AnnuAl RepoRt 2008 - Ülker Bisküvi€¦ · ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 1 In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer,

AnnuAl RepoRt 2008

Contents2 Ülker Bisküvi in Brief3 The Vision of Ülker Bisküvi4 The History of Ülker Bisküvi6 Overview of Yıldız Holding8 Key Financial and Operational Indicators8 Capital and Shareholder Structure9 Performance of Ülker Bisküvi Shares10 Message from the Chairman of the Board11 Board of Directors12 Message from the General Manager14 The Food Industry Worldwide15 The Food Industry in Turkey17 Activities in 2008 Ülker Bisküvi in 2008 Production and Capacity Marketing and Distribution Investments Subsidiaries • BirlikPazarlama • İdealGıda • İstanbulGıda-BirleşikDışTicaret • BiskotGıda • AtlasGıdaPazarlama • Godiva • OtherSubsidiaries28 Corporate Governance Ülker Bisküvi Family: Human Resources R&D,QualityandEnvironmentActivities StockholderRelationsandProfitDistributionPolicy Social Responsibility Projects CorporateGovernancePrinciplesComplianceReport40 Profit Distribution Proposal 42 Audit Board Report43 Independent Audit Report

1ÜLKER BİSKÜVİ ANNUAL REPORT 2008

In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer, becoming Yıldız Holding, a world-renowned brand name. With a 56% share in the biscuit market, Ülker Bisküvi is by far the market leader in the industry. In the “Brands 2008” survey by AC Nielsen, Ülker was ranked first in the biscuit category, and second and third in the categories of “top-of-the-mind” brands and those that consumers feel closest to, respectively.

2

As the first company of Yıldız Holding, operating its core business for 64 years, Ülker Bisküvi serves as the flagship of the Holding both in terms of sales turnover and profitability. According to the Istanbul Chamber of Industry (ICI) 2007 list of Turkey’s Top 500 Industrial Enterprises, Ülker Bisküvi was ranked 108th.

Ülker Bisküvi produces biscuits, crackers, chocolate covered biscuits and wafers at its factories in Istanbul/Topkapı and Ankara. As the indisputable leader in the Turkish biscuit industry, Ülker Bisküvi also takes its place among the giant food producers of the world with its 280 assorted biscuit and cracker products that are supplied to both the local and international markets.

In 1996, Ülker Bisküvi received the ISO 9002 certification for quality standards in production; and in 2001, it was awarded the HACCP certification for quality standards in food safety. In 2002, it won the top mark of “High Level” in an analysis made by the Europe-based quality certification firm BRC, which has further secured its success in the field of quality control.

Ülker Bisküvi develops new products in its independent laboratories, employing an experienced and expert R&D staff in keeping with its quality-focused approach. Introducing an average of 60 new products per year to the market, Ülker Bisküvi has continued to excel in innovation, thus making Ülker one of the top food brands.

Ülker Bisküvi’s products are exported mainly to the Middle East, Russia and Central Asian Republics, as well as to Europe, Africa and the United States. Ülker Bisküvi not only contributes to Turkey’s economy through its exports, but it also successfully represents Turkey’s approach to quality on a global scale.

Ülker Bisküvi has an effective quality control system that injects synergy into the entire process from production through consumption; and it continues its investments based on its strategy that is focused on sustainable and profitable growth.

Ülker Bisküvi is a consumer-focused company that satisfies its consumers’ needs and expectations at the maximum level, and it has formed a harmonious and lasting relationship with its target group. Surveys conducted in recent years attest to the high levels of loyalty to the Ülker brand. In the “Brands 2008” survey by AC Nielsen, Ülker has ranked first in the biscuit category, and second and third in the categories of “top-of-the-mind” brands and those that consumers feel closest to, respectively.

Local distribution of biscuits and chocolate covered products produced by Ülker Bisküvi and its subsidiaries is undertaken by its subsidiary, Atlas Gıda Pazarlama, and other marketing companies of Yıldız Holding, i.e. Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama.

Ülker Bisküvi in Brief

As the indisputable leader in the Turkish biscuit industry, Ülker Bisküvi takes its place among the giant food producers of the world with its 280 assorted biscuit and cracker products that are supplied to both the local and international markets. Ülker Bisküvi not only contributes to Turkey’s economy through its exports to Europe, Africa and the United States, but it also successfully represents Turkey’s approach to quality on a global scale.


The Vision of Ülker Bisküvi is to strengthen its position as a most preferred brand by consumers, and to be among the first five companies in the world in 10 years, particularly in the area of bakery products.

4

1944

Ülker Bisküvi was established by Sabri Ülker in 1944 in the Eminönü district of Istanbul. It started out as a small bakery, with just three workers, producing 200 kg of biscuits per day. Within a few years, the company relocated to the Topkapı district of Istanbul and had four 20 m2 ovens, which enabled the Company to achieve what was considered a high level of production at the time.

1948

Producing a total of 75 tons of biscuits in 1944, Ülker Bisküvi tripled its capacity at its Topkapı facility that was specifically set up in 1948 in order to increase production.

1955

In 1955, Ülker Bisküvi began distributing its products throughout Turkey at factory prices, and enjoyed a huge growth in production. The marketing of biscuits, chocolate and other products by street vendors in Turkey’s larger cities represented a truly revolutionary approach.

1970

In keeping with the growth of Ülker Bisküvi, a multiple shareholder company, Anadolu Gıda Sanayii A.Ş., was established in 1970 in Ankara, doubling its biscuit production capacity.

The History of Ülker Bisküvi

In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer, becoming the flagship of Yıldız Holding, and a world-renowned brand name.


1974

Exports began in 1974, with the Middle East market chosen as the first target. During the same year, the Company also set up an R&D department to improve its performance in international competition.

1979

Ülker products began to be produced in cellophane-based packaging.

2003

In 2003, Ülker Bisküvi merged with Anadolu Gıda, and realized important steps towards increased institutionalization.

2007

The company name was changed from Ülker Gıda to Ülker Bisküvi in 2007 as part of a move to provide a clearer description of its field of business.

2008

Within the scope of Corporate Governance, Articles of Incorporation were amended and Corporate Governance and Audit Committees were set up. At the beginning of 2008, Ülker Bisküvi took part in the acquisition of the premium chocolatier brand, Godiva, with a 25.23% share.

6

Yıldız HoldingYıldız Holding, continuing its growth in FMCG, is considered one of the pioneers and leading groups of the sector in both the domestic and international arenas.

As of the end of 2008, Yıldız Holding, consisting of seven different groups, contributed a major added value, as represented by a USD 10.9 billion turnover. The Company employs 29,500 people in 43 factories, 9 of which are located abroad, and differentiates itself from the competitors with its production and sales capability, product variety and distribution network.

Today, food is the main area of growth for Yıldız Holding, as it was in the past. Organized under Yıldız Holding umbrella, Ülker (Biscuit, Chocolate, Candy) Group and Food and Beverage Group reaches customers directly, with 160 brands and more than 2,700 assorted products. In addition to meeting all nutritional demands of customers, these two groups also forecast possible demands and plan products for the future.

R&D and the Business Development Group support other groups in products, marketing and new investment fields. The International Operations Group manages the foreign investments of the Holding. The Information Technology Group and the Packaging Group meet the needs of Yıldız Holding, and are growing in the sector with their visionary approach. A new business field, the Real Estate Investment Group, continues its growth as well.

Yıldız Holding, drawing global attention for its success, is the preferred strategic partner for giant global brands such as Kellogg’s, Hero Baby and Cargill. Thus, the Holding is consistently transcending its borders. The Company has strengthened its long-established reputation thanks to its social awareness, reflected in various projects such as environment, sports, education, health and the arts. Yıldız Holding contributes to social development through the social responsibility and sponsorship projects it has undertaken.

In addition to figures and created capacities, Yıldız Holding represents a system of values that reaches from the first half of the 20th century into the 21st century. The Company, growing with a spirit of entrepreneurship, evolution, trust, honesty, vision, innovation, determination and bravery, has created a global value.

Overview of Yıldız Holding

Yıldız Holding, continuing its growth in FMCG, is considered one of the pioneers and leading groups of the sector in both the domestic and international arenas.


8

Key Financial Indicators (TRY) 2007 2008

Shareholders’ Equity 716,159,403 705,944,420

Gross Profit 307,237,376 306,330,460

Operating Profit 99,500,588 112,489,893

EBITDA 125,549,150 135,891,705

Net Profit for the Year 116,073,842 15,685,234

Production (*) 129,741 127,624

Sales (*) 131,758 128,103

(*) Figures are given in tons.

Capital and Shareholder StructureThe shareholder structure of Ülker Bisküvi, as of 31 December 2008, is provided below. No single individual owns more than a 10% share in the Company.

Shareholder Amount (TRY) %

Yıldız Holding A.Ş. 113,049,151 42.09

Dynamic Growth Fund 71,369,033 26.57

Ülker Family 12,370,449 4.61

Free Float and Others 71,811,367 26.74

Total 268,600,000 100.00

Key Financial and Operational Indicators

With the strong financial and operational results it has achieved, Ülker Bisküvi increased its value in the eyes of stakeholders, and decisively moved forward towards its goals.

Ülker Bisküvi’s gross profit in 2008 was TRY 306.3 million, while its net profit for the year reached TRY 15.6 million.

In 2008, total production increased by 4,800 tons with the wafer facility investment in Ankara Factory. The total production of the Istanbul and Ankara factories reached 127,624 tons, with an increase of 75% in total capacity utilization.

Gross Operating Profit (TRY)

2007

2006

2008 306,330,460321,792,720

386,203,854

15,685,2342008

2007

2006

116,054,667

89,291,998

Net Profit for the Year (TRY)

127,6242008

2007

2006

129,741

124,850

Production (Ton/Year)

128,1032008

2007

2006

131,758

122,575

Sales (Ton/Year)


Performance of Ülker Bisküvi Shares

Source: Reuters and Bizim Menkul Değerler

Company Ülker Bisküvi

Reuters & Foreks Code ULKER.IS

ISIN Code TREULKR00015

Industry Food

XU100

XU050

ISE Index Listings XUTUM

XUSIN

XGIDA

XSANK

Price (TRY) 31.12.2008 1.76

Free Floatation (%) 31

Market Value (‘000 USD) 310,643

Free Floating Market Value (‘000 USD) 96,299

Average Trading Volume (‘000 USD) (01 January 08-31 December 08) 1,543

Beta 0.81

Ülker Bisküvi, celebrating its 65th anniversary in 2009, gained its consumers’ confidence by constantly emphasizing quality and efficiency in its structure. Focusing on the needs and demands of its consumers, the Company enjoyed a year of success, despite the unfavorable environment caused by macroeconomic conditions. In 2008, the net sales of Ülker Bisküvi reached TRY 1,412 million, and the operating profit was TRY 112 million.

February2008 March April May June July August September October November December 2009 February

5.004.804.004.404.204.003.803.603.403.203.002.802.602.402.202.001.801.601.401.201.00

XU100ÜLKER

10

Message from the Chairman of the Board

Dear Shareholders,

The growth period that the world economy enjoyed in the past several years ended in the last quarter of 2008 with the US-based financial crisis. 2008 will be remembered as a year when the developed, great economies were confronted with a global financial crisis, resulting in a global recession.

Although the shock waves of the economic crisis reached Turkey in 2008, the impact was felt towards the end of the year, thanks to the fact that our country was at the perimeter of these developments. However, entering into a crisis psychology was inevitable. Structural arrangements, such as “lean management” implementations and strategic planning efforts, which were initiated during previous years, helped our companies to be well-prepared against any crisis. Thus, our companies were protected against the crisis, which began in the last quarter of the year.

In 2008, Ülker Bisküvi took the potential impact of the financial crisis of the last quarter of the year into account, and managed to reach its objectives according to plan, and in spite of an intense competitive environment. The dynamics of the food sector, where Ülker Bisküvi operates, offered an important advantage for our Company. Since the food sector is not among the first three sectors that consumers will cut back on, it can be assumed that our sector will be impacted less by the existing economic conditions than other sectors.

Ülker Bisküvi, celebrating its 65th anniversary in 2009, gained its consumers’ confidence by constantly emphasizing quality and efficiency in its structure. Focusing on the needs and demands of its consumers, the Company enjoyed a year of success, despite the unfavorable environment caused by macroeconomic conditions. In 2008, the net sales of Ülker Bisküvi reached TRY 1,412 million, and the operating profit was TRY 112 million.

The Company gained a competitive advantage by presenting the best quality in the most efficient way to its consumers, thanks to realized investments and newly developed products by the R&D teams in 2008.

Implementations, which were already in effect in the existing corporate structure, have been rearranged along Corporate Governance Principles, with the amendments made in the Articles of Incorporation in 2008. According to the changes in the Articles of Incorporation, the number of independent members on the Board of Directors was raised from two to three. The Corporate Governance, Audit and Risk Committees were set up.

Transparency, accountability and responsibility was adopted in all of our business processes and in our relations with all stakeholders. With the changes introduced, in regards to increased effectiveness and efficiency in corporate actions, reporting safety and compliance with legal regulations, the solid structure of Ülker Bisküvi was strengthened even more.

At Ülker Bisküvi, we assign great value to our consumers’ opinions and expectations. We believe that our Company will continue to differentiate itself, thanks to its capacity to develop product concepts in accordance with customer needs. Our integrated structure, advanced technology, strong distribution network, and our relationship with our suppliers based on trust, constitute major advantages for Ülker Bisküvi. With the help of the synergy from the Godiva acquisition of 25.23%, solid capital structure, export activities in 110 countries and a wide distribution network, Ülker Bisküvi will carry its successes into 2009 as well.

Yours Sincerely,

Murat ÜlkerChairman of the Board

In 2008, Ülker Bisküvi took the potential impact of the financial crisis of the last quarter of the year into account, and managed to reach its objectives according to plan, and in spite of an intense competitive environment. The dynamics of the food sector, where Ülker Bisküvi operates, offered an important advantage for our Company. Since the food sector is not among the first three sectors that consumers will cut back on, it can be assumed that our sector will be impacted less by the existing economic conditions than other sectors.


Board of Directors

Murat Ülker Chairman of the BoardBorn in Istanbul in 1959. Murat Ülker began his business career in 1982, after graduating from the Management Department, Faculty of Economics and Administrative Sciences, Boğaziçi University. After working as the Control Coordinator in the Group in 1984, he attended various training courses (AIB and ZDS) abroad and worked as a trainee at the Continental Baking Company in the United States. Mr. Ülker worked in the export field for two years in the Middle East, and also oversaw about 60 factories and facilities operating in the biscuit, chocolate and food industry in the United States and Europe for three years. Mr. Ülker participated in various IESC projects and realized many investments in keeping with the principle of vertical integration. After working as Assistant General Manager for Enterprises, General Manager, Executive Committee Member and Board Member in various companies of the Group, Murat Ülker was elected as the Chairman of the Board of Directors of Yıldız Holding in 2000. He is married, with three children, and speaks English and German. His hobbies include sailing, as well as traveling with his family.

Orhan Özokur Vice-Chairman of the BoardBorn in Balıkesir in 1946. Having begun working during his high school years, Orhan Özokur carried on his academic and business life hand-in-hand, and graduated from the Academy of Economic and Business Studies. Mr. Özokur joined the Group as a Commercial Manager in 1973, and served as Chairman of the Board and Board Member in different companies of the Group before being appointed as Vice-Chairman of the Board of Directors of Yıldız Holding in 2000. Mr. Özokur is married, with three children, and speaks English. He has a special interest in basketball, and his hobbies also include tennis, listening to music and playing the guitar.

Ali Ülker Board Member (Managing Director)Born in Istanbul in 1969. After studying at the Economics and Business Management Departments, Faculty of Economics and Administrative Sciences, Boğaziçi University, Ali Ülker attended various academic programs at IMD, Harvard and Wharton. Mr. Ülker took part in De Boccard & Yorke consultancy company’s Internal Kaizen Study (1992) and IESC Sales System Improvement and Company Internal Organization Project (1997). He began his business career in 1985 as a trainee at the Quality Control Department of Ülker Gıda A.Ş. He served as a trainee, Sales Executive, Sales Coordinator, Product Group Coordinator and Product Group Manager during 1986-1998 at the chocolate production facilities and Atlas Gıda Pazarlama A.Ş. He served as the General Manager of Atlas Gıda Pazarlama A.Ş. in 1998, Vice-Chairman of the Consumer Group for Marketing and Chainstores in 2000, and General Manager of Merkez Gıda Pazarlama A.Ş. in 2001. Mr. Ülker was appointed Vice-Chairman of the Food Group in 2002. In 2005, he was appointed Chairman of the Ülker (Biscuit, Chocolate, Candy) Group. He is married with three children, and speaks English and German. His hobbies include fishing, watching movies, reading books, and playing basketball and billiards.

Necdet Buzbaş Board MemberBorn in Samsun in 1948. Necdet Buzbaş graduated from the Faculty of Chemistry, Istanbul University, and began his business career at Adeka İlaç Sanayii, a pharmaceutical company in Samsun. Mr. Buzbaş joined the Ülker Group in 1975 for a new chapter in his professional career, and subsequently worked as Plant Chief Officer, Production Manager, Assistant General Manager and General Manager at Ülker Gıda Sanayi A.Ş. before being appointed as Chairman of the Ülker Group as part of the 2000 reorganization of the Company. Appointed a member of the Advisory Committee in 2005, Mr. Buzbaş has also served as a member of the Governing Body of the Confederation of Turkish Employers’ Associations (TİSK), Chairman of the Turkish Food Industry Employers’ Association, member of the Assembly of Istanbul Chamber of Industry (ICI), and member of the Executive Committee of the Association of Sugar Products Industry (ŞEMAD). He speaks English, and has also served in civil society organizations including the Educational Volunteers Foundation of Turkey (TEGEV), KalDer (Quality Association) and KATEK (Quality and Technology Advisory Committee of ISO).

Cengiz Solakoğlu Board Member (Independent)Born in Erzurum in 1948. After graduating from the Istanbul Academy of Economic and Business Studies in 1964, Cengiz Solakoğlu began his business career as a salesman at Beko Ticaret A.Ş. He became an Area Sales Manager in 1969, and Sales Director in 1975. Solakoğlu was General Manager in Beko Ticaret A.Ş. between 1977-1983, and in Atılım A.Ş. between 1983-1991. He was appointed Vice-Chairman in 1991 and Chairman in 1994 of the Consumption Group of Koç Holding. Also serving as a member of the Executive Committee of Koç Group in 1996-1998, he was appointed Chairman of the Durables Consumption Group of Koç Holding in 2002. Having worked uninterruptedly for 37 years in the Koç Group, Mr. Solakoğlu retired due to the Group’s policy of mandatory retirement at age 60. He was one of the founders of the Educational Volunteers Foundation of Turkey and has been a Board Member since its foundation, serving as Chairman of the Board between 2002-2004. He was elected a Leader of Civil Society by the Ekonomist magazine in 2004. In 2007, he reassumed the role of Chairman of the Board of the Educational Volunteers Foundation of Turkey. Çolakoğlu is a Board Member in Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Fresh Cake San. A.Ş., İdeal Gıda A.Ş. and Anadolu Gıda San A.Ş. He is married with two children and three grandchildren.

Mahmut Mahir Kuşculu Board Member (Independent)Born in Istanbul in 1950. After graduating from the Istanbul Erkek Lisesi and then the Faculty of Economics, Istanbul University, Mr. Kuşculu completed his postgraduate education in marketing in the United States. Mr. Kuşculu served as Executive Manager and Board Member in the family glass industry businesses, Tamcam A.Ş. and Arsal Cam Sanayii, from 1970. He established the foreign trade companies, Kutaş Dış Ticaret ve Pazarlama A.Ş. in 1982, and Erdem Dış Ticaret A.Ş. in 1985, also taking part in their management. Mr. Kuşculu has served on the Professional Committees of the Istanbul Chamber of Commerce and the Istanbul Chamber of Industry for 20 years, and has also been a member of the Assembly of Istanbul Chamber of Industry for 13 years. Mr. Kuşculu is also Board Member of Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Fresh Cake San. A.Ş. İdeal Gıda A.Ş., Anadolu Gıda San A.Ş., Polinas Plastik San. A.Ş., Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş. and Godiva Chocolatier Inc. He is married, and has two children.

Güven Obalı Board Member (Independent)Born in Cihanbeyli in 1943. After graduating from Ankara Yıldırım Beyazıt Middle School in 1957, and Ankara Gazi High School in 1960, he completed his degree in Ankara University Political Sciences Faculty, Finance and Economics Department in 1964. He was appointed Assistant Tax Inspector the same year and became Tax Inspector in 1967. He was sent to Germany in order to study Value Added Tax Regulation for one year in 1971. In 1975, left the Ministry of Finance and began working at the Industrial Development Bank of Turkey (Türkiye Sınai Kalkınma Bankası). Starting his career as Financial Analyst, he continued with managerial positions in various units. During his tenure, he also acted as a representative of the bank in the Management and Audit Boards of various companies, such as Şişe Cam Group, Koruma Tarım İlaçları A.Ş., Çelik Halat A.Ş. and Bakırsan A.Ş. After retiring, he founded ABC Sworn Financial Advisor Company in 1994. He retired as sworn financial advisor in 2004. Obalı continues to serve as Audit Board Member in Kuveyt Türk Katılım Bank and as a Board Member in Ülker Çikolata A.Ş., Ülker Bisküvi A.Ş., Atlas Gıda Pazarlama A.Ş., Atlantik Gıda Pazarlama A.Ş., Bizim Toplu Tüketim A.Ş. and Sağlam Gayrimenkul Yatırım Ortaklığı A.Ş. companies. He is honorary member in various associations and foundations. He is married, with two children.

Audit Committee Ataman Yıldız Audit Committee MemberNurettin Aliz Audit Committee MemberMusa Doğan Audit Committee Member

12

Message from the General Manager

Dear Shareholders,

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

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

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

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

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

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

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

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

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

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

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

We are actively taking steps to lessen any impacts on the Company from the current global economic crisis. In line with our principle of “focusing on the consumer”, we continue to develop new products based on consumer needs and preferences. In addition, with our

In 2008, our Company acquired 25.23% of Godiva, and became one of its shareholders. As a result of this important breakthrough, Ülker Bisküvi is taking advantage of this opportunity by working towards a combination of biscuit-chocolate, sharing experience and acquiring a synergy in the international arena.


integrated structure, advanced technology and strong distribution network based on long relationships with suppliers, we will feel little, if any, affects from the economic crisis.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yours Sincerely,

Dr. Cafer FındıkoğluGeneral Manager

14

The Food Industry Worldwide

The food industry, which is based on processing agricultural products, animal husbandry and fishing, is the most important branch of the manufacturing industry in the world, with annual sales of over USD 2 trillion. All developed countries place special emphasis on the agricultural and food sector, independent from their intensity of industrialization. The major indicator is that 80% of the agriculture and food production in the world is carried out by 25 developed countries.

Food is the most strategic item for life. When food safety is not provided, there are threats to health, stability, peace and faith in the future. Based on the developments in Haiti, United Nations Food Program Director J. Sheeran asserted on 15 April 2008 that if food safety is not provided, it not only causes hunger, but also creates a threat for peace and balance. Increasing world population, contaminated, unusable natural resources in agriculture, global warming, food material and industrial raw materials, allocation of land for products that are used for biofuel and fluctuations in the world agricultural product markets are all threats for the provision of food safety.

The products of the food industry cannot be viewed merely as commercial commodities, due to the fact that nutrition is one of the basic needs of life. The food industry has a sustainable and continuous growth rate due to its added value, high employment figures and satisfaction of vital needs.

In recent years, price hikes have been seen in basic food items. In 2008, prices for many food items reached record-breaking levels, but with the decrease in demand due to the global economic crisis, it reverted back to the long-term average in the last months of the year. Following the end of the crisis, prices are expected to increase again, inevitably.

In the first half of 2008, all food sectors, especially the rice sector, were impacted by global warming. Products such as wheat, corn and rice, which are basic for nutrition, are becoming strategically important. The reflections of this trend were seen in 2008 as well. Many countries implemented limitations to agricultural product export due to inventory drops to strategically critical levels. Strategic inventory levels dropped to 116 million tons of wheat and 79 million tons of rice at the beginning of 2008.

One of the reasons for increased international demands for grains is the gradually increasing income level in China and India. As the income level has increased, the demand for meat products and the demand for grains used for animal feed has grown. While the increase in the demand for grains used in the production of bread is directly related to the growth in population, the growing demand for meat is related entirely to economic development and growth in the GDP. The rising income levels increased the consumption of meat and other basic food items by millions of people in India and China. China, as the exporter for food items recently in the past, became an importer.

Another reason for the increasing prices of agricultural products is the demand for ethanol in the United States. Ethanol is a fuel used on its own or mixed with petrol for cars and other motor vehicles. It is produced mainly from sugar cane and corn. While the United States is the biggest exporter of corn in the world, it currently uses more corn for ethanol than it exports. The ethanol project, introduced in 2005, is the most significant reason behind the increase in the prices of corn.

EU countries have decided to move 10% of their total energy consumption from fossil fuel to biofuel by 2020. In this context, they are issuing union aid and support oilseeds production for biodiesel, and sugar cane production for bioethanol.

The products of the food industry cannot be viewed merely as commercial commodities, due to the fact that nutrition is one of the basic needs of life. The food industry has a sustainable and continuous growth rate due to its added value, high employment figures and satisfaction of vital needs.


The Food Industry in Turkey

The food industry is one of the first industries set up in Turkey. Its rich agricultural resources and young workforce makes this industry ever more important. The growth of production in the food industry surpasses the overall economic growth.

The industry is also affected by the recent changes in spending trends and eating habits. Such factors as the increase in per capita income, greater participation of the female population in the area of employment and expansion of the core family structure due to changing lifestyles as a result of urbanization have also changed the patterns of consumption. The development of consumer awareness is considered an opportunity for the food industry. Demand for trustworthy brands and packaged products have grown with the growing importance of food safety and quality. Another rising trend is the demand for organic fruit and vegetables. In addition, Turkey’s geographic closeness to the EU countries, as well as the Middle East and Russian markets, is an important export advantage for the industry.

