EXTENDING THE LIMITS OF HAPPINESS...
ÜLKER ANNUAL REPORT 2016 CONTENTS
02 Key Financial Indicators 04 Sales Volume and Income Growth 05 Capital and Shareholder Structure 06 Ülker’s Share Performance on the BIST 08 About pladis 10 Production Facilities 12 Message from the Chairman 14 Board of Directors 16 Message from the CEO 18 Strategies 20 Current Economic Outlook, Global and Turkish Food Industries 22 Production and Capacity 28 Investments 29 Subsidiaries and Financial Investments 32 Sustainability 40 Human Resources 44 Quality and R&D 50 Social Responsibility 53 Corporate Governance Principles Compliance Report 62 Risk Management 63 Investor Relations 64 2016 Ordinary General Assembly Meeting Agenda 65 Subsidiary Company Report Results 66 Power of Attorney 67 Dividend Distribution Policy 68 Independent Audit Report 69 Consolidated Financial Statements for the Year Ended 31 December 2016 Together With Independent Auditor’s Report We created a new structure in order to expand the boundaries of happiness with a wide range of products that will meet different consumer expectations and needs in different regions of the world. We combined biscuit, chocolate and confectionery companies under the name of pladis, under the structure of a single company. Now, we are moving towards higher targets on global scale. 2 KEY FINANCIAL INDICATORS
Ülker increased its real operating profit by 8% in 2016 and amounted TL 465 million in 2016. During this period, consolidated sales amounted TL 3,922 million and investments made worthed TL 258 million.
Summary Balance Sheet (TL) 2015 2016 Current Assets 3,477,399,742 3,501,795,901 Non-Current Assets 1,724,400,850 2,024,393,048 Total Assets 5,201,800,592 5,526,188,949 Short-term Liabilities 1,785,736,307 3,169,041,952 Long-term Liabilities 1,807,684,924 502,550,519 Shareholders’ Equity 1,398,657,101 1,649,206,349 Non-controlling Interest 209,722,260 205,390,129 Total Assets 5,201,800,592 5,526,188,949
Summary Profit and Loss (TL) 2015 (restated) 2016 Revenue 3,793,737,272 3,921,686,855 Gross Profit 869,120,182 921,953,888 Operating Profit 430,947,316 464,764,367 Net Profit of the Parent 292,129,375 230,371,563
Ratios 2015 (restated) 2016 Gross Profit Margin (%) 22.9 23.5 Net Profit Margin of the Parent (%) 7.7 5.9 Earnings per share (TL 1 Nominal) 0.85 0.67 Ülker, 2016 yılında 335 milyon TL faaliyet kârı gerçekleştirmiştir. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 3
Operating Profit (TL million) Shareholders’ Equity (TL million) 2015 2015 430.9 1,398.7 2016 2016 464.8 1,649.2
Net Profit (TL million) Net Profit Margin (%) 2015 2015 292.1 7.7 2016 2016 230.4 5.9
EBITDA (TL million) EBITDA Margin (%) 2015 2015 478.5 12.6 2016 2016 512.7 13.1
Edited EBITDA (Excluding other revenue/expense) 4 SALES VOLUME AND INCOME GROWTH
In 2016 Ülker realized sales of 598,285 tons and total turnover reached TL 3.922 million, an increase of 3%.
Sales Volume by Category (Tons) 2015
272,774 175,741 66,224 119,588
2016
270,169 171,436 60,313 96,367
Net Sales by Category (TL Million) 2015
1,390 1,730 409 265
2016
1,483 1,873 407 159
Biscuit Chocolate Cake Other ÜLKER BİSKÜVİ ANNUAL REPORT 2016 5 CAPITAL STRUCTURE
December 31, Share Value 2016 Share Ratio Yıldız Holding A.Ş. 98,912,930 28.92% pladis Foods Limited 71,820,000 21.00% Yıldız Holding Subsidiaries and Ülker Family Members 29,267,569 8.56% Free Float 146,999,501 41.52% Total 342,000,000 100.00%
8.56% 41.52% Yıldız Holding Subsidiaries and Free Float Ülker Family Members
21.00% pladis Foods Limited
28.92 % Yıldız Holding A.Ş. 6 ÜLKER’S SHARE PERFORMANCE ON THE BIST
41.52% of 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 16.16 as of December 31, 2016. At year-end, Ülker’s market capitalization totaled TL 5,526 million, while the market value of its free-float shares had risen to TL 2,295 million.
Company Ülker Bisküvi Reuters & Forex Code ULKER.IS Bloomberg Code ULKER TI Industry Food NATIONAL MARKET BIST ALL BIST FOOD, DRINK BIST INDUSTRIAL BIST SUSTAINABILITY BIST DIVIDEND BIST DIVIDEND 25 BIST NATIONAL BIST 100 BIST 50 Related BIST Index BIST 30 As of December 31, 2016 Share Price (TL) 16.16 Free-float Ratio (%) 41.52 Market Capitalization (TL) 5,526 million
Share Performance (%) 2014 2015 2016 TL 25.3 -3.8 -7.0 USD 35.6 -23.1 -23.0 ÜLKER BİSKÜVİ ANNUAL REPORT 2016 7 8 About pladis
Through its entrepreneurial spirit, local expertise and iconic brands, pladis reaches 4 billion consumers worldwide.
pladis finished pladis is a new global company which In forming pladis, Yıldız Holding continued brings together Yildiz Holding’s core its strong legacy and expertise in the food its first year snacking businesses Godiva Chocolatier, sector. Yıldız has a rich heritage in baking United Biscuits, Ülker and DeMet’s Candy and confectionery, dating back to 1944, with double digit Company with their iconic brands under when Ülker, Turkey’s much-loved biscuit growth and a one umbrella. brand, was born. Today, pladis continues to keep its family business spirit and collective turnover of TL 14.3 Formed in June 2016, pladis has 34 factories heritage at its core. in 13 countries and 26,000 employees. billion. By revenue it forms the largest part of its We are determined to be a global leader parent company, Yıldız Holding. in biscuits and confectionery, and to be a powerful player in the sweet and savoury pladis finished its first year with double segments, chocolate and chocolate digit growth and a turnover of 14.3 billion products, wafers, cakes, gums and candies. TL. Through its entrepreneurial spirit, local pladis is one of the few companies that expertise and iconic brands, pladis reaches have the capability of producing this variety 4 billion consumers worldwide. across the sector.
Yıldız Holding’s Revenue Breakdown Consolidated Turnover Yıldız Food TL 5.5 billion pladis TL 14.3 billion Yıldız Non – Food TL 11.1 billion Gözde TL 3.4 billion Consolidated TL 34.3 billion ÜLKER BİSKÜVİ ANNUAL REPORT 2016 9
pladis Regional Structure
America Sub-Saharan Africa North Africa Middle East Europe South Asia China and Southeast Asia Japan and Korea Turkey Central Asia United Kingdom and Ireland
Happiness is the core of our legacy left to us and it is the Although we remain committed to meeting our customers’ sole reason lying behind all our iconic successful brands. local needs, we have transformed ourselves into a truly Together we promise the World more happiness in every global business which values the diversity of our footprint bite. and our irresistible and iconic brands. pladis is a strategic investor with long term goals. We are Our brands are our growth engine: constantly innovating and are very proud to call ourselves • McVitie’s – a renowned biscuits brand across the UK and bakers and chocolatiers. We never compromise on quality Europe; and always strive for excellence in everything we do. • Godiva – the international premium chocolate brand; and In addition, we continue to boost our product portfolio • Ülker – the leading biscuits and confectionery brand in by launching more hybrid products and targeting new Turkey and MENA region. markets. Each year, we export to more than 120 countries and produce 1 million tons of biscuits, 500,000 tons of chocolate, and 50,000 tons of gums and candies. 10 PRODUCTION FACILITIES
Silivri, Hadımköy, Topkapı, Gebze, Istanbul Factory Istanbul Factory Istanbul Factory İzmit Factory Chocolate, chocolate Cake Chocolate Biscuit & cracker covered biscuit Established in 1992 Established in 1991 Established in 1997 Established in 1995 Capacity: 50 thousand Capacity: 195 thousand Capacity: 119 thousand Capacity: 45 thousand ton/year ton/year ton/year ton/year
Ankara Karaman Factory Factory Biscuit Biscuit, cake, cracker & chocolate Established in 1969 Established in 1986 Capacity: 150 thousand ton/ Capacity: 215 thousand ton/year year 86 thousand m2 indoor area The biggest biscuit production factory of the Middle East region ÜLKER BİSKÜVİ ANNUAL REPORT 2016 11
SAUDI ARABIA FACTORY Purchased in 2016 Capacity: 57 thousand ton/year
EGYPT FACTORY
Purchased in 2016 Capacity: 44 thousand ton/year 12 MESSAGE FROM THE CHAIRMAN
A momentous change for Ülker Bisküvi in 2016 was coming under the roof of the global pladis company.
We reached Dear Shareholders, pressure. The worst periods were in July and August; but through September, we saw the a relatively In 2016, not only our country, but the markets begin to recover. Unfortunately, this entire world, felt the adverse impact of was followed by a rise in foreign exchange favorable unforeseen events. The conflicts in the rates due to external issues, and markets outcome Middle East, especially in Syria and Iraq, as were affected once again. well as massive migration movements also through careful continued in 2016. This war in the Middle On a positive note, these uncertainties East expanded to western countries as acts and crises were not reflected in the management of of “terrorism”; acts of terrorism took place in business results of Ülker Bisküvi. At the our business in our country, as well. Above all, and taking its end of the year, the goals we set for growth place as a significant tragedy in our political and profitability fell only slightly short 2016, throughout history, was the attempted coup. Our of our objectives. Consolidated sales country experienced great suffering from of our company were realized as TL 3.9 the year’s many this coup attempt – thwarted, thankfully, billion whereas profit from consolidated challenges. through the united efforts of our nation. participations was TL 230 million. We achieved new investment of TL 258 million It was inevitable that adverse events in the in line with our strategies to improve our world and in Turkey would reverberate in the business during this period. economy. We reached a relatively favorable outcome The global economy faced low trade through careful management of our volume and growth rates. Likewise, Turkey business in 2016, throughout the year’s also faced uncertainties due to global many challenges. We continued to bring events, as well as internal threats at home. our operating expenses under control, However, I believe that our country’s and to keep our production at optimum economy proved resistant against these levels, as we have always done. We followed challenges, which not many countries would an effective pricing strategy, with timely be capable of withstanding, and we have price increases and transitions; and, as a overcome the most difficult hurdles so far. result, we were successful in protecting Particularly with regard to the July 15 coup and increasing our profitability. While our attempt, the markets were under great sales volume did not show a growth in ÜLKER BİSKÜVİ ANNUAL REPORT 2016 13
Consolidated sales of our company were realized as TL 3.9 billion whereas profit from consolidated participations was TL 230 million. We achieved new investment of TL 258 million in line with our strategies to improve our business during this period.
total, sales of our more profitable branded such as McVitie’s Digestives and Krispi, in products continued in both domestic Turkey, and presented them to our Turkish and international operations, and we consumers. And we have brought products sustained our gain from the market share. cherished by consumers in Turkey into new A momentous change for Ülker Bisküvi in markets. We will continue to work towards 2016 was coming under the roof of the making our factories in Turkey a production global pladis company, which we founded. base that provides products to global Ülker Bisküvi, Ülker, and its sub-brands, markets. played significant roles in Turkey, the Middle East and Central Asia regions. Ülker We are ready for changes that we foresee Bisküvi was the milestone of our strategy for 2017. We are prepared for any projected towards the pladis TR & MENA & CA Region: risks, and we have strong reflexes for those 33% of the net sales of pladis are from that may appear unexpectedly. England and Ireland, and 31% and 9% of its net sales are from Turkey and the Middle With our business partners, consumers, East, respectively. These numbers clearly customers and employees, we are demonstrate the role of Ülker Bisküvi confident that we will see happy results for in pladis. By bringing two Yıldız Holding Ülker Bisküvi in the new activity period. factories, in Egypt and in Saudi Arabia, under Ülker, we have strengthened our Sincerely, position in the region. We will continue this strategy in 2017: we recently announced that discussions have begun on bringing Murat ÜLKER two more companies, in Saudi Arabia and Chairman in Kazakhstan, under the umbrella of Ülker Bisküvi. Ülker Bisküvi both contributes to, and benefits from, our ongoing synergy under pladis. We have started producing some of our most popular products abroad, 14 BOARD OF DIRECTORS
Murat Ülker Best Rothmans Entegre Sigara ve Tütün at Atlas Gıda Pazarlama A.Ş. He then Chairman Sanayi A.Ş. Mr. Tütüncü joined the Group served as General Manager of Atlas Gıda A graduate of Boğaziçi University, Faculty in 1996 as Facilities Coordinator, and Pazarlama in 1998, Deputy Chairman of Economics and Administrative later served as General Manager of Ülker of the Consumer Group for Marketing Sciences, Department of Business Bisküvi and Çikolata production facilities and responsible for Chain Stores in Administration, Murat Ülker began his in 1998; in 2000, he became the Deputy 2000, General Manager of Merkez Gıda professional career in 1982 and started Chairman of the Ülker Group. Mr. Tütüncü Pazarlama A.Ş. in 2001 and Deputy work as Control Coordinator with the is a graduate of Gazi University, Faculty Chairman of the Organized Retail Food Group in 1984. He later attended various of Engineering, Mechanical Engineering Group in 2002. In 2005, he was appointed training courses (AIB and ZDS) abroad Department. In 1987, he won the IRI Chairman of Ülker (Biscuit, Chocolate, and worked as a trainee at Continental scholarship and studied Production, Candy) Group. Mr. Ülker speaks English Baking Company in the US. Mr. Ülker also Quality Control and Maintenance and German; his hobbies include fishing, worked in the export business for two Procedures in Italy. He also holds a Master watching movies, reading books, and years in the Middle East. Subsequently, he of Science degree in the field of Industrial playing basketball and billiards. analyzed about 60 factories and facilities and Organizational Psychology. From operating in the biscuit, chocolate and 1993 until 1994, Mr. Tütüncü attended the Ahmet Özokur food industries in the US and Europe Business Administration Training Program Board Member over a period of three years. Mr. Ülker also at Boğaziçi University where he studied Ahmet Özokur studied Business participated in various IESC projects, and Marketing Techniques, International Administration and Marketing at spearheaded many vertical integration Marketing, Factory Organization and Indiana University, Department of related investments. After serving as Management. He also completed the Business Administration and at the Assistant General Manager for Enterprises, Strategic Marketing Program at Harvard European Business School. He began his General Manager, Executive Committee Business School and attended several professional career in 2004 as Executive Member and Board Member in various training programs at IMD/Switzerland and Board Member at Hızlı Sistem A.Ş. In 2005, companies of the Group, Mr. Ülker was Insead/Singapore. Mr. Tütüncü speaks he was appointed General Manager of appointed Chairman of the Board of Yıldız English and is a member of TÜSİAD Datateknik, and he was promoted to the Holding in 2000. Mr. Ülker speaks English (Turkish Industrialists’ and Businessmen’s position of CEO of Datateknik Informatics and German; his hobbies include sailing Association). Mr. Tütüncü was born in Group within the same year. Post- and traveling with his family. He is married 1958. He is married and has three children. merger in 2006, Datateknik Informatics and has three children. Group became a fully integrated Ali Ülker group engaged in systems integration, Mehmet Tütüncü Board Member distribution of computer components, Deputy Chairman - CEO Ali Ülker graduated from Boğaziçi software development and distribution, Mehmet Tütüncü was appointed University, Faculty of Economics and development of interactive applications, Chairman of the Food and Beverages Administrative Sciences, Department of manufacturing and distribution of Expert Group in 2005. As of October 2009, Economics and Business Administration. branded products; it was a pioneering the Gum and Candy companies were He also attended various academic and innovative company in its sector. In incorporated into the Food Group; Mr. programs at IMD, Harvard and Wharton. 2008, with the restructuring of Datateknik Tütüncü was appointed CEO for biscuit- Mr. Ülker took part in the De Boccard & Informatics Group under the umbrella of chocolate-cake operations in September Yorke Consultancy Company’s Internal Yıldız Holding, Mr. Özokur was appointed 2011, in addition to his other duties. Mr. Kaizen Study (1992) and the IESC Sales Assistant to the Chairman. Within the Tütüncü began his professional career System Improvement and Internal same year, he was also appointed in 1981 as an engineer at the Ministry Organization Project (1997). He began his Project Leader at Yıldız Holding Real of National Education, Construction professional career in 1985 as a trainee in Estate Investment Group and Executive Department. From 1983 to 1987, he the Quality Control Department of Ülker Member of Beta Marina İşletmeciliği A.Ş. worked as a Local Industry Specialist Gıda A.Ş. Later, he served as trainee, Sales Subsequently, Mr. Özokur also served as at the Ministry of Industry and Trade. Executive, Sales Coordinator, Product the General Manager of Sağlam Real Estate Between 1987 and 1996, he served as Group Coordinator and Product Group Investment Trust which eventually merged Production Manager, Business Manager Manager between 1986 and 1998 at with SAF REIT. Mr. Özokur has an interest in and General Manager, respectively, at the chocolate production facilities and aquatic sports. He is married and has two children. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 15
İbrahim Taşkın* Member of the Executive Committee of leading companies in Turkey in the areas of Board Member the Group between 1996 and 1998. In strategy and organizational development Born in Trabzon in 1965, İbrahim Taşkın 2002, he was appointed Chairman of the as a senior executive, founder and completed his primary education in Durable Consumer Goods Group of Koç partner at Coopers & Lybrand and ARGE Artvin, and his secondary education in Holding. Having worked at the Koç Group Danışmanlık. He has been focusing on İstanbul. He graduated from the Faculty continuously for more than 37 years, Mr. developing efficient corporate structures of Law at İstanbul University in 1986. He Solakoğlu retired due to the Group’s policy particularly in large multi-business served as an officer at the Disciplinary of mandatory retirement at age 60. He is companies. He has conducted a number Court in Şanlıurfa, and completed his among the founders of the Educational of studies on increasing the efficiency of compulsory military service in 1988. As Volunteers Foundation of Turkey (TEGV) boards of directors, along with defining a self-employed lawyer, he has been a and the 1907 Fenerbahçe Association. organizational structures from the “head.” member of the İstanbul Bar Association Mr. Solakoğlu was named a Leader of Civil In addition to management consultancy, since 1989. Between 1990 and1994, he Society by Ekonomist magazine in 2003. he assumed board membership in lectured on Constitutional Law, Criminal He is married and has two children. numerous companies. Mr. Yalnızoğlu Law, Criminal Proceedings Law and shares his experiences in management, Occupational Legislation of the Police Duran Akbulut and addresses the benefits of “good” Forces at the Florya Police Training Center Board Member (Independent) management with non-governmental and of the General Directorate of Security in Born in the Suşehri district of Sivas in professional organizations at universities, Turkey. From 1996 to 2004 he was involved 1937, Mr. Akbulut completed primary in seminars and conferences, and on social in politics in addition to practicing law. He school and junior high school there before media. has been responsible for legal affairs at moving to Istanbul. In 1959, he started his Yıldız Holding since 2004, and currently professional career and became a partner Halil Bülent Çorapçı serves as the Head of Global Legal Affairs in the “Goya” retail chain. From the 1970s Board Member (Independent) at Yıldız Holding. He also serves as a board onwards, he served as Board Member at Born in Yalova, İstanbul in 1936, Halil Bülent member for several companies, and works various Cankurtaran Holding companies Çorapçı graduated with merit from İstanbul for various associations and foundations including Esem, Roventa, Adidas; Chairman Economics and Business School in 1956. in the capacity of founder, manager or at Aymasan; and partner at Adidas and He began his professional career in 1953 member. In addition to his responsibilities Esem for 28 years. He was a member of with the Karamancılar-Gazioğulları Group in the affiliated companies of the Holding, the Turkish Football Federation in 1983, as and has since served in managerial and he also serves as Chairman of the Honor well as Board Member at Cercle d’Orient auditing roles in the Group’s companies. Board and Chairman of the Board of Food from 1978 until 1994, which included two He has attended several training courses Security and Defense. Mr. Taşkın is married years of service as Vice Chairman. Since abroad. Throughout his career, Çorapçı with four children, and he speaks English. 1996, Mr. Akbulut has served as Chairman has been a member of the boards of of Cercle d’Orient. He is married and has directors for Karamancılar Holding, Orta Cengiz Solakoğlu two children. Anadolu Mensucat, Anadolu Cam Sanayii, Board Member Nasaş Aluminyum, Çelik Halat, Polinas, Cengiz Solakoğlu graduated from the Ahmet Murat Yalnızoğlu Henkel, and Turyağ. He is currently a Istanbul Academy of Economic and Board Member (Independent) board member at Astay Gayrimenkul A.Ş, Business Studies in 1964, and began his Born in 1957, Murat Yalnızoğlu completed Atikpaşa ve Sultanahmet (Four Seasons professional career in sales at Beko Ticaret his secondary education at the İstanbul Hotels) A.Ş., Senapa Stampa Plastik A.Ş., A.Ş. He was promoted to Regional Sales High School for Boys. He obtained a Martı GYO, and Kerevitaş (Super Fresh) A.Ş. Manager in 1969 and to Sales Director in Bachelor’s degree from Boğaziçi University, He is a member of the İstanbul Chamber 1975. After serving as the General Manager and a Master’s degree in industrial and of Certified Public Accountants with of Beko Ticaret from 1977 to 1983, he systems engineering from the University registration number 20. He is also a senior was appointed General Manager of Atılım of Florida, USA. He began his professional member of the Tax Council. Mr. Çorapçı is A.Ş., another Koç Group company. During career in 1982 as an entrepreneur in married with two sons. He speaks English his eight year tenure in that position, the fields of information systems and and is an avid reader. he pioneered the efforts to strengthen software development. In 1989, he worked the Arçelik Authorized Dealer System. in an information technologies-oriented In 1991, Mr. Solakoğlu was appointed management consultancy at Arthur * One of our board members, Mahmut Mahir Kuşçulu, has resigned from his duties. Pursuant to article 363 Deputy Chairman of the Consumption Andersen and Andersen Consulting. He of the Turkish Code of Commerce, İbrahim Taşkın was Group of Koç Holding; he was also a later managed consultancy projects for appointed in Mahmut Mahir Kuşçulus’ stead to carry out his term, pending approval in the next General Assembly. 16 MESSAGE FROM THE CEO
At the end of the studies, our sustainability report as Ülker Bisküvi San A.Ş. was evaluated with the C note.
Despite the We have felt the impact of economic A major role in our success can be attributed and political events worldwide in Turkey’s to the following: challenges in economy. In addition to economic • Throughout the 2016 operating cycle, we, stagnation in other economies - particularly as always, made an effort to remain within 2016, Ülker Bisküvi in the EU states - civil wars and tensions the most reachable price ranges for our proved capable in neighboring countries and the Middle consumers. East, along with financial instability in the • As our star brands continued their of improving global economy as a whole, have caused success, we launched our new and a deviation in Turkey’s growth targets. successful products. its operating Especially following the July 15 coup attempt, • We kept our operating expenses under performance. which caused serious trauma to our country, control by increasing productivity. the markets have under enormous pressure; • We improved our strategic cooperation this pressure was felt most intensely in through retail. July and August, with markets beginning to • We prioritized investments that would recover in September. create a competitive advantage for us. • We cared for the satisfaction of our Although a 2.2% growth rate for the first nine employees. months in 2016 was not what was targeted for the Turkish economy, growth grew to The financial and operational results thus 4.5%, primarily in the second quarter, making achieved demonstrate yet again that Ülker Turkey’s economy one of Europe’s fastest Bisküvi San. A.Ş. is on solid and sustainable growing. Turkey’s growth target for 2017 was ground, regardless of external conditions. announced at 4.4% in the medium-term The alignment of all our operations and all program. our employees towards common goals and productivity plays a significant role in Despite the challenges in 2016, Ülker Bisküvi achieving this sustainability. proved capable of improving its operating performance. Ülker ended the year with a 3% increase in sales and, consequently, with TL 3.9 billion in profit. Ülker’s real operating profit for the same period rose by 8%, reaching TL 465 million. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 17
Sales of our Our sustainability activities have started We brought 13 thousand children together to deliver results. This year, for the first with art in four years, under the Ülker branded products time as Ülker Bisküvi, we collected all our Children’s Art Workshop. The Sabri Ülker sustainability activities under one report. We Food Research Foundation has, to date, continued in reported to the Carbon Disclosure Project provided balanced nutrition education to both domestic (CPD), completing the process on June 30. one million primary school students between The Carbon Disclosure Project works on the ages of 8-11 under the “Balance in Food and international changing how businesses function, in order Project”, conducted in cooperation with to lower environmental impacts and to the Ministry of National Education across 10 operations. protect our natural resources. Companies cities in Turkey. Within the scope of the Ülker that evaluate their environmental risks Grass Roots Project, carried out with the have proven to be more successful in Turkish Football Federation, we have worked strategically managing such risks. Thousands towards establishing sports as a way of life of companies, from mid-size to public for approximately 276 thousand children to companies worldwide, have benefited from date, including the basketball projects. this process. At the end of the studies, our sustainability report as Ülker Bisküvi San A.Ş. In 2017, we will continue to work towards was evaluated with the C note. reaching our goals and bringing value to you, our shareholders, employees and suppliers, With this report, we have taken our position and to our country’s economy. on the Sustainability Index of the İstanbul Stock Exchange, as one of 29 companies. Sincerely,
We continued our social responsibility practices as well. In eight years, including Mehmet Tütüncü 2016, the Ülker Children’s Cinema Festival CEO has cultivated the imaginations of one million children and invested in the future. 18 STRATEGIES
With the acquisition of the Food Manufacturing Company in Saudi Arabia and Hi Food in Egypt, we positioned facilities as the main production base in the region, allowing us to gain access to the fast growing market and create synergy in North Africa and Middle East.
In the area of productivity, we aim to: With the acquisition of the Food Manufacturing Company Become the most productive company in all segments of in Saudi Arabia; use the region as the main production base the industry, enabling faster access and creating synergy in the fast- growing Middle East market, Boost product quality through operational efficiency efforts and production costs, With the acquisition of the Egyptian Company for Advanced Food Industry (Hi-Food) in Egypt; gain a position Achieve further efficiency and productivity in distribution in Egypt where consumption grows rapidly, station as the channels and sales points by cutting sales costs. base and main production facility for North Africa sales,
In brand investments, we aim to: With the acquisition of Hamle in Kazakhstan; strategical Offer our powerhouse brands to consumers at reasonable positioning as the main base to access Central Asia, Russia, prices, and China, and meet new consumers in regions where consumption increases rapidly, Ensure the continuity of our brand investments, Increasing the existing brand awareness in the Middle East, Achieve new and strong product launches, North Africa, Central Asia and Turkey even more,
Achieve innovation that will create demand, and increase Reaching new consumers in a wide geography, consumption. Implementing synergy activities both in the field and in Overall, we aim to: production,
Increase our operating profit by achieving higher sales Implement and maintain good corporate governance volumes and revenues in biscuit, chocolate and cake practices at the highest level, operations, Achieve strong results that will satisfy all stakeholders. Expand to become a strong regional player, ÜLKER BİSKÜVİ ANNUAL REPORT 2016 19 20 CURRENT ECONOMIC OUTLOOK, GLOBAL AND TURKISH FOOD INDUSTRIES
Food prices decreased in 2016 when compared to 2015. Together with this drop, average prices of raw materials have been shrinking for about five years.
The IMF further The global financial markets began the year In the IMF report dated October 2016, 2016 with amid uncertainties created by the global economic growth forecasts for 2016 revised its geopolitical, political and economic problems and 2017 were left fixed at 3.1% and 3.4% inherited from the year before. In addition respectively. growth forecast to these issues, the direction of the markets for emerging in the first six months was determined by On the other hand, the growth forecast for the volatility in growth indicators in China, developed countries was reduced from 1.8% economies, which concerns about economic growth, and to 1.6% for this year. The greatest factor in the United Kingdom’s decision to leave the the downward revision regarding developed has been slowing European Union. countries was that the US economy was down for the past performing worse than expected, which In the second half of the year while the resulted in a serious reduction in that five years, from intensified political and economic agenda country’s growth expectations. has driven the market, the increase in the 4.1% to 4.2%, exchange rate of US dollars and the interest The IMF further revised its growth forecast rates became the main focuses. The US for emerging economies, which has been Federal Reserve, which raised the interest slowing down for the past five years, from rates for the first time at the end of 2015, was 4.1% to 4.2%, but kept its expectation for 2017 expected to raise the interest rates four times at 4.6%. in 2016, yet, due to fluctuations in the global economy and financial markets, the rise Among these countries, Russia received came in only once at the end of the year. This an upward revision regarding growth process has created a pressuring climate expectations and the IMF forecast that the across all assets, especially in developing Russian economy will shrink by 0.8% this year, countries. but is expected to grow by 1.1% next year. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 21
Turkish economy The gradual escalation in nationalization Turkish Economy movements worldwide will probably Despite the recession in its close trading saw 2.2% growth increase restrictions on trade. And, with partner countries, in particular the EU, as the prevention of immigration, inflation is well as financial volatility and escalating in the first nine expected to start rising in the medium term. geopolitical tensions, the Turkish economy months of 2016. Precursor indicators are expected to show up saw 2.2% growth in the first nine months of in the first half of 2017. 2016.
Food prices decreased in 2016 when According to data published by the Turkish compared to 2015. Together with this drop, Statistical Institute (TÜİK), consumer prices average prices of raw materials have been rose by 1.64% in December 2016. With this shrinking for about five years. Although sugar increase, the annual inflation rate came to and vegetable oil prices have been rising, 8.53%, more than about three points over the there has been a decline in average food Central Bank’s 5% estimate. Transportation prices, in particular due to reductions in meat saw the highest annual increase by 12.4% and dairy products.. The price of cocoa, one in CPI, whereas food and non-alcoholic of the main raw materials, has fallen sharply; beverages became one of the main whereas palm oil prices have increased. In expenditure groups with an increase by 5.4%. 2016, the global food price index (FAO Index) regressed to 161.6 points, down 1.5% from the previous year. 22 PRODUCTION AND CAPACITY
The Ankara Factory, is located on an 110,000 m² land parcel, of which 80,000 m² is covered space. In 2016, the factory operated with three work shifts. Within this scope, the factory produced 110,186 tons of biscuits.
