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ECZACIBAŞI INVESTMENT HOLDING CO. 01 JANUARY DECEMBER 2013 BOARD OF DIRECTORS ANNUAL REPORT TABLE OF CONTENTS 1.INTRODUCTION Board of Directors and Committees 1 Amendments to Articles of Association 3 Share Data 4 Profit Distribution Policy 5 Company Overview and Summary Financial Data 6 Graphical Comparison of Financial Results for the Last Four Years 7 2.STUDIES Brief information about our affiliates in which we more than 10 percent of share capital: 8 - Eczacıbaşı Menkul Değerler A.Ş. 8 - E-Kart Elektronik Kart Sistemleri Sanayi ve Ticaret A.Ş 9 - EİS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar San. ve Tic. A.Ş İntema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş Kaynak Tekniği Sanayi ve Ticaret A.Ş Eczacıbaşı Holding A.Ş Eczacıbaşı Yatırım Ortaklığı A.Ş. 13 Management Activities 14 Explanations Concerning the Main Aspects of Internal Audit and Risk Management Systems of the Group 15 Activities conducted in the year of 2013 with respect to Risk Management 15 Events Occurring Since Balance Sheet Period 15 Report on Subsidiaries 16 Profit Distribution Proposal 17 Profit Distribution Table 18 REPORT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES 19 1.SHAREHOLDERS 19 2.PUBLIC DISCLOSURE AND TRANSPARENCY 23 3.STAKEHOLDERS 27 4.BOARD OF DIRECTORS 29 I. INTRODUCTION Report Period This report covers the period between 01 January 2013 and 31 December Title of Company Eczacıbaşı Yatırım Holding Ortaklığı A.Ş. Authorized Boards for the Period Board of Directors F. Bülent Eczacıbaşı Chairman R. Faruk Eczacıbaşı Vice President Sezgin Bayraktar Dr. Öztin Akgüç Member Member Z. Fehmi Özalp Member M. Sacit Basmacı Member Levent A. Ersalman Asaf Savaş Akat Dırahşan Tamara Bozkuş Member Independent Director Independent Director The members of the Board of Directors have been elected for a term of 1 year at the Ordinary General Assembly Meeting on 14 May 2013 to take office till the Ordinary General Assembly Meeting to be held in The Board of Directors is authorized to take decisions regarding all issues which fall outside of the authority exclusively granted to the general assembly in line with the Turkish Commercial Code and the articles of association. ECZACIBAŞI INVESTMENT HOLDING CO. 1 Committee in charge of the Audit Asaf Savaş Akat Dırahşan Tamara Bozkuş Independent Director - Chairman Independent Director Corporate Governance Committee Dırahşan Tamara Bozkuş M. Sacit Basmacı Member Risk Early Detection Committee Dırahşan Tamara Bozkuş Z. Fehmi Özalp Member Independent Director - Chairman Independent Director - Chairman Assessment of Performance of Committees of Board of Directors The committees formed in order to ensure that the duties and responsibilities of the Board of Directors are performed properly have striven to hold meetings as frequently as required for the efficiency of iüts activities regarding the matters set forth in their duties and working principles in accordance with the Turkish Commercial Code and Capital Markets Law. Any resources and support that are necessary for the Committees to perform their respective tasks have been provided by the Board of Directors. Committees have notified the Board of Directors orally or in writing of their activities. Changes Made During the Period At the General Assembly held on 14 May 2013, it has been decided by the majority of votes that the following articles of the Articles of Association be amended and deleted from the Articles of Association, respectively: articles to be amended Article 4 Article 5 Article 6 Article 7 Article 8 Article 12 Article 13 Article 14 Article 17 Article 19 Subject Term Registered Office Registered Capital Issued Capital Increasing or Reducing of Capital Issuing of Bonds, Profit Sharing Certificate (Participation Bond) and Financing Bond Board of Directors Meetings and Work Order Management and Authority for Representation ECZACIBAŞI INVESTMENT HOLDING CO. 2 Article 21 Article 22 Article 24 Article 26 Article 27 Article 28 Article 29 Article 30 Article 31 Article 32 Article 33 Article 36 Article 37 Article 38 Article 39 Salaries and Honorarium General Manager Supervisors, Shareholders General Assembly Notification of the Ministry and Attendance of a Commissar Voting Right List of Attendants Submission of Reports and Balance Sheets to the Relevant Authorities Presidential Board of the General Assembly Mode of Voting The Signing of Minutes of the General Assembly Net Profit Distribution of Profit Distribution of Profit Legal Reserves Article 40 Announcements articles deleted from the Articles of Association: Article 15 Deposit of Shares Article 25 Article 41 Duties and Responsibilities of Auditors Articles of Association To Be Sent To the Ministry The amended texts of the relevant articles are available at our web site and Public Disclosure Platform. Amendments made to the Share Capital No change has been made to the share capital of the