The reduction of VAT rates to 8% is a positive step in the struggle against unregistered businesses and unfair competition. The VAT reduction, which covered many products from pulses to fizzy drinks, soups, tea and coffee, is aimed at encouraging the public to use trustworthy and packaged products. It also meant a significant relief in the financing burden of the industry and is also expected to make a contribution towards the integration between agriculture and industry, which has been a major problem of the food industry for years.

In addition to other factors, due to global warming in 2007, basic nutritional products such as wheat, corn and rice became strategic. The reflections of this trend were seen in 2008. Prices increased rapidly, reaching 40% in the world and Turkish market.

Although demand elasticity is lower, when compared to other industries, the food industry is expected to be similarly affected by the crisis. Crisis reactions of the consumers are to turn towards more economical products and cut consumption as much as possible. Therefore, it is thought that there may be a drop of about 10% in the industry. The industry also hosts many foreign investments. A total of 258 foreign companies operate in the production of food and beverages in Turkey. 10% of foreign companies in the manufacturing industry, and 2% of all foreign companies that have invested in Turkey, prefer the food industry.

The development of consumer awareness is considered an opportunity for the food industry. Demand for trustworthy brands and packaged products has grown with the growing importance of food safety and quality.

16


Activities in 2008

In the scope of corporate governance, Articles of Incorporation were amended at the Ordinary General Board Meeting on 28 May 2008, and Corporate Governance and Audit Committees were set up.

In order to enable speedy access to company information for shareholders, the corporate website www.ulkerbiskuvi.com.tr was launched.

18

Ülker Bisküvi in 2008

January 2008

Fresh Cake Gıda A.Ş, in which Ülker Bisküvi has a 10% share, bought a 50% share of Unmaş Unlu Mamuller San. ve Tic. A.Ş. (Uno Ekmek) and Doruk Unlu Mamuller San. ve Perakende Hizmetler A.Ş.

March 2008

Ülker Bisküvi acquired 25.23% shares of G-New Inc. in the USA, and Godiva Belgium BVBA Company, which is active in Belgium.

The Collective Labor Agreement bargaining between Ülker Bisküvi and Öz Gıda İş Sendikası, covering the term of 01 January 2008-31 December 2009, resulted in an agreement, which was signed.


May 2008

As per Corporate Governance activities, the Articles of Incorporation were amended at the Ordinary General Board Meeting on 27 May 2008.

July 2008

In order to enable speedy access to company information for shareholders, the corporate website www.ulkerbiskuvi.com.tr was launched.

August 2008

Within the scope of the Corporate Governance Principles, issued by the Stock Exchange Commission, a Corporate Governance Committee was set up. Again within the scope of SEC regulations, the Audit Committee, which had previously been set up, was reorganized along the subject principles.

Activities throughout 2008

• The Corporate Balanced Scorecard Project was finalized in order to transform company strategies into operational objectives.

• The “Best Practice” application continued this year as well in order to share the best practices among the countries where we operate.

• Along the “Continuous Efficiency” principle, the processes definitions in 2007 were analyzed with the “Lean Management” technique. Monitoring and development of efficiency in all processes were systematized.

• Job analysis and permanent staff activities have been realized in order to increase operational efficiency.

20

Production and Capacity

Ülker Bisküvi, which has a 56% market share in the Turkish biscuit sector, produces biscuits at its Istanbul/Topkapı and Ankara factories. In addition to these two main factories, Ülker Bisküvi also makes use of the production facilities of its subsidiaries, İdeal Gıda in Gebze and Biskot Gıda in Karaman.

The total biscuit production of Ülker Bisküvi at its high-tech factories in Topkapı and Ankara was 127,624 tons in 2007.

The Topkapı Factory produces biscuits in 10 production lines. The Ankara Factory produces biscuits, chocolate covered biscuits and wafers in 19 production lines in total, including 14 biscuit production lines and 5 wafer production lines.

İStANBUl tOPKAPI FACtORY

The Topkapı Factory operated at high capacity in 2008, with 50,234 tons of biscuit production and 51,087 tons of net biscuit sales. During 2008, the actual average rate of capacity utilization of the factory, operating in three shifts, was 73%.

All of the production processes at Ülker Bisküvi’s factories are equipped with high technology. Most of the boxing, box handling, packaging and storage processes providing logistic support are carried out using robot technology and automation.

Main Products of the topkapı Factory

Petitbeurre (with cacao, double baked)• Çizi (with sesame seed) • Haylayf • Çokodamla • Hanımeller • Biskrem (with chocolate, apple, fig and • dark chocolate)Negrita•


ANKARA FACtORY

Ülker Bisküvi’s Ankara Factory has a total area of 110,000 m2, including 80,000 m2 closed space. For more than 38 years, it has been a driving force of the economy in the region as the biggest biscuit production and storage complex in the Middle East.

In 2008, the production volume of the Ankara Factory was 77,390 tons. The net sales volume was 77,016 tons. The actual average rate of capacity utilization of the factory, operating in three shifts, was 76% in 2008.

Main Products of the Ankara Factory

Petitbeurre (plain, two colors) • Krim Kraker • Probis• Çokoprens• As Kraker• Başak - Plain, linseed and chocolate• İkram (with chocolate, hazelnut, cheese, • walnut, vanilla)Tempo • Rondo (plain, banana, strawberry, coconut, • orange, raspberry, cheesecake flavors) Altınbaşak • Gofret (hazelnut, banana, orange, • strawberry, coconut, vanilla, cacao and chocolate flavors) Halley • Kat Kat Tat • Çubuk Kraker• Alpella Ring • Mavi Yeşil branded products• Hasat• Hanımeller Kurabiyem (cookie with hazelnut • and chocolate)

22

Our powerful distribution network ensures that customers can easily access Ülker Bisküvi products anytime and anywhere. Ülker’s distribution network has been specially shaped on every level to know the consumer and to respond to their demands in accordance with the market conditions.

Marketing and Distribution

The domestic marketing and distribution of biscuits and chocolate covered products of Ülker Bisküvi and its subsidiaries are performed by its subsidiary, Atlas Gıda Pazarlama, as well as Yıldız Holding companies Pasifik Pazarlama, Esas Pazarlama, Merkez Gıda Pazarlama and Rekor Pazarlama.

Atlas Pazarlama performs nationwide distribution through its Regional Offices in Istanbul, Ankara, Izmir, Thrace region, Bursa, Samsun, Gaziantep and Erzurum, and 132 experienced, reputable and efficient distributors across Turkey. Atlas Pazarlama provides regular and high quality service to 170,000 points of sale weekly, with a total of more than 1,750 delivery vans.

This powerful distribution network ensures that customers can easily access Ülker Bisküvi products anytime and anywhere. Ülker Bisküvi and its subsidiaries are capable of providing a biscuit to everyone in the world with two weeks’ production.

Ülker’s distribution network has been specially shaped on every level to know the consumer and to respond to their demands in accordance with the market conditions.


Ülker Bisküvi has invested TRY 12 million in modernization and expansion in 2008. The common objective of the investments is to reinforce Ülker Bisküvi’s leading position in the market, increase customer satisfaction, improve product quality, and contribute to efficiency and productivity so as to make the cost basis more competitive.

Investments

Ülker Bisküvi has fully achieved the investments foreseen in its strategic development plan in 2008.

The common objective of the investments is to reinforce Ülker Bisküvi’s leading position in the market, increase customer satisfaction, improve product quality, and contribute to efficiency and productivity so as to make the cost basis more competitive.

Ülker Bisküvi has invested TRY 1.4 million in modernization and expansion of the Topkapı Factory in 2008. Also, almost TRY 10.7 million was invested in the Ankara Factory. These investments in both factories include work for the establishment of new facilities, capacity growth, renewal, production line improvements, productivity improvements, and hygiene and storage.

24

Ülker Bisküvi, which is the flagship of Yıldız Holding, is involved in a number of companies within the Holding, and created a strong portfolio and synergistic structure through vertical and horizontal integration.

Under this structure, Ülker Bisküvi benefits effectively from the different companies within Yıldız Holding, each having a leading position in their sector. In addition to the biscuit facilities in different cities in Anatolia, Ülker Bisküvi has formed a dynamic value production process that includes all the branches of the food industry, such as obtaining good quality flour, butter and packaging.

Subsidiaries

Ülker Bisküvi Sanayi A.Ş. Subsidiary List as of 31/12/2008

Subsidiary Share (%) Field of Business

Birlik Pazarlama 99.0 Flour production

İdeal Gıda San. ve Tic. A.Ş. 97.5 Biscuit and cracker production

İstanbul Gıda Dış Ticaret A.Ş. 83.8 International marketing

Atlas Gıda Paz. San. ve Tic. A.Ş. 78.2 Domestic marketing

Birleşik Dış Ticaret A.Ş. 68.0 Foreign trade

Biskot Bisküvi San. ve Tic. A.Ş. 50.5 Biscuit and chocolate covered biscuit production

G-New Inc. 25.2 International investment

Godiva Belgium BVBA. 25.2 Chocolate production and marketing

PNS Pendik Nişasta A.Ş. 23.0 Starch and starch-based sugar production

Netlog Lojistik A.Ş. 12.5 Logistics and transportation

BİM Birleşik Mağazalar A.Ş. 12.0 Retail

Sağlam GYO A.Ş. 10.7 REIT

Fresh Cake A.Ş. 10.0 Cake production

Tire Kutsan A.Ş. 9.8 Paper and cardboard box production

Besler Gıda A.Ş. 7.0 Oil and margarine production


Birlik Pazarlama

As one of the important subsidiaries of Ülker Bisküvi Sanayi A.Ş., Birlik Pazarlama produces not only flour from every kind of grain as needed by Yıldız Holding, but also packaged wheat flour and rice flour for the market.

Established in 1978, Birlik Pazarlama moved its Head Office to Ankara in 1992. Located on the same site as the Ankara Factory of Ülker Bisküvi, in a 63,032 m2 area, Birlik Pazarlama has about 24,000 m2 of closed space. Operating three flour factories, a factory processing soya, oat and other grains and a rice plant, Birlik Pazarlama also has a flour factory and a branch office in Karaman.

Birlik Pazarlama has done contractual planting in cooperation with agrarian research institutes for improving, developing and increasing cultivation of varieties of wheat necessary for biscuit production, and that are lacking within the country.

Birlik Pazarlama has TSE (Turkish Standards Institute)-ISO-EN 9000, TSE HACCP TS 13001 and ISO 22000 certifications. In 2007, the HACCP certification was replaced with ISO 22000 certification.

The subsidiaries of Birlik Pazarlama include Hero Gıda, Netlog Lojistik and PNS Pendik Nişasta.

Birlik Pazarlama sold its Tire Kutsan shares, which had a registered value of TRY 3,195,000, at TRY 6,400,000.

CapacitiesThe company’s actual wheat processing capacity is 930 tons per day in total, including 730 tons per day in Ankara and 200 tons per day in Karaman. Birlik Pazarlama’s rice processing capacity is 19 tons per day, soya processing capacity is 7.5 tons per day and oat processing capacity is 2 tons per day.

With a total grain storage capacity of 35,000 tons, Birlik Pazarlama plans to increase both its grain processing and storage capacity in 2009. Birlik Pazarlama will continue its investments for improving quality production with a more competitive price in 2009.

İdeal Gıda İdeal Gıda, which was established in 1997 in the Gebze Industrial Estate, operating in an area of 85,000 m2 that includes 39,000 m2 closed space, has actively produced biscuits and crackers since 2000. The capacity utilization in Ideal Gıda was 93% in 2008.

İdeal Gıda has continuously invested in its facilities and equipment to increase its production capacity since its inception. It produces four main product groups for domestic and international markets in eight production lines. With a workforce of 386, İdeal Gıda increased its biscuit and cracker production from 30,654 tons in 2003 to 37,770 tons in 2004, and 41,338 tons in 2005. The total production in 2006 was 37,337 tons due to the fact that production had to stop for a month during the conversion of ovens to natural gas. The production in 2008 reached 42,166 tons, up from 40,205 tons in 2007.

The production is carried out in compliance with ISO 9001-2000, ISO 14001-2004, ISO 22000, OHSAS 18001-1999, HACCP, BRC and IFS certification standards.

İdeal Gıda ranked 398th in the Istanbul Chamber of Industry list of Turkey’s Top 500 Industrial Enterprises in 2007.

İstanbul Gıda-Birleşik Dış Ticaretİstanbul Gıda was established in 1987 to undertake international sales and marketing of all products of Yıldız Holding. Established in 1999, Birleşik Dış Ticaret is another export company of Yıldız Holding, and has a branch in the Atatürk Airport Free Trade Zone.

These two companies export Ülker products to more than 110 countries, including the Balkans and the Middle East in particular, and also the United States, Europe, the Turkic Republics, Africa and the Far East, through their powerful sales and distribution channels.

İstanbul Gıda-Birleşik Dış Ticaret owns warehouses with a capacity of 13,450 pallets, which meet all requirements.

Biskot Gıda Ülker Bisküvi acquired Biskot Gıda, operating in three factories in the Karaman Industrial Estate, in 1999. In 2006, Biskot Gıda sold the cake factory - one of its four factories - to AGS Anadolu Gıda, in which it has a 99% share. In 2007, Biskot Gıda sold its shares in AGS Anadolu Gıda to its shareholders.

Providing jobs to around 2,700 people at the three factories in the Karaman Industrial Estate, Biskot Gıda is the most important industrial enterprise and the biggest employer in the region.

Significant increases in the production capacity of the chocolate facility with a winkler molding line, semi-finished chocolate preparation facilities, wafer production facility, Rulokat ovens, granulated cakes line and karpuf line were recorded, in addition to the existing ones. The average capacity utilization rate was 78% at the biscuit facilities, 82% at the wafer facilities, and 78% at the Rulokat facilities with newly added ovens. The average annual capacity utilization rate at the chocolate facilities is 55%, although seasonally it goes up to 67%.

26

Subsidiaries

Atlas Gıda Pazarlama Atlas Gıda Pazarlama is one of the leading companies of bakery products in terms of sales and reach. It issues invoices to 80% of 170,000 points of sale throughout Turkey, which are visited at least once a week.

Established in 1987, Atlas Gıda Pazarlama carries on an efficient and widespread distribution/marketing operation in 10 regions across Turkey, in addition to its head office organization in Istanbul. Atlas Gıda Pazarlama’s organization of distribution channels consisted of distributors, chain markets, local markets and sales representatives in 2007, although it transferred the Chain Markets to a newly established Group company, Pasifik Gıda Pazarlama, at the end of 2007.

• Distributors: Atlas Gıda Pazarlama’s 132 distributors market the products they buy from the Company to the regions and points of sale through their own sales organization.

• Sales representatives: Using vehicles hired from Atlas Gıda Pazarlama, sales representatives’ organizations buy and sell products to points of sale allocated to them in Istanbul, Ankara and Izmir. There are 160 sales representatives in total working for Atlas Gıda Pazarlama.

Following the restructuring in 2005, Atlas Gıda Pazarlama has focused primarily on the domestic distribution of biscuits, cakes, crackers and some chocolate covered products. There are 40 brand names in Atlas Gıda’s portfolio.

Following the establishment of a Category Assistant General Manager’s Department, the Company was able to implement different promotional and consumer initiatives for different product categories in parallel to its rapidly expanding product portfolio, develop storage and logistics strategies on a product basis, and measure its delivery efficiency more accurately.

Biskot Gıda increased its biscuit production from 5,221 tons in 1999 to 101,907 tons in 2007 through new investments and efficiency improvements.

Biskot Gıda’s product portfolio includes Petitbeurre-Finger-Picnic, Cream and Sandwich Biscuits, Chocolate Covered Bar, Chocolate Flavored Wafer, Rulokat, Çokomel, Cream Chocolate, Special Biscuits, Special Chocolate, crackers and most recently, Mavi Yeşil branded products in the reduced calorie segment, which have a fast growing consumption rate.

In addition to the Ülker, Alpella, Halk and Karsa brands, the Company continues to produce “private label” crackers, marshmallows, wafers, chocolate and chocolate covered products in three different factories.

Biskot Gıda ranked 204th in the Istanbul Chamber of Industry list of Turkey’s Top 500 Industrial Enterprises in 2006, and 208th in 2007. Its position did not decline even though it sold one of its four factories, the cake factory, to AGS-Anadolu Gıda in 2006.

Biskot Gıda has ISO 9001 Quality Management System, ISO 22000 Food Safety Management System, ISO 14001 Environmental Management System certifications and received the Global Food Standard (BRC) quality certificate in 2008.


Other Subsidiaries • Besler Gıda produces oil, the main raw material in biscuit and wafer production,• PNS Pendik Nişasta is one of the largest companies in the corn and starch sector,• Fresh Cake is an international joint-venture, producing cakes,• Sağlam GYO is a real estate investment partnership which went public at the beginning of 2007, • Tire Kutsan is a publicly traded company producing carton and cardboard boxes,• BİM Birleşik Mağazacılık is a publicly traded company operating in the field of markets and stores.

Godiva With the agreement signed in December 2007, the world’s leading premium chocolatier brand, Godiva, has become an official member of Yıldız Holding. Ülker Bisküvi played an active role in this process by acquiring 25.23% shares of Godiva.

Godiva, established in Brussels in 1926 by Joseph Draps, takes its name from the legendary story and personality of Lady Godiva, and has been producing premium chocolate products for 80 years. The Godiva brand serves its customers through 450 stand alone boutiques and 9,300 sales points worldwide with more than 60 products ranging from premium chocolates to biscuits, from coffee to cocoa, chocolate drinks, cakes and chocolate bars. Having opened its first boutique in the United States on New York’s Fifth Avenue in 1972, Godiva offers its products throughout four geographic regions, including North America, Japan, the Pacific region and Europe.

The world trend, leaning towards a combination of biscuit-chocolate, has made a big imprint on Ülker Bisküvi’s partnership with Godiva by 25.23%. In an important breakthrough, Ülker Bisküvi is taking advantage of this opportunity by sharing experiences and acquiring a synergy in the international arena.

Regarding the synergy that will be acquired by joining Yıldız Holding, Jim Goldman, Godiva CEO, asserted in an interview to Capital magazine in May 2008 that they were very impressed when they saw the technology Yıldız Holding owns in biscuit and chocolate production. He stated, “In comparison to us, Yıldız Holding has great opportunities for growth in markets such as Turkey and Middle East, where they know the markets better than we do. As a member of the Yıldız family, we intend to increase investments and growth rates. This business can definitely reach a billion dollar level”.

28

A human resources policy, open to development, is necessary in order to reflect advanced technology and new opportunities in business life, while operating under global competitive conditions. Ülker Bisküvi is maintaining its industrial competitive advantage, not only through technology, but also by big investments in human resources.

Corporate Governance

Ülker Bisküvi Family

Human Resources

Breakdown of Seniority (2008)

5 years and less 41%

Between 11-19 years 23%

Between6-10 years27%

20 years and more

9%

Educational Breakdown (2008)

Primary education29%

Undergraduate and above 8%

Breakdown of Age Groups (2008)

45 and above 6%

Between 31-44

52%

30 and below 42%

Vocational study 1%

High school 62%


Yıldız Holding’s human resources policy is conducted with a vision to shape and implement a top notch human resources organization in all the fields of business. Ülker Bisküvi’s human resources operations are also in keeping with the Holding policy.

The company’s mission in human resources is to increase the competitiveness of Ülker Bisküvi through efficient human resources with a high quality of work, high motivation, company loyalty and collaboration.

Under the conditions of global competition, the key to realizing high technology and new opportunities in business life is a human resources policy open to development. Ülker Bisküvi organizes employee satisfaction surveys aimed at further increasing company loyalty and motivation of employees and creates development programs in keeping with these results, as well as offering social and sports activities for employees and their families.

In 2008, the Process Project training courses aimed at employee participation in the resolution of problems and in the analyzing processes were completed at the Istanbul/Topkapı Factory.

As in previous years, the Smile Group, which is organized on a voluntary basis, continued a series of activities in order to increase all employees’ motivation in the factories and to strengthen the social communication network and loyalty to the Company. All of the factories took part in these efforts.

• In addition to technical visits between the factories to increase the social communication network, factory visits were also organized for families of employees to provide them an opportunity to see the working environment and find out more about the Company.• Employees were sent to football games with Beşiktaş, Fenerbahçe and Galatasaray football teams, sponsored by Ülker.

• The traditional football tournament was successfully organized in 2008 as well. Ranking teams were rewarded. • The traditional company picnic took place, where the employers have an opportunity to relax with their families. • Among activities for National Independence and Children’s Day on the 23rd of April, a movie festival for employee’s children was organized under the sponsorship of Ülker. • A big screen TV was installed at the dining room and the community facility’s teahouse, showing videos to inform and educate employees during their break times. • Feasible and successful ideas in the Mind Cube platform were rewarded.

A human resources policy, open to development, is necessary in order to reflect advanced technology and new opportunities in business life, while operating under global competitive conditions, in parallel with the developments in the world. Ülker Bisküvi is maintaining its industrial competitive advantage, not only by technology, but also by big investments in human resources.

Corresponding to the idea that each manager should also be a good human resources manager, all managers are informed about human resources in order to better enable their personal development.

Regarding employees as “our biggest capital” and “our most important asset”, Ülker Bisküvi is committed to ensuring and supporting the development of its employees not only for business targets and competitiveness of the Company, but for their own personal advancement as well.

Support for the personal and professional development of employees is done through Training and Development Programs, so that they can maintain top performance in their job and prepare Ülker Bisküvi and themselves for the future.

Ülker Bisküvi provides its employees in-house and outsourced training opportunities in the following areas:

• Quality Systems (Food Chemicals Hygiene and Use, ISO 14001 Environment Management Systems, OHSAS 18001 Briefing, ISO 22000 Food Safety, etc.) • Personal Development (Problem Solving and Decision Making Techniques, Interpersonal Relations Management and Communication Skills, Emotional Intelligence in Business Life, Negotiation Techniques, etc.)• Foreign Languages (English, etc.)• Technical Training (Pneumatic, Mechatronics, Siemens S7 200, Siemens S7 300, etc.)• On-the-job (Color Coding of Waste, Control and Management of Solid and Hazardous Wastes in the Laboratory, Oven Use, Cold Room Control and Coordination, etc.)• Job orientation (Job start program, factory visit, etc.)

Ülker Bisküvi uses the Performance Management System, based on aims and competencies, to reward and identify employees’ potential and achievements. The Performance Management System is aimed at improving the skills of each and every employee and their contribution to the vision of Ülker Bisküvi.

Major competencies of Yıldız Holding have been defined under the following headings, Consumer-focused, Team Work Disposition, Innovation, Result-oriented, Effective Problem Solving.

A Collective Labor Negotiation was signed in March 2006 with Öz Gıda İş Trade Union for the period from 1 January 2008 to 31 December of 2009. Ülker Bisküvi’s senior and employee termination benefit, as of 31 December 2008, was TRY 13,487,009.

30

Ülker Bisküvi, offering innovative products that appeal to the traditional taste buds of Turkey and world, defines the ethical principles in R&D practices as follows:

• Using scientific methods and techniques to search for, find and report the facts, • Caring for the people, environmental health and public good in keeping with the laws and regulations in effect as well as the principles and targets of the Group, • Giving the utmost importance to ensuring customer satisfaction and meeting customer needs, • To provide food safety-quality-price-variety optimization in products,• Acting in line with the principle that “we never offer our customers any product that we will not consume ourselves.”

Ülker Bisküvi, with the professional and experienced R&D staff, continued to develop new products parallel to its sense of quality, and brought its innovative approach to a higher level in 2008 as well.

One of the greatest projects Ülker Bisküvi realized in 2008 was the “Hanımeller Large Sized Cookie” product segment. In addition

R&D, Quality and Environment Activities

to the biscuit, wafer and cracker group, the following projects were completed successfully:

• 13 new products (Hanımeller Kurabiyem with Hazelnut, Hanımeller Kurabiyem with Chocolate Chips, Clip Light Crackers, Biskrem with Hazelnut, Hanımeller Negrita, Hanımeller Papatya, Çizi with Olives and Thyme, Çizi with Tomato and Basilicum, Halk Tatbeni Mosaic, Clip Cracker, Rich in Grains, Başak with Linseed, Canpare with Coffee, 9 Kat Tat Chocolate Wafer)• Two product developments (Woopie ice cream biscuit, Alpella Ring)• Seven packaging developments (Rondo Cheesecake 4 in 1, Rondo Cheesecake, Başak 12 in 1, Germany Halley 10 in 1, Export Alpella Ring 10 in 1, Alpella Ring 30 gr, Chocosandwich).

In 2008, the products developed as a result of R&D activities represented 1.8% of the total product tonnage of the Ankara Factory, and 2.5% of the total product tonnage of the Istanbul Factory. The Ankara R&D department is still working on 60 new projects and the İstanbul Factory is working on 37 new projects.

One of the greatest projects Ülker Bisküvi realized in 2008 was the “Hanımeller Large Sized Cookie” product segment. In addition, 13 new products in the biscuit, wafer and cracker group, two product developments and seven packaging developments were completed successfully.


In 2008, in order to guarantee the standardized, reliable and free from human mistakes production quality of Ülker products, which are consumed by people of all ages and all cultures, the following activities were performed as well.

Many periodical tests and analyses were conducted on raw materials, packaging, semi-processed items and final product evaluation. Production trials with physical, chemical and microbiologic analyses were performed on a total of 105 alternative raw materials in Ankara, and on a total of 67 alternative raw materials in Topkapı.

In addition, analysis results performed by accredited laboratories were requested from suppliers and have been recorded in 2008. Within the scope of defined analysis methods and plans, routine activities in process and CCP controls, shelf life analyses, scoring, appliances, environment and employee hygiene supervision are continued. As for standardized production of Ülker products, and to determine the differences between similar products of competitive companies, an audit was made on four products (Biskrem, Pötibör, Hanımeller and Baby Biscuit) in 2008.

As in the previous year, Employee Hygiene Training was organized in order to guarantee product safety and hygiene in 2008.

Ülker Bisküvi has the objective to meet customer expectations at the highest possible level and increase customer satisfaction constantly. The Company investigated customer feedback about the products received by the Feedback Center department carefully and took necessary corrective and preventive action. In addition, tests and analyses were made in cooperation with the suppliers to prevent quality-related problems at the source.

