for financial assets and financial liabilities which are carried at fair value. The consolidated financial statements are based on the statutory records, which are maintained under historical cost conventions, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with TAS. Functional and presentation currency Financial statements of each subsidiary of the Group are presented in the currency of the primary economic environment in which the entities operate (its functional currency). The results and financial position of the each subsidiary are expressed in Turkish Lira, which is the functional and presentation currency of the Group. 81 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). As of 31 December 2013, foreign currency rates declared by Central Bank of Republic of Turkey are 1 Euro = TL 2,9365, 1 USD = TL 2,1343 (2012: 1 Euro = TL 2,3517, 1 USD = TL 1,7826). For the period between January 1,2013 and December 31,2013, average foreign currency rates declared by Central Bank of Republic of Turkey are 1Euro = TL 2,5290, 1 USD = TL 1,9033 (2012: 1Euro = TL 2,3041, 1 USD = TL 1,7922). Consolidation (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies. (b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (c) Disposal of subsidiaries When the group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 2.2 Changes in the Accounting Policies: Accounting policy changes are applied retrospectively and the previous year financial statements are arranged. 82 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Comparative Information and Restatement of Prior Period Consolidated Financial Statements In order to allow the determination of financial position and performance, the Group’s consolidated financial statements are prepared in comparison with the previous period. In order to comply with the presentation of consolidated financial statements the current period when deemed necessary, comparative information is classified, and describes important differences. The Group consolidated financial statements, to conform to current period financial statements for prior periods have made some reclassifications. The nature of the classifications, and amounts due are as follows: ASSETS Current Assets Cash and Cash Equivalent Financial Investments Trade Receivables -Due from related parties -Other trade receivables Other Receivables -Due from related parties -Other receivables Inventories Prepaid Expenses Current Income Tax Assets Other Current Assets Non-Current Assets Financial Investments Other Receivables -Other Receivables Investment Properties Tangible Assets Intangible Assets Prepaid Expenses Deferred Tax Assets Other Non-Current Assets TOTAL ASSETS Impact of change in Previously the POA format of reported financial statements 2.258.514.250 1.267.728.071 2.963.016 - Restated 2.258.514.250 1.267.728.071 2.963.016 433.197.344 163.727.576 227.659 433.197.344 163.955.235 131.398.216 8.463.471 186.149.155 64.887.401 16.142.125 4.071.798 (20.441.582) 131.398.216 8.463.471 186.149.155 16.142.125 4.071.798 44.445.819 898.093.294 326.344.908 - 898.093.294 326.344.908 125.282 30.460.000 524.302.908 674.439 4.060.370 12.125.387 3.156.607.544 12.121.201 (12.121.201) - 125.282 30.460.000 524.302.908 674.439 12.121.201 4.060.370 4.186 3.156.607.544 83 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). LIABILITIES Current Liabilities Short Term Financial Liabilities Short Term Portion of Long Term Financial Liabilites Trade Payables -Due to related parties -Other trade payables Employee Benefit under Liabilities Other Payables -Other Payables to Related Parties -Other Payables Financial Instruments Current Income Tax Liabilities Short Term Provisions -Provisions for employee benefits -Other Short Term Provisions Other Current Liabilities Non-Current Liabilities Long Term Financial Liabilites Long Term Provisions -Provisions for employee benefits Deferred Tax Liabilites Other Non-Current Liabilities SHAREHOLDERS’ EQUITY Equity Attributable To Equity Holders’ of the Parent Share Capital Inflation Adjustments to Share Capital Valuation Funds Other comprehensive income/expense not to be reclassified to profit or loss -Actuarial losses -Investment property valuation fund Other comprehensive income/expense to be reclassified to profit or loss -Financial asset valuation fund Restricted Reserves Appropriated from Profits Retained Earnings Net income for the period Non Controlling Interest TOTAL LIABILITIES Previously Reported Impact of change in the POA format of financial statements 1.143.105.831 614.427.393 (480.427.663) 480.427.663 Restated 1.143.105.831 133.999.730 480.427.663 247.377.711 223.718.564 53.277 15.198.264 247.377.711 223.771.841 15.198.264 253.281 4.805.214 409.549 1.562.959 - 253.281 4.805.214 409.549 1.562.959 11.990.240 21.839.896 16.721.024 (345.301) (9.849.656) (5.056.584) 933.748.301 886.525.280 - 11.644.939 11.990.240 11.664.440 933.748.301 886.525.280 20.283.290 26.753.898 185.833 (143.752.227) 20.283.290 26.753.898 185.833 1.079.753.412 957.451.288 342.000.000 108.056.201 - (1.912.682) 20.637.311 (1.912.682) 20.637.311 73.181.956 125.405.583 166.968.003 122.302.124 3.156.607.544 123.114.916 - 123.114.916 73.181.956 125.405.583 166.968.003 122.302.124 3.156.607.544 1.079.753.412 957.451.288 342.000.000 108.056.201 143.752.227 84 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Comparative Information and Restatement of Prior Period Financial Statements In accordance with CMB decision dated 7 June 2013 and the numbered 20/670, the reclassifications were made by Group in the consolidated balance sheet statements for the year ended 31 December 2012 are as follow: Classifications within the current assets are as follow: • Income accrual amounting to TL 227.659 that is presented under other current assets in the previous year consolidated financial statement is classified in other trade receivables. • Prepaid expenses amounting to TL 16.425.125 that is presented under other current assets in the previous year consolidated financial statement is classified as a separate line. • Current income tax asset amounting to TL 4.107.798 that is presented under other current assets in the previous year consolidated financial statement is classified as a separate line. Classifications within the non current assets are as follow: • Prepaid expenses amounting to TL 12.121.201 that is presented under other non current assets in the previous year consolidated financial statement is classified as a separate line. Classifications within the current liabilities are as follow: • Borrowings amounting to TL 480.427.663 that is presented under short term financial liabilities in the previous year consolidated financial statement is classified in short term portion of long term financial liabilities as a separate line, • Expense accrual amounting to TL 55.277 that is presented under other current assets in the previous year consolidated financial statement is classified in other trade payables. • Employee benefits amounting to TL 15.198.264 that is presented under short term provisions and other short term liabilities in the previous year consolidated financial statement is classified employee benefits under liabilites as a separate line. Classifications within the equity are as follow: • Valuation funds of investment property and financial assets amounting to TL 143.752.227 that is presented under valuation fund in the previous year consolidated financial statement is classified under investment property valuation fund amounting to TL 20.637.311 and financial assets valuation fund amounting to TL 123.114.946 as two separate lines, respectively. 85 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Comparative Information and Restatement of Prior Period Financial Statements 31 December 2012 Statement of Income Impact of change in Previously Classified the POA format of reported export income financial statements Sales Revenue 2.340.639.227 2.593.599 Cost of Sales (-) (1.837.981.934) GROSS PROFIT 502.657.293 Research and Development Expenses (-) (8.900.058) Marketing, Sales and Distribution Expenses (-) (226.945.293) General Administrative Expenses (-) (96.295.271) Other Operating Income 48.423.387 (2.593.599) Other Operating Expenses (-) (16.893.938) OPERATING PROFIT 202.046.120 Income from Investing Activities Expenses from Investing Activities (-) OPERATING PROFIT BEFORE FINANCE INCOME AND EXPENSES 202.046.120 Finance Income 249.162.549 Finance Expenses (-) (207.673.589) PROFIT BEFORE TAX 243.535.080 Tax Charge (47.961.146) Current Tax Charge (31.304.716) Deferred Tax (Loss)/Income (16.656.430) PROFIT FOR THE PERIOD 195.573.934 - Restated 2.343.232.826 - (1.837.981.934) 505.250.892 (8.900.058) (226.945.293) (96.295.271) 142.685.024 188.514.812 (120.564.969) (137.458.907) 224.166.175 100.283.773 100.283.773 (78.301.595) (78.301.595) (187.032.834) 142.930.601 - 246.148.353 62.129.715 (64.742.988) 243.535.080 (47.961.146) (31.304.716) (16.656.430) 195.573.934 In accordance with CMB decision dated 7 June 2013 and the numbered 20/670, the reclassifications were made by Group in the consolidated balance sheet statements for the year ended 31 December 2012 are as follow: • Income from exchange rate differences amounting to TL 102.612.459 which is caused by valuation trade receivables and payables, losses from exchange rate differences amounting to TL 81.428.469, financial income arising from credit sales amounting to TL 47.240.129, financial expense arising from credit purchases amounting to TL 35.974.952, discount income amounting to TL 4.749.655 and discount expense amounting to TL 3.222.652 that are presented under financial income/ expense in the previous year consolidated financial statements are classified other operating income/expenses. • Rent income amounting to TL 6.794.552, profit from the sales of tangible asset amounting to TL 4.119.663 and loss from the sales of tangible asset amounting to TL 61.104 that are presented under other operating income/expense in the previous year consolidated financial statement are classified income from investing activities. • Income from exchange rate differences amounting to TL 21.791.066 which is caused by borrowings, dividend income amounting to TL 579.290, interest income amounting to TL 63.493.102, gain on sale of securities amounting to TL 3.326.094, valuation of investment property amounting to TL 823.000, loss on sale of financial asset amounting to TL 105.505 and losses from exchange rate amounting to TL 78.134.986 that are presented under financial income/expense in the previous year consolidated financial statement are classified income from investing activities. 2.3 Changes and Errors in Accounting Estimates: Change and errors in accounting estimates are applied retrospectively and the previous year financial statements are arranged. If the changes in the accounting policies are related only to one period then they are applied in the current year; if they are related with the future period, then they are applied both in the current period and future periods. The Group’s subsidiary of Biskot Biskuvi Gıda San. ve Tic. A.Ş. changed its estimation of useful lives of tangible assets in the current year. If the Group did not make changes in accounting estimates, total depreciation expense would have been higher amounting to TL 6.632.229 in the consolidated financial statements for the year ended 31 December 2013. 86 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 2.4 New and Revised International Financial Reporting Standards: a. New standarts, amendments and interpretations are applied to annual reporting period ended December 31,2013 of the consolidated financial statements that is as follow; - Amendment to IAS 1, ‘Financial statement presentation’, regarding other comprehensive income; is effective for annual periods beginning on or after 1 July 2012. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. - Amendment to IAS 19, ‘Employee benefits’; is effective for annual periods beginning on or after 1 January 2013. These amendments eliminate the corridor approach and calculate finance costs on a net funding basis. - Amendment to IFRS 1, ‘First time adoption’, on government loans;; is effective for annual periods beginning on or after 1 January 2013. This amendment addresses how a first-time adopter would account for a government loan with a belowmarket rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. - Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting¸; is effective for annual periods beginning on or after 1 January 2013. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. - Amendment to IFRSs 10, 11 and 12 on transition guidance¸; is effective for annual periods beginning on or after 1 January 2013. These amendments provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. - Annual improvements 2011; is effective for annual periods beginning on or after 1 January 2013.These annual improvements, address six issues in the 2009-2011 reporting cycle. It includes changes to: • IFRS 1, ‘First time adoption’ • IAS 1, ‘Financial statement presentation’ • IAS 16, ‘Property plant and equipment’ • IAS 32, ‘Financial instruments; Presentation’ • IAS 34, ‘Interim financial reporting’ - IFRS 10, ‘Consolidated financial statements’; is effective for annual periods beginning on or after 1 January 2013. The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. It defines the principle of control, and establishes controls as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements. - IFRS 11, ‘Joint arrangements’;; is effective for annual periods beginning on or after 1 January 2013. IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. 87 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). - IFRS 12, ‘Disclosures of interests in other entities’; is effective for annual periods beginning on or after 1 January 2013. IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. - IFRS 13, ‘Fair value measurement’; is effective for annual periods beginning on or after 1 January 2013. IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. - IAS 27 (revised 2011), ‘Separate financial statements’; is effective for annual periods beginning on or after 1 January 2013. IAS 27 (revised 2011) includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. - IAS 28 (revised 2011), ‘Associates and joint ventures’; is effective for annual periods beginning on or after 1 January 2013. IAS 28 (revised 2011) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. - IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ is effective for annual periods beginning on or after 1 January 2013. This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. The interpretation may require mining entities reporting under IFRS to write off existing stripping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body. b. New standards and amendments will be applied for periods beginning on or after 1 January 2014 that is as follow; - Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsetting is effective for annual periods beginning on or after 1 January 2014.These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. - Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities is effective for annual periods beginning on or after 1 January 2014. These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and which display particular characteristics. Changes have also been made IFRS 12 to introduce disclosures that an investment entity needs to make. - Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures is effective for annual periods beginning on or after 1 January 2014. This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. - Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement’-‘Novation of derivatives is effective for annual periods beginning on or after 1 January 2014. This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meets specified criteria. - IFRIC 21, ‘Levies’ is effective for annual periods beginning on or after 1 January 2014. This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. 88 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). New standards, comments and changes has been published by International Accounting Standards Board (IASB) but hasn’t been published by POA. The new standards, comments and changes on the current TFRS standards has been published by TASB but yet to be come into effect for the current reporting period.However the new standards, comments and changes hasn’t been adjusted or published to TFRS by POA because of this changes can not be a part of TFRS. Company will conduct the neccecarry changes in its period end financial statements and disclosures after the standards and comments has been published in TFRS. - IFRS 9 ‘Financial instruments’ – classification and measurement; is effective for annual periods beginning on or after 1 January 2015. This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, ‘Financial instruments: Recognition and measurement’. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements. These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions. - Amendments to IFRS 9,‘Financial instruments’, regarding general hedge. These amendments to IFRS 9, ‘Financial instruments’, bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements. - Amendment to IAS 19 regarding defined benefit plans;; is effective for annual periods beginning on or after 1 July 2014. These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. Annual improvements 2012; is effective for annual periods beginning on or after 1 July 2014. These amendments include changes from the 2010-12 cycle of the annual improvements project, that affect 7 standards: - IFRS 2, ‘Share-based payment’ - IFRS 3, ‘Business Combinations’ - IFRS 8, ‘Operating segments’ - IAS 16, ‘Property, plant and equipment’ and IAS 38,‘Intangible assets’ - IFRS 9, ‘Financial instruments’, IAS 37, ‘Provisions, contingent liabilities and contingent assets’ - IAS 39, Financial instruments – Recognition and measurement’. Annual improvements 2013; is effective for annual periods beginning on or after 1 July 2014. The amendments include changes from the 2011-2-13 cycle of the annual improvements project that affect 4 standards - IFRS 1, ‘First time adoption’ - IFRS 3, ‘Business combinations’ - IFRS 13, ‘Fair value measurement’ - IAS 40, ‘Investment property’ 2.5 Summary of Significant Accounting Policies The accounting policies applied in preparation of the accompanying financial statements are as follows. This accounting policy was applied in a consistent manner unless otherwise settled. Revenue: Most of the revenue is generated from sale of biscuit, chocolate, chocolate coated biscuit, wafer and cake. Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. 89 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Sales of goods Revenue generated from biscuit, chocolate, chocolate coated biscuit, wafer and cake is recognized when all the following conditions are satisfied: • The Group has transferred to the buyer the significant risks and rewards of ownership of the goods, • The Group retains neither continuing managerial involvement to the degree usually associated with no ownership or effective control over the goods sold, • The amount of revenue can be measured reliably, • It is probable that the economic benefits associated with the transaction will flow to the entity, and • The costs incurred or to be incurred in respect of the transaction can be measured reliably. Sales discounts are granted at the point of sale based on a percentage and are recorded as a reduction of revenue in the period of the sale. Sale discount percentages vary depending on the product sold. Interest Income Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate. Dividend Income Dividend income is recognised when the right to receive payment is established. Rent Income Rent income from real estates is accounted by the linear method during the respective rent agreement. Inventories: Inventories are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with the majority being valued on weighted average basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make a sale. When the net realizable value of inventory is less than cost, the inventory is written down to the net realizable value and the expense is included in statement of income/(loss) in the period the writedown or loss occurred. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the original write-down. Tangible Assets: Tangible assets are stated at the historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are changed to the income statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, In every reporting period, the scrap value and useful lives of tangible fixed assets are reviewed and necessary adjustments are made. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within ‘Gain or losses from investing activities’ in the income statement. 90 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Leases: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. Business Combinations: Group recognizes assets and liabilities that are subject to business combinations involving entities under common control, at carrying value in the consolidated financial statements. For the annual reporting period after 31 December 2012, business combination involving entities under common control accounted by using pooling of interest retrospectively, based on the decision is taken by POA. While the using pooling of interest, the financial statements are adjusted as business combination is realized at the beginning of the reporting period when common control transaction is occured and the financial statements presented comparetively at the beginning of the reporting period occurred common control. Neither goodwill nor income from acquisition is not realized as a result of these transactions. Positive/negative differences arising after the net-off of investment in associate against the stake in purchased entity’s share capital, are directly recognized as “ Effect of business combinations under common control “ in retained earnings. Investment Property: Investment properties are properties held to earn rentals and/or for capital appreciation, including property under construction for such purposes. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. A property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model for the asset recognised. This classification alternative is available on a property-by-property basis. However, once this classification alternative is selected for one such property interest held under an operating lease, all property classified as investment property shall be accounted for using the fair value model. When this classification alternative is selected, any interest so classified is included in the disclosures required. An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized. Intangible Assets: The intangible assets are carried at cost of acquisition, less accumulated amortization and any impairment loss. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. 91 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Impairment of Assets: If initial recognition value in an asset is greater than estimated net releasable value, the value of asset should be recorded at recoverable value. If any indicators and changes which are not been recorded at recoverable value, any impairment in tangible fixed asset depreciation should be reviewed. The impairment depreciation expense should be adjusted the different between initial recognition value in asset over recoverable value. The recoverable value in an asset is higher than value between the cost reduced at fair value and usage value. The asset to estimate in any impairment should be categorized at sub-cash flow statements. Estimated impairment in any tangible fixed assets are reviewed as to whether reverse and value of impairment. Financial Assets: Classification The group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group’s loans and receivables comprise `trade and other receivables’ and `cash and cash equivalents’ in the balance sheet (notes 2.14 and 2.15). (c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other income when the group’s right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income. 92 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as ‘Gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the group’s right to receive payments is established. Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities. Financial Liabilities Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Derivative financial instruments and hedge accounting The Group is exposed to currency and interest rate risks arising from its operations. The Group uses derivative financial instruments (mainly uses interest swap contracts) to hedge its financial risks associated with specific firm commitments and interest rate fluctuations of its expected future transactions. The most important source of the interest rate risk is bank loans. Group’s policy is to turn the floating rate bank loans to fixed rates. The Group classifies these transactions as financial instruments designated at fair value through profit/loss. Differences due to the measurement of the fair value of trading derivative instruments are included in the income statement. Foreign Currency Transactions: In preparing the consolidated financial statements of the Group, transactions in currencies other than TL (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At balance sheet, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. 93 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise except for: • Exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings, • Exchange differences on transactions entered into in order to hedge certain foreign currency risks. • Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognized in the foreign currency translation reserve and recognized in profit or loss on disposal of the net investment. Earnings Per Share: Earnings per share disclosed in the accompanying consolidated statement of income is determined by dividing net income by the weighted average number of shares in existence during the year concerned. In Turkey, companies can raise their share capital by distributing “bonus shares” to shareholders from retained earnings. In computing earnings per share, such “bonus share” distributions are assessed as issued shares. Accordingly, the retrospective effect for those share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation. Events After Balance Sheet Date: Subsequent events cover any events which arise between the reporting date and the balance sheet date, even occurred after any declaration of the net profit for the period or specific financial information publicly disclosed. The Group adjusts its consolidated financial statements if such subsequent events arise which require to adjust financial statements. If the non-adjusting events that occured after balance sheet date, effect economic decisions to user of financial statements, the non-adjusting events will disclose the notes of the consolidated financial statements. Provisions, Contingent Liabilities and Contingent Assets: Provisions Provisions should be adjusted in consolidation financial statements if amount of estimated liability is reliable, economic benefit resources occurred from those liabilities and there are any liabilities arise from previous period as proved as legally. If estimated in future liability on operational loss as legally, a provision should not been adjusted. Provision amount is valued by the present value of the estimated expenses carry out value of the liabilities with respect to the current market assessment of the time value of money and before tax rates which reflects the risks unique to debt. Contingent assets and liabilities Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Group are not included in the consolidated financial statements and treated as contingent assets or liabilities (Note 16). Related Party Disclosures: Related parties in consolidated financial statements: A related party is a person or entity that is related to the entity that is preparing its consolidated financial statements. 94 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). (a) A person or a close member of that person’s family is related to a reporting entity if that person: • has control or joint control of the reporting entity, • has significant influence over the reporting entity, • is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to a reporting entity if any of the following conditions applies: • The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). • One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). • Both entities are joint ventures of the same third party. • One entity is a joint venture of a third entity and the other entity is an associate of the third entity. • The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. • The entity is controlled or jointly controlled by a person identified in (a). • A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). Related party transactions: A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. Government Grants and Incentives: Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets. Current and deferred income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 95 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the group is unable to control the reversal of the temporary difference for associates. Only were there is an agreement in place that gives the group the ability to control the reveral of the temporary difference not recognised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Employee Benefits/Retirement Pay Provision: Benefits such as bonus, allowance for heating, marriage allowance, leave of absence, religious holidays, education incentive, birth and death allowance are provided to the Group employees. Moreover, under the Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group. Such payments are considered as being part of defined retirement benefit plan as per IAS 19 (revised): “Employee Benefits.” The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of employees. The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. The retirement benefit obligation recognised in the balance sheet represents the net present value of the total due to retirement of all employees. Recognised actuarial gains and losses are presented in the income statement. Cash Flow Statement: In statement of cash flow, cash flows are classified according to operating, investment and finance activities. Cash flows from operating activities reflect cash flows generated from the manufacturing and marketing of biscuit, chocolate, chocolate coated biscuit, wafer and cake. Cash flows from investment activities express cash used in investment activities (direct investments and financial investments) and cash flows generated from investment activities of the Group. Cash flows relating to finance activities express sources of financial activities and payment schedules of the Group. Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 96 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Capital and Dividends Ordinary shares are classified as equity New shares and export option related with marginal costs, less collection of tax effect presented under equity. The dividend distribution, accounted liabilities in the consolidated financial statements on the approval date of dividend distribution by shareholder. 2.6 Significant Accounting Estimates and Assumptions Assumptions, estimations and decisions made for the preparation of the consolidated financial tables are evaluated regularly and attributed to events with conceivable evidence with respect to past knowledge and circumstances. Significant accounting estimation and assupmtions Group, has estimation and assumptions related to future term. Accounting assumptions which rarely accrue gives identical outcome with the realised results. Assumptions and estimations that can lead to significant adjustments on the carrying value of the assets and liabilities in the following reporting period are as follow: Useful life of tangible assets: Group has calculated the depreciation amounts regarding the useful lives specified in note 13The Group’s subsidiary Biskot Biskuvi Gıda San. ve Tic. A.Ş. changed its estimation of useful lives of tangible assets in the current year. As a result of such change 31 December 2013 reduced by the depreciation expense for the year ending TL 6.632.229. Impairment of inventories In the current year, a provision has been provided for inventories that are not expected to be used and are slow moving. In the current year, the Group has also provided provision for inventories with net realizable values lower than costs. Based on the analysis, TL 4.790.533 impairment provision has been provided for inventories (2012: TL 9.147.920). Doubtful receivables provision In the current year, a provision has been provided for receivables that are not expected to be collectible and those that have not been collected for long time. As of 31 December 2013, a provision for TL 6.222.135 of the trade receivables has been provided for as doubtful receivable provision (2012: TL 6.494.812). Deferred taxes: The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between the financial statements as reported for IFRS purposes and financial statements prepared in accordance with the tax legislation. These differences arise from the differences in accounting periods for the recognition of income and expenses in accordance with IFRS and tax legislation. Group has deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences, all of which could reduce taxable income in the future. Fully or partial recoverability of tax assets are estimated based on available current evidences. The main factors which are considered include future earnings potential; cumulative losses in recent years; expiration dates of both loss carry-forwards and other tax assets; the carry-forward period associated with the deferred tax assets; future reversals of existing taxable temporary differences; tax-planning strategies that would, if necessary, be implemented, and the nature of the income that can be used to realize the deferred tax asset. As a result of the assessment made, the Group has recognized deferred tax assets amounting to TL 4.244.512 in certain entities because it is probable that taxable profit will be available sufficient to recognize deferred tax assets in those entities (2012: TL 4.060.370). 97 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Fair values of derivative instruments and other financial instruments The Group determines the fair values of its financial instruments without an active market using various market information for similar transactions, similar instruments with fair values and discounted cash flow analysis. Discounted cash flow analysis is applied with 7.1% discount rate for G New and 8.2% discount rate for Godiva Belgium which are Group’s financial investments. A change in discount rate by 1%, changes fair value of G New and Godiva Belgium amounting TL 9.346.245. 2.7 Summary of Financial Information Related to Subsidiaries: Summary of financial statements related to Ülker Çikolata San. A.Ş. and Biskot Biskuvi Gida San. Tic. A.Ş. in accordance with IFRS 12 are as follow: Ülker Çikolata Sanayi A.Ş. Total assets Total liabilities Total shareholders’ equity 2013 524.274.137 191.757.162 332.516.975 2012 702.402.546 397.437.237 304.965.309 Revenue Net profit for the year 938.529.940 102.014.897 776.035.799 96.405.681 86.196.051 40.669.970 (276.589.084) 114.236.669 172.835.073 (145.703.603) Total assets Total liabilities Total shareholders’ equity 2013 530.351.621 334.809.498 195.542.123 2012 449.093.617 273.151.994 175.941.623 Revenue Net profit for the year 826.796.780 48.909.255 669.230.767 35.330.541 98.755.296 (3.557.102) (13.885.092) 11.862.000 (32.520.410) 40.670.230 Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş.(*) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities (*) Summary of financial information include consolidation adjustments. 3. BUSINESS COMBINATIONS Reform Gıda Paz. San. ve Tic. A.Ş. which was acquired from Yıldız Holding A.Ş. on 18 February 2013 was fully consolidated with scope of transaction under common controls in the consolidated financial statements as of 1 January 2013. Atlantik Gıda Pazarlama ve Ticaret A.Ş which was fully consolidated in the consolidated financial statements in the previous years was transferred on 15 November 2012 and consolidated under Ülker Çikolata Sanayi A.Ş. 98 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 4. SEGMENTAL INFORMATION The Group’s core business activities are manufacturing and marketing of biscuit, chocolate coated biscuit, wafer, cake and chocolate. The reports reviewed routinely by the decision makers of the Group comprise consolidated financial information of Ülker Bisküvi Sanayi A.Ş. and its subsidiaries. Since the Group has operations in only one area and the decision makers use the consolidated financial information, segmental reporting in accordance with TFRS 8 have not been provided in the these consolidated financial statements. 5. CASH AND CASH EQUIVALENTS 2013 25.443 9.056.986 1.154.745.091 555.638 1.164.383.158 Cash Demand deposits Time deposits (*) Cheques received (*) 2012 3.797 13.917.225 1.252.969.855 837.194 1.267.728.071 Time deposits consist of overnight amounting to TL 1.150.297.129 (31 December 2012: TL 1.249.169.924). Details of time deposits are shown below; Currency Type TL USD EUR Effective Interest Rate (%) %8,94 %1,86 %0,2 Maturity Ocak-Şubat 2014 Ocak 2014 Ocak 2014 2013 145.138.421 686.297.216 323.309.454 1.154.745.091 Currency Type TL USD EUR Effective Interest Rate (%) %8,32 %2,49 %2,90 Maturity Ocak 2013 Ocak 2013 Ocak 2013 2012 117.859.499 819.293.160 315.817.196 1.252.969.855 Short Term Financial Investments: Available for sale financial assets 2013 611.476 611.476 2012 2.963.016 2.963.016 Long Term Financial Investments: Available for sales financial assets 2013 464.661.239 464.661.239 2012 326.344.908 326.344.908 6. FINANCIAL INVESTMENTS Long Term Available for Sale Financial Investments G New, Inc Godiva Belgium BVBA BİM Birleşik Mağazalar A.Ş. Other Share % %19,23 %19,23 %0,20 2013 148.876.952 289.715.942 25.825.951 242.394 464.661.239 Share % %19,23 %19,23 %0,20 2012 124.240.079 175.584.561 26.140.536 379.732 326.344.908 99 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Available for sale financial assets are presented at their fair values. The difference of TL 254.670.905 (2012: TL 123.114.916) in the fair values of such assets has been presented in other comprehensive income under equity. As the expected value gaps for available for sale financial assets of TL 242.394 (2012: TL 379.732) that are not traded in an active market are high and expected values are not reliably measured, these have been presented at historical cost in these consolidated financial statements. 7. FINANCIAL LIABILITIES Short Term Borrowings Short Term Portion of Long Term Borrowings Long Term Borrowings Short Term Borrowings Bank Loans Short Term Portion of Long Term Borrowings Bank Loans Financial Lease Payables Long Term Borrowings Bank Loans Financial Lease Payables 2013 2012 150.942.003 1.098.791.211 9.851.176 1.259.584.390 133.999.730 480.427.663 886.525.280 1.500.952.673 2013 150.942.003 150.942.003 2012 133.999.730 133.999.730 2013 1.093.534.286 5.256.925 1.098.791.211 2012 472.373.355 8.054.308 480.427.663 2013 9.788.823 62.353 9.851.176 2012 882.244.318 4.280.962 886.525.280 Details of Group’s syndication loans are as follows; Participation loan consists of two credit trenches which are USD 138.280.000 and EUR 134.850.000 14 international banks joined the participation. Effective interest rate for both credit trenches is libor + 3,4% and the maturity date is November 2014. Principal payments of the loans are paid with interest, semi-annually at the end of the period. The covenants which belong to participation credits are as follows; a) Leverage: The ratio of the consolidated net loan at the end of the balance sheet date to the consolidated EBITDA in the valid period should not be over the ratio of 3 to 1. b) Interest Coverage: Consolidated interest coverage ratio of the Group for the balance sheet date should be at least 3 to 1. In current year, the consolidated financial statements of the Group comply with the covenants of the bank loan agreement. 100 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 2013 Currency Type TL EUR USD Maturity Spot February 2014-November 2014 February 2014-April 2015 Effective Interest Rate (%) Spot 2.89% 3,92% Maturity Spot April 2013-April 2015 January 2013-December 2014 Effective Interest Rate (%) Spot 3,95% 3,22% Short Term 4.370.289 783.805.171 456.300.829 1.244.476.289 Long Term 9.788.823 9.788.823 Short Term 2.170.443 17.477.202 586.725.440 606.373.085 Long Term 371.921.590 510.322.728 882.244.318 2013 2012 1.244.476.289 9.788.823 1.254.265.112 606.373.085 874.404.926 7.839.392 1.488.617.403 2013 2012 5.376.313 (119.388) 5.256.925 8.491.321 (437.013) 8.054.308 2013 2012 69.587 (7.234) 62.353 4.382.782 (101.820) 4.280.962 2013 2012 5.256.925 62.353 5.319.278 8.054.308 4.231.026 49.936 12.335.270 2012 Currency Type TL EUR USD Repayment schedule of financial borrowings is as follows: To be paid within 1 year To be paid within 1-2 years To be paid within 2-3 years a) The detail of short term financial lease payables is as follows: Short-Term Financial Lease Payables Financial lease payables Deferred financial lease payables costs (-) b) The detail of long term financial lease payables is as follows: Long-Term Financial Lease Payables Financial lease payables Deferred financial lease payables costs (-) Repayment schedule of financial lease payables is as follows: To be paid within 1 year To be paid within 1-2 years To be paid within 2-3 years As of 31 December 2013 TL 3.469 of financial lease payables are due to Fon Finansal Kiralama A.Ş., which is a related party (2012: TL 736.602). 101 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 8. OTHER FINANCIAL LIABILITIES 2013 2012 - 409.549 409.549 2013 2012 446.815.319 446.815.319 433.197.344 433.197.344 175.211.204 34.664.418 (6.222.135) (1.698.738) 201.954.749 124.901.079 47.033.200 (6.494.812) (1.484.232) 163.955.235 648.770.068 597.152.579 Short term derivative financial liabilities 9. TRADE RECEIVABLES AND PAYABLES Due from Related Parties Due from related parties (Note 32) Other Trade Receivables Trade receivables Discount of trade receivables Notes receivables Provision for doubtful receivables Total Short Term Trade Receivables Trade receivables are disclosed at discounted net realizable value using the effective yield method. Net realizable value has been calculated over discount rate of 8% (2012: 8%) based on the Group’s cash sales. The provision for trade receivables is provided for based on the estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience. The movement of the allowance for doubtful receivables as of 31 December 2013 and 2012 is as follows; Opening balance Charge for the period Provisions reversal Collections Closing balance 2013 2012 (6.494.812) (37.454) 201.484 108.647 (6.222.135) (4.164.191) (3.511.894) 890.539 290.734 (6.494.812) Description on the level and nature of the risks related to trade receivables is given in note 33. Short Term Trade Payables Due to related parties (Note 32) Trade payables 2013 2012 273.321.957 235.142.437 508.464.394 247.377.711 223.771.841 471.149.552 Trade payables are disclosed at discounted net realizable value using the effective yield method. Net realizable value has been calculated over discount rate of 8% (2012: 8%) based on the Group’s cash sales. 102 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 10. OTHER RECEIVABLES AND PAYABLES 2013 2012 3.417.357 16.860.567 20.277.924 131.398.216 8.463.471 139.861.687 6.886.001 318.056 352.662 8.872.318 431.530 16.860.567 5.558.315 21.018 567.352 2.316.786 8.463.471 Other Long Term Receivables 2013 2012 Deposits and guarantees given 161.464 161.464 125.282 125.282 2013 2012 86.857 344.940 431.797 253.281 4.805.214 5.058.495 2013 2012 79.436.010 8.341.511 101.979.209 2.771.255 10.584.281 (4.790.533) 198.321.733 68.702.310 6.564.795 102.881.574 8.582.907 8.565.489 (9.147.920) 186.149.155 Other Receivables Due from related parties (Note 32) Short term other receivables Other Short Term Receivables VAT receivables Deposits and guarantees given Receivables from personnel Receivables from tangible sales Other Other Payables Non-trade payables to related parties (Note 32) Other short term payables Description on the level and nature of the risks related to trade receivables is given in note 33. 11. INVENTORIES Details of inventory are as follows; Raw materials Work in progress Finished goods Trade goods Other inventories Allowance for impairment on inventory (-) Inventory is presented on cost value and allowance for impairment is booked for inventory valuing lower than cost. 103 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The movement of allowance for impairment on inventory for the periods ended on 31 December 2013 and 31 December 2012 are below: Opening balance Charge fort he year Used allowance Closing balance 2013 (9.147.920) (240.539) 4.597.926 (4.790.533) 2012 (2.929.611) (6.218.309) (9.147.920) 2013 30.460.000 220.000 (20.645.000) 10.035.000 2012 7.555.084 22.081.916 823.000 30.460.000 12. INVESTMENT PROPERTIES Opening balance Transfer to investment properties Valuation fund classified under equity Net gain from fair value adjustments classified profit or loss Disposal Closing balance The fair value of the Group’s investment properties at 31 December 2013 has been calculated on the basis of a valuation carried out at that date by 6 December 2013 and 18 December 2012,by independent valuers not related to the Group. EVA Gayrimenkul Değerleme Danışmanlık A.Ş. is one of the accredited independent valuers by Capital Markets Board of Turkey, and has appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The valuation, which conforms to International Valuation Standards, based on market evidence of transaction prices for similar properties. The rent income earned by the Group from its investment properties amounting to TL 581.968 (2012: TL 178.461) within the current period. Direct operating expenses arising from the investment properties in the current period amounting to TL 94.132 (2012: 134.757 TL). The Group has sold the warehouse that is located Bayrampaşa/İstanbul, amounting to TL 17.118.094 as of 30 July 2013. 13. TANGIBLE ASSETS Movement of tangible assets between 1 January 2013 and 31 December 2013 is as follows: Cost Land Land improvements Buildings Machinery, plant and equipment Vehicles Furniture and fixture Leasehold improvements Other tangible assets Construction in progress Disposal Addition in accordance with consolidation Transfers (Note 14) 31 December 2013 8.376.659 6.247.149 251.413.316 - (5.000.000) 218.343 311.242 (12.649.602) - 18.529 3.629.014 3.376.659 6.484.021 242.703.970 680.430.113 1.134.736 43.157.448 22.939.760 (10.838.263) 26.909 (52.591) 1.810.320 (1.475.205) 3.201.591 - 38.625.881 760.017 734.359.082 1.109.054 44.252.580 - - 16.013.470 1.396 1 January 2013 19.655.248 1.396 12.654.101 1.023.070.166 Addition 1.488.838 - (5.130.616) - 50.973.591 (932.995) 77.769.003 (36.079.272) - (43.267.229) 19.427.468 3.201.591 (233.788) 1.067.727.700 104 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Disposal Addition in accordance with consolidation Transfers 31 December 2013 (2.254.779) (308.929) (61.205.894) (7.376.112) 1.418.179 - - (2.563.708) (67.163.827) (386.987.793) (34.389.867) (1.040.694) (59.590) (36.847.749) (1.842.131) 5.385.082 49.025 1.414.115 (817.420) - - (416.809.998) (1.051.259) - (37.275.765) (10.428.953) (910.709) (1.396) (498.767.258) (44.887.338) 1.036.022 9.302.423 (817.420) - (10.303.640) (1.396) - (535.169.593) Accumulated Depreciation Land improvements Buildings Machinery, plant and equipment Vehicles Furniture and fixture Leasehold improvements Other tangible assets Net Value 1 January Charge for the 2013 Period 524.302.908 532.558.107 From depreciation and amortization expenses, TL 46.489.626 (2012: TL 42.184.241) is included in cost of goods sold, TL 247.693 TL (2012: TL 153.758) is included in research and development expenses, TL 2.237.258 (2012: TL 1.781.298) is included in marketing and selling expenses and TL 2.811.377 (2012: TL 3.637.499) is included in general and administrative expenses. There are not any fixed assets acquired through financial leasing in the current period. There are not any mortgage or collateral on tangible assets in the current period. Movement of tangible assets between 1 January 2012 and 31 December 2012 is as follows: Cost Land Land improvements Buildings Machinery, plant and equipments Vehicles Furniture and fixtures Leasehold improvements Other tangible assets Constructions in progress 1 January 2012 Addition 9.566.659 6.022.168 255.837.155 224.981 851.159 626.368.027 1.721.090 43.753.923 21.356.289 2.502 37.162.602 1.001.790.415 Disposal Transfer to investment property Transfers (Note 14) 31 December 2012 (610.333) (6.051.329) (1.190.000) 1.386.664 8.376.659 6.247.149 251.413.316 14.715.785 (5.175.805) (586.354) 1.752.779 (2.676.437) 251.717 (81.836) (1.484) 22.806.167 (13.838) 40.602.588 (9.146.087) 44.522.106 680.430.113 1.134.736 327.183 43.157.448 (4.114.104) 2.243.182 19.655.248 378 1.396 - (47.300.830) 12.654.101 (10.165.433) (11.317) 1.023.070.166 105 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Accumulated Depreciation 1 January 2012 Charge for the Period Leasehold improvements (1.963.682) (291.097) Buildings (55.406.480) (7.353.375) Machinery, plant and equipments (352.463.520) (37.190.667) Vehicles (1.558.321) (68.490) Furniture and fixtures (37.417.246) (1.776.207) Leasehold improvements (10.999.708) (782.192) Other tangible assets (2.206) (674) (459.811.163) (47.462.702) Net Value Disposal Transfer to investment property Transfers 31 December 2012 239.390 1.314.571 - (2.254.779) (61.205.894) 2.666.394 586.117 2.345.704 57.169 1.484 5.896.258 1.295.778 2.610.349 - (386.987.793) (1.040.694) - (36.847.749) - (10.428.953) (1.396) - (498.767.258) 541.979.252 524.302.908 There are not any fixed assets acquired through financial leasing in the prior period. There are not any mortgage or collateral on tangible assets in the prior period. The estimated useful lives of tangible assets are as follow: Useful Life 25 – 50 years 10 – 50 years 4 – 15 years 4 – 10 years 4 – 10 years 3 – 10 years 5 – 10 years Buildings Land improvements Machinery, plant and equipments Vehicles Other tangible assets Furniture and fixtures Leasehold improvements (*) Leasehold improvements consists of the expenses made for property. In the condition of the useful life is longer than the rent period the property is amortized based on rent period. On the other hand, the useful life is shorter than the rent period the property is amortized based on its useful life. The useful lives of leasehold improvements in the scope of the term 31 December 2013 and 2012 are between 5 to 10 years. (*) 14. INTANGIBLE ASSETS R Movement of intangible assets between 1 January 2013 and 31 December 2013 is as follows: Cost Rights Other intangible assets Accumulated Amortization Rights Other intangible assets Net Value 1 January 2013 1.895.364 1.047.549 2.942.913 Addition 31.099 118.666 149.765 Disposal (27.871) (27.871) Transfers (Note 13) 230.657 3.131 233.788 31 December 2013 2.157.120 1.141.475 3.298.595 1 January 2013 (1.535.567) (732.907) (2.268.474) Charge of the Period (132.766) (133.621) (266.387) Disposal 27.855 27.855 Transfers - 31 December 2013 (1.668.333) (838.673) (2.507.006) 674.439 791.589 106 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Movement of intangible assets between 1 January 2012 and 31 December 2012 is as follows:: Cost Rights Other intangible assets Accumulated Amortization Rights Other intangible assets 1 January 2012 1.672.642 910.417 2.583.059 Addition 222.722 125.815 348.537 Transfers 11.317 11.317 31 December 2012 1.895.364 1.047.549 2.942.913 1 January 2012 (1.338.752) (635.628) (1.974.380) Charge of the Period (196.815) (97.279) (294.094) Transfers - 31 December 2012 (1.535.567) (732.907) (2.268.474) Net Value 608.679 674.439 The intangible assets are amortized on a straight-line basis over their estimated useful lives. Useful Life 2 – 15 years 2 – 12 years Rights Other intangible assets 15. GOVERNMENT GRANTS AND INCENTIVES Export operations and other foreign exchange activities performed under fundamentals and methods indentified by Ministry of Finance and Undersecretariat of foreign trade are exempt from stamp duty and transaction stamps. Government grants are given for supporting foreign fair attendance with respect to the Credit Coordination Committee’s decision at 16 December 2004 with number 2004/11 which is prepared with respect to the decision Government Grants for Export. Group is also benefiting from tax incentive for export of the agricultural products with. respect to the Credit Coordination Committee’s decision of 20/6 “Export return on Agricultural Products” 2000/5. Group is benefiting from the energy and employment support incentives with respect to the “Law related with change in grants for investment and employment support, decision number 5084” effective from 6 February 2004 and published in formal journal, with the intention of applying insurance and tax premium incentives, supplying energy support and acquiring free of charge land and property for investments in order to increase investments and employment. Group has received government incentives amounting TL 14.994.642 in current year(2012: TL 16.672.352). This benefit, regarded as government incentives, is explained in note 2. In current year the amount related to law 5084; TL 1.383.386 is from exports of argicultural product grants, TL 10.405.731 is from employment grants, TL 3.205.525 is from other grants. (2012: TL 222.032 from energy grants, TL 9.156.281 from employment grants, TL 7.294.039 from other grants). Incentive of TL 135,000,000 has been approved by T.C Ministry of Economy at 19 November 2013 with respect to the expansion and product diversification investment of Ülker Bisküvi San. A.Ş Gebze Factory. The investment is planned to complete until 11 November 2017. 16. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES Short Term Debt Provisions Provisions for returns Provisions for lawsuits Other 2013 2.568.884 3.772.686 2.358.055 8.699.625 2012 5.644.363 4.102.508 2.243.369 11.990.240 107 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Movement of the legal case provisions for December 2013 and 2012 is as follows: 2013 4.102.508 1.106.882 (1.092.903) (343.801) 3.772.686 Opening balance Charge for the period Reversal of provisions Payment/relinquishment (-) 2012 1.872.274 3.407.068 (958.528) (218.306) 4.102.508 A significant portion of the legal case provision as of 31 December 2013 and 2012 is related to legal filings made by the personnel. a) Guarantees Given (Balances denominated in foreign currencies have been presented in their original currency) A) CPM’s given in the name of own legal personality 2013 2012 TL USD TL USD 60.003.938 64.900 103.588.583 802.858 B) CPM’s given on behalf of the fully consolidated companies - - - - C) CPM’s given on behalf of third parties for ordinary course of business - - - - - - - - - - - - - - - - 64.900 103.588.583 802.858 D) Total amount of other CPM’s given i. Total amount of CPM’s given on behalf of the majority shareholder ii. Total amount of CPM’s given on behalf of the group companies which are not in scope of B and C iii. Total amount of CPM’s given on behalf of third parties which are not in scope of C Total 60.003.938 b) Lawsuits Filed by and Against to the Group ba) As of 31 December 2013; Lawsuits filed by the Group: Compensation litigations Foreclosure litigations Tax litigations (*) Action of debts Penalty litigations Main part of tax litigations consist of litigations related to VAT receivables. (*) TL 230.000 17.286.710 10.467.551 75.674 921.392 28.981.327 USD 7.100.000 3.404.577 10.504.577 EUR 107.252 107.252 108 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Lawsuits filed againist to the Group (*): Action of debts Foreclosure litigations Compensation litigations TL 931.145 67.066 3.106.117 4.104.328 USD 400.000 400.000 A provision of TL 3.772.686 has been provided for various court cases filed against the Group. For the rest of the lawsuits no provision was recognised because no cash outflow is projected (2012: TL 4.102.508). (*) bb) As of 31 December 2012; Lawsuits filed by the Group: Compensation litigations Foreclosure litigations Tax litigations (*) Action of debts Penalty litigations (*) TL 260.000 18.303.490 5.439.855 73.131 11.875 24.088.351 USD 7.100.000 3.404.577 10.504.577 TL 2.517.308 342.642 1.558.514 4.418.464 USD 400.000 400.000 Main part of tax litigations consist of litigations related to VAT receivables. Lawsuits filed againist to the Group: Action of debts Foreclosure litigations Compensation litigations Operational Leasing Agreements The operating leases of the Company cover a one year period. All operational leasing agreements include a clause allowing the re-arrangement of the terms of the lease had the lessee renewed the contract under the current market conditions. The lessee does not have a right to purchase the asset at the end of the term. Group’s rental income from its operational leasing agreements for assets leased is TL 7.298.438 during the current year. (2012: TL 6.072.534). In the current year operational leasing expenses are TL 2.808.924 (2012: TL 1.826.690). Due to non-cancellable rent agreements, the Group’s rental revenue to be received in the future periods is TL 6.638.301 (2012: TL 6.963.629) and are all to be realized in a one year period. Due to non-cancellable rent agreements, the Group’s rent payments to be incurred in the future periods is TL 1.474.344 (2011: TL 2.215.193) and are all payable in a one year period. 17. COMMITMENTS The Group’s export commitments amount to USD 306.631.805 as of 31 December 2013 (2012: USD 321.050.247). The average period of export commitments are 2 years. If the export commitments will not fulfiled,the Groupe will loss the tax advantage. All of export commitments in 2012 have been realized and there is not any issue for export commitments in 2013. 109 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 18. EMPLOYEE BENEFITS Short Term Liabilities for Employee Benefits Unused vacation accrual Performance premium accrual 2013 7.658.170 6.614.891 14.273.061 2012 6.202.714 5.442.225 11.644.939 Movement of Unused Vacation Provision Opening balance Decrease in period Increased in period Closing balance 2013 6.202.714 (4.448.796) 5.904.252 7.658.170 2012 5.636.690 (4.398.128) 4.964.152 6.202.714 Movement of Performance Premium Provision Opening balance Cash payments in period Increased in period Closing balance 2013 5.442.225 (6.756.183) 7.928.849 6.614.891 2012 4.824.006 (4.824.006) 5.442.225 5.442.225 Long Term Liabilities for Employee Benefits 2013 2012 Provision for employee termination benefits 23.380.797 23.380.797 20.283.290 20.283.290 Under Turkish Labor Law, the Company is required to pay employment termination benefits to each entitled employee. Also, employees are entitled to be paid their retirement pay provisions who retired by gaining right to receive retirement pay provisions according to of the prevailing 506 numbered Social Insurance Law’s Article 60, as amended by 6 March 1981 dated, 2422 numbered and 25 August 1999 dated, 4447 numbered laws. Some transition provisions related to the pre-retirement service term was excluded from the law since the related law was changed as of 23 May 2002. The amount payable consists of one month’s salary limited to a maximum of TL 3.254,44 for each period of service as of 31 December 2013 (2012: TL 3.033,98). The liability is not funded, as there is no funding requirement. The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of employees. TAS 19 requires actuarial valuation methods to be developed to estimate the entity’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 December 2013, the provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. The provisions at the respective balance sheet dates have been calculated assuming an annual inflation rate of 7.4% and a discount rate of 11.2%, resulting in a real discount rate of approximately 3.57% (2012: 3.57%). The maximum liability is revised semiannually. The basis considered in calculating the provisions is the amount of maximum liability of TL 3.438,22 which became effective as of 1 January 2013. As of 2013 year end, the probability of resignation of employees is 3.9% (2012: 3.6%). Movement of provision for employee termination benefits is as below; Opening balance Services cost Interest cost Actuarial gain/loss Cash payments in period Closing balance 2013 2012 20.283.290 10.286.217 724.113 (746.680) (7.166.143) 23.380.797 18.866.864 9.636.391 565.296 1.586.355 (10.371.616) 20.283.290 110 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 19. PREPAID EXPENSES Short Term Prepaid Expenses Advance given Prepaid expenses Other 2013 45.588.569 101.662 1.745.975 47.436.206 2012 14.354.145 1.361.684 426.296 16.142.125 Long Term Prepaid Expenses Advance given Prepaid expenses 2013 20.903.238 88.074 20.991.312 2012 12.087.943 33.258 12.121.201 2013 2012 11.360.308 6.356.514 17.716.822 10.194.957 5.003.307 15.198.264 2013 2012 44.300.846 2.271.062 252.363 46.824.271 41.365.810 3.002.094 77.915 44.445.819 2013 2012 7.794.298 7.733.719 261.609 15.789.626 5.996.958 5.367.066 300.416 11.664.440 2013 2012 35.571 35.571 185.833 185.833 20. EMPLOYEE BENEFITS Payables to personel Social security premiums payable 21. OTHER ASSET AND LIABILITIES Other Current Asset VAT carried forward Other VAT Other asset Other Current Liabilites Advance received Tax and fund payable Other liabilities Other Non-Current Liabilities Other non-current liabilities 111 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 22. SHAREHOLDERS’ EQUITY a) Capital Structure The composition of the Company’s paid-in share capital as of 31 December 2012 and 2011 is as follows: 2013 Shareholders Yıldız Holding A.Ş. Yıldız Holding A.Ş. Subsidiaries and Ülker Family Dynamic Growth Fund Other Amount 166.967.458 38.888.808 136.143.734 342.000.000 2012 Share %48,82 %11,37 %39,81 %100,00 Amount 151.778.531 73.308.031 48.220.722 68.692.716 342.000.000 Share %44,38 %21,43 %14,10 %20,09 %100,00 b) Valuation Fund Financial Asset Valuation Fund: Financial Asset Valuation Fund is generated from the valuation of available for sale instruments with their fair values. When a financial asset valued at its fair value is disposed, the related portion in the valuation fund is directly recognized in that period’s profit and loss. When a financial instrument is revalued and a decrease in value is observed, the related portion in the valuation fund is directly recognized in that period’s profit and loss. As of 31 December 2013 the Group has a financial asset valuation fund of TL 254.670.905 (2012: TL 123.114.916). Investment Property Valuation Fund: Properties accounted as fixed assets in previous periods, might be transferred to investment property due to changes in usage patterns. In this way in 2012, Group classified some of the real estate properties as investment property and preferred to book under fair value method. Accordingly, the increase in the fair value amounting to TL 22.904.916 during the first transfer, has been accounted as the increase in the fair value under equity. In the following period, the increase in fair value due to the increase in the fair value of real estate amounting to TL 220.000 in 2013 and TL 823.000 in 2012 have been accounted under the income statement. As of 30 July 2013, the disposal of valuation fund amounting to TL 15.405.576 has been realized due to sales of investment property. c) Restricted Reserves Appropriated from Profit Restricted reserves appropriated from profit are composed of legal reserves. Legal reserves comprise of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of historical statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the historical paid-in share capital. The second legal reserve is appropriated after the first legal reserve and dividends, at the rate of 10% per annum of all cash dividend distributions. According to the Turkish Commercial Code, legal reserves can be only used to offset losses unless they exceed the 50% of paid-in capital. Other than that, legal reserves must not be used whatsoever. In accordance with the CMB’s requirements which were effective until 1 January 2008, the amount generated from the firsttime application of inflation adjustments on financial statements, and followed under the “accumulated loss” item was taken into consideration as a reduction in the calculation of profit distribution based on the inflation adjusted financial statements within the scope of the CMB’s regulation issued on profit distribution. The related amount that was followed under the “accumulated loss” item could also be offset against the profit for the period (if any) and undistributed retained earnings and the remaining loss amount could be offset against capital reserves arising from the restatement of extraordinary reserves, legal reserves and equity items, respectively. In addition, in accordance with the CMB’s requirements which were effective until 1 January 2008, at the first-time application of inflation adjustments on financial statements, equity items, namely “Capital issue premiums”, “Legal reserves”, “Statutory reserves”, “Special reserves” and “Extraordinary reserves” were carried at nominal value in the balance sheet and restatement differences of such items were presented in equity under the “Shareholders’ equity inflation restatement differences” line item in aggregate. “Shareholders’ equity inflation restatement differences” related to all equity items could only be subject to the capital increase by bonus issue or loss deduction, while the carrying value of extraordinary reserves could be subject to the capital increase by bonus issue; cash profit distribution or loss deduction. 112 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). However, in accordance with the CMB’s Decree Volume: XI; No: 29 issued on 1 January 2008 and other related CMB’s announcements, “Paid-in capital”, “Restricted reserves” and “Premium in excess of par” should be carried at their registered amounts in statutory records. Restatement differences (e.g. inflation restatement differences) arising from the application of the Decree should be associated with: -“Capital restatement differences” account, following the “Paid-in capital” line item in the financial statements, if such differences are arising from “Paid-in Capital” and not added to capital; -“Retained earnings/Accumulated loss”, if such differences are arising from “Restricted reserves” and “Premium in excess of par” and has not been subject to profit distribution or capital increase. Other equity items are carried at the amounts valued according to the CMB’s Financial Reporting Standards. Capital restatement differences can only be included in capital. Profit Distribution: Publicly listed companies distribute dividends in accordance with the requirements of CMB as explained below: In accordance with the Capital Markets Board’s (the “Board”) Decree issued on 23 January 2013, in relation to the profit distribution of earnings derived from the operations, minimum profit distribution is not required for listed companies, and accordingly, profit distribution should be made based on the requirements set out in the Board’s Communiqué Serial:II, No: 19.1 “Principles of Dividend Advance Distribution of Companies That Are Subject To The CMB Regulations”, terms of articles of corporations and profit distribution policies publicly disclosed by the companies. Furthermore, based on the afore-mentioned decree, companies that are required to prepare consolidated financial statements should calculate their net distributable profits, to the extent that they can be recovered from equity in their statutory records, by considering the net profit for the period in the consolidated financial statements which are prepared and disclosed in accordance with the Communiqué Serial: XI, No: 29. The Group realized dividend payments TL 172.673.511 (2012: TL 281.484.501) in the current period. Legal Reserves and Share Issuance Premiums which are considered as legal reserves under the Turkish Commercial Code No: 466, have been presented at their values in legal books. Thus, the inflation adjustment differences from the valuation studies for IFRS purposes for those as of the balance sheet date that have not been subject to profit distribution or capital increase have been presented under retained earnings. Resources Available for Profit Distribution: The Group has in its legal books a profit for the period of TL 356.215.080 (2012: TL 436.125.813) that can be utilized for profit distribution. The Group has sufficient funds for profit distribution in the statutory financial statements d) Retained Earnings Details of retained earnings are as follows: Retained earnings Extraordinary reserves Inflation restatement differences of shareholders’ equity accounts other than capital and legal reserves Other reserves 2013 (477.354.121) 365.002 2012 (611.542.752) 149.700.462 (17.305.173) 600.619.014 106.324.722 (17.305.173) 604.553.046 125.405.583 e) Non-Controlling Interest/Non-Controlling Interest Profit or Loss The amount of non-controlling interest as of 31 December 2013 is equal to TL 138.338.939 (2012: TL 122.302.124). The minority share of TL 38.682.116 on operating results for the current year has been presented separately from the profit for the same period in these consolidated statements of income. (2012: TL 28.605.931). 113 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 23. REVENUE AND COST OF SALES a) Revenue The detail of operating income is as follows: Domestic sales Export sales Sales return and dicsounts (-) Sales Income (net) 2013 3.058.811.904 557.937.303 (868.378.662) 2.748.370.545 2012 2.628.870.326 461.642.086 (747.279.586) 2.343.232.826 2013 (1.576.628.424) (258.315.953) (136.420.175) (45.810.137) 1.776.716 (902.365) (2.016.300.338) (98.759.935) (2.115.060.273) 2012 (1.431.481.600) (193.690.700) (116.619.058) (42.184.241) 2.070.626 39.822.024 (1.742.082.949) (95.898.985) (1.837.981.934) b) Cost of Sales Raw material used Personnel expenses Production overheads Depreciation and amortization expenses Change in work-in-progress inventories Chenge in finished goods inventories Cost of merchandises sold Cost of trade goods sold Cost of sales 24. RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVE EXPENSES Research and development expenses Marketing, selling and distribution expenses General administrative expenses 2013 2012 (13.396.585) (262.511.713) (94.030.049) (369.938.347) (8.900.058) (226.945.293) (96.295.271) (332.140.622) 2013 2012 (2.412.237) (8.437.857) (247.693) (2.298.798) (13.396.585) (2.429.009) (4.022.197) (153.758) (2.295.094) (8.900.058) 25. EXPENSES BY NATURE The detail of operating expenses is as follow: Research and Development Expenses Personnel expenses Material used Depreciation and amortization expenses Other 114 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Marketing, Selling and Distribution Expenses Personnel expenses Outsource expenses Depreciation and amortization expenses Rent expenses Other General Administration Expenses Personnel expenses Operating expenses (*) Depreciation and amortization expenses Condultancy expense Tax, duties and levies Other Total Operating Expenses 2013 2012 (28.067.702) (216.691.685) (2.237.258) (1.920.198) (13.594.870) (262.511.713) (25.604.285) (188.158.156) (1.781.298) (2.983.451) (8.418.103) (226.945.293) 2013 (39.973.213) (36.920.199) (2.811.377) (504.584) (956.465) (12.864.211) (94.030.049) 2012 (41.774.853) (38.900.006) (3.637.499) (318.985) (1.212.395) (10.451.533) (96.295.271) (369.938.347) (332.140.622) The operating expenses of the Group mainly comprise management support, information technology and administration expenses that are charged by Yıldız Holding. (*) 26. OPERATING INCOME/EXPENSES The detail of operating income is as follow: Foreign exchange gains Financial income on credit sales Rediscount income Services income Provision no longer required Other income (*) (*) 2013 75.578.871 38.056.154 3.150.950 2.073.227 1.852.487 14.144.386 134.856.075 2012 102.612.459 47.240.129 4.749.655 3.348.575 1.193.561 29.370.433 188.514.812 2013 (49.406.297) (25.165.375) (4.706.685) (1.144.336) (5.201.669) (85.624.362) 2012 (81.428.469) (35.974.952) (3.222.652) (6.345.676) (10.487.158) (137.458.907) Other income consist of other miscellaneous expenses. The detail of operating expense is as follow: Foreign exchange losses Financial expense from dated acquisition Redicount expenses Provision expenses Other expenses (*) (*) Other expenses consist of other miscellaneous expenses. 115 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 27. INVESTMENT INCOME/EXPENSES The detail of investment income is as follow: Foreign exchange gains Interest income Gain on sales of tangible assets Rent income Dividend income Other income 2013 168.508.740 37.794.133 15.933.425 7.373.538 434.426 222.088 230.266.350 2012 21.791.066 63.493.102 4.119.663 6.974.552 579.296 3.326.094 100.283.773 2013 (19.227.795) (4.361.591) (23.589.386) 2012 (78.134.986) (61.104) (105.505) (78.301.595) 2013 52.271.455 52.271.455 2012 62.129.715 62.129.715 2013 2012 (291.086.539) (1.349.214) (292.435.753) (53.910.050) (10.832.938) (64.742.988) The detail of investment expenses is as follow: Foreign exchange losses Loss on sales of tangible assets Loss on slaes of financial assets 28. FINANCIAL INCOME Foreign exchange gain 29. FINANCIAL EXPENSES Foreign exchange and interest losses from financing Other 30. TAX ASSET AND LIABILITIES (INCLUDING DEFERRED TAX ASSET AND LIABILITIES The Group accounts deferred tax assets and liabilities for temporary timing differences rooted from differences between legal financial statements and financial statements prepared in accordance with TFRS. The differences in question are caused generally by the fact that some profit and loss accounts come up in different periods in legal financial statements and financial statements prepared in accordance with TFRS. These differences are specified below. Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, deferred tax positions of the firms with deferred tax assets is netted against those with deferred tax liabilities and reflected on a separateentity basis. The rate applied in the calculation of deferred tax assets and liabilities are %5,%10 and 20% (2012:%5, %,10 and 20%). 116 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Deferred tax bases: Deferred tax assets 2013 2012 Useful life and valuation differences on tangible and intangible assets Valuation differences of investment properties Valuation differences of marketable securities Profit margin elemination on inventories Discount of trade receivables/payables (net) Allowance of employee termination benefits Provision of doubtful receivables Previous year losses Provision for legal case Derivative financial liabilities Other (272.145) (954.861) (23.380.797) (5.813.744) (14.867.955) (3.772.686) (15.742.974) (64.805.162) (375.220) (163.265) (20.283.291) (6.105.319) (14.883.860) (4.102.505) (409.550) (23.106.902) (69.429.912) Deferred tax liabilites 2013 2012 143.786.202 9.349.692 268.551.100 421.686.994 142.065.713 28.892.100 130.017.014 1.104.578 302.079.405 Deferred tax assets/liabilities: Deferred tax assets 2013 2012 Useful life and valuation differences on tangible and intangible assets Valuation differences of investment properties Valuation differences of marketable securities Profit margin elemination on inventories Discount of trade receivables/payables (net) Allowance of employee termination benefits Provision of doubtful receivables Previous year losses Provision for legal case Derivative financial liabilities Other Movement of Deferred Tax Liabilities: Opening balance Taxes netted from funds transfereed under equity Deferred tax expense Closing balance (54.429) (190.973) (4.676.160) (1.162.749) (2.973.591) (754.537) (3.148.595) (12.961.034) (75.044) (32.654) (4.056.658) (1.221.064) (2.976.772) (820.502) (81.910) (4.621.381) (13.885.985) Deferred tax liabilities 2013 2012 28.757.239 467.485 13.427.555 42.652.279 2013 22.693.528 7.072.045 (74.328) 29.691.245 28.413.142 1.444.605 6.500.851 220.915 36.579.513 2012 108.983 5.928.115 16.656.430 22.693.528 117 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The Group calculated deferred tax assets of TL 14.867.955 for deductible financial losses in the consolidated financial statements for the current year (2012: TL 14.883.860). The maturities of these losses are as follows: 2014 2015 2016 2017 2018 Toplam 2013 3.060.807 6.616.884 5.190.264 14.867.955 2012 1.224.677 4.084.417 4.740.990 4.833.776 14.883.860 Corporate Tax The Company and its Turkish subsidiaries are subject to Turkish corporate taxes. Provision is made in the accompanying financial statements for the estimated charge based on the Group’s results for the period. Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized. The effective tax rate in 31 December 2013 is 20% (2012: %20). In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate is 20% in 2013 (2012: %20). Losses are allowed to be carried five years maximum to be deducted from the taxable profit of the following years. However, losses occurred cannot be deducted from the profit occurred in the prior years retroactively. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1st-25th of April following the close of the accounting year to which they relate. The companies with special accounting periods, file their tax returns between 1st-25th of fourth month after fiscal year end. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. Income withholding tax In addition to corporate taxes, companies should also calculate income withholding taxes and funds surcharge on any dividends distributed, except for companies receiving dividends who are Turkish residents and Turkish branches of foreign companies. Income withholding tax applied in between 24 April 2003 – 22 July 2006 is 10% and commencing from 23 July 2006, this rate has been changed to 15% upon the Council of Ministers’ Resolution No: 2006/10731. Undistributed dividends incorporated in share capital are not subject to income withholding tax. Since the Group did not assume any investment incentives, it has used 20% corporate tax rate. Provision for taxation as of 31 December 2013 and 2012 is as follows: Current year corporate tax provision Prepaid tax and funds Taxation in the balance sheet 2013 (51.860.071) 40.388.418 (11.471.653) 2012 (31.304.716) 29.741.757 (1.562.959) 118 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 2013 2012 51.860.071 (74.328) 51.785.743 31.304.716 16.656.430 47.961.146 2013 2012 279.116.304 %20 243.535.080 %20 55.823.261 48.707.016 652.721 (64.131) (4.626.108) - 4.099.390 (2.439.055) (1.272.808) (1.133.397) 51.785.743 47.961.146 Current year corporate tax provision Deferred tax income/loss Taxation in the income statement The reconciliation of provision for taxation as of 31 December 2013 and 2012 are as follows: Reconciliation of taxation: Profit before taxation and non-controlling interest Effective tax rate Calculated tax Ayrılan ile hesaplanan vergi karşılığının mutabakatı: -Non-deductible expenses -Dividend and other non-taxable income -Other non-deductible gains/losses -Consolidation adjustments Taxation in the income statement 31. EARNINGS PER SHARE A summary of the Group’s weighted average number of shares outstanding as of 31 December 2013 and 2012 and computation of earnings per share set out here as follows: Weighted average number of shares existing during the period Net Profit Earnings per share (TL 1 per value each) 2013 2012 34.200.000.000 188.648.445 0,55 34.200.000.000 166.968.003 0,49 2013 446.815.319 3.417.357 450.232.676 2012 433.197.344 131.398.216 564.595.560 32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES a) The detail of receivables from related parties is as follows: Trade receivables Non-trade receivables Trade receivables from related parties are mainly composed of sales transactions and approximate maturity is 2 months. Nontrade receivables are loans given to related parties, and interest is received as monthly based on effective market interest rate. The interest rate used in 31 December 2013 is 8% for TL, 4% for foreign currencies (2012: 8% for TL, 4% for foreign currencies). 119 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The detail of trade and non-trade receivables from related parties is as follow: 2013 Trade Principle Shareholders Yıldız Holding A.Ş. Non-Trade 2012 Trade Non-Trade - 905.012 - 123.077.866 Other Companies Controlled by the Principle Shareholders 220.716.160 Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş. (*) Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. 131.726.060 Teközel Gıda T.Sağ. Mrk. Hiz. San. Tic. A.Ş. 39.587.999 Eksper Gıda Paz. San. ve Tic. A.Ş. 8.902.164 Hamle Company Ltd. (Kazakhistan) 5.875.462 Hero Gıda Sanayi ve Ticaret A.Ş. 4.065.122 KBF Limited 2.868.176 GF Lovell 179.940 Other 32.894.236 446.815.319 2.321.999 190.346 3.417.357 201.853.482 116.892.120 28.694.568 6.773.630 42.315.570 7.217.513 1.439.703 2.291.071 25.719.687 433.197.344 8.320.350 131.398.216 Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. and Atlantik Gıda Paz. ve Tic. A.Ş. have discountinued their operations and handed over the marketing and trading activities in the traditional channel at 1 March 2012 and 1 April 2012 respectively to Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş. which is under parent company Yıldız Holding A.Ş. (*) The Group’s trade receivables from related parties mainly arise from sales to Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş. and Pasifik Tük. Ürün. Satış ve Ticaret A.Ş. those make the sale and distribution of products throughout Turkey. b)The detail of payables to related parties is as follow: Payables to related parties are due to purchases and approximately matured in 2 months. 2013 273.321.957 86.857 273.408.814 Trade payables Non-trade payables 2012 247.377.711 253.281 247.630.992 The detail of trade and non-trade payables is as follows: 2013 Trade Principle Shareholders Yıldız Holding A.Ş. Non-Trade 2012 Trade Non-Trade 9.796.437 - 3.933.850 - Other Companies Controlled by the Principle Shareholders Önem Gıda San. ve Tic. A.Ş. 166.622.151 Besler Gıda ve Kimya San. Tic. A.Ş. 51.189.561 Marsa Yağ San. ve Tic. A.Ş. 18.007.874 Ak Gıda San. ve Tic. A.Ş. 7.138.768 Northstar Innovation A.Ş. 4.645.202 PNS Pendik Nişasta San. A.Ş. 2.722.927 Other 13.199.037 273.321.957 86.857 86.857 157.649.340 59.013.476 848.768 4.590.798 2.481.546 2.636.117 16.223.816 247.377.711 253.281 253.281 Other than those described above, as of 31 December 2013 the Group has TL 3.469 financial leasing payable to Fon Finansal Kiralama A.Ş (2012: 736.602 TL). 120 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). c)The detail of purchases from and sales to related parties is as follows: 2013 2012 Purchases Sales Other Companies Controlled by the Principle Shareholders Önem Gıda San. ve Tic. A.Ş. 734.588.256 501.569 Besler Gıda ve Kimya San. ve Tic. A.Ş. 176.732.028 Marsa Yağ San. ve Tic. A.Ş. 55.417.406 Ak Gıda San. ve Tic. A.Ş. 38.593.469 59.764 Pendik Nişasta San. A.Ş. 19.963.502 CCC Gıda San. ve Tic. A.Ş. 14.585.155 430.023 Örgen Gıda San. ve Tic. A.Ş. 6.243.090 330 Hero Gıda San. Tic. A.Ş. 35.330.569 Teközel Gıda Tem. Sağ. Mark. Hizm. A.Ş. 156.078.808 Pasifik Tüketim Ürünleri Satış ve Tic. A.Ş. 542.515.493 Eksper Gıda Paz. San. ve Tic. A.Ş. 30.644.680 Hüner Pazarlama San. ve Tic. A.Ş. - 1.194.744.992 Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş.(*) Other 45.573.662 25.957.602 1.091.696.568 1.986.263.830 Purchases Sales 590.132.596 4.705.144 213.683.840 41.810 2.461.218 33.821.619 53.873 14.282.743 9.291.125 6.975.058 146.426 27.380.290 3.466 127.460.679 450.332.586 22.768.146 19.648.258 66.053 914.157.476 66.508.514 16.583.383 937.372.658 1.583.131.645 Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. and Atlantik Gıda Paz. ve Tic. A.Ş. transferred their marketing and trading activities in the traditional channel to Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş. within the structure of Yıldız Holding A.Ş. respectively, on March 1, 2012 and July 1, 2012. (*) The Group mainly acquires raw materials from Besler Gıda ve Kimya Sanayi ve Ticaret A.Ş, which produces vegetable oil and margarine, Önem Gıda San. ve Tic. A.Ş, Pendik Nişasta San. A.Ş and Ak Gıda Sanayi ve Tic. A.Ş. The Group sells its products mainly to two companies which conduct sales and distribution operations of the Group. These firms are Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş and Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş.. The detail of income and expenses pertaining to interest, rent and services arising from transactions with related parties is as follows: For the twelve month period ended on 31 December 2013; Principle Shareholders Yıldız Holding A.Ş. Other Companies Hero Gıda Sanayi ve Tic.A.Ş. Hüner Pazarlama San. ve Tic. A.Ş. Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş. (*) Önem Gıda San. ve Tic. A.Ş. Besler Gıda ve Kimya San. ve Tic. A.Ş. Marsa Yağ San. ve Tic. A.Ş. Northstar Innovation A.Ş. Seher Gıda Paz. San. Tic. A.Ş. İzsal Gayrimenkul Geliştirme A.Ş. Natura Gıda San. ve Tic. A.Ş. Other Rent Income Rent Expenses 120.722 (14.419) 1.800 576.878 (255) 52.722 (81.376) 870.852 (5.000) (5.238) 3.730 100.788 355.246 - (932.266) 366.756 154.722 (4.022) 2.604.216 (1.042.576) Service Income Service Expenses Interest Income Interest Expenses 2.497.606 (102.991.122) 220.588.848 (2.629.638) 2.045.559 415.245 (365.814) (9.143) - - 945.072 (540.342) 4.632.411 (111.887) 4.189 (613.967) 23.324 (1.615.407) 851 (1.594) 48.361 (12.435.899) 19.083 (16.328) (378.852) 429.118 (419.417) 84.409 1.066.617 (5.170.217) 12.674.833 (114.044) 12.123.247 (124.056.022) 233.352.279 (3.357.649) 121 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). For the twelve month period ended on 31 December 2012; Principle Shareholder Yıldız Holding A.Ş. Other Companies Hero Gıda Sanayi ve Tic.A.Ş. Hüner Pazarlama San. ve Tic. A.Ş. Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş. Önem Gıda San. ve Tic. A.Ş. Besler Gıda ve Kimya San. ve Tic. A.Ş. SCA Yıldız Kağıt ve Kişisel Bakım Üretim A.Ş. Northstar Innovation A.Ş. İzsal Gayrimenkul Geliştirme A.Ş. Natura Gıda San. ve Tic. A.Ş. Other Rent Income Rent Expenses Service Income 57.820 (5.066) 1.488.100 Service Expenses Interest Income Interest Expenses (85.737.633) 54.627.598 (29.529.269) 2.701.949 (316.558) 145.311 587.956 (85.293) 46.384 (838.779) 2.143.289 (4.629.612) 224.746 (5.962) 3.621.773 (220.942) 2.834.451 (4.656.538) (4.475) 3.499.825 (1.300.221) 5.440.622 1.456 5.825 (4.578.707) - (1.068.953) (414.024) 350.712 348.287 (1.900.115) 224.700 (132.590) 4.031.026 (7.019.430) 2.808.782 (565.905) 1.405.840 (2.055.825) 23.906.430 (106.247.670) 60.270.831 (34.751.712) Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. and Atlantik Gıda Paz. ve Tic. A.Ş. transferred their marketing and trading activities in the traditional channel to Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş. within the structure of Yıldız Holding A.Ş. respectively, on March 1, 2012 and July 1, 2012. (*) Benefits provided to board members and key management personnel: Short term benefits provided to key management personnels and board members 2013 16.541.995 16.541.995 2012 15.160.264 15.160.264 33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS Additional Information on Financial Instruments (a) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 7, cash and cash equivalents disclosed in Note 5 and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Note 22. The management of the Group considers the cost of capital and the risks associated with each class of capital. The management of the Group aims to balance its overall capital structure through the payment of dividends, new share issues and the issue of new debt or the redemption of existing debt. The Group controls its capital with the liability/total capital ratio.Net liability is divided by total capital in this ratio. Cash and cash equivalents are subtracted from total loans to calculate the net liability. The shareholder’s equity is added to net liabilities to calculate the total capital. 122 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Net liability/Total capital ratio as of 31 December 2013 and 2012 are as follows: 2013 1.259.584.390 (1.164.383.158) 95.201.232 1.129.829.508 1.225.030.740 %8 Total financial liabilities Negative: Cash & cash equivalent Net liabilities Total shareholders’ equity Total capital Net liabilities/Total shareholders’ equity 2012 1.500.952.673 (1.267.728.071) 233.224.602 957.451.288 1.190.675.890 %20 b) Financial Risk Factors The risks of the Group, resulted from operations, include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group’s risk management program generally seeks to minimize the effects of uncertainty in financial market on financial performance of the Group. Risk management is implemented by finance department according to the policies approved by Board of Directors. The Group’s finance department provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. The written procedures are formed by Board of Directors to manage the foreign currency risk, interest risk, credit risk, use of derivative and non-derivative financial instruments and the assessment of excess liquidity. (b)-1 Credit Risk Management Credit Risk of Financial Instruments 2013 Receivabels Trade Receivables Other Receivables Related Party Third Party Related Party Third Party Deposit in Bank 446.815.319 201.954.749 3.417.357 - 108.951.703 - 446.815.319 201.454.052 3.417.357 B. Net book value of financial assets that are renegotiated, if not that will be accepted as past due or impaired - - - - - C. Carrying value of financial assets that are past due but not impaired -The part under guarantee with collateral etc - 451.438 451.438 - - - - 49.259 6.271.394 (6.222.135) 49.259 - - - - - - - - Maximum net credit risk as of balance sheet date (*) -The part of maximum risk under guarantee with collateral etc (**) A. Net book value of financial assets that are neither past due nor impaired D. Net book value of impaired assets -Past due (gross carrying amount) -Impairment (-) -The part of net value under guarantee with collateral etc -Not past due (gross carrying amount) -Impairment (-) -The part of net value under guarantee with collateral etc. E. Off-balance sheet items with credit risk (*) Items that increase the credit reliability, such as; letter of guarantees received, are not taken into account in the calculation. Guarantees include letter of guarantees, guarantee notes and mortgages. (**) 17.022.031 1.163.802.077 - - 17.022.031 1.163.802.077 123 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Credit Risk of Financial Instruments 2012 Receivabels Trade Receivables Other Receivables Related Party Third Party Related Party Third Party Deposit in Bank 433.197.344 163.955.235 131.398.216 - 118.117.379 - 433.197.344 162.779.868 131.398.216 B. Net book value of financial assets that are renegotiated, if not that will be accepted as past due or impaired - - - - - C. Carrying value of financial assets that are past due but not impaired -The part under guarantee with collateral etc. - 801.635 801.635 - - - - 373.732 6.868.544 (6.494.812) 373.732 - - - - - - - - Maximum net credit risk as of balance sheet date (*) -The part of maximum risk under guarantee with collateral etc. (**) A. Net book value of financial assets that are neither past due nor impaired D. Değer düşüklüğüne uğrayan varlıkların net defter değerleri -Past due (gross carrying amount) -Impairment (-) -The part of net value under guarantee with collateral etc -Not past due (gross carrying amount) -Impairment (-) -The part of net value under guarantee with collateral etc. 8.588.753 1.266.887.080 - - 8.588.753 1.266.887.080 E. Off-balance sheet items with credit risk (*) Items that increase the credit reliability, such as; letter of guarantees received, are not taken into account in the calculation. Guarantees include letter of guarantees, guarantee notes and mortgages. (**) Aging of the past due receivables are as follows: 2013 Past due 1-30 days Past due 1-3 months Past due 3-12 months Past due 1-5 years Past due more than 5 years Total past due receivables The part under guarantee with collateral Trade Receivables 273.398 178.040 451.438 451.438 Receivables Other Receivables - Total Receivables 273.398 178.040 451.438 451.438 2012 Past due 1-30 days Past due 1-3 months Past due 3-12 months Past due 1-5 years Past due more than 5 years Total past due receivables The part under guarantee with collateral Trade Receivables 54.171 22.205 725.259 801.635 801.635 Receivables Other Receivables - Total Receivables 54.171 22.205 725.259 801.635 801.635 124 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Collaterals held for the trade receivables that are past due but not impaired as of balance sheet date are as follows: Guarantees Received Collaterals 2013 Fair Value 2012 Fair Value 451.438 451.438 750.000 51.635 801.635 Collaterals held for the trade receivables that are past due and impaired as of balance sheet date are as follows: 2013 Fair Value 49.259 Guarantees Received 2012 Fair Value 373.732 When one part of the financial instrument does not fulfill its obligations, that results in a financial loss risk to the Group and that risk is defined as credit risk. Group’s credit risk is basically related to its trade receivables. The balance shown in the balance sheet is the net amount that is obtained when doubtful receivables are written off according to the Group management’s previous experiences and current economic conditions. Group’s non-trade receivables from related parties are mostly due to Yıldız Holding. (b)-2 Liquidity risk management The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The funding risk of the current and prospective debt demands is managed by maintaining the availability of lenders with high quality and in sufficient number. Liquidity risk charts The following table presents the maturity of Group’s non-derivative financial liabilities. The table includes both interest and principal cash flows. Contractual maturity analysis 2013 Total cash outflow according to contract Carrying value (I +II+ III) Less than 3 months (I) 3-12 months (II) 1-5 years (III) 1.254.265.112 1.283.805.043 254.781.942 1.019.141.924 5.319.278 5.445.900 5.372.898 3.415 508.464.394 511.693.887 444.474.845 67.219.042 431.797 514.535 418.439 96.096 1.768.480.581 1.801.459.365 705.048.124 1.086.460.477 9.881.177 69.587 9.950.764 Non-derivative financial liabilities Bank borrowing Financial lease liabilities Trade payables Other payables Total liabilities 125 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The expected maturities are same as the maturities per contracts. Contractual maturity analysis 2012 Total cash outflow according to contract Carrying value (I +II+ III) Less than 3 months (I) 3-12 months (II) 1-5 years (III) Non-derivative financial liabilities Bank borrowing Financial lease liabilities Trade payables Other payables Total liabilities 1.488.617.403 1.536.111.361 218.195.652 12.335.270 12.874.103 2.687.781 471.149.552 475.681.523 403.695.468 5.058.495 6.059.478 1.060.252 1.977.160.720 2.030.726.465 625.639.153 415.343.489 902.572.220 5.803.540 4.382.782 71.986.055 4.999.226 498.132.310 906.955.002 The expected maturities are same as the maturities per contracts. Contractual maturity analysis 2013 Carrying value Total cash outflow according to contract (I+II+III) Less than 3 months (I) 3-12 months (II) 1-5 years (III) 409.549 409.549 409.549 409.549 409.549 409.549 - - Derivative financial liabilities Other financial liabilities Total liabilities (b)-3 Market risk management The Group, is subject to financial risks related with the foreign exchange currency rates ((b)-3.1) and interest rates ((b)3.2). Market risk management is also measured based on sensitivity analysis. In the current year, the Group’s market risk management method or its market risk exposure have not changed when compared to prior year. (b)-3.1 Foreign currency risk management Transactions in foreign currencies expose the Group to foreign currency risk. This risk mainly arises from fluctuation of foreign currency used in conversion of foreign assets and liabilities into Turkish Lira. Foreign currency risk arises as a result of trading transactions in the future and the difference between the assets and liabilities recognized. In this regard, the Group manages this risk with a method of netting foreign currency denominated assets and liabilities. The management reviews the foreign currency open position and provides measures when needed. The Group is mainly exposed to foreign currency risk in USD, EUR, GBP, CHF and DKK. 126 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The foreign currency denominated assets and liabilities of monetary and non-monetary items are as follows: 2013 TL Equivalents (Fonksiyonel para birimi) USD EUR 1. Trade Receivables 2a. Monetary Financial Assets 2b. Non-Monetary Financial Assets 3. Other 4. CURRENT ASSETS 5. Trade Receivables 6a. Monetary Financial Assets 6b. Non-Monetary Financial Assets 7. Other 8. NON-CURRENT ASSETS 153.318.398 1.018.500.873 610.376 2.436.185 1.174.865.832 25.398 5.358.025 5.383.423 58.327.991 324.964.420 285.984 757.657 384.336.052 11.900 11.900 9. TOTAL ASSETS 1.180.249.255 10. Trade Payables 11. Financial Liabities 12a. Other Monetary Financial Liabilities 12b. Other Non-monetary Financial Liabilities 13. CURRENT LIABILITIES 14. Trade Payables 15. Financial Liabilities 16a. Other Monetary Financial Liabilities 16b. Other Non-monetary Financial Liabilities 17. OTHER NON-CURRENT LIABILITIES 18. TOTAL LIABILITIES 19. Net foreign currency liability position pozisyonu 20. Net foreign currency asset/liability position of monetary items (1+2a+5+6a10-11-12a-14-15-16a) (114.623.773) CHF GBP DKK 9.328.182 110.617.650 277.050 120.222.882 1.814.527 1.814.527 - 409.170 6.289 23.450 6.289 432.620 8.448 8.448 8.167 14.147 22.314 - 384.347.952 122.037.409 6.289 441.068 22.314 30.731.446 1.245.362.925 522.895 12.063.339 367.526.290 - 1.652.674 156.973.119 171.939 6.543 7.530 33.020 - - 7.574.597 1.284.191.863 9.851.176 - 3.187.260 382.776.889 - 261.131 159.058.863 3.354.734 - 14.073 - 1.485 34.505 - - 9.851.176 - 3.354.734 - - - 1.294.043.039 382.776.889 162.413.597 14.073 34.505 - (113.793.784) 1.571.063 (40.376.188) (7.784) 406.563 22.314 (114.623.773) 3.714.682 (42.206.634) (7.784) 399.600 8.167 127 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 2012 TL Equivalents (Fonksiyonel para birimi) USD 1. Trade Receivables 2a. Monetary Financial Assets 2b. Non-Monetary Financial Assets 3. Other 4. CURRENT ASSETS 5. Trade Receivables 6a. Monetary Financial Assets 6b. Non-Monetary Financial Assets 7. Other 8. NON-CURRENT ASSETS 79.422.283 1.267.283.958 530.463 4.684.173 1.351.920.877 236.908 3.575.021 3.811.929 9. TOTAL ASSETS 10. Trade Payables 11. Financial Liabities 12a. Other Monetary Financial Liabilities 12b. Other Non-monetary Financial Liabilities 13. CURRENT LIABILITIES 14. Trade Payables 15. Financial Liabilities 16a. Other Monetary Financial Liabilities 16b. Other Non-monetary Financial Liabilities 17. OTHER NON-CURRENT LIABILITIES 18. TOTAL LIABILITIES 19. Net foreign currency liability position pozisyonu 20. Net foreign currency asset/liability position of monetary items (1+2a+5+6a10-11-12a-14-15-16a) (174.133.921) EUR CHF GBP DKK 31.717.906 519.425.765 297.578 876.786 552.318.035 132.900 15.000 147.900 9.435.421 - 241.279 145.118.437 15.754 16.626 1.323.020 3.437 155.876.878 15.754 261.342 1.465.983 35.088 1.465.983 35.088 7.047 7.047 - 1.355.732.806 552.465.935 157.342.861 15.754 296.430 7.047 13.212.287 612.203.994 9.135.509 4.308.356 329.680.604 5.041.034 2.173.391 11.911 10.424.523 62.494 1.233 61.783 - 699.721 - 5.291.185 639.842.975 886.525.280 - 2.837.861 341.867.855 286.564.023 - 96.591 12.756.999 13.144 159.755.178 - 1.833 63.616 - 699.721 - 886.525.280 286.564.023 159.755.178 - - - 1.526.368.255 628.431.878 172.512.177 13.144 63.616 699.721 (170.635.452) (75.965.943) (15.169.316) 2.610 232.814 (692.674) (174.133.921) (74.317.446) (17.861.728) 2.610 196.122 (692.674) 128 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The Group’s import and export totals for the twelve month periods are presented below: 2013 2012 Total exports 557.937.303 461.642.086 Total imports 72.422.195 40.111.885 Foreign currency sensitivity The Group is exposed to foreign exchange risk arising primarily from USD and EUR.In the table below, the foreign currency sensitivity of the Company arising from 10% change in US dollar and EUR rates. 10% is the rate used when reporting to senior management of the Company. This rate is the anticipated rate change of the Company’s senior management. Sensitivity analysis includes only the monetary items in foreign currency at year end and shows the effect of 10% increase in USD and in EUR foreign currency rates. Negative value implies the effect of 10% increase in USD and in EUR foreign currency rates against TL on the decrease in the net profit. 1-US Dollar net asset/liabilities 2-Part of hedged from US Dollar risk (-) 3-US Dollar net effect (1 +2) 4-Euro net asset/liability 5 – Part of hedged from Euro risk (-) 6-Euro net effect (4+5) Total(3 + 6) 2013 2012 Income/Expense Income/Expense Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency If US Dollar appreciated against TL by 10% 792.825 (792.825) (13.247.828) 13.247.828 792.825 (792.825) (13.247.828) 13.247.828 If Euro appreciated against TL by 10% (12.393.978) 12.393.978 (4.200.543) 4.200.543 (12.393.978) 12.393.978 (4.200.543) 4.200.543 (11.601.153) 11.601.153 (17.448.371) 17.448.371 (b)-3.2 Interest risk management Financial liabilities based on fixed and floating interest rates expose the Company to interest rate risk. The related risk is controlled by interest rate swap agreements and floating interest rate agreements by balancing the fixed and floating interest rate borrowings. Risk strategies are reviewed periodically considering the interest rate expectations and predetermined interest risks; which aims to establish optimum interest risk management regarding the balance sheet position and the interest expenses. Interest rate sensitivity Sensitivity analysis is determined based on the interest rate risk that the non-derivative instruments exposed to on the balance sheet date and is kept fixed during the reporting period. The Company management expects a fluctuation of 1% in Euribor interest rates. 1% increase or decrease is used in reporting the interest rate risk to the key management personnel and represents management’s assessment of the reasonably possible change in interest rates. On the reporting date if Euribor/Libor interest rates had been 1% higher/lower and all other variables were held constant: Net income of the Group would have been decreased by TL 8.143.945 (Net profit in 2012 would have been decreased by TL 8.055.402). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. In case of 1% decrease in Euribor interest rate, the net profit of the company for the current period would have increased with the same rate. 129 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). The financial instruments that are sensitive to interest rate are as follows: Interest Position Table Fixed interest rate financial instruments 2013 2012 Financial Assets Cash and Cash Equivalents Other Receivables 1.154.745.091 17.022.031 1.252.969.855 8.588.753 Financial Liabilities Borrowings Financial lease payables Other Payables 436.516.669 5.319.278 344.940 551.932.260 12.335.270 4.805.214 3.417.357 131.398.216 817.748.443 86.857 936.685.143 253.281 Floating interest rate financial instruments Financial Assets Non-trade receivables from related parties Financial Liabilities Borrowings Non-trade payables to related parties (b)-3.3 Price risk The Group is exposed to price risk due to the fluctuations in exchange rate and interest rate. The investigation on market information is examined and followed through appropriate valuation method regarding price risk by the Group. In current year, there have not been any changes compared to prior year in the market risk that the Group is exposed to or the administration or calculation methods of these risks. (b)-3.4 Equity investments price sensitivity The sensitivity analysis presented below has been prepared based on the equity investments price risks exposed. As of reporting date, assuming that all other variables are held constant and when the values used in the valuation method increase/decrease by 10%: As of 31 December 2013, as long as the equity investment are classified as available for sale and not disposed of or they are not impaired the net profit/loss will not be affected. The other funds in the shareholders’ equity will increase/decrease by TL 2.582.595 (2011: increase/decrease of TL 2.613.567). This situation is the result of the changes in the fair value of available for sale securities. (*) 163.955.235 564.595.560 - 1.267.728.071 - - Borrowings and receivables Financial assets at amortized cost - - 201.954.749 450.232.676 - 1.164.383.158 - - Borrowings and receivables Financial assets at amortized cost The management of Groups considers that the carrying values of the financial assets reflect their fair values. Financial Liabilities Financial liabilities Trade payables Payable to related parties Other financial liabilities 2012 Financial Assets Cash and cash equivalents Trade receivables Due from related parties Financial investments Financial Liabilities Financial liabilities Trade payables Payable to related parties 2013 Financial Assets Cash and cash equivalents Trade receivables Due from related parties Financial investments Categories and fair values of financial instruments 34. FINANCIAL INSTRUMENTS - 329.307.924 Available for sale financial assets - 465.272.715 Available for sale financial assets 1.500.952.673 223.771.841 247.630.992 409.549 - Financial liabilities at amortized cost 1.259.584.390 235.142.437 273.408.814 - Financial liabilities at amortized cost 1.500.952.673 223.771.841 247.630.992 409.549 1.267.728.071 163.955.235 564.595.560 329.307.924 Carrying value 1.259.584.390 235.142.437 273.408.814 1.164.383.158 201.954.749 450.232.676 465.272.715 Carrying value 7 9 32 8 5 9 32 6 Notes 7 9 32 5 9 32 6 Notes 130 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). 131 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Derivative Financial Instruments The Group entered into interest rate swap agreement to control part of its borrowings by replacing floating interest rate with fixed interest rate swaps. Floating interest rate of the loan is hedged by the result of the change in six month Libor interest. The notional value of the swap contract is USD 93.000.000. As of December 31, 2013, the Group has not got any swap contract related to interest rate. (2012:TL 409.549). Fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows: • First level: The fair value of financial assets and financial liabilities are determined with reference to actively traded market prices. • Second level: Other than market prices specified at first level, the fair value of financial assets and financial liabilities are evaluated with reference to inputs that used to determine directly or indirectly observable price in market. • Third level: The fair value of financial assets and financial liabilities are evaluated with reference to inputs that used to determine fair value but not relying on observable data in the market. Level classifications of financial assets at fair value are as follows: Level of fair value as of reporting date Level 2 TL 2013 Level 1 TL 611.476 - 611.476 - - - Fair value difference through comprehensive income statement -Shares 464.418.845 25.825.951 - 438.592.894 Total 465.030.321 26.437.427 - 438.592.894 Financial assets Fair value difference through profit and loss -Held for trading Level 3 TL 132 ÜLKER BİSKÜVİ ANNUAL REPORT 2013 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.). Level of fair value as of reporting date Level 2 TL 2012 Level 1 TL 2.963.016 531.435 2.431.581 - Fair value difference through comprehensive income statement -Shares 325.965.176 26.140.536 - 299.824.640 Total 328.928.192 26.671.971 2.431.581 299.824.640 (409.549) (409.549) - (409.549) (409.549) - Financial assets Fair value difference through profit and loss -Held for trading Level 3 TL Financial liabilities Other financial liabilities Year beginning and year and reconciliations of financial assets and liabilities valued at 3rd level are below: Opening balance Total gain/loss -Classified under the comprehensive income Closin balance 35. EVENTS AFTER THE BALANCE SHEET DATE None. 2013 2012 299.824.640 255.906.906 138.768.254 438.592.894 43.917.734 299.824.640 Davutpaşa Cad. No: 10 Topkapı - Istanbul - TURKEY Tel: +90 212 567 68 00 Fax: +90 212 613 90 90 www.ulker.com.tr www.ulkerbiskuvi.com.tr