Biscuit
Established in the The Ankara Factory, is located on an Biskot Bisküvi, Karaman Biscuit Factory, is 110,000 m² land parcel, of which 80,000 located on 53,600 m2 land parcel, of which Gebze Organized m² is covered space. In 2016, the factory 27,298 m² is covered space. The factory operated with three work shifts. Within this produced 46,450 tons of biscuits. Industrial Zone in scope, the factory produced 110,186 tons of 1997, the Gebze biscuits. Main Brands Ülker Pötibör, Çizi, Krispi, Haylayf, Hanımeller, Factory is located Established in the Gebze Organized Ülker Bebe, Biskrem, Krim Kraker, Probis, Industrial Zone in 1997, the Gebze Factory Çokoprens, Taç Kraker, İkram, Canpare, on an 85,330 m² is located on an 85,330 m² land parcel, of Rondo, Altınbaşak, 9 Kat Tat, Halley, Kat Kat land parcel, of which 80,000 m² is covered space. In 2016, Tat, Ülker Çubuk Kraker, Saklıköy, Dore, Ülker the factory operated with three work shifts. Kremalı, Balık Kraker which 80,000 m² is Company produced 75,550 tons of goods at its Gebze Factory in 2016. covered space. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 23 24 PRODUCTION AND CAPACITY
Ülker Çikolata carries out its operations on 77,745 m² closed space with 4 facilities established on 26,742 m².
Çikolata
In 2016, the total A subsidiary of Ülker, Ülker Çikolata carries Biskot Bisküvi produces chocolates and out its operations on 77,745 m² closed chocolate-coated biscuits and bars at 18 production of space with 4 facilities established on 26,742 plants in the Karaman Chocolate Factory. m². In 2016, the total production of Ülker The factory produced 38,305 tons of Ülker Çikolata Çikolata at the Topkapı Factory was 102,087 biscuits. at the Topkapı tons. Main Brands Factory was The net sales of chocolate at Silivri Factory Ülker Çikolatalı Gofret, Çokokrem, Metro, were at 17,275. Albeni, Çokonat, Dido, Cocostar, Ülker 102,087 tons. Çikolata, Laviva, Ülker Napoliten, Ülker Smart, HobbySmartt, Piko, Ece, Çikolatin, Halk Çokomilk, Caramio, Alpella and Halk ÜLKER BİSKÜVİ ANNUAL REPORT 2016 25 26 PRODUCTION AND CAPACITY
Ülker produced 40,043 tons of cakes at its Esenyurt Factory in 2016.
Kek Biskot Bisküvi Ülker produces cakes at its Esenyurt Main Brands Factory, which was established in 1993 on Dankek, Kekstra, O’lala, Albeni, Alpella, Pöti, produces a covered area of 26,000 m². In 2016, the Smartt, Sekiz Kek factory operated with three work shifts. cakes at seven Within this scope, the factory produced plants in the 40,043 tons of goods. Karaman Cake Biskot Bisküvi produces cakes at seven plants in the Karaman Cake Factory on Factory on 25,293 m² closed space. The factory 25,293 m² closed produced 20,361 tons of goods. space. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 27 28 INVESTMENTS
In 2016, Ülker made 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 further In 2016, Ülker further reinforced its robust In 2016, Ülker invested in the installation market position with new capital investments of new facilities, capacity increases, reinforced its that included new installations in the renovations, modifications to production factories, capacity increases, modifications lines, efficiency increases, and improvements robust market to production lines, productivity upgrades, in the areas of hygiene and warehousing. position with and improvements in hygienic conditions and warehousing processes. • Packing machinery purchase it new capital • Production feeding unit renewal Ülker’s capital expenditures aim to further • Service tank renewal investments. solidify the Company’s dominant market • New Packaging machinery purchase position, increase consumer satisfaction, • New production line assembly improve product quality, and to make its cost structure more competitive by increasing The consolidated total of expansion and operational efficiency. modernization investments was about TL 258 million. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 29 SUBSIDIARIES AND FINANCIAL INVESTMENTS
Over the last five Biskot Bisküvi Gıda and Ülker Çikolata Ülker Çikolata In 2011, Ülker acquired a majority stake in years, Godiva Biskot Bisküvi Gıda Ülker Çikolata, previously jointly held by Thanks to the merger of AGS-Anadolu Yıldız Holding. Ülker Çikolata produces solid has truly been a Gıda San. ve Tic. A.Ş., a cakes producer, chocolate, chocolate covered products, success story. with Biskot Bisküvi Gıda San. ve Tic. A.Ş. chocolate cream, giftable chocolates and at 2011 year-end, the Company attained powder cocoa under. The Company is the a larger production volume. Its product market leader in its sector and operates the portfolio consists of bicuit (petit-beurre facilities located in Topkapı/Istanbul with a biscuits, fingers), special biscuit, cream- total covered area of 77,745 m². filled biscuits, sandwich biscuits, crackers, wafers, chocolate wafers, rolled wafers, cake Godiva (muffin, baton), chocolate-covered cakes, With Godiva Belgium BVBA, in which Ülker chocolate-covered bar, chocolate-covered Bisküvi has a 19% stake and G-New Inc, in marshmallow, chocolate cream, chocolate which Ülker Bisküvi has a 12% stake, Godiva eggs with toys, and giftable chocolates. Our Chocolatier Inc. is the owner of the Godiva major brands are Ülker, Alpella, Halk and brand, the world’s leading brand of premium Karsa. We also produce for PL brands. Our chocolate and chocolate coated products. Company was ranked 121st in the ISO 500 In 2008, Yıldız Holding acquired Godiva in 2015. Chocolatier Inc. for USD 850 million, the largest overseas acquisition by a Turkish The Biskot Silivri Branch comprises 10,500 company. Over the last five years, Godiva has square meters. Confined areas expanded to truly been a success story. 42,500 square meters with the addition of a new building. The factory has 16 production Since that time, Godiva has reached 32 plants. The Company stands out with its thousand points of sale across the world, and unique products, such as dragées, cornet, has achieved more than 10% sales growth drops, eggs and so on. each year. 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 nearly 60% of the Company’s total, up from 43% five years earlier. 30 SUBSIDIARIES AND FINANCIAL INVESTMENTS
Godiva has reached 32 thousand points of sale across the world achieving more than 10% sales growth each year and entered new markets such as Australia, China, Indonesia, Korea, Macau, Saudi Arabia and Turkey.
In the coming years, Godiva plans to focus on further Hi-Food for Advanced Food Industries (S.A.E.) expansion in China, Middle East and Turkey. The Company Hi-Food for Advanced Food Industries was established on aims to open 50 new stores every year. January 15, 2004. Its mission is to produce, pack and sell chocolates, sugar and other food products in the factory in İstanbul Gıda Dış Ticaret A.Ş. Egypt, and to export these to the market and the countries in İstanbul Gıda Dış Ticaret A.Ş. was established in 1987 the region. in İstanbul. The address of the company and its main headquarters is Masaldan İş Merkezi in Çamlıca, İstanbul. Food Manufacturers Company İstanbul Gıda Dış Ticaret A.Ş. sells and markets Ülker The Food Manufacturers Company was established on products abroad. It has distribution channels and a January 25, 2000. Its mission is to produce, pack and sell client portfolio spanning 104 countries for the export of biscuits, cakes and chocolates in the factory in Saudi Arabia, Ülker-branded products in the snacks category (biscuits, and to export these to the market and the countries in the chocolates, cakes). region.
The Company merged with Eksper Gıda Pazarlama Sanayi ve Ticaret A.Ş., another Group company focusing mainly on export, on December 31, 2015.
For the most part, Eksper Gıda Pazarlama Sanayi ve Ticaret A.Ş. is engaged in the export of goods in the categories of vegetable oil, milk and dairy products, water and soda produced by the Group companies, as well as non-Ülker brand snacks. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 31
Ülker Çikolata Biskot Bisküvi 91.7% Gıda 73.9%
Food Manufacturers Godiva Belgium Company 19.2% 55.0%
Subsidiaries and Financial Investment (Current)
Hi-Food for Advanced Food Reform Industries 100.0% (S.A.E.) 51.4%
İstanbul Gıda Dış Atlas Gıda Ticaret A.Ş 100.0% 100.0% G New Inc. 12.2% 32 SUSTAINABILITY
The conservation and management of biodiversity play an important role in Ülker’s sustainability vision, strategic objectives and environmental protection activities.
All our facilities have ISO 14001 certificates. All facilities also have ISO 9001 and ISO 22001 certificates.
As a result of the work carried out, we achieved an energy saving
of 20.8 million kWh/hour, resulting in a total of 9,900 tons of CO2 emission reduction.
In 2024, our 80th year, we aim to use 30% less water in our factories.
We are carrying out our activities with the goal of “Zero Waste” to 100% recycling and landfill sites in 2024. ÜLKERÜLKER BİSKÜVİ BİSKÜVİ ANNUAL ANNUAL REPORT REPORT 2016 2016 33
We supply 80% of wheat, which is our main raw material, from domestic sources and add value to the lives of hundreds of thousands of producers.
We consider sports as a motivation to improve children’s lives, add value and make them happy.
In the last five years, we have reduced about 20 thousand tons of sugar and 550 tons of salt from products belonging to Ülker and its sub-brands.
As Ülker Bisküvi, we are involved in the studies of The World Cocoa Foundation as a member since 2012, in their studies of supplying cocoa, the raw material of chocolate from sustainable sources. 34 SUSTAINABILITY
For us, sustainability is about the happiness of both earth and the people. Sustainability means to be among those who leave a world in which children can be happy; investing in the future today for a better world and happier people.
When we do our Our Understanding of Sustainability Our Sustainability Targets for 2024 When we do our job, we attach importance We see sustainability as protecting the job, we attach to making other people happy, and being land and water – one of the key steps for happy ourselves. us to continue our work tomorrow – and importance to watching over our farmers’, employees’, making other The core of our sustainability activities goes consumers’ thus society’s happiness. In line back to the day Ülker was founded; based with this vision, we have set “Sustainability people happy, on our founder Sabri Ülker’s “wasteless Targets” for the 80th year of Ülker. Within company model”. Mr. Sabri Ülker created the concept of “This is our World”, we and being happy a company culture that neither wastes a announced the topics; environment, ourselves. gram of flour, a drop of water, nor the labor value chain, innovation, employees, social of man. He left this culture to the next responsibility and leadership. By setting long generations. And with the strength he gave term targets, we aim to be the leader in the us, we’re trying to develop this heritage, and field of sustainability in our country. pass it on to the next generations. Among our objectives for 2024 are: The resources of our world are limited. We • To grow without increasing carbon believe that it is our primary responsibility emissions; to consciously use these limited resources, • To send zero waste to regular storage to manage our talents correctly, and to facilities; respond both to our world that has an • To reduce the water use per production increasing population and to our consumers by 30%; who have changing expectations. Because, • Have zero occupational accidents with our leadership in the sector requires us to work days lost, be a pioneer and an example in the field of • Reduce the ratio of changing employees sustainability. from 5% to 3.5% • Reduce the use of plastic in flexible packages by 20% • Use 2,000 tons of saturated fat in total in all fat products, and less than 8,000 tons of saturated fat in the bakeries category. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 35
Ülker Bisküvi The Sustainability Index influence of Ülker Bisküvi, and fulfils its As a publicly traded company, we consider predefined duties and responsibilities. became the first our responsibility for sustainability as much for the value chain and the society as for its Ülker’s Journey in Sustainability and food company to investors and shareholders. In this respect, Our Principles be included in the in 2015 Ülker Bisküvi became the first food The sustainability efforts carried out under company to be included in the Borsa İstanbul six categories at Ülker Bisküvi continued at Borsa İstanbul BIST Sustainability Index, which evaluates the an accelerated pace in 2016. We are moving sustainability activities and performances towards our goals by conducting workshops BIST Sustainability of the largest 100 companies in Turkey since in these areas in order to reach our 2024 Index and 2014. Ülker enhanced its success in the BIST objectives, and to determine our roadmap on Sustainability Index in 2016. this journey. maintained its Our Approach to Sustainable Environment position in 2016 as Management Taking the necessary steps in terms of well. The sustainability efforts at Ülker Bisküvi environmental sustainability, with sustainable are founded on generating long-term value water management and sustainable raw and establishing the necessary strategies, material supply, we are committed to policies and objectives in order to manage excellence and efficiency in operations that the risks that may arise due to economic, produce zero waste and are carbon neutral. environmental and social factors. The Ülker Bisküvi Sustainability Platform provides that Our relationship with the environment is these efforts comply with the Corporate defined by our mission to “contribute to Governance Principles as well as with the a happier world”. Ülker Bisküvi considers decisions, management and processes of issues related to environmental sustainability the Company. The in different areas such as climate change and energy, natural resource management, Ülker Bisküvi Sustainability Committee packaging and waste management and is represented at an executive level by biodiversity. In addition, we manage the president, vice president and general our impact through the Environmental manager. The Sustainability Platform Management System, which was developed continuously monitors the environmental, within the framework of our common social and administrative developments, Environmental Policy. most of which occur outside the direct 36 SUSTAINABILITY
We reduced the number of loss-time occupational accidents in 2016 as well.
Our employees In line with our objective to grow without production can be improved in terms of increasing carbon emissions, we continue ecological sustainability, as much as it can in are the most to carry out energy studies, to establish terms of economic and social sustainability, detailed energy monitoring systems, in areas such as Giresun, where hazelnuts important part of and to develop new projects in Ülker are found in natural vegetation and where our sustainability Bisküvi factories. As part of operational they are produced. sustainability efforts, integration of two efforts at Ülker systems, ISO14064 Greenhouse Gas In January 2016, we organized the Emissions Accounting and Verification, and Sustainable Hazelnut Farming Workshop Bisküvi. ISO50001 Energy Management, continues as part of this initiative. In this workshop, we at the Gebze and Topkapı factories. We also assessed the socio-economic aspects of provide training workshops in sustainability hazelnut cultivation and its environmental to our factory personnel as part of these impact, as well as the current state and the efforts. In 2016, we began disclosing our future of hazelnut farming, with experts and strategy on climate change and our data on stakeholders. We also produced a report carbon emissions to the Carbon Disclosure on the current situation entitled “Towards Project (CDP). Sustainable Hazelnut Farming in Giresun.” Again within the scope of the project; Protecting and managing biodiversity plays we started a pilot implementation in the an important role in Ülker’s sustainability selected gardens in Giresun. vision, its strategic objectives and its environmental protection activities. Our Value Chain main approach in this field is based on We follow best practices in the industries assessing and monitoring the impact of our in which we operate, and always aim to do operations on biodiversity, ensuring that we better. We help all stakeholders in the value adhere to defined objectives and do the chain meet their basic needs, and advance necessary reporting. We aim to preserve together especially with farmers and the diversity of hazelnuts and to support producers. We blend our corporate values hazelnut producers with the Sustainable with sustainable community values and Hazelnut Farming Project, which was integrate these into our business practices. launched in 2015 and is conducted in In this regard, sustainable supply of raw cooperation with the WWF. One of our materials, one of the most fundamental major objectives is to show that hazelnut steps for sustainable growth, is of great importance to us. We build our strategy ÜLKER BİSKÜVİ ANNUAL REPORT 2016 37
We follow best from a perspective that includes not only environmental principles. Within this scope, our own operations, but also our 2,600 we organized general training programs practices in the suppliers. We develop our strategy so that it for our 4 suppliers in 2016, and performed is not only limited to our operations, but also inspections in our 237 food and packaging industries in which includes our suppliers. We procure 80% of suppliers in total to check their compliance we operate, and the wheat, which is our main raw material, with the standards we set. We established domestically, and thus add value to the lives a quality certification as a prerequisite in always aim to do of hundreds of thousands of producers. the supplier audits made in 2016. Likewise, In purchasing wheat and other agricultural we carried out quality and food safety better. raw materials, we prioritize sourcing directly inspections in 178 warehouses where our from farmers. By providing seed support products are stored. to farmers, we apply contracted seed sowing. As Turkey’s largest cocoa user, we Innovation aim to support the economic and social We always aim at being the first in the areas development of cocoa farmers by adopting we operate. Working hard and challenging sustainable principles around cocoa ourselves, we work with the motivation to supply. As a member of the World Cocoa be the first to present the best. Adopting an Foundation since 2012, as Ülker Bisküvi, understanding of respectful competition we participate in efforts towards obtaining in parallel to our company values, we cocoa, the main raw material of chocolate, continuously create value for all our from sustainable sources. Within the scope stakeholders and investors. of the palm oil, which is another important raw material for us, purchased in 2016, we We are aware of the importance of received GreenPalm certification, which innovation for us to enable consumer is equivalent to 29% of the 60,000 tons of satisfaction and to fulfill our responsibility palm oil we bought in 2016. in environmental and social sustainability. We see innovation as the key for sustainable Our approach is to transform our entire growth, and we continue our investments in value chain, and to contribute to a R&D and innovation. Within this framework, sustainable world. In this context, we aim in 2016 we got the permits for pladis Turkey to extend our approach to the whole of our Chocolate R&D Center from the Ministry value chain with our Supply Chain Policy, of Science, Industry and Technology, and which includes our ethical, social and completed our preparation for the Bakery Products R&D Center. Furthermore, we also 38 SUSTAINABILITY
We added value to 300,000 children’s lives with our social responsibility projects on sports, arts and culture, and balanced nutrition.
Ülker’s anticipate an increase of approximately 7% for the same goal. We keep the human relationship with in the budget we have allocated for R&D being at the center, and we create the and innovation in 2017. In this respect, we necessary foundations for the development the environment have two R&D Centers with certification of new talents. We refrain from hierarchical from the Ministry of Science, Industry structures in internal communication and is defined by and Technology that began operating we offer to all our employees the value they in 2016. We are aware that innovation is deserve. its mission to only possible with the participation of “contribute to a employees at all levels in the process. We Occupational Health and Safety collect creative ideas from our employees (OHS) efforts are managed under the happier world”. through the Mental Cube system, and responsibility of the Operational Excellence, strive to implement them. Among our Health, Safety, Energy and Environment 2024 objectives is a 100% increase in the General Manager and the senior executives number of projects implemented through who are members of the Sustainability the Mental Cube. Likewise, we offer our Platform. We aim to proactively assess employees the opportunity to share their potential OHS risks and take precautionary ideas and achieve their dreams through the measures, thereby preventing accidents. Idea Stars, which is an idea management As part of our efforts on operational and sharing platform open to all employees excellence, we create awareness in our of Yıldız Holding globally. In 2016, our employees about safe behaviors and employees shared about 150 ideas through provide regular trainings on this topic. We the Idea Stars platform. gave 17 hours of training per employee in 2015, and in 2016 we increased this figure by Our Employees 30% to 21 hours per employee. Within this Our employees are the most important part scope, we have been awarded a gold medal of our sustainability efforts at Ülker Bisküvi. in Brandon Hall Awards, in the category of As in all areas of our work, we develop a Training and Development, with our “Zero sustainable approach to our employees as well. We know that we can achieve success only through the common efforts of our employees. Our individual differences are respected, and we strive as a single team ÜLKER BİSKÜVİ ANNUAL REPORT 2016 39
We always aim Mistake Training Program” which we have Apart from what we explained under been implementing in our factories since Social Responsibility section of this report, at being the 2012 using the motto “Our Target is Zero we continued our efforts to reduce the Mistake”. saturated fat in our products also in 2016, first in the areas within the scope of our 2024 targets. We we operate. As a result of our awareness activities, reduced the fat content of all our products we reduced the number of loss-time by 19%, as we decreased the salt content Working hard occupational accidents from 374 days by 61%. In 2016 turnover, we increased in 2015 to 244 in 2016 by 35%, thereby the share of our products which have high and challenging achieving a drop in loss time. nutrition, with reduced sugar, fat and salt. ourselves, we 2015 results of the survey we perform every Leadership work with the two years on employee commitment and We act with the responsibility of being satisfaction, which is another important a pioneer in the industry. With our motivation to issue of primary importance for us, showed determination to succeed and our diligence, be the first to that employee commitment was; 63% for we put our heart into what we do and our employees covered in the Collective achieve beyond our objectives. We follow present the best. Agreement and 76% for our employees global developments, determine the rules, not-covered in the Collective Agreement. and provide transformational leadership in Based on this survey, we continued to an innovative and original way. improve our processes in 2016. We aim to further improve these rates, which are In 2015, an assessment of our corporate already above the average in Turkey, and to sustainability performance enabled our be included among the “High Performance inclusion in the BIST Sustainability Index as Companies.” We plan to reduce our its first food company. We began to respond employee turnover rate to 3.5% from 5% by to the Dow Jones Sustainability Index for the 2024. first time. In December 2016, we were listed in the FTSE4Good Emerging Markets Index In line with the importance we give to which was launched recently to measure diversity and equal opportunities in the the companies’ environmental, social and business environment, we support more governance performance. projects by women at the Youth Platform, which aims to integrate young people and Through our partnerships and industrial female employees into business life, and at memberships, we engage in collaborations our executive boards. that will carry our industry forward in areas such as value chain sustainability, and Social Responsibility nutrition and healthy living. In addition to We put a healthy and active life at the being the first Turkish company to become forefront of our activities, and inform all a member of the World Cocoa Foundation, Protecting our consumers and other stakeholders in in 2015 we also became a member of and managing a transparent manner. While promoting the European Food Information Council a healthy society, we focus on making life (EUFIC), which aims to create awareness in biodiversity plays easier and more streamlined. consumers about nutrition and food safety. an important We added value to 300,000 children’s In addition to these developments; with our role in Ülker’s lives with our social responsibility “This is our World” campaign we received projects on sports, arts and culture, and the Sustainable Communication Award at sustainability balanced nutrition. “In 2016, we carried out the Sustainable Business Awards organized “University-School Collaboration”, “Istanbul for the 3rd time by the Sustainability vision, its U14 Schools League”, “Elite Football Villages” Academy in 2016. strategic projects where we gave football training to students. In 2016, we continued our objectives and its activities, without slowing down, in the field of culture and art such as; “Ülker Art environmental Studio for Children”, “Ülker Movie Festival for protection Children”, “Istanbul Modern - Your Thursday Sponsorship” and “Printing Museum - Free activities. Tuesday Day Support”. 40 HUMAN RESOURCES
In a family where the quality concept is continuously enriched, the mission of Ülker brand is to be the best in every era.
The Company In line with Ülker’s vision to “become As in previous years, the Company a food and beverage company which organized a series of events in 2016 to aims to increase always pleases its consumers, customers, increase the level of motivation of the entire employees and shareholders, and makes workforce, encourage social interaction its competitive them smile,” Ülker’s global vision and an among employees and foster their loyalty advantages in innovative and sustainable human resource toward the Company: management system, by: both domestic Quality Summit • Establishing a competitive, active, In a family where the quality concept is and foreign pioneer in innovation and an innovator continuously enriched, the mission of markets via organization, Ülker brand is to be the best in every era. • Embracing a culture based on ethical In line with our mission; with the aim of effective human principles and values, and always reaching our “zero defect quality” target sticking to rational decisions. Quality Summit is organized every year resources where projects for improving our product practices. Ülker shapes its human resources practices and service quality are shared in a mutual in line with Yıldız Holding Values and Yıldız opportunity environment that give us the Holding Human Resources Strategies, which chance to learn from each other. are expressed as: “Our Customers Come First!”; “We Are Number 1 in Quality!”; “We Our target is the Zero Defect Quality Project Are Competitive!”; “We Achieve Together!”; Contest – the climax of the Quality Summit “We Are Results Oriented!” and “We Are – where the successful projects shaped Driven By Change!” with zero defect culture, are awarded. The biggest step in our journey is this platform The Company aims to increase its where information about all projects is competitive advantages in both domestic shared in an environment of motivation and and foreign markets via effective human communication. 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. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 41
Changing its Within this scope, Zero Defect Manuals, independent consultancy firm. Supervisor/ having simple language, were printed First Line Manager, Customer Oriented theme every year, for employees of all levels. The quality Approach, Values, Loyalty, Corporate campaign we started in 2013 in all our Governance & Change, Leadership, innovation days’ brands and companies in line with our Business Efficiency, Communication/ theme this year motto “We’ll achieve all together”, will Collaboration, Powers, Talent Management continue with all pace and excitement in and Performance/Award are the major is; “Innovation is quality awards, contests, meetings and categories of the survey to evaluate our environments where achievements are employees. a life style”. shared. The results are shared with all our Stars of the Year employees and a platform is prepared Traditionally organized for all our employees where we talk about (with the Focus Groups to participate in, with the aim of sharing that we also structure within the company) the best business practices, and of and implement the actions that can be awarding behaviors that contribute to team taken. Thus, not only operational changes work, “Stars of the Year” encourages our are made but also extra activities increasing employees to practice new and different motivation and corporate loyalty are also ideas. Within the scope of “Stars of the organized in order to carry our company to Year”, for the last 5 years 395 projects in the a better position. categories of “Innovation, Cost Advantage, Contribution to Growth, Operational Innovation Perfection and Star Holding Values” were Changing its theme every year, innovation put into practice at our workplaces and had days’ theme this year is; “Innovation is direct contribution to our business. a life style”. For this purpose; in line with our motto “We get power from change”; Voice of the Stars Innovation Days are organized every Employee satisfaction is our goal and thus year with the participation of Product a survey is made to get feedback from our R&D, Packaging R&D and Marketing employees. Voice of the Stars Employee departments. This organization includes Loyalty Survey, repeated every two years, all our employees in the journey to reach is organized by an international and sustainable and profitable innovations in 42 HUMAN RESOURCES 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.
Ülker devised our companies. Projects awarded in the In line with the Human Resources Planning Individual category of “Product”, can be included program, initiated across Ülker companies in our companies’ product development in 2011 and further enhanced with various Development (pipeline) processes. By awarding measures in 2013, Ülker developed a individuals, the aim is to increase employee backup system for managerial positions Plans to ensure satisfaction and motivation. to ensure the continuity of the Company’s success. In addition, the Company devised the career Ülker is committed to supporting its Individual Development Plans to ensure development of employees, viewed as “the Company’s the career development of personnel. In most important capital and asset,” not only order to create a “feedback culture” within personnel to reach business targets and enhance the framework of the Human Resources competitiveness, but also for their own Planning and Performance Management personal development. Process initiatives, the Company actively encouraged managers to provide feedback Ülker offers personnel various training to employees. opportunities in a diverse range of topics that include: With “We First” slogan, in order to provide • Leadership Trainings (Leadership our employees with opportunities that Summit, Leadership Compass, can use their potentials or lead a career Leadership Map, First Step to in our affiliates, internal job notices were Leadership) created for open positions and shared with • Personal Development (Catalogue) employees. Trainings • Ethical and Operational Principles With its superior quality standards, Ülker has Training, created “Happy Moments” for the Turkish • Occupational Safety and Health people since 1944; and the Company is Training, committed to developing its human capital • Zero Defects (ZD) Book Training, in line with its future goals and in keeping • Food Control Personnel Hygiene with the principle of continuity of service. Training ÜLKER BİSKÜVİ ANNUAL REPORT 2016 43
Breakdown by Age 30 and below Between 31-44 45 and above
Ankara 419 547 104
Esenyurt 177 307 19
Gebze 336 331 46
Çamlıca 12 42 5
Total 944 1,227 174
Breakdown by Seniority 5 years and less Between 6-10 years More than10 years
Ankara 526 244 300
Esenyurt 237 93 173
Gebze 476 73 164
Çamlıca 19 18 22
Total 1,258 428 659
Breakdown by Education
Bachelor’s Degree Primary School High School Associate Degree and Higher
Ankara 94 871 52 53
Esenyurt 115 330 30 28
Gebze 123 483 49
Çamlıca 0 4 2 53
Total 332 1,688 133 192 44 QUALITY AND R&D
Quality teams lead the activities carried out to eliminate “non-conformity” for sustainable quality standards and keep track of the outcomes.