Implemented in 2007, SAP was developed into a more extensive and active application in 2008. Thus, all controls and analyses were commenced to be conducted on SAP which

enabled them to be stored and monitored easily on magnetic tapes.

Ülker Bisküvi adopts the principle to produce “Delicious, Healthy and Safe” products, which are in compliance with the laws and regulations, under hygienic conditions, consistently and with a superior quality. In 2008, this approach was certified by the renewal of the following documents; • ISO 9001:2000 Quality Management System,• ISO 22000 Food Safety Management System,• TS 18001 Occupational Health and Safety Management System,• BRC (Achieved Grade: A)• IFS (at Higher level)

Ülker Bisküvi received ISO 14001 Environment Management System certificate thanks to the emphasis put on the environment during the production process in 2008.

The environmental policy of Ülker Bisküvi is shaped along the following principles and objectives:

• To bring under control all wastes resulting from activities and all kinds of contamination, • To educate both the employees and the suppliers and business partners regarding this issue, • To support efficient use of natural resources and energy sources and to prevent loss, • To perform as per defined standards and regulations in this area.

Training for employees and business partners were organized, and actions were taken to raise awareness for sustaining a habitable world along these principles and objectives.

Both factories of Ülker Bisküvi own the emission permission certificate. According to the results of emissions measurements, among the greenhouse gases, only carbon dioxide is produced. The resulting figure, upon consumption of natural gas, is far below the limit values as per regulation.

Fire systems in the facilities are regularly maintained in order to prevent fuel loss and increase efficiency.

A system has been developed for collecting wastes separately at the origin. This is essential for controlling waste and contamination resulting from production, in accordance with the laws and regulations. External fields for waste have been formed to store separately collected wastes appropriately for a temporary period, as subject to environment regulations. Thus, all wastes resulting from production are collected in the appropriate waste units at the external fields for waste and delivered to the contractor under the responsibility and control of the Environment Management Representative.

As for 2008, Ülker Bisküvi has made an investment of TRY 1,000,000 for the waste water facility in the Ankara branch, and the system currently has a modern structure. At the same time, the capacity of the waste water treatment facility increased by 100%.

As of result of the investment in the Waste Water Treatment Facility:

• The top of the treatment pools have been covered to prevent a negative impact on the environment and to protect the facility from bad weather conditions. • The airing system in the aeration and balancing pool has been enhanced. Thus, a more efficient and homogenous aeration is provided.• The capacity of the balancing pool was increased (water for one day) and waves have been minimized. • In the floatation unit, 20 microns of air have been added and floatation and resolution has been made. KOI (Chemical Oxygen Consumption) fell by 60%.• Test equipment was bought to analyze waste water so that a quicker and efficient analysis of water quality is obtained.

32

Stockholder Relations and Profit Distribution Policy

Relations with stockholders are managed by İlhan Turan Usta, Finance and Accounting Manager of Ülker Bisküvi, and Semih Atalay, Capital Markets and Investor Relations Coordinator of Yıldız Holding.

This unit holds meetings with local and foreign investors, as well as attending investor conferences organized at home and abroad. To this end, the Investor Relations Unit met with many local and foreign corporate investors in 2008.

Ülker Bisküvi meets with investors in “Investor Meetings” organized by local and foreign investment banks and investment institutions. Ülker Bisküvi generally participates in every meeting where it has been invited. In the meetings with foreign and local investors and shareholders, the Company shares information about activities and future ideas, plans and expectations. As long as they are not confidential and are shared previously, the Company answers all questions in a straightforward and clear manner.

Relations with shareholders are managed by Erdal Atak, the CMB-UFRS Expert in the Department of Finance. This unit manages the communication with ISE, CMB, CRA (Central Registry Agency) and ISE Settlement and Custody Bank (Takasbank), and informs shareholders of announcements from these bodies. It also organizes meetings with shareholders upon their request, or on a project basis as required, in addition to the ordinary and extraordinary shareholders’ meetings.

A Balanced and Stable Course on ISEThe negative developments in the international markets and the impact and pressure of the losses in ISE caused local and international investors to make more cautious decisions. They are also anxious about the future. Ülker Bisküvi shares have acted in parallel to the general trends in 2008.

Consequently, Ülker Bisküvi shares have been preferred by those investors who tend to make a long-term investment far from speculative considerations, also aiming at an attractive dividend alongside a balanced price course, and looking for a stable return compared to alternative investment opportunities. Ülker Bisküvi shares are traded on the ISE National Market under the ticker symbol ULKER.IS.

After the merger, Ülker Bisküvi has become one of the biggest companies on the ISE in terms of both volume and market value.

Ülker Bisküvi shares have acted in parallel to the general trends in 2008. Consequently, Ülker Bisküvi shares have been preferred by those investors who tend to make a long-term investment far from speculative considerations, also aiming at an attractive dividend alongside a balanced price course, and looking for a stable return compared to alternative investment opportunities.


2004 2005 2006 2007 2008

Market Value (‘000 USD)

Maximum 1,360,773 1,085,083 1,069,449 1,131,223 1,081,239

Minimum 179,105 589,681 452,504 620,739 243,951

Share Performance (%)

TRY 115.5 (2.1) (20.9) 43.4 (61.9)

USD 122.0 (1.3) (24.5) 73.9 (71.0)

According to ISE 100 60.7 (38.5) (19.6) 1.0 (21.2)

Profit Distribution PolicyÜlker Bisküvi has adopted the principle of determining the amount of dividend to be distributed according to the resolution adopted in the Shareholders’ Meeting within the framework of Turkish Commercial Law, provisions of the CMB, and the provisions laid down in the Articles of Incorporation, which will not be less than the rate and amount fixed by the Capital Market Board, and distributing it within the legal periods designated by the CMB.

Profit distribution proposals made by the Board of Directors to the General Meeting keep a sensitive balance between the expectations of the shareholders and the growth requirements of Ülker Bisküvi in consideration of the existing conditions of the national economy and the industry in which the Company operates.

The principle of distributing the dividends in cash and/or as free shares, and the shares A and B and the founding shares are privileged to have shares from the profit at the rates laid down in the Articles of Incorporation.

Furthermore, the Articles of Incorporation also states that employees shall be paid merit bonuses from the profit according to their performance. Although there is a provision on payment of advance dividend in the Articles of Incorporation, this method has not been exercised to date.

Source: Reuters and Bizim Menkul Değerler

Company Ülker Bisküvi

Reuters & Foreks Code ULKER.IS

ISIN Code TREULKR00015

Industry Food

XU100

XU050

ISE Index Listings XUTUM

XUSIN

XGIDA

XSANK

Price (TRY) 31.12.2008 1.76

Free Floatation (%) 31

Market Value (‘000 USD) 310,643

Free Floating Market Value (‘000 USD) 96,299

Average Trading Volume (‘000 USD) (01 January 08-31 December 08) 1,543

Beta 0.81

34

Social Responsibility Projects

Respect for Environment in ProductionÜlker Bisküvi follows environmental policy, not only in the context of legal obligations, but with the awareness of a citizen of the world. The activities are based on the strategy to reduce greenhouse gas emission, which is the greatest cause of global warming. With this objective, fuel systems used in the Company’s production facilities are maintained regularly in order to prevent fuel loss and increase efficiency. According to Control of Industrial Facilities Origination Air Pollution Legislation, the smoke gas emission measurements are below the legal limits prescribed by law.

Ülker Bisküvi’s activities for environmental protection are not only limited to greenhouse gasses. In regard to water issues, which gains importance every day, efficient utilization activities are continuously executed. The purification facilities in the Ülker Bisküvi factories each year clean more than 78,360 cubic meters of water and make it reusable.

In addition to the above, used paper, plastic and batteries are collected separately and disposed of appropriately within the Company.

Importance Given to Healthy NutritionÜlker Bisküvi takes the nutritional needs, amount of consumed foods and frequency of consumption into account in R&D practices. Consequently, with this information in mind, the Company introduces a selection of products suitable for the needs of the consumers.

Keeping in mind our strategy for the introduction of healthy products, in June 2007 Ülker Bisküvi stopped using trans fats in all of its products. The Company is also differentiating itself by developing healthy products, thanks to the technological infrastructure.

Ülker Bisküvi contributes healthy nutrition with its products, not only to Turkey, but also to consumers around the world.

Ülker Bisküvi’s social responsibility approach is based on respect for the environment and care for a healthy lifestyle as reflected in its products. In addition, the Company gives moral and material support to the projects of Yıldız Holding.


Support for Yıldız Holding’s Social Responsibility ProjectsSince its inception, Yıldız Holding has undertaken social responsibility projects aimed at social development, as well as contributing to the economic development of Turkey. The wide-ranging social activities of the Group range from environmental protection to sports. The Company focuses especially on projects that invite children to get involved with life.

As the flagship of Yıldız Holding, Ülker Bisküvi continues support for social responsibility and sponsorship projects undertaken by the Group.

Yıldız Holding, building close relationships with youth and children, supports professional football and also projects for children, who the Company considers to be the future of Turkish sports. The Grassroots project has been undertaken that aims to get children into the habit of participating in sports. This project is undertaken in cooperation with the Turkish Football Federation. Children between the ages of 6-12 can enroll at the Grassroots centers for free in Istanbul, Adana and Trabzon.

Another activity within the scope of the “Grassroots” project are football villages. This activity was first organized in Van in 2007. It has continued for two terms in four different cities: Sinop, Bolu, Sivas and Isparta. In football villages children are not only taught to play football, but they are also given information on nutrition, personal development, chess and environmental awareness. The Football and Basketball Festival is where sports is paired with fun for thousands of students from all over Turkey. The Festival is organized each year in a different city and students learn cooperation, fair play and friendship, in addition to sports.

The sports projects have introduced over 20,000 children to sports to date. They have seen new places and enjoyed having a chance to just be children. In the last months of 2008, with sponsorship for the Tournament for the Handicapped, the number of participating children reached 26,000.

Another activity Yıldız Holding is proud of hosting is the movie presentation for children on April 23 at the National Independence and Children’s Day. In 2008, Ülker sponsored the movie “Nim’s Island”. It was shown free in 123 movie theaters in 33 cities. 125,000 children had the opportunity to watch the movie, and for many it was the first time in a movie theater.

Yıldız Holding, while undertaking projects for the physical and mental development of children, also did not neglect their environment and the land where they live. The Company is one of the initial supporters of TEMA’s rural development projects. Yıldız Holding has supported three villages in Edirne and Kırklareli. Under this project, pastures in those villages have been cleared. New fruit saplings have been bought, activities such as viniculture, apiculture and alternative seeds plantation increased the income of the villages.

As children are of the utmost importance, the Holding is continuing investment in education, environment and sports. The Company also supports congresses and conferences which contribute to the development of the industry in which it is active.

36

1. Declaration of Compliance with the Corporate Governance PrinciplesOur Company is aware of the importance of the implementation of the principles included in the Corporate Governance Principles published by the Capital Market Board in 2003 and revised and finalized in 2005, and has undertaken necessary work and continues to show necessary care to make further progress in this process. Please find below the evaluations and findings of our Company in respect to the level of compliance with the Corporate Governance Principles, as well as its comprehensive opinion for the improvement of the level of compliance in terms of scope and nature. In brief;

• The organization of stockholder relations has been restructured.• Arrangements have been made in respect to trading of insider information.• Working guidelines of committees have been reshaped.• The website has been designed as stated in the Principles.• Work has been undertaken for the Compliance of the Articles of Incorporation with the Corporate Governance Principles.• Work has been undertaken for the organization of a Corporate Governance Committee and for the reorganization of the Audit Committee under the Board of Directors.

It is also planned to gradually implement those principles which have not yet been implemented, although this has not led to any conflict of interests between the interest owners to date.

The following Corporate Governance Principles Compliance Report has also been disclosed to the public on the Company’s website at www.ulkerbiskuvi.com.tr.

SECtION I - StOCKHOlDERS

2. Stockholder Relations UnitRelations with stockholders are managed by İlhan Turan Usta, Finance and Accounting Manager of Ülker Bisküvi, and Semih Atalay, Capital Markets and Investor Relations Coordinator. They also respond to queries made by our stockholders in writing or via Internet as well as attending investor meetings held in Turkey and abroad. Their contact details are given below:

Semih AtalayCapital Markets and Investor Relations Coordinator Kısıklı Mah. Ferah Cad. No: 1 B.Çamlıca Üsküdar Istanbul/[email protected] +90 (216) 524 25 00

İlhan Turan UstaFinance and Accounting ManagerDavutpaşa Cad. No: 10 34015 Topkapı Istanbul/[email protected] +90 (212) 567 68 00

Relations with shareholders are managed by Erdal Atak ([email protected]), the CMB-UFRS Expert in the Department of Finance. This unit manages the communication with ISE, CMB, CRA (Central Registry Agency) and ISE Settlement and Custody Bank (Takasbank) and informs shareholders of announcements from these bodies. It also organizes meetings with shareholders upon their request, or on a project basis as required, in addition to the ordinary and extraordinary shareholders’ meetings.

3. Exercise of the Right of Access to Information by StockholdersThe written or verbal requests of information from our stockholders during the period have been met, except those that are characterized as business secrets or not disclosed to the public. All information that might be required for the exercise of the stockholders’ rights is provided to our stockholders in our annual reports, special case announcements and through individual requests. Furthermore, necessary information is also made available to stockholders in general at the website: www.ulkerbiskuvi.com.tr.

4. Information on General MeetingsOne Ordinary General Meeting was held in 2008.

Ordinary General Meeting:The Ordinary General Meeting 2007, held on 27 May, 2008, was attended by our stockholders representing approximately 74% of the paid-in capital, which was TRY 268,600,000. No interest owner or media came to the meeting.

As provided in the Law and Articles of Incorporation, the invitation to the meeting containing venue, date, time, agenda and power of attorney form was made duly by a notice given in Turkish Trade Registry Gazette No. 7059, dated 9 May 2008, daily newspapers Dünya and Referans of 8 May 2008 and via Internet, as well as by sending registered mail to the holders of stocks issued to name and to holders of stocks issued to the bearer if they have lodged shares and notified the Company of their address in advance.

Corporate Governance Principles Compliance Report


The financial statements and reports, including the annual report, the profit distribution proposal, any necessary information document prepared in relation to the items on the agenda of the General Meeting, and any other documents in support of the items on the agenda as well as the latest version of the Articles of Incorporation and the copy of amendments and grounds thereof if any amendment will be in the Articles of Incorporation are made available to our stockholders for review at the head office and branch offices of our Company as from the date of notice given for invitation to the General Meeting.

In the General Meeting, information about the issues on the agenda was given in a straightforward and clear manner. Shareholders were given equal opportunity to express their feelings and ask questions and a healthy discussion atmosphere was created.

No questions were raised by the stockholders at the General Meeting, and no proposals were made other than the items on the agenda.

5. Voting Rights and Minority RightsEvery stock has one vote, as per our Articles of Incorporation.

The capital of our Company consists of Group (A), (B), (C) and (D) stocks, and four members of the Board of Directors can be elected from among the candidates nominated by the absolute majority of Group (A) stockholders, and one member can be elected from among the candidates nominated by the absolute majority of Group (D) stockholders, and the other members can be elected from among the candidates nominated according to the general provisions. There is no mutual affiliation relationship between any of our shareholders and our Company.

There is no provision in our Articles of Incorporation that prevents voting by proxy as the representative of stockholders not present.

6. Profit Distribution Policy and Date of Profit DistributionWithin the scope of the Corporate Governance Principles set forth by CMB, our Board of Directors has adopted a profit distribution policy as mentioned herein below as the profit distribution policy to be proposed to the General Meetings. Accordingly;

Our Company has adopted the principle of determining the amount of dividend to be distributed according to the resolution adopted in the General Meeting within the framework of Turkish Commercial Law, provisions of the

CMB, and the provisions laid down in the Articles of Incorporation, which will not be less than the rate and amount fixed by the Capital Market Board, and distributing it within the legal periods designated by the CMB.

Profit distribution proposals made by the Board of Directors to the General Meeting keep a sensitive balance between the expectations of the stockholders and the growth requirements of our Company in consideration of the existing conditions of the national economy and the industry in which the Company operates.

The principle of distributing the dividends in cash and/or as free shares, and the shares A and B and founding shares are privileged to have shares from the profit at the rates laid down in the Articles of Incorporation. Furthermore, the Articles of Incorporation also states that employees shall be paid merit bonuses from the profit according to their performance.

Also, although there is a provision on payment of advance dividend in the Articles of Incorporation, this method has not been exercised to date.

The stockholders were informed about the profit distribution policy of our Company at the General Meeting. This profit distribution policy is disclosed to the public and is also included in the Company’s website and annual reports.

7. transfer of SharesArticle 10 of our Articles of Incorporation provides for the transfer of shares issued to name. According to the said Article, the shares issued to name can be transferred in principle. The transfer shall be effective as from delivery of share to the transferee and registration into the share book. The Company may refrain from registering the transfer into the share book without stating a reason.

SECtION II - PUBlIC INFORMAtION AND tRANSPARENCY

8. Company Information PolicyCompany information policy is carried out in accordance with legal regulations, CMB legislation and the rules determined by legal announcements. The Company prepared a written document regarding public disclosure and information and published it on its website following the approval of the Board of Directors.

Additionally, it is adopted as the basic principle to make available any information which has been already disclosed to the

public, to the relevant person in the shortest time possible upon request. In addition, stockholders’ requests for information are met in writing or verbally by Erdal Atak, CMB-UFRS Expert reporting to the Department of Finance, and Semih Atalay, Capital Markets and Investor Relations Coordinator of Yıldız Holding. In the event of any important developments requiring public information during the year, necessary special case announcements are also made in a timely manner. Our annual report is prepared in detail to ensure public access to any information regarding the activities of the Company.

9. Material Case AnnouncementsOur Company issued 15 material case announcements in 2008, pursuant to the CMB regulations. No additional explanation was requested by CMB in reference to the special case announcements made by our Company. There are no special case announcements that have not been made in due time by our Company.

10. Company Website and its ContentAll data related to informing the stockholders in relation to our Company are available at www.ulkerbiskuvi.com.tr both in Turkish and English. The website contains the following information: - Information on Ülker Bisküvi and its subsidiaries- Vision of the Company- Ethical rules and principles- Information on the Board of Directors and the General Manager- Capital structure of the Company- Organizational structure- Social responsibility- Trade registry information and Company profile- Articles of Incorporation- Financial Statements and footnotes- Annual reports- Material case announcements- Corporate Governance Principles- Information on General Meetings (Agenda, minutes, list of attendants and power of attorney form) - Company Information Policy- Committees- Press announcements (General Meeting announcements, etc) - Insider information list- Broker companies’ reports- Rating reports- ISE stock performance

11. Declaration of Individual Ultimate Controlling Stockholder(s)There is no individual ultimate controlling stockholder in our Company. Our shareholder structure is included in the annual report and on our website.

38

12. Public Disclosure of Persons who can have Insider InformationOur Company has taken every precaution necessary to prevent the use of insider information, and the website lists the executives who have access to information that can affect the value of capital market instruments, as well as other individuals/entities from whom it receives services.

SECtION III - INtERESt OWNERS

13. Informing the Interest OwnersIn the event that the rights of interest owners are not regulated by the legislation or contract, their interests shall be protected within the framework of the rules of goodwill and by observing the prestige of Company to the extent permitted by the resources of the Company.

Additionally, the employees have access to circulars and announcements through the internet portal of the Company. Some of the important announcements are released simultaneously to all employees via e-mail.

14. Participation of Interest Owners in the ManagementThe Board of Directors consists of seven members, as per our Articles of Incorporation, and these members are elected by the General Meeting upon recommendation of various shareholders according to the provisions laid down in the Articles of Incorporation.

15. Human Resources PolicyThe basic policy of the human resources department is to develop a high performance team with the improvement and development of human resources building upon what has been done to date.

The human resources policy adopted by our Company is in general the policies adopted by Yıldız Holding and these policies are available at www.ulker.com.tr and www.ulkerbiskuvi.com.tr. No discrimination complaint was made against the human resources policy implemented by our Company.

16. Information Regarding Relations with Customers and SuppliersOur Company seeks continuity of service quality and standards at all stages of production. Utmost care is taken about the confidentiality of the customers and suppliers’ information that has the nature of trade secrets. Customer satisfaction is one of the basic principles of our Company.

17. Social Responsibility The social responsibility activities of Yıldız Holding, under which our Company operates, are listed in our annual report and are also available at www.ulker.com.tr and www.ulkerbiskuvi.com.tr. Our Company takes utmost care about implementing such policies that respect and support the environment, sports, education and public health.

SECtION IV - BOARD OF DIRECtORS

18. Structure and Composition of the Board of Directors, and the Independent MembersThe Board of Directors is composed of seven members. In line with the Articles of Incorporation, these members are elected by the General Meeting. Four members can be elected from among the candidates nominated by the absolute majority of Group (A) stockholders and one member can be elected from among the candidates nominated by the absolute majority of Group (D) stockholders, and the other members can be elected from among the candidates nominated according to the general provisions.

Details of members of the Board of Directors and the General Manager are provided below.

Name & Surname title

Murat Ülker Chairman of the Board

Orhan Özokur Vice-Chairman of the Board

Ali Ülker Board Member, Managing Director

Necdet Buzbaş Board Member

Mahmut Mahir Kuşculu Board Member

Cengiz Solakoğlu Board Member

Güven Obalı Board Member

Mahmut Mahir Kuşculu, Cengiz Solakoğlu and Güven Obalı serve on the Board of Directors as independent members.

19. Qualifications of Members of the Board of DirectorsThe minimum qualifications required for election as a member of the Board of Directors are in line with the qualifications set forth in Articles 3.1.1., 3.1.2 and 3.1.5 of Section IV of CMB Corporate Governance Principles. In the Articles of Incorporation, there is a provision requiring that the Board Members have a sufficient knowledge of the legal framework which regulates the activities of the Company, and be qualified and experienced and able to analyze the financial statements and reports

Corporate Governance Principles Compliance Report


of the Company. Additionally, as per the Articles of Incorporation, at least one third of the members of the Board of Directors are required to be elected from among university graduates.

Our Board of Directors consists of seven members, and this number ensures efficient organization of the activities of the Board of Directors.

20. the Vision of the CompanyOur Company, and all companies of Yıldız Holding, have been founded with the belief that every person is entitled to enjoy a pleasant childhood no matter which country s/he may live in.

The vision of Ülker Bisküvi is to strengthen its position as a most preferred brand by consumers, and to be among the top five companies in the world markets within the next 10 years, particularly in the area of bakery products.

The vision and mission of Yıldız Holding and our Company have been made public and are available at www.ulker.com.tr and www.ulkerbiskuvi.com.tr.

21. Risk Management and Internal Control MechanismActivities regarding risk management are carried out by the Committee in Charge of Audit within the scope of Internal Control Regulation. Furthermore, our Company is also audited regularly by the audit units of Yıldız Holding A.Ş., its principal shareholder, and by independent auditors. The findings of these audits are submitted to members of the Committee in Charge of Audit and other members of the Board of Directors. Company workflows, procedures, powers and responsibilities of employees have been placed under control, subjected to constant supervision within the framework of risk management.

22. Powers and Responsibilities of Members of the Board of Directors and ExecutivesThe powers and responsibilities of members of the Board of Directors and executives are clearly set forth in the Articles of Incorporation available at www.ulkerbiskuvi.com.tr.

The Board of Directors exercises its powers having all the information required, prudently and within the framework of rules of goodwill to ensure proper fulfillment of its role.

23. Principles of Activity of the Board of Directors The Board of Directors held 27 meetings in 2008. Utmost care is taken to determine the date of meetings to allow all members to attend. The Board of Directors meets at least once a month regularly and as pre-scheduled and irrespective of this period, whenever it is deemed necessary.

24. Non-transaction and Non-Competition with the CompanyMembers of the Board of Directors do not have any transaction or activity that may be within the scope of prohibition of transaction and competition with the Company and, hence, require permission from the General Meeting.

25. Ethic RulesÜlker Bisküvi is a member of a Group that produces quality and healthy products, respects its employees, cares for the rights of shareholders, suppliers and customers, is law-abiding, attaches importance to values of the society, bears social responsibility, has adopted such principles of management that are based on the highest level respect, cooperation, high performance of work, honesty, consistence, respect, confidence and responsibility between executives, employees, suppliers and customers, and that endeavors to improve these principles.

The ethic rules adopted by Yıldız Holding companies are implemented in all group companies, and these ethic rules also covering our Company have been made public and are available for the information of our stockholders at www.ulker.com.tr and www.ulkerbiskuvi.com.tr.

26. Number, Composition and Independence of the Committees in the Board of Directors

Audit Committee:The Audit Committe, which was established with the decision of the Board of Directors dated 22 May 2006, has been reorganized as per Communiqué No: 22, Series: X of CMB following the decision of the Board decision on 5 August 2008. The Audit Committe ensures that financial and operational activities of the Company are carried out on a solid and healthy base. Working under the Board of Directors, the Committee is responsible for following up the processes of the accounting system, auditing and disclosure of financial information, and internal control system. This committee meets whenever required, which should be no less than quarterly.

The information on the Audit Committee is as follows:

Name, Surname

Title Position

Mahmut Mahir Kuşculu

Chairman of the Committee

Board Member (Independent)

Güven Obalı Committee Member


Musa Doğan Committee Member

Inspector

Corporate Governance Committee:Following the decision of the Board on 5 August 2008, a Corporate Governance Committee was established within the Company as per CMB Corporate Governance Principles. Being responsible to the Board of Directors, the Committee meets whenever required, which should be no less than three times in a year.

The information on the Corporate Governance Committee is as follows:

Name, Surname

Title Position

Cengiz Solakoğlu

Chairman of the Committee


Semih Atalay

Committee Member

Holding Capital Markets Coordinator

İlhan Turan Usta

Committee Member

Finance Director

27. Financial Benefits Provided for the Board of Directors The fees of members of the Board of Directors are determined separately for each by the General Meeting in view of the financial conditions of the Company. It has been decided to pay a monthly gross fee of TRY 2,200 to each member of the Board of Directors in 2008, pursuant to the decision adopted at the General Meeting.

No member of the Board of Directors or executive has been either directly or through a third party, given any loan, or allowed to use any credit, or provided any guarantees during this period.

