Corporate Governance Principles Compliance Report

Corporate Governance Principles Compliance Report

1. Corporate Governance Principles Compliance Statement

Being aware of the importance of applying the principles included in the Corporate Governance Compliance which was published in 2003 and revised and finalized in 2005 by the Capital Markets Board, our company has performed necessary studies and continues to show due diligence to take the process further. The opinions of our company with regard to improving the level of compliance in terms of scope and quality by its assessments and determinations with respect to the Corporate Governance principles have been comprehensively presented below. Generally;

  • The relations with the Shareholders unit was structured,
  • Arrangements were made in relation to the trade of the information taken from inside,
  • Working principles of the committees were organized,
  • The web page was organized as specified in the principles,
  • Studies were done for the compliance of the Articles of Association with the principles of Corporate Governance,
  • Corporate Management Committee, Risk Committee and Auditing Committee which will serve dependant on the Executive Board were established and their committee structures were made in accordance with corporate governance principles.

The principles constituting exceptional quality which are not applied yet have not caused any interest conflict among the stakeholders until today and they are planned to be applied within a process.

The “Notice regarding the Determination and Application of Corporate Governance Principles” of Capital Markets Board (CMB) dated 30.12.2011 Serial: IV No: 56 and some Corporate Governance Principles were made compulsory for the companies which are dealt in Istanbul Stock Exchange Market (ISEM). Accordingly, compliance with the provisions stipulated to be compulsorily complied with by

the CMB have been accepted as it is and studies have been completed with regard to compliance with other principles in question in the Notice.

Moreover, our Corporate Governance Principles Compliance Report which is given below is presented to public information at www.ulkerbiskuvi.com.tr,the website of our Company.

PART I - SHAREHOLDERS
2. Relations with the Shareholders Unit

Relations with the Shareholders are carried out within the structure of the Directorate of Financial Afffairs. This unit responds the applications made in written or via the internet by our shareholding partners, and participates in the investors’ conferences which are organized inside and outside the country. Contact information about the relations with the shareholders unit are given below:

İlhan Turan Usta
Director of Financial Affairs
Davutpaşa Cad. No:10 34015 Topkapı/Istanbul
ilhan.usta@ulker.com.tr
+90 212 567 68 00

Hafize Nurtaç Ziyal
M&A General Manager of Business Development and Investor Relations
Kısıklı Mah. Ferah Cad. No: 1 B
Çamlıca Üsküdar/Istanbul
nurtac.ziyal@ulker.com.tr
0 216 524 25 00

Relations with the Shareholders Unit not only organizes meetings with domestic and foreign investors but also participates in the investors’ conferences which are organized inside and outside the country. The Investor Relations Unit meets domestic and foreign corporate investors within this framework.

Relations with the Shareholders, on the other hand, is carried out within the structure of the Directorate of Financial Affairs. The ISEM, CMB and CRA explanations about informing the shareholders and the communication which is maintained with these institutions are carried out by this unit. Besides ordinary and extraordinary general meetings, there also meetings organized with the shareholders based on projects or in line with their demands whenever necessary.

3. Shareholders’ Exercise of their Rights to Information

Written and verbal information demands coming from our shareholders within the period have been fulfilled except for the information which are qualified as commercial secrets or not disclosed to public. All of the information which is necessary for the proper exercise of the rights of shareholding is presented for the use of our shareholders in our annual activity reports, special situation explanations and by means of individual demands. Necessary information is also presented in general for the use of the shareholders at www.ulkerbiskuvi.com.tr in the electronic environment.

4. Information on the General Assembly

In article 1527 of Turkish Code of commerce dated 13.01.2011 and numbered 6102; it was resolved that participating in the general meetings of the incorporated companies in electronic environment, giving suggestions, giving opinions and exercising votes led to all legal results of physical participation and vote exercising and participating and exercising votes in the general meeting in the electronic environment was compulsory in terms of the companies which are quoted on exchange.

And the Notice on the Electronic General Meeting System to be Applied in the General Meetings of the Incorporated Companies which organized the procedures and principles with regard to the establishment, function, technical matters and security criteria of the electronic general meeting system in the Official Gazette dated 28.08.2012 and numbered 28395 in the “Regulation on General Meetings to be made in the Electronic Environment in the Incorporated Companies” which was issued by the Ministry of Customs and Trade for the purpose of determining the principles of application of the said article was published in the Official Gazette dated 29.08.2012 and numbered 28396 and the effective date of the said regulations were determined as 01.10.2012. The companies which are quoted on exchange which will be making their general meeting call after 01 October 2012 will be subject to the provisions of the Regulation.

a) Annual Ordinary General Meeting

Ordinary General Meeting was held on 22 May 2012.

The Ordinary General Meeting regarding the year 2011 was made in Barcelo Eresin Topkapı Hotel in the address Millet Caddesi No:186 Topkapı – ISTANBUL with the participation of the shareholders representing approximately 81% of the paid capital of 342.000 bin TL. No stakeholders and media authorities participated in the meeting.

The invitation regarding the meeting was made within the required time to contain the agendum as stipulated in Law and the articles of association, thereby being announced on the Turkish Trade Registry Gazette dated 30 April 2012 and numbered 8058, on the publication dated 30 April 2012 of the World Gazette which is published daily, and at www.ulkerbiskuvi.com.tr, the website of Ülker Bisküvi Sanayi A.Ş. thereby notifying the date and agendum of the meeting.

Financial tables and reports including the annual activity report, profit distribution suggestion, the required informing documentation which was prepared in relation to the items of agendum of the General Meeting and other documents which constitute a basis for the items of agendum and the final wording of the articles of association and the amendment text and its reasons if any amendment is to be made in the articles of association shall be available for the examination by our shareholders at the headquarters and branches of our Company as of the date of announcement for the invitation to the General Meeting.

At the General Meeting, the matters which are included in the agendum shall be communicated in an objective and detailed manner by an explicit and comprehensible method; and the shareholders shall be given the chance to explain their opinions and ask questions under equal terms and a proper discussion environment shall be created.

At the General Meeting regarding the year 2011, no questions were asked by the shareholders and no suggestion was given other than the items of agendum.

Two Extraordinary General Meetings was made within the year 2012.

b) Extraordinary General Meeting with regard to the Amendment of the Articles of Association

The Extraordinary General Meeeting with regard to the amendment of the articles of association was held on 19.03.2012 at the Company Headquarters with the participation of the shareholders presenting approximately 73% of the paid capital of 268.600 bin TL.

The invitation regarding the meeting which contains the place, date, time, agendum of the meeting, the copy of power of attorney, was made within the required time to contain the agendum as stipulated in Law and the articles of association, thereby being announced on the Turkish Trade Registry Gazette dated 22.02.2012 and numbered 8011, on the publication dated 23.02.2012 of the World Gazette and on the webpage and by registered letter to the bearer shareholders who previously executed share certificates and communicated their addresses.

It was unanimously decided to increase the paid capital of the company by 73.400.000.- and make it 342.000.000.-TL and totally restrict the pre-emption rights of the current partners, approving the registered distribution of Group “C” bearer share certificates in the amount of 73.400.000.-TL which will be issued due to Capital increase to the holders of Registered Dividend Shares and Groups A and B Preferred Share Certificates against the removal of the preferred share certificates and dividend privileges and to the holders of preferred share certificates at the rate of their removed privileges, to the holders of registered dividend shares at the rate of their removed certificates.

c) Extraordinary General Meeting with regard to the Election of Independent Members .

The Extraordinary General Meeting which was made on 9 August 2012 in the Company Headquarters with the participation of the shareholders representing approximately 83% of the paid capital of 342.000 bin TL.

The invitation regarding the meeting was made within the required time to contain the agendum as stipulated in Law and the articles of association, thereby being announced on the Turkish Trade Registry Gazette dated 6 July 2012 and numbered 8106, on the publication dated 7 July 2012 of the World Gazette which is published daily, and at www.ulkerbiskuvi.com.tr, the website of Ülker Bisküvi Sanayi A.Ş. thereby notifying the date and agendum of the meeting.

After informing the general assembly about the backgrounds of the members of the Executive Board, it was unanimously decided to elect Mr. Duran AKBULUT and Mr. Ekrem PAKDEMİRLİ who were present at the meeting and declared that they were members to serve for 3 years in the executive board until the extraordinary general meeting which will be made 3 years later, and to pay each of the elected independent members of the executive board a monthly gross salary of 5.000 TL, not to pay any salaries to the members of the executive board who serve in the committees which are formed within the Company with the majority of votes.

5. Rights to Vote and Minority Rights

Each share has one right to vote pursuant to our articles of association.

The capital of our company consists of group (A), (B), and (C) shares and four of the members of the Executive Board will be elected among the candidates who will be determined with the absolute majority of the group (A) shareholders, one of them will be elected among the candidates who will be determined with the absolute majority of group (B) shareholders and other members will be elected among the candidates who will be determined in accordance with the general provisions. None of our shareholders have mutual participation relationship with our Company. Accumulated vote exercising method is applied in our company.

The articles of association do not contain any provisions preventing the non-shareholders to exercise votes in proxy as representatives.

6. Profit Distribution Policy and Profit Distribution Time

Our Executive Board has adopted a profit distribution policy within the scope of Corporate Governance Principles which are determined by CMB as expressed below. Accordingly;

Our Company has adopted the principle of determining the profit amount to be distributed in line with the decision taken in the General Meeting within the framework of the provisions included in Turkish Code of Commerce, CMB provisions and our Articles of Association provided not being less than the rates and amounts determined by the Capital Markets Board and distributing within the legal periods determined by the CMB.

The profit distribution proposed by our Executive Board to the General Assembly shall be determined thereby considering the country economic and the current status of the sector in which our Company is involved, observing the sensitive balance between the expectations of our shareholders and the growth requirements of our Company.

It is adopted that the dividend to be distributed will be distributed in cash and/or as free shares and the privileges were removed with the decision taken at the Extraordinary General Meeting dated 19 March 2012 with regard to receiving share from the profit. Moreover, our articles of association include the application of giving our employees merit premium in line with their performances.

Our articles of association also include a provision with regard to giving dividend advance and this method has not been used until today.

The profit distribution policy of our company has been submitted to the information of the shareholders at the General Meeting. Our profit distribution policy has been explained to public and is included on the Company website and activity reports.

7. Transfer of Shares

The matter of transferring bearer share certificates has been included in Article 9 of our articles of association. The bearer share certificates can be virtually transferred in accordance with that article. The transfer shall inure by the delivery of the endorsed certificate to the transferee and being registered in the share ledger. The Company may decline the registration into the share ledger even without showing any reason.

PART II – PUBLIC DISCLOSURE AND TRANSPARENCY

8. Company Informing Policy

The “Informing Policy” of the Company shall be executed within the framework of the rules determined by legal regulations, CMB legislation and notices published. The Company has prepared a written document with regard to public disclosure and informing and had it approved by the Executive Board and announced it to the shareholders and the public via the website.

Furthermore, it has been adopted as a fundamental principle to communicate all kinds of information which is disclosed to public to the person as soon as possible upon request. In case shareholders request any information, written and verbal information will be given. In case of important developments to be explained to the public within the year, necessary special situation explanations will also be made in time. Our activity report is prepared in detail to enable the public access to all kinds of information about the activities of the Company.

9. Special Situation Explanations

Our Company has made 21 special situation explanations in 2012 January – September pursuant to CMB regulations. There are no special situation explanations which were not made in time by our Company.

10. Company Website and Its Content

The company website can be found in Turkish and in English at www.ulkerbiskuvi.com.tr adress. Our company website includes the following information to inform the shareholders;

  • Information on Ülker Bisküvi and Affiliates
  • Company Vision
  • Ethic Principles
  • Information on the Executive Board and Management
  • Company Partnership Structure
  • Company Organizational Structure
  • Social Responsibility
  • Trade Register Information and Company Identity
  • Articles of Association of the Company
  • Financial Tables and Footnotes
  • Annual Activity Reports
  • Special Situation Explanations
  • Corporate Governance Compliance Report
  • Information on the General Meeting (Agendum, Minutes, Attendance Sheet and Form of Exercising Votes in Proxy)
  • Company Informing Policy
  • Committees
  • Newspaper Announcements and Notices (General Meeting announcements etc.)
  • List of Insider Learners
  • Grading Reports
  • Ülker in Istanbul Stock Exchange Market (Ratio and Graphic Information regarding Share Certificates)

11. Explaining Real Person Ultimate Controlling Shareholder(s)

Our company does not have any real person ultimate controlling shareholders. Our partnership structure is included in our activity report and our website.

12. Announcing the Persons who are Insider Learners

All kinds of necessary precautions have been taken to prevent the use of the information which is learned from inside and the managers and other persons/institutions who are in such positions to access any information which may affect the value of the capital market tools of our Company are constantly updated in the Company webpage. The managers and other persons/institutions who are in such positions to access any information which may affect the value of the capital market tools of our Company have been presented below.

PART III - STAKEHOLDERS
13. Informing Stakeholders

In case the rights of the stakeholders are not regulated by a legislation or a contract, the interests of the stakeholders shall be protected by observing the reputation of the Company as well within the framework of rules of good faith and within company possibilities. Furthermore, the company employees shall have the chance to access the authorized signatures list and announcements via intracompany internet portal and some important notices are communicated to all employees promptly via email.

14. Participation of the Stakeholders in the Executive Board

Pursuant to our articles of association, the Executive Board shall consist of minimum 7 members and these members shall be elected by the General Assembly with the proposal of several shareholders in line with the provisions which are included in the articles of association. The Executive Board shall consist of 9 members 3 of which are independent members.

15. Human Resources Policy

The fundamental policy of human resources is to take what has been performed till today as a basis and create a high performance team by the efforts of improvement and enhancement of human resources.
The human resources policy which is adopted by our company is generally the polices adopted by Yildiz Holding and these policies are included at www.ulkerbiskuvi.com.tr address. There have been no complaints with regard to discrimination for the human resources policy of our company.

16. Information on Relations with Customers and Suppliers

Our Company observes the continuity of service quality and standard at all phases of production. We give attention to the confidentiality of the information of the customers and suppliers which serve as commercial secrets. Customer satisfaction is included among the fundamental principles of our Company.

17. Social Responsibility

The social responsibility activities of Yıldız Holding to which our company is connected are included in our activity report and at www.ulkerbiskuvi.com.tr address. Our Company shows maximum attention to applying respectful and supportive policies to the Environment, Sports, Education and Public Health.

PART IV – EXECUTIVE BOARD
18. Structure, Formation of the Executive Board and Independent Members

Our Executive Board consists of 9 members. These members are elected by the General Assembly in line with the provisions included in these articles of association 4 members with the absolute majority of group A certificates, 1 member with the absolute majority of group B certificates and other members in line with general provisions among the members suggested.

Information regarding the members of our Executive Board is presented below.

  1. Name & Surname
  2. Murat ÜLKER
  3. Ali ÜLKER
  4. Ahmet ÖZOKUR
  5. Mehmet TÜTÜNCÜ
  6. Mahmut Mahir KUŞCULU
  7. Cengiz SOLAKOĞLU
  8. Duran AKBULUT(*)
  9. Ekrem PAKDEMİRLİ(*)
  10. Alain STRASSER
  1. Title
  2. Chairman of the Executive Board
  3. Vice Chairman of the Executive Board
  4. Member of the Executive Board
  5. Member of the Executive Board
  6. Member of the Executive Board
  7. Member of the Executive Board
  8. Member of the Executive Board
  9. Member of the Executive Board
  10. Member of the Executive Board
<

(*) Elected at the Extraordinary General Meeting which was held on 09.08.2012.

Ekrem PAKDEMİRLİ, Duran AKBULUT and Alain STRASSER serve in the capacity of independent members in the Executive Board. There are no female members among the members of the Executive Board.

19. Qualifications of the Members of the Executive Board

Minimum qualifications sought in the election of the members of the Executive Board tally with the qualifications specified in articles 3.1.1, 3.1.2 and 3.1.5 of part IV of Corporate Governance Principles which are given in the notices Seri IV No and 57 of CMB. Our articles of association includes the provision of electing the members of the Executive Board among the persons possessing basic information on the legal principles which regulate the transactions and savings with regard to the field of activity of the Company, trained and experienced on company management, having the skill of scrutinizing financial tables and reports and minimum 1/3 of the members having had higher education.

Our Executive Board consists of 9 members and this number enables organization of the activities of the Executive Board in an effective manner.

20. Company Vision

Our Company and all companies connected to Yıldız Holding were founded with “the belief that every person has the right to have a nice childhood regardless of the country s/he lives in”. The vision of Ülker Bisküvi is to further strengthen and continue its brand status which is the most preferred one by the consumer particularly in baked products and be among the first 5 companies within the next 10 years. The vision and mission of Yıldız Holding and our Company which is disclosed to public is included at the addresses www.ulker.com.tr and www.ulkerbiskuvi.com.tr.

21.Risk Management and Internal Control Mechanism

The activities of our Company with regard to risk management are carried out by the Risk Committee. Our Company is also audited regularly by the auditing units of Yıldız Holding A.Ş., which is the main partner of our Company and an independent auditing organization. The findings which were obtained from these audits are communicated to the members of the Committee in charge of Audit and the members of the Executive Board. The business flows, procedures of our Company, powers and responsibilities of our employees are controlled within the framework of risk management and are subject to constant auditing.

22.Powers and Responsibilities of the Members of the Executive Board and the Managers

The powers and responsibilities of the members of the Executive Board and the managers are expressly mentioned in the Articles of Association of the Company at www.ulkerbiskuvi.com.tr

address. Our Executive Board exercises its powers prudentially by possessing all kinds of information required for the complete fulfilment of its task and within the framework of rules of good faith.

23.Activity Procedures of the Executive Board

Our Executive Board had 26 meetings within 2012 January – September. The date of the meeting is determined to enable the participation of all of our members. Our Executive Board meets regularly whenever deemed necessary for company businesses and transactions.

24. Restraint of Making Transactions and Competition with the Company

The members of our Executive Board do not have any transactions or activities which may be within the scope of the restraint of making transactions and competition with our Company thus require taking permission from the General Assembly.

25. Ethic Rules

As Ülker Bisküvi, we are a member of a group of companies which has produced quality and healthy goods since its foundation, is respectful to its employees, protects the rights of its partners and shareholders and suppliers and customers, obeys laws, gives importance to social values, has social responsibility, adopted management principles based on the highest level of love and respect towards managers-employees-suppliers-customers, principles of honesty, consistency, trust and responsibility and aims to improve these principles.

The ethic rules which are adopted by Yıldız Holding are applied in general by all companies and these ethic rules which are adopted by our Company as well are disclosed to public within the framework of information policy and submitted for the information of our shareholders at www.ulkerbiskuvi.com.tr address.

26. Number, Structure and Independency of the Committees which are formed in the Executive Board
Audit Committee:

The Auditing Committee which was established by the Resolution of the Executive Board dated 22.05.2006 within the structure of the Company was reorganized with the resolution of the Executive Board dated 05.08.2008 pursuant to the notice Serial: X No: 22 of the Capital Markets Board. The Auditing Committee serves to supervise the financial and operational activities. The purpose of the committee which serves dependant on the Executive Board is to provide the audit of the Company accounting system, financial information and disclosure of them to public and the supervision of the

functioning and effectiveness of the internal control system. This committee meets whenever necessary provided not less than four times a year. The amended structure of the Auditing Committee with the resolution of the Executive Board dated 16.10.2010 is given below:

  1. Name and Last Name
  2. Duran AKBULUT
  3. Ekrem PAKDEMİRLİ
  1. Title
  2. Committee Chairman
  3. Committee Member
  1. Relationship with the Company
  2. Member of the Executive Board (Independent)
  3. Member of the Executive Board (Independent)

Corporate Governance Committee:

A Corporate Governance Committee was established within the structure of the Company in line with the Notice of Corporate Governance Principles of the Capital Markets Board with the resolution of the Executive Board dated 05.08.2008. The Committee serves dependant on the Executive Board. This committee meets whenever necessary provided not less than three times a year. The structure of the Corporate Governance Committee which was amended with the resolution of the Executive Board dated 15.10.2012 is given below:

  1. Name and Last Name
  2. Duran AKBULUT
  3. Alain STRASSER
  4. Hafize Nurtaç ZİYAL
  1. Title
  2. Committee Chairman
  3. Committee Member
  4. Committee Member
  1. Relationship with the Company
  2. Member of the Executive Board (Independent)
  3. Member of the Executive Board (Independent)
  4. M&A Business Development and Investor Relations General Manager


Risk Committee:

A Risk Committee was established within the structure of the Company in line with the Corporate Governance Principles of the Capital Markets Board and the Articles of Association of the Company. The Committee serves dependant on the Executive Board and meets whenever necessary. The new structure of the committee which was amended with the resolution of the Executive Board dated 16.10.2012 is as follows.

  1. Name and Last Name
  2. Ekrem PAKDEMİRLİ
  3. Necdet BUZBAŞ
  1. Title
  2. Committee Chairman
  3. Committee Member
  1. Relationship with the Company
  2. Member of the Executive Board (Independent)
  3. -

27. Financial Rights given to the Executive Board

The salaries of the members of the Executive Board shall be determined separately for each by the General Assembly based on the financial status of the Company. Pursuant to the resolution taken in the General Assembly, it was decided to pay a monthly gross salary of 2.450.-TL for each member of the Executive Board in the year 2012. It was decided to pay a monthly salary of 5.000. –TL for the independent members who were elected on 9 August 2012.

None of the members of the board and managers were lent money; no credits were available under the name of a personal loan or no collaterals such as guarantee in favour of them were given them directly or by means of a third person.

The salary system principles accepted by the General Assembly with regard to the interests to be provided to the Senior Management and the Executive Board are given in detail at www.ulkerbiskuvi.com.tr.