Company during the period. The registered capital of the Company is TL and issued capital is TRL 70,000, ECZACIBAŞI INVESTMENT HOLDING CO. 3 Share Performance Shares Prices (as of end of months) Jan 12 TRL 4,59 Jan 13 TRL 6,24 Feb.12 TRL 4,75 Feb.13 TRL 6,82 Mar.12 TRL 5,56 Mar.13 TRL 7,52 Apr.12 TRL 7,02 Apr.13 TRL 7,00 May.12 TRL 5,84 May.13 TRL 6,72 Jun.12 TRL 6,82 Jun.13 TRL 5,90 Jul.12 TRL 6,68 Jul.13 TRL 6,06 Aug.12 TRL 6,22 Aug.13 TRL 5,78 Sep.12 TRL 5,80 Sep.13 TRL 6,12 Oct.12 TRL 5,86 Oct.13 TRL 6,42 Nov.12 TRL 6,36 Nov.13 TRL 6,12 Dec.12 TRL 6,32 Dec.13 TRL 5,20 ECZACIBAŞI INVESTMENT HOLDING CO. 4 Share Performance for Last 24 Months 8,00 TL 7,00 TL 6,00 TL 5,00 TL 4,00 TL 3,00 TL 2,00 TL 1,00 TL 0,00 TL Distributed Dividend and Ratio Out of the profit for the year 2008, dividend with a gross rate of 7,25% and net rate of 6,16% has been distributed. Out of the profit for the year 2009, dividend with a gross rate of 5% and net rate of 4,25% has been distributed. Out of the profit for the year 2010, dividend with a gross rate of 7% and net rate of 5,95 has been distributed on 25 May Out of the profit for the year 2011, dividend with a gross rate of 15% and net rate of 12,75 has been distributed on 19 June It has been decided at the Ordinary General Assembly held on 14 May 2013 that that the dividend with a gross rate of 15% and net rate of 12,75 out of the profit for the year 2012 be distributed on 28 May 2013 and profit distribution has been completed. List of shareholders who hold more than 10% of the Share Capital Name (Title) of Shareholder Share Amount TL Share Ratio (%) Eczacıbaşı Holding A.Ş ,49 * 69,84 * * Up-to-date amount and rate as of 11 March 2014 ECZACIBAŞI INVESTMENT HOLDING CO. 5 Company Overview Summary Financial Data of the Company SUMMARY OF FINANCIAL DATA 2013/ /12 Sale Revenues Gross Profit Operating Profit ( ) Depreciation Expenses and Amortization Operating Profit Before Depreciation ( ) Net Profit of Period Total Assets Total Shareholders Equity Total Current Assets Total Short-Term Liabilities Investment Expenses Liquidity Ratios - Current Ratio 18,89 14,37 - Liquidity Ratio 18,89 14,37 Ratios on Financial Structure - Total Liabilities / Total Assets 0,03 0,03 - Total Shareholders Equity / Total Assets 0,97 0,97 - Total Shareholders Equity / Total Liabilities 35,48 30,80 Profitability Ratios - Net Profit of Period / Total Shareholders Equity 0,006 0,019 - Net Profit of Period / Total Assets 0,005 0,018 - Net Profit of Period / Net Sales 0,005 0,013 ECZACIBAŞI INVESTMENT HOLDING CO. 6 Comparison of Operating Profit and Net Period Profit of Last 4 Years Milyon TL Comparison of Total Assets and Total Shareholders Equity of Last 4 Years Million TL ECZACIBAŞI INVESTMENT HOLDING CO. 7 II. ACTIVITIES Developments in Investments No change has been made to our portfolio of affiliates during the period. Investment Portfolio Eczacıbaşı Yatırım Holding has 16 affiliates within Eczacıbaşı Group. Brief information about our affiliates in which we more than 10 percent of share capital: Eczacıbaşı Menkul Değerler A.Ş. Capital Market operations started by Eczacıbaşı Group through Eczacıbaşı Yatırım Holding Ortaklığı A.Ş. in 1973 have been gathered under the umbrella of Eczacıbaşı Menkul Değerler A.Ş., a subsidiary of Yatırım Holding in 1983 and continued to grow steadily every year. Eczacıbaşı Menkul Değerler is one of the pioneering and strong securities firms in Turkish Capital Market with its paid-in share capital of 11 million TL, 102 specialized employees, sales network operating in Istanbul (Levent, Kadıköy) - Ankara - İzmir - Bursa - Antalya regions and its products and services offered through its state of the art electronic infrastructure. The fundamental policy of Eczacıbaşı Menkul Değerler A.Ş. is the customer satisfaction. Supporting its expertise in the capital markets with the products created using the advanced technologies of the 21 st century, it offers expert services to its individual and corporate investors at home and abroad. As a Group A securities firm holding all the licenses for operating in the fields permitted by the Capital Markets Board, Eczacıbaşı Menkul Değerler offers the following services: Brokerage in trading of all kinds of securities Investor Information Services Margin transactions Portfolio management Futures Transactions Domestic and Overseas Mutual Funds ECZACIBAŞI INVESTMENT HOLDING CO. 8 Electronic Services Brokerage and consulting services for foreign corporate investors IPO brokerage for companies Survey Thanks to its hi-tech Tele Yatirim 24, Net Yatirim 24, Net Analist and Net Mesaj systems, securities brokerage services as well as analyses and comments related to capital markets are provided more quickly, cost-effectively and accurately. E-Kart Elektronik Kart Sistemleri Sanayi ve Ticaret A.