40

At Meeting number 534, dated 27 April 2009, the Board of Directors of Ülker Bisküvi, reviewed the consolidated income statement, which was issued in accordance with the Capital Market Board’s Communiqué No: 29, Series XI and which passed the independent audit, and the profit distribution table, which was prepared in view of the Capital Market Board’s resolutions number 7/242, dated 25 February 2005, and number 21/537, dated 05 May 2006 as well as resolution number 1/6, dated 09 January 2008, regarding the calculation of the net distributable annual profit from the activities in 2007 in respect of the companies that are open to public offering; and decided to distribute dividends in cash against dividend coupons No. 6 for the founding shares and against dividend coupons 2008 for the group A, B, C and D shares. It was decided to submit a proposal to our shareholders to the Ordinary General Meeting to distribute the intended TRY 3,898,316.71 gross and TRY 3,313,569.20 net sum of dividends in accordance with article 34 of our Articles of Incorporation on profit distribution on the basis of cash dividend at the gross amount of TRY 0.01122 (1.12%) and net amount of TRY 0.00953 (0.95%) for each ordinary share with a nominal value of TRY 1, so that the gross amount of TRY 3,012,376.71 (net 2,560,520.21) will be distributed to the ordinary shares and gross amount of TRY 531,684.49 (net 451,931.82) will be distributed to Group A and B shares, and gross amount of TRY 354,255.50 (net 301,117.18) will be distributed to the founding shares and the remaining revenue to be recorded in the account of Extraordinary Reserves.

1. Paid-in / Issued Capital 268,600,000.00

2. Total Legal Capital Reserve (According to legal records) 40,281,577.11

As per Articles of Incorporation, if there is a privilege in the profit distribution, information regarding this is as stated below;

An amount 17.65% of the first dividend will be distributed to A and B group shareholders, 11.76% of the first dividend will be distributed to the registered

dividend right certificate holders.

As per SPK As per legal records (LR)

3. Term Profit 20,130,810.00 15,372,842.05

4. Taxes Due (-) (4,445,576.00) 0.00

5. Net Term Profit (=) 15,685,234.00 15,372,842.05

6. Losses of previous years (-) 0.00 0.00

7. Primary Reserve (-) 768,642.10 768,642.10

8. NET DISTRIBUTABLE TERM PROFIT (=) 14,916,591.90 14,604,199.95

9. Donations within the year (+) 145,291.67

10. Net distributable term profit that includes donation for calculation of first dividends 15,061,883.57

11. First dividend to shareholders 3,012,376.71

- Cash 3,012,376.71

- Free

- Total 3,012,376.71

12. Dividend to privileged shareholders 531,684.49

13. Dividend to the members of the Board of Directors, Employees etc. 0.00

14. Dividend to Redeemed Shareholders 354,255.50

15. Second dividend to shareholders 0.00

16. Second Issue legal reserve funds 0.00

17. Status Reserves 0.00

18. Special Reserves 0.00

19. EXTRAORDINARY RESERVES 11,018,275.19 10,705,883.24

20. Other resources planned for distribution 0.00 0.00

- Profit of the previous year 0.00 0.00

- Extraordinary Reserves 0.00 0.00

- Other reserves to be distributed as per law and Articles of Incorporation 0.00 0.00

Profit Distribution Proposal

Profit Distribution table for 2008


INFORMATION OF DISTRIBUTED PROFIT RATIO

INFORMATION OF DIVIDEND PER SHARE

GROUP

TOTAL AMOUNT OF DIVIDEND (TRY)

DIVIDEND PER 1 TRY NOMINAL VALUED SHARE RATIO (%)

GROSS

AMOUNT (TRY) RATIO (%)

A 356,238.92 23,981.09 2,398,108.97

B 175,445.57 23,981.09 2,398,108.97

C and D 3,012,376.71 0.01122 1.12

FOUNDER 354,255.50

TOTAL 3,898,316.71

NET

A 302,803.08 20,383.93 2,038,392.62

B 149,128.73 20,383.93 2,038,392.62

C and D 2,560,520.21 0.00953 0.95

FOUNDER 301,117.18

TOTAL 3,313,569.20

GROUP TOTAL DIVIDEND AMOUNT (TRY)

QUANTITY DIVIDEND PER SHARE (TRY)

FOUNDER SHARES GROSS 354,255.50 22,171.00 15.97833

NET 301,117.18 13.58158

RATIO OF THE DISTRIBUTED DIVIDEND OVER THE NET DISTRIBUTABLE TERM PROFIT INCLUDING DONATIONS

AMOUNT OF DIVIDENDS, DISTRIBUTED TO PARTNERS (TRY)

RATIO OF THE DISTRIBUTED DIVIDEND TO SHAREHOLDERS OVER THE NET DISTRIBUTABLE TERM PROFIT INCLUDING DONATIONS (%)

3,898,316.71 25.88

42

Company * Title : ÜLKER BİSKÜVİ SANAYİ A.Ş.* Head Office : İSTANBUL* Capital : 268,600,000.-TRY.* Field of Business : Production of biscuits, chocolate covered products and wafers. Names and surnames of auditor(s),terms of : Ataman Yıldız, Nurettin Aliz, Musa Doğanoffice, whether they are shareholders or Their term of office is 1 year.employees of the Company The auditors are neither shareholders nor employees of the Company.

Number of the Board of Directors and : Attended four meetings of the Board of meetings attended and the Audit Committee Directors in 2008 and the Audit Committee meetings held meetings were held monthly. Scope, dates and conclusion of review made : The Company accounts, books and documents on the shareholders’ accounts, books were duly audited at the end of every month, and documents and it has been found that the statutory books have been kept in compliance with the provisions of its Articles of Incorporation and the Turkish Commercial Law. Dates and results of counts made by : Since the Company does not have any cash in the Company cash office pursuant to the cash office and all payments and receiptsTurkish Commercial Law Article 353, are realized through check and bank channels, paragraph 1, sub-paragraph 3 no counts have been made.

Dates and results of review made pursuant : The required review was made at the end of to Turkish Commercial Law, Article 353, every month, and the existing securities andparagraph 1, sub-paragraph 4 negotiable instruments have been found in accordance with the records, and other duties assigned to the auditors in the other paragraphs of the same article have been fulfilled. Any complaint or corruption reported and : No complaint or corruption was reported relevant action taken verbally or in writing to us during our term of office.

We have reviewed the accounts and transactions of ÜLKER BİSKÜVİ SANAYİ A.Ş. for the period 01 January 2008 to 31 December 2008 in accordance with the Turkish Commercial Law, Articles of Incorporation, other applicable regulations and generally accepted accounting principles and standards.

In our opinion, the annexed balance sheet dated 31 December 2008 reflects the financial status of the Company at that date, and the income statement for the period from 01 January 2008 to 31 December 2008 reflects the results of activities in that period accurately and correctly, which we agree with the contents, and the profit distribution proposal appears to be in compliance with the laws and Articles of Incorporation of the partnership.

In conclusion, we hereby kindly request you consider and vote for the approval of the balance sheet and income statement, and granting discharge to the Board of Directors.

Auditor Auditor Auditor Ataman Yıldız Nurettin Aliz Musa Doğan

Audit Board Report

ÜLKER BİSKÜVİ SANAYİ A.Ş.AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2008

(TRANSLATED INTO ENGLISH FROM THE ORIGINAL TURKISH REPORT)

CONVENIENCE TRANSLATION OFTHE REPORT AND FINANCIAL STATEMENTS

ORIGINALLY ISSUED IN TURKISH

INDEPENT AUDITORS’ REPORT

To the Board of Directors of Ülker Bisküvi Sanayi A.Ş.

We have audited the accompanying consolidated financial statements of Ülker Bisküvi Sanayi A.Ş. (“the Company”) and its subsidiaries (together “the Group”) comprising the consolidated balance sheet as of 31 December 2008, and the consolidated statement of income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting standards issued by the Capital Market Board. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards published by Capital Markets Board. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying financial statements give a true and fair view of the consolidated financial position of Ülker Bisküvi Sanayi A.Ş as of 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with the financial reporting standards published by the Capital Market Board.

Istanbul, 10 April 2009

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU

Burç SevenPartner

46

ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

ASSETS Notes 31 December 2008(Restated)

31 December 2007Current Assets 1.121.498.021 698.267.291

Cash and Cash Equivalents 6 154.180.917 34.947.778 Financial Assets 7 801.177 1.091.960 Trade Receivables - Trade Receivables from Related Parties 37 89.321.243 97.212.485 - Other Trade Receivables 10 140.318.598 155.127.985 Other Receivables - Non-trade Receivables from Related Parties 37 538.241.741 260.347.566 - Other Short Term Receivables 11 15.384.989 4.207.520 Inventories 13 140.703.915 114.671.292 Other Current Assets 26 42.545.441 30.660.705

Non-Current Assets 910.273.386 689.346.848Trade Receivables 10 318.509 66.100 Other Receivables 11 62.260 73.450 Financial Assets 7 350.457.314 369.097.455 Investments Accounted for Under Equity Method 16 254.229.895 26.450.517 Tangible Assets 18 284.390.117 273.692.032 Intangible Assets 19 2.074.444 2.321.903 Goodwill 20 1.534.035 1.534.035 Deferred Tax Assets 35 7.009.443 6.380.217 Other Non-current Assets 26 10.197.369 9.731.139

TOTAL ASSETS 2.031.771.407 1.387.614.139

The accompanying notes form an integral part of these financial statements.


ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

LIABILITIES Notes 31 December 2008(Restated)

31 December 2007Current Liabilities 900.761.473 525.391.213

Finacial Liabilities 8 483.678.611 231.793.801 Trade Payables- Trade Payables to Related Parties 37 222.974.689 169.662.742 - Other Trade Payables 10 69.197.466 97.541.600 Other Payables- Other Payables to Related Parties 37 65.704.715 555.720 - Other Payables 11 45.575.046 9.623.735 Corporate Tax Payable 35 18.390 4.729.163 Provisions 22 2.097.964 1.885.127 Provisions for Employee Benefits 24 1.416.477 1.338.412 Other Liabilities 26 10.098.115 8.260.913

Non-Current Liabilities 377.373.865 101.992.723Financial Liabilities 8 344.504.346 65.792.781 Trade Payables- Trade Payables to Related Parties 37 - 3.066.309 Provisions for Employee Benefits 24 3.826.257 3.688.273 Deferred Tax Liabilities 35 29.043.262 29.445.360

SHAREHOLDERS’ EQUITY 753.636.069 760.230.203Total Equity Attributable To Equity Holders’ of the Parent 27 705.944.420 716.159.403

Share Capital 268.600.000 268.600.000 Inflation Adjustments to Share Capital 108.056.201 108.056.201 Valuation Funds 125.668.539 151.828.984 Restricted Reserves Appropriated from Profits 28.772.464 20.736.186 Translation Difference 31.760.228 -Retained Earnings 127.401.754 50.864.190 Net Profit for the Period 15.685.234 116.073.842

Minority Interest 27 47.691.649 44.070.800

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 2.031.771.407 1.387.614.139


48

ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENT OF INCOMEFOR THE YEAR ENDED 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

Notes

January 1- December 31,

2008

Restated January 1-

December 31, 2007

Sales Revenue 28 1.412.160.407 1.408.886.707 Cost of Sales (-) 28 (1.105.829.947) (1.101.649.331)GROSS PROFIT 306.330.460 307.237.376Marketing, Sales and Distribution Expenses (-) 29 (181.764.610) (195.474.658)General Administrative Expenses (-) 29 (52.252.476) (36.888.232)Research and Development Expenses (-) 29 (961.310) (1.025.381)Other Operating Income 31 45.094.891 36.539.139 Other Operating Expenses (-) 31 (3.957.062) (10.887.656)OPERATING PROFIT 112.489.893 99.500.588Share in Net Profit of Investments Accounted for Under Equity Method 16 (14.818.955) 4.364.157 Finance Income 32 353.521.512 152.372.968 Finance Expenses (-) 33 (427.435.808) (108.846.093)PROFIT BEFORE TAXATION 23.756.642 147.391.620Tax Charge from Continued Operations 35 (4.445.576) (23.861.688)Current Tax Charge (4.118.292) (31.226.321)Deferred Tax (Charge)/Benefit (327.284) 7.364.633 PROFIT FOR THE PERIOD 19.311.066 123.529.932Reconciliation of the Profit for the PeriodMinority Interest 27 3.625.832 7.456.090 Equityholders of the Parent 15.685.234 116.073.842 Earnings per Share From Operating Activities 36 0,06 0,43



ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

Not

esSh

are

Capi

tal

Infl

atio

n Ad

just

men

ts

to S

hare

Ca

pita

lVa

luat

ion

Fund

Gai

n on

Sal

e of

Pro

pert

y to

Sh

are

Capi

tal

Stat

utor

y Re

serv

es

Curr

ency

Tr

ansl

atio

n Re

serv

eN

et P

rofi

t/Lo

ssRe

tain

ed

Earn

ings

Tota

l Equ

ity

Attr

ibut

able

to

Equ

ity

Hol

ders

of t

he

Pare

ntM

inor

ity

Inte

rest

Tota

l

Prev

ious

ly R

epor

ted

Bala

nce

as o

f 31

Dec

embe

r 200

627

241.

087.

000

107.

536.

225

57.7

75.8

9926

.636

.968

11.5

91.2

84-

89.1

59.0

933.

184.

645

536.

971.

114

36.3

84.3

4257

3.80

5.45

6

Incr

ease

in V

alue

of S

ecur

itie

s Tr

aded

in a

M

arke

t-

-94

.053

.085

--

--

-94

.053

.085

94.2

4594

.147

.330

Tran

sfer

of g

ain

on s

ale

of p

rope

rty

to s

hare

ca

pita

l27

.486

.141

--

(26.

636.

968)

--

-(8

49.1

73)

--

-

Net

Inco

me

Reco

gniz

ed T

hrou

gh E

quit

y 27

.486

.141

-94

.053

.085

(26.

636.

968)

--

-(8

49.1

73)

94.0

53.0

8592

.245

94.1

47.3

30

Tran

sfer

s to

Res

erve

s &

Ret

aine

d Ea

rnin

gs-

--

-9.

140.

481

-(8

9.15

9.09

3)80

.018

.612

--

-

Tran

sfer

s fr

om E

xtra

ordi

nary

Res

erve

s 26

.859

--

--

--

(26.

859)

--

-

Effe

ct o

f Inc

reas

e in

Sub

sidi

arie

s’ S

hare

s (*

)-

519.

976

--

4.42

1-

-(2

10.5

20)

313.

877

(313

.877

)-

Div

iden

d Pa

id-

--

--

--

(31.

252.

515)

(31.

252.

515)

-(3

1.25

2.51

5)

Net

Pro

fit f

or th

e Pe

riod

--

--

--

116.

073.

842

-11

6.07

3.84

27.

456.

090

123.

529.

932

Bala

nce

as o

f 31

Dec

embe

r 200

727

268.

600.

000

108.

056.

201

151.

828.

984

-20

.736

.186

-11

6.07

3.84

250

.864

.190

716.

159.

403

44.0

70.8

0076

0.23

0.20

3

Bala

nce

as o

f 1 Ja

nuar

y 20

08

2726

8.60

0.00

010

8.05

6.20

115

1.82

8.98

4

20.7

36.1

86

116.

073.

842

50.8

64.1

90

76

0.23

0.20

3

Incr

ease

in V

alue

of S

ecur

itie

s Tr

aded

in a

M

arke

t-

-(2

6.16

0.4

45)

--

--

-(2

6.16

0.44

5)(4

.983

)(2

6.16

5.42

8)

Curr

ency

Tra

nsla

tion

Res

erve

--

--

-31

.760

.228

--

31.7

60.2

28-

31.7

60.2

28

Net

Inco

me

Reco

gniz

ed T

hrou

gh E

quit

y 27

--

(26.

160.

445)

--

31.7

60.2

28-

-5.

599.

783

(4.9

83)

5.59

4.80

0

Tran

sfer

to R

etai

ned

Earn

ings

& R

eser

ves

--

--

8.03

6.27

8-

(116

.073

.842

)10

8.03

7.56

4-

--

Div

iden

d Pa

id-

--

--

--

(31.

500.

000)

(31.

500.

000)

-(3

1.50

0.00

0)

Net

Pro

fit f

or th

e Pe

riod

--

--

--

15.6

85.2

34-

15.6

85.2

343.

625.

832

19.3

11.0

66

Bala

nce

as o

f 31

Dec

embe

r 200

826

8.60

0.00

010

8.05

6.20

112

5.66

8.53

9-

28.7

72.4

6431

.760

.228

15.6

85.2

3412

7.40

1.75

470

5.94

4.42

047

.691

.649

753.

636.

069

(*) G

roup

, acq

uire

d %

4,73

sha

re o

f Atl

as G

ıda

Paza

rlam

a Sa

nayi

ve

Tica

ret A

.Ş. f

rom

UEB

Dyn

amic

Gro

wth

Fun

d at

Oct

ober

19,

200

7. “

Infl

atio

n Ad

just

men

ts to

Sha

re C

apit

al”,

“St

atut

ory

Rese

rves

” an

d “R

etai

ned

Earn

ings

” am

ount

ing

to 5

19.9

76

TL, 4

.421

TL

and

(210

.521

) TL

resp

ecti

vely

are

reco

gniz

ed th

roug

h Sh

areh

olde

rs E

quit

y.

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.

50

ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

Notes1 January-

31 December 2008

(Restated)1 January-

31 December 2007CASH FLOWS FROM OPERATING ACTIVITIESNet profit for the period 19.311.066 123.529.932Adjustments to reconcile net profit/(loss) to net cash provided by operating activities - -

- Depreciation expenses of tangible assets 18 23.077.911 24.121.758- Amortization expenses of intangible assets 19 323.901 1.926.804- Allowance for doubtful receivables 10 1.304.350 (593.003)- Provision for employment termination benefits 24 (663.527) (122.649)- Interest accrual 33 13.892.436 5.466.710- Gain on sales of assets 31 (9.283.716) (4.651.786)- Provision for Impairment of inventory 13 (2.900.779) 3.850.219- Unrealized foreign currency loss/(gain) 32-33 67.799.800 (12.715.000)- (Income)/loss from investments accounted for under equity method 16 14.818.955 (4.364.157)- Accrued taxation 35 4.445.576 23.861.688

Operating cash flows provided before changes in working capital 132.125.973 160.310.516- (Increase) in trade receivables 10 13.137.620 (24.975.866)- (Increase)/Decrease in trade receivables from related parties 37 7.891.242 22.875.803- Decrease in inventories 13 (23.131.844) (34.697.686)- (Increase) in other receivables and other current assets 11-26 (12.649.582) (19.610.263)- (Decrease) in trade payables 10 (28.344.134) 47.675.468- (Increase)/Decrease in payables to related parties 37 53.311.947 88.002.551- Increase/(Decrease) in other liabilities 11-26 34.981.554 6.357.857

Cash (utilized in)/generated from operations 177.322.776 245.938.380- Taxes paid 26-35 (19.696.728) (33.376.472)- Employee termination benefits paid 24 (525.544) (1.632.943)- Collections from doubtful trade receivables 10 115.008 2.789.116

Net cash provided by operating activities 157.215.512 213.718.081

CASH FLOWS FROM INVESTING ACTIVITIES- Acquisitions of tangible assets 18 (51.734.889) (37.750.746)- Acquisitions of intangible assets 19 (76.442) (2.999.685)- Proceeds from sales of assets 18-19-31 27.242.609 10.785.308- Net cash outflow from share purchase of subsidiaries - (2.290.674)- Shares of the subsidiaries disposed - 4.732.879- (Increase)/Decrease in non-trade receivables from related parties 37 (277.894.175) (92.383.355)- Acquisitions of long term financial assets 7-16 (218.067.626) (87.510.489)

Net cash (used in) investing activities (520.530.524) (207.416.762)



ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

Notes1 January-

31 December 2008

(Restated)1 January-

31 December 2007CASH FLOWS FROM FINANCING ACTIVITIES

- Loan repayments 8 (176.904.957) (141.801.075)- Loans acquired 8 625.809.096 181.287.367- Dividends paid (31.500.000) (31.252.515)- Changes in non-trade receivables from related parties 37 65.148.955 (6.213.901)- Changes in minority interest (net) 27 (4.983) (1.219.018)

Net cash (used in)/provided by financing activities 482.548.151 800.858

NET CHANGE IN CASH AND CASH EQUIVALENTS 119.233.139 7.102.177

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 6 34.947.778 27.845.601

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 6 154.180.917 34.947.778


52

ÜLKER BİSKÜVİ SANAYİ A.Ş. AND ITS SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008(Amounts expressed in Turkish Lira [TL] unless otherwise stated.)

1. ORGANIZATION AND OPERATIONS OF THE GROUP

Organization and Shareholders:

Ülker Bisküvi Sanayi A.Ş. Group, (“the Group”), comprises of the parent Ülker Bisküvi Sanayi A.Ş. (“the Company”), seven subsidiaries in which the Company owns the majority share of the capital or which are controlled by the Company and four joint ventures. Ülker Bisküvi Sanayi A.Ş. was established in 1944. The Company’s core business activities are manufacturing of biscuits, chocolate coated biscuits and wafers.

Ülker Bisküvi Sanayi A.Ş. which is registered at the Capital Market Board, merged under its own title with Anadolu Gıda Sanayi A.Ş., whose shares have been quoted on İstanbul Stock Exchange since 30 October 1996, as of 31 December 2003.

In the extraordinary general meeting of the Company held on 13 August 2007, the amendment in the third section of the articles of association (part related with the title of the Company) has been discussed. After the voting process, the amendments of Company’s title from Ülker Gıda ve Ticaret A.Ş. to Ülker Bisküvi Sanayi A.Ş. has been unanimously resolved. Ülker Bisküvi Sanayi A.Ş. is located in Davutpaşa Cad. No:10 Topkapı Zeytinburnu/İstanbul.

As of 31 December 2008, the total number of people employed by the Group is 5.055 which contains 1.670 employees who worked as subcontractors (31 December 2007: 4.492, subcontractor: 2.092).

As of 31 December 2008 and 31 December 2007, the names and percentages of the shareholders owning more than 10% of the Company’s share capital are as follows:

31 December 2008 Percentage

31 December 2007 PercentageName of the Shareholders Share Share

Yıldız Holding A.Ş. 113.049.151 %42,09 113.049.151 %42,09Dynamic Growth Fund 71.369.033 %26,57 71.369.033 %26,57Other 84.181.816 %31,34 84.181.816 %31,34

268.600.000 % 100,00 268.600.000 % 100,00

As of 31 December 2008 and 31 December 2007, the details of the subsidiaries in terms of share of ownership and principal business activities are as follows:

31 December 2008 31 December 2007 Ratio of Ratio of Ratio of Ratio of Direct Effective Direct Effective Ownership Ownership Ownership Ownership Nature ofSubsidaries % % % % Operationsİdeal Gıda Sanayi ve Ticaret A.Ş. %97,5 %97,9 %97,5 %97,9 ManufacturingBiskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. %50,5 %50,8 %50,5 %50,8 Manufacturingİstanbul Gıda Dış Ticaret A.Ş. %83,8 %83,8 %83,8 %83,8 Sales&MarketingAtlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. %78,2 %78,2 %78,2 %78,2 Sales&MarketingBirleşik Dış Ticaret A.Ş. %68,0 %69,0 %68,0 %69,0 Sales&MarketingBirlik Pazarlama Sanayi ve Ticaret A.Ş. %99,0 %99,0 %99,0 %99,0 ManufacturingRekor Gıda Pazarlama A.Ş. - %46,6 - %46,6 Sales&Marketing

Consolidated Subsidaries, Associates and Joint Ventures:

İdeal Gıda Sanayi ve Ticaret A.Ş. and Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. manufacture and sell similar products with those of Ülker Bisküvi Sanayi A.Ş. On the other hand İstanbul Gıda Dış Ticaret A.Ş., Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş., Birleşik Dış Ticaret A.Ş. and Rekor Gıda Pazarlama A.Ş are involved in domestic and international sales and marketing of products of the above mentioned companies and other food products purchased from the domestic market. Birlik Pazarlama Sanayi ve Ticaret A.Ş. provides raw materials to manufacturing companies.



In the 2007 period, Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. has sold 99,0% of the shares it had in AGS Anadolu Gıda Sanayi ve Ticaret A.Ş. As a result, AGS Anadolu Gıda Sanayi ve Ticaret A.Ş is considered outside of the consolidation scope as of 31 December 2007. Besides, in the 2007 period Biskot Bisküvi Gıda Sanayi ve Ticaret A.Ş. acquired 90% of the shares of Rekor Gıda Pazarlama Sanayi ve Ticaret A.Ş. from a related party firm.

The associates and joint ventures of Ülker Bisküvi Sanayi A.Ş. which are accounted for under equity method in consolidation are as follows:

31 December 2008 31 December 2007 Ratio of Ratio of Ratio of Ratio of Direct Effective Direct Effective Ownership Ownership Ownership Ownership Nature ofAssociates and Joint Ventures % % % % OperationsPendik Nişasta Sanayi ve Ticaret A.Ş. %23,00 %24,99 %23,00 %24,99 ManufacturingHero Gıda Sanayi ve Ticaret A.Ş. - %39,59 - %39,59 ManufacturingGodiva Belgium BVBA %25,23 %25,23 - - ManufacturingG New Inc. %25,23 %25,23 - - Investment

Approval of Financial Statements

The Board of Directors has approved the financial statements and given authorization for the issuance of the financial statements on 10 April 2009. The General Assembly has the authority to amend/modify the statutory financial statements. 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

2.1 Basis of the presentation:

The Company maintains its books of account and prepares its statutory financial statements (“Statutory Financial Statements”) in accordance with accounting principles in the Turkish Commercial Code and tax legislation. Subsidiaries operating in foreign countries maintain their books of account in the currencies of those countries and prepare their statutory financial statements in accordance with the legislation effective in those counties.