Operational Ülker Biscuit Quality System, Quality teams lead the activities carried Principles and Importance out to eliminate “non-conformity” for Perfection efforts Under the umbrella of Zero Defects Manual sustainable quality standards and keep Trainings, we provided systematic training track of the outcomes. make a great deal sessions to Ülker’s own employees and to of contribution to the employees of our contractors on the Continuous and sustainable quality topics of Quality, Food Safety, Occupational approach carries us to Zero Defect. Within the sustainability Health and Safety, Environment the framework of sustainable quality Management Systems, Allergenic approach, targets are set and systematically of the quality Substances, Pest Control and CCP. monitored in the following issues. system. Ülker Biscuit Quality System is a control Operational Perfection efforts make a great system built upon Input, Process Control deal of contribution to the sustainability of and Food Safety requisites. In this system the quality system. the aim is to make sure that Input, Process Control and Food Safety parameters work in Within this scope, we make sure production accordance with the “zero defect” principle. line workers actively participate in In case a defect or non-conformity occurs, enhancement activities regarding quality corrective and preventive measures are problems and ensure that they solve these taken within the framework of continuous problems. Problems are examined by enhancement so that the non-conformity forming Star Development Teams (YGT). does not occur again. 5S, consumer feedback, Q points, pollution sources, lubircation points, line panels and Regarding the products demanded by production line cleaning processes are the consumers, the general principle is to some of these activities. continuously manufacture them at the same standards each time and to establish Biscuit and Cake Quality Assurance and operate the entire infrastructure and Ülker factories in Esenyurt, Gebze and control system required for delivering them Ankara manufacture biscuit and cake to the consumers. products at “gold standard” consumer specifications. From raw material to the end product, Ülker production always meets the prescribed requirements and standards. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 45
As part of the As part of the quality control procedures, Company initiated the project for setting quality control elements that can pose a risk to product up the Food Quality and Safety Chain from quality and food safety were controlled the Supplier to Consumer (AIB - American procedures, by critical control points (CCP). Shelf life Institute of Bakery), and conducted factory analyses were also regularly monitored. inspections on a weekly basis. To reach elements that Supervisory work on product scoring, sustainable quality and ensure employee equipment hygiene, the environment and compliance with Ülker principles and can pose a risk to employees also were carried out on a values, Company personnel completed AIB product quality regular basis. Awareness and Internal Inspection trainings, and internal inspection teams were set and food safety Ülker provided training sessions to its up in the three factories. The teams carry own employees and the employees of its out internal food safety inspections in all were controlled contractors on the topics of Quality, Food sections of the each factory on a monthly by critical control Safety, Occupational Safety and Health, basis. Furthermore, each and every Environment Management Systems factory of the Company had food safety points (CCP). and Energy Management Systems, and inspections twice a year undertaken by AIB Allergenic Substances. Pest Control and (American Institute of Bakering). CCP trainings were organized and repeated systematically under the title of Zero Food safety inspections of Ülker Bisküvi Defects (ZD) Book Trainings. suppliers and distributers at different sites were carried out throughout the year by Ülker always aims to meet consumer AIB/Quality teams to ensure food safety expectations at the highest level possible and quality during storage throughout and to consistently increase customer each stage, beginning from the suppliers satisfaction. Therefore, the Company of the raw materials used in its products continuously solicits consumer feedback until the product reaches the customer. and takes any corrective action that is Products are inspected at the point of required. In addition, inspections and sale during visits by sale representatives, analyses are conducted in collaboration and observations are reported to factory with suppliers to prevent any quality-related management. problems at the source. To this end, the 46 QUALITY AND R&D
Ülker continued to update and develop specialty fields, one of the most important steps in the quality movement initiated as part of the quality road map.
The quality focus Ülker consistently produces “Delicious, a wide range of areas including new points for 2016 Healthy and Trusted” products of superior product development, current product quality, in compliance with existing laws and improvement, cost cutting, quality were determined regulations, and under stringent hygienic enhancement, alternative raw material conditions. Accordingly, the Ülker Ankara, approval and technical/technological in accordance Gebze and Esenyurt factories hold the support. Ülker assessed these projects following quality certifications: in terms of business, consumer and with our factory technology, and prioritized those that quality results in ISO 9001:2008 Quality Management were most innovative. In order to continue System to bolster its culture of innovation, the 2015, and quality ISO 22000 Food Safety Management Company planned a variety of new R&D Systems initiatives for the future. operations in ISO 14001 Environment Management line with these Systems Ülker continued to update and develop OHSAS 18001 Occupational Health and specialty fields, one of the most important focus points were Safety Management System steps in the quality movement initiated BRC (Achieved Grade: A) as part of the quality road map. System conducted. IFS (Higher Level) and product revisions that are suitable for AIB quality priority were followed up with full force. Biscuit and Cake R&D With the completion of the Global R&D As part of the R&D activities, a total of 63 organizational structure in biscuits R&D, projects were carried out in 2016: 15 of the global objectives of Ülker have further these projects were completed; 43 projects clarified. In this regard, new missions and are ongoing; 22 customer surveys were tasks have been added to ongoing activities. conducted. The qualities of the products were documented and detailed with these Biscuit R&D Unit implemented numerous surveys. projects in 2016. The Company carried out many R&D related projects in We conducted in total 435 large- and small- rapid succession in line with corporate scale R&D trials in 2016. and consumer-focused strategies in ÜLKER BİSKÜVİ ANNUAL REPORT 2016 47
The last 10 In 2016, investments were made into new AIB audit, and in reducing the number of infrastructure for an R&D laboratory and notifications from customers about foreign inspections office departments, and pilot equipment substances. investments will continue through 2017. carried out The new laboratory infrastructure made Our success in unannounced AIB at the Ülker it possible for product development inspections: experiments to be carried out in the The last 10 inspections carried out at the Çikolata facility laboratory. This, in turn, allowed for both Ülker Çikolata facility very successful and faster and low-cost product development. found no threats that could jeopardize food very successful safety. Internal inspections undertaken and found no The following products were rolled out across the factory within the scope of as a result of R&D activities: food safety continue to be carried out threats that could Cafeteria products, Saklıköy Çikolatalı, by inspector teams according to a set Pötibör Çaya Banmalık, Rondo Black, schedule. Project operations on food safety jeopardize food Hanımeller Tuzlu, Krispi Tırtıklı, Frambuazlı, carried out throughout the chain, from safety. Dankek Baton Hindistan Cevizli, Smart raw materials to consumer, has positively Süt Kek, Dankek Rulo Muzlu Pasta, Dankek affected our business output. Lokmalık Havuçlu Tarçınlı, Kantin Olala Bar Fındıklı, Kantin Pöti Meyveli, Kantin Pöti Zero Defect Trainings Kakaolu, Kantin Pöti Havuçlu Tarçınlı, Kantin The Zero-Defect Trainings began in 2015 8 Kek Portakallı, Kantin 8 Kek Karamelli, with six internal trainers. The trainings, Kantin 8 Kek Karamelli, Kantin 8 Kek Muzlu, which can be completed in three modules, and Kantin Smart Kek. Corresponding continued in 2016. Internal trainers sauces: Çilek Sos, Vişne Sos, Portakal provided sessions on zero defect, quality Topping, and Çikolatalı Sos. and food safety to 373 operators for a total of seven hours in two different Chocolate Quality Assurance 2016 modules. The efficiency of the training was The quality focus points for 2016 were measured with a test at the conclusion of determined in accordance with our the training, in addition to a production line Among the criteria factory quality results in 2015, and quality test. Successful operators received a Zero that affect the operations in line with these focus points Defect certificate. In total, 546 workers were conducted. Our focus points are: received four hours of zero-defect training, quality index, we • To conduct risk analyses on food with the training efficiency measured by the defense and to define priority action trainers. have reached points our goals in • To reduce costs associated with poor Audits quality Ülker Çikolata consistently produces the AIB audit, • To increase quality awareness in “Delicious, Healthy and Trusted” products operators of superior quality, in compliance with and in reducing • To decrease the number of notifications applicable laws and regulations, and under the number of from customers about foreign stringent hygienic conditions. Accordingly, substances the Company completed to audit the notifications • To increase quality awareness at FAZ 3 following certifications successfully: facilities through efforts in operational ISO 9001:2008 Quality Management from customers excellency Systems about foreign ISO 22000 Food Safety Management Among the criteria that affect the quality Systems substances. index, we have reached our goals in the 48 QUALITY AND R&D
Ülker has fulfilled ISO 14001 Environment Management work on chocolate matching for McVitie’s Systems biscuits, which were launched by the biscuit the requirements OHSAS 18001 Occupational Health and factory, were also completed in a short time. for an R&D center Safety Management System BRC (Achieved Grade: A) In 2016, the 7th In the out-of-home consumption channel, as set forth by version was audited and successfully we worked with Eksper Gıda on milk, bitter completed. and white overcoat chocolate as well as the Ministry of IFS (Higher Level) bitter cocoline products, and added a total of Science, Industry LRQA-HELALDER Certificate seven new products to our portfolio. OU-KOSHER- Certificate and Technology, As part of new product development and Chocolate R&D cost improvement in existing products, we and received Ülker Çikolata R&D continues its work in carried out studies in coordination with our R&D center four different categories: Coated Products; the Northstar Department of Consumer Solid-Spread Cocoa Products, Silivri R&D and Technical Research, and we conducted 26 certificate. Dragee products, Packaging Development consumer tests, seven QDA surveys and and Design. The Ülker Çikolata R&D a QSI test, a new research method, and 17 department was engaged in a total of 605 difference test surveys. projects directed towards new product development, cost improvement, alternative As part of new product development and in raw materials, and process and quality relation to existing products, a total of 125 improvement in Ülker Çikolata, Biskot Silivri, difference test surveys were conducted with Biskot Karaman. employees who were selected as panelists from the Biskot Silivri and Ülker Çikolata In 2016, as part of an initiative to develop factories. projects in line with customer needs and emerging trends, a total of 94 products were Activities carried out jointly with the material launched. These included new products, balancing team in 2016 at the Biskot Silivri changes in the weight of the products factory resulted in examinations of existing and line extension, MP studies and export product prescriptions, and necessary products. steps were undertaken to produce realistic prescriptions, resulting in a 19% improvement We have also developed new products in the system. for international markets in 2016. Five new products were launched as a result We produced more than 50 mold and of projects on Godiva Kaju and United product designs. Among these are the Biscuits Hobnob at the Biskot Silivri factory. Godiva FDM bar, Smartt products, and Dido Products designed for Demet’s, which and Stick, which were on the shelves this year. have successfully passed consumer tests, are planned to be launched in 2017. Two We began to use slip sheet technology at products for Godiva are ready to be launched the Biskot Silivri factory, and then extended at the Ülker Çikolata Topkapı factory. As this as a best practice to the Gebze Bisküvi part of the Godiva FDM project, which will factory. be launched in 2017, we completed the R&D work for 21 SKU, and two SKU for the We have fulfilled the requirements for an R&D Godiva 300g tablet project. The production center as set forth by the Ministry of Science, of Hobnob and Nibbles dragée biscuits for Industry and Technology, and received our United Biscuits were successfully completed; R&D center certificate. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 49 50 SOCIAL RESPONSIBILITY
As a producer of biscuits and chocolates, we have been with many generations since their childhood.
To date, Ülker’s Approach to Social Ülker Children’s Film Festival Responsibility The Ülker Children’s Film Festival was approximately 1.1 launched in 2008 as a gift to children on Happy Children April 23, National Sovereignty and Children’s million children Based on our experiences and observations Day, to help develop their creativity through from across in the past 72 years, we know that cinema. supporting children will make a great Turkey have difference in their futures, and therefore we With the Festival, which has taken place on focus on children in our social responsibility the same day in all corners of Turkey for the participated projects. We aim to open a window for past nine years, we have reached around 1.1 in the Ülker children with each and every project, from million children. We have thus provided an arts to sports. opportunity to meet the “silver screen” for Children’s Film those children who were unable for various As a producer of biscuits and chocolates, reasons to attend movies. Our company Festival. we have been with many generations since executives attended premieres in cities their childhood. We have known them including Mardin, Van, Kars, Artvin, Edirne, closely, we see their needs, and we care and Denizli, and watched the films with the about them. We are happy to be involved in children, sharing their joy and happiness. projects that contribute their development, to be supporting them for their futures; we To date, approximately 1.1 million children are happy about their happiness. from across Turkey have participated in the Ülker Children’s Film Festival. We share the joy of reaching 2.5 million children in Turkey with our activities in Ülker Children’s Art Workshop sports, arts and culture, and education We believe that art plays a prominent role since 2007. in children’s capacity to dream and, more important, in giving children the courage to Over nine years, we celebrated the holidays realize their dreams. At Ülker, we know that of 1.1 million children, nurtured their one of the roads to happiness is through the imagination, and invested in the future. arts, and we support and invest in projects that introduce children to art at a young ÜLKER BİSKÜVİ ANNUAL REPORT 2016 51
We hope to reach age. In this regard, we have established the Entering its sixth year in the 2016-2017 Ülker Children’s Art Workshop to encourage academic session, the Project, which now more children children to engage with art at a young age, includes preschool and first year students for them to develop an understanding of in addition to 2nd, 3rd and 4th graders, with even better aesthetics, and to turn children into art reached around 1.5 million students and content in the lovers. In addition to leading art platforms parents. such as Contemporary İstanbul and Art future with the International, our Workshop also hosts The project creates awareness about children at exhibitions supported by Yıldız balanced nutrition among parents Art Workshop, Holding, such as the Burhan Doğançay as well as children. In addition to the which has Retrospective, as well as in other cities mobile application iGrow, which tracks where the Ülker Children’s Film Festival is the development of children, the introduced arts organized. We hope to reach more children Foundation continues its awareness and with even better content in the future with communication activities for parents to around 16,000 the Art Workshop, which has introduced with Tam Zamanında Mutfağı (a series of children since its arts to around 16,000 children since its videos that contain balanced food recipes), establishment in 2011. prepared to promote healthy kitchens and a establishment in healthy future. Balanced Diet Project 2011. Creating the most comprehensive and As part of the Ülker Football Villages project, sustainable nutrition education program in the Sabri Ülker Foundation visits villages Turkey, the Sabri Ülker Foundation reaches to discuss the importance of balanced out to children with the Balanced Diet nutrition with young athletes. Project, in order that they may comprehend the importance of a balanced diet from Sports Projects school age. As Ülker, with our continuing collaborations, we believe we have contributed to the As part of the Balanced Diet Project, proliferation of brands that support the organized in collaboration with the Ministry sports world. of Education, the Sabri Ülker Foundation provided training in balanced nutrition to one The Ülker Football for Children Project is million primary school students between the the leading social responsibility project ages of 8-11, in 10 cities in Turkey. contributing to the multi-dimensional 52 SOCIAL RESPONSIBILITY
Today, many children who were trained at the Football Villages play for professional football clubs and national teams.
The most talented development of children through trainings period of one week, they acquire advanced it offers in sports and other areas. The most football training and discover the spirit of and the highest important leg of the project is the TFF-Ülker fellowship, sportsmanship and solidarity Football Villages. Sixty-Five Football Villages -- qualities that are at the heart of football. performing were organized in 25 cities over nine years Today, many children who were trained at children are for talented children coming from across the Football Villages play for professional the country. Children, who are educated in football clubs and national teams. brought together diverse subjects such as chess, balanced nutrition, creative drama, environmental Three more projects were added to the at the Elit Football awareness, personal hygiene, first aid and Sports for Children program by Ülker this Villages by Ülker. art, have fun, learn and play football at the year: Football Schools during summer same time. months; the U13 İstanbul School League organized with the participation of 380 The most talented and the highest schools from the 38 districts of İstanbul; performing children are brought together at and the University-School Collaboration. the Elit Football Villages by Ülker. As talented Since 2007, we have reached more than children between the ages of 12 and 13 are 330 thousand children with these projects, trained by the national team trainers for a organized in collaboration with the related federations.
Projects in which children met with sports: NUMBER OF PROJECT DURATION CHILDREN Football Training Centers 7 years 79,000 Football Villages 10 years 6,100 Elite Football Villages 3 years 264 Football Festivals 5 years 162,000 U20 Grassroots Festivals 2 months 1,700 Grassroots Day 5 years 17,300 Basketball Festival 8 years 8,000 Football Schools 1 year 2,500 U13 İstanbul School League 1 year 10,000 School of Physical Education and Sport 1 year 43,200 TOTAL 330,064 ÜLKER BİSKÜVİ ANNUAL REPORT 2016 53 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT
PART I- CORPORATE GOVERNANCE PRINCIPLES: Within the scope of the sustainability activities, first COMPLIANCE STATEMENT comprehensive sustainability report was released in 2016. The Company has provided in detail below the assessment and findings on the level of compliance with the Corporate Reasons for the Corporate Governance Principles that Governance Principles and our comments on the potential are not implemented: improvement areas related to compliance in scope and No model or mechanism was created for the Stakeholders to quality. participate in the management. However, the independent members of the Board of Directors make sure that the Pursuant to Capital Markets Board Communiqué and Article Company and shareholders as well as all stakeholders are 17 of the Capital Market Law No: 6362, dated December represented in the management. The Company takes the 6, 2012, and II-17.1 Corporate Governance Communique advices and opinions of the employees, suppliers, various released on 1.3.2014 issuance of a “Corporate Governance non-governmental organizations and all other stakeholders Compliance Report” and compliance with specified into consideration. Corporate Governance Principles have become mandatory for companies traded on Borsa Istanbul (BIST). Accordingly, For our employees, we have an existing written the Company has resolved that the requirements imposed compensation policy that must be formulated as per the by the CMB be strictly followed, and the Company has also Article 3.1.2 of the “Corporate Governance Principles” and we completed all the work necessary for compliance with the are still working on the issue. other principles specified in the Communiqué. Some of the members of the Board of Directors assume The established committees of the Board of Directors duties in a number of committees. actively carry out their tasks. Committee working principles were announced on the website. Committee chairmen As per the Article 4.6.5 of the “Corporate Governance were determined amongst the independent members Principles”, the remuneration of the members of the Board of of the Board of Directors while independent member Directors and executive senior managers as well as all other candidates are in majority in the committees. benefits granted are publicly announced via Annual Report. However, the announcement is not made on personal basis Three weeks in prior to the General Assembly, information but made to indicate the differentiation between the Board document, meeting agenda, annual report, résumés of of Directors and executive senior managers. the member candidates for the Board of Directors and other information to be announced were submitted to the There are no female members in the Board of Directors. information of the investors and shareholders. There are no provisions in the Articles of Association, giving Related party transactions were submitted to the the shareholders any personal right to request “private information of the Board of Directors, and by getting the audit” from the general assembly. The regulations of the approval of the independent members of the Board of Turkish Code of Commerce and the Capital Markets Board Directors a decision was taken to continue the transactions. are deemed sufficient to appoint a private auditor. Every shareholder’s right to request private audit is “recognized” Company website and the annual report were reviewed and within the framework of the regulations of the Turkish Code action was taken to make necessary updates. of Commerce n.6102 that entered into force on 01.07.2012.
A report for the “extensive and continuous transactions in The Company also plans to implement those principles 2016” was prepared and published on the Public Disclosure that have not been implemented yet as soon as possible, Platform upon the decision of the Board of Directors. although there have not been any conflicts of interest among shareholders due to the limited number of corporate Independency of the independent members of the Board governance principles implemented to date. of Directors was examined, and new candidates were presented by the Nomination Committee to the Board of Even if the aim is to fully comply with the non-compulsory Directors. Corporate Governance Principles as well; we have not yet achieved to fully comply with the principles due to the 54 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT
difficulties faced in the implementation of a number of Relations with shareholders are coordinated by the principles, and due to the fact that some of the principles Financial Affairs Department. The Financial Affairs do not match with the current structure of the market and Department manages the public disclosures as required the company. We are working on the principles that have to the BIST, the Capital Markets Board, and the Central not yet been implemented; and thus we’re planning to start Registry Agency and other communications with these the implementation after completing the administrative, agencies. In addition to organizing the ordinary and legal, and technical infrastructure procedures that will extraordinary general assembly meetings, the Investor support the effective management of our company. Relations Unit may organize other ad-hoc meetings held at the request of shareholders. The Company has also disclosed the following Corporate Governance Principles Compliance Report to the public 2.2 Shareholders’ Right to Information via the websites: www.ulkerbiskuvi.com.tr and http:// Except for information considered either commercial ulkerbiskuviyatirimciiliskileri.com/default.aspx secret or insider information, all written or verbal requests from our investors for information in the period were met. Part II – Shareholders We provided our shareholders with all the information as required under their rights as shareholders via the 2.1 Investor Relations Unit annual report, material disclosures, and replies to The Company’s relations with shareholders are handled individual inquiries. In accordance with Article 1524 of by the Investor Relations Unit and coordinated by the the Turkish Commercial Code No: 6102, dated January Financial Affairs Department. The Unit processes any 13, 2011, the Company has also shared all necessary and all written or online inquiries submitted by our information and announcements with shareholders on shareholders and attends all local and international its corporate website, www.ulkerbiskuvi.com.tr and http:// investor conferences. In 2016, 206 meetings in total – 154 ulkerbiskuviyatirimciiliskileri.com/default.aspx meetings with the investors/52 meetings with the analysts – were held. Investor Relations unit presented the report Auditing principles and procedures are described in Article summarizing the activities of each quarter to the Board of 20 of the Company’s Articles of Association. In 2016, Directors. shareholders did not call for any private audits.
Contact information for the Investor Relations Department 2.3. General Assembly Meetings follows: Pursuant to Article 1527 of the Turkish Commercial Code No. 6102 dated January 13, 2011, which stipulates that Serkan Aslıyüce online participation in general assembly meetings, making Director of Financial Affairs proposals and statements online, and online voting shall Kısıklı Mah. Ferah Cad. No: 1 Büyük Çamlıca have the same legal effects in all aspects as participating Üsküdar/İSTANBUL and voting in any general assembly meeting in person; [email protected] and that all companies traded on the stock exchange are +90 216 524 25 00 required to set up and maintain a system allowing online participation in general assembly meetings and voting; the Özgür Kalyoncu online general assembly convenes on the same date and Investor Relations Manager with a parallel agenda as the physical general assembly. License Type: Capital Markets Board Advanced Level License – 205830 The Ordinary General Assembly of 2015 was convened on Capital Markets Board Corporate Governance Rating March 24, 2016. License - 701396 Kısıklı Mah. Ferah Cad. No: 1 B The 2015 Ordinary General Assembly of the Company Çamlıca Üsküdar/Istanbul convened at Radisson Blu Asia Hotel at Atatürk Mahallesi [email protected] Yakut Caddesi Ataşehir – ISTANBUL with the participation +90 216 524 25 56 of shareholders representing almost 81.5% of the paid- in capital of TL 342,000,000. No stakeholders or media representatives were present at the meeting. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 55
The invitation for the General Assembly, which stated the Pursuant to the relevant provision in the Articles of date and agenda of the meeting, was published in the Association, shareholders and their proxies are allowed to Turkish Trade Registry Gazette No. 9024 dated March 3, exercise their respective rights at any General Assembly 2016 and in the daily Dünya Newspaper dated March 2, meeting, under the referenced regulations via the 2016 and on the Ülker Bisküvi Sanayi A.Ş. website: www. electronic system set up for this purpose. ulkerbiskuvi.com.tr and http://ulkerbiskuviyatirimciiliskileri. com/default.aspx as specified by law and the Articles of The Company does not grant any privileges to share groups Association within the prescribed time limit. or other shares. None of our shareholders controls, or is controlled by, the Company. Cumulative voting is not The Company makes the financial statements and reports, practiced in the Company. including the annual report, dividend proposal, electing the members of the Board of Directors, presenting As per Article 27 of the Company’s Articles of Association, the company auditor, memo on the proposed agenda shareholders representing one-twentieth (1/20) of the to be discussed at the General Assembly, and other share capital can exercise minority rights. documents for items of the agenda, if any, and the rationale thereof available for review by our shareholders at the The Articles of Association do not contain any provision headquarters and branches of the Company starting from prohibiting voting by proxy, who is not a shareholder of the the date of the invitation for the General Assembly. Company.
Items on the agenda are expressed in an unbiased and 2.5. Dividend Rights detailed manner at the General Assembly and shall be clear and intelligible. Shareholders are provided with Our Board of Directors has adopted the profit distribution equal opportunity to express their opinions, and raise any policy in accordance with the Corporate Governance questions to create a healthy atmosphere for discussion. Principles published by the CMB. No shareholder asked any question at the General Assembly nor made any suggestions except for those The Company distributes profit in accordance with the related to the items in the agenda. Turkish Commercial Code, Capital Market Law, Tax Law, other applicable legislation and the articles related to profit The amount of contributions and donations made by the distribution in the Company’s Articles of Association. Company during the fiscal period have been discussed at the General Assembly meeting as a separate agenda item The Board of Directors’ profit distribution proposal, which and shareholders have been informed about same. complies with the Company’s profit distribution policy and the Capital Markets Board’s Corporate Governance Prior to the General Assembly meeting, the Company Principles, is included in the annual report and is submitted shared with the shareholders the meeting agenda, a for the approval of shareholders at the General Assembly; sample proxy form, informational document, balance detailed information on the history of profit distribution sheet, profit-loss statements, independent auditor’s and capital increases is disclosed to the general public via report and footnotes, auditor’s report, Board of Directors’ the corporate web site. resolution on profit distribution, the annual report, and the resolution on the selection of an independent audit The Company has set its profit distribution policy in company, via the corporate website, www.ulkerbiskuvi.com. accordance with the Capital Market Law and Articles of tr and http://ulkerbiskuviyatirimciiliskileri.com/default.aspx. Association, taking into consideration the Company’s operational performance, financial situation and market 2.4. Voting and Minority Rights developments. Starting from the earnings of fiscal year 2012, the Company will distribute a minimum of 70% of According to the Articles of Association, each share carries its net distributable profit for each accounting period in the right to one vote. cash, upon the proposal of the Board of Directors and the approval of the General Assembly, with any changes made Any shareholder, who is entitled to attend General by these entities, in accordance with Turkish legislation, Assembly meetings, may attend the meetings via electronic and after due consideration of the Company’s cash flow communication means in accordance with Article 1527 of requirements. the Turkish Commercial Code. Pursuant to the Regulation on the General Assembly of Joint Stock Companies to This policy will be reviewed each year by the Board of be Held via Electronic Means, the Company may set up Directors, taking into account any negative developments an electronic General Assembly system or procure any in domestic and global economic conditions, the situation system developed for this purpose so that shareholders of current projects and the Company’s financial resources. are able to attend, express their views, make suggestions, and cast their votes via electronic communication means. 56 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT
In accordance with the profit distribution policy, dividends • Social Responsibility are equally distributed to all shares in the relevant • Registration Information and Company Profile accounting period, and no privileges are granted. • Articles of Association • Financial Statements and Notes Again, the Articles of Association provides for advanced • Annual Reports dividend payment, but the Company has not made any • Material Event Disclosures advanced dividend payment so far. • Report on Compliance with Corporate Governance Principles Shareholders were informed of the Company’s profit • Information on the General Assembly (Agenda, distribution policy at the General Assembly, and the profit Proceedings, List of Attendees and Proxy Form Template) distribution policy has been disclosed to the public and • Company’s Information Policy included in our annual reports, and is also available on the • Committees Company’s website. • News and Announcements (Invitations to the General Assembly, and the like) A decision was taken at the Ordinary General Assembly • List of Corporate Insiders Meeting held on 24.03.2016 to; i) distribute all of gross TL • Ratings Reports 94.000.000,00 (net TL 79.900.000,00) from the profit • Ülker on the BIST (Ratios and Charts related to the for the period in conformity with the “Article on Profit Company’s Shares) Distribution” in the Articles of Association; ii) set aside TL • List of Monitoring Analysts and Investor Presentations 7.690.000,00 from the profit for the period as secondary • Sustainability legal reserve funds; iii) distribute TL 3.852.958,00 to the employees; iv) distribute the entire amount of profit (to be 3.2. Annual Report distributed) in cash, and distribute the amount before 5 In the Annual Report of our Company, facts and figures – April 2016; v) authorize company executives to determine specified in the Corporate Governance Principles of the other issued about the distribution. Profit distribution was “Corporate Governance Communiqué ” (Series: II-17.1) made on 5 April 2016. dated 03.01.2014 – are given.
2.6. Share Transfer PART IV – STAKEHOLDERS
Following the approval of the amendments to the Articles 4.1. Information to Stakeholders of Association at the Ordinary General Assembly meeting In the event there is not any regulation in laws or contracts held on March 28, 2013, the Company shall not issue any regarding rights of stakeholders, the Company endeavors registered shares. to protect their rights in good faith and within means available to the Company with due consideration given to PART III – PUBLIC DISCLOSURE AND TRANSPARENCY the reputation of the Company.
3.1. Company’s Website and Contents Thereof In addition, all employees have access to internal circulars The Company website at www.ulkerbiskuvi.com.tr is and memos through the Company’s Intranet and receive available in Turkish and English. Furthermore, company’s certain important announcements through e-mail. investor relations website is available in Turkish and English There are no restrictions that prevent stakeholders from on the address http://ulkerbiskuviyatirimciiliskileri.com/ contacting the Corporate Governance Committee or default.aspx. The following information is available for the the Audit Committee about any Company transactions purpose of disclosure to our shareholders: they deem either unethical or contrary to regulations. Stakeholders may contact these committees by any • Company’s Vision communication means they prefer. • Code of Conduct • Information on the Board of Directors and Executive Management • Company’s Shareholding Structure • Organizational Chart ÜLKER BİSKÜVİ ANNUAL REPORT 2016 57
4.2. Participation of Stakeholders in Management Ülker Bisküvi, since its inception, has been a part of a Group According to the Articles of Association, the Board of Directors of companies that produce quality and healthy products; has at least seven members who are elected by the General respect their employees; uphold the rights of their partners Assembly upon nomination by shareholders of different share and shareholders, and of their suppliers and customers; classes in accordance with the Articles of Association. comply with all applicable laws; recognize social values; and have social responsibility. In addition, the Group of companies’ The Board of Directors has nine members, including three management philosophy pursues the highest level of independent directors. respect and trust among executives, employees, suppliers, and customers; achieves employee cooperation and high The Company does not have any practices related to performance of personnel; maintains dignity, consistency stakeholders’ participation in management. and a sense of responsibility in its approach; all the while continually striving to improve this management philosophy. 4.3. Human Resources Policy The main purpose of the Company’s human resources The Code of Conduct as adopted by Ülker Bisküvi is generally policy is to build a team of high performance employees by abided by all Group companies and is disclosed to the public improving and developing the human capital on the basis of within the scope of the Group’s information policy and is the things done so far. available to our shareholders on the website: www.ulkerbiskuvi. com.tr. and http://ulkerbiskuviyatirimciiliskileri.com/default. The human resources policy adopted by the Company is aspx. fundamentally that of Yıldız Holding’s, and is available at www. ulkerbiskuvi.com.tr and http://ulkerbiskuviyatirimciiliskileri. PART V – BOARD OF DIRECTORS com/default.aspx 5.1. Structure, Organization, and Independent Members The Company has never received any complaints that its of the Board of Directors human resources policy is discriminatory. The Company’s Board of Directors is composed of nine members, three of whom are independent members. 4.4. Code of Conduct and Social Responsibility The Board of Directors comprises executive and non- Information on the corporate social responsibility activities of executive members, and a majority of the Board’s members the parent company, Yıldız Holding, is available in our annual are non-executive members. reports and on the website: www.ulkerbiskuvi.com.tr and http://ulkerbiskuviyatirimciiliskileri.com/default.aspx .Keenly Non-executive members include independent members, who aware of our social responsibility, the Company takes utmost satisfy all of the criteria set out in the Capital Market Law, who care to adopt policies that support environmental, sports, have the capacity to perform their duties with impartiality, and educational, and health care related projects. who can devote their time to monitor the functioning of the Company and to fulfill all the responsibilities vested to them as The Code of Conduct is also available in a related section on independent members. the website. The Company observes the continuity of service quality and standard at all phases of production and maintains Details of the Company’s Board of Directors are as follows: trade secrets of customers and suppliers as confidential. Customer satisfaction is one of the main principles of our Company.