Ş Innovation based security: Bearing the responsibility for connecting the people to the digital world seamlessly. In today s world, in which the experience of having easy connection to the digital world securely and from any location and any time without any ceasing has become an indispensable fact of our lives, increasing number of people can securely and easily connect to the ecosystem of the digital world from any location being sure that their personal information will not be replaced, stolen or used for other purposes and can make seamless and secure exchange of information accordingly. E-Kart was established in 1999 for providing its clients uninterrupted connectivity systems and processes that protects the privacy of personal information and security, that is innovative, secure and easily accessible at any location and time. In 2001, 50% shares of E-Kart Elektronik Kart Sistemleri have been sold to Giesecke & Devrient GmbH, the second largest company in its category. Starting its production activities in 2001, E-Kart has the first facility for Visa/Europay-accredited credit cards, smart cards manufacturing and personalization and is the first company having a SIM card production plant in Turkey. The annual card production capacity of E-Kart is 100 millions. In addition to its smart card production, E-Kart also performs daily card personalization operations for a number of banks thanks to its quick, high quality and secure service understanding. E-Kart has an infrastructure for card manufacturing, software and personalization according to the Visa/Europay, SAS and other international security specifications. E-Kart, that holds the ISO-IEC Information Security Management System, has completed the studies for NATO Facility Security Certificate and is thereby waiting for the certification process to be completed. In addition, the preparations required for the ISO 14298:2013 Management of Security Printing Certification process are currently underway and accordingly the certification is expected to be received within The Company has achieved a first by receiving the ISO Business Continuity Management System Certificate in terms of providing the continuation of its products and services under extraordinary conditions. ISO Environmental Management System and OHSAS Occupational Health and Safety Management System Certificates have been added in 2011 to already existing ISO 9001 Quality Management System Certificate. Besides the Management System Certificates, ISO Verification Audit of Greenhouse Gases Inventory Part was realized for the first time in 2011; PAS 2050 Product Carbon Footprint Certificate was received in 2012 so that a first is realized in its sector by receiving both certificates. In 2014, the Company has also obtained ISO Customer Satisfaction Management System Certificate. ECZACIBAŞI INVESTMENT HOLDING CO. 9 Continuing its leading position both in banking and GSM cards markets, E-Kart has achieved the major seller position in Moldova, Ukraine, Azerbaijan, Georgia and Kazakhstan with its marketing and sales activities in line with its geographical growth target. Getting prepared also for entering new markets, E- Kart is also targeting to grow up in these markets. The paid-in capital of the company as of 31 December 2013 is TRL EİS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar San. ve Tic. A.Ş. Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar does not have an actual production and has an holding structure with its Subsidiaries, Partnerships Subject to the Joint Management and Affiliates. In this structure, it directly performs property development activities; and engages in healthcare, cosmetics and personal care products sectors through its subsidiaries. A 50/50 joint venture of Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar of Eczacıbaşı Holding, and located in newly popular district of Zerekiyakoy, Sariyer, Istanbul, Ormanada project involves an investment of USD 300 million and residential units will vary from 170 to 700 square meters in size and would be priced in the range of USD 500 thousand to USD 2.2 million per unit. Ormanada has been created with the cooperation of Torti Gallas and Partners, Kreatif Mimarlık ve Rainer Schmidt Landscape Architects, all having a global experience and expertise. The project to be carried out by the Company s subsidiary Eczacıbaşı Gayrimenkul Geliştirme ve Yatırım A.Ş., which, within the context and control of the signed contract, would choose a contractor or sub-contractors by bidding on the basis of taking offers on unit prices, bargaining or contracting at a lump sum price will consist of 273 residential units including 188 villas and 85 detached houses. The project will be completed in two phases and there would be 150 residential units in the 1 st phase, and it is projected that the 2 nd phase would include 123 residential units. As of 31 December 2013, sales deals have been made and sales contracts signed for 98 residential units in the first phase and 57 units in the second phase. In this project which consists of two separate phases, 1. Phase housing units started to be delivered as from April 2013, and as of 31 December 2013, 96 residential units have been delivered; 2. Phase residential units started to be delivered as from December 2013, and as of 31 December 2013, 5 residential units have been delivered and transferred. The infrastructure (construction other than the buildings: roads, electricity, water, sewage, natural gas, telephone lines etc.) and superstructure (building construction) works of the Ormanada project continue as planned. As of 31 December 2013, the share of Eczacıbaşı Yatırım Holding Ortaklığı A.