Capital Market Board (CMB) Decree No XI-29 “Capital Markets Financial Reporting Standards” provides principals and standards regarding the preparation and presentation of financial statements. This Decree became effective for periods beginning after 1 January 2008 and with its issuance Decree No XI-25 “Capital Markets Accounting Standards” was annulled. Based on this Decree, the companies are required to prepare their financial statements based on International Financial Reporting Standards (“IFRS”) as accepted by the European Union. However during the period in which the differences between the standards accepted by European Union and the standards issued by International Accounting Standards Board (“IASB”) are announced by Turkish Accounting Standards Board (“TASB”), IAS/ IFRS will be applied. In this scope, Turkish Accounting/ Financial Reporting Standards issued by TASB which do not contradict to the standards accepted will be adopted.

The accompanying consolidated financial statements have been prepared in accordance with IFRS and comply with CMB’s decree announce on 14 April 2008 regarding the format of the financial statements and footnotes since at the date of the issuance of these financial statements the differences of IAS/ IFRS accepted by the European Union are not declared by the TASB. In this scope, some reclassifications are made in the prior year financial statements. Changes made in prior year financial statements are represented in Note-41.

Financial statements are prepared on the basis of historical cost principal except for revaluation of some financial instruments.

Determination of Functional 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.

54


The functional currency of the Group’s subsidiaries, Godiva Belgium BVBA and G New Inc. is Euro and US $, respectively. The Group’s consolidated reporting currency is TRY. In accordance with IAS 21 (The Effects of Changes in Foreign Exchange Rates), in the preparation of the Group’s consolidated financial statements, balance sheet items of the related subsidiaries are translated at the balance sheet date at Euro and US$, respectively whereas. income, expenses and cashflows are translated either at the rates prevailing at the trade date (historical rate) or the annual average rate. Exchange difference arising from the consolidatation of such subsidiaries using the equity method is recognized under the exchange difference account in equity.

As of 31.12.2008, Central Bank of Republic of Turkey declared foreign currency rates are 1 Euro = 2,1408 TL, 1 U.S.D. = 1,5123 TL. Between the period of 1 January – 31 December 2008, average foreign currency rates declared by Central Bank of Republic of Turkey are 1 Euro = 1,8969 TL, 1 U.S.D = 1,2976 TL.

Preparation of Financial Statements in Hyperinflationary Periods:

CMB, with its resolution dated 17 March 2005 declared that companies operating in Turkey which prepare their financial statements in accordance with CMB Accounting Standards, effective 1 January 2005, will not be subject to the application of inflation accounting. Consequently, in the accompanying financial statements IAS 29 “Financial Reporting in Hyperinflationary Economies” was not applied.

Consolidation:

The consolidated financial statements include the financial statements of the companies controlled by the Group stated in Note 1. Necessary adjustments are posted for the elimination of Subsidiaries, all the intercompany transactions, and balances between the Company and its Subsidiaries (“Group”).

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary to bring its accounting policies into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

The acquisition of subsidiaries from third parties is accounted for using the purchase method. On acquisition, the assets and liabilities of a subsidiary are measured at their fair values as at the date of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognized if applicable. Where necessary, adjustments are made to the annual financial statements of subsidiaries to bring the accounting policies used by them in line with those used by the Group. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition up to the effective date of disposal, as appropriate.

Goodwill arising on acquisitions is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately in profit or loss.

Acquisitions of entities under common control are accounted for on a carryover basis, which results in the historical book value of assets and liabilities of the acquired entity being combined with that of the Company. The consolidated historical financial statements of the Group are retroactively restated to reflect the effect of the acquisition as if it occurred during the period in which the entities were under common control. Any difference between the purchase price and the net assets acquired is reflected in equity.

Disposal of entities under common control are accounted for on a carryover basis, which results in the historical book value of assets and liabilities of the disposed entity not combined with that of the Company. The consolidated historical financial statements of the Group are retroactively restated to reflect the effect of the acquisition as if it occurred during the period in which the entities were under common control. Any difference between the proceeds received from the disposal and the net assets disposed is reflected in equity.



Affiliates

An affiliate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

Results and assets and liabilities of affiliates are incorporated in the accompanying consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in that case they are accounted for under IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. Under the equity method, affiliates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the affiliate, less any impairment in the value of individual investments. Losses of an affiliate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the affiliate) are not recognized.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the affiliate recognized at the date of acquisition is recognized as goodwill. Goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

Where a Group entity transacts with an affiliate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant affiliate.

Interests in Joint Ventures

Where a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognized in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.

Comparative Information and Restatement of Prior Period Financial Statements:

Consolidated financial statements of the Group have been prepared comparatively to the prior period. If the presentation or classification of the financial statements is changed, in order to maintain consistency, financial statements of the prior periods are also reclassified in line with the related changes.

The Group has acquired 90% of the shares of Rekor Gıda Pazarlama Sanayi ve Ticaret A.Ş. from a related party firm in year 2007. As Ülker Bisküvi Sanayi A.Ş. and Rekor Gıda Pazarlama Sanayi ve Ticaret A.Ş. did not have any changes in their ownerships prior to the acquisition of this component, this acquisition has been referred to as common equity under control. In such a case, business operations are considered to be a part of Ülker Bisküvi Sanayi A.Ş. from the beginning and are accounted for on the basis of consolidating their benefits. This accounting application supports the management’s belief that it is the best method of presenting the economic nature of this transaction. Consolidated financial statements include all of the assets and liabilities according to their carrying values within the common equity control method. Furthermore, consolidated income statements are prepared from the beginning of the period in which the acquisition was conducted. Previous period financial statements are also prepared in the same manner in order for the financial statements to be comparable. As a result of these operations, no goodwill was calculated and any difference arising from the difference between the investment balance and the share in the acquired company’s equity is accounted under the shareholder’s equity within “effect of the business combinations with common equity control”.

Also, the Group has applied the Communiqué Serial: XI, No: 29 to its first interim financial statements for the annual periods beginning from 1 January 2008. The details of the opening restatements of the Group’s financial statements for the period ended as of 31 December 2007 in accordance with the Communiqué Serial: XI, No: 29 are presented in Note 41.

56


Netting:

Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet 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.

2.2 Changes in the Accounting Policies:

Financial statements of the Company have been prepared comparatively with the prior period in order to give information about financial position and performance. The Group applied CMB Decree XI/ 29 beginning from the first balance sheet date after 1 January 2008. The Group’s opening financial statements as of 31 December 2007 have been restated accordingly. Details of the changes have been disclosed in note 41.

2.3 Changes and Errors in Acccounting Estimates:

If the changes in the accounting polices are related to one period they are applied in the current year; if they are related with the future period they are applied both in the current period and future periods. The Group did not have any changes in the accounting estimates in the current period.

The Group applied CMB Decree XI/ 29 beginning from the first balance sheet date after 1 January 2008. The Group’s opening financial statements as of 31 December 2007 have been restated accordingly. Details of the changes have been disclosed in note 41.

2.4 Adoption of New and Revised International Financial Reporting Standards:

In the current period, among the new and revised standards applicable starting with 1 January 2008, published by International Accounting Standards Board (IASB), and by International Financial Reporting Interpretations Committee (IFRIC), the Company has applied those standards that are related with the Company’s operations conducts.

Even though the below mentioned standards together with the changes to and interpretations of the prior standards are obligatory to adopt to the financial statements starting from 1 January 2008, the Company’s operations conducts are not related with these standards:

IFRIC 11, “IFRS 2 – Transactions Regarding an Entity’s Buying its Own Equity Instruments”•IFRIC 12, “Share-Based Payment”,•IFRIC 14, “IAS 19- The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”,•IFRIC 39, IFRS 7 “Changes in Reclassification of Financial Instruments”•



The standards that are not put into effect yet, neither are adopted by the Company, and Changes to, interpretations of the prior standards

The below mentioned standards and interpretations have been published as of the approval date of the financial statements, however, they are not put into effect:

IFRS 8, “Operating segments”• Effective for annual periods beginning on or after 1 January 2009

IFRIC 13, “Customer loyalty programmes”• Effective for annual periods beginning on or after 1 July 2008

IFRIC 15, “Agreements for the construction of real estate”• Effective for annual periods beginning on or after 1 January 2009

IFRIC 16, “Hedges of a net investment in a foreign operation”• Effective for annual periods beginning on or after 1 October 2008

IFRIC 17, “Distributons of Non-Cash Assets to Owners• Effective for annual periods beginning on or after 1 July 2009

IFRIC 18, “Transfers of Assets from Customers”• Effective for annual periods beginning on or after 1 July 2009

IFRS 2, “Share-based Payment” Amendment relating to vesting •conditions and cancellations

Effective for annual periods beginning on or after 1 January 2009

IFRS 1, “First-time Adoption of International Financial Reporting •Standards

-Amendment relating to cost of an investment on first-time adoption”


IFRS 3, “Business Combinations” • Effective for annual periods beginning on or after 1 July 2009

IAS 27, “Consolidated and Separate Financial Statements•

IAS 28, “Investments in Associates” •

IAS 31 “Interests in Joint Ventures” Comprehensive revision on applying •the acquisition method

IAS 23, “(Amendment) Borrowing costs” Comprehensive revision to •prohibit immediate expensing


IAS 27, “Consolidated and Separate Financial Statements Amendment •relating to cost of an investment on first-time adoption


IAS 1, “Presentation of Financial Statements” • Effective for annual periods beginning on or after 1 January 2009

IAS 32, “Financial Instruments: Presentation” Amendments relating to •disclosure of puttable instruments and obligations arising on liquidation

IAS 1, “Presentation of Financial Statements” Comprehensive revision •including requiring a statement of comprehensive income


IAS 39, “Financial Instruments: Recognition and Measurement” •Amendments for eligible hedged items


Amendments to IFRS 1 “First-time Adaptation of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements”

The amendment determines the cost of a subsidiary, jointly controlled entity or associate on transition to IFRS under IAS 27 or as a deemed cost. The amendment to IAS 27 requires the recognition of dividends from a subsidiary, jointly controlled entity or associate as income in the unconsolidated financial statements. The adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

58


IFRS 2 “Share-Based Payments”

The amendments clarify the definition of vesting conditions and introduce the concept of a ‘non-vesting condition’ which is a condition that is neither a service condition nor a performance condition. The standard also requires the application of similar criteria to be used in the recognition of awards cancelled by either an entity or the counterparty (employer or employee). The adoption IFRS 2 in future periods will have no material impact on the financial statements of the Group.

IFRS 8 “Operating Segments”

IFRS 8 “Operating Segments” supersedes IAS 14 ‘Segment Reporting”. The standard specifies how an entity should report information about its operating segments based on the segment criteria used in internal reporting which are prepared by the management. The adoption of these standards in future periods will have no material impact on the financial statements of the Group.

IAS 32 and IAS 1 ‘Puttable Instruments and Obligations Arising On Liquidation’

Under the revised IAS 32, subject to specified criteria are being met, puttable instruments and obligations arising on liquidation will be classified as equity while, the amendment to IAS 1 requires the definition and disclosure of such instruments, which are classified as equity. The adoption of these standards in future periods will have no material impact on the financial statements of the Group. IAS 23 (Revised) “Borrowing Costs”

The amendment requires an entity to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The amendment will eliminate the expensing option of borrowing costs in the period in which they are incurred.

IFRS 3 “Business Combinations”

The amendments require the recognition of an acquisition related cost of a business combination as an expense in the period in which the cost is incurred. It also requires subsequent changes in the fair value of a contingent consideration recognized in business combination to be recognized in the statement of income rather than in equity.

IFRIC 13 “ Customer Loyalty Programmes”

Under IFRIC 13, customer loyalty programmes should be recognized as a separately identifiable component of the sales transaction(s). A portion of the fair value of the consideration received in respect of the initial sale shall be allocated to the award credits and the consideration allocated to award credits should be recognized as revenue when awards credits are redeemed. The adoption IFRIC 13 in future periods will have no material impact on the financial statements of the Company because the interpretation is not relevant to its operations.

IFRIC 15 “Agreements for the construction of real estate”

IFRIC 15 provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 “Construction Contracts” or IAS 18 “Revenue” and when revenue from the construction should be recognized.

IFRIC 16 “Hedges of A Net Investment In A Foreign Operation”

IFRIC 16 provides guidance on three main issues: The presentation currency used in the entity’s financial statements cannot be used as a basis for the application of hedge accounting. Therefore, a hedged risk can be considered as the exchange differences arising between the functional currency of the foreign operation and the presentation currency used in the financial statements of the parent entity. A hedging instrument can be held within the Company or companies. The adoption of the Interpretation in future periods will have no material impact on the financial statements of the Group.



IFRIC 17 “Distributions of Non-Cash Assets To Owners”

IFRIC 17 applies to all reciprocal non-cash distributions of assets by an entity to its owners, including the distributions that give owners a choice of receiving either non-cash assets or a cash alternative. The adoption of the Interpretation in future periods will have no material impact on the financial statements of the Group.

IFRIC 18 “Transfers of Assets From Customers”

The Interpretation clarifies the accounting for cash received from a customer that must be used only to acquire or construct the item of property, plant, and equipment in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services. The adoption of the Interpretation in future periods will have no material impact on the financial statements of the Group. IAS 1 (Revised) “Presentation of Financial statements”

IAS 1 has been revised in order to improve users’ ability to analyze and compare the information given in financial statements. Changes made to the revised standard are: the statement of changes in equity can only include transactions with shareholders; in addition to statement of income, presentation of a new “Statement of Other Comprehensive Income” showing all income and expense items as profit and loss; and interpretation of prior financial statements in the current period, or presentation of the prior effects of the retrospective application of new accounting policies in a newly formed column in the financial statements.The Company will apply the related amendments in 2009.

IAS 39, “Financial Instruments: Recognition and Measurement” Amendments relating to hedging items

The amendment clarifies that inflation may only be hedged if changes in inflation are a contractually specified portion of cash flows of a recognised financial instrument.

2.5 Summary of Significant Accounting Policies

The accounting policies applied in preparation of the accompanying financial statements are as follows:

Revenue:

Most of the revenue is generated from sale of biscuit, chocolate covered biscuit and wafer. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates, and other similar allowances

Sale of goods

Revenue generated from biscuit, chocolate covered biscuit and wafer are recognised when all the following conditions are satisfied :

The Group has transferred to the buyer the significant risks and rewards of ownership of the goods,•The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor 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.

Sales returns are granted based on agreements with the third party distributors, sales agents, and chain grocery stores and recorded as a reduction of revenue in the period of sale.

60


Divident and interest revenue

Interest revenue 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.

Dividend revenue from investments is recognized when the shareholders’ rights to receive payment have been established.

Rent income

Rent income from real estates is accounted by the linear method during the respective rent agreement.

Inventories:

Inventories are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with the majority being valued on an average basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make a sale.

Tangible Assets:

Tangible assets that are acquired before 1 January 2005 are carried at their restated costs adjusted to the effects of inflation as of 31 December 2004, less any accumulated depreciation and any impairment loss and tangible assets that are acquired after 1 January 2005 are carried at cost of acquisition, less any accumulated depreciation and any impairment loss. Depreciation is charged so as to write off the cost of assets, other than land and construction in progress, over their estimated useful lives, using the straight line method. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or, when shorter, the term of the relevant lease.

Leasing – the Group as lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognized as assets of the Company 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 balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to 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. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Business Combinations and Goodwill

The acquisition of subsidiaries and businesses are accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the recognition criteria under IFRS 3, “Business Combinations” are recognized at fair value at the date of acquisition, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”, which are recognized and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately in profit or loss.

If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is effected because either the fair values to be assigned to the acquiree’s identifiable assets, liabilities or contingent liabilities or the cost of



the combination can be determined only provisionally, the combination is accounted using such provisional values. Any adjustments to those provisional values as a result of completing the initial accounting are recognized within twelve months of the acquisition date.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognized. In business combinations under common control, assets and liabilities subject to business combination are accounted for at carrying value in consolidated financial statements. Statements of income are consolidated starting from the beginning of the fiscal year in which the business combination is realized. Financial statements of previous fiscal years are restated in the same manner in order to maintain consistency and comparability. Any positive or negative goodwill arising from such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment in subsidiary and the share acquired in subsidiary’s equity is directly accounted under equity as “effect of business combinations under common control”.

Intangible Assets:

Intangible assets that are acquired before 1 January 2005 are carried at their restated costs adjusted to the effects of inflation as of 31 December 2004, less any accumulated amortization and any impairment loss and intangible assets that are acquired after 2005 are carried at cost of acquisition, less any accumulated amortization and any impairment loss.

Impairment of Assets:

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where 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.

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.

Borrowing Costs:

All borrowing costs are recorded in the income statement in the period in which they are incurred.

Financial Instruments:

Financial assets:

Investments are recognised and derecognised on a trade date where the purchase or sale of an investments under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of 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’.

Effective interest method:

The effective interest method is a method of calculating the amortised 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.

Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

Financial assets at FVTPL:

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. Assets in this category are classified as current assets.

62


Held-to-maturity investments:

Investments in debt securities 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 recorded at amortized cost using the effective interest method less impairment, with revenue recognized on an effective yield basis.

Available-for-sale financial assets: Investments other than held-to-maturity debt securities and held for trading securities are classified as available-for-sale, and are measured at subsequent reporting dates at fair value except available-for-sale investments that do not have quoted prices in active markets and whose fair values cannot be reliably measured are stated at cost and restated to the equivalent purchasing power. Gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in the profit or loss for the period. Impairment losses recognized in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognized in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less any impairment.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are 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 impacted. For financial assets carried at amortised 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. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of AFS 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 recognised, the previously recognised 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 amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, any increase in fair value subsequent to an impairment loss is recognised 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 have an original maturity of 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. The carrying amount of these assets approximates their fair value.



Financial Liabilities

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised 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 amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Derivative financial instruments and hedge accounting

The Group is exposed to currency and interest rate risks arising from its operations. The main reason of the interest rate risk is bank loans. The Group uses derivative financial instruments (mainly uses interest swap contracts) to hedge its financial risks associated with specific firm commitments and interest rate fluctuations of its expected future transactions. Derivative financial instruments are not used for speculative purposes.

Derivative financial instruments are initially measured at fair value at the contract date, and are remeasured to fair value at subsequent reporting dates.

Since the changes in the fair value of derivative financial instruments that are not designated and effective as hedges of future cash flows, the ineffective portion is recognized immediately in profit or loss.

Changes in the fair value of derivative financial instruments which do not meet the required criteria for hedge accounting are recognized in the statement of income in the period in which they are occured.

Business Combinations:

None.

Foreign Currency Transactions:

For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in TL, which is the functional currency of the Group, and the presentation currency for the consolidated financial statements.

64


In preparing the financial statements of the individual entities, transactions in foreign currencies (currencies other than TL foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date. Gains and losses arising on settlement and translation of foreign currency items are included in the statements of income.

Earnings Per Share:

Earnings per share disclosed in the accompanying consolidated statement of income is determined by dividing net income by the weighted average number of shares in existence during the year concerned.

In Turkey, companies can raise their share capital by distributing “bonus shares” to shareholders from retained earnings. In computing earnings per share, such “bonus share” distributions are assessed as issued shares. Accordingly, the retrospective effect for those share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation.

Events After Balance Sheet Date:

Events after balance sheet date are those events, favourable and unfavourable, that occur between the balance sheet date and the publication date of the balance sheet. Should any evidence about the events that are prior to the balance sheet date or any related events arise subsequent to the balance sheet date, should be explained in the relevant disclosure. Provisions, Contingent Liabilities and Contingent Assets:

The Group shall recognise a provision only when it has a present obligation as a result of a past event, and it is probable that the entity will be required to transfer economic benefits in settlement; and the amount of the obligation can be estimated reliably. Contingent liabilities are reviewed consistently to determine whether there is a possibility of an outflow of resources embodying economic benefits from the company. For items of contingent liabilities, when a future outflow of resources embodying economic benefits from the company becomes probable, such contingent liabilities, except for the reliable estimate cannot be made, are recognized as a provision in the financial statements attributable to the period in which the change in the outflow of resources embodying economic benefits becomes probable.

The Group, reflects its related liabilities in the notes to the extent that contingent liabilities are probable but there is no realiable assumption on the amount of resources embodying economic benefits.

A contingent asset is defined as a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent asset is disclosed where an inflow of economic benefits is probable.



Related Parties:

A party is related to an entity if:

(a) directly, or indirectly through one or more intermediaries, the party:(i) controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);(ii) has an interest in the entity that gives it significant influence over the entity; or(iii) has joint control over the entity;(b) the party is an associate (as defined in IAS 28 Investments in Associates) of the entity;(c) the party is a joint venture in which the entity is a venturer (see IAS 31 Interests in Joint Ventures);(d) the party is a member of the key management personnel of the entity or its parent;(e) the party is a close member of the family of any individual referred to in (a) or (d);(f) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or(e) ; or(g) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is arelated party of the entity.

Segmental Information: Since the Group has operations in only one production area, no segment reporting has been presented. Government Grants and Incentives:

Withholding tax at the rate of 19,8% is still applied to investment allowances relating to investment incentive certificates obtained prior to 24 April 2003 regardless of the appropriation of the profit.

The Group is exempt from the stamp tax and duties attributed to the export transactions and other profitable foreign exchange operations to the extent of the procedures and basis determined by the Ministry of Finance and Undersecretariat of Foreign Trade.

The government grants are paid to support the participation of attending fairs abroad according to the decision dated 16 December 2004 and numbered 2004/11 of Money Credit and Coordination Committee which was prepared on the basis of “Decisions of Export-oriented Government Grants”.

Based on the Cash Loan Coordination Board’s resolution dated 20/6, the Group also receives tax refunds for the export of its agricultural products in accordance with the Communiqué No: 2000/5 on ‘Export Refunds for Agricultural Products’. Taxation and Deferred Income Taxes:

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 accompanying 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 as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes 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 balance sheet date.

Provision is made in the financial statements for the Group’s estimated liability to Turkish corporation tax on its results for the year. The charge for current tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed.

66


Deferred tax

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and 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 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 recognised 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 recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise 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 each balance sheet date 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 balance sheet date. 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.

Employee Benefits/Retirement Pay Provision:

Benefits such as bonus, allowance for heating, marriage allowance, leave of absence, religious holidays, education incentive, birth and death allowance are provided to the Group employees. Moreover, under the Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group.

Such payments are considered as being part of defined retirement benefit plan as per IAS 19 (revised): “Employee Benefits.” The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of employees. The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation.

Future retirement payments are discounted to their present value at the balance sheet date at an interest rate determined as net of an expected inflation rate and an appropriate discount rate.

Cash Flow Statement:

The Group prepares statements of cash flow as an integral part of its of financial statements to enable financial statement analysis about the change in its net assets, financial structure and the ability to direct cash flow amounts and timing according to the developing conditions. Cash flows for the period are mainly reported depending on investment and financial operations of the Group.

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.



2.6 Critical accounting judgments and key sources of estimation uncertainty

Critical judgments in applying the entity’s accounting policies and key sources of estimation uncertainty

In the process of applying the entity’s accounting policies as outlined in Note 2.5, management has made the following judgments that have the most significant effect on the amounts recognized in the financial statements:

Useful lives of tangible assets:

The Group, performs the depreciation calculation over the useful lives that are stated in Note 18.

Deferred taxes:

Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect of temporary differences between book and tax bases of assets and liabilities. In the subsidiaries of the Group, there are deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences, all of which could reduce taxable income in the future. Based on available evidence, both positive and negative, it is determined whether it is probable that all or a portion of the deferred tax assets will be realized. The main factors which are considered include future earnings potential; cumulative losses in recent years; history of loss carry-forwards and other tax assets expiring; the carry-forward period associated with the deferred tax assets; future reversals of existing taxable temporary differences; tax-planning strategies that would, if necessary, be implemented, and the nature of the income that can be used to realize the deferred tax asset. As a result of the assessment made, the Group has recognized deferred tax assets in certain entities because it is probable that taxable profit will be available sufficient to recognize deferred tax assets in those entities.

3. BUSINESS COMBINATIONS

The inclusion of Rekor Gıda Pazarlama Sanayi ve Ticaret A.Ş. in the scope of the consolidation is stated in Note 2.

4. PARTNERSHIPS

Hero Gıda Sanayi ve Ticaret A.Ş. and Pendik Nişasta Sanayi ve Ticaret A.Ş. are joint ventures and consolidated by equity method. The consolidation of joint ventures are explianed in detail in Note 2.

5. SEGMENTAL INFORMATION

Since the Group has operations in only one production area, no segmental reporting exists.

6. CASH AND CASH EQUIVALENTS

31 December 2008 31 December 2007Cash 11.730 19.285Demand deposits 43.308.139 10.088.835Time deposits (*) 110.625.636 24.312.616Other liquid assets 235.412 527.042

154.180.917 34.947.778

(*) Time deposists consist of repurchase agreements amounted as TL 2.779.744 (31 December 2007: TL 2.080.830).

Cash and cash equivalents include bank deposits amounting to TL 753.682 at Türkiye Finans Katılım Bankası A.Ş. which is a related party (31 December 2007: TL 882.423).

68


The detail of time deposits is as follows:

Currency Type Interest Rate (%) Maturity 31 December 2008TL %14,00-%16,75 January 2009 108.584.017USD %1,75-%3,50 January 2009 2.041.619

110.625.636

Currency Type Interest Rate (%) Maturity 31 December 2007TL %15,00-%17,50 January 2008 21.123.596USD %3,00-%4,00 January 2008 3.129.160EUR %1,50-%2,50 January 2008 59.860

24.312.616

7. FINANCIAL ASSETS

Short Term Financial Assets: 31 December 2008 31 December 2007Available for sale financial assets 787.217 959.035Financial assets at fair value through profit or loss 13.960 132.925

801.177 1.091.960

Short term financial assets of the Company includes various liquid funds and stocks.

Long Term Financial Assets: 31 December 2008 31 December 2007Available for Sale Financial Assets 350.457.314 369.097.455

350.457.314 369.097.455

Long Term Available for Sale Ratio % 31 December 2008 Ratio % 31 December 2007BİM Birleşik Mağazalar A.Ş. (*) %12,03 296.673.233 %12,03 321.970.950Tire Kutsan O.M.K. ve K. San. A.Ş. (**) %9,83 32.063.813 %9,83 23.454.236KBF Ltd. (***) %50,76 7.017.862 %50,76 7.017.862Sağlam GYO A.Ş. (*) %10,71 2.520.000 %10,71 7.080.000Besler Gıda ve Kimya San. A.Ş. %7,00 3.097.685 %7,00 3.097.685Netlog A.Ş. %12,60 2.614.613 %12,60 2.613.408Fresh Cake Gıda A.Ş. %10,00 2.430.618 %10,00 2.430.618Dünya Gümrükleme Müş. A.Ş. (***) %79,58 575.454 %79,58 575.454Igit Ulus.Nak. Turizm Mak. San. Tic. A.Ş.(***) %46,84 2.581.078 - -Diğer 882.958 857.242

350.457.314 369.097.455

(*) The shares are traded on a stock exchange and have been valued at their fair value.