Name-Surname Position Status Term of Office Murat ÜLKER Chairman of Board Directors Non-executive 27.03.2014-27.03.2017 Mehmet TÜTÜNCÜ (*) Vice Chairman of Board of Directors Executive 27.03.2014-27.03.2017 Ali ÜLKER Member Executive 27.03.2014-27.03.2017 Ahmet ÖZOKUR Member Non-executive 27.03.2014-27.03.2017 Mahmut Mahir KUŞCULU (**) Member Executive 14.06.2016-27.03.2017 Cengiz SOLAKOĞLU Member Non-executive 27.03.2014-27.03.2017 Ahmet Murat YALNIZOĞLU Member (Independent) Non-executive 24.03.2016-27.03.2017 Duran AKBULUT Member (Independent) Non-executive 27.03.2014-27.03.2017 Halil Bülent ÇORAPÇI Member (Independent) Non-executive 24.03.2016-27.03.2017
(*) As of 29.04.2014, Mehmet TÜTÜNCÜ was elected as vice chairman by boards of directors’ resolution. (**) Mr. Mahmut Mahir KUŞÇULU, who was the member of board of directors resigned from his duties on 14.06.2016. Within the framework of Article 363 in Turkish Commercial Code, it was decided by our Board of Directors that İbrahim Taşkın was selected in order to complete the remaining membership period and submitted for approval at the first General Assembly meeting ahead. 58 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT
The Chairman of the Board of Directors and the General Beginning from 1990 for four years he lectured Manager are two different persons. The Company’s CEO is constitutional law, criminal law, criminal procedure law Mr. Mehmet TÜTÜNCÜ. and police profession code at Florya Police Academy in Istanbul. In between 1996-2004 he was involved in political Mr. Ahmet Murat YALNIZOĞLU, Mr. Duran AKBULUT and activities with various assignments in addition to his career Mr. Halil Bülent ÇORAPÇI serve as independent board as a free-lance lawyer. He has been in charge of Legal Affairs members. of Yıldız Holding since 2004. Currently he is President of Global Legal Affairs at Yıldız Holding. He is also member We have no female members among the members of the of board of directors of many companies and member of Board of Directors and we are working on the issue. board as a founder and/or director at various association and foundations. Besides his responsibilities at Yıldız Murat Ülker- Chairman of Board of Directors Holding Group he is President of Discipline Committee, Murat Ülker began his professional career at the Group in Food Safety and Defense Board and Global Legal Affairs at 1982 after graduating from Boğaziçi University, Faculty of Yıldız Holding. He is married and father of four children. He Economics and Administrative Sciences, Department of speaks English. Business Administration. He is married with three children. He is fluent in English and German. Cengiz Solakoğlu - Member Having worked at Koç Group continuously for 37 years, Mehmet Tütüncü- Vice Chairman of Board of Directors Cengiz Solakoğlu retired due to the Group’s policy for Mehmet Tütüncü was appointed Chairman of the Food mandatory retirement at age 60. He is among the founders and Beverages Group in 2005. As of October 2009, the of the Educational Volunteers Foundation of Turkey (TEGV) Gum and Candy companies were incorporated into the and the 1907 Fenerbahçe Association. Mr. Solakoğlu was Food Group. He was born in 1958 and is married with three named a Leader of Civil Society by Economist magazine in children. He likes to travel and collect small hand-crafted 2003. He is married with two children. boxes. Duran Akbulut - Member (Independent) Ali Ülker- Member Duran Akbulut was born in the town of Suşehri in Sivas in Born in 1969, Ali Ülker is married with three children. He is 1937. He completed his primary and secondary education fluent in English and German. His hobbies include fishing, in Suşehri, Sivas before moving to Istanbul. He is married watching movies, reading books, and playing basketball and with two children. billiards.
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.
Ibrahim TAŞKIN – Member* İbrahim Taşkın was born on April 15th 1965 in Trabzon. He went to primary school in Artvin and high school in Istanbul. He graduated from Istanbul University Faculty of Law in 1986. He served his military service as a disciplinary officer at military disciplinary court in Şanlıurfa in 1988.
He is a member of Istanbul Bar as a self-employed lawyer since 1989. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 59
Halil Bülent Çorapçı - Member (Independent) entrepreneur in 1982 focusing at information technologies Mr. Çorapçı, borned in 1936 at Yalova/Istanbul, graduated and software development. In 1989, Mr. Yalnızoğlu resumed from Istanbul Yüksek İktisat ve Ticaret Okulu in 1956. He his career at Arthur Andersen & Andersen Consulting as started his professional career at Karamancılar-Gazioğulları management consultant in information technology. He in 1953, responsible from various group companies in the later led consultancy projects in the areas of strategy and areas of management and audit. Mr. Çorapçı attended organizational development for the leading companies in many seminar at abroad within the context of his area and Turkey at Coopers&Lybrand and Research Development as worked at Karamacılar Holding, Orta Anadolu Mensucat, managing partner, founder, and partner roles. Anadolu Cam Sanayii, Nasaş Aliminyum, Çelik Halat, Polinas, Henkel and Turyağ during his professional career. He also Mr Yalnızoğlu focused in reorganization of large companies acted as board member in these companies. Currently, with diversified businesses since 2006. He practiced many performs as a board member at Astay Gayrimenkul A.Ş, projects including the ways to improve board efficiency, Atikpaşa ve Sultanahmet(Four Seasons Otelleri) A.Ş., and structural organization at start-ups. Mr. Yalnızoğlu Senapa Stampa Plastik A.Ş., Martı GYO, Kerevitaş (Super acted as board member in many organizations aside of fresh) A.Ş. Mr. Çorapçı is registered at the chamber of board consultancy. certified public accountant of Istanbul and a former member of tax council founded in accordance with the law. The internal and external Group duties of each Board Mr. Çorapçı is married with two sons, with a well knowledge member assumed on behalf of the Company and rationale of English and interested in books and readings. thereof are disclosed for the information of the General Assembly where the election of each Board member is Ahmet Murat Yalnızoğlu - Member (Independent) discussed. Borned in 1957, Murat YALNIZOĞLU graduated from Istanbul Erkek Lisesi followed by the completion of There is not any separate committee designated. The industry and system engineering at University of Florida. duties of a nomination committee are performed by the Mr. Yalnızoğlu started his professional career as an Corporate Governance Committee.
Name-Surname Title Duties Outside the Company Murat ÜLKER Chairman of Board Directors Chairman of the Board of Directors of Group companies Vice Chairman of Board of Mehmet TÜTÜNCÜ Directors Member of the Board of Directors of Group companies Ahmet ÖZOKUR Member Member of the Board of Directors of Group companies Ali ÜLKER Member Member of the Board of Directors of Group companies Ibrahim TAŞKIN* Member Member of the Board of Directors of Group companies Cengiz SOLAKOĞLU Member Member of the Board of Directors of Group companies Board Member at IELEV Eğitim Kurumları AŞ. and managing Ahmet Murat YALNIZOĞLU Member (Independent) partner at Pruva Yönetim Danışmanlığı Ltd. Şti. Duran AKBULUT Member (Independent) Chairman of the Executive Board of Büyük Kulüp Independent Board Member at Astay Gayrimenkul AŞ, Atikpaşa Turizm A.Ş, Sultanahmet (Four Seasons Otelleri) A.Ş. Pilen Pak A.Ş, Martı GYO, Kerevitaş (Super Fresh) A.Ş., Halil Bülent ÇORAPÇI Member (Independent) Senapa Stampa Plastik A.Ş.
5.2. Rules of Conduct of the Board of Directors convene when it is deemed necessary by the Chairman The Company’s Board of Directors held 31 meetings in the or one-third of the Board members. The meetings of the period of January – December 2016. Due consideration Board of Directors may be held at the headquarters of the was given when setting the meeting dates and times so that Company or at a convenient location in the city where the each and every member is able to attend the meeting. headquarters is located or in another city by resolution The Board of Directors meets regularly and as often as of the Board of Directors. The Board of Directors may, necessary to conduct its business and affairs effectively. upon resolution, determine whether or not they will have a The Board of Directors shall convene once a month when distribution of responsibilities among the Board members. it is deemed necessary due to the Company operations and transactions. The Board of Directors must also 60 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT
An invitation for the meeting must made by a seven-day prior No objection has been raised against any resolution adopted notice and includes the agenda and documentation related by the Board of Directors during 2016. to the call for the meeting. In 2016, Audit Committee’s, Corporate Governance In principle, members participate in a Board of Directors Committee’s and Risk Committee’s meeting minutes and meeting in person. However, it is possible that Board reports were monitored and reviewed by the Board of members may participate in a Board of Directors meeting by Directors. means of electronic communication. Written stipulations of a member who does not participate in a Board meeting but Nor has there been any material transaction with respect submits his/her comments on the agenda in writing shall be to related party transactions which were presented to presented to the other members. independent members for approval.
Any discussion and resolution of Board of Directors must be Any material information which must be disclosed to the recorded in written minutes, which must be signed by each public is promptly disclosed after the end of each meeting. member present at the meeting and then recorded in the book of resolutions. Any member with a dissenting vote must 5.3. Number, Structure, and Independency of Committees also state his/her rationale for his/her dissenting vote before Formed by the Board of Directors signing the minutes of that meeting. Minutes of meetings and related documents and correspondence related therewith Audit Committee shall be regularly archived by the Secretariat of the Board of The Audit Committee, which was established by a resolution Directors. The Board of Directors shall meet with a quorum of of the Board of Directors on May 22, 2006, was restructured at least more than one-half of the number of members and by a resolution of the Board of Directors dated August 5, resolve by a majority of members present at the meeting. 2008 in accordance with Communiqué No. 22 Serial No.: X In the event there is a tie in the votes, the voted issue shall of the Capital Markets Board. The Audit Committee ensures be discussed at the next meeting. The proposal shall be that the Company’s financial and operational functions deemed rejected if it is not approved by a majority vote at are monitored in a reliable manner. The purpose of the the next meeting. Each Board member has one voting right Committee, which reports directly to the Board of Directors, regardless of his/her title and area of duty. is to oversee the Company’s accounting system, audit and disclosure of financial information, and the functioning and The names, duties and responsibilities of members of the effectiveness of the internal audit system. This Committee Board of Directors are clearly specified in the Articles of meets as necessary, but at least four times each year. In 2016, Association which is available on our website: Audit Committee had 4 meetings, and meeting minutes and www.ulkerbiskuvi.com.tr. reports were presented to the Board of Directors.
While carrying out their responsibilities, the members of the The new members of the Audit Committee as selected by Board Directors are furnished all the information necessary the resolution of the Board of Directors dated June 14, 2016 for them to fully perform their duties and act prudently and are as follows: in good faith.
Name-Surname Title Position with Company Duran AKBULUT Chairman of Committee Board Member (Independent) Ahmet Murat YALNIZOĞLU Member Board 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. In 2016, Corporate Governance Committee had 4 meetings, and meeting minutes and reports were presented to the Board of Directors. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 61
The new members of the Audit Committee as selected by resolution of the Board of Directors dated June 14, 2016 are as follows:
Name-Surname Title Position with Company Chairman of Duran AKBULUT Committee Board Member (Independent) Ahmet Murat YALNIZOĞLU Member Board Member (Independent) Hafize Nurtaç AFRİDİ Member President of M&A & Business Devp. Özgür KALYONCU Member Investor Relations Manager
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. In 2016, Risk Committee had 6 meetings, and meeting minutes and reports were presented to the Board of Directors.
The new structure changed with the Board of Directors decision on June 14, 2016, is as follows.
Name-Surname Title Position with Company Halil Bülent ÇORAPÇI Chairman of Committee Board Member (Independent) Ahmet Murat YALNIZOĞLU Member Board Member (Independent)
Any independent member may be a member of more than 5.6. Remuneration one committee, but s/he may be selected as chairman of Remuneration of the members of the Board of Directors only one committee. The Board of Directors may appoint is determined – separately for each member – by the an independent member as a committee member General Assembly according the financial situation of the for more than one committee in accordance with the Company. In the General Assembly it was decided; to pay a Corporate Governance Principles. net salary of TL 4.700 to Ahmet Murat YALNIZOĞLU, Duran AKBULUT, and Halil Bülent ÇORAPÇI until the next ordinary 5.4. Risk Management and Internal Audit Mechanism general assembly and; not to pay any salaries – for the tasks The Company’s activities with regard to risk management the Board members carry out in the committees – to the are carried out by the Risk Committee. The Company is members of the Board of Directors who assume tasks in also audited regularly by the auditing units of Yıldız Holding the committees established within the Company. A.Ş., which is the majority shareholder of the Company, and an independent audit firm. The findings of these No loan was extended to any member or executive officer audits are communicated to the members of the Audit during the period, nor extended, directly or through a third Committee and to the Board of Directors. The business party, any personal loan or given any collateral on their flows, and procedures of the Company, and authorities behalf, such as a surety. and responsibilities of employees are controlled within the framework of risk management and are subject to Principles for remuneration regarding interests of executive continuous monitoring and checks. management and the Board of Directors are explained in detail on the website: www.ulkerbiskuvi.com.tr and http:// 5.5. Strategic Objectives of the Company ulkerbiskuviyatirimciiliskileri.com/default.aspx 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. 62 RISK MANAGEMENT
Corporate Risk Management efforts include determining As a company engaged in production and sales activities potential incidents that may affect Ülker Bisküvi, in various countries, Ülker Bisküvi is aware of the necessity managing risks in line with the Company’s risk taking to monitor risks and take necessary measures, especially profile, and providing an acceptable level of assurance about risks arising from currency and interest rates, for the Company to achieve its goals. Corporate Risk raw material prices, partnerships and new investments, Management is a systematic process which is utilized in which have become even more important with the latest devising strategies, implemented across the Company and developments. impacted by the Company’s Board of Directors, senior management as well as all of its employees. The Company’s risk management activities are carried out While a potential risk may present a negative factor by the Risk Committee. Furthermore, Ülker Bisküvi is also which must be taken under control, for companies audited regularly by the audit units of Yıldız Holding A.Ş., that implement Corporate Risk Management it creates the parent company, and also by independent auditors. important opportunities. In the past, risks were managed by The findings of these audits are reported to the members individual departments; however, in line with the changes in of the Audit Board as well as to Board members. The the overall risk management concept, risks are now tackled Company’s workflows, procedures, and the authorities as a whole and assessed on the basis of each company. and responsibilities of employees have been placed under Previously, risk assessment was carried out by the internal control, and subjected to constant supervision within the audit departments of companies, measurements were framework of risk management. 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 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. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 63 INVESTOR RELATIONS
The Ülker Bisküvi Investor Relations Department always Investor Relations Unit is responsible for establishing the seeks to establish more effective, transparent, equal and Information Policy of the Company, and for ensuring that timely communications with investors. The Company this policy is adopted within Ülker Bisküvi. strives to carry out such processes in strict compliance with applicable laws, rules and regulations, and on par with Tasks of the Unit are as follows: global best practices. a) Ensuring that shareholders’ records are reliable, secure In 2016, Ülker Bisküvi held a total of 206 meetings in and up to date, Turkey and overseas (including the meetings held at the Head Office) with 156 investors and 54 analysts. b) Answering shareholders’ written information requests (Number of meetings in 2015: 369.) The Company also about the Company – apart from those that interfere with participated in conferences in New York and London. At trade secrets and that are not publicly announced, these conferences and meetings, Ülker Bisküvi provided information to shareholders and prospective investors, and c) Ensuring that the General Assembly Meeting is held in regularly received requests for information. conformity with the applicable legislation, the Articles of Association, and other internal regulations of the Company, The number of analysts covering Ülker Bisküvi totaled 22 in 2016 (2015: 21 corporation). ç) Preparing documents that shareholders make use of at the General Assembly Meeting, The day after publicly announcing the quarterly financial results on the Public Disclosure Platform, Ülker Bisküvi d) Keeping record of the voting results, and ensuring that continues to organize Teleconferences and Webcasts in reports about the results are sent to the shareholders, order to provide information to investors and analysts, and to answer questions if any. Relevant contact phone e) Overseeing and tracking all issues regarding public numbers and the web address, were shared on the disclosure, including the Legislation and the Information meeting date at the Company’s official website Policy of the Company. www.ulkerbiskuvi.com.tr.
Analysts and investors had great interest in the Teleconference and Webcast, as they asked questions about issues like the strategy, restructuring, market share, and growth objectives of Ülker Bisküvi. 64 2016 ORDINARY GENERAL ASSEMBLY MEETING AGENDA
Our Board of Directors has taken a decision regarding the following issues;
The Ordinary General Assembly meeting – where the Company’s 2016 activities and accounts will be discussed and resolved – will be held in accordance with the 414th Article of the Turkish Code of Commerce, at the address of Company Headquarters Kısıklı Mahallesi, Ferah Caddesi No:1 Büyükçamlıca Üsküdar/İstanbul on Friday March 31, 2017 at 14:00 o’clock with the following agenda, and within this framework; a request for the ministry representative’s presence in the meeting will be made to the T.R Ministry of Science, Industry and Technology, T.R Prime Ministry Capital Markets Board and Presidency of Borsa İstanbul A.Ş. will be informed about this meeting, and This decision will be publicly announced via Public Disclosure Platform.
ÜLKER BİSKÜVİ SANAYİ A.Ş. 2016 ORDINARY GENERAL ASSEMBLY MEETING AGENDA 1. Opening and appointing the Chairman, 2. Authorizing the Meeting Council to sign the Meeting Minutes of the General Assembly, 3. Presenting and negotiating 2016 Annual Report, 4. Presenting and negotiating 2016 Independent External Audit Report, 5. Presenting, negotiating and approving 2016 Financial Statements, 6. Acquaintance of the member of the Board of Directors and Auditors separately through activities of 2016, 7. Approval of the appointment of the new Board Member appointed during the term, 8. The election of new members of the Board of Directors and determination of their term of Office, 9. Determining the way to use the Company’s profit of 2016, and determining the percentage of profit and dividend shares to be distributed, 10. Presenting the Company Auditor recommended by Board of Directors to the approval of General Assembly, 11. Informing the General Assembly about the donations made by the Company within 2016 and deciding about the upper limit of the donations that will be made in 2017, 12. Informing the General Assembly about the Collaterals, Pledges and Mortgages given by the Company in 2016, 13. Determining the remunerations of the Members of the Board of Directors, 14. 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, 15. 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. ÜLKER BİSKÜVİ ANNUAL REPORT 2016 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 is provided in note 2.6 of the financial statements.
The report issued by Ülker Bisküvi Sanayi A.Ş. Board of Directors states: “We have reached the conclusion based on the circumstances we knew about at the time of making the transaction or taking the measure or avoiding the measure; in all transactions between Ülker Bisküvi Sanayi A.Ş. and its controlling shareholders, and the associate companies of the controlling shareholders in 2016, i) appropriate consideration was provided in each transaction, and ii) there were no measures, taken or avoided, that could cause loss for the company, and iii) within this scope there were no transactions or measures that would require offsetting”. 66 POWER OF ATTORNEY
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 Friday 31st of March 2017, at 14:00, at the address of Company Headquarters Kısıklı Mahallesi, Ferah Caddesi No:1 Büyükçamlıca Üsküdar/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.
P.S.: In case the proxy form is not notarized, the signature declaration including the notarized signature sample of the person giving proxy or the signature circular must be attached to this proxy form.
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. Opening and appointing the Chairman, 2. Authorizing the Meeting Council to sign the Meeting Minutes of the General Assembly, 3. Presenting and negotiating 2016 Annual Report, 4. Presenting and negotiating 2016 Independent External Audit Report, 5. Presenting, negotiating and approving 2016 Financial Statements, 6. Acquaintance of the member of the Board of Directors and Auditors separately through activities of 2016, 7. Approval of the appointment of the new Board Member appointed during the term, 8. The election of new members of the Board of Directors and determination of their term of Office, 9. Determining the way to use the Company’s profit of 2016, and determining the percentage of profit and dividend shares to be distributed, 10. Presenting the Company Auditor recommended by Board of Directors to the approval of General Assembly, 11. Informing the General Assembly about the donations made by the Company within 2016 and deciding about the upper limit of the donations that will be made in 2017, 12. Informing the General Assembly about the Collaterals, Pledges and Mortgages given by the Company in 2016,
13. Determining the remunerations of the Members of the Board of Directors, 14. 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, 15. 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.
* 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 ÜLKER BİSKÜVİ ANNUAL REPORT 2016 67 DIVIDEND DISTRIBUTION POLICY
As per the 199th Article of the Turkish Code of Commerce n.6102 entering into force on the 1st of July 2012, Ülker Bisküvi Sanayi A.Ş. Board of Directors is responsible for; i) issuing a report in the first three months of the activity year, regarding its relations with the company’s controlling shareholder and the associate companies of the controlling shareholder in the previous activity year, and ii) including the conclusion of this report in the annual report. Necessary explanations on the transactions between Ülker Bisküvi Sanayi A.Ş. the related parties are available in the financial report footnote n.31.
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 2016, 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.”
DIVIDEND DISTRIBUTION TABLE
1. Paid-in/Issued Capital (TL) 342,000,000.00 2. Total Legal Reserves (According to Legal Requirements) (136,140,090.82) Information regarding privileges in profit distribution according to Articles of Association, if any - According to the CMB According to Legal Requirements (LR) 3. Profit for the Period 278,919,443.26 96,448,319.94 4. Taxes Payable (-) (48,547,880.26) (6,201,940.30) 5. Net Profit for the Period (=) 230,371,563.00 90,246,379.64 6. Losses from Previous Years (-) 0.00 0.00 7. Amounts Transferred to Special Funds as per the Article 5/1-e of Corporate Tax Law (-) - - 8. First Legal Reserves (-) 0.00 0.00 9. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 230,371,563.00 90,246,379,64 10. Donations During the Year (+) 352,677.54 11. Net Distributable Profit plus Donations, for the calculation of the First Dividend 230,722,240.54 12. First Dividend to Shareholders 64,000,000.00 - Cash - Bonus 0.00 - Total 64,000,000.00 13. Dividend to Privileged Shareholders 0.00 14. Dividend to Board Members and Employees 3,560,616.95 15. Dividend to Redeemed Shareholders 0.00 16. Secondary Dividend to Shareholders (Bonus) 0.00 17. Secondary Legal Reserves 4,690,000.00 18. Statutory Reserves 0.00 19. Special Reserves 0.00 20. EXTRAORDINARY RESERVES 158,120,946.05 21,556,379.64 21. Other Resources Payable 0.00 0.00 - Previous Year's Profit 0.00 0.00 - Extraordinary Reserves 0.00 0.00 -Other Distributable Reserves as per the Legal Requirements and Articles of Association 0.00 0.00
INFORMATION REGARDING THE DISTRIBUTED PROFIT SHARE DIVIDEND PER SHARE
TOTAL DIVIDEND DIVIDEND PER SHARE WITH GROUP AMOUNT (TL) NOMINAL VALUE OF TL 1 GROSS 64,000,000.00 0.1871345 18.71345 NET 54,400,000.00 0.1590643 15.90643
RATIO OF DISTRIBUTED DIVIDEND TO NET DISTRIBUTABLE PROFIT PLUS DONATIONS
THE RATIO OF THE DIVIDEND DISTRIBUTED TO THE DIVIDEND DISTRIBUTED TO SHAREHOLDERS TO NET DISTRIBUTABLE PROFIT PLUS SHAREHOLDERS (TL) DONATIONS (%) 64,000,000.00 70.64
*Tax expense accrued to the parent company.
ÜLKER BİSKÜVİ ANNUAL REPORT 2016 69 ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES
CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT
(ORIGINALLY ISSUED IN TURKISH)
CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
CONTENTS PAGE(S)
CONSOLIDATED BALANCE SHEET ...... 1-2
CONSOLIDATED STATEMENTS OF INCOME...... 3
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME...... 4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY...... 5-6
CONSOLIDATED STATEMENTS OF CASH FLOW ...... 7-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...... 9-84
NOTE 1 ORGANIZATION AND OPERATIONS OF THE GROUP ...... 9-10 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS...... 10-33 NOTE 3 BUSINESS COMBINATIONS ...... 34-36 NOTE 4 SEGMENTAL INFORMATION...... 37 NOTE 5 CASH AND CASH EQUIVALENTS ...... 38 NOTE 6 FINANCIAL INVESTMENTS...... 38-39 NOTE 7 FINANCIAL LIABILITIES ...... 39-41 NOTE 8 TRADE RECEIVABLES AND PAYABLES...... 41-42 NOTE 9 OTHER RECEIVABLES AND PAYABLES...... 42-43 NOTE 10 INVENTORIES...... 43 NOTE 11 INVESTMENT PROPERTIES...... 44 NOTE 12 TANGIBLE ASSETS ...... 45-47 NOTE 13 INTANGIBLE ASSETS...... 47-48 NOTE 14 GOVERNMENT GRANTS AND INCENTIVES ...... 48 NOTE 15 OTHER PROVISIONS, CONTINGENT ASSETS AND LIABILITIES...... 48-50 NOTE 16 COMMITMENTS AND OBLIGATIONS...... 50 NOTE 17 PROVISION FOR EMPLOYEE BENEFITS ...... 51-52 NOTE 18 PREPAID EXPENSES ...... 52 NOTE 19 EMPLOYEE BENEFITS RELATED LIABILITIES...... 52 NOTE 20 OTHER ASSET AND LIABILITIES...... 52 NOTE 21 DEFERRED REVENUE ...... 53 NOTE 22 SHAREHOLDERS’ EQUITY...... 53-55 NOTE 23 REVENUE AND COST OF SALES...... 55 NOTE 24 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING EXPENSES, ...... GENERAL ADMINISTRATIVE EXPENSES...... 56 NOTE 25 EXPENSES BY NATURE ...... 56 NOTE 26 OTHER OPERATING INCOME AND EXPENSES ...... 57 NOTE 27 INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES...... 57 NOTE 28 FINANCIAL INCOME ...... 58 NOTE 29 FINANCIAL EXPENSES ...... 58 NOTE 30 TAX ASSET AND LIABILITIES...... 58-62 NOTE 31 EARNINGS PER SHARE...... 62 NOTE 32 BALANCES AND TRANSACTIONS WITH RELATED PARTIES...... 63-67 NOTE 33 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS...... 67-80 NOTE 34 FINANCIAL INSTRUMENTS ...... 81-84 NOTE 35 EVENTS AFTER THE BALANCE SHEET DATE...... 84 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31 DECEMBER 2016, 2015 AND 2014
(Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Restated (*) Restated (*) Audited Audited Audited Current Period Previous Period Previous Period ASSETS Notes 2016 2015 2014
Current Assets 3.501.795.901 3.477.399.742 3.262.280.793 Cash and Cash Equivalents 5 2.169.912.611 1.344.388.200 1.055.071.051 Financial Investments 6 754.935 704.437 778.877 Trade Receivables - Due from related parties 8-32 602.050.480 572.655.892 527.891.860 - Other trade receivables 8 170.895.789 190.547.613 184.892.563 Other Receivables - Due from related parties 9-32 1.618.637 802.126.831 984.706.867 - Other receivables 9 20.067.395 36.102.814 20.591.448 Inventories 10 361.942.164 315.486.154 274.795.357 Prepaid Expenses - Due to related parties 18-32 78.046.637 112.601.084 116.813.193 - Other prepaid expenses 18 37.326.851 56.601.534 45.760.424 Current Income Tax Assets 11.063.641 825.280 967.014 Other Current Assets 20 48.116.761 45.359.903 50.012.139
Non-Current Assets 2.024.393.048 1.724.400.850 1.305.361.800 Financial Investments 6 928.800.295 765.334.184 529.090.164 Trade Receivables - Due from related parties 8-32 65.491 6.196.664 5.016.739 Other Receivables - Other receivables 9 185.292 176.911 173.841 Investment Properties 11 14.587.592 12.904.161 11.971.843 Tangible Assets 12 1.032.162.499 891.477.307 721.432.631 Intangible Assets 13 1.573.673 1.808.877 1.823.464 Prepaid Expenses 18 14.160.059 28.562.343 25.993.023 Deferred Tax Assets 30 32.858.147 17.936.217 9.855.909 Other Non-Current Assets - 4.186 4.186
TOTAL ASSETS 5.526.188.949 5.201.800.592 4.567.642.593
(*) Restatement effects have been explained in Note 2.