Ş. in the share capital of Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar is 24,78%. İntema İnşaat ve Tesisat Malzemeleri Yatırım ve Pazarlama A.Ş. Intema was founded in 1978 by Eczacıbaşı Group and Vitra authorized resellers and listed in ISE in İntema, which underwent material structural changes in 1997, became the sole marketing and sales organization of all the products of the Eczacıbaşı Construction Group. By spreading the concept of business partnership with authorized distributors and with the support on marketing and sales matters, the opportunity to offer the products manufactured by the Eczacıbaşı Construction Group as package and the competitive advantage in the market was increased. İntema, with the specialist team joining it ECZACIBAŞI INVESTMENT HOLDING CO. 10 and the scope of services widening from day to day, became in 1998 a company engaged in sales with elegant and multi-sided design services in relation with modern kitchens and bathrooms in Turkey. İntema, which has adopted customer focused service approach for years, has pursued its works in this subject and improves and continues its pre- and post-sales service tradition. İntema which efficiently continues its activities with the CRM Project, PartnersClub which it has established in 1998 by leading the way in the construction sector, adopts the multi-sided partnership approach with the professionals in the sector. The expert sales point organization started through İntema stores is being spread among the authorized distribution channel and ensures accurate representation of the entity and brand image and standardization of showcase and service quality. İntema stores take part in all the stages from the drawing of a project to its assembling and undersigns turnkey delivery projects. Vitra-Artema authorized service teams, which operates under İntema organization and which are the first regular service team organization in the sector, provides today post-sales services throughout Turkey in 114 points in connection with construction group products. Due to these activities, İntema was awarded in 2001 and 2006 the label of the Company targeting Customer Satisfaction as a Principle. 80% of the authorized distributors of İntema, which attaches importance to technological infrastructure developments and targets to reflect this to its services, takes orders via internet for the first time and solely in the sector. Also, customers are provided services with the website of which is the most comprehensive and customer focused website in the sector and e-crm works are continued. With these efforts, İntema got the first place in 2001 with its e-intema Project in the Creativity- Innovativeness Best Application Development Category, which is determined by the Eczacıbaşı Group each year through an evaluation from among the companies within the group. For the same reason, the first place was awarded to İntema in 2003 in the Industry category of the e-conversion leaders project organized by Capital Magazine and Siemens Business Services each year. The issued share capital of Intema is TRL Kaynak Tekniği Sanayi ve Ticaret A.Ş. Our entity, which is a Eczacıbaşı Group company and which was established on 1 March 1974 for production of covered welding electrode, has started production of MIG welding wires from the beginning of the 1980s. Kaynak Tekniği Sanayi ve Ticaret A.Ş., which undertook in 1992 the Turkish distributorship of the welding machines producted by The Lincoln Electric Company, the headquarters of which is located in Cleveland, the United States of America, turned its relationship with The Lincoln Electric Co. into equal-shared partnership on 5 May 1998 and has taken a big step in the enlargement in the European, Russian, African and Middle Eastern markets and in the increase of the exports to these regions. The Lincoln Electric Co., which is the foreign partner of the entity, is one of the world s leading companies in welding consumables, welding machines, welding generators, automation and robotics systems and plasma cutting machines. The Lincoln Electric Co. provides services to a wide territory with its partners in 18 countries in the world and its sales offices in 160 countries. The factory building, which has made production in Kartal, Istanbul since 1974, has moved in the middle of
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