(**) Ülker Bisküvi Sanayi A.Ş. and Mondi Packaging have agreed to continue their cooperation in Tire Kutsan San. A.Ş. (Tire) as a partnership for a period of 3 years. Ülker Bisküvi Sanayi A.Ş.’s shares which has a nominal value of TL 3.887.332,61, equals to the 9,83% of Tire’s equity share. According to this agreement, Ülker Bisküvi Sanayi A.Ş. will transfer 388.733.261 number of Tire Kutsan A.Ş. shares to Mondi Pacakaging after three years following the date, 3 September 2007 on the basis of a share price of 0,05006927 USD and an annual interest of 6%. As of 31 December 2007, the valuation of the shares of Tire Kutsan A.Ş. are done on the basis of the terms on this agreement.

(***) The indicated subsidiaries are not included in the Group consolidation because of their materiality and low activity volume.



8. FINANCIAL BORROWINGS

31 December 2008 31 December 2007Short Term Financial Borrowings:Short term bank loans 480.156.445 229.898.784Short term financial lease payables 3.522.166 1.895.017

483.678.611 231.793.801

Long Term Financial Borrowings:Long term loans 337.682.520 61.729.100Long term financial lease payables 6.821.826 4.063.681

344.504.346 65.792.781

31 December 2008Currency Type Maturity Interest Rate (%) Short Term Long TermTL October 2008- January 2009 25%-28% 2.704.243 -USD January 2008- December 2013 1,64 %-10,75% 477.452.202 337.682.520

480.156.445 337.682.520

31 December 2007Currency Type Maturity Interest Rate (%) Short Term Long TermTL Spot - 1.053.666 -USD December 2008-December 2009 %5,40-%7,10 215.121.713 61.729.100EUR May 2008-July 2008 %4,75-%5,25 13.723.405 -

229.898.784 61.729.100 Repayment schedule of financial borrowings is as follows:

31 December 2008 31 December 2007to be paid within 1 year 480.156.445 229.898.784to be paid within 1-2 years 110.712.352 61.729.100to be paid within 2-3 years 86.201.100 -to be paid within 3-4 years 102.080.250 -to be paid within 4-5 years 38.688.818 -

817.838.965 291.627.884 All financial lease payables as of 31 December 2008 and 31 December 2007 are due to Fon Finansal Kiralama A.Ş. which is a related party.

The Company signed the credit agreement amounting to USD 950 million regarding the takeover of Godiva Belgium BVBA and G New Inc. with Yıldız Holding A.Ş. and Ülker Çikolata Sanayi A.Ş, and undertook its own qutoa amounting to USD 240 million. In addition the Company bailed together with Yıldız Holding A.Ş and Ülker Çikolata Sanayi A.Ş. for the loan amounting to USD 710 million.

a) The detail of short term financial lease payables is as follows:

Short-Term Financial Lease Payables 31 December 2008 31 December 2007Financial lease payables 4.670.616 2.720.743Deferred financial lease payables (-) (1.148.450) (825.726)

3.522.166 1.895.017

70


b) The detail of long term financial lease payables is as follows:

Long-Term Financial Lease Payables 31 December 2008 31 December 2007Financial lease payables 7.768.770 5.261.436Deferred financial lease payables (-) (946.944) (1.197.755)

6.821.826 4.063.681

The maturity detail of the financial lease payables is as follows:

31 December 2008 31 December 2007to be paid within 1 year 3.522.166 1.895.015to be paid within 1-2 years 3.839.810 1.328.860to be paid within 2-3 years 2.758.035 1.400.656to be paid within 3-4 years 223.981 1.334.165to be paid within 4-5 years - -

10.343.992 5.958.698

9. OTHER FINANCIAL LIABILITIES

None.

10. TRADE RECEIVABLES AND PAYABLES

31 December 2008 31 December 2007Due From Related PartiesDue from related parties (Note: 37) 89.321.243 97.212.485

89.321.243 97.212.485

Other Trade ReceivablesTrade receivables 149.599.718 163.219.763Provision for doubtful receivables(-) (9.281.120) (8.091.778)

140.318.598 155.127.985

Total Short Term Trade Receivables 229.639.841 252.340.470

Trade receivables are disclosed at discounted net realizable value using the effective yield method. Net realizable value has been calculated over discount rate of 20% based on the Group’s cash sales. (31 December 2007: 18%).



The allowance for trade receivables is provided 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 2008 and 31 December 2007 is as follows:

1 January – 31 December 2008


Opening balance (8.091.778) (11.473.897)Charge for the period (3.334.862) (858.010)Translation gain or loss (1.095.002) -Cancelled provisions 3.125.514 1.451.013Collections 115.008 2.789.116Closing balance (9.281.120) (8.091.778)

Long Term Trade Receivables 31 December 2008 31 December 2007Notes Receivable 318.509 66.100

318.509 66.100

Short Term Trade Payables 31 December 2008 31 December 2007Trade payables to related parties (Note:37) 222.974.689 169.662.742Trade payables 69.197.466 97.541.600

292.172.155 267.204.342

Long Term Trade Payables 31 December 2008 31 December 2007Trade payables to related parties (Note:37) - 3.066.309

- 3.066.309

11. OTHER RECEIVABLES AND PAYABLES

31 December 2008 31 December 2007Other ReceivablesNon trade receivables from related parties (Note: 37) 538.241.741 260.347.566Short term other receivables 15.384.989 4.207.520

553.626.730 264.555.086

Other Short Term ReceivablesOther short term receivables 14.724.510 1.943.525Tax receivables 492.589 -Deposits and guarantees given 4.883 8.112Receivables from personel 163.007 255.883Receivables transferred (*) - 6.031.831Allowances for other doubtful receivables(-) - (4.031.831)

15.384.989 4.207.520

(*) The Group has taken TL 13.910.000 worth of lien for the related receivable. The lien has been assigned to a third party and TL 3.000.000 has been received in cash. In accordance with the transfer agreement, TL 2.000.000 that the transferee has an unconditional commitment to pay in cash, unless the property subject to this mortgage is not sold within 2 years as of the transfer date, has been collected. Since the collection of the lien is not possible per the above provision in the agreement, the receivable and corresponding provision of TL 4.031.831 have been taken off from the Company’s books.

72


Other Long Term Receivables 31 December 2008 31 December 2007Deposists and guarantees given 62.260 73.450

62.260 73.450

Other Payables 31 December 2008 31 December 2007Other short term payables 45.575.046 9.623.735Non trade payables to related parties (Note: 37) 65.704.715 555.720

111.279.761 10.179.455

Other Short Term Payables 31 December 2008 31 December 2007Advances received 41.882.588 6.556.481Due to Personel 2.825.374 2.464.056Other Payables 862.084 318.063Deposists and guarantees received 5.000 285.135

45.575.046 9.623.735

12. RECEIVABLES AND PAYABLES FROM FINANCIAL SECTOR OPERATIONS

None (31 December 2007: None).

13. INVENTORIES

The detail of inventories is as follows:

31 December 2008 31 December 2007Raw materials 84.950.591 73.733.785Work in progress 1.512.780 1.576.936Finished goods 36.391.728 25.833.395Trade goods 17.554.901 8.504.285Other inventories 1.243.355 8.873.110Inventory impairment provision (-) (949.440) (3.850.219)

140.703.915 114.671.292

Inventory is presented on cost value and allowence for impairment on inventory is booked.

The movement of allowence for impairment on inventory for the periods ending 31 December 2008 and 31 December 2007 are below:

1 January-31 December 2008


Opening balance (3.850.219) -Charge for the year (288.998) (3.850.219)Used allowence 3.189.777 -Closing balance (949.440) (3.850.219)

14. BIOLOGICAL ASSETS

None. (31 December 2007: None)

15. ASSETS RELATED TO ONGOING CONSTRUCTION CONTRACTS

None. (31 December 2007: None)



16. INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

Associates and joint ventures are accounted for under the equity pick-up method:

Associates and Joint Ventures Share % 31 December 2008 Share % 31 December 2007Hero Gıda San. ve Tic. A.Ş. %39,60 7.662.821 %39,60 8.344.515Pendik Nişasta San. ve Tic. A.Ş. %23,99 17.528.533 %23,99 18.106.002Godiva Belgium BVBA %25,23 95.936.778 - -G New Inc. %25,23 133.101.763 - -

254.229.895 26.450.517

31 December 2008 31 December 2007Indexed cost 242.553.696 33.415.813Profits arising after the acquisition date and net-off with dividends received(-) 11.676.199 (6.965.296)

254.229.895 26.450.517

The financial information for the Group’s associates and joints ventures accounted for under the equity pick-up method are as follows:

31 December 2008 31 December 2007Total assets 1.484.049.926 124.095.954Total liabilities (630.312.553) (32.781.524)Net assets 854.737.373 91.314.430

Group’s share in net assets 254.229.895 26.450.517

1 January -31 December 2008

1 January -31 December 2007

Net sales 677.032.499 170.883.763Net profit for the period (42.726.234) 12.728.611Group’s share in net profit for the period (14.818.955) 4.364.157

74


On the basis of IFRS 3, the Company took over 25,23% shares of Godiva Belgium BVBA and G New Inc. for 73.734.943 U.S.D. (93.044.667 TL) and 93.512.926 U.S.D (117.793.273 TL) respectively. The goodwill resulting from this acqusition is stated in below: Goodwill resulting from the acqusition of G-New Inc. is presented below:

Carrying Value Fair Value Portion of GroupCurrent Assets 43.848.017 47.941.687 12.095.688Cash and Cash Equivalents 2.398.324 2.398.324 605.097Receivables and Other Current Assets 16.495.464 16.495.464 4.161.806Inventories 24.954.229 29.047.899 7.328.785Tangible and Intangible Non-current Assets 75.668.091 564.000.045 142.297.211Short-term Liabilities (28.941.343) (51.443.168) (12.976.589)Financial Liabilities - (18.703.729) (4.718.951)Trade Payables (18.231.019) (22.019.116) (5.555.423)Other Liabilities (10.710.323) (10.710.323) (2.702.215)Long-term Liabilities (1.298.970) (168.211.994) (42.439.886)Financial Liabilities - (166.913.024) (42.112.156)Debt Obligations (1.298.970) (1.298.970) (327.730)Net Total Assets 89.275.796 392.296.570 98.976.424Total Cash Paid 117.793.27318 March 2008 Positive Goodwill 18.816.84931 December 2008 Positive Goodwill(*) 24.023.287

(*) Goodwill from the acquisition of G New Inc. is disclosed in investments based on the equity method. Goodwill resulting from the acqusition of G-New Inc. is presented below:

Carrying Value Fair Value Portion of GroupCurrent Assets 106.590.463 114.678.904 28.933.488Cash and Cash Equivalents 36.797.759 36.797.759 9.284.075Receivables and Other Current Assets 40.812.209 40.812.209 10.296.920Inventories 28.980.495 37.068.937 9.352.493Non-Current Assets 62.790.448 339.520.822 85.661.102Receivables and other Non-current Assets 9.061.134 9.190.616 2.318.792Tangible and Intangible Non-current Assets 53.729.315 330.330.206 83.342.310Short-term Liabilities (60.675.776) (71.349.402) (18.001.445)Financial Liabilities - (1.853.499) (467.638)Trade Payables (17.679.013) (17.679.013) (4.460.415)Other Liabilities (42.996.763) (51.816.889) (13.073.402)Long-term Liabilities (621.293) (60.599.459) (15.289.243)Financial Liabilities - (59.978.166) (15.132.491)Other Obligations (621.293) (621.293) (156.752)Net Total Assets 108.083.842 322.250.866 81.303.892Total Cash Paid 93.044.66718 March 2008 Positive Goodwill 11.740.77531 December 2008 Positive Goodwill(*) 12.681.716

(*) Goodwill from the acquisition of Godiva Belgium BVBA is disclosed in investments based on the equity method.



17. INVESTMENT PROPERTY

None (31 December 2007: None). 18. TANGIBLE ASSETS (NET)

Movements of tangible assets between 1 January 2008 and 31 December 2008 are as follows:

Cost 1 January 2008 Addition Disposal Transfers 31 December 2008Land 3.210.302 1.404.000 (711.614) - 3.902.688 Land improvements 5.770.007 17.165 - 149.188 5.936.360 Buildings 158.637.820 10.394.464 (13.482.684) 5.258.414 160.808.014Machinery, plant and equipment 274.800.627 2.085.670 (6.289.715) 23.405.660 294.002.242 Vehicles 11.464.127 81.017 (5.397.185) - 6.147.959 Furniture and fixtures 31.071.691 640.296 (856.113) 579.511 31.435.385 Leasehold improvements 16.180.503 86.801 (2.449) - 16.264.855 Other tangible assets 1.864.738 2.455.187 - 23.939 4.343.864 Construction in progress 13.635.469 34.570.289 - (29.416.712) 18.789.046

516.635.284 51.734.889 (26.739.760) - 541.630.413

Accumulated depreciation 1 January 2008 Addition Disposal Transfers 31 December 2008Land - - - - -Land improvements (855.464) (209.322) - - (1.064.786) Buildings (25.857.370) (1.420.324) 547.497 - (26.730.197) Machinery, plant and equipment (176.180.663) (12.274.213) 4.893.876 - (183.561.000) Vehicles (4.866.369) ( 382.527) 2.617.262 - ( 2.631.634) Furniture and fixtures (28.897.143) (1.702.615) 722.068 - (29.877.690) Leasehold improvements (4.555.055) ( 840.242) 164 - ( 5.395.133) Other tangible assets (1.731.188) (6.248.668) - - (7.979.856)

(242.943.252) (23.077.911) 8.780.867 - (257.240.296)

Net Book Value 273.692.032 284.390.117

76


Movements of tangible assets between 1 January 2007 and 31 December 2007 are as follows:

Cost 1 January 2007 Addition Disposal Transfers

Change in Consolidation

StructureReclassifi-cations(*)

31 December 2007

Land 3.284.095 50.000 (123.793) - - - 3.210.302

Land improvements 5.679.066 86.022 - 11.219 (6.300) - 5.770.007

Buildings 165.048.586 15.640 (2.878.103) 651.697 (4.200.000) - 158.637.820

Machinery, plant and equipment 256.832.395 2.195.170 (34.852) 18.607.174 (2.799.260) - 274.800.627

Vehicles 10.880.039 159.786 (2.661.688) 1.737 - 3.084.253 11.464.127

Furniture and fixtures 30.419.601 948.653 (829.909) 543.212 (9.866) - 31.071.691

Leasehold improvements 15.718.088 462.415 - - - - 16.180.503

Other tangible assets 1.864.738 - - - - - 1.864.738

Construction in progress 2.033.626 33.833.060 (2.409.615) (19.821.602) - - 13.635.469

491.760.234 37.750.746 (8.937.960) (6.563) (7.015.426) 3.084.253 516.635.284

Accumulated depreciation 1 January 2007 Addition Disposal Transfers

Change in Consolidation

StructureReclassifi-cations(*)

31 December 2007

Land - - - - - - -

Land improvements (595.686) (259.936) - - 158 - (855.464)

Buildings (21.744.045) (4.651.882 ) 419.557 - 119.000 - (25.857.370)

Machinery, plant and equipment (162.627.058) (15.791.917) 9.071 - 2.229.241 - (176.180.663)

Vehicles (4.963.906) (685.761) 1.806.986 - - (1.023.688) (4.866.369)

Furniture and fixtures (27.596.548) (1.886.352) 568.828 - 2.333 14.596 (28.897.143)

Leasehold improvements (3.694.549) (845.910 ) - - - (14.596) (4.555.055)

Other tangible assets (1.731.188) - - - - (1.731.188)

(222.952.980) ( 24.121.758) 2.804.442 - 2.350.732 (1.023.688) (242.943.252)

Net Book Value 268.807.254 273.692.032

(*) The Group performed reclassifications between Tangible Assets and Intangible Assets to the closing balance of December 31, 2007 (Footnote 41). The useful lifes of tangible assests are as follows:

Useful lifeBuildings 25 – 50 yearsLand improvements 10 – 50 yearsMachinery and equipment 4 – 15 yearsVehicles 4 – 10 yearsOther tangible assets 4 – 10 yearsFurniture and fittings 3 – 10 yearsLeasehold improvements 5 – 10 years



19. INTANGIBLE ASSETS (NET)

Movements of intangible assets between 1 January 2008 and 31 December 2008 are as follows:

Cost 1 January 2008 Addition Disposal 31 December 2008Rights 20.234.534 8.463 - 20.242.997 Research and development costs 7.249 - - 7.249 Other intangible assets 521.486 67.979 - 589.465 Computer software 41.955 - - 41.955

20.805.224 76.442 - 20.881.666

Accumulated amortization 1 January 2008 Addition Disposal 31 December 2008Rights (18.089.755) (295.438) - (18.385.193) Research and development costs (4.457) (725) - (5.182) Other intangible assets (366.743) (20.467) - (387.210) Computer software (22.366) (7.271) - (29.637)

(18.483.321) (323.901) - (18.807.222)

Net Book Value 2.321.903 2.074.444

Movements of intangible assets between 1 January 2007 and 31December 207 are as follows:

Cost 1 January 2007 Addition Disposal

Change inConsolidation

Structure Reclassifications31 December

2007Rights 20.486.338 2.994.770 - (162.321) (3.084.253) 20.234.534Research and development costs 7.249 - - - - 7.249Other intangible assets 521.486 - - - - 521.486Computer software 37.040 4.915 - - - 41.955

21.052.113 2.999.685 - (162.321) (3.084.253) 20.805.224

Accumulated Amortization 1 January 2007 Addition Disposal

Change inConsolidation

Structure Reclassifications31 December

2007Rights (17.310.348) (1.897.232) - 94.137 1.023.688 (18.089.755) Research and development costs (3.733) (724) - - - (4.457)Other intangible assets (345.303) (21.440) - - - (366.743)Computer software (14.958) (7.408) - - - (22.366)

(17.674.342) (1.926.804) - 94.137 1.023.688 (18.483.321)

Net Book Value 3.377.771 2.321.903

The intangible assets are amortized on a straight-line basis over their estimated useful lives for the period.

Useful LifeRights 2 – 15 yearsOther intangible assets 5 – 12 yearsAdvertising films Period of the right of usage

In Amortization expenses, 13.650.202 TL (31 December 2007: 16.817.848 TL) is included in cost of goods sold, 7.020 TL ( 31 December 2007: 15.435 TL) is included in research and development expenses, 3.679.506 TL ( 31 December 2007: 4.257.390 TL) is included in marketing and selling expenses and 6.065.084 TL( 31 December 2007: 4.957.889 TL ) are included in general administrative expenses.

78


20. GOODWILL

Ülker Bisküvi Sanayi A.Ş., acquired 4,725% share, which corresponds to 968.625 shares, of the total equity of Atlas Gıda Pazarlama Sanayi ve Ticaret A.Ş. for TL 2.405.600 from Dynamic Growth Fund on 19 October 2007. As a result of this acquisition a positive goodwill amounting TL 1.534.035 has been generated. The impairment calculations have been performed as of 30 June 2008 and as a result of this assessment no impairment for the goodwill was noted (31 December 2007:TL 1.534.035).

The goodwill resulting from the acquisition of Godiva Belgium BVBA and G-New Inc is presented in Note 16.

21. GOVERNMENT GRANTS AND INCENTIVES

Group has received government incentive in the current period amounting TL 518.264. ( 31 December 2007:TL 1.300.984). This benefit is considered as government incentives and explained on Note 2.

22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

Short-Term Provisions 31 December 2008 31 December 2007Provision for lawsuits 2.097.964 1.885.127

2.097.964 1.885.127

a) Gurantees Received and Given

31 December 2008

aa)USD(TL)

EUR(TL)

GBP(TL)

Total FX (TL) TL Total

Guarantee letters given 7.679.516 12.659 - 7.692.175 28.779.140 36.471.315Export commitments 32.740.421 - - 32.740.421 - 32.740.421Guarantees given 1.079.564.870 - - 1.079.564.870 - 1.079.564.870

1.119.984.807 12.659 - 1.119.997.466 28.779.140 1.148.776.606

31 December 2007

ab)USD(TL)

EUR(TL)

GBP(TL)

Total FX (TL) TL Total

Guarantee letters given 5.850.556 10.112 - 5.860.668 40.717.533 46.578.201Export Commitments 26.942.870 - - 26.942.870 - 26.942.870Import letter of credit - 392.063 - 392.063 - 392.063Guarantees given 11.647.000 - - 11.647.000 - 11.647.000

44.440.426 402.175 - 44.842.601 40.717.533 85.560.134



b) Lawsuits Filed by and Against to the Group

ba) As of 31 December 2008 ;

Lawsuits filed by the Group:

TLCompensation litigations 1.165.000Foreclosure proceedings 380.272Tax litigations 40.888Action of debt 818.724Penalty proceedings 267.450

2.672.334

Lawsuits filed against to the Group:

TLAction of debts (*) 183.897Compensation ligitations (*) 2.099.724

2.283.621

(*) A provision of TL 2.094.964 has been provided for various court cases filed against the Group. For the rest of the lawsuits it is decided not to book any provision because no cash outflow is projected. (31 December 2007: TL 1.885.127).

bb) As of 31 December 2007;

Lawsuits filed by the Group:

TL USD EURCompensation litigations 1.000.000 - -Foreclosure proceedings 257.449 - -Tax litigations 46.779 - -Action of debt 302.509 122.331 57.326

1.606.737 122.331 57.326

Lawsuits filed against to the Group:

TL USD EURAction of debts 1.022.321 - -Compensation ligitations 2.124.528 400.000 -

3.146.849 400.000 -

23. COMMITMENTS

The Group’s export commitments’ amount is TL 32.740.421 as of 31 December 2008 ( 31 December 2007: 26.942.870 )

80


24. EMPLOYEE BENEFITS

Short Term Provisions 31 December 2008 31 December 2007Unused vacation accrual 1.416.477 1.338.412

1.416.477 1.338.412

Long Term Provisions 31 December 2008 31 December 2007Retirement pay provision 3.826.257 3.688.273

3.826.257 3.688.273

Under Turkish Labor Law, the Group is required to pay employment termination benefits to each employee who has qualified. Also, employees are required to be paid their retirement pay who retired by gaining right to receive according to current 506 numbered Social Insurance Law’s 6 March 1981 dated, 2422 numbered and 25 August 1999 dated, 4447 numbered with 60th article that has been changed.

The amount payable consists of one month’s salary limited to a maximum of TL 2.173,19 for each period of service at 31 December 2008 (31 December 2007: TL 2.087,92). As the maximum liability is revised semi annually, the maximum amount of TL 2.260,05 effective from 1 January 2008 has been taken into consideration in calculation of provision from employment termination benefits.

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. IAS 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 2008, 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 % 5,40 and a discount rate of %12, resulting in a real discount rate of approximately %6,26 (31 December 2007: 5,71%).

Movement of retirement pay provision is as follows:

1 January –31 December 2008

1 January –31 December 2007

Opening balance 3.688.273 5.443.865Service costs 2.157.090 108.030Interest costs 209.528 286.224Actuarial gain (264.615) -Provision released in current period (1.438.475) (516.903)Payment (525.544) (1.632.943)Closing balance 3.826.257 3.688.273

25. RETIREMENT BENEFITS

None (31 December 2007: None).



26. OTHER ASSETS AND LIABILITIES

Other Current Assets 31 December 2008 31 December 2007VAT carried forward 24.479.267 22.186.691Order advances given 2.823.760 6.833.867Prepaid expenses 933.865 537.796Prepaid taxes and dues 10.867.663 -Others 3.440.886 1.12.351

42.545.441 30.660.705

Other non-current assets 31 December 2008 31 December 2007Advances given 10.197.369 9.731.139

10.197.369 9.731.139

Other Short-Term Liabilities 31 December 2008 31 December 2007Performance and revenue premium provision 2.377.645 1.929.989Taxes and dues payable 2.526.905 2.645.974Social security premiums payable 2.028.653 1.837.867Expense accruals 3.085.611 1.004.308Other liabilities 79.301 842.775

10.098.115 8.260.913

27. SHAREHOLDERS’ EQUITY

The composition of the Company’s paid-in share capital as of 31 December 2008 and 31 December 2007 is as follows:

31 December 2008Share (%)

31 December 2007Share (%)Shareholders TL TL

Yıldız Holding A.Ş. 113.049.151 %42,09 113.049.151 %42,09Dynamic Growth Fund 71.369.033 %26,57 71.369.033 %26,57Others 84.181.816 %31,34 84.181.816 %31,34

268.600.000 % 100,00 268.600.000 % 100,00

Subsequent to the acquisition of Anadolu Gıda Sanayi A.Ş., the Company increased its registered share capital ceiling to TL 500.000.000 with the permission of Capital Market Board dated 23 January 2004 and numbered 1301.

Considering additional profit share distribution, Class A and B share certificate owners have been granted a privilege out of the primary dividend at an additional rate of 17,65%. Additionally, the owners of 22.171 founder certificates not included in the capital structure have been granted privilege out of the primary dividend at the rate of 11,76%. Class A and D share certificate owners have also been granted privilege for 4 and 1 vote respectively, for appointing candidates for board of directors.

Ülker Bisküvi Sanayi A.Ş.’s registered capital ceiling is TL 500.000.000, the capital equity has increased from TL 241.087.000 to TL 268.600.000 through a transfer from gain on sale of tangible assets amounting TL 27.486.141 and TL 26.858 from extraordinary reserves. However, a balance of TL 849.173 which exists in Ülker Bisküvi Sanayi A.Ş.’s legal records but can not be presented as a part of the consolidated financial statements according to capital markets regulations are balanced within the shareholder’s equity balances through debit in the retained earnings balance.