1 The accompanying notes form an integral part of these consolidated financial statements. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31 DECEMBER 2016, 2015 AND 2014
(Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Restated (*) Restated (*) Audited Audited Audited Previous Previous Current Period Period Period Notes 2016 2015 2014 Current Liabilities 3.169.041.952 1.785.736.307 1.659.870.610 Short Term Financial Liabilities 7 544.791.623 932.018.207 805.663.027 Short Term Portion of Long Term Financial Liabilities 7 1.815.280.366 27.772.158 47.498.415 Trade Payables - Due to related parties 8-32 335.895.278 311.000.386 322.557.410 - Other trade payables 8 302.086.015 284.456.228 282.083.463 Employee Benefit Related Liabilities 19 30.593.339 27.331.047 19.777.216 Other Payables - Due to related parties 9-32 - 86.239.625 57.719.971 - Other payables 9 8.431.010 4.472.618 45.380.378 Deferred Revenue 21 48.439.307 39.895.543 19.276.761 Current Income Tax Liabilities 30 14.818.549 9.514.388 9.951.871 Short Term Provisions - Provisions for employee benefits 17 32.320.259 27.251.246 21.823.994 - Other short term provisions 15 24.095.936 24.011.257 18.887.221 Other Current Liabilities 20 12.290.270 11.773.604 9.250.883
Non-Current Liabilities 502.550.519 1.807.684.924 1.790.276.343 Long Term Financial Liabilities 7 384.844.123 1.735.320.937 1.705.163.759 Other Payables - Due to related parties 32 - - 21.262.355 Long Term Provisions - Provisions for employee benefits 17 72.356.363 37.439.337 32.650.452 Deferred Tax Liabilities 30 45.350.033 34.924.650 31.199.777
SHAREHOLDERS’ EQUITY 22 1.854.596.478 1.608.379.361 1.117.495.640 Equity Attributable To Equity Holders’ of the Parent 1.649.206.349 1.398.657.101 974.710.579 Share Capital 342.000.000 342.000.000 342.000.000 Inflation Adjustments to Share Capital 108.056.201 108.056.201 108.056.201 Effect of Business Combinations Under Common Control (141.862.799) (161.872.759) (161.872.759) Other Comprehensive Income/Expense not to be Reclassified to Profit and Loss -Gains and Losses from Revaluation Funds - Increases on Revaluation of Plant, Property and Equipment 5.231.735 5.231.735 5.231.735 - Actuarial loss on post employment termination benefit obligation (16.686.755) (430.543) (752.410) Other Comprehensive Income/Expense to be Reclassified to Profit and Loss -Currency Translation Adjustments 3.215.880 1.080.204 - - Gains on Revaluation Funds - Gains from Financial Assets Measured at Fair Value through Other Comprehensive Income 695.363.441 539.968.646 315.553.570 Restricted Reserves Appropriated from Profits 119.806.833 112.116.833 104.901.091 Retained Earnings 303.710.250 160.377.409 45.911.283 Net Profit for the Period 230.371.563 292.129.375 215.681.868 Non-Controlling Interest 205.390.129 209.722.260 142.785.061 TOTAL LIABILITIES AND EQUITY 5.526.188.949 5.201.800.592 4.567.642.593 (*) Restatement effects have been explained in Note 2.
2 The accompanying notes form an integral part of these consolidated financial statements. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 AND 2015
(Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Audited Restated (*) Audited Current Period Previous Period Notes 2016 2015
Revenue 23 3.921.686.855 3.793.737.272 Cost of Sales (-) 23 (2.999.732.967) (2.924.617.090) GROSS PROFIT FROM OPERATIONS 921.953.888 869.120.182 General Administrative Expenses (-) 24-25 (116.580.651) (112.724.354) Marketing, Selling and Distribution Expenses (-) 24-25 (366.845.974) (344.441.814) ResearchandDevelopmentExpenses(-) 24-25 (8.733.516) (9.188.838) Other Operating Income 26 86.622.093 115.378.374 Other Operating Expenses (-) 26 (51.651.473) (87.196.234) OPERATING PROFIT FROM MAIN 464.764.367 430.947.316 OPERATION Income from Investment Activities 27 443.595.719 798.074.110 Expenses from Investment Activities (-) 27 (113.224.762) (233.809.590) OPERATING PROFIT BEFORE 795.135.324 995.211.836 FINANCIAL INCOME AND EXPENSES Financial Income 28 135.086.029 184.768.227 Financial Expenses (-) 29 (637.981.038) (818.419.023) PROFIT BEFORE TAX 292.240.315 361.561.040 Tax Expense 30 (50.235.585) (38.746.904) Corporate Income Tax Expense (-) (58.661.106) (55.022.708) Deferred Tax Income 8.425.521 16.275.804 PROFIT FOR THE YEAR 242.004.730 322.814.136
Distribution of the Profit for the Year Non-Controlling Interest 11.633.167 30.684.761 Equity Holders of the Parent 230.371.563 292.129.375 Earning per Share 31 0,67 0,85
(*) Restatement effects have been explained in Note 2.
3 The accompanying notes form an integral part of these consolidated financial statements. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 AND 2015
(Amounts expressed in Turkish Lira (TL) unless otherwise stated.) Restated (*) Audited Audited Previous Current Period Period 2016 2015
PROFIT FOR THE YEAR 242.004.730 322.814.136
Other Comprehensive Income: Items not to be Reclassified Under Profit and Loss (16.977.326) 424.214 Actuarial Gain/(Loss) on Post-Employment Termination Benefit (21.221.658) 530.268 Obligation
Deferred Tax Effect 4.244.332 (106.054)
Items to be Reclassified Under Profit and Loss 156.304.257 237.136.582 Currency Translation Adjustments 1.011.452 12.664.604 Change in Revaluation Funds of Financial Assets 163.466.111 236.286.293
Deferred Tax Effect (8.173.306) (11.814.315)
OTHER COMPREHENSIVE INCOME 139.326.931 237.560.796
TOTAL COMPREHENSIVE INCOME 381.331.661 560.374.932
Distribution of Total Comprehensive Income Non-Controlling Interest 9.685.839 42.428.410 Equity holders of the Parent 371.645.822 517.946.522
(*) Restatement effects have been explained in Note 2.
4 The accompanying notes form an integral part of these consolidated financial statements. 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 2016 AND 2015 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Accumulated Other Other Comprehensive Comprehensive Income To Income Not To Be Be Reclassified Under Reclassified Under Profit Accumulated Profit And Loss And Loss Profit
Effect of Actuarial Business Revaluation Loss on Post- Inflation Combinations Financial Currency of Plant, Employment Restricted Equity Adjustments Under Assets Translation Property and Termination Reserves Net Profit Attributable to Non- Share to Share Common Measured at Adjustments Equipment Benefit Appropriated for the Retained Equity Holders Controlling Capital Capital Control Fair Value Obligation from Profits Period Earnings of the Parent Interest Total Equity As of 1 January 2015 (Previously reported) 342.000.000 108.056.201 - 315.553.570 - 5.231.735 (695.347) 104.901.091 211.712.640 50.843.109 1.137.602.999 92.365.694 1.229.968.693 Restatement effect ------(57.063) - 3.969.228 (4.931.826) (1.019.661) 50.419.367 49.399.706 Transactions under common control - - (161.872.759) ------(161.872.759) - (161.872.759) As of 1 January 2015 (Restated) 342.000.000 108.056.201 (161.872.759) 315.553.570 - 5.231.735 (752.410) 104.901.091 215.681.868 45.911.283 974.710.579 142.785.061 1.117.495.640 Total comprehensive - - - 224.415.076 1.080.204 - 321.867 - 292.129.375 - 517.946.522 42.428.410 560.374.932 income Dividend paid (*) ------(94.000.000) (94.000.000) (5.158.667) (99.158.667)
Transactions under ------29.667.456 29.667.456 common control Transfer ------7.215.742 (215.681.868) 208.466.126 - - - As of 31 December 2015 342.000.000 108.056.201 (161.872.759) 539.968.646 1.080.204 5.231.735 (430.543) 112.116.833 292.129.375 160.377.409 1.398.657.101 209.722.260 1.608.379.361
(*) At the General Assembly Meeting for the year of 2014 held on 26 March 2015, it has been resolved to distribute TRY 94.000.000 as cash and fully funded by the profit for the year and started to be distributed as of April 7th 2015..
5 The accompanying notes form an integral part of these consolidated financial statements. 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 2016 AND 2015 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Accumulated Other Other Comprehensive Comprehensive Income Income Not To Be To Be Reclassified Under Reclassified Under Profit Accumulated Profit And Loss And Loss Profit
Effect of Revaluation Actuarial Business Currency of Plant, Loss on Post- Equity Inflation Combinations Financial Translation Property Employment Restricted Attributable Adjustments Under Assets Adjustments and Termination Reserves to Equity Non- Share to Share Common Measured at Equipment Benefit Appropriated Net Profit for Retained Holders of the Controlling Capital Capital Control Fair Value Obligation from Profits the Period Earnings Parent Interest Total Equity As of 1 January 2016 (Previously reported) 342.000.000 108.056.201 - 539.968.646 - 5.231.735 (373.480) 112.116.833 260.288.906 161.340.007 1.528.628.848 110.801.136 1.639.429.984 Restatement effect - - - - 1.080.204 - (57.063) - 31.840.469 (962.598) 31.901.012 98.921.124 130.822.136 Transactions under common control - - (161.872.759) ------(161.872.759) - (161.872.759) As of 1 January 2016 (Restated) 342.000.000 108.056.201 (161.872.759) 539.968.646 1.080.204 5.231.735 (430.543) 112.116.833 292.129.375 160.377.409 1.398.657.101 209.722.260 1.608.379.361 Total comprehensive - - - 155.394.795 2.135.676 - (16.256.212) - 230.371.563 - 371.645.822 9.685.839 381.331.661 income Dividend paid (**) - - (14.000.000) ------(94.000.000) (108.000.000) (6.825.333) (114.825.333) Transaction with non- controlling interest ------(13.271.467) (13.271.467) (7.254.329) (20.525.796) Gain on sale of real estate ------174.893 174.893 61.692 236.585 Transfer - - 34.009.960 - - - - 7.690.000 (292.129.375) 250.429.415 - - - As of 31 December 2016 342.000.000 108.056.201 (141.862.799) 695.363.441 3.215.880 5.231.735 (16.686.755) 119.806.833 230.371.563 303.710.250 1.649.206.349 205.390.129 1.854.596.478
(**) At the General Assembly Meeting for the year of 2015 held on 24 March 2016, it has been resolved to distribute TRY 94.000.000 as cash and fully funded by the profit for the year and started to be distributed as of April 5th 2016.
6 The accompanying notes form an integral part of these consolidated financial statements. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 AND 2015 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Restated (*) Audited Audited Current Previous Period Period 1 January- 1 January- 31 December 31 December Notes 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the year 242.004.730 322.814.136 Adjustments to reconcile net profit to net cash provided by operating activities Adjustment for depreciation and amortization expenses Depreciation expenses of tangible assets 11-12 82.078.732 74.890.486 Amortization expenses of intangible assets 13 845.978 881.009 Adjustment for impairment loss Adjustment for impairment loss of other financial investments Financialinvestmentvaluationdecrease/(increase) (50.498) 74.440 Adjustment for impairment loss of inventories 10 2.240.020 7.216.500 Adjustments for provisions Adjustments for provisions related with employee benefits Provisionforemploymentbenefits 17 37.823.556 16.735.799 Provisionforunusedvacation 17 12.988.272 11.305.065 Performancepremiumprovision 17 14.894.595 12.593.706 Provision for lawsuits 1.237.740 1.059.324 Adjustments for other provisions Allowance for doubtful receivables 8 677.474 950.776 Provision / (reversal) of sales return (4.007.038) 4.007.038 Change in other provisions (net) 2.856.865 398.992 Adjustment for dividend income (683.686) (870.451) Adjustment for interest income/(expense) Adjustmentforinterestincome 27 (76.346.373) (67.832.604) Adjustment for interest expenses Discountexpenses(net) (3.178.695) (2.204.523) Interestexpenses 29 76.968.092 72.125.042 Adjustments for Losses (Gains) on Fair Values Adjustments for Losses (Gains) on Fair Value of Investment Properties 27 (1.705.000) (865.000) Adjustmentfortaxexpenses 30 50.235.585 38.746.904 Adjustment for gains arised from tangible assets Loss/(Gain) on sale of tangible and intangible assets (net) 27 949.531 (266.111) Other adjustments for which cash effects are investing or financing cash flow Change in foreign currency of financial liabilities (net) 28-29 419.548.700 555.066.754 Changeinforeigncurrencyfrominvestingactivities(net) 27 (245.574.571) (486.571.928) Commission expenses and finance service income (net) 6.378.217 6.459.000 Paid stamp taxes for acquisition of subsidiary 718.894 - Other adjustments to reconcile profit (loss) Rentincome 27 (7.679.254) (7.932.696) Net Operating cash flows provided before changes in working capital 613.221.866 558.781.658
Restated (*) Audited
The accompanying notes form an integral part of these consolidated financial statements. 7 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 AND 2015 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
Previous Audited Period Current Period 1 January- 1 January- 31 December 31 December 2015 Notes 2016 Changes in Working Capital Decrease / (Increase) in trade receivables 18.605.000 (7.315.833) Increase in trade receivables from related parties (22.717.765) (45.194.716) Increase in inventories (48.696.030) (47.907.297) Decrease / (Increase) in other receivables and other current assets 81.505.780 (20.018.248) Increase in trade payables 20.388.034 2.819.749 (Decrease) / Increase in trade payables to related parties 24.732.976 (10.916.842) (Decrease) / Increase in other payables and liabilities 18.683.685 (8.633.650) Net cash generated from operations 705.723.546 421.614.821 Payments Related with Provisions for Employee Benefits Employment termination benefit paid 17 (24.267.576) (12.797.434) Unusedvacationpaid 17 (10.904.937) (8.714.525) Performancepremiumpaid 17 (14.074.903) (11.335.770) Lawsuits provision paid (2.888) (341.318) Taxespaid (63.595.306) (55.318.457) Collections from doubtful trade receivables 8 23.675 458.447 Net cash generated from operating activities 592.901.611 333.565.764
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of tangible and intangible assets 4.156.147 2.174.111 Acquisitions of tangible assets 12 (257.178.994) (215.718.313) Acquisitions of intangible assets 13 (542.139) (315.590) Cash outflow due to acquisition of subsidiary (20.525.796) - Paid stamp taxes for acquisition of subsidiary (718.894) - Change in non-trade receivables from related parties 800.508.195 364.406.110 Dividend income 683.686 870.451 Interestreceived 76.346.373 67.832.604 Proceeds from capital increase of subsidiaries - 29.667.456 Rent income 7.679.254 7.932.696 Net cash generated from investing activities 610.407.832 256.849.525
CASH FLOWS FROM FINANCING ACTIVITIES Loans acquired 756.796.184 602.029.402 Loan repayment (1.106.308.827) (1.043.733.147) Change in leasing liabilities (363.593) (376.556) Dividends paid (114.825.333) (99.158.667) Interest paid (72.418.409) (71.862.326) Changes in non-trade payables to related parties (86.239.625) 7.257.299 Net cash used in financing activities (623.359.603) (605.843.995)
NET CHANGE IN CASH AND CASH EQUIVALENTS 579.949.840 (15.428.706) THE EFFECT OF FOREIGN EXCHANGE RATE CHANGE ON 245.574.571 304.745.855 CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE 5 1.344.388.200 1.055.071.051 YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE 5 2.169.912.611 1.344.388.200 PERIOD
The accompanying notes form an integral part of these consolidated financial statements. 8 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
1. ORGANIZATION AND OPERATIONS OF THE GROUP Ülker Bisküvi Sanayi A.Ş. (“the Company”) and its subsidiaries (all together “the Group”), comprises of the parent Ülker Bisküvi Sanayi A.Ş. (“the Company”) and ten subsidiaries in which the Company owns the majority share of the capital or which are controlled by the Company (2015: ten). 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 Borsa Istanbul since 30 October 1996, as of 31 December 2003.
The headquarter of Ülker Bisküvi Sanayi A.Ş. is located Kısıklı Mah. Ferah Cad. No:1 Büyük Çamlıca Üsküdar / Istanbul.
As of 31 December 2016, the total number of people employed by the Group is 8.462, which contains 986 employees who worked as subcontractors (31 December 2015: 9.488, subcontractor: 1.071).
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. Shareholder pladis Foods Limited is a subsidiary of Yıldız Holding A.Ş. with a shares of 100%.
As of 31 December 2016 and 31 December 2015, the names and percentages of the shareholders holding more than 10% of the Company’s share capital are as follows: 2016 2015 Name of the Shareholders Share Percentage Share Percentage Yıldız Holding A.Ş. 98.912.930 %28,92 168.124.482 %49,16 pladis Foods Limited (*) 71.820.000 %21,00 -- Yıldız Holding A.Ş. Subsidiaries and Ülker Family 29.267.569 %8,56 27.738.115 %8,11 Other 141.999.501 %41,52 146.137.403 %42,73 342.000.000 %100,00 342.000.000 %100,00 (*) Yıldız Holding A.Ş. has sold 71.820.000 shares of Ülker Bisküvi Sanayi A.Ş which is equivalent %21 to pladis Foods Limited as of 23 December 2016.
As of 31 December 2016 and 2015, the details of the subsidiaries under full consolidiation in terms of direct and effective share of ownership and principal business activities (The change rate in ownership of the entities which acquired with transaction under common control in 2016 has been shown 2015 as well) are as follows:
31 December 2016 31 December 2015 Ratio of Ratio of Ratio of Ratio of Direct Effective Direct Effective Nature of Subsidiaries Ownership Ownership Ownership Ownership Operation Biskot Bisküvi Gıda Sanayi ve Ticaret %73,9 %73,9 %73,9 %73,9 Manufacturing A.Ş. Ülker Çikolata Sanayi A.Ş. %91,7 %91,7 %91,7 %91,7 Manufacturing Atlas Gıda Pazarlama Sanayi ve %100,0 %100,0 %100,0 %100,0 Trading Ticaret A.Ş. Reform Gıda Paz. San. ve Tic. A.Ş. %100,0 %100,0 %100,0 %100,0 Trading İstanbul Gıda Dış Ticaret A.Ş. (*) %100,0 %100,0 %100,0 %100,0 Export UI Egypt B.V. (**) %51,0 %51,0 %51,0 %51,0 Investing Hi-Food for Advanced Food - %51,4 - %45,9 Manufacturing Industries (**) Sabourne Investments Ltd (***) %100,0 %100,0 %100,0 %100,0 Investing Food Manufacturers’ Company (***) - %55,0 - %55,0 Manufacturing Food Manufacturers’ Company for - %52,3 - %52,3 Export Distribution (***) (*) The Company purchased 20.250.000 shares of İstanbul Gıda Dış Ticaret A.Ş. from Yıldız Holding A.Ş., who is 100% shareholder, for an amount of TRY 43 million as of 31 March 2016.
9 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
1. ORGANIZATION AND OPERATIONS OF THE GROUP (cont’d)
(**)The Company purchased 51.0% shares of UI Egypt B.V., operating in Netherlands, from Yıldız Holding A.Ş. for an amount of USD 30 million as of 31 March 2016. As a result of the transaction, the Company has gained the controlling power in UI Egypt B.V. and Hi Food for Advanced Food Industries, which UI Egypt B.V. has 90% shares. Food Manufacturers' Company, subsidiary of the Company, has acquired 10% share of Hi Food for Advanced Food Industries amounting SAR 19.721.937 on 13 December 2016.
(***)The Company purchased 100.0% shares of Sabourne Investments Limited., from Yıldız Holding A.Ş. for an amount of USD 50 million as of 27 June 2016. As a result of the transaction, the Company has gained the controlling power in Food Manufacturers’ Company, which Sabourne Investments Limited has 55.0% shares and the controlling power in Food Manufacturers’ Company for Distribution, which Food Manufacturers’ Company has 95.0% shares.
Dividend Paid:
The Company has paid a dividend amount of TRY 94.000.000 (2015: TRY 94.000.000) in the current period. Dividend per share is TRY 0.27 (2015: TRY 0.27).
Approval of Financial Statements:
The Board of Directors has approved the financial statements and given authorization for the issuance on 7 March 2017. The General Assembly has the authority to amend/modify the financial statements.
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
2.1 Basis of the presentation: Principles for Preparation of Financial Statements 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 (“TAS”) 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 Company 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.
10 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d) 2.1 Basis of the presentation(cont’d):
Principals for Preparation of Financial Statements and Significant Accounting Policies
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.
As of 31 December 2016, rates declared by Central Bank of Republic of Turkey are; 1 Euro = TRY 3,7099, 1 USD = TRY 3,5192, 1 SAR = TRY 0,9383, 1 EGP = TRY 0,1943 (31 December 2015: 1 Euro = TRY 3,1776, 1 USD = TRY 2,9076, 1 SAR = TRY 0,7747, 1 EGP = TRY 0,3716). For the period between January 1, 2016 and December 31 2016, average rates declared by Central Bank of Republic of Turkey are 1 Euro = TRY 3,3375, 1 USD = TRY 3,0181, 1 SAR = TRY 0,8047, 1 EGP = TRY 0,3195 (2015: 1 Euro = TRY 3,0187, 1 USD = TRY 2,7191, 1 SAR = TRY 0,7249, 1 EGP = TRY 0,3517).
Consolidation
(a) Subsidaries
Subsidiaries are all 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.
(b) Changes in ownership interests in subsidiaries without change of control
Changes in the Group's ownership interests in subsidiaries that do not result in the loss of control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recorded directly in equity and attributed to owners of the Company.
(c) Losses control of subsidiaries
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable TAS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under TAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.
11 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.2 Changes in the Accounting Policies:
Accounting policy changes are applied retrospectively and the previous year financial statements are rearranged.
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 reclassified, and material differences are presented. The Group has made some reclassifications in order to conform to current period financial statements for prior periods. The nature of the classifications and amounts are as follows:
As per the principle related to “Accounting for business combinations under common control” the Public Oversight Accounting and Auditing Standards Authority issued in the Official Gazette dated 21 July 2013, business combinations under common control shall be accounted through restating previous period’s financial statements via the pooling of interest method. The Group management restated only its consolidated balance sheet as at 31 December 2015 and the consolidated statements of comprehensive income and cash flows for the year then ended at 31 December 2015 for the transactions made under common control (details explained in Note 1) to fulfil the economic decision-making needs of financial statement users, because of the impracticability, within the scope of TAS 8. Effect of the restatements are shown below. Reported Restated Previous Previous Period Effects of Period 31 December Restatement with 31 December 2015 Eliminations 2015
Current Assets 2.418.802.807 1.058.596.935 3.477.399.742 Cash and Cash Equivalents 1.319.138.698 25.249.502 1.344.388.200 Financial Investments 704.437 - 704.437 Trade Receivables 648.516.627 114.686.878 763.203.505 Other Receivables 30.821.174 807.408.471 838.229.645 Inventories 234.137.771 81.348.383 315.486.154 Prepaid Expenses 149.529.118 19.673.500 169.202.618 Current Income Tax Assets - 825.280 825.280 Other Current Assets 35.954.982 9.404.921 45.359.903
Non-Current Assets 1.507.784.747 216.616.103 1.724.400.850 Financial Investments 765.334.184 - 765.334.184 Trade Receivables 6.196.664 - 6.196.664 Other Receivables 173.437 3.474 176.911 Investment Properties 11.865.000 1.039.161 12.904.161 Tangible Assets 678.525.362 212.951.945 891.477.307 Intangible Assets 1.495.673 313.204 1.808.877 Prepaid Expenses 28.562.349 (6) 28.562.343 Deferred Tax Assets 15.627.892 2.308.325 17.936.217 Other Non-Current Assets 4.186 - 4.186
TOTAL ASSETS 3.926.587.554 1.275.213.038 5.201.800.592
12 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.2 Changes in the Accounting Policies (cont’d):
Comparative Information and Restatement of Prior Period Consolidated Financial Statements (cont’d) Reported Restated Previous Previous Period Period 31 December Effects of Restatement 31 December 2015 with Eliminations 2015
Current Liabilities 653.505.104 1.132.231.203 1.785.736.307 Short Term Financial Liabilities 92.987.409 839.030.798 932.018.207 Short Term Portion of Long Term 19.921.073 7.851.085 27.772.158 Financial Liabilities Trade Payables 474.424.217 121.032.397 595.456.614 Employee Benefit Related Liabilities 20.844.357 6.486.690 27.331.047 Other Payables 1.375.545 89.336.698 90.712.243 Deferred Revenue - 39.895.543 39.895.543 Current Income Tax Liabilities 8.251.757 1.262.631 9.514.388 Short Term Provisions 25.272.122 25.990.381 51.262.503 Other Current Liabilities 10.428.624 1.344.980 11.773.604
Non-Current Liabilities 1.633.652.466 174.032.458 1.807.684.924 Long Term Financial Liabilities 1.570.188.333 165.132.604 1.735.320.937 Long Term Provisions 28.539.483 8.899.854 37.439.337 Deferred Tax Liabilities 34.924.650 - 34.924.650
SHAREHOLDERS’ EQUITY 1.639.429.984 (31.050.623) 1.608.379.361 Equity Attributable To Equity Holders’ of the Parent 1.528.628.848 (129.971.747) 1.398.657.101 Share Capital 342.000.000 - 342.000.000 Inflation Adjustments to Share Capital 108.056.201 - 108.056.201 Effect of Business Combinations Under Common Control - (161.872.759) (161.872.759) Other Comprehensive Income/Expense not to be Reclassified to Profit and Loss - Actuarial loss on post employment termination benefit obligation (373.480) (57.063) (430.543) - Investment property valuation funds 5.231.735 - 5.231.735 Other Comprehensive Income/Expense to be Reclassified to Profit and Loss - Currency Translation Adjusment - 1.080.204 1.080.204 - Financial assets revaluation fund 539.968.646 - 539.968.646 Restricted Reserves Appropriated from Profits 112.116.833 - 112.116.833 Retained Earnings 161.340.007 (962.598) 160.377.409 Net Profit for the Period 260.288.906 31.840.469 292.129.375 Non-Controlling Interest 110.801.136 98.921.124 209.722.260
TOTAL LIABILITIES AND EQUITY 3.926.587.554 1.275.213.038 5.201.800.592
13 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.2 Changes in the Accounting Policies (cont’d):
Comparative Information and Restatement of Prior Period Consolidated Financial Statements (cont’d)
Reported Restated Previous Previous Period Effects of Period 31 December Restatement with 31 December 2014 Eliminations 2014
Current Assets 2.037.226.487 1.225.054.306 3.262.280.793 Cash and Cash Equivalents 1.033.829.882 21.241.169 1.055.071.051 Financial Investments 778.877 - 778.877 Trade Receivables 603.842.384 108.942.039 712.784.423 Other Receivables 13.676.676 991.621.639 1.005.298.315 Inventories 212.335.266 62.460.091 274.795.357 Prepaid Expenses 129.778.124 32.795.493 162.573.617 Current Income Tax Assets 239.096 727.918 967.014 Other Current Assets 42.746.182 7.265.957 50.012.139
Non-Current Assets 1.150.964.524 154.397.276 1.305.361.800 Financial Investments 529.047.891 42.273 529.090.164 Trade Receivables 5.016.739 - 5.016.739 Other Receivables 171.384 2.457 173.841 Investment Properties 11.000.000 971.843 11.971.843 Tangible Assets 568.962.508 152.470.123 721.432.631 Intangible Assets 1.313.408 510.056 1.823.464 Prepaid Expenses 25.993.023 - 25.993.023 Deferred Tax Assets 9.455.385 400.524 9.855.909 Other Non-Current Assets 4.186 - 4.186
TOTAL ASSETS 3.188.191.011 1.379.451.582 4.567.642.593
14 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.2 Changes in the Accounting Policies (cont’d):
Comparative Information and Restatement of Prior Period Consolidated Financial Statements (cont’d)
Reported Restated Previous Previous Period Effects of Period 31 December Restatement with 31 December 2014 Eliminations 2014
Current Liabilities 657.499.682 1.002.370.928 1.659.870.610 Short Term Financial Liabilities 78.154.911 727.508.116 805.663.027 Short Term Portion of Long Term 13.293.204 34.205.211 47.498.415 Financial Liabilities Trade Payables 511.339.510 93.301.363 604.640.873 Employee Benefit Liabilities 16.818.074 2.959.142 19.777.216 Other Payables 944.034 102.156.315 103.100.349 Deferred Revenue - 19.276.761 19.276.761 Current Income Tax Liabilities 9.354.763 597.108 9.951.871 Short Term Provisions 19.569.362 21.141.853 40.711.215 Other Current Liabilities 8.025.824 1.225.059 9.250.883
Non-Current Liabilities 1.300.722.636 489.553.707 1.790.276.343 Long Term Financial Liabilities 1.243.537.763 461.625.996 1.705.163.759 Other Liabilities - 21.262.355 21.262.355 Long Term Provisions 25.985.036 6.665.416 32.650.452 Deferred Tax Liabilities 31.199.837 (60) 31.199.777
SHAREHOLDERS’ EQUITY 1.229.968.693 (112.473.053) 1.117.495.640 Equity Attributable To Equity Holders’ of the Parent 1.137.602.999 (162.892.420) 974.710.579 Share Capital 342.000.000 - 342.000.000 Inflation Adjustments to Share Capital 108.056.201 - 108.056.201 Effect of Business Combinations Under Common Control - (161.872.759) (161.872.759) Other Comprehensive Income/Expense not to be Reclassified to Profit and Loss - Actuarial loss on post employment termination benefit obligation (695.347) (57.063) (752.410) - Investment property valuation funds 5.231.735 - 5.231.735 Other Comprehensive Income/Expense to be Reclassified to Profit and Loss - Financial assets revaluation fund 315.553.570 - 315.553.570 Restricted Reserves Appropriated from Profits 104.901.091 - 104.901.091 Retained Earnings 50.843.109 (4.931.826) 45.911.283 Net Profit for the Period 211.712.640 3.969.228 215.681.868 Non-Controlling Interest 92.365.694 50.419.367 142.785.061
TOTAL LIABILITIES AND EQUITY 3.188.191.011 1.379.451.582 4.567.642.593
15 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.2 Changes in the Accounting Policies (cont’d):
Comparative Information and Restatement of Prior Period Consolidated Financial Statements (cont’d) Reported Restated Previous Previous Period Effects of Period 1 January- Restatement 1 January- 1 January-31 December 2015 31 December with 31 December Profit Loss 2015 Eliminations 2015
Revenue 3.075.120.076 718.617.196 3.793.737.272 Cost of Sales (-) (2.408.422.513) (516.194.577) (2.924.617.090) GROSS PROFIT FROM OPERATIONS 666.697.563 202.422.619 869.120.182 General Administrative Expenses (-) (71.743.647) (40.980.707) (112.724.354) Marketing, Sales and Distribution Expenses (-) (232.289.703) (112.152.111) (344.441.814) Research Expenses (-) (8.757.144) (431.694) (9.188.838) Other Operating Income 84.670.488 30.707.886 115.378.374 Other Operating Expenses (-) (52.150.358) (35.045.876) (87.196.234) OPERATING PROFIT FROM MAIN 386.427.199 430.947.316 OPERATION 44.520.117 Income from Investment Activities 454.682.737 343.391.373 798.074.110 Expenses from Investment Activities (-) (190.063.931) (43.745.659) (233.809.590) OPERATING PROFIT BEFORE FINANCIAL INCOME AND EXPENSES 651.046.005 344.165.831 995.211.836 Financial Income 135.221.113 49.547.114 184.768.227 Financial Expenses (-) (466.425.843) (351.993.180) (818.419.023) PROFIT BEFORE TAX 319.841.275 41.719.765 361.561.040 Tax Expense (36.117.509) (2.629.395) (38.746.904) Tax on Income (-) (50.485.572) (4.537.136) (55.022.708) Deferred Tax Income 14.368.063 1.907.741 16.275.804 PROFIT FOR THE YEAR 283.723.766 39.090.370 322.814.136
Other Comprehensive Income: Items not to be Reclassified Under Profit and Loss 424.214 - 424.214 Actuarial Gain/(Loss) on Post-Employment Termination Benefit Obligation 530.268 - 530.268 Deferred Tax Effect (106.054) - (106.054)
Items to be Reclassified Under Profit and Loss 224.471.978 12.664.604 237.136.582 Currency Translation Adjustments - 12.664.604 12.664.604
Change in Revaluation Funds of Financial Assets 236.286.293 - 236.286.293
Deferred Tax Effect (11.814.315) - (11.814.315)
OTHER COMPREHENSIVE INCOME 224.896.192 12.664.604 237.560.796
TOTAL COMPREHENSIVE INCOME 508.619.958 51.754.974 560.374.932
16 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.3 Adoption of New and Revised International Financial Reporting Standards: a. Standards, amendments and interpretations applicable as at 31 December 2016
- IFRS 14 ‘Regulatorydeferral accounts’, effective fromannual periods beginning on or after 1 January2016. IFRS 14, ‘Regulatory deferral accounts’ permits first–time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items..
