Message From The General Manager

Dear Shareholders,
2008 was a year when the global crisis impacted all world economies beginning in the second half of the year. The crisis started in the finance sector in the United States, originating from difficulties experienced in mortgage credits return payments. The crisis, albeit external to us, and due to uncontrollable reasons, affected our country, our sector, although to a lesser extent than the other sectors and, consequently, our Company as well. Although fuel and oil prices, which were overvalued in 2007, started to fall with the crisis, price increases in energy and other items affected our costs unfavorably.

For our Company, 2008 has been a year when we focused on efficiency through our “continuous efficiency principle”, in order to maintain our existing leading position in the intensely competitive environment and to lessen the impacts of the economic crisis, which was felt more fiercely in the second half of the year. Following this principle, the processes, defined in 2007, were analyzed in line with “lean management” techniques. Monitoring and development of efficiency efforts were systematized in all processes.

We monitored developments in the sector and consumer expectations closely, and without compromising quality, we continued production in full force. As a result of our strategic planning activities, we realized our projects for 2008. We updated our strategic plan for 2009-2013.

I would like to share with you, our treasured Shareholders, the following developments in our Company during 2008.

Institutionalization Activities
In line with the Articles of Incorporation, which was amended upon approval of our shareholders in the Ordinary General Meeting in 2007; we carried out some important steps in accordance with the Corporate Governance Principles in 2008. For example, the company set up the Corporate Governance and Audit Committees, and launched the corporate website, www.ulkerbiskuvi.com.tr.

Production and Capacity Utilization
In 2008, total production increased by 4,800 tons, with the wafer facility investment in Ankara Factory.

Although the impact of the global crisis environment increased, our total production from the Istanbul and Ankara factories reached 127,624 tons. Our capacity utilization ratios were 73% in our Istanbul Factory, and 76% in our Ankara Factory. Consequently, our total capacity utilization reached 75%.

The investments made by our Company during 2008 totaled TRY 12.1 million, including TRY 1.4 million at the Topkapı Factory, and TRY 10.7 million at the Ankara Factory. These investments made in both factories include the establishment of new facilities, capacity growth, renovation, improvements in production lines, efficiency improvement, etc.

Continuous Efficiency
In 2008, our efforts to expand our “Lean Production” philosophy continued. The “Lean Production Project”, which started in the Ankara Factory in 2007, continued in the new facilities of this factory. In the Istanbul Factory, the project began in the second half of 2008. Our objective is to implement this philosophy across all departments, and cease all unnecessary expenditures within the Company.

Our efforts to implement our continuous efficiency plan includes Job Analysis in order to increase operational productivity, a Permanent Staff Project and the Best Practice Share Application, energy efficiency project and using fewer colors in packaging.

Crisis and the Measures
In our country, the global crisis that has affected the entire world, has had an impact in the food sector, although to a lesser extent than other sectors. Our projection for 2009 is that the food sector will continue to be less affected than the other sectors. As a Company, we have put great effort in minimizing the impacts of the crisis. As for our major fields of activity, we made agreements with our suppliers in order to increase our terms, we stopped recruiting employees unless it is necessary, we reviewed all investments that are expected to create value in the long term and are not urgent, and, as always, we are taking increased measures to prevent unnecessary expenditures.

We are actively taking steps to lessen any impacts on the Company from the current global economic crisis. In line with our principle of “focusing on the consumer”, we continue to develop new products based on consumer needs and preferences. In addition, with our integrated structure, advanced technology and strong distribution network based on long relationships with suppliers, we will feel little, if any, affects from the economic crisis.

R&D and New Products
In 2008, our Company, acting upon our principles of customer satisfaction in a fiercely competitive environment, continued its efforts to introduce new products with various tastes and flavors, in parallel to our consumers’ opinions and expectations.

We believe that opportunities for innovative actions in our sector are infinite. Bearing this in mind, our R&D departments in the Istanbul and Ankara factories worked on 92 new projects, and as a result, 13 new products were introduced into the market. Hanımeller Kurabiyem, Clip Light Crackers, Biskrem Fındıklı, Zengin Tahıllı Kraker, Başak Keten Tohumlu, Kahveli Canpare, Dokuz Kat Çikolatalı Gofret ve Hanımeller Papatya are just a few of our new products.

Quality, Environment and Social Contribution
During 2008, both of our factories were reviewed for production, worker safety and environmental responsibility. As a result, all of our nine certificates of quality were renewed.

We continued with our philosophy of quality production, which resulted in earning certificates of quality in all of our fields of operation. Our factories have earned the ISO 9001:2000 Quality Management System, ISO 22000 Food Safety Management System, TS 180001 Occupational Health and Safety Management System, BRC and IFS certificates.

On the other hand, radical changes in the increase of energy efficiency and a decrease of carbon emissions, due to the regulations linked to the Kyoto Protocol and accepted on 5 February 2009, were implemented. The Company has exerted great efforts to follow the new regulations and I am delighted to report that the carbon emissions of both of our factories is below the legal limits. This is further proof of the Company’s dedication to and respect for the environment in which we live.

Hand in Hand with Our Employees, We Achieve Success
At the end of the year the Company had 1,290 employees. We view our employees as our most important asset, and in order to support personal development of our employees, we provided 52,099 hours of education in 2008. Thus, we achieved maximum values in quality and efficiency. Our education-oriented approach for personal development and to increase the quality of work of our employees will continue at the same pace in 2009 as well.

“Mind Cube” is a permanent idea suggestion system that has been in place in the Company for years. Ideas from employees on how to increase efficiency in all areas have grown by 262% over the previous year. Accordingly, 284 employees have been rewarded for their suggestions.

The “Smile Group”, set up in both factories on a voluntary basis for increasing the motivation and morale of our employees, continued its activities in 2008 as well.

In both our factories, we organized periodic “Industrial Relations Board” meetings with employee and syndicate representatives. In these meetings, requests and suggestions from our employees, and sharing of information about company policies was made first hand. Trust, cooperation and empathy with our employees rose to the highest level.

Balanced Scorecard Activities
In 2008, we finalized the Balanced Scorecard Project. Corporate Balanced Scorecard Activities help to transform our company strategies into operational objectives. In the Balanced Scorecard Project, we formed corporate and department scorecards. The project, which was initiated in the second half of 2008 in order to transfer the scorecards into SAP environment for monitoring, is in the final stage. When the project is finalized, corporate and department scorecards will be monitored in the SAP system.

In 2008, we also finalized the Assessment of Process Key Performance Indicators project, which is also complementary to the Corporate Scorecard project. Thus, as per realizing the strategies of our company, the project now allows us to assess corporate, department and process performance.

Our Objectives for 2009
We will carry on our activities, characterized by customer orientation, an innovative approach and commitment to quality and a high level of hygiene in 2009 as well. As for reaching our strategic objectives, there are many projects we have laid out in our strategic planning, and we will finalize the ones corresponding to 2009.

We will continue our transformation to the “Lean Production” philosophy, which we aim to extend to all our facilities.

In 2009, we will commit ourselves to keeping our financial and operational results at the highest possible level, following budget and strategically planned objectives. Our driving forces are, as it has always been, your support as our valued stakeholders and the efforts of our employees.

Yours sincerely,
Dr. Cafer FINDIKOĞLU
General Manager