82


b) Valuation Funds

Valuation Funds are the effects of valuation of the available for sale investments using their fair values. If the investment which is carried at its fair value is disposed, the related valuation fund is reflected to the income statement of the period. If the valuation resulted by an impairment of an investment the related valuation fund is also reflected to the income statement of the period.

The valuation fund of the Group as of December 31, 2008 is amounting to 125.668.539 TL (December 31,2007: 151.828.984 TL).

c) Restricted Reserves Appropriated from Profit

Restricted reseves 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 5% per annum of all cash dividend distributions. 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. In addition, in accordance with the CMB’s requirements which were effective until 1 January 2008, at the first-time application of inflation adjustments on financial statements, equity items, namely “Capital issue premiums”, “Legal reserves”, “Statutory reserves”, “Special reserves” and “Extraordinary reserves” were carried at nominal value in the balance sheet and restatement differences of such items were presented in equity under the “Shareholders’ equity inflation restatement differences” line item in aggregate. “Shareholders’ equity inflation restatement differences” related to all equity items could only be subject to the capital increase by bonus issue or loss deduction, while the carrying value of extraordinary reserves could be subject to the capital increase by bonus issue; cash profit distribution or loss deduction.

However, in accordance with the CMB’s Decree Volume: XI; No: 29 issued on 1 January 2008 and other related CMB’s announcements, “Paid-in capital”, “Restricted reserves” and “Premium in excess of par” should be carried at their registered amounts in statutory records. Restatement differences (e.g. inflation restatement differences) arising from the application of the Decree should be associated with:

- “Capital restatement differences” account, following the “Paid-in capital” line item in the financial statements, if such differences are arising from “Paid-in Capital” and not added to capital;

- “Retained earnings/Accumulated loss”, if such differences are arising from “Restricted reserves” and “Premium in excess of par” and has not been subject to profit distribution or capital increase.

Other equity items are carried at the amounts that are valued based on the CMB’s Financial Reporting Standards.

Capital restatement differences can only be included in capital.



Profit distrubiton:

Based on the CMB’s decree issued on 9 January 2009, for listed companies, minimum profit distribution rate shall be applied as 20% for the year 2008 (31 December 2007: 20%). In accordance with this decree and CMB’s Decree Volume: IV, No: 27 “Decree for the Principles of the Distribution of Dividends and Dividend Advances for Listed Companies Regulated by CMB”, depending on the decision made in general shareholders’ meeting, the profit distribution can be made either by giving bonus shares to shareholders which are issued either in cash or by adding dividend to capital or giving some amount of cash and some amount of bonus shares to shareholders. If the primary dividend amount determined is less than 5% of the paid-in capital, the Decree gives the option to not to distribute the related amount and to keep it within the equity. However, for companies that have not made any dividend distributions in the prior period and therefore, has classified their shares as “old shares” and “new shares” and those that will distribute dividends from the profit for the year obtained from their activities, primary dividend amount shall be distributed in cash.

If the profit distribution calculated in accordance with the CMB’s minimum profit distribution requirement over the net profit distribution calculated based on the CMB’s standards is recovered in full from distributable profit presented in the statutory accounts, the related amount will be distributed fully, if not, net distributable profit amount presented in the statutory accounts will be distributed fully.

Resources Available for Profit Distribution:

The Group has in its legals books a profit for the period of TL 15.448.738 (31 December 2007: TL 97.968.374,30) and other reserves of TL 127.959.500TL (31 December 2007: TL 71.046.545,34) that can be utilized for profit distribution.

d) Retained Earnings

Details of the retained earnings is as follows:

31 December 2008 31 December 2007Retained earnings 57.582.388 44.836.038Capital-investment elimination (*) (115.084.884) (115.084.884)Extraordinary reserves 142.317.148 78.525.934Inflation restatement differences of shareholders’ equity accounts other than capital and legal reserves 38.728.240 38.728.240Other Reserves 3.858.862 3.858.862 127.401.754 50.864.190

(*) The positive goodwill amounting to TL 115.705.451 and negative goodwill amounting to TL 620.567 were written off from assets of the Group as of 1 January 2006 and this amount was recorded under capital – investment elimination account due to the fact that such balances have resulted from the acquisitions of entities under common control.

Minority interest

The amount of minority interest as of 31 December 2008 is equal to TL 47.691.649.(31 December 2007: TL 44.070.800). The minority share of TL 3.625.832 on operating results for the period between 1 January – 31 December 2008 has been presented separately from the net profit for the same period in the accompanying consolidated statements of income (1 January – 31 December 2007: 7.456.090 TL )

84


28. REVENUE AND COST OF SALES

a) The detail of operating income is as follows:

1 January31 December 2008


Domestic sales 1.523.166.257 1.399.348.335Export sales 256.355.113 256.781.060Other operating income 41.360.329 78.151.024Sales returns (-) (74.548.366) (43.680.343)Sales discounts (-) (334.172.926) (281.713.369)Sales Income (net) 1.412.160.407 1.408.886.707

b) Cost of sales



Raw materials used 516.832.778 434.602.435Personnel expenses 84.590.851 66.833.834Production overheads 42.361.904 33.359.204Depreciation expenses 13.650.202 16.817.848Change in work-in-progress inventories 64.156 (1.283.016)Change in finished goods inventories (10.558.333) (18.139.382)Cost of merchandises sold 646.941.558 532.190.923Cost of trade goods sold 458.888.389 566.706.494Cost of services rendered - 2.751.914Cost of sales 1.105.829.947 1.101.649.331

29. RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTING EXPENSES, GENERAL ADMINISTRATIVE EXPENSES



Marketing, selling and distribution expenses (181.764.610) (195.474.658)General administrative expenses (52.252.476) (36.888.232)Research and development expenses (961.310) (1.025.381)

(234.978.396) (233.388.271)



30. EXPENSES BY NATURE

The detail of operating expenses are as follows;



Marketing, Selling and Distribution ExpensesPersonnel expenses (21.157.881) (18.925.119)Marketing expenses (150.670.991) (162.903.929)Depreciation and amortization expenses (3.679.506) (4.257.390)Other (6.256.232) (9.388.220)

(181.764.610) (195.474.658)

General Administrative ExpensesPersonnel expenses (16.586.476) (14.711.298)Operating expenses (17.859.903) (6.950.111)Depreciation and amortization expenses (6.065.084) (4.957.889)Consultancy expenses (5.842.975) (4.346.391)Taxes,duties and levies (1.570.334) (1.319.109)Other (4.327.704) (4.603.434)

(52.252.476) (36.888.232)

Research and Development ExpensesPersonnel expenses (254.164) (328.774)Materials used (225.536) (160.129)Depreciation and amortization expenses (7.020) (15.435)Consultancy expenses (356.077) (341.109)Other (118.513) (179.934)

(961.310) (1.025.381)

(*) The operating expenses of the Group mainly comprises of management support, information technology and administaration expenses reflected by Yıldız Holding.

31. OTHER OPERATING INCOME/(EXPENSES) a) The detail of other operating income is as follows;



Gain on sale of property, plant and equipment 12.299.698 4.842.614Provisions released 587.601 4.351.813Rent income 6.658.034 6.028.053Dividend income 15.217.814 9.995.704Other ordinary income and profits 10.331.744 11.320.955

45.094.891 36.539.139

86


b) The detail of other operating expenses is as follows;



Provision expense (115.837) (577.054)Loss on sale of property, plant and equipment (3.015.982) (190.828)Tax penalty (75.200) (3.638.051)Other expenses (750.043) (6.481.723)

(3.957.062) (10.887.656)

32. FINANCE INCOME



Foreign exchange gain 243.764.181 68.389.462Financing Income from forward sales 42.805.497 45.324.017Foreign currency and interest gain from financing 62.264.761 31.000.300Discount income 4.672.310 7.659.189Other 14.763 -

353.521.512 152.372.968

33. FINANCE EXPENSES



Foreign exchange loss (-) (201.795.908) (50.247.767)Foreign currency and interest gain from financing (180.088.141) (20.174.012)Financing expense from forward purchases (35.856.357) (30.768.673)Discount expense (4.862.112) (5.050.968)Other (4.833.290) (2.604.673)

(427.435.808) (108.846.093) 34. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

None. (31 December 2007: None.)

35. DEFERRED 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 IFRS. Those 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 IFRS.

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 accompanying consolidated financial statements, have been calculated on a separate-entity basis.The rate applied in the calculation of deferred tax assets and liabilities is 20% (2007: 20%).



Subsidiaries that have deferred tax asset:

Deferred tax bases

Deferred tax assets Deferred tax liabilities31 December 2008 31 December 2007 31 December 2008 31 December 2007

Indexation and useful life differences of tangible and intangible assets (9.722.455) (1.456.885) 117.954.970 116.952.290Financial instruments valuation differences (1.579.220) 1.407.420 131.783.420 158.329.920Profit margin elimination on inventory - - (2.571.920) (2.095.365)Discount of trade receivables/payables (net) 555.715 (531.175) 319.175 1.663.130Allowance for employee termination benefits (978.540) (1.064.550) (2.946.810) (3.106.880)Allowance for doubtful receivables (7.228.630) (5.561.755) - (4.031.830)Previous year losses (14.738.555) (18.116.265) - -Provision for lawsuits - - (2.000.964) (1.885.125)Other (2.539.947) (5.522.310) 1.516.005 148.100

(36.231.632) (30.845.520) 244.053.876 265.974.240

Deferred tax asset/liabilities

Deferred tax assets Deferred tax liabilities31 December 2008 31 December 2007 31 December 2008 31 December 2007

Indexation and useful life differences of tangible and intangible assets (1.944.491) (291.377) 23.590.994 23.390.458Financial instruments valuation differences (78.961) 70.371 6.589.171 7.916.496Profit margin elimination on inventory - - (514.384) (419.073)Discount of trade receivables/payables (net) 111.143 (106.235) 63.835 332.626Allowance for employee termination benefits (195.708) (212.910) (589.362) (621.376)Allowance for doubtful receivables (1.445.726) (1.112.351) - (806.366)Previous year losses (2.947.711) (3.623.253) - -Provision for lawsuits - - (400.193) (377.025)Other (507.989) (1.104.462) 303.201 29.620

(7.009.443) (6.380.217) 29.043.262 29.445.360

Movement of Deferred Tax Liabilities:1 January

31 December 20081 January

31 December 2007Opening balance 23.065.143 22.442.917Taxation net off funds in equity (1.358.608) 7.986.859Deferred tax (income) 327.284 (7.364.633)

22.033.819 23.065.143

The Group is 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 year.

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 2008 is 20% (31 December 2007: 20%).

88


In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate is 20% in 2008 (31 December 2007: 20%).

Losses are allowed to be carried 5 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 1-25 April following the close of the accounting year to which they relate. The companies with special accounting periods, file their tax returns between 1st-25th of fourth month after fiscal year end. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years.

Income witholding tax

In addition to corporate taxes, companies should also calculate income withholding taxes and funds surcharge on any dividends distributed, except for resident companies in Turkey which include this dividend income in their taxable profit for the related period and Turkish branches of foreign companies. The rate of income withholding tax is 10% starting from 24 April 2003. This rate was changed to 15% with the code numbered 5520 article 15 commencing from 21 June 2006. However until the resolution of council of ministers, it was used as 10%. After the resolution, declared in Official Gazette in 23 July 2006, this rate is changed to 15% effective from 23 July 2006.

Undistributed dividends incorporated in share capital are not subject to income withholding taxes. Withholding tax at the rate of 19,8% is still applied to investment allowances relating to investment incentive certificates obtained prior to 24 April 2003. Subsequent to this date, companies can deduct 40% of the investments within the scope of the investment incentive certificate and that are directly related to production facilities of the company. The investments without investment incentive certificates do not qualify for tax allowance.

Investment incentive certificates are revoked commencing from 1 January 2006. If companies cannot use investment incentive due to inadequate profit, such outstanding investment incentive can be carried forward to following years as of 31 December 2005 so as to be deducted from taxable income of subsequent profitable years. However the companies can deduct the carried forward outstanding allowance from 2006, 2007 and 2008 taxable income. The investment incentive amount that cannot be deducted from 2008 taxable income will not be carried forward to following years.

The tax rate that the companies can use in the case of deducting the tax investment incentive amount in 2006, 2007 and 2008 is 30%. If the Company cannot use the investment incentive carried forward, the effective tax rate will be 20% and the unused investment incentive will be cancelled.

As the Group did not use any investment incentives, the Company has used 20% corporate tax rate. Provision for taxation as of 31 December 2008 and 31 December 2007 are as follows:

31 December 2008 31 December 2007Current tax provision (4.118.292) (31.226.321)Prepaid taxes and funds 4.099.902 26.497.158Taxation in the balance sheet (18.390) (4.729.163)


1 July-31 December 2007

Current tax provision (4.118.292) (31.226.321)Deferred tax benefit (327.284) 7.364.633Taxation in the statement of income (4.445.576) (23.861.688)



The reconciliation of taxation as of 31 December 2008 and 2007 are as follows:



Reconciliation of taxation:

Profit before tax 23.756.641 147.391.620

Effective tax rate 20% 20%

Expected taxation 4.751.328 29.478.324

Tax effects of:- Non-deductible expenses 2.742.731 2.634.149- Dividends and other non-taxable income (4.590.469) (6.010.727)- Carryforward tax losses (34.348) (3.833.211)- Exempt from tax (2.677.999) -- Consolidation adjustments 4.254.333 1.593.153

Taxation in the statement of income 4.445.576 23.861.688

36. EARNINGS PER SHARE

A summary of the Group’s weighted average number of shares outstanding as of 31 December 2008 and 2007 and computation of earnings per share set out here as follows (cash increases are assumed to exclude founder shares):



Weighted average number of common stock outstanding 26.860.000.000 26.860.000.000Net profit 15.685.234 116.073.842Basic Earnings Per Share (1 TL par value each) 0,06 0,43

37. BALANCES AND TRANSACTIONS WITH RELATED PARTIES a) The detail of receivables from related parties is as follows:

31 December 2008 31 December 2007Trade receivables 89.321.243 97.212.485Non-trade receivables 538.241.741 260.347.566

627.562.984 357.560.051

Trade receivables from retaled parties is 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 quarterly based on effective market interest rate. The interest rate used in 31 December 2008 is & 23.(31 December 2008: 18%).

90


The detail of trade and non-trade receivables is as follows:

31 December 2008 31 December 2007Trade Non-Trade Trade Non-Trade

Principle ShareholdersYıldız Holding A.Ş. 105.379 467.928.846 - 203.297.485

SubsidiariesHero Gıda Sanayi ve Ticaret A.Ş 12.106.903 - 9.657.636 -

Other CompaniesHamle Company Ltd. (Kazakistan) 15.549.453 - 4.466.674 -Atlantik Gıda Pazarlama ve Tic. A.Ş. 13.503.700 - 5.460.278 -Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. 8.522.854 - 104.435 374.239Esas Pazarlama ve Tic. A.Ş 8.112.014 19.821 18.325.034 -Teközel Gıda T.Sağ. Mrk. Hiz. San. Tic. A.Ş. 7.012.262 - 11.305.950 -Fresh Cake Gıda San.ve Tic. A.Ş 4.241.705 - 17.138.570 -Merkez Gıda Pazarlama San. ve Tic. A.Ş. 3.337.092 - 3.769.087 -GF Lovell Deutshland GMBH 3.236.045 - 4.450.122 -Ülker Çikolata Sanayi A.Ş 3.203.620 12.149.575 2.147.040 13.681.600Anadolu Gıda San.A.Ş 2.050.775 - 7.421.728 -Ak Gıda San. ve Tic. A.Ş. 1.237.826 16.852.939 35.841 11.647.000Della Gıda San.ve Tic. A.Ş. - 15.123.000 543 11.647.000BİM Birleşik Mağazalar A.Ş. - - 7.760.363 -Other 7.101.615 26.167.560 5.169.184 19.700.242

89.321.243 538.241.741 97.212.485 260.347.566

In addition to the balances above, there are bank deposits amounting to TL 753.682 at Türkiye Finans Katılım Bankası A.Ş. (31 December 2007: TL 882.423)

The trade receivables from related parties mainly comprises the sales to Atlantik Gıda Pazarlama ve Tic. A.Ş and Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. which undertakes the sales of biscuit and chocolate covered biscuit in domestic market under Ülker umbrella. The non-trade receivables from related parties comprises the interest invoices issued to Yıldız Holding, Ülker Çikolata Sanayi A.Ş, Ak Gıda San. ve Tic. A.Ş. and Della Gıda San.ve Tic. A.Ş

b) The detail of payables to related parties is as follows:

Payables to related parties is due to purchases and approximately matured in 2 months.

31 December 2008 31 December 2007Short-Term PayablesTrade payables 222.974.689 169.662.742Non-trade payables 65.704.715 555.720

288.679.404 170.218.462Long-Term PayablesTrade payables (*) - 3.066.309

- 3.066.309



The detail of trade and non-trade payables is as follows:

31 December 2008 31 December 2007Trade Non-Trade Trade Non-Trade

Principle ShareholdersYıldız Holding A.Ş. 1.400.019 65.376.459 2.283.165 -

SubsidiariesHero Gıda Sanayi ve Ticaret A.Ş 7.236.176 - 11.069.572 -Pendik Nişasta Sanayi A.Ş 989.361 - 2.392.694 -

Other Companies Fresh Cake Gıda San.ve Tic.A.Ş 63.655.583 - 37.868.220 -Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. 57.269.639 - 53.399 -Besler Gıda ve Kimya San. Tic. A.Ş. 40.663.788 - 30.203.321 -Önem Gıda San. ve Tic. A.Ş 13.199.028 - 7.914.566 -Öncü Pazarlama ve Ticaret A.Ş 9.085.015 - 35.693.946 -Ak Gıda San. ve Tic. A.Ş. 6.361.129 - 5.414.082 -Anadolu Gıda San.A.Ş. 4.826.609 - 2.561.258 -Netlog Lojistik Hizmetleri A.Ş. 2.978.464 - 2.640.351 -Tire Kutsan O.M.K. ve K. San. A.Ş. 2.900.337 - 2.390.457 -Ülker Çikolata Sanayi A.Ş. 1.767.261 - 2.217.188 -Atlantik Gıda Pazarlama ve Tic. A.Ş. 137.847 - 14.381.667 -Esas Pazarlama ve Tic. A.Ş. 29.152 14.871 4.423.754 -Other 10.475.281 313.385 8.155.102 555.720

222.974.689 65.704.715 169.662.742 555.720

The trade payables to related parties mainly comprises the raw materials and finished goods purchases from Fresh Cake Gıda San.ve Tic.A.Ş, Besler Gıda ve Kimya San. Tic. A.Ş. and Önem Gıda San. ve Tic. A.Ş and the advances given to Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. The non-trade payables to related parties mainly comprises the information service, management and corporate support received from Yıldız Holding A.Ş.

92


c) The detail of purchases from and sales to related parties is as follows:



Purchases Sales Purchases SalesSubsidiaries

Hero Gıda San. ve Tic. A.Ş. 45.605.461 46.213.390 46.617.411 38.359.829Pendik Nişasta San. A.Ş. 8.533.385 31.503 10.980.119 368.538

Other CompaniesBesler Gıda ve Kimya Sanayi ve Ticaret A.Ş. 155.103.201 6.926.336 130.658.673 5.456.975Fresh Cake Gıda Sanayi ve Ticaret A.Ş. 105.060.552 11.013.004 136.287.311 48.977.668Önem Gıda San. ve Tic. A.Ş 83.122.189 1.034.532 84.619.480 8.839.532Ak Gıda Sanayi ve Ticaret A.Ş. 44.697.636 6.338.906 42.444.712 5.099.531Ülker Çikolata San.A.Ş. 39.067.232 21.239.975 50.547.403 39.410.118Anadolu Gıda Sanayi A.Ş. 24.645.961 19.903.648 16.382.071 12.650.493Tire Kutsan O.M.K. ve K. San. A.Ş. 19.879.602 302.413 26.930.372 57.628Örgen Gıda A.Ş. 13.458.972 3.300.866 14.133.732 3.527.750Komili Kağıt ve Kiş.Bak. Ürt. San.ve T.A.Ş. 7.477.797 864.382 10.035.719 1.688.661Della Gıda Sanayi Ve Tic. A.Ş. 7.283.698 1.013.920 6.612.483 714.685Baycan Çiklet Ve Gıda Sanayi A.Ş. 3.206.356 296.356 6.518.006 1.680.908Esas Pazarlama Ve Ticaret A.Ş. 1.327.160 64.322.531 20.365.402 77.740.879Atlantik Gıda Pazarlama ve Ticaret A.Ş. 167.915 33.558.766 245.847 41.681.467Bizim Toplu Tüketim Paz. San. Ve Tic. A.Ş. 147.398 7.806.390 97.477 7.128.332Teközel G.,Tem., Sağ. Mrk. Hz.Sn.ve T.A.Ş. 140.504 57.747.822 313.288 30.394.570Merkez Gıda Pazarlama Ve Ticaret A.Ş. 54.104 22.092.569 206.878 24.538.742Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş. 27.661 112.732.724 309.960 1.712.586Other 18.479.192 15.105.256 60.658.775 37.848.214

577.485.976 431.845.289 664.965.119 387.877.106

The Group mainly acquires raw materials from Besler Gıda ve Kimya Sanayi ve Ticaret A.Ş which produces vegetable oil and margarine, Pendik Nişasta San.A.Ş, Ak Gıda Sanayi ve Tic.A.Ş and Önem Gıda San ve Tic.A.Ş.The Group sells its products to Esas Pazarlama Ve Ticaret A.Ş., Atlantik Gıda Pazarlama ve Tic. A.Ş, Pasifik Tük. Ürün. Satış Ve Ticaret A.Ş



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 months period ended 31December 2008;

Rent Income

Rent Expense

Service Income

Service Expense

Interest Income

Interest Expense

Principle ShareholdersYıldız Holding A.Ş. 136.978 2.350.312 236.199 26.108.811 26.366.822 5.608.836

SubsidiariesHero Gıda Sanayi ve Tic.A.Ş. 27.789 180 496.024 131.020 - -Pendik Nişasta Sanayi ve Tic.A.Ş 540 - 276.470 - - -

Other CompaniesNetlog Lojistik Hizmetleri A.Ş. 3.193.714 1.585.187 435.763 40.366.023 - 20.000Öncü Pazarlama ve Ticaret A.Ş 107.001 205.413 804.592 30.987.217 - 897.146Ülker Çikolata San.A.Ş. 414.226 5.009 123.552 2.865.778 979.457 -Pasifik Tük.Ürn. Satış ve Tic.A.Ş 85.727 500 186.064 640.527 125.389 -Başak Sağlık Hizm.A.Ş 2.606 286.291 1.693 510.725 - -Besler Gıda ve Kim. San. ve Tic.A.Ş - 42.350 91.481 89.478 880.587 150.440Anadolu Gıda Sanayi A.Ş. 235 - 1.225.991 60.380 907.612 -Natura Gıda Sanayi ve Ticaret A.Ş. 254.345 - 15.935 16.433 - -Della Gıda Sanayi ve Ticaret A.Ş. - - - 14.408 1.345.527 -Seher Gıda Paz. San. ve Ticaret A.Ş. 334.584 - 29.902 8.358 - -Fon Finansal Kiralama A.Ş. - - - 859 1.636 1.097.283Bim Birleşik Mağazalar A.Ş - - - 2.039.898Tire Kutsan O.M.K. ve K. San. A.Ş. - - 4.375 3.954 - -Other 269.018 200.925 402.095 4.240.070 2.532.841 14.439

4.826.763 4.676.167 4.330.946 108.083.939 33.139.871 7.788.144

For the period ended 31 December 2007, 4.730.311 TL rent income, 2.672.349 TL rent expense and 6.675.293 TL service income, 97.584.961 TL service expense, 26.778.353 TL interest income and 1.728.221 TL interest expense is occured.

Please refer to Note 1 for the explanation of AGS Anadolu Gıda Sanayi ve Ticaret A.Ş which is excluded from the scope of the consolidation. Also please refer to Note 2 for the explanation regarding the addition of Rekor Gıda Pazarlama Sanayi ve Ticaret A.Ş. into the consolidation scope.

e) Benefits provided to board members and key management personnel:

31 December 2008 31 December 2007BOD Members 1.701.492 1.596.914Senior management 4.075.472 3.504.034

5.776.964 5.100.948

f) The detail of guarantees, commitments and advances given in favour of related parties is as follows (in original currencies).

31 December 2008 31 December 2007TL 250.000 1.000.156USD 703.856.292 178.366.248

94


38. NATURE AND LEVEL OF RISKS DERIVED FROM 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 8, cash and cash equivalents disclosed in note 6 and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in note 27.

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 is substracted from total liabilities to calculate the net liability. The shareholder’s equity is added to net liabilties to calculate the total capital.

Net liability/Total capital ratio as of 31 December 2008 and 31 December 2007 is as follows;

31 December 2008 31December 2007Total liabilities 1.120.355.112 567.857.233Negative: Liquid assets (154.180.917) (34.947.778)Net liabilities 966.174.195 532.909.455Total shareholder’s equity 705.944.420 716.159.403Total capital 1.672.118.615 1.249.068.858

Net Liability/Total Capital Ratio %58 % 43

b) Financial Risk Factors

The risks of the Group, resulted from operations, include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group’s risk management program generally seeks to minimize the effects of uncertainty in financial market on financial performance of the Group.

Risk management is implemented by finance department according to the policies approved by Board of Directors. The Group’s finance department provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. The written procedures are formed by Board of Directors to manage the foreign currency risk, interest risk, credit risk, use of derivative and non-derivative financial instruments and the assessment of excess liquidity.



(b-1) Credit Risk Management

Receivables

Credit Risk of Financial Instruments Trade Receivables Other Receivables

31 December 2008Related

partyThird party

Related party

Third party

Deposits in Bank

Derivative Instruments Other

Maximum net credit risk as of balance sheet date (*) 89.321.243 140.318.598 538.241.741 15.384.989 153.933.775 - -

- The part of maximum risk under guarantee with collateral etc. (**) - 28.321.782 - - - - -

A. Net book value of financial assets that are neither past due nor impaired 88.954.898 125.189.960 538.190.566 15.384.989 153.933.775 - -

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 366.345 15.128.638 51.175 - - - -

- The part under guarantee with collateral etc. - 6.372.804 - - - - -

D. Net book value of impaired assets - - - - - - -

- Past due (gross carrying amount) - 9.281.120 - - - - -

- Impairment (-) - (9.281.120) - - - - -

- The part of net value under guarantee with collateral etc. - 320.470 - - - - -

- 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 - - 719.637.471 - - - -

(*) 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, gurantee notes and mortgages.

96


Receivables

Credit Risk of Financial Instruments Trade Receivables Other Receivables

31 December 2007Related

partyThird party

Related party

Third party

Deposits in Bank

Derivative Instruments Other

Maximum net credit risk as of balance sheet date (*) 97.212.485 155.127.985 260.347.566 4.207.520 34.401.451 - -

- The part of maximum risk under guarantee with collateral etc. (**) - 32.510.916 - - - - -

A. Net book value of financial assets that are neither past due nor impaired 97.212.485 148.240.166 260.347.566 4.207.520 34.401.451 - -

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 - 6.887.819 - - - - -

- The part under guarantee with collateral etc. - 470.030 - - - - -

D. Net book value of impaired assets - - - - - - -

- Past due (gross carrying amount) - 8.091.778 - - - - -

- Impairment (-) - (8.091.778) - - - - -

- The part of net value under guarantee with collateral etc. - 265.000 - - - - -

- 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

Aging of the past due receivables are as follows:

Receivables31 December 2008 Trade Receivables Other Receivables TotalPast due 1-30 days 5.465.385 - 5.465.385Past due 1-3 months 4.771.043 - 4.771.043Past due 3-12 months 1.948.282 51.175 1.999.457Past due 1-5 years 12.591.393 - 12.591.393Past due more than 5 years - -Total past due receivables 24.776.103 51.175 24.827.278The part under guarantee with collateral 6.693.274 6.693.274

Receivables31 December 2007 Trade Receivables Trade Receivables TotalPast due 1-30 days 3.030.570 - 3.030.570Past due 1-3 months 1.200.654 - 1.200.654Past due 3-12 months 2.154.639 - 2.154.639Past due 1-5 years 8.593.734 - 8.593.734Past due more than 5 years - - -Total past due receivables 14.979.597 - 14.979.597The part under guarantee with collateral 735.030 - 735.030



Collaterals held for the trade receivables that are past due but not impaired as of balance sheet date are as follows:

31 December 2008 31 December 2007Nominal Value Nominal Value

Guarantees Received 4.958.141 470.030Mortgages 1.396.610 -Collaterals - -Notes Received 18.053 -

6.372.804 470.030

Collaterals held for the trade receivables that are past due and impaired as of balance sheet date are as follows:

31 December 2008 31 December 2007Nominal Value Nominal Value

Guarantees Received 320.470 265.000

b.2) Liquidity risk management

The main responsibility of managing the liquidity risk is at the Board of Directors. The Board of Directors maintained an adequate liquidity risk management for the Group’s short, middle and long term funding and liquidity necessities. 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 following table presents the maturity of Group’s derivative and non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of non-derivative financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Derivative financial liabilities are presented according to undiscounted net cash inflow and cash outflow. The table has been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instrument that settle on a net basis and the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.

98


Contractual Maturity AnalysisDecember, 31 2008 Carrying value

Total cash outflow according

to contract (I+II+III+IV)

Less than 3 months (I)

3-12 months (II) 1-5 years (III)

More than 5 years (IV)

Non-derivative financial liabilities

Bank borrowings 817.838.965 882.050.618 109.867.119 380.800.989 391.382.510 -

Financial lease liabilities 10.343.992 11.643.090 1.070.727 3.191.301 7.381.062 -

Trade payables 292.172.155 298.484.705 280.693.777 17.481.717 309.211 -

Other financial liabilities 111.279.761 112.050.459 112.050.459 - - -

Total liabilities 1.231.634.873 1.304.228.872 503.682.082 401.474.007 399.072.783 -

The expected maturities are same as the maturities per contracts.

Contractual Maturity AnalysisDecember, 31 2007 Carrying value

Total cash outflow according

to contract (I+II+III+IV)

Less than 3 months (I)

3-12 months (II) 1-5 years (III)

More than 5 years (IV)

Non-derivative financial liabilities

Bank borrowings 291.627.884 304.364.016 62.146.261 174.426.461 67.791.294 -

Financial lease liabilities 5.958.698 6.744.625 888.005 1.372.439 4.484.181 -

Trade payables 267.204.342 273.316.604 259.761.582 13.555.022 - -

Other financial liabilities 10.179.455 10.179.455 10.179.455 - - -

Total liabilities 574.970.379 594.604.700 332.975.303 189.353.922 72.275.475 -

The expected maturities are same as the maturities per contracts.

(b) -3 Market risk management

The Group, is subject to financial risks related with the fx rates ((b) -3.1) and interest rates ((b) -3.2).

Market risk management is also followed by 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 provide measures if required. 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:

31 December 2008TL Equivalent

(Functional Currency) US DOLLAR EUR CHF GBP DKK

1. Trade Receivables 50.421.977 20.544.597 8.866.128 - 169.575 -

2a. Monetary Financial Assets 509.110.327 331.526.530 2.868.452 90.861 669.540 14.412

2b. Non-Monetary Financial Assets 863.921 571.263 - - - -

3. Other 50.224.761 24.697.757 5.746.364 97.495 12.001 1.416.041

4. CURRENT ASSETS 610.620.986 377.340.147 17.480.944 188.356 851.116 1.430.4535. Trade Receivables - - - - - -

6a. Monetary Financial Assets 4.418.615 - 2.064.002 - - -

6b. Non-Monetary Financial Assets - - - - - -

7. Other 1.512 1.000 - - - -

8. NON-CURRENT ASSETS 4.420.128 1.000 2.064.002 - - -

9. TOTAL ASSETS 615.041.114 377.341.147 19.544.945 188.356 851.116 1.430.453

10. Trade Payables 31.555.652 19.362.636 892.435 112.744 3.292 677.280

11. Financial Liabilities 474.430.619 311.055.456 1.296.853 870.735 - -

12a. Other Monetary Financial Liabilities 66.567.564 43.164.248 602.248 - - -

12b. Other Non-Monetary Financial Liabilities 7.177.326 4.745.893 52 - 446 -

13. CURRENT LIABILITIES 579.731.161 378.328.234 2.791.588 983.479 3.738 677.28014. Trade Payables - - - - - -

15. Financial Liabilities 341.507.921 225.000.302 3.215 862.295 - -

16a. Other Monetary Financial Liabilities - - - - - -

16b. Other Non-Monetary Financial Liabilities - - - - - -

17. NON-CURRENT LIABILITIES 341.507.921 225.000.302 3.215 862.295 - -

18. TOTAL LIABILITIES 921.239.082 603.328.536 2.794.805 1.845.774 3.738 677.28020. Net foreign currency asset liability position (306.197.968) (225.987.388) 16.750.143 (1.657.418) 847.378 753.173

21. Net foreign currency asset/liability position of monetary items items (1+2a+5+6a-10-11-12a-14-15-16a) (350.110.837) (246.511.515) 11.003.832 (1.754.913) 835.823 (662.868)

100


31 December 2007TL Equivalent

(Functional Currency) US DOLLAR EUR CHF GBP

1. Trade Receivables 230.850.489 174.470.839 15.942.421 32.820 148.699

2a. Monetary Financial Assets 9.272.780 6.258.141 847.554 847.554 229.776

2b. Non-Monetary Financial Assets - - - - -

3. Other 2.241.935 1.913.555 7.728 - -

4. CURRENT ASSETS 242.365.204 182.642.535 16.797.703 32.820 378.4755. Trade Receivables - - - - -

6a. Monetary Financial Assets 1.165 1.000 - - -

6b. Non-Monetary Financial Assets - - - - -

7. Other - - - - -

8. NON-CURRENT ASSETS 1.165 1.000 - - -

9. TOTAL ASSETS 242.366.369 182.643.535 16.797.703 32.820 378.475

10. Trade Payables 39.019.173 29.761.746 2.340.042 280.558 28.166

11. Financial Liabilities 228.852.664 183.492.625 8.852.066 - -

12a. Other Monetary Financial Liabilities - - - - -

12b. Other Non-Monetary Financial - - - - -

13. CURRENT LIABILITIES 267.871.837 213.254.371 11.192.108 280.558 28.166 14. Trade Payables - - - - -

15. Financial Liabilities 65.409.720 53.000.200 2.152.021 - -

16a. Other Monetary Financial Liabilities - - - - -

16b. Other Non-Monetary Financial - - - - -

17. NON-CURRENT LIABILITIES 65.409.720 53.000.200 2.152.021 - -

18. TOTAL LIABILITIES 333.281.557 266.254.571 13.344.129 280.558 28.166 20. Net foreign currency asset liability (90.915.188) (83.611.036) 3.453.574 (247.738) 350.309

21. Net foreign currency asset/liability position of monetary items items (1+2a+5+6a-10-11-12a-14-15-16a) (93.157.123) (85.524.591) 3.445.846 (247.738) 350.309

The Group’s import and export totals for the twelve month periods are presented below:



Total exports 256.355.113 256.781.060

Total imports 173.161.601 49.292.311



Foreign currency sensitivity

The Group is exposed to foreign exchange risk arising primarily from US Dollar and TL currency exposures.

In the table below, the foreign currency sensitivity of the Company arrising from %10 change in US dolar and TL 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 US dolar and TL foreign currency rates. Positive value implies the effect of %10 increase in US dolar and TL foreign currency rates on net profit increase against EURO.

31 December 2008 31 December 2007Income/Expense Income/Expense

Appreciation of foreign currency

Devaluation offoreign currency

Appreciation offoreign currency

Devaluation ofForeign currency

If US Dollar appreciated against TL by 10%1 - US Dollar net asset/liability (37.279.936) 37.279.936 (9.961.049) 9.961.0492- Part of hedged from US Dollar risk (-)3- US Dollar net effect (1 +2) (37.279.936) 37.279.936 (9.961.049) 9.961.049 If Euro appreciated against TL by 10%4 - Euro net asset/liability 2.355.700 (2.355.700) 589.309 (589.309)5 - Part of hedged from Euro risk (-)6- Euro net effect (4 +5) 2.355.700 (2.355.700) 589.309 (589.309)

Total (3+6 ) (34.924.236) 34.924.236 (9.371.741) 9.371.741

(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 intrest 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 has been determined based on the interest rate risk that the non-derivative instruments are exposed with on the balance sheet date. Assumption related to the analysis of floating rate liabilities is that the year end balance exists for the whole year. The Company management expects a fluctuation of 1% in TL interest rates.

On the reporting date if Euribor interest rates had been 1% higher/lower and all other variables were held constant, net income of the Company would have increased TL 1.236.985. ( 1 January-31 December 2007:TL 229.958).

102


The financial instruments that are sensitive to interest rate are as follows:

Interest Rate Position 31 December 2008 31 December 2007Fixed interest rate financial instruments

Financial assetsCash and Cash Equivalents 43.216.720 22.950.073 Available for sale financial assets - -

Financial liabilities 254.100.000 884.977 Floating interest rate financial instruments

Financial assets - -Financial liabilities 552.745.650 98.999.500

(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 has 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 2008, 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 effected.

The other funds in the shareholders’ equity will increase/decrease by TL 10.767.018 (2007: incerase/decrease of TL 13.659.846 ).This situation is the result of the changes in the value of available for sale securities.



39. FINANCIAL INSTRUMENTS

Categories and fair values of financial instruments:

31 December 2008

Financial assets at amortized

costLoans and

receivables

Available for sale financial

assets

Financial liabilities at

amortized cost Carrying value NotesFinancial assetsCash and cash equivalents 154.180.917 - - - 154.180.917 6Trade receivables - 140.318.598 - - 140.318.598 10Due from related parties - 627.562.984 - - 627.562.984 37Other financial assets - - 351.244.531 - 351.244.531 7Financial liabilitiesFinancial liabilities - - 828.182.957 - 828.182.957 8Trade payables - - 69.197.466 - 69.197.466 10Due to related parties - - 288.679.404 - 288.679.404 37Other financial liabilities - - - - - 9

31 December 2007

Financial assets at amortized

costLoans and

receivables

Available for sale financial

assets

Financial liabilities at

amortized cost Carrying value NotesFinancial assetsCash and cash equivalents 34.947.778 - - - 34.947.778 6Trade receivables - 155.127.985 - - 155.127.985 10Due from related parties - 357.560.051 - - 357.560.051 37Other financial assets - - 370.056.490 - 370.056.490 7Financial liabilitiesFinancial liabilities - - 297.586.582 - 297.586.582 8Trade payables - - 97.541.600 - 97.541.600 10Due to related parties - - 170.218.462 - 170.218.462 37Other financial liabilities - - - - - 9

(*) The Company management believes that the carrying values of the financial assets reflect their fair values. Derivative Financial Instruments

The Group entered into interest rate swap agreement to control part of its borrowings by replacing floating interest rate with fixed interest rate swaps. The booked value of the related loan is 228.000.000USD. The floating interest rate of the related loan is confined against the change in six months libor rate. The expected fair value of the transaction corresponds to 755.122USD (2007: None). 40. EVENTS AFTER THE BALANCE SHEET DATE

Based on the agreement between Ülker Bisküvi and Mondi Packaging , Ülker Bisküvi has transferred its shares which has a nominal value of TL 3.887.332,61 equals to the % 9,83 of Tire Kutsan Oluklu Mukavva Kutu ve Kağıt Sanayi A.Ş to Mondi Packaging Corrugated B.V.

104


41. OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS

a) Acquisition of subsidiary

The Company signed the credit agreement amounting to USD 950 million regarding the take-over of Godiva Belgium BVBA and G New Inc. with Yıldız Holding A.Ş. and Ülker Çikolata Sanayi A.Ş., and undertook its own quota amounting to USD 240 million. In addition, the Company bailed together with Yıldız Holding A.Ş. and Ülker Çikolata Sanayi A.Ş. for the loan amounting to USD 710 million. The aforementioned loan has a maturity of 5 years and a pay-back period of 6 months. The company purchased 25,23 % of the companies Godiva Belgium BVBA ve G New Inc. by paying out TL 207.076.487.

b) Decrease in the rate of value added tax

The value added tax rate calculated on biscuits, goods of the food industry, was decreased from 18% to 8% commencing from 1 June 2006 with the Cabinet decision 2007/12143 appeared on May 30, 2007 in the Official Gazette issue 26537.

c) Adjustments to prior year financial statements

The Group prepared its financial statements for the first period after 1 January 2008 in accordance with Capital Market Board (CMB) Decree No XI-29. In order to be comply with Communiqué Serial XI No: 29 the necessary changes in accounting policies were made as of 1 January 2007. The Company made certain reclassifications to its financial statements as at 31 December 2006 in accordance with Capital Market Board (CMB) Decree No XI-29 in line with UFRS 1 “The First Implementation of International Financial Reporting Standards”.

a. IFRS 3 (“Business Combinations”) requires that the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“positive goodwill”) is recognized in directly profit and loss. Positive goodwill was classified in the balance sheet in the financial statements prepared in accordance with Capital Market Board (CMB) Decree No XI-25 and was amortized accordingly. The effect of the adjustment resulted in an increase amounting to TL 19.175 in profit before tax of the period 1 January, 2007-31 December 2007 and an increase amounting to TL 19.175 in the shareholders’ equity as of 31 December 2007. The related change in accounting policy does not have a tax effect.

b. “Financing income from forward sales” amounting to 45.324.017TL and “ Financing expense from forward purchases” amounting to 30.768.673TL which are presented in “sales, other sales, sales returns, sales discounts and cost of sales” in the financials of December 31, 2007; are disclosed in “Finance Income” and “Finance Expense” respectively in December 31, 2008.

c. The Company performed classification between Minority Interests and Net Income in the Shareholders’ Equity movement table of financials dated December 31, 2008 in the closing of December 31, 2007 amounting to 2.069.902TL.



The Group has applied the Communiqué Serial: XI, No: 29 to its first interim financial statements for the annual periods beginning from 1 January 2008. The details of the opening restatements of the Group’s financial statements for the period ended as of 31 December 2007 in accordance with the Communiqué Serial: XI, No: 29 are presented below:

ASSETS

Prepared in accordance with Decree XI,No:25 Adjustments

Prepared in accordance with Decree XI,No:29

Current assets 698.267.291 - 698.267.291Cash and cash equivalents 34.947.778 - 34.947.778 Marketable securities 1.091.960 (1.091.960) -Financial investments - 1.091.960 1.091.960 Trade receivables 158.831.026 (158.831.026) -- Due from related parties 97.212.485 97.212.485- Other trade receivables 155.127.985 155.127.985Due from related parties 355.901.946 (355.901.946) -Other receivables 2.162.584 (2.162.584) -- Non-Trade receivables from related parties - 260.347.566 260.347.566- Other short term receivables - 4.207.520 4.207.520 Inventories 121.505.159 (6.833.867) 114.671.292 Other current assets 23.826.838 6.833.867 30.660.705

Non current assets 689.327.673 19.175 689.346. 848Trade receivables 139.550 (73.450) 66.100Other receivables - 73.450 73.450Financial investments 395.547.972 (26.450.517) 369.097.455Investments valued by equity method - 26.450.517 26.450.517Tangible assets 281.362.606 (7.670.574) 273.692.032Intangible assets 4.382.468 (2.060.565) 2.321.903Goodwill 1.514.860 19.175 1.534.035 Deffered tax asset 6.380.217 6.380.217 Other non current assets - 9.731.139 9.731.139

TOTAL ASSETS 1.387.594.964 19.175 1.387.614.139

106


LIABITIES

Prepared in accordance with Decree XI,No:25 Adjustments

Prepared in accordance with Decree XI,No:29

Current liabilities 525.391.213 - 525.391.213Financial liabilities 231.793.801 (231.793.801) -- Short term loans - 231.793.801 231.793.801Trade payables 96.513.710 (96.513.710) -- Trade payables to related parties - 171.261.574 171.261.574- Other trade payables - 95.942.768 95.942.768Due to related parties 174.313.606 (174.313.606) -Advances received 6.556.481 (6.556.481) -Other payables - - - - Due to other related paries 873.783 873.783 - Other payables 9.305.672 9.305.672Currrent Tax Liability - 4.729.163 4.729.163Provision for depts 10.757.426 (8.872.299) 1.885.127Provision for employee benefits - 1.338.412 1.338.412Other Short term liabilities 5.456.189 2.804.724 8.260.913

Non-current liabilities 101.992.723 - 101.992.723Financial liabilities 65.792.781 - 65.792.781 Tradepayables - - -- Due to related parties - 3.066.309 3.066.309Due to related parties 3.066.309 (3.066.309) -Provisions 3.688.273 (3.688.273) -Provision for employee benefits - 3.688.273 3.688.273 Deffered tax liabilities 29.445.360 - 29.445.360

EQUITY 760.211.028 19.175 760.230.203Equity attributable to equity holders of the parent 716.140.228 19.175 716.159.403

Paid-in capital 268.600.000 - 268.600.000 Inflation adjustments to share capital 146.784.441 (38.728.240) 108.056.201Reciprocal Subsidiary Capital Adjustment (115.084.884) 115.084.884 -Value increase fund 151.828.984 - 151.828.984Restricted reserves appropriated from profit - 20.736.186 20.736.186Profit Reserves 103.120.982 (103.120.982) -Retained earnings/(accumulated deficit) 44.836.038 6.028.152 50.864.190Profit/loss for the period 116.054.667 19.175 116.073.842

Minority interest 44.070.800 - 44.070.800

TOTAL LIABILITIES 1.387.594.964 19.175 1.387.614.139



The detailed information for the reclassifications for the first-time application of Capital Market Board (CMB) Decree No XI-29 of the comperative financial information in preparation of the consolidated financial statements for the nine month period ended 31 December 2008 is given below:

- Financial Investments: “Shares” and “Investment Funds” amounting to TL 1.091.960 presented in “Marketable Securities” in the balance sheet as of 31 December 2007 is presented in “Financial Investments” in the financial statements dated 31 December 2008.

- Receivables due from Related Parties: “Trade Receivables” amounting to TL 97.984.230 presented in “Due from Related Parties” in the balance sheet as of 31 December 2007 is presented in “Receivables due from Related Parties” in the financial statements dated 31 December 2008.

- Other Short Term Receivables: “Deposits and Guarantees Given” amounting to TL 8.112 presented in “Trade Receivables” in the balance sheet as of 31 December 2007 is presented in “Other Short Term Receivables in the financial statements dated 31 December 2008.

- Other Short Term Receivables: “Non-Trade receivables from related parties” amounting to TL 262.128.507 presented in “Trade Receivables” in the balance sheet as of 31 December 2007 is presented in “Other Short Term Receivables” in the financial statements dated 31 December 2008.

- Other Current Assets: “Advances Given to Suppliers” amounting to TL 6.833.867 presented in “Inventories” in the balance sheet as of 31 December 2007 is presented in “Other Current Assets” in the financial statements dated 31 December 2008.

- Other Long Term Receivables: “Deposits and Guarantees Given” amounting to TL 73.450 presented in “Trade Receivables” in the balance sheet as of 31 December 2007 is presented in “Other Long Term Receivables” in the financial statements dated 31 December 2008.

- Investments Valued by Equity Method: “Subsidiaries” amounting to TL 26.450.517 presented in “Financial Investments” in the balance sheet as of 31 December 2007 is presented in “Investments Valued by Equity Method” is presented in “Investments Valued by Equity Method” in the financial statements dated 31 December 2008.

- Fixed Assets: “Vehicles” comprising of leased assets of TL 2.060.565 that has presented as “Intangible Assets” in the balance sheets as of 31 December 2007 has been presented as “Tangible Assets” in the balance sheet as of 31 December 2008.

- Other Non-Current Assets: “Advances Given” amounting to TL 9.731.139 presented in “Tangible Assets” in the balance sheet as of 31 December 2007 is presented in “Other Non-Current Assets” in the financial statements dated 31 December 2008.

- Non-Trade Payables to Related Parties: “Non-trade Payables” amounting to TL 873.783 in “Due to Related Parties” in the balance sheet as of 31 December 2007 is presented in “Non-Trade Payables to Related Parties” in the financial statements dated 31 December 2008.

- Trade Payables to Related Parties: “Trade Payables” amounting to TL 171.261.574 in “Due to Related Parties” in the balance sheet as of 31 December 2007 is presented in “Trade Payables to Related Parties” in the financial statements dated 31 December 2008.

- Other Short Term Liabilities: “Deposits and Guarantees Taken” amounting to TL 285.135 in “Trade Receivables” in the balance sheet as of 31 December 2007 is presented in “Other Short Term Liabilities” in the financial statements dated 31 December 2008.

- Other Short Term Liabilities: “Payables to Employees” amounting to TL 2.464.056 in “Due to Related Parties” in the balance sheet as of 31 December 2007 is presented in “Other Short Term Liabilities” in the financial statements dated 31 December 2008.

- Other Short Term Liabilities: “Advances Taken” amounting to TL 6.556.481 in the balance sheet as of 31 December 2007 is presented in “Other Short Term Liabilities” in the financial statements dated 31 December 2008.

- Current Tax Liability: “Current Tax Provision” and “Prepaid Taxes and Funds” amounting to TL 4.729.163 in “Provisions” in the balance sheet as of 31 December 2007 is presented in “Current Tax Liability” in the financial statements dated 31 December 2008.

- Provision for Short Term Employee Benefits: “Unused Vacation Provision” amounting to TL 1.338.412 in “Provisions” in the balance sheet as of 31 December 2007 is presented in “Provision for Short Term Employee Benefits” in the financial statements dated 31 December 2008.

108


- Other Short Term Liabilities: “Expense Accruals”, “Performance Premium Provision” and “Other Provisions” amounting to TL 2.804.724 in “Provisions” in the balance sheet as of 31 December 2007 is presented in “Other Short Term Liabilities” in the financial statements dated 31 December 2008.

- Long Term Due to Related Liabilities: “Trade Payables” amounting to TL 3.066.309 in “Due to Related Parties” in the balance sheet as of 31 December 2007 is presented in “Long Term Due to Related Liabilities” in the financial statements dated 31 December 2008.

- Provision for Long Term Employee Benefits: “Retirement Pay Provision” amounting to TL 3.688.273 in “Provisions” in the balance sheet as of 31 December 2007 is presented in “Provision for Long Term Employee Benefits” in the financial statements dated 31 December 2008.

- Restricted Reserves Appropriated from Profit: “Legal Reserves” amounting to TL 20.736.186 in “Profit Reserves” in the balance sheet as of 31 December 2007 is presented in “Restricted Reserves Appropriated from Profit” in the financial statements dated 31 December 2008.

- Retained Earnings: “Inflation Adjustments to Items other than Share Capital” amounting to TL 38.728.240 in “Inflation adjustments to Share Capital” in the balance sheet as of 31 December 2007 is presented in “Retained Earnings” in the financial statements dated 31 December 2008.

- Retained Earnings: “Cancellation of Goodwill” amounting to TL (115.084.884) in “Reciprocal Subsidiary Capital Adjustment” in the balance sheet as of 31 December 2007 is presented in “Retained Earnings” in the financial statements dated 31 December 2008.

- Retained Earnings: “Extraordinary Reserves” amounting to TL 78.525.934 in “Profit Reserves” in the balance sheet as of 31 December 2007 is presented in “Retained Earnings” in the financial statements dated 31 December 2008.

- Retained Earnings: “Other Reserves” amounting to TL 3.858.862 in “Profit Reserves” in the balance sheet as of 31 December 2007 is presented in “Retained Earnings” in the financial statements dated 31 December 2008.

Davutpaşa Cad. No: 10 Topkapı-Istanbul/TurkeyTel: +90 (212) 567 68 00 Fax: +90 (212) 613 90 90www.ulker.com.tr www.ulkerbiskuvi.com.tr

Documents

AnnuAl RepoRt 2008 - Ülker Bisküvi€¦ · ANNUAL REPORT 2008 ÜLKER BİSKÜVİ 1 In just 64 years, Ülker Bisküvi has evolved from a small biscuit bakery into a major food producer,