- Annual improvements 2014, effective from annual periods beginning on or after 1 January 2016. These set of amendments impacts 4 standards: IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal. IFRS 7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1) regarding servicing contracts. IAS 19, ‘Employee benefits’ regarding discount rates. IAS 34, ‘Interim financial reporting’ regarding disclosure of information.
- Amendment to IFRS 11, 'Joint arrangements' on acquisition of an interest in a joint operation, effective from annual periods beginning on or after 1 January 2016. This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. - Amendments to IAS 16 ‘Property,plant and equipment’, and IAS 41, ‘Agriculture’, regarding bearer plants, effective from annual periods beginning on or after 1 January 2016. These amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. It has been decided that bearer plants should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. - Amendment to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets', on depreciation and amortisation, effective from annual periods beginning on or after 1 January 2016. In this amendment the it has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. It is also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. - Amendments to IAS 27, ‘Separate financial statements’ on the equity method, effective from annual periods beginning on or after 1 January 2016. These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. - Amendment to IFRS 10 ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’, effective from annual periods beginning on or after 1 January 2016.These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries. - Amendment to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative, effective from annual periods beginning on or after 1 January 2016, these amendments are as part of the IASB initiative to improvepresentation and disclosure in financial report. b. Standards, amendments and interpretations effective after 1 January 2017
- Amendments to IAS 7 ‘Statement of cash flows’ on disclosure initiative, effective from annual periods beginning on or after 1 January 2017. These amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.
17 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.3 Adoption of New and Revised International Financial Reporting Standards (cont’d):: b. Standards, amendments and interpretations effective after 1 January 2017 (cont’d)
- Amendments IAS 12 ‘Income Taxes’, effective from annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. It also clarify certain other aspects of accounting for deferred tax assets.
- Amendments to IFRS 2, ‘Share based payments’ on clarifying how to account for certain types of share-based payment transactions, effective from annual periods beginning on or after 1 January 2018. This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority.
- IFRS 9 ‘Financial instruments’, effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model.
- IFRS 15 ‘Revenue from contracts with customers’, effective from annual periods beginning on or after 1 January 2018. IFRS 15, ‘Revenue from contracts with customers’ is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally.
- Amendment to IFRS 15, ‘Revenue from contracts with customers’, effective from annual periods begining on or after 1 January 2018. These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The IASB has also included additional practical expedients related to transition to the new revenue standard.
- IFRS 16 ‘Leases’, effective from annual periods beginning on or after 1 January 2019, This standard replaces the current guidance in IAS 17 and is a farreaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short- term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
18 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.3 Adoption of New and Revised International Financial Reporting Standards (cont’d):: b. Standards, amendments and interpretations effective after 1 January 2017 (cont’d)
- Amendments to IFRS 4, ‘Insurance contracts’ regarding the implementation of IFRS 9, ‘Financial instruments’, effective from annual periods beginning on or after 1 January 2018. These amendments introduce two approaches: an overlay approach and a deferral approach. The amended standard will:
give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued; and give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments standard— IAS 39.
- Amendment to IAS 40, Investment property’ relating to transfers of investment property, effective from annual periods beginning on or after 1 January 2018. These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence.
- Annual improvements 2014–2016, effective from annual periods beginning on or after 1 January 2018. These amendments impact 3 standards: IFRS 1,’ First-time adoption of IFRS’, regarding the deletion of short-term exemptions for first-time adopters regarding IFRS 7, IAS 19, and IFRS 10 effective 1 January 2018. IFRS 12,’Disclosure of interests in other entities’ regarding clarification of the scope of the standard. These amendments should be applied retrospectively for annual periods beginning on or after 1 January 2017. IAS 28,’Investments in associates and joint ventures’ regarding measuring an associate or joint venture at fair value effective 1 January 2018.
- IFRIC 22,’ Foreign currency transactions and advance consideration’, effective from annual periods beginning on or after 1 January 2018. This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice.
The Group will apply these amendments starting from their effective dates by regarding their effects on its operations.
2.4 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 (Note 23).
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,
19 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d)
Revenue (cont’d)
Sales of goods (cont’d) 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. Sale returns are performed with respect to the current agreements with distributers and recorded as reduction of revenue in the period of sale.. 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 write-down 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: Property, plant and equipment are recognized at the value after accumulated depreciation and impairment are deducted from cost values.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Depreciation is recognized so as to write off the cost or valuation of assets, other than freehold land and properties under construction, less their residual value over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under financial leasing are depreciated over their expected useful lives on the same basis as owned assets.
Gain or loss from selling or abandoning from service of property, plant and equipment is equal to the difference between revenue and book value of assets and gain or loss is booked under statement of income.
20 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Lease - The Group as lessor
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
Lease - The Group as lessee
Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs.
Operating lease payments (also in the event that lease incentives are received to enter into operating leases, such incentives are recognized under Profit or Loss Statement) are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Business Combinations
The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition- date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Bussiness combinations are accounted in accordance with TFRS 3 "Business Combinations" except for the assets (or disposal groups) that are classified as held for sale in accordance with TFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
21 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Business Combinations (cont’d)
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
Transactions with non-controlling interests
The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For share purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. In case of the share sales to non- controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recorded in equity. Investment Properties
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. Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the year in which they arise.
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.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property that is measured at fair value to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property that is measured at fair value, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.
When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.
Intangible Assets Intangible assets acquired separately Intangible assets acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
22 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Intangible Assets (cont’d): Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives ( 5–10 years). Computer software development costs recognized as assets are amortized over their estimated useful lives. Intangible assets acquired in a business combination Intangible assets acquired in a business combination are identified and recognized separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably. The cost of such intangible assets is initially recognized at their fair value at the acquisition date Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in profit or loss when the asset is derecognized. Impairment of Assets:
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
23 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Impairment of Assets (cont’d):
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or (cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. When the Group borrows funds specifically for the purpose of the qualifying assets, the amount of borrowing costs eligible for capitalization is the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. General borrowings of the Group are capitalized to the applicable qualifying assets based on a capitalization rate. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of income/ (loss) in the period in which they are incurred.
Financial Instruments Financial assets All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets as ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity investments’, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Offsetting
Financial assets and liabilities are offset and the net amount is reported in the consolidated financial statements when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for financial assets other than those financial assets designated as at FVTPL.
24 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d) Financial Instruments (cont’d) Deferred financial expenses
Deferred financial expenses (basically expenses derived from long-term bank loans taken from financial institutions) are amortized by using effective interest method in line with long-term loans’ days to maturity.
Financial assets as 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 categorized as held for trading unless they are designated as hedges. Held-to-maturity investments Those financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment and related revenue are recognized by using effective interest method.
Available-for-sale financial assets
Quoted equity investments and quoted certain debt securities held by the Group that are traded in an active market are classified as being available-for-sale (AFS) financial assets and are stated at fair value. Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using effective interest method and foreign exchange gains and losses on monetary assets which are recognized in profit or loss. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange gains and losses that are recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income. AFS equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period. Loans and receivables Those receivables are financial assets with fixed or determinable payments that are quoted in an active market are classified under loans and receivables. Loans and receivables are measured at amortized cost using effective interest method less any impairment. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period.
25 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Financial Instruments (cont’d) Impairment of financial assets (cont’d) Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognized in consolidated income statement. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
In respect of available-for-sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity.
Cash and cash equivalents
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.
Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
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.
26 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Financial Liabilities (cont’d): 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. 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.
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.
27 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Dividend and interest income
Dividend income from investments is recognized when the shareholder's right to receive payment has been established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Earnings Per Share: Earnings per share disclosed in the consolidated income statement are determined by dividing net income attributable to equity holders of the parent by the weighted average number of shares outstanding during the period concerned.
Events After the Reporting Period Events after the reporting period are those events that occur between the balance sheet date and the date when the financial statements are authorized for issue, even if they occur after an announcement related with the profit for the year or public disclosure of other selected financial information.
The Group adjusts the amounts recognized in its financial statements if adjusting events occur after the balance sheet date.
Provisions, Contingent Assets and Contingent Liabilities:
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
The amount recognized as a provision should be the best estimate of the expenditure required to settle the present obligation at the balance sheet date, that is, the amount that an entity would rationally pay to settle the obligation at the balance sheet date
If some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement could be recognized as an asset when, and only when, it is virtually certain that reimbursement will be received and can be estimated reliably.
28 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Related Party Disclosures:
Related parties in consolidated financial statements: A related party, persons or company that is related to the company that is preparing its consolidated financial statements.
(a) A person or a close member of that person’s family is related to an company if that person:
(i) has control or joint control of the company, (ii) has significant influence over the company, (iii) is a member of the key management personnel of the ecompany or of a parent of the company.
(b) A company is related to a reporting entity if any of the following conditions applies:
(i) The company members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One company is an associate or joint venture of the other company (or an associate or joint venture of a member of a group of which the other company is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The company is a post-employment benefit plan for the benefit of employees of either the company or a compny related to the company. If the company is itself such a plan, the sponsoring employers are also related to the company.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) 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 company transaction is a transfer of resources, services or obligations between a company 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, or altenatively netted off with the cost of related asset.
29 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d): Current and deferred income tax
Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the consolidated financial statements, have been calculated on a separate-entity basis.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the income statement because of items of income or expense that are taxable or deductible in other years and it items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax liability or asset is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which are used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
30 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.4 Summary of Significant Accounting Policies (cont’d):
Current and deferred income tax (cont’d):
Current and deferred tax for the period
Current and deferred tax are recognized as in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Employee Benefits
Termination and retirement benefits Under 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 TAS 19 (Revised) Employee Benefits (“TAS 19”).
The retirement benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation. All actuarial gains and losses calculated are recognized in the other comprehensive statement of profit or loss.
Statement of Cash Flows
In the statement of cash flows, cash flows during the period are classified under operating, investing or financing activities.
The cash flows arisen from operating activities indicate cash flows due to the Group entities’ operations.
The cash flows due to investing activities indicate the Group cash flows that are used for and obtained from investments (investments in property, plant and equipment and financial investments).
The cash flows due to financing activities indicate the cash obtained from financial arrangements and used in their repayment.
Share Capital and Dividends
Ordinary shares are classified as equity. Dividends distributed over the ordinary shares are classified as dividend liability after deducting retained earnings at the period in which the dividend distribution decision is made.
Shareholders’ Equity
In the restatement of shareholders’ equity items, the addition of funds formed due to hyperinflation such as the revaluation value increase fund in share capital is not considered as a contribution from shareholders. Additions of legal reserves and retained earnings to share capital are considered as contributions by shareholders. In the restatement of shareholders’ equity items added to share capital the capital increase registry dates or the payment dates are considered.
Revaluation fund included in the value increase funds is related to the value increase at the date of the transaction of the net assets owned by the Group before the sale transaction.
31 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.5 Summary of Significant Accounting Policies (cont’d):
In the process of applying the entity’s accounting policies, which are described in note 2.4, management has made the following judgments that have the most significant effect on the amounts recognized in the financial statements:
Useful life of tangible assets:
Group has calculated the depreciation expenses regarding the useful lives specified in note 12.
Impairment of inventories A provision has been provided for inventories that are not expected to be used and are slow moving. The Group has also provided provision for inventories with net realizable values lower than costs. Based on the analysis, TL 9.867.495 impairment provision has been provided for inventories (2015: TL 8.783.613).
Doubtful receivables provision
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 2016, the provision for TL 5.903.016 of the trade receivables has been provided for as doubtful receivable provision (2015: TL 4.944.814). Deferred taxes: The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between the financial statements as reported for TFRS 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 TFRS 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.
As of 31 December 2016, the Group has accounted for deferred tax assets by TL 44.285.820 (2015: TL 32.736.325, 2014: TL 17.991.009) in consolidated financial statements due to the investment incentives regarding to expansion and product diversifications. 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.
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 with an independent third party valuation company kis Bağımsız Denetim ve SMMM A.Ş.which has CMB license. 5 years discounted cash flow analysis is applied with 7.3% (2015: 6.9%) discount rate and 1.9% (2015: 2.3%) long term growth rate for G-New and 8.9% (2015: 7.6%) discount rate and 2.7% (2015: 2.3%) long term growth rate for Godiva Belgium which are Group’s financial investments. A change in discount rate by 1%, effects the fair value of G New and Godiva Belgium amounting to TL 12.898.952 (2015: TL 11.294.051).
32 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.6 Summary of Financial Information Related to Subsidiaries:
Set out below are the summarised financial information for each subsidiary that has non-controlling interests that are material to the Group as of 31 December 2016 and 2015:
Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş.
2016 2015 Total assets 643.688.912 536.682.257 Total liabilities 364.865.891 264.381.090 Total shareholders’equity 278.823.021 272.301.167 Accumulated funds on non-controlling interests 72.706.489 71.005.432
Revenue 758.576.926 760.009.656 Net profit for the year 14.793.545 46.348.848
Cash flow provided from operating activities 82.546.131 32.541.631 Cash flow used in investment activities (67.198.229) (35.821.424) Cash flow used in financing activities 10.994.670 23.376.087
Food Manufacturers’ Company
2016 2015 Total assets 297.353.197 233.682.996 Total liabilities 130.852.712 116.470.929 Total shareholders’equity 166.500.485 117.212.067 Accumulated funds on non-controlling interests 76.505.955 53.291.094
Revenue 275.763.271 274.486.129 Net profit for the year 21.394.728 19.024.831
Cash flow provided from operating activities 54.657.376 40.154.270 Cash flow used in investment activities (54.446.036) (15.365.079) Cash flow used in financing activities 60.979 (21.125.007)
33 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
3. BUSINESS COMBINATIONS
The Company purchased 20.250.000 shares of İstanbul Gıda Dış Ticaret A.Ş. from Yıldız Holding A.Ş., who is 100% shareholder, for an amount of TRY 43 million as of 31 March 2016. The net assets acquired and the effects of transaction in equity are presented as follows:
Net Assets within the Scope of Consolidation Asset/(Liability) Current Assets Cash and cash equivalents 2.107.616 Trade receivables 180.630.937 Other receivables 1.061.196.715 Other current assets 21.474.982 Non-Current Assets Tangible and intangible assets (Net) 2.882.635 Other non-current assets 1.707.255 Current Liabilities Financial liabilities (877.541.939) Trade payables (155.346.116) Other current liabilities (57.421.414) Non-Current Liabilities Financial liabilities (145.809.229) Other non-current liabilities (4.132.149) Net Assets added into the scope of consolidation 29.749.293 Total share of the Group ownership %100,0 The portion of the net assets to Group 29.749.293 Cash paid for the acquisition (43.000.000) Net Equity Impact from the acquisition of subsidiary (13.250.707)
34 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
3. BUSINESS COMBINATIONS (cont’d)
The Company purchased 51.0% shares of UI Egypt B.V., operating in Netherlands, from Yıldız Holding A.Ş. for an amount of USD 30 million as of 31 March 2016. As a result of the transaction, the Company has gained the controlling power in UI Egypt B.V. and Hi Food for Advanced Food Industries, which UI Egypt B.V. has 90% shares. The net assets acquired and the effects of transaction in equity are presented as follows:
Net Assets within the Scope of Consolidation Asset/(Liability) Current Assets Cash and cash equivalents 2.488.891 Trade receivables 10.833.046 Other receivables 5.195.245 Other current assets 36.779.487 Non-Current Assets Tangible and intangible assets (Net) 112.375.536 Current Liabilities Financial liabilities (20.065.284) Trade payables (16.867.164) Other current liabilities (6.367.205) Non-Current Liabilities Financial liabilities (19.686.374) Other non-current liabilities (20.084.669) Net Assets added into the scope of consolidation 84.601.509 Minorityshares 8.481.038 Total share of the Group ownership %51,0 The portion of the net assets to Group 38.821.440 Cash paid for the acquisition (86.199.000) Net Equity Impact from the acquisition of subsidiary (47.377.560)
35 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
3. BUSINESS COMBINATIONS (cont’d)
The Company purchased 100.0% shares of Sabourne Investments Limited from Yıldız Holding A.Ş. for an amount of USD 50 million as of 27 June 2016. As a result of the transaction, the Company has gained the controlling power in Food Manufacturers’ Company, which Sabourne Investments Limited. has 55.0% shares and the controlling power in Food Manufacturers’ Company for Distribution, which Food Manufacturers’ Company has 95.0% shares. The net assets acquired and the effects of transaction in equity are presented as follows:
Net Assets within the Scope of Consolidation Asset/(Liability) Current Assets Cash and cash equivalents 20.739.660 Trade receivables 44.777.045 Other receivables 745.081 Other current assets 68.509.347 Non-Current Assets Tangible and intangible assets (Net) 99.047.045 Current Liabilities Financial liabilities (7.063.661) Trade payables (75.796.136) Other current liabilities (27.658.240) Non-Current Liabilities Other non-current liabilities (5.968.579) Net Assets added into the scope of consolidation 117.331.562 Minorityshares 53.291.094 Total share of the Group ownership %100,0 The portion of the net assets to Group 64.040.468 Cash paid for the acquisition (145.275.000) Net Equity Impact from the acquisition of subsidiary (81.234.532)
36 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 2016 (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. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes strategic decisions. The Group management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The board of directors review segmental analysis on gross profit and operational profit.
The Group, follows its operations with domestic (local operations of Turkish companies in Turkey) and international basis in accordance with TFRS 8. The information for 1 January - 31 December 2015 and 1 January - 31 December 2016;
Elimination 1 January-31 Domestic Foreign Effects December 2016 Revenue 2.915.350.924 1.488.977.416 (482.641.485) 3.921.686.855 Gross Profit 630.177.114 291.893.304 (116.530) 921.953.888 Operating Profit (*) 329.157.294 100.922.888 (286.435) 429.793.747
Investment expense 209.814.481 47.364.513 - 257.178.994
(*) Profit before other income/expense.
Elimination 1 January-31 Domestic Foreign Effects December 2015 Revenue 2.718.077.755 1.527.947.977 (452.288.460) 3.793.737.272 Gross Profit 595.744.104 275.046.254 (1.670.176) 869.120.182 Operating Profit (*) 308.789.143 93.534.344 441.689 402.765.176
Investment expense 167.625.196 48.002.987 - 215.628.183
(*) Profit before other income/expense
37 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
5. CASH AND CASH EQUIVALENTS
2016 2015 2014 Cash on hand 1.633.042 322.183 510.419 Demand deposits 29.317.915 28.884.182 23.749.995 Time deposits (*) 2.138.961.654 1.315.181.835 1.030.810.637 2.169.912.611 1.344.388.200 1.055.071.051
(*) All of the time deposits consist of overnight (2015: 1.315.181.835 TL ve 2014: 89.854.816 TL).
The details of time deposits:
Annually Weighted Average Currency Type Effective Interest Rate Maturity 2016 TL 10,62% January2017 374.319.771 EUR 1,50% January2017 672.616.138 USD 2,49% January2017 1.092.025.745 2.138.961.654
Annually Weighted Average Currency Type Effective Interest Rate Maturity 2015 EUR 1,59% January2016 533.399.795 USD 2,47% January2016 781.782.040 1.315.181.835
Annually Weighted Average Currency Type Effective Interest Rate Maturity 2014 TL 10,00% January2015 64.949.805 USD 2,78% January-February2015 965.860.832 1.030.810.637
6. FINANCIAL INVESTMENTS
Short Term Financial Investments: 2016 2015 2014 Available for sale financial assets 754.935 704.437 778.877 754.935 704.437 778.877
Long Term Financial Investments: 2016 2015 2014 Available for sales financial assets 928.800.295 765.334.184 529.090.164 928.800.295 765.334.184 529.090.164
38 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
6. FINANCIAL INVESTMENTS (cont’d)
Long Term Available for Sale Financial Share Share Investments Share % 2016 % 2015 % 2014 G New, Inc %12,20 187.228.229 %12,20 196.711.611 %19,23 175.542.535 Godiva Belgium BVBA %19,23 712.010.658 %19,23 537.772.863 %19,23 323.374.698 BİM Birleşik Mağazalar A.Ş. %0,20 29.361.290 %0,20 30.649.592 %0,20 29.930.540 Other 200.118 200.118 242.391 928.800.295 765.334.184 529.090.164
Available for sale financial assets are presented at their fair values. As of 31 December 2016 the after tax difference belonging to equity holder of TRY 695.363.441 as of 31 December 2016 (2015: TRY 539.968.646 and 2014: TL315.553.570) in the fair values of such assets has directly been presented in other comprehensive income under equity. As the expected value gaps for available for sale financial assets of TL 200.118 (2015: TL 200.118, 2014: TL 242.391 ) 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 accompanying consolidated financial statements
7. FINANCIAL LIABILITIES
2016 2015 2014 Short Term Liabilities 544.791.623 932.018.207 805.663.027 Short Term Portion of Long Term Liabilities 1.815.280.366 27.772.158 47.498.415 Long Term Liabilities 384.844.123 1.735.320.937 1.705.163.759 2.744.916.112 2.695.111.302 2.558.325.201
Short Term Liabilities: 2016 2015 2014 Bank loans 514.162.247 932.018.207 805.663.027 Funds borrowed from related parties (Not 32) 30.629.376 -- 544.791.623 932.018.207 805.663.027
Short Term Portion of Long Term Liabilities 2016 2015 2014 Bank Loans 1.815.280.366 27.409.159 47.121.860 Financial Lease Payables - 362.999 376.555 1.815.280.366 27.772.158 47.498.415
Long Term Liabilities 2016 2015 2014 Bank Loans 384.778.487 1.735.254.707 1.704.734.529 Financial Lease Payables 65.636 66.230 429.230 384.844.123 1.735.320.937 1.705.163.759
The syndication loan has received as of 26 November 2014. Details of Group’s syndication loans are as follows;
Syndication loan consists of two credit trenches which are USD 284.500.000 and EUR 211.823.840. 26 international banks joined to the syndication. Effective interest rate for both credit trenches is Libor + 2,75% and the maturity date is November 2017. Principal payments of the loans are repaid at maturity with semi-annual interest payments.
39 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
7. FINANCIAL LIABILITIES (cont’d)
The covenants which belong to syndication loan are as follows; a) Leverage: The ratio of the consolidated net debt at balance sheet date to the consolidated EBITDA (Earnings before interest,tax,depreciation and amortization) in the valid period should not be over 3 to 1. b) Interest Coverage: Consolidated interest coverage ratio of the Group should be at least 3 to 1. In current year, the consolidated financial statements of the Group comply with the covenants of the syndication loan agreement.
Bank Barrowings
31 December 2016
Effective Weighted Currency Type Maturity Short Term Long Term Average Interest Rate (%) TL January2017-January2021 Spot-%10,59 14.383.813 199.500.000 January 2017-February EUR 2019 %2,75 809.483.182 175.706.890 USD June2017-June2020 %3,90 1.522.762.304 7.978.500 January 2017-September %17,00 EGP 2019 4.266.762 1.593.097 SAR January2017 %1,53 9.175.928 - 2.360.071.989 384.778.487 31 December 2015
Effective Weighted Currency Type Maturity Short Term Long Term Average Interest Rate (%) TL January2016-July2016 Spot 1.398.009 - EUR February2016-June2020 %2,76 84.733.636 750.209.542 January 2016-November %3,18 USD 2017 855.399.919 978.876.603 November 2016- %14,00 EGP September 2019 10.832.140 6.168.562 SAR August2016 %1,43 7.063.662 - 959.427.366 1.735.254.707 31 December 2014
Effective Weighted Currency Type Maturity Short Term Long Term Average Interest Rate (%) TL January 2015 Spot 2.073.392 - April 2015-November %2,97 EUR 2017 11.817.724 648.233.402 February 2015-November %2,90 USD 2017 804.269.861 1.054.122.575 January 2015-September %17,00 EGP 2019 12.897.729 2.378.552 SAR January 2015 %1,49 21.726.181 - 852.784.887 1.704.734.529
40 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
7. FINANCIAL LIABILITIES (cont’d)
Bank Barrowings (cont’d)
Repayment schedule of bank loans are as follows: 2016 2015 2014 To be paid within 1 year 2.360.071.989 959.427.366 852.784.887 To be paid within 1-2 years 326.181.593 1.663.088.205 284.805.193 To be paid within 2-3 years 32.255.242 27.348.086 1.419.929.336 To be paid within 3-4 years 26.341.652 25.682.363 - To be paid within 4-5 years - 19.136.053 - 2.744.850.476 2.694.682.073 2.557.519.416
Financial lease payables
Short-Term Financial Lease Payables 2016 2015 2014 Financial lease payables - 362.999 467.784 Deferred financial lease payables costs (-) - - (91.229) - 362.999 376.555
Long-Term Financial Lease Payables 2016 2015 2014 Financial lease payables 67.729 468.398 468.398 Deferred financial lease payables costs (-) (2.093) (402.168) (39.168) 65.636 66.230 429.230
The detail of long term financial lease payables is as follows: 2016 2015 2014 To be paid within 1 year - 362.999 376.555 Tobepaidwithin1-5years 65.636 66.230 429.230 65.636 429.229 805.785
8. TRADE RECEIVABLES AND PAYABLES 2016 2015 2014 Due from Related Parties Due from related parties (Note 32) (Net) 602.050.480 572.655.892 527.891.860 602.050.480 572.655.892 527.891.860
Other Trade Receivables Tradereceivables(net) 175.965.309 194.387.255 182.537.227 Notes receivables (net) 833.496 1.105.172 6.392.821 Provision for doubtful receivables (5.903.016) (4.944.814) (4.037.485) 170.895.789 190.547.613 184.892.563
TotalShortTermTradeReceivables 772.946.269 763.203.505 712.784.423
2016 2015 2014 Due from Related Parties Due from related parties (Note 32) 65.491 6.196.664 5.016.739 Total Short Term Trade Receivables 65.491 6.196.664 5.016.739
41 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
8. TRADE RECEIVABLES AND PAYABLES (cont’d)
Trade receivables are disclosed at discounted net realizable value using the effective yield method. Net realizable value has been calculated over discount rate of 10,6% (2015: 12,9%) 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 2016 and 2015 is as follows;
2016 2015 Opening balance (4.944.814) (4.037.485) Chargefortheperiod (677.474) (950.776) Provisions released 77.986 204.676 Currency translation differencies (382.389) (619.676) Collections 23.675 458.447 Closing balance (5.903.016) (4.944.814)
Description on the level and nature of the risks related to trade receivables is provided in Note 33.
2016 2015 2014 Short Term Trade Payables Due to related parties (Note 32) (Net) 335.895.278 311.000.386 322.557.410 Tradepayables(Net) 302.086.015 284.456.228 282.083.463 637.981.293 595.456.614 604.640.873
Trade payables are disclosed at discounted net realizable value using the effective yield method. Net realizable value has been calculated over discount rate of 10,6 % (2015: 12,9%) based on the Group’s cash sales.
9. OTHER RECEIVABLES AND PAYABLES 2016 2015 2014 Other Receivables Due from related parties (Note 32) 1.618.637 802.126.831 984.706.867 Short term other receivables 20.067.395 36.102.814 20.591.448 21.686.032 838.229.645 1.005.298.315
2016 2015 2014 Other Short Term Receivables VAT receivables 11.969.170 15.463.094 12.717.532 Receivablesfrompersonnel 1.345.977 1.278.441 392.024 Deposits and guarantees given 492.863 25.196 828.476 Insurancecompensationreceivable - 13.319.191 - Other 6.259.385 6.016.892 6.653.416 20.067.395 36.102.814 20.591.448
2016 2015 2014 Other Long Term Receivables Deposits and guarantees given 185.292 176.911 173.841 185.292 176.911 173.841
2016 2015 2014 Other Payables Due to related parties (Note 32) - 86.239.625 57.719.971 Other short term payables 8.431.010 4.472.618 45.380.378 8.431.010 90.712.243 103.100.349
42 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
9. OTHER RECEIVABLES AND PAYABLES (cont’d)
2016 2015 2014 Other payables Other short term payables 5.560.898 2.314.794 43.941.056 Depositsandguaranteesreceived 2.870.112 2.157.824 1.439.322 8.431.010 4.472.618 45.380.378
Description on the level and nature of the risks related to other receivables is provided in Note 33.
10. INVENTORIES Details of inventory are as follows;
2016 2015 2014
Raw materials 173.973.830 134.649.764 110.049.087 Workinprogress 10.532.864 11.270.572 10.639.452 Finishedgoods 155.334.121 149.824.901 133.495.268 Tradegoods 8.018.029 5.553.918 7.919.484 Other inventories 23.950.815 22.970.612 17.030.332 Allowanceforimpairmentoninventory(-) (9.867.495) (8.783.613) (4.338.266) 361.942.164 315.486.154 274.795.357
Inventory is presented on cost value and allowance for impairment is booked for inventory valuing lower than cost.
The movement of allowance for impairment on inventory for the years ended on 31 December 2016 and 31 December 2015 are below: 2016 2015 Opening balance (8.783.613) (4.338.266) Chargefortheyear (2.240.020) (7.216.500) Used allowance 1.455.006 3.048.810 Currency translation differencies (298.868) (277.657) Closing balance (9.867.495) (8.783.613)
43 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
11. INVESTMENT PROPERTIES
2016 2015 Opening balance 12.904.161 11.971.843 Purchases - 90.130 Increase in fair value 1.705.000 865.000 Chargefortheyear (21.569) (22.812) Closing balance 14.587.592 12.904.161
The fair value of the Group’s investment properties at 31 December 2016 and 2015 has been calculated on the basis of a valuation carried out at that date by 31 December 2016 and 2015, 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 difference between book value and fair value of investment porperty outside of this valuation is assessed to be immaterial.
The rent income earned by the Group from its investment properties amounting to TL 1.371.045 (2015: TL 1.449.145) within the current period. Direct operating expenses arising from the investment properties in the current period amounting to TL 78.686 (2015: 77.471 TL).
44 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
12. TANGIBLE ASSETS Movement of tangible assets between 1 January 2016 and 31 December 2016 is as follows: Currency Cost 1 January Transfers translation 31 December 2016 Addition Disposal (Note 13) differencies 2016 Land 16.458.202 215.675 - - (6.204.713) 10.469.164 Land improvements 7.803.257 121.837 - 137.695 - 8.062.789 Buildings 291.432.723 3.965.388 (430.493) 53.875.405 (2.234.711) 346.608.312 Machinery, plant and equipment 1.081.200.410 28.723.858 (14.344.736) 147.504.867 (8.827.688) 1.234.256.711 Vehicles 4.194.313 4.162.664 (512.847) - (249.416) 7.594.714 Furniture and fixture 57.395.634 3.553.587 (246.024) 3.036.894 24.425 63.764.516 Leaseholdimprovements 19.930.469 3.313.530 - 2.473.744 - 25.717.743 Other tangible assets 4.847.122 423.148 - (1.673.199) 815.834 4.412.905 Construction in progress 164.296.470 212.699.307 - (205.424.041) (10.539.163) 161.032.573 1.647.558.600 257.178.994 (15.534.100) (68.635) (27.215.432) 1.861.919.427 Currency 1 January Transfers translation 31 December Accumulated Depreciation 2016 Addition Disposal (Note 13) differencies 2016 Landimprovements (3.250.227) (389.105) - - - (3.639.332) Buildings (98.063.141) (9.932.288) 108.210 - (2.161.308) (110.048.527) Machinery, plant and equipment (592.709.779) (64.277.283) 9.851.488 - 858.998 (646.276.576) Vehicles (3.149.815) (575.618) 291.167 - 27.140 (3.407.126) Furniture and fixture (44.063.893) (4.001.648) 177.557 - (35.615) (47.923.599) Leaseholdimprovements (12.061.217) (1.986.472) - - - (14.047.689) Other tangible assets (2.783.221) (894.749) - - (736.109) (4.414.079) (756.081.293) (82.057.163) 10.428.422 - (2.046.894) (829.756.928)
Net Book Value 891.477.307 1.032.162.499
From depreciation and amortization expenses, TL 75.775.623 (2015: TL 68.783.805) is included in cost of goods sold, TL 306.994 TL (2015: TL 288.313) is included in research and development expenses, TL 1.503.163 (2015: TL 1.428.003) is included in marketing and selling expenses and TL 5.338.930 (2015: TL 5.271.374) is included in general and administrative expenses. There are not any fixed assets acquired through financial leasing in the current period. There is not any mortgage or collateral on tangible assets in the current period. In 2016, the Group has capitalized TL 3.631.811 interest and TL 9.625.185 foreign exchange losses with regards to borrowings and accounted for such borrowing costs under tangible assets.
45 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
12. TANGIBLE ASSETS (cont’d)
Movement of tangible assets between 1 January 2015 and 31 December 2015 is as follows: Currency 1 January Transfers translation 31 December Cost 2015 Addition Disposal (Note 13) differencies 2015 Land 7.082.394 8.383.233 (10.000) - 1.002.575 16.458.202 Land improvements 7.191.880 29.765 - 581.612 - 7.803.257 Buildings 280.167.591 793.891 (45.550) 2.272.084 8.244.707 291.432.723 Machinery, plant and equipments 955.895.617 7.454.987 (11.787.332) 93.765.305 35.871.833 1.081.200.410 Vehicles 3.407.242 706.131 (428.315) - 509.255 4.194.313 Furniture and fixtures 51.642.760 3.320.583 (237.024) 1.866.212 803.103 57.395.634 Leaseholdimprovements 16.891.825 1.334.436 (141.000) 1.845.208 - 19.930.469 Other tangible assets 2.928.770 185.481 (1.491) 915.865 818.497 4.847.122 Constructionsinprogress 67.916.496 193.419.676 - (101.797.118) 4.757.416 164.296.470 1.393.124.575 215.628.183 (12.650.712) (550.832) 52.007.386 1.647.558.600 Currency 1 January Transfers translation 31 December Accumulated Depreciation 2015 Addition Disposal (Note 13) differencies 2015 Leaseholdimprovements (2.893.688) (356.539) - - - (3.250.227) Buildings (86.037.714) (9.059.456) - - (2.965.971) (98.063.141) Machinery, plant and equipments (527.014.528) (60.014.975) 10.214.963 - (15.895.239) (592.709.779) Vehicles (2.744.375) (300.101) 306.166 - (411.505) (3.149.815) Furniture and fixtures (40.422.557) (3.287.479) 171.621 - (525.478) (44.063.893) Leaseholdimprovements (10.918.934) (1.190.754) 48.471 - - (12.061.217) Other tangible assets (1.660.148) (658.370) 1.491 - (466.194) (2.783.221) (671.691.944) (74.867.674) 10.742.712 - (20.264.387) (756.081.293)
Net Book Value 721.432.631 891.477.307
There are no any fixed assets acquired through financial leasing between 1 January-December 2015.
In 2015, the Group has capitalized TL 819.703 interest and TL 5.671.936 foreign exchange losses with regards to borrowings and accounted for such borrowing costs under tangible assets.
46 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
12. TANGIBLE ASSETS (cont’d)
The estimated useful lives of tangible assets are as follow: Useful Life Buildings 25 – 50 years Land improvements 10 – 50 years Machinery, plant and equipments 4 – 15 years Vehicles 4 – 10 years Other tangible assets 4 – 10 years Furniture and fixtures 3 – 10 years Leasehold improvements During rent period
13. INTANGIBLE ASSETS Movement of intangible assets between 1 January 2016 and 31 December 2016 is as follows: Cost 1 January Transfers 31 December 2016 Addition Disposal (Note 12) 2016 Rights 2.442.307 93.575 - 68.635 2.604.517 Development costs 675.004 - - - 675.004 Other intangible assets 2.636.278 448.564 (53.625) - 3.031.217 5.753.589 542.139 (53.625) 68.635 6.310.738
Accumulated 1 January Transfers 31 December Amortization 2016 Addition Disposal (Note 12) 2016 Rights (2.028.211) (246.793) - - (2.275.004) Development costs (222.292) (135.002) - - (357.294) Other intangible assets (1.694.209) (464.183) 53.625 - (2.104.767) (3.944.712) (845.978) 53.625 - (4.737.065)
Net Book Value 1.808.877 1.573.673
Movement of intangible assets between 1 January 2015 and 31 December 2015 is as follows:
Cost 1 January Transfers 31 December 2015 Addition Disposal (Note 12) 2015 Rights 2.444.196 89.104 (90.993) - 2.442.307 Development costs 675.004 - - - 675.004 Other intangible assets 1.858.960 226.486 - 550.832 2.636.278 4.978.160 315.590 (90.993) 550.832 5.753.589
Accumulated 1 January Transfers 31 December Amortization 2015 Addition Disposal (Note 12) 2015 Rights (1.928.752) (190.452) 90.993 - (2.028.211) Development costs (121.041) (101.251) - - (222.292) Other intangible assets (1.104.903) (589.306) - - (1.694.209) (3.154.696) (881.009) 90.993 - (3.944.712)
Net Book Value 1.823.464 1.808.877
47 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
13. INTANGIBLE ASSETS (cont’d)
The intangible assets are amortized on a straight-line basis over their estimated useful lives. Useful Life
Rights 2 – 15 yıl Development costs 5 yıl Other intangible assets 2 – 12 yıl
14. GOVERNMENT GRANTS AND INCENTIVES
Export operations and other foreign exchange activities performed under fundamentals and methods identified 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.
Incentive of TL 135.000.000 and TL 22.442.150 have been approved by Ministry of Economy at 19 November 2013 with respect to the expansion and product diversification investment of Ülker Bisküvi San. A.Ş Gebze Factory and Ankara Factory, respectively. The investment is planned to complete until 11 November 2017. Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. has obtained four investment incentives with regards to product diversifications investments by TL 54.236.064 in Karaman plant. The Group has utilized TL 18.863.586 (2015: TL 17.924.849) portion of such incentives and accounted for defferred tax assets by TL 44.285.820 (2015: TL 32.736.325) for the remaining portion of these earned incentives (Note 30).
The Group has received government incentives amounting TL 21.441.493 in current year (2015: TL 27.228.872). In current year the amount related to law 5084; TL 9.580.615 is from employment grants, TL 7.488.447 is from agricultural products export incentives and TL 1.994.630 is from investment incentive, TL 2.377.801 is from other grants (2015: TL 13.205.758 from employment grants, TL 13.782.537 from investment incentive, TL 240.577 from other grants).
15. OTHER PROVISIONS, CONTINGENT ASSETS AND LIABILITIES Short Term Debt Provisions 2016 2015 2014 Provisions for lawsuits 5.547.396 4.312.544 3.594.538 Provision for returns - 4.007.038 - Provision for marketing activities 10.454.091 9.168.567 7.722.427 Other 8.094.449 6.523.108 7.570.256 24.095.936 24.011.257 18.887.221 Movement for lawsuit provisions for 2016 and 2015 is as follows:
2016 2015 Opening balance 4.312.544 3.594.538 Charge for the period 2.260.968 1.541.102 Terminated provisions (1.023.228) (481.778) Payment/relinquishment (-) (2.888) (341.318) 5.547.396 4.312.544 A significant portion of the lawsuit provisions as of 31 December 2016 and 2015 is related to legal filings made by the personnel.
48 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
15. OTHER PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (cont’d) a) Guarantees Given (Balances denominated in foreign currencies have been presented in their original currency) 2016 2015 TL USD EUR TL USD EUR A) CPM’s given in the name of own legal personality 70.285.091 - 50.000 49.716.690 64.900 - B) CPM’s given on behalf of the fully consolidated companies 1.916.000 - 5.622.171 - - 6.522.171 C) CPM’s given on behalf of third parties for ordinary course of business (*)
- - 75.000.000 - - - D) Total amount of other CPM’s given - 80.000.000 - 50.000.000 147.000.000 - i. Total amount of CPM’s given on behalf of the majority shareholder (**) - 80.000.000 - 50.000.000 147.000.000 - ii. Total amount of CPM’s given on behalf of the group companies which arenotinscopeofBandC ------iii. Total amount of CPM’s given on behalf of third parties which are not in scope of C ------Total 72.201.091 80.000.000 80.672.171 99.716.690 147.064.900 6.522.171 (*)The guarantee given for raw material supplier of the Group in order to purchases done for the Group. (**) The procedures with regards to release of the CPMs given on behalf of the majority shareholders are finalised in February 2017. The ratio of other CPMs to the Group’s equity is 17,1% (2015: 34,1%). The Group charges commission fee to majority shareholder amounting to TL 3.969.122 for CPMs in accordance with policy. b) Lawsuits Filed by and Against to the Group ba) As of 31 December 2016;
Lawsuits filed by the Group: TL USD EUR Compensation litigations 170.000 - 102.942 Foreclosure litigations 696.467 - - Tax litigations (*) 8.664.975 - - Action of debts 145.290 3.404.577 - Penalty cases 3.000 - - 9.679.732 3.404.577 102.942 (*)Main part of tax litigations consist of litigations related to VAT receivables. Lawsuits filed against to the Group: TL USD Action of debts 510.554 - Foreclosure litigations 1.782.736 - Compensation litigations 3.184.618 400.000 5.477.908 400.000 The provision of TL 5.547.396 has been accounted for various court cases filed against the Group. For the rest of the lawsuits no provision was recognised because no cash outflow is projected for those (2015: TL 4.312.544 and 2014: TL 3.594.538).
49 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
15. OTHER PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (cont’d) b) Lawsuits Filed by and Against to the Group (cont’d) bb) As of 31 December 2015;
Lawsuits filed by the Group: TL USD EUR Compensation litigations 170.000 - 102.942 Foreclosure litigations 714.517 - - Tax litigations (*) 8.818.073 - - Action of debts 85.619 3.404.577 - 9.788.209 3.404.577 102.942 Lawsuits filed against to the Group: TL USD Action of debts 541.851 - Foreclosure litigations 1.293.219 - Compensation litigations 2.920.520 400.000 4.755.590 400.000 bc) As of 31 December 2014;
Lawsuits filed by the Group: TL USD EUR Compensation litigations 120.000 - 102.942 Foreclosure litigations 1.122.384 - - Tax litigations (*) 10.148.233 - - Action of debts 195.675 3.404.577 - 11.586.292 3.404.577 102.942
(*) Main part of tax litigations consist of litigations related to VAT receivables.
Lawsuits filed against to the Group: TL USD Action of debts 706.516 - Foreclosure litigations 194.339 - Compensation litigations 3.502.133 400.000 4.402.988 400.000 Operational Leasing Agreements
The operating leases 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 tangible assets and investment properties leased is TL 7.152.333 during the current year (2015: TL 6.950.175). In the current year operational leasing expenses are TL 1.128.552 (2015: TL 466.624). Due to non-cancellable rent agreements, the Group’s rental revenue to be received in the future periods is TL 7.153.608 (2015: TL 7.271.212) 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 1.220.988 (2015: TL 2.259.713) and are all payable in a one year period.
16. COMMITMENTS AND OBLIGATIONS The Group’s export commitments amount to USD 157.500.263 as of 31 December 2016 (2015: USD 130.318.263). The average period of export commitments are 2 years. If the export commitments will not be fulfiled, the Group will loss the tax advantage. Export commitments in 2016 have been realized completely (2015: USD 76.183.855).
50 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
17. PROVISION FOR EMPLOYEE BENEFITS
Short Term Liabilities for Employee Benefits 2016 2015 2014 Unused vacation accrual 17.084.014 14.331.487 10.952.278 Performance premium accrual 14.564.434 12.919.759 10.871.716 Salary payments accrual 671.811 - - 32.320.259 27.251.246 21.823.994
Movement of Unused Vacation Provision 2016 2015 Opening balance 14.331.487 10.952.278 Decrease in period (10.904.937) (8.714.525) Increased in period 12.988.272 11.305.065 Currency translation differences 669.192 788.669 Closing balance 17.084.014 14.331.487
Movement of Performance Premium Provision 2016 2015 Opening balance 12.919.759 10.871.716 Cashpaymentsinperiod (14.074.903) (11.335.770) Increased in period 14.894.595 12.593.706 Currency translation differences 824.983 790.107 Closing balance 14.564.434 12.919.759
Long Term Liabilities for Employee Benefits 2016 2015 2014 Provision for employee termination benefits 72.356.363 37.439.337 32.650.452 72.356.363 37.439.337 32.650.452
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 4.297,21 for each period of service as of 31 December 2015 (2014: TL 3.828,37).
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 2016, 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 7,5% and a discount rate of 11.8%, resulting in a real discount rate of approximately 4,00% (2015: 4,00%). The Group assessed the probability of paying the termination benefits for employees who have completed 15 years and 3600 days with social security Premium payment as 100% if such employees started working prior to 8 September 1999 based on Law numbered 4447. The maximum liability is revised semi annually. The basis considered in calculating the provisions is the amount of maximum liability of TL 4.426,16 which became effective as of 1 January 2017. As of 2016 year end, the probability of resignation of employees is 5.3% (2014: 5,2%).
51 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
17. PROVISION FOR EMPLOYEE BENEFITS (cont’d)
Movement of provision for employee termination benefits is as below;
2016 2015
Opening balance 37.439.337 32.650.452 Servicescost 34.134.544 15.430.818 Interestcost 3.689.012 1.304.981 Actuarial loss / gain 21.221.658 (530.268) Currency translation differences 139.388 1.380.788 Cashpaymentsduringyear (24.267.576) (12.797.434) Closing balance 72.356.363 37.439.337
18. PREPAID EXPENSES
Short Term Prepaid Expenses 2016 2015 2014 Advances given to related parties (Note 32) 78.046.637 112.601.084 116.813.193 Advances given to third parties 30.114.080 51.065.418 40.866.156 Prepaid expenses 7.212.771 5.536.116 4.862.615 Other -- 31.653 115.373.488 169.202.618 162.573.617
Long Term Prepaid Expenses 2016 2015 2014 Advances given to third parties 14.132.127 28.528.378 25.842.428 Prepaid expenses 27.932 33.965 150.595 14.160.059 28.562.343 25.993.023
19. EMPLOYEE BENEFITS RELATED LIABILITIES
2016 2015 2014 Payables to personnel 15.537.880 18.358.796 13.061.819 Social security premiums payable 15.055.459 8.972.251 6.715.397 30.593.339 27.331.047 19.777.216
20. OTHER ASSET AND LIABILITIES
Other Current Asset 2016 2015 2014 VAT carried forward 48.028.344 45.254.438 47.988.600 Other VAT - 28.119 1.941.180 Other 88.417 77.346 82.359 48.116.761 45.359.903 50.012.139
Other Current Liabilities 2016 2015 2014 Taxes and fund payable 11.921.229 11.179.496 9.092.622 Other liabilities 369.041 594.108 158.261 12.290.270 11.773.604 9.250.883
52 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
21. DEFERRED REVENUE
Deferred revenue 2016 2015 2014 Advances received 16.240.365 12.986.779 10.946.956 Deferred revenue for next months 32.198.942 26.908.764 8.329.805 48.439.307 39.895.543 19.276.761
22. SHAREHOLDERS’ EQUITY a) Capital Structure The composition of the Company’s paid-in share capital as of 31 December 2016 and 2015 is as follows:
2016 2015 Shareholders Amount Share Amount Share Yıldız Holding A.Ş. 98.912.930 28,92% 168.124.482 49,16% pladis Foods Limited 71.820.000 21,00% -- Yıldız Holding A.Ş. Subsidiaries and Ülker Family 29.267.569 8,56% 27.738.115 8,11% Other 141.999.501 41,52% 146.137.403 42,73% 342.000.000 100,00% 342.000.000 100,00% b) Valuation Funds 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 2016 the Group has financial asset valuation fund of TL 695.363.441 (2014: TL 539.968.646). 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 22.081.916 during the first transfer, has been accounted as the increase in the fair value under equity. In the following period, the increase in the fair value of real estate amounting to TL 1.705.000 in 2016, TL 865.000 in 2015 and TL 965.000 in 2014 have been accounted under the income statement (Note 27). 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 first-time 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.
53 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
22. SHAREHOLDERS’ EQUITY (cont’d) c) Restricted Reserves Appropriated from Profit (cont’d)
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”,” Premium on capital stock”,“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.
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.
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.
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 fund amounting to TL 827.564.714 (2015: TL 263.551.164) that can be utilized for profit distribution.
54 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
22. SHAREHOLDERS’ EQUITY (cont’d) d) Retained Earnings
Details of retained earnings are as follows: 2016 2015 Retained earnings (544.364.258) (540.472.102) Extraordinaryreserves 281.263.051 94.529.328 Inflation restatement differences of shareholders’ equity accounts other than capital and legal reserves (18.214.566) (18.214.566) Other reserves 585.026.023 624.534.749 303.710.250 160.377.409 e) Non-Controlling Interest/ Non-Controlling Interest Profit or Loss The amount of non-controlling interest as of 31 December 2016 is equal to TL 205.390.129 (2015: TL 209.722.260). The minority share of TL 11.633.167 on operating results for the current year has been presented separately from the profit for the same period in these consolidated statements of income. (2015: TL 30.684.761).
23. REVENUE AND COST OF SALES a) Revenue
The detail of operating income is as follows: 2016 2015 Domestic sales 4.267.363.414 4.003.313.371 Export sales 796.153.118 890.009.811 Sales returns and discounts (1.141.829.677) (1.099.585.910) Sales Income (net) 3.921.686.855 3.793.737.272 b) Cost of Sales
2016 2015 Raw material used (2.175.330.283) (2.137.152.105) Personnelexpenses (378.482.143) (287.562.905) Productionoverheads (222.678.158) (193.597.246) Depreciation and amortization expenses (75.775.623) (68.783.805) Changeinwork-in-progressinventories (737.707) 631.120 Change in finished goods inventories 5.509.220 21.883.552 Costofmerchandisessold (2.847.494.694) (2.664.581.389) Costoftradegoodssold (152.238.273) (260.035.701) Cost of sales (2.999.732.967) (2.924.617.090)
55 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
24. RESEARCH EXPENSES, MARKETING EXPENSES, GENERAL ADMINISTRATIVE EXPENSES
2016 2015 General administrative expenses (116.580.651) (112.724.354) Marketingexpenses (366.845.974) (344.441.814) Researchexpenses (8.733.516) (9.188.838) (492.160.141) (466.355.006)
25. EXPENSES BY NATURE
The detail of operating expenses is as follow: 2016 2015 Research Expenses Personnelexpenses (3.724.383) (3.654.841) Materials used (2.085.562) (1.881.362) Depreciation and amortization expenses (306.994) (288.313) Other (2.616.577) (3.364.322) (8.733.516) (9.188.838)
2016 2015 Marketing Expenses Marketingoperatingexpenses (295.833.820) (282.186.574) Personnelexpenses (48.678.122) (48.919.011) Depreciation and amortization expenses (3.694.726) (1.909.737) Rentexpenses (1.503.163) (1.428.003) Other (17.136.143) (9.998.489) (366.845.974) (344.441.814)
General Administration Expenses 2016 2015 Personnelexpenses (49.102.340) (48.071.968) Operatingexpenses(*) (41.819.734) (39.622.945) Depreciation and amortization expenses (5.338.930) (5.271.374) Consultancyexpenses (4.162.431) (4.396.921) Other (16.157.216) (15.361.146) (116.580.651) (112.724.354)
(492.160.141) (466.355.006)
(*) The operating expenses of the Group mainly comprise management support, information technology and administration expenses that are charged by Yıldız Holding.
56 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
26. OTHER OPERATING INCOME AND EXPENSES a) The detail of operating income is as follow: 2016 2015 Financial income on discount and credit sales 53.145.605 54.182.057 Foreignexchangegains 20.269.120 48.855.732 Services income 2.047.207 148.447 Terminated provisions 354.505 813.853 Other income 10.805.656 11.378.285 86.622.093 115.378.374 b) The detail of operating expense is as follow:
2016 2015 Financial income on discount and credit sales (28.555.371) (40.781.917) Foreignexchangelosses (5.008.100) (20.562.195) Provision expenses (2.488.467) (2.049.438) Other expenses (15.599.535) (23.802.684) (51.651.473) (87.196.234)
27. INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES a) The detail of investment income is as follow:
2016 2015 Foreignexchangegains 356.448.978 719.741.422 Interest income 76.346.373 67.832.604 Rent income 7.679.254 7.932.696 Dividend income 683.686 870.451 Fairvalueincreaseininvestmentproperty(Note11) 1.705.000 865.000 Income on sales of tangible assets 681.930 831.767 Other 50.498 170 443.595.719 798.074.110 b) The detail of investment expenses is as follow:
2016 2015 Foreignexchangelosses (110.874.407) (233.169.494) Loss on sales of tangible assets (1.631.461) (565.656) Other (718.894) (74.440) (113.224.762) (233.809.590)
57 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
28. FINANCIAL INCOME
2016 2015 Foreignexchangegain 131.116.907 184.768.227 Guarantee commission income 3.969.122 - 135.086.029 184.768.227
29. FINANCIAL EXPENSES
2016 2015
Foreignexchangelossesfromfinancing (550.665.607) (739.834.981) Interest expenses (76.968.092) (72.125.042) Commission and finance service expenses (10.347.339) (6.459.000) (637.981.038) (818.419.023)
30. TAX ASSETS 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 UFRS. 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 UFRS. 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 separate-entity basis.
The rate applied in the calculation of deferred tax assets and liabilities for entities in Turkey is 20% (2015: 20%).
58 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
30. TAX ASSET AND LIABILITIES (cont’d)
Deferred tax bases 2016 2015 2014 2016 2015 2014 Indexation and useful life differences of tangible and intangible asets - -- 196.250.875 163.530.691 150.024.219 Investment properties valuation differences - -- 13.036.359 11.284.955 10.369.517 Marketable securities valuation differences - -- 732.877.901 569.361.288 333.147.147 Profit margin elimination on inventories (3.531.800) (3.139.435) (133.260) - -- Discount of trade receivables / payables (net) - (1.773.475) (1.995.678) 1.319.445 -- Allowance of employee terminationbenefits (62.985.130) (29.412.870) (26.788.886) - -- Provision of doubtful receivables (466.860) (444.845) (848.288) - -- Previousyearlosses (832.325) (2.305.687) (9.494.630) - -- Provisionforlawsuits (5.547.396) (4.312.538) (3.594.538) - -- Impairmentoninventories (6.482.410) (5.312.140) (4.331.441) - -- Performance premium provision - - (461.355) - -- Provision for unused vacation (11.449.020) (9.771.720) (7.305.260) - -- Other (13.012.994) (17.864.286) (5.903.710) 4.147.578 14.534.512 21.628.050 (104.307.935) (74.336.996) (60.857.046) 947.632.158 758.711.446 515.168.933
59 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
30. TAX ASSET AND LIABILITIES (cont’d) Deferred tax assets / liabilities: 2016 2015 2014 2016 2015 2014 Indexation and useful life differences of tangible and intangible asets - -- 39.250.175 32.706.138 30.004.844 Investment properties valuation differences - -- 651.818 564.248 518.476 Marketable securities valuation differences - -- 36.643.895 28.468.064 16.657.357 Profit margin elimination on inventories (706.360) (627.887) (26.652) - -- Discount of trade receivables / payables (net) - (354.695) (399.136) 263.889 -- Allowance of employee terminationbenefits (12.597.026) (5.882.574) (5.357.777) - -- Provision of doubtful receivables (93.372) (88.969) (169.658) - -- Previousyearlosses (166.465) (461.137) (1.898.926) - -- Provision for lawsuits (1.109.479) (862.508) (718.908) - -- Impairmentoninventories (1.296.482) (1.062.428) (866.288) - -- Performance premium provision - - (92.271) - -- Investmentallowance (44.285.820) (32.736.325) (17.991.009) Provision for unused vacation (2.289.804) (1.954.344) (1.461.052) - -- Other (2.602.599) (3.572.857) (1.180.742) 829.516 2.853.707 4.325.610 (65.147.407) (47.603.724) (30.162.419) 77.639.293 64.592.157 51.506.287
60 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
30. TAX ASSET AND LIABILITIES (cont’d)
Movement of Deferred Tax Liabilities: 2016 2015 Opening balance 16.988.433 21.343.868 Taxesnettedfromfundsrecognisedunderequity 3.928.974 11.920.369 Deferred tax income (8.425.521) (16.275.804) Closing balance 12.491.886 16.988.433
As of 31 December 2016, the Group calculated deferred tax assets of TL 832.325 for deductible financial losses in the consolidated financial statements for the current year (2015: TL 2.305.687). The maturities of these losses are as follows:
2016 2015 2016 - 2.258.375 2017 832.325 47.312 Total 832.325 2.305.687
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 2016 is 20% (2015: 20%).
In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate is 20% in 2016 (2015: 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.
Until 31 December 2018, Hi Food for Advanced Food Industries, the Group’s subsidiary, is exempt from corporate tax for earnings gained from operating activities due to tax incentives made within the scope of foreign trade legislation. The corporation tax rate in Suudi Arabia where Food Manufacturers’ Company, a subsidiary of the Group is 20%. (2015: 20%).
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.
61 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
30. TAX ASSET AND LIABILITIES (cont’d)
Provision for taxation as of 31 December 2016 and 2015 is as follows:
2016 2015
Current year corporate tax provision (59.588.634) (53.251.248) Prepaid taxes and funds 44.770.085 43.736.860 Taxation in the balance sheet (14.818.549) (9.514.388)
2016 2015
Current year corporate tax provision (58.661.106) (55.022.708) Deferred tax income 8.425.521 16.275.804 Taxation in the income statement (50.235.585) (38.746.904)
The reconciliation of provision for taxation as of 31 December 2016 and 2015 are as follows:
2016 2015 Reconciliation of taxation: Profit before taxation and non-controlling interest 292.240.315 361.561.040 Effective tax rate %20 %20
Calculated tax 58.448.063 72.312.208
Tax effects of: -Non-deductibleexpenses 2.471.608 5.730.699 - Dividend and other non-taxable income (764.630) (4.958.911) -Investmentallowance (13.314.219) (28.412.019) - Effect of carry forward tax loss - (1.919.101) - Carry forward tax loss 6.747.188 - which were not subject to deferred tax - Tax rate difference (3.176.234) (3.630.173) -Other (176.191) (375.799)
Taxation in the income statement 50.235.585 38.746.904
31. EARNINGS PER SHARE
A summary of the Group’s weighted average number of shares outstanding as of 31 December 2016 and 2015 and computation of earnings per share set out here as follows:
2016 2015
Weighted average number of common stock outstanding 34.200.000.000 34.200.000.000 Net profit 230.371.563 292.129.375 Earningspershare(TL1pervalueeach) 0,67 0,85
62 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
a) The detail of receivables from related parties is as follows:
2016 2015 2014 Tradereceivables 602.115.971 578.852.556 532.908.599 Non-trade receivables 1.618.637 802.126.831 984.706.867 603.734.608 1.380.979.387 1.517.615.466
Trade receivables from related parties are mainly composed of sales transactions and approximate maturity is 2 months. Non-trade 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 2016 is 10,6% for TL (2015: 12,9%).
The detail of trade and non-trade receivables from related parties is as follow:
2016 2015 2014 Non- Trade Trade Trade Non-Trade Trade Non-Trade Principle Shareholder Yıldız Holding A.Ş. (*) 327.441 - - 562.221.691 - 747.022.359 Other Companies Controlled by the Principle Shareholder and Ülker Family Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş. 286.184.297 - 257.572.982 - 228.682.259 - Pasifik Tük. Ürün. Satış ve Ticaret A.Ş. 209.964.008 - 186.668.812 - 159.678.951 - Teközel Gıda T. Sağ. Mrk. Hiz. San. Tic. A.Ş. 46.952.482 - 44.551.725 - 42.331.926 - United Biscuits (UK) Ltd. 9.571.784 - - - - - Rekor Gıda Paz. San. ve Tic. A.Ş. - - 41.768.628 40.198.031 Misbis Gıda San. Tic. A.Ş. 1.990.685 1.618.637 3.608.941 7.297.899 3.609.322 - Natura Gıda San. ve Tic. A.Ş. 1.439.452 - 427.371 - 1.810.863 - Önem Gıda San. ve Tic. A.Ş. 103.743 - 363.154 - 7.582.493 - Besler Gıda ve Kimya San. ve Tic. A.Ş.(*) 8.863 - - 232.607.241 - 220.294.895 UI Mena B.V. - - - - - 17.389.613 Other 45.573.216 - 43.890.943 - 49.014.754 - 602.115.971 1.618.637 578.852.556 802.126.831 532.908.599 984.706.867
(*) The balance consists of company fundings regarding to effect of business combinations under common control which is occurred in 2016.
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.
The detail of advances given to related parties is as follow: 2016 2015 2014 Önem Gıda San. ve Tic. A.Ş. (Note 18) 78.046.637 112.601.084 116.813.193 78.046.637 112.601.084 116.813.193
63 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (cont’d)
b) The detail of payables to related parties is as follows; Trade payables to related parties mainly composed of purchase transactions and approximate maturity is 2 months. 2016 2015 2014 Tradepayables 335.895.278 311.000.386 322.557.410 Non-trade payables - 86.239.625 78.982.326 335.895.278 397.240.011 401.539.736 The detail of payables to related parties is as follows:
2016 2015 2014 Non- Trade Trade Trade Non-Trade Trade Non-Trade Principle Shareholder Yıldız Holding A.Ş. 10.140.950 - 22.590.147 - 13.121.314 - Other Companies Controlled by the Principle Shareholder and Ülker Family Önem Gıda San. ve Tic. A.Ş. 224.268.445 - 199.902.805 - 183.090.994 - Besler Gıda ve Kimya San. Tic. A.Ş. 56.674.647 - 42.355.406 - 39.976.982 - Marsa Yağ San. ve Tic. A.Ş. 15.411.320 - 15.197.181 - 15.331.778 - CCC Gıda San. ve Tic. A.Ş. 10.409.333 - 10.295.813 - 5.943.232 - Maia International B.V. (*) 65.417 - - 86.199.000 - 56.059.752 Northstar Innovation A.Ş. 927.435 - 1.774.659 - 3.397.646 - Ak Gıda San. ve Tic. A.Ş. (**) - - - - 40.066.538 - Otherr 17.997.731 - 18.884.375 40.625 21.628.926 22.922.574 335.895.278 - 311.000.386 86.239.625 322.557.410 78.982.326
(*) The balance consists of company fundings regarding to effect of business combinations under common control which is occurred in 2016.
(**) As of 31 December 2015 Ak Gıda San. ve Tic. A.Ş. has been classified as third party due to sold by Yıldız Holding A.Ş. on 1 July 2015.
The detail of due to related parties as loan payable is as follows:
2016 2015 2014 Yıldız Holding A.Ş. 30.629.376 - - 30.629.376 - -
64 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (cont’d c) The detail of purchases from and sales to related parties is as follows: 2016 2015 Purchases Sales Purchases Sales Other Companies Controlled by the Principle Shareholder and Ülker Family Önem Gıda San. ve Tic. A.Ş. 1.089.964.949 42.123 985.508.049 6.137.489 Besler Gıda ve Kimya San. ve Tic. A.Ş. 178.658.272 69.378 195.476.253 627.186 Marsa Yağ San. ve Tic. A.Ş. 54.743.131 560.337 54.345.654 500 Ak Gıda San. ve Tic. A.Ş. (*) - - 128.228.730 632.442 Pendik Nişasta San. A.Ş. 48.665.157 - 34.711.280 815 CCC Gıda San. ve Tic. A.Ş. 26.789.072 147.797 35.168.874 240.450 Teközel Gıda Tem. Sağ. Mark. Hizm. A.Ş. 205.813 140.402.883 - 187.280.132 Pasifik Tüketim Ürünleri Satış ve Tic. A.Ş. - 853.697.018 1.228 751.219.854 Horizon Hızlı Tük. Ür. Paz. Sat. ve Tic. A.Ş. 1.050.550 1.736.108.226 2.962.070 1.516.984.946 Rekor Gıda Paz. San. ve Tic. A.Ş. - - 383.323 145.674.820 Other 49.041.063 237.277.350 72.384.094 165.085.648 1.449.118.007 2.968.305.112 1.509.169.555 2.773.884.282
(*) Ak Gıda San. ve Tic. A.Ş. has been classified as third party due to sold by Yıldız Holding A.Ş. on 1 July 2015. For this reason; purchases and sales amounts between 1 January 2015 – 30 June 2015 reported as related parties.
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 and Pendik Nişasta San. A.Ş.. The major part of selling and distribution operations of the Group all Turkey are operated by Horizon Hızlı Tüketim Ürünleri Pazarlama Satış ve Tic. A.Ş. and Pasifik Tük. Ürün. Satış ve Ticaret A.Ş.
65 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (cont’d) d) 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 2016;
Interest Interest Income and Income and Foreign Foreign Rent Rent Service Service exchange exchange Income Expenses Income Expenses gains losses Principle Shareholders Yıldız Holding A.Ş. 60.206 (948) 33.234 (117.924.351) 381.236.422 (28.730.190) Other Companies Hüner Pazarlama San. ve Tic. A.Ş. 666.450 - 304.920 (63.211) - - Horizon Hızlı Tük. Ür. Paz. 46.176 (144.856) 115.939 (12.089.260) - - Sat. ve Tic. A.Ş. Önem Gıda San. ve Tic. A.Ş. 1.708.710 (18.006) 4.390.439 (31.429.165) - (3.996.105) Besler Gıda ve Kimya San. ve Tic. A.Ş. - - 78.119 (239.978) 65.251 (2.361.445) Pasifik Tüketim Ürünleri Satış ve Tic. A.Ş. 162.137 - - (3.601.581) - - Northstar Innovation A.Ş. - - 21.736 (751.290) - - İzsal Gayrimenkul Geliştirme 29.952 (1.195.909) 12.904 (618.342) - - A.Ş. Marsa Yağ San. ve Tic. A.Ş. 7.018 - 41.724 - 51.147 (790.883) United Biscuits (UK) Ltd. - - 596.750 (354.177) 1.395.156 - Other 58.741 (288.901) 826.382 (781.686) 4.082.658 (401.017) 2.739.390 (1.648.620) 6.422.147 (167.853.041) 386.830.634 (36.279.640)
66 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
32. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (cont’d)
For the twelve month period ended on 31 December 2015;
Interest Interest Income and Income and Foreign Foreign Rent Rent Service Service exchange exchange Income Expenses Income Expenses gains losses Principle Shareholders Yıldız Holding A.Ş. 90.199 (6.091) 1.125.373 (110.811.111) 541.286.083 (212.133.997) Other Companies Hüner Pazarlama San. ve Tic. A.Ş. 645.099 - 378.690 (242.934) - - Horizon Hızlı Tük. Ür. Paz. 16.142 (142.115) 346.191 (5.210.503) - - Sat. ve Tic. A.Ş. Önem Gıda San. ve Tic. A.Ş. 1.438.385 (2.668) 5.722.662 (17.411.579) 11.168 (3.204.059) Besler Gıda ve Kimya San. ve Tic. A.Ş. - - 134.269 (1.891.114) 57.845.040 (2.564.896) Marsa Yağ San. ve Tic. A.Ş. 6.516 - 34.100 - 125.762 (1.804.378) Pasifik Tüketim Ürünleri Satış ve Tic. A.Ş. 107.101 - 218.706 (1.171.698) - - Northstar Innovation A.Ş. - - 29.656 (1.362.591) - - İzsal Gayrimenkul Geliştirme 26.007 (1.200.959) 17.412 (733.962) - - A.Ş. Rekor Gıda Paz. San. ve Tic. A.Ş. 185.504 - 581.999 (346.954) - - CCC Gıda San. ve Tic. A.Ş. 8.052 - 924.056 (169.916) 1.033.281 (1.685.895) Other 29.940 (859) 913.283 (464.081) 11.507.545 (9.887.560) 2.552.945 (1.352.692) 10.426.397 (139.816.443) 611.808.879 (231.280.785)
e) Benefits provided to members of BOD and key management personnel 2016 2015 Fees and other short term benefits 15.800.583 12.518.537 15.800.583 12.518.537
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.
67 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS
Net liability / Total capital ratio as of 31 December 2016, 2015 and 2014 are as follows: 2016 2015 2014 Total financial liabilities 2.744.916.112 2.695.111.302 2.558.325.201 Negative: Cash & cash equivalent (2.169.912.611) (1.344.388.200) (1.055.071.051) Net liabilities 575.003.501 1.350.723.102 1.503.254.150 Total shareholders’ equity 1.854.596.478 1.608.379.361 1.117.495.640 Total capital 2.429.599.979 2.959.102.463 2.620.749.790 Net liabilities/Total Capital Ratio %24 %46 %57 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.
68 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -1 Credit Risk Management Receivables Credit Risk of Financial Instruments Trade Receivables Other Receivables
Related Deposit in 2016 Party Third Party Related Party Third Party Bank
Maximum net credit risk as of balance sheet date (*) 602.115.971 170.895.789 1.618.637 20.252.687 2.168.279.569 - The part of maximum risk under guarantee with collateral etc (**) - 120.987.871 - - -
A. Net book value of financial assets that are neither past due nor impaired 593.209.835 162.198.665 1.618.637 20.252.687 2.168.279.569
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 8.906.136 8.648.818 - - - - The part under guarantee with collateral etc - 108.677 - - -
D. Net book value of impaired assets - 48.306 - - - -Pastdue(grosscarryingamount) - 5.951.322 - - - - Impairment (-) - (5.903.016) - - - - The part of net value under guarantee with collateral etc - 48.306 - - - - 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.
69 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -1 Credit Risk Management (cont’d) Receivables Credit Risk of Financial Instruments Trade Receivables Other Receivables
Related 2015 Party Third Party Related Party Third Party Deposit in Bank
Maximum net credit risk as of balance sheet date (*) 578.852.556 190.547.613 802.126.831 36.279.725 1.344.066.017 - The part of maximum risk under guarantee with collateral etc (**) - 183.619.663 - - -
A. Net book value of financial assets that are neither past due nor impaired 567.126.924 175.307.802 802.126.831 36.279.725 1.344.066.017
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 11.725.632 15.196.148 - - - - The part under guarantee with collateral etc - 737.315 - - -
D. Net book value of impaired assets - 43.663 - - - -Pastdue(grosscarryingamount) - 4.988.477 - - - - Impairment (-) - (4.944.814) - - - - The part of net value under guarantee with collateral etc - 43.663 - - - - 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.
70 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -1 Credit Risk Management (cont’d) Receivables Credit Risk of Financial Instruments Trade Receivables Other Receivables
Related 2014 Party Third Party Related Party Third Party Deposit in Bank
Maximum net credit risk as of balance sheet date (*) 532.908.599 184.892.563 984.706.867 20.765.289 1.054.560.632 - The part of maximum risk under guarantee with collateral etc (**) - 41.102.355 - - -
A. Net book value of financial assets that are neither past due nor impaired 524.500.831 170.886.063 984.706.867 20.765.289 1.054.560.632
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 8.407.768 13.958.194 - - - - The part under guarantee with collateral etc - 167.998 - - -
D. Net book value of impaired assets - 48.306 - - - -Pastdue(grosscarryingamount) - 4.085.791 - - - - Impairment (-) - (4.037.485) - - - - The part of net value under guarantee with collateral etc - 48.306 - - - - 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.
71 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -1 Credit Risk Management (cont’d)
Aging of overdue receivables as of 31 December 2016, 2015 and 2014 is as follows:
Receivables Trade Other Trade 31 December 2016 Receivables Receivables Receivables Overduebetween1-30days 8.444.823 - 8.444.823 Overduebetween1-3months 1.109.466 - 1.109.466 Overduebetween3-12months 5.992.795 - 5.992.795 Overduebetween1-5years 2.056.176 - 2.056.176 Total overdue receivables 17.603.260 - 17.603.260 The portion of under guarantee with 156.983 - 156.983 collateral etc
Receivables Trade Other Trade 31 December 2015 Receivables Receivables Receivables Overduebetween1-30days 10.474.778 - 10.474.778 Overduebetween1-3months 6.159.788 - 6.159.788 Overduebetween3-12months 1.511.632 - 1.511.632 Overduebetween1-5years 8.819.245 - 8.819.245 Total overdue receivables 26.965.443 - 26.965.443 The portion of under guarantee with 780.978 - 780.978 collateral etc
Receivables Trade Other Total 31 December 2014 Receivables Receivables Receivables Overduebetween1-30days 12.076.339 - 12.076.339 Overduebetween1-3months 1.942.748 - 1.942.748 Overduebetween3-12months 1.072.805 - 1.072.805 Overduebetween1-5years 7.322.376 - 7.322.376 Total overdue receivables 22.414.268 - 22.414.268 The portion of under guarantee with 216.304 - 216.304 collateral etc
Collaterals held for the trade receivables that are past due and not impaired as of balance sheet date are as follows:
2016 2015 2014 Fair Value Fair Value Fair Value Guarantees Received 108.677 737.315 167.998 108.677 737.315 167.998
72 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -1 Credit Risk Management (cont’d)
Collaterals held for the trade receivables that are past due and impaired as of balance sheet date are as follows:
2016 2015 2014 Fair Value Fair Value Fair Value Guarantees Received 48.306 43.663 48.306 48.306 43.663 48.306
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 A.Ş. (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.
Total cash outflow Contractual maturity according to Less than analysis contract ( I 3 months 3-12 1-5 years 2016 Carrying value +II+ III) (I) months (II) (III) Non-derivative financial liabilities
Bankborrowing 2.744.850.476 2.854.791.288 130.801.081 2.319.569.105 404.421.102 Financial lease liabilities 65.636 67.729 - - 67.729 Trade payables 637.981.293 644.385.260 627.527.427 16.857.833 - Other payables 8.431.010 8.431.010 8.431.010 - - Total liabilities 3.391.328.415 3.507.675.287 766.759.518 2.336.426.938 404.488.831
The expected maturities are same as the maturities per contracts. Total cash outflow Contractual maturity according to Less than 3 analysis contract ( I months 3-12 1-5 years 2015 Carrying value +II+ III) (I) months (II) (III) Non-derivative financial liabilities
Bankborrowing 2.694.682.073 2.778.656.193 915.880.966 84.682.973 1.778.092.254 Financial lease liabilities 429.229 831.397 - 362.999 468.398 Trade payables 595.456.614 599.264.250 595.504.674 3.759.576 - Other payables 90.712.243 90.712.243 90.712.243 - - Total liabilities 3.381.280.159 3.469.464.083 1.602.097.883 88.805.548 1.778.560.652
73 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -2 Liquidity risk management (cont’d)
Liquidity risk charts (cont’d)
The expected maturities are same as the maturities per contracts. Total cash outflow Contractual maturity according to Less than 3 analysis contract ( I months 3-12 1-5 years 2014 Carrying value +II+ III) (I) months (II) (III)
Non-derivative financial liabilities
Bankborrowing 2.557.519.416 2.673.329.905 252.158.365 638.446.940 1.782.724.600 Financial lease liabilities 805.785 936.182 64.237 403.547 468.398 Trade payables 604.640.873 609.535.675 563.284.424 46.251.251 - Other payables 103.100.349 103.100.349 103.100.349 - - Total liabilities 3.266.066.423 3.386.902.111 918.607.375 685.101.738 1.783.192.998
(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.
The foreign currency denominated assets and liabilities of monetary and non-monetary items are as follows:
74 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -3.1 Foreign currency risk management (cont’d) 2016 TL Equivalents USD EUR CHF GBP DKK
1. Trade Receivables 149.077.013 27.825.666 12.914.995 - 750.096 - 2a. Monetary Financial Assets 1.769.795.850 310.792.280 181.801.194 28.550 344.041 14.378 2b. Non-Monetary Financial Assets ------3. Other 3.297.187 610.393 309.420 - 272 - 4. CURRENT ASSETS 1.922.170.050 339.228.339 195.025.609 28.550 1.094.409 14.378 5. Trade Receivables 65.492 18.610 - - - - 6a. Monetary Financial Assets 95.596 27.164 - - - - 6b. Non-Monetary Financial Assets ------7. Other 11.344.023 1.113.078 1.984.440 18.809 - - 8. NON-CURRENT ASSETS 11.505.111 1.158.852 1.984.440 18.809 - -
9. TOTAL ASSETS 1.933.675.161 340.387.191 197.010.049 47.359 1.094.409 14.378
10. Trade Payables 124.437.263 24.229.721 10.227.995 13.814 272.198 - 11. Financial Liabilities 2.332.245.484 432.701.268 218.195.418 - - - 12a. Other Monetary Financial Liabilities 8.092.785 755.756 610.766 - 733.346 - 12b. Other Non-monetary Financial Liabilities 16.035.548 3.730.275 782.109 - 1.486 - 13.LiabilitiesCURRENT LIABILITIES 2.480.811.080 461.417.020 229.816.288 13.814 1.007.030 - 14. Trade Payables ------15. Financial Liabilities 183.685.390 2.267.135 47.361.624 - - - 16a. Other Monetary Financial Liabilities ------16b. Other Non-monetary Financial ------17. NON-CURRENT LIABILITIES 183.685.390 2.267.135 47.361.624 - - -
18. TOTAL LIABILITIES 2.664.496.470 463.684.155 277.177.912 13.814 1.007.030 -
19. Net foreign currency liability (730.821.309) (123.296.964) (80.167.863) 33.545 87.379 14.378 20. Net foreign currency of monetary items (1+2a+5+6a-10-11-12a-14-15-16a) (729.426.971) (121.290.160) (81.679.614) 14.736 88.593 14.378
75 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -3.1 Foreign currency risk management (cont’d) 2015 TL Equivalents USD EUR CHF GBP DKK
1. Trade Receivables 145.905.557 33.861.840 13.171.446 - 1.301.017 - 2a. Monetary Financial Assets 2.113.603.710 542.699.817 167.980.574 8.426 427.947 22.365 2b. Non-Monetary Financial Assets 704.436 242.274 - - - - 3. Other 4.523.312 1.313.947 217.227 3.364 644 - 4. CURRENT ASSETS 2.264.737.015 578.117.878 181.369.247 11.790 1.729.608 22.365 5. Trade Receivables 6.196.663 2.131.195 - - - - 6a. Monetary Financial Assets 88.636 30.375 100 - - - 6b. Non-Monetary Financial Assets ------7. Other 25.028.612 1.634.213 5.997.235 416.750 - - 8. NON-CURRENT ASSETS 31.313.911 3.795.783 5.997.335 416.750 - -
9. TOTAL ASSETS 2.296.050.926 581.913.661 187.366.582 428.540 1.729.608 22.365
10. Trade Payables 82.712.781 11.694.730 13.523.938 61.322 1.291.878 - 11. Financial Liabilities 940.133.556 294.194.497 26.665.923 - - - 12a. Other Monetary Financial Liabilities 89.009.301 136.555 27.557.348 - 243.222 - 12b. Other Non-monetary Financial Liabilities 12.777.763 3.167.266 1.121.044 - 1.486 - 13. CURRENT LIABILITIES 1.124.633.401 309.193.048 68.868.253 61.322 1.536.586 - 14. Trade Payables ------15. Financial Liabilities 1.729.086.145 336.661.371 236.093.134 - - - 16a. Other Monetary Financial Liabilities ------16b. Other Non-monetary Financial ------17. NON-CURRENT LIABILITIES 1.729.086.145 336.661.371 236.093.134 - - -
18. TOTAL LIABILITIES 2.853.719.546 645.854.419 304.961.387 61.322 1.536.586 -
19. Net foreign currency liability (557.668.620) (63.940.758) (117.594.805) 367.218 193.022 22.365 20. Net foreign currency of monetary items (1+2a+5+6a-10-11-12a-14-15-16a) (575.147.217) (63.963.926) (122.688.223) (52.896) 193.864 22.365
76 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -3.1 Foreign currency risk management (cont’d) 2014 TL Equivalents USD EUR CHF GBP DKK
1. Trade Receivables 149.808.245 45.578.861 13.661.496 - 1.551.804 - 2a. Monetary Financial Assets 1.956.238.067 841.728.089 1.349.224 13.281 142.933 10.494 2b. Non-Monetary Financial Assets 777.877 335.451 - - - - 3. Other 5.137.823 1.773.774 359.644 4.347 - - 4. CURRENT ASSETS 2.111.962.012 889.416.175 15.370.364 17.628 1.694.737 10.494 5. Trade Receivables 5.016.738 2.163.413 - - - - 6a. Monetary Financial Assets 27.877 11.900 100 - - - 6b. Non-Monetary Financial Assets ------7. Other 15.155.831 133.979 5.262.930 - - - 8. NON-CURRENT ASSETS 20.200.446 2.309.292 5.263.030 - - -
9. TOTAL ASSETS 2.132.162.458 891.725.467 20.633.394 17.628 1.694.737 10.494
10. Trade Payables 70.742.611 20.453.269 6.573.919 7.239 1.291.973 284.058 11. Financial Liabilities 816.087.585 346.832.490 4.189.642 - - - 12a. Other Monetary Financial Liabilities 91.668.829 15.556.027 19.709.986 - - - 12b. Other Non-monetary Financial 1.667 Liabilities 10.300.134 3.665.656 635.959 - U - 13. CURRENT LIABILITIES 988.799.159 386.507.442 31.109.506 7.239 1.293.640 284.058 14. Trade Payables ------15. Financial Liabilities 1.702.355.977 454.578.712 229.812.955 - - - 16a. Other Monetary Financial Liabilities 21.262.356 9.169.156 - - - - 16b. Other Non-monetary Financial ------17. NON-CURRENT LIABILITIES 1.723.618.333 463.747.868 229.812.955 - - -
18. TOTAL LIABILITIES 2.712.417.492 850.255.310 260.922.461 7.239 1.293.640 284.058
19. Net foreign currency liability (580.255.034) 41.470.157 (240.289.067) 10.389 401.097 (273.564) 20. Net foreign currency of monetary items (1+2a+5+6a-10-11-12a-14-15-16a) (591.026.431) 42.892.609 (245.275.682) 6.042 402.764 (273.564)
77 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(b) -3.1 Foreign currency risk management (cont’d)
The Group’s import and export totals for the year ended 2016 and 2015 are presented below:
2016 2015
Total exports 796.153.118 890.009.811
Total imports 221.095.704 192.402.024
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.
2016 2015 Income / Expense Income / Expense Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency
1 - US Dollar net asset / liabilities (42.684.433) 42.684.433 (18.598.151) 18.598.151 2- Part of hedged from US Dollar risk (-) - - - - 3- US Dollar net effect (1 +2) (42.684.433) 42.684.433 (18.598.151) 18.598.151
4 – Euro net asset / liability (30.302.320) 30.302.320 (38.985.410) 38.985.410 5 – Part of hedged from Euro risk (-) - - - - 6- Euro net effect (4+5) (30.302.320) 30.302.320 (38.985.410) 38.985.410
Total (3 + 6) (72.986.753) 72.986.753 (57.583.561) 57.583.561
78 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(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 and all other variables were held constant:
Net income of the Group would have been decreased by TL 1.756.800 (Net profit in 2015 would have been decreased by TL 1.436.964). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. In case of 1% decrease in Libor/Euribor interest rate, the net profit of the Group for the current period would have increased by TL 943.928 (Net profit in 2015 would have been increased by TL 729.882).
The financial instruments that are sensitive to interest rate are as follows:
2016 2015 2014 Fixed interest rate financial instruments
Financial Assets Cash and Cash Equivalents 2.138.961.654 1.315.181.835 1.030.810.637 Other Receivables 17.222.132 36.279.725 20.765.289
Financial Liabilities Borrowings 880.634.633 1.135.125.472 1.240.301.965 Financial lease payables 65.636 429.229 805.785 Other Payables 8.431.010 4.472.618 45.380.378
Floating interest rate financial instruments
Financial Non-trade receivables from Assets related parties 1.618.637 802.126.831 984.706.867 Other Receivables 3.030.555 - -
Financial Liabilities Borrowings 1.833.586.467 1.559.556.601 1.317.217.451 Loan Payables due to Related Parties 30.629.376 - - Loan Payables due to Third Parties - 86.239.625 78.982.326
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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
33. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)
(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 2016, 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 2.971.627 (2015: increase/decrease of TL 3.135.403). This situation is the result of the changes in the fair value of available for sale securities.
80 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
34. FINANCIAL INSTRUMENTS
Classifications and fair values of financial instruments
Financial assets presented at Credits and Available for sale Financial liabilities at 2016 amortized cost receivables financial assets amortized cost Carrying value Notes Financial Assets Cashandcashequivalents 2.169.912.611 - - - 2.169.912.611 5 Tradereceivables - 170.895.789 - - 170.895.789 8 Due from related parties - 603.734.608 - - 603.734.608 32 Financial investments - - 929.555.230 - 929.555.230 6
Financial Liabilities Financial liabilities - - - 2.744.916.112 2.744.916.112 7 Tradepayables - - - 302.086.015 302.086.015 8 Payable to related parties - - - 335.895.278 335.895.278 32
Financial assets presented at Credits and Available for sale Financial liabilities at 2015 amortized cost receivables financial assets amortized cost Carrying value Notes Financial Assets Cashandcashequivalents 1.344.388.200 - - - 1.344.388.200 5 Tradereceivables - 190.547.613 - - 190.547.613 8 Due from related parties - 1.380.979.387 - - 1.380.979.387 32 Financial investments - - 766.038.621 - 766.038.621 6
Financial Liabilities Financial liabilities - - - 2.695.111.302 2.695.111.302 7 Tradepayables - - - 284.456.228 284.456.228 8 Payable to related parties - - - 397.240.011 397.240.011 32
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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
34. FINANCIAL INSTRUMENTS
Classifications and fair values of financial instruments
Financial assets presented at Credits and Available for sale Financial liabilities at 2014 amortized cost receivables financial assets amortized cost Carrying value Notes Financial Assets Cashandcashequivalents 1.055.071.051 - - - 1.055.071.051 5 Tradereceivables - 184.892.563 - - 184.892.563 8 Due from related parties - 1.517.615.466 - - 1.517.615.466 32 Financial investments - - 529.869.041 - 529.869.041 6
Financial Liabilities Financial liabilities - - - 2.558.325.201 2.558.325.201 7 Tradepayables - - - 282.083.463 282.083.463 8 Payable to related parties - - - 401.539.736 401.539.736 32
The management of Groups considers that the carrying values of the financial assets reflect their fair values.
82 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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
34. FINANCIAL INSTRUMENTS (cont’d)
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 1 Level 2 Level 3 Financial assets 2016 TL TL TL
Financial assets for which fair value differences reflected through profit and loss - Shares 754.935 754.935 - - Financial assets for which fair value differences reflected through comprehensive income statement - Shares 928.600.177 29.361.290 899.238.887 -
Total 929.355.112 30.116.225 899.238.887 -
Level of fair value as of reporting date Level 1 Level 2 Level 3 Financial assets 2015 TL TL TL
Financial assets for which fair value differences reflected through profit and loss - Shares 704.437 704.437 - -
Financial assets for which fair value differences reflected through comprehensive income statement - Shares 765.134.066 30.649.592 734.484.474 -
Total 765.838.503 31.354.029 734.484.474 -
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 2016 (Amounts expressed in Turkish Lira (TL) unless otherwise stated.)
34. FINANCIAL INSTRUMENTS (cont’d)
Fair value of financial instruments (cont’d)
Level of fair value as of reporting date Level 1 Level 2 Level 3 Financial assets 2014 TL TL TL
Financial assets for which fair value differences reflected through profit and loss - Shares 778.877 778.877 - -
Financial assets for which fair value differences reflected through comprehensive income statement - Shares 528.847.773 29.930.540 498.917.233 -
Total 529.626.650 30.709.417 498.917.233 -
35. SUBSEQUENT EVENTS
Ülker Bisküvi Sanayi A.Ş. has initiated negotiation with United Biscuits which is subsidiaries of Yıldız Holding with regards to the acquisition of 100% owned IBC facility and its sales and distribution rights of McVities products in Middle East